424B3

424B3 1 d352312d424b3.htm 424B3 424B3

Filed Pursuant to Rule 424(b)3
Registration No. 333-270489

PROSPECTUS

LOGO

(Proposed Holding Company for Somerset Savings Bank, SLA)

Up to 9,200,000 Shares of Common Stock Offered to the Public

(Subject to Increase of up to 10,580,000 Shares)

This is the initial public offering of shares of common stock of SR Bancorp, Inc., a Maryland corporation. SR Bancorp is offering its shares in connection with the mutual to stock conversion of Somerset Savings Bank, SLA. We expect that our shares of common stock will be listed on the Nasdaq Capital Market under the symbol “SRBK.” We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012.

We are offering up to 9,200,000 shares of common stock for sale on a best efforts basis, subject to certain conditions. We must sell a minimum of 6,800,000 shares to complete the offering. If, as a result of regulatory considerations, demand for the shares or changes in market conditions, the independent appraiser determines our market value has increased, we may sell up to 10,580,000 shares without giving you further notice or the opportunity to change or cancel your order. Additionally, we will contribute up to $920,000 in cash and up to 460,000 shares of SR Bancorp stock, which, together, represents 6.0% of the value of the common stock issued in the offering at the maximum of the offering range, to Somerset Regal Charitable Foundation, Inc., a charitable foundation to be formed in connection with the stock offering. We must sell a minimum of 6,800,000 shares to complete the offering.

The shares of common stock are first being offered for sale in a subscription offering to eligible depositors of Somerset Savings Bank, SLA and the tax-qualified employee benefit plans of Somerset Savings Bank, SLA. Shares not purchased in the subscription offering may be offered for sale to the general public in a community offering, with a preference given to natural persons (including trusts of natural persons) residing in the New Jersey Counties of Hunterdon, Middlesex and Somerset. Any shares of common stock not purchased in the subscription offering or the community offering may be offered for sale to the public through a syndicate of broker-dealers, referred to as the “syndicated community offering” throughout this prospectus. However, no shares purchased in the subscription offering or the community offering will be issued until the completion of any syndicated community offering. We may sell up to 10,580,000 shares of common stock because of demand for the shares of common stock or changes in market conditions, without resoliciting subscribers.

At present, all of our depositors have voting rights in Somerset Savings Bank as to all matters requiring depositor action. Upon completion of the conversion and related stock offering, depositors will no longer have voting rights. Upon completion of the conversion and related stock offering, all voting rights in Somerset Savings Bank will be vested in SR Bancorp as the sole shareholder of Somerset Savings Bank. The shareholders of SR Bancorp will possess exclusive voting rights with respect to SR Bancorp common stock. Accordingly, only depositors who purchase SR Bancorp common stock will continue to have voting rights following the conversion.

The subscription offering is scheduled to terminate at 2:00 p.m., Eastern time, on August 15, 2023. We may extend this termination date without notice to you until September 29, 2023. Funds received before completion of the offering will be maintained in a segregated account at Somerset Savings Bank, SLA, or at our discretion, of another insured depository institution. All subscriptions received will earn interest at our passbook savings rate, which is currently 0.05% per annum.

The minimum purchase is 25 shares. Generally, no individual, or individuals acting through a single qualifying account held jointly, may purchase more than 25,000 shares ($250,000) of common stock, and no person or entity, together with associates or persons acting in concert with such person or entity, may purchase more than 40,000 shares ($400,000) of common stock in all categories of the stock offering combined. Once submitted, orders are irrevocable unless the stock offering is terminated or extended beyond September 29, 2023. If we extend the stock offering beyond September 29, 2023, we will give subscribers an opportunity to change, cancel or maintain their stock orders. If we terminate the stock offering because we fail to sell the minimum number of shares, or for any other reason, we will promptly return your funds with interest at our passbook savings rate.

Following completion of the conversion and related stock offering, pursuant to an Agreement and Plan of Merger, dated July 25, 2022, by and among Somerset Savings Bank, SLA, SR Bancorp, Inc., Regal Bancorp, Inc. and Regal Bank, as amended on March 7, 2023 and July 10, 2023, we intend to acquire Regal Bancorp. In connection with the proposed merger of Regal Bancorp, Inc. with and into SR Bancorp, Inc., each shareholder of Regal Bancorp, Inc. will receive $23.00 in cash in exchange for each share of Regal Bancorp, Inc. common stock that they own. If we are unable to complete the conversion, including the related stock offering, we will terminate the merger.

Keefe, Bruyette & Woods, Inc. will use its best efforts to assist us in our selling efforts, but is not required to purchase any of the common stock that is offered for sale. Purchasers will not pay a commission to purchase shares of common stock in the offering. All shares offered for sale are offered at a price of $10.00 per share.

This investment involves a degree of risk, including the possible loss of principal. Please read “Risk Factors” beginning on page 16.

OFFERING SUMMARY

Price Per Share: $10.00


	Minimum		Midpoint		Maximum		Adjusted Maximum
Number of shares offered for sale		6,800,000		8,000,000		9,200,000		10,580,000
Gross offering proceeds⁽¹⁾	$	68,000,000	$	80,000,000	$	92,000,000	$	105,800,000
Estimated offering expenses, excluding selling agent fees and expenses⁽¹⁾⁽²⁾	$	2,444,500	$	2,444,500	$	2,444,500	$	2,444,500
Selling agent fees and expenses⁽¹⁾	$	965,000	$	1,085,000	$	1,205,000	$	1,343,000
Estimated net proceeds	$	64,590,500	$	76,470,500	$	88,350,500	$	102,012,500
Estimated net proceeds per share	$	9.50	$	9.56	$	9.60	$	9.64

(1)

See “The Conversion and Stock Offering—Plan of Distribution; Selling Agent and Underwriter Compensation” for a discussion of Keefe, Bruyette & Woods, Inc.’s compensation for the stock offering and the compensation to be received by Keefe, Bruyette & Woods, Inc. and the other broker-dealers that may participate in any syndicated community offering.

(2)	Excludes records agent fees and expenses payable to Keefe, Bruyette & Woods, Inc., which are included in estimated offering expenses. See “The Conversion and Stock Offering—Records Management.”

These securities are not deposits or savings accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency.

Neither the Securities and Exchange Commission, the Board of Governors of the Federal Reserve System, the New Jersey Department of Banking and Insurance, the Federal Deposit Insurance Corporation, nor any state securities regulator has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

For assistance, please contact our Stock Information Center at 1-(844) 265-9680.

LOGO

The date of this prospectus is July 13, 2023

LOGO

Table of Contents


	Page
Summary		1
Risk Factors		16
Forward-Looking Statements		28
Selected Consolidated Financial and Other Data of Somerset Savings Bank, SLA		30
Selected Consolidated Financial and Other Data of Regal Bancorp, Inc.		32
How We Intend to Use the Proceeds From the Stock Offering		35
Our Dividend Policy		37
Market for the Common Stock		37
Capitalization		38
Historical and Pro Forma Regulatory Capital Compliance		40
Pro Forma Unaudited Condensed Consolidated Financial Statements Giving Effect to the Conversion and Proposed Merger		41
Comparison of Independent Valuation and Pro Forma Financial Information With and Without the Charitable Foundation		68
Management’s Discussion and Analysis of Financial Condition and Results of Operations of SR Bancorp		70
Business of SR Bancorp and Somerset Savings Bank, SLA		88
Management’s Discussion and Analysis of Financial Condition and Results of Operations of Regal Bancorp		99
Business of Regal Bancorp and Regal Bank		118
Management of SR Bancorp		121
Executive Compensation		125
Subscriptions by Executive Officers and Directors		131
Regulation and Supervision		132
Taxation		139
The Proposed Merger with Regal Bancorp		140
The Conversion and Stock Offering		155
Somerset Regal Charitable Foundation		170
Restrictions on Acquisition of SR Bancorp and Somerset Savings Bank, SLA		173
Description of SR Bancorp Capital Stock		177
Transfer Agent and Registrar		178
Legal Matters		178
Experts		178
Where You Can Find Additional Information		178
Index to Consolidated Financial Statements of Somerset Savings Bank, SLA		F-1
Index to Consolidated Financial Statements of Regal Bancorp, Inc.		G-1

SUMMARY

This summary highlights material information from this document and may not contain all the information that is important to you. To understand the conversion, the stock offering and the merger fully, you should read this entire prospectus carefully, including the consolidated financial statements and the notes to the consolidated financial statements. For assistance, please call our Stock Information Center at 1-(844) 265-9680.

THE COMPANIES

SR Bancorp, Inc.

Somerset Savings Bank, SLA

220 West Union Avenue

Bound Brook, New Jersey 08805

(732) 560-1700

SR Bancorp, Inc. (“SR Bancorp”) is a new Maryland corporation that was formed by Somerset Savings Bank, SLA (“Somerset Savings Bank”) to be the holding company of Somerset Savings Bank upon completion of its conversion from the mutual to stock form of organization. SR Bancorp has had no operations to date and has never issued any capital stock. This stock offering is being made by SR Bancorp. Upon completion of the conversion and related stock offering, SR Bancorp will own all of Somerset Savings Bank’s capital stock.

Somerset Savings Bank is a New Jersey-chartered mutual savings association that operates from seven branches in Hunterdon, Middlesex and Somerset Counties, New Jersey. Somerset Savings Bank offers a variety of deposit and loan products to individuals and small businesses, most of which are located in our primary market. The acquisition of Regal Bancorp, Inc. (“Regal Bancorp”) and its wholly owned subsidiary, Regal Bank, will expand our market presence into Essex, Morris and Union Counties, New Jersey and enhance our market presence in Somerset County, New Jersey. At March 31, 2023, Somerset Savings Bank had total assets of $664.9 million, deposits of $517.0 million and total equity of $119.1 million. As part of this transaction, Somerset Savings Bank will convert its charter to a New Jersey-chartered commercial bank.

Our executive offices are located at 220 West Union Avenue, Bound Brook, New Jersey 08805. Our telephone number at this address is (732) 560-1700.

Our website address is www.somersetsavings.com. Information on our website should not be considered a part of this prospectus.

Proposed Merger with Regal Bancorp

On July 25, 2022, Somerset Savings Bank and SR Bancorp entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Regal Bancorp, Inc. and Regal Bank. The Merger Agreement was subsequently amended on March 7, 2023 and July 10, 2023. Pursuant to the Merger Agreement, as amended, promptly following the completion of the conversion and related stock offering, SRB Interim Corporation, a wholly-owned subsidiary of SR Bancorp, formed solely to facilitate the merger, will merge with and into Regal Bancorp, a New Jersey corporation, followed by the merger of Regal Bancorp with and into SR Bancorp, with SR Bancorp as the surviving entity (the “Merger”). In connection with the proposed Merger, Regal Bancorp shareholders will exchange each of their shares of Regal Bancorp common stock for $23.00 in cash. The aggregate cash consideration is approximately $69.5 million.

Immediately following the Merger, Regal Bank, a New Jersey chartered commercial bank headquartered in Livingston, New Jersey and the wholly-owned subsidiary of Regal Bancorp, will merge with and into Somerset Savings Bank (the “Bank Merger”), which will convert to a commercial bank charter and be renamed Somerset Regal Bank.

Upon closing of the proposed Merger, the Executive Chairman of the Board of Directors of Regal Bancorp, David M. Orbach, and two other current Regal Bancorp board members, will join the Boards of Directors of SR Bancorp and Somerset Regal Bank. Mr. Orbach will serve as Executive Chairman of the Board of Directors of SR Bancorp and as Executive Vice Chairman of the Board of Directors of Somerset Regal Bank. William P. Taylor will continue as Chief Executive Officer and Chairman of the Board of Directors of Somerset Regal Bank and will serve as Chief Executive Officer and a director of SR Bancorp. Christopher J. Pribula will continue as President, Chief Operating Officer and a director of Somerset Regal Bank and SR Bancorp. In addition, Messrs. Orbach, Taylor and Pribula entered into employment agreements

with SR Bancorp and Somerset Savings Bank at the time of execution of the Merger Agreement, which will become effective as of the effective date of the mutual-to-stock conversion for Messrs. Taylor and Pribula and will becomes effective as of the closing of the proposed Merger for Mr. Orbach.

Regal Bank is a full-service commercial bank that serves the banking needs of small-to medium-sized businesses, professional entities, and individuals primarily in its market area of Essex, Hudson, Morris, Somerset and Union Counties, New Jersey. Regal Bank’s primary business is offering a variety of insured deposit accounts and using such funds as well as borrowings to originate commercial mortgage loans. At March 31, 2023, Regal Bancorp had total consolidated assets of $473.3 million, deposits of $401.8 million and total equity of $51.1 million.

The proposed Merger will increase the combined banks’ deposit base and its loan portfolio, provide Somerset Savings Bank with greater commercial lending expertise and access to commercial loan customers and provide Regal Bank with greater residential lending expertise and access to residential loan customers.

SR Bancorp intends to conduct its offering at the same time Regal Bancorp is soliciting the approval of the proposed Merger from its shareholders and Somerset Savings Bank is soliciting the approval of the offering from its voting members. The failure to complete the offering will result in the termination of the proposed Merger, but the failure to complete the proposed Merger will not necessarily result in the termination of the offering, but would mostly likely require the establishment of a new offering range and require a resolicitation of subscribers if SR Bancorp determined to complete the offering under these circumstances.

Our Business Strategy

The business strategy of the combined entity is to operate and grow a profitable community-oriented financial institution. Following completion of the conversion and related stock offering and the proposed Merger, the combined entity plans to achieve this by:

•

leveraging the residential lending expertise of Somerset Savings Bank and the commercial lending expertise of Regal Bank to pursue new opportunities to increase lending in our primary market area and expand its existing loan relationships;

•

continuing to use prudent underwriting practices to maintain the high quality of its loan portfolio;

•

increasing transaction deposit accounts and deposit balances;

•

building profitable business and consumer relationships through enhanced product offerings and by continuing to provide superior customer service;

•

continuing to leverage technology to maintain efficient operations and enhance customer service; and

•

expanding our franchise through acquisitions (including the Merger with Regal Bancorp) and other possible transactions in its primary market area.

Please see “Risk Factors—Risks Related to Growth” and “Risk Factors—Risks Related to Lending Activities” for a discussion of certain risks associated with our business strategy.

Market Area

We are headquartered in Bound Brook, New Jersey. We operate seven full-service branch offices throughout Hunterdon, Middlesex and Somerset Counties, New Jersey. Regal Bank operates ten branches in Essex, Morris, Somerset and Union Counties, New Jersey. We currently consider our New Jersey market area to include the counties of Hunterdon, Middlesex and Somerset. The acquisition of Regal Bancorp will expand our market presence into Essex, Morris and Union Counties and enhance our market presence in Somerset County. The economy in this market area has benefitted from being varied and diverse, with a broad economic base. Employment in service industries, education, healthcare and social services account for the largest employment sectors, with pharmaceutical, financial services and retail companies among the largest employers in the primary market area served by Somerset Savings Bank and Regal Bank. Population and household data indicate that the market areas served by Somerset Savings Bank and Regal Bank are a mix of urban and suburban markets, with Middlesex County as the most populous county with a total 2022 population of 861,000, and Hunterdon County as the least populous county with a total 2022 population of 130,000. Income measures indicate that the counties of Hunterdon, Morris and Somerset are relatively affluent markets, with household and per capita income measures above the comparable U.S. and New Jersey measures. Hunterdon, Morris and Somerset Counties maintain higher percentages of households with incomes above $100,000 compared to the U.S. and New Jersey.

Regulation and Supervision

SR Bancorp will be subject to regulation, supervision and examination by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Somerset Savings Bank is and will remain subject to regulation by the New Jersey Department of Banking and Insurance (the “NJDBI”) and the Federal Deposit Insurance Corporation (the “FDIC”).

THE STOCK OFFERING

Reasons for the Conversion and Stock Offering

Somerset Savings Bank’s primary reasons for the conversion and the stock offering are to:

•

raise capital to provide the funds necessary to acquire Regal Bancorp;

•

raise capital to support growth;

•

enhance existing products and services, and support the development of new products and services to support growth and enhance customer service;

•

attract and retain qualified directors, management and employees through equity ownership and stock-based compensation plans;

•

raise capital to make necessary capital investments in facilities and technology to support our internal growth;

•

increase philanthropic endeavors to the communities served by Somerset Regal Bank through the formation and funding of a charitable foundation;

•

facilitate future mergers and acquisitions; and

•

use the additional capital for other general corporate purposes.

The following diagram shows our current organizational structure as a mutual savings association with no shareholders:

SOMERSET SAVINGS BANK, SLA

(a New Jersey-chartered mutual savings association)

After the conversion, offering, charter conversion and Merger are completed, we will be organized as a fully public stock holding company, as follows:

PUBLIC SHAREHOLDERS

(including charitable foundation)

100%

SR BANCORP, INC.

(a Maryland corporation)

100%

SOMERSET REGAL BANK

(a New Jersey-chartered stock commercial bank)

Terms of the Offering

We are offering for sale between 6,800,000 and 9,200,000 shares of SR Bancorp common stock in this offering. The amount of common stock being sold is based on an appraisal of Somerset Savings Bank. With regulatory approval, we may increase the number of shares to be issued by 15% to 10,580,000 shares without giving you further notice or the opportunity to change or cancel your order. In considering whether to increase the offering size, the NJDBI and the FDIC will consider the amount of subscriptions received, the views of our independent appraiser, our financial condition and results of operations and changes in market conditions.

The purchase price is $10.00 per share. You will not pay a commission to buy any shares in the offering. Keefe, Bruyette & Woods, Inc. (“KBW”), our financial advisor in connection with the conversion, will use its best efforts to assist us in selling our shares of common stock, but KBW is not obligated to purchase any shares in the offering.

How We Determined the Offering Range and the $10.00 Purchase Price

Our decision to offer between 6,800,000 and 9,200,000 shares, which is our offering range, is based on an independent appraisal of our pro forma market value prepared by RP Financial, LC (“RP Financial”), an appraisal firm experienced in appraisals of financial institutions. RP Financial is of the opinion that as of May 8, 2023, the estimated pro forma market value of the common stock offering of SR Bancorp was $80.0 million. Based on shares to be issued in the conversion and applicable regulations, this market value forms the midpoint of an offering range with a minimum of $68.0 million and a maximum of $92.0 million.

Our Board of Directors determined that the common stock should be sold at $10.00 per share. The $10.00 per share price was selected primarily because it is the price most commonly used in stock conversion offerings by savings banks. Therefore, based on the valuation range, the number of shares of SR Bancorp common stock that will be sold in the offering will range from 6,800,000 shares to 9,200,000 shares. If demand for the shares or market conditions warrant, our appraised value can be increased by up to 15%, which would result in an offering of $105.8 million and an offering of
10,580,000 shares of common stock.

In preparing its appraisal, RP Financial considered the information in this prospectus, including our consolidated financial statements, as well as the impact of the Merger and the impact of the contribution of shares of SR Bancorp and cash to Somerset Regal Charitable Foundation, Inc. (“Somerset Regal Charitable Foundation,” sometimes referred to as the “charitable foundation,” or the “foundation,” as the case may be). RP Financial also considered the following factors, among others:

•

our historical, present and projected operating results and financial condition and the economic and demographic characteristics of our market area on a combined basis factoring in completion of the Merger;

•

the effect of the capital raised in the offering on our net worth and earnings potential; and

•

a comparative evaluation of the operating and financial statistics of Somerset Savings Bank with a peer group of 10 publicly traded savings banks and savings bank holding companies that RP Financial considers comparable to SR Bancorp on a pro forma basis.

The appraisal peer group consists of the following companies, all of which are traded on the Nasdaq Stock Market. Unless otherwise indicated, total assets are as of March 31, 2023.


Company Name	Ticker Symbol	Headquarters	Total Assets
			(In millions)
Affinity Bancshares, Inc.	AFBI	Covington, GA	$	932
ESSA Bancorp, Inc.	ESSA	Stroudsburg, PA		1,986
HMN Financial, Inc.	HMNF	Rochester, MN		1,072
Home Federal Bancorp, Inc. of Louisiana	HFBL	Shreveport, LA		686
IF Bancorp, Inc.	IROQ	Watseka, IL		843
HV Bancorp, Inc.⁽¹⁾	HVBC	Doylestown, PA		626
Magyar Bancorp, Inc.	MGYR	New Brunswick, NJ		840
Northeast Community Bancorp, Inc.	NECB	White Plains, NY		1,503
Provident Bancorp, Inc.	PVBC	Amesbury, MA		1,702
William Penn Bancorporation	WMPN	Bristol, PA		862

(1)	Subsequently eliminated from peer group due to announced sale-of-control.

In determining the valuation, RP Financial considered adjustments to the pro forma market value based on a comparison of SR Bancorp with the peer group. RP Financial advised the Board of Directors that the valuation conclusion included the following adjustments relative to the peer group:

RP Financial considered adjustments to the pro forma market value based on a comparison of SR Bancorp with the peer group. RP Financial advised the Board of Directors that the valuation analysis took into consideration that relative to the peer group a slight downward adjustment was applied for profitability, growth and viability of earnings and a moderate downward adjustment was applied for marketing of the issue. Additionally, RP Financial made slight upward adjustments for SR Bancorp’s financial condition and asset growth in comparison to the peer group’s characteristics for those valuation parameters. RP Financial made no adjustments for primary market area, dividends, liquidity of the shares, management and the effect of government regulations and regulatory reform.

The downward adjustment applied for profitability, growth and viability of earnings took into consideration SR Bancorp’s lower pro forma return on equity and less favorable efficiency ratio. The downward adjustment for marketing of the issue took into consideration a general selloff in financial shares during the past twelve months. The upward adjustment applied for financial condition was due to SR Bancorp’s more favorable credit quality measures, greater balance sheet liquidity and stronger pro forma capital position. The upward adjustment applied for asset growth was due to SR Bancorp’s stronger historical asset growth as the result of the acquisition of Regal Bancorp and greater leverage capacity as the result of the capital that will be raised in the offering.

The independent appraisal will be updated before we complete the conversion. If the pro forma market value of the common stock offering at that time is either below $68.0 million or above $105.8 million, then SR Bancorp, after consulting with the Federal Reserve, may terminate the plan of conversion and return all funds promptly with interest; extend or hold a new subscription or community offering, or both; establish a new offering range and commence a resolicitation of subscribers; or take such other actions as may be permitted by the Federal Reserve and the Securities and Exchange Commission. If we resolicit subscribers in this instance, then all funds delivered to us to purchase shares of common stock in the subscription and community offerings will be returned promptly with interest.

Two measures that investors use to analyze an issuer’s stock are the ratio of the offering price to the issuer’s tangible book value and the ratio of the offering price to the issuer’s annual net income. RP Financial considered these ratios, among other factors, in preparing its appraisal. Tangible book value is the same as total equity, less intangible assets.

The following table presents a summary of selected pricing ratios for the peer group companies and for SR Bancorp that RP Financial used in its appraisal. The ratios for SR Bancorp are based on pro forma core earnings for the 12 months ended March 31, 2023 including the proposed Merger and pro forma book value as of March 31, 2023. The ratios for the peer group are based on estimated core earnings for the 12 months ended March 31, 2023 and book value as of March 31, 2023 (using stock prices as of May 8, 2023).


	Price to Earnings Multiple		Price to Book Value Ratio			Price to Tangible Book Value Ratio
SR Bancorp (pro forma):
Minimum		9.49x		40.95	%		48.83	%
Midpoint		11.09x		45.45	%		53.62	%
Maximum		12.68x		49.48	%		57.84	%
Adjusted Maximum		14.48x		53.59	%		62.00	%
Peer group companies as of May 8, 2023:
Average		11.72x		73.38	%		76.80	%
Median		8.78x		69.37	%		74.61	%

Compared to the median pricing ratios of the peer group at the maximum of the offering range, our stock would be priced at a premium of 44.4% to the peer group on a price-to-earnings basis, a discount of 28.7% to the peer group on a price-to-book basis, and a discount of 22.5% to the peer group on a price-to-tangible book basis. This means that, at the maximum of the offering range, a share of our common stock would be more expensive than the peer group based on a core earnings per share basis and less expensive than the peer group based on a book value per share basis and a tangible book value per share basis.

The independent appraisal does not indicate market value. You should not assume or expect that the valuation described above means that our common stock will trade at or above the $10.00 purchase price after the offering. Furthermore, the pricing ratios presented in the appraisal were used by RP Financial to estimate our pro forma appraised value for regulatory purposes and not to compare the relative value of shares of our common stock with the value of the capital stock of the peer group. The value of the capital stock of a particular company may be affected by a number of factors such as financial performance, asset size and market location.

How We Will Use the Proceeds of this Offering

The following table summarizes how we will use the proceeds of this offering, based on the sale of shares at the minimum and maximum of the offering range.


(In thousands)	Minimum of the Range 6,800,000 Shares at $10.00 per Share			Maximum of the Range 9,200,000 Shares at $10.00 per Share
Gross offering proceeds	$	68,000		$	92,000
Less: offering expenses		(3,410	)		(3,650	)

Net offering proceeds		64,590			88,350

Less:
Proceeds contributed to Somerset Savings Bank		(32,295	)		(44,175	)
Proceeds used for loan to employee stock ownership plan		(5,712	)		(7,728	)
Proceeds contributed to Somerset Regal Charitable Foundation		(680	)		(920	)

Proceeds remaining for SR Bancorp	$	25,903		$	35,527

Initially, SR Bancorp intends to use the proceeds that it retains, along with the cash obtained from a dividend from Somerset Savings Bank prior to the closing of the Merger, to pay the merger consideration to the shareholders of Regal Bancorp. Remaining proceeds, if any, may initially be invested in short-term liquid investments. In the future, SR Bancorp may use the portion of the proceeds that it retains, if any, to, among other things, invest in securities, pay cash dividends or repurchase shares of common stock, subject to regulatory restrictions. Somerset Regal Bank intends to invest the proceeds it receives for investment in short-term liquid investments and, at a later date, anticipates using a portion of the proceeds it receives to fund new loans, purchase securities and expand its business activities. SR Bancorp and Somerset Regal Bank may also use the proceeds of the offering to diversify their businesses and acquire other companies, although we have no specific plans to do so at this time other than our proposed Merger with Regal Bancorp.

Possible Change in the Offering Range

RP Financial will update its appraisal before we complete the offering. If, as a result of demand for the shares, regulatory considerations, or changes in market conditions, RP Financial determines that our pro forma market value has increased, we may sell up to 10,580,000 shares in the offering without further notice to you. If our pro forma market value of the offering at that time is either below $68.0 million or above $105.8 million, then, after consulting with Federal Reserve, the NJDBI and the FDIC we may:

•

terminate the stock offering and promptly return all funds;

•

set a new offering range and give all subscribers the opportunity to confirm, modify or rescind their purchase orders for shares of SR Bancorp’s common stock; or

•

take such other actions as may be permitted by Federal Reserve, the NJDBI, the FDIC and the Securities and Exchange Commission (the “SEC”).

If we set a new offering range, we will promptly return funds, with interest at 0.05% for funds received in the offering, cancel deposit account withdrawal authorizations and commence a resolicitation. In connection with the resolicitation, we will notify subscribers of their right to place a new stock order for a specified period of time.

Possible Termination of the Offering

We must sell a minimum of 6,800,000 shares to complete the offering. If we terminate the offering because we fail to sell the minimum number of shares or for any other reason, we will promptly return your funds with interest at our passbook savings rate and we will cancel deposit account withdrawal authorizations. If we terminate the offering, we will also terminate the Merger.

Conditions to Completing the Offering

We are conducting the offering under the terms of our plan of conversion from mutual to stock form of organization. We cannot complete the offering unless:

•

we sell at least the minimum number of shares offered;

•

we receive approval of our voting members; and

•

we receive the final regulatory approval to complete the offering and to form SR Bancorp to become the bank holding company of Somerset Savings Bank.

Federal Reserve, NJDBI or FDIC approval does not constitute a recommendation or endorsement of an investment in our stock.

We Will Form Somerset Regal Charitable Foundation

To further our commitment to the communities we serve, we intend to establish a charitable foundation to be named “Somerset Regal Charitable Foundation, Inc.” as part of the conversion and stock offering. The charitable foundation will be dedicated exclusively to supporting charitable causes and community development activities in the communities in which we operate. Assuming we receive approval of our voting members to establish the charitable foundation, we will contribute cash ranging from $680,000 at the minimum of the valuation range to $1,058,000 at the adjusted maximum of the valuation range and shares of our common stock (which, together, represents 6.0% of the value of the common stock issued in the offering). The number of shares contributed to our charitable foundation will range from 340,000 shares at the minimum of the valuation range to 529,000 shares at the adjusted maximum of the valuation range, which shares will have a value of $3.4 million at the minimum of the valuation range and $5.3 million at the adjusted maximum of the valuation range, based on the $10.00 per share offering price. As a result of the issuance of shares and the contribution of cash to the charitable foundation, we will record an after-tax expense of approximately $3.1 million at the minimum of the valuation range and of approximately $4.8 million at the adjusted maximum of the valuation range, during the quarter in which the conversion and offering are completed.

Issuing shares of common stock to the charitable foundation will:

•

dilute the voting interests of purchasers of shares of our common stock in the stock offering; and

•

result in an expense, and a reduction in earnings, during the quarter in which the contribution is made, equal to the full amount of the contribution to the charitable foundation, offset in part by a corresponding tax benefit.

The establishment and funding of the charitable foundation has been approved by the Board of Directors of SR Bancorp and Somerset Savings Bank and is subject to approval by Somerset Savings Bank’s voting members. If the voting members do not approve the charitable foundation, we may, in our discretion, complete the conversion and offering without the inclusion of the charitable foundation and without resoliciting subscribers. We may also determine, in our discretion, not to complete the conversion and offering if the voting members do not approve the establishment and funding of the charitable foundation.

The amount of common stock that we would offer for sale would be greater if the offering were to be completed without the formation of Somerset Regal Charitable Foundation. For a further discussion of the financial impact of the charitable foundation, including its effect on those who purchase shares in the offering and on the shares issued to shareholders of SR Bancorp, see “Risk Factors—The Contribution to the Charitable Foundation Will Dilute Your Ownership Interest and Adversely Affect Net Income in Fiscal 2024” and “Comparison of Independent Valuation and Pro Forma Financial Information With and Without the Charitable Foundation.”

Benefits of the Offering to Management and Potential Dilution to Shareholders Following the Conversion

We intend to adopt the benefit plans described below, which will result in additional compensation expense. The actual expense will depend on the market value of SR Bancorp’s common stock. As indicated under “Pro Forma Unaudited Condensed Consolidated Financial Statements Giving Effect to the Conversion and Proposed Merger,” based upon assumptions set forth therein, the annual pre-tax expense related to the employee stock ownership plan and the stock-based benefit plan (including stock options and stock awards) would be $444,000 and $2.0 million, respectively, assuming shares are sold in the offering at the adjusted maximum of the offering range and shares have a value of $10.00 per share. See “Pro Forma Unaudited Condensed Consolidated Financial Statements Giving Effect to the Conversion and Proposed Merger” for a detailed analysis of the expenses of each of these plans.

Employee Stock Ownership Plan. We intend to establish an employee stock ownership plan that will purchase shares equal to 8.0% of the total shares of common stock issued in the stock offering, including shares contributed to the charitable foundation, or 772,800 shares of common stock, assuming we sell the maximum number of the shares in the offering. This plan is a tax-qualified retirement plan for the benefit of all our employees. Purchases by the employee stock ownership plan will be included in determining whether the required minimum number of shares has been sold in the offering. The employee

stock ownership plan will use the proceeds from a 20-year loan from SR Bancorp to purchase these shares. As the loan is repaid and shares are released from collateral, the shares will be allocated to the accounts of employee participants. Allocations will be based on a participant’s compensation as a percentage of total plan compensation. Non-employee directors are not eligible to participate in the employee stock ownership plan. Assuming the employee stock ownership plan purchases 772,800 shares in the offering, we will recognize additional pre-tax compensation expense of
$7.7 million over a 20-year period, assuming the shares of common stock have a fair market value of $10.00 per share. If, in the future, the shares of common stock have a fair market value greater or less than $10.00, the compensation expense will increase or decrease accordingly. See “Pro Forma Unaudited Condensed Consolidated Financial Statements Giving Effect to the Conversion and Proposed Merger” for an illustration of the effects of this plan.

Stock-Based Benefit Plan. In addition to shares purchased by the employee stock ownership plan, we intend to grant stock options and stock awards under one or more stock-based benefit plans that we intend to implement no sooner than six months after the completion of the conversion and related stock offering. Shareholder approval of these plans will be required. If adopted within 12 months following the completion of the conversion and related stock offering, the stock-based benefit plan will reserve shares of restricted stock and stock options equal to 4.0% and 10.0% of the shares issued in the offering, respectively, including shares contributed to Somerset Regal Charitable Foundation, or up to 386,400 shares and 966,000 shares of common stock at the maximum of the offering range, respectively, for awards to employees and directors, at no cost to the recipients. If the stock-based benefit plan is adopted after one year from the date of the completion of the conversion and related stock offering, the 4.0% and 10.0% limitations described above will no longer apply. We have not yet determined whether we will present any such plan for shareholder approval before or after 12 months following the completion of the conversion and related stock offering.

The following additional restrictions would apply to our stock-based benefit plan only if such plan is adopted within one year after the conversion and offering:

•

non-employee directors in the aggregate may not receive more than 30% of the options and shares of restricted common stock authorized under the plan;

•

no non-employee director may receive more than 5% of the options and shares of restricted common stock authorized under the plan;

•

no individual may receive more than 25% of the options and shares of restricted common stock authorized under the plan;

•

options and shares of restricted common stock may not vest more rapidly than 20% per year, beginning on the first anniversary of stockholder approval of the plan; and

•

accelerated vesting is not permitted except for death, disability or upon a change in control of Somerset Regal Bank or SR Bancorp.

The following table summarizes the stock benefits that our officers, directors and employees may receive following the conversion, at the adjusted maximum of the offering range and assuming that our employee stock ownership plan purchases 8.0% of the common stock issued in the offering (including shares contributed to the charitable foundation) and that we implement a stock-based benefit plan granting options to purchase 10.0% of the total shares of common stock of SR Bancorp issued in connection with the offering (including shares contributed to the charitable foundation) and awarding shares of restricted common stock equal to 4.0% of the total shares of common stock of SR Bancorp issued in connection with the offering (including shares contributed to the charitable foundation).


Plan	Individuals Eligible to Receive Awards		As a Percent of Common Stock Outstanding			Value of Benefits Based on Adjusted Maximum of Offering Range (In Thousands)
Employee stock ownership plan		All employees		8.0	%	$	8,887
Stock awards		Directors, officers and employees		4.0			4,444
Stock options		Directors, officers and employees		10.0			5,499	⁽¹⁾

Total				22.0	%	$	18,830

(1)

The actual value of restricted stock grants will be determined based on their fair value as of the date grants are made. Fair value is assumed to be the same as the offering price of $10.00 per share. The fair value of stock options has been estimated at $4.95 per option using the Black-Scholes option pricing model with the following assumptions: a grant-date share price and option exercise price of $10.00; dividend yield of 0%; an expected option life of 10 years; a risk free interest rate of 3.48%; and a volatility rate of 32.02% based on an index of publicly traded bank and thrift institutions. The actual expense of the stock option plan will be determined by the grant-date fair value of the options, which will depend on a number of factors, including the valuation assumptions used in the option pricing model ultimately adopted which may or may not be Black-Scholes.

The value of the shares of common stock will be based on the price per share of our common stock at the time those shares are granted. The following table presents the total value of all shares of common stock to be available for award and issuance under the stock-based benefit plan, assuming the stock-based benefit plan award shares of common stock equal to 4.0% of the common stock issued in the offering, including shares contributed to the charitable foundation, and the shares for the plans are purchased or issued in a range of market prices from $8.00 per share to $14.00 per share.


Share Price	285,600 Shares Awarded at Minimum of Offering Range	336,000 Shares Awarded at Midpoint of Offering Range	386,400 Shares Awarded at Maximum of Offering Range	444,360 Shares Awarded at Maximum of Offering Range, As Adjusted
(In thousands, except share price information)
$8.00	$2,285	$2,688	$3,091	$3,555
10.00	2,856	3,360	3,864	4,444
12.00	3,427	4,032	4,637	5,332
14.00	3,998	4,704	5,410	6,221

The grant-date fair value of the options granted under the stock-based benefit plan will be based, in part, on the price per share of our common stock at the time the options are granted. The value will also depend on the various assumptions utilized in the option-pricing model ultimately adopted. The following table presents the total estimated value of the options to be available for grant under the stock-based benefit plan, assuming the stock-based benefit plan awards options equal to 10.0% of the outstanding shares of common stock after completion of the conversion and related stock offering, including shares contributed to the charitable foundation, assuming the range of market prices for the shares are $8.00 per share to $14.00 per share at the time of the grant. The Black-Scholes option pricing model provides an estimate only of the fair value of the options. The actual value of the options may differ significantly from the value set forth in the table.


Exercise Price	Grant-Date Fair Value Per Option	714,000 Options at Minimum of Offering Range	840,000 Options at Midpoint of Offering Range	966,000 Options at Maximum of Offering Range	1,110,900 Options at Maximum of Offering Range, As Adjusted
(In thousands, except share price information)
$8.00	$3.96	$2,827	$3,326	$3,825	$4,399
10.00	4.95	3,534	4,158	4,782	5,499
12.00	5.94	4,241	4,990	5,738	6,599
14.00	6.93	4,948	5,821	6,694	7,699

Tax Consequences

Somerset Savings Bank and SR Bancorp have received an opinion of counsel, Luse Gorman, PC, regarding the material federal income tax consequences of the conversion, including an opinion that it is more likely than not that the fair market value of the non-transferable subscription rights to purchase the common stock will be zero and, accordingly, no gain or loss will be recognized by members upon the distribution to them of the non-transferable subscription rights to purchase the common stock and no taxable income will be realized by members as a result of the exercise of the nontransferable subscription rights. Somerset Savings Bank and SR Bancorp have also received an opinion of Baker Tilly US, LLP regarding the material New Jersey state tax consequences of the conversion. As a general matter, the conversion will not be a taxable transaction for purposes of federal or state income taxes to Somerset Savings Bank, SR Bancorp, or persons eligible to subscribe in the subscription offering. See the section of this prospectus entitled “Taxation” for additional information regarding taxes.

Persons Who Can Order Stock in the Offering

We have granted rights to subscribe for shares of SR Bancorp common stock in a “subscription offering” to the following persons in the following order of priority:

Persons with $50 or more on deposit at Somerset Savings Bank as of the close of business on June 30, 2021 (“Eligible Account Holders”).

The tax-qualified employee benefit plans of Somerset Savings Bank (including our employee stock ownership plan and 401(k) plan).

Persons with $50 or more on deposit at Somerset Savings Bank as of the close of business on June 30, 2023 (“Supplemental Eligible Account Holders”).

Persons with a deposit account at Somerset Savings Bank as of the close of business on July 5, 2023 (“Voting Members”).

If we receive subscriptions for more shares than are to be sold in this stock offering, we may be unable to fill or may only partially fill your order. Shares will be allocated in order of the priorities described above under a formula outlined in the plan of conversion. See “The Conversion and Stock Offering—Subscription Offering and Subscription Rights” for a description of the allocation priorities and procedures.

We may offer shares not sold in the subscription offering to the general public in a “community offering” that can begin concurrently with, during or immediately following the subscription offering. Orders received in the community offering will be subordinate to subscription offering orders. Natural persons and trustees of natural persons residing in the following counties in the State of New Jersey: Hunterdon, Middlesex and Somerset will have first preference to purchase shares in the community offering and remaining shares will be available to the general public. Shares of common stock not purchased in the subscription offering or the community offering may be offered for sale through a “syndicated community offering” managed by KBW. We have the right to accept or reject, in whole or in part, in our sole discretion, orders we receive in the community offering and syndicated community offering.

You May Not Sell or Transfer Your Subscription Rights

Applicable regulations prohibit you from transferring your subscription rights. If you order shares of common stock in the subscription offering, you will be required to certify that you are purchasing the common stock for yourself and that you have no agreement or understanding to sell or transfer your subscription rights or the shares that you are purchasing. We intend to take legal action, including reporting persons to federal or state agencies, against anyone who we believe has sold or transferred his or her subscription rights. We will not accept your order if we have reason to believe you have sold or transferred your subscription rights. On the stock order form, you cannot add the names of others for joint stock registration who do not have subscription rights or who qualify only in a lower subscription offering priority than you do. Doing so may jeopardize your subscription rights. You may only add those who were eligible to purchase shares of common stock in the subscription offering at your date of eligibility. In addition, the stock order form requires that you list all deposit accounts, giving all names on each account and the account number at the applicable eligibility date. Failure to provide this information, or providing incomplete or incorrect information, may result in a loss of part or all of your share allocation if there is an oversubscription.

How to Purchase Common Stock

In the subscription offering and the community offering, you may pay for your shares by:

Personal check, bank check or money order, from the purchaser, made payable directly to SR Bancorp; or

authorizing us to withdraw available funds (without any early withdrawal penalty) from your Somerset Savings Bank deposit account(s), other than checking accounts or individual retirement accounts (“IRAs”). To use funds from accounts with check writing privileges, please submit a check. To use IRA funds, please see “—Using IRA Funds to Purchase Shares in the Offering” below.

Somerset Savings Bank is not permitted to knowingly lend funds (including funds drawn on a Somerset Savings Bank line of credit) to anyone for the purpose of purchasing shares of common stock in the offering. Also, payment may not be made by cash or wire transfer. Additionally, you may not use any type of third party check to pay for shares of common stock.

Checks and money orders will be immediately cashed, so the funds must be available within the account when we receive your original stock order form and check. The funds will be deposited by us into a Somerset Savings Bank segregated account, or at our discretion, at another insured depository institution. We will pay interest at Somerset Savings Bank’s passbook savings rate from the date those funds are processed until completion or termination of the offering. Withdrawals from certificates of deposit at Somerset Savings Bank for the purpose of purchasing common stock in the offering may be made without incurring an early withdrawal penalty. All funds authorized for withdrawal from deposit accounts with Somerset Savings Bank must be available within the deposit accounts at the time the stock order form is received. A hold will be placed on the amount of funds designated on your stock order form. Those funds will be unavailable to you during the offering; however, the funds will not be withdrawn from the accounts until the stock offering is completed and will continue to earn interest at the applicable contractual deposit account rate until the completion of the stock offering. If, upon a withdrawal from a certificate of deposit account, the balance falls below the minimum balance requirement, the remaining funds will earn interest at the current passbook savings rate.

You may submit your original stock order form in one of three ways: (1) by mail, using the stock order reply envelope provided; (2) by paying for overnight courier to the address indicated on the stock order form; or (3) by hand delivery to Somerset Savings Bank’s office, located at 220 West Union Avenue, Bound Brook, New Jersey. Stock order forms may not be hand-delivered to our banking offices. Our banking offices will not have offering materials on hand. Once submitted, your order is irrevocable. We are not required to accept copies or facsimiles of stock order forms.

Using IRA Funds to Purchase Shares in the Offering

You may be able to subscribe for shares of common stock using funds in your IRA, or other retirement account. If you wish to use some or all of the funds in your Somerset Savings Bank IRA or other retirement account, the applicable funds must be transferred to a self-directed account maintained by an independent trustee, such as a brokerage firm, and the purchase must be made through that account. If you do not have such an account, you will need to establish one before placing your stock order, which may require the payment of a one-time and/or annual administrative fee to the independent trustee. Because individual circumstances differ and the processing of retirement fund orders takes additional time, we recommend that you contact our Stock Information Center promptly, preferably at least two weeks before the August 15, 2023 offering deadline, for assistance with purchases using your individual retirement account or other retirement account you may have at Somerset Savings Bank or elsewhere. Whether you may use such funds to purchase shares in the stock offering may depend on timing constraints and, possibly, limitations imposed by the institution where the funds are held.

Purchase Limitations

The minimum number of shares of common stock that may be purchased is 25. Generally, no individual, or individuals exercising subscription rights through a single qualifying deposit account held jointly, may purchase more than 25,000 shares ($250,000) of common stock. If any of the following persons purchases shares of common stock, their purchases, when combined with your purchases, cannot exceed 40,000 shares ($400,000) in all categories of the offering, combined:

•

Any person who is related by blood or marriage to you and who lives in your home;

•

Companies or other entities in which you are an officer or partner or have a 10% or greater beneficial ownership interest;

•

Trusts or other estates in which you have a substantial beneficial interest or as to which you serve as a trustee or in another fiduciary capacity; and

•

Any other persons who may be your associates or persons acting in concert with you.

We may, in our sole discretion and without further notice to or solicitation of subscribers or other prospective purchasers, increase the maximum purchase limitation to 9.9% of the number of shares sold in the offering, provided that the total number of shares purchased by persons, their associates and those persons with whom they are acting in concert, to the extent such purchases exceed 5% of the shares sold in the offering, shall not exceed, in the aggregate, 10% of the total number of the shares sold in the offering.

Unless we determine otherwise, persons having the same address and persons exercising subscription rights through qualifying deposit accounts registered to the same address will be subject to this overall purchase limitation. We have the right to determine, in our sole discretion, whether prospective purchasers are “associates” or “acting in concert.”

Subject to regulatory approval, we may increase or decrease the purchase limitations at any time. Our tax-qualified employee benefit plans, including our employee stock ownership plan, are authorized to purchase up to 10.0% of the shares issued in the offering, including shares contributed to our charitable foundation, without regard to these purchase limitations.

Delivery of Prospectus

To ensure that each person receives a prospectus at least 48 hours before the deadline for orders for common stock, we may not mail prospectuses any later than five days before such date or hand-deliver prospectuses later than two days before that date. Stock order forms may only be delivered if accompanied or preceded by a prospectus. We are not obligated to deliver a prospectus or stock order form by means other than U.S. mail. Execution of a stock order form will confirm receipt of delivery of a prospectus in accordance with SEC Rule 15c2-8.

We will make reasonable attempts to provide a prospectus and offering materials to holders of subscription rights. The subscription offering and all subscription rights will expire at 2:00 p.m., Eastern time, on August 15, 2023, whether or not we have been able to locate each person entitled to subscription rights.

Once Submitted, Your Stock Purchase Order May Not Be Revoked Except Under Certain Circumstances

Funds that you submit to purchase shares of our common stock in the stock offering will be held in a segregated account at Somerset Savings Bank, or at our discretion, at another insured depository institution, until the termination or completion of the offering, including any extension of the expiration date. Because completion of the conversion is subject to the receipt of all required regulatory approvals, including an update of the independent appraisal, among other factors, there may be one or more delays in the completion of the conversion. Any orders that you submit to purchase shares of our common stock in

the offering are irrevocable, and you will not have access to subscription funds unless the offering is terminated, or extended beyond September 29, 2023, or the number of shares to be sold in the stock offering is increased to more than 10,580,000 shares or decreased to fewer than 6,800,000 shares.

Purchases and Stock Elections by Directors and Executive Officers

We expect that our directors and executive officers, together with their associates, will subscribe for approximately 128,500 shares, which equals 1.9% of the total shares of SR Bancorp that would be outstanding following the stock offering at the minimum of the offering range, including the contribution of shares of SR Bancorp stock to the charitable foundation. Our directors and executive officers will pay the same $10.00 per share price as everyone else who purchases shares in the stock offering. Like all of our eligible depositor purchasers, our directors and executive officers have subscription rights based on their deposits and, in the event of an oversubscription, their orders will be subject to the allocation provisions set forth in our plan of conversion. Purchases by our directors and executive officers will count towards the minimum number of shares we must sell to close the offering.

Market for SR Bancorp’s Common Stock

We have never issued capital stock and there is no established market for our common stock. We anticipate that our shares of common stock will be listed on the Nasdaq Capital Market under the symbol “SRBK.” KBW currently intends to become a market maker in the common stock, but it is under no obligation to do so.

SR Bancorp’s Dividend Policy

We have not determined whether we will pay dividends on shares of our common stock. After the offering, we will consider a policy of paying regular cash dividends. Our ability to pay dividends will depend on a number of factors, including capital requirements, regulatory limitations, tax considerations, general economic conditions and our operating results and financial condition. Initially, our ability to pay dividends will be limited to the net proceeds of the offering retained by SR Bancorp and earnings from the investment of such proceeds. Additionally, Somerset Savings Bank could dividend cash to SR Bancorp, subject to regulatory limitations described in more detail in “Our Dividend Policy.”

Restrictions on the Acquisition of SR Bancorp and Somerset Savings Bank

Federal regulations, as well as provisions contained in the certificate of incorporation, articles of incorporation and bylaws of SR Bancorp and Somerset Savings Bank restrict the ability of any person, firm or entity to acquire SR Bancorp, Somerset Savings Bank, or their respective capital stock. These restrictions include the requirement that a potential acquirer of common stock obtain the prior approval of the Federal Reserve, the FDIC and/or the NJDBI before acquiring in excess of 10% of the voting stock of SR Bancorp or Somerset Savings Bank, as well as a provision in SR Bancorp’s articles of incorporation that provides that any shares acquired in excess of 10% of the voting stock of SR Bancorp would not be entitled to be voted and would not be counted as voting stock in connection with any matters submitted to the shareholders for a vote. Under regulations applicable to the conversion, for a period of three years following completion of the conversion, no person may acquire beneficial ownership of more than 10% of our common stock without prior approval of the Federal Reserve.

Steps We May Take if We Do Not Receive Orders for the Minimum Number of Shares

If we do not receive orders for at least 6,800,000 shares of common stock, we may take several steps to sell the minimum number of shares of common stock in the offering range. Specifically, we may:

•

increase the purchase limitations;

•

seek regulatory approval to extend the stock offering beyond September 29, 2023, so long as we resolicit subscribers who previously submitted subscriptions in the stock offering; and/or

•

reduce the valuation and offering range, provided that any such extension or reduction will require us to resolicit subscriptions received in the offering and provide subscribers with the opportunity to increase, decrease or cancel their subscriptions.

If we extend the offering past September 29, 2023, all subscribers will be notified and given an opportunity to confirm, change or cancel their orders. If you do not respond to this notice, we will cancel your stock order and promptly return your funds with interest for funds received in the subscription and community offering or cancel your deposit account withdrawal authorization. If one or more purchase limitations are increased, subscribers in the subscription offering who ordered the

maximum amount and checked the box on the stock order form, will be, and, in our sole discretion, some other large purchasers may be, given the opportunity to increase their subscriptions up to then-applicable limit. If the number of shares to be sold in the stock offering is increased to more than 10,580,000 shares or decreased to less than 6,800,000 shares, we will resolicit subscribers, and all funds delivered to us to purchase shares of common stock in the subscription and community offerings will be returned promptly with interest.

Delivery of Shares of Common Stock

All shares of common stock sold will be issued in book entry form. Stock certificates will not be issued. A statement reflecting ownership of shares of common stock issued in the subscription and community offerings will be mailed by our transfer agent to the persons entitled thereto at the registration address noted by them on their stock order forms as soon as practicable following consummation of the conversion and related stock offering. We expect trading in the stock to begin on the day of completion of the conversion and related stock offering or the next business day. Until a statement reflecting ownership of shares of common stock is available and delivered to purchasers, purchasers might not be able to sell the shares of common stock that they ordered, even though the shares of common stock will have begun trading. Your ability to sell the shares of common stock before receiving your statement will depend on arrangements you may make with a brokerage firm.

Emerging Growth Company Status

We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). For as long as we are an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies. See “Risk Factors—Risks Related to the Offering—We are an emerging growth company and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors” and “Regulation and Supervision—Emerging Growth Company Status.”

An emerging growth company may elect to use an extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies, but must make such election when the company is first required to file a registration statement. Such an election is irrevocable during the period a company is an emerging growth company. We have elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

Important Risks in Owning SR Bancorp, Inc.’s Common Stock

An investment in our common stock involves substantial risks and uncertainties. Investors should carefully consider all of the information in this prospectus, including the detailed discussion of these and other risks under “Risk Factors” beginning on page 16, before investing in our common stock. Some of the more significant risks include the following:

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The COVID-19 pandemic could continue to pose risks to our business, our results of operations and the future prospects of SR Bancorp;

•

Regulatory approvals for the proposed Merger may not be received, may take longer than expected, or may impose conditions that are not presently anticipated, cannot be met or that could have an adverse effect on the resulting company following the Merger;

•

The Merger Agreement may be terminated in accordance with its terms and the proposed Merger may not be completed;

•

Somerset Savings Bank may be unable to effectively integrate Regal Bank’s operations;

•

We could potentially recognize goodwill impairment charges after the proposed Merger;

•

Unanticipated costs related to the Merger could reduce SR Bancorp’s future earnings;

•

A worsening of economic conditions in our market area could reduce demand for our products and services and/or result in increases in our level of non-performing loans, which could adversely affect our operations, financial condition and earnings;

•

Inflation can have an adverse impact on our business and on our customers;

•

Recent bank industry events involving financial institution failures may adversely affect our business and the market price of our common stock;

•

An economic recession could result in increases in our level of non-performing loans and/or reduce demand for our products and services, which would lead to lower revenue, higher loan losses and lower earnings;

•

The geographic concentration of our loan portfolio and lending activities makes us vulnerable to a downturn in our local market area;

•

Changes in interest rates or the shape of the yield curve may adversely affect our profitability and financial condition;

•

Our business strategy includes growth, and our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively;

•

New lines of business or new products and services may subject us to additional risks;

•

All of our loans are secured by real estate, and a downturn in the local real estate market could negatively impact our profitability;

•

Our, and Regal Bank’s, reliance on third parties to originate certain loans may negatively impact our financial results if such relationships are discontinued;

•

Because we intend to increase our multi-family and commercial real estate and commercial loan originations, our lending risk will increase;

•

If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings and capital could decrease;

•

If our non-performing assets increase, our earnings will be adversely affected;

•

Our inability to generate core deposits may cause us to rely more heavily on wholesale funding strategies for funding and liquidity needs, which could have an adverse effect on our net interest margin and profitability;

•

Strong competition within our market area may limit our growth and profitability;

•

We face significant operational risks because the nature of the financial services business involves a high volume of transactions;

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Cyber-attacks or other security breaches could adversely affect our operations, net income or reputation;

•

Risks associated with system failures, interruptions, or breaches of security could negatively affect our earnings;

•

The cost of additional finance and accounting systems, procedures and controls in order to satisfy our new public company reporting requirements will increase our expenses;

•

We are a community bank and our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance;

•

Our risk management framework may not be effective in mitigating risk and reducing the potential for significant losses;

•

Changes in laws and regulations and the cost of regulatory compliance with new laws and regulations may adversely affect our operations and/or increase our costs of operations;

•

Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions;

•

Monetary policies and regulations of the Federal Reserve could adversely affect our business, financial condition and results of operations;

•

We are an emerging growth company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors;

•

We are also a smaller reporting company, and even if we no longer qualify as an emerging growth company, any decision on our part to comply only with certain related reporting and disclosure requirements applicable to smaller reporting companies could make our common stock less attractive to investors;

•

Changes in accounting standards could affect reported earnings;

•

Changes in management’s estimates and assumptions may have a material impact on our consolidated financial statements and our financial condition or operating results;

•

The future price of the shares of common stock may be less than the $10.00 purchase price per share in the stock offering;

•

Our failure to effectively deploy the net proceeds from the offering may have an adverse effect on our financial performance;

•

Our return on equity will be low following the stock offering. This could negatively affect the trading price of our shares of common stock;

•

Our stock-based benefit plan will increase our expenses and reduce our income;

•

The implementation of our stock-based benefit plan may dilute your ownership interest;

•

Various factors may make takeover attempts more difficult to achieve;

•

There may be a limited trading market in our shares of common stock, which would hinder your ability to sell our common stock and may lower the market price of our common stock;

•

You may not revoke your decision to purchase SR Bancorp common stock in the subscription or community offerings after you send us your order;

•

The distribution of subscription rights could have adverse income tax consequences;

•

The contribution to the charitable foundation will dilute your ownership interest and adversely affect net income in fiscal 2024; and

•

Our contribution to the charitable foundation may not be tax deductible, which could reduce our profits.

How You Can Obtain Additional Information—Stock Information Center

Our banking personnel may not, by law, assist with investment-related questions about the stock offering. If you have any questions regarding the conversion or offering, please call our Stock Information Center toll free, at 1-(844) 265-9680. The Stock Information Center is open Monday through Friday between 10:00 a.m. and 4:00 p.m., Eastern time. The Stock Information Center will be closed on bank holidays.

Following the Completion of the Conversion and Related Stock Offering, Shares of Regal Bancorp Common Stock Will be Exchanged for $23.00 in Cash

Following the completion of the conversion and related stock offering and upon the completion of the proposed Merger, each outstanding share of Regal Bancorp common stock will automatically be converted into the right to receive $23.00 in cash.

Conditions to Completing the Proposed Merger

We cannot complete the proposed Merger unless:

•

the conversion and stock offering are completed;

•

we receive the approval of the NJDBI, the FDIC and Federal Reserve (or the waiver of any required notice or application); and

•

Regal Bancorp’s shareholders approve the Merger Agreement.

RISK FACTORS

You should consider carefully the following risk factors in evaluating an investment in the shares of common stock.

Risks Related to COVID-19

The COVID-19 pandemic could continue to pose risks to our business, our results of operations and the future prospects of SR Bancorp.

The COVID-19 pandemic has adversely impacted the global and national economy and certain industries and geographies in which our clients operate. Given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 pandemic on the business of SR Bancorp, its clients, employees and third-party service providers. The extent of such impact will depend on future developments, which are highly uncertain. Additionally, the responses of various governmental and non-governmental authorities and consumers to the pandemic may have material long-term effects on SR Bancorp and its clients which are difficult to quantify in the near-term or long-term.

Risks Related to the Proposed Merger

Before the Merger and the bank merger may be completed, SR Bancorp and Regal Bancorp must obtain certain regulatory approvals. The approvals could be delayed or not obtained at all and, if they are granted, may impose terms and conditions, limitations, obligations or costs, or place restrictions on the conduct of the resulting company’s business or require changes to the terms of the transactions contemplated by the Merger Agreement. Any such conditions, limitations, obligations or restrictions could delay or prevent the completion of the transactions contemplated by the Merger Agreement, impose additional material costs on or materially limit the revenues of the resulting company following the Merger or otherwise reduce the anticipated benefits of the Merger.

The Merger Agreement may be terminated in accordance with its terms and the proposed Merger may not be completed.

The Merger Agreement is subject to a number of conditions which must be fulfilled in order to complete the proposed Merger. These conditions include, but are not limited to, (i) approval by Regal Bancorp shareholders and Somerset Savings Bank voting members, (ii) the receipt of all regulatory approvals, (iii) the absence of any order, decree, injunction or proceeding by a governmental entity that prohibits the proposed Merger being in effect, and no law, statute, rule or regulation having been enacted, promulgated or enforced by any governmental entity which would prohibit the completion of the proposed Merger and (iv) certain other customary closing conditions. These conditions to completing the proposed Merger may not be fulfilled in a timely manner or at all, and, accordingly, the proposed Merger may not be completed. In addition, the parties can mutually decide to terminate the Merger Agreement at any time and may elect to terminate the Merger Agreement in certain other circumstances.

Somerset Savings Bank may be unable to effectively integrate Regal Bank’s operations.

The proposed Merger involves the integration of Regal Bank into Somerset Savings Bank. The difficulties of integrating the operations of these two institutions include, among other things:

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integrating personnel with diverse business backgrounds;

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combining different corporate cultures; and

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retaining key employees.

The process of integrating operations could cause an interruption of, or loss of momentum in, the activities of one or more of SR Bancorp, Somerset Savings Bank, and Regal Bank and the loss of key personnel. The integration of Regal Bank

will require the experience and expertise of certain key employees of Regal Bank who are expected to be retained by Somerset Savings Bank. However, there can be no assurances that Somerset Savings Bank will be successful in retaining these employees for the period necessary to successfully integrate Regal Bank’s operations. The diversion of management’s attention and any delays or difficulties encountered in connection with the proposed Merger, along with Regal Bank’s integration, could have an adverse effect on the business and results of operations of Regal Bancorp and SR Bancorp.

We could potentially recognize goodwill impairment charges after the proposed Merger and conversion.

Our merger with Regal Bancorp will be accounted for using the purchase method of accounting. In accordance with applicable accounting principles, SR Bancorp estimates that, as a result of the proposed Merger, total intangible assets of $28.2 million, including goodwill totaling $19.4 million, will be recorded under Statement of Financial Accounting Standard No. 142 (“SFAS No. 142”). As a result, at the maximum of the offering range, goodwill will equal approximately 9.4% of the $195.2 million of pro forma consolidated total shareholders’ equity at March 31, 2023. Pursuant to the provisions of SFAS No. 142, SR Bancorp will annually review the fair value of its investment in Regal Bancorp to determine that such fair value equals or exceeds the carrying value of its investment, including goodwill. If the fair value of our investment in Regal Bancorp does not equal or exceed its carrying value, we will be required to record goodwill impairment charges, which may adversely affect our future earnings. The fair value of a banking franchise can fluctuate downward based on a number of factors that are beyond management’s control, e.g. adverse trends in interest rates and increased loan losses. If our banking franchise value declines after consummation of the conversion and the proposed Merger, there may be goodwill impairment charges to operations, which would adversely affect our future earnings.

Unanticipated costs relating to the proposed Merger could reduce SR Bancorp’s future earnings.

Somerset Savings Bank and SR Bancorp believe they have reasonably estimated the likely costs of integrating the operations of Regal Bancorp and Regal Bank and the incremental costs of operating as a combined company. However, it is possible that unexpected transaction costs such as taxes, fees, professional expenses or unexpected future operating expenses, such as increased personnel costs or increased taxes, as well as other types of unanticipated adverse developments, could have a material adverse effect on the results of operations and financial condition of SR Bancorp and/or Somerset Savings Bank after the proposed Merger. If unexpected costs are incurred, the proposed Merger could have a dilutive effect on SR Bancorp’s earnings. In other words, if the proposed Merger is completed and SR Bancorp and/or Somerset Savings Bank incurs unexpected costs and expenses as a result of the proposed Merger, SR Bancorp’s earnings could be less than anticipated.

Risks Related to Economic Conditions

Local economic conditions have a significant impact on the ability of our borrowers to repay loans and the value of the collateral securing loans. A deterioration in economic conditions, especially local conditions, could have the following consequences, any of which could have a material adverse effect on our business, financial condition, liquidity and results of operations, and could more negatively affect us compared to a financial institution that operates with more geographic diversity:

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demand for our products and services may decline;

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loan delinquencies, problem assets and foreclosures may increase;

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collateral for loans, especially real estate, may decline in value, thereby reducing customers’ future borrowing power, and reducing the value of assets and collateral associated with existing loans; and

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the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us.

Moreover, a significant decline in general economic conditions caused by inflation, recession, acts of terrorism, civil unrest, an outbreak of hostilities or other international or domestic calamities, an epidemic or pandemic, unemployment or other factors beyond our control could further impact these local economic conditions and could further negatively affect the financial results of our banking operations. In addition, deflationary pressures, while possibly lowering our operating costs, could have a significant negative effect on our borrowers, especially our business borrowers, and the values of underlying collateral securing loans, which could negatively affect our financial performance.

Inflation can have an adverse impact on our business and on our customers.

Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money. Recently, there has been a rise in inflation and the Federal Reserve Board has raised certain benchmark interest rates in an effort to combat inflation. As discussed below under “—Risks Related to Interest Rates – Changes in interest rates or the shape of the yield curve may adversely affect our profitability and financial condition,” as inflation increases and market interest rates rise the value of our investment securities, particularly those with longer maturities, would decrease, although this effect can be less pronounced for floating rate instruments. In addition, inflation generally increases the cost of goods and services we use in our business operations, such as electricity and other utilities, which increases our noninterest expenses. Furthermore, our customers are also affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans with us.

Recent bank industry events involving financial institution failures may adversely affect our business and the market price of our common stock.

Recent developments and events in the financial services industry, including the failures of Silicon Valley Bank, Signature Bank and First Republic Bank and the voluntary liquidation of Silvergate Bank, have resulted in decreased confidence in banks among depositors, other counterparties and investors, as well as significant disruption, volatility and reduced valuations of equity and other securities of banks in the capital markets. These events have occurred against the backdrop of a rapidly rising interest rate environment which, among other things, has resulted in unrealized losses in longer duration securities and loans held by banks, more competition for bank deposits and may increase the risk of a potential recession. These events and developments could materially and adversely impact our business or financial condition, including through potential liquidity pressures, reduced net interest margins, and potential increased credit losses. These recent events and developments have, and could continue to, adversely impact the market price and volatility of our common stock. These recent events may also result in changes to laws or regulations governing banks and bank holding companies or result in the impositions of restrictions through supervisory or enforcement activities, including higher capital requirements, which could have a material impact on our businesses. The cost of resolving the recent failures may prompt the FDIC to increase its premiums above the recently increased levels or to issue additional special assessments.

Our business activities and earnings are affected by general business conditions in the United States and in our local market area. These conditions include short-term and long-term interest rates, inflation, unemployment levels, real estate values, monetary supply, consumer confidence and spending, fluctuations in both debt and equity capital markets, and the strength of the economy in the United States generally and in our market area in particular. If the national economy experiences a recession, which might include rising unemployment levels, declines in real estate values and/or an erosion in consumer confidence, the ability of our borrowers to repay their loans in accordance with their terms could be impaired. Nearly all of our loans are secured by real estate or made to businesses in the counties in which we have offices in New Jersey. As a result of this concentration, a prolonged or more severe downturn in the local economy, could result in significant increases in non-performing loans, negatively impacting our interest income and resulting in higher provisions for loan losses. An economic downturn could also result in reduced demand for credit, which would lessen our revenues.

The geographic concentration of our loan portfolio and lending activities makes us vulnerable to a downturn in our local market area.

Our loan portfolio is concentrated primarily in North Central New Jersey. This makes us vulnerable to a downturn in the local economy and real estate markets, although our local market area has not experienced any recent material declines in real estate value, nor have we experienced a material increase in the number of foreclosures during the preceding twelve months. Adverse conditions in the local economy such as unemployment, recession, a catastrophic event or other factors beyond our control could impact the ability of our borrowers to repay their loans, which could impact our net interest income. Decreases in local real estate values caused by economic conditions, changes in tax laws or other events could adversely affect the value of the property used as collateral for our loans, which could cause us to realize a loss in the event of a foreclosure. Further, deterioration in local economic conditions could increase our allowance for loan losses, which in turn could necessitate an increase in our provision for loan losses and a resulting reduction to our earnings and capital.

Risks Related to Interest Rates

Changes in interest rates or the shape of the yield curve may adversely affect our profitability and financial condition.

We derive our income mainly from the difference or spread between the interest earned on loans, securities and other interest-earning assets and the interest paid on deposits, borrowings and other interest-bearing liabilities. In general, the

larger the spread, the more we earn. When market interest rates change, the interest we receive on our assets and the interest we pay on our liabilities will fluctuate. This can cause decreases in our spread and can adversely affect our income.

In response to rising inflation, the Federal Reserve’s Federal Open Market Committee has significantly increased market interest rates, with the expectation of continued market interest rates increases. Our net interest spread and net interest margin may have decreased and may continue to decrease due to potential increases in our cost of funds that may outpace any increases in our yield on interest-earnings assets. The rates we earn on our assets and the rates we pay on our liabilities are generally fixed for a contractual period of time. Like many financial institutions, our liabilities generally have shorter contractual maturities than our assets. This is exacerbated due to our historical focus on one- to four-family residential real estate loans, the substantial majority of which have fixed interest rates. This imbalance can create significant earnings volatility because market interest rates change over time. In a period of rising interest rates, the interest income we earn on our assets may not increase as rapidly as the interest we pay on our liabilities. For example, during the nine month periods ended March 31, 2023 and 2022, Somerset Savings Bank experienced an increase in certificates of deposits and a decrease in lower-cost savings accounts reflecting the decision of many depositors to take advantage of increased interest rates being paid on certificates of deposits. In addition, the estimated fair value of the available-for-sale debt securities portfolio may change depending changes in interest rates, among other factors. Stockholders’ equity is increased or decreased by the amount of the change in the unrealized gain or loss (difference between the estimated fair value and the amortized cost) of the available-for-sale debt securities portfolio, under the category of accumulated other comprehensive income (loss). During the nine months ended March 31, 2023 and the year ended June 30, 2022, we incurred other comprehensive losses of $800,000 and $3.9 million, respectively, related to net changes in unrealized holding losses in the available-for-sale investment securities portfolio. Interest rates also affect how much money we lend. For example, when interest rates rise, the cost of borrowing increases and loan originations tend to decrease. In addition, changes in interest rates can affect the average life of loans and securities. For example, an increase in interest rates generally results in decreased prepayments of loans and mortgage-backed securities, as borrowers are less likely to refinance their debt. Changes in market interest rates also impact the value of our interest-earning assets and interest-bearing liabilities. In particular, the unrealized gains and losses on securities available for sale are reported, net of tax, in accumulated other comprehensive income, which is a component of shareholders’ equity. Consequently, declines in the fair value of these instruments resulting from changes in market interest rates have, and may continue to, adversely affect shareholders’ equity.

Risks Related to Growth

Our business strategy includes growth, and our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively.

Our business strategy includes growth in assets, deposits and the scale of our operations. Achieving our growth targets will require us to attract customers that currently bank at other financial institutions in our market, thereby increasing our share of the market, and to expand the size of our market area. Our ability to successfully grow will depend on a variety of factors, including our ability to attract and retain experienced bankers, the continued availability of desirable business opportunities, the competitive responses from other financial institutions in our market area and our ability to manage our growth. Growth opportunities may not be available or we may not be able to manage our growth successfully. If we do not manage our growth effectively, our financial condition and operating results could be negatively affected. Furthermore, there can be considerable costs involved in expanding lending capacity, and generally a period of time is required to generate the necessary revenues to offset these costs, especially in areas in which we do not have an established presence. Accordingly, any such business expansion can be expected to negatively impact our earnings until certain economies of scale are reached.

New lines of business or new products and services may subject us to additional risks.

From time to time, we may implement new lines of business or offer new products and services within existing lines of business. In addition, we will continue to invest in research, development, and marketing for new products and services. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new products and services, we may invest significant time and resources. Initial timetables for the development and introduction of new lines of business and/or new products or services may not be achieved and price and profitability targets may not prove feasible. Furthermore, if customers do not perceive our new offerings as providing significant value, they may fail to accept our new products and services. External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. Furthermore, the burden on management and our information technology in introducing any new line of business and/or new product or service could have a significant impact on the effectiveness of our system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Lending Activities

All of our loans are secured by real estate, and a downturn in the local real estate market could negatively impact our profitability.

At March 31, 2023, our entire total loan portfolio was secured by real estate, most of which is located in our primary lending market area of Hunterdon, Middlesex and Somerset Counties, New Jersey and surrounding areas. Future declines in real estate values in our primary lending markets and surrounding markets because of an economic downturn could significantly impair the value of the particular collateral securing our loans and our ability to sell the collateral upon foreclosure for an amount necessary to satisfy the borrower’s obligations to us. This could require us to increase our allowance for loan losses to address the decrease in the value of the real estate securing our loans, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Unlike larger financial institutions that are more geographically diversified, our profitability depends primarily on the general economic conditions in our primary market area. Local economic conditions have a significant impact on our residential real estate and other types of lending, including, the ability of borrowers to repay these loans and the value of the collateral securing these loans.

Moreover, a significant decline in general economic conditions, caused by inflation, acts of terrorism, an outbreak of hostilities or other international or domestic calamities or other factors beyond our control could further impact these local economic conditions and could further negatively affect our financial performance. In addition, deflationary pressures, while possibly lowering our operating costs, could have a significant negative effect on our borrowers, especially our business borrowers, and the values of underlying collateral securing loans, which could negatively affect our financial performance.

Our, and Regal Bank’s, reliance on third parties to originate certain loans may negatively impact our financial results if such relationships are discontinued.

We purchase residential mortgage loans from third-party brokers. Such purchases represented $34.1 million, or 75.8%, of our residential mortgage loan purchases and originations for the nine months ended March 31, 2023. Similarly, Regal Bank relies on third-party brokers to refer to it multi-family real estate loans. Such referrals represented $3.3 million, or 88.7%, of Regal Bank’s multi-family loan originations for the three months ended March 31, 2023 and $18.4 million, or 48.8%, of Regal Bank’s multi-family loan originations at December 31, 2022. These third parties are used to supplement the originations made by in-house staff. In each case, we and Regal Bank separately underwrite each loan before it is either purchased or closed. Should these broker relationships be discontinued or we or Regal Bank are otherwise unable to use these companies in the future, our ability to originate residential mortgage loans or multi-family real estate loans may be disrupted unless and until we are able to find a suitable replacement or have the capability to originate such loans through our lending staff. If we have to add more staff, our compensation expense would increase. Our income may be negatively affected if our residential mortgage lending or multi-family residential lending operations are disrupted.

Because we intend to increase our multi-family and commercial real estate and commercial loan originations, our lending risk will increase.

Multi-family and commercial real estate and commercial loans generally have more risk than residential mortgage loans. Because the repayment of multi-family and commercial real estate and commercial loans depends on the successful management and operation of the borrower’s properties or related businesses, repayment of such loans can be affected by adverse conditions in the real estate market or the local economy. Multi-family and commercial real estate and commercial loans may also involve relatively large loan balances to individual borrowers or groups of related borrowers. A downturn in the real estate market or the local economy could adversely impact the value of properties securing the loan or the revenues from the borrower’s business thereby increasing the risk of non-performing loans. Also, many multi-family and commercial real estate and commercial business borrowers can have more than one loan outstanding with us. Consequently, an adverse development with respect to one loan or one credit relationship can expose us to a significantly greater risk of loss compared to an adverse development with respect to a residential mortgage loan. Further, unlike residential mortgages or multi-family and commercial real estate loans, commercial and industrial loans may be secured by collateral other than real estate, such as inventory and accounts receivable, the value of which may be more difficult to appraise, may be more susceptible to fluctuation in value at default, and may be more difficult to realize upon enforcement of our remedies. As our multi-family and commercial real estate and commercial loan portfolios increase, the corresponding risks and potential for losses from these loans may also increase.

If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings and capital could decrease.

We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for our loans. In determining the amount of the allowance for loan losses, we review our loans and our loss and delinquency experience, and we evaluate other factors including, among other things, current economic conditions. If our assumptions are incorrect, or if

delinquencies or non-performing loans increase, our allowance for loan losses may not be sufficient to cover probable and incurred losses inherent in our loan portfolio, which would require additions to our allowance, that could materially decrease our net income. Our allowance for loan losses was 0.31% of total loans at March 31, 2023.

The Financial Accounting Standards Board has delayed the effective date of the implementation of Current Expected Credit Losses (“CECL”) standard. CECL will be effective for SR Bancorp on July 1, 2023. CECL will require financial institutions to determine periodic estimates of lifetime expected credit losses on loans, and recognize the expected credit losses as allowances for credit losses. This will change the current method of providing allowances for loan losses that are incurred or probable, which would likely require us to increase our allowance for credit losses, and to greatly increase the types of data we would need to collect and review to determine the appropriate level of the allowance for credit losses.

In addition, bank regulators periodically review our allowance for loan losses and, based on their judgments and information available to them at the time of their review, may require us to increase our allowance for loan losses or recognize further loan charge-offs. An increase in our allowance for loan losses or loan charge-offs as required by these regulatory authorities may reduce our net income and our capital, which may have a material adverse effect on our financial condition and results of operations.

If our non-performing assets increase, our earnings will be adversely affected.

At March 31, 2023, we had $147,000 in non-performing assets, which was comprised entirely of non-performing loans and no other real estate owned. Non-performing assets adversely affect our net income in various ways:

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we record interest income only on the cash basis or cost-recovery method for non-accrual loans and we do not record interest income for other real estate owned;

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we must provide for probable loan losses through a current period charge to the provision for loan losses;

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noninterest expense increases when we write down the value of properties in our other real estate owned portfolio to reflect changing market values;

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there are legal fees associated with the resolution of problem assets, as well as carrying costs, such as taxes, insurance, and maintenance fees; and

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the resolution of non-performing assets requires the active involvement of management, which can distract them from more profitable activity.

If additional borrowers become delinquent and do not pay their loans and we are unable to successfully manage our non-performing assets, our losses and troubled assets could increase significantly, which could have a material adverse effect on our financial condition and results of operations.

Risks Related to Our Funding

We must maintain sufficient funds to respond to the needs of depositors and borrowers. Deposits have traditionally been our exclusive source of funds for use in lending and investment activities. We also receive funds from loan repayments, investment maturities and income on other interest-earning assets. While we emphasize generating transaction accounts, we cannot guarantee if and when this will occur. Further, the considerable competition for deposits in our market area also has made, and may continue to make, it difficult for us to obtain reasonably priced deposits. Moreover, deposit balances can decrease if customers perceive alternative investments as providing a better risk/return tradeoff. If we are not able to increase our lower-cost transactional deposits at a level necessary to fund our asset growth or deposit outflows, we may be forced seek other sources of funds, including other certificates of deposit, Federal Home Loan Bank advances, brokered deposits and lines of credit to meet the borrowing and deposit withdrawal requirements of our customers, which may be more expensive and have an adverse effect on our net interest margin and profitability. In this regard, total deposits decreased $5.8 million, or 1.1%, to $517.0 million at March 31, 2023 from $522.8 million at December 31, 2022. The decrease in deposits coupled with a desire to increase liquidity led Somerset Savings Bank to obtain a $20.0 million borrowing from the Federal Reserve Bank under the new Bank Term Funding Program to enhance liquidity and fund loan growth.

Risks Related to Competition

Strong competition within our market area may limit our growth and profitability.

Competition in the banking and financial services industry is intense. In our market area, we compete with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, insurance companies,

and brokerage and investment banking firms operating locally and elsewhere. Many of our competitors have greater name recognition, market presence and substantially more resources that benefit them in attracting business, and offer certain services that we do not or cannot provide. Our smaller asset size also makes it more difficult to compete, as many of our competitors are larger and can more easily afford to invest in the marketing and technologies needed to attract and retain customers. In addition, larger competitors may be able to price loans and deposits more aggressively than we do, which could affect our ability to grow and remain profitable on a long-term basis. Our profitability depends upon our continued ability to successfully compete in our market area. If we must raise interest rates paid on deposits or lower interest rates charged on our loans, our net interest margin and profitability could be adversely affected. Competition also makes it increasingly difficult and costly to attract and retain qualified employees. For additional information see “Business of SR Bancorp and Somerset Savings Bank, SLA—Competition.”

The financial services industry could become even more competitive as a result of continuing legislative, regulatory and technological changes and continued industry consolidation. Banks, securities firms and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking. Also, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Many of our competitors have fewer regulatory constraints and may have lower cost structures. Additionally, due to their size, many Competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services than we can as well as better pricing for those products and services.

Risks Related to Operations and Security

We face significant operational risks because the nature of the financial services business involves a high volume of transactions.

We operate in diverse markets and rely on the ability of our employees and systems to process a high number of transactions. Operational risk is the risk of loss resulting from our operations, including but not limited to, the risk of fraud by employees or persons outside our company, the execution of unauthorized transactions by employees, errors relating to transaction processing and technology, breaches of our internal control systems and compliance requirements. Insurance coverage may not be available for such losses, or where available, such losses may exceed insurance limits. This risk of loss also includes potential legal actions that could arise as a result of operational deficiencies or as a result of non-compliance with applicable regulatory standards, adverse business decisions or their implementation, or customer attrition due to potential negative publicity. In the event of a breakdown in our internal control systems, improper operation of systems or improper employee actions, we could suffer financial loss, face regulatory action, and/or suffer damage to our reputation.

Cyber-attacks or other security breaches could adversely affect our operations, net income or reputation.

We regularly collect, process, transmit and store significant amounts of confidential information regarding our customers, employees and others and concerning our own business, operations, plans and strategies. In some cases, this confidential or proprietary information is collected, compiled, processed, transmitted or stored by third parties on our behalf.

Information security risks have generally increased in recent years because of the proliferation of new technologies, the use of the Internet and telecommunications technologies to conduct financial and other transactions and the increased sophistication and activities of perpetrators of cyber-attacks and mobile phishing. Mobile phishing, a means for identity thieves to obtain sensitive personal information through fraudulent e-mail, text or voice mail, is an emerging threat targeting the customers of financial entities. A failure in or breach of our operational or information security systems, or those of our third-party service providers, as a result of cyber-attacks or information security breaches or due to employee error, malfeasance or other disruptions could adversely affect our business, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs and/or cause losses.

Although we employ a variety of physical, procedural and technological safeguards to protect this confidential and proprietary information from mishandling, misuse or loss, these safeguards do not provide absolute assurance that mishandling, misuse or loss of the information will not occur, and that if mishandling, misuse or loss of information does occur, those events will be promptly detected and addressed. Similarly, when confidential or proprietary information is collected, compiled, processed, transmitted or stored by third parties on our behalf, our policies and procedures require that the third party agree to maintain the confidentiality of the information, establish and maintain policies and procedures designed to preserve the confidentiality of the information, and permit us to confirm the third party’s compliance with the terms of the agreement. As information security risks and cyber threats continue to evolve, we may be required to expend additional resources to continue to enhance our information security measures and/or to investigate and remediate any information security vulnerabilities.

If this confidential or proprietary information were to be mishandled, misused or lost, we could be exposed to significant regulatory consequences, reputational damage, civil litigation and financial loss.

Risks associated with system failures, interruptions, or breaches of security could negatively affect our earnings.

Information technology systems are critical to our business. We use various technology systems to manage our customer relationships, general ledger, securities, deposits, and loans. We have established policies and procedures to prevent or limit the impact of system failures, interruptions, and security breaches, but such events may still occur and may not be adequately addressed if they do occur. In addition, any compromise of our systems could deter customers from using our products and services. Although we rely on security systems to provide the security and authentication necessary to effect the secure transmission of data, these precautions may not protect our systems from compromises or breaches of security.

In addition, we outsource a majority of our data processing to third-party providers. If these third-party providers encounter difficulties, or if we have difficulty communicating with them, our ability to adequately process and account for transactions could be affected, and our business operations could be adversely affected. Threats to information security also exist in the processing of customer information through various other vendors and their personnel.

The occurrence of any system failures, interruptions, or breaches of security could damage our reputation and result in a loss of customers and business, subject us to additional regulatory scrutiny or expose us to litigation and possible financial liability. Any of these events could have a material adverse effect on our financial condition and results of operations.

The cost of additional finance and accounting systems, procedures and controls to satisfy our new public company reporting requirements will increase our expenses.

As a result of the completion of the offering, we will become a public reporting company. The obligations of being a public company, including the substantial public reporting obligations, will require significant expenditures and place additional demands on our management team. We have made, and will continue to make, changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a public company. However, the measures we take may not be sufficient to satisfy our obligations as a public company. Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes Oxley Act”) requires annual management assessments of the effectiveness of our internal control over financial reporting, starting with the second annual report that we would expect to file with the SEC. Any failure to achieve and maintain an effective internal control environment could have a material adverse effect on our business. In addition, we may need to hire additional compliance, accounting and financial staff with appropriate public company experience and technical knowledge, and we may not be able to do so in a timely fashion. As a result, we may need to rely on outside consultants to provide these services for us until qualified personnel are hired. These obligations will increase our operating expenses and could divert our management’s attention from our operations.

We are a community bank and our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance.

We are a community bank and our reputation is one of the most valuable components of our business. A key component of our business strategy is to rely on our reputation for customer service and knowledge of local markets to expand our presence by capturing new business opportunities from existing and prospective customers in our market area and contiguous areas. As such, we strive to conduct our business in a manner that enhances our reputation. This is done, in part, by recruiting, hiring and retaining employees who share our core values of being an integral part of the communities we serve, delivering superior service to our customers and caring about our customers. If our reputation is negatively affected by the actions of our employees, by our inability to conduct our operations in a manner that is appealing to current or prospective customers, or otherwise, our business and operating results may be materially adversely affected.

Our risk management framework may not be effective in mitigating risk and reducing the potential for significant losses.

Our risk management framework is designed to minimize risk and loss to us. We seek to identify, measure, monitor, report and control our exposure to risk, including strategic, market, liquidity, compliance and operational risks. While we use broad and diversified risk monitoring and mitigation techniques, these techniques are inherently limited because they cannot anticipate the existence or future development of currently unanticipated or unknown risks. Recent economic conditions and heightened legislative and regulatory scrutiny of the financial services industry, among other developments, have increased our level of risk. Accordingly, we could suffer losses if we fail to properly anticipate and manage these risks.

Risks Related to Regulatory Matters

Changes in laws and regulations and the cost of regulatory compliance with new laws and regulations may adversely affect our operations and/or increase our costs of operations.

We are subject to extensive regulation, supervision and examination by our banking regulators. Such regulation and supervision govern the activities in which a financial institution and its holding company may engage and are intended primarily for the protection of insurance funds and the depositors and borrowers of Somerset Savings Bank rather than for the protection of our shareholders. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the ability to impose restrictions on our operations, classify our assets and determine the level of our allowance for loan losses. These regulations, along with the currently existing tax, accounting, securities, deposit insurance and monetary laws, rules, standards, policies, and interpretations, control the methods by which financial institutions conduct business, implement strategic initiatives, and govern financial reporting and disclosures. As a smaller institution, we are disproportionately affected by the ongoing increased costs of compliance with banking and other regulations. Any change in such regulation and oversight, whether in the form of regulatory policy, new regulations, legislation or supervisory action, may have a material impact on our operations. Further, changes in accounting standards can be both difficult to predict and involve judgment and discretion in their interpretation by us and our independent accounting firm. These changes could materially impact, potentially retroactively, how we report our financial condition and results of operations.

Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions.

The USA PATRIOT and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts. Failure to comply with these regulations could result in fines or sanctions, including restrictions on conducting acquisitions or establishing new branches. The policies and procedures we have adopted that are designed to assist in compliance with these laws and regulations may not be effective in preventing violations of these laws and regulations.

Monetary policies and regulations of the Federal Reserve could adversely affect our business, financial condition and results of operations.

In addition to being affected by general economic conditions, our earnings and growth are affected by the policies of the Federal Reserve. An important function of the Federal Reserve is to regulate the money supply and credit conditions. Among the instruments used by the Federal Reserve to implement these objectives are open market purchases and sales of U.S. government securities, adjustments of the discount rate and changes in banks’ reserve requirements against bank deposits. These instruments are used in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits. Their use also affects interest rates charged on loans or paid on deposits.

The monetary policies and regulations of the Federal Reserve have had a significant effect on the operating results of financial institutions in the past and are expected to continue to do so in the future. The effects of such policies upon our business, financial condition and results of operations cannot be predicted.

We are an emerging growth company, and, for as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies,” including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As an emerging growth company, we also will not be subject to Section 404(b) of the Sarbanes-Oxley Act, which would require that our independent auditors review and attest as to the effectiveness of our internal control over financial reporting. We have also elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

We are also a smaller reporting company, and even if we no longer qualify as an emerging growth company, any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to smaller reporting companies could make our common stock less attractive to investors.

In addition to qualifying as an emerging growth company, SR Bancorp qualifies as a “smaller reporting company” under the federal securities laws. For as long as it continues to be a smaller reporting company, it may choose to take advantage of exemptions from various reporting requirements applicable to public companies that are not available to companies that are not smaller reporting companies, including, but not limited to, reduced financial disclosure obligations and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. If some investors find our common stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our common stock and the price of our common stock may be more volatile.

Risks Related to Accounting Matters

Changes in accounting standards could affect reported earnings.

The bodies responsible for establishing accounting standards, including the Financial Accounting Standards Board, the Securities and Exchange Commission and other regulatory bodies, periodically change the financial accounting and reporting guidance that govern the preparation of our financial statements. These changes can be hard to predict and can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply new or revised guidance retroactively.

Changes in management’s estimates and assumptions may have a material impact on our consolidated financial statements and our financial condition or operating results.

In preparing this prospectus as well as periodic reports we will be required to file under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management is and will be required under applicable rules and regulations to make estimates and assumptions as of specified dates. These estimates and assumptions are based on management’s best estimates and experience at such times and are subject to substantial risk and uncertainty. Materially different results may occur as circumstances change and additional information becomes known. Areas requiring significant estimates and assumptions by management include our evaluation of the adequacy of our allowance for loan losses, the determination of our deferred income taxes, our fair value measurements, our determination of goodwill impairment, and our evaluation of our defined benefit pension plan obligations.

Risks Related to the Stock Offering

The future price of the shares of common stock may be less than the $10.00 purchase price per share in the stock offering.

If you purchase shares of common stock in the stock offering, you may not be able to sell them later at or above the $10.00 purchase price in the stock offering. The aggregate purchase price of the shares of common stock sold in the stock offering will be based on an independent appraisal. The independent appraisal is not intended, and should not be construed, as a recommendation of any kind as to the advisability of purchasing shares of common stock. The independent appraisal is based on certain estimates, assumptions and projections, all of which are subject to change from time to time. After the shares begin trading, the trading price of our common stock will be determined by the marketplace, and may be influenced by many factors, including prevailing interest rates, economic conditions, changes in federal tax laws, new regulations, investor perceptions of SR Bancorp and the outlook for the financial services industry in general. Price fluctuations in our common stock may be unrelated to our operating performance.

Our failure to effectively deploy the net proceeds may have an adverse effect on our financial performance.

We intend to invest between $32.3 million and $44.2 million of the net proceeds of the stock offering (or $51.0 million at the adjusted maximum of the offering range) in Somerset Savings Bank. We will use the net proceeds we retain to fund the merger consideration, to fund a loan to our employee stock ownership plan to purchase shares of common stock in the stock offering and to fund the charitable foundation. Somerset Savings Bank intends to use the net proceeds it receives to fund new loans, purchase securities, expand its retail banking franchise by acquiring other financial institutions or other financial services companies, or for other general corporate purposes. However, with the exception of paying the merger consideration, funding the loan to the employee stock ownership plan and funding the charitable foundation, we have not allocated specific amounts of the net proceeds for any of these purposes, and we will have significant flexibility in determining the amount of the net proceeds we apply to different uses and when we apply or reinvest such proceeds. Also, certain of these uses, such as acquiring other financial institutions, may require the approval of the NJDBI, the FDIC or the

Federal Reserve. We have not established a timetable for investing the net proceeds, and we cannot predict how long we will require to invest the net proceeds. Our failure to reinvest these funds effectively would reduce our profitability and may adversely affect the value of our common stock.

Our return on equity will be low following the stock offering. This could negatively affect the trading price of our shares of common stock.

Net income divided by average shareholders’ equity, known as “return on equity,” is a ratio many investors use to compare the performance of financial institutions. Our return on equity will be low until we are able to profitably leverage the additional capital we receive from the offering. Our return on equity also will be negatively affected by added expenses associated with our employee stock ownership plan and the stock-based benefit plan we intend to adopt sometime following the conversion and offering. Until we can increase our net interest income and noninterest income and leverage the capital raised in the offering, we expect our return on equity to be low, which may reduce the market price of our shares of common stock.

Our stock-based benefit plan will increase our expenses and reduce our income.

We intend to adopt a stock-based benefit plan after the conversion, subject to shareholder approval, which will increase our annual compensation and benefit expenses related to the stock options and stock awards granted to participants under the stock-based benefit plan. The amount of these stock-related compensation and benefit expenses will depend on the number of options and stock awards granted, the fair market value of our stock or options on the date of grant, the vesting period, and other factors that we cannot predict at this time. If we adopt a stock-based benefit plan within 12 months following the conversion, the shares of common stock reserved for issuance pursuant to awards of restricted stock and grants of options under such plans would be limited to 4.0% and 10.0%, respectively, of the total shares of our common stock outstanding following the offering. If we adopt a stock-based benefit plan more than 12 months after the completion of the conversion, we may award restricted shares of common stock or grant options in excess of these amounts, which would further increase costs.

In addition, we will recognize expense for our employee stock ownership plan when shares are committed to be released to participants’ accounts. The cost of acquiring the shares of common stock for the employee stock ownership plan is estimated to be between $5.7 million at the minimum of the offering range and $8.9 million at the adjusted maximum of the offering range (assuming we are able to purchase all of such shares in the offering). We will record annual employee stock ownership plan expenses in an amount equal to the fair value of shares of common stock committed to be released to employees. We will also recognize expense for restricted stock awards and stock options over the vesting period of awards made to recipients. The expense in the first year following the stock offering for our new stock-based benefit plan is estimated to be approximately $2.0 million ($1.7 million after tax) at the adjusted maximum of the stock offering range as set forth in the pro forma financial information under “Pro Forma Unaudited Condensed Consolidated Financial Statements Giving Effect to the Conversion and Proposed Merger,” assuming the $10.00 per share purchase price as fair market value. Actual expenses, however, may be higher or lower, depending on the price of our common stock. For further discussion of our proposed stock-based plan, see “Management—Benefits to be Considered Following Completion of the Stock Offering.”

The implementation of our stock-based benefit plan may dilute your ownership interest.

We intend to adopt a stock-based benefit plan following the conversion and offering. This plan may be funded either through open market purchases of our common stock or from the issuance of authorized but unissued shares of common stock. Our ability to purchase shares of our common stock to fund this plan will be subject to many factors, including the availability of stock in the market, the trading price of the stock, our capital levels, alternative uses for our capital and our financial performance. While we may elect to fund the stock-based benefit plan through open market purchases, shareholders would experience a 12.28% dilution in ownership interest if newly issued shares of our common stock are used to fund the exercise of stock options and the grant of shares of restricted common stock equal to 10% and 4%, respectively, of the shares outstanding following the offering, and all such stock options are exercised. Such dilution would also reduce our future earnings per share.

Various factors may make takeover attempts more difficult to achieve.

Certain provisions of our articles of incorporation and bylaws and state and federal banking laws, including regulatory approval requirements, could make it more difficult for a third party to acquire control of SR Bancorp without our Board of Directors’ approval. Under regulations applicable to the conversion, for a period of three years following completion of the conversion, no person may acquire beneficial ownership of more than 10% of our common stock without prior approval of the Federal Reserve. Under federal law, subject to certain exemptions, a person, entity or group must notify the Federal Reserve before acquiring control of a bank holding company. There also are provisions in our articles of incorporation and bylaws that may be used to delay or block a takeover attempt, including a provision that prohibits any person from voting

more than 10% of our outstanding shares of common stock. Taken as a whole, these statutory provisions and provisions in our articles of incorporation and bylaws could result in our being less attractive to a potential acquirer and thus could adversely affect the market price of our common stock.

For additional information, see “Restrictions on Acquisition of SR Bancorp and Somerset Savings Bank, SLA” and “Management—Benefits to be Considered Following Completion of the Stock Offering.”

There may be a limited trading market in our shares of common stock, which would hinder your ability to sell our common stock and may lower the market price of our common stock.

We have never issued capital stock and there is no established market for our common stock. We expect that our common stock will be traded on the Nasdaq Capital Market under the symbol “SRBK” upon conclusion of the offering. The development of an active trading market depends on the existence of willing buyers and sellers, the presence of which is not within our control, or that of any market maker. The number of active buyers and sellers of the shares of common stock at any particular time may be limited. Under such circumstances, you could have difficulty selling your shares of common stock on short notice, and, therefore, you should not view the shares of common stock as a short-term investment. If you purchase shares of common stock, you may not be able to sell them at or above $10.00 per share. Purchasers of common stock in the offering should have long-term investment intent and should recognize that there will be a limited trading market in the common stock. This may make it difficult to sell the common stock after the offering and may have an adverse impact on the price at which the common stock can be sold.

You may not revoke your decision to purchase SR Bancorp common stock in the subscription or community offerings after you send us your order.

Funds submitted or automatic withdrawals authorized in connection with the purchase of shares of common stock in the subscription and community offerings will be held by us until the completion or termination of the conversion and offering, including any extension of the expiration date and consummation of a syndicated community offering or firm commitment underwritten public offering. Because completion of the conversion and related stock offering will be subject to regulatory approvals and an update of the independent appraisal prepared by RP Financial, LC., among other factors, there may be a delay in completing the conversion and offering. Orders submitted in the subscription and community offerings are irrevocable, and purchasers will have no access to their funds unless the offering is terminated, or extended beyond September 29, 2023, or the number of shares to be sold in the offering is increased to more than 10,580,000 shares or decreased to fewer than 6,800,000 shares.

The distribution of subscription rights could have adverse income tax consequences.

If the subscription rights granted to certain current or former depositors of Somerset Savings Bank are deemed to have an ascertainable value, receipt of such rights may be taxable in an amount equal to such value. Whether subscription rights are considered to have ascertainable value is an inherently factual determination. We have received an opinion of counsel, Luse Gorman, PC, that it is more likely than not that such rights have no value; however, such opinion is not binding on the Internal Revenue Service.

Risks Related to the Somerset Regal Charitable Foundation

The contribution to the charitable foundation will dilute your ownership interest and adversely affect net income in fiscal 2024.

We intend to establish and fund a new charitable foundation in connection with the offering. We intend to contribute to the charitable foundation up to 460,000 shares of our common stock and $900,000 in cash (which, together, represents 6.0% of the value of the common stock at the maximum of the offering). The contribution will have an adverse effect on our net income for the quarter and year in which we make the contribution. The after-tax expense of the contribution is expected to reduce net income for the year ended June 30, 2024 by approximately $4.1 million. In addition, persons purchasing shares in the offering will have their ownership and voting interests in SR Bancorp diluted by up to 4.6% due to the contribution of shares of common stock to the charitable foundation.

Our contribution to the charitable foundation may not be tax deductible, which could reduce our profits.

We may not have sufficient profits to be able to fully use the tax deduction from our contribution to the charitable foundation. Under the Internal Revenue Code, an entity is permitted to deduct up to 10% of its taxable income (generally income before federal income taxes and charitable contributions expense) in any one year for charitable contributions. Any contribution in excess of the 10% limit may be deducted for federal income tax purposes over each of the five years following the year in which the charitable contribution is made. Accordingly, a charitable contribution could, if necessary, be deducted over a six-year period and expires thereafter.

FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect,” “will,” “would,” “should,” “could” or “may,” and words of similar meaning. These forward-looking statements include, but are not limited to:

•

statements of our goals, intentions and expectations;

•

statements regarding our business plans, prospects, growth and operating strategies;

•

statements regarding the quality of our loan and investment portfolios; and

•

estimates of our risks and future costs and benefits.

These forward-looking statements are based on our current beliefs and expectations, which are subject to business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ from those expressed or implied by the forward-looking statements. These factors include the following:

•

our ability to successfully consummate our proposed Merger with Regal Bancorp and integrate Regal Bancorp’s operations into our operations;

•

monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Federal Reserve Board;

•

inflation and fluctuations in interest rates and a decline in the level of our interest rate spread;

•

general economic and business conditions nationally and in those areas in which we operate;

•

volatility and deterioration in the credit and equity markets;

•

changes in consumer spending, borrowing and savings habits;

•

demographic changes;

•

competition for loans and deposits and failure to attract or retain loans and deposits;

•

the failure to successfully integrate acquired operation and realize expected synergies;

•

the ability to maintain relationships with the third parties we utilize to supplement our loan originations;

•

a failure to maintain adequate levels of capital and liquidity to support our operations;

•

the current or anticipated impact of military conflict, terrorism or other geopolitical events;

•

risks of natural disasters;

•

a failure in or breach of our operational or security systems or infrastructure, including cyberattacks;

•

the failure to maintain current technologies;

•

the inability to successfully implement future information technology enhancements;

•

difficult business and economic conditions that can adversely affect our industry and business, including competition, fraudulent activity and negative publicity;

•

failure to attract or retain key employees;

•

our ability to access cost-effective funding;

•

fluctuations in real estate values;

•

changes in accounting policies and practices;

•

changes in governmental regulation, including, but not limited to, any increase in FDIC insurance premiums;

•

the continuing impact of the COVID-19 pandemic on our business and results of operation;

•

the adequacy of our allowance for loan losses;

•

our credit quality and the effect of credit quality on our credit losses expense and allowance for loan losses;

•

changes in the financial performance and/or condition of our borrowers and the ability of our borrowers to perform under the terms of their loans and other terms of credit agreements;

•

our ability to control expenses;

•

changes in securities markets; and

•

risks as it relates to cyber security against our information technology and those of our third-party providers and vendors.

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. Please see “Risk Factors” beginning on page 16. Except as required by applicable law or regulation, we do not undertake, and we specifically disclaim any obligation, to release publicly the results of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA OF

SOMERSET SAVINGS BANK, SLA

The information presented below at or for each of the periods is only a summary, and should be read in conjunction with our consolidated financial statements and notes beginning on page F-1 of this prospectus. The information at June 30, 2022 and 2021 and for each of the years then ended is derived in part from the audited consolidated financial statements that appear in this prospectus. The information at March 31, 2023 and for the three and nine months ended March 31, 2023 and 2022 is not audited, but, in the opinion of management, includes all adjustments necessary for a fair presentation. All of these adjustments are normal and recurring. The results of operations for the three and nine months ended March 31, 2023 are not necessarily indicative of the results of operations that may be expected for the entire year or for any other period.


	At March 31, 2023		At June 30,
	At March 31, 2023		2022		2021

	(In thousands)
Selected Financial Condition Data:
Total assets	$	664,870	$	648,631	$	639,358
Cash and cash equivalents		53,183		35,344		56,751
Securities available for sale		38,699		47,857		47,098
Securities held-to-maturity		175,744		192,903		193,252
Loans, net of allowance for loan losses		357,340		334,558		306,798
Bank-owned life insurance		28,547		28,056		27,441
Deposits		517,047		522,072		509,993
Borrowings		20,000		—		—
Equity		119,057		118,231		121,943


	For the Three Months Ended March 31,				For the Nine Months Ended March 31,				For the Years Ended June 30,
	2023		2022		2023		2022		2022		2021

	(In thousands)
Selected Operating Data:
Interest income	$	4,086	$	3,349	$	11,696	$	9,889	$	13,432	$	13,180
Interest expense		613		352		1,345		1,258		1,535		2,415

Net interest income		3,473		2,997		10,351		8,631		11,897		10,765
Provision for loan losses		—		—		—		—		—		—

Net interest income after provision for loan losses		3,473		2,997		10,351		8,631		11,897		10,765
Noninterest income		219		323		911		1,013		1,351		1,212
Noninterest expense		3,419		2,736		10,114		8,184		11,014		10,582

Income before income taxes		273		583		1,148		1,460		2,234		1,395
Income tax expense		14		99		135		213		363		145

Net income	$	259	$	484	$	1,013	$	1,247	$	1,871	$	1,250


	At or For the Nine Months Ended March 31,						At or For the Years Ended June 30,
	2023			2022			2022			2021
Performance Ratios⁽¹⁾:
Return on average assets		0.21	%		0.26	%		0.29	%		0.20	%
Return on average equity		1.15	%		1.37	%		1.54	%		1.04	%
Interest rate spread⁽²⁾		2.20	%		1.80	%		1.89	%		1.74	%
Net interest margin⁽³⁾		2.28	%		1.88	%		1.96	%		1.85	%
Noninterest income to average assets		0.19	%		0.21	%		0.21	%		0.20	%
Noninterest expense to average assets		2.09	%		1.68	%		1.70	%		1.70	%
Efficiency ratio⁽⁴⁾		89.86	%		84.86	%		83.14	%		88.35	%
Average interest-earning assets to average interest-bearing liabilities		127.65	%		128.69	%		127.77	%		128.03	%
Capital Ratios:
Average equity to average assets		18.10	%		18.73	%		18.71	%		19.40	%
Tier 1 capital to average assets		18.45	%		18.55	%		19.36	%		19.90	%


	At or For the Nine Months Ended March 31,						At or For the Years Ended June 30,
	2023			2022			2022			2021
Asset Quality Ratios:
Allowance for loan losses as a percentage of total loans		0.31	%		0.35	%		0.33	%		0.36	%
Allowance for loan losses as a percentage of non-performing loans		759.18	%		N/A			N/A			424.09	%
Net (charge-offs) recoveries to average outstanding loans during the year		—	%		—	%		—	%		—	%
Non-performing loans as a percentage of total loans		0.04	%		—	%		—	%		0.09	%
Non-performing loans as a percentage of total assets		0.02	%		—	%		—	%		0.04	%
Total non-performing assets as a percentage of total assets		0.28	%		—	%		—	%		0.04	%
Other:
Number of offices		7			7			7			7
Number of full-time equivalent employees		65			63			64			65

(1)	Annualized where appropriate for the nine months ended March 31, 2023 and 2022.

(2)	Represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.

(3)	Represents net interest income as a percentage of average interest-earning assets.

(4)	Represents noninterest expense divided by the sum of net interest income and noninterest income.

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA OF REGAL BANCORP, INC.

The information at March 31, 2023 and for the three months ended March 31, 2023 and 2022 is not audited, but in the opinion of management, includes all adjustments necessary for a fair presentation. All of these adjustments are normal and recurring. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results of operations that may be expected for the entire year or for any other period.

The information presented below at or for each of the periods is only a summary and should be read in conjunction with the Regal Bancorp, Inc. consolidated financial statements and notes beginning on page G-1 of this prospectus. The information as of December 31, 2022 and 2021 and for each of the years then ended is derived in part from the audited consolidated financial statements of Regal Bancorp that appear in this prospectus.


	At March 31, 2023		At December 31, 2022

	(In thousands)
Selected Financial Condition Data:
Total assets	$	473,316	$	495,679
Cash and cash equivalents		81,592		106,847
Securities available for sale		16,594		15,477
Securities held-to-maturity		2,574		2,592
Loans, net of allowance for loan losses		343,249		339,259
Bank-owned life insurance		7,386		7,346
Deposits		401,819		426,008
Federal Home Loan Bank advances		5,000		5,000
Equity		51,135		49,143


	For the Three Months Ended March 31,
	2023		2022

	(In thousands)
Selected Operating Data:
Interest income	$	4,969	$	4,207
Interest expense		1,105		516

Net interest income		3,864		3,691
Provision for loan losses		—		—

Net interest income after provision for loan losses		3,864		3,691
Noninterest income		120		264
Noninterest expense		3,131		2,940

Income before income taxes		853		1,015
Income tax expense		267		234

Net income	$	586	$	781


	At or For the Three Months Ended March 31,
	2023			2022
Performance Ratios:
Return on average assets		0.49	%		0.57	%
Return on average equity		4.68	%		6.66	%
Interest rate spread⁽¹⁾		2.99	%		2.65	%
Net interest margin⁽²⁾		3.37	%		2.79	%
Noninterest income to average assets		0.10	%		0.19	%
Noninterest expense to average assets		2.60	%		2.13	%
Efficiency ratio⁽³⁾		79.6	%		74.0	%
Capital Ratios:
Average equity to average assets		10.40	%		8.49	%
Tier 1 capital to average assets		12.43	%		10.12	%
Asset Quality Ratios:
Allowance for loan losses as a percentage of total loans		1.17	%		1.60	%
Allowance for loan losses as a percentage of non-performing loans		753.0	%		2,705.0	%


	At or For the Three Months Ended March 31,
	2023			2022
Net (charge-offs) recoveries to average outstanding loans during the year		—	%		—	%
Non-performing loans as a percentage of total loans		0.16	%		0.06	%
Non-performing loans as a percentage of total assets		0.11	%		0.04	%
Total non-performing assets as a percentage of total assets		0.11	%		0.04	%
Other:
Number of offices		10			10
Number of full-time equivalent employees		65			72

(1)	Represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities. Annualized.

(2)	Represents net interest income as a percentage of average interest-earning assets. Annualized.

(3)	Represents noninterest expense divided by the sum of net interest income and noninterest income.


	At or for the Year Ended December 31,
	2022		2021

	(Dollars in thousands, except per share data)
Financial Condition Data:
Total assets	$	495,679	$	573,772
Cash and cash equivalents		106,847		167,834
Time deposits in other financial institutions		12,640		16,568
Securities available for sale		15,477		15,463
Securities held-to-maturity		2,592		2,591
Loans, net of allowance for loan losses		339,259		356,009
Deposits:
Noninterest-bearing		105,652		124,507
Interest-bearing		320,356		385,085

Total deposits		426,008		509,592
Federal Home Loan Bank advances		5,000		5,000
Subordinated debt		9,915		9,900
Total Stockholders’ equity		49,143		46,697
Asset Quality Data:
Nonaccrual loans	$	541	$	216
Foreclosed real estate		—		—
Accruing troubled debt restructures		—		—
Loans 90 days past due and still accruing		—		—
Loan charge-offs		—		(12	)
Loan recoveries		—		—
Operations Data:
Total interest income	$	18,274	$	17,979
Total interest expense		2,244		3,332

Net Interest Income		16,030		14,647
Provision for loan losses		—		45

Net interest income after provision for loan losses		16,030		14,602
Noninterest income		756		969
Noninterest expenses		12,298		11,549

Income before income tax expense		4,488		4,022
Income tax expense		1,394		1,125

Net income	$	3,094	$	2,897

Per Common Share Data:
Net income per share–- Basic	$	1.02	$	0.96
Net income per share–- Diluted		1.02		0.96
Cash dividends per share		—		—


	At or for the Year Ended December 31,
	2022			2021

Performance Ratios
Return on average assets		0.62	%		0.51	%
Return on average equity		5.33	%		5.28	%
Noninterest income to average assets		0.15	%		0.17	%
Net interest spread⁽¹⁾		2.93	%		2.42	%
Net interest margin⁽²⁾		3.11	%		2.64	%
Noninterest expense to average assets		0.02	%		2.03	%
Efficiency ratio⁽³⁾		73.00	%		74.00	%
Dividend payout ratio		—	%		—	%
Capital Ratios:
Average equity to average assets		11.73	%		9.63	%
Tier 1 capital to total assets		11.72	%		9.62	%
Asset Quality Ratios:
Allowance for loan losses as a percentage of total loans		1.63	%		1.58	%

(1)	Represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.

(2)	Represents net interest income as a percentage of average interest-earning assets.

(3)	Represents noninterest expense divided by the sum of net interest income and noninterest income.

HOW WE INTEND TO USE THE PROCEEDS FROM THE STOCK OFFERING

Although we cannot determine what the actual net proceeds from the sale of the shares of common stock will be until the offering is completed, we anticipate that the net proceeds will be between $64.6 million and $88.4 million, or $102.0 million if the offering range is increased by 15%.

We intend to distribute the net proceeds as follows:


	Based Upon the Sale at $10.00 Per Share of
	6,800,000 Shares						8,000,000 Shares						9,200,000 Shares						10,580,000⁽¹⁾Shares
	Amount			Percent of Net Proceeds			Amount			Percent of Net Proceeds			Amount			Percent of Net Proceeds			Amount			Percent of Net Proceeds
	(Dollars in thousands)
Offering proceeds	$	68,000					$	80,000					$	92,000					$	105,800
Less offering expenses		(3,410	)					(3,530	)					(3,650	)					(3,788	)

Net offering proceeds	$	64,590			100.0	%	$	76,470			100.0	%	$	88,350			100.0	%	$	102,012			100.0	%

Distribution of net proceeds:
To Somerset Savings Bank	$	(32,295	)		(50.0	)%	$	(38,235	)		(50.0	)%	$	(44,175	)		(50.0	)%	$	(51,006	)		(50.0	)%
To fund loan to employee stock ownership plan⁽²⁾		(5,712	)		(8.8	)%		(6,720	)		(8.8	)%		(7,728	)		(8.8	)%		(8,887	)		(8.7	)%
Cash contribution to the charitable foundation		(680	)		(1.1	)%		(800	)		(1.1	)%		(920	)		(1.0	)%		(1,058	)		(1.0	)%

Retained by SR Bancorp	$	25,903			40.1	%	$	30,715			40.2	%	$	35,527			40.2	%	$	41,061			40.3	%

(1)	As adjusted to give effect to an increase in the number of shares, which could occur due to a 15% increase in the offering range to reflect demand for the shares or changes in market conditions following the commencement of the offering.

(2)

The employee stock ownership plan (the “ESOP”) will purchase up to 8.0% of shares of common stock of SR Bancorp offered in the stock offering and the shares contributed to the charitable foundation, with the ESOP obtaining the funds to purchase the shares from a loan made available by SR Bancorp to the ESOP. The loan will be repaid principally through Somerset Savings Bank’s contribution to the ESOP over the anticipated 20-year term of the loan. The interest rate for the ESOP loan is expected to be equal to the prime rate, as published in The Wall Street Journal, on the closing date of the conversion and offering.

Payments for shares of common stock made through withdrawals from existing deposit accounts will not result in the receipt of new funds for investment but will result in a reduction of Somerset Savings Bank’s deposits. The net proceeds may vary because total expenses relating to the offering may be more or less than our estimates. For example, our expenses would increase if all shares were not sold in the subscription and community offerings and a portion of the shares were sold in a syndicated community offering or firm commitment underwritten public offering. Somerset Savings Bank will receive the net proceeds of the offering.

SR Bancorp intends to use the proceeds that it retains, along with cash obtained from a dividend from Somerset Savings Bank prior to the closing of the merger, to pay the merger consideration to the shareholders of Regal Bancorp and will use any remaining retained offering proceeds for general corporate purposes.

See “Our Dividend Policy” for a discussion of our expected dividend policy following the completion of the conversion. Under current federal regulations, we may not repurchase shares of our common stock during the first year following the completion of the conversion, except when extraordinary circumstances exist and with prior regulatory approval, or except to fund the granting of restricted stock awards (which would require notification to the Federal Reserve).

Somerset Regal Bank may use proceeds that it receives from SR Bancorp from the stock offering:

•

to fund new loans;

•

to enhance existing products and services, hire additional employees and support growth and develop new products and services;

•

to expand its retail banking franchise by acquiring other financial institutions or other financial services companies as opportunities arise, although we do not currently have any understandings or agreements to acquire a financial institution or other entity other than our proposed merger with Regal Bank;

•

to invest in securities; and

•

for other general corporate purposes.

Initially, a substantial portion of the net proceeds will be invested in short-term investments, investment-grade debt obligations and mortgage-backed securities. We have not determined specific amounts of the net proceeds that would be used for the purposes described above. The use of the proceeds outlined above may change based on many factors, including, but not limited to, changes in interest rates, equity markets, laws and regulations affecting the financial services industry, the attractiveness and availability of potential acquisitions to expand our operations, and overall market conditions. The use of the proceeds may also change depending on our ability to receive regulatory approval to acquire other financial institutions.

We expect our return on equity to be low until we are able to reinvest effectively the additional capital raised in the offering. See “Risk Factors—Risks Related to the Stock Offering—Our failure to effectively deploy the net proceeds may have an adverse effect on our financial performance” and “—Our return on equity will be low following the offering. This could negatively affect the trading price of our shares of common stock.”

OUR DIVIDEND POLICY

No decision has been made with respect to the amount, if any, and timing of any dividend payments following the completion of the conversion and related stock offering and of the proposed Merger. The amount of dividends to be paid, if any, will be subject to our capital requirements, our financial condition and results of operations, tax considerations, statutory and regulatory limitations, and general economic conditions. We cannot assure you that we will pay dividends in the future, or that, if dividends are paid, any such dividends will not be reduced or eliminated in the future. The source of dividends will depend on the net proceeds retained by SR Bancorp and earnings thereon, and dividends from Somerset Regal Bank. In addition, SR Bancorp will be subject to state law limitations and federal bank regulatory policy on the payment of dividends.

After the completion of the conversion and the proposed Merger, Somerset Regal Bank will not be permitted to pay dividends on its capital stock to SR Bancorp, its sole shareholder, if Somerset Regal Bank’s shareholders’ equity would be reduced below the amount of the liquidation account established in connection with the conversion. In addition, Somerset Regal Bank will not be permitted to make a capital distribution if, after making such distribution, it would be undercapitalized.

Under New Jersey law and applicable regulations, Somerset Regal Bank may declare and pay a dividend on its capital stock only to the extent that the payment of the dividend would not impair the capital stock of the bank. In addition, a stock bank may not pay a dividend unless the bank would, after the payment of the dividend, have a surplus of not less than 50% of its capital stock, or alternatively, the payment of the dividend would not reduce the surplus.

Any payment of dividends by Somerset Regal Bank to SR Bancorp that would be deemed to be drawn from Somerset Regal Bank’s bad debt reserves established prior to 1988, if any, would require a payment of taxes at then-current tax rate by Somerset Regal Bank on the amount of earnings deemed to be removed from the pre-1988 bad debt reserves for such distribution. Somerset Regal Bank does not intend to make any distribution that would create such a federal tax liability. For further information concerning additional federal law and regulations regarding the ability of Somerset Regal Bank to make capital distributions, including the payment of dividends to SR Bancorp, see “Taxation—Federal Taxation.”

We will file a consolidated federal tax return with Somerset Regal Bank. Accordingly, it is anticipated that any cash distributions made by us to our shareholders would be treated as cash dividends and not as a non-taxable return of capital for federal tax purposes. Additionally, during the three-year period following the conversion, we will not be permitted to make any capital distribution to shareholders that would be treated by recipients as a tax-free return of capital for federal income tax purposes.

MARKET FOR THE COMMON STOCK

We have never publicly issued capital stock and there is no established market for our shares of common stock. We expect that our shares of common stock will be listed on the Nasdaq Capital Market under the symbol “SRBK,” subject to completion of the offering and compliance with certain listing conditions, including the presence of at least three registered and active market makers. KBW has advised us that it intends to make a market in shares of our common stock following the offering, but it is not obligated to do so or to continue to do so once it begins. While we will attempt before completion of the offering to obtain commitments from at least two other broker-dealers to make a market in shares of our common stock, there can be no assurance that we will be successful in obtaining such commitments.

The development and maintenance of a public market, having the desirable characteristics of depth, liquidity and orderliness, depends on the existence of willing buyers and sellers, the presence of which is not within our control or that of any market maker. The number of active buyers and sellers of shares of our common stock at any particular time may be limited, which may have an adverse effect on the price at which shares of our common stock can be sold. There can be no assurance that persons purchasing the shares of common stock will be able to sell their shares at or above the $10.00 offering purchase price per share.

CAPITALIZATION

The following table presents the historical capitalization of Somerset Savings Bank and Regal Bancorp at March 31, 2023 and the capitalization of SR Bancorp after giving effect to the receipt of the offering proceeds and the proposed Merger (referred to as “pro forma” information). The table depicts adjustments to capitalization resulting first from the offering and then from the proposed Merger only at the minimum of the offering range and then depicts SR Bancorp’s capitalization following the offering and the proposed Merger at the minimum, midpoint, maximum and adjusted maximum, of the offering range. The pro forma capitalization gives effect to the assumptions listed under “Pro Forma Unaudited Condensed Consolidated Financial Statements Giving Effect to the Conversion and Proposed Merger.”


				Offering Adjustments: 6,800,000 at Minimum of Offering Range												Pro Forma Capitalization Based Upon the Sale of
	Somerset Savings Bank						Somerset Bancorp Post-offering			Regal Bancorp			Merger Adjustments			6,800,000 Shares at $10.00 per share			8,000,000 Shares at $10.00 per share			9,200,000 Shares at $10.00 per share			10,580,000 Shares at $10.00 per share ⁽¹⁾
	(Dollars in thousands, except per share amounts)
Deposits⁽²⁾	$	517,047		$	—		$	517,047		$	401,819		$	(1,745	)	$	917,121		$	917,121		$	917,121		$	917,121
Borrowings		20,000			—			20,000			14,919			—	⁽⁶⁾		34,919			34,919			25,000	⁽⁶⁾		25,000	⁽⁶⁾

Total deposits and borrowed funds	$	537,047		$	—		$	537,047		$	416,738		$	(1,745	)	$	952,040		$	952,040		$	942,121		$	942,121

Shareholders’ equity:
Preferred stock	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Common stock⁽³⁾		—			71			71			—			—			71			84			97			111
Additional paid-in capital		—			67,919			67,919			34,358			(34,358	)		67,919			80,386			92,853			107,191
Retained earnings		126,559			—			126,559			17,316			(18,336	)		125,539			125,539			125,539			125,539
Accumulated other comprehensive income		(7,502	)		—			(7,502	)		(539	)		539			(7,502	)		(7,502	)		(7,502	)		(7,502	)
Less:
After tax cost of contribution to the charitable foundation		—			(3,060	)		(3,060	)		—			—			(3,060	)		(3,600	)		(4,140	)		(4,761	)
Common stock acquired by employee stock ownership plan⁽⁴⁾		—			(5,712	)		(5,712	)		—			—			(5,712	)		(6,720	)		(7,728	)		(8,887	)
Common stock acquired by stock-based incentive plan⁽⁵⁾		—			(2,856	)		(2,856	)		—			—			(2,856	)		(3,360	)		(3,864	)		(4,444	)

Total shareholders’ equity	$	119,057		$	56,362		$	175,419		$	51,135		$	(52,155	)	$	174,399		$	184,827		$	195,255		$	207,247

Pro Forma Shares Outstanding
Total shares outstanding		—			7,140,000			7,140,000			—			—			7,140,000			8,400,000			9,660,000			11,109,000
Shares offered for sale in the conversion		—			6,800,000			6,800,000			—			—			6,800,000			8,000,000			9,200,000			10,580,000
Shares contributed to the charitable foundation		—			340,000			340,000			—			—			340,000			400,000			460,000			529,000
Total shareholders’ equity as a percentage of pro forma total assets		17.91	%		—			24.32	%		10.80	%		—			15.29	%		16.06	%		16.96	%		17.81	%
Tangible shareholders’ equity as a percentage of pro forma tangible assets		17.91	%		—			24.32	%		10.60	%		—			13.15	%		13.95	%		14.87	%		15.77	%

(1)	As adjusted to give effect to an increase in the number of shares, which increase could occur due to a 15% increase in the offering range to reflect demand for the shares or changes in market conditions following the commencement of the offering.

(2)	Does not reflect withdrawals from deposit accounts at Somerset Savings Bank to purchase common stock in the offering. These withdrawals will reduce pro forma deposits by the amounts of the withdrawals.

(3)

No effect has been given to the issuance of additional shares of common stock pursuant to the exercise of options under a stock-based benefit plan. If the plan is implemented within the first year after the closing of the offering, an amount up to 10.0% of the shares of common stock of SR Bancorp offered in the stock offering and the shares issued contributed to the charitable foundation will be reserved for issuance upon the exercise of options under the plans.

(4)

Assumes that 8.0% of the shares of common stock of SR Bancorp offered in the stock offering and shares contributed to the charitable foundation will be acquired by the employee stock ownership plan financed by a loan from SR Bancorp. The loan will be repaid principally from Somerset Savings Bank’s contributions to the employee stock ownership plan. Since SR Bancorp will finance the employee stock ownership plan debt, this debt will be eliminated through consolidation and no liability will be reflected on SR Bancorp’s consolidated balance sheet. Accordingly, the number of shares of common stock acquired by the employee stock ownership plan is shown in this table as a reduction of total shareholders’ equity.

(footnotes continue on next page)

(footnotes continued from previous page)

(5)

Assumes a number of shares of common stock equal to 4.0% of the shares of common stock of SR Bancorp offered in the offering and at the completion of the offering (including shares contributed to the charitable foundation) will be purchased for grant by a stock-based benefit plan. The funds to be used by such plan to purchase shares will be provided by SR Bancorp. The dollar amount of common stock to be purchased is based on the $10.00 per share offering price and represents unearned compensation. This amount does not reflect possible increases or decreases in the value of common stock relative to the offering price. SR Bancorp will accrue compensation expense to reflect the vesting of shares granted pursuant to such stock-based benefit plan and will credit capital in an amount equal to the charge to operations. Implementation of such plan will require shareholder approval.

(6)	Assumes the redemption of subordinated debt at the closing of the proposed Merger, with such redemption occurring only if the offering closes at the maximum or adjusted maximum of the offering range.

HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE

At March 31, 2023, Somerset Savings Bank exceeded all regulatory capital requirements. The following table presents Somerset Savings Bank’s regulatory capital position relative to the regulatory capital requirements at March 31, 2023, on a historical and a pro forma basis, assuming completion of the proposed Merger and the offering. The table reflects receipt by Somerset Regal Bank of 50% of the net proceeds of the offering. For a discussion of the assumptions underlying the pro forma capital calculations presented below, see “How We Intend to Use the Proceeds From the Stock Offering,” “Capitalization” and “Pro Forma Unaudited Condensed Consolidated Financial Statements Giving Effect to the Conversion and Proposed Merger.” For a discussion of the capital standards applicable to Somerset Savings Bank and Regal Bank, see “Regulation and Supervision—Federal Bank Regulation.”


	Somerset Savings Bank Historical at March 31, 2023					Pro Forma at March 31, 2023, Based Upon the Sale in the Stock Offering of⁽¹⁾
	Somerset Savings Bank Historical at March 31, 2023					6,800,000 shares⁽²⁾					8,000,000 shares⁽²⁾					9,200,000 shares⁽²⁾					10,580,000 shares⁽²⁾
	Amount		Percent of Assets⁽¹⁾			Amount		Percent of Assets⁽²⁾			Amount		Percent of Assets⁽²⁾			Amount		Percent of Assets⁽²⁾			Amount		Percent of Assets⁽²⁾
	(Dollars in thousands)
Capital under generally accepted accounting principals	$	119,057		17.91	%	$	185,030		16.85	%	$	189,962		17.21	%	$	194,894		17.56	%	$	200,566		17.96	%

Tier 1 leverage capital
Actual	$	126,559		19.67	%	$	164,373		14.97	%	$	169,305		15.33	%	$	174,237		15.70	%	$	179,909		16.11	%
Requirement		32,163		5.00	%		54,908		5.00	%		55,205		5.00	%		55,502		5.00	%		55,844		5.00	%

Excess	$	94,396		14.67	%	$	109,465		9.97	%	$	114,100		10.33	%	$	118,735		10.70	%	$	124,065		11.11	%

(1)	Shown as a percent of assets under generally accepted accounting principles and total assets for leverage ratio.

(2)	Reconciliation of capital adjustment for Somerset Savings Bank:


	Minimum			Midpoint			Maximum			Maximum, as Adjusted
	(In thousands)
Gross offering proceeds	$	68,000		$	80,000		$	92,000		$	105,800
Less: offering expenses		(3,410	)		(3,530	)		(3,650	)		(3,788	)

Net conversion proceeds		64,590			76,470			88,350			102,012
Equity adjustments
Infused into the Bank (50% of net proceeds)		32,295			38,235			44,175			51,006
Less: ESOP adjustment at bank		(5,712	)		(6,720	)		(7,728	)		(8,887	)

Net increase from offering		26,583			31,515			36,447			42,119
Plus: Merger Adjustments
Regal Bank Historical Capital		60,187			60,187			0,187			60,187
Fair Value and Push-Down Accounting		18,250			18,250			18,250			18,250
Somerset Post-Closing Dividend to SR Bancorp		(39,047	)		(39,047	)		(39,047	)		(39,047	)
Increase in GAAP capital		65,973			70,905			75,837			81,509

Less: increase in disallowed intangible assets		(28,159	)		(28,159	)		(28,159	)		(28,159	)

Increase in Tier 1 capital	$	37,814		$	42,746		$	47,678		$	53,350

Asset adjustments
Regal Bank Historical Assets	$	473,316		$	473,316		$	473,316		$	473,316
Infused into the Bank (50% of net proceeds)		32,295			38,235			44,175			51,006
Fair Value and Push-Down Accounting		16,505			16,505			16,505			16,505
Somerset Post-Closing Dividend to SR Bancorp		(39,047	)		(39,047	)		(39,047	)		(39,047	)

Increase in GAAP assets		483,069			489,009			494,949			501,780

Less: Increase in disallowed intangible assets		(28,159	)		(28,159	)		(28,159	)		(28,159	)

Increase in leverage assets	$	454,910		$	460,850		$	466,790		$	473,621

PRO FORMA UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS GIVING

EFFECT TO THE CONVERSION AND PROPOSED MERGER

The following pro forma unaudited condensed consolidated statements of financial condition and the pro forma unaudited consolidated statements of income give effect to the proposed offering and the proposed Merger, based on the assumptions set forth below. As a result, the pro forma data assumes the completion of the offering and the proposed Merger. The condensed pro forma unaudited consolidated financial statements are based, in part, on the audited consolidated financial statements of Somerset Savings Bank for the year ended June 30, 2022 and Regal Bancorp for the year ended December 31, 2022, respectively, and the unaudited consolidated financial statements of Somerset Savings Bank for the nine months ended March 31, 2023 and Regal Bancorp for the three months ended March 31, 2023. The pro forma unaudited condensed consolidated financial statements give effect to the offering at historical cost and the proposed Merger using the purchase method of accounting as required by accounting principles generally accepted in the United States of America.

The pro forma adjustments in the tables assume the issuance of 6,800,000 shares, which is the minimum of the offering range, and 10,580,000 shares, which is the maximum of the offering range, as adjusted, in the offering. Regal Bancorp shareholders will receive $23.00 in cash for their shares of Regal Bancorp. For a more detailed discussion of how many shares will be issued in connection with the offering, see “Pro Forma Unaudited Condensed Consolidated Financial Statements Giving Effect to the Conversion and Proposed Merger —Analysis of Pro Forma Outstanding Shares of SR Bancorp Common Stock.” The purchase price for purposes of the pro forma presentation for Regal Bancorp was calculated as follows:


	March 31, 2023			June 30, 2022
	(In thousands)
Net assets acquired (not adjusted for purchase accounting)	$	51,135		$	47,776
Less: existing intangible assets of Regal		(1,080	)		(1,094	)
Purchase accounting adjustments:
Estimated non-tax deductible merger costs		(3,962	)		(3,962	)
Loans receivable, net⁽¹⁾		(5,114	)		(5,114	)
Deposits⁽¹⁾		1,745			1,745
Core deposit intangible asset⁽²⁾		8,747			8,747
Tax impact of purchase accounting adjustments at 25%		(1,345	)		(1,345	)
Goodwill		19,412			22,785

Purchase price, net	$	69,537		$	69,537

(1)

Fair value adjustments are calculated using discounted cash flow analysis using a comparison of portfolio rates to market rates as of March 31, 2023, with such adjustments applied to the March 31, 2023 balances. Fair value adjustments are amortized using the estimated lives of the respective assets and liabilities.

(2)

Core deposit intangible reflects the present value benefit to SR Bancorp of utilizing the acquired core deposits as a funding source relative to wholesale funding costs based on the rates of Federal Home Loan Bank advances. The core deposit intangible is calculated using deposit balances and interest rates as of March 31, 2023. Costs of the acquired core deposits include interest costs, plus estimated operating expenses, less estimated noninterest income to be derived from the core deposits. The acquired core deposits are projected to decay based on the upper quartile of attrition rates pursuant to a survey conducted by the Office of the Comptroller of the Currency of community and midsize banks. . The yield benefit for each period is discounted to present value using a weighted average cost of capital. The core deposit intangibles are amortized over the estimated lives of the core deposits using a straight line amortization method.

The net proceeds are based upon the following assumptions:

•

SR Bancorp will sell all shares of common stock offered in the subscription offering;

•

SR Bancorp’s employee stock ownership plan will purchase, with a loan from SR Bancorp, a number of shares equal to 8.0% of the total number of conversion shares of SR Bancorp, which includes shares sold in the offering and shares contributed to Somerset Regal Charitable Foundation. The loan will be repaid in substantially equal payments of principal and interest over a 20-year period;

•

total expenses of the offering, other than fees and commissions paid to KBW, will be $2.4 million;

•

5.0% of the value of the common stock issued in the offering and cash equal to 1.0% of the common stock issued in the offering (for a total of 6.0%) will be contributed to Somerset Regal Charitable Foundation; and

•

KBW will receive fees equal to 1.0% of the aggregate purchase price of the shares of stock sold in the offering, excluding any shares contributed to Somerset Regal Charitable Foundation.

The expenses of the offering may vary from those estimated. These items, net of income tax effects, are shown as a reduction in shareholders’ equity in the following tables, but are not shown as a reduction in net income for the periods shown in the following tables.

We calculated the pro forma consolidated net income of SR Bancorp for the year as if the shares of common stock had been sold at the beginning of the year and the net proceeds had been invested at 3.60% (2.70% on an after-tax basis), which is equal to the yield on the five-year U.S. Treasury Note as of March 31, 2023. In light of current interest rates, we consider this rate to more accurately reflect the pro forma reinvestment rate than the arithmetic average method, which assumes reinvestment of the net proceeds at a rate equal to the average of the yield on interest-earning assets and the cost of deposits for those periods.

We further believe that the reinvestment rate is factually supportable because:

•

the yield on the U.S. Treasury Note can be determined and/or estimated from third-party sources; and

•

we believe that U.S. Treasury securities are not subject to credit losses due to a U.S. Government guarantee of payment of principal and interest.

We calculated historical and pro forma per share amounts by dividing historical and pro forma amounts of net income and shareholders’ equity by the indicated number of shares of common stock. For pro forma calculations, we adjusted these figures to give effect to the shares of common stock purchased by the employee stock ownership plan. We computed per share amounts for each period as if the common stock was outstanding at the beginning of the periods, but we did not adjust per share historical or pro forma shareholders’ equity to reflect the earnings on the estimated net proceeds.

The pro forma tables give effect to the implementation of a stock-based benefit plan. We have assumed that the stock-based benefit plan will acquire an amount of common stock equal to 4.0% of the shares of common stock of SR Bancorp offered in the stock offering and the shares contributed to the charitable foundation at the same price for which they were sold in the offering. We assume that shares of common stock are granted under the plan in awards that vest over a five-year period.

We have also assumed that the stock-based benefit plan will grant options to acquire common stock equal to 10.0% of the shares of common stock of SR Bancorp offered in the stock offering and the shares contributed to the charitable foundation. In preparing the following table, we also assumed that stockholder approval was obtained, that the exercise price of the stock options and the market price of the stock at the date of grant were $10.00 per share and that the stock options had a term of ten years and vested over five years. We applied the Black-Scholes option pricing model to estimate a grant-date fair value of $4.95 for each option. In addition to the terms of the options described above, the Black-Scholes option pricing model incorporated an estimated volatility rate of 32.02% for the common stock based on an index of publicly traded thrifts, no dividend yield, an expected option life of 10 years and a risk-free interest rate of 3.48%.

As disclosed under “How We Intend to Use the Proceeds From the Stock Offering,” SR Bancorp intends to contribute 50% of the net proceeds from the offering to Somerset Regal Bank. SR Bancorp will contribute up to $1.1 million to the charitable foundation, will use a portion of the proceeds it retains to fund the cash portion of the merger consideration, use a portion of the proceeds it retains to make a loan to the employee stock ownership plan and retain the rest of the proceeds for future use.

The pro forma table does not give effect to:

•

withdrawals from deposit accounts for the purpose of purchasing shares of common stock in the offering;

•

SR Bancorp’s results of operations after the offering;

•

increased fees and expenses that we would pay KBW and other broker-dealers if we conducted a community or syndicated offering; or

•

changes in the market price of the shares of common stock after the offering.

The unaudited condensed consolidated pro forma balance sheets assume the offering and the proposed Merger were consummated on March 31, 2023.

The pro forma unaudited statements are provided for informational purposes only. The pro forma financial information presented is not necessarily indicative of the actual results that would have been achieved had the offering and the Merger been consummated on March 31, 2023 at the beginning of the periods presented, and is not indicative of future results. The pro forma unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto of Somerset Savings Bank and Regal Bancorp contained elsewhere in this prospectus.

The shareholders’ equity represents the resulting book value of the common shareholders’ ownership of SR Bancorp and Regal Bancorp computed in accordance with accounting principles generally accepted in the United States of America. Pro forma shareholders’ equity and book value are not intended to represent the fair market value of the common stock and, due to the existence of the tax bad debt reserve and intangible assets, may be different than amounts that would be available for distribution to shareholders in the event of liquidation.

The unaudited pro forma net earnings and common shareholders’ equity derived from the above assumptions are qualified by the statements set forth under this caption and should not be considered indicative of the market value of SR Bancorp common stock or the actual results of operations of SR Bancorp and Regal Bancorp for any period. Such pro forma data may be materially affected by the actual gross proceeds from the sale of shares of SR Bancorp in the offering and the actual expenses incurred in connection with the offering and the proposed Merger.

Pro forma merger adjustments to net income include entries to reflect the estimated fair value adjustments on financial assets and liabilities and the amortization of identifiable intangible assets created in the proposed Merger. Excluded from the calculation of pro forma net income are any adjustments to reflect the estimated interest income to be earned on the net proceeds of the offering, the estimated interest income to be foregone on the cash required to fund the proposed Merger and related expenses, and other estimated expense reductions from consolidating the operations of Regal Bancorp with those of SR Bancorp.

PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION

MARCH 31, 2023

The following table presents pro forma balance sheet information at March 31, 2023 at the minimum of the offering range assuming the issuance of 6,800,000 shares in the offering, and the contribution of 340,000 shares and $680,000 of cash to the Somerset Regal Charitable Foundation, and the cash purchase of Regal Bancorp.


	SR Bancorp Historical			Offering Adjustments⁽¹⁾			SR Bancorp Pro Forma as Converted			Regal Bancorp Historical			Merger Adjustments⁽²⁾			SR Bancorp Pro Forma Consolidated
	(In thousands)
Assets
Cash and due from banks	$	7,990		$	55,342	⁽³⁾	$	63,332		$	81,592		$	(74,860	)⁽¹¹⁾	$	70,064
Interest bearing-deposits in other financial institutions		45,193			—			45,193			11,633			—			56,826
Securities available for sale		38,699			—			38,699			16,594			—			55,293
Securities held to maturity		175,744			—			175,744			2,574			—			178,318
Equity securities at fair value		19			—			19			—			—			19
Loans receivable, net		357,340			—			357,340			343,249			(5,114	)⁽¹²⁾		695,475
Premises and equipment, net		3,510			—			3,510			1,735			—			5,245
Federal Home Loan Bank stock, at cost		702			—			702			784			—			1,486
Bank owned life insurance (BOLI)		28,547			—			28,547			7,386			—			35,933
Goodwill		—			—			—			1,080			18,332	⁽¹³⁾		19,412
Core deposit intangible		—			—			—			—			8,747	⁽¹⁴⁾		8,747
Other		7,126			1,020	⁽⁴⁾		8,146			6,689			(1,005	)⁽¹⁵⁾		13,830

Total assets	$	664,870		$	56,362		$	721,232		$	473,316		$	(53,900	)	$	1,140,648

Liabilities
Deposits	$	517,047		$	—		$	517,047		$	401,819		$	(1,745	)⁽¹⁶⁾	$	917,121
FHLB advances		20,000			—	⁽⁵⁾		20,000			5,000			—			25,000
Subordinated debt		—			—			—			9,919			—	⁽¹⁷⁾		9,919
Other liabilities		8,766			—			8,766			5,443			—			14,209

Total liabilities		545,813			—			545,813			422,181			(1,745	)		966,249

Shareholders’ equity
Common stock		—			71	⁽⁶⁾		71			—			—			71
Additional paid-in capital		—			67,919	⁽⁷⁾		67,919			34,358			(34,358	)⁽¹⁸⁾		67,919
Retained earnings		126,559			(3,060	)⁽⁸⁾		123,499			17,316			(18,336	)⁽¹⁹⁾		122,479
Accumulated other comprehensive loss		(7,502	)		—			(7,502	)		(539	)		539	⁽¹⁸⁾		(7,502	)
Employee stock ownership plan		—			(5,712	)⁽⁹⁾		(5,712	)		—			—			(5,712	)
Stock-based incentive plan		—			(2,856	)⁽¹⁰⁾		(2,856	)		—			—			(2,856	)

Total equity		119,057			56,362			175,419			51,135			(52,155	)		174,399

Total liabilities and equity	$	664,870		$	56,362		$	721,232		$	473,316		$	(53,900	)	$	1,140,648

(1)

Shows the effect of the offering, assuming gross proceeds of $68.0 million at the minimum of the offering range, offering expenses of $3.4 million, establishment of an ESOP and granting of stock awards under a stock-based incentive plan that will acquire 8.0% and 4.0% of total offering and charitable foundation shares outstanding, respectively, and a contribution of cash and common stock equal to 6% of the shares issued in the stock offering to Somerset Regal Charitable Foundation. The ESOP will purchase its shares in the offering and possibly open market purchases. The stock-based incentive plan will purchase shares in the open market after receiving shareholder approval to adopt the plan. Open market purchases by the ESOP and stock-based incentive plan are assumed at $10.00 per share.

(2)	Reflects the purchase accounting and acquisition adjustments related to the acquisition of Regal Bancorp for a price of $23.00 per share in cash.

(footnotes continued on next page)

(footnotes continued from previous page)

(3)	Calculated as follows:


	(In thousands)
Gross proceeds of offering	$	68,000
Estimated expenses		(3,410	)
Contribution of cash to Somerset Regal Charitable Foundation		(680	)
Common stock acquired by ESOP		(5,712	)
Common stock acquired by stock-based incentive plan		(2,856	)

Pro forma adjustment	$	55,342

(4)	Deferred tax asset recorded to reflect the $4.1 million cash and stock contribution to the Somerset Regal Charitable Foundation an effective tax rate of 25%.

(5)	The ESOP loan is funded internally with a loan from SR Bancorp, thus no borrowing liability is recorded on the consolidated balance sheet of SR Bancorp.

(6)	Par value $0.01 per share and the issuance of 6,800,000 shares in the offering and 340,000 shares contributed to the Somerset Regal Charitable Foundation.

(7)	Calculated as follows:


	(In thousands)
Net proceeds of offering	$	64,590
Contribution of stock to the Somerset Regal Charitable Foundation		3,400
Less: par value (Footnote 6)		(71	)

Pro forma adjustment	$	67,919

(8)	After tax expense of the cash and stock contribution to the Somerset Regal Charitable Foundation and a marginal tax rate of 25%.

(9)	Contra-equity account established to reflect the obligation to repay the loan to the ESOP.

(10)	Contra-equity account established to reflect the stock-based incentive plan.

(11)	Includes the cash merger consideration paid to shareholders of Regal Bancorp, non-tax-deductible transaction expenses and tax deductible transaction expenses.


	(In thousands)
Cash merger consideration	$	69,537
Somerset merger costs expensed (pre-tax)		1,360
Regal Bancorp merger costs included in goodwill (after tax)		3,962
Retire Regal Bancorp subordinated debt (see footnote 17)		—

Total cash adjustment	$	74,860

(12)

Reflects the reversal of the March 31, 2023 allowance for loan and lease losses of Regal Bancorp and a fair value adjustment applied to the acquired loans. The fair value adjustment includes a credit component and a yield component. The credit component include the estimated credit losses embedded in the acquired loans as of March 31, 2023. The yield component reflects the differences between market and portfolio yields as of March 31, 2023. The fair value adjustment will be accreted into income over the lives of the related loans.


	(In thousands)
Reversal of Regal Bancorp allowances	$	4,076
Fair value – credit component		(5,338	)
Fair value – yield component		(3,852	)

Pro forma adjustment	$	(5,114	)

(footnotes continued on next page)

(footnotes continued from previous page)

(13)	Goodwill is an intangible asset that is not subject to amortization. The goodwill balance will be tested annually for impairment. Goodwill is calculated as:


	Goodwill
	(In thousands, except share data)
Purchase price per share ($)				$	23.00
Number of Regal Bancorp shares acquired					3,023,369
Purchase price, net				$	69,537
Fair value of net assets
Acquired shareholders’ equity	$	51,135
Regal merger costs (after tax)		(3,962	)
Taxable purchase accounting adjustments:
Fair value adjustment for acquired certificates of deposits		1,745
Fair value adjustment for acquired loans		(9,190	)
Reverse allowance for loan losses		4,076
Core deposit intangible		8,747
Tax effect at the marginal tax rate of 25%	$	(1,345	)

Less: fair value of net assets				$	51,206

Goodwill adjustment				$	18,332

(14)

Core deposit intangible is an identifiable intangible asset representing the economic value of the acquired Regal Bancorp core deposit base calculated as the present value benefit of funding operations with the acquired core deposit base versus using an alternative wholesale funding source. The core deposit intangible asset is amortized into expense over the estimated life of the core deposit base.

(15)	Deferred tax entry consists of fair value adjustments of $1.3 million and Somerset merger costs of $340,000.

(16)

Fair value adjustment to reflect the difference between portfolio costs and market rates as of March 31, 2023 for time deposits acquired in the Merger. Yield adjustment is estimated using present value analysis and the fair value adjustment is amortized into expense over the lives of the related time deposits.

(17)	Subordinated debt is retired at closing only if the offering closes above the midpoint of the offering range

(18)	Adjustment to eliminate the historical Regal Bancorp capital account entries.

(19)	Adjustment to retained earnings as follows:


	(In thousands)
Eliminate historical Regal Bancorp retained earnings	$	(17,316	)
Somerset merger costs pre-tax		(1,360	)
Deferred tax adjustment		340

Adjustment to paid-in capital	$	(18,336	)

PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION

JUNE 30, 2022

The following table presents pro forma balance sheet information at June 30, 2022 at the minimum of the offering range assuming the issuance of 6,800,000 shares in the offering, and the contribution of 340,000 shares and $680,000 of cash to the Somerset Regal Charitable Foundation.


	SR Bancorp Historical			Offering Adjustments ⁽¹⁾			SR Bancorp Pro Forma as Converted			Regal Bancorp Historical			Merger Adjustments ⁽²⁾			SR Bancorp Pro Forma Consolidated
	(In thousands)
Assets
Cash and cash equivalents	$	7,557		$	55,342	⁽³⁾	$	62,899		$	151,755		$	(74,860	)⁽¹¹⁾	$	139,794
Interest bearing-deposits in other financial institutions		27,787			—			27,787			14,656			—			42,443
Securities available for sale		47,857			—			47,857			15,591			—			63,448
Securities held to maturity		192,903			—			192,903			2,581			—			195,484
Equity securities at fair value		19			—			19			—			—			19
Loans receivable, net		334,558			—			334,558			338,707			(5,114	)⁽¹²⁾		668,151
Premises and equipment, net		3,443			—			3,443			1,987			—			5,430
Federal Home Loan Bank stock, at cost		702			—			702			784			—			1,486
Bank owned life insurance (BOLI)		28,056			—			28,056			7,270			—			35,326
Goodwill		—			—			—			1,094			21,691	⁽¹³⁾		22,785
Core deposit intangible		—			—			—			—			8,747	⁽¹⁴⁾		8,747
Other		5,749			1,020	⁽⁴⁾		6,769			3,751			(1,005	)⁽¹⁵⁾		9,515

Total assets	$	648,631		$	56,362		$	704,993		$	538,176		$	(50,541	)	$	1,192,628

Liabilities
Deposits	$	522,072		$	—		$	522,072		$	473,702		$	(1,745	)⁽¹⁶⁾	$	994,029
FHLB advances		—			—	⁽⁵⁾		—			5,000			—			5,000
Subordinated debt		—			—			—			9,909			—	⁽¹⁷⁾		9,909
Other liabilities		8,328			—			8,328			1,789			—			10,117

Total liabilities		530,400			—			530,400			490,400			(1,745	)		1,019,055

Shareholders’ equity
Common stock		—			71	⁽⁶⁾		71			—			—			71
Additional paid-in capital		—			67,919	⁽⁷⁾		67,919			34,358			(34,358	)⁽¹⁸⁾		67,919
Retained earnings		125,546			(3,060	)⁽⁸⁾		122,486			13,882			(14,902	)⁽¹⁹⁾		121,466
Accumulated other comprehensive loss		(7,315	)		—			(7,315	)		(464	)		464	⁽¹⁸⁾		(7,315	)
Employee stock ownership plan		—			(5,712	)⁽⁹⁾		(5,712	)		—			—			(5,712	)
Stock-based incentive plan		—			(2,856	)⁽¹⁰⁾		(2,856	)		—			—			(2,856	)

Total equity		118,231			56,362			174,593			47,776			(48,796	)		173,573

Total liabilities and equity	$	648,631		$	56,362		$	704,993		$	538,176		$	(50,541	)	$	1,192,628

(1)

Shows the effect of the mutual-to-stock offering of SR Bancorp, assuming gross proceeds of $68.0 million at the minimum of the offering range, offering expenses of $3.4 million, establishment of an ESOP and stock-based incentive plan that will acquire 8.0% and 4.0% of total offering and charitable foundation shares, respectively, and a contribution of cash and common stock to the Somerset Regal Charitable Foundation in an amount equal to 6.0% of the gross proceeds. The ESOP will purchase its shares in the offering and possibly open market purchases. The stock-based incentive plan will purchase shares in the open market after receiving shareholder approval to adopt the plan. Open market purchases by the ESOP and stock-based incentive plan are assumed at $10.00 per share.

(2)	Reflects the purchase accounting and acquisition adjustments related to the acquisition of Regal Bancorp for a price of $23.00 per share in cash.

(footnotes continued on next page)

(footnotes continued from previous page)

(3) Calculated as follows:


	(In thousands)
Gross proceeds of offering	$	68,000
Estimated expenses		(3,410	)
Contribution of cash to Somerset Regal Charitable Foundation		(680	)
Common stock acquired by ESOP		(5,712	)
Common stock acquired by stock-based incentive plan		(2,856	)

Pro forma adjustment	$	55,342

(4)	Deferred tax asset recorded to reflect the $4.1 million cash and stock contribution to the Somerset Regal Charitable Foundation an effective tax rate of 25%.

(5)	The ESOP loan is funded internally with a loan from SR Bancorp, thus no borrowing liability is recorded on the consolidated balance sheet of SR Bancorp.

(6)	Par value $0.01 per share and the issuance of 6,80,000 shares in the offering and 340,000 shares contributed to the Foundation.

(7)	Calculated as follows:


	(In thousands)
Net proceeds of offering	$	64,590
Contribution of stock to Somerset Regal Charitable Foundation		3,400
Less: par value (Footnote 6)		(71	)

Pro forma adjustment	$	67,919

(8)	After tax expense of the cash and stock contribution to the charitable foundation and a marginal tax rate of 25%.

(9)	Contra-equity account established to reflect the obligation to repay the loan to the ESOP.

(10)	Contra-equity account established to reflect the stock-based incentive plan.

(11)	Includes the cash merger consideration paid to shareholders of Regal Bancorp, non-tax-deductible transaction expenses and tax deductible transaction expenses.


	(In thousands)
Cash merger consideration	$	69,537
Somerset merger costs expensed (pre-tax)		1,360
Regal Bancorp merger costs included in goodwill (after tax)		3,962
Retire Regal Bancorp subordinated debt [see footnote 17]		—

Total cash adjustment	$	74,860

(12)

Reflects the reversal of the June 30,2022 allowance for loan and lease losses of Regal Bancorp and a fair value adjustment applied to the acquired loans. The fair value adjustment includes a credit component and a yield component. The credit component include the estimated credit losses embedded in the acquired loans as of March 31, 2023. The yield component reflects the differences between market and portfolio yields as of March 31, 2023. The fair value adjustment will be accreted into income over the lives of the related loans.


	(In thousands)
Reversal of Regal Bancorp allowances	$	4,076
Fair value – credit component		(5,338	)
Fair value – yield component		(3,852	)

Pro forma adjustment	$	(5,114	)

(footnotes continued on next page)

(footnotes continued from previous page)

(13)	Goodwill is an intangible asset that is not subject to amortization. The goodwill balance will be tested annually for impairment. Goodwill is calculated as:


	Goodwill
	(In thousands, except share data)
Purchase price per share ($)				$	23.00
Number of Regal Bancorp shares acquired					3,023,369
Purchase price, net				$	69,537
Fair value of net assets
Acquired shareholders’ equity	$	47,776
Regal merger costs (after tax)		(3,962	)
Taxable purchase accounting adjustments:
Fair value adjustment for acquired certificates of deposits		1,745
Fair value adjustment for acquired loans		(9,190	)
Reverse allowance for loan losses		4,076
Core deposit intangible		8,747
Tax effect at the marginal tax rate of 25%	$	(1,345	)

Less: fair value of net assets				$	47,847

Goodwill adjustment				$	21,691

(14)

(15)	Deferred tax entry consists of fair value adjustments of $1.3 million and Somerset merger costs of $340,000.

(16)

(17)	Subordinated debt is retired at closing only if the offering closes above the midpoint of the offering range.

(18)	Adjustment to eliminate the historical Regal Bancorp capital account entries.

(19)	Adjustment to retained earnings as follows:


	(In thousands)
Eliminate historical Regal Bancorp retained earnings	$	(13,882	)
Somerset merger costs pre-tax		(1,360	)
Deferred tax adjustment		340

Adjustment to paid-in capital	$	(14,902	)

PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION

MARCH 31, 2023

The following table presents pro forma balance sheet information at March 31, 2023 at the adjusted maximum of the offering range assuming the issuance of 10,580,000 shares in the offering, and the contribution of 529,000 shares and $1.1 million of cash to Somerset Regal Charitable Foundation.


	SR Bancorp Historical			Offering Adjustments⁽¹⁾			SR Bancorp Pro Forma as Converted			Regal Bancorp Historical			Merger Adjustments⁽²⁾			SR Bancorp Pro Forma Consolidated
	(In thousands)
Assets
Cash and cash equivalents	$	7,990		$	87,623	⁽³⁾	$	95,613		$	81,592		$	(84,779	)⁽¹¹⁾	$	92,426
Interest-bearing deposits in other financial institutions		45,193			—			45,193			11,633			—			56,826
Securities available for sale		38,699			—			38,699			16,594			—			55,293
Securities held to maturity		175,744			—			175,744			2,574			—			178,318
Equity securities at fair value		19			—			19			—			—			19
Loans receivable, net		357,340			—			357,340			343,249			(5,114	)⁽¹²⁾		695,475
Premises and equipment, net		3,510			—			3,510			1,735			—			5,245
Federal Home Loan Bank stock, at cost		702			—			702			784			—			1,486
Bank owned life insurance (BOLI)		28,547			—			28,547			7,386			—			35,933
Goodwill		—			—			—			1,080			18,332	⁽¹³⁾		19,412
Core deposit intangible		—			—			—			—			8,747	⁽¹⁴⁾		8,747
Other		7,126			1,587	⁽⁴⁾		8,713			6,689			(1,005	)⁽¹⁵⁾		14,397

Total assets	$	664,870		$	89,210		$	754,080		$	473,316		$	(63,819	)	$	1,163,577

Liabilities
Deposits	$	517,047		$	—		$	517,047		$	401,819		$	(1,745	)⁽¹⁶⁾	$	917,121
FHLB advances		20,000			—	⁽⁵⁾		20,000			5,000			—			25,000
Subordinated debt		—			—			—			9,919			(9,919	)⁽¹⁷⁾		—
Other liabilities		8,766			—			8,766			5,443			—			14,209

Total liabilities		545,813			—			545,813			422,181			(11,664	)		956,330

Shareholders’ equity
Common stock		—			111	⁽⁶⁾		111			—			—			111
Additional paid-in capital		—			107,191	⁽⁷⁾		107,191			34,358			(34,358	)⁽¹⁸⁾		107,191
Retained earnings		126,559			(4,761	)⁽⁸⁾		121,798			17,316			(18,336	)⁽¹⁹⁾		120,778
Accumulated other comprehensive loss		(7,502	)		—			(7,502	)		(539	)		539	⁽¹⁸⁾		(7,502	)
Employee stock ownership plan		—			(8,887	)⁽⁹⁾		(8,887	)		—			—			(8,887	)
Equity incentive plan		—			(4,444	)⁽¹⁰⁾		(4,444	)		—			—			(4,444	)

Total equity		119,057			89,210			208,267			51,135			(52,155	)		207,247

Total liabilities and equity	$	664,870		$	89,210		$	754,080		$	473,316		$	(63,819	)	$	1,163,577

(1)

Shows the effect of the mutual-to-stock conversion of SR Bancorp, assuming gross proceeds of $105.8 million at the adjusted maximum of the valuation range, offering expenses of $3.7 million, establishment of an ESOP and stock-based incentive plan that will acquire 8.0% and 4.0% of total offering and charitable foundation shares, respectively, and a contribution of cash and common stock equal to 6.0% of the gross proceeds. The ESOP will purchase its shares in the offering and possibly open market purchases. The stock-based incentive plan will purchase shares in the open market after receiving shareholder approval to adopt the plan. Open market purchases by the ESOP and equity incentive plan are assumed at $10.00 per share.

(2)	Reflects the purchase accounting and acquisition adjustments related to the acquisition of Regal Bancorp for a price of $23.00 per share in cash and authorized but unissued shares of common stock.

(footnotes continued on next page)

(footnotes continued from previous page)

(3)	Calculated as follows:


	(In thousands)
Gross proceeds of offering	$	105,800
Estimated expenses		(3,788	)
Contribution of cash to Somerset Regal Charitable Foundation		(1,058	)
Common stock acquired by ESOP		(8,887	)
Common stock acquired by equity incentive plan		(4,444	)

Pro forma adjustment	$	87,623

(4)	Deferred tax asset recorded to reflect the $6.3 million cash and stock contribution to the Somerset Regal Charitable Foundation and a marginal tax rate of 25%.

(5)	The ESOP loan is funded internally with a loan from SR Bancorp, thus no borrowing liability is recorded on the consolidated balance sheet of SR Bancorp.

(6)	Par value $0.01 per share and the issuance of 10,580,000 shares in the offering and 529,000 shares contributed to Somerset Regal Charitable Foundation.

(7)	Calculated as follows:


	(In thousands)
Net proceeds of offering	$	102,012
Contribution of stock to Somerset Regal Charitable Foundation		5,290
Less: par value (Footnote 6)		(111	)

Pro forma adjustment	$	107,191

(8)	After tax expense of the cash and stock contribution to the charitable foundation and a tax rate of 25%.

(9)	Contra-equity account established to reflect the obligation to repay the loan to the ESOP.

(10)	Contra-equity account established to reflect the stock-based incentive plan.

(11)	Includes the cash consideration paid to shareholders of Regal Bancorp, non-tax-deductible transaction expenses and tax deductible transaction expenses.


	(In thousands)
Cash consideration	$	69,537
Somerset merger costs expensed (pre tax)		1,360
Regal Bancorp merger costs included in goodwill (after tax)		3,962
Retire Regal Bancorp subordinated debt		9,919

Total cash adjustment	$	84,779

(12)

Reflects the reversal of the March 31, 2023 allowance for loan and lease losses of Regal Bancorp and a fair value adjustment applied to the acquired loans. The fair value adjustment includes a credit component and a yield component. The credit component includes the estimated credit losses embedded in the acquired loans as of March 31, 2023. The yield component reflects the differences between market and portfolio yields as of March 31, 2023. The fair value adjustment will be accreted into income over the lives of the related loans.


	(In thousands)
Reversal of Regal Bancorp allowances	$	4,076
Fair value – credit component		(5,338	)
Fair value – yield component		(3,852	)

Pro forma adjustment	$	(5,114	)

(footnotes continued on next page)

(footnotes continued from previous page)

(13)	Goodwill is an intangible asset that is not subject to amortization. The goodwill balance will be tested annually for impairment. Goodwill is calculated as:


	Goodwill
	(In thousands, except per share data)
Purchase price per share ($)				$	23.00
Number of Regal shares acquired					3,023,369
Purchase price, net				$	69,537
Fair value of net assets
Acquired shareholders’ equity	$	51,135
Regal merger costs (after tax)		(3,962	)
Taxable purchase accounting adjustments:
Fair value adjustment for acquired certificates of deposits s		1,745
Fair value adjustment for acquired loans		(9,190	)
Reverse allowance for loan losses		4,076
Core deposit intangible		8,747
Tax effect at the marginal tax rate of 25%	$	(1,345	)

Less: fair value of net assets				$	51,206

Goodwill adjustment				$	18,332

(14)

Core deposit intangible is an identifiable intangible asset representing the economic value of the acquired Regal Bancorp core deposit base, calculated as the present value benefit of funding operations with the acquired core deposit base versus using an alternative wholesale funding source. The core deposit intangible asset is amortized into expense over the estimated life of the core deposit base.

(15)	Deferred tax entry consists of fair value adjustments of $1.3 million and Somerset merger costs of $340,000.

(16)

(17)	Assumes the redemption of subordinated debt at closing only if the offering closes at the midpoint of the offering range.

(18)	Adjustment to eliminate the historical Regal Bancorp capital account entries.

(19)	Adjustment to paid-in capital is calculated as follows:


	(In thousands)
Eliminate historical Regal Bancorp retained earnings	$	(17,316	)
Somerset merger costs pre-tax		(1,360	)
Deferred tax adjustment		340

Adjustment to paid-in capital	$	(18,336	)

PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION

JUNE 30, 2022

The following table presents pro forma balance sheet information at June 30, 2022 at the adjusted maximum of the offering range assuming the issuance of 10,580,000 shares in the offering, and the contribution of 529,000 shares and $1.1 million of cash to Somerset Regal Charitable Foundation.


	SR Bancorp Historical			Offering Adjustments⁽¹⁾			SR Bancorp Pro Forma as Converted			Regal Bancorp Historical			Merger Adjustments⁽²⁾			SR Bancorp Pro Forma Consolidated
	(In thousands)
Assets
Cash and cash equivalents	$	7,557		$	87,623	⁽³⁾	$	95,180		$	151,755		$	(84,769	)	$	162,166
Interest-bearing deposits in other financial institutions		27,787			—			27,787			14,656			—			42,443
Securities available for sale		47,857			—			47,857			15,591			—			63,448
Securities held to maturity		192,903			—			192,903			2,581			—			195,484
Equity securities at fair value		19			—			19			—			—			19
Loans receivable, net		334,558			—			334,558			338,707			(5,114	)		668,151
Premises and equipment, net		3,443			—			3,443			1,987			—			5,430
Federal Home Loan Bank stock, at cost		702			—			702			784			—			1,486
Bank owned life insurance (BOLI)		28,056			—			28,056			7,270			—			35,326
Goodwill		—			—			—			1,094			21,691			22,785
Core deposit intangible		—			—			—			—			8,747			8,747
Other		5,749			1,587	⁽⁴⁾		7,336			3,751			(1,005	)		10,082

Total assets	$	648,631		$	89,210		$	737,841		$	538,176		$	(60,450	)	$	1,215,567

Liabilities
Deposits	$	522,072		$	—		$	522,072		$	473,702		$	(1,745	)	$	994,029
FHLB advances		—			—	⁽⁵⁾		—			5,000			—			5,000
Subordinated debt		—			—			—			9,909			(9,909	)		—
Other liabilities		8,328			—			8,328			1,789			—			10,117

Total liabilities		530,400			—			530,400			490,400			(11,654	)		1,009,146

Shareholders’ equity
Common stock		—			111	⁽⁶⁾		111			—			(34,358	)		111
Additional paid-in capital		—			107,191	⁽⁷⁾		107,191			34,358			(14,902	)		107,191
Retained earnings		125,546			(4,761	)⁽⁸⁾		120,785			13,882			464			119,765
Accumulated other comprehensive loss		(7,315	)		—			(7,315	)		(464	)		—			(7,315	)
Employee stock ownership plan		—			(8,887	)⁽⁹⁾		(8,887	)		—			—			(8,887	)
Equity incentive plan		—			(4,444	)⁽¹⁰⁾		(4,444	)		—			—			(4,444	)

Total equity		118,231			89,210			207,441			47,776			(48,796	)		206,421

Total liabilities and equity	$	648,631		$	89,210		$	737,841		$	538,176		$	(60,450	)	$	1,215,567

(1)

Shows the effect of the mutual-to-stock conversion of SR Bancorp, assuming gross proceeds of $105.8 million at the adjusted maximum of the valuation range, offering expenses of $3.7 million, establishment of an ESOP and stock-based incentive plan that will acquire 8.0% and 4.0% of offering plus charitable foundation shares, respectively, and a contribution of cash and common stock to the Somerset Regal Charitable Foundation in an amount equal to 6.0% of the gross proceeds. The ESOP will purchase its shares in the offering and possibly open market purchases. The stock-based incentive plan will purchase shares in the open market after receiving shareholder approval to adopt the plan. Open market purchases by the ESOP and equity incentive plan are assumed at $10.00 per share.

(2)	Reflects the purchase accounting and acquisition adjustments related to the acquisition of Regal Bancorp for a price of $23.00 per share in cash.

(footnotes continued on next page)

(footnotes continued from previous page)

(3)	Calculated as follows:


	(In thousands)
Gross proceeds of offering	$	105,800
Estimated expenses		(3,788	)
Contribution of cash to Somerset Regal Charitable Foundation		(1,058	)
Common stock acquired by ESOP		(8,887	)
Common stock acquired by equity incentive plan		(4,444	)

Pro forma adjustment	$	87,623

(4)	Deferred tax asset recorded to reflect the $6.3 million cash and stock contribution to Somerset Regal Charitable Foundation and an effective tax rate of 25%.

(5)	The ESOP loan is funded internally with a loan from SR Bancorp, thus no borrowing liability is recorded on the consolidated balance sheet of SR Bancorp.

(6)	Par value $0.01 per share and the issuance of 10,580,000 shares in the offering and 529,000 shares contributed to Somerset Regal Charitable Foundation.

(7)	Calculated as follows:


	(In thousands)
Net proceeds of offering	$	102,012
Contribution of stock to Somerset Regal Charitable Foundation		5,290
Less: par value (Footnote 6)		(111	)

Pro forma adjustment	$	107,191

(8)	After tax expense of the cash and stock contribution to the charitable foundation and a tax rate of 25%.

(9)	Contra-equity account established to reflect the obligation to repay the loan to the ESOP.

(10)	Contra-equity account established to reflect the stock-based incentive plan.

(11)	Includes the cash consideration paid to shareholders of Regal Bancorp, non-tax-deductible transaction expenses and tax deductible transaction expenses.


	(In thousands)
Cash consideration	$	69,537
Somerset merger costs expensed (pre tax)		1,360
Regal Bancorp merger costs included in goodwill (after tax)		3,962
Retire Regal Bancorp subordinated debt [see footnote 17]		9,909

Total cash adjustment	$	84,769

(12)

Reflects the reversal of the June 30, 2022 allowance for loan and lease losses of Regal Bancorp and a fair value adjustment applied to the acquired loans. The fair value adjustment includes a credit component and a yield component. The credit component includes the estimated credit losses embedded in the acquired loans as of March 31, 2023. The yield component reflects the differences between market and portfolio yields as of March 31, 2023. The fair value adjustment will be accreted into income over the lives of the related loans.


	(In thousands)
Reversal of Regal Bancorp allowances	$	4,076
Fair value – credit component		(5,338	)
Fair value – yield component		(3,852	)

Pro forma adjustment	$	(5,114	)

(footnotes continued on next page)

(footnotes continued from previous page)

(13)	Goodwill is an intangible asset that is not subject to amortization. The goodwill balance will be tested annually for impairment. Goodwill is calculated as:


	Goodwill
	(In thousands, except per share data)
Purchase price per share				$	23.00
Number of Regal shares acquired					3,023,369
Purchase price, net				$	69,537
Fair value of net assets
Acquired shareholders’ equity	$	47,776
Regal merger costs (after tax)		(3,962	)
Taxable purchase accounting adjustments:
Fair value adjustment for acquired certificates of deposits		1,745
Fair value adjustment for acquired loans		(9,190	)
Reverse allowance for loan losses		4,076
Core deposit intangible		8,747
Tax effect at the marginal tax rate of 25%	$	(1,345	)

Less: fair value of net assets				$	47,847

Goodwill adjustment				$	21,691

(14)

(15)	Deferred tax entry consists of fair value adjustments of $1.3 million and Somerset merger costs of $340,000.

(16)

(17)	Reflects the redemption of subordinated debt is retired at closing only if the offering closes above the midpoint of the offering range.

(18)	Adjustment to eliminate the historical Regal Bancorp capital account entries.

(19)	Adjustment to retained earnings capital is calculated as follows:


	(In thousands)
Eliminate historical Regal Bancorp retained earnings	$	(13,882	)
Somerset merger costs pre-tax		(1,360	)
Deferred tax adjustment		340

Adjustment to paid-in capital	$	(14,902	)

PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE NINE MONTHS ENDED MARCH 31, 2023

The following table presents pro forma income statement information for the nine months ended March 31, 2023, at the minimum of the offering range, assuming the issuance of 6,800,000 shares in the offering, 340,000 shares and $680,000 of cash contributed to Somerset Regal Charitable Foundation and the cash acquisition of Regal Bancorp.


	SR Bancorp Historical			Offering Adjustments⁽¹⁾		SR Bancorp Pro Forma As Converted			Regal Bancorp Historical			Merger Adjustments⁽³⁾			SR Bancorp Pro Forma Consolidated
	(In thousands, except per share data)
Interest and dividend income	$	11,696		$	—	$	11,696		$	14,761		$	4,998	⁽⁴⁾	$	31,455
Interest expense		(1,345	)		—		(1,345	)		(2,405	)		(1,184	)⁽⁵⁾		(4,934	)

Net interest income		10,351			—		10,351			12,356			3,814			26,521
Provision for loan losses		—			—		—			—