$1.33
$9.90
bear $1.33
base $3.50
bull $9.90
margin of safety $1.75
market price* $18.46
SR Bancorp is the holding company for Somerset Regal Bank, a New Jersey community bank (about $1.08 billion of assets, $846 million of deposits and $193.8 million of equity at June 30, 2025) with 14 branches in Essex, Hunterdon, Middlesex, Morris, Somerset and Union Counties. It converted from a mutual savings bank and listed in September 2023, the same month it bought Regal Bancorp. Earnings come mainly from the spread between what it earns on loans and securities and what it pays on deposits. Because it is a bank, borrowing is the raw material of the business, so we value the earnings left for shareholders after interest and subtract no separate debt. How we measure earnings. We start from operating cash flow, subtract changes in working capital and stock compensation, and subtract capital spending. Fiscal 2025 (year to June 2025) came to about $0.30 per share (cash flow $4.7 million; stock compensation $1.1 million; capex $0.4 million). Fiscal 2024 was a loss (about -$0.57 per share), distorted by the conversion, the Regal acquisition and a $4.5 million share gift to a charitable foundation, so we do not use it. Only one clean full year exists. We set the earnings level from the nine months to March 2026 rather than from fiscal 2025 alone: stock compensation has risen to $1.6 million for nine months (about $2.1 million a year, versus $1.1 million) as the 2024 equity plan awards vest, and net income for the nine months was $2.4 million versus $2.9 million a year earlier. On that basis earnings are about $0.21 per share a year. Trailing growth cannot be measured (fiscal 2025 rose from a loss), and we assume none in year one. One accounting judgement matters: $4.3 million of non-cash accretion on the acquired loan book lifted fiscal 2025 profit but is not in operating cash flow; we did not credit it because its cash arrives through loan repayments and it fades as those loans run off. The company also holds equity well above what it needs to operate; we did not credit a return of that capital because, at a fair price, buybacks add no value beyond the earnings already counted, and the plan to do so is not contracted. Bear case, about $1.33 per share (earnings of about $0.08 a year, flat). Net interest margin already fell 26 basis points to 2.93% in fiscal 2025 because deposit costs rose faster than asset yields; a further slide of that kind takes roughly $0.14 per share off earnings. Stock compensation stays near $2 million. This is close to the weak level seen in the first nine months of fiscal 2025 (about $0.06). The business is worth about $1.33 per share, owes no separate debt in our method, and the difference is the same $1.33. Base case, about $3.50 per share (earnings of about $0.21 a year, held flat). The deposit franchise, with a history back to 1887 across the same New Jersey counties, keeps earning at the recent rate; asset quality is clean (non-performing assets around 0.01% of assets in the filing's ratio table) and there are no troubled debt restructurings. We credit no growth because none is secured. Worth about $3.50; no separate debt subtracted; difference $3.50. Bull case, about $9.90 per share. The bank has redeployed its excess liquidity into loans, growing net loans by $46 million in fiscal 2024 and $61 million in fiscal 2025 from its own funds. We assume five more years of $60 million annual loan growth, each year adding roughly $0.09 per share as low-yielding securities and cash are swapped into loans, then flat at about $0.64. Worth about $9.90; no separate debt subtracted; difference $9.90. What would make this wrong: the equity base is about $22 per share, far above our values, because the bank earns a low return on it. If management returns that surplus capital at or above book value, or margins recover faster than assumed, value would be higher. If deposit costs keep rising or credit quality turns, it would be lower. We could not confirm regulatory capital ratios or the remaining unamortized acquisition discount from the filings reviewed, and the latest quarterly report was available only as structured data, not full text.