SR Bancorp (SRBK) risk factors, FY2024 10-K

Risks Related to Recent Acquisition

1. 01The Company must successfully integrate the former Regal Bank operations and retain the former Regal Bank employees and customers

Risks Related to Economic Conditions

1. 02A 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
2. 03the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us
3. 04Inflation can have an adverse impact on our business and on our customers
4. 05A 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 credit losses and lower earnings

Risks Related to Interest Rates

1. 06Changes in interest rates or the shape of the yield curve may adversely affect our profitability and financial condition

Risks Related to Strategy and Growth

1. 07Our business strategy includes moderate 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
2. 08New lines of business or new products and services may subject us to additional risks
3. 09A significant portion of our loans are secured by real estate, which could negatively impact our profitability upon a downturn in the local real estate market
4. 10Our reliance on third parties to originate certain loans may negatively impact our financial results if such relationships are discontinued
5. 11Because we intend to increase our multi-family and commercial real estate and commercial loan originations, our lending risk will increase
6. 12If our allowance for credit losses is not sufficient to cover actual credit losses, our earnings and capital could decrease
7. 13to our allowance, that could materially decrease our net income. Our allowance for credit losses was 0.71% and 0.31% of total loans at June 30, 2024 and June 30, 2023, respectively

Risks Related to Our Funding

1. 14Our 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

Risks Related to Competition

1. 15Strong competition within our market area may limit our growth and profitability

Risks Related to Operations and Security

1. 16We face significant operational risks because the nature of the financial services business involves a high volume of transactions
2. 17Cyber-attacks or other security breaches could adversely affect our operations, net income or reputation
3. 18Risks associated with system failures, interruptions, or breaches of security could negatively affect our earnings
4. 19Our success depends on retaining certain key personnel
5. 20The cost of additional finance and accounting systems, procedures and controls to satisfy our new public company reporting requirements will increase our expenses
6. 21We 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
7. 22Our risk management framework may not be effective in mitigating risk and reducing the potential for significant losses
8. 23While our Board of Directors takes an active role in cybersecurity risk tolerance, we rely to a large degree on management and outside consultants in overseeing cybersecurity risk management
9. 24Natural disasters, acts of terrorism, global market disruptions and other external events could harm our business

Risks Related to Regulatory Matters

1. 25Changes 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
2. 26Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions
3. 27Monetary policies and regulations of the Federal Reserve could adversely affect our business, financial condition and results of operations
4. 28We 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
5. 29We 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

Risks Related to Accounting Matters

1. 30Changes in accounting standards could affect reported earnings
2. 31Changes in management’s estimates and assumptions may have a material impact on our consolidated financial statements and our financial condition or operating results

Risks Related to Our Common Stock

1. 32Our return on equity remains low following the stock offering, which could negatively affect our stock price
2. 33Various factors may make takeover attempts more difficult to achieve

Risks Related to COVID-19

1. 34The COVID-19 pandemic could continue to pose risks to our business, our results of operations and the future prospects of SR Bancorp

Risks Related to the Somerset Regal Charitable Foundation

1. 35Our contribution to the charitable foundation may not be tax deductible, which could reduce our profits