# EDGAR Filing Document

**Accession Number:** 0001951276
**File Stem:** 0001193125-23-068811
**Filing Date:** 2023-3
**Character Count:** 2208495
**Document Hash:** 653d45c0aa3651ab56b41072b2644757
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001193125-23-068811.hdr.sgml**: 20230810

**ACCESSION NUMBER**: 0001193125-23-068811

**CONFORMED SUBMISSION TYPE**: S-1

**PUBLIC DOCUMENT COUNT**: 44

**FILED AS OF DATE**: 20230313

**DATE AS OF CHANGE**: 20230713

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** SR Bancorp, Inc.
- **CENTRAL INDEX KEY:** 0001951276
- **STANDARD INDUSTRIAL CLASSIFICATION:** SAVINGS INSTITUTIONS, NOT FEDERALLY CHARTERED [6036]
- **IRS NUMBER:** 000000000
- **STATE OF INCORPORATION:** MD
- **FISCAL YEAR END:** 0630

**FILING VALUES:**
- **FORM TYPE:** S-1
- **SEC ACT:** 1933 Act
- **SEC FILE NUMBER:** 333-270489
- **FILM NUMBER:** 23726593

**BUSINESS ADDRESS:**
- **STREET 1:** 220 WEST UNION AVENUE
- **CITY:** BOUND BROOK
- **STATE:** NJ
- **ZIP:** 08805
- **BUSINESS PHONE:** (732) 560-1700

**MAIL ADDRESS:**
- **STREET 1:** 220 WEST UNION AVENUE
- **CITY:** BOUND BROOK
- **STATE:** NJ
- **ZIP:** 08805

##### [**Table of Contents**](#toc)
**As filed with the United States Securities and Exchange Commission on March 13, 2023** 

**Registration No. 333-<u> </u>** 

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**UNITED STATES** 

**SECURITIES AND EXCHANGE COMMISSION** 

**WASHINGTON, D.C. 20549** 

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**FORM S-1** 

**REGISTRATION STATEMENT** 

***UNDER***

***THE SECURITIES ACT OF 1933***

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## SR Bancorp, Inc.
**(Exact Name of Registrant as Specified in Its Charter)** 

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| | | |
|:---|:---|:---|
| **Maryland** | **6036** | **92-2601722** |
| **(State or other jurisdiction of**<br> **incorporation or organization)** | **(Primary Standard Industrial**<br> **Classification Code Number)** | **(I.R.S. Employer**<br> **Identification Number)** |

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**220 West Union Avenue** 

**Bound Brook, New Jersey 08805** 

**(732) 560-1700** 

**(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices)** 

**William P. Taylor** 

**Chairman and Chief Executive Officer** 

**220 West Union Avenue** 

**Bound Brook, New Jersey 08805** 

**(732) 560-1700** 

**(Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)** 

***Copies to:***

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| | |
|:---|:---|
| **John J. Gorman, Esq.**<br> **Marc P. Levy, Esq.**<br> **Luse Gorman, PC**<br> **5335 Wisconsin Avenue, N.W., Suite 780**<br> **Washington, D.C. 20015**<br> **(202) 274-2000** | **Edward G. Olifer, Esq.**<br> **Stephen F. Donahoe, Esq.**<br> **Kilpatrick Townsend & Stockton LLP**<br> **607 14<sup>th</sup> Street**<br> **Suite 900**<br> **Washington, DC 20005** |

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**Approximate date of commencement of proposed sale to the public:** As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: ☒

If this Form is filed to register additional shares for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.:

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| | | | |
|:---|:---|:---|:---|
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| Emerging growth company | ☒ |  |  |

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐

**The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.** 

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##### [**Table of Contents**](#toc)
**<u>Prospectus Supplement</u>**

**Interests in** 

**SOMERSET SAVINGS BANK, SLA 401(k) SAVINGS AND INVESTMENT PLAN** 

**Offering of Participation Interests of up to 1,146,810 Shares of**![LOGO](g352312g91n05.jpg)

## SR BANCORP, INC.
**Common Stock** 

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In connection with the mutual to stock conversion of Somerset Savings Bank, SLA, a New Jersey-chartered mutual savings association (the "Somerset Savings"), SR Bancorp, Inc., a newly-formed Maryland corporation and the to be holding company of the Bank, is offering shares of its common stock for sale at $10.00 per share. Following the offering, it is expected that shares of SR Bancorp, Inc. common stock will be listed on the Nasdaq Capital Markets under the symbol "SRBK."

In connection with the stock offering, Somerset Savings is allowing participants in the Somerset Savings Bank, SLA Savings and Investment Plan (the "401(k) Plan") to invest a portion of their account balances in SR Bancorp common stock. This prospectus supplement relates to the election of 401(k) Plan participants to direct the trustees of the 401(k) Plan to invest up to 50% of their account balance in the 401(k) Plan in SR Bancorp, Inc. Common Stock at the time of the stock offering. Based upon the value of the 401(k) Plan assets at December 31, 2022, the trustees of the 401(k) Plan could purchase up to 1,146,810 shares of SR Bancorp common stock on behalf of participants, at the purchase price of $10.00 per share, in the stock offering.

Before you consider investing, you should read the prospectus of SR Bancorp, dated May ___, 2023, which is attached to this prospectus supplement. It contains detailed information regarding the conversion, the stock offering of SR Bancorp and the financial condition, results of operations and business of Somerset Savings. This prospectus supplement provides information regarding the 401(k) Plan. You should read this prospectus supplement together with the prospectus and keep both for future reference.

**For a discussion of risks that you should consider, see "[Risk Factors](#tx352312_2)" beginning on page 19 of the attached prospectus, and "Notice of Your Rights Concerning Employer Securities" in this prospectus supplement.** 

**The interests in the Plan and the offering of shares of SR Bancorp common stock have not been approved or disapproved by the Federal Deposit Insurance Corporation, the New Jersey Department of Banking and Insurance, the Board of Governors of the Federal Reserve System, the Securities and Exchange Commission or any other federal or state agency. Any representation to the contrary is a criminal offense.** 

**The securities offered by this prospectus supplement are not deposits or savings accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency.** 

This prospectus supplement may be used only in connection with offers and sales by SR Bancorp in the stock offering of SR Bancorp common stock that may be acquired within the 401(k) Plan. No one may use this prospectus supplement to reoffer or resell interests in shares of SR Bancorp common stock acquired through the 401(k) Plan.

You should rely only on the information contained in this prospectus supplement and the attached prospectus. SR Bancorp, Somerset Savings and the 401(k) Plan have not authorized anyone to provide you with different information.

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##### [**Table of Contents**](#toc)
This prospectus supplement does not constitute an offer to sell or solicitation of an offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make an offer or solicitation in that jurisdiction. Neither the delivery of this prospectus supplement and the attached prospectus nor any sale of SR Bancorp common stock shall under any circumstances imply that there has been no change in the affairs of SR Bancorp, Somerset Savings or the 401(k) Plan since the date of this prospectus supplement, or that the information contained in this prospectus supplement or incorporated by reference is correct as of any time after the date of this prospectus supplement.

**The date of this prospectus supplement is [date].** 

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##### [**Table of Contents**](#toc)
**TABLE OF CONTENTS** 

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| | |
|:---|:---|
|  [THE OFFERING](#supp352312_1) | 1 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Securities Offered](#supp352312_2) | 1 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Election to Purchase SR Bancorp, Inc. Common Stock](#supp352312_3) | 1 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Purchase Priorities](#supp352312_4) | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Purchases in the Offering and Oversubscriptions](#supp352312_5) | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Composition of the SR Bancorp, Inc. Stock Fund](#supp352312_6) | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Minimum and Maximum Investment](#supp352312_7) | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Value of the Plan Assets](#supp352312_8) | 4 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [How to Order Stock in the Offering](#supp352312_9) | 4 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Order Deadline](#supp352312_10) | 5 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Irrevocability of Transfer Direction](#supp352312_11) | 5 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Future Direction to Purchase and Sell Common Stock](#supp352312_12) | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Voting Rights of Common Stock](#supp352312_13) | 6 |
|  [DESCRIPTION OF THE 401(k) PLAN](#supp352312_14) | 7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Introduction](#supp352312_15) | 7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Eligibility and Participation](#supp352312_16) | 7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Contributions under the Plan](#supp352312_17) | 7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Limitations on Contributions](#supp352312_18) | 8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Benefits under the Plan](#supp352312_19) | 8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Investment of Contributions and Account Balances](#supp352312_20) | 8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Performance History](#supp352312_21) | 9 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Description of the Investment Funds](#supp352312_22) | 9 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [SR Bancorp, Inc. Stock Fund](#supp352312_23) | 11 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Withdrawals from the Plan](#supp352312_24) | 11 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Administration of the Plan](#supp352312_25) | 12 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Amendment and Termination](#supp352312_26) | 12 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Merger, Consolidation or Transfer](#supp352312_27) | 12 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Federal Income Tax Consequences](#supp352312_28) | 12 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Notice of Your Rights Concerning Employer Securities](#supp352312_29) | 13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Additional ERISA Considerations](#supp352312_30) | 14 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Securities and Exchange Commission Reporting and Short-Swing Profit Liability](#supp352312_31) | 14 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Financial Information Regarding Plan Assets](#supp352312_32) | 15 |
|  [LEGAL OPINION](#supp352312_33) | 15 |

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|:---|:---|
| **THE OFFERING** | **THE OFFERING** |
| **Securities Offered** | Somerset Savings Bank, SLA is offering participants in the 401(k) Plan the opportunity to purchase participation interests in shares of SR Bancorp, Inc. common stock through the 401(k) Plan. A "participation interest" represents your indirect ownership of a share of SR Bancorp, Inc. common stock that is acquired by the 401(k) Plan and is equivalent to one share of SR Bancorp common stock. In this prospectus supplement, "participation interests" are referred to as shares of SR Bancorp common stock. At the stock offering purchase price of $10.00 per share and allowing participants to use up to 50% of their account balances, the 401(k) Plan may acquire up to 1,146,810 shares of SR Bancorp, Inc. common stock in the stock offering, based on the approximate fair market value of the 401(k) Plan's assets as of December 31, 2022.<br>Only employees of Somerset Savings may become participants in the 401(k) Plan and only participants may purchase shares of SR Bancorp common stock through the 401(k) Plan. However, your investment in shares of SR Bancorp common stock in connection with the stock offering is subject to the purchase priorities listed below.<br>Information regarding to the 401(k) Plan is contained in this prospectus supplement and information with respect to the financial condition, results of operations and business of SR Bancorp and the Somerset Savings is contained in the accompanying prospectus. The address of the corporate/main office of SR Bancorp and Somerset Savings is 220 West Union Avenue, Bound Brook, New Jersey 08805 and the telephone number at this address is (732) 560-1700.<br>***Address questions about this prospectus supplement to Dana DePace, VP, Human Resources Manager, Somerset Savings Bank, SLA, 220 West Union Avenue, Bound Brook, New Jersey 08805; telephone number (732) 893-1770; email:d_depace@somersetsavings.com.***<br>***Direct all questions about the stock offering, the prospectus, or obtaining a stock order form to purchase stock in the offering outside the 401(k) Plan to the Stock Information Center at [telephone #] (toll-free)***, ***Monday through Friday, [10:00 a.m. through 5:00 p.m.], Eastern time. The Stock Information Center will be closed on bank holidays.*** |
|  **Election to Purchase SR Bancorp,**<br> **Inc. Common Stock** | In connection with the stock offering, you may elect to designate a portion (up to 50%) of your 401(k) account balance to a money market fund called "Stock Purchase," which will be used to subscribe for SR Bancorp common stock in the stock offering. In making this designation, you should carefully read the prospectus and this prospectus supplement and consider the information set forth on page [#] of this prospectus supplement under *"Notice of Your Rights Concerning Employer Securities — The Importance of Diversifying Your Retirement Savings."* The trustees of the SR Bancorp, Inc. Stock Fund will subscribe for the purchase of SR Bancorp common stock at $10.00 per share in accordance with your directions. However, your directions are subject to the purchase priorities and purchase limitations, as described below. |

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|:---|:---|
| **Purchase Priorities** | All 401(k) Plan participants are eligible to elect to subscribe for SR Bancorp common stock in the stock offering. However, the elections are subject to the purchase priorities in the Plan of Conversion of Somerset Savings Bank, SLA, which provides for a subscription offering and a community offering. In the stock offering, the purchase priorities are as follows and apply in case more shares of SR Bancorp common stock are ordered than are available for sale (an "oversubscription):<br>Subscription Offering:<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Each person with $50 or more on deposit at Somerset Savings as of the close of business on June 30, 2021, has first priority.<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) Somerset Savings' tax-qualified plans, including the employee stock ownership plan and the 401(k) Plan, have second priority.<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) Each person with $50 or more on deposit at Somerset Savings as of the close of business on [•], 2023, has third priority.<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) Each Person with a deposit account at Somerset Savings at the close of business on the [Voting Record Date], has fourth priority.<br>Community Offering:<br>Shares of SR Bancorp common stock 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) in the New Jersey Counties of Hunterdon, Middlesex and Somerset.<br>If you fall into subscription offering categories (1), (3) or (4) above, you have subscription rights to purchase SR Bancorp common stock in the subscription offering and you may use funds (up to 50% of your account balance) in the 401(k) Plan to pay for the SR Bancorp common stock. You may also be able to purchase shares of SR Bancorp common stock in the subscription offering even though you are ineligible to purchase through subscription offering categories (1), (3) or (4) through subscription offering category (2), reserved for the Somerset Savings' tax-qualified employee plans.<br>If you fall into purchase priority (1), (3) or (4), you will separately receive offering materials in the mail, including a stock order form. You may use the stock order form to purchase shares of SR Bancorp common stock outside the 401(k) Plan.<br>Additionally, instead of (or in addition to) placing an order outside the 401(k) Plan using the stock order form, you may place an order for the purchase of SR Bancorp common stock through the 401(k) Plan in the manner described below under "How to Order Common Stock in the Stock Offering Through the Plan." |

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|:---|:---|
| **Purchases in the Offering and Oversubscriptions** | The trustees of the 401(k) Plan will subscribe for SR Bancorp common stock in the stock offering in accordance with your directions. Once you make your election, the amount that you elect to transfer from your existing investment options for the purchase of SR Bancorp common stock will be sold from your existing investment options and the proceeds will be transferred to the Stock Purchase option (which will be invested in a money market fund during the offering period) pending the completion of the stock offering several weeks later. After the end of the stock offering period, we will determine whether all or any portion of your order will be filled (if the offering is oversubscribed you may not receive any or all of your order, depending on your purchase priority, as described above). The amount that can be used toward your order will be applied to the purchase of SR Bancorp common stock. Following the closing of the stock offering, your purchased shares of SR Bancorp common stock will be transferred to the 401(k) Plan and will be reflected in your 401(k) Plan account as soon as practicable thereafter.<br>In the event the stock offering is oversubscribed, and the trustees are unable to use the full amount allocated by you to purchase SR Bancorp common stock in the stock offering, the amount that cannot be invested in shares of SR Bancorp common stock, and any interest earned on that amount, will be transferred from the Stock Purchase option and reinvested in the existing funds of the 401(k) Plan, in accordance with your then existing investment election (in proportion to your investment direction for future contributions). The prospectus describes the allocation procedures in the event of an oversubscription. If you choose not to direct the investment of your account balances towards the purchase of SR Bancorp common stock in connection with the stock offering, your account balances will remain in the investment funds of the 401(k) Plan as previously directed by you. |
| **Composition of the SR Bancorp, Inc. Stock Fund** | Shares of SR Bancorp common stock purchased by the 401(k) Plan in the stock offering will be transferred to the 401(k) Plan and held in the SR Bancorp, Inc. Stock Fund. The SR Bancorp, Inc. Stock Fund is neither a mutual fund nor a diversified or managed investment option. Rather, it is merely a recordkeeping mechanism established by the 401(k) Plan custodian to track the shares purchased by the participants in the stock offering through the Plan. The SR Bancorp, Inc. Stock Fund will consist solely of shares of SR Bancorp common stock purchased by participants in the 401(k) Plan, which will be initially valued at $10.00 per share (i.e., the purchase price).<br>Following the stock offering, each day the aggregate value of SR Bancorp, Inc. Stock Fund will be determined by dividing the total market value of the fund at the end of the day by the total number of shares held in the fund by all participants as of the previous day's end. The change in share value reflects the day's change in stock price of SR Bancorp common stock, and the value of each participation interest should be the same as one share of SR Bancorp common stock.<br>I**nvestment in SR Bancorp common stock involves risks common to investments in shares of stock. For a discussion of material risks you should consider, see the "Risk Factors" section of the accompanying prospectus and the section of the prospectus supplement called "Notice of Your Rights Concerning Employer Securities" (see below).**<br>The portion of your 401(k) Plan account invested in the SR Bancorp, Inc. Stock Fund will be reported to you on your regular 401(k) Plan participant statements. You can also go online at any time to <u>www.principal.com</u> or call 1-800-547-7754 to review your account balances. |
| **Minimum and Maximum**<br> **Investment** | In connection with the stock offering, the 401(k) Plan will permit you to use up to 50% of your 401(k) Plan account balance for the purchase of SR Bancorp common stock in the stock offering.<br>The trustees of the 401(k) Plan will subscribe for shares of SR Bancorp common stock offered for sale in the stock offering, in accordance with each participant's direction. The trustee will pay $10.00 per share, which will be the same price paid by all other persons who purchase shares in the stock offering. To purchase SR Bancorp common stock through the 401(k) Plan, the minimum investment is $250, which will purchase 25 shares. No individual may purchase more than $250,000 (25,000 shares) of SR Bancorp common stock. Furthermore, no person or entity, together with associates or persons acting in concert with such person or entity, may purchase more than $250,000 (25,000 shares) of SR Bancorp common stock in all categories of the stock offering combined. Please see the prospectus for further details regarding additional maximum purchase limits for investors in the stock offering. |

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|:---|:---|
| **Value of the Plan Assets** | As of December 31, 2022, the market value of the assets of the 401(k) Plan attributable to active and former employees of Somerset Savings was approximately $11,468,106. |
| **How to Order Stock in the Offering** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• You can elect to transfer (in whole dollar amounts) all or a portion of your account balance in the Plan to the Stock Purchase option, which will be used by the 401(k) Plan trustees to purchase shares of SR Bancorp common stock. This is done by following the procedures described below. Please note the following conditions concerning this election:<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• You can elect to transfer up to 50% of your current 401(k) Plan account balance to the Stock Purchase option.<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Your election is subject to a minimum purchase of 25 shares of common stock, which equals $250.<br>Your election, plus any order you placed outside the 401(k) Plan, are together subject to a maximum purchase limit of no more than 25,000 shares of SR Bancorp common stock, which equals $250,000. The prospectus describes an additional purchase limitation of 25,000 shares of SR Bancorp common stock, which equals $250,000, for an individual, together with associates or persons acting in concert with such individual.<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The election period for the Plan purchases ends at 4:00 p.m., Eastern Time, on June ___, 2023 (the "Plan Purchase Period").<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Your election to purchase common stock in the offering through the 401(k) Plan will be accepted by Principal Financial Group, the recordkeeper of the 401(k) Plan. After your election is accepted by Principal Financial Group, it will be rounded down to the closest dollar amount divisible by $10.00, and will be used by the trustees to purchase shares of SR Bancorp common stock sold in the stock offering. This difference will remain in the Stock Purchase option until the completion of the stock offering, which is expected to be several weeks after the Plan Purchase Period ends. At that time, the SR Bancorp common stock purchased based on your election will be transferred to the 401(k) Plan and any remaining funds will be transferred out of the Stock Purchase option for investment in other funds under the 401(k) Plan, based on your election currently on file for future contributions.<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The amount you elect to transfer to the Stock Purchase option will be held separately until the completion of the stock offering. Therefore, this money is not available for distributions, loans, or withdrawals until the stock offering is completed, which is expected to be several weeks after the 401(k) Plan Purchase Period ends.<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Following the completion of the stock offering, your purchased shares of SR Bancorp common stock will be reflected in your 401(k) Plan account through the SR Bancorp, Inc. Stock Fund.<br>Follow these steps to make your election to use your account balance in the 401(k) Plan to purchase shares of SR Bancorp, Inc. common stock in the stock offering. You are allowed only one election to transfer funds to the Stock Purchase option. |

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|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Go to www.principal.com and log into your 401(k) Plan account. In Account Login, click on drop down and choose "Personal," then "GO." Enter your Username and Password. If you haven't established your Username and Password, click on the link "Establish your Username and Password" and follow the prompts.<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• On your Personal Summary Page, choose the line for the Somerset Savings, SLA 401(k) Savings and Investment Plan.<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• When you reach "Your Account Overview," click on "Investments" across the top navigation of the screen, and then click on "Change Investments."<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• When you reach the "Change Investments" screen, click on the box titled "Move Balances." Then click on Make a Transfer."<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Click on "Advanced Transfer Features" and choose "dollars," then enter the amount you would like to transfer "From" each investment. When you have completed transferring "From" each investment, choose "Continue."<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Enter the dollars that you will be transferring into the Stock Purchase account. The Stock Purchase account is a money market investment that will hold the funds until the stock offering is concluded. All of the funds that you transferred "From" other investments must be transferred to another investment. All of the dollars must be transferred "To" another investment.<br>When you have completed the "To" portion of the transaction, click "Continue." You will be taken to a confirmation page. Please review your transaction for accuracy. If you need to make changes, click on "Cancel" or "Start Over" or "Previous" to make changes. If the information is correct, click on the box, "I confirm the information above and authorize Principal Life Insurance Company to process this request." You will receive a communication in your Message Center confirming your transaction.<br>After you completed your online election, you will also need to complete the Stock Information Form and return it either using the self-addressed pre-paid envelope, emailing it to d_depace@somersetsavings.com or by delivering it in person, to be received by Dana DePace, VP, Human Resources Manager, Somerset Savings Bank, SLA, 220 West Union Avenue, Bound Brook, New Jersey 08805; telephone number (732) 893-1770. |
| **Order Deadline** | You must make your election online at <u>www.principal.com</u> and return your Stock Information Form in the pre-paid envelope, by emailing to d_depace@somersetsavings.com or by delivering it in person to Dana DePace, VP, Human Resources Manager, Somerset Savings Bank, SLA, 220 West Union Avenue, Bound Brook, New Jersey 08805; telephone number (732) 893-1770; to be received no later than [time] p.m., Eastern Time, on June ___, 2023. |
| **Irrevocability of Transfer**<br> **Direction** | **<u>Once you make an election to transfer amounts to the Stock Purchase option to be used by the trustee to purchase SR Bancorp common stock in connection with the stock offering, you may not change your election.</u>** |

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|:---|:---|
|  | **<u>Your election is irrevocable</u>**. You will, however, continue to have the ability to transfer amounts not directed towards the purchase of SR Bancorp common stock among all of the other investment funds on a daily basis. |
| **Future Direction to Purchase and Sell Common Stock** | You will be able to purchase SR Bancorp common stock after the stock offering through the 401(k) Plan by investing your future contributions through the SR Bancorp, Inc. Stock Fund, provided, that no more than 50% of your future contributions (both employer and employee) may be invested in the SR Bancorp, Inc. Stock Fund. Additionally, after the stock offering, you will be able to transfer no more than 50% of your account balance to the SR Bancorp, Inc. Stock Fund.<br>After the stock offering, to the extent that shares are available, the trustee of the 401(k) Plan will acquire shares of SR Bancorp common stock at your election in open market transactions at the prevailing price, which may be less than or more than $10.00 per share. In addition, a brokerage commission of $0.05 per share of stock purchased will be charged.<br>You may change your investment allocation on a daily basis. **However, please be advised that your ability to buy or sell SR Bancorp common stock within the 401(k) Plan largely depends upon the existence of an active market for the stock. If SR Bancorp common stock is illiquid (meaning there are a low number of buyers and sellers of the stock) on the date you elect to buy or sell SR Bancorp common stock within the 401(k) Plan, your election may not be immediately processed. As a result, the prevailing price for SR Bancorp, Inc. common stock may be less or more than its fair market value on the date of your election.**<br>Special restrictions may apply to purchasing shares of SR Bancorp common stock by the participants who are subject to the provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended, relating to the purchase and sale of securities by officers, directors and principal stockholders of SR Bancorp.<br>**Please note that if you are an officer of the Somerset Savings who is restricted by regulation from selling shares of SR Bancorp common stock acquired in the stock offering for one year, the SR Bancorp common stock that you purchased in the stock offering will not be tradable until the one-year trading restriction has lapsed.** |
| **Voting Rights of Common Stock** | You may direct the trustee as to how to vote your shares of SR Bancorp common stock held in the SR Bancorp, Inc. Stock Fund, if permitted by Somerset Savings. If the trustee does not receive your voting instructions, the trustee will be directed by Somerset Savings to vote your shares in the same proportion as the voting instructions received from other participants related to their shares of SR Bancorp common stock held by the 401(k) Plan, provided that such vote is made in accordance with the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). All voting instructions will be kept confidential. |

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**DESCRIPTION OF THE 401(k) PLAN** 

**Introduction** 

Somerset Savings originally adopted the 401(k) Plan effective as of January 1, 1984. In connection with the mutual-to-stock conversion of Somerset Savings, SR Bancorp and Somerset Savings desire to allow participants to purchase common stock of SR Bancorp in their accounts in the 401(k) Plan. The 401(k) Plan is a tax-qualified plan with a cash or deferred compensation feature established in accordance with the requirements under Section 401(a) and Section 401(k) of the Internal Revenue Code of 1986, as amended (the "Code").

Somerset Savings intends that the 401(k) Plan, in operation, will comply with the requirements under Section 401(a) and Section 401(k) of the Code. Somerset Savings will adopt any amendments to the 401(k) Plan that may be necessary to ensure the continuing qualified status of the 401(k) Plan under the Code and applicable Treasury Regulations.

*ERISA.* The 401(k) Plan is an "individual account plan" other than a "money purchase pension plan" within the meaning of ERISA. As such, the 401(k) Plan is subject to all of the provisions of Title I (Protection of Employee Benefit Rights) and Title II (Amendments to the Code Relating to Retirement Plans) of ERISA, except to the funding requirements contained in Part 3 of Title I of ERISA, which by their terms do not apply to an individual account plan (other than a money purchase plan). The 401(k) Plan is not subject to Title IV (Plan Termination Insurance) of ERISA. The funding requirements contained in Title IV of ERISA are not applicable to participants or beneficiaries under the 401(k) Plan.

*Reference to Full Text of Plan.* The following portions of this prospectus supplement summarize certain provisions of the 401(k) Plan. They are not complete and are qualified in their entirety by the full text of the 401(k) Plan. Copies of the 401(k) Plan are available to all employees by filing a request with the 401(k) Plan Administrator c/o Somerset Savings, Attn: Dana DePace, VP, Human Resources Manager, Somerset Savings Bank, SLA, 220 West Union Avenue, Bound Brook, New Jersey 08805; telephone number (732) 893-1770; email:d_depace@somersetsavings.com.

**Eligibility and Participation** 

As an employee of Somerset Savings, you are eligible to become a participant in the 401(k) Plan on the entry date coinciding with or immediately following completion of six months of service and attainment of age 21. The entry dates under the 401(k) Plan are the first day of the month on or after you meet these requirements.

As of December 31, 2022, there were approximately 89 active and former employees with account balances in the 401(k) Plan.

**Contributions under the Plan** 

*Elective Deferrals.* You may defer up to 100% of your compensation as of the date you become a participant in the 401(k) Plan, but may choose a different percentage or choose not to defer at all. You are automatically enrolled to defer 2% of your compensation.

You are permitted to defer up to 100% of your compensation, subject to certain restrictions imposed by the Code, and to have that amount contributed to the 401(k) Plan on your behalf. Your elective deferrals are subject to certain restrictions imposed by the Code, and for 2023, you may defer up to $22,500 and you may defer an additional $7,500 if you qualify for catch-up contributions as described in the next paragraph. The Compensation of each participant taken into account under the Plan is limited by the Code, and for 2023 the limit is $330,000 (this limit may change on an annual basis). Canceling or changing your contribution percentage can be accomplished by going to <u>www.Principal.com</u>.

*Catch-up Contributions*. If you have made the maximum amount of elective deferrals allowed by the 401(k) Plan or other legal limits and you have attained at least age 50 (or will reach age 50 prior to the end of the tax year, which is December 31), you are also eligible to make an additional catch-up contribution. In 2023, the maximum catch-up contribution is $7,500. You may authorize your employer to withhold a specified dollar amount of your compensation for this purpose.

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*Employer Contributions*. Somerset Savings currently makes a contribution equal to 3% of your contribution.

**Limitations on Contributions** 

*Contribution Limits.* For the tax year beginning January 1, 2023, the amount of your elective deferrals may not exceed $22,500 per calendar year, or $30,000, if you are eligible to make catch-up contributions. Contributions in excess of this limit are known as excess deferrals. If you defer amounts in excess of this limitation, your gross income for federal income tax purposes will include the excess in the year of the deferral. In addition, unless the excess deferral is distributed before April 15 of the following year, it will be taxed again in the year distributed. Income on the excess deferral distributed by April 15 of the immediately succeeding year will be treated, for federal income tax purposes, as earned and received by you in the tax year in which the contribution is made.

The total amount of contributions that you make and any contribution your employer makes on your behalf to your account in one year is generally limited to the lesser of 100% of your compensation or $66,000 (for 2023), or if applicable, $73,500 (for 2023) including catch-up contributions.

*Rollovers*. You may make a rollover contribution of an eligible rollover distribution from any other qualified retirement plan or an individual retirement arrangement (IRA). These funds will be maintained in a separate rollover account in which you will have a nonforfeitable vested interest.

**Benefits under the Plan** 

*Vesting.* At all times, you have a fully vested, nonforfeitable interest in the portion of your account balance attributable to elective deferrals and employer contributions under the 401(k) Plan.

*Distribution at Termination of Employment*. You will be entitled to receive a distribution of the vested amounts in your account when your employment terminates for any reason. Your benefit will be equal to the vested balance of your account. The Plan will make involuntary cash-out distributions of vested account balances in accordance with the Plan. If you are not a 5% or more owner of your employer, your required benefit commencement date is the April 1<sup>st</sup> following the close of the year in which the later occurs: you attain age 72 <sup>1</sup>⁄<sub>2</sub> or you terminate employment.

*Distribution after Death of Participant*. In the event of your death, the value of your entire account will be payable to your beneficiary in accordance with the 401(k) Plan.

**Investment of Contributions and Account Balances** 

All amounts credited to your accounts under the 401(k) Plan are held in the 401(k) Plan trust (the "Trust"), which is administered by the trustee of the 401(k) Plan. Prior to the effective date of the offering, you were provided the opportunity to direct the investments of your account into one of the investment options described below.

Morley Stable Value Class 80-I Fund

Loomis Sayles Core Plus Bond Y Fund

American Funds American Balanced R6 Fund

JP Morgan SmartRetirement 2020 A Fund

JP Morgan SmartRetirement 2030 A Fund

JP Morgan SmartRetirement 2040 A Fund

JP Morgan SmartRetirement 2050 A Fund

JP Morgan SmartRetirement 2060 A Fund

American Funds Washington Mutual Investors R6 Fund

JP Morgan Large Cap Growth A Fund

MidCap S&P 400 Index Separate Account

American Century Small Cap Value R6 Fund

Vanguard Global Equity Investor Fund

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**Performance History** 

The following table provides performance data with respect to the investment funds in the Plan:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Average Annual Total Return<br>(as of 12/31/2022 year end)** | **Average Annual Total Return<br>(as of 12/31/2022 year end)** | **Average Annual Total Return<br>(as of 12/31/2022 year end)** | **Average Annual Total Return<br>(as of 12/31/2022 year end)** |
| **Investment Option Name** | **1-Year** | **3-Year** | **5-Year** | **10-Year** |
|  Morley Stable Value Class 80-I Fund | 1.14% | 1.14% | 1.28% | 1.00% |
|  Loomis Sayles Core Plus Bond Y Fund | -12.75% | -1.64% | 0.58% | 1.70% |
|  American Funds American Balanced R6 Fund | -11.83% | 4.42% | 5.84% | 8.59% |
|  JP Morgan SmartRetirement 2020 A Fund | -14.26% | -0.08% | 1.70% | 4.58% |
|  JP Morgan SmartRetirement 2030 A Fund | -16.82% | 1.02% | 2.72% | 6.17% |
|  JP Morgan SmartRetirement 2040 A Fund | -17.98% | 2.78% | 3.93% | 7.37% |
|  JP Morgan SmartRetirement 2050 A Fund | -18.54% | 3.18% | 4.23% | 7.54% |
|  JP Morgan SmartRetirement 2060 A Fund | -18.47% | 3.19% | 4.29% | N/A |
|  American Funds Washington Mutual Investors R6 Fund | -8.18% | 8.55% | 9.41% | 12.25% |
|  JP Morgan Large Cap Growth A Fund | -25.59% | 11.03% | 13.69% | 14.96% |
|  MidCap S&P 400 Index Separate Account | -13.10% | 7.14% | 6.62% | 10.68% |
|  American Century Small Cap Value R6 Fund | -14.52% | 8.70% | 7.44% | 10.72% |
|  Vanguard Global Equity Investor Fund | -22.64% | 2.31% | 4.61% | 8.52% |

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**Description of the Investment Funds** 

**Morley Stable Value Class 80-I Fund.** The Fund primarily consists of a diversified portfolio of Stable Value Investment Contracts (Investment Contracts) issued by life insurance companies, banks and other financial institutions, the performance of which may be predicated on underlying fixed income investments. The principal value of these assets is designed to remain stable regardless of stock and bond market fluctuations. The Fund is typically appropriate for investors who desire low volatility, stable principal value, and returns commensurate with a capital preservation objective for a component of their retirement savings. The Fund is designed for long-term retirement investing.

**Loomis Sayles Core Plus Bond Y Fund.** The investment seeks high total investment return through a combination of current income and capital appreciation. Under normal market conditions, the fund will invest at least 80% of its net assets (plus any borrowings made for investment purposes) in bonds, which include debt securities of any maturity. In addition, it will invest at least 65% of its net assets in investment grade securities. The fund will generally seek to maintain an effective duration of +/- 2 years relative to the Bloomberg U.S. Aggregate Bond Index

**American Funds American Balanced R6 Fund.** The investment seeks conservation of capital, current income and long-term growth of capital and income. The fund uses a balanced approach to invest in a broad range of securities, including common stocks and investment-grade bonds. It also invests in securities issued and guaranteed by the U.S. government and by federal agencies and instrumentalities. In addition, the fund may invest a portion of its assets in common stocks, most of which have a history of paying dividends, bonds and other securities of issuers domiciled outside the United States.

**JP Morgan SmartRetirement 2020 A Fund.** The investment seeks high total return with a shift to current income and some capital appreciation over time as the fund approaches and passes the target retirement date. The fund is intended for investors who retired on or around the year 2020 and plan to withdraw their investment in the fund throughout retirement. It is designed to provide exposure to equity, fixed income and cash/cash equivalent asset classes by investing in mutual funds and ETFs within the same group of investment companies, passive ETFs that are managed by unaffiliated investment advisers in certain limited instances and/or direct investments in other financial instruments.

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**JP Morgan SmartRetirement 2030 A Fund.** The investment seeks high total return with a shift to current income and some capital appreciation over time as the fund approaches and passes the target retirement date. The fund is generally intended for investors who plan to retire around the year 2030 and then withdraw their investment in the fund throughout retirement. It is designed to provide exposure to equity, fixed income and cash/cash equivalent asset classes by investing in mutual funds and ETFs within the same group of investment companies, passive ETFs that are managed by unaffiliated investment advisers in certain limited instances and/or direct investments in other financial instruments.

**JP Morgan SmartRetirement 2040 A Fund.** The investment seeks high total return with a shift to current income and some capital appreciation over time as the fund approaches and passes the target retirement date. The fund is generally intended for investors who plan to retire around the year 2040 and then withdraw their investment in the fund throughout retirement. It is designed to provide exposure to equity, fixed income and cash/cash equivalent asset classes by investing in mutual funds and ETFs within the same group of investment companies, passive ETFs that are managed by unaffiliated investment advisers in certain limited instances and/or direct investments in other financial instruments.

**JP Morgan SmartRetirement 2050 A Fund.** The investment seeks high total return with a shift to current income and some capital appreciation over time as the fund approaches and passes the target retirement date. The fund is generally intended for investors who plan to retire around the year 2050 and then withdraw their investment in the fund throughout retirement. It is designed to provide exposure to equity, fixed income and cash/cash equivalent asset classes by investing in mutual funds and ETFs within the same group of investment companies, passive ETFs that are managed by unaffiliated investment advisers in certain limited instances and/or direct investments in other financial instruments.

**JP Morgan SmartRetirement 2060 A Fund.** The investment seeks high total return with a shift to current income and some capital appreciation over time as the fund approaches and passes the target retirement date. The fund is generally intended for investors who plan to retire around the year 2060 and then withdraw their investment in the fund throughout retirement. It is designed to provide exposure to equity, fixed income and cash/cash equivalent asset classes by investing in mutual funds and ETFs within the same group of investment companies, passive ETFs that are managed by unaffiliated investment advisers in certain limited instances and/or direct investments in other financial instruments.

**American Funds Washington Mutual Investors R6 Fund.** The investment seeks to produce income and to provide an opportunity for growth of principal consistent with sound common stock investing. The fund invests primarily in common stocks of established companies that are listed on, or meet the financial listing requirements of, the New York Stock Exchange and have a strong record of earnings and dividends. Its advisor strives to maintain a fully invested, diversified portfolio, consisting primarily of high-quality common stocks.

**JP Morgan Large Cap Growth A Fund.** The investment seeks long-term capital appreciation. Under normal circumstances, at least 80% of the fund's assets will be invested in the equity securities of large, well-established companies. "Assets" means net assets, plus the amount of borrowings for investment purposes. Large, well-established companies are companies with market capitalizations equal to those within the universe of the Russell 1000(R) Growth Index at the time of purchase.

**MidCap S&P 400 Index Separate Account.** The investment option normally invests the majority of assets in common stocks of companies that compose the S&P MidCap 400 Index. Management attempts to mirror the investment performance of the index by allocating assets in approximately the same weightings as the S&P MidCap 400 Index. Over the long-term, management seeks a very close correlation between the performance of the Separate Account before expenses and that of the S&P MidCap 400 Index.

**American Century Small Cap Value R6 Fund.** The investment seeks long-term capital growth; income is a secondary consideration. Under normal market conditions, the portfolio managers will invest at least 80% of the fund's net assets in small cap companies. The portfolio managers consider small cap companies to include those with market capitalizations no larger than that of the largest company in the S&P Small Cap 600(R) Index or the Russell 2000(R) Index.

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**Vanguard Global Equity Investor Fund.** The investment seeks long-term capital appreciation. The fund invests primarily in U.S. and foreign equity securities chosen mainly on the basis of bottom-up stock analysis. It typically invests across a wide range of industries, and its holdings are expected to represent a mix of value and growth stocks, as well as a mix of developed and emerging markets stocks, across the capitalization spectrum. Under normal circumstances, at least 80% of the fund's assets will be invested in equity securities. The fund uses multiple investment advisors. Each advisor independently selects and maintains a portfolio of common stocks and other investments for the fund.

**An investment in any of the funds listed above is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. As with any mutual fund investment, there is always a risk that you may lose money on your investment in any of the funds listed above.** 

**SR Bancorp, Inc. Stock Fund** 

In connection with the stock offering, the 401(k) Plan now offers the SR Bancorp, Inc. Stock Fund as an additional choice to the investment options described above. The SR Bancorp, Inc. Stock Fund invests primarily in the shares of common stock of SR Bancorp. In connection with the stock offering, you may, in the manner described earlier, direct the trustee to invest up to 50% of your 401(k) Plan account in the SR Bancorp, Inc. Stock Fund.

As of the date of this prospectus supplement, there is no established market for SR Bancorp common stock. Accordingly, there is no record of the historical performance of the SR Bancorp, Inc. Stock Fund. Performance of the SR Bancorp, Inc. Stock Fund depends on a number of factors, including the financial condition and profitability of SR Bancorp and Somerset Savings and market conditions for shares of SR Bancorp common stock generally.

Investments in the SR Bancorp, Inc. Stock Fund involve special risks common to investments in the shares of common stock of SR Bancorp. In making a decision to invest a part of your account balance in the SR Bancorp, Inc. Stock Fund, you should carefully consider the information set forth on page [#] of this prospectus supplement under *"Notice of Your Rights Concerning Employer Securities – The Importance of Diversifying Your Retirement Savings."*

*For a discussion of material risks you should consider, see "Risk Factors" beginning on page [19] of the attached prospectus and the section of this prospectus supplement called "Notice of Your Rights Concerning Employer Securities" below.* 

**Withdrawals from the Plan** 

Applicable federal law requires the Plan to impose substantial restrictions on the right of a 401(k) Plan participant to withdraw amounts held for his or her benefit under the 401(k) Plan prior to the participant's termination of employment with Somerset Savings. A substantial federal tax penalty may also be imposed on withdrawals made prior to the participant's attainment of age 59 <sup>1</sup>⁄<sub>2</sub>, regardless of whether the withdrawal occurs during his or her employment with Somerset Savings or after termination of employment.

*Withdrawal from your Account prior to Retirement.* Once you have attained age 59 <sup>1</sup>⁄<sub>2</sub>, you may request distribution of all or part of the amounts credited to your accounts attributable to elective deferrals, nonelective contributions and matching contributions.

*Hardship Withdrawals*. If you incur a financial hardship, you may request a withdrawal from the portion of your account attributable to your pre-tax and after-tax elective deferrals.

*Rollover Contributions*. You may withdraw amounts you contributed to the 401(k) Plan as a rollover contribution at any time.

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*Loan*. You may request a loan from your account pursuant to the procedures established in the 401(k) Plan.

**Administration of the Plan** 

*The Trustee*. The trustee of the Plan is Principal Trust Company. Principal Trust Company serves as trustee for all the investments funds under the Plan, except that William P. Taylor, Christopher J. Pribula and Dana DePace will serve as trustees of the SR Bancorp, Inc. Stock Fund only during the stock offering period.

*Plan Administrator*. Pursuant to the terms of the Plan, the Plan is administered by the Plan administrator. The address of the Plan administrator is Somerset Savings, 220 West Union Avenue, Bound Brook, New Jersey 08805. The Plan administrator is responsible for the administration of the Plan, interpretation of the provisions of the Plan, prescribing procedures for filing applications for benefits, preparation and distribution of information explaining the Plan, maintenance of plan records, books of account and all other data necessary for the proper administration of the Plan, preparation and filing of all returns and reports relating to the Plan which are required to be filed with the U.S. Department of Labor and the Internal Revenue Service, and for all disclosures required to be made to participants, beneficiaries and others under Sections 104 and 105 of ERISA.

*Reports to Plan Participants*. The 401(k) Plan administrator will furnish you a statement at least quarterly showing the balance in your account as of the end of that period, the amount of contributions allocated to your account for that period, and any adjustments to your account to reflect earnings or losses (if any). In addition, you can go on-line to <u>principal.com</u> or call 1-(800) 547-7754 at any time to review your account balances.

**Amendment and Termination** 

It is the intention of Somerset Savings to continue the 401(k) Plan indefinitely. Nevertheless, Somerset Savings may terminate the 401(k) Plan at any time. If the 401(k) Plan is terminated in whole or in part, then regardless of other provisions in the 401(k) Plan, you will have a fully vested interest in your accounts. Somerset Savings reserves the right to make any amendment or amendments to the 401(k) Plan which do not cause any part of the trust to be used for, or diverted to, any purpose other than the exclusive benefit of participants or their beneficiaries; provided, however, that Somerset Savings may make any amendment it determines necessary or desirable, with or without retroactive effect, to comply with ERISA.

**Merger, Consolidation or Transfer** 

In the event of the merger or consolidation of the 401(k) Plan with another plan, or the transfer of the trust assets to another plan, the 401(k) Plan requires that you would receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit you would have been entitled to receive immediately before the merger, consolidation or transfer.

**Federal Income Tax Consequences** 

The following is a brief summary of the material federal income tax aspects of the 401(k) Plan. You should not rely on this summary as a complete or definitive description of the material federal income tax consequences relating to the 401(k) Plan. Statutory provisions change, as do their interpretations, and their application may vary in individual circumstances. Finally, the consequences under applicable state and local income tax laws may not be the same as under the federal income tax laws. Please consult your tax advisor with respect to any distribution from the 401(k) Plan and transactions involving the 401(k) Plan.

As a "tax-qualified retirement plan," the Code affords the 401(k) Plan special tax treatment, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) the sponsoring employer is allowed an immediate tax deduction for the amount contributed to the Plan each year;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) participants pay no current income tax on amounts contributed by the employer on their behalf; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) earnings of the 401(k) Plan are tax-deferred, thereby permitting the tax-free accumulation of income and gains on investments.

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Somerset Savings will administer the 401(k) Plan to comply with the requirements of the Code as of the applicable effective date of any change in the law.

*Lump-Sum Distribution*. A distribution from the 401(k) Plan to a participant or the beneficiary of a participant will qualify as a lump-sum distribution if it is made within one taxable year, on account of the participant's death, disability or separation from service, or after the participant attains age 59 <sup>1</sup>⁄<sub>2</sub>, and consists of the balance credited to participants under the 401(k) Plan and all other profit sharing plans (and in some cases all other stock bonus plans), if any, maintained by Somerset Savings. The portion of any lump-sum distribution required to be included in your taxable income for federal income tax purposes consists of the entire amount of the lump-sum distribution, less the amount of after-tax contributions, if any, you have made to this 401(k) Plan and any other profit sharing plans maintained by Somerset Savings, which is included in the distribution.

*SR Bancorp, Inc. Common Stock Included in Lump-Sum Distribution*. If a lump-sum distribution includes SR Bancorp common stock, the distribution generally will be taxed in the manner described above, except that the total taxable amount may be reduced by the amount of any net unrealized appreciation with respect to SR Bancorp common stock, that is, the excess of the value of SR Bancorp common stock at the time of the distribution over its cost or other basis of the securities to the trust. The tax basis of SR Bancorp common stock, for purposes of computing gain or loss on its subsequent sale, equals the value of SR Bancorp common stock at the time of distribution, less the amount of net unrealized appreciation. Any gain on a subsequent sale or other taxable disposition of SR Bancorp common stock, to the extent of the amount of net unrealized appreciation at the time of distribution, will constitute long-term capital gain, regardless of the holding period of SR Bancorp common stock. Any gain on a subsequent sale or other taxable disposition of SR Bancorp common stock, in excess of the amount of net unrealized appreciation at the time of distribution, will be considered long-term capital gain. The recipient of a distribution may elect to include the amount of any net unrealized appreciation in the total taxable amount of the distribution, to the extent allowed by regulations to be issued by the Internal Revenue Service.

*Distributions: Rollovers and Direct Transfers to Another Qualified Plan or to an IRA*. You may roll over virtually all distributions from the 401(k) Plan to another qualified plan or to an individual retirement account (IRA) in accordance with the terms of the other plan or account.

**Notice of Your Rights Concerning Employer Securities** 

There has been an important change in Federal law that provides specific rights concerning investments in employer securities, such as SR Bancorp common stock. Because you may in the future have investments in SR Bancorp, Inc. Stock Fund under the Plan, you should take the time to read the following information carefully.

*Your Rights Concerning Employer Securities*. The 401(k) Plan must allow you to elect to move any portion of your account that is invested in the SR Bancorp, Inc. Stock Fund from that investment into other investment alternatives under the 401(k) Plan. You may contact the 401(k) Plan Administrator shown above for specific information regarding this new right, including how to make this election. In deciding whether to exercise this right, you will want to give careful consideration to the information below that describes the importance of diversification. All of the investment options under the Plan are available to you if you decide to diversify out of the SR Bancorp, Inc. Stock Fund.

*The Importance of Diversifying Your Retirement Savings*. To help achieve long-term retirement security, you should give careful consideration to the benefits of a well-balanced and diversified investment portfolio. Spreading your assets among different types of investments can help you achieve a favorable rate of return, while minimizing your overall risk of losing money. This is because market or other economic conditions that cause one category of assets, or one particular security, to perform very well often cause another asset category, or another particular security, to perform poorly. If you invest more than 20% of your retirement savings in any one company or industry, your savings may not be properly diversified. Although diversification is not a guarantee against loss, it is an effective strategy to help you manage investment risk.

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In deciding how to invest your retirement savings, you should take into account all of your assets, including any retirement savings outside of the Plan. No single approach is right for everyone because, among other factors, individuals have different financial goals, different time horizons for meeting their goals, and different tolerance for risk. Therefore, you should carefully consider the rights described here and how these rights affect the amount of money that you invest in SR Bancorp common stock through the 401(k) Plan.

It is also important to periodically review your investment portfolio, your investment objectives, and the investment options under the 401(k) Plan to help ensure that your retirement savings will meet your retirement goals.

**Additional ERISA Considerations** 

As noted above, the 401(k) Plan is subject to certain provisions of ERISA, including special provisions relating to control over the 401(k) Plan's assets by participants and beneficiaries. The 401(k) Plan's feature that allows you to direct the investment of your account balances is intended to satisfy the requirements of Section 404(c) of ERISA relating to control over plan assets by a participant or beneficiary. The effect of this is two-fold. First, you will not be deemed a "fiduciary" because of your exercise of investment discretion. Second, no person who otherwise is a fiduciary, such as Somerset Savings, the 401(k) Plan Administrator, or the 401(k) Plan's trustee is liable under the fiduciary responsibility provision of ERISA for any loss which results from your exercise of control over the assets in your Plan account.

Because you will be entitled to invest all or a portion of your account balance in the Plan in SR Bancorp common stock, the regulations under Section 404(c) of ERISA require that the 401(k) Plan establish procedures that ensure the confidentiality of your decision to purchase, hold, or sell employer securities, except to the extent that disclosure of such information is necessary to comply with federal or state laws not preempted by ERISA. These regulations also require that your exercise of voting and similar rights with respect to the common stock be conducted in a way that ensures the confidentiality of your exercise of these rights.

**Securities and Exchange Commission Reporting and Short-Swing Profit Liability** 

Section 16 of the Securities Exchange Act of 1934, as amended, imposes reporting and liability requirements on officers, directors, and persons beneficially owning more than 10% of public companies such as SR Bancorp. Section 16(a) of the Securities Exchange Act of 1934 requires the filing of reports of beneficial ownership. Within 10 days of becoming an officer, director or person beneficially owning more than 10% of the shares of SR Bancorp, the individual must fill out a Form 3 reporting initial beneficial ownership and file it with the Securities and Exchange Commission. Changes in beneficial ownership, such as purchases, sales and gifts generally must be reported periodically, either on a Form 4 within two business days after the change occurs, or annually on a Form 5 within 45 days after the close of SR Bancorp's fiscal year. Discretionary transactions in and beneficial ownership of the common stock through the SR Bancorp, Inc. Stock Fund of the Plan by officers and persons beneficially owning more than 10% of the common stock of SR Bancorp generally must be reported to the Securities and Exchange Commission by such individuals.

In addition to the reporting requirements described above, Section 16(b) of the Securities Exchange Act of 1934, as amended, provides for the recovery by SR Bancorp of profits realized by an officer, director or any person beneficially owning more than 10% of SR Bancorp's common stock resulting from non-exempt purchases and sales of SR Bancorp common stock within any six-month period.

The Securities and Exchange Commission has adopted rules that provide exemptions from the profit recovery provisions of Section 16(b) for all transactions in employer securities within an employee benefit plan, provided certain requirements are met. These requirements generally involve restrictions upon the timing of elections to acquire or dispose of employer securities for the accounts of Section 16(b) persons.

Except for distributions of common stock due to death, disability, retirement, termination of employment or under a qualified domestic relations order, persons affected by Section 16(b) are required to hold shares of common stock distributed from the Plan for six months following such distribution and are prohibited from directing additional purchases within the SR Bancorp, Inc. Stock Fund for six months after receiving such a distribution.

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**Financial Information Regarding Plan Assets** 

Financial information representing the net assets available for 401(k) Plan benefits and the change in net assets available for 401(k) Plan benefits is available upon written request to the Plan Administrator at the address shown above.

**LEGAL OPINION** 

The validity of the issuance of the common stock has been passed upon by Luse Gorman, PC, Washington, D.C., which firm acted as special counsel to SR Bancorp in connection with SR Bancorp's stock offering.

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**PROSPECTUS**![LOGO](g352312g91n05.jpg)

## SR Bancorp, Inc.
**(Proposed Holding Company for Somerset Savings Bank, SLA)** 

**Up to 11,500,000 Shares of Common Stock Offered to the Public** 

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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 11,500,000 shares of common stock for sale on a best efforts basis, subject to certain conditions. We must sell a minimum of 8,500,000 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 13,225,000 shares without giving you further notice or the opportunity to change or cancel your order. Additionally, we will contribute up to $1.2 million in cash and up to 575,000 shares of SR Bancorp stock, which, together, represents 6.0% of the value of the common stock issued in the offering, to Somerset Regal Charitable Foundation, Inc., a charitable foundation to be formed in connection with the stock offering. We must sell a minimum of 8,500,000 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 13,225,000 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 [offering deadline]. We may extend this termination date without notice to you until [extension date]. Funds received before completion of the offering will be maintained in a segregated account at Somerset Savings Bank, SLA. 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 25,000 shares ($250,000) 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 [extension date]. If we extend the stock offering beyond [extension date], 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, 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](#tx352312_2)*" beginning on page 19.** 

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**OFFERING SUMMARY** 

Price Per Share: $10.00

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Minimum** | **Midpoint** | **Maximum** | **Adjusted<br>Maximum** |
|  Number of shares offered for sale | 8500000 | 10000000 | 11500000 | 13225000 |
|  Gross offering proceeds<sup>(1)</sup> | $85000000 | $100000000 | $115000000 | $132250000 |
|  Estimated offering expenses, excluding selling agent fees and expenses<sup>(1)(2)</sup> | $2202000 | $2202000 | $2202000 | $2202000 |
|  Selling agent fees and expenses<sup>(1)</sup> | $1135000 | $1285000 | $1435000 | $1607500 |
|  Estimated net proceeds | $81663000 | $96513000 | $111363000 | $128440500 |
|  Estimated net proceeds per share | $9.61 | $9.65 | $9.68 | $9.71 |

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(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 ()<u> </u> -<u> </u>.

![LOGO](g352312g0309130151800.jpg)

The date of this prospectus is [Prospectus Date]

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![LOGO](g352312g00a01.jpg)

SOMERSET SAVINGS287 80 80 Roseland Livingston 95 NEW JERSEY West Orange Manhattan Florham Park 287 Millburn Summit Spring eld 78 Brooklyn 78 78 Whitehouse Bound NEW YORK Somerville Brook Middlesex 95 Raritan 287 Manville Somerset Flemington 95Somerset Savings Bank O_cesBound Brook (Headquarters)220 West Union AvenueFlemington141 Broad Street Manville41 South Main StreetMiddlesex1305 Bound Brook RoadRaritan802 Somerset Street Somerville64 West End AvenueWhitehouse410 Route 22 WestRegal Bank O_ces(1)Livingston (Headquarters)570 West Mt. Pleasant AvenueLivingston66 W Mount Pleasant AvenueRoseland180 Eagle Rock AvenueFlorham Park30 Columbia TurnpikeMillburn290 Millburn AvenueWest Orange641 Eagle Rock AvenueSummit360 Spring_eld AvenueSomerset464B Elizabeth AvenueSpring_eld899 Mountain AvenueSomerville151 N Adamsville RoadN E W J E R S E Y(1)On July 25, 2022, Somerset Savings Bank, SLA and SR Bancorp, Inc. entered into an Agreement and Plan of Merger with Regal Bancorp, Inc. and Regal Bank. The Merger Agreement was subsequently amended on March 7, 2023. Pursuant to the Merger Agreement, as amended, promptly following the completion of the conversion and related stock o_ering, SRB Interim Corporation, a wholly-owned subsidiary of SR Bancorp, 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. 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. Immediately following the Merger, Regal Bank, a New Jersey chartered commercial bank headquartered in Livingston, New Jersey and wholly-owned subsidiary of Regal Bancorp, will merge with and into Somerset Savings Bank, which will convert to a commercial bank charter and be renamed Somerset Regal Bank. The Regal Bank o_ces listed above will become branches of Somerset Savings Bank upon the closing of the Bank Merger.

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**Table of Contents** 

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| | |
|:---|:---|
|  | **Page** |
|  [Summary](#tx352312_1) | 1 |
|  [Risk Factors](#tx352312_2) | 19 |
|  [Forward-Looking Statements](#tx352312_3) | 32 |
|  [Selected Consolidated Financial and Other Data of Somerset Savings Bank, SLA](#tx352312_4) | 34 |
|  [Selected Consolidated Financial and Other Data of Regal Bancorp](#tx352312_5) | 36 |
|  [How We Intend to Use the Proceeds From the Stock Offering](#tx352312_6) | 38 |
|  [Our Dividend Policy](#tx352312_7) | 40 |
|  [Market for the Common Stock](#tx352312_8) | 40 |
|  [Capitalization](#tx352312_9) | 41 |
|  [Historical and Pro Forma Regulatory Capital Compliance](#tx352312_10) | 43 |
|  [Pro Forma Unaudited Condensed Consolidated Financial Statements Giving Effect to the Conversion and Proposed Merger](#tx352312_11) | 44 |
|  [Comparison of Independent Valuation and Pro Forma Financial Information With and Without the Foundation](#tx352312_12) | 67 |
|  [Management's Discussion and Analysis of Financial Condition and Results of Operations of SR Bancorp](#tx352312_13) | 69 |
|  [Business of SR Bancorp and Somerset Savings Bank, SLA](#tx352312_14) | 87 |
|  [Management's Discussion and Analysis of Financial Condition and Results of Operations of Regal Bancorp](#tx352312_15) | 100 |
|  [Business of Regal Bancorp and Regal Bank](#tx352312_16) | 111 |
|  [Management of SR Bancorp](#tx352312_17) | 114 |
|  [Executive Compensation](#tx352312_18) | 118 |
|  [Subscriptions by Executive Officers and Directors](#tx352312_19) | 125 |
|  [Regulation and Supervision](#tx352312_20) | 126 |
|  [Taxation](#tx352312_21) | 133 |
|  [The Proposed Merger with Regal Bancorp](#tx352312_22) | 134 |
|  [The Conversion and Stock Offering](#tx352312_23) | 150 |
|  [Somerset Regal Charitable Foundation](#tx352312_24) | 168 |
|  [Restrictions on Acquisition of SR Bancorp and Somerset Savings Bank, SLA](#tx352312_25) | 171 |
|  [Description of SR Bancorp Capital Stock](#tx352312_26) | 175 |
|  [Transfer Agent and Registrar](#tx352312_27) | 176 |
|  [Legal Matters](#tx352312_28) | 176 |
|  [Experts](#tx352312_29) | 176 |
|  [Where You Can Find Additional Information](#tx352312_30) | 176 |
|  [Index to Consolidated Financial Statements of Somerset Savings Bank, SLA](#tx352312_31) | F-1 |
|  [Index to Consolidated Financial Statements of Regal Bancorp, Inc.](#tx352312_32) | G-1 |

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**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* ***[toll free]*** *at (<u> </u>)<u> </u> - .* 

**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 December 31, 2022, Somerset Savings Bank had total assets of $649.5 million, deposits of $522.8 million and total equity of $118.1 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 <u>www.somersetsavings.com</u>. 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. 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 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

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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 December 31, 2022, Regal Bancorp had total consolidated assets of $495.7 million, deposits of $426.0 million and total equity of $49.1 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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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;

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• increasing transaction deposit accounts and deposit balances;

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

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

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

Please see "*Risk Factors—Risk Related to Growth*" and "*Risk 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

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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").

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**THE STOCK OFFERING** 

**Reasons for the Conversion, Stock Offering and Merger** 

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• raise capital to provide the funds necessary to acquire Regal Bancorp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• raise capital to support growth;

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

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

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

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• facilitate future mergers and acquisitions; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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:

&nbsp;&nbsp;&nbsp; **SOMERSET SAVINGS BANK, SLA**<br>(a New Jersey-chartered mutual savings association)<br>

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

&nbsp;&nbsp;&nbsp; **PUBLIC SHAREHOLDERS**<br>(including charitable foundation)<br>

100%<br>

&nbsp;&nbsp;&nbsp; **SR BANCORP, INC.**<br>(a Maryland corporation)<br>

100%<br>

&nbsp;&nbsp;&nbsp; **SOMERSET REGAL BANK**<br>(a New Jersey-chartered stock commercial bank)<br>

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**Terms of the Offering** 

We are offering for sale between 8,500,000 and 11,500,000 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 13,225,000 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 8,500,000 and 11,500,000 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 February 21, 2023, the estimated pro forma market value of the common stock offering of SR Bancorp was $100.0 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 $85.0 million and a maximum of $115.0 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 8,500,000 shares to 11,500,000 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 $132.25 million and an offering of 13,225,000 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"). RP Financial also considered the following factors, among others:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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;

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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.

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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 December 31, 2022.

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| | | | |
|:---|:---|:---|:---|
| **Company Name** | **Ticker<br>Symbol** | **Headquarters** | **Total Assets** |
|  |  |  | **(Dollars in millions)** |
| Affinity Bancshares, Inc. | AFBI | Covington, GA | $791 |
| ESSA Bancorp, Inc. | ESSA | Stroudsburg, PA | 1927 |
| HMN Financial, Inc. | HMNF | Rochester, MN | 1096 |
| Home Federal Bancorp, Inc. of Louisiana | HFBL | Shreveport, LA | 577 |
| IF Bancorp, Inc. | IROQ | Watseka, IL | 824 |
| HV Bancorp, Inc.<sup>(1)</sup> | HVBC | Doylestown, PA | 616 |
| Magyar Bancorp, Inc. | MGYR | New Brunswick, NJ | 822 |
| Northeast Community Bancorp, Inc. | NECB | White Plains, NY | 1425 |
| Provident Bancorp, Inc. | PVBC | Amesbury, MA | 1636 |
| William Penn Bancorporation | WMPN | Bristol, PA | 871 |

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(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 slight 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 the decline in the broader stock market, which included 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 $85.0 million or above $132.25 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.

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.

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.

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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 December 31, 2022 including the proposed Merger and pro forma book value as of December 31, 2022. The ratios for the peer group are based on estimated core earnings for the 12 months ended December 31, 2022 and book value as of December 31, 2022 (using stock prices as of February 21, 2023).

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| | | | |
|:---|:---|:---|:---|
|  | **Price to Earnings**<br>**Multiple** | **Price to Book**<br>**Value Ratio** | **Price to Tangible**<br>**Book Value Ratio** |
|  SR Bancorp (pro forma): |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Minimum | 9.49x | 47.37% | 57.08% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Midpoint | 11.06x | 52.11% | 61.96% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Maximum | 12.59x | 56.31% | 66.23% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Adjusted Maximum | 14.32x | 60.50% | 70.32% |
|  Peer group companies as of February 21, 2023: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Average | 10.74x | 93.52% | 96.61% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Median | 9.89x | 94.22% | 97.45% |

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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 27.3% to the peer group on a price-to-earnings basis, a discount of 40.2% to the peer group on a price-to-book basis, and a discount of 32.0% 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.

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| | | |
|:---|:---|:---|
| **(Dollars in thousands)** | **8,500,000 Shares at**<br>**$10.00**<br>**per Share** | **11,500,000 Shares at**<br>**$10.00**<br>**per Share** |
|  Gross offering proceeds | $85000 | $115000 |
|  Less: offering expenses | (3337) | (3637) |
|  Net offering proceeds | $81663 | $111363 |
|  Less: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceeds contributed to Somerset Savings Bank | (40832) | (55682) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceeds used for loan to employee stock ownership plan | (7140) | (9660) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceeds contributed to Somerset Regal Charitable Foundation | (850) | (1150) |
|  Proceeds remaining for SR Bancorp | $32842 | $44872 |

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Initially, SR Bancorp intends to use the proceeds, along with other funds, including capital funds held by Regal Bancorp, 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.

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**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 13,225,000 shares in the offering without further notice to you. If our pro forma market value of the offering at that time is either below $85.0 million or above $132.25 million, then, after consulting with Federal Reserve, the NJDBI and the FDIC we may:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• terminate the stock offering and promptly return all funds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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 8,500,000 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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• we sell at least the minimum number of shares offered;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• we receive approval of our voting members; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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 $850,000 at the minimum of the valuation range to $1,322,500 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 425,000 shares at the minimum of the valuation range to 661,250 shares at the adjusted maximum of the valuation range, which shares will have a value of $4.3 million at the minimum of the valuation range and $6.6 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 $3.8 million at the minimum of the valuation range and of approximately $6.0 million at the adjusted maximum of the valuation range, during the quarter in which the conversion and offering are completed.

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Issuing shares of common stock to the charitable foundation will:

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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 2023*" and "*Comparison of Independent Valuation and Pro Forma Financial Information With and Without the 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 $600,000 and $2.5million, 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 966,000 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 966,000 shares in the offering, we will recognize additional pre-tax compensation expense of $9.7 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 our charitable foundation, or up to 483,000 shares and 1,207,500 shares of common stock at the maximum of the offering range,

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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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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;

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

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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).

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| | | | |
|:---|:---|:---|:---|
| **Plan** | **Individuals Eligible to Receive Awards** | **As a Percent of<br>Common Stock<br>Outstanding** | **Value of Benefits Based on<br>Adjusted Maximum of<br>Offering Range<br>(Dollars in Thousands)** |
|  Employee stock ownership plan | All employees | 8.0% | $11109 |
|  Stock awards | Directors, officers and employees | 4.0 | 5555 |
|  Stock options | Directors, officers and employees | 10.0 | 6971<sup>(1)</sup> |
|  Total |  | 22.0% | $23635 |

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(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 $5.02 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 3.88%; and a volatility rate of 31.47% 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.

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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.

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| | | | | |
|:---|:---|:---|:---|:---|
| **Share Price** | **357,000 Shares**<br> **Awarded at Minimum**<br> **of Offering Range** | **420,000 Shares**<br> **Awarded at Midpoint of<br>Offering Range** | **483,000 Shares**<br> **Awarded at Maximum**<br> **of Offering Range** | **555,450 Shares**<br> **Awarded at Maximum**<br> **of Offering<br>Range, As Adjusted** |
| **(***In thousands, except share price information***)** | **(***In thousands, except share price information***)** | **(***In thousands, except share price information***)** | **(***In thousands, except share price information***)** | **(***In thousands, except share price information***)** |
| $8.00 | 2856 | 3360 | 3864 | 4444 |
| 10.00 | 3570 | 4200 | 4830 | 5555 |
| 12.00 | 4284 | 5040 | 5796 | 6665 |
| 14.00 | 4998 | 5880 | 6762 | 7776 |

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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 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.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Exercise Price** | **Grant-Date Fair**<br> **Value Per Option** | **892,500 Options**<br> **at Minimum of**<br> **Offering Range** | **1,050,000 Options**<br> **at Midpoint of**<br> **Offering Range** | **1,207,500 Options**<br> **at Maximum of**<br> **Offering Range** | **1,388,625 Options**<br> **at Maximum**<br> **of Offering<br>Range, As Adjusted** |
| **(***In thousands, except share price information***)** | **(***In thousands, except share price information***)** | **(***In thousands, except share price information***)** | **(***In thousands, except share price information***)** | **(***In thousands, except share price information***)** | **(***In thousands, except share price information***)** |
| $8.00 | 4.02 | 3588 | 4221 | 4854 | 5582 |
| 10.00 | 5.02 | 4480 | 5271 | 6062 | 6971 |
| 12.00 | 6.02 | 5373 | 6321 | 7269 | 8360 |
| 14.00 | 7.03 | 6274 | 7382 | 8489 | 9762 |

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**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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Persons with $50 or more on deposit at Somerset Savings Bank as of the close of business on June 30, 2021
("Eligible Account Holders").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. The tax-qualified employee benefit plans of Somerset Savings Bank
(including our employee stock ownership plan and 401(k) plan).

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Persons with $50 or more on deposit at Somerset Savings Bank as of the close of business on [•], 2023
("Supplemental Eligible Account Holders").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Persons with a deposit account at Somerset Savings Bank at the close of business on the [Voting Record Date]
("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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Personal check, bank check or money order, from the purchaser, made payable directly to SR Bancorp; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. 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

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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 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 08805. 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 [offering deadline] 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 25,000 shares ($250,000) in all categories of the offering, combined:

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

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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."

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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 [expiration date], 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 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 [extension date], or the number of shares to be sold in the stock offering is increased to more than 13,225,000 shares or decreased to fewer than 8,500,000 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 123,500 shares, which equals 1.4% of the total shares of SR Bancorp that would be outstanding following the stock offering at the minimum of the offering range, 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. At the maximum of the offering range, SR Bancorp will retain approximately $44.9 million of the net offering proceeds. Additionally, Somerset Savings Bank could dividend cash to SR Bancorp, subject to regulatory limitations described in more detail in "*Our Dividend Policy*."

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**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 8,500,000 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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• increase the purchase limitations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• seek regulatory approval to extend the stock offering beyond [extension date], so long as we resolicit
subscribers who previously submitted subscriptions in the stock offering; and/or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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 [extension date], 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 13,225,000 shares or decreased to less than 8,500,000 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.

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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 19, before investing in our common stock. Some of the more significant risks include the following:

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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;

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Somerset Savings Bank may be unable to effectively integrate Regal Bank's operations;

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Unanticipated costs related to the Merger could reduce SR Bancorp's future earnings;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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;

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

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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;

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Almost all of our loans are secured by real estate, and a downturn in the local real estate market could
negatively impact our profitability;

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

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

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

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

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

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

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

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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;

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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;

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

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Changes in accounting standards could affect reported earnings;

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

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

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

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

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

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Various factors may make takeover attempts more difficult to achieve;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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;

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

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The contribution to the charitable foundation will dilute your ownership interest and adversely affect net income
in 2023; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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 [Stock center number]. 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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the conversion and stock offering are completed;

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Regal Bancorp's shareholders approve the Merger Agreement.

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.

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**RISK FACTORS** 

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

**<u>Risks Related to COVID-19</u>**

**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.

**<u>Risks Related to the Proposed Merger</u>**

**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.** 

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.

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.

**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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• integrating personnel with diverse business backgrounds;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• combining different corporate cultures; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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 $32.1 million, including goodwill totaling $23.9 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 10.4% of the $229.2 million of pro forma consolidated total shareholders' equity at December 31, 2022. 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.

**<u>Risks Related to Economic Conditions</u>**

**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.** 

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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• demand for our products and services may decline;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• loan delinquencies, problem assets and foreclosures may increase;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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.

**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.** 

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.

**<u>Risks Related to Interest Rates</u>**

**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.

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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 six month periods ended December 31, 2022 and 2021, 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 six months ended December 31, 2022 and the year ended June 30, 2022, we incurred other comprehensive losses of $1.1 million and $5.6 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.

**<u>Risks Related to Growth</u>**

**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.

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**<u>Risks Related to Lending Activities</u>**

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

At December 31, 2022, 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 $63.4 million, or 71.0%, of our residential mortgage loan purchases and originations for the six months ended December 31, 2022. Similarly, Regal Bank relies on third-party brokers to refer to it multi-family real estate loans. Such referrals represented $18.4 million, or 48.8%, of Regal Bank's multi-family loan originations at December 31, 2022 and $16.7 million, or 70.3%, of Regal Bank's multi-family loan originations at December 31, 2021. 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

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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 December 31, 2022.

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 December 31, 2022, we had $150,000 in non-performing assets, which consisted of $150,000 in non-performing loans and no other real estate owned. Non-performing assets adversely affect our net income in various ways:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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;

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

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

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

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

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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.

**<u>Risks Related to Competition</u>**

**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—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.

**<u>Risks Related to Operations and Security</u>**

**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

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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.

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**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.

**<u>Risks Related to Regulatory Matters</u>**

**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.

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**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 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 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.

**<u>Risks Related to Accounting Matters</u>**

**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.

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**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.

**<u>Risks Related to the Stock Offering</u>**

**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 $40.8 million and $55.7 million of the net proceeds of the stock offering (or $64.2 million at the adjusted maximum of the offering range) in Somerset Savings Bank. We will use a portion of 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. We may use the remaining net proceeds to invest in short-term investments and for general corporate purposes, including repurchasing shares of our common stock and paying dividends. 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.

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**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 $7.1 million at the minimum of the offering range and $11.1 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 $2.5 million ($2.1 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 "*Management—Benefits to be Considered Following Completion of the Stock Offering*."

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**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 [extension date], or the number of shares to be sold in the offering is increased to more than 13,225,000 shares or decreased to fewer than 8,500,000 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.

**<u>Risks Related to the Charitable Foundation</u>**

**The contribution to the charitable foundation will dilute your ownership interest and adversely affect net income in 2023.** 

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 661,250 shares of our common stock and $1.3 million 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, 2023 by approximately $6.0 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.

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**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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• statements of our goals, intentions and expectations;

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• statements regarding the quality of our loan and investment portfolios; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to successfully consummate our proposed Merger with Regal Bancorp and integrate Regal Bancorp's
operations into our operations;

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

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• volatility and deterioration in the credit and equity markets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in consumer spending, borrowing and savings habits;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• demographic changes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• competition for loans and deposits and failure to attract or retain loans and deposits;

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

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

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

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• risks of natural disasters;

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the failure to maintain current technologies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the inability to successfully implement future information technology enhancements;

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• failure to attract or retain key employees;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to access cost-effective funding;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• fluctuations in real estate values;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in accounting policies and practices;

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

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the adequacy of our allowance for loan losses;

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to control expenses;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in securities markets; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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 19. 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.

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**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 December 31, 2022 and for the six months ended December 31, 2022 and 2021 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 six months ended December 31, 2022 are not necessarily indicative of the results of operations that may be expected for the entire year or for any other period.

---

| | | | |
|:---|:---|:---|:---|
|  | **At December 31,<br>2022** | **At June 30,** | **At June 30,** |
|  | **At December 31,<br>2022** | **2022** | **2021** |
|  | **(***In thousands***)** | **(***In thousands***)** | **(***In thousands***)** |
|  **Selected Financial Condition Data:** |  |  |  |
|  Total assets | $649513 | $648631 | $639358 |
|  Cash and cash equivalents | 27135 | 35344 | 56751 |
|  Securities available for sale | 41062 | 47857 | 47098 |
|  Securities held-to-maturity | 183753 | 192903 | 193252 |
|  Loans, net of allowance for loan losses | 357616 | 334558 | 306798 |
|  Bank-owned life insurance | 28384 | 28056 | 27441 |
|  Deposits | 522762 | 522072 | 509993 |
|  Federal Home Loan Bank advances |  |  |  |
|  Equity | 118071 | 118231 | 121943 |

---

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **For the Six Months Ended**<br>**December 31,** | **For the Six Months Ended**<br>**December 31,** | **For the Years Ended**<br>**June 30,** | **For the Years Ended**<br>**June 30,** |
|  | **2022** | **2021** | **2022** | **2021** |
|  | **(***In thousands***)** | **(***In thousands***)** | **(***In thousands***)** | **(***In thousands***)** |
|  **Selected Operating Data:** |  |  |  |  |
|  Interest income | $7610 | $6540 | $13432 | $13180 |
|  Interest expense | 732 | 905 | 1535 | 2415 |
|  Net interest income | 6878 | 5635 | 11897 | 10765 |
|  Provision for loan losses |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net interest income after provision for loan losses | 6878 | 5635 | 11897 | 10765 |
|  Noninterest income | 694 | 691 | 1351 | 1212 |
|  Noninterest expense | 6698 | 5449 | 11014 | 10582 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Income before income taxes | 874 | 877 | 2234 | 1395 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Income tax expense | 121 | 114 | 363 | 145 |
|  Net income | $753 | $763 | $1871 | $1250 |

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **At or For the Six Months<br>Ended December 31,** | **At or For the Six Months<br>Ended December 31,** | **At or For the Years Ended<br>June 30,** | **At or For the Years Ended<br>June 30,** |
|  | **2022** | **2021** | **2022** | **2021** |
|  **Performance Ratios:** |  |  |  |  |
|  Return on average assets | 0.23% | 0.24% | 0.29% | 0.20% |
|  Return on average equity | 1.28% | 1.25% | 1.54% | 1.04% |
|  Interest rate spread<sup>(1)</sup> | 2.22% | 1.77% | 1.89% | 1.74% |
|  Net interest margin<sup>(2)</sup> | 2.28% | 1.86% | 1.96% | 1.85% |
|  Noninterest income to average assets | 0.21% | 0.21% | 0.21% | 0.20% |
|  Noninterest expense to average assets | 2.07% | 1.68% | 1.70% | 1.70% |
|  Efficiency ratio<sup>(3)</sup> | 88.46% | 86.14% | 83.14% | 88.35% |
|  Average interest-earning assets to average interest-bearing liabilities | 126.62% | 127.66% | 127.77% | 128.03% |
|  **Capital Ratios:** |  |  |  |  |
|  Average equity to average assets | 18.19% | 18.87% | 18.71% | 19.40% |
|  Tier 1 capital to average assets | 19.51% | 19.23% | 19.36% | 19.90% |
|  **Asset Quality Ratios:** |  |  |  |  |
|  Allowance for loan losses as a percentage of total loans | 0.31% | 0.37% | 0.33% | 0.36% |
|  Allowance for loan losses as a percentage of non-performing loans | 743.55% | 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 | 0.02% | —% | —% | 0.04% |
|  **Other:** |  |  |  |  |
|  Number of offices | 7 | 7 | 7 | 7 |
|  Number of full-time equivalent employees | 66 | 64 | 64 | 65 |

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(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.

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**SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA OF REGAL BANCORP** 

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 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 or for the Year Ended December 31,** | **At or for the Year Ended December 31,** |
|  | **2022** | **2021** |
|  | **(***Dollars in thousands, except per share data***)** | **(***Dollars in thousands, except per share data***)** |
|  **Financial Condition Data:** |  |  |
|  Total assets | $495679 | $573772 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cash and cash equivalents | 106847 | 167834 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Time deposits in other financial institutions | 12640 | 16568 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Securities available for sale | 15477 | 15463 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Securities held-to-maturity | 2592 | 2591 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loans, net of allowance for loan losses | 339259 | 356009 |
|  **Deposits:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Noninterest-bearing | $105652 | 124507 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Interest-bearing | 320356 | 385085 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total deposits | 426008 | 509592 |
|  Federal Home Loan Bank advances | 5000 | 5000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Subordinated debt | 9915 | 9900 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total Stockholders' equity | 49143 | 46697 |
|  **Asset Quality Data:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Nonaccrual loans | $541 | $216 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Foreclosed real estate |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accruing troubled debt restructures |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loans 90 days past due sand still accruing |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loan charge-offs |  | (12) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loan recoveries |  |  |
|  **Operations Data** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest income | $18274 | $17979 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest expense | 2244 | 3332 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net Interest Income | 16030 | 14647 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Provision (credit) for Loan Losses |  | 45 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net interest income after provision for loan losses | 16030 | 14602 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Noninterest income | 756 | 969 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Noninterest expenses | 12298 | 11549 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Income Before Income Tax Expense | 4488 | 4022 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Income Tax Expense | 1394 | 1125 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net Income | $3094 | $2897 |
|  **Per Common Share Data:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net Income Per Share–- Basic | $1.02 | $0.96 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net Income Per Share–- Diluted | 1.02 | $0.96 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cash dividends per share |  |  |
|  **Performance Ratios** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Return on average assets | 0.62% | 0.51% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Return on average equity | 5.33% | 5.28% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Noninterest income to average assets | 0.15% | 0.17% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net interest spread | 2.93% | 2.42% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net interest margin | 3.11% | 2.64% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Noninterest expense to average assets | 0.02% | 2.03% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Efficiency ratio | 73.00% | 74.00% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Dividend payout ratio | —% | —% |
|  **Capital Ratios:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Average equity to average assets | 11.73% | 9.63% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Tier 1 capital to total assets | 11.72% | 9.62% |
|  **Asset Quality Ratios:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Allowance for loan losses as a percentage of total loans | 1.63% | 1.58% |

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| | | |
|:---|:---|:---|
|  Allowance for loan losses as a percentage of total non-performing loans | 1039% | 2598% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Number of offices | 10 | 10 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Number of full-time equivalents | 66 | 72 |

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**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 $81.7 million and $111.4 million, or $128.4 million if the offering range is increased by 15%.

We intend to distribute the net proceeds as follows:

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Based Upon the Sale at $10.00 Per Share of** | **Based Upon the Sale at $10.00 Per Share of** | **Based Upon the Sale at $10.00 Per Share of** | **Based Upon the Sale at $10.00 Per Share of** | **Based Upon the Sale at $10.00 Per Share of** | **Based Upon the Sale at $10.00 Per Share of** | **Based Upon the Sale at $10.00 Per Share of** | **Based Upon the Sale at $10.00 Per Share of** |
|  | **8,500,000 Shares** | **8,500,000 Shares** | **10,000,000 Shares** | **10,000,000 Shares** | **11,500,000 Shares** | **11,500,000 Shares** | **13,225,000<sup>(1)</sup> Shares** | **13,225,000<sup>(1)</sup> Shares** |
|  | **Amount** | **Percent<br>of Net<br>Proceeds** | **Amount** | **Percent<br>of Net<br>Proceeds** | **Amount** | **Percent<br>of Net<br>Proceeds** | **Amount** | **Percent<br>of Net<br>Proceeds** |
|  | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** |
|  Offering proceeds | $85000 |  | $100000 |  | $115000 |  | $132250 |  |
|  Less offering expenses | (3337) |  | (3487) |  | (3637) |  | (3810) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net offering proceeds | $81663 | 100.0% | $96513 | 100.0% | $111363 | 100.0% | $128440 | 100.0% |
|  Distribution of net proceeds: |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; To Somerset Savings Bank | $(40832) | (50.0)% | $(48257) | (50.0)% | $(55682) | (50.0)% | $(64220) | (50.0)% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; To fund loan to employee stock ownership plan<sup>(2)</sup> | (7140) | (8.7)% | (8400) | (8.7)% | (9660) | (8.7)% | (11109) | (8.7)% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cash contribution to the charitable foundation | (850) | (1.0)% | (1000) | (1.0)% | (1150) | (1.0)% | (1323) | (1.0)% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Retained by SR Bancorp | $32842 | 40.3% | $38857 | 40.3% | $44872 | 40.3% | $51789 | 40.3% |

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(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 ("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 may use the proceeds it retains from the offering:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• to fund the proposed Merger;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• to invest in securities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• to pay cash dividends to shareholders;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• to repurchase shares of our common stock;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• to finance the potential acquisition of financial institutions or financial services companies, although we do
not currently have any agreements or understandings regarding any specific acquisition transaction other than our proposed Merger with Regal Bancorp; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• for other 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).

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• to fund new loans;

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• to invest in securities; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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*."

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**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.

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**CAPITALIZATION** 

The following table presents the historical capitalization of Somerset Savings Bank and Regal Bancorp at December 31, 2022 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*."

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | | **Offering<br>Adjustments:<br>8,500,000 at<br>Minimum of<br>Offering<br>Range** | | | | **Pro Forma**<br>**Capitalization Based Upon the Sale of** | **Pro Forma**<br>**Capitalization Based Upon the Sale of** | **Pro Forma**<br>**Capitalization Based Upon the Sale of** | **Pro Forma**<br>**Capitalization Based Upon the Sale of** |
|  |<br>**Somerset<br>Savings<br>Bank** | **Offering<br>Adjustments:<br>8,500,000 at<br>Minimum of<br>Offering<br>Range** |<br>**Somerset**<br>**Bancorp**<br>**Post-offering** |<br>**Regal<br>Bancorp** |<br>**Merger<br>Adjustments** | **8,500,000**<br>**Shares at**<br>**$10.00 per**<br>**share** | **10,000,000**<br>**Shares at**<br>**$10.00 per**<br>**share** | **11,500,000**<br>**Shares at**<br>**$10.00 per**<br>**share** | **13,225,000**<br>**Shares at**<br>**$10.00 per**<br>**share <sup>(1)</sup>** |
|  | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** |
|  Deposits <sup>(2)</sup> | $522762 | $— | $522762 | $426008 | $(1607) | $947163 | $947163 | $947163 | $947163 |
|  Borrowings |  |  |  | 14915 | —<sup>(6)</sup> | 14915 | 14915 | 5000<sup>(6)</sup> | 5000<sup>(6)</sup> |
|  Total deposits and borrowed funds | $522762 | $— | $522762 | $440923 | $(1607) | $962078 | $962078 | $952163 | $952163 |
|  **Shareholders' equity:** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Preferred stock | $— | $— | $— | $— | $— | $— | $— | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Common stock <sup>(3)</sup> |  | 89 | 89 |  |  | 89 | 105 | 121 | 139 |
|  Additional paid-in capital |  | 85824 | 85824 | 34358 | (34358) | 85824 | 101408 | 116992 | 134914 |
|  Retained earnings | 126299 |  | 126299 | 15411 | (16431) | 125279 | 125279 | 125279 | 125279 |
|  Accumulated other comprehensive income | (8228) |  | (8228) | (626) | 626 | (8228) | (8228) | (8228) | (8228) |
|  **Less:** |  |  |  |  |  |  |  |  |  |
|  After tax cost of contribution to the charitable foundation |  | (3825) | (3825) |  |  | (3825) | (4500) | (5175) | (5951) |
|  Common stock acquired by employee stock ownership plan <sup>(4)</sup> |  | (7140) | (7140) |  |  | (7140) | (8400) | (9660) | (11109) |
|  Common stock acquired by stock-based incentive <br>plan <sup>(5)</sup> |  | (3570) | (3570) |  |  | (3570) | (4200) | (4830) | (5555) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total shareholders' equity | $118071 | $71378 | $189449 | $49143 | $(50163) | $188429 | $201464 | $214499 | $229489 |
|  <u>Pro Forma Shares Outstanding</u> |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total shares outstanding |  | 8925000 | 8925000 |  |  | 8925000 | 10500000 | 12075000 | 13886250 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Shares offered for sale in the conversion |  | 8500000 | 8500000 |  |  | 8500000 | 10000000 | 11500000 | 13225000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Shares contributed to the charitable foundation |  | 425000 | 425000 |  |  | 425000 | 500000 | 575000 | 661250 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total shareholders' equity as a percentage of pro forma total assets | 18.18% |  | 26.28% | 9.91% |  | 16.18% | 17.10% | 18.16% | 19.19% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Tangible shareholders' equity as a percentage of pro forma tangible assets | 18.18% |  | 26.28% | 9.72% |  | 13.80% | 14.78% | 15.88% | 16.96% |

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(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.

(*footnotes continue on next page*)

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##### [**Table of Contents**](#toc)
(*footnotes continued from previous page*)

(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.

(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.

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##### [**Table of Contents**](#toc)
**HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE** 

At December 31, 2022, 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 December 31, 2022, 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 "*Use of Proceeds*," "*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*."

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| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Somerset Savings<br>Bank Historical at<br>December 31, 2022** | **Somerset Savings<br>Bank Historical at<br>December 31, 2022** | **Pro Forma at December 31, 2022, Based Upon the Sale in the Stock Offering of <sup>(1)</sup>** | **Pro Forma at December 31, 2022, Based Upon the Sale in the Stock Offering of <sup>(1)</sup>** | **Pro Forma at December 31, 2022, Based Upon the Sale in the Stock Offering of <sup>(1)</sup>** | **Pro Forma at December 31, 2022, Based Upon the Sale in the Stock Offering of <sup>(1)</sup>** | **Pro Forma at December 31, 2022, Based Upon the Sale in the Stock Offering of <sup>(1)</sup>** | **Pro Forma at December 31, 2022, Based Upon the Sale in the Stock Offering of <sup>(1)</sup>** | **Pro Forma at December 31, 2022, Based Upon the Sale in the Stock Offering of <sup>(1)</sup>** | **Pro Forma at December 31, 2022, Based Upon the Sale in the Stock Offering of <sup>(1)</sup>** |
|  | **Somerset Savings<br>Bank Historical at<br>December 31, 2022** | **Somerset Savings<br>Bank Historical at<br>December 31, 2022** | **8,500,000 shares<sup>(2)</sup>** | **8,500,000 shares<sup>(2)</sup>** | **8,250,000 shares<sup>(2)</sup>** | **8,250,000 shares<sup>(2)</sup>** | **11,500,000 shares<sup>(2)</sup>** | **11,500,000 shares<sup>(2)</sup>** | **13,225,000 shares<sup>(2)</sup>** | **13,225,000 shares<sup>(2)</sup>** |
|  | **Amount** | **Percent<br>of<br>Assets<sup>(1)</sup>** | **Amount** | **Percent<br>of<br>Assets<sup>(2)</sup>** | **Amount** | **Percent<br>of<br>Assets<sup>(2)</sup>** | **Amount** | **Percent<br>of<br>Assets<sup>(2)</sup>** | **Amount** | **Percent<br>of<br>Assets<sup>(2)</sup>** |
|  | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** |
|  Capital under generally accepted accounting principals | $118071 | 18.18% | $184747 | 16.40% | $189652 | 16.73% | $194557 | 17.05% | $200198 | 17.41% |
|  Tier 1 leverage capital |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Actual | $126299 | 19.57% | $160900 | 14.28% | $165805 | 14.62% | $170710 | 14.96% | $176351 | 15.34% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Requirement | 32276 | 5.00% | 56322 | 5.00% | 56693 | 5.00% | 57064 | 5.00% | 57491 | 5.00% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Excess | $94023 | 14.57% | $104578 | 9.28% | $109112 | 9.62% | $113646 | 9.96% | $118860 | 10.34% |

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(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:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Minimum** | **Midpoint** | **Maximum** | **Maximum,<br>as Adjusted** |
|  | **(***In thousands***)** | **(***In thousands***)** | **(***In thousands***)** | **(***In thousands***)** |
|  Gross offering proceeds | $85000 | $100000 | $115000 | $132250 |
|  Less: offering expenses | $(3337) | $(3487) | $(3637) | $(3810) |
|  Net conversion proceeds | $81663 | $96513 | $111363 | $128440 |
| **Equity adjustments** |  |  |  |  |
|  Infused into the Bank (50% of net proceeds) | $40832 | $48257 | $55682 | $64220 |
|  Less: ESOP adjustment at bank | $(7140) | $(8400) | $(9660) | $(11109) |
|  Net increase from offering | $33692 | $39857 | $46022 | $53111 |
|  Plus: Merger Adjustments |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Regal Bank Historical Capital | $58295 | $58295 | $58295 | $58295 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Regal Pre-Closing Dividend | $(36793) | $(36793) | $(36793) | $(36793) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fair Value Push-Down Accounting | $18623 | $18623 | $18623 | $18623 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; ESOP contra at bank level | $(7140) | $(8400) | $(9660) | $(11109) |
|  Increase in GAAP capital | $66676 | $71581 | $76486 | $82127 |
|  Less: increase in disallowed intangible assets | $(32075) | $(32075) | $(32075) | $(32075) |
|  Increase in Tier 1 capital | $34601 | $39506 | $44411 | $50052 |
| **Asset adjustments** |  |  |  |  |
|  Regal Bank Historical Assets | $491935 | $491935 | $491935 | $491935 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Infused into the Bank (50% of net proceeds) | $40832 | $48257 | $55682 | $64220 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Regal Pre-Closing Dividends | $(36793) | $(36793) | $(36793) | $(36793) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fair Value and Push-Down Accounting | $17016 | $17016 | $17016 | $17016 |
|  Increase in GAAP assets | $512989 | $520414 | $527839 | $536378 |
|  Less: Increase in disallowed intangible assets | $(32075) | $(32075) | $(32075) | $(32075) |
|  Increase in leverage assets | $480914 | $488339 | $495764 | $504303 |

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**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 six months ended December 31, 2022. 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 8,500,000 shares, which is the minimum of the offering range, and 13,225,000 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:

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| | | |
|:---|:---|:---|
|  | **December 31, 2022** | **June 30, 2022** |
|  | **(***In thousands***)** | **(***In thousands***)** |
|  Net assets acquired (not adjusted for purchase accounting) | $49143 | $47776 |
|  Purchase accounting adjustments: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Estimated non-tax deductible merger costs | $(3962) | $(3962) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loans receivable, net<sup>(1)</sup> | (7737) | (7737) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deposits<sup>(1)</sup> | 1607 | 1607 |
|  Core deposit intangible<sup>(2)</sup> | 8141 | 8141 |
|  Tax impact of purchase accounting adjustments at 25% | (503) | (503) |
|  Goodwill | 22849 | 24216 |
|  Purchase price, net | $69537 | $69537 |

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(1) Fair value adjustments are calculated using discounted cash flow analysis using a comparison of portfolio rates
to market rates as of December 31, 2022, with such adjustments applied to the December 31, 2022 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 December 31, 2022. 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:

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• total expenses of the offering, other than fees and commissions paid to KBW, will be $2.2 million;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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 3.99% (2.99% on an after-tax basis), which is equal to the yield on the five-year U.S. Treasury Note as of December 31, 2022. 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:

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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 $5.02 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 31.47% 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 3.88%.

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 $1.3 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:

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• SR Bancorp's results of operations after the offering;

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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 December 31, 2022.

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 December 31, 2022 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.

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**PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION** 

**DECEMBER 31, 2022** 

The following table presents pro forma balance sheet information at December 31, 2022 at the minimum of the offering range assuming the issuance of 8,500,000 shares in the offering, and the contribution of 425,000 shares and $850,000 of cash to Somerset Regal Charitable Foundation.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **SR<br>Bancorp<br>Historical** | **Offering<br>Adjustments <sup>(1)</sup>** | **SR Bancorp<br>Pro Forma as<br>Converted** | **Regal<br>Bancorp<br>Historical** | **Merger<br>Adjustments <sup>(2)</sup>** | **SR Bancorp<br>Pro Forma<br>Consolidated** |
|  | **(***In thousands***)** | **(***In thousands***)** | **(***In thousands***)** | **(***In thousands***)** | **(***In thousands***)** | |
|  **Assets** |  |  |  |  |  |  |
|  Cash and cash equivalents | $7385 | $70103<br><sup>(3)</sup>  | $77488 | $13014 | $(74860 | $15642 |
|  Interest bearing-deposits in other financial institutions | 19750 |  | 19750 | 106473 |  | 126223 |
|  Securities available for sale | 41062 |  | 41062 | 15477 |  | 56539 |
|  Securities held to maturity | 183753 |  | 183753 | 2592 |  | 186345 |
|  Equity securities at fair value | 21 |  | 21 |  |  | 21 |
|  Loans receivable, net | 357616 |  | 357616 | 339259 | (7737 | 689138 |
|  Premises and equipment, net | 3597 |  | 3597 | 1819 |  | 5416 |
|  Federal Home Loan Bank stock, at cost | 702 |  | 702 | 784 |  | 1486 |
|  Bank owned life insurance (BOLI) | 28384 |  | 28384 | 7346 |  | 35730 |
|  Goodwill |  |  |  | 1085 | 22849 | 23934 |
|  Core deposit intangible |  |  |  |  | 8141 | 8141 |
|  Other | 7243 | 1275<sup>(4)</sup> | 8518 | 7830 | (163) | 16185 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total assets | $649513 | $71378 | $720891 | $495679 | $(51770) | $1164800 |
|  **Liabilities** |  |  |  |  |  |  |
|  Deposits | $522762 | $— | $522762 | $426008 | $(1607 | $947163 |
|  FHLB advances |  | —<sup>(5)</sup> |  | 5000 |  | 5000 |
|  Subordinated debt |  |  |  | 9915 |  | 9915 |
|  Other liabilities | 8680 |  | 8680 | 5613 |  | 14293 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities | $531442 |  | $531442 | $446536 | $(1607) | $976371 |
|  **Shareholders' equity** |  |  |  |  |  |  |
|  Common stock | $— | $89<sup>(6)</sup> | $89 | $— | $— | $89 |
|  Additional paid-in capital |  | 85824<br><sup>(7)</sup>  | 85824 | 34358 | (34358 | 85824 |
|  Retained earnings | 126299 | (3825)<sup>(8)</sup> | 122474 | 15411 | (16431 | 121454 |
|  Accumulated other comprehensive loss | (8228) |  | (8228) | (626) | 626 | (8228) |
|  Employee stock ownership plan |  | (7140)<sup>(9)</sup>  | (7140) |  |  | (7140) |
|  Stock-based incentive plan |  | (3570)<sup>(10)</sup>  | (3570) |  |  | (3570) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total equity | $118071 | 71378 | 189449 | 49143 | (50163) | 188429 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities and equity | $649513 | $71378 | $720891 | $495679 | $(51770) | $1164800 |

---

------

(1) Shows the effect of the offering, assuming gross proceeds of $85.0 million at the minimum of the offering
range, offering expenses of $3.3 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 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*)

------

##### [**Table of Contents**](#toc)
*(footnotes continued from previous page)* 

(3) Calculated as follows:

---

| | |
|:---|:---|
|  | **(***In thousands***)** |
|  Gross proceeds of offering | $85000 |
|  Estimated expenses | (3337) |
|  Contribution of cash to Somerset Regal Charitable Foundation | (850) |
|  Common stock acquired by ESOP | (7140) |
|  Common stock acquired by stock-based incentive plan | (3570) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma adjustment | $70103 |

---

(4) Deferred tax asset recorded to reflect the $5.1 million cash and stock contribution to 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 8,500,000 shares in the offering and 425,000 shares contributed
to Somerset Regal Charitable Foundation.

(7) Calculated as follows:

---

| | |
|:---|:---|
|  | **(***In thousands***)** |
|  Net proceeds of offering | $81663 |
|  Contribution of stock to Somerset Regal Charitable Foundation | 4250 |
|  Less: par value (Footnote 6) | (89) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma adjustment | $85824 |

---

(8) After tax expense of the cash and stock contribution to the 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 | $69537 |
|  Somerset merger costs expensed (pre-tax) | 1360 |
|  Regal Bancorp merger costs included in goodwill (after tax) | 3962 |
|  Retire Regal Bancorp subordinated debt [see footnote 17] |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total cash adjustment | $74860 |

---

(12) Reflects the reversal of the December 31, 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 December 31, 2022.
The yield component reflects the differences between market and portfolio yields as of June 30, 2022. The fair value adjustment will be accreted into income over the lives of the related loans.

---

| | |
|:---|:---|
|  | **(***In thousands***)** |
|  Reversal of Regal Bancorp allowances | $5611 |
|  Fair value – credit component | (5326) |
|  Fair value – yield component | (8022) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma adjustment | $(7737) |

---

(*footnotes continued on next page*)

------

##### [**Table of Contents**](#toc)
(*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** | **Goodwill** |
|  | **(***In thousands, except share data***)** | **(***In thousands, except share data***)** |
|  Purchase price per share ($) |  | $23.00 |
|  Number of Regal Bancorp shares acquired |  | 3023369 |
|  Purchase price, net |  | $69537 |
|  Fair value of net assets |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Acquired shareholders' equity | $49143 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Regal merger costs (after tax) | (3962) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Taxable purchase accounting adjustments: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fair value adjustment for acquired certificates of deposits | 1607 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fair value adjustment for acquired loans | (13348) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Reverse allowance for loan losses | 5611 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Core deposit intangible | 8141 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Tax effect at the marginal tax rate of 25% | $(503) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Less: fair value of net assets |  | $46689 |
|  Goodwill adjustment |  | $22849 |

---

(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 for fair value adjustments $503,000 and Somerset merger costs $340,000.

(16) Fair value adjustment to reflect the difference between portfolio costs and market rates as of
December 31, 2022 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) 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

(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 | $(15411) |
|  Somerset merger costs pre-tax | (1360) |
|  Deferred tax adjustment | 340 |
|  Adjustment to paid-in capital | $(16431) |

---

------

##### [**Table of Contents**](#toc)
**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 8,500,000 shares in the offering, and the contribution of 425,000 shares and $850,000 of cash to Somerset Regal Charitable Foundation.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **SR<br>Bancorp<br>Historical** | **Offering<br>Adjustments <sup>(1)</sup>** | **SR Bancorp<br>Pro Forma as<br>Converted** | **Regal<br>Bancorp<br>Historical** | **Merger<br>Adjustments <sup>(2)</sup>** | **SR Bancorp<br>Pro Forma<br>Consolidated** |
|  | **(***In thousands***)** | **(***In thousands***)** | **(***In thousands***)** | **(***In thousands***)** | **(***In thousands***)** | |
|  **Assets** |  |  |  |  |  |  |
|  Cash and cash equivalents | $7557 | $70103<br><sup>(3)</sup>  | $77660 | $151755 | $(74860)<sup>(11)</sup>  | $154555 |
|  Interest bearing-deposits in other financial institutions | 27787 |  | 27787 | 14656 |  | 42443 |
|  Securities available for sale | 47857 |  | 47857 | 15591 |  | 63448 |
|  Securities held to maturity | 192903 |  | 192903 | 2581 |  | 195484 |
|  Equity securities at fair value | 19 |  | 19 |  |  | 19 |
|  Loans receivable, net | 334558 |  | 334558 | 338707 | (7737)<sup>(12)</sup>  | 665528 |
|  Premises and equipment, net | 3443 |  | 3443 | 1987 |  | 5430 |
|  Federal Home Loan Bank stock, at cost | 702 |  | 702 | 784 |  | 1486 |
|  Bank owned life insurance (BOLI) | 28056 |  | 28056 | 7270 |  | 35326 |
|  Goodwill |  |  |  | 1094 | 24216<sup>(13)</sup> | 25310 |
|  Core deposit intangible |  |  |  |  | 8141<sup>(14)</sup> | 8141 |
|  Other | 5749 | 1275<sup>(4)</sup> | 7024 | 3751 | (163)<sup>(15)</sup> | 10612 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total assets | $648631 | $71378 | $720009 | $538176 | $(50403) | $1207782 |
|  **Liabilities** |  |  |  |  |  |  |
|  Deposits | $522072 | $— | $522072 | $473702 | $(1607)<sup>(16)</sup> | $994167 |
|  FHLB advances |  | —<sup>(5)</sup> |  | 5000 |  | 5000 |
|  Subordinated debt |  |  |  | 9909 | —<sup>(17)</sup> | 9909 |
|  Other liabilities | 8328 |  | 8328 | 1789 |  | 10117 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities | $530400 |  | $530400 | $490400 | $(1607) | $1019193 |
|  **Shareholders' equity** |  |  |  |  |  |  |
|  Common stock | $— | $89<sup>(6)</sup> | $89 | $— | $— | $89 |
|  Additional paid-in capital |  | 85824<sup>(7)</sup> | 85824 | 34358 | (34358)<sup>(18)</sup> | 85824 |
|  Retained earnings | 125546 | (3825)<sup>(8)</sup> | 121721 | 13882 | (14902)<sup>(19)</sup> | 120701 |
|  Accumulated other comprehensive loss | (7315) |  | (7315) | (464) | 464<sup>(18)</sup> | (7315) |
|  Employee stock ownership plan |  | (7140)<sup>(9)</sup> | (7140) |  |  | (7140) |
|  Stock-based incentive plan |  | (3570)<sup>(10)</sup> | (3570) |  |  | (3570) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total equity | $118231 | 71378 | 189609 | 47776 | (48796) | 188589 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities and equity | $648631 | $71378 | $720009 | $538176 | $(50403) | $1207782 |

---

------

(1) Shows the effect of the offering, assuming gross proceeds of $85.0 million at the minimum of the offering
range, offering expenses of $3.3 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 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*)

------

##### [**Table of Contents**](#toc)
(*footnotes continued from previous page*)

(3) Calculated as follows:

---

| | |
|:---|:---|
|  | **(***In thousands***)** |
|  Gross proceeds of offering | $85000 |
|  Estimated expenses | (3337) |
|  Contribution of cash to Somerset Regal Charitable Foundation | (850) |
|  Common stock acquired by ESOP | (7140) |
|  Common stock acquired by stock-based incentive plan | (3570) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma adjustment | $70103 |

---

(4) Deferred tax asset recorded to reflect the $5.1 million cash and stock contribution to 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 8,500,000 shares in the offering and 425,000 shares contributed
to Somerset Regal Charitable Foundation.

(7) Calculated as follows:

---

| | |
|:---|:---|
|  | **(***In thousands***)** |
|  Net proceeds of offering | $81663 |
|  Contribution of stock to Somerset Regal Charitable Foundation | 4250 |
|  Less: par value (Footnote 6) | (89) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma adjustment | $85824 |

---

(8) After tax expense of the cash and stock contribution to the 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 | $69537 |
|  Somerset merger costs expensed (pre-tax) | 1360 |
|  Regal Bancorp merger costs included in goodwill (after tax) | 3962 |
|  Retire Regal Bancorp subordinated debt [see footnote 17] |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total cash adjustment | $74860 |

---

(12) Reflects the reversal of the December 31, 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 December 31, 2022.
The yield component reflects the differences between market and portfolio yields as of June 30, 2022. The fair value adjustment will be accreted into income over the lives of the related loans.

---

| | |
|:---|:---|
|  | **(***In thousands***)** |
|  Reversal of Regal Bancorp allowances | $5611 |
|  Fair value – credit component | (5326) |
|  Fair value – yield component | (8022) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma adjustment | $(7737) |

---

(*footnotes continued on next page*)

------

##### [**Table of Contents**](#toc)
(*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** | **Goodwill** |
|  | **(***In thousands, except share data***)** | **(***In thousands, except share data***)** |
|  Purchase price per share ($) |  | $23.00 |
|  Number of Regal Bancorp shares acquired |  | 3023369 |
|  Purchase price, net |  | $69537 |
|  Fair value of net assets |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Acquired shareholders' equity | $47776 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Regal merger costs (after tax) | (3962) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Taxable purchase accounting adjustments: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fair value adjustment for acquired certificates of deposits | 1607 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fair value adjustment for acquired loans | (13348) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Reverse allowance for loan losses | 5611 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Core deposit intangible | 8141 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Tax effect at the marginal tax rate of 25% | $(503) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Less: fair value of net assets |  | $45322 |
|  Goodwill adjustment |  | $24216 |

---

(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 for fair value adjustments $503,000 and Somerset merger costs $340,000.

(16) Fair value adjustment to reflect the difference between portfolio costs and market rates as of
December 31, 2022 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) 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.

(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 | $(13882) |
|  Somerset merger costs pre-tax | (1360) |
|  Deferred tax adjustment | 340 |
|  Adjustment to paid-in capital | $(14902) |

---

------

##### [**Table of Contents**](#toc)
**PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION** 

**DECEMBER 31, 2022** 

The following table presents pro forma balance sheet information at December 31, 2022 at the adjusted maximum of the offering range assuming the issuance of 13,225,000 shares in the offering, and the contribution of 661,250 shares and $1.3 million of cash to Somerset Regal Charitable Foundation.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **SR<br>Bancorp<br>Historical** | **Offering<br>Adjustments <sup>(1)</sup>** | **SR Bancorp<br>Pro Forma as<br>Converted** | **Regal<br>Bancorp<br>Historical** | **Merger<br>Adjustments <sup>(2)</sup>** | **SR Bancorp<br>Pro Forma<br>Consolidated** |
|  | **(***In thousands***)** | **(***In thousands***)** | **(***In thousands***)** | **(***In thousands***)** | **(***In thousands***)** | **(***In thousands***)** |
|  **<u>Assets</u>** |  |  |  |  |  |  |
|  Cash and cash equivalents | $7385 | $110454<br><sup>(3)</sup>  | $117839 | $13014 | $(84775)<sup>(11)</sup> | $46078 |
|  Interest-bearing deposits in other financial institutions | 19750 |  | 19750 | 106473 |  | 126223 |
|  Securities available for sale | 41062 |  | 41062 | 15477 |  | 56539 |
|  Securities held to maturity | 183753 |  | 183753 | 2592 |  | 186345 |
|  Equity securities at fair value | 21 |  | 21 |  |  | 21 |
|  Loans receivable, net | 357616 |  | 357616 | 339259 | (7737)<sup>(12)</sup> | 689138 |
|  Premises and equipment, net | 3597 |  | 3597 | 1819 |  | 5416 |
|  Federal Home Loan Bank stock, at cost | 702 |  | 702 | 784 |  | 1486 |
|  Bank owned life insurance (BOLI) | 28384 |  | 28384 | 7346 |  | 35730 |
|  Goodwill |  |  |  | 1085 | 22849<sup>(13)</sup> | 23934 |
|  Core deposit intangible |  |  |  |  | 8141<sup>(14)</sup> | 8141 |
|  Other | 7243 | 1984<sup>(4)</sup> | 9227 | 7830 | (163)<sup>(15)</sup> | 16894 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total assets | $649513 | $112438 | $761951 | $495679 | $(61685) | $1195945 |
|  **<u>Liabilities</u>** |  |  |  |  |  |  |
|  Deposits | $522762 | $— | $522762 | $426008 | $(1607)<sup>(16)</sup> | $947163 |
|  FHLB advances |  | —<sup>(5)</sup> |  | 5000 |  | 5000 |
|  Subordinated debt |  |  |  | 9915 | (9915)<sup>(17)</sup> |  |
|  Other liabilities | 8680 |  | 8680 | 5613 |  | 14293 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities | $531442 | $— | $531442 | $446536 | $(11522) | $966456 |
|  **<u>Shareholders' equity</u>** |  |  |  |  |  |  |
|  Common stock | $— | $139<sup>(6)</sup> | $139 | $— | $— | $139 |
|  Additional paid-in capital |  | 134914<sup>(7)</sup> | 134914 | 34358 | (34358)<sup>(18)</sup> | 134914 |
|  Retained earnings | 126299 | (5951)<sup>(8)</sup> | 120348 | 15411 | (16431)<sup>(19)</sup> | 119328 |
|  Accumulated other comprehensive loss | (8228) |  | (8228) | (626) | 626<sup>(18)</sup> | (8228) |
|  Employee stock ownership plan |  | (11109)<sup>(9)</sup> | (11109) |  |  | (11109) |
|  Equity incentive plan |  | (5555)<sup>(10)</sup>  | (5555) |  |  | (5555) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total equity | $118071 | $112438 | $230509 | $49143 | $(50163) | $229489 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities and equity | $649513 | $112438 | $761951 | $495679 | $(61685) | $1195945 |

---

------

(1) Shows the effect of the offering, assuming gross proceeds of $132.2 million at the adjusted maximum of the
valuation range, offering expenses of $3.8 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 foundation shares outstanding, respectively, and
a contribution of cash and common stock equal to 6% of the shares issued in the 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 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*)

------

##### [**Table of Contents**](#toc)
(*footnotes continued from previous page*)

(3) Calculated as follows:

---

| | |
|:---|:---|
|  | **(***In thousands***)** |
|  Gross proceeds of offering | $132250 |
|  Estimated expenses | (3810) |
|  Contribution of cash to Foundation | (1323) |
|  Common stock acquired by ESOP | (11109) |
|  Common stock acquired by equity incentive plan | (5555) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma adjustment | $110454 |

---

(4) Deferred tax asset recorded to reflect the $7.9 million cash and stock contribution to 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 13,225,000 shares in the offering and 661,250 shares contributed
to Somerset Regal Charitable Foundation.

(7) Calculated as follows:

---

| | |
|:---|:---|
|  | **(***In thousands***)** |
|  Net proceeds of offering | $128440 |
|  Contribution of stock to Foundation | 6613 |
|  Less: par value (Footnote 6) | (139) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma adjustment | $134914 |

---

(8) After tax expense of the cash and stock contribution to the 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 | $69537 |
|  Somerset merger costs expensed (pre tax) | 1360 |
|  Regal Bancorp merger costs included in goodwill (after tax) | 3962 |
|  Retire Regal Bancorp subordinated debt | 9915 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total cash adjustment | $84775 |

---

(12) Reflects the reversal of the December 31, 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 December 31, 2022.
The yield component reflects the differences between market and portfolio yields as of December 31, 2022. The fair value adjustment will be accreted into income over the lives of the related loans.

---

| | |
|:---|:---|
|  | **(***In thousands***)** |
|  Reversal of Regal Bancorp allowances | $5611 |
|  Fair value – credit component | (5326) |
|  Fair value – yield component | (8022) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma adjustment | $(7737) |

---

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##### [**Table of Contents**](#toc)
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(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** | **Goodwill** |
|  | **(***In thousands, except per share data***)** | **(***In thousands, except per share data***)** |
|  Purchase price per share ($) |  | $23.00 |
|  Number of Regal shares acquired |  | 3023369 |
|  Purchase price, net |  | $69537 |
|  Fair value of net assets |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Acquired shareholders' equity | $49143 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Regal merger costs (after tax) | (3962) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Taxable purchase accounting adjustments: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fair value adjustment for acquired certificates of deposits s | 1607 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fair value adjustment for acquired loans | (13348) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Reverse allowance for loan losses | 5611 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Core deposit intangible | 8141 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Tax effect at the marginal tax rate of 25% | $(503) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Less: fair value of net assets |  | $46689 |
|  Goodwill adjustment |  | $22849 |

---

(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 for fair value adjustments $503,000 and Somerset merger costs $340,000.

(16) Fair value adjustment to reflect the difference between portfolio costs and market rates as of
December 31, 2022 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) 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.

(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 | $(15411) |
|  Somerset merger costs pre-tax | (1360) |
|  Deferred tax adjustment | 340 |
|  Adjustment to paid-in capital | $(16431) |

---

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##### [**Table of Contents**](#toc)
**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 13,225,000 shares in the offering, and the contribution of 661,250 shares and $1.3 million of cash to Somerset Regal Charitable Foundation.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **SR<br>Bancorp<br>Historical** | **Offering<br>Adjustments <sup>(1)</sup>** | **SR Bancorp<br>Pro Forma as<br>Converted** | **Regal<br>Bancorp<br>Historical** | **Merger<br>Adjustments <sup>(2)</sup>** | **SR Bancorp<br>Pro Forma<br>Consolidated** |
|  | **(***In thousands***)** | **(***In thousands***)** | **(***In thousands***)** | **(***In thousands***)** | **(***In thousands***)** | **(***In thousands***)** |
|  **<u>Assets</u>** |  |  |  |  |  |  |
|  Cash and cash equivalents | $7557 | $110454<br><sup>(3)</sup>  | $118011 | $151755 | $(84769)<sup>(11)</sup> | $184997 |
|  Interest-bearing deposits in other financial institutions | 27787 |  | 27787 | 14656 |  | 42443 |
|  Securities available for sale | 47857 |  | 47857 | 15591 |  | 63448 |
|  Securities held to maturity | 192903 |  | 192903 | 2581 |  | 195484 |
|  Equity securities at fair value | 19 |  | 19 |  |  | 19 |
|  Loans receivable, net | 334558 |  | 334558 | 338707 | (7737)<sup>(12)</sup> | 665528 |
|  Premises and equipment, net | 3443 |  | 3443 | 1987 |  | 5430 |
|  Federal Home Loan Bank stock, at cost | 702 |  | 702 | 784 |  | 1486 |
|  Bank owned life insurance (BOLI) | 28056 |  | 28056 | 7270 |  | 35326 |
|  Goodwill |  |  |  | 1094 | 24216<sup>(13)</sup> | 25310 |
|  Core deposit intangible |  |  |  |  | 8141<sup>(14)</sup> | 8141 |
|  Other | 5749 | 1984<sup>(4)</sup> | 7733 | 3751 | (163)<sup>(15)</sup> | 11321 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total assets | $648631 | $112438 | $761069 | $538176 | $(60312) | $1238933 |
|  **<u>Liabilities</u>** |  |  |  |  |  |  |
|  Deposits | $522072 | $— | $522072 | $473702 | $(1607)<sup>(16)</sup> | $994167 |
|  FHLB advances |  | —<sup>(5)</sup> |  | 5000 |  | 5000 |
|  Subordinated debt |  |  |  | 9909 | (9909)<sup>(17)</sup> |  |
|  Other liabilities | 8328 |  | 8328 | 1789 |  | 10117 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities | $530400 | $— | $530400 | $490400 | $(11516) | $1009284 |
|  **<u>Shareholders' equity</u>** |  |  |  |  |  |  |
|  Common stock | $— | $139<sup>(6)</sup> | $139 | $— | $— | $139 |
|  Additional paid-in capital |  | 134914<sup>(7)</sup> | 134914 | 34358 | (34358)<sup>(18)</sup> | 134914 |
|  Retained earnings | 125546 | (5951)<sup>(8)</sup> | 119595 | 13882 | (14902)<sup>(19)</sup>  | 118575 |
|  Accumulated other comprehensive loss | (7315) |  | (7315) | (464) | 464<sup>(18)</sup> | (7315) |
|  Employee stock ownership plan |  | (11109)<sup>(9)</sup> | (11109) |  |  | (11109) |
|  Equity incentive plan |  | (5555)<sup>(10)</sup> | (5555) |  |  | (5555) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total equity | $118231 | $112438 | $230669 | $47776 | $(48796) | $229649 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities and equity | $648631 | $112438 | $761069 | $538176 | $(60312) | $1238933 |

---

------

(1) Shows the effect of the mutual to stock conversion of SR Bancorp, assuming gross proceeds of
$132.2 million at the adjusted maximum of the valuation range, offering expenses of $3.8 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 offering plus
foundation shares, respectively, and a contribution of cash and common stock to the Foundation in an amount equal to 6% 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.

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##### [**Table of Contents**](#toc)
(*footnotes continued from previous page*)

(3) Calculated as follows:

---

| | |
|:---|:---|
|  | **(***In thousands***)** |
|  Gross proceeds of offering | $132250 |
|  Estimated expenses | (3810) |
|  Contribution of cash to Somerset Regal Charitable Foundation | (1323) |
|  Common stock acquired by ESOP | (11109) |
|  Common stock acquired by equity incentive plan | (5555) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma adjustment | $110454 |

---

(4) Deferred tax asset recorded to reflect the $7.9 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 13,225,000 shares in the offering and 661,250 shares contributed
to Somerset Regal Charitable Foundation.

(7) Calculated as follows:

---

| | |
|:---|:---|
|  | **(***In thousands***)** |
|  Net proceeds of offering | $128440 |
|  Contribution of stock to Somerset Regal Charitable Foundation | 6613 |
|  Less: par value (Footnote 6) | (139) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma adjustment | $134914 |

---

(8) After tax expense of the cash and stock contribution to the 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 | $69537 |
|  Somerset merger costs expensed (pre tax) | 1360 |
|  Regal Bancorp merger costs included in goodwill (after tax) | 3962 |
|  Retire Regal Bancorp subordinated debt [see footnote 17] | 9909 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total cash adjustment | $84769 |

---

(12) Reflects the reversal of the December 31, 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 December 31, 2022.
The yield component reflects the differences between market and portfolio yields as of December 31, 2022. The fair value adjustment will be accreted into income over the lives of the related loans.

---

| | |
|:---|:---|
|  | **(***In thousands***)** |
|  Reversal of Regal Bancorp allowances | $5611 |
|  Fair value – credit component | (5326) |
|  Fair value – yield component | (8022) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma adjustment | $(7737) |

---

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(*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** | **Goodwill** |
|  | **(***In thousands, except per share data***)** | **(***In thousands, except per share data***)** |
|  Purchase price per share |  | $23.00 |
|  Number of Regal shares acquired |  | 3023369 |
|  Purchase price, net |  | $69537 |
|  Fair value of net assets |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Acquired shareholders' equity | $47776 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Regal merger costs (after tax) | (3962) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Taxable purchase accounting adjustments: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fair value adjustment for acquired certificates of deposits | 1607 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fair value adjustment for acquired loans | (13348) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Reverse allowance for loan losses | 5611 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Core deposit intangible | 8141 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Tax effect at the marginal tax rate of 25% | $(503) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Less: fair value of net assets |  | $45322 |
|  Goodwill adjustment |  | $24216 |

---

(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 for fair value adjustments $847,000 and Somerset merger costs $290,000.

(16) Fair value adjustment to reflect the difference between portfolio costs and market rates as of
December 31, 2022 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) Reflects the redemption of subordinated debt is retired at closing assuming the offering closes at the maximum
or adjusted maximum 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 | $(13882) |
|  Somerset merger costs pre-tax | (1360) |
|  Deferred tax adjustment | 340 |
|  Adjustment to paid-in capital | $(14902) |

---

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##### [**Table of Contents**](#toc)
**PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME** 

**FOR THE SIX MONTHS ENDED DECEMBER 31, 2022** 

The following table presents pro forma income statement information for the six months ended December 31, 2022, at the minimum of the offering range, including 8,500,000 shares issued in the offering, and 425,000 shares and $850,000 of cash contributed to Somerset Regal Charitable Foundation.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **SR<br>Bancorp<br>Historical** | **Offering<br>Adjustments <sup>(1)</sup>** | **SR<br>Bancorp<br>Pro Forma**<br>**As<br>Converted** | **Regal<br>Bancorp<br>Historical** | **Merger<br>Adjustments <sup>(3)</sup>** | **SR Bancorp<br>Pro Forma<br>Consolidated** |
|  | **(***In thousands, except per share data***)** | **(***In thousands, except per share data***)** | **(***In thousands, except per share data***)** | **(***In thousands, except per share data***)** | **(***In thousands, except per share data***)** | **(***In thousands, except per share data***)** |
|  Interest and dividend income | $7610 | $— | $7610 | $9792 | $4386<sup>(4)</sup> | $21788 |
|  Interest expense | (732) |  | (732) | (1300) | (703)<sup>(5)</sup> | (2735) |
|  Net interest income | 6878 |  | 6878 | 8492 | 3683 | 19053 |
|  Provision for loan losses | $— | $— | $— | $— | $— | $— |
|  Net interest income after provision for loan losses | $6878 | $— | $6878 | $8492 | $3683 | $19053 |
|  Noninterest income | 694 |  | 694 | 298 |  | 992 |
|  Noninterest expense | (6698) | (179)<sup>(2)</sup> | (6877) | (6488) | (407)<sup>(6)</sup> | (13772) |
|  Income before income taxes | $874 | $(179) | $695 | $2302 | $3276 | $6273 |
|  Income tax expense | (121) | 45 | (76) | (773) | (819)<sup>(7)</sup> | (1668) |
|  Net income | $753 | $(134) | $619 | $1529 | $2457 | $4605 |
|  Basic EPS <sup>(8)</sup> | $— | $— | $0.08 | $0.51 | $— | $0.56 |
|  Diluted EPS <sup>(8)</sup> | $— | $— | $0.08 | $0.51 | $— | $0.56 |

---

------

(1) Shows the effect of the stock offering of SR Bancorp, assuming gross proceeds of $85.0 million, the
minimum of the offering range, offering expenses of $3.3 million, and establishment of an ESOP that will acquire 8.0% of the offering and foundation shares issued in the transaction. The ESOP will purchase shares in the offering and in open
market purchases. The loan taken down by the ESOP will be amortized over 20 years on a straight line basis. The ESOP expense shown reflects the estimated amortization expense on a pretax basis for the period shown. SR Bancorp also intends to adopt a
stock-based incentive plan that will purchase 4.0% of the offering and foundation shares issued in the transaction. The stock-based incentive plan will purchase shares in the open market after receiving shareholder approval. Open market purchases
are assumed at $10 per share. SR Bancorp also intends to adopt a stock option plan that will include 10.0% of the offering plus foundation shares issued in the transaction Pursuant to an application of the Black-Scholes option pricing model, the
stock options are assumed to have a value of $5.02 per option. The option value is assumed to be expensed over the five year vesting period for the options and 25% of the option expense is assumed to be deductible for income tax purposes. The stock
option plan is subject to shareholder approval. Adjustments to record estimated stock-based incentive plan expense, stock option plan expense, and interest income to be earned on net proceeds of the offering will be recorded as incurred. Since these
estimates are speculative, they are not reflected in the calculations of pro forma income. The estimated interest income assuming net cash proceeds of $70.1 million from the offering are invested at an average pretax yield of 3.99 percent
for the six months ended December 31, 2022 would be approximately $1.4 million pretax. The yield utilized approximates the yield on a five year U.S. Treasury security as of December 31, 2022. The estimated expense for the equity
incentive plan assuming gross proceeds of $85.0 million is $0.4 million pretax for the six months ended December 31, 2022. The estimated expense for the stock option plan assuming gross proceeds of $85.0 million is
$0.5 million pretax for the six months ended December 31, 2022. The ESOP loan is amortized over 20 years on a straight line basis. ESOP shares are assumed to be released at $10 per share. Stock-based incentive plan shares are assumed to
vest over 5 years on a straight-line basis. Taxes are calculated on an assumed marginal rate of 25.0%. No expenses are included for merger-related charges, all of which are one time expenses.

(2) ESOP loan with a balance of $7.1 million and an amortization period of 20 years straight line. ESOP loan
is assumed to be funded internally, so no interest expense is recorded on the consolidated income statement for SR Bancorp. ESOP expense thus reflects only the amortization of principal for the period shown.

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

(4) Adjustment to interest income is the accretion of the fair value adjustment on the Regal Bancorp loans
resulting from acquisition accounting. Adjustments to record estimated interest income to be foregone as a result of funding the cash portion of the merger consideration and expenses of the acquisition will be recorded as incurred. Because they are non-recurring, these expenses are not reflected in the pro forma income statements. The estimated reduction in interest income assuming funding requirements of $74.9 million for the merger and related expenses,
assuming such cash costs were funded with investments yielding 3.99 percent for the six months ended December 31, 2022, would be approximately $1.5 million. The cost approximates the yield on the five year U.S. Treasury security on
December 31, 2022.

(5) Adjustment to interest expense is the amortization of the fair value adjustment on deposits. No adjustment is
included for the retirement of the Regal Bancorp subordinated debt due since these estimates are speculative. If the debt were retired as of December 31, 2022, the pre-tax interest reduction would be
$500,000.

(6) Adjustment to non-interest expense is the amortization of the core
deposit intangible over 10 years on a straight line basis.

(7) Marginal tax rate of 25.0%.

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##### [**Table of Contents**](#toc)
**PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME** 

**FOR THE YEAR ENDED JUNE 30, 2022** 

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **SR<br>Bancorp<br>Historical** | **Offering<br>Adjustments <sup>(1)</sup>** | **SR<br>Bancorp<br>Pro Forma**<br>**As<br>Converted** | **Regal<br>Bancorp<br>Historical** | **Merger<br>Adjustments <sup>(3)</sup>** | **SR Bancorp<br>Pro Forma<br>Consolidated** |
|  | **(***In thousands, except per share data***)** | **(***In thousands, except per share data***)** | **(***In thousands, except per share data***)** | **(***In thousands, except per share data***)** | **(***In thousands, except per share data***)** | **(***In thousands, except per share data***)** |
|  Interest and dividend income | $13432 | $— | $13432 | $17121 | $7290<sup>(4)</sup> | $37843 |
|  Interest expense | (1535) |  | (1535) | (2355) | (1161)<sup>(5)</sup>  | (5051) |
|  Net interest income | 11897 |  | 11897 | 14766 | 6129 | 32792 |
|  Provision for loan losses | $— | $— | $— | $— | $— | $— |
|  Net interest income after provision for loan losses | $11897 | $— | $11897 | $14766 | $6129 | $32792 |
|  Noninterest income | 1351 |  | 1351 | 1149 |  | 2500 |
|  Noninterest expense | (11014) | (357)<sup>(2)</sup> | (11371) | (11602) | (814)<sup>(6)</sup> | (23787) |
|  Income before income taxes | $2234 | $(357) | $1877 | $4313 | $5315 | $11505 |
|  Income tax expense | (363) | 89 | (274) | (1240) | (1329)<sup>(7)</sup> | (2843) |
|  Net income | $1871 | $(268) | $1603 | $3073 | $3986 | $8662 |
|  Basic EPS <sup>(8)</sup> | $— | $— | $0.19 | $0.83 | $— | $1.05 |
|  Diluted EPS <sup>(8)</sup> | $— | $— | $0.19 | $0.83 | $— | $1.05 |

---

------

(1) Shows the effect of the stock offering of SR Bancorp, assuming gross proceeds of $85.0 million, the
minimum of the offering range, offering expenses of $3.3 million, and establishment of an ESOP that will acquire 8.0% of the offering and foundation shares issued in the transaction. The ESOP will purchase shares in the offering and in open
market purchases. The loan taken down by the ESOP will be amortized over 20 years on a straight line basis. The ESOP expense shown reflects the estimated amortization expense on a pretax basis for the period shown. SR Bancorp also intends to adopt a
stock-based incentive plan that will purchase 4.0% of the offering and foundation shares issued in the transaction. The stock-based incentive plan will purchase shares in the open market after receiving shareholder approval. Open market purchases
are assumed at $10 per share. SR Bancorp also intends to adopt a stock option plan that will include 10.0% of the offering plus foundation shares issued in the transaction Pursuant to an application of the Black-Scholes option pricing model, the
stock options are assumed to have a value of $5.02 per option. The option value is assumed to be expensed over the five year vesting period for the options and 25% of the option expense is assumed to be deductible for income tax purposes. The stock
option plan is subject to shareholder approval. Adjustments to record estimated stock-based incentive plan expense, stock option plan expense, and interest income to be earned on net proceeds of the offering will be recorded as incurred. Since these
estimates are speculative, they are not reflected in the calculations of pro forma income. The estimated interest income assuming net cash proceeds of $70.1 million from the offering are invested at an average pretax yield of 3.99 percent
for the year ended June 30, 2022 would be approximately $2.8 million pretax. The yield utilized approximates the yield on a five year U.S. Treasury security as of December 31, 2022. The estimated expense for the equity incentive plan
assuming gross proceeds of $85.0 million is $0.7 million pretax for the year ended June 30, 2022. The estimated expense for the stock option plan assuming gross proceeds of $85.0 million is $0.9 million pretax for the year
ended June 30, 2022. The ESOP loan is amortized over 20 years on a straight line basis assumed marginal rate of 25.0%. No expenses are included for merger-related charges, all of which are one time expenses.

(2) ESOP loan with a balance of $7.1 million and an amortization period of 20 years straight line. ESOP loan
is assumed to be funded internally, so no interest expense is recorded on the consolidated income statement for SR Bancorp. ESOP expense thus reflects only the amortization of principal for the period shown.

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

(4) Adjustment to interest income is the accretion of the fair value adjustment on the Regal Bancorp loans
resulting from acquisition accounting. Adjustments to record estimated interest income to be foregone as a result of funding the cash portion of the merger consideration and expenses of the acquisition will be recorded as incurred. Because they are non-recurring, these expenses are not reflected in the pro forma income statements. The estimated reduction in interest income assuming funding requirements of $74.9 million for the merger and related expenses,
assuming such cash costs were funded with investments yielding 3.99 percent for the year ended June 30, 2022, would be approximately $3.0 million. The cost approximates the yield on the five year U.S. Treasury security on
December 31, 2022.

(5) Adjustment to interest expense is the amortization of the fair value adjustment on deposits. No adjustment is
included for the retirement of the Regal Bancorp subordinated debt due since these estimates are speculative. If the debt were retired as of December 31, 2022, the pre-tax interest reduction would be
$500,000.

(6) Adjustment to non-interest expense is the amortization of the core
deposit intangible over 10 years on a straight line basis.

(7) Marginal tax rate of 25.0%.

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##### [**Table of Contents**](#toc)
**PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME** 

**FOR THE SIX MONTHS ENDED DECEMBER 31, 2022** 

The following table presents pro forma income statement information for the six months ended December 31, 2022, at the adjusted maximum of the offering range, including 13,225,000 shares issued in the offering, and the contribution of 661,250 shares and $1.3 million of cash contributed to Somerset Regal Charitable Foundation.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **SR<br>Bancorp<br>Historical** | **Offering<br>Adjustments <sup>(1)</sup>** | **SR<br>Bancorp<br>Pro Forma**<br>**As<br>Converted** | **Regal<br>Bancorp<br>Historical** | **Merger<br>Adjustments <sup>(3)</sup>** | **SR Bancorp<br>Pro Forma<br>Consolidated** |
|  | **(***In thousands, except per share data***)** | **(***In thousands, except per share data***)** | **(***In thousands, except per share data***)** | **(***In thousands, except per share data***)** | **(***In thousands, except per share data***)** | **(***In thousands, except per share data***)** |
|  Interest and dividend income | $7610 | $— | $7610 | $9792 | $4386<sup>(4)</sup> | $21788 |
|  Interest expense | (732) |  | (732) | (1300) | (703)<sup>(5)</sup> | (2735) |
|  Net interest income | 6878 |  | 6878 | 8492 | 3683 | 19053 |
|  Provision for loan losses | $— | $— | $— | $— | $— | $— |
|  Net interest income after provision for loan losses | $6878 | $— | $6878 | $8492 | $3683 | $19053 |
|  Noninterest income | 694 |  | 694 | 298 |  | 992 |
|  Noninterest expense | (6698) | (277)<sup>(2)</sup> | (6975) | (6488) | (407)<sup>(6)</sup> | (13870) |
|  Income before income taxes | $874 | $(277) | $597 | $2302 | $3276 | $6175 |
|  Income tax expense | (121) | 69 | (52) | (773) | (819)<sup>(7)</sup> | (1644) |
|  Net income | $753 | $(208) | $545 | $1529 | $2457 | $4531 |
|  Basic EPS <sup>(8)</sup> | $— | $— | $0.04 | $0.51 | $— | $0.35 |
|  Diluted EPS <sup>(8)</sup> | $— | $— | $0.04 | $0.51 | $— | $0.35 |

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(1) Shows the effect of the stock offering of SR Bancorp, assuming gross proceeds of $132.25 million, the
adjusted maximum of the offering range, offering expenses of $3.8 million, and establishment of an ESOP that will acquire 8.0% of the offering and foundation shares issued in the transaction. The ESOP will purchase shares in the offering and in
open market purchases. The loan taken down by the ESOP will be amortized over 20 years on a straight line basis. The ESOP expense shown reflects the estimated amortization expense on a pretax basis for the period shown. SR Bancorp also intends to
adopt a stock-based incentive plan that will purchase 4.0% of the offering and foundation shares issued in the transaction. The stock-based incentive plan will purchase shares in the open market after receiving shareholder approval. Open market
purchases are assumed at $10 per share. SR Bancorp also intends to adopt a stock option plan that will include 10.0% of the offering plus foundation shares issued in the transaction Pursuant to an application of the Black-Scholes option pricing
model, the stock options are assumed to have a value of $5.02 per option. The option value is assumed to be expensed over the five year vesting period for the options and 25% of the option expense is assumed to be deductible for income tax purposes.
The stock option plan is subject to shareholder approval. Adjustments to record estimated stock-based incentive plan expense, stock option plan expense, and interest income to be earned on net proceeds of the offering will be recorded as incurred.
Since these estimates are speculative, they are not reflected in the calculations of pro forma income. The estimated interest income assuming net cash proceeds of $110.5 million from the offering are invested at an average pretax yield of
3.99 percent for the six months ended December 31, 2022 would be approximately $2.2 million pretax. The yield utilized approximates the yield on a five year U.S. Treasury security as of December 31, 2022. The estimated expense
for the equity incentive plan assuming gross proceeds of $132.25 million is $0.6 million pretax for the six months ended December 31, 2022. The estimated expense for the stock option plan assuming gross proceeds of $132.2 million
is $0.7 million pretax for the six months ended December 31, 2022. The ESOP loan is amortized over 20 years on a straight line basis. ESOP shares are assumed to be released at $10 per share. Stock-based incentive plan shares are assumed to
vest over 5 years on a straight-line basis. Taxes are calculated on an assumed marginal rate of 25.0%. No expenses are included for merger-related charges, all of which are one time expenses.

(2) ESOP loan with a balance of $11.1 million and an amortization period of 20 years straight line. ESOP loan
is assumed to be funded internally, so no interest expense is recorded on the consolidated income statement for SR Bancorp. ESOP expense thus reflects only the amortization of principal for the period shown.

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

(4) Adjustment to interest income is the accretion of the fair value adjustment on the Regal Bancorp loans
resulting from acquisition accounting. Adjustments to record estimated interest income to be foregone as a result of funding the cash portion of the merger consideration and expenses of the acquisition will be recorded as incurred. Because they are non-recurring, these expenses are not reflected in the pro forma income statements. The estimated reduction in interest income assuming funding requirements of $74.9 million for the merger and related expenses,
assuming such cash costs were funded with investments yielding 3.99 percent for the six months ended December 31, 2022, would be approximately $1.5 million. The cost approximates the yield on the five year U.S. Treasury security on
December 31, 2022.

(5) Adjustment to interest expense is the amortization of the fair value adjustment on deposits. No adjustment is
included for the retirement of the Regal Bancorp subordinated debt due since these estimates are speculative. If the debt were retired as of December 31, 2022, the pre-tax interest reduction would be
$500,000

(6) Adjustment to non-interest expense is the amortization of the core
deposit intangible over 10 years on a straight line basis.

(7) Marginal tax rate of 25.0%.

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##### [**Table of Contents**](#toc)
**PRO FORMA CONVERSION VALUATION DATA** 

The following consolidated pro forma data, which are based on Somerset Savings Bank and Regal Bancorp's equity at December 31, 2022 and June 30, 2022 and net income for the six months ended December 31, 2022 and the year ended June 30, 2022 for Somerset Savings Bank and Regal Bancorp, respectively, may not represent the actual financial effects of the offering or our operating results after the offering and the proposed Merger. The consolidated pro forma data rely exclusively on the assumptions outlined above and the notes to the pro forma tables. The consolidated pro forma data do not represent the fair market value of our common stock, the current fair market value of our assets or liabilities, or the amount of money that would be available for distribution to shareholders if we were to be liquidated after the offering.

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##### [**Table of Contents**](#toc)
We are offering our common stock on a best efforts basis. We must issue a minimum of 8,500,000 shares in the offering to complete the offering.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **At or for the Six Months Ended December 31, 2022**<br>**Based on the Sale at $10.00 Per Share of:** | **At or for the Six Months Ended December 31, 2022**<br>**Based on the Sale at $10.00 Per Share of:** | **At or for the Six Months Ended December 31, 2022**<br>**Based on the Sale at $10.00 Per Share of:** | **At or for the Six Months Ended December 31, 2022**<br>**Based on the Sale at $10.00 Per Share of:** |
|  | **Minimum<br>8,500,000<br>$10.00 per**<br>**share** | **Midpoint<br>10,000,000<br>$10.00 per<br>share** | **Maximum<br>11,500,000<br>$10.00 per**<br>**share** | **Maximum<br>As Adjusted<br>13,225,000<br>$10.00 per**<br>**share<sup>(1)</sup>** |
|  | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** |
|  Appraised value of Somerset Savings Bank | $85000 | $100000 | $115000 | $132250 |
|  Plus: foundation shares | 4250 | 5000 | 5750 | 6613 |
|  Pro forma value including foundation shares | $89250 | $105000 | $120750 | $138863 |
|  Gross proceeds of offering | $85000 | 100000 | $115000 | $132250 |
|  Less: estimated expenses | (3337) | (3487) | (3637) | (3810) |
|  Estimated net proceeds | 81663 | 96513 | 111363 | 128440 |
|  Less: common stock acquired by ESOP<sup>(2)</sup> | (7140) | (8400) | (9660) | (11109) |
|  Less: common stock to be acquired by the equity incentive plan<sup>(3)</sup> | (3570) | (4200) | (4830) | (5555) |
|  Less: cash contribution to foundation | (850) | (1000) | (1150) | (1323) |
|  Net investable proceeds from offering | $70103 | $82913 | $95723 | $110454 |
|  <u>Consolidated pro forma net income</u> |  |  |  |  |
|  Pro forma net income: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Historical Somerset Savings Bank | $753 | $753 | $753 | $753 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma income on net investable proceeds | 1049 | 1241 | 1432 | 1653 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma impact of funding the merger | (1120) | (1120) | (1120) | (1120) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma ESOP adjustments<sup>(2)</sup> | (134) | (158) | (181) | (208) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma restricted stock award expense<sup>(3)</sup> | (268) | (315) | (362) | (417) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma stock option expense<sup>(4)</sup> | (420) | (494) | (569) | (654) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Estimated merger adjustments | 3986 | 3986 | 3986 | 3986 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma net income | $3846 | $3893 | $3939 | $3994 |
|  Pro forma net income per share<sup>(5)</sup>: |  |  |  |  |
|  Historical Somerset Savings Bank | $0.10 | $0.08 | $0.06 | $0.06 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma income on net investable proceeds | 0.13 | 0.13 | 0.13 | 0.13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma impact of funding the merger | (0.14) | (0.12) | (0.10) | (0.09) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma ESOP adjustments<sup>(2)</sup> | (0.02) | (0.02) | (0.02) | (0.02) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma restricted stock award expense<sup>(3)</sup> | (0.03) | (0.03) | (0.03) | (0.03) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma stock option expense<sup>(4)</sup> | (0.05) | (0.05) | (0.05) | (0.05) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Estimated merger adjustments | 0.48 | 0.41 | 0.36 | 0.31 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma net income per share | $0.47 | $0.40 | $0.35 | $0.31 |
|  Offering price as a multiple of pro forma income per share<sup>(5)</sup> | 10.64x | 12.50x | 14.29x | 16.13x |
|  Number of shares used to calculate pro forma net income per share<sup>(6)</sup> | 8228850 | 9681000 | 11133150 | 12803122 |
|  <u>Pro forma shareholders' equity</u> |  |  |  |  |
|  Pro forma shareholders' equity (book value): |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Historical Somerset Savings Bank | $118071 | $118071 | $118071 | $118071 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Estimated net proceeds | 81663 | 96513 | 111363 | 128440 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Plus: common stock contributed to the foundation | 4250 | 5000 | 5750 | 6613 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Less: after tax cost of contribution to the foundation | (3825) | (4500) | (5175) | (5951) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Less: common stock acquired by ESOP<sup>(2)</sup> | (7140) | (8400) | (9660) | (11109) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Less: common stock acquired by equity incentive plan | (3570) | (4200) | (4830) | (5555) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Estimated merger adjustments<sup>(3)</sup> | (1020) | (1020) | (1020) | (1020) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma shareholders' equity per share<sup>(6)</sup> | 188429 | 201464 | 214499 | 229489 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Intangible assets | (32075) | (32075) | (32075) | (32075) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma tangible shareholders' equity per share | $156354 | $169389 | $182424 | $197414 |
|  Pro forma shareholders' equity per share: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Historical Somerset Savings Bank | $13.22 | $11.25 | $9.77 | $8.50 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Estimated net proceeds | 9.15 | 9.19 | 9.22 | 9.25 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Plus: common stock contributed to the foundation | 0.48 | 0.48 | 0.48 | 0.48 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Less: after tax cost of contribution to the foundation | (0.43) | (0.43) | (0.43) | (0.43) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Less: common stock acquired by ESOP<sup>(2)</sup> | (0.80) | (0.80) | (0.80) | (0.80) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Less: common stock acquired by equity incentive plan<sup>(3)</sup> | (0.40) | (0.40) | (0.40) | (0.40) |

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| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Estimated merger adjustments | (0.11) | (0.10) | (0.08) | (0.07) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma shareholders' equity per share | 21.11 | 19.19 | 17.76 | 16.53 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Intangible assets | (3.59) | (3.05) | (2.66) | (2.31) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma tangible shareholders' equity per share | $17.52 | $16.14 | $15.10 | $14.22 |
|  Offering price as a percentage of pro forma equity per share | 47.37% | 52.11% | 56.31% | 60.50% |
|  Offering price as a percentage of pro forma tangible equity per share | 57.08% | 61.96% | 66.23% | 70.32% |
|  Shares used for pro forma shareholders' equity per share | 8925000 | 10500000 | 12075000 | 13886250 |

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(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 stock offering.

(2) Assumes that 8.0% of the shares of common stock sold in the stock offering, including shares contributed to the
charitable foundation, will be purchased by the employee stock ownership plan. For purposes of this table, the funds used to acquire these shares are assumed to have been borrowed by the employee stock ownership plan from SR Bancorp. Somerset Regal
Bank intends to make annual contributions to the employee stock ownership plan in an amount at least equal to the required principal and interest payments on the debt. Financial Accounting Standards Board Accounting Standards Codification 718-40, "*Compensation—Stock Compensation—Employee Stock Ownership Plans*" ("ASC 718-40") requires that an employer record compensation
expense in an amount equal to the fair value of the shares committed to be released to employees. The pro forma adjustments assume that the employee stock ownership plan shares are allocated in equal annual installments based on the number of loan
repayment installments assumed to be paid by Somerset Regal Bank, the fair value of the common stock remains equal to the subscription price and an effective combined federal and state tax rate of 25.0%. The unallocated employee stock ownership plan
shares are reflected as a reduction of shareholders' equity. No reinvestment is assumed on proceeds contributed to fund the employee stock ownership plan. The pro forma net income further assumes that 17,850, 21,000, 24,150 and 27,772 shares
were committed to be released during the year at the minimum, midpoint, maximum and adjusted maximum of the offering range, respectively, and in accordance with ASC 718-40, only the employee stock ownership
plan shares committed to be released during the period were considered outstanding for net income per share calculations.

(3) Assumes that a stock-based benefit plan purchases an aggregate number of shares of common stock equal to 4.0%
of the shares of common stock sold in the stock offering and shares contributed to the charitable foundation. Shareholder approval of the plan and purchases by the plan may not occur earlier than six months after the completion of the conversion.
The shares may be acquired directly from SR Bancorp or through open market purchases. Shares in the stock-based benefit plan are assumed to vest over a period of five years. The funds to be used to purchase the shares will be provided by SR Bancorp.
The table assumes that (i) the stock-based benefit plan acquires the shares through open market purchases at $10.00 per share, (ii) 10% of the amount contributed to the plan is amortized as an expense during the six months ended
December 31, 2022, and (iii) the plan expense reflects an effective combined federal and state tax rate of 25%. Assuming shareholder approval of the stock-based benefit plan and that shares of common stock are awarded through the use of
authorized but unissued shares of common stock, shareholders would have their ownership and voting interests diluted by approximately 3.85% at the midpoint of the offering range.

(4) Assumes that options are granted under a stock-based benefit plan to acquire an aggregate number of shares of
common stock equal to 10% of the shares of common stock sold in the stock offering and shares contributed to the charitable foundation. Shareholder approval of the plan may not occur earlier than six months after the completion of the conversion. In
calculating the pro forma effect of the stock-based benefit plan, it is assumed that the exercise price of the stock options and the trading price of the common stock at the date of grant were $10.00 per share, the estimated grant-date fair value
determined using the Black-Scholes option pricing model was $5.02 for each option, the aggregate grant-date fair value of the stock options was amortized to expense on a straight-line basis over a five-year vesting period, and that 25.0% of the
amortization expense (or the assumed portion relating to options granted to directors) resulted in a tax benefit using an assumed tax rate of 25.0%. The actual expense 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 and the option pricing model ultimately adopted. Under the above assumptions, the adoption of the stock-based benefit plan will result in no additional shares under the treasury stock
method for calculating earnings per share. There can be no assurance that the exercise price of the stock options will be equal to the $10.00 price per share. If a portion of the shares used to satisfy the exercise of options comes from authorized
but unissued shares, our net income per share and shareholders' equity per share would decrease. The issuance of authorized but unissued shares of common stock pursuant to the exercise of options under such plan would dilute shareholders'
ownership and voting interests by approximately 9.09% at the midpoint of the offering range.

(5) Net income per share computations are determined by taking the number of shares assumed to be sold in the stock
offering and contributed to the charitable foundation and, in accordance with ASC 718-40, subtracting the employee stock ownership plan shares that have not been committed for release during the year. See
footnote 2, above. The number of shares of common stock actually sold may be more or less than the assumed amounts.

(6) The retained earnings of Somerset Regal Bank will be substantially restricted after the conversion. See *"Our Dividend Policy*," "*The Conversion and Stock Offering—Liquidation Rights*" and "*Regulation and Supervision —Federal Bank Regulation—Dividends*."

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##### [**Table of Contents**](#toc)

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **At or for the Year Ended June 30, 2022**<br>**Based on the Sale at $10.00 Per Share of:** | **At or for the Year Ended June 30, 2022**<br>**Based on the Sale at $10.00 Per Share of:** | **At or for the Year Ended June 30, 2022**<br>**Based on the Sale at $10.00 Per Share of:** | **At or for the Year Ended June 30, 2022**<br>**Based on the Sale at $10.00 Per Share of:** |
|  | **Minimum<br>8,500,000<br>$10.00 per<br>share** | **Midpoint<br>10,000,000<br>$10.00 per**<br>**share** | **Maximum<br>11,500,000<br>$10.00 per**<br>**share** | **Maximum<br>As Adjusted<br>13,225,000<br>$10.00 per**<br>**share<sup>(1)</sup>** |
|  | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** |
|  Gross proceeds of offering | $85000 | $100000 | $115000 | $132250 |
|  Plus: foundation shares | 4250 | 5000 | 5750 | 6613 |
|  Pro forma value including foundation shares | $89250 | $105000 | $120750 | $138863 |
|  Gross proceeds of offering | $85000 | $100000 | $115000 | $132250 |
|  Less: estimated expenses | (3337) | (3487) | (3637) | (3810) |
|  Estimated net proceeds | 81663 | 96513 | 111363 | 128440 |
|  Less: common stock acquired by ESOP<sup>(2)</sup> | (7140) | (8400) | (9660) | (11109) |
|  Less: common stock to be acquired by the equity incentive plan<sup>(3)</sup> | (3570) | (4200) | (4830) | (5555) |
|  Less: cash contribution to foundation | (850) | (1000) | (1150) | (1323) |
|  Net investable proceeds from offering | $70103 | $82913 | $95723 | $110454 |
|  Consolidated pro forma net income |  |  |  |  |
|  Pro forma net income: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Historical Somerset Savings Bank | $1871 | $1871 | $1871 | $1871 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma income on net investable proceeds | 2098 | 2481 | 2865 | 3305 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma impact of funding the merger | (2240) | (2240) | (2240) | (2240) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma ESOP adjustments<sup>(2)</sup> | (268) | (315) | (362) | (417) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma restricted stock award expense<sup>(3)</sup> | (536) | (630) | (725) | (833) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma stock option expense<sup>(4)</sup> | (840) | (988) | (1137) | (1307) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Estimated merger adjustments | 7059 | 7059 | 7059 | 7059 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma net income | $7144 | $7238 | $7331 | $7438 |
|  Pro forma net income per share<sup>(5)</sup>: |  |  |  |  |
|  Historical Somerset Savings Bank | $0.23 | $0.19 | $0.17 | $0.14 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma income on net investable proceeds | 0.25 | 0.26 | 0.26 | 0.26 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma impact of funding the merger | (0.27) | (0.23) | (0.20) | (0.17) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma ESOP adjustments<sup>(2)</sup> | (0.03) | (0.03) | (0.03) | (0.03) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma restricted stock award expense<sup>(3)</sup> | (0.07) | (0.07) | (0.07) | (0.07) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma stock option expense<sup>(4)</sup> | (0.10) | (0.10) | (0.10) | (0.10) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Estimated merger adjustments | 0.86 | 0.73 | 0.63 | 0.55 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma net income per share | $0.87 | $0.75 | $0.66 | $0.58 |
|  Offering price as a multiple of pro forma income per share<sup>(5)</sup> | 11.49x | 13.33x | 15.15x | 17.24x |
|  Number of shares used to calculate pro forma net income per share<sup>(5)</sup> | 8246700 | 9702000 | 11157300 | 12830895 |
|  Pro forma shareholders' equity |  |  |  |  |
|  Pro forma shareholders' equity (book value): |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Historical Somerset Savings Bank | $118231 | $118231 | $118231 | $118231 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Estimated net proceeds | 81663 | 96513 | 111363 | 128440 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Plus: common stock contributed to the foundation | 4250 | 5000 | 5750 | 6613 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Less: after tax cost of contribution to the foundation | (3825) | (4500) | (5175) | (5951) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Less: common stock acquired by ESOP<sup>(2)</sup> | (7140) | (8400) | (9660) | (11109) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Less: common stock acquired by equity incentive plan | (3570) | (4200) | (4830) | (5555) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Estimated merger adjustments<sup>(3)(4)</sup> | (1020) | (1020) | (1020) | (1020) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma shareholders' equity per share<sup>(6)</sup> | 188589 | 201624 | 215679 | 230669 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Intangible assets | (33451) | (33451) | (33451) | (33451) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma tangible shareholders' equity per share | $155138 | $168173 | $182228 | $197218 |
|  Pro forma shareholders' equity per share: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Historical Somerset Savings Bank | $13.24 | $11.26 | $9.87 | $8.58 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Estimated net proceeds | 9.15 | 9.19 | 9.22 | 9.25 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Plus: common stock contributed to the foundation | 0.48 | 0.48 | 0.48 | 0.48 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Less: after tax cost of contribution to the foundation | (0.43) | (0.43) | (0.43) | (0.43) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Less: common stock acquired by ESOP<sup>(2)</sup> | (0.80) | (0.80) | (0.80) | (0.80) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Less: common stock acquired by equity incentive plan<sup>(3)</sup> | (0.40) | (0.40) | (0.40) | (0.40) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Estimated merger adjustments | (0.11) | (0.10) | (0.08) | (0.07) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma shareholders' equity per share | 21.13 | 19.20 | 17.86 | 16.61 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Intangible assets | (3.75) | (3.19) | (2.77) | (2.41) |

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| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma tangible shareholders' equity per share | $17.38 | $16.01 | $15.09 | $14.2 |
|  Offering price as a percentage of pro forma equity per share | 47.33% | 52.08% | 55.99% | 60.2% |
|  Offering price as a percentage of pro forma tangible equity per share | 57.54% | 62.46% | 66.27% | 70.42% |
|  Shares used for pro forma shareholders' equity per share | 8925000.0 | 10500000.0 | 12075000.0 | 13886250.0 |

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(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 stock offering.

(2) Assumes that 8.0% of the shares of common stock sold in the stock offering, including shares contributed to the
charitable foundation, will be purchased by the employee stock ownership plan. For purposes of this table, the funds used to acquire these shares are assumed to have been borrowed by the employee stock ownership plan from SR Bancorp. Somerset Regal
Bank intends to make annual contributions to the employee stock ownership plan in an amount at least equal to the required principal and interest payments on the debt. Financial Accounting Standards Board Accounting Standards Codification 718-40, "*Compensation—Stock Compensation—Employee Stock Ownership Plans*" ("ASC 718-40") requires that an employer record compensation
expense in an amount equal to the fair value of the shares committed to be released to employees. The pro forma adjustments assume that the employee stock ownership plan shares are allocated in equal annual installments based on the number of loan
repayment installments assumed to be paid by Somerset Regal Bank, the fair value of the common stock remains equal to the subscription price and an effective combined federal and state tax rate of 25.0%. The unallocated employee stock ownership plan
shares are reflected as a reduction of shareholders' equity. No reinvestment is assumed on proceeds contributed to fund the employee stock ownership plan. The pro forma net income further assumes that 35,700, 42,000, 48,300 and 55,545 shares
were committed to be released during the year at the minimum, midpoint, maximum and adjusted maximum of the offering range, respectively, and in accordance with ASC 718-40, only the employee stock ownership
plan shares committed to be released during the period were considered outstanding for net income per share calculations.

(3) Assumes that a stock-based benefit plan purchases an aggregate number of shares of common stock equal to 4.0%
of the shares of common stock sold in the stock offering and shares contributed to the charitable foundation. Shareholder approval of the plan and purchases by the plan may not occur earlier than six months after the completion of the conversion.
The shares may be acquired directly from SR Bancorp or through open market purchases. Shares in the stock-based benefit plan are assumed to vest over a period of five years. The funds to be used to purchase the shares will be provided by SR Bancorp.
The table assumes that (i) the stock-based benefit plan acquires the shares through open market purchases at $10.00 per share, (ii) 10% of the amount contributed to the plan is amortized as an expense during the six months ended
December 31, 2022, and (iii) the plan expense reflects an effective combined federal and state tax rate of 25%. Assuming shareholder approval of the stock-based benefit plan and that shares of common stock are awarded through the use of
authorized but unissued shares of common stock, shareholders would have their ownership and voting interests diluted by approximately 3.85% at the midpoint of the offering range.

(4) Assumes that options are granted under a stock-based benefit plan to acquire an aggregate number of shares of
common stock equal to 10% of the shares of common stock sold in the stock offering and shares contributed to the charitable foundation. Shareholder approval of the plan may not occur earlier than six months after the completion of the conversion. In
calculating the pro forma effect of the stock-based benefit plan, it is assumed that the exercise price of the stock options and the trading price of the common stock at the date of grant were $10.00 per share, the estimated grant-date fair value
determined using the Black-Scholes option pricing model was $5.02 for each option, the aggregate grant-date fair value of the stock options was amortized to expense on a straight-line basis over a five-year vesting period, and that 25.0% of the
amortization expense (or the assumed portion relating to options granted to directors) resulted in a tax benefit using an assumed tax rate of 25.0%. The actual expense 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 and the option pricing model ultimately adopted. Under the above assumptions, the adoption of the stock-based benefit plan will result in no additional shares under the treasury stock
method for calculating earnings per share. There can be no assurance that the exercise price of the stock options will be equal to the $10.00 price per share. If a portion of the shares used to satisfy the exercise of options comes from authorized
but unissued shares, our net income per share and shareholders' equity per share would decrease. The issuance of authorized but unissued shares of common stock pursuant to the exercise of options under such plan would dilute shareholders'
ownership and voting interests by approximately 9.09% at the midpoint of the offering range.

(5) Net income per share computations are determined by taking the number of shares assumed to be sold in the stock
offering and contributed to the charitable foundation and, in accordance with ASC 718-40, subtracting the employee stock ownership plan shares that have not been committed for release during the year. See
footnote 2, above. The number of shares of common stock actually sold may be more or less than the assumed amounts.

(6) The retained earnings of Somerset Regal Bank will be substantially restricted after the conversion. See *"Our Dividend Policy*," "*The Conversion and Stock Offering—Liquidation Rights*" and "*Regulation and Supervision —Federal Bank Regulation—Dividends*."

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**COMPARISON OF INDEPENDENT VALUATION AND PRO FORMA FINANCIAL INFORMATION** 

**WITH AND WITHOUT THE FOUNDATION** 

As set forth in the following table, if we do not establish and fund Somerset Regal Charitable Foundation as part of the offering, RP Financial estimates that our pro forma valuation would be greater, which would have resulted in an increase in the amount of common stock offered for sale in the offering. If the foundation is not established, however, there is no assurance that the updated appraisal that RP Financial will prepare at the closing of the offering would conclude that our pro forma market value would be the same as the estimate set forth in the table below. The updated appraisal will be based on the facts and circumstances existing at that time, including, among other things, market and economic conditions.

The information presented in the following table is for comparative purposes only. It assumes that the offering was completed at December 31, 2022, based on the assumptions set forth under "*Pro Forma Unaudited Condensed Consolidated Financial Statements Giving Effect to the Conversion and Proposed Merger*."

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| | | | | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Minimum of Offering Range** | **Minimum of Offering Range** | **Minimum of Offering Range** |  | **Midpoint of Offering Range** | **Midpoint of Offering Range** | **Midpoint of Offering Range** |  | **Maximum of Offering Range** | **Maximum of Offering Range** | **Maximum of Offering Range** |  | **Adjusted Maximum of<br>Offering Range** | **Adjusted Maximum of<br>Offering Range** | **Adjusted Maximum of<br>Offering Range** |  |
|  | **With**<br>**Foundation** |  | **Without<br>Foundation** |  | **With**<br>**Foundation** |  | **Without<br>Foundation** |  | **With**<br>**Foundation** |  | **Without<br>Foundation** |  | **With**<br>**Foundation** |  | **Without<br>Foundation** |  |
|  | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** |  |
|  Estimated offering amount | $85000 |  | $94775 |  | $100000 |  | $111500 |  | $115000 |  | $128225 |  | $132250 |  | $147459 |  |
|  Pro forma market capitalization | 89250 |  | 94775 |  | 105000 |  | 111500 |  | 120750 |  | 128225 |  | 138863 |  | 147459 |  |
|  Pro forma total assets | 1164800 |  | 1173389 |  | 1177835 |  | 1187940 |  | 1180955 |  | 1192576 |  | 1195945 |  | 1209310 |  |
|  Pro forma total liabilities | 976371 |  | 976371 |  | 976371 |  | 976371 |  | 966456 |  | 966456 |  | 966456 |  | 966456 |  |
|  Pro forma shareholders' equity | 188429 |  | 1970189 |  | 201464 |  | 211569 |  | 214499 |  | 226120 |  | 229489 |  | 242854 |  |
|  Pro forma net income | 3846 |  | 3944 |  | 3893 |  | 4007 |  | 3939 |  | 4071 |  | 3994 |  | 4144 |  |
|  Pro forma shareholders' equity per share | $21.11 |  | $20.79 |  | $19.19 |  | $18.97 |  | $17.76 |  | $17.63 |  | $16.53 |  | $16.47 |  |
|  Pro forma shareholders' tangible equity per share | $17.52 |  | $17.41 |  | $16.14 |  | $16.09 |  | $15.10 |  | $15.13 |  | $14.22 |  | $14.29 |  |
|  Pro forma net income per share | $0.47 |  | $0.45 |  | $0.40 |  | $0.39 |  | $0.35 |  | $0.34 |  | $0.31 |  | $0.30 |  |
|  **Pro forma pricing ratios:** |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  Offering price as a percentage of pro forma shareholders' equity per share | 47.37 | % | 48.10 | % | 52.11 | % | 52.71 | % | 56.31 | % | 56.72 | % | 60.50 | % | 60.72 | % |
|  Offering price as a percent of pro forma tangible shareholders' equity per share | 57.08 | % | 57.44 | % | 61.96 | % | 62.15 | % | 66.23 | % | 66.09 | % | 70.32 | % | 69.98 | % |
|  Offering price as a multiple of pro forma net income per share | 10.64 | x | 11.11 | x | 12.50 | x | 12.82 | x | 14.29 | x | 14.71 | x | 16.13 | x | 16.67 | x |
|  Offering price to assets | 7.66 | % | 8.08 | % | 8.91 | % | 9.39 | % | 10.22 | % | 10.75 | % | 11.61 | % | 12.19 | % |
|  **Pro forma financial ratios:** |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  Return on assets | 0.66 | % | 0.67 | % | 0.66 | % | 0.67 | % | 0.67 | % | 0.68 | % | 0.67 | % | 0.69 | % |
|  Return on shareholders' equity | 4.08 | % | 4.00 | % | 3.86 | % | 3.79 | % | 3.67 | % | 3.60 | % | 3.48 | % | 3.41 | % |
|  Shareholders' equity to assets | 16.18 | % | 16.79 | % | 17.10 | % | 17.81 | % | 18.16 | % | 18.96 | % | 19.19 | % | 20.08 | % |
|  Tangible equity to assets | 13.9803 | % | 14.45 | % | 14.78 | % | 15.53 | % | 15.88 | % | 16.72 | % | 16.96 | % | 17.90 | % |

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(1) The following table shows the estimated after-tax expense associated
with the contribution to the charitable foundation, as well as pro forma net income, pro forma net income per share, pro forma return on assets and pro forma return on shareholders' equity assuming the contribution to the charitable foundation
was expensed during the six month ended December 31, 2022.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Minimum of the<br>Offering Range** | **Midpoint of the<br>Offering Range** | **Maximum of the<br>Offering Range** | **Adjusted<br>Maximum of<br>the Offering<br>Range** |
|  | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** |
|  After tax expense of contribution to foundation | $3825 | $4500 | $5175 | $5951 |
|  Pro forma net income | $21 | $(607) | $(1236) | $(1957) |
|  Pro forma net income per share | $— | $(0.06) | $(0.11) | $(0.15) |
|  Offering price to pro forma net income | 1,936.20x | (79.74) | (45.05) | (32.70) |
|  Pro forma return on assets | —% | (0.11) | (0.23) | (0.36) |
|  Pro forma return on equity | 0.02% | (0.65) | (0.25) | (1.85) |

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**MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF** 

**OPERATIONS OF SR BANCORP** 

The objective of this section is to help potential investors understand our views on our results of operations and financial condition. You should read this discussion in conjunction with the Somerset Savings Bank Consolidated Financial Statements and Notes to the Consolidated Financial Statements that appear at the end of this prospectus.

**Overview** 

Our principal business is to acquire deposits from individuals and businesses in the communities surrounding our offices and to use these deposits to fund loans.

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 and its wholly owned subsidiary, Regal Bank, will expand our market presence into Essex, Hudson, Morris and Union Counties, New Jersey and enhance our market presence in Somerset County, New Jersey. At December 31, 2022, Somerset Savings Bank had total assets of $649.5 million, deposits of $522.8 million and total equity of $118.1 million. In connection with this offering, Somerset Savings Bank is converting from the mutual to stock form of organization. As part of this transaction, Somerset Savings Bank will convert its charter to a New Jersey-chartered commercial bank named "Somerset Regal Bank."

On July 25, 2022 SR Bancorp and Somerset Savings Bank entered into an Agreement and Plan of Merger, as amended on March 7, 2023, pursuant to which SR Bancorp will acquire Regal Bancorp, a New Jersey corporation and sole shareholder of Regal Bank, a New Jersey chartered commercial bank headquartered in Livingston, New Jersey with total assets of $495.7 million as of December 31, 2022. As part of the acquisition, Regal Bank will merge into Somerset Savings Bank, with Somerset Savings Bank as the surviving entity operating under the name "Somerset Regal Bank."

In the future, SR Bancorp may acquire or organize other operating subsidiaries, including other financial institutions or financial services companies, although it currently has no specific plans or agreements to do so, other than our proposed Merger with Regal Bancorp.

***Income*.** Our primary source of pre-tax income is net interest income. Net interest income is the difference between interest income, which is the income that we earn on our loans and investments, and interest expense, which is the interest that we pay on our deposits. Changes in levels of interest rates affect our net interest income.

A secondary source of income is noninterest income, which is revenue that we receive from providing products and services. The majority of our noninterest income generally comes from service charges and fees related to deposit accounts and net gains in cash surrender value of bank-owned life insurance. In some years, we recognize income from the sale of securities.

***Allowance for Loan Losses*.** The allowance for loan losses is a valuation allowance for probable losses inherent in the loan portfolio. We evaluate the need to establish allowances against losses on loans on a quarterly basis. When additional allowances are necessary, a provision for loan losses is charged to earnings. Loans are charged against the allowance when management believes that the collectability of the principal loan amount is not probable. Recoveries on loans previously charged off, if any, are credited to the allowance for loan losses when realized.

***Expenses.*** The noninterest expenses we incur in operating our business consist of salaries and employee benefits expenses, occupancy expenses, furniture and equipment expenses, advertising, FDIC insurance premiums, directors fees, professional fees, insurance, telephone, postage and supplies and other miscellaneous expenses.

Our largest noninterest expense is salaries and employee benefits, which consist primarily of salaries and wages paid to our employees, payroll taxes, and expenses for retirement plans and other employee benefits including disability insurance and health insurance. Following the offering, we will recognize additional annual employee compensation expenses stemming from the adoption of new equity benefit plans. For an illustration of expenses associated with new equity benefit plans, see "*Pro Forma Unaudited Condensed Consolidated Financial Statements Giving Effect to the Conversion and Proposed Merger*."

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Occupancy and equipment expenses and furniture and equipment expenses are the fixed and variable costs of buildings and equipment, and consist primarily of depreciation charges, furniture and equipment expenses, repair and maintenance costs, real estate taxes and costs of utilities. Depreciation of premises and equipment is computed using a straight-line method based on the estimated useful lives of the related assets or the expected lease terms, if shorter. Furniture and equipment also includes fees paid to third parties for use of their software and for processing customer information, deposits and loans.

Advertising includes most marketing expenses including multi-media advertising (public and in-branch), promotional events and materials, civic and sales focused memberships, and community support.

Federal deposit insurance premiums are payments we make to the FDIC for insurance of our deposit accounts.

Professional fees include legal, accounting, auditing, risk management and payroll processing expenses.

Insurance includes expenses for worker's compensation, property and casualty insurance and professional insurance.

Other expenses include expenses for directors fees, office supplies, postage, telephone and other miscellaneous operating expenses.

**Anticipated Increase in Noninterest Expense** 

Following the completion of the conversion and related stock offering, we anticipate that our noninterest expense will increase as a result of the increased costs associated with operating as a public company. These additional expenses will consist primarily of legal and accounting fees, expenses of shareholder communications and meetings and expenses related to the addition of personnel. Noninterest expenses are also expected to increase due to the increased compensation expenses associated with the purchase of shares by our employee stock ownership plan and the possible implementation of a stock-based benefit plan, if approved by our shareholders. For further information, see "*Summary—Benefits of the Offering to Management and Potential Dilution to Shareholders Following the Conversion*," "*Risk Factors—Risks Related to the Stock Offering—Our stock-based benefit plan will increase our expenses and reduce our income*" and "*Management—Benefits to be Considered Following Completion of the Stock Offering*."

**Critical Accounting Policies** 

Certain of our accounting policies are important to the presentation of our financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances. Facts and circumstances that could affect these judgments include, but are not limited to, changes in interest rates, changes in the performance of the economy and changes in the financial condition of borrowers. Our significant accounting policies are discussed in detail in Note 1 to our Consolidated Financial Statements included elsewhere in this prospectus.

The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an "emerging growth company" we plan to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, our consolidated financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

Management believes our most critical accounting policies, which involve the most complex or subjective decisions or assessments, are as follows: allowance for loan losses and the valuation of our deferred tax assets.

*Allowance for Loan Losses*: The allowance for loan losses is a valuation allowance for probable and reasonably estimable incurred credit losses in the loan portfolio as of the balance sheet date. Loan losses are charged against the allowance when management believes the collectability of a loan balance is not probable. Subsequent

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recoveries, if any, are credited to the allowance. Management estimates the allowance balance required for all portfolio segments using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management's judgment, should be charged off.

The allowance consists of specific and general components. The specific component of the allowance relates to loans that are individually classified as impaired. A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans for which the terms have been modified resulting in a concession and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired.

Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

Impaired loans are measured based on the present value of expected future cash flows, discounted at the loan's effective interest rate, or, as a practical expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. Large groups of smaller balance homogeneous loans, such as consumer and residential real estate loans, are collectively evaluated for impairment. We have defined the population of impaired loans to generally be all non-accrual non-residential, multi-family, and construction and land loans, and troubled debt restructurings.

Troubled debt restructured loans are those loans whose terms have been modified such that a concession has been granted because of deterioration in the financial condition of the borrower. Modifications could include extension of the terms of the loan, reduced interest rates, and forgiveness of accrued interest and/or principal. Once an obligation has been classified a troubled debt restructuring, it continues to be considered a troubled debt restructuring and is individually evaluated for impairment until paid in full. For a cash flow dependent loan, we record an impairment charge equal to the difference between the present value of the estimated future cash flows under the restructured terms discounted at the loans original effective interest rate, and the original loan's carrying amount. For a collateral dependent loan, we record an impairment when the current estimated fair value, net of estimated costs to sell when necessary, of the property that collateralizes the impaired loan is less than the recorded investment in the loan.

For all loan classes, the accrual of income on loans, including impaired loans, is generally discontinued when a loan becomes more than 90 days delinquent or when certain factors indicate reasonable doubt as to the ability of the borrower to meet contractual principal and/or interest obligations. Loans on which the accrual of income has been discontinued are designated as non-accrual loans. All previously accrued interest is reversed and income is recognized subsequently only in the period received, provided the remaining principal balance is deemed collectible. A non-accrual loan is not returned to an accrual status until principal and interest payments are brought current and factors indicating doubtful collection no longer exist.

Principal and interest payments received on non-accrual loans for which the remaining principal balance is not deemed collectible are applied as a reduction to principal and interest income is not recognized. If the principal balance on the loan is later deemed collectible and the loan is returned to accrual status, any interest payments that were applied to principal while on non-accrual are recorded as an unearned discount on the loan, classified as deferred fees, costs and discounts, and are recognized into interest income using the level-yield method over the remaining contractual life of the individual loan, adjusted for actual prepayments. The general component of the allowance covers non-impaired loans and is based on historical loss experience adjusted for current qualitative factors. The historical loss experience is a quantitative factor determined by portfolio segment and is based on our actual loss history. This actual loss experience is supplemented with other factors based on the risks present for each portfolio segment. These factors include consideration of the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Lending policies and procedures, including underwriting standards and collection, charge-off and recovery loans practices.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• National, regional and local economic and business conditions as well as the condition of various market
segments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Nature and volume of the portfolio and terms of loans.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Volume and severity of past due, classified and non-accrual loans as well
as other loan modifications.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Existence and effect of any concentrations of credit and changes in the level of such concentrations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Effect of external factors, such as competition and legal and regulatory requirements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Value of underlying collateral for collateral dependent loans.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The experience, ability, and depth of lending management and other relevant staff.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Quality of the institution's loan review system.

The loan portfolio is categorized according to collateral type, loan purpose, lien position, or borrower type (i.e., commercial, consumer). The categories used include residential one-to-four family, multi-family, non-residential, construction and land, junior liens, and consumer and other.

*Income Taxes*: Income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The measurement of deferred tax assets is reduced by a valuation allowance for the amount of the deferred tax asset that is more likely than not to be realized.

A tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded.

We recognize interest and/or penalties related to income tax matters in other operating expenses.

**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, we plan 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 our existing loan relationships***. Somerset Savings Bank's principal business activity historically has been the origination of residential mortgage loans, which comprised 97.8% of its total loan portfolio at December 31, 2022. Regal Bank's principal business activity historically has been the origination of multi-family and commercial real estate loans, which comprised 94.4% of its total loan portfolio at December 31, 2022. Following the conversion and the proposed Merger, Somerset Regal Bank will continue to provide products and services that meet the needs of the existing residential lending customers and be able to offer such products, services and expertise to the former Regal Bank customers throughout its newly-expanded market area. Additionally, Somerset Regal Bank will continue to provide products and services that meet the needs of Regal Bank's existing commercial customers and be able to offer such products, services and expertise to the former Somerset Savings Bank customers and throughout its newly-expanded market area.

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The opportunity for Somerset Savings Bank and Regal Bank to diversify their loan portfolios and leverage their lending expertise in new markets were primary factors for the proposed Merger. Moreover, with the additional capital raised in the offering, we will be able to increase our loan originations in our market area, and originate loans with larger balances. Regal Bank's legal lending limit was $9.5 million as of December 31, 2022 and Somerset Savings Bank's legal lending limit was $17.7 million at December 31, 2022. The legal lending limit of Somerset Regal Bank is expected to be $30.2 million following the completion of the offering (assuming the offering is completed at the midpoint of the offering range) and the proposed Merger. While Somerset Regal Bank's credit risk management policies will result in an internal loan to one borrower limit less than Somerset Regal Bank's regulatory limit, the legal lending limit of Somerset Regal Bank will provide opportunities to expand a portion of the existing customer relationships that Somerset Savings Bank will acquire in its merger with Regal Bank.

We intend to leverage the SBA preferred lender expertise of Regal Bank to expand SBA lending activity in our market areas. SBA lending capabilities provide an opportunity to establish additional commercial account relationships and the potential to generate additional noninterest income related to the sale and servicing of the guaranteed portion of an SBA loan on the secondary market.

***Continuing to use prudent underwriting practices to maintain the high quality of the Somerset Regal Bank loan portfolio.*** Each of Somerset Savings Bank and Regal Bank believe that maintaining high asset quality is a key to long-term financial success. Both companies have sought to grow their respective loan portfolios while keeping non-performing assets to a minimum. Each of Somerset Savings Bank's and Regal Bank's strategy for credit risk management focuses on having an experienced team of credit professionals, well-defined policies and procedures, appropriate and conservative loan underwriting criteria and active credit monitoring. At December 31, 2022, there were $150,000 of non-performing loans in Somerset Savings Bank's loan portfolio representing 0.04% of total loans. Although as a result of, and following the proposed Merger, the resulting bank's commercial loan portfolio will increase, Somerset Regal Bank intends to maintain the philosophy of managing large loan exposures through a prudent approach to lending.

***Building profitable business and consumer relationships through enhanced product offerings and by continuing to provide superior customer service.*** We are a full-service financial services company offering our customers a broad range of loan and deposit products and services, including internet banking, which enables our customers to pay bills on-line, among other conveniences. Following the proposed Merger, our commercial lending capacity will be significantly enhanced, which will allow us to seek to increase the commercial real estate and commercial business loans we originate and better serve the small businesses in our market area which generally have higher fees and yields associated with them when compared to residential mortgages. Further, the proposed Merger with Regal Bancorp will allow us to expand our commercial deposit accounts which generally yield higher average balances than can be acquired from retail deposit relationships.

As a community-oriented financial institution, we emphasize providing superior customer service as a means to attract and retain customers. We deliver personalized service and respond with flexibility to customer needs. We believe that our community orientation is attractive to our customers and distinguishes us from the larger institutions that operate in our area but are headquartered elsewhere. Further, given our attractive market area, we believe we are well-positioned to increase our customer relationships without a proportional increase in overhead expense or operating risk.

***Increasing transaction deposit accounts and deposit balances.*** Deposits are our primary source of funds for lending and investment. We intend to focus on expanding our core deposits (which we define as all deposits except for certificates of deposit). Core deposits represented 71.8% of our total deposits at December 31, 2022 compared to 70.5% of our total deposits at December 31, 2021. Going forward, we believe that Somerset Regal Bank will increase its core deposits by increasing its commercial lending activities and enhancing our relationships with its retail customers through our commitment to quality customer service along with the introduction of additional products and services, such as remote deposit capture and enhanced online business account services.

***Continuing to leverage technology to maintain efficient operations and enhance customer service.*** We have historically focused on leveraging technology to maintain efficient operations and provide our customers with secure means to conduct business with Somerset Savings Bank outside of our traditional branch network. Customer facing applications include online banking and mobile banking with bill payment capabilities, mobile deposit and debit card control functionality. We have been a Zelle<sup>™</sup> participant since 2019 which has allowed our customers the

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ability to send and receive real-time payments online and through mobile banking. Our online loan application platform affords customers the convenience of submitting a loan application online at their convenience. Internally we leverage technology to achieve internal efficiencies for tasks such as document preparation and retention, data analytics and call report preparation. We intend to build on this foundation and have plans to add, among other services, online deposit account opening for existing customers, tokenization and expanded business online banking capabilities including wire transfer origination and ACH origination services. We believe our investment in technology allows us to remain competitive, effectively serve our customers and results in efficiencies which contribute to the maintenance of favorable operating expense.

***Expanding our franchise through acquisitions (including our proposed Merger with Regal Bancorp) and other possible transactions in our primary market area.*** On July 25, 2022, as amended on March 7, 2023, we entered into a Merger Agreement pursuant to which we will acquire Regal Bancorp and its wholly owned subsidiary, Regal Bank, which we intend to merge into Somerset Savings Bank. The proposed Merger will create a larger deposit base and loan portfolio, provide Somerset Savings Bank with greater access to commercial loan products and services and provide Regal Bank with greater access to residential products and services. The combined bank, with more than $1.0 billion in assets, will offer a fuller and broader array of financial products encompassing retail and commercial banking, real estate, consumer and commercial lending, than either Somerset Savings Bank or Regal Bank currently offers. We will continue to consider both organic growth as well as acquisition opportunities that may enhance the value of our franchise and yield potential financial benefits for our shareholders. The capital we raise in the offering will allow us the ability to explore further acquisitions, although we do not currently have any agreements or planned activity regarding any specific acquisition transaction.

**Comparison of Financial Condition at December 31, 2022 and June 30, 2022** 

***Total Assets***. Total assets increased $900,000, or 0.1%, to $649.5 million at December 31, 2022 from $648.6 million at June 30, 2022. The increase was primarily the result of a $23.0 million net increase in loans, offset by a $8.2 million decrease in cash and cash equivalents and a $16.0 million decrease in securities.

***Cash and Cash Equivalents***. Cash and cash equivalents decreased $8.2 million, or 23.2%, to $27.1 million at December 31, 2022 from $35.3 million at June 30, 2022 as funds were used to fund loan growth, which was offset by additional cash received from loan and securities repayments.

***Securities***. Total securities (securities held for sale and held to maturity) decreased $16.0 million, or 6.6%, to $224.8 million at December 31, 2022 from $240.8 million at June 30, 2022.

***Loans***. Loans held for investment, net, increased $23.0 million, or 6.9%, to $357.6 million at December 31, 2022 from $334.6 million at June 30, 2022. Residential mortgage loans increased $23.1 million, or 7.1%, to $348.8 million at December 31, 2022 from $325.7 million at June 30, 2022 primarily due to an increase in loans purchased through our correspondent relationships.

***Deposits***. Deposits increased $690,000, or 0.1%, to $522.8 million at December 31, 2022 from $522.1 million at June 30, 2022. NOW and money market accounts increased $4.4 million, or 3.0%, to $150.8 million at December 31, 2022 from $146.4 million at June 30, 2022. Savings accounts decreased $5.9 million, or 3.2%, to $182.2 million at December 31, 2022 from $188.1 million at June 30, 2022. Noninterest-bearing deposits decreased $1.2 million, or 2.7%, to $42.5 million at December 31, 2022 from $43.7 million at June 30, 2022. Certificates of deposit increased $3.5 million, or 2.4%, to $147.3 million at December 31, 2022 from $143.8 million at June 30, 2022. The increase in certificates of deposit and the decrease in savings accounts reflected the decision of many depositors to take advantage of increased market rates being paid on certificates of deposit.

***Borrowings***. We had no borrowings at December 31, 2022 or June 30, 2022, respectively.

***Total Equity***. Total equity decreased $160,000, or 0.1%, to $118.1 million at December 31, 2022 from $118.2 million at June 30, 2022. The decrease resulted from a $913,000 increase in accumulated other comprehensive loss, to a loss of $8.2 million at December 31, 2022 from a loss of $7.3 million at June 30, 2022, offset by net income of $753,000 for the six months ended December 31, 2022.

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**Average Balances and Yields** 

The following tables set forth average balance sheets, average yields and costs, and certain other information for the years indicated. All average balances are daily average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Deferred loan fees totaled $319,000 and $272,000 for the six months ended December 31, 2022 and 2021, respectively.

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **At**<br>**December 31**<br>**2022** | **For the Six Months Ended December 31,** | **For the Six Months Ended December 31,** | **For the Six Months Ended December 31,** | **For the Six Months Ended December 31,** | **For the Six Months Ended December 31,** | **For the Six Months Ended December 31,** |
|  | **At**<br>**December 31**<br>**2022** | **2022** | **2022** | **2022** | **2021** | **2021** | **2021** |
|  | **Weighted-<br>Average<br>Yield/Rate** | **Average<br>Outstanding<br>Balance** | **Interest** | **Average<br>Yield/Rate(1)** | **Average<br>Outstanding<br>Balance** | **Interest** | **Average<br>Yield/Rate(1)** |
|  |  | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** |
|  **Interest-earning assets:** |  |  |  |  |  |  |  |
|  Loans | 2.99% | $345513 | $5338 | 3.09% | $300016 | $4516 | 3.01% |
|  Securities | 1.67% | 232912 | 1882 | 1.62% | 257407 | 1988 | 1.54% |
|  Other | 3.66% | 24001 | 390 | 3.25% | 48773 | 36 | 0.15% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest-earning assets | 2.52% | 602426 | 7610 | 2.53% | 606196 | 6540 | 2.16% |
|  Noninterest-earning assets |  | 44807 |  |  | 41019 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total assets |  | $647233 |  |  | $647215 |  |  |
|  **Interest-bearing liabilities:** |  |  |  |  |  |  |  |
|  Savings and club accounts | 0.06% | $185895 | 57 | 0.06% | $177046 | 53 | 0.06% |
|  Interest-bearing demand accounts | 0.06% | 146163 | 48 | 0.07% | 141343 | 44 | 0.06% |
|  Certificates of deposit | 0.85% | 143708 | 627 | 0.87% | 156440 | 808 | 1.03% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest-bearing deposits | 0.31% | 475766 | 732 | 0.31% | 474829 | 905 | 0.38% |
|  Federal Home Loan Bank advances | —% | 5 |  | 4.27% | 11 |  | 0.18% |
|  Other borrowings | —% | 11 |  | 2.04% | 11 |  | 0.18% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest-bearing liabilities | 0.31% | 475782 | 732 | 0.31% | 474851 | 905 | 0.38% |
|  Noninterest-bearing deposits |  | 43296 |  |  | 41392 |  |  |
|  Other noninterest-bearing liabilities |  | 10447 |  |  | 8859 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities |  | 529525 |  |  | 525102 |  |  |
|  Equity |  | 117708 |  |  | 122113 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities and equity |  | $647233 |  |  | $647215 |  |  |
|  Net interest income |  |  | $6878 |  |  | $5635 |  |
|  Net interest rate spread (1) | 2.21% |  |  | 2.22% |  |  | 1.78% |
|  Net interest-earning assets (2) |  | $126644 |  |  | $131345 |  |  |
|  Net interest margin (3) | 2.28% |  |  | 2.28% |  |  | 1.86% |
|  Average interest-earning assets to interest-bearing liabilities |  | 126.62% |  |  | 127.66% |  |  |

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(1) Annualized.

(2) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3) Net interest margin represents net interest income divided by average total interest-earning assets.

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**Rate/Volume Analysis** 

The following tables present the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. For purposes of these tables, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume. There were no out-of-period items or adjustments required to be excluded from the tables below.

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| | | | |
|:---|:---|:---|:---|
|  | **Six Months Ended**<br>**December 31, 2022 vs. 2021** | **Six Months Ended**<br>**December 31, 2022 vs. 2021** | **Six Months Ended**<br>**December 31, 2022 vs. 2021** |
|  | **Increase (Decrease) Due to** | **Increase (Decrease) Due to** | **Total Increase<br>(Decrease)** |
|  | **Volume** | **Rate** | **Total Increase<br>(Decrease)** |
|  | **(In thousands)** | **(In thousands)** | **(In thousands)** |
|  **Interest-earning assets:** |  |  |  |
|  Loans | $1426 | $(604) | $822 |
|  Securities | (445) | 339 | (106) |
|  Other | (37) | 391 | 354 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest-earning assets | 944 | 126 | 1070 |
|  **Interest-bearing liabilities:** |  |  |  |
|  Savings and club accounts | 13 |  | 13 |
|  Interest-bearing accounts | 4 |  | 4 |
|  Certificates of deposit | (118) | (72) | (190) |
|  Federal Home Loan Bank advances |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest-bearing liabilities | (102) | (72) | (173) |
|  Change in net interest income | $1046 | $198 | $1243 |

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**Comparison of Operating Results for the Six Months Ended December 31, 2022 and 2021** 

***General.*** Net income decreased $10,000, or 1.3%, to $753,000 for the six months ended December 31, 2022 from $763,000 for the six months ended December 31, 2021. The decrease was caused by an increase in non interest expense, partially offset by an increase in net interest income.

***Interest Income.*** Interest income increased $1.1 million, or 16.4%, to $7.6 million for the six months ended December 31, 2022 from $6.5 million for the six months ended December 31, 2021. The increase resulted primarily from a $822,000, or 18.2%, increase in interest income on loans and a $354,000, or 983%, increase in interest income on other assets, offset by a $106,000, or 5.3%, decrease in interest income on securities. The average balance of securities decreased $24.5 million, or 9.5%, to $232.9 million for the six months ended December 31, 2022, compared to $257.4 million for the six months ended December 31, 2021. This decrease was offset by an increase of eight basis points in the average yield of securities to 1.62% for the six months ended December 31, 2022 from 1.54% for the six months ended December 31, 2021. The increase in the interest income on other assets was due to a 310 basis point increase in the average yield of other assets from 0.15% for the six months ended December 31, 2021 to 3.25% for the six months ended December 31, 2022, offset by a $24.8 million, or 50.8%, decrease in the average balance of other assets from $48.8 million for the six months ended December 31, 2021 to $24.0 million for the six months ended December 31, 2022. The average balance of loans increased $45.5 million, or 15.2%, to $345.5 million for the six months ended December 31, 2022, compared to $300.0 million for the six months ended December 31, 2021. In addition, the average yield on the loan portfolio increased eight basis points to 3.09% for the six months ended December 31, 2022 from 3.01% for the six months ended December 31, 2021.

***Interest Expense.*** Interest expense decreased $173,000, or 19.1%, to $732,000 for the six months ended December 31, 2022 from $905,000 for the six months ended December 31, 2021. The decrease in interest expense resulted from a decrease in interest expense on deposits. The average rate paid on certificates of deposit decreased 16 basis points to 0.87% for the six months ended December 31, 2022 from 1.03% for the six months ended December 31, 2021 and the average balance of certificates of deposit decreased $12.7 million, or 8.1%, to $143.7 million for the six months ended December 31, 2022 from $156.4 million for the six months ended December 31, 2021. This decrease was offset by an increase in the average balance of savings and club accounts of $8.8 million, or

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5.0%, to $185.9 million for the six months ended December 31, 2022 from $177.0 million for the six months ended December 31, 2021 and an increase in the average balance of interest-bearing demand deposits of $4.8 million, or 3.4%, to $146.2 million for the six months ended December 31, 2022 from $141.3 million for the six months ended December 31, 2021.

***Net Interest Income.*** Net interest income increased $1.2 million, or 22.1%, to $6.9 million for the six months ended December 31, 2022 from $5.6 million for the six months ended December 31, 2021. We had increases in our net interest rate spread of 44 basis points to 2.22% for the six months ended December 31, 2022 from 1.78% for the six months ended December 31, 2021, increases in our net interest margin of 42 basis points to 2.28% for the six months ended December 31, 2022 from 1.86% for the six months ended December 31, 2021 but a decrease in our net interest-earning assets of $4.7 million, or 3.6%, to $126.6 million for the six months ended December 31, 2022 from $131.3 million for the six months ended December 31, 2021. The increases in our net interest rate spread and our net interest margin were primarily a result of the decreasing cost of interest-bearing liabilities outpacing the increasing yield on interest-earning assets.

***Provision for Loan Losses.*** We establish provisions for loan losses, which are charged to operations in order to maintain the allowance for loan losses at a level we consider necessary to absorb credit losses incurred in the loan portfolio that are both probable and reasonably estimable at the balance sheet date. In determining the level of the allowance for loan losses, we consider, among other things, past and current loss experience, evaluations of real estate collateral, current economic conditions, volume and type of lending, adverse situations that may affect a borrower's ability to repay a loan and the levels of delinquent loans. The amount of the allowance is based on estimates and the ultimate losses may vary from such estimates as more information becomes available or conditions change. We assess the allowance for loan losses and make provisions for loan losses on a monthly basis.

Based on our evaluation of the above factors, we did not record a provision for loan losses for either the six months ended December 31, 2022 or the six months ended December 31, 2021. The absence of a provision for loan losses reflects that we had only $150,000 of non-performing loans and no declassified loans at December 31, 2022 and no charge-offs for the six months ended December 31, 2022. Our allowance for loan losses as a percentage of total loans was 0.31% at December 31, 2022 compared to 0.37% at December 31, 2021, reflecting continued strong credit quality in our loan portfolio. To the best of our knowledge, we have provided for all losses that are both probable and reasonable to estimate at December 31, 2022 and December 31, 2021.

***Noninterest Income.*** Noninterest income was as follows:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Six Months Ended December 31,** | **Six Months Ended December 31,** | **Change** | **Change** |
|  | **2022** | **2021** | **Amount** | **Percent** |
|  | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** |
|  Service charges and fees on deposit | $345 | $351 | $(6) | (1.7)% |
|  Increase in cash surrender value of bank-owned life insurance | 321 | 316 | 5 | 1.6% |
|  Fees and service charges on loans | 11 | 10 | 1 | 10.0% |
|  Unrealized gain on equity securities | 2 |  | 2 |  |
|  Other | 15 | 14 | 1 | 7.1% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total noninterest income | $694 | $691 | $3 | 0.4% |

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Noninterest income increased $3,000, or 0.4%, to $694,000 for the six months ended December 31, 2022 from $691,000 for the six months ended December 31, 2021, primarily as a result of an increase of $5,000 in the cash surrender value of bank-owned life insurance.

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***Noninterest Expense*.** Noninterest expense was as follows:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Six Months Ended December 31,** | **Six Months Ended December 31,** | **Change** | **Change** |
|  | **2022** | **2021** | **Amount** | **Percent** |
|  | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** |
|  Salaries and employee benefits | $4006 | $3208 | $798 | 24.9% |
|  Occupancy | 362 | 364 | (2) | (0.5)% |
|  Furniture and equipment | 270 | 301 | (31) | (10.3)% |
|  Data processing | 598 | 542 | 56 | 10.3% |
|  Advertising | 108 | 105 | 3 | 2.9% |
|  Federal deposit insurance premiums | 78 | 73 | 5 | 6.8% |
|  Directors fees | 177 | 150 | 27 | 18.0% |
|  Professional fees | 556 | 123 | 433 | 352.0% |
|  Insurance | 85 | 89 | (4) | (4.5)% |
|  Telephone, postage and supplies | 156 | 156 |  | —% |
|  Other expenses | 302 | 338 | (36) | (10.7)% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total noninterest expense | $6698 | $5449 | $1249 | 26.5% |

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Noninterest expense increased $1.2 million, or 22.9%, to $6.7 million for the six months ended December 31, 2022 from $5.4 million for the six months ended December 31, 2021, primarily as a result of a $798,000, or 24.9%, increase in salaries and employee benefits and a $433,000, or 352%, increase in professional services related to the proposed acquisition of Regal Bancorp, offset by decreases in other expenses. The increase in salaries and employee benefits represents annual merit adjustments and increased health care and pension plan costs. The decrease in other expenses was driven by recoveries of charge-offs stemming from customer deposit accounts.

***Income Tax Expense.*** The provision for income taxes was $121,000 for the six months ended December 31, 2022, compared to $114,000 for the six months ended December 31, 2021. Our effective tax rate was 13.8% for the six months ended December 31, 2022 compared to 13.0% for the six months ended December 31, 2021. The lower effective tax rates for the six months ended December 31, 2022 and December 31, 2021 reflect lower state income tax liabilities due to the application of net operating loss carryforwards and a lower state income tax rate applied to the net investment income derived by Somerset Savings Bank's investment company subsidiary.

**Comparison of Financial Condition at June 30, 2022 and June 30, 2021** 

***Total Assets***. Total assets increased $9.3 million, or 1.5%, to $648.6 million at June 30, 2022 from $639.4 million at June 30, 2021. The increase was primarily the result of a $27.8 million net increase in loans, offset by a $21.4 million decrease in cash and cash equivalents.

***Cash and Cash Equivalents.*** Cash and cash equivalents decreased $21.4 million, or 37.8%, to $35.3 million at June 30, 2022 from $56.8 million at June 30, 2021 as funds were used to fund loan growth and purchase investment securities, which was offset by additional cash received from loan and securities repayments.

***Securities***. Total securities (securities held for sale and held to maturity) increased $402,000, or 0.2%, to $240.8 million at June 30, 2022 from $240.4 million at June 30, 2021.

***Loans***. Loans held for investment, net, increased $27.8 million, or 9.0%, to $334.6 million at June 30, 2022 from $306.8 million at June 30, 2021. Residential mortgage loans increased $28.2 million, or 9.5%, to $325.7 million at June 30, 2022 from $297.6 million at June 30, 2021 primarily due to an increase in loans purchased through our correspondent relationships.

***Deposits***. Deposits increased $12.1 million, or 2.4%, to $522.1 million at June 30, 2022 from $510.0 million at June 30, 2021. NOW and money market accounts increased $7.7 million, or 5.5%, to $146.4 million at June 30, 2022 from $138.7 million at June 30, 2021. Savings accounts increased $15.5 million, or 9.0%, to $188.1 million at June 30, 2022 from $172.6 million at June 30, 2021. Noninterest-bearing deposits increased $4.1 million, or 10.3%, to $43.7 million at June 30, 2022 from $39.6 million at June 30, 2021. Certificates of deposit decreased $15.2 million, or 9.6%, to $143.8 million at June 30, 2022 from $159.0 million at June 30, 2021. The decrease in certificates of deposit and the increase in other deposit categories reflected the decision of many depositors to maintain such funds in other types of deposits and not to renew such certificates of deposit due to lower market interest rates.

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***Borrowings***. We had no borrowings at June 30, 2022 or June 30, 2021.

***Total Equity.*** Total equity decreased $3.7 million, or 3.0%, to $118.2 million at June 30, 2022 from $121.9 million at June 30, 2021. The decrease resulted from a $5.6 million increase in accumulated other comprehensive loss, to a loss of $7.3 million at June 30, 2022 from a loss of $1.7 million at June 30, 2021, offset by net income of $1.9 million for the year ended June 30, 2022.

**Average Balances and Yields** 

The following tables set forth average balance sheets, average yields and costs, and certain other information for the years indicated. All average balances are daily average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Deferred loan fees totaled $434,000 and $893,000 for the years ended June 30, 2022 and 2021, respectively.

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | At June 30<br>2022 | For the Years Ended June 30, | For the Years Ended June 30, | For the Years Ended June 30, | For the Years Ended June 30, | For the Years Ended June 30, | For the Years Ended June 30, |
|  | At June 30<br>2022 | 2022 | 2022 | 2022 | 2021 | 2021 | 2021 |
|  | Weighted-<br>Average<br>Yield/Rate | Average<br>Outstanding<br>Balance | Interest | Average<br>Yield/Rate | Average<br>Outstanding<br>Balance | Interest | Average<br>Yield/Rate |
|  |  | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** |
|  Interest-earning assets: |  |  |  |  |  |  |  |
|  Loans | 2.78% | $305130 | $9302 | 3.05% | $306580 | $9527 | 3.11% |
|  Securities | 1.66% | 258215 | 4003 | 1.55% | 211426 | 3583 | 1.69% |
|  Other | 0.43% | 43708 | 127 | 0.29% | 62788 | 70 | 0.11% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest-earning assets | 2.22% | 607053 | 13432 | 2.21% | 580794 | 13180 | 2.27% |
|  Noninterest-earning assets |  | 41326 |  |  | 40545 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total assets |  | $648379 |  |  | $621339 |  |  |
|  Interest-bearing liabilities: |  |  |  |  |  |  |  |
|  Savings and club accounts | 0.06% | $180920 | 108 | 0.06% | $162297 | 81 | 0.05% |
|  Interest-bearing demand accounts | 0.06% | 141732 | 88 | 0.06% | 127767 | 78 | 0.06% |
|  Certificates of deposit | 0.93% | 152476 | 1339 | 0.88% | 163570 | 2256 | 1.38% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest-bearing deposits | 0.32% | 475128 | 1535 | 0.32% | 453634 | 2415 | 0.53% |
|  Federal Home Loan Bank advances | —% |  |  | —% |  |  | —% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest-bearing liabilities | 0.32% | 475128 | 1535 | 0.32% | 453634 | 2415 | 0.53% |
|  Noninterest-bearing deposits |  | 42384 |  |  | 38087 |  |  |
|  Other noninterest-bearing liabilities |  | 8846 |  |  | 8514 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities |  | 526358 |  |  | 500235 |  |  |
|  Equity |  | 122021 |  |  | 121104 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities and equity |  | $648379 |  |  | $621339 |  |  |
|  Net interest income |  |  | $11897 |  |  | $10765 |  |
|  Net interest rate spread (1) | 1.90% |  |  | 1.89% |  |  | 1.74% |
|  Net interest-earning assets (2) |  | $131925 |  |  | $127160 |  |  |
|  Net interest margin (3) | 1.97% |  |  | 1.96% |  |  | 1.85% |
|  Average interest-earning assets to interest-bearing liabilities |  | 127.77% |  |  | 128.03% |  |  |

---

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(1) Net interest rate spread represents the difference between the weighted average yield on interest-earning
assets and the weighted average rate of interest-bearing liabilities.

(2) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3) Net interest margin represents net interest income divided by average total interest-earning assets.

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##### [**Table of Contents**](#toc)
**Rate/Volume Analysis** 

The following tables present the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. For purposes of these tables, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume. There were no out-of-period items or adjustments required to be excluded from the tables below.

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| | | | |
|:---|:---|:---|:---|
|  | **Years Ended**<br>**June 30, 2022 vs. 2021** | **Years Ended**<br>**June 30, 2022 vs. 2021** | **Years Ended**<br>**June 30, 2022 vs. 2021** |
|  | **Increase (Decrease) Due to** | **Increase (Decrease) Due to** | **Total Increase<br>(Decrease)** |
|  | **Volume** | **Rate** | **Total Increase<br>(Decrease)** |
|  | **(In thousands)** | **(In thousands)** | **(In thousands)** |
|  **Interest-earning assets:** |  |  |  |
|  Loans | $(47) | $(178) | $(225) |
|  Securities | 868 | (448) | 420 |
|  Other | (21) | 78 | 57 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest-earning assets | 800 | (548) | 252 |
|  **Interest-bearing liabilities:** |  |  |  |
|  Savings and club accounts | 27 |  | 27 |
|  Interest-bearing accounts | 10 |  | 10 |
|  Certificates of deposit | 59 | (976) | (917) |
|  Federal Home Loan Bank advances |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest-bearing liabilities | 96 | (976) | (880) |
|  Change in net interest income | $704 | $428 | $1132 |

---

**Comparison of Operating Results for the Years Ended June 30, 2022 and 2021** 

***General.*** Net income increased $621,000, or 49.7%, to $1.9 million for the year ended June 30, 2022 from $1.3 million for the year ended June 30, 2021. The increase was caused by an increase in net interest income, offset by increases in noninterest expense and income tax expense.

***Interest Income.*** Interest income increased $252,000, or 1.9%, to $13.4 million for the year ended June 30, 2022 from $13.2 million for the year ended June 30, 2021. The increase resulted primarily from a $420,000, or 11.7%, increase in interest income on securities and a $57,000, or 81.4%, increase in interest income on other assets, offset by a $225,000, or 2.4%, decrease in interest income on loans. The average balance of securities increased $46.8 million, or 22.1%, to $258.2 million for the year ended June 30, 2022, compared to $211.4 million for the year ended June 30, 2021 as cash from deposits that exceeded loan growth were invested in securities. This increase was offset by a decrease of 14 basis points in the average yield of securities to 1.55% for the year ended June 30, 2022 from 1.69% for the year ended June 30, 2021. The increase in the interest income on other assets was due to an 18 basis point increase in the average yield of other assets from 0.11% for the year ended June 30, 2021 to 0.29% for the year ended June 30, 2022, offset by a $19.1 million, or 30.4%, decrease in the average balance of other assets from $62.8 million for the year ended June 30, 2021 to $43.7 million for the year ended June 30, 2022. The average balance of loans decreased $1.5 million, or 0.5%, to $305.1 million for the year ended June 30, 2022, compared to $306.6 million for the year ended June 30, 2021. In addition, the average yield on the loan portfolio decreased six basis points to 3.05% for the year ended June 30, 2022 from 3.11% for the year ended June 30, 2021.

***Interest Expense.*** Interest expense decreased $880,000 or 36.4%, to $1.5 million for the year ended June 30, 2022 from $2.4 million for the year ended June 30, 2021. The decrease in interest expense resulted from a decrease in interest expense on deposits. The average rate we paid on certificates of deposit decreased 50 basis points to 0.88% for the year ended June 30, 2022 from 1.38% for the year ended June 30, 2021 and the average balance of certificates of deposit decreased $11.1 million, or 6.8%, to $152.5 million for the year ended June 30, 2022 from $163.6 million for the year ended June 30, 2021. These decreases were offset by an increase in the average balance of savings and club accounts of $18.6 million, or 11.5%, to $180.9 million for the year ended June 30, 2022 from $162.3 million for the year ended June 30, 2021 and an increase in the average balance of interest-bearing demand deposits of $14.0 million, or 10.9%, to $141.7 million for the year ended June 30, 2022 from $127.8 million for the year ended June 30, 2021.

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##### [**Table of Contents**](#toc)
***Net Interest Income.*** Net interest income increased $1.1 million, or 10.50%, to $11.9 million for the year ended June 30, 2022 from $10.8 million for the year ended June 30, 2021. We had increases in our net interest rate spread of 15 basis points to 1.89% for the year ended June 30, 2022 from 1.74% for the year ended June 30, 2021, increases in our net interest margin of 11 basis points to 1.96% for the year ended June 30, 2022 from 1.85% for the year ended June 30, 2021 and in our net interest-earning assets of $4.7 million, or 3.7%, to $131.9 million for the year ended June 30, 2022 from $127.2 million for the year ended June 30, 2021. The increases in our net interest rate spread and our net interest margin were primarily a result of the cost of interest-bearing liabilities decreasing at a faster rate than the yield on interest-earning assets.

***Provision for Loan Losses.*** We establish provisions for loan losses, which are charged to operations in order to maintain the allowance for loan losses at a level we consider necessary to absorb credit losses incurred in the loan portfolio that are both probable and reasonably estimable at the balance sheet date. In determining the level of the allowance for loan losses, we consider, among other things, past and current loss experience, evaluations of real estate collateral, current economic conditions, volume and type of lending, adverse situations that may affect a borrower's ability to repay a loan and the levels of delinquent loans. The amount of the allowance is based on estimates and the ultimate losses may vary from such estimates as more information becomes available or conditions change. We assess the allowance for loan losses and make provisions for loan losses on a monthly basis.

Based on our evaluation of the above factors, we did not record a provision for loan losses for either the year ended June 30, 2022 or the year ended June 30, 2021. The absence of a provision for loan losses reflects that we had no non-performing loans or classified loans at June 30, 2022 and no charge-offs for the year ended June 30, 2022. Our allowance for loan losses as a percentage of total loans was 0.33% at June 30, 2022 compared to 0.36% at June 30, 2021, reflecting continued strong credit quality in our loan portfolio. To the best of our knowledge, we have provided for all losses that are both probable and reasonable to estimate at June 30, 2022 and June 30, 2021.

***Noninterest Income.*** Noninterest income was as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Years Ended June 30,** | **Years Ended June 30,** | **Change** | **Change** |
|  | **2022** | **2021** | **Amount** | **Percent** |
|  | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** |
|  Service charges and fees on deposit | $688 | $533 | $155 | 29.1% |
|  Increase in cash surrender value of bank-owned life insurance | 622 | 618 | 4 | 0.6% |
|  Fees and service charges on loans | 21 | 9 | 12 | 133.3% |
|  Unrealized gain on equity securities | (8) | 27 | (35) | (129.6)% |
|  Other | 28 | 25 | 3 | 12.0% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total noninterest income | $1351 | $1212 | $139 | 11.5% |

---

Noninterest income increased $139,000, or 11.5%, to $1.4 million for the year ended June 30, 2022 from $1.2 million for the year ended June 30, 2021, primarily as a result of an increase of $155,000 in service charges and fees on deposit accounts. Due to the financial hardships caused by the pandemic, the assessment of certain fees and charges on customer accounts were halted in 2020 as a relief measure. Those fees and charges were then resumed at the end of fiscal year 2021.

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##### [**Table of Contents**](#toc)
***Noninterest Expense*.** Noninterest expense was as follows:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Years Ended June 30,** | **Years Ended June 30,** | **Change** | **Change** |
|  | **2022** | **2021** | **Amount** | **Percent** |
|  | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** |
|  Salaries and employee benefits | $6365 | $6061 | $304 | 5.0% |
|  Occupancy | 710 | 807 | (97) | (12.0)% |
|  Furniture and equipment | 592 | 613 | (21) | (3.4)% |
|  Data processing | 1145 | 1228 | (83) | (6.8)% |
|  Advertising | 266 | 167 | 99 | 59.3% |
|  Federal deposit insurance premiums | 151 | 144 | 7 | 4.9% |
|  Directors fees | 297 | 282 | 15 | 5.3% |
|  Professional fees | 412 | 313 | 99 | 31.6% |
|  Insurance | 168 | 150 | 18 | 12.0% |
|  Telephone, postage and supplies | 323 | 303 | 20 | 6.6% |
|  Other expenses | 585 | 514 | 71 | 13.8% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total noninterest expense | $11014 | $10582 | $432 | 4.1% |

---

Noninterest expense increased $432,000, or 4.1%, to $11.0 million for the year ended June 30, 2022 from $10.6 million for the year ended June 30, 2021, primarily as a result of a $304,000, or 5.0%, increase in salaries and employee benefits and a $99,000, or 31.6%, increase in professional services related to the acquisition of Regal Bancorp, offset by decreases in occupancy, and furniture and equipment. The increase in salaries and employee benefits represents annual merit adjustments and increased health care and pension plan costs. The decrease in occupancy relates to the additional cleaning and maintenance costs incurred during fiscal year 2021 related to COVID-19, as well as related services from fiscal year 2020 that were delayed and performed in fiscal year 2021 due to the pandemic. The decrease in furniture and equipment represents the attrition of fixed assets and the savings in data processing fees negotiated in our new contract.

***Income Tax Expense.*** The provision for income taxes was $363,000 for the year ended June 30, 2022, compared to $145,000 for the year ended June 30, 2021. Our effective tax rate was 16.2% for the year ended June 30, 2022 compared to 10.4% for the year ended June 30, 2021. The lower effective tax rates for fiscal years 2022 and 2021 reflect lower state income tax liabilities due to the application of net operating loss carryforwards and a lower state income tax rate applied to the net investment income derived by Somerset Savings Bank's subsidiary.

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| | | | |
|:---|:---|:---|:---|
|  | **Years Ended**<br>**June 30, 2022 vs. 2021** | **Years Ended**<br>**June 30, 2022 vs. 2021** | **Years Ended**<br>**June 30, 2022 vs. 2021** |
|  | **Increase (Decrease) Due to** | **Increase (Decrease) Due to** | **Total Increase<br>(Decrease)** |
|  | **Volume** | **Rate** | **Total Increase<br>(Decrease)** |
|  | **(In thousands)** | **(In thousands)** | **(In thousands)** |
|  **Interest-earning assets:** |  |  |  |
|  Loans | $(47) | $(178) | $(225) |
|  Securities | 868 | (448) | 420 |
|  Other | (21) | 78 | 57 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest-earning assets | 800 | (548) | 252 |
|  **Interest-bearing liabilities:** |  |  |  |
|  Savings and club accounts | 27 |  | 27 |
|  Interest-bearing accounts | 10 |  | 10 |
|  Certificates of deposit | 59 | (976) | (917) |
|  Federal Home Loan Bank advances |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest-bearing liabilities | 96 | (976) | (880) |
|  Change in net interest income | $704 | $428 | $1132 |

---

**Market Risk** 

***General*.** Our most significant form of market risk is interest rate risk because, as a financial institution, the majority of our assets and liabilities are sensitive to changes in interest rates. Therefore, a principal part of our operations is to manage interest rate risk and limit the exposure of our financial condition and results of operations to changes in market interest rates. Our ALCO/Investment Committee, which consists of members of management, is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of

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##### [**Table of Contents**](#toc)
risk that is appropriate, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the policy and guidelines approved by our Board of Directors. We currently utilize a third-party modeling program, prepared on a quarterly basis, to evaluate our sensitivity to changing interest rates, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the Board of Directors.

We have sought to manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates. We have implemented the following strategies to manage our interest rate risk:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• growing target deposit accounts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• utilizing our investment securities portfolio as part of our balance sheet asset and liability and interest rate
risk management strategy to reduce the impact of movements in interest rates on net interest income and economic value of equity, which can create temporary valuation adjustments to equity in Accumulated Other Comprehensive Income; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• continuing to price our one-to-four family residential real estate loan products in a way that encourages borrowers to select our adjustable-rate loans as opposed to longer-term, fixed-rate
loans.

By following these strategies, we believe that we are better positioned to react to increases and decreases in market interest rates.

We generally do not engage in hedging activities, such as engaging in futures or options, or investing in high-risk mortgage derivatives, such as collateralized mortgage obligation residual interests, real estate mortgage investment conduit residual interests or stripped mortgage-backed securities.

***Economic Value of Equity*.** We compute amounts by which the net present value of our cash flow from assets, liabilities and off-balance sheet items (economic value of equity "EVE") would change in the event of a range of assumed changes in market interest rates. We measure potential change in our EVE through the use of a financial model. This model uses a discounted cash flow analysis and an option-based pricing approach to measure the interest rate sensitivity of net portfolio value. Historically, the model estimated the economic value of each type of asset, liability and off-balance sheet contract under the assumption that the United States Treasury yield curve increases or decreases instantaneously by 100 to 300 basis points in 100 basis point increments. However, given the current level of market interest rates, an EVE calculation for an interest rate decrease of greater than 100 basis points has not been prepared. A basis point equals one-hundredth of one percent, and 100 basis points equals one percent. An increase in interest rates from 3% to 4% would mean, for example, a 100-basis point increase in the "Basis Point Change in Interest Rates" column below.

The table below sets forth, as of December 31, 2022, the calculation of the estimated changes in our EVE that would result from the designated immediate changes in the United States Treasury yield curve.

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| | | | |
|:---|:---|:---|:---|
| **At December 31, 2022** | **At December 31, 2022** | **At December 31, 2022** | **At December 31, 2022** |
| **Change in Interest**<br> **Rates (basis**<br> **points)<sup>(1)</sup>** | **Estimated EVE<sup>(2)</sup>** | **Estimated Increase (Decrease) in**<br> **EVE** | **Estimated Increase (Decrease) in**<br> **EVE** |
| **Change in Interest**<br> **Rates (basis**<br> **points)<sup>(1)</sup>** | **Estimated EVE<sup>(2)</sup>** | **Amount** | **Percent** |
| **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| +400 | $65587 | $(70468) | (51.79)% |
| +300 | 81122 | (54933) | (40.38)% |
| +200 | 101925 | (34130) | (25.09)% |
| +100 | 121437 | (14618) | (10.74)% |
|  | 136055 |  |  |
| -100 | 147229 | 11174 | 8.21% |
| -200 | 154599 | 18544 | 13.63% |

---

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(1) Assumes an immediate uniform change in interest rates at all maturities.

(2) EVE is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts.

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##### [**Table of Contents**](#toc)
The table above indicates that at December 31, 2022, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 25.1% decrease in EVE, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 13.6% increase in EVE.

The table below sets forth, as of June 30, 2022, the calculation of the estimated changes in our EVE that would result from the designated immediate changes in the United States Treasury yield curve.

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| | | | |
|:---|:---|:---|:---|
| **At June 30, 2022** | **At June 30, 2022** | **At June 30, 2022** | **At June 30, 2022** |
| **Change in Interest**<br> **Rates (basis**<br> **points)<sup>(1)</sup>** | **Estimated EVE<sup>(2)</sup>** | **Estimated Increase (Decrease) in EVE** | **Estimated Increase (Decrease) in EVE** |
| **Change in Interest**<br> **Rates (basis**<br> **points)<sup>(1)</sup>** | **Estimated EVE<sup>(2)</sup>** | **Amount** | **Percent** |
| **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| +400 | $67475 | $(69019) | (50.6)% |
| +300 | 82753 | (53741) | (39.4)% |
| +200 | 102803 | (33691) | (24.7)% |
| +100 | 123280 | (13214) | (9.7)% |
|  | 136494 |  | — % |
| -100 | 146526 | 10032 | 7.4% |
| -200 | 152579 | 16085 | 11.8% |

---

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(1) Assumes an immediate uniform change in interest rates at all maturities.

(2) EVE is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts.

The table above indicates that at June 30, 2022, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 24.7% decrease in EVE, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience an 11.8% increase in EVE.

***Change in Net Interest Income***. The following table sets forth, at December 31, 2022, the calculation of the estimated changes in our net interest income ("NII") that would result from the designated immediate changes in the United States Treasury yield curve.

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| | | | | |
|:---|:---|:---|:---|:---|
| **At December 31, 2022** | **At December 31, 2022** | **At December 31, 2022** | **At December 31, 2022** | **At December 31, 2022** |
| **Change in Interest**<br> **Rates (basis**<br> **points)<sup>(1)</sup>** | **Net Interest**<br> **Income Year 1**<br> **Forecast** | **Year 1**<br> **Change**<br> **From Level** | **Net Interest**<br> **Income Year 2**<br> **Forecast** | **Year 2**<br> **Change**<br> **From Level** |
| +400 | $11830 | $(3669) | $13968 | $(3785) |
| +300 | 12750 | (2750) | 14944 | (2809) |
| +200 | 14164 | (1336) | 16807 | (946) |
| +100 | 15789 | 290 | 18357 | 604 |
|  | 15500 |  | 17753 |  |
| -100 | 14918 | (582) | 16425 | (1328) |
| -200 | 14249 | (1250) | 14869 | (2884) |

---

The table above indicates that at December 31, 2022, we would have experienced an 8.6% decrease in NII in the event of an instantaneous parallel 200 basis point increase in market interest rates and an 8.1% decrease in NII in the event of an instantaneous 200 basis point decrease in market interest rates.

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##### [**Table of Contents**](#toc)
The table below sets forth, as of June 30, 2022, the calculation of the estimated changes in our net interest income ("NII") that would result from the designated immediate changes in the United States Treasury yield curve.

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| | | | | |
|:---|:---|:---|:---|:---|
| **At June 30, 2022** | **At June 30, 2022** | **At June 30, 2022** | **At June 30, 2022** | **At June 30, 2022** |
| **Change in Interest**<br> **Rates (basis**<br> **points)<sup>(1)</sup>** | **Net Interest**<br> **Income Year 1**<br> **Forecast** | **Year 1**<br> **Change**<br> **From Level** | **Net Interest**<br> **Income Year 2**<br> **Forecast** | **Year 2 Change**<br> **From Level** |
| +400 | $11487 | $(3241) | $13607 | $(2938) |
| +300 | 12314 | (2414) | 14401 | (2144) |
| +200 | 13639 | (1089) | 16003 | (542) |
| +100 | 15110 | 382 | 17276 | 731 |
|  | 14728 |  | 16545 |  |
| -100 | 14168 | (560) | 15296 | (1249) |
| -200 | 13681 | (1047) | 13976 | (2569) |

---

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(1) Assumes an immediate uniform change in interest rates at all maturities.

The table above indicates that at June 30, 2022, after one year, we would have experienced an 8.6% decrease in NII in the event of an instantaneous parallel 200 basis point increase in market interest rates and an 8.1% decrease in NII in the event of an instantaneous 200 basis point decrease in market interest rates.

Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The above table assumes that the composition of our interest sensitive assets and liabilities existing at the date indicated remains constant uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our NPV and will differ from actual results.

**Liquidity and Capital Resources** 

Liquidity is the ability to fund assets and meet obligations as they come due. Our primary sources of funds consist of deposit inflows, loan repayments, and repayments from investment securities. In addition, we have the ability to collateralize borrowings in the wholesale markets or borrow advances from the Federal Home Loan Bank of New York. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. Our Asset/Liability Management Committee is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated contingencies. We seek to maintain a ratio of liquid assets (including cash and federal funds sold) as a percentage of total deposits ranging between 4% and 30%. At December 31, 2022, this ratio was 5.2%. We believe that we have enough sources of liquidity to satisfy our short- and long-term liquidity needs as of December 31, 2022. We anticipate that we will maintain higher liquidity levels following the completion of the stock offering.

We regularly adjust our investments in liquid assets based upon our assessment of:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) expected loan demand;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) expected deposit flows;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) yields available on interest-earning deposits and securities; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) the objectives of our asset/liability management program.

Excess cash is invested generally in interest-earning deposits and short- and intermediate-term securities.

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##### [**Table of Contents**](#toc)
Our most liquid assets are cash and cash equivalents. The levels of these assets depend on our operating, financing and investing activities during any given period. At December 31, 2022, cash and cash equivalents totaled $27.1 million. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $41.1 million at December 31, 2022.

At December 31, 2022, we had $5.8 million in outstanding loan commitments and $23.5 million of unused lines of credit. Certificates of deposit due within one year of December 31, 2022 totaled $98.6 million, or 18.9% of total deposits. If these deposits do not remain with us, we will be required to seek other sources of funds, including loan sales, other deposit products, including replacement certificates of deposit, securities sold under agreements to repurchase (repurchase agreements) and advances from the Federal Home Loan Bank of New York and other borrowing sources. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or after December 31, 2022. We believe, however, based on past experience that a significant portion of such deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

Our cash flows are derived from operating activities, investing activities and financing activities as reported in our Consolidated Statements of Cash Flows included in our Consolidated Financial Statements.

Our primary investing activities are originating and purchasing loans and purchasing mortgage-backed securities. During the six months ending December 31, 2022, we originated $38.6 million of loans. We purchased $900,000 in securities classified as held to maturity during the six months ended December 31, 2022.

Financing activities consist primarily of activity in deposit accounts. We experienced a net increase in total deposits of $700,000 for the six months ended December 31, 2022. The increase for the six months ended December 31, 2022 resulted primarily from a $3.2 million increase in transactional deposits and a $3.5 million increase in certificates of deposit, offset by a $5.9 million decrease in savings accounts. We experienced a net increase in total deposits of $12.1 million for the year ended June 30, 2022 and a net increase of $28.8 million for the year ended June 30, 2021. The increase for the year ended June 30, 2022 resulted primarily from a $27.3 million increase in transactional deposits, offset by a $15.2 million decrease in certificates of deposit. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors, and by other factors.

We had no outstanding borrowings at December 31, 2022, June 30, 2022 and 2021, respectively.

Somerset Savings Bank is subject to various regulatory capital requirements, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At June 30, 2022, Somerset Savings Bank exceeded all regulatory capital requirements. Somerset Savings Bank is considered "well capitalized" under regulatory guidelines. See "*Regulation and Supervision—Federal Banking Regulation—Capital Requirements*" and Note 11 of the Notes to the Consolidated Financial Statements.

The net proceeds from the offering will significantly increase our liquidity and capital resources. Over time, the initial level of liquidity will be reduced as net proceeds from the stock offering are used for general corporate purposes, including the funding of loans. Our financial condition and results of operations will be enhanced by the net proceeds from the offering, resulting in increased net interest-earning assets and net interest income. However, due to the increase in equity resulting from the net proceeds raised in the offering, our return on equity will be adversely affected following the offering.

**Recent Accounting Pronouncements** 

For a discussion of the impact of recent accounting pronouncements, see Note 1 of the Notes to the Somerset Savings Bank financial statements included in this prospectus.

**Impact of Inflation and Changing Prices** 

Our consolidated financial statements and related notes have been prepared in accordance with generally accepted accounting principles ("GAAP"). GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration for changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on our performance than the effects of inflation.

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**BUSINESS OF SR BANCORP AND SOMERSET SAVINGS BANK** 

**General** 

SR Bancorp is a Maryland chartered company established to be the holding company for Somerset Savings Bank. Upon completion of the conversion and related stock offering, SR Bancorp's primary business activity will be the ownership of the outstanding common stock of Somerset Savings Bank. SR Bancorp does not own or lease any property but instead uses the premises, equipment and other property of Somerset Savings Bank with the payment of appropriate rental fees, as required by applicable law and regulations, under the terms of an expense allocation agreement.

In the future, SR Bancorp may acquire or organize other entities or operating subsidiaries; however, there are no current plans, arrangements, agreements or understandings, written or oral, to do so, other than the transaction with Regal Bancorp.

Somerset Savings Bank is a New Jersey-chartered mutual savings and loan 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 proposed acquisition of Regal Bancorp and its wholly owned subsidiary, Regal Bank, will expand our market presence into Essex, Hudson, Morris and Union Counties, New Jersey and enhance our market presence in Somerset County, New Jersey. At December 31, 2022, Somerset Savings Bank had total assets of $649.5 million, deposits of $522.8 million and total equity of $118.1 million. In connection with this offering, Somerset Savings Bank is converting from the mutual to stock form of organization. As part of this transaction, Somerset Savings Bank will convert its charter to a New Jersey-chartered commercial bank named Somerset Regal Bank.

Our website address is www.somersetsavings.com. We plan to make available on our website, free of charge, our annual report on Form 10-K, quarterly reports on Form 10-Q and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. Information on our website should not be considered a part of this prospectus.

**Proposed Merger with Regal Bancorp** 

On July 25, 2022, as amended on March 7, 2023 we entered into an Agreement and Plan of Merger pursuant to which SR Bancorp will merge with Regal Bancorp, a New Jersey corporation and sole shareholder of Regal Bank, a New Jersey chartered commercial bank headquartered in Livingston, New Jersey that was chartered in 2007, with SR Bancorp as the surviving entity. 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 loans. At December 31, 2022, Regal Bancorp had total consolidated assets of $493.3 million, deposits of $426.0 million and total equity of $49.1 million.

Following the closing of the conversion and related stock offering, SR Bancorp will merge with Regal Bancorp and Somerset Savings Bank will merge with Regal Bank, with Somerset Savings Bank as the surviving entity, operating under the name Somerset Regal Bank. In connection with the proposed Merger, Regal Bancorp's shareholders will receive $23.00 in cash for each share of Regal Bancorp common stock they own. The aggregate deal cost of the proposed Merger is approximately $69.5 million.

In connection with 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 upon completion of the Merger. 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

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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.

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.

**Market Area** 

Somerset Savings Bank serves central New Jersey through its main office in Bound Brook and six full-service banking offices in the New Jersey counties of Somerset (four offices), Hunterdon (two offices) and Middlesex (one office). The acquisition of Regal Bank will expand Somerset Savings Bank's market presence in northern and central New Jersey with the addition of ten full-service banking offices, which are located in the New Jersey counties of Essex (five offices), Somerset (two offices), Union (two offices) and Morris (one office).

The markets served by the combined branch networks of Somerset Savings Bank and Regal Bancorp encompass a broad geographic area in central and northern New Jersey. The market areas served by Somerset Savings Bank and Regal Bank have highly developed and diverse economies. Pharmaceutical, financial services, professional services and retail companies are among the largest employers in the primary market area counties served by Somerset Savings Bank and Regal Bank. Employment data shows that jobs in services and education/healthcare/social services accounted for the largest and second largest employment sectors, respectively, in the primary market area counties and in New Jersey. Wholesale/retail trade was the third largest employment sector for the primary market counties followed by manufacturing jobs in the counties of Hunterdon, Morris and Somerset. Finance/insurance/real estate was the fourth largest employment sector for the counties of Essex, Middlesex and the State of New Jersey. Transportation/utility jobs were the fourth largest employment sector for Union County.

Population and household data indicate that the market areas served by Somerset Savings Bank's and Regal Bank's branches are a mix of urban and suburban markets. Middlesex County is the most populous county with a total population of 861,000, while Hunterdon County is the least populous county with a total population of 130,000. For the 2017 to 2022 period, Essex County recorded the strongest population growth with an annual growth rate of 0.9%. Comparatively, Middlesex County recorded the slowest population growth over the past five years, with an annual growth rate of 0.3%. Five-year annual population growth rates for the U.S. and New Jersey equaled 0.6% and 0.7%, respectively.

Income measures show that the counties of Hunterdon, Morris and Somerset are relatively affluent markets, with household and per capita income measures that are well above the comparable U.S. and New Jersey measures. Comparatively, household and per capita income measures for Essex County are the lowest among the primary area counties, which were also lower than the comparable New Jersey measures and similar to the comparable U.S. measures. The primary market area counties experienced income growth rates that were slightly lower than the comparable state and national growth rates for the 2017 through 2022 period.

A comparison of household income distribution measures provides another indication of the relative affluence of Hunterdon, Morris and Somerset Counties, which maintained significantly higher percentages of households with incomes above $100,000 compared to the U.S and New Jersey. None of the primary market area counties maintained a lower percentage of households with incomes above $100,000 compared to the U.S, while Essex County and Union County maintained a lower percentage of households with incomes above $100,000 compared to New Jersey.

Somerset Savings Bank maintains its largest balance of deposits in Somerset County, where it is headquartered and maintains its largest branch presence. Based on June 30, 2022 deposit data, Somerset Savings Bank's $319.1 million of deposits provided for a 1.7% market share of bank and thrift deposits in Somerset County, which was the 12<sup>th</sup> largest market share out of 22 financial institutions in the market. Regal Bank maintains its largest balance of deposits in Essex County, where it is headquartered and maintains its largest branch presence. Based on June 30, 2022 deposit data, Regal Bank's $311.2 million of deposits provided for a 1.1% market share of bank and thrift deposits in Essex County, which was the 15<sup>th</sup> largest market share out of 31 financial institutions in the market.

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**Competition** 

We face significant competition for the attraction of deposits and origination of loans. Our most direct competition for deposits has historically come from the many financial institutions operating in our market area, including commercial banks, savings banks, savings and loan associations and credit unions, and from other financial service companies such as brokerage firms and insurance companies. Several large holding companies operate banks in our market area, and these institutions are significantly larger than us and, therefore, have significantly greater resources. We also face competition for investors' funds from money market funds, mutual funds and other corporate and government securities. At June 30, 2022, which is the most recent date for which data is available from the FDIC, we held approximately 1.7% of the deposits in Somerset County, which was the 12<sup>th</sup> largest market share out of the 22 institutions with offices in Somerset County, we held approximately 2.0% of the deposits in Hunterdon County and approximately 0.1% of the deposits in Middlesex County.

Our competition for loans comes primarily from financial institutions in our market area and from other financial service providers, such as mortgage companies and mortgage brokers. Competition for loans also comes from non-depository financial service companies entering the mortgage market, such as insurance companies, securities companies, financial technology companies and specialty finance companies.

We expect competition to remain intense in the future as a result of legislative, regulatory and technological changes and the continuing trend toward consolidation of the financial services industry. Technological advances, for example, have lowered barriers to entry, allowed banks to expand their geographic reach by providing services over the internet and made it possible for non-depository institutions, including financial technology companies, to offer products and services that traditionally have been provided by banks. Competition for deposits and the origination of loans could limit our growth in the future.

**Lending Activities** 

We offer a variety of loans, including residential and non-residential mortgage, equity loans and passbook, certificate or personal loans. Historically, we have had a significant portion of our loan portfolio concentrated in residential loans, including one- to four-family residential loans. At December 31, 2022 residential mortgage loans comprised 97.8% of our total loan portfolio.

We did not participate in the Paycheck Protection Program administered by the U.S. Small Business Administration.

In the future, we intend to continue to concentrate on ways to compete for a greater share of commercial loan originations in our primary market area. The proposed Merger with Regal Bank will significantly enhance our capabilities in this area.

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***Loan Portfolio Composition.*** The following table sets forth the composition of our loan portfolio by type of loan at the dates indicated.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | | | **At June 30,** | **At June 30,** | **At June 30,** | **At June 30,** |
|  | **At December 31, 2022** | **At December 31, 2022** | **2022** | **2022** | **2021** | **2021** |
|  | **Amount** | **Percent** | **Amount** | **Percent** | **Amount** | **Percent** |
|  | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** |
|  Mortgage loans: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Residential real estate | $348795 | 97.79% | $325723 | 97.60% | $297558 | 97.14% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-residential real estate | 449 | 0.12% | 459 | 0.14% | 476 | 0.16% |
|  Consumer | 7448 | 2.09% | 7543 | 2.26% | 8285 | 2.70% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total loans | $356692 | 100.00% | 333725 | 100.00% | 306319 | 100.00% |
|  Less (add): |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Allowance for losses | 1116 |  | 1116 |  | 1116 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net deferred loan origination (fees) costs | (2040) |  | (1950) |  | (1595) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loans, net | $357616 |  | $334558 |  | $306798 |  |

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***Contractual Maturities.*** The following tables set forth the contractual maturities of our total loan portfolio at December 31, 2022. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less. The tables present contractual maturities and do not reflect repricing or the effect of prepayments. Actual maturities may differ.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Residential<br>Real Estate** | **Non-Residential<br>Real Estate** | **Consumer** | **Total**<br>**Loans** |
|  | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** |
|  Amounts due in: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; One year or less | $44 | $— | $5768 | $5812 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; After one through five years | 6103 |  | 444 | 6547 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; After five through 15 years | 106753 | 148 | 1094 | 107995 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; More than 15 years | 235895 | 301 | 142 | 236338 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $348795 | $449 | $7448 | $356692 |

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***Fixed Versus Adjustable-Rate Loans.*** The following tables sets forth our fixed and adjustable-rate loans at December 31, 2022 that are contractually due after December 31, 2023.

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| | | | |
|:---|:---|:---|:---|
|  | **Due After December 31, 2023** | **Due After December 31, 2023** | **Due After December 31, 2023** |
|  | **Fixed** | **Adjustable** | **Total** |
|  | **(***In thousands***)** | **(***In thousands***)** | **(***In thousands***)** |
|  Real estate mortgage loans: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Residential real estate | $309286 | $39465 | $348751 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-residential real estate | 449 |  | 449 |
|  Consumer | 1680 | 5759 | 7439 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $311415 | $45224 | $356639 |

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***One- to Four-Family Residential Mortgage Loans*.** We offer two types of residential mortgage loans: fixed-rate loans and adjustable-rate loans. We offer fixed-rate mortgage loans with terms of up to 30 years. We offer adjustable-rate mortgage loans with interest rates and payments that adjust annually after an initial fixed period of three, five or six years. Interest rates and payments on our adjustable-rate loans generally are adjusted to a rate equal to a percentage above the U.S. Treasury Security Index. The maximum amount by which the interest rate may be increased or decreased is generally 2.0% per adjustment period and the lifetime interest rate cap is generally 6.0% over the initial interest rate of the loan.

Borrower demand for adjustable-rate loans compared to fixed-rate loans is a function of the level of interest rates, the expectations of changes in the level of interest rates, and the difference between the interest rates and loan fees offered for fixed-rate mortgage loans as compared to the interest rates and loan fees for adjustable-rate loans. The relative amount of fixed-rate and adjustable-rate mortgage loans that can be originated at any time is largely determined by the demand for each in a competitive environment. The loan fees, interest rates and other provisions of mortgage loans are determined by us on the basis of our own pricing criteria and competitive market conditions.

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While one- to four-family residential real estate loans are normally originated with up to 30-year terms, such loans typically remain outstanding for substantially shorter periods because borrowers often prepay their loans in full either upon sale of the property pledged as security or upon refinancing the original loan. Therefore, average loan maturity is a function of, among other factors, the level of purchase and sale activity in the real estate market, prevailing interest rates and the interest rates payable on outstanding loans.

It is our general policy not to make high loan-to-value loans (defined as loans with a loan-to-value ratio of 80% or more) without private mortgage insurance. We require all properties securing mortgage loans to be appraised by a board-approved independent appraiser. We require title insurance on all first mortgage loans, and borrowers must obtain hazard insurance. Additionally, we require flood insurance for loans on properties located in a flood zone, and may require such insurance on properties not located in a flood zone.

Generally, adjustable-rate loans will better insulate Somerset Savings Bank from interest rate risk as compared to fixed-rate mortgages. An increased monthly mortgage payment required of adjustable-rate loan borrowers in a rising interest rate environment, however, could cause an increase in delinquencies and defaults. To mitigate the risk of an increase to a monthly mortgage payment of an adjustable-rate loan, which could result in an increase to delinquencies and defaults, we adhere to strict underwriting guidelines by initially qualifying a borrower at a higher interest rate. The marketability of the underlying property also may be adversely affected in a high interest rate environment. In addition, although adjustable-rate mortgage loans make our asset base more responsive to changes in interest rates, the extent of this interest sensitivity is limited by the annual and lifetime interest rate adjustment limits.

***Home equity loans and lines of credit.*** We generally offer home equity loans and lines of credit with a maximum combined loan-to-value ratio of 70% based on the appraised value for one- to four-family owner-occupied loans. Home equity loans have fixed rates of interest and are originated with terms of up to 20 years. Home equity lines of credit have adjustable rates and are based upon the prime rate as published in *The Wall Street Journal*. We hold a first or second mortgage position on all of the properties that secure our home equity loans.

***Consumer loans.*** We offer unsecured personal loans up to $5,000 and rehabilitation loans up to $10,000. Borrowers seeking a personal loan must be a Somerset Savings Bank customer for at least one year, among other requirements. Rehabilitation loans are subject to a 70% loan to value limit and must be for one- to two-family owner-occupied properties located in Somerset Savings Bank's market area. We also offer loans secured by passbook and certificates of deposit accounts held at Somerset Savings Bank, up to 90% of the balance of the certificate of deposit or passbook. For more information on our loan commitments, see "*Management's Discussion and Analysis of Financial Condition and Results of Operations of SR Bancorp—Liquidity and Capital Resources*."

Unsecured loans generally entail greater risk than do residential mortgage loans. Such loan collections depend on the borrower's continuing financial stability, and therefore are likely to be adversely affected by various factors, including job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.

The procedures for underwriting consumer loans include an assessment of the applicant's payment history on other debts and ability to meet existing obligations and payments on the proposed loan. Although the applicant's creditworthiness is a primary consideration, the underwriting process also includes a comparison of the value of the collateral, if any, to the proposed loan amount.

***Loan Originations, Sales, Purchases and Participations***. Loan originations come from a number of sources. The primary source of loan originations are existing customers, walk-in traffic, purchases from correspondent banks, advertising and referrals from customers. At December 31, 2022, we had no loan participations. As a supplement to our in-house loan originations of one- to four-family residential real estate loans, Somerset Savings Bank enters into agreements with unaffiliated mortgage brokers as a source for additional residential real estate loans. We currently work with eight different mortgage brokers in our market area, none of which we have an ownership interest in or share any common employees or directors. These mortgage brokers fund the one- to four-family residential real estate loans and then sell them on a loan by loan basis to Somerset Savings

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Bank following re-underwriting of the loan in accordance with our own underwriting criteria. We use the same parameters in evaluating these loans as we do for our in-house loan originations of one- to four-family residential real estate loans. For each purchased loan, we generally pay a fixed fee based on the loan balance. For the six months ended December 31, 2022 we purchased for our portfolio $24.7 million of loans from these mortgage brokers and for the years ended June 30, 2022 and 2021, we purchased for our portfolio $52.8 million and $11.2 million, respectively, of loans from these mortgage brokers. As part of purchasing the loans, we acquire the servicing rights to the loans. The purchased loans are acquired from these mortgage brokers without recourse or any right to require the mortgage broker to repurchase the loans. The fixed aggregate fee we pay to acquire the loan and servicing rights are amortized over the contractual life of the loan.

***Loan Approval Procedures and Authority.*** Our lending activities follow written, non-discriminatory, underwriting standards and loan origination procedures established by our Board of Directors and management. The Board of Directors has granted loan approval authority to certain officers or groups of officers up to prescribed limits, based on the officer's position and experience. The Management Loan Committee, comprised of Somerset Savings Bank's Chairman, President, Loan Division Manager, Origination Manager and Mortgage Underwriter, approves residential and commercial loans up to $1.0 million and builder tract loans up to $1.5 million. Proposed loans in excess of such amounts must be approved by the Board of Directors.

***Loans to One Borrower.*** The maximum amount that we may lend to one borrower and the borrower's related entities is limited, by regulation, to generally 15% of our stated capital and reserves. At December 31, 2022, our regulatory limit on loans to one borrower was $17.7 million and our loan policy has a $2.0 million loan to one borrower limit. At that date, our largest lending relationship was one loan for $961,000 secured by a fixed rate mortgage loan. This loan was performing in accordance with its terms at December 31, 2022.

***Loan Commitments.*** We issue commitments for fixed- and adjustable-rate mortgage loans conditioned upon the occurrence of certain events. Commitments to originate mortgage loans are legally binding agreements to lend to our customers. Generally, our loan commitments expire after 60 days.

**Non-performing and Problem Assets** 

When a loan is 15 days past due, we send the borrower a late charge notice. If the loan delinquency is not corrected, other forms of collections are implemented, including telephone calls and collection letters. We attempt personal, direct contact with the borrower to determine the reason for the delinquency, to ensure that the borrower correctly understands the terms of the loan and to emphasize the importance of making payments on or before the due date. If necessary, subsequent late charges and delinquency notices are issued and the account will be monitored on a regular basis thereafter. By the 90<sup>th</sup> day of delinquency, we will send the borrower a final demand for payment and we may refer the loan to legal counsel to commence foreclosure proceedings. Any of our loan officers can shorten these time frames in consultation with the senior lending officer.

Generally, loans are placed on non-accrual status when payment of principal or interest 90 days or more delinquent unless the loan is considered well-secured and in the process of collection. Loans are also placed on non-accrual status if collection of principal or interest in full is in doubt. When loans are placed on a non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received. The loan may be returned to accrual status if both principal and interest payments are brought current and factors indicating doubtful collection no longer exist, including performance by the borrower under the loan terms for a six-month period. Our Mortgage Lending Officer reports monitored loans, including all loans rated special mention, substandard, doubtful or loss, to the Board of Directors on a quarterly basis. In addition, management presents a quarterly loan loss allowance analysis to our Board of Directors.

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***Past Due Loans***. The following table sets forth our loan delinquencies by type and amount at the dates indicated.

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | | | | **At June 30,** | **At June 30,** | **At June 30,** | **At June 30,** | **At June 30,** | **At June 30,** |
|  | **At December 31, 2022** | **At December 31, 2022** | **At December 31, 2022** | **2022** | **2022** | **2022** | **2021** | **2021** | **2021** |
|  | **30-59**<br>**Days**<br>**Past Due** | **60-89**<br>**Days**<br>**Past Due** | **90 Days<br>or More<br>Past Due** | **30-59**<br>**Days**<br>**Past Due** | **60-89**<br>**Days**<br>**Past Due** | **90 Days**<br>**or More<br>Past Due** | **30-59**<br>**Days**<br>**Past Due** | **60-89**<br>**Days**<br>**Past Due** | **90 Days**<br>**or More<br>Past Due** |
|  | | **(In thousands)** | **(In thousands)** | **(In thousands)** | **(In thousands)** | **(In thousands)** | **(In thousands)** | **(In thousands)** | **(In thousands)** |
|  Real estate mortgage loans: |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Residential real estate | $466 | $— | $150 | $279 | $— | $— | $710 | $— | $340 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-residential real estate |  |  |  |  |  |  |  |  |  |
|  Consumer |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $466 | $— | $150 | $279 | $— | $— | $710 | $— | $340 |

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***Non-Performing Assets.*** The following table sets forth information regarding our non-performing assets. Somerset Savings Bank had no troubled debt restructurings as of December 31, 2022, June 30, 2022 or June 30, 2021.

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| | | | |
|:---|:---|:---|:---|
|  | **At December**<br>**31, 2022** | **At June 30,** | **At June 30,** |
|  | **At December**<br>**31, 2022** | **2022** | **2021** |
|  | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
|  Non-accrual loans: |  |  |  |
|  Real estate mortgage loans: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Residential real estate | $— | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-residential real estate |  |  |  |
|  Consumer |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total non-accrual loans |  |  |  |
|  Accruing loans past due 90 days or more: |  |  |  |
|  Real estate mortgage loans: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Residential real estate | 150 |  | 340 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-residential real estate |  |  |  |
|  Consumer |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total accruing loans past due 90 days or more | 150 |  | 340 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total non-performing loans | 150 |  | 340 |
|  Real estate owned |  |  |  |
|  Total non-performing assets | $150 | $— | $340 |
|  Total non-performing loans to total loans | 0.04% | —% | 0.10% |
|  Total non-accrual loans to total loans | —% | —% | —% |
|  Total non-performing assets to total assets | 0.02% | —% | 0.05% |

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On the basis of this review of our loans, our classified and special mention loans at the dates indicated were as follows:

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| | | | |
|:---|:---|:---|:---|
|  | **At December**<br>**31, 2022** | **At June 30,** | **At June 30,** |
|  | **At December**<br>**31, 2022** | **2022** | **2021** |
|  | **(In thousands)** | **(In thousands)** | **(In thousands)** |
|  Substandard loans | $150 | $— | $340 |
|  Doubtful loans |  |  |  |
|  Loss loans |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total classified loans | $150 | $— | $340 |
|  Special mention loans | $— | $— | $— |

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***Real Estate Owned***. Real estate acquired by us as a result of foreclosure or by deed in lieu of foreclosure is classified as real estate owned. When property is acquired it is recorded at the lower of cost or estimated fair market value at the date of foreclosure, establishing a new cost basis. Estimated fair value generally represents the sale price a buyer would be willing to pay on the basis of current market conditions, including normal terms from other financial institutions, less the estimated costs to sell the property. Holding costs and declines in estimated fair market value result in charges to expense after acquisition. At December 31, 2022, we had no real estate owned.

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***Classification of Assets.*** Our policies, consistent with regulatory guidelines, provide for the classification of loans and other assets that are considered to be of lesser quality as substandard, doubtful, or loss assets. An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets include those assets characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. Assets classified as doubtful have all of the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Assets (or portions of assets) classified as loss are those considered uncollectible and of such little value that their continuance as assets is not warranted. Assets that do not expose us to risk sufficient to warrant classification in one of the aforementioned categories, but which possess potential weaknesses that deserve our close attention, are required to be designated as special mention. As of December 31, 2022, we had no assets designated as special mention.

The allowance for loan losses is the amount estimated by management as necessary to absorb credit losses incurred in the loan portfolio that are both probable and reasonably estimable at the balance sheet date. Our determination as to the classification of our assets and the amount of our loss allowances are subject to review by the FDIC and the NJDBI, which can require that we establish additional loss allowances. We regularly review our asset portfolio to determine whether any assets require classification in accordance with applicable regulations. On the basis of our review of our assets at December 31, 2022, we had $150,000 of assets classified as substandard, and no assets classified as doubtful or loss.

**Allowance for Loan Losses** 

Our allowance for loan losses is maintained at a level necessary to absorb loan losses that are both probable and reasonably estimable. Management, in determining the allowance for loan losses, considers the losses inherent in our loan portfolio and changes in the nature and volume of loan activities, along with the general economic and real estate market conditions. A description of our methodology in establishing our allowance for loan losses is set forth in the section "*Management's Discussion and Analysis of Financial Condition and Results of Operations of SR Bancorp—Critical Accounting Policies-Allowance for Loan Losses*." The allowance for loan losses as of December 31, 2022 was maintained at a level that represents management's best estimate of losses inherent in the loan portfolio, and such losses were both probable and reasonably estimable. However, this analysis process is inherently subjective, as it requires us to make estimates that are susceptible to revisions as more information becomes available. Although we believe that we have established the allowance at levels to absorb probable and estimable losses, future additions may be necessary if economic or other conditions in the future differ from the current environment.

In addition, as an integral part of their examination process, the Federal Deposit Insurance Corporation and the New Jersey Department of Banking and Insurance have authority to periodically review our allowance for loan losses. Such agencies may require that we recognize additions to the allowance based on their judgments of information available to them at the time of their examination.

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The following table sets forth activity in our allowance for loan losses for the years indicated.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **At or For the Six Months Ended<br>December 31,** | **At or For the Six Months Ended<br>December 31,** | **At or For the Years Ended<br>June 30,** | **At or For the Years Ended<br>June 30,** |
|  | **2022** | **2021** | **2022** | **2021** |
|  | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
|  Allowance for loan losses at beginning of year | $1116 | $1116 | $1116 | $1116 |
|  Provision for loan losses |  |  |  |  |
|  Charge-offs |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total charge-offs |  |  |  |  |
|  Recoveries: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total recoveries |  |  |  |  |
|  Net (charge-offs) recoveries |  |  |  |  |
|  Allowance at end of year | $1116 | $1116 | $1116 | $1116 |
|  Allowance to non-performing loans | 743.55% | N/A | N/A | 424.09% |
|  Allowance to total loans outstanding at the end of the year | 0.31% | 0.37% | 0.33% | 0.36% |
|  Net (charge-offs) recoveries to average loans outstanding during the year | —% | —% | —% | —% |

---

Somerset Savings Bank had no charge-offs at December 31, 2022, June 30, 2022 or June 30, 2021, respectively.

***Allocation of Allowance for Loan Losses.*** The following tables set forth the allowance for loan losses allocated by loan category and the percent of the allowance in each category to the total allocated allowance at the dates indicated. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **At December 31, 2022** | **At December 31, 2022** | **At December 31, 2022** | **At June 30,** | **At June 30,** | **At June 30,** | **At June 30,** | **At June 30,** | **At June 30,** |
|  | **At December 31, 2022** | **At December 31, 2022** | **At December 31, 2022** | **2022** | **2022** | **2022** | **2021** | **2021** | **2021** |
|  | **Allowance<br>for Loan<br>Losses** | **Percent of<br>Allowance in<br>Each<br>Category to<br>Total<br>Allocated<br>Allowance** | **Percent<br>of Loans<br>in Each<br>Category<br>to Total<br>Loans** | **Allowance<br>for Loan<br>Losses** | **Percent of<br>Allowance<br>in Each<br>Category<br>to Total<br>Allocated<br>Allowance** | **Percent<br>of Loans<br>in Each<br>Category<br>to Total<br>Loans** | **Allowance<br>for Loan<br>Losses** | **Percent of<br>Allowance<br>in Each<br>Category<br>to Total<br>Allocated<br>Allowance** | **Percent<br>of Loans<br>in Each<br>Category<br>to Total<br>Loans** |
|  | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** |
|  Real estate mortgage loans: |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Residential real estate | $1112 | 99.64% | 97.79% | $1111 | 99.55% | 97.60% | $1111 | 99.55% | 97.14% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-residential real estate | 4 | 0.36% | 0.12% | 5 | 0.45% | 0.14% | 5 | 0.45% | 0.16% |
|  Consumer |  | —% | 2.09% |  | —% | 2.26% |  | —% | 2.70% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total allocated allowance | 1116 | 100.00% | 100.00% | 1116 | 100.00% | 100.00% | 1116 | 100.00% | 100.00% |
|  Unallocated | 1116 |  |  |  |  |  |  |  |  |
|  Total | $1116 |  |  | $1116 |  |  | $1116 |  |  |

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**Investment Activities** 

***General*.** The goals of our investment policy is to maximize portfolio yield over the long term in a manner that is consistent with minimizing risk, and meeting liquidity needs, pledging requirements, and asset/liability management and interest rate risk strategies. Subject to loan demand and our interest rate risk analysis, we will increase the balance of our investment securities portfolio when we have excess liquidity.

We have authority to invest in various types of liquid assets, including United States Treasury obligations, securities of various U.S. government sponsored enterprises and federal agencies, mortgage-backed securities and certificates of deposit of federally insured institutions. Within certain regulatory limits, we also may invest a portion of our assets in corporate securities (equity as well as debt) and mutual funds. As a member of the Federal Home Loan Bank of New York, we also are required to maintain an investment in Federal Home Loan Bank of New York stock.

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Our investment objectives are to provide and maintain liquidity, to establish an acceptable level of interest rate and credit risk, to provide an alternate source of low-risk investments when demand for loans is weak and to achieve a yield consistent with credit and interest rate risk parameters included in Somerset Savings Bank's policies. Our Board of Directors has the overall responsibility for the investment portfolio, including approval of our investment policy, which is reviewed and approved at least annually. The Investment Committee, consisting of the Chief Executive Officer, President and Chief Financial Officer, is responsible for implementation of the investment policy, and monitoring our investment performance. Our Board of Directors reviews the status of our investment portfolio on a quarterly basis.

At December 31, 2022, our investment portfolio consisted primarily of securities and obligations issued by U.S. government-sponsored enterprises totaling $219.0 million, subordinated debentures issued by financial institutions in the Mid-Atlantic region totaling $7.8 million and collateralized mortgage obligations totaling $3.1 million. At December 31, 2022, we also owned $702,000 of Federal Home Loan Bank of New York stock. As a member of Federal Home Loan Bank of New York, we are required to purchase stock in the Federal Home Loan Bank of New York, which is carried at cost and classified as a restricted investment.

At December 31, 2022, all of our available-for-sale securities are carried at fair value through accumulated other comprehensive income.

For additional information regarding our investment securities portfolio, see Notes 2 and 3 to the Notes to Financial Statements.

***United States Government and Federal Agency Obligations.*** While United States Government and federal agency securities generally provide lower yields than other investments in our securities investment portfolio, we maintain these investments, to the extent appropriate, for liquidity purposes, as collateral for borrowings and as an interest rate risk hedge in the event of significant mortgage loan prepayments.

***Mortgage-Backed Securities.*** We invest in mortgage-backed securities insured or guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. We invest in mortgage-backed securities to achieve positive interest rate spreads with minimal administrative expense, and to lower our credit risk as a result of the guarantees provided by Freddie Mac, Fannie Mae or Ginnie Mae.

Investments in mortgage-backed securities involve a risk that actual payments will be greater or less than the prepayment rate estimated at the time of purchase, which may require adjustments to the amortization of any premium or acceleration of any discount relating to such interests, thereby affecting the net yield on our securities. We periodically review current prepayment speeds to determine whether prepayment estimates require modification that could cause amortization or accretion adjustments.

***Collateral Mortgage Obligations.*** CMOs are debt securities issued by a special-purpose entity that aggregates pools of mortgages and mortgage-backed securities and creates different classes of securities with varying maturities and amortization schedules, as well as a residual interest, with each class possessing different risk characteristics. The cash flows from the underlying collateral are generally divided into "tranches" or classes that have descending priorities with respect to the distribution of principal and interest cash flows, while cash flows on pass-through mortgage-backed securities are distributed pro rata to all security holders. All of the CMOs in our investment portfolio are rated "AAA" by at least one of the major investment securities rating services.

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**Deposit Activities and Other Sources of Funds** 

***General*.** Deposits and loan repayments are the major sources of our funds for lending and other investment purposes. Scheduled loan repayments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments are significantly influenced by general interest rates and money market conditions.

***Deposit Accounts*.** Deposits are primarily attracted from within our market area through the offering of a broad selection of deposit instruments, including noninterest-bearing demand deposits (such as checking accounts), interest-bearing demand accounts (such as NOW accounts), savings accounts, money market accounts and certificates of deposit. We also hold $1.4 million of accounts from a variety of local municipal relationships. We have no brokered deposits.

We also offer a variety of deposit accounts designed for the businesses operating in our market area. Our business banking deposit products include a business checking account designed for small businesses, savings and money market accounts. We offer bill payment services through our online banking system.

Deposit account terms vary according to the minimum balance required, the time period the funds must remain on deposit and the interest rate, among other factors. In determining the terms of our deposit accounts, we consider the rates offered by our competition, the rates on borrowings, our liquidity needs, profitability to us, and customer preferences and concerns. We generally review our deposit mix and pricing weekly. Our deposit pricing strategy has generally been to offer competitive rates on all types of deposit products, and to periodically offer special rates in order to attract deposits of a specific type or term.

The following table sets forth the distribution of total deposits by account type at the dates indicated.

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **At December 31, 2022** | **At December 31, 2022** | **At December 31, 2022** | **At June 30,** | **At June 30,** | **At June 30,** | **At June 30,** | **At June 30,** | **At June 30,** |
|  | **At December 31, 2022** | **At December 31, 2022** | **At December 31, 2022** | **2022** | **2022** | **2022** | **2021** | **2021** | **2021** |
|  | **Amount** | **Percent** | **Average<br>Rate** | **Amount** | **Percent** | **Average<br>Rate** | **Amount** | **Percent** | **Average<br>Rate** |
|  | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** |
|  Noninterest-bearing demand deposits | $42546 | 8.14% | —% | $43722 | 8.38% | —% | $39645 | 7.78% | —% |
|  Interest-bearing demand deposits | 150794 | 28.84 | 0.06 | 146408 | 28.04 | 0.06 | 138732 | 27.20 | 0.05 |
|  Savings and club accounts | 182166 | 34.85 | 0.05 | 188115 | 36.03 | 0.05 | 172588 | 33.84 | 0.05 |
|  Time deposits | 147256 | 28.17 | 1.29 | 143827 | 27.55 | 0.60 | 159028 | 31.18 | 1.13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $522762 | 100.00% |  | $522072 | 100.00% |  | $509993 | 100.00% |  |

---

As of December 31, 2022 and 2021, the aggregate amount of uninsured deposits (deposits in amounts greater than $250,000, which is the maximum amount for federal deposit insurance), was $29.1 million and $23.3 million, respectively. In addition, as of December 31, 2022, the aggregate amount of all our uninsured certificates of deposit was $3.6 million. We have no deposits that are uninsured for any reason other than being in excess of the maximum amount for federal deposit insurance. The following table sets forth the maturity of the uninsured certificates of deposit as of December 31, 2022.

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| | |
|:---|:---|
| | **At**<br>**December 31, 2022** |
| | **(***In thousands***)** |
|  **Maturity Period:** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Three months or less | $176 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Over three through six months | 374 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Over six through twelve months | 1901 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Over twelve months | 1096 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $3547 |

---

***Borrowings*.** We have the ability to utilize advances from the Federal Home Loan Bank of New York to supplement our investable funds. The Federal Home Loan Bank functions as a central reserve bank providing credit for member financial institutions. As a member, we are required to own capital stock in the Federal Home Loan Bank and are authorized to apply for advances on the security of such stock and certain of our mortgage loans and other assets (principally securities that are obligations of, or guaranteed by, the United States), provided certain standards related to creditworthiness have been met. Advances are made under several different programs, each having its own interest rate and range of maturities. Depending on the program, limitations on the amount of advances are based either on a fixed percentage of an institution's net worth or on the Federal Home Loan Bank's assessment of the institution's creditworthiness.

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At December 31, 2022 and December 31, 2021, we had no outstanding advances from the Federal Home Loan Bank of New York. At December 31, 2022, we had access to additional Federal Home Loan Bank advances of up to $100 million based on our unused qualifying collateral available to support such advances.

We also have the ability to borrow from the Federal Reserve Bank of New York to supplement our investable funds. All borrowings are secured by pledges of qualifying loans and are generally on overnight terms with interest rates quoted at the time of the borrowing. At December 31, 2022, June 30, 2022 and June 30, 2021, we had no outstanding borrowings with the Federal Reserve Bank of New York. At December 31, 2022, we had Board of Director authorization to borrow up to $25 million.

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**Properties** 

The following table sets forth certain information relating to our properties as of December 31, 2022. We own our main office and all of our branches.

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| | | | |
|:---|:---|:---|:---|
| **Description and Address** | **Date<br>Opened** | **Square<br>Footage** | **Net Book Value<br>at**<br>**December 31, 2022<br>(In thousands)** |
|  **Main Office** |  |  |  |
|  220 West Union Avenue<br> Bound Brook, New Jersey 08805 | July 1, 1981 | 15000<sup>(1)</sup> | $907 |
|  **Branch Offices** |  |  |  |
|  Somerville Branch<br> 64 West End Avenue<br> Somerville, New Jersey 08876 | December 1, 1965 | 3100 | 176 |
|  Raritan Branch<br> 802 Somerset Street<br> Raritan, New Jersey 08869 | May 1, 1968 | 1800 | 194 |
|  Middlesex Branch<br> 1305 Bound Brook Road<br> Middlesex, New Jersey 08848 | October 1, 1968 | 1800 | 268 |
|  Whitehouse Branch<br> 410 US Highway 22<br> Whitehouse Station, New Jersey 08888 | November 1, 1971 | 1800 | 490 |
|  Flemington Branch<br> 141 Broad Street<br> Flemington, New Jersey 08822 | December 1, 1974 | 3400 | 380 |
|  Manville Branch<br> 41 South Main Street<br> Manville, New Jersey 08835 | July 31, 2006 | 4900 | 645 |

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(1) Includes additional administrative office space at main office complex.

**Personnel** 

As of December 31, 2022, we had 66 full-time employees and no part-time employees, none of whom is represented by a collective bargaining unit. We believe our relationship with our employees is good.

**Legal Proceedings** 

Periodically, there have been various claims and lawsuits against us, such as claims to enforce liens, condemnation proceedings on properties in which we hold security interests, claims involving the making and servicing of real property loans and other issues incident to our business. We are not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows.

**Subsidiaries** 

Upon completion of the stock offering and the proposed Merger, Somerset Regal Bank will be SR Bancorp's only subsidiary.

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**MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF** 

**OPERATIONS OF REGAL BANCORP** 

**General** 

This section presents discussion and analysis of Regal Bancorp's financial condition at December 31, 2022 and 2021, and Regal Bancorp's results of operations for the years ended December 31, 2022 and 2021. This section should be read in conjunction with Regal Bancorp's accompanying financial statements and related footnotes to our financial statements.

**Critical Accounting Policies** 

The preparation of Regal Bancorp's financial statements and the information included in Regal Bancorp's management's discussion and analysis is governed by policies that are based on accounting principles generally accepted in the United States (otherwise known as "GAA P") and general practices within the banking industry. The financial information contained in Regal Bancorp's financial statements is, to a significant extent, based on measures of the financial effects of transactions and events that have already occurred. A variety of factors could affect the ultimate value that is obtained either when earning income, recognizing an expense, recovering an asset or relieving a liability. In addition, GAAP itself may change from one previously acceptable method to another method.

An accounting policy is deemed to be "critical" if it is important to a company's results of operations and financial condition and requires significant judgment and estimates on the part of management in its application. The preparation of financial statements and related disclosures in conformity with GAAP requires Regal Bancorp to make estimates and assumptions that affect certain amounts reported in Regal Bancorp's financial statements and related disclosures. Actual results could differ from these estimates and assumptions. Regal Bancorp believes that the estimates and assumptions used in connection with the amounts reported in Regal Bancorp's financial statements and related disclosures contained herein are reasonable and made in good faith.

Regal Bancorp considers its current critical accounting policy to be the one that relates to the determination of Regal Bancorp's allowance for loan losses, which is highly susceptible to change from period to period and requires Regal Bancorp to make numerous assumptions, and use data inputs, about information that directly affects the calculation of the amounts reported in Regal Bancorp's financial statements. For example, a large unexpected charge off could substantially reduce Regal Bancorp's allowance for loan losses and potentially require Regal Bancorp to record an increased loan loss provision to replenish the allowance, which would negatively affect Regal Bancorp's operating results and financial condition.

The amount of the allowance for loan losses reflects Regal Bancorp's judgment as to the estimated credit losses that have probably been incurred in Regal Bancorp's existing loan portfolio. The allowance is established through a loan loss provision charged to expense. Loans are charged off against the allowance when Regal Bancorp believes that any portion of the outstanding principal amount of the loan will not be collected and is confirmed as a loss. Subsequent recoveries of previous charge-offs are added back to the allowance. Regal Bancorp evaluates the appropriateness of the allowance at least quarterly or more frequently when necessary. This evaluation is inherently subjective as it requires Regal Bancorp to make estimates that are susceptible to significant revision as more information becomes available.

For a summary of Regal Bancorp's other significant accounting policies, see note 1 to Regal Bancorp's financial statements.

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**Overview of Regal Bancorp's Financial Results** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Net earnings increased to $3.1 million or $1.02 per diluted share in 2022 from $2.9 million or $0.96
per diluted share in 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Net interest income increased to $16.0 million in 2022 from $14.6 million in 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Net interest margin increased to 3.11% in 2022, from 2.64% in 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The provision for loan losses decreased to $0 in 2022 from $45,000 in 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Non-interest income decreased to $756,000 in 2022, from $969,000 in 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Noninterest expenses increased to $12.3 million in 2022, from $11.5 million in 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Regal Bancorp's efficiency ratio (which measures Regal Bancorp's non-interest expenses as a percentage of revenues) was 73% for 2022 compared to 74% for 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Income tax expense increased to $1.4 million in 2022, from $1.1 million in 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Total assets decreased to $495.7 million at December 31, 2022, from $573.8 million at December 31,
2021. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Total loans receivable decreased to $344.6 million at December 31, 2022, from $361.6 million at
December 31, 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• New loan originations increased to $52.7 million in 2022 from $48.4 million in 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Nonaccrual loans increased to $541,000 at December 31, 2022, from $216,000 at December 31, 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• There was no real estate owned through foreclosure at December 31, 2022, and 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Total deposits decreased to $426.0 million at December 31, 2022, from $509.6 million at December 31,
2021. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Book value per common share increased to $16.25 at December 31, 2022, from $15.44 at December 31, 2021.

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**Comparison of Financial Condition at December 31, 2022 and December 31, 2021** 

***General***

Regal Bancorp's total assets at December 31, 2022 decreased to $495.7 million from $573.8 million at December 31, 2021, with the decrease being principally caused by a $61.0 million decrease in cash and a $16.8 million decrease in loans receivable, net. Cash decreased as rates on deposits lagged the market, causing an outflow which led to a decrease in deposits to $426.0 million at December 31, 2022 from $509.6 million at December 31, 2021. Loans decreased principally due to $9.9 million in paydowns of loans originated under the Paycheck Protection Program.

***Cash and Cash Equivalents***

Cash and cash equivalents declined to $106.8 million at December 31, 2022 from $167.8 million at December 31, 2021. The decrease in total cash resulted in a corresponding decrease in liquidity.

***Time Deposits with Other Financial Institutions***

Time deposits with other financial institutions amounted to $12.6 million at December 31, 2022 compared to $16.6 million at December 31, 2021. These time deposits consist of certificates of deposits and the decrease was caused by scheduled maturities.

***Securities Available for Sale***

At both December 31, 2022 and 2021, Regal Bancorp held securities available for sale with fair values of $15.5 million. These investments were comprised principally of U.S. government agencies, corporate bonds, municipal bonds, and mortgage-backed securities. Management has maintained investment securities at this relatively low level in recent years because the yields are lower than the yields on Regal Bancorp's loan portfolio.

The following table sets forth information regarding fair values, weighted average yields, and maturities of available for sale investments. The yields have been computed on a tax equivalent basis. Maturities are based on the final contractual payment dates and do not reflect the impact of prepayments or early redemptions that may occur:

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| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **As of December 31, 2022** | **As of December 31, 2022** | **As of December 31, 2022** | **As of December 31, 2022** | **As of December 31, 2022** | **As of December 31, 2022** | **As of December 31, 2022** | **As of December 31, 2022** | **As of December 31, 2022** | **As of December 31, 2022** |
|  | **Due in One Yar** | **Due in One Yar** | **One to Five Years** | **One to Five Years** | **Five to Ten Years** | **Five to Ten Years** | **After Ten Years** | **After Ten Years** | **Total Investment<br>Securities** | **Total Investment<br>Securities** |
|  | **Fair**<br>**Value** | **Weighted<br>Average**<br>**Yield** | **Fair<br>Value** | **Weighted<br>Average<br>Yield** | **Fair**<br>**Value** | **Weighted<br>Average**<br>**Yield** | **Fair**<br>**Value** | **Weighted<br>Average**<br>**Yield** | **Fair**<br>**Value** | **Weighted**<br>**Average**<br>**Yield** |
|  | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
|  Securities available for sale: |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; U.S. government agencies | 962 | 0.70% | 6865 | 3.61% |  | —% |  | —% | 7827 | 3.24% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Corporate bonds | 2818 | 1.14% | 855 | 2.00% |  | —% |  | —% | 3673 | 1.36% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Municipal bonds | 1338 | 1.97% | 298 | 2.05% |  | —% |  | —% | 1636 | 1.98% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Mortgage-backed securities | 10 | 1.99% | 48 | 2.42% | 282 | 1.91% | 2001 | 1.98% | 2341 | 1.98% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total securities available for sale | 5128 |  | 8066 |  |  |  | 2001 |  | 15477 |  |

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***Securities Held-to-Maturity***

At both December 31, 2022, and 2021 Regal Bancorp held securities held-to-maturity with a fair value of $2.6 million. These investments were comprised principally of a foreign government bond and annuities and management has the intent and ability to hold these investments to maturity.

The following table sets forth information regarding fair values, weighted average yields, and maturities of held to maturity investments. The yields have been computed on a tax equivalent basis. Maturities are based on the final contractual payment dates and do not reflect the impact of prepayments or early redemptions that may occur:

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| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **As of December 31, 2022** | **As of December 31, 2022** | **As of December 31, 2022** | **As of December 31, 2022** | **As of December 31, 2022** | **As of December 31, 2022** | **As of December 31, 2022** | **As of December 31, 2022** | **As of December 31, 2022** | **As of December 31, 2022** |
|  | **Due in One Year** | **Due in One Year** | **One to Five**<br>**Years** | **One to Five**<br>**Years** | **Five to Ten Years** | **Five to Ten Years** | **After Ten Years** | **After Ten Years** | **Total Investment<br>Securities** | **Total Investment<br>Securities** |
|  | **Fair**<br>**Value** | **Weighted<br>Average**<br>**Yield** | **Fair<br>Value** | **Weighted<br>Average<br>Yield** | **Fair**<br>**Value** | **Weighted<br>Average**<br>**Yield** | **Fair**<br>**Value** | **Weighted<br>Average**<br>**Yield** | **Fair**<br>**Value** | **Weighted**<br>**Average**<br>**Yield** |
|  | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
|  Securities held to maturity: |  |  |  |  |  |  |  |  |  |  |
|  Foreign government bond | 200 | 1.57% | 100 | 2.50% |  | —% |  | —% | 300 | 2.50% |
|  Annuities |  | —% |  | —% |  | —% | 2292 | 0.42% | 2292 | 0.42% |
|  Total securities available for sale | 200 |  | 100 |  |  |  | 2292 |  | 2592 |  |

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***Loans Receivable***

***Loan Portfolio Composition***

The following table sets forth the composition of Regal Bank's loan portfolio by type at the date indicated.

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| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2022** | **2021** |
|  | **(In thousands)** | **(In thousands)** |
|  Owner occupied commercial real estate | $55693 | $57294 |
|  Other commercial real estate | 87732 | 101744 |
|  Multi-family | 181725 | 172831 |
|  Commercial and industrial | 13374 | 22805 |
|  Consumer | 6082 | 6919 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total gross loans | 344606 | 361593 |
|  Deferred loan fees and costs, net | $264 | $27 |
|  Allowance for loan losses | (5611) | (5611) |
|  Loans, net | $339259 | $356009 |

---

Loans receivable, before deducting the allowance for loan losses, amounted to $344.6 million at December 31, 2022, compared to $361.6 million at December 31, 2021. The $17.0 million decrease was driven principally by a $14.0 million decrease in other commercial real estate loans.

New loan originations in 2022 were $52.7 million compared to $43.4 million (excluding PPP loan originations) in 2021. New loans originated in 2022 had a weighted-average initial interest rate of 4.41%, compared to 3.61% in 2021.

The initial average interest rate of new non-PPP loans originated in 2022 and 2021 was lower than the average interest rate on Regal Bancorp's overall loan portfolio because of generally low market interest rate conditions during 2022 and 2021.

There were no PPP loans originated during 2022. Regal Bancorp originated $15.0 million in PPP loans in 2021. The PPP loans all have fixed interest rates of 1.0%, and were all paid off during 2022.

At December 31, 2022, Regal Bancorp's loan portfolio was comprised of $331.2 million of loans secured by real estate and $13.4 million of commercial loans, compared to $338.8 million of loans secured by real estate, $9.9 million of unsecured and government guaranteed PPP loans, and $12.9 million of other commercial loans at December 31, 2021.

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The following table set forth the contractual maturities of our total loan portfolio at December 31, 2022. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less. Because the tables present contractual maturities and do not reflect repricing or the effect of prepayments, actual maturities may differ.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Owner**<br>**Occupied<br>Commercial**<br>**Real Estate** | **Other<br>Commercial<br>Real Estate** | **Multi-<br>family** | **Commercial<br>and**<br>**Industrial** | **Consumer** | **Total** |
|  | **(In thousands)** | **(In thousands)** | **(In thousands)** | **(In thousands)** | **(In thousands)** | **(In thousands)** |
|  Amounts due in: |  |  |  |  |  |  |
|  One year or less | 940 | 3255 | 756 | 3081 | 212 | 8244 |
|  After one year through five years | 2844 | 5645 | 25499 | 3236 | 1816 | 39040 |
|  After five years through 15 years | 12017 | 35366 | 109978 | 3708 | 4054 | 165123 |
|  After 15 years | 39892 | 43466 | 45492 | 3349 |  | 132199 |
|  Total | 55693 | 87732 | 181725 | 13374 | 6082 | 344606 |

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The following table sets forth our fixed and adjustable-rate loans at December 31, 2022 that are contractually due after December 31, 2023.

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| | | | |
|:---|:---|:---|:---|
|  | **Due after December 31, 2023** | **Due after December 31, 2023** | **Due after December 31, 2023** |
| | **Fixed** | **Adjustable** | **Total** |
| | | **(In thousands)** | |
|  Real estate loans: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Residential real estate: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Consumer | 1982 | 3901 | 5883 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Multi-Family | 9604 | 171364 | 180968 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Owner occupied commercial real estate | 4081 | 50698 | 54779 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other commercial real estate | 321 | 84247 | 84568 |
|  Commercial and Industrial |  | 10164 | 10164 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total loans | 15988 | 323584 | 339572 |

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***Non-performing Assets; Nonaccrual Loans; TDR Loans***

Non-performing assets include loans that are 90 or more days past due or on non-accrual status, including troubled debt restructurings ("TDRs") on non-accrual status, and real estate and other loan collateral acquired through foreclosure and repossession. Loans 90 days or greater past due may remain on an accrual basis if adequately collateralized and in the process of collection. At December 31, 2022, we did not have any accruing loans past due 90 days or greater. For non-accrual loans, interest previously accrued but not collected is reversed and charged against income at the time a loan is placed on non-accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Real estate that we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as foreclosed real estate until it is sold. When property is acquired, it is initially recorded at the fair value, less estimated costs to sell, at the date of foreclosure, establishing a new cost basis. Holding costs and declines in fair value after acquisition of the property result in charges against income. There is no foreclosed real estate recorded at December 31, 2022, nor are there loans for which formal foreclosure proceedings are in process.

There were no TDRs at December 31, 2022 and 2021.

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| | | |
|:---|:---|:---|
|  | **2022** | **2021** |
|  | **(Dollars in thousands)** | **(Dollars in thousands)** |
|  Loans accounted for on a non-accrual basis: Real estate loans: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Consumer | $204 | $216 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other commercial real estate | 337 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total real estate loans | 541 | 216 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total non-accrual loans | 541 | 216 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total non-performing assets | 541 | 216 |
|  Non-accrual loans to total loans | 0.16% | 0.06% |
|  Non-accrual loans to total assets | 0.11% | 0.04% |
|  Non-performing assets to total assets | 0.11% | 0.04% |

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***Allowance for Loan Losses***

Regal Bancorp's allowance for loan losses was $5.6 million, or 1.63% of total loans at December 31, 2022, compared to $5.6 million, or 1.55% of total loans, at December 31, 2021. The allowance for loan losses did not change because there were no charge-offs or recoveries record during the year ended December 31, 2022, and the result of management's judgment that the allowance for loan losses was adequately funded to cover the inherent risks in the loan portfolio as of the balance sheet dates. At December 31, 2022, the allowance for loan losses consisted entirely of an Accounting Standards Codification ("ASC") 450 general reserve and there were no specific reserves.

Credit ratios pertaining to the allowance for loan losses are as follows:

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| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2022** | **2021** |
|  Nonperforming loans as a percent of gross loans | 0.16% | 0.06% |
|  Nonperforming assets as a percent of gross assets | 0.11% | 0.04% |
|  Allowance to total loans outstanding | 1.63% | 1.55% |
|  Allowance to non-accrual loans | 1037.15% | 2597.69% |

---

The following table sets forth the breakdown of the allowance for loan losses by loan category at the dates indicated:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
|  | **Amount** | **Percent of<br>Allowance to**<br>**Total Allowance** | **Percent of<br>Loans in<br>Category of<br>Total Loans** | **Amount** | **Percent of<br>Allowance to<br>Total Allowance** | **Percent of<br>Loans in<br>Category of<br>Total Loans** |
|  Real estate loans: |  |  |  |  |  |  |
|  Residential real estate: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Consumer | 88 | 1.6% | 1.8% | $114 | 2.0% | 1.9% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Multi-Family | 2453 | 43.7 | 52.7 | 2271 | 40.5 | 47.8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Owner occupied commercial real estate | 808 | 14.4 | 16.2 | 802 | 14.3 | 15.8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other Commercial real estate | 1449 | 25.8 | 25.5 | 1630 | 29.1 | 28.1 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total real estate loans | 4798 | 85.5 | 96.1 | 4817 | 85.8 | 93.7 |
|  Commercial and Industrial | 254 | 4.5 | 3.9 | 214 | 3.8 | 6.3 |
|  Unallocated | 559 | 10.0 | N/A | 580 | 10.3 | N/A |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total loans | 5611 | 100.0% | 100.0% | 5611 | 100.0% | 100.0% |

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Management performs a quarterly review of the appropriateness of the allowance for loan losses, which takes into consideration, among other factors, the change in Regal Bancorp's volume of loans outstanding, recoveries of prior loan charge offs, the quantity and specific review of problem loans outstanding, the history of prior loan losses and any credit risk rating upgrades or downgrades in the loan portfolio. The assessment of the appropriateness of the allowance for loan losses is aided by an independent loan review consultant that reviews selected components of our loan portfolio on a quarterly basis and validates the methodology by which Regal Bancorp determines the allowance for loan losses on an annual basis.

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***Contractual Obligations, Commitments, Contingencies, and Off-Balance Sheet Financial Information***

Regal Bancorp's off-balance sheet arrangements relate to unfunded loan commitments and lease obligations. See Note 1 to Regal Bancorp's financial statements regarding Regal Bancorp's adoption of the new lease accounting standard. There were no other material changes during the year ended December 31, 2022.

***Restricted Equity Investments***

Restricted Equity Investments amounted to $784,000 at December 31, 2022, compared to $810,000 at December 31, 2021, and was comprised of a required investment in Federal Home Loan Bank of New York ("FHLB") stock and the common stock of Regal Bancorp's correspondent bank, Atlantic Community Bankers Bank. Regal Bancorp makes these investments in order to have access to borrowing facilities and other banking services. The reduction in such investments was due to a reduction in the required FHLB investment.

***Goodwill and Intangible Assets***

Goodwill was $1.0 million at both December 31, 2022 and 2021. Based on the results of the annual impairment test, Regal Bancorp did not recognize any impairment in 2022 and 2021.

Intangibles assets were $38,000 at December 31, 2022 and $57,000 at December 31, 2021. Regal Bancorp expects to amortize its core deposit intangibles over the next two years.

***Deferred Income Tax Asset, net***

Regal Bancorp's net deferred income tax asset amounted to $2.3 million at December 31, 2022, an increase from the $2.1 million deferred tax asset at December 31, 2021. The largest component of the deferred tax asset relates principally to the provision for loan losses, which is immediately expensed in accordance with GAAP for income statement purposes but may not be fully deductible in the current period for federal and state income tax purposes.

***Deposits***

Deposits are a major source of our funds for lending and other investment purposes. Total deposits at December 31, 2022 decreased to $426.0 million compared to $509.6 million at December 31, 2021. At December 31, 2022, certificates of deposits totaled $124.5 million, and demand, savings and money market accounts aggregated to $301.5 million compared to $163.6 million of certificates of deposits, and checking, savings and money market accounts of $346.0 million at December 31, 2021. Certificates of deposits represented 29.2% of total deposits at December 31, 2022, compared to 32.1% of total deposits at December 31, 2021.

The following table sets forth the average balances of deposits for the periods indicated

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
|  | **2022** | **2022** | **2022** | **2021** | **2021** | **2021** |
|  | **Average<br>Balance** | **Average<br>Rate** | **Percent of<br>Total<br>Deposits** | **Average<br>Balance** | **Average<br>Rate** | **Percent of<br>Total<br>Deposits** |
|  Noninterest-bearing demand deposits | $111083 | —% | 24.0% | $109515 | —% | 21.7% |
|  Interest-bearing demand deposits | 96206 | 0.16 | 20.8 | 90651 | 0.13 | 17.9 |
|  Money market deposits | 65567 | 0.14 | 14.2 | 64562 | 0.30 | 12.8 |
|  Savings | 54569 | 0.10 | 11.8 | 48955 | 0.11 | 9.7 |
|  Certificates of deposit | 135402 | 0.74 | 29.3 | 191480 | 1.11 | 37.9 |
|  Total | 462827 | 0.28% | 100.0% | $505163 | 0.49% | 100.0% |

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The following table sets forth the maturity of our uninsured certificates of deposit at December 31, 2022.

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| | |
|:---|:---|
| | **December 31,**<br>**2022** |
|  | *(Dollars in thousands)* |
|  Amounts due in: |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Three months or less | $2777 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; After three months to six months | 2273 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; After six months to 12 months | 4907 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; After 12 months | 7998 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $17955 |

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***FHLB Borrowings, Subordinated Debentures, Accrued Interest Payable and Other Liabilities***

FHLB borrowings amounted to $5.0 million at both December 31, 2022, and 2021.

Subordinated debentures amounted to $9.9 million at both December 31, 2022, and 2021. In June 2017, Regal Bancorp completed a $10.0 million private placement of unsecured subordinated debt (the "Notes"). The Notes bear an initial interest rate of 7.25% and mature on July 1, 2027. The interest rate on the Notes were fixed from June 21, 2017 until June 30, 2022. Interest was paid semi-annually during the fixed period. Thereafter, Regal Bancorp began paying quarterly interest on the Notes at a variable rate equal to three month London Interbank Offer Rate ("LIBOR") plus 5.405%. The three month LIBOR is being discontinued in 2023. Regal Bancorp is currently reviewing its options in replacing this index. The subordinated debt is reported net of debt issuance costs of $85,000 at December 31, 2022 and $100,000 at December 31, 2021.

Information pertaining to borrowings, both FHLB borrowings and subordinated debentures, is detailed in the following table.

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| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
|  | **(***Dollars in thousands***)** | **(***Dollars in thousands***)** |
|  Balance outstanding at end of period | $14915 | $14900 |
|  Average amount outstanding during the period | $14908 | $16773 |
|  Weighted average interest rate during the period | 6.24% | 5.71% |
|  Maximum outstanding at any month end | $14915 | $16778 |
|  Weighted average interest rate at end of period | 6.24% | 5.87% |

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***Shareholders' Equity***

Shareholders' equity increased to $49.1 million at December 31, 2022 from $46.7 million at December 31, 2021, reflecting net income of $3.1 million and a $648,000 comprehensive loss recorded through accumulated other comprehensive income/loss.

**Comparison of Results of Operations for the Years Ended December 31, 2022 and 2021** 

***Net Interest Income***

Net interest income is Regal Bancorp's primary source of earnings and is influenced by the amount, distribution and repricing characteristics of Regal Bancorp's interest-earning assets and interest-bearing liabilities, as well as by the relative levels and movements of interest rates. Net interest income is the difference between interest income earned on Regal Bancorp's interest-earning assets, principally loans, securities, time deposits, and overnight investments, and interest expense paid on Regal Bancorp's interest-bearing liabilities, principally deposits and borrowings.

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Net income information is as follows:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31,** | **December 31,** | **Change** | **Change** |
|  | **2022** | **2021** | **Amount** | **Percent** |
|  | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** | **(***Dollars in thousands, except per share amounts***)** |
|  Net interest income | $16030 | $14647 | 1383 | 44.00 |
|  Provision for loan losses |  | 45 | (45) | (100.00) |
|  Noninterest income | 756 | 969 | (213) | (21.98) |
|  Non-interest expenses | 12298 | 11549 | 749 | 6.49 |
|  Income tax expense | 1394 | 1125 | 269 | 23.91 |
|  Net income | 3094 | 2897 | 197 | 6.80 |
|  Basic earnings per share | 1.02 | 0.96 | 0.06 | 6.25 |
|  Diluted earnings per share | 1.02 | 0.96 | 0.06 | 6.25 |
|  Return on average assets | 0.59 | 0.51 | 0.08 | 15.46 |
|  Return on average equity | 5.41 | 5.28 | 0.12 | 2.35 |

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Regal Bancorp's net interest income increased to $16.0 million for 2022 from $14.6 million for 2021. The $1.4 million increase reflected principally the effect of a $1.1 million decrease in interest expense due to the low interest rate environment during 2022, and a $295,000 increase in interest income earned on assets due to the Federal Reserve aggressively increasing the federal funds rate during 2022 and the resulting increase on interest earned on cash held at the Federal Reserve Bank.

Regal Bancorp's average interest-earning assets decreased by $42.6 million from $558.6 million during 2021 to $516.0 million during 2022, reflecting principally a decrease of $31.7 million in the average balance of loans, and a decrease of $11.2 million in other interest-earnings assets. At the same time, average deposits decreased by $43.9 million when comparing 2022 to 2021. Average shareholders' equity increased by $2.4 million between the periods. Regal Bancorp's average noninterest-bearing liabilities outstanding increased from $157.1 million for during 2021 to $160.1 million during 2022.

Regal Bancorp's interest rate spread increased to 2.93% for 2022 from 2.42% for 2021 and Regal Bancorp's interest rate margin increased to 3.11% for 2022 from 2.64% for 2021. These increases were driven principally by the pay down of relatively low yield PPP loans held during 2021.

The following table provides information on average assets, liabilities and shareholders' equity; yields earned on interest-earning assets; and rates paid on interest-bearing liabilities for the periods indicated. The yields and rates shown are based on a computation of income/expense (including any related fee income or expense) for each year divided by average interest-earning assets/interest-bearing liabilities during each year. Average balances are based on daily balances. Net interest margin is computed by dividing net interest and dividend income by average interest-earning assets during each year. The interest rate spread is the difference between the yield earned on interest-earning assets and the rate paid on interest-bearing liabilities. It does not show the effect of noninterest- bearing liabilities and capital. The net interest margin is greater than the interest rate spread due to the additional income earned on assets funded by noninterest-bearing liabilities, demand deposits and shareholders' equity.

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The increase in net interest income during the period was due to the low interest rate environment during 2022. The decline in interest expense on deposits exceeded the decrease in interest income earned on loans as the weighted average costs of deposits declined 23 basis points and the weighted average yield on loans increased 31 basis points.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Years ended December 31,** | **Years ended December 31,** | **Years ended December 31,** | **Years ended December 31,** | **Years ended December 31,** | **Years ended December 31,** |
|  | **2022** | **2022** | **2022** | **2021** | **2021** | **2021** |
|  | **Average<br>Balance** | **Interest<sup>(1)</sup>** | **Yield<br>Cost<sup>(1)</sup>** | **Average<br>Balance** | **Interest<sup>(1)</sup>** | **Yield<br>Cost<sup>(1)</sup>** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Assets: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Interest-earning assets: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loans <sup>(2)</sup> | 346485 | 15666 | 4.52% | 378209 | 17221 | 4.55% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Securities |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Securities—taxable investments | 14394 | 212 | 1.47% | 11300 | 204 | 1.81% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Securities—nontaxable investments | 3436 | 94 | 2.74% | 6208 | 117 | 1.88% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other interest-earnings assets <sup>(3)</sup> | 151664 | 2328 | 1.53% | 162903 | 511 | 0.31% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest-earning assets | 515979 | 18300 | 3.55% | 558620 | 18053 | 3.23% |
|  Noninterest-earning assets | 10819 |  |  | 10913 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total assets | 526798 |  |  | 569533 |  |  |
|  **Liabilities and stockholders' equity:** |  |  |  |  |  |  |
|  Interest-bearing liabilities: Interest-bearing demand deposits | 96206 | 150 | 0.16% | 90651 | 118 | 0.13% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Money market deposits | 65567 | 89 | 0.14% | 64562 | 76 | 0.12% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Savings | 54569 | 54 | 0.10% | 48955 | 54 | 0.11% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Time deposits | 135402 | 1006 | 0.74% | 191480 | 2127 | 1.11% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest-bearing deposits | 351744 | 1299 | 0.37% | 395648 | 2375 | 0.60% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; FHLBNY and Fed borrowings | 5000 | 157 | 3.14% | 6881 | 215 | 3.12% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Short-term borrowings |  |  | 0.00% |  |  | 0.00% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Subordinated debentures | 9915 | 788 | 7.95% | 9892 | 742 | 7.50% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest-bearing liabilities | 366659 | 2244 | 0.61% | 412421 | 3332 | 0.81% |
|  Noninterest-bearing liabilities | 160139 |  |  | 157112 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities | 469562 |  |  | 514680 |  |  |
|  Total stockholders' equity | 57236 |  |  | 54853 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities and stockholders' equity | 526798 |  |  | 569533 |  |  |
|  Net interest-earning assets | 149320 |  |  | 146199 |  |  |
|  Full tax-equivalent net interest income |  | 16056 |  |  | 14721 |  |
|  Less: tax equivalent adjustments |  | (26) |  |  | (74) |  |
|  Net interest income |  | 16030 |  |  | 14647 |  |
|  Interest rate spread <sup>(1)(4)</sup> |  |  | 2.93% |  |  | 2.42% |
|  Net interest margin <sup>(1)(5)</sup>  |  |  | 3.11% |  |  | 2.64% |
|  Average interest-earning assets to average interest-bearing liabilities |  | 140.72% |  |  | 135.45% |  |
|  **Supplemental Information:** |  |  |  |  |  |  |
|  Total deposits, including noninterest-bearing demand deposits | 426179 | 1299 | 0.30% | 505163 | 2375 | 0.47% |
|  Total deposits, FHLBNY borrowings, and sub debt<br> including noninterest-bearing demand deposits | 441094 | 2244 | 0.51% | 521936 | 3332 | 0.64% |

---

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(1) Income on securities, as well as resulting yields, interest rate spread and net interest margin, are presented
on a tax -equivalent basis. The tax-equivalent adjustments are deducted from tax-equivalent net interest income to agree to amounts reported in the consolidated
statements of net income. For the year ended December 31, 2022 and 2021, yields on securities before tax-equivalent adjustments were 1.57% and 1.41%, respectively.

(2) Loans on non-accrual status are included in average balances.

(3) Includes FHLB stock and associated dividends.

(4) Interest rate spread represents the difference between the tax-equivalent yield on interest-earning assets and the cost of interest- bearing liabilities.

(5) Net interest margin represents net interest income (tax-equivalent basis) divided by average interest-earning assets.

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The following table provides information regarding changes in interest and dividend income and interest expense. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in rate (change in rate multiplied by prior volume), (2) changes in volume (change in volume multiplied by prior rate) and (3) changes in rate-volume (change in rate multiplied by change in volume).

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| | | | |
|:---|:---|:---|:---|
|  | **For the Years Ended**<br>**December 31, 2022**<br>**Compared to 2021**<br>**Increase (Decrease) Due to:** | **For the Years Ended**<br>**December 31, 2022**<br>**Compared to 2021**<br>**Increase (Decrease) Due to:** | **For the Years Ended**<br>**December 31, 2022**<br>**Compared to 2021**<br>**Increase (Decrease) Due to:** |
|  | **Volume** | **Rate** | **Net** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Interest income: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loans | (1434) | (121) | (1555) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Securities |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Securities—taxable investments | 46 | (38) | 8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Securities—nontaxable investments | (76) | 53 | (23) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other interest-earning assets | (35) | 1852 | 1817 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest income | (1499) | 1746 | 247 |
|  Interest expense: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deposits | (263) | (813) | (1076) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; FHLBNY Borrowings | (59) | 1 | (58) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Subordinated debentures | 2 | 44 | 46 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest expense | (320) | (768) | (1088) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Change in fully tax-equivalent net interest income | (1179) | 2514 | 1335 |

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***Provision for Loan Losses***

Regal Bancorp determines the amount of a provision for loan losses each quarter based on Regal Bancorp's review of the adequacy of the allowance for loan losses. For the year ended December 31, 2022, Regal Bancorp's reviews did not result in Regal Bancorp recording a provision for loan losses, compared to a provision of $45,000 for the year ended December 31, 2021. The decreased provision for 2022 was a primarily a function of a $17.0 million, or 4.7%, decrease in the loan portfolio during 2022.

***Noninterest Income***

Noninterest income decreased to $756,000 from $969,000 for 2022. The decrease was primarily due to a $243,000 decrease in gains from sales of loans.

***Noninterest Expenses***

Noninterest expenses increased by 6.5% or $749,000 to $12.3 million for 2022 as compared to 2021. Regal Bancorp's efficiency ratio, representing noninterest operating expenses as a percentage of income, was 73.3% for 2022 compared to 74.2% for 2021.

Salaries and employee benefits increased to $7.0 million for the year ended December 31, 2022, from $6.6 million for the year ended December 31, 2021. The increase from 2021 to 2022 is primarily the result of an increase in bonus expense. At December 31, 2022, Regal Bancorp had 66 full-time equivalent employees, compared to 72 at December 31, 2021.

Professional fees expense increased by $433,000 from 2021 to 2022, primarily due to an increase in legal and audit fees.

***Provision for Income Taxes***

Regal Bancorp's provision for income taxes increased by $269,000 from 2021 to 2022, due to a $466,000 increase in pretax net income. As a result, Regal Bancorp's effective tax rate (inclusive of state and local taxes) was 31.1% for 2022 compared to 28.0% for 2021.

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##### [**Table of Contents**](#toc)
**BUSINESS OF REGAL BANCORP AND REGAL BANK** 

Regal Bank is a New Jersey state chartered commercial bank headquartered in Livingston, Essex County, New Jersey, in the densely populated north eastern portion of New Jersey. Regal Bank began operations in December 2007 and conducts business from its main office and corporate headquarters in Livingston New Jersey and nine other branch offices in Essex, Morris, Somerset and Union Counties in New Jersey. Regal Bank operates as an independent community bank offering a broad range of deposit and loan products and services to the general public. Regal Bank focuses, in particular, on multi-family and commercial real estate lending in Regal Bank's trade area, which it defines as northern and central New Jersey.

Regal Bancorp became the holding company for Regal Bank in 2017. Apart from its ownership and control of Regal Bank, Regal Bancorp conducts no other business. At December 31, 2022, Regal Bancorp had $496 million in total assets, $339 million in net loans, $426 million in deposits and total equity of $49 million.

Regal Bank is a member of the Federal Home Loan Bank of New York and its deposits are insured up to the applicable limits by the Federal Deposit Insurance Corporation. The address of Regal Bancorp's principal executive office is 570 West Mt. Pleasant Avenue, Livingston, New Jersey 07039 and its telephone number is (973) 716-0600. As of December 31, 2022, Regal Bancorp had 66 full-time employees and 67 total employees.

**Market Area** 

New Jersey is America's most densely populated state and is one of the largest banking markets in terms of customers. Regal Bank's primary trade area, which is comprised of Essex, Hudson, Morris Somerset and Union Counties, reflects these statewide characteristics. The economy in this market area is based upon a variety of service businesses, including financial services and local small and mid-sized businesses, as well as manufacturing. In addition, as part of the New York metropolitan area, Regal Bank's trade area contains a large number of commuters who work in New York City.

**Business Strategy** 

Regal Bank was established based on the belief that there was and continues to be excellent potential for a locally owned and managed commercial bank in its market area. In recent years as a result of increased bank consolidations and mergers in New Jersey, many local banks have been acquired by larger and out-of-state institutions. Regal Bank believes that this consolidation and merger activity has made it more difficult for small and mid-sized businesses to obtain prompt service and access to decision-makers in many financial institutions. Regal Bank seeks to serve its customers through a combination of old-fashioned personal service, a high level of responsiveness, state-of-the-art banking technology and convenient hours.

To attract the business of individuals, businesses and professionals, Regal Bank offers a broad range of deposit and loan products and banking services. Products and services provided include personal and business checking accounts, retirement accounts, money market accounts, time and savings accounts at competitive interest rates, wire transfers, access to automated teller services, on-line banking, remote deposit capture and mobile banking. In addition, Regal Bank offers safe deposit boxes.

**Lending Activities** 

Regal Bank offers a variety of loan products to its commercial and retail customers. Regal Bank's lending focus is primarily on multi-family and commercial real estate loans. To a lesser extent, Regal Bank also makes consumer loans, commercial and industrial loans, home equity lines of credit and other consumer loans.

Regal Bank's commercial real estate loans include loans secured by multi-family residential properties, mixed-use properties, office buildings, industrial and other commercial properties located principally in its primary lending areas. As of December 31, 2022, Regal Bank's loan portfolio included $181.7 million of multi-family real estate loans, consisting of $87.7 million of loans secured by non-owner-occupied commercial properties and $55.7 million of loans secured by owner-occupied commercial properties.

Regal Bank offers fixed-rate terms on its commercial real estate loans. Rates are typically fixed for a five-year period and are subject to adjustment every five years throughout the life of the loan. Maturities range from 15 to 30 years with amortization periods up to 30 years for loans secured by multi-family properties and 25 years for all other commercial real estate loans.

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##### [**Table of Contents**](#toc)
For all commercial and multi-family real estate loans, Regal Bank generally requires a minimum debt service coverage ratio of 1.25x and maximum loan-to-value ratio of 75% for purchase transactions and 70% for refinancings. When each loan is underwritten, it is stress tested using an increased vacancy factor and interest rate.

Additionally, each managing principal's personal financial condition is reviewed, including a global cash flow analysis. All of Regal Bank's commercial real estate loans, except for loans secured by multi-family properties, carry personal guarantees of the principals of the borrowers. For multi-family real estate loans, all managing principals are required to execute a carve-out guaranty agreement. This document details numerous acts, any of which, if committed by the principal, will trigger a personal guaranty of the loan.

Multi-family loans primarily consist of borrowings secured by residential apartment buildings containing anywhere from six to over 60 units. Typically these loans are made to borrowing entities whose principals have significant experience in managing such properties.

The management of Regal Bank believes that the risk presented by loans secured by multi-family properties is mitigated by the fact that the rental income supporting repayment of the loan comes from multiple tenants and is not commercial in nature.

Regal Bank management believes that while its overall commercial real estate loan concentration is elevated, it does not represent excessive or undue exposure or risk of loss. Regal Bank's loan portfolio reflects a balanced mix of property types and a sub-concentration in multi-family loans.

Regal Bank manages credit risk through conservative underwriting policies and procedures, loan monitoring practices, external loan reviews and portfolio segmentation analysis and stress testing.

**Investment Activities** 

Regal Bank maintains a relatively small investment portfolio. At both December 31, 2022 and 2021 the investment portfolio totaled $19.0 million. Regal Bank views the investment portfolio as a source of earnings and liquidity and a tool for management of interest rate risk. Decisions on types of investments are dictated by investment and balance sheet management policies approved by the Board of Directors. Regal Bank's Investment/Asset Liability Committee of the Board of Directors sets investment maturity guidelines and strategies based on Regal Bank's financial goals and interest rate sensitivity.

Debt and equity securities are classified as either held to maturity ("HTM") or as available for sale ("AFS"). Investment securities that Regal Bank has the positive intent and ability to hold to maturity are classified as HTM securities and reported at amortized cost. Investment securities not classified as HTM nor held for the purpose of trading in the near term are classified as AFS securities and reported at fair value, with unrealized gains and losses excluded from earnings and reported as accumulated other comprehensive income/(loss), a separate component of shareholders' equity, net of tax.

At both December 31, 2022 and 2021, the held to maturity and available for sale investment portfolios totaled $2.6 million and $15.5 million, respectively. Investments as of such dates consisted of U.S. government agency obligations, mortgage-backed securities, corporate bonds, municipal bonds, and annuities.

**Sources of Funds** 

Regal Bank uses deposits and borrowings to finance lending and investment activities. Regal Bank utilizes deposits gathered in its marketplace as its first preference for funding. Borrowing sources include short and long- term Federal Home Loan Bank of New York advances that utilize Regal Bank's investment and loan portfolios as collateral.

**Competition** 

The banking business is highly competitive. Regal Bank faces substantial immediate competition and potential future competition both in attracting deposits and in originating loans. Regal Bank competes with numerous commercial banks, savings banks and savings and loan associations, most of which have assets, capital and lending limits larger than those of Regal Bank. Other competitors include money market mutual funds, mortgage bankers, insurance companies, stock brokerage firms, regulated small loan companies, credit unions and issuers of commercial paper and other securities, as well as "fintech" companies, many of which partner with insured depository institutions to offer credit and deposit products online.

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Regal Bank's larger competitors have greater financial resources to finance wide-ranging advertising campaigns. However, we utilize limited media advertising together with referrals and employee calling programs.

Additionally, Regal Bank competes for business by providing high quality, personal service to customers, customer access to our decision-makers and competitive interest rates and fees. As a small, independent, community-based bank, Regal Bank seeks to hire and retain quality employees who desire greater responsibility than may be available working for a larger employer and who are attracted by the opportunity to participate in a community bank. Additionally, the bank management experience of Mr. Orbach and Mr. Lupo, as well as the local real estate and other business activities of our directors, help us to continue to develop business relationships.

**Supervision and Regulation** 

***Bank Regulation***

Regal Bancorp is subject to supervision, regulation and examination by the Federal Reserve. In addition, Regal Bancorp is subject to a variety of local, state and federal laws.

Regal Bank is subject to supervision, regulation and examination by the New Jersey Department of Banking and Insurance and the FDIC. In addition, Regal Bank is subject to a variety of local, state and federal laws.

Banking regulations include, but are not limited to the following: permissible types and amounts of loans, investments and other activities, capital adequacy, branching, interest rates on loans and the safety and soundness of banking practices.

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##### [**Table of Contents**](#toc)
**MANAGEMENT OF SR BANCORP** 

**Shared Management Structure** 

The directors of SR Bancorp are the same persons who are the directors of Somerset Savings Bank. In addition, each executive officer of SR Bancorp is also an executive officer of Somerset Savings Bank. We expect that SR Bancorp and Somerset Regal Bank will continue to have common executive officers unless and until there is a business reason to establish separate management structures. To date, executive officers and directors have been compensated for their services only by Somerset Savings Bank.

Following completion of the closing of the conversion and related stock offering, and solely in connection with 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 upon completion of the Merger. 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.

**Executive Officers of SR Bancorp and Somerset Savings Bank** 

The following table lists the individuals who are the current executive officers of SR Bancorp and Somerset Savings Bank, their ages as of December 31, 2022 and the positions they hold.

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| | | |
|:---|:---|:---|
| **Name** | **Age** | **Position** |
| William P. Taylor | 65 | Chief Executive Officer |
| Christopher J. Pribula | 58 | President and Chief Operating Officer |
| Neil C. Viotto | 53 | Senior Vice President – Mortgage Lending |
| Harris M. Faqueri | 40 | Vice President and Chief Financial Officer |

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The executive officers of Somerset Savings Bank are, and the executive officers of Somerset Regal Bank will be, elected annually.

**Directors of Somerset Savings Bank and SR Bancorp** 

***Composition of our Board*.** SR Bancorp has six directors. Directors serve three-year staggered terms so that approximately one-third of the directors are elected at each annual meeting. Directors of Somerset Savings Bank are elected by SR Bancorp as its sole shareholder. Following completion of the merger with Regal Bancorp, we will increase the size of our board to nine members and will appoint David Orbach and two other directors, each of whom will be a current board member of Regal Bancorp, to our Board.

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The following table states our current directors' names, their ages as of December 31, 2022, and the years when they began serving as directors of Somerset Savings Bank and SR Bancorp and when their current term expires:

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| | | | | |
|:---|:---|:---|:---|:---|
| **Name** | **Position(s) Held With**<br> **Somerset Savings Bank** | **Age** | **Director**<br> **Since** | **Current Term<br>Expires** |
| William P. Taylor | Chairman and Chief Executive Officer | 65 | 2007 | 2025 |
| Mary E. Davey | Director | 73 | 1995 | 2024 |
| John W. Mooney | Director | 73 | 2011 | 2024 |
| Christopher J. Pribula | Director, President and Chief Operating Officer | 58 | 2018 | 2026 |
| James R. Silkensen | Director | 78 | 2011 | 2024 |
| Douglas M. Sonier | Director | 73 | 1986 | 2025 |

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***The Business Background of Our Directors and Executive Officers***. The business experience for the past five years of each of our directors and executive officers is set forth below. Unless otherwise indicated, directors and executive officers have held their positions for the past five years.

**Directors** 

***William P. Taylor*** has served as Chairman of the Board of Somerset Savings Bank since 2018. Mr. Taylor has been Chief Executive Officer of Somerset Savings Bank since 2013 and prior to that, served as President since 2009. Mr. Taylor holds a Bachelor's of Science degree from Wake Forest University in accounting. Mr. Taylor joined Somerset Savings Bank in 1983 as assistant vice president and controller. Mr. Taylor serves on the Board of the New Jersey Bankers Association and the Somerset County Business Partnership. Mr. Taylor's extensive executive leadership and banking experience and knowledge of our market area enhances the breadth of experience of the Board of Directors.

***Mary E. Davey*** has over 45 years of experience in upper management of non-profit organizations with responsibility for projects such as special needs housing, budget development and management, state and federal government grants, programmatic oversight and work with external auditors and outside funding bodies. Her profession includes membership in the National Association of Social Workers, Children's Interagency Coordinating Council of Bergen County Executive Board and Chair of the Mental Health – Education Partnership/Subcommittee and a member of the Suicide Prevention and Education Committee for Bergen County and the Ridgewood Stigma-free Committee. Ms. Davey holds a Bachelor's Degree in Sociology from Anna Maria College and a Master's Degree in Social Work from Rutgers University. Ms. Davey is a civic leader with deep management and budgeting experience.

***John W. Mooney*** is a retired Specialty Chemical Executive with 35 years of experience, progressing through manufacturing, marketing, business development and general management. He received a BS in Chemical Engineering from Rutgers University and an MBA from Rider University. He spent 33 years with National Starch and Chemical Company including seven years in a general manager position with global P&L responsibility for an $80 million unit supplying specialty chemicals to the Personal Care industry in the U.S., Europe and Asia. He spent the last few years of his career as Vice President of Business Development. Mr. Mooney serves on two non-profit boards: (1) The Central Jersey Housing Resource Center, where he also spent eight years as President; and (2) the Samaritan Homeless Interim Program. Mr. Mooney's business experience is of significant benefit to the Board of Directors.

***Christopher J. Pribula*** has been President and Chief Operating Officer of Somerset Savings Bank since 2019, having previously served as Executive Vice President and Chief Operating Officer beginning in 2013. Mr. Pribula worked in several community banks, including The Chatham Trust Company, West Jersey Community Bank, Prestige State Bank and Somerset Hills Bank, prior to joining Somerset Savings Bank in 2006 as Vice President – Operations Division Manager. Mr. Pribula serves on the Board of Raritan Valley Habitat for Humanity as Treasurer. Mr. Pribula is a graduate of Kean University with a degree in accounting. Mr. Pribula's extensive banking and accounting experience provides expertise to the Board of Directors.

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***James R. Silkensen*** is a graduate of Pacific University and received an MBA from Oregon State University**.** Mr. Silkensen worked at the Federal Home Loan Bank Board for 12 years and at the New Jersey League of Community Bankers for 25 years, serving the last few years as President. Mr. Silkensen served as Co-President and Chief Executive Officer of the New Jersey Bankers Association for the last two years of his career. He has served in various volunteer leadership positions at the Cranford United Methodist Church and currently serves on the Board of Trustees of the Charitable Foundation of the New Jersey Bankers Association. Mr. Silkensen brings significant banking and regulatory experience to the Board of Directors.

***Douglas M. Sonier*** is a graduate from Rider University with a BS in Accounting. He began his career with the accounting and advisory firm of WithumSmith+Brown where he was a partner for over 40 years and is currently an Emeritus Partner. His experience is primarily with privately held and not-for-profit businesses in the manufacturing, professional service, retail, and wholesale/distribution sectors. Mr. Sonier's accounting experience benefits our Board of Directors in its oversight of audit and financial reporting matters.

**Additional SR Bancorp and Somerset Regal Bank Directors Following the Proposed Merger** 

***David M. Orbach*** has served as Executive Chairman of the Board of Regal Bancorp since its formation and of Regal Bank since 2011. Mr. Orbach acted as the lead organizer in founding Regal Bank in 2007. Prior to joining Regal, from 2005 to 2011, Mr. Orbach was the Managing Partner and Founder of Gallant Funding, L.P., a private mezzanine and bridge lending company for commercial real estate in the New Jersey and New York regions. Before starting Gallant, he served as Vice President and General Counsel, as well as a Director and Corporate Secretary, of NorCrown Bank, a community bank based in Livingston, New Jersey. Prior to joining NorCrown, Mr. Orbach was an associate in the real estate department of the law firm of Pryor Cashman Sherman & Flynn LLP, located in New York City. Mr. Orbach is involved with numerous charitable and non-profit organizations and serves as a board member within several of these organizations. Mr. Orbach earned his B.A. in Economics from the City University of New York at Queens College and his J.D. from the Benjamin N. Cardozo School of Law. Mr. Orbach's extensive banking experience and commercial real estate experience is of significant benefit to the Board of Directors.

**Executive Officers of Somerset Savings Bank Who Are Not Also Directors** 

***Neil C. Viotto*** has served as Senior Vice President , Mortgage Lending and CRA Officer since October 2022, having previously served as Vice President Mortgage Originations Manager from 2011-2021. Mr. Viotto had served as Senior Vice President Director of Residential and Consumer Lending at Peapack Gladstone Bank from May 2021 through October 2022 before returning to the Somerset Savings Bank. Mr. Viotto currently serves on the Land Use Board for the Town of Clinton since November 2015. Mr. Viotto is a graduate of Kean University with a degree in Accounting.

***Harris M. Faqueri*** has served as Vice President/Chief Financial Officer since March 2021. Mr. Faqueri served as Vice President, Accounting at Investors Bank, Short Hills, New Jersey where he was responsible for the management and oversight of various accounting and reporting functions, including facets of financial reporting and compliance. Mr. Faqueri is a graduate of Rutgers University with a Bachelor's degree in Economics and an MBA in Professional Accounting**.**

**Board Independence** 

The Board of Directors has determined that each of our directors, other than Messrs. Orbach, Taylor and Pribula, would be considered independent under the Nasdaq Stock Market corporate governance listing standards. In determining the independence of our directors, the Board of Directors considered relationships between Somerset Savings Bank and our directors that are not required to be reported under "*Executive Compensation—Transactions With Certain Persons*," consisting of deposit accounts that our directors maintain at Somerset Savings Bank.

**Meetings and Committees of the Board of Directors of Somerset Savings Bank** 

We conduct business through meetings of our Board of Directors and its committees. During the year ended June 30, 2022, the Board of Directors of SR Bancorp did not meet and the Board of Directors of Somerset Savings Bank met 17 times, which included regular and special board meetings. The Board of Directors of SR Bancorp has met one time since its incorporation. Prior to completion of the conversion and the related stock offering, the Board of Directors of SR Bancorp will establish the following committees: the Compensation Committee, the Nominating and Corporate Governance Committee and the Audit Committee. Each of these committees operates under a written charter, which governs its composition, responsibilities and operations.

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Each of these committees operates under a written charter, which governs its composition, responsibilities and operations.

The table below sets forth the directors that will serve on each of the listed standing committees, other than those members of the board of Regal Bancorp who will join the board of SR Bancorp. Each member of each committee meets the Nasdaq Stock Market and the Securities and Exchange Commission independence requirements for such committee. The Board of Directors has determined that Mr. Sonier will qualify as an "audit committee financial expert" as such term is defined by the rules and regulations of the Securities and Exchange Commission.

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| | | |
|:---|:---|:---|
| **Audit Committee** | **Compensation Committee** | **Nominating and Corporate Governance Committee** |
| Douglas M. Sonier (Chair)<br> Mary E. Davey<br> John W. Mooney<br> James R. Silkensen | Mary E. Davey (Chair)<br> John W. Mooney<br> James R. Silkensen<br> Douglas M. Sonier | John W. Mooney (Chair)<br> Mary E. Davey<br> Douglas M. Sonier<br> James R. Silkensen |

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**Corporate Governance Policies and Procedures** 

In addition to having established committees of the Board of Directors, SR Bancorp has adopted policies to govern the activities of both SR Bancorp and Somerset Savings Bank, including a corporate governance policy and a code of business conduct and ethics. The corporate governance policy sets forth:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the duties and responsibilities of each director;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the composition, responsibilities and operation of the Board of Directors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the establishment and operation of board committees, including audit, nominating and compensation committees;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• succession planning;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• convening executive sessions of independent directors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the Board of Directors' interaction with management and third parties; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the evaluation of the performance of the Board of Directors and the chief executive officer.

SR Bancorp has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer and persons performing similar functions. The code of ethics is designed to deter wrongdoing and to promote honest and ethical conduct, the avoidance of conflicts of interest, full and accurate disclosure and compliance with all applicable laws, rules and regulations.

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**EXECUTIVE COMPENSATION** 

**Summary Compensation Table** 

The following information is furnished for our principal executive officer and the two most highly compensated executive officers (other than the principal executive officer) whose total compensation exceeded $100,000 for the fiscal year ended June 30, 2022. These individuals are sometimes referred to in this prospectus as the "named executive officers."

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name and Principal Position** | **Year** | **Salary** | **Non-equity<br>Incentive Plan<br>Compensation** | **All Other<br>Compensation <sup>(2)</sup>** | **Total** |
|  William P. Taylor<br> *Chief Executive Officer* | 2022 | $371700 | $22152 | $95782 | $489634 |
|  Christopher J. Pribula<br> *President and Chief Operating Officer* | 2022 | $303000 | $17580 | $53658 | $374238 |
|  David W. Wigg<sup>(1)</sup><br> *Senior Vice President* | 2022 | $163750 | $9630 | $4912 | $178292 |

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(1) Mr. Wigg retired from Somerset Savings Bank on December 30, 2022.

(2) The compensation represented by the amounts for 2022 set forth in the "All Other Compensation" column
for the Named Executive Officers is detailed in the following table:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **401(k) Plan<br>Employer**<br>**Contributions** | **Automobile<br>Allowance** | **Supplemental<br>Retirement Plan<sup>(3)</sup>** | **Total All Other**<br>**Compensation** |
|  William P. Taylor | $8775 | $10407 | $76600 | $95782 |
|  Christopher J. Pribula | $9090 | $8168 | $36400 | $53658 |
|  David W. Wigg | $4912 | $— | $— | $4912 |

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(3) Represents the contribution made to the Supplemental Executive Retirement Plan for the benefit of Messrs.
Taylor and Pribula.

***Employment Agreements.*** Somerset Savings Bank has entered into employment agreements with Messrs. Taylor and Pribula, which become effective as of the effective date of the mutual-to-stock conversion. The term of the employment agreement with Mr. Taylor will begin as of the effective date of the conversion and end on the third anniversary of that date. Upon notice to Mr. Taylor of at least 30 days prior to the expiration of the term of the agreement, Somerset Savings Bank may extend the term of the agreement for an additional twelve months. The initial term of the employment agreement with Mr. Pribula will begin as of the effective date of the conversion and end on the third anniversary of that date. Commencing on the first anniversary of the effective date of the agreement with Mr. Pribula and on each anniversary date thereafter, the term of the agreement will extend automatically for one additional year, so that the remaining term is again three years, unless either Somerset Savings Bank or Mr. Pribula gives notice to the other party of non-renewal. If either party provides a notice of non-renewal, the term will become fixed at that time and expire at the end of the then current term. Notwithstanding the foregoing, in the event SR Bancorp or Somerset Savings Bank (or Somerset Regal Bank) enters into a transaction that would constitute a change in control, as defined under the employment agreements, the term of the agreements would automatically extend so that they would expire no less than two years following the effective date of the change in control.

The employment agreements specify the base salaries of Messrs. Taylor and Pribula, which initially will be $460,000 and $400,000, respectively. The Board of Directors or the Compensation Committee of the Board of Directors of Somerset Savings Bank may increase, but not decrease, the executives' base salaries. In addition to base salary, the agreements provide that each executive will participate in any bonus plan or arrangement of Somerset Savings Bank in which senior management is eligible to participate and/or may receive a bonus on a discretionary basis, as determined by the Board of Directors or the Compensation Committee. Somerset Savings Bank will provide a target cash bonus opportunity for Mr. Taylor of at least 25% of his base salary and for Mr. Pribula of at least 20% of his base salary. Each executive is also entitled to participate in all employee benefit plans, arrangements and perquisites offered to employees and officers of Somerset Savings Bank and the reimbursement of reasonable travel and other business expenses incurred in the performance of his duties for Somerset Savings Bank. Somerset Savings Bank will also provide each executive with the use of an automobile and reimburse the executive for automobile-related expenses.

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Somerset Savings Bank may terminate the executives' employment, or the executives may resign from their employment, at any time with or without good reason. Under the employment agreements, in the event Somerset Savings Bank terminates an executive's employment without cause or the executive voluntary resigns for "good reason" (i.e., a "qualifying termination event"), Somerset Savings Bank will pay the executive a severance payment equal to the greater of (i) the remaining base salary and total annual bonus opportunity (based on the highest annual bonus earned during the three most recent calendar years prior to his date of termination) he would have received during the remaining term of the employment agreement or (ii) two time the sum of the executive's base salary and the average annual incentive bonus paid to the executive for the three most recently completed calendar years prior to the date of termination. In addition, the executives will be reimbursed for their monthly COBRA premium payments for up to 18 months.

If a qualifying termination event occurs at or within two years following a change in control of SR Bancorp or Somerset Savings Bank (or Somerset Regal Bank), the executive would be entitled to (in lieu of the payments and benefits described in the previous paragraph) a severance payment equal to three times the sum of (i) his base salary in effect as of the date of termination (or during the three preceding years, if higher) and (ii) and average annual total incentive bonus earned by the executive for the three most recently completed calendar years prior to the change in control (or, if greater, the annual total incentive bonus that would have been earned in the year of the change in control at target bonus opportunity). In addition, the executive would receive a lump sum payment equal to the value of 36 month's health care cost (based on COBRA premium payments).

For purposes of the employment agreements, the term "good reason" includes (i) a material reduction in the executive's base salary and/or aggregate incentive compensation opportunities (unless the reduction is part of a non-discriminatory reduction applicable to all executive officers), (ii) a material reduction in the executive's authority, duties or responsibilities, (iii) the failure to re-appoint the executive to his executive position or the failure to nominate and recommend the election of the executive to the Board of Directors of SR Bancorp or to appoint or nominate and elect the executive to the Board of Directors of Somerset Savings Bank, (iv) a relocation of the executive's principal place of employment by more than twenty miles or (v) a material breach of the employment agreement by the Bank.

The employment agreements terminate upon the executive's death or disability. Upon termination of employment (other than a termination in connection with a change in control), the executive will be required to adhere to one-year non-competition and non-solicitation restrictions set forth in his or her employment agreement.

The non-competition and non-solicitation covenants apply following a change in control for a period mutually to be agreed to by the parties, which will be no less than six months nor exceed two years. In the event payments and benefits provided to the executive become subject to Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), and after considering the value of the non-competition and non-solicitation covenants, the payments will be reduced if the reduction would leave the executive financially better off on an after-tax basis than if the executive received the entire payment and was obligated to pay the excise tax under Section 4999 of the Code.

Concurrent with the signing of the Merger Agreement, Messrs. Lupo, Tower and Orbach each entered into a settlement agreement with SR Bancorp, Somerset Savings Bank, Regal Bancorp and Regal Bank that cancel the executive's applicable change in control agreement and quantify the estimated cash change in control payment each executive will be entitled to receive at closing at $1.0 million, $859,000 and $487,000, respectively. These amounts will be updated prior to the closing to reflect the then current compensation of Messrs. Lupo, Tower and Orbach. The settlement agreements provide that the non-competition and non-solicitation provisions contained in the change in control agreements and discussed above survive the termination of the change in control agreements.

In addition, David M. Orbach entered into a new employment agreement with Somerset Savings Bank, effective as of the effective date of the Merger between Regal Bancorp and SR Bancorp. See "*The Merger with Regal Bancorp—Interests of Certain Persons in the Merger—New Employment Agreement with Somerset Savings Bank*."

***Bonus Policy.*** The independent members of the Board of Directors of Somerset Savings Bank annually approves discretionary employee bonuses pursuant to a written bonus policy. The Board of Directors recognizes that the net income of Somerset Savings Bank is tied to employee contributions and has developed the policy to reflect the contributions of employees. The guidelines are based on the return on assets of Somerset Savings Bank, which are verified by an independent accounting firm, and, for senior executive officers, the bonus amounts may range from 4% to 14% of the executive's base salary. The Board of Directors may also take into consideration other factors, such as asset quality, liquidity, expense controls and personnel issues in determining the amount of a bonus award. It is anticipated that the bonus policy will be re-evaluated by the Board of Directors of SR Bancorp and Somerset Regal Bank upon completion of the Merger.

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***Deferred Compensation Plan.*** Somerset Savings Bank sponsors the Somerset Savings Bank, SLA Deferred Compensation Plan (the "Deferred Compensation Plan") for the benefit of certain employees (including the Named Executive Officers) and directors. Both Messrs. Taylor and Pribula participate in the Deferred Compensation Plan. Participants in the Deferred Compensation Plan are eligible to defer the receipt of a portion of their compensation each year. At least semi-annually, Somerset Savings Bank credits each participant's account under the Deferred Compensation Plan with earnings equal to the greater of (i) the highest certificate of deposit rate in effect on each June 30 and December 31 or (ii) the weighted average cost of all deposits of the Bank as of June 30 and December 31. Benefits under the Deferred Compensation Plan are paid to participants within 60 days of the earlier of the participants' separation from service, death or disability or a fixed date elected by the participant. Distributions are normally made in equal quarterly installments over 10 years, unless the participant elects an available alternative method of distribution. Distributions upon a participant's death are paid in a lump sum, unless the participant has already begun receiving benefits under the plan, in which case the payments will continue to be made to the participant's beneficiary at the same time they would have been paid to the participant. Upon a participant's disability, all benefits (or remaining benefits) will be paid to the participant in a lump sum. A participant may also take earlier distributions in the event of certain unforeseeable emergencies. Participants must make any elections regarding the time and form of distributions at the time they elect to defer compensation under the Deferred Compensation Plan and can only modify those elections in accordance with the terms of the plan.

***Supplemental Executive Retirement Plan.*** Somerset Savings Bank sponsors the Somerset Savings Bank Supplemental Executive Retirement Plan (the "Supplemental Plan") for certain employees, including the Messrs. Taylor and Pribula. Under the Supplemental Plan, on each May 1, Somerset Savings Bank will credit to each participant's account under the plan an amount equal to a "designated percentage" of the participant's compensation for the year. Somerset Savings Bank determines the "designated percentage" each year based on calculations provided by their benefits consultant. However, the "designated percentage" is intended to replace the benefits the participant may not receive under the Pension Plan as a result of the limit on compensation that may be considered for purposes of tax-qualified plan, which for 2022 is $305,000. At least semi-annually, Somerset Savings Bank credits each participant's account under the Supplemental Plan with earnings equal to the greater of (i) the highest certificate of deposit rate in effect on each May 1 and November 1 or (ii) the weighted average cost of all deposits of the Bank as of May 1 and November 1. Benefits are normally distributed under the Supplemental Plan in quarterly installments over five years within 90 days following the participant's separation from service or disability. Alternatively, participants may elect (at the time of becoming eligible to participate in the plan) that benefits be distributed in either quarterly installments over 10 years or in a lump sum. Upon a participant's death prior to the participant's separation from service or disability, benefits will be distributed over five years with 90 days following the participants' death, unless the participant has elected a lump sum payment. A participant may also take earlier distributions in the event of certain unforeseeable emergencies. In connection with the freezing of the Pension Plan (see "—*Pension Plan*" below) and the implementation of the ESOP, Somerset Savings Bank is exploring appropriate changes to the Supplemental Plan.

***401(k) Plan.*** Somerset Savings Bank maintains the Somerset Savings Bank, SLA Savings and Investment Plan, a tax-qualified defined contribution plan for eligible employees (the "401(k) Plan"). The named executive officers are eligible to participate in the 401(k) Plan on the same terms as other eligible employees of Somerset Savings Bank. Eligible employees who are at least 21 years of age become participants in the 401(k) Plan after they have been employed for six consecutive months.

Under the 401(k) Plan, a participant may elect to defer, on a pre-tax basis, between 2% and 100% of their eligible compensation. For 2022, the salary deferral contribution limit is $20,500, provided, however, that a participant over age 50 may contribute an additional $6,500 to the 401(k) Plan for a total of $27,000. In addition to salary deferral contributions, Somerset Savings Bank makes contributions equal to 3% of the participant's plan compensation. A participant is immediately 100% vested in his or her salary deferral contributions and employer contributions.

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Somerset Savings Bank intends to allow participants in the 401(k) plan to use up to 50% of their account balances in the 401(k) Plan to subscribe for stock in the offering. The expense recognized in connection with the 401(k) Plan totaled approximately $116,573 for the fiscal year ended June 30, 2022.

***Pension Plan.*** Somerset Savings Bank sponsors the Somerset Savings Bank, SLA Pension Plan (the "Pension Plan"). The named executive officers are eligible to participant in the Pension Plan on the same basis as other eligible employees of Somerset Savings Bank. Employees become participants in the plan on the May 1 following the attainment of age 20-1/2 and the completion of one year of service. The normal annual retirement benefit (after attaining age 65) under the Pension Plan equals 1.54% of the participant's average compensation (as defined in the plan) up to the participant's "covered compensation" (i.e., the amount of compensation that may be taxed each year for purposes of social security) plus 2% of the participant's compensation in excess of his or her covered compensation, multiplied by the participant's years of credit service (up to a maximum of 27 years). The early retirement benefit (generally available after a participant has attained age 55 and completed 15 years of service) payable under the Pension Plan upon a participant's termination of employment prior to his or her normal retirement age equals the normal retirement benefit reduced by 3-1/3% for each year between ages 55 and 57 and 6-2/3% for each year between ages 57 and 62. Participants vest in their retirement benefits under the Pension Plan after earning five years of credited service after age 18. The expense recognized in connection with the Pension Plan totaled approximately $442,482 for the fiscal year ended June 30, 2022. Somerset Savings Bank has taken steps to freeze the Pension Plan with respect to participation and benefit accounts effective as of April 30, 2023.

***Employee Stock Ownership Plan.*** In connection with the conversion, Somerset Savings Bank intends to adopt an employee stock ownership plan (or "ESOP") for eligible employees. The named executive officers will be eligible to participate in the ESOP on the same terms as other eligible employees. Eligible employees will begin participation in the ESOP on the later of the effective date of the conversion or upon the first entry date commencing on or after the eligible employee's completion of six months of service and attainment of age 21.

The ESOP trustee is expected to purchase, on behalf of the ESOP, 8.0% of the total number of shares of SR Bancorp, Inc. common stock sold in the conversion and contributed to the charitable foundation. If eligible account holders subscribe for all the SR Bancorp common stock sold in the offering, no shares will be available to be purchased by the ESOP. In that case, or if market conditions otherwise warrant, the ESOP's subscription order will not be filled (or may not be filled completely) and the ESOP may elect to purchase shares in the open market following the completion of the conversion and related stock offering. In either case, we anticipate the ESOP will fund its stock purchase with a loan from SR Bancorp, Inc. equal to the aggregate purchase price of the common stock. The trustee will repay the loan principally through contributions to the ESOP by Somerset Savings Bank and any dividends payable on common stock held by the ESOP over the anticipated 20-year term of the loan. The interest rate for the ESOP loan is expected to equal the prime rate, as published in *The Wall Street Journal*, on the closing date of the offering. See "*Pro Forma Unaudited Condensed Consolidated Financial Statements Giving Effect to the Conversion and Proposed Merger*."

The trustee will hold the shares purchased by the ESOP in an unallocated suspense account, and shares will be released from the suspense account on a pro-rata basis as the trustee repays the loan. The trustee will allocate the shares released among participants' accounts based on each participant's proportional share of compensation relative to all participants. A participant will vest in his or her account balance based on his or her years of service with the bank, at the rate of 25% per year after two years of service, so that the participant will be 100% vested after completing five years of service. Participants who are employed by Somerset Savings Bank immediately prior to the closing of the offering will receive credit for vesting purposes for years of service prior to adoption of the ESOP. Participants also will automatically become fully vested upon attainment of their normal retirement age (age 65), death or disability, a change in control, or termination of the ESOP. Generally, participants will receive distributions from the ESOP upon terminating employment in accordance with the terms of the plan document. The ESOP reallocates any unvested shares forfeited upon a participant's termination of employment among the remaining participants.

The ESOP will permit participants to direct the trustee as to how to vote the shares of common stock allocated to their accounts. The trustee will vote unallocated shares and allocated shares for which participants do not timely provide instructions on any matter in the same ratio as those shares for which participants provide timely instructions, subject to fulfillment of the trustee's fiduciary responsibilities.

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Under applicable accounting requirements, Somerset Savings Bank will record a compensation expense for the ESOP at the fair market value of the shares as they are committed to be released from the unallocated suspense account, which may be more or less than the original issue price. The compensation expense resulting from the release of the common stock from the suspense account and allocation to the accounts of plan participants will result in a corresponding reduction in the earnings of SR Bancorp, Inc.

**Directors' Compensation** 

The following table sets forth for the year ended June 30, 2022, certain information as to the total remuneration we paid to our non-employee directors.

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| | | | |
|:---|:---|:---|:---|
| **Name** | **Fees Earned or Paid<br>in Cash ($)** | **All Other<br>Compensation ($)** | **Total ($)** |
|  Mary E. Davey | 60600 | – | 60600 |
|  John W. Mooney | 60600 | – | 60600 |
|  James R. Silkensen | 60600 | – | 60600 |
|  Douglas M. Sonier | 63200 | – | 63200 |
|  Robin Suskind<sup>(1)</sup> | 52200 | – | 52200 |

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(1) Ms. Suskind resigned from the Board of Directors effective April 20, 2022.

***Director Fees.*** Directors of Somerset Savings Bank receive a per meeting fee of $4,200 and a per committee meeting fee of $750. The chairman of the Audit Committee receives an additional $200 per month.

Each individual who serves as a director of Somerset Savings Bank also serves as a director of SR Bancorp, Inc. Initially, each director will receive director fees only in his or her capacity as a director of Somerset Savings Bank. Following the completion of the conversion and related stock offering, SR Bancorp, Inc. may also determine to pay director fees but has not determined to do so at this time.

***Deferred Compensation Plan.*** Directors are eligible to defer a portion of their board compensation under the Deferred Compensation Plan, as described above. For the year ended June 30, 2022, Ms. Davey elected to defer a portion of her board compensation.

**Benefits to be Considered Following Completion of the Stock Offering** 

Following the stock offering, we intend to implement one or more stock-based benefit plans that will provide for grants of stock options and restricted common stock awards. According to applicable regulations, if implemented within the first year after the offering, we anticipate that the plans will authorize a number of stock options and a number of shares of restricted stock, not to exceed 10% and 4%, respectively, of the outstanding shares of common stock of SR Bancorp at the completion of the offering, including shares contributed to the charitable foundation. These limitations will not apply if the plans are implemented more than one year after the consummation date of the conversion.

The stock-based benefit plans will not be implemented sooner than six months after the offering and, if implemented within one year after the stock offering, must be approved by a majority of the votes eligible to be cast by our shareholders. If the stock-based benefit plans are established more than one year after the offering is completed, they must be approved by a majority of votes cast by shareholders.

Certain additional restrictions would apply to the stock-based benefit plans if implemented within one year after completion of the offering, including:

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• no non-employee director may receive more than 5% of the options and
restricted stock awards authorized under the plans;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• no individual employee may receive more than 25% of the options and restricted stock awards authorized under the
plans;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the options and shares of restricted common stock may not vest more rapidly than 20% per year, beginning on the
first anniversary of the date of grant; and

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

These restrictions do not apply to plans adopted after one year following the completion of the stock offering.

We have not yet determined whether we will present the stock-based benefit plans for shareholder approval within one year or more than one year following the completion of the offering. If applicable regulations or policies regarding stock-based benefit plans change, including any regulations or policies restricting the size of awards and vesting of benefits as described above, the restrictions described above may not be applicable.

We may obtain the shares needed for our stock-based benefit plans by issuing additional shares of common stock from authorized but unissued shares or by repurchasing shares of our common stock.

The actual value of the shares awarded under stock-based benefit plans would be based in part on the price of SR Bancorp's common stock at the time the shares are awarded. The following table presents the total value of all shares of restricted stock that would be available for issuance under the stock-based benefit plans, assuming the shares are awarded when the market price of our common stock ranges from $8.00 per share to $14.00 per share.

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| | | | | |
|:---|:---|:---|:---|:---|
| **Share Price** | **357,000 Shares**<br>**Awarded at Minimum**<br>**of Offering Range** | **420,000 Shares**<br>**Awarded at Midpoint of<br>Offering Range** | **483,000 Shares**<br>**Awarded at Maximum**<br>**of Offering Range** | **555,450 Shares**<br>**Awarded<br>at Maximum**<br>**of Offering<br>Range, As Adjusted** |
| **(***In thousands, except share price information***)** | **(***In thousands, except share price information***)** | **(***In thousands, except share price information***)** | **(***In thousands, except share price information***)** | **(***In thousands, except share price information***)** |
| $8.00 | 2856 | 3360 | 3864 | 4444 |
| 10.00 | 3570 | 4200 | 4830 | 5555 |
| 12.00 | 4284 | 5040 | 5796 | 6665 |
| 14.00 | 4998 | 5880 | 6762 | 7776 |

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The grant-date fair value of the options granted under the stock-based benefit plans will be based in part on the price of shares of common stock of SR Bancorp at the time the options are granted. The value also will 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 plans, assuming the market price and exercise price for the stock options are equal to the range of market prices for the shares is $8.00 per share to $14.00 per share. The Black-Scholes option pricing model provides an estimate only of the fair value of the options, and the actual value of the options may differ significantly from the value set forth in this table.

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|:---|:---|:---|:---|:---|:---|
| **Exercise Price** | **Grant-Date Fair**<br>**Value Per Option** | **892,500 Options**<br>**at Minimum of**<br>**Offering Range** | **1,050,000 Options**<br>**at Midpoint of**<br>**Offering Range** | **1,207,500 Options**<br>**at Maximum of**<br>**Offering Range** | **1,388,625 Options**<br>**at Maximum**<br>**of Offering<br>Range, As Adjusted** |
| **(***In thousands, except share price information***)** | **(***In thousands, except share price information***)** | **(***In thousands, except share price information***)** | **(***In thousands, except share price information***)** | **(***In thousands, except share price information***)** | **(***In thousands, except share price information***)** |
| $8.00 | 4.02 | 3588 | 4221 | 4854 | 5582 |
| 10.00 | 5.02 | 4480 | 5271 | 6062 | 6971 |
| 12.00 | 6.02 | 5373 | 6321 | 7269 | 8360 |
| 14.00 | 7.03 | 6274 | 7382 | 8489 | 9762 |

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**The tables presented above are provided for informational purposes only. There can be no assurance that our stock price will not trade below $10.00 per share. Before you make an investment decision, we urge you to read this prospectus carefully, including, but not limited to, the section entitled "*Risk Factors*."** 

**Transactions with Certain Persons** 

Federal law generally prohibits publicly traded companies from making loans to their executive officers and directors, but it contains a specific exemption from the prohibition for loans made by federally insured financial institutions, such as Somerset Savings Bank, to their executive officers and directors in compliance with federal banking regulations. Somerset Savings Bank had no outstanding loans or extensions of credit to its executive officers and directors, and members of their immediate families, at June 30, 2022. Somerset Savings Bank has a policy that no extension of credit will be granted to its directors, officers or employees on terms more favorable than to those available to the general public. For information about restrictions on our ability to make loans to insiders, see "*Regulation and Supervision—Federal Bank Regulation—Transactions with Affiliates and Loans to Insiders*."

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In accordance with the listing standards of the Nasdaq Stock Market, any transactions that would be required to be reported under this section of this Prospectus must be reviewed by our audit committee or another independent body of the Board of Directors. In addition, any transaction with a director is reviewed by and subject to approval of the members of the Board of Directors who are not directly involved in the proposed transaction to confirm that the transaction is on terms that are no less favorable as those that would be available to us from an unrelated party through an arms' length transaction.

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**SUBSCRIPTIONS BY EXECUTIVE OFFICERS AND DIRECTORS** 

The table below sets forth the proposed purchases of subscription shares for each of Somerset Savings Bank's directors and executive officers, including their associates, and for all of these individuals as a group. In the event of an oversubscription by eligible account holders, directors and executive officers may not be able to purchase the amount of shares listed below. If the individual maximum purchase limitation is increased, persons subscribing for the maximum amount may increase their purchase order. See "*The Conversion and Stock Offering—Limitations on Purchases of Shares*." Directors and officers will purchase shares of common stock at the same $10.00 purchase price per share and on the same terms as other purchasers in the offering. This table excludes shares of common stock to be purchased by the employee stock ownership plan, as well as any stock awards or stock option grants that may be made no earlier than six months after the completion of the offering. Federal and state regulations prohibit our directors and officers from selling the shares they purchase in the offering for one year after the closing of the offering. Subscriptions by management through our 401(k) plan are included in the proposed purchases set forth below and will be counted as part of the maximum number of shares such individuals may subscribe for in the offering and as part of the maximum number of shares directors and officers may purchase in the offering.

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| | | | |
|:---|:---|:---|:---|
| **Name** | **Number of Shares** | **Dollar Amount** | **Percentage of Total<br>Outstanding Shares at the<br>Minimum<br>of the Offering Range<br>Following the Merger<sup>(1)</sup>** |
|  **Board of Directors** |  |  |  |
|  William P. Taylor | 25000 | 250000 | \* |
|  Mary E. Davey | 8500 | 85000 | \* |
|  John W. Mooney | 10000 | 100000 | \* |
|  Christopher J. Pribula | 25000 | 250000 | \* |
|  James R. Silkensen | 10000 | 100000 | \* |
|  Douglas M. Sonier | 25000 | 250000 | \* |
|  **Executive Officers Who Are Not Directors:** |  |  |  |
|  Neil C. Viotto | 10000 | 100000 | \* |
|  Harris Faqueri | 10000 | 100000 | \* |
|  All directors and executive officers as a group (8 persons) | 123500 | 1235000 | 1.4% |

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(1) Assumes 8,925,000 outstanding shares of SR Bancorp following the stock offering and the Merger, comprised of
8,500,000 shares sold at the minimum of the offering range and 425,000 shares contributed to the charitable foundation.

\* Less than 1%. 

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**REGULATION AND SUPERVISION** 

Set forth below is a brief description of certain material regulatory requirements that will be applicable to Somerset Savings Bank and SR Bancorp assuming all the transactions contemplated by the Merger Agreement, which are subject to receipt of regulatory, shareholder and voting member approvals, are consummated. Namely, the description assumes that Somerset Savings Bank, a New Jersey chartered mutual savings association, will convert from the mutual to the stock form of organization and become the wholly owned subsidiary of SR Bancorp, and immediately afterward convert its charter to that of a New Jersey chartered commercial bank, to be named, effective upon consummation of the bank merger, Somerset Regal Bank. The description also assumes that the stock offering by SR Bancorp, and the acquisition of Regal Bancorp and of its wholly owned subsidiary, Regal Bank, are consummated.

As a result, upon consummation of the mutual-to-stock conversion, stock offering, charter conversion, Merger and bank merger (collectively, the "proposed transactions"), Somerset Regal Bank will be a New Jersey chartered commercial bank, in stock form, that is not a member of the Federal Reserve System (referred to as a "state nonmember bank") subject to regulation, supervision and examination by the NJDBI and the FDIC. In turn, SR Bancorp will be a bank holding company registered under the Bank Holding Company Act of 1956, as amended, and subject to regulation, supervision and examination by the Federal Reserve. As a public holding company, SR Bancorp will also be subject to the rules and regulations of the SEC under the federal securities laws. The description is not intended to be a complete list or description of such statutes and regulations and their effects on Somerset Regal Bank and SR Bancorp upon, and assuming, consummation of the proposed transactions.

**Bank Regulation** 

As a New Jersey chartered commercial bank with federally insured deposits, Somerset Regal Bank will be subject to comprehensive regulation by the NJDBI, as its chartering authority, and by the FDIC, as its primary federal regulator and deposit insurer. New Jersey chartered commercial banks are required to file reports with, and are periodically examined by, the FDIC and the NJDBI concerning their activities and financial condition and must obtain regulatory approvals before entering into certain transactions, including, but not limited to, mergers with or acquisitions of other financial institutions.

This regulatory and supervisory structure is intended primarily for the protection of depositors and the Deposit Insurance Fund. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies regarding classifying assets and establishing an adequate allowance for loan losses for regulatory purposes. The regulatory authorities have substantial discretion to take enforcement action with respect to an institution that fails to comply with applicable regulatory requirements or engages in violations of law or unsafe and unsound practices.

**New Jersey Banking Laws and Supervision** 

As a New Jersey chartered commercial bank, Somerset Regal Bank will be subject to extensive regulation, examination and supervision by the NJDBI, as its chartering authority.

***Activity Powers.*** New Jersey chartered banks derive their lending, investment and other activity powers primarily from the New Jersey Banking Act of 1948, as amended, and the regulations of the NJDBI. Under these laws and regulations, New Jersey chartered banks generally may invest in:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• real estate mortgages;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• consumer and commercial loans;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• specific types of debt securities, including certain corporate debt securities and obligations of federal, state
and local governments and agencies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• certain types of corporate equity securities; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• certain other assets.

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New Jersey chartered banks may also make other investments pursuant to "leeway" authority that permits investments not otherwise permitted by the New Jersey Banking Act. Leeway investments must comply with a number of limitations on the individual and aggregate amounts of leeway investments. A bank may also exercise trust powers upon approval of the NJDBI. New Jersey banks also may exercise those powers, rights, benefits or privileges authorized for national banks or out-of-state banks or for federal or out-of-state savings banks or savings associations, provided that before exercising any such power, right, benefit or privilege, prior approval by the NJDBI by regulation or by specific authorization is required. The exercise of these lending, investment and activity powers is limited by federal law and regulations. See "—*Federal Bank Regulation—Activities and Investments*" below. Certain corporate transactions by a New Jersey bank, such as establishing branches and acquiring other banks, require the prior approval of the NJDBI.

***Loan-to-One-Borrower Limitations.*** With certain specified exceptions, a New Jersey chartered bank may not make loans or extend credit to a single borrower or to entities related to the borrower in an aggregate amount that would exceed 15% of the bank's capital funds. A bank may lend an additional 10% of the bank's capital funds if secured by collateral meeting the requirements of the New Jersey Banking Act.

The New Jersey Banking Act imposes conditions and limitations on the liabilities to a bank of its directors and executive officers and of corporations and partnerships controlled by such persons, that are comparable in many respects to the conditions and limitations imposed on the loans and extensions of credit to insiders and their related interests under federal law, as discussed below. The New Jersey Banking Act also provides that a bank that is in compliance with the Federal Reserve's Regulation O, as discussed below, is deemed to be in compliance with such provisions of the New Jersey Banking Act.

***Dividends.*** Under the New Jersey Banking Act, a stock bank may not pay a cash dividend unless, following the payment, the bank's capital stock will be unimpaired, and the bank will have a surplus of no less than 50% of its capital stock or, if not, the payment of the dividend will not reduce the surplus of the bank. Federal law may also limit the amount of dividends that may be paid by a New Jersey chartered nonmember bank. See "—*Federal Bank Regulation—Prompt Corrective Regulatory Action*" below.

***Minimum Capital Requirements.*** Regulations of the NJDBI impose on New Jersey chartered depository institutions minimum capital requirements generally similar to those imposed by the FDIC on insured state banks. See "—*Federal Bank Regulation—Capital Requirements*."

***Examination and Enforcement.*** The NJDBI examines all state chartered commercial banks. The NJDBI has authority to enforce applicable law and prevent practices that may cause harm to an institution, including the issuance of cease and desist orders and civil money penalties and removal of directors, officers and employees. The NJDBI also has authority to appoint a conservator or receiver for a bank under certain circumstances such as insolvency or unsafe or unsound condition to transact business.

**Federal Bank Regulation** 

***Supervision and Enforcement Authority*.** Somerset Regal Bank will be subject to extensive regulation, examination and supervision by the FDIC as its primary federal prudential regulator and the insurer of its deposits. State nonmember banks must file reports with the FDIC concerning their activities and financial condition. State nonmember banks must also obtain prior FDIC approval before entering into certain corporate transactions such as establishing new branches and mergers with, or acquisitions of, other financial institutions. There are periodic examinations by the FDIC to evaluate state nonmember bank's safety and soundness and compliance with various regulatory requirements.

The FDIC maintains substantial enforcement authority over regulated institutions. That includes, among other things, the ability to assess civil money penalties, issue cease and desist orders and remove directors and officers. In general, enforcement actions may be initiated in response to violations of laws and regulations, breaches of fiduciary duty and unsafe or unsound practices. The FDIC may also appoint itself as conservator or receiver for an insured bank under certain circumstances.

***Capital Requirements.*** FDIC regulations require FDIC-supervised institutions to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets ratio of 8%, and a Tier 1 capital to average total assets leverage ratio of 4%.

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Common equity Tier 1 capital is generally defined as common shareholders' equity and retained earnings. Tier 1 capital is generally defined as common equity Tier 1 and additional Tier 1 capital. Additional Tier 1 capital generally includes certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries. Total capital includes Tier 1 capital (common equity Tier 1 capital plus additional Tier 1 capital) and Tier 2 capital. Tier 2 capital is comprised of capital instruments and related surplus meeting specified requirements and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt. Also included in Tier 2 capital is the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of Accumulated Other Comprehensive Income ("AOCI"), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values. Institutions that have not exercised the AOCI opt-out have AOCI incorporated into common equity Tier 1 capital (including unrealized gains and losses on available-for-sale-securities). Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations. Somerset Savings Bank exercised the AOCI opt-out election, which is reflected in historical and pro forma regulatory capital at December 31, 2022 and June 30, 2022, respectively. See "*Historical and Pro Forma Regulatory Capital Compliance*."

In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, a bank's assets, including certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes, residual interests), are multiplied by a risk weight factor assigned by the regulations based on perceived risks inherent in the type of asset. Higher levels of capital are required for asset categories believed to present greater risk. For example, a risk weight of 0% is assigned to cash and U.S. government securities, a risk weight of 50% is generally assigned to prudently underwritten first lien one-to-four family residential mortgages, a risk weight of 100% is assigned to commercial and consumer loans, a risk weight of 150% is assigned to certain past due loans and a risk weight of between 0% to 600% is assigned to permissible equity interests, depending on certain specified factors.

In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if an institution does not hold a "capital conservation buffer" consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements, effectively resulting in the following minimum ratios: a common equity Tier 1 capital ratio of 7.0%, a Tier 1 capital ratio of 8.5%, and a total capital ratio of 10.5%.

Institutions that have less than $10 billion in total consolidated assets and meet other qualifying criteria may elect to use the optional community bank leverage ratio framework, which requires maintaining a leverage ratio of greater than 9%, to satisfy the regulatory capital requirements, including the risk-based requirements. A qualifying institution may opt in and out of the community bank leverage ratio framework on its quarterly call report. Somerset Savings Bank has opted into the community bank leverage ratio framework.

In assessing an institution's capital adequacy, the FDIC takes into consideration, not only these numeric factors, but also qualitative factors. The FDIC has the authority to establish higher capital requirements for individual institutions where deemed necessary.

At December 31, 2022, Somerset Savings Bank exceeded each of its capital requirements, on a historical and a pro forma basis.

***Standards for Safety and Soundness.*** As required by statute, the federal banking agencies have adopted final regulations and Interagency Guidelines Establishing Standards for Safety and Soundness. The guidelines set forth the safety and soundness standards the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. The guidelines address internal controls and information systems, internal audit systems, credit underwriting, loan documentation, interest rate exposure, asset growth, asset quality, earnings and compensation, fees and benefits. The agencies have also established standards for safeguarding customer information. If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard.

***Activities and Investments.*** Federal law provides that a state-chartered bank insured by the FDIC generally may not engage as a principal in any activity not permissible for a national bank to conduct or make any equity investment of a type or in an amount not authorized for a national bank, notwithstanding state law, subject to certain exceptions.

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In addition, the FDIC is authorized to permit a state-chartered bank to engage in state-authorized activities or investments not permissible for national banks (other than non-subsidiary equity investments) if it meets all applicable capital requirements and it is determined that the activities or investments involved do not pose a significant risk to the Deposit Insurance Fund. The FDIC has adopted procedures for institutions seeking approval to engage in such activities or investments. In addition, a state nonmember bank may control a subsidiary that engages in activities as principal that would only be permitted for a national bank to conduct in a "financial subsidiary" if a bank meets specified conditions and deducts its investment in the subsidiary for regulatory capital purposes.

***Prompt Corrective Regulatory Action.*** Federal law requires, among other things, that federal bank regulatory authorities take "prompt corrective action" with respect to banks that do not meet minimum capital requirements. For these purposes, the law establishes five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized.

An institution is considered "well capitalized" if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a leverage ratio of 5.0% or greater and a common equity Tier 1 ratio of 6.5% or greater. An institution is "adequately capitalized" if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, a leverage ratio of 4.0% or greater and a common equity Tier 1 ratio of 4.5% or greater. An institution is "undercapitalized" if it has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a leverage ratio of less than 4.0% or a common equity Tier 1 ratio of less than 4.5%. An institution is "significantly undercapitalized" if it has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a leverage ratio of less than 3.0% or a common equity Tier 1 ratio of less than 3.0%. An institution is "critically undercapitalized" if it has a ratio of tangible equity (as defined in the regulations) to total assets equal to or less than 2.0%. At June 30, 2022, Somerset Savings Bank was classified as a "well capitalized" institution, on a historical and a pro forma basis.

"Undercapitalized" banks must adhere to growth, capital distribution (including dividend) and other limitations, and are required to submit a capital restoration plan to the appropriate federal banking agency. An undercapitalized bank's compliance with a capital restoration plan must be guaranteed by any company that controls the undercapitalized institution in an amount equal to the lesser of 5.0% of the institution's total assets when deemed undercapitalized or the amount necessary to achieve the status of adequately capitalized. If an "undercapitalized" bank fails to submit an acceptable plan, it is treated as if it is "significantly undercapitalized." "Significantly undercapitalized" banks must comply with one or more of a number of possible additional measures, including an order by the FDIC to sell sufficient voting stock to become adequately capitalized, reduce total assets, cease receipt of deposits from correspondent banks, dismiss directors or officers, or limit interest rates paid on deposits, compensation of executive officers or capital distributions by the parent holding company. "Critically undercapitalized" institutions are subject to additional measures including, subject to a narrow exception, the appointment of a receiver or conservator within 270 days after it is determined to be critically undercapitalized.

A bank that is classified as well-capitalized, adequately capitalized or undercapitalized may be treated as though it were in the next lower capital category if the FDIC, after notice and opportunity for hearing, determines that an unsafe or unsound condition, or an unsafe or unsound practice, warrants such treatment.

Qualifying institutions that elect and comply with the community bank leverage ratio framework are considered well-capitalized under the prompt corrective action regulations with a community bank leverage ratio of 9% or greater. See "—*Capital Requirements*" above.

***Transaction with Affiliates and Loans to Insiders.*** Transactions between banks and their affiliates are governed by federal law. Generally, Section 23A of the Federal Reserve Act and the Federal Reserve's Regulation W prohibit a bank and its subsidiaries from engaging in a "covered transaction" with an affiliate if the aggregate amount of covered transactions outstanding with that affiliate, including the proposed transaction, would exceed an amount equal to 10% of the bank's capital stock and surplus. The aggregate amount of covered transactions outstanding with all affiliates is limited to 20% of the bank's capital stock and surplus. Section 23B applies to "covered transactions," as well as to certain other transactions, and requires that all such transactions be on terms substantially the same, or at least as favorable, to the institution or subsidiary as prevailing market terms for transactions with or involving a non-affiliate. The term "covered transaction" includes making loans to, purchasing assets from, and issuing guarantees to an affiliate, and other similar transactions. Section 23B transactions also include the bank's providing services and selling assets to an affiliate. In addition, loans or other extensions of credit by a bank to an affiliate are required to be collateralized according to the requirements set forth in Section 23A of the Federal Reserve Act.

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A bank's loans to its directors, executive officers and owners of 10% or more of its stock (each, an insider) and any entities controlled by such persons are subject to the conditions and limitations imposed by Sections 22(g) and 22(h) of the Federal Reserve Act and the Federal Reserve's Regulation O. Among other things, these provisions generally require that extension of credit to insiders be made on terms that are substantially the same as and follow credit underwriting procedures that are not less stringent than those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features. In addition, extensions of credit to insiders may not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based on a bank's unimpaired capital and surplus. Extensions of credit in excess of certain limits must be approved by the bank's Board of Directors. Extensions of credit to executive officers are subject to additional limits based on the type of extension involved.

***Federal Insurance of Deposit Accounts.*** Deposit accounts in Somerset Savings Bank are insured up to a maximum of $250,000 per depositor.

The FDIC assesses all insured depository institutions. An institution's assessment rate depends upon the perceived risk to the Deposit Insurance Fund of that institution, with less risky institutions paying lower rates. Currently, assessments for institutions of less than $10 billion of total assets are based on financial measures and supervisory ratings derived from statistical models estimating the probability of failure within three years. Assessment rates (inclusive of possible adjustments) for insured depository institutions with assets of less than $10 billion currently range from 1.5 to 30 basis points of each institution's total assets less tangible capital.

The FDIC may increase or decrease the range of assessments uniformly, except that no adjustment in the risk-based assessment system may be made without notice and comment rulemaking.

Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or regulatory condition imposed in writing. We do not know of any practice, condition or violation that might lead to termination of our deposit insurance.

***Community Reinvestment Act.*** Under the Community Reinvestment Act, or "CRA," every insured depository institution has a continuing and affirmative obligation, consistent with its safe and sound operation, to help meet the credit needs of its entire community, including low- and moderate-income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution's discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA. The CRA requires the FDIC, in connection with its examination of each state non-member bank, to assess the institution's record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by such institution, including applications to establish branches and acquire other financial institutions. The CRA requires the FDIC to provide a written evaluation of an institution's CRA performance utilizing a four-tiered descriptive rating system. Somerset Savings Bank's most recent FDIC CRA rating, dated May 31, 2022, was "Satisfactory."

***Federal Home Loan Bank System.*** Somerset Savings Bank is a member of the Federal Home Loan Bank System, which consists of 11 regional Federal Home Loan Banks. The Federal Home Loan Banks provide a central credit facility primarily for member institutions. Somerset Savings Bank, as a member of the Federal Home Loan Bank of New York, is required to acquire and hold shares of capital stock in the Federal Home Loan Bank of New York. Somerset Savings Bank was in compliance with this requirement at December 31, 2022.

**Holding Company Regulation** 

***Federal Holding Company Regulation*.** Upon completion of the proposed transactions, SR Bancorp will be a bank holding company registered with the Federal Reserve and will be subject to regulation, examination, supervision and reporting requirements applicable to bank holding companies. In addition, the Federal Reserve will have enforcement authority over SR Bancorp and its non-savings bank subsidiaries. Among other things, this authority permits the Federal Reserve to restrict or prohibit activities that are determined to be a serious risk to the subsidiary bank.

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A bank holding company is generally prohibited from engaging in non-banking activities, or acquiring direct or indirect control of more than 5% of the voting securities of any company engaged in non-banking activities. One of the principal exceptions to this prohibition is for activities the Federal Reserve had determined to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. Some of the principal activities that the Federal Reserve has determined by regulation to be so closely related to banking are: (1) making or servicing loans; (2) performing certain data processing services; (3) providing discount brokerage services; (4) acting as fiduciary, investment or financial advisor; (5) leasing personal or real property; (6) making investments in corporations or projects designed primarily to promote community welfare; and (7) acquiring a savings and loan association whose direct and indirect activities are limited to those permitted for bank holding companies.

The Gramm-Leach-Bliley Act of 1999 authorizes a bank holding company that meets specified conditions, including that its depository institution subsidiaries are "well capitalized" and "well managed," to opt to become a "financial holding company." A "financial holding company" may engage in a broader range of financial activities than a bank holding company. Such activities may include insurance underwriting and investment banking. SR Bancorp has no plans to elect "financial holding company" status at this time.

***Capital.*** Bank holding companies with $3 billion or more in total consolidated assets are subject to consolidated regulatory capital requirements that are as stringent as those applicable to their insured depository subsidiaries. Upon consummation of the proposed transactions, SR Bancorp will have pro forma consolidated assets of less than $3 billion and, therefore, will not be subject to the consolidated capital requirements, unless otherwise advised by the Federal Reserve.

***Source of Strength.*** Federal law provides that bank and savings and loan holding companies must act as a source of strength to their subsidiary depository institution. The expectation is that the holding company will provide capital, liquidity and other support for the institution in times of financial stress.

***Stock Repurchases and Dividends.*** A bank holding company is generally required to give the Federal Reserve prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the company's consolidated net worth. The Federal Reserve may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe and unsound practice, or would violate any law, regulation, Federal Reserve order or directive, or any condition imposed by, or written agreement with, the Federal Reserve. There is an exception to this approval requirement for well-capitalized bank holding companies that meet certain other conditions. Federal Reserve guidance provides for regulatory consultation and nonobjection under specified circumstances prior to a holding company redeeming or repurchasing regulatory capital instruments, including common stock, regardless of the previously referenced notification requirement.

The Federal Reserve has issued a policy statement regarding capital distributions, including dividends, by bank holding companies. In general, the Federal Reserve's policies provide that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the bank holding company appears consistent with the organization's capital needs, asset quality and overall financial condition. Regulatory guidance provides for prior consultation with and nonobjection of the Federal Reserve in certain cases, such as where a proposed dividend exceeds earnings for the period for which the dividend would be paid (*e.g.*, calendar quarter) or where the company's net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund a proposed dividend. The Federal Reserve guidance also provides for consultation and nonobjection for material increases in the amount of a bank holding company's common stock dividend. Additionally, under the prompt corrective action laws, the ability of a bank holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized.

These regulatory policies could affect the ability of SR Bancorp to pay dividends, engage in stock repurchases or otherwise engage in capital distributions.

***Acquisition of Holding Company.*** Under the Change in Bank Control Act, no person, or group of persons acting in concert, may acquire control of a bank holding company, such as SR Bancorp, unless the Federal Reserve has been given 60 days' prior written notice and not disapproved the proposed acquisition. Control, as defined under the Change in Bank Control Act and applicable regulations, means the power, directly or indirectly, to direct the management or policies of the company or to vote 25% or more of any class of voting securities of the company. Acquisition of more than 10% of any class of a bank holding company's voting securities constitutes a rebuttable presumption of control under certain circumstances, including where, as will be the case with SR Bancorp, the issuer has registered securities under Section 12 of the Exchange Act.

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In addition, federal regulations provide that no company may acquire control of a bank holding company without the prior approval of the Federal Reserve. Control, as defined under the Bank Holding Company Act and Federal Reserve regulations, means ownership, control or power to vote 25% or more of any class of voting stock, control in any manner over the election of a majority of the company's directors, or a determination by the regulator that the acquiror has the power to exercise, directly or indirectly, a controlling influence over the management or policies of the company. Any company that acquires such control becomes a "bank holding company" subject to registration, examination and regulation by the Federal Reserve. Effective September 30, 2020, the Federal Reserve amended its regulations concerning when a company exercises a controlling influence over a bank or bank holding company for purposes of the Bank Holding Company Act. Relevant factors include the company's voting and nonvoting equity investment in the bank or bank holding company, director, officer and employee overlap and the scope of business relationships between the company and bank or bank holding company.

***New Jersey Holding Company Regulation.*** As a bank holding company, SR Bancorp will also be subject to the provisions of the New Jersey Banking Act of 1948, as amended, and the regulations of the NJDBI. New Jersey law establishes similar filing and prior approval requirements by the NJDBI for acquisitions of New Jersey chartered institutions.

**Federal Securities Laws** 

SR Bancorp's common stock will be registered with the SEC after the stock offering. SR Bancorp, therefore, will be subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Exchange Act.

The registration under the Securities Act of shares of common stock issued in the stock offering does not cover the resale of those shares. Shares of common stock purchased by persons who are not affiliates of SR Bancorp may be resold without registration. Shares purchased by an affiliate of SR Bancorp will be subject to the resale restrictions of Rule 144 under the Securities Act. If SR Bancorp meets the current public information requirements of Rule 144, each affiliate that complies with the other conditions of Rule 144, including those that require the affiliate's sale to be aggregated with those of other persons, would be able to sell in the public market without registration, a number of shares not to exceed, in any three-month period, the greater of 1% of the outstanding shares of SR Bancorp, or the average weekly volume of trading in the shares during the preceding four calendar weeks.

***Emerging Growth Company Status.*** SR Bancorp qualifies as an "emerging growth company" under the JOBS Act. 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 shareholder 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 of 2002, which would require that our independent auditors review and attest as to the effectiveness of our internal control over financial reporting. An emerging growth company may also 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. Such an election is irrevocable during the period a company is an emerging growth company.

**Sarbanes-Oxley Act of 2002** 

The Sarbanes-Oxley Act of 2002 is intended to improve corporate responsibility, provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws. Upon completion of the proposed transactions, SR Bancorp will have in place policies, procedures and systems designed to comply with these regulations.

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**TAXATION** 

**Federal Taxation** 

***General.*** SR Bancorp and Somerset Savings Bank are subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below. The following discussion of federal taxation is intended only to summarize material federal income tax matters and is not a comprehensive description of the tax rules applicable to SR Bancorp and Somerset Savings Bank.

***Method of Accounting.*** For federal income tax purposes, Somerset Savings Bank currently reports its income and expenses on the accrual method of accounting and uses a tax year ending June 30 for filing its federal income tax returns.

***Net Operating Loss Carryovers.*** Effective with the passage of the Tax Cuts and Jobs Act, net operating loss carrybacks are no longer permitted, and net operating losses are allowed to be carried forward indefinitely. Net operating loss carryforwards arising from tax years beginning after January 1, 2018 are limited to offset a maximum of 80% of a future year's taxable income. At June 30, 2022, Somerset Savings Bank had no net operating loss carryovers at the federal level and $2.9 million in net operating loss carryovers at the state level.

***Capital Loss Carryovers.*** Generally, a financial institution may carry back capital losses to the preceding three taxable years and forward to the succeeding five taxable years. Any capital loss carryback or carryover is treated as a short-term capital loss for the year to which it is carried. As such, it is grouped with any other capital losses for the year to which carried and is used to offset any capital gains. Any loss remaining after the five-year carryover period that has not been deducted is no longer deductible. At December 31, 2022, Somerset Savings Bank had no capital loss carryovers.

***Corporate Dividends.*** We may generally exclude from our income 100% of dividends received from Somerset Savings Bank as a member of the same affiliated group of corporations.

***Audit of Tax Returns.*** Somerset Savings Bank's federal income tax returns and New Jersey State income tax returns have not been audited in the last three years.

**State Taxation** 

***New Jersey State Taxation.*** In 2014, tax legislation was enacted that changed the manner in which financial institutions and their affiliates are taxed in New Jersey. Taxable income is apportioned to New Jersey based on the location of the taxpayer's customers, with special rules for income from certain financial transactions. The location of the taxpayer's offices and branches are not relevant to the determination of income apportioned to New Jersey. The Corporation Business Tax rate is 9% on adjusted entire net income or on the portion allocable to New Jersey; the rate is 7.5% for all corporations with entire net income of $100,000 or less; and the rate is 6.5% for all corporations with entire net income of $50,000 or less. An alternative tax on apportioned capital, capped at $5.0 million for a tax year, is imposed to the extent that it exceeds the tax on apportioned income. The New Jersey alternative tax rate is 0.05% for 2019, 0.025% for 2020 and was completely phased out as of January 1, 2021. Qualified community banks and thrift institutions that maintain a qualified loan portfolio are entitled to a specially computed modification that reduces the income taxable to New Jersey.

***Maryland State Taxation****.* As a Maryland business corporation, SR Bancorp is required to file an annual report with and pay personal property taxes to the State of Maryland.

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**THE PROPOSED MERGER WITH REGAL BANCORP** 

**General** 

On July 25, 2022 SR Bancorp and Somerset Savings Bank entered into an Agreement and Plan of Merger with Regal Bancorp and Regal Bank, as amended on March 7, 2023, pursuant to which SRB Interim Corporation, a wholly owned subsidiary of SR Bancorp formed solely to facilitate the proposed Merger, will merge with and into Regal Bancorp, immediately followed by the merger of Regal Bancorp with and into SR Bancorp, with SR Bancorp as the surviving entity. Immediately following the Merger, it is expected that Regal Bank will merge with and into Somerset Savings Bank, with Somerset Savings Bank as the surviving entity to be re-named "Somerset Regal Bank." The proposed Merger will occur only following the completion of the conversion and related stock offering.

**Legal Steps of the Proposed Transaction** 

In connection with the proposed Merger, Regal Bancorp's shareholders will exchange each share of their Regal Bancorp common stock for $23.00 in cash. Pursuant to the terms of the Merger Agreement, at the effective time of the proposed Merger, SRB Interim Corporation will merge with and into Regal Bancorp, immediately followed by the merger of Regal Bancorp with and into SR Bancorp with SR Bancorp as the surviving entity. The articles of incorporation and bylaws of SR Bancorp will continue to be the articles of incorporation and bylaws of the surviving corporation.

In order to effectuate the proposed Merger with Regal Bancorp, Somerset Savings Bank is converting from the mutual to stock form of organization, and SR Bancorp is offering shares of its common stock for sale in the offering. The consummation of the proposed Merger is subject to completion of conversion and related stock offering, as well as the receipt of all required regulatory approvals and non-objections and the approval of Regal Bancorp shareholders. SR Bancorp has filed applications with the FDIC, NJDBI and requested a waiver of formal application and approved requirements from the Federal Reserve as it relates to the proposed Merger in connection with the proposed Merger. Somerset Savings Bank needs the approval of its voting members in order to consummate the conversion, including the stock offering.

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. SR Bancorp is mailing this prospectus to potential investors on or about ________________, 2023. Regal Bancorp mailed its proxy statement to its shareholders soliciting their votes in favor of the proposed Merger on or about ________________, 2023, and Somerset Savings Bank mailed its proxy statement to its Voting Members soliciting their votes in favor of the conversion on or around ________________, 2023. The offering will terminate on [offering deadline] unless extended to a later date. Regal Bancorp's shareholders' meeting is scheduled for ________________, 2023, and Somerset Savings Bank's Voting Members' meeting is scheduled for ________________, 2023. Assuming Regal Bancorp shareholders approve the proposed Merger, SR Bancorp receives sufficient subscriptions to complete the offering and receives the approval of its Voting Members and all required regulatory approvals, it is expected the offering will be consummated in the third quarter of 2023 and the Merger will be consummated promptly following the consummation of the conversion and related stock offering.

**Reasons for the Proposed Merger** 

Our Board of Directors believes that the proposed Merger will enhance the competitive position of SR Bancorp by enabling us to expand our market presence in Essex, Hudson, Morris and Union Counties, New Jersey and enhance our market presence in Somerset County, New Jersey. The Merger will increase the combined bank's deposit base and its loan portfolio, provide Somerset Savings Bank with greater access to commercial loan customers and provide Regal Bank with greater access to residential loan customers. In addition, the consideration to be paid to Regal Bancorp, Inc. shareholders in the Merger will permit Somerset Savings Bank to use a significant portion of the capital raised in the offering, while continuing to be a well-capitalized commercial bank for regulatory purposes.

The proposed Merger will facilitate a key step in the execution of Somerset Savings Bank's business strategy–to increase market share in Somerset Savings Bank's primary market area through the acquisition or purchase of deposits as well as increasing Somerset Savings Bank's commercial loan portfolio. The combination of Somerset Savings Bank and Regal Bank will provide customers of both institutions with convenient access to their accounts by increasing the number of branches available in Somerset Savings Bank's primary market area.

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The proposed Merger, combined with the stock offering, will permit Somerset Savings Bank to use a significant portion of its capital, while continuing to well exceed each of its regulatory capital requirements. In addition to enabling Somerset Savings Bank to expand its franchise, which will enhance its ability to compete in its market area, the proposed Merger is also expected to reduce the pressure to leverage its balance sheet that typically exists when institutions with high capital levels engage in stock offerings.

The terms of the Merger Agreement were the result of arm's length negotiations between the representatives of Somerset Savings Bank and Regal Bancorp. In its deliberations and in making its determination, Somerset Savings Bank's Board of Directors considered many factors including, without limitation, the factors described above, as well as the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• information concerning the financial condition, results of operations, capital levels, asset quality and
prospects of Somerset Savings Bank and Regal Bancorp, including consideration of both companies' historical and projected results of operation and financial condition and a review of Regal Bancorp's financial performance by comparison to
peer group;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• SR Bancorp's access to capital and managerial resources relative to that of Regal Bancorp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the anticipated short-term and long-term impact the offering and proposed Merger will have on SR Bancorp's
consolidated results of operations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the general structure of the transaction and the perceived compatibility of the respective management teams and
business philosophies of Somerset Savings Bank and Regal Bank, which Somerset Savings Bank's board believed would make it easier to integrate the operations of the two companies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the belief that the proposed Merger will enhance Somerset Savings Bank's franchise value by the expansion of
its branch network in Essex, Morris and Union Counties, New Jersey and by enhancing its ability to compete in its primary market area of Somerset County, New Jersey; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Somerset Savings Bank's long-term growth strategy.

The discussion of the information and factors considered by our Board of Directors is not intended to be exhaustive, but includes all material factors considered by our Board of Directors. In reaching its determination to approve the proposed Merger, our Board of Directors did not assign any specific or relative weights to any of the foregoing factors, and individual directors may have weighed factors differently.

**Consideration to be Received in the Merger** 

Shares of Regal Bancorp common stock issued and outstanding immediately prior to the completion of the Merger will automatically be converted into the right to receive $23.00 in cash per share.

**Accounting Treatment** 

SR Bancorp will account for the proposed Merger under the "purchase" method of accounting in accordance with United States generally accepted accounting principles. Using the purchase method of accounting, the assets and liabilities of Regal Bancorp will be recorded by SR Bancorp at their respective fair values at the time of the completion of the proposed Merger. The excess of Regal Bancorp's purchase price over the net fair value of the assets acquired and liabilities assumed will then be allocated to identified intangible assets, with any remaining unallocated cost recorded as goodwill.

**Regulatory Approvals Needed to Complete the Merger** 

***General.*** The proposed Merger will occur only following the completion of the conversion and related stock offering. Please see "*The Conversion and Stock Offering—Approvals Required."* In addition, the proposed Merger cannot proceed in the absence of the requisite regulatory approvals. See "*The Merger with Regal Bancorp—Conditions to Completing the Proposed Merger*" and "—*Termination, Amendment and Waiver*." There can be no assurance that the requisite regulatory approvals will be obtained, and if obtained, there can be no assurance as to the

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date of any approval. There can also be no assurance that any regulatory approvals will not contain a condition or requirement that causes the approvals to fail to satisfy the condition set forth in the Merger Agreement and described under "*The Merger with Regal Bancorp—Conditions to Completing the Proposed Merger*."

The approval of an application merely implies the satisfaction of regulatory criteria for approval, which does not include review of the proposed Merger from the standpoint of the adequacy of the cash consideration. Furthermore, regulatory approvals do not constitute an endorsement or recommendation of the proposed Merger.

***Merger Approvals.*** Completion of the proposed Merger is subject to prior approval or waiver of approval of the FDIC, NJDBI and the Federal Reserve. In reviewing applications for transactions of this type, the regulators consider, among other factors, the financial and managerial resources and future prospects of the existing and resulting institutions, the convenience and needs of the communities to be served, and competitive factors.

In addition, the FDIC may not approve a transaction if it will result in a monopoly or otherwise be anti-competitive. Somerset Savings Bank filed applications with the FDIC and the NJDBI and SR Bancorp has requested a waiver of formal application and approved requirements from the Federal Reserve as it relates to the proposed Merger. The regulatory applications remain under review.

Under the Community Reinvestment Act of 1977, the FDIC must consider the record of performance of Regal Bank and Somerset Savings Bank in meeting the credit needs of the entire community, including low- and moderate-income neighborhoods, served by each institution. As part of the review process, bank regulatory agencies periodically receive comments and protests from community groups and others. Regal Bank received a "Satisfactory" rating during its last Community Reinvestment Act examination by the FDIC and Somerset Savings Bank received a "Satisfactory" rating during its last Community Reinvestment Act examination conducted by the FDIC.

In addition, a period of 15 to 30 days must expire following approval by the FDIC before completion of the Merger of Somerset Savings Bank and Regal Bank is allowed, within which period the United States Department of Justice may file objections to the Merger under the federal anti-trust laws. While Regal Bancorp and SR Bancorp believe that the likelihood of objection by the Department of Justice is remote in this case, there can be no assurance that the Department of Justice will not initiate proceedings to block the Merger of the two banks, or that the Attorney General of the State of New Jersey will not challenge the Merger of the two banks, or if any proceeding is instituted or challenge is made, as to the result of the challenge.

**Interests of Certain Persons in the Merger** 

As described below, certain of Regal Bancorp's officers and directors have interests in the Merger that are in addition to, or different from, the interests of Regal Bancorp's shareholders generally. Regal Bancorp's Board of Directors was aware of these interests and took them into account in approving the Merger.

***Existing Regal Bank Change in Control Agreements.*** Thomas Lupo, President and Chief Executive Officer, Daniel Tower, Executive Vice President and Chief Operating Officer and David Orbach, Chairman of the Board of Regal Bancorp and Regal Bank each is a party to a change in control agreement with Regal Bank.

Under the change in control agreements, each of the executives becomes entitled to a lump sum cash payment upon a qualifying termination of employment following the occurrence of a "change in control," which is defined to mean (1) a reorganization, merger, consolidation or sale of all or substantially of the assets of Regal Bank, or any similar transaction, in any case in which Regal Bank's shareholders before such transaction hold less than a majority of the voting stock of the resulting entity; or (2) individuals who constitute Regal Bank's incumbent Board cease for any reason to constitute a majority thereof. In such event, the change in control agreements provide that the executive is entitled to receive a lump sum cash payment equal to three times the sum of the executive's then current base salary and the average of the executive's last three year's bonuses. The change in control agreements also provide for one year of continued hospital, health, medical and life insurance from the employer. The Merger with SR Bancorp will constitute a "change in control" within the meaning of the change in control agreements.

The change in control agreements provide that no payments can be made that constitute an "excess parachute payment" under Section 280G of the Internal Revenue Code and to avoid such a result, the benefits will be reduced to the extent necessary, to an amount that, when aggregated with any other payments that are contingent

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on the occurrence of the merger transaction, will not cause an excess parachute payment under Section 280G of the Internal Revenue Code. Parachute payments generally are payments that, in the aggregate, exceed three times the recipient's average taxable compensation for the five taxable years ending before the year in which the change in control occurs (the "base amount"). Recipients of parachute payments are subject to a 20% excise tax on the amount by which such payments exceed the base amount (an "excess parachute payment"), in addition to regular income taxes, and excess parachute payments are not deductible by the employer as compensation expense for federal income tax purposes.

The change in control agreements provide that for twelve months following termination of employment, the executive will not, directly or indirectly, solicit, cause any other person to solicit, or assist any other person with soliciting any customer, depositor or borrower of Regal Bank, or any potential customer, depositor or borrower of Regal Bank to become a customer, depositor or borrower of another financial institution. Further, for twelve months after termination of employment, the executive will not, directly or indirectly, participate in the solicitation or hiring of any employee, consultant or agent of Regal Bank or induce such party to cease their employment with Regal Bank or their successors or to accept employment or a consulting or agency position with any other person or entity. For six months following termination of employment, the executive also will not, either directly or indirectly, commence employment with or render services to any other insured depository institution within any county in which Regal Bank has a branch or office.

Concurrent with the signing of the Merger Agreement, Messrs. Lupo, Tower and Orbach each entered into a settlement agreement with SR Bancorp, Somerset Savings Bank, Regal Bancorp and Regal Bank that cancel the executive's applicable change in control agreement and quantify the estimated cash change in control payment each executive will be entitled to receive at closing at $1.0 million, $859,000 and $487,000, respectively. These amounts will be updated prior to the closing to reflect the then current compensation of Messrs. Lupo, Tower and Orbach. The settlement agreements provide that the non-competition and non-solicitation provisions contained in the change in control agreements and discussed above survive the termination of the change in control agreements.

***New Employment Agreement with Somerset Savings Bank.*** David M. Orbach entered into a new employment agreement with Somerset Savings Bank, effective as of the effective date of the Merger between Regal Bancorp and SR Bancorp. The employment agreement has a three-year term. Commencing on the first anniversary of the agreement and on each anniversary thereafter, the agreement will automatically renew for an additional year, so that the remaining term will again be three years, unless either party gives notice of non-renewal to the other, in which case the agreement will terminate at the end of the then current term. Notwithstanding the foregoing, if SR Bancorp or Somerset Savings Bank enters into a transaction that would constitute a change in control, as defined under the employment agreement, the term of the agreement would automatically extend so that it would expire no less than two years following the effective date of the change in control.

During the term of the agreement, Mr. Orbach will serve as Executive Chairman of SR Bancorp and Executive Vice Chairman of Somerset Savings Bank. The initial base salary under the agreement is $375,000. The Board of Directors or the Compensation Committee of the Board of Directors of Somerset Savings Bank may increase, but not decrease, Mr. Orbach's base salary. In addition to base salary, the agreement provides that Mr. Orbach will participate in any bonus plan or arrangement of Somerset Savings Bank in which senior management is eligible to participate and/or may receive a bonus on a discretionary basis, as determined by the Board of Directors or the Compensation Committee of the Board of Directors. Somerset Savings Bank will provide a target cash bonus opportunity for Mr. Orbach of at least 20% of his base salary. Mr. Orbach is also entitled to participate in all employee benefit plans, arrangements and perquisites offered to employees and officers of Somerset Savings Bank and the reimbursement of reasonable travel and other business expenses incurred in the performance of his duties for Somerset Savings Bank. Somerset Savings Bank will also provide him with the use of an automobile and reimburse him for automobile-related expenses.

Somerset Savings Bank may terminate Mr. Orbach's employment, or Mr. Orbach may resign from his employment, at any time with or without good reason. Under the employment agreement, if Somerset Savings Bank terminates Mr. Orbach's employment without cause or Mr. Orbach voluntary resigns for "good reason" (i.e., a "qualifying termination event"), Somerset Savings Bank will pay him a severance payment equal to the greater of (1) the remaining base salary and total annual bonus opportunity (based on the highest annual bonus earned during the three most recent calendar years before his date of termination) he would have received during the remaining term of the employment agreement or (2) two times the sum of his base salary and the average annual incentive bonus paid to him for the three most recently completed calendar years before the date of termination. In addition, he will be reimbursed for his monthly COBRA premium payments for up to 18 months.

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If a qualifying termination event occurs at or within two years following a change in control of SR Bancorp or Somerset Savings Bank, Mr. Orbach would be entitled to (in lieu of the payments and benefits described in the previous paragraph) a severance payment equal to three times the sum of (1) his base salary in effect as of the date of termination (or during the three preceding years, if higher) and (2) and average annual total incentive bonus earned by him for the three most recently completed calendar years before the change in control (or, if greater, the annual total incentive bonus that would have been earned in the year of the change in control at target bonus opportunity). In addition, he will receive a lump sum payment equal to the value of 36 months' health care cost (based on COBRA premium payments).

For purposes of the employment agreement, the term "good reason" generally includes: (1) a material reduction in Mr. Orbach's base salary and/or aggregate incentive compensation opportunities under Somerset Savings Bank's annual and long-term incentive plans or programs, as applicable; (2) a material reduction in Mr. Orbach's authority, duties or responsibilities; (3) the failure to re-appoint Mr. Orbach to his executive position or to nominate and recommend his election to SR Bancorp's Board of Directors or to appoint or nominate and elect him to the Somerset Savings Bank's Board of Directors; (4) a relocation of his principal place of employment by more than 20 miles from his primary place of business; or (5) a material breach of the employment agreement.

The employment agreement terminates upon Mr. Orbach's death or disability. Upon termination of employment (other than a termination in connection with a change in control), Mr. Orbach will be required to adhere to one-year non-competition and non-solicitation restrictions set forth in the employment agreement.

The non-competition and non-solicitation covenants apply following a change in control for a period mutually to be agreed to by the parties, which will be no less than six months nor exceed two years. If payments and benefits provided to Mr. Orbach becomes subject to Sections 280G and 4999 of the Internal Revenue Code, and after considering the value of the non-competition and non-solicitation covenants, the payments will be reduced if the reduction would leave him financially better off on an after-tax basis than if he received the entire payment and was obligated to pay the excise tax under Section 4999 of the Internal Revenue Code.

***Appointment of Directors to the SR Bancorp Board of Directors***. SR Bancorp will appoint three members of Regal Bancorp's Board of Directors to the Boards of directors of SR Bancorp and Somerset Savings Bank. Those individuals will be Mr. Orbach and two other directors of Regal Bancorp, who will be chosen by SR Bancorp following consultation with Regal Bancorp.

***Employee Severance.*** Except in the circumstances described below, an employee of Regal Bancorp or Regal Bank who has one year of service and whose employment is involuntarily terminated, other than for cause, at or within twelve months of the effective time of the Merger, will receive a lump sum payment equal to two weeks base pay for each full year of service at Regal Bancorp or Regal Bank with a minimum payment equal to four weeks of base pay and a maximum payment amount equal to 26 weeks of base pay. Any employee of Regal Bancorp or Regal Bank who has a separate employment agreement, change in control agreement or severance agreement is entitled only to the payments provided by such agreement.

***Continued Director and Officer Liability Coverage.*** For a period of six years following the effective time of the Merger, SR Bancorp has agreed to indemnify, and advance expenses in matters that may be subject to indemnification to, persons who served as directors, officers or employees of Regal Bancorp, Regal Bank or any of their subsidiaries with respect to liabilities and claims (and related expenses, including fees and disbursements of counsel) made against them resulting from their service as such before the effective time of the Merger to the same extent as Regal Bancorp currently provides for indemnification of its officers and directors. SR Bancorp has also agreed to purchase and keep in force for a period of six years following the effective time of the Merger directors' and officers' liability insurance to provide coverage for acts or omissions of the type and in the amount currently covered by Regal Bancorp's and Regal Bank's existing directors' and officers' liability insurance for acts or omissions occurring on or before the effective time of the Merger. However, SR Bancorp is not required to expend in the aggregate an amount greater than 250% of the annual cost currently expended by Regal Bancorp and Regal Bank with respect to such insurance (the "Insurance Amount"). If the cost of procuring such insurance would exceed the Insurance Amount, SR Bancorp will use its reasonable best efforts to obtain as much comparable insurance as is available for the Insurance Amount.

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**Employee Matters** 

Each person who is an employee of Regal Bank as of the closing of the Merger (whose employment is not specifically terminated upon the closing) will become an employee of Somerset Savings Bank. SR Bancorp or its subsidiaries will make available employer-provided health and other employee welfare benefit plans to each continuing employee on the same basis that such employees received coverage from Regal Bank until Somerset Savings Bank alters such benefits to make them consistent with the benefits being offered by Somerset Savings Bank. Former employees of Regal Bank who become employees of Somerset Savings Bank in connection with the Merger will generally be eligible to participate in the Somerset Savings Bank's 401(k) Plan and the Somerset Savings Bank employee stock ownership plan in accordance with the eligibility provisions of the respective plans. Former employees of Regal Bank will be considered new employees for purposes of eligibility and vesting in Somerset Savings Bank's defined benefit pension plan and will be considered existing employees for eligibility and vesting purposes for the employee stock ownership plan.

**Time of Completion** 

The closing of the Merger will take place no later than the 5<sup>th</sup> business day after the last condition precedent pursuant to the Merger Agreement has been fulfilled or waived (including the expiration of any applicable waiting period), or at such other place, date or time upon which SR Bancorp and Regal Bancorp mutually agree. On the closing date, Regal Bancorp will merge with and into SR Bancorp. SR Bancorp will file a certificate of merger with the New Jersey Division of Taxation in accordance with the New Jersey Business Corporation Act, and will file articles of merger with the Maryland Department of Assessments and Taxation merging Regal Bancorp into SR Bancorp. The Merger will become effective at the time stated in such certificate of merger and articles of merger.

It is expected that the Merger will be completed in the third quarter of 2023, following the completion of the conversion and related stock offering. However, because completion of the Merger is subject to regulatory approvals and other conditions, the parties cannot be certain of the actual timing. Furthermore, either company may terminate the Merger Agreement if, among other reasons, the Merger has not been completed on or before August 31, 2023, unless failure to complete the Merger by that time is due to a failure to fulfill any material obligation under the Merger Agreement by the party seeking to terminate the agreement. See "—*Termination, Amendment and Waiver*."

**Possible Alternative Structures** 

SR Bancorp is entitled to revise the structure of the proposed Merger, the bank merger or the mutual-to-stock conversion, provided that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• there are no adverse Federal or state income tax consequences to Regal Bancorp shareholders as a result of the
modification;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the consideration to be paid to the holders of Regal Bancorp common stock under the proposed Merger Agreement is
not changed in kind or value or reduced in amount and, in the case of revision to the structure of the conversion, the pro forma capitalization of SR Bancorp cannot be materially different than that contemplated by this prospectus; provided however,
a change in the appraised or forma market valuation of the SR Bancorp common stock to be issued in the conversion will not be deemed to be a change in the consideration to be paid to the holders of Regal Bancorp common stock; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the modification will not materially delay or jeopardize receipt of any required regulatory approvals or other
consents and approvals relating to the consummation of the proposed Merger.

**Representations and Warranties** 

The Merger Agreement contains various representations and warranties by SR Bancorp and Somerset Savings Bank and Regal Bancorp and Regal Bank that are customary for a transaction of this kind. Some of the representations and warranties are qualified by materiality and other exceptions. The representations and warranties include, among other things:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the organization, existence, and corporate power and authority, and capitalization of each of the companies;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• ownership of subsidiaries;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• authority to enter into the Merger Agreement and that the Merger Agreement is binding on the parties;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the absence of conflicts with and violations of law and various documents, contracts and agreements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• filings required to be made with and approvals required to be obtained from governmental agencies and consents to
be obtained from third parties in connection with the Merger Agreement, and a statement that the parties are not aware of any reasons why such approvals and consents will not be obtained;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• financial statements and regulatory reports;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• filing of tax returns and payment of taxes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the absence of any development materially adverse to the companies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• material contracts and leases of Regal Bancorp and Regal Bank;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• ownership of property;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• insurance coverage;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the absence of adverse material litigation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• compliance with applicable laws and regulations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• employee benefit matters, including employee benefit plans;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• brokers and financial advisors of Regal Bancorp and Regal Bank;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• environmental matters;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• loan portfolios;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• investment securities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• related party transactions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• termination benefits related to employment agreements and other benefit plans for Regal Bancorp and Regal Bank;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the absence of brokered deposits;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the inapplicability of anti-takeover laws and regulations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the absence of obligations to register securities for Regal Bancorp or Regal Bank;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• derivative transactions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Regal Bancorp's receipt of a fairness opinion;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the absence of trust business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the availability of Regal Bancorp's securities documents;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• intellectual property;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• labor matters; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the accuracy of the information supplied.

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All representations, warranties and covenants of the parties, other than the covenants in specified sections that relate to continuing matters, terminate upon the Merger.

**Covenants of the Parties** 

***Conduct of Business Pending the Merger.*** In the Merger Agreement, Regal Bancorp has agreed, pending consummation of the Merger, that it will, among other things, unless otherwise consented to in writing by Somerset Savings Bank (which consent will not be unreasonably withheld, conditioned or delayed):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• operate its business, and cause each of its subsidiaries, including Regal Bank, to operate their businesses only
in the usual, regular and ordinary course of business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• use reasonable efforts to preserve intact its business organization and assets and advantageous business
relationships and maintain its rights and franchises; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• voluntarily take no action that would:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• adversely affect the ability of Regal Bancorp, Regal Bank, SR Bancorp or Somerset Savings Bank to obtain any
necessary bank regulatory and governmental approvals for the transactions contemplated by the Merger Agreement or materially increase the period of time necessary to obtain such approvals; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• adversely affect the ability of Regal Bancorp to perform its covenants and agreements contained in the Merger
Agreement.

***Negative Covenants of Regal Bancorp.*** Regal Bancorp and Regal Bank have agreed that from the date of the Merger Agreement until the completion of the Merger, except as otherwise specifically permitted or required by the Merger Agreement, or consented to by Somerset Savings Bank in writing (which consent shall not be unreasonably withheld, conditioned or delayed), Regal Bancorp and Regal Bank will not and will not agree to do the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• amend or waive any provision of their organizational documents, except as required by law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• change the number of authorized or issued shares of capital stock, issue any shares that are held as treasury
shares, or issue or grant any stock options or securities convertible into shares of common stock, make any grant or award under the Regal Bancorp Stock Benefit Plan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• split, combine or reclassify any shares of capital stock;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• declare, set aside or pay any dividend or other distribution in respect of capital stock, or redeem or otherwise
acquire any shares of capital stock, except that Regal Bank may pay dividends to Regal Bancorp (as permitted under applicable law or regulations) consistent with past practice;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• enter into, amend in any material respect or terminate any contract or agreement (including without limitation
any settlement agreement with respect to litigation), except in the ordinary course of business consistent with past practice;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• make application for the opening or closing of any, or open or close any, branch office or automated banking
facility;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• grant or agree to pay any increase in salary, bonus, severance or termination to, or enter into, renew or amend
any employment agreement, severance agreement and/or supplemental executive agreement with, or increase in any manner the compensation or fringe benefits of, any of its directors, officers or employees, except (1) as may be required pursuant to
existing commitments; (2) merit pay increases in the ordinary course of business consistent with past practice; (3) bonus payments consistent with accruals that have been made by Regal Bancorp for 2022 and that are in the ordinary course
of business consistent with past practice, and a pro rata targeted bonus for 2023 in an amount that is consistent with past practice; (4) for profit-sharing contributions to the Regal Bank 401(k) Profit Sharing Plan for 2022 and pro rata based
on the timing of the closing of the Merger for 2023, consistent with past practice; or (5) as may be necessary to comply with Section 409A of the Internal Revenue Code;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Hire any new employee with annual compensation in excess of $75,000, provided that Regal Bancorp or Regal Bank
may hire at-will employees to fill vacancies that may from time to time arise in the ordinary course of business in consultation with Somerset Savings Bank;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• enter into or, except as may be required by law (including amendments or modifications necessary to comply with
Section 409A of the Internal Revenue Code), or materially modify any pension, retirement, stock option, stock purchase, stock appreciation right, stock grant, savings, profit sharing, deferred compensation, supplemental retirement, consulting,
bonus, group insurance or other employee benefit, incentive or welfare contract, plan or arrangement, or any trust agreement related thereto, in respect of any of its directors, officers or employees;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• make any contributions to any defined contribution or defined benefit plan not in the ordinary course of business
consistent with past practice;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• merge or consolidate Regal Bancorp or Regal Bank with any other corporation or restructure, reorganize or
completely or partially liquidate or dissolve Regal Bancorp or Regal Bank;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• sell or lease all or any substantial portion of the assets or business of Regal Bancorp or its subsidiaries;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• acquire all or any substantial portion of the assets or business of another entity except in connection with
foreclosures or other collections of loans or other credit arrangements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• enter into a purchase and assumption transaction with respect to deposits and liabilities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• permit the revocation or surrender by Regal Bank of its certificate of authority to maintain, or file an
application for the relocation of, any existing branch office;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• sell or otherwise dispose of the capital stock or asset of Regal Bancorp or Regal Bank other than in the ordinary
course of business consistent with past practice;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• subject any asset of Regal Bancorp or its subsidiaries to a lien or other encumbrance (other than deposits, FHLB
advances, repurchase agreements, bankers acceptances, "treasury tax and loan" accounts established in the ordinary course of business and transactions in "federal funds" and the satisfaction of legal requirements in the exercise
of trust powers), except in the ordinary course of business consistent with past practice;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• incur any indebtedness for borrowed money (or assume guarantee any indebtedness for borrowed money), except in
the ordinary course of business consistent with past practice;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• take any action that would result in Regal Bancorp's representations and warranties in the Merger Agreement
becoming untrue or in any of the closing conditions in the Merger Agreement not being satisfied, except in each case as may be required by applicable law or regulation or by any bank regulator;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• knowingly take any action that could reasonably be expected to prevent or impede the Merger or bank merger from
qualifying as a tax-free reorganization under the Internal Revenue Code;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• change any method of accounting (tax or financial), except as may be required by accounting principles generally
accepted in the United States of America or banking regulators;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• waive, release, grant or transfer any material rights of value or modify or change in any material respect any
existing material agreement or indebtedness, other than in the ordinary course of business consistent with past practice;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• purchase any equity securities, or purchase securities for Regal Bancorp's investment portfolio inconsistent
with Regal Bancorp's or Regal Bank's current investment policy or otherwise alter, in any material respect, the mix, maturity, credit or interest rate risk profile of its portfolio of investment securities or its portfolio of
mortgage-backed securities;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• make any loans other than loans that are consistent with Regal Bank's current policies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• pay, loan, or advance any amount to, or sell, transfer or lease any properties or assets to, or as applicable
from, or enter into any agreement or arrangement with, any affiliates or associates, other than compensation or business expense reimbursement in the ordinary course of business consistent with past practice;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• enter into any derivative transaction other than in the ordinary course of business consistent with past
practice;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• except for actions taken in accordance with the Merger Agreement, take any action that would give rise to a right
of payment under any employment, change in control, severance or similar agreement or under Regal Bancorp compensation or benefit plan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• enter into any new line of business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• make any material changes to its material banking policies except as may be required by law or banking
regulators;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• make capital expenditures in excess of $50,000 individually or $100,000 in the aggregate, other than expenditures
necessary to maintain existing assets in good repair;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• purchase or sell any assets or incur any liabilities other than in the ordinary course of business consistent
with past practice;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• sell any participation interest in any loan, or purchase or sell any mortgage loan servicing rights, other than
in the ordinary course of business consistent with past practice;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• enter into leases or other contracts involving payments in excess of $25,000 annually, or containing any
financial commitment extending beyond 12 months from the date of the Merger Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• pay, discharge, settle or compromise any claim, action, litigation, arbitration or proceeding, other than in the
ordinary course of business consistent with past practice that involves solely money damages not to exceed $50,000 individually or $100,000 in the aggregate, and that does not create negative precedent for other pending or potential claims, actions,
litigation, arbitration or proceedings;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• foreclose upon or take a deed or title to any commercial real estate without first conducting an environmental
assessment of the property or foreclose upon any commercial real estate if such environmental assessment indicates the presence of a materials of environmental concern;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• issue any broadly distributed communication of a general nature to employees without prior consultation with
Somerset Savings Bank and, to the extent relating to post-closing employment, benefit or compensation information without the prior written consent of Somerset Savings Bank (which shall not be unreasonably withheld, delayed or conditioned) or issue
any broadly distributed communication of a general nature to customers without the prior written approval of Somerset Savings Bank (which shall not be unreasonably withheld, delayed or conditioned), except as required by law or for communications in
the ordinary course of business consistent with past practice that do not relate to the Merger; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• except as provided in the Merger Agreement, redeem the Regal Bancorp Subordinated Notes.

***Current Information.*** Each party will confer with each other as to the general status of its ongoing operations. Regal Bank and Somerset Savings Bank will meet regularly basis to discuss and plan for the conversion of Regal Bank's data processing and related electronic informational systems to those of Somerset Savings Bank. Each party will promptly notify the other party of any material change in its business, any non-confidential governmental complaints, investigations or hearings or the institution or the threat of material litigation involving it.

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***Access to Properties and Records.*** Subject to other terms of the Merger Agreement, Regal Bancorp and Regal Bank have agreed to permit SR Bancorp reasonable access to their employees and properties, and to disclose and make available their books, papers and records relating to their operations.

***Financial and Other Statements.*** Regal Bancorp will furnish to Somerset Savings Bank copies of audited financial statements and copies of all internal control reports submitted to Regal Bancorp by its independent accountants. Regal Bancorp will deliver to Somerset Savings Bank copies of all reports that are filed with bank regulators. Each party will advise the other party of the receipt of examination reports from any bank regulator and will furnish to the other party any additional financial data as the other party may reasonably request.

***Consents and Approvals of Third Parties; All Reasonable Efforts.*** Regal Bancorp and Somerset Savings Bank will use all commercially reasonable efforts to obtain all consents and approvals necessary for the consummation of the Merger. Subject to the terms of the Merger Agreement, Regal Bancorp and Somerset Savings Bank will use all commercially reasonable efforts to take all action necessary or advisable to consummate the Merger and Somerset Savings Bank will use all commercially reasonable efforts to take all action necessary or advisable to consummate the mutual-to-stock conversion and the conversion of its charter from a New Jersey-chartered savings association to a New Jersey-chartered commercial bank.

***Failure to Fulfill Conditions.*** Regal Bancorp and SR Bancorp have agreed to promptly notify the other if they determine that a condition to their obligation to complete the Merger (or for Somerset Savings Bank, the mutual-to-stock conversion) cannot be fulfilled and that they will not waive the condition.

***No Solicitation.*** Regal Bancorp has agreed that, unless the Merger Agreement has been terminated, neither it, its subsidiaries, its officers, directors, employees, representatives, agents, advisors or affiliates will:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• initiate, solicit, knowingly encourage or knowingly facilitate any inquiries or proposals to acquire Regal
Bancorp or Regal Bank;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• engage or participate in any negotiations with any entity to acquire Regal Bancorp or Regal Bank;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• provide any confidential or non-public information or data to, or have or
participate in any discussions with, any entity to acquire Regal Bancorp or Regal Bank; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• unless the Merger Agreement has been terminated, approve or enter into any term sheet, letter of intent,
commitment, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement or other agreement to acquire Regal Bancorp or Regal Bank.

Notwithstanding the foregoing, before the Regal Bancorp shareholder approval of the Merger, Regal Bancorp may furnish non-public information regarding Regal Bancorp to, or enter into discussions with, any entity to acquire Regal Bancorp and Regal Bank if:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Regal Bancorp has received a bona fide unsolicited written proposal to acquire Regal Bancorp and Regal Bank from
a person or entity that did not result from a breach of Regal Bancorp's non-solicitation obligation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the Regal Bancorp Board determines in good faith, after consultation with and having considered the advice of its
outside legal counsel and, with respect to financial matters, its independent financial advisor, that such proposal to acquire Regal Bancorp or Regal Bank constitutes or is reasonably likely to lead to a "Superior Proposal" (as defined
below) and that the failure to furnish information to or enter into discussions with such person or entity may cause the Regal Bancorp Board of Directors to breach its fiduciary duties to shareholders under applicable law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Regal Bancorp has provided SR Bancorp with at least two business days' prior notice of such determination;
and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• before furnishing or affording access to any information or data with respect to Regal Bancorp, Regal Bancorp
receives from such person or entity a confidentiality agreement with terms no less favorable to Regal Bancorp than those contained in the confidentiality agreement between Regal Bancorp and Somerset Savings Bank.

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"Superior Proposal" means any bona fide written proposal to acquire Regal Bancorp and Regal Bank on terms that the Regal Bancorp Board determines in its good faith judgment, after consultation with and having considered the advice of outside legal counsel and, with respect to financial matters, its financial advisor (1) would result in a transaction that involves consideration to the Regal Bancorp shareholders that is more favorable, from a financial point of view, than the consideration to be paid to Regal Bancorp's shareholders pursuant to this Agreement, considering, among other things, the nature of the consideration being offered; and (2) is reasonably likely to be completed on the terms proposed, in each case taking into account all legal, financial, regulatory and other aspects of the proposal.

Regal Bancorp must promptly provide to Somerset Savings Bank any non-public information regarding Regal Bancorp or its subsidiaries that it provides to any other person or entity that was not previously provided to Somerset Savings Bank. Regal Bancorp will immediately cease and cause to be terminated any activities, discussions or negotiations with any person or entity with respect to any proposal to acquire Regal Bancorp or Regal Bank. Regal Bancorp will promptly notify Somerset Savings Bank in writing if any proposals are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued with Regal Bancorp or any of its representatives, in each case in connection with any proposal to acquire Regal Bancorp or Regal Bank, and such notice will indicate the name of the person or entity initiating such discussions or negotiations or making such proposal or information request and the material terms and conditions of any proposals and an unredacted copy of any such proposal or information request. Regal Bancorp will keep SR Bancorp apprised of any related developments, discussions and negotiations on a current basis, including any amendments to or revisions of the terms of such inquiry or proposal. Regal Bancorp will use its reasonable best efforts to enforce any existing confidentiality or standstill agreements to which it or any of its subsidiaries is a party.

***Regal Bancorp Shareholder Meeting.*** Regal Bancorp will take all actions necessary to call, give notice of, convene and hold a meeting of its shareholders as promptly as practicable to vote on the Merger Agreement and the transactions provided for in the Merger Agreement. Regal Bancorp's Board of Directors will recommend at its shareholder meeting that the shareholders vote to approve the Merger Agreement and will use its commercially reasonable efforts to obtain shareholder approval. Regal Bancorp will not (1) withdraw, qualify or modify, or propose to withdraw, qualify or modify its recommendation to approve the Merger Agreement, or make any statement, filing or release inconsistent with the that recommendation; or (2) approve or recommend, or publicly propose to approve or recommend, any third-party proposal to acquire Regal Bancorp or Regal Bank. However, before the Regal Bancorp shareholder meeting, the Regal Bancorp Board of Director may approve or recommend a Superior Proposal to its shareholders and withdraw, qualify or modify its recommendation to approve the proposed Merger if (i) the Regal Bancorp Board of Directors has reasonably determined in good faith, after consultation with and having considered the advice of outside legal counsel, that the failure to take such action would be reasonably likely to violate its fiduciary duties to the Regal Bancorp shareholders under applicable law, and (2) after providing five business days' notice to SR Bancorp, after taking into account any such adjusted, modified or amended terms as may have been committed to in writing by SR Bancorp, Regal Bancorp Board has again in good faith made the determination that such third-party proposal to acquire Regal Bancorp and Regal Bank constitutes a Superior Proposal.

Unless the Merger Agreement has been terminated, the Merger Agreement must be submitted to the Regal Bancorp shareholders regardless of whether (1) the Regal Bancorp Board of Directors has changed its recommendation as to whether to vote for the proposed Merger or (2) a third-party proposal to acquire Regal Bancorp and Regal Bank has been publicly proposed or announced or otherwise submitted to Regal Bancorp or any of its advisors. SR Bancorp may require Regal Bancorp to adjourn, delay or postpone the Regal Bancorp shareholders meeting once for a period not to exceed 30 calendar days to solicit additional proxies necessary to obtain the required approval of Regal Bancorp shareholders.

***Merger-related Regulatory Approvals.*** Each of Regal Bancorp, Regal Bank, SR Bancorp and Somerset Savings Bank will cooperate with the other and use their best efforts to promptly prepare all necessary documentation, to effect all necessary filings and to obtain all necessary permits, consents, waivers, approvals and authorizations of the Securities and Exchange Commission, bank regulators and any other third parties necessary to consummate the proposed Merger.

***Shareholder Litigation.*** Regal Bancorp must provide SR Bancorp prompt notice of any shareholder litigation against Regal Bancorp or its directors or officers relating to the proposed Merger and must provide SR Bancorp the opportunity to participate (at SR Bancorp's expense) in the defense or settlement of any such litigation.

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Regal Bancorp must provide SR Bancorp the right to review and comment on all filings or responses to be made by Regal Bancorp in connection with any such litigation. Regal Bancorp will not settle any such litigation without SR Bancorp's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed.

***Regal Bank Dividend.*** Immediately prior to the closing of the proposed Merger, Regal Bank must pay a cash dividend to Regal Bancorp in an amount equal to the maximum cash dividend payment that is permissible under New Jersey Revised Statutes Section 17:9A-5d, as mutually determined by Regal Bancorp and SR Bancorp.

***Treatment of Regal Bancorp Subordinated Notes.*** If requested by Somerset Savings Bank following the receipt of (1) all required regulatory approvals for the Merger and the mutual-to-stock conversion; (2) Regal Bancorp shareholder approval of the Merger; and (3) the required approval of the depositors of Somerset Savings Bank of the conversion, Regal Bancorp will take all necessary steps to redeem the Regal Bancorp subordinated notes. If the Regal Bancorp subordinated notes are not redeemed, SR Bancorp agrees to execute and deliver one or more supplemental indentures, guarantees, and/or other instruments required to assume the Regal Bancorp subordinated notes.

***Employee Benefits.***

Somerset Savings Bank will review all Regal Bancorp compensation and benefit plans and may terminate or continue such plans. Except as set forth below, all Regal Bancorp employees who become participants in a Somerset Savings Bank compensation and benefit plan will be given credit for meeting eligibility and vesting requirements in such plans (but not for benefit accrual purposes) for service as an employee of Regal Bancorp or Regal Bank. Continuing employees will be considered new employees for purposes of eligibility and vesting in the Somerset Savings Bank defined benefit pension plan and will be considered as existing employees of Somerset Savings Bank for purposes of eligibility and vesting in the tax-qualified Somerset Savings Bank employee stock ownership plan to be formed in connection with the mutual-to-stock conversion.

SR Bancorp will honor the terms of existing Regal Bancorp employment, change in control, severance and other compensation agreements, plans and arrangements. Concurrently with the execution and delivery of the Merger Agreement, each executive of Regal Bank that was a party to a change in control agreement executed a settlement agreement setting forth the manner in which his rights under the change in control agreement will be settled by Regal Bank or Somerset Savings Bank.

In the event of any termination of any Regal Bank health, disability or life insurance plan or consolidation of such plan with any Somerset Savings Bank health, disability or life insurance plan, Somerset Savings Bank will make available to employees of Regal Bank who continue employment with Somerset Savings Bank and their dependents employer-provided health, disability or life insurance coverage on the same basis as it provides such coverage to Somerset Savings Bank employees. No coverage of any of the Regal Bank continuing employees or their dependents will terminate under any of the Regal Bank health, disability or life insurance plans before the time such continuing employees and their dependents become eligible to participate in the corresponding Somerset Savings Bank health, disability or life insurance plans, programs and benefits. With respect to any employee benefit plans of Somerset Savings Bank in which any continuing employee becomes eligible to participate, Somerset Savings Bank has agreed to use commercially reasonable efforts to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• cause to be waived all pre-existing conditions, exclusions and waiting
periods with respect to participation and coverage requirements applicable to such employees and their eligible dependents, except to the extent such pre-existing conditions, exclusions or waiting period would
apply under the analogous Somerset Savings Bank employee plan; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• provide each such employee and their eligible dependents with credit for any eligible expenses incurred by such
employee or dependent in satisfying any applicable deductible, co-payment or out-of-pocket requirements under any new plan.

Each Regal Bank employee whose employment is involuntarily terminated (other than for cause) at or within 12 months of the closing of the Merger and who is not covered by a separate employment agreement, change in control agreement or severance agreement will receive a severance payment equal to two weeks of base pay for each full year of service at Regal Bank, with a minimum payment equal to four weeks of base pay for employees who have at least one full year of service as of their date of termination and a maximum of 26 weeks of base pay.

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Regal Bank will have the right to pay a retention bonus to certain of its key employees.

**Conditions to Completing the Proposed Merger** 

***Conditions to the Obligations of Each Party Under the Merger Agreement***. The respective obligations of SR Bancorp, Somerset Savings Bank, Regal Bancorp and Regal Bank to complete the proposed Merger are subject to the following conditions, none of which may be waived:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• approval of the Merger Agreement by the requisite vote of Regal Bancorp's shareholders;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the absence of any order, decree, injunction proceeding by a governmental entity, statute, rule or regulation by
which the proposed Merger is enjoined or prohibited;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• receipt of all required regulatory approvals, authorizations and consents and the expiration of all statutory
waiting periods;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• no stop order suspending the effectiveness of the registration statement of which this prospectus is a part shall
have been issued, and no proceedings for that purpose have been initiated or threatened by the Securities and Exchange Commission;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the conversion and related stock offering have been completed.

***Additional Conditions to the Obligations Under the Merger Agreement***. The obligations of Somerset Savings Bank and Regal Bancorp are further subject to the following conditions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• subject to the materiality standards provided in the Merger Agreement, the accuracy of the representations and
warranties of the parties made in the Merger Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the other party to the Merger Agreement has performed in all material respects its obligations under the Merger
Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the other party to the Merger Agreement has obtained all material permits, authorizations, consents, waivers,
clearances or approvals required for the lawful completion of the Merger;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• SR Bancorp having delivered the merger consideration to the exchange agent;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• SR Bancorp having received a "comfort" letter from the independent accountants for Regal Bancorp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• since December 31, 2021, Regal Bancorp party shall not have suffered any material adverse effect;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the absence of conditions or requirements in any regulatory approvals that (1) would prohibit or materially
limit the ownership or operation by either party of the business or assets of Regal Bancorp or Regal Bank, (2) materially limit the business currently conducted by Somerset Savings Bank, (3) compel either party to dispose of or hold
separate all or any material portion of the business or assets of Regal Bancorp or Regal Bank or (4) compel SR Bancorp or Somerset Savings Bank to take any action or commit to take any action or agree to any condition or request, if the
prohibition, limitation, condition or other requirement could reasonably be expected to have a material adverse effect on the future operations of SR Bancorp and Somerset Savings Bank; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• neither SR Bancorp nor Somerset Savings Bank having terminated the employment agreement executed by
Mr. Orbach.

SR Bancorp and Regal Bancorp cannot guarantee whether all of the conditions to the Merger will be satisfied or waived by the party permitted to do so.

**Termination, Amendment and Waiver** 

***Termination***. The Merger Agreement may be terminated at any time before the completion of the Merger under the following circumstances:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• By mutual written agreement of the parties;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• By either Regal Bancorp or SR Bancorp (provided, that the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement) if there has been a breach by the other party of any of the representations or warranties set forth in the Merger Agreement, in each case such that the conditions to closing would not be
satisfied and such breach either cannot be cured or shall not have been cured within 30 days after the giving of written notice to such party of such breach;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• By either Regal Bancorp or SR Bancorp (provided, that the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement) if there has been a material failure to perform or comply with any of the covenants or agreements set forth in the Merger Agreement, and such failure either cannot be cured or has not been cured
with 30 days after the giving of written notice to such party of such breach;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• By either SR Bancorp or Regal Bancorp, if the Merger has not been completed by August 31, 2023, which date
may be extended by mutual agreement; provided that no party may terminate the Merger Agreement if the failure to close the Merger was due to such party's breach of any of its obligations under the Merger Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• By either Regal Bancorp or SR Bancorp if the Regal Bancorp shareholder vote or Somerset Savings Bank voting
member vote are not obtained (but only if the party seeking to terminate has fulfilled its obligations relating to calling the special meeting and recommending that its shareholders or voting members, as applicable, approve the Merger Agreement);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• By either Regal Bancorp or SR Bancorp if any required regulatory approval has been denied and such denial has
become final and non-appealable, or a governmental authority or court has issued a final, unappealable order prohibiting consummation of the transactions contemplated by the Merger Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• By SR Bancorp if (1) Regal Bancorp materially breaches its obligations regarding the solicitation of other
third-party acquisition proposals or its obligation to submit the Merger Agreement to its shareholders or (2) the Regal Bancorp Board of Directors receives a "Superior Proposal" and withdrawn, modifies or changes its recommendation to
shareholders in a manner adverse to SR Bancorp.

***Effect of Termination***. If the termination results from a willful breach of any representation, warranty, covenant or agreement, the breaching party will be liable for any and all damages, costs and expenses sustained or incurred by the non-breaching party.

***Termination Fee.*** The Merger Agreement provides that Regal Bancorp may be obligated to pay Somerset Savings Bank a termination fee of $2,336,000, plus out-of-pocket expenses not to exceed $550,000, if the Merger Agreement is terminated in the following circumstances:

SR Bancorp terminates the agreement because (1) Regal Bancorp has materially breached its obligations regarding the solicitation of other third-party acquisition proposals or its obligation to submit the Merger Agreement to its shareholders or (2) the Regal Bancorp Board of Directors receives a "Superior Proposal" and withdraws, modifies or changes its recommendation to shareholders in a manner adverse to SR Bancorp.

If SR Bancorp terminates the Merger Agreement because (1) Regal Bancorp breaches a covenant or agreement or if any representation or warranty of Regal Bancorp has become untrue and such breach or untrue representation or warranty has not been or cannot be cured within 30 days following written notice to Regal Bancorp and such breach giving rise to such termination was knowing and intentional, or (2) Regal Bancorp's shareholders fail to approve and adopt the Merger Agreement, and at the time of such termination, SR Bancorp was not in breach of any representation, warranty or material covenant, then Regal Bancorp must pay the termination fee, plus out-of-pocket expenses not to exceed $550,000, if (a) an acquisition proposal was publicly announced or disclosed (i) before the termination of the Merger Agreement if terminated in accordance with (1) above, or (ii) before Regal Bancorp's shareholders meeting if terminated in accordance with (2), above, and (b) within 12 months after termination of the Merger Agreement, Regal Bancorp enters into an agreement with respect to an acquisition proposal.

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***Expenses.*** Each of the parties will pay its own costs and expenses incurred in connection with the Merger.

***Amendment, Extension and Waiver***. The parties to the Merger Agreement may (1) amend the Merger Agreement; (2) extend the time for the performance of any of the obligations under the Merger Agreement; (3) waive any inaccuracies in the representations and warranties in the Merger Agreement; or (4) waive compliance with any of the agreements or conditions contained in the Merger Agreement, except that after any approval of the agreement by the Regal Bancorp shareholders, there may not be, without further approval of such shareholders, any amendment of the Merger Agreement that reduces the amount or value or changes the form of consideration to be delivered to Regal Bancorp's shareholders pursuant to the Merger Agreement.

**Management and Operations Following the Merger** 

***Board of Directors*.** Three individuals currently serving on the Board of Directors of Regal Bancorp, including David M. Orbach and two other Regal Bancorp directors to be selected by SR Bancorp after consultation with Regal Bancorp, will become directors of SR Bancorp and Somerset Regal Bank following completion of the proposed Merger. Mr. Orbach has indicated his intention to accept these positions. 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.

***Management.*** The current management team of Somerset Savings Bank will remain in place as a result of the proposed Merger. Mr. Orbach will be named as the Executive Chairman of the Board of SR Bancorp and the Executive Vice Chairman of the Board 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.

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**THE CONVERSION AND STOCK 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 and we receive approval from Somerset Savings Bank's voting members as well as the approvals of the NJDBI and the FDIC to complete the conversion and the approval of the Federal Reserve and NJDBI for SR Bancorp to become the parent company of Somerset Savings Bank.

**General** 

On July 25, 2022, the Board of Directors of Somerset Savings Bank unanimously adopted a plan of conversion pursuant to which Somerset Savings Bank will convert from the mutual (meaning no shareholders) to stock form of organization and will become the wholly owned subsidiary of SR Bancorp, a new Maryland corporation. SR Bancorp will own all of the capital stock of Somerset Savings Bank upon completion of the conversion. All of the common stock of SR Bancorp will be owned by public shareholders, our tax qualified employee benefit plans and Somerset Regal Charitable Foundation. The Plan of Conversion was amended on March 7, 2023.

The plan of conversion provides that we will offer shares of common stock for sale in a subscription offering to certain eligible depositors of Somerset Savings Bank, to our tax-qualified employee benefit plans, including the employee stock ownership plan and our 401(k) plan, and, if necessary, to members of the general public through a community offering and, possibly, through a syndicate of registered broker-dealers. In any community offering, we will give a preference to natural persons residing in New Jersey.

We have the right to accept or reject, in whole or in part, any orders to purchase shares of the common stock received in the community offering. The community offering, if any, may begin at the same time as, during, or after the subscription offering, and must be completed within 45 days after the completion of the subscription offering unless otherwise extended by us with the approval of the FDIC and the NJDBI, if required. See "—*Community Offering*."

SR Bancorp anticipates that net proceeds of the offering will be between $81.7 million and $111.4 million, (or $128.4 million if the offering range is increased by 15%) and that it will invest between $40.8 million and $55.7 million in Somerset Regal Bank (or $64.2 million if the offering range is increased by 15%). The conversion will be consummated only upon the issuance of at least 8,500,000 shares of our common stock offered pursuant to the plan of conversion.

We determined the number of shares of common stock to be offered in the offering based upon an independent valuation appraisal of the estimated consolidated pro forma market value of SR Bancorp. All shares of common stock to be sold in the offering will be sold at $10.00 per share. Investors will not be charged a commission to purchase shares of common stock in the offering. The independent valuation will be updated and the final number of the shares of common stock to be issued in the offering will be determined at the completion of the offering. See "—*How We Determined the Offering Range and the $10.00 Purchase Price*" for more information as to the determination of the estimated pro forma market value of the common stock.

The following is a brief summary of the material aspects of the conversion and offering. A copy of the plan of conversion is available from Somerset Savings Bank upon request and is available for inspection at the offices of Somerset Savings Bank and at the Federal Reserve, the FDIC and the NJDBI. The plan of conversion is also filed as an exhibit to the registration statement that we have filed with the SEC. See "*Where You Can Find Additional Information*."

**Reasons for the Conversion and Offering** 

The primary reasons for the conversion and stock offering are:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• raise capital to provide the funds necessary to acquire Regal Bancorp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• raise capital to support growth;

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

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

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

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• facilitate future mergers and acquisitions; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• use the additional capital for other general corporate purposes.

In addition, in the stock holding company structure, we will have greater flexibility in structuring mergers and acquisitions. Potential sellers often want a stock component for at least part of the acquisition consideration. Our new stock holding company structure will enable us to offer stock or cash consideration and will therefore enhance our ability to compete with other bidders when acquisition opportunities arise. Other than the acquisition of Regal Bancorp, we have no current arrangements or agreements to acquire other banks, thrifts and financial service companies or branch offices.

The offering will afford our directors, officers and employees the opportunity to become shareholders, which we believe to be an effective performance incentive and an effective means of attracting and retaining qualified personnel. The offering also will provide our customers and local community members with an opportunity to acquire our common stock.

**Approvals Required** 

The affirmative vote of more than a majority of the total votes cast by voting members of Somerset Savings Bank at the special meeting of voting members is required to approve the plan of conversion and the affirmative vote of a majority of the total votes cast by voting members of Somerset Savings Bank at the special meeting of voting members is required to the establishment and funding of the charitable foundation.

Each of the FDIC and the NJDBI must approve the conversion and applications have been filed with them. The Federal Reserve must approve SR Bancorp becoming the bank holding company of Somerset Savings Bank. SR Bancorp's has filed a holding company application with the Federal Reserve, which remains under review. SR Bancorp also filed a Registration Statement on Form S-1 with the Securities and Exchange Commission to register the shares of SR Bancorp common stock that it will issue in the offering.

**Effects of Conversion on Depositors and Borrowers** 

***Continuity****.* While the conversion is being accomplished, our normal business of accepting deposits and making loans will continue without interruption. We will continue to be a New Jersey savings association until the conversion and will continue to be regulated by the FDIC and the NJDBI after the conversion. In connection with the conversion, we have applied to convert Somerset Savings Bank from a savings association to a New Jersey state-chartered commercial bank. After the conversion, we will continue to offer existing services to depositors, borrowers and other customers. The directors serving Somerset Savings Bank at the time of the conversion will be the directors of Somerset Savings Bank and of SR Bancorp after the conversion.

***Effect on Deposit Accounts****.* Each depositor of Somerset Savings Bank at the time of the conversion will automatically continue as a depositor after the conversion, and the deposit balance, interest rate and other terms of deposit accounts will not change as a result of the conversion. Each deposit account will continue to be insured by the FDIC to the same extent as before the conversion. Depositors will continue to hold their existing certificates of deposit, savings accounts and other evidences of their accounts.

***Effect on Loans****.* No loan outstanding from Somerset Savings Bank will be affected by the conversion, and the amount, interest rate, maturity and security for each loan will remain as it was contractually fixed prior to the conversion.

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***Effect on Voting Rights of Depositors****.* 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, depositors will no longer have voting rights. Upon completion of the conversion, 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.

***Tax Effects****.* We have received an opinion of counsel or tax advisor with regard to federal and state income tax consequences of the conversion to the effect that the conversion will not be taxable for federal or state income tax purposes to Somerset Savings Bank or its depositors. See "—*Material Income Tax Consequences*."

***Effect on Liquidation Rights****.* Each depositor in Somerset Savings Bank has both a deposit account in Somerset Savings Bank and a pro rata ownership interest in the net worth of Somerset Savings Bank based upon the deposit balance in his or her account. This ownership interest is tied to the depositor's account and has no tangible market value separate from the deposit account. Any depositor who opens a deposit account obtains a pro rata ownership interest in Somerset Savings Bank without any additional payment beyond the amount of the deposit. A depositor who reduces or closes his or her account receives a portion or all, respectively, of the balance in the deposit account but nothing for his or her ownership interest in the net worth of Somerset Savings Bank, which is lost to the extent that the balance in the account is reduced or closed.

In the unlikely event that Somerset Savings Bank were to liquidate after the conversion, all claims of creditors, including those of depositors, also would be paid first, followed by distribution of a "liquidation account" to depositors as of June 30, 2021 and [•] who continue to maintain their deposit accounts as of the date of liquidation, with any assets remaining thereafter distributed to SR Bancorp as the holder of Somerset Savings Bank's capital stock. Pursuant to federal banking regulations, a post-conversion merger, consolidation, sale of bulk assets or similar combination or transaction with another insured depository institution would not be considered a liquidation and, in such a transaction, the liquidation account would be assumed by the surviving institution. See "—*Liquidation Rights*."

**Subscription Offering and Subscription Rights** 

Under the plan of conversion, we have granted rights to subscribe for our common stock to the following persons in the following order of priority:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Persons with deposits in Somerset Savings Bank with balances aggregating $50.00 or more on deposit at Somerset
Savings Bank ("qualifying deposits") as of the close of business on June 30, 2021;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Our tax-qualified employee benefit plans;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Persons with qualifying deposits in Somerset Savings Bank as of the close of business on [•], 2023; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Voting Members of Somerset Savings Bank as of the close of business on [•], 2023, who are not Eligible or
Supplemental Eligible Account Holders.

The amount of common stock that any person may purchase will depend on the availability of the common stock after satisfaction of all subscriptions having prior rights in the subscription offering and the maximum purchase limitation set forth in the plan of conversion. See "*The Conversion and Stock Offering—Limitations on Purchases of Shares*."

***Priority 1: Eligible Account Holders.*** Subject to the maximum purchase limitations, each depositor with a qualifying deposit as of June 30, 2021 will receive nontransferable subscription rights to subscribe for up to the greater of:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• $250,000 of common stock (which equals 25,000 shares);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• one-tenth of 1% of the total offering of shares; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 15 times the product (rounded down to the next whole number) obtained by multiplying the total number of shares
of common stock to be issued by a fraction, the numerator of which is the amount of the qualifying deposit of the Eligible Account Holder and the denominator is the total amount of qualifying deposits of all Eligible Account Holders, in each case as
of the eligibility record date.

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If there are insufficient shares to satisfy all subscriptions by Eligible Account Holders, shares first will be allocated so as to permit each subscribing Eligible Account Holder, if possible, to purchase a number of shares sufficient to make the person's total allocation equal 100 shares or the number of shares actually subscribed for, whichever is less. After that, unallocated shares will be allocated among the remaining subscribing Eligible Account Holders whose subscriptions remain unfilled in the proportion that the amounts of their respective qualifying deposits bear to the total qualifying deposits of all remaining Eligible Account Holders whose subscriptions remain unfilled. If an amount so allocated exceeds the amount subscribed for by any one or more Eligible Account Holders, the excess shall be reallocated, one or more times as necessary, among those Eligible Account Holders whose subscriptions are not fully satisfied on the same principle until all available shares have been allocated or all subscriptions satisfied. Subscription rights of Eligible Account Holders who are also executive officers or directors of SR Bancorp or Somerset Savings Bank or their associates will be subordinated to the subscription rights of other Eligible Account Holders to the extent attributable to increased deposits in Somerset Savings Bank in the one-year period preceding June 30, 2021.

To ensure a proper allocation of stock, each Eligible Account Holder must list on his or her stock order form all deposit accounts in which such Eligible Account Holder had an ownership interest at June 30, 2021. Failure to list an account, or providing incomplete or incorrect information, could result in the loss of all or part of a subscriber's stock allocation.

***Priority 2: Tax-Qualified Employee Plans.*** The tax-qualified employee plans of Somerset Savings Bank, such as our employee stock ownership plan and 401(k) plan, have nontransferable subscription rights to purchase up to 10.0% of the shares of common stock issued in the offering, including shares contributed to Somerset Regal Charitable Foundation. The employee stock ownership plan intends to purchase up to 8% of the common stock issued in the offering, including shares contributed to the charitable foundation. Subscriptions by the employee stock ownership plan will not be aggregated with shares of common stock purchased by any other participants in the offering, including subscriptions by our officers and directors, for the purpose of applying the purchase limitations in the plan of conversion. If Eligible Account Holders subscribe for all of the shares being sold, subscriptions for shares by the tax-qualified employee plans may be satisfied, in whole or in part, out of authorized but unissued shares subject to the maximum purchase limitations applicable to such plans, or may be satisfied, in whole or in part, through open market purchases by the tax-qualified employee plans subsequent to the closing of the offering, subject to approval of the FDIC and NJDBI, if required.

***Priority 3: Supplemental Eligible Account Holders.*** To the extent that there are sufficient shares of common stock remaining after satisfaction of subscriptions by Eligible Account Holders and the tax-qualified employee plans, and subject to the maximum purchase limitation, each Supplemental Eligible Account Holder will receive nontransferable subscription rights to subscribe for up to the greater of:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• $250,000 of common stock (which equals 25,000 shares);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• one-tenth of 1% of the total offering of shares; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 15 times the product, rounded down to the next whole number, obtained by multiplying the total number of shares
of common stock to be sold by a fraction of which the numerator is the amount of qualifying deposits of the Supplemental Eligible Account Holder and the denominator is the total amount of qualifying deposits of all Supplemental Eligible Account
Holders.

If there are insufficient shares to satisfy all subscriptions by Supplemental Eligible Account Holders, shares first will be allocated so as to permit each subscribing Supplemental Eligible Account Holder, if possible, to purchase a number of shares sufficient to make the person's total allocation equal 100 shares or the number of shares actually subscribed for, whichever is less. After that, unallocated shares will be allocated among the remaining subscribing Supplemental Eligible Account Holders whose subscriptions remain unfilled in the proportion that the amounts of their respective qualifying deposits bear to the total qualifying deposits of all remaining Supplemental Eligible Account Holders whose subscriptions remain unfilled. If an amount so allocated exceeds the amount subscribed for by any one or more Supplemental Eligible Account Holders, the excess shall be reallocated, one or more times as necessary, among those Supplemental Eligible Account Holders whose subscriptions are not fully satisfied on the same principle until all available shares have been allocated or all subscriptions satisfied.

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To ensure a proper allocation of stock, each Supplemental Eligible Account Holder must list on his or her stock order form all deposit accounts in which such Supplemental Eligible Account Holder had an ownership interest at [•], 2023. Failure to list an account, or providing incomplete or incorrect information, could result in the loss of all or part of a subscriber's stock allocation.

***Priority 4: Voting Members.*** To the extent that there are sufficient shares of common stock remaining after satisfaction of subscriptions by Eligible Account Holders, the tax-qualified employee plans and Supplemental Eligible Account Holders, subject to the maximum purchase limitation, each Voting Member who is not an Eligible Account Holder or Supplemental Eligible Account Holder, shall receive nontransferable subscription rights to subscribe for up to the greater of:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• $250,000 of common stock (which equals 25,000 shares); or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• one-tenth of 1% of the total offering of shares.

If shares are available for Voting Members but there are not sufficient shares to satisfy all subscriptions by Voting Members, shares first will be allocated so as to permit each subscribing Voting Member, if possible, to purchase a number of shares sufficient to make each Voting Member's total allocation equal to 100 shares or the number of shares actually subscribed for, whichever is less. After that, unallocated shares will be allocated among the remaining subscribing Voting Members in the proportion that each Voting Member's subscription bears to the total subscriptions of all such subscribing Voting Members whose subscriptions remain unfilled.

To ensure a proper allocation of stock, each Voting Member must list on his or her stock order form all deposit accounts in which such Voting Member had an ownership interest at [voting record date]. Failure to list an account or providing incorrect or incomplete information could result in the loss of all or part of a subscriber's stock allocation.

**Community Offering** 

To the extent that shares remain available for purchase after satisfaction of all subscriptions received in the subscription offering, we will offer shares to the general public in a community offering. In the community offering with a preference to natural persons and trustees of natural persons residing in the following counties in the State of New Jersey: Hunterdon, Middlesex and Somerset (the "Local Community").

Subject to the maximum purchase limitations, these persons may purchase up to $250,000 of common stock (which equals 25,000 shares). The community offering, if any, may begin concurrently with, during or promptly after the subscription offering, and may terminate at any time without notice. Subject to any required regulatory approvals, we will determine, in our discretion, the advisability of a community offering, the commencement and termination dates of any community offering, and the methods of finding potential purchasers in such offering. **The opportunity to purchase shares of common stock in the community offering category is subject to our right, in our sole discretion and reasonably consistent with achieving a reasonably wide distribution of the common stock, to accept or reject any such orders in whole or in part either at the time of receipt of an order or as soon as practicable following the expiration date of the offering.**

If there are not sufficient shares of common stock available to fill orders in the community offering, orders will first be filled up to a maximum of 2% of the total shares sold in the offering, and, thereafter, any remaining shares will be allocated on an equal number of shares basis per order until all shares are allocated.

**Syndicated Community Offering** 

The plan of conversion provides that, if necessary, all shares of common stock not purchased in the subscription offering and community offering may be offered for sale to the general public in a syndicated community offering to be managed by KBW, acting as our agent. In such capacity, KBW may form a syndicate of other brokers-dealers who are member firms of the Financial Industry Regulatory Authority ("FINRA"). Neither KBW nor any registered broker-dealer will have any obligation to take or purchase any shares of the common stock in the syndicated community offering; however, KBW has agreed to use its best efforts in the sale of shares in any syndicated community offering. We have not selected any particular broker-dealers to participate in a syndicated community offering and will not do so until prior to the commencement of the syndicated community offering. The syndicated community offering would terminate no later than 45 days after the expiration of the subscription offering, unless extended by us, with approval of the Federal Reserve, the FDIC and the NJDBI. See "*The Conversion and Stock Offering—Community Offering*" above for a discussion of rights of subscribers in the event an extension is granted.

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**The opportunity to subscribe for shares of common stock in the syndicated community offering or underwritten public offering is subject to our right in our sole discretion to accept or reject orders, in whole or part, either at the time of receipt of an order or as soon as practicable following the expiration date of the offering. If your order is rejected in part, you will not have the right to cancel the remainder of your order.** 

Common stock sold in the syndicated community offering also will be sold at the $10.00 per share purchase price. Subject to the maximum purchase limitation, purchasers in the syndicated community offering are eligible to purchase up to $250,000 of common stock (which equals 25,000 shares).

If there is a syndicated offering, it is currently expected that investors would follow the same general procedures applicable to purchasing shares in the subscription and community offerings (the use of stock order forms and the submission of funds directly to SR Bancorp for the payment of the purchase price of the shares ordered) except that payment must be in immediately available funds (bank checks, money orders, deposit account withdrawals from accounts at Somerset Savings Bank or wire transfers). See "—*Procedure for Purchasing Shares*." "Sweep" arrangements and delivery versus payment settlement will only be used in a syndicated community offering to the extent consistent with Rules 10b-9 and 15c2-4 of Exchange Act and then-existing guidance and interpretations thereof of the SEC regarding the conduct of "min/max" offerings.

If we are unable to find purchasers from the general public to meet the minimum of the offering range, we will make other purchase arrangements, if feasible. Other purchase arrangements must be approved by the FDIC and the NJDBI. If other purchase arrangements cannot be made, we may either: terminate the stock offering and promptly return all funds; or set a new offering range and give all the opportunity to confirm, modify or rescind their order for shares of SR Bancorp common stock; or take such other actions as may be permitted by the FDIC, the NJDBI and the FINRA. In addition, we may consider a firm commitment public offering, if feasible, subject to the receipt of all applicable regulatory and FINRA approvals.

**Limitations on Purchases of Shares** 

The plan of conversion includes the following limitations on the number of shares of common stock that may be purchased in the offering:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• No person (or persons exercising subscription rights through a single qualifying deposit held jointly) may
purchase fewer than 25 shares of common stock or generally more than $250,000 (25,000 shares);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Our tax-qualified employee benefit plans, including our employee stock
ownership plan and 401(k) plan, may purchase in the aggregate up to 10.0% of the shares of common stock issued in the offering, including shares contributed to the charitable foundation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Except for our employee stock ownership plan, no person or entity, together with associates or persons acting in
concert with such person or entity, may purchase more than $250,000 (25,000 shares) in all categories of the offering combined; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The maximum number of shares of common stock that may be purchased in all categories of the offering by our
executive officers and directors and their associates, in the aggregate, may not exceed 25% of the shares issued in the offering.

Depending upon market or financial conditions, our Board of Directors, with the approval of the FDIC and the NJDBI and without further approval of the Voting Members of Somerset Savings Bank, may decrease the purchase limitations or increase the purchase limitations, as described above; provided; however these maximum purchase limitations may not be increased to a percentage in excess of 5% of the shares sold in the offering, excluding shares issued to the foundation, except that they may be increased to up to 9.99% of the shares sold in the offering, provided that orders for common stock exceeding 5% of the shares of common stock cannot exceed in the aggregate 10.0% of the total shares of common stock. If a purchase limitation is increased, subscribers in the subscription offering who ordered the maximum amount will be, and, in our sole discretion, some other large subscribers may be, given the opportunity to increase their subscriptions up to then applicable limit.

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The plan of conversion defines "acting in concert" to mean: (1) knowing participation in a joint activity or interdependent conscious parallel action towards a common goal whether or not by an express agreement; or (2) a combination or pooling of voting or other interests in the securities of an issuer for a common purpose under any contract, understanding, relationship, agreement or other arrangement, whether written or otherwise. In general, a person who acts in concert with another party will also be deemed to be acting in concert with any person who is also acting in concert with that other party. We may presume that certain persons are acting in concert based upon, among other things, joint account relationships and that persons may have filed joint Schedules 13D or 13G with the SEC with respect to other companies. For purposes of the plan of conversion, our directors are not deemed to be acting in concert solely by reason of their board membership.

The plan of conversion defines "associate," with respect to a particular person, to mean:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• a corporation or organization (other than SR Bancorp or Somerset Savings Bank or a majority-owned subsidiary of
these entities) of which a person is an officer, director or owner of 10.0% or more of the outstanding voting stock;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• any person who is related by blood or marriage to such person and who lives in the same house as such person;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• any trust or other estate, if the person has a substantial beneficial interest in the trust or estate or is a
trustee or fiduciary of the trust or estate except that for the purposes relating to subscriptions in the offering and the sale of common stock following the reorganization, a person who has a substantial beneficial interest in any non-tax-qualified employee plan or any tax-qualified employee plan, or who is a trustee or fiduciary of such plan, is not an associate
of such plan, and except that for purposes of aggregating total shares that may be held by officers and directors, the term "associate" does not include any tax-qualified employee plan; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• any partnership in which the person is a general or limited partner; provided, however, that any tax-qualified or non-tax-qualified employee plan shall not be deemed to be an associate of any director or officer of SR Bancorp or
Somerset Savings Bank.

**Plan of Distribution; Selling Agent and Underwriter Compensation** 

***Subscription and Community Offerings.*** To assist in the marketing of our shares of common stock in the subscription and community offerings, we have retained KBW, which is a broker-dealer registered with the Financial Industry Regulatory Authority. KBW will assist us on a best efforts basis in the subscription and community offerings by:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• providing advice on the financial and securities marketing implications of the conversion;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• assisting in structuring the stock offering, including developing and assisting in implementing a marketing
strategy for the stock offering;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• serving as sole bookrunning manager in connection with the stock offering;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• reviewing all offering documents related to the stock offering, including the prospectus and any related stock
offering materials;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• assisting SR Bancorp in preparing for and scheduling meetings with potential investors and broker-dealers, as
necessary;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• assisting SR Bancorp in analyzing proposals from outside vendors retained in connection with the stock offering;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• assisting us in the drafting and distribution of press releases as required or appropriate in connection with the
stock offering;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• meeting with our Board of Directors and/or our management to discuss any of the above services; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• performing such other financial advisory and investment banking services in connection with the conversion and
the offering as may be agreed upon by KBW and SR Bancorp.

For these services, KBW will receive a success fee of 1.0% of the shares of common stock sold in the stock offering, excluding shares contributed to the charitable foundation. In addition, if KBW reasonably determines that it is required or requested to provide significant services as a result of a resolicitation of subscribers, Keefe, Bruyette & Woods, Inc. will be entitled to additional compensation for such services, not to exceed $30,000.

***Syndicated Community Offering.*** If shares of common stock are sold in a syndicated community offering, we will pay fees not to exceed 6% of the aggregate dollar amount of common stock sold in the syndicated community offering to KBW and any other broker-dealers included in the syndicated community offering. The success fee to be paid to KBW for its services in the subscription and community offerings will be credited against any fee payable for services in the syndicated community offering.

***Expenses.* **KBW also will be reimbursed for reasonable out-of-pocket expenses, not to exceed $30,000, and fees and expenses of its legal counsel not to exceed $200,000. These expenses may be increased by additional amounts not to exceed $20,000 and $35,000, respectively, if unusual circumstances arise or a delay or resolicitation occurs, including a delay in the stock offering that would require an update to the financial information included in this prospectus. In no event shall out-of-pocket expenses, including fees and expenses of legal counsel, exceed $285,000. If the plan of conversion is terminated or if KBW's engagement is terminated in accordance with the provisions of the agency agreement, KBW will receive reimbursement of its reasonable out-of-pocket expenses. KBW shall have earned in full, and be entitled to be paid in full, all fees then due and payable at such date of termination. We have separately agreed to pay KBW fees and expenses for serving as records management agent, as described below.

**Records Management** 

We have also engaged KBW as records agent in connection with the conversion and the subscription and community offerings. In its role as records agent, KBW, will assist us in the stock offering by:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• consolidating deposit accounts and vote calculations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• designing and preparing proxy forms and stock order forms;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• providing subscription services and organizing and supervising our stock information center;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• providing proxy and ballot tabulation services for the special meeting of depositors, including acting as or
supporting the inspector of election; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• providing necessary subscription services to distribute, collect and tabulate stock orders in the stock offering.

KBW will receive fees of $30,000 for these services, of which $15,000 has been paid as of the date of this prospectus. These fees can be increased by an amount of up to $10,000 if there are material changes in regulations or the plan of conversion, or there are delays requiring duplicate or replacement processing. KBW will also be reimbursed for its reasonable out-of-pocket expenses not to exceed $15,000.

**Indemnity** 

We will indemnify KBW against liabilities and expenses, including legal fees, incurred in connection with certain claims or litigation arising out of or based upon untrue statements or omissions contained in the offering materials for the common stock, including liabilities under the Securities Act, as well as certain other claims and litigation arising out of KBW's engagement with respect to the conversion.

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**Solicitation of Offers by Officers and Directors** 

Our directors and executive officers may participate in the solicitation of offers to purchase shares of common stock. Other trained employees may participate in the offering in ministerial capacities, providing clerical work in effecting a sales transaction or answering questions of a ministerial nature. Other questions of prospective purchasers will be directed to executive officers or registered representatives. We will rely on Rule 3a4-1 of the Securities Exchange Act of 1934 so as to permit officers and directors, and employees to participate in the sale of shares of common stock. No officer, director or employee will be compensated for his participation by the payment of commissions or other remuneration based either directly or indirectly on the transactions in the shares of common stock. KBW will solicit orders and conduct sales of the common stock of SR Bancorp in states in which our directors and executive officers are not permitted to offer and sell our shares of common stock.

**Prospectus Delivery** 

To ensure that each purchaser receives a prospectus at least 48 hours before the expiration date of the offering in accordance with Rule 15c2-8 of the Securities Exchange Act of 1934, as amended, no prospectus will be mailed any later than five days before the expiration date or hand delivered any later than two days before the expiration date. 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 in accordance with Rule 15c2-8. Stock order forms will be distributed only with a prospectus. Funds received will be maintained in a segregated account at Somerset Savings Bank, or in our discretion at another insured depository institution and will earn interest at our passbook savings rate from the date those funds are processed.

**Procedure for Purchasing Shares** 

***Expiration Date****.* The subscription and community offerings will expire at 2:00 p.m., Eastern time, on [offering deadline]. We may extend the offering for up to 45 days without notice to purchasers in the offering. Any extension of the offering beyond, 2023 would require regulatory approvals.

We reserve the right in our sole discretion to terminate the offering at any time and for any reason, in which case we will cancel any deposit account withdrawal orders and promptly return all funds delivered to us, with interest calculated at Somerset Savings Bank's passbook savings rate from the date the stock order form was processed.

***Use of Order Forms****.* To purchase shares of common stock in the subscription and community offerings, you must complete an original stock order form and remit full payment. All stock order forms must be received (not postmarked) by the Stock Information Center before 2:00 p.m., Eastern time, on [offering deadline]. We are not required to accept stock order forms that are not received by that time, are executed defectively or are received without full payment or without appropriate deposit account withdrawal instructions. We are not required to notify purchasers of incomplete or improperly executed stock order forms. We have the right (but are not required) to permit the correction of incomplete or improperly executed order forms. You may submit your stock order form and payment in one of the following three ways: (1) by mail using the 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. We will not accept stock order forms at our other banking locations.

Once tendered, a stock order form cannot be modified or revoked without our consent. We reserve the absolute right, in our sole discretion, to reject orders received in the community offering, in whole or in part, at the time of receipt or at any time before completion of the offering. If you are ordering shares, you must represent that you are purchasing shares for your own account and that you have no agreement or understanding with any person for the sale or transfer of the shares. We have the right to reject any order submitted in the offering by a person who we believe is making false representations or who we otherwise believe, either alone or acting in concert with others, is violating, evading, circumventing, or intends to violate, evade or circumvent the terms and conditions of the plan of conversion. Our interpretation of the terms and conditions of the plan of conversion and of the acceptability of the stock order forms will be final.

By signing the stock order form, you will be acknowledging that the common stock is not a deposit or savings account and is not federally insured or otherwise guaranteed by Somerset Savings Bank or the federal government, and that you received a copy of this prospectus. However, signing the stock order form will not result in you waiving your rights under the Securities Act of 1933 or the Securities Exchange Act of 1934.

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***Payment for Shares****.* Payment for all shares of common stock must accompany all completed original stock order forms for the purchase to be valid. Payment for shares may only be made by:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) personal check, bank check or money order, from the purchaser, made payable to SR Bancorp, Inc.; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) authorization of withdrawal from the types of Somerset Savings Bank deposit accounts permitted on the stock
order form.

Appropriate means for designating withdrawals from deposit accounts at Somerset Savings Bank are provided on the stock order form. The funds designated must be available in the account(s) at the time the stock order form is received. A hold will be placed on these funds, making them unavailable to the account holder. Funds authorized for withdrawal will continue to earn interest within the account at the contractual rate until the offering is completed, at which time the designated withdrawal will be made. Interest penalties for early withdrawal applicable to certificate of deposit accounts will not apply to withdrawals authorized for the purchase of shares of common stock; however, if a withdrawal results in a certificate of deposit account with a balance less than the applicable minimum balance requirement, the certificate of deposit will be canceled at the time of withdrawal without penalty and the remaining balance will earn interest at the current passbook savings rate subsequent to the withdrawal.

In the case of payments made by personal check, these funds must be available in the account(s) when the stock order form is received. Checks and money orders will be immediately cashed and placed in a segregated account at Somerset Savings Bank, or in our discretion at another insured depositor institution, and will earn interest at Somerset Savings Bank's passbook savings rate from the date payment is processed until the offering is completed or terminated.

We will have the right, in our sole discretion, to permit institutional investors to submit irrevocable orders together with the legally binding commitment for payment and to thereafter pay for the shares of common stock for which they subscribe at any time before 48 hours before the completion of the offering. This payment may be made by wire transfer.

Our employee stock ownership plan will not be required to pay for any shares purchased in the offering until consummation of the offering; provided there is a loan commitment from an unrelated financial institution or SR Bancorp to lend to the employee stock ownership plan the necessary amount to fund the purchase. In addition, if our 401(k) plan purchases shares in the stock offering, it will not be required to pay for such shares until completion of the stock offering.

Regulations prohibit Somerset Savings Bank from knowingly lending funds or extending credit to any persons to purchase shares of common stock in the offering. Cash and wire transfers will not be accepted. Additionally, you may not use a check drawn on a Somerset Savings Bank line of credit, and we will not accept third-party checks of any type (a check written by someone other than you) payable to you and endorsed over to SR Bancorp. You may not designate on your stock order form a direct withdrawal from a Somerset Savings Bank retirement account. See "—*Using Individual Retirement Account Funds*" for information on using such funds. Once we receive your executed stock order form, it may not be modified, amended or rescinded without our consent, unless the offering is not completed by the expiration date, in which event purchasers may be given the opportunity to increase, decrease or rescind their orders for a specified period of time.

***Using Individual Retirement Account Funds.*** If you are interested in using funds in your IRA or other retirement account to purchase shares of common stock in the stock offering, you must do so through an account offered by a custodian that can hold common stock. By regulation, Somerset Savings Bank retirement accounts are not capable of holding common stock. Therefore, if you wish to use funds that are currently in a retirement account held at Somerset Savings Bank, you may not designate on the stock order form that you wish funds to be withdrawn from the account for the purchase of common stock. The funds you wish to use for the purchase of common stock will instead have to be transferred to an independent trustee or custodian, such as a brokerage firm, which offers the type of retirement accounts that can hold common stock. The purchase must be made through that account. If you do not have such an account, you will need to establish one before placing a stock order. A one-time and/or annual administrative fee may be payable to the independent trustee or custodian. You may select the IRA custodian of

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your choice. You may, but are under no obligation to, select KBW or one of its affiliated broker dealers, Stifel, Nicolaus & Company, Incorporated ("SN") or Century Securities Associates ("CSA") as your IRA or other retirement account custodian. If you do purchase shares of SR Bancorp common stock using funds from a KBW, SN or CSA IRA account, you acknowledge that KBW, SN or CSA, as applicable, did not recommend or give you advice regarding such purchase. Other than the standard account fees and compensation associated with all IRA accounts, KBW, SN and CSA do not receive additional fees or compensation as a result of the purchase of SR Bancorp common stock through a KBW, SN or CSA IRA or other retirement account. There will be no early withdrawal or IRS interest penalties for these transfers. Individuals interested in using funds in an individual retirement account or any other retirement account, whether held at Somerset Savings Bank *or elsewhere*, to purchase shares of common stock should contact our Stock Information Center for guidance as soon as possible, preferably at least two weeks before the [expiration date] offering deadline. Processing such transactions takes additional time, and whether such funds can be used may depend on limitations imposed by the institutions where such funds are currently held. We cannot guarantee that you will be able to use such funds.

***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 completion of the 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.

***Other Restrictions****.* Notwithstanding any other provision of the plan of conversion, no person is entitled to purchase any shares of common stock to the extent the purchase would be illegal under any federal or state law or regulation, including state "blue sky" regulations, or would violate regulations or policies of the Financial Industry Regulatory Authority, particularly those regarding free riding and withholding. We may ask for an acceptable legal opinion from any purchaser as to the legality of his or her purchase and we may refuse to honor any purchase order if an opinion is not timely furnished. In addition, we are not required to offer shares of common stock to any person who resides in a foreign country, or in a state of the United States with respect to which any of the following apply:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. a small number of persons otherwise eligible to subscribe for shares under the plan of conversion reside in
such state;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. the offer or sale of shares of common stock to such persons would require us or our employees to register,
under the securities laws of such state, as a broker or dealer or to register or otherwise qualify our securities for sale in such state; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. such registration or qualification would be impracticable for reasons of cost or otherwise.

**Restrictions on Transfer of Subscription Rights and Shares** 

Applicable banking regulations prohibit any person with subscription rights, including the Eligible Account Holders, Supplemental Eligible Account Holders and Other Members, from transferring or entering into any agreement or understanding to transfer the legal or beneficial ownership of the subscription rights issued under the plan of conversion or the shares of common stock to be issued upon their exercise. These rights may be exercised only by the person to whom they are granted and only for his or her account. When registering your stock purchase on the stock order form, you cannot add the name(s) 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. Each person exercising subscription rights will be required to certify that he or she is purchasing shares solely for his or her own account and that he or she has no agreement or understanding regarding the sale or transfer of such shares. 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. The regulations also prohibit any person from offering or making an announcement of an offer or intent to make an offer to purchase subscription rights or shares of common stock to be issued upon their exercise before completion of the stock offering.

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**We will pursue any and all legal and equitable remedies if we become aware of the transfer of subscription rights, and we will not honor orders that we believe involve the transfer of subscription rights.** 

**Stock Information Center** 

Our banking office personnel may not, by law, assist with investment-related questions about the stock offering. If you have any questions regarding the conversion or stock offering, please call our Stock Information Center toll free, at [Stock center number]. 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.

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

The plan of conversion and applicable regulations require that the aggregate purchase price of the common stock sold in the offering be based on the appraised pro forma market value of the common stock, as determined by an independent valuation. We have retained RP Financial to prepare the independent appraisal. RP Financial will receive fees totaling $165,000 for the preparation and delivery of the original appraisal report, plus reimbursement of reasonable out-of-pocket expenses, $25,000 for the preparation and delivery of each required updated appraisal report and up to $25,000 for preparation of the pro forma tables in conjunction with the appraisal engagement. We paid RP Financial $22,400 in fees during the year ended June 30, 2022 for Board of Director education. We have agreed to indemnify RP Financial and its employees and affiliates against specified losses, including any losses in connection with claims under the federal securities laws, arising out of its services as independent appraiser, except where such liability results from RP Financial's bad faith or negligence.

The independent valuation was prepared by RP Financial in reliance upon the information contained in this prospectus, including the consolidated financial statements of Somerset Savings Bank that appear starting on page F-1 of this prospectus and the consolidated financial statements of Regal Bancorp that appear starting on page G-1 of this prospectus. RP Financial prepared the appraisal taking into account the pro forma impact of the offering, as well as the Merger. RP Financial also considered the following factors, among others:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the effect of the capital raised in this offering on our net worth and earnings potential;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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 association holding companies that RP Financial considers comparable to SR Bancorp on a pro forma basis;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the trading market for securities of comparable institutions and general conditions in the market for such
securities; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our proposed dividend policy.

The independent valuation is also based on an analysis of a peer group of publicly traded savings and loan holding companies that RP Financial considered comparable to SR Bancorp under regulatory guidelines applicable to the independent valuation. Under these guidelines, at least ten peer group companies are required to be selected from the universe of all publicly-traded financial institutions with relatively comparable resources, strategies and financial and other operating characteristics. Such companies were also required to be traded on an exchange (such as Nasdaq or the New York Stock Exchange). The peer group companies selected for SR Bancorp consisted of companies that were not subject to an actual or rumored acquisition and that had been in stock form for at least one year.

Consistent with regulatory appraisal guidelines, the appraisal applied three primary methodologies: (1) the pro forma price-to-book value approach applied to both reported book value and tangible book value; (2) the pro forma price-to-earnings approach applied to reported and core earnings; and (3) the pro forma price-to-assets approach. The market value ratios applied in the three methodologies were based on the current market valuations of the peer group companies. RP Financial placed the greatest emphasis on the price-to-earnings and price-to-book approaches in estimating pro forma market value. RP Financial did not consider a pro forma price-to-assets approach to be as meaningful in preparing the appraisal, as this approach is more meaningful when a company has low equity or earnings. The price-to-assets approach is less meaningful for a company like SR Bancorp, as Somerset Savings Bank has equity in excess of regulatory capital requirements and positive reported and core earnings.

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RP Financial advised the Board of Directors that the valuation analysis took into consideration that relative to the peer group, an adjustment was applied for financial condition, and for profitability, growth and viability of earnings and dividends. RP Financial made no adjustments for: (1) asset growth; (2) primary market area; (3) liquidity of the shares; (4) marketing of the issue; (5) management; and (6) effect of government regulations and regulatory reform.

Included in RP Financial's independent valuation were certain assumptions as to the pro forma earnings of SR Bancorp after the offering. These assumptions included estimated expenses, an assumed after-tax rate of return of 2.99% at December 31, 2022 on the net offering proceeds and purchases in the open market of common stock by the stock-based benefit plan at the $10.00 per share purchase price. See "*Pro Forma Unaudited Condensed Consolidated Financial Statements Giving Effect to the Conversion and Proposed Merger*" for additional information concerning assumptions included in the independent valuation and used in preparing pro forma data. The use of different assumptions may yield different results.

The independent valuation states that as of February 21, 2023, the estimated pro forma market value of SR Bancorp was $105.0 million (inclusive of the shares to be contributed to the Somerset Regal Charitable Foundation). Based on applicable regulations, this market value forms the midpoint of a range with a minimum of $89.3 million and a maximum of $120.8 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 mutual holding company and standard 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 8,500,000 shares to 11,500,000 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 appraised value of $132.25 million and an offering of 13,225,000 shares of common stock.

We will not decrease the minimum of the valuation range and the minimum of the offering range without a resolicitation of subscribers. The offering price of $10.00 per share will remain fixed.

The Board of Directors of Somerset Savings Bank reviewed the independent valuation and, in particular, considered the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Somerset Savings Bank's financial condition and results of operations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• a comparison of financial performance ratios of Somerset Savings Bank to those of other financial institutions of
similar size; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• market conditions generally and in particular for financial institutions.

All of these factors are set forth in the independent valuation. The Board of Directors also reviewed the methodology and the assumptions used by RP Financial to prepare the independent valuation and believes that such assumptions were reasonable. The offering range may be amended with the approval of the NJDBI and the Federal Reserve as a result of subsequent developments in the financial condition of Somerset Savings Bank or market conditions generally.

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The appraisal is based in part on Somerset Savings Bank's financial condition and results of operations, the pro forma effect of the additional capital raised by the sale of shares of common stock in the offering, the Merger with Regal Bancorp, the contribution of shares to a charitable foundation and an analysis of a peer group of ten publicly-traded subsidiary companies of mutual holding companies that RP Financial considers comparable to SR Bancorp The appraisal peer group consists of the following companies, all of which are traded on the Nasdaq Stock Market.

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| | | | |
|:---|:---|:---|:---|
| **Company Name** | **Ticker<br>Symbol** | **Headquarters** | **Total Assets** |
|  | |  | **(Dollars in millions)** |
|  Affinity Bancshares, Inc. | AFBI | Covington, GA | $791 |
|  ESSA Bancorp, Inc. | ESSA | Stroudsburg, PA | 1927 |
|  HMN Financial, Inc. | HMNF | Rochester, MN | 1096 |
|  Home Federal Bancorp, Inc. of Louisiana | HFBL | Shreveport, LA | 577 |
|  IF Bancorp, Inc. | IROQ | Watseka, IL | 824 |
|  HV Bancorp, Inc.<sup>(1)</sup> | HVBC | Doylestown, PA | 616 |
|  Magyar Bancorp, Inc. | MGYR | New Brunswick, NJ | 822 |
|  Northeast Community Bancorp, Inc. | NECB | White Plains, NY | 1425 |
|  Provident Bancorp, Inc. | PVBC | Amesbury, MA | 1636 |
|  William Penn Bancorporation | WMPN | Bristol, PA | 871 |

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

The following table presents a summary of selected pricing ratios for SR Bancorp, for the peer group companies and for all publicly traded thrifts as presented in the RP Financial appraisal. Compared to the median pricing ratios of the peer group, SR Bancorp's pro forma pricing ratios at the maximum of the offering range indicated a premium of 27.3% on a price-to-core earnings basis and a discount of 32.0% on a price-to-tangible book value basis.

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| | | | |
|:---|:---|:---|:---|
|  | **Price to Core<br>Earnings<br>Multiple<sup>(1)</sup>** | **Price to Book<br>Value Ratio<sup>(2)</sup>** | **Price to Tangible<br>Book Value<br>Ratio<sup>(2)</sup>** |
|  SR Bancorp (pro forma): |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Minimum | 9.49x | 47.37% | 57.08% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Midpoint | 11.06x | 52.11% | 61.96% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Maximum | 12.59x | 56.31% | 66.23% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Adjusted maximum | 14.32x | 60.50% | 70.32% |
|  Peer Group: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Average | 10.74x | 93.52% | 96.61% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Median | 9.89x | 94.22% | 97.45% |

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(1) Ratios are based on earnings for the 12 months ended December 31, 2022 and share prices as of
February 21, 2023.

(2) Ratios are based on book value as of December 31, 2022 and share prices as of February 21, 2023.

**The independent valuation is not intended, and must not be construed, as a recommendation of any kind as to the advisability of purchasing our shares of common stock. RP Financial did not independently verify our consolidated financial statements that appear starting on page F-1 of this prospectus and other information that we provided to them, nor did RP Financial independently value our assets or liabilities. The independent valuation considers Somerset Savings Bank as a going concern and should not be considered as an indication of the liquidation value of Somerset Savings Bank. Moreover, because the valuation is necessarily based upon estimates and projections of a number of matters, all of which may change from time to time, no assurance can be given that persons purchasing our common stock in the offering will thereafter be able to sell their shares at prices at or above the $10.00 price per share.** 

If the update to the independent valuation at the conclusion of the offering results in an increase in the maximum of the offering range to more than $132.25 million and a corresponding increase in the offering range to more than 13,225,000 shares, or a decrease in the minimum of the offering range to less than $85.0 million and a corresponding decrease in the offering range to less than 8,500,000 shares, then we will promptly return with interest at 0.05% per annum all funds previously delivered to us to purchase shares of common stock in the subscription and community offerings and cancel deposit account withdrawal authorizations and, after receiving the approval of the NJDBI, the FDIC and the Federal Reserve, we may terminate the plan of conversion. Alternatively, we may establish a new offering range, extend the offering period and commence a resolicitation of purchasers or take other actions as permitted by the NJDBI, the FDIC and the Federal Reserve to complete the offering. If we

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extend the offering and conduct a resolicitation due to a change in the independent valuation, we will notify subscribers of the extension of time and of the rights of subscribers to place a new stock order for a specified period of time. Extensions may not conclude beyond a date that is 90 days after the date on which the NJDBI and the FDIC approved the plan of reorganization, unless the NJDBI and FDIC approves an extension of the stock offering. The plan of conversion will terminate if the conversion and offering are not completed by [•], 2025, which is two years after the NJDBI approved the plan of conversion.

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.

An increase in the number of shares to be issued in the offering would decrease both a subscriber's ownership interest and SR Bancorp's pro forma earnings and shareholders' equity on a per share basis while increasing shareholders' equity on an aggregate basis. A decrease in the number of shares to be issued in the offering would increase both a subscriber's ownership interest and SR Bancorp's pro forma earnings and shareholders' equity on a per share basis, while decreasing shareholders' equity on an aggregate basis.

A copy of the independent valuation report of RP Financial, together with the detailed memorandum setting forth the method and assumptions used in the appraisal report, is filed as an exhibit to each of the documents specified under "*Where You Can Find Additional Information*."

**Certain Restrictions on Purchase or Transfer of Shares After the Conversion Applicable to Officers and Directors** 

Common stock purchased in the offering will be freely transferable, except for shares purchased by our directors and executive officers. All shares of common stock purchased in the offering by our directors or executive officers, as well as their associates, generally may not be sold for one year following the closing of the conversion, except upon the death of the director or executive officer. Each statement of ownership for restricted shares will bear a legend giving notice of this restriction on transfer, and instructions will be issued to SR Bancorp's transfer agent to the effect that any transfer within this time period of record ownership of the shares other than as provided above is a violation of the restriction. Any shares of common stock issued at a later date as a stock dividend, stock split or otherwise with respect to the restricted stock will be similarly restricted. The directors and executive officers of SR Bancorp and Somerset Savings Bank also will be restricted by the insider trading rules promulgated pursuant to the Exchange Act.

Purchases of shares of our common stock by any of our directors, certain officers and their associates, during the three-year period following the closing of the conversion may be made only through a broker or dealer registered with the SEC, except with the prior written approval of the Federal Reserve, the FDIC and/or the NJDBI. This restriction does not apply, however, to negotiated transactions involving more than 1% of our outstanding common stock or to purchases of our common stock by our stock-based benefit plan or any of our tax-qualified employee stock benefit plans or nontax-qualified employee stock benefit plans, including any restricted stock plans.

Federal regulations prohibit SR Bancorp from repurchasing its shares of common stock during the first year following the reorganization unless compelling business reasons exist for such repurchases, or to fund stock equity plans that have been ratified by shareholders (with regulatory approval) or tax-qualified employee stock benefit plans. In addition, the repurchase of shares of common stock is subject to Federal Reserve policy related to repurchases of shares by bank holding companies.

**Material Income Tax Consequences** 

Consummation of the conversion is subject to the prior receipt of an opinion of counsel or tax advisor with respect to federal income taxation that the conversion will not be a taxable transaction to Somerset Savings Bank or SR Bancorp, Eligible Account Holders, Supplemental Eligible Account Holders, and Voting Members of Somerset Savings Bank. Unlike private letter rulings, opinions of counsel or tax advisors are not binding on the IRS or any state taxing authority, and such authorities may disagree with such opinions. In the event of such disagreement, there can be no assurance that SR Bancorp or Somerset Savings Bank would prevail in a judicial proceeding.

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Somerset Savings Bank and SR Bancorp have received an opinion of counsel, Luse Gorman, PC, regarding all of the material federal income tax consequences of the conversion, which includes the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The conversion of Somerset Savings Bank to a New Jersey-chartered stock savings bank will qualify as a tax-free reorganization within the meaning of Internal Revenue Code Section 368(a)(1)(F).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. No gain or loss will be recognized by Somerset Savings Bank as a New Jersey-chartered stock savings bank on the
receipt of money from SR Bancorp in exchange for its shares or by SR Bancorp upon receipt of money from the sale of SR Bancorp Common Stock. (Section 1032(a) of the Internal Revenue Code).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. The assets of Somerset Savings Bank will have the same basis in the hands of Somerset Savings Bank as they had
in the hands of Somerset Savings Bank immediately prior to the conversion. The holding period of Somerset Savings Bank's assets to be received by Somerset Savings Bank will include the period during which the assets were held by Somerset
Savings Bank prior to the conversion. (Sections 362(b) and 1223(2) of the Internal Revenue Code).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. No gain or loss will be recognized by the account holders of Somerset Savings Bank upon the issuance to them of
withdrawable deposit accounts in Somerset Savings Bank as a New Jersey-chartered stock savings bank in the same dollar amount and under the same terms as their deposit accounts in Somerset Savings Bank and no gain or loss will be recognized by
Eligible Account Holders or Supplemental Eligible Account Holders upon receipt by them of an interest in the liquidation account of Somerset Savings Bank as a New Jersey-chartered stock savings bank, in exchange for their ownership interests in
Somerset Savings Bank. (Section 354(a) of the Internal Revenue Code).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. The basis of the account holders' deposit accounts in Somerset Savings Bank will be the same as the basis
of their deposit accounts in Somerset Savings Bank surrendered in exchange therefor. The basis of each Eligible Account Holder's and Supplemental Eligible Account Holder's interests in the liquidation account of Somerset Savings Bank as a
New Jersey-chartered stock savings bank will be zero, that being the cost of such property.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. It is more likely than not that the fair market value of the nontransferable subscription rights will be zero.
Accordingly, no gain or loss will be recognized by Eligible Account Holders, Supplemental Eligible Account Holders or Voting Members upon distribution to them of nontransferable subscription rights to purchase shares of SR Bancorp common stock.
(Rev. Rul. 56-572, 1956-2 C.B. 182).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. It is more likely than not that the basis of the SR Bancorp common stock to its shareholders will be the
purchase price thereof. (Section 1012 of the Internal Revenue Code). The shareholder's holding period will commence upon the exercise of the subscription rights. (Section 1223(6) of the Internal Revenue Code).

In the view of RP Financial (who is acting as independent appraiser of the value of the shares of SR Bancorp common stock in connection with the conversion), which view is not binding on the IRS, the subscription rights do not have any value for the reasons set forth in paragraph 6, above. If the subscription rights granted to Eligible Account Holders, Supplemental Eligible Account Holders and Voting Members are deemed to have an ascertainable value, receipt of these rights could result in taxable gain to those Eligible Account Holders, Supplemental Eligible Account Holders and Voting Members who exercise the subscription rights in an amount equal to their value, and SR Bancorp could recognize gain on a distribution. Eligible account holders, Supplemental Eligible Account Holders and Voting Members are encouraged to consult with their own tax advisors as to the tax consequences in the event that subscription rights are deemed to have an ascertainable value.

The IRS has announced that it will not issue private letter rulings with respect to the issue of whether nontransferable rights have value. Unlike private letter rulings, an opinion of counsel or the view of an independent appraiser is not binding on the IRS and the IRS could disagree with the conclusions reached therein. Depending on the conclusion or conclusions with which the IRS disagrees, the IRS may take the position that the transaction is

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taxable to any one or more of Somerset Savings Bank, SR Bancorp and the Eligible Account Holders, Supplemental Eligible Account Holders and Voting Members who exercise their subscription rights. In the event of a disagreement, there can be no assurance that SR Bancorp or Somerset Savings Bank would prevail in a judicial or administrative proceeding.

The opinion of Luse Gorman, PC, unlike a letter ruling issued by the Internal Revenue Service, is not binding on the Internal Revenue Service and the conclusions expressed therein may be challenged at a future date. The Internal Revenue Service has issued favorable rulings for transactions substantially similar to the proposed conversion and stock offering, but those rulings may not be cited as precedent by any taxpayer other than the taxpayer to whom a ruling is addressed. We do not plan to apply for a letter ruling concerning the transactions described herein.

We have also received an opinion from Baker Tilly US, LLP that the New Jersey income tax consequences are consistent with the federal income tax consequences.

The federal and state tax opinions have been filed with the SEC as exhibits to SR Bancorp's registration statement.

**Liquidation Rights** 

In the unlikely event of a complete liquidation of Somerset Savings Bank before the conversion, all claims of creditors of Somerset Savings Bank, including those of depositors of Somerset Savings Bank (to the extent of their deposit balances), would be paid first. Then, if there were any assets of Somerset Savings Bank remaining, depositors of Somerset Savings Bank would receive those remaining assets, pro rata, based upon the deposit balances in their deposit account in Somerset Savings Bank immediately before liquidation. In the unlikely event that Somerset Savings Bank were to liquidate after the conversion, all claims of creditors, including those of depositors, would be paid first, followed by distribution of a "liquidation account" to certain Eligible Account Holders and Supplemental Eligible Account Holders, with any assets remaining thereafter distributed to SR Bancorp as the sole shareholder of Somerset Savings Bank's capital stock. Pursuant to conversion regulations, a post-conversion merger, consolidation, sale of bulk assets or similar combination or transaction with another insured savings institution would not be considered a liquidation and, in these types of transactions, the liquidation account would be assumed by the surviving institution.

The plan of conversion provides for the establishment, upon the completion of the conversion, of a special "liquidation account" for the benefit of Eligible Account Holders and Supplemental Eligible Account Holders in an amount equal to the total equity of Somerset Savings Bank as of the date of its latest balance sheet contained in this prospectus.

The purpose of the liquidation account is to provide Eligible Account Holders and Supplemental Eligible Account Holders who maintain their deposit accounts with Somerset Savings Bank after the conversion with a liquidation interest in the unlikely event of the complete liquidation of Somerset Savings Bank after the conversion. Each Eligible Account Holder and Supplemental Eligible Account Holder that continues to maintain his or her deposit account at Somerset Savings Bank, would be entitled, on a complete liquidation of Somerset Savings Bank after the conversion, to an interest in the liquidation account before any payment to the shareholders of SR Bancorp. Each Eligible Account Holder and Supplemental Eligible Account Holder would have an initial interest in the liquidation account for each deposit account, including without limitation savings accounts, transaction accounts such as negotiable order of withdrawal accounts, money market deposit accounts, and certificates of deposit, with a balance of $50 or more held in Somerset Savings Bank on June 30, 2021 and [•], 2023, respectively. Each Eligible Account Holder and Supplemental Eligible Account Holder would have a pro rata interest in the total liquidation account for each such deposit account, based on the proportion that the balance of each such deposit account on June 30, 2021 or [•], 2023, respectively, bears to the balance of all deposit accounts in Somerset Savings Bank on such dates.

If, however, on any annual closing date commencing on or after the effective date of the conversion, the amount in any such deposit account is less than the amount in the deposit account on June 30, 2021 or [•], 2023, as applicable, or any other annual closing date, then the interest in the liquidation account relating to such deposit account would be reduced from time to time by the proportion of any such reduction, and such interest will cease to exist if such deposit account is closed. In addition, no interest in the liquidation account would ever be increased despite any subsequent increase in the related deposit account. Payment pursuant to liquidation rights of Eligible

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Account Holders and Supplemental Eligible Account Holders would be separate and apart from the payment of any insured deposit accounts to such Eligible Account Holder and Supplemental Eligible Account Holder. Any assets remaining after the above liquidation rights of Eligible Account Holders and Supplemental Eligible Account Holders are satisfied would be distributed to SR Bancorp as the sole shareholder of Somerset Savings Bank.

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**SOMERSET REGAL CHARITABLE FOUNDATION** 

**General** 

In furtherance of our commitment to the communities in our market area, the plan of conversion provides that we will establish a new charitable foundation, Somerset Regal Charitable Foundation, Inc., as a non-stock, nonprofit Delaware corporation in connection with the offering. The charitable foundation will be funded with cash and shares of our common stock. By further enhancing our visibility and reputation in the communities within our market area, we believe the charitable foundation will enhance the long-term value of Somerset Savings Bank's community banking franchise. The offering presents us with a unique opportunity to provide a substantial and continuing benefit to these communities through the charitable foundation. The establishment and funding of the charitable foundation is subject to regulatory approval and approval by the members of Somerset Savings Bank.

**Purpose of the Charitable Foundation** 

In connection with the closing of the offering, we intend to contribute to the charitable foundation in cash ranging from $850,000 at the minimum of the valuation range to $1,323,000 at the adjusted maximum of the valuation range and shares of common stock (representing in the aggregate 6.0% of the value of the common stock of Somerset Regal Bancorp that will be sold in the offering). The purpose of the charitable foundation is to provide financial support to charitable organizations in our market area and to enable the communities that we serve to share in our long-term growth. Somerset Regal Charitable Foundation will be dedicated completely to community activities and the promotion of charitable causes and may be able to support those activities in ways that are not presently available to us. Somerset Regal Charitable Foundation may also support our ongoing obligations to our communities under the Community Reinvestment Act. Somerset Savings Bank received a satisfactory rating in its most recent Community Reinvestment Act examination by the FDIC.

Funding Somerset Regal Charitable Foundation with shares of our common stock is also intended to allow our community to share in our potential growth and success after the offering is completed because the charitable foundation will benefit directly from any increases in the value of our shares of common stock. In addition, the charitable foundation will maintain close ties with Somerset Savings Bank, thereby forming a partnership within the communities in which Somerset Savings Bank operates.

**Structure of the Charitable Foundation** 

Somerset Regal Charitable Foundation will be incorporated under Delaware law as a non-stock, nonprofit corporation. The certificate of incorporation of Somerset Regal Charitable Foundation will provide that the corporation is organized exclusively for charitable purposes set forth in Section 501(c)(3) of the Internal Revenue Code. The certificate of incorporation will further provide that no part of the net earnings of the charitable foundation will inure to the benefit of, or be distributable to, its members (i.e., directors) or officers or to private individuals.

Somerset Regal Charitable Foundation will be governed by a Board of Directors, initially consisting of Messrs. Taylor and Pribula and at least one other individual. We are required to select one person to service on the initial Board of Directors who is not one of our officers or directors and who is from the local community who should have experience with local charitable organizations and grant making. For five years after the offering, one seat on the charitable foundation's Board of Directors will be reserved for a person from our local community who should have experience with charitable organizations and grant making and who is not one of our officers, directors or employees, and at least one seat on the charitable foundation's Board of Directors will be reserved for one of Somerset Savings Bank's directors or to private individuals.

The Board of Directors of Somerset Regal Charitable Foundation will be responsible for establishing its grant and donation policies, consistent with the purposes for which it was established. As directors of a nonprofit corporation, directors of the charitable foundation will be bound by their fiduciary duty to advance the charitable foundation's charitable goals, to protect its assets and to act in a manner consistent with the charitable purposes for which the charitable foundation is established. The directors of the charitable foundation also will be responsible for directing the activities of the charitable foundation, including the management and voting of the shares of our common stock held by the charitable foundation. However, as required by applicable regulations, all shares of our common stock held by the charitable foundation must be voted in the same ratio as all other shares of our common stock on all proposals considered by our shareholders.

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Somerset Regal Charitable Foundation's place of business will be located at our administrative offices. The Board of Directors of the charitable foundation will appoint its officers and retain employees necessary to manage its operations. To the extent applicable, we will comply with the affiliates restrictions set forth in Sections 23A and 23B of the Federal Reserve Act and applicable banking regulations governing transactions between Somerset Savings Bank and the charitable foundation.

Somerset Regal Charitable Foundation will generally receive working capital from the initial cash contribution and:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Dividends, if any, paid in the future on our shares of common stock;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) within the limits of applicable federal and state laws, loans collateralized by the shares of common stock
owned by the charitable foundation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) the proceeds of the sale of any of the shares of common stock in the open market from time to time.

As a private foundation under Section 501(c)(3) of the Internal Revenue Code, Somerset Regal Charitable Foundation will generally be required to annually distribute grants or donations equal to at least 5% of the average fair market value of its net investment assets.

**Tax Considerations** 

We believe Somerset Regal Charitable Foundation should qualify as an exempt organization under Section 501(c)(3) of the Internal Revenue Code and will be classified as a private foundation. If Somerset Regal Charitable Foundation files its application for tax-exempt status within 27 months of the last day of the month in which it was organized, and provided the IRS approves the application, its effective date as a Section 501(c)(3) organization will be the date of its organization. We have not received a tax opinion as to whether Somerset Regal Charitable Foundation's tax-exempt status will be affected by the regulatory requirement that all shares of our common stock held by the charitable foundation must be voted in the same ratio as all other outstanding shares of our common stock on all proposals considered by our shareholders.

We believe our contribution of shares of our common stock to Somerset Regal Charitable Foundation should not constitute an act of self-dealing and that we should be entitled to a tax deduction in the amount of the contribution of cash and the fair market value of the stock (at the time of the contribution) less any nominal amount that the charitable foundation is required to pay us for the stock. We are permitted to deduct for charitable purposes only an amount equal to 10.0% of our annual taxable income in any one year. We are permitted under the Internal Revenue Code to carry the excess contribution over the five-year period following the contribution to Somerset Regal Charitable Foundation. We estimate that substantially all of the contribution should be deductible over the six-year period (*i.e.*, the year in which the contribution is made and the succeeding five-year period). However, we do not have any assurance that the contribution will be tax-deductible. In that event, our contribution to Somerset Regal Charitable Foundation would be expensed without a tax benefit, resulting in a reduction in earnings in the year that determination is made. Furthermore, even if the contribution is deductible, we may not have sufficient earnings to be able to use the deduction in full. Any decision to make additional contributions to Somerset Regal Charitable Foundation in the future would be based on an assessment of, among other factors, our financial condition at that time, the interests of our shareholders and depositors, and the financial condition and operations of the foundation.

As a private foundation, earnings and gains, if any, from the sale of common stock or other assets are exempt from federal and state income taxation. However, investment income, such as interest, dividends and capital gains, is generally taxed at a rate of 2.0%, although we expect to qualify for a lower special rate of 1.0%. Somerset Regal Charitable Foundation will be required to file an annual return with the IRS within four and one-half months after the close of its fiscal year. Somerset Regal Charitable Foundation will be required to make its annual return available for public inspection. The annual return for a private foundation includes, among other things, an itemized list of all grants made or approved, showing the amount of each grant, the recipient, any relationship between a grant recipient and the foundation's managers and a concise statement of the purpose of each grant.

**Regulatory Requirements Imposed on the Charitable Foundation** 

Our banking regulators require that, before our Board of Directors approved the plan of conversion, the Board of Directors had to identify its members that will serves on the charitable foundation's board and these directors could not participate in our board's discussions concerning contributions to the charitable foundation, and could not vote on the matter. Our Board of Directors complied with this regulation in approving the plan of conversion.

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The NJDBI, the FDIC and the Federal Reserve will generally not object if a well-capitalized savings bank contributes to a charitable foundation an aggregate amount of 8% or less of the proceeds raised or shares issued in an offering. Somerset Savings Bank qualifies as a well-capitalized savings bank for purposes of this limitation, and the contribution to the charitable foundation will not exceed this limitation.

Applicable regulations impose the following additional requirements on the establishment of the charitable foundation:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the charitable foundation's primary purpose must be to serve and make grants in our local community;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our banking regulations may examine the charitable foundation at the foundation's expense;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the charitable foundation must comply with all supervisory directives imposed by our banking regulators;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the charitable foundation must provide annually to our banking regulations a copy of the annual report that the
charitable foundation submits to the IRS;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the charitable foundation must operate according to written policies adopted by its Board of Directors, including
a conflict of interest policy;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the charitable foundation may not engage in self-dealing and must comply with all laws necessary to maintain its tax-exempt status under the Internal Revenue Code; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the charitable foundation must vote its shares of our common stock in the same ratio as all of the other shares
voted on each proposal considered by our shareholders.

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**RESTRICTIONS ON ACQUISITION OF SR BANCORP AND SOMERSET SAVINGS BANK, SLA** 

Although the Board of Directors of SR Bancorp is not aware of any effort that might be made to obtain control of SR Bancorp after the conversion, the Board of Directors believes that it is appropriate to include certain provisions as part of SR Bancorp's articles of incorporation and bylaws to protect the interests of SR Bancorp and its shareholders from takeovers which our Board of Directors might conclude are not in the best interests of Somerset Savings Bank, SR Bancorp or SR Bancorp's shareholders.

The following discussion is a general summary of the material provisions of SR Bancorp's articles of incorporation and bylaws, Maryland general corporation law, and certain other regulatory provisions that may be deemed to have an "anti-takeover" effect. The following description of certain of these provisions is necessarily general and, with respect to provisions contained in SR Bancorp's articles of incorporation and bylaws, reference should be made in each case to the document in question, each of which is part of Somerset Savings Bank's applications as filed with the FDIC and the NJDBI, SR Bancorp's registration statement filed with the SEC and SR Bancorp's holding company application filed with the Federal Reserve and the NJDBI. See "*Where You Can Find Additional Information*."

**SR Bancorp's Articles of Incorporation and Bylaws** 

SR Bancorp's articles of incorporation and bylaws contain a number of provisions relating to corporate governance and rights of shareholders that might discourage future takeover attempts. As a result, shareholders who might desire to participate in such transactions may not have an opportunity to do so. In addition, these provisions will also render the removal of the Board of Directors or management of SR Bancorp more difficult.

***Directors****.* SR Bancorp's Board of Directors is divided into three classes, with the members of each class of directors serving staggered three-year terms. SR Bancorp's bylaws provide that SR Bancorp will have the number of directors as fixed by its Board of Directors. SR Bancorp currently has six directors. This number will change to nine upon the consummation of the acquisition of Regal Bancorp, when three current directors of Regal Bancorp are appointed to the Board of Directors of SR Bancorp.

***Evaluation of Offers.*** The articles of incorporation of SR Bancorp provide that its Board of Directors, when evaluating a transaction that would or may involve a change in control of SR Bancorp (whether by purchases of its securities, merger, consolidation, share exchange, dissolution, liquidation, sale of all or substantially all of its assets, proxy solicitation or otherwise), may, in connection with the exercise of its business judgment in determining what is in the best interests of SR Bancorp and its shareholders and in making any recommendation to the shareholders, give due consideration to all relevant factors, including, but not limited to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the economic effect, both immediate and long-term, upon SR Bancorp's shareholders, including shareholders,
if any, who do not participate in the transaction;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the social and economic effect on the present and future employees, creditors and customers of, and others
dealing with, SR Bancorp and its subsidiaries and on the communities in which SR Bancorp and its subsidiaries operate or are located;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• whether the proposal is acceptable based on the historical, current or projected future operating results or
financial condition of SR Bancorp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• whether a more favorable price could be obtained for SR Bancorp's stock or other securities in the future;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the reputation and business practices of the other entity to be involved in the transaction, including its
management and affiliates, and how they would affect the employees of SR Bancorp and its subsidiaries;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the future value of the stock or any other securities of SR Bancorp or the other entity to be involved in the
proposed transaction;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• any anti-trust or other legal and regulatory issues that are raised by the proposal;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the business and historical, current or expected future financial condition or operating results of the other
entity to be involved in the transaction, including, but not limited to, debt service and other existing financial obligations, financial obligations to be incurred in connection with the proposed transaction, and other likely financial obligations
of the other entity to be involved in the proposed transaction; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the ability of SR Bancorp to fulfill its objectives as a financial institution holding company and the ability of
its subsidiary financial institution(s) to fulfill the objectives of a federally insured financial institution under applicable statutes and regulations.

If the Board of Directors determines that any proposed transaction should be rejected, it may take any lawful action to defeat such transaction.

***Restrictions on Call of Special Meetings****.* SR Bancorp's bylaws provide that special meetings of shareholders may be called by the President, the Chief Executive Officer, the Chairperson of the Board or by the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors that SR Bancorp would have if there were no vacancies on the Board of Directors. In addition, special meetings of the shareholders shall be called by the Secretary at the request of shareholders only on the written request of shareholders entitled to cast at least a majority of all the votes entitled to be cast at the meeting.

***Prohibition of Cumulative Voting****.* The articles of incorporation prohibit cumulative voting for the election of directors.

***Limitation of Voting Rights****.* The articles of incorporation provide that in no event will any person who owns more than 10.0% of then-outstanding shares of common stock, be entitled or permitted to vote any of the shares of common stock held in excess of the 10.0% limit. The 10% limit does not apply if, before the shareholder acquires shares in excess of the 10% limit, the acquisition is approved by a majority of the directors who are not affiliated with the holder and who were members of the Board of Directors before the time of the acquisition (or who were chosen to fill any vacancy of an otherwise unaffiliated director by a majority of the unaffiliated directors).

***Restrictions on Removing Directors from Office****.* SR Bancorp's articles of incorporation provide that directors may be removed from office only for cause and only by the vote of the holders of at least two-thirds of the outstanding shares of capital stock entitled to vote generally in the election of directors, (after giving effect to the limitation on voting rights discussed above in "—*Limitation of Voting Rights*").

***Shareholder Nominations and Proposals.*** The bylaws provide that any shareholder desiring to make a nomination for the election of directors or a proposal for new business at an annual meeting of shareholders must submit written notice to SR Bancorp between 90 and 120 days before the anniversary date of the proxy statement relating to the previous year's annual meeting. However, if less than 90 days' prior public disclosure of the date of the meeting is given to shareholders and the date of the annual meeting is advanced by more than 30 days, or delayed by more than 30 days from the anniversary date of the preceding year's annual meeting, then shareholders must submit written notice to SR Bancorp no later than 10 days following the day on which public disclosure of the date of the meeting is first made. Shareholder submissions regarding nominations or business proposals must contain certain information as set forth in the bylaws.

***Authorized but Unissued Shares***. After the conversion, SR Bancorp will have authorized but unissued shares of common and preferred stock. See "*Description of SR Bancorp Capital Stock*." The articles of incorporation authorize 50,000,000 shares of common stock and 5,000,000 shares of serial preferred stock. SR Bancorp is authorized to issue preferred stock from time to time in one or more series subject to applicable provisions of law, and the Board of Directors is authorized to fix the designations, and relative preferences, limitations as to dividends, voting rights, and terms and conditions of redemption of such shares. In addition, the articles of incorporation provide that a majority of the total number of directors may, without action by the shareholders, amend the articles of incorporation to increase or decrease the aggregate number of shares of stock of any class or series that SR Bancorp has the authority to issue. If there is a proposed merger, tender offer or other attempt to gain control of SR Bancorp that the Board of Directors does not approve, it would be possible for the Board of Directors to authorize the issuance of a series of preferred stock with rights and preferences that would impede the completion of the transaction. An effect of the possible issuance of preferred stock therefore may be to deter a future attempt to gain control of SR Bancorp. The Board of Directors has no present plan or understanding to issue any preferred stock.

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***Filling Vacancies on the Board of Directors.*** Pursuant to SR Bancorp's articles of incorporation, vacancies on the Board of Directors may be filled only by the affirmative vote of a majority of the remaining directors in office, even if the remaining directors do not constitute a quorum, and any director elected to fill a vacancy will hold office for the remainder of the full term of the class of directors in which the vacancy occurred and until a successor is elected and qualifies.

***Amendments to Articles of Incorporation and Bylaws.*** Generally, SR Bancorp's articles may be amended by the approval of at least two-thirds of all votes entitled to be cast by the holders of shares of capital stock of SR Bancorp entitled to vote on the matter, except that the proposed amendment of any provision of the articles of incorporation need only be approved by the vote of a majority of all the votes entitled to be cast by the holders of shares of capital stock of SR Bancorp entitled to vote on the matter if the amendment of such provision is approved by at least two-thirds of the Board of Directors.

SR Bancorp's bylaws may be amended either by a majority of the Board of Directors, or by an 80% vote of SR Bancorp's shareholders, voting together as a single class.

**Maryland Corporate Law** 

***Business Combinations.*** Under Maryland law, "business combinations" between a Maryland corporation and an interested shareholder or an affiliate of an interested shareholder are prohibited for five years after the most recent date on which the interested shareholder becomes an interested shareholder. These business combinations include a merger, consolidation, statutory share exchange or, in circumstances specified in the statute, certain transfers of assets, certain stock issuances and transfers, liquidation plans and reclassifications involving interested shareholders and their affiliates or issuance or reclassification of equity securities. Maryland law defines an interested shareholder as: (1) any person who beneficially owns 10% or more of the voting power of a corporation's voting stock after the date on which the corporation had 100 or more beneficial owners of its stock; or (2) an affiliate or associate of the corporation at any time after the date on which the corporation had 100 or more beneficial owners of its stock who, within the two-year period before the date in question, was the beneficial owner of 10% or more of the voting power of the then-outstanding voting stock of the corporation. A person is not an interested shareholder under the statute if the Board of Directors approved in advance the transaction by which the person otherwise would have become an interested shareholder. However, in approving a transaction, the Board of Directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board.

After the five-year prohibition, any business combination between the Maryland corporation and an interested shareholder generally must be recommended by the Board of Directors of the corporation and approved by the affirmative vote of at least: (1) 80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation; and (2) two-thirds of the votes entitled to be cast by holders of voting stock of the corporation excluding shares held by the interested shareholder with whom the business combination is to be effected or held by an affiliate or associate of the interested shareholder. These super-majority vote requirements do not apply if the corporation's common shareholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested shareholder for its shares.

***Maryland Control Share Acquisition Statute.*** Maryland General Corporation Law contains a control share acquisition statute that, in general terms, provides that where a shareholder acquires issued and outstanding shares of a corporation's voting stock (referred to as control shares) within one of several specified ranges (one-tenth or more but less than one-third, one-third or more but less than a majority, or a majority or more), approval by shareholders of the control share acquisition must be obtained before the acquiring shareholder may vote the control shares. The required shareholder vote is two-thirds of all votes entitled to be cast, excluding "interested shares," defined as shares held by the acquiring person, officers of the corporation and employees who are also directors of the corporation.

A corporation may, however, opt out of the control share statute through an articles or bylaw provision, which SR Bancorp has done pursuant to its bylaws. Accordingly, the Maryland control share acquisition statute does not apply to acquisitions of shares of SR Bancorp common stock. Though not expected, SR Bancorp could decide to become subject to the Maryland control share acquisition statute by amending its bylaws to eliminate the opt-out provision.

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**Conversion Regulations** 

Conversion regulations provide that, except with the prior written approval of the Federal Reserve, no person may make an offer or announcement of an offer to purchase shares or actually acquire shares of a converted institution or its holding company for a period of three years from the date of the completion of the conversion if, upon the completion of such offer, announcement or acquisition, the person would become the beneficial owner of more than 10.0% of the outstanding stock of the institution or its holding company.

**Change in Control Regulations** 

Under the Change in Bank Control Act, no person, or group of persons acting in concert, may acquire control of a bank holding company unless the Federal Reserve has been given 60 days' prior written notice and has not disapproved the proposed acquisition. The Federal Reserve considers several factors in evaluating a notice, including the financial and managerial resources of the acquirer and competitive effects. Control, as defined under the applicable regulations, means the power, directly or indirectly, to direct the management or policies of the company or to vote 25% or more of any class of voting securities of the company. Acquisition of more than 10% of any class of a bank holding company's voting securities constitutes a rebuttable presumption of control under certain circumstances, including where, as will be the case with SR Bancorp, the issuer has registered securities under Section 12 of the Securities Exchange Act of 1934.

In addition, federal regulations provide that no company may acquire control (as defined in the Bank Holding Company Act) of a bank holding company without the prior approval of the Federal Reserve. Any company that acquires such control becomes a "bank holding company" subject to registration, examination and regulation by the Federal Reserve.

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**DESCRIPTION OF SR BANCORP CAPITAL STOCK** 

**General** 

SR Bancorp is authorized to issue 55,000,000 shares, of which 50,000,000 shares are common stock having a par value of $0.01 per share and 5,000,000 shares are preferred stock having a par value of $.01 per share. Each share of SR Bancorp's common stock has the same relative rights as, and is identical in all respects with, each other share of common stock. Upon payment of the purchase price for the common stock, as required by the plan of conversion, all stock will be duly authorized, fully paid and nonassessable. SR Bancorp will not issue any shares of preferred stock in the offering.

The common stock of SR Bancorp represents non-withdrawable capital, is not an account of any type, and is not insured by the FDIC or any other government agency.

**Common Stock** 

***Dividends.*** SR Bancorp may pay dividends on its common stock if, after giving effect to such distribution, (1) it would be able to pay its indebtedness as the indebtedness comes due in the usual course of business and (2) its total assets exceed the sum of its liabilities and the amount needed, if it were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of any holders of capital stock who have a preference upon dissolution. The holders of common stock of SR Bancorp will be entitled to receive and share equally in dividends declared by the Board of Directors of SR Bancorp. If SR Bancorp issues preferred stock, the holders of the preferred stock may have a priority over the holders of the common stock with respect to dividends.

***Voting Rights.*** After the offering, the holders of common stock of SR Bancorp will possess exclusive voting rights in SR Bancorp. They will elect SR Bancorp's Board of Directors and act on other matters as are required to be presented to them under Maryland law or as are otherwise presented to them by the Board of Directors. Except as discussed in "*Restrictions on Acquisition of SR Bancorp and Somerset Savings Bank, SLA*," each holder of common stock will be entitled to one vote per share and will not have any right to cumulate votes in the election of directors. Any person who beneficially owns more than 10% of then-outstanding shares of SR Bancorp's common stock, however, will not be entitled or permitted to vote any shares of common stock held in excess of the 10% limit. If SR Bancorp issues preferred stock, holders of SR Bancorp preferred stock may also possess voting rights. See "*Restrictions on Acquisition of SR Bancorp and Somerset Savings Bank, SLA*" for additional information regarding voting rights.

***Liquidation.*** If there is any liquidation, dissolution or winding up of Somerset Savings Bank, SR Bancorp, as the sole holder of Somerset Savings Bank's capital stock, would be entitled to receive all of Somerset Savings Bank's assets available for distribution after payment or provision for payment of all debts and liabilities of Somerset Savings Bank, including all deposit accounts and accrued interest. Upon any liquidation, dissolution or winding up of SR Bancorp, the holders of its common stock would be entitled to receive after payment or provision for payment of all its debts and liabilities all of the assets of SR Bancorp available for distribution. If SR Bancorp issues preferred stock, the preferred stock holders may have a priority over the holders of the common stock upon liquidation or dissolution.

***Preemptive Rights; Redemption.*** Holders of the common stock of SR Bancorp will not be entitled to preemptive rights with respect to any shares that may be issued. The common stock cannot be redeemed.

***Dissenters' Rights of Appraisal.*** SR Bancorp's articles of incorporation provide that SR Bancorp's shareholders will not be entitled to dissenters' rights of appraisal with respect to a merger or consolidation of SR Bancorp with another corporation unless the Board of Directors determines by a resolution approved by a majority of directors then in office that dissenters' rights will apply to all or any classes of stock.

**Preferred Stock** 

SR Bancorp will not issue any preferred stock in the offering and it has no current plans to issue any preferred stock after the offering. Preferred stock may be issued with designations, powers, preferences and rights as the Board of Directors may from time to time determine. The Board of Directors can, without shareholder approval, issue preferred stock with voting, dividend, liquidation and conversion rights that could dilute the voting strength of the holders of the common stock and may assist management in impeding an unfriendly takeover or attempted change in control.

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**TRANSFER AGENT AND REGISTRAR** 

The transfer agent and registrar for our common stock will be [•].

**LEGAL MATTERS** 

The legality of our common stock and the federal tax consequences of the conversion and offering has been passed upon for us by Luse Gorman, PC, Washington, D.C. The state tax consequences of the conversion and offering has been opined upon by Baker Tilly US, LLP, Iselin, New Jersey. Certain legal matters will be passed upon for KBW by Kilpatrick Townsend & Stockton LLP, Washington, D.C.

**EXPERTS** 

The Consolidated Financial Statements of Somerset Savings Bank as of and for the year ended June 30, 2022 and June 30, 2021 included in this prospectus have been so included herein in reliance upon the report of Baker Tilly US, LLP, an independent registered public accounting firm, which is included herein, and upon the authority of said firm as experts in accounting and auditing.

The consolidated financial statements of Regal Bancorp, Inc. and subsidiary as of and for the years ended December 31, 2022 and December 31, 2021 included in this prospectus have been so included in reliance on the report of Baker Tilly US, LLP, independent registered public accounting firm, which is included herein, and upon the authority of said firm as experts in accounting and auditing.

RP Financial has consented to the publication herein of the summary of its report to SR Bancorp setting forth its opinion as to the estimated pro forma market value of the shares of common stock upon completion of the conversion and related stock offering and its letter with respect to subscription rights.

**WHERE YOU CAN FIND ADDITIONAL INFORMATION** 

SR Bancorp has filed with the Securities and Exchange Commission a registration statement under the Securities Act with respect to the shares of common stock offered hereby. As permitted by the rules and regulations of the SEC, this prospectus does not contain all the information set forth in the registration statement. Such information, including the appraisal report, which is an exhibit to the registration statement, can be examined without charge through the SEC's web site (*www.sec.gov*), which contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, including SR Bancorp. The statements contained in this prospectus as to the contents of any contract or other document filed as an exhibit to the registration statement are, of necessity, brief descriptions of the material terms of, and should be read in conjunction with, such contract or document.

We have filed an application with the NJDBI with respect to the conversion. This prospectus omits certain information contained in such application. The non-confidential portions of the application may be inspected, without charge, at the offices of the NJDBI, 20 West State Street, Trenton, New Jersey 08625. The plan of conversion is available, upon request, at each of Somerset Savings Bank's offices.

Somerset Savings Bank has filed a notice with the FDIC a notice with respect to the reorganization and offering. This prospectus omits certain information contained in such notice. The notice may be inspected, without charge, at the offices of the Regional Director of the Federal Deposit Insurance Corporation, 350 Fifth Avenue, Suite 1200, New York, New York 10118-0110.

SR Bancorp has filed with the Federal Reserve an application with respect to its acquisition of Somerset Savings Bank. This prospectus omits certain information contained in the application. The application may be inspected, without charge, at the offices of the Federal Reserve, 20<sup>th</sup> Street and Constitution Avenue, NW, Washington, DC 20551 and at the Federal Reserve Bank of New York, 33 Liberty Street, New York, New York 10045.

In connection with the stock offering, SR Bancorp will register its common stock under Section 12(b) of the Exchange Act and, upon such registration, SR Bancorp and the holders of its common stock will become subject to the proxy solicitation rules, reporting requirements and restrictions on common stock purchases and sales by directors, officers and greater than 10% shareholders, the annual and periodic reporting and certain other requirements of the Exchange Act. Under the plan of conversion, SR Bancorp has undertaken that it will not terminate such registration for a period of at least three years following the stock offering.

------

##### [**Table of Contents**](#toc)
**INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF** 

**SOMERSET SAVINGS BANK, SLA** 

---

| | |
|:---|:---|
|  [Report of Independent Registered Public Accounting Firm](#fin352312_1) | F-2 |
|  Consolidated Financial Statements |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Consolidated Statement of Financial Condition at December 31, 2022 (unaudited) and for the Years Ended June 30, 2022 and June 30, 2021](#fin352312_2) | F-3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Consolidated Statements of Income for the Six Months Ended December 31, 2022 and December 31, 2021 (unaudited) and the Years Ended June 30, 2022 and June 30, 2021](#fin352312_3) | F-4 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Consolidated Statements of Comprehensive (Loss) Income for the Six Months Ended December 31, 2022 and 2021 (unaudited) and the Years Ended June 30, 2022 and June 30, 2021](#fin352312_5) | F-5 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Consolidated Statements of Changes in Equity for the Six Months Ended December 31, 2022 and 2021 (unaudited) and the Years Ended June 30, 2022 and June 30, 2021](#fin352312_6) | F-6 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2022 and 2021 (unaudited) and the Years Ended June 30, 2022 and June 30, 2021](#fin352312_7) | F-7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [Notes to Consolidated Statements](#fin352312_8) | F-8 through F-47 |

---

\* \* \*

Separate financial statements for SR Bancorp, Inc. have not been included in this prospectus because SR Bancorp, Inc. has not engaged in any significant activities, has no significant assets, and has no contingent liabilities, revenue or expenses.

All financial statement schedules have been omitted as the required information either is not applicable or is included in the financial statement or related notes.

------

##### [**Table of Contents**](#toc)
![LOGO](g352312dsp23a.jpg)

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** 

To the stakeholders and the Board of Directors of Somerset Savings Bank, S.L.A. and Subsidiaries:

**Opinion on the Financial Statements** 

We have audited the accompanying consolidated statements of financial condition of Somerset Savings Bank, S.L.A. and Subsidiaries (the "Company") as of June 30, 2022 and 2021, the related consolidated statements of income, comprehensive (loss) income, changes in equity, and cash flows for the years then ended, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2022 and 2021, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

**Basis for Opinion** 

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have not been able to determine the specific year that we began serving as the Company's auditor; however, we are aware that we have served as the Company's auditor since at least 1994.

![LOGO](g352312dsp23b.jpg)

Baker Tilly US, LLP

Iselin, New Jersey

October 21, 2022

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##### [**Table of Contents**](#toc)
**Somerset Savings Bank, SLA and Subsidiaries** 

------

Consolidated Statements of Financial Condition

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

---

| | | | |
|:---|:---|:---|:---|
|  | | **June 30,** | **June 30,** |
|  | **December 31,**<br>**2022** | **2022** | **2021** |
|  | (Unaudited) | | |
|  **Assets** |  |  |  |
|  Cash and due from banks | $7385 | $7557 | $7436 |
|  Interest-bearing deposits at other banks | 19750 | 27787 | 49315 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total cash and cash equivalents | 27135 | 35344 | 56751 |
|  Securities available-for-sale, at fair value | 41062 | 47857 | 47098 |
|  Securities held-to-maturity | 183753 | 192903 | 193252 |
|  Equity securities, at fair value | 21 | 19 | 27 |
|  Loans receivable, net of allowance of $1,116 and $1,116, respectively | 357616 | 334558 | 306798 |
|  Premises and equipment, net | 3597 | 3443 | 3511 |
|  Restricted equity securities, at cost | 702 | 702 | 635 |
|  Accrued interest receivable | 1184 | 1068 | 1039 |
|  Bank owned life insurance | 28384 | 28056 | 27441 |
|  Other assets | 6059 | 4681 | 2806 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total assets | $649513 | $648631 | $639358 |
|  **Liabilities and Equity** |  |  |  |
|  **Liabilities** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deposits: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Noninterest-bearing | $42546 | $43722 | $39645 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Interest-bearing | 480216 | 478350 | 470348 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total deposits | 522762 | 522072 | 509993 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Advance payments by borrowers for taxes and insurance | 4017 | 4068 | 3686 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other liabilities | 4663 | 4260 | 3736 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities | 531442 | 530400 | 517415 |
|  **Equity** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Retained earnings | 126299 | 125546 | 123675 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accumulated other comprehensive loss | (8228) | (7315) | (1732) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total equity | 118071 | 118231 | 121943 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities and equity | $649513 | $648631 | $639358 |

---

*See notes to consolidated financial statements*

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##### [**Table of Contents**](#toc)
**Somerset Savings Bank, SLA and Subsidiaries** 

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Consolidated Statements of Income

For the Six Months Ended December 31, 2022 and 2021 (Unaudited) and Years Ended June 30, 2022 and 2021

(Dollars in Thousands)

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Six Months Ended December 31,** | **Six Months Ended December 31,** | **Year Ended June 30,** | **Year Ended June 30,** |
|  | **2022** | **2021** | **2022** | **2021** |
|  | (Unaudited) | (Unaudited) | | |
|  **Interest Income** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loans, including fees | $5338 | $4516 | $9302 | $9527 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Securities, taxable | 1882 | 1988 | 4003 | 3583 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other | 390 | 36 | 127 | 70 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest income | 7610 | 6540 | 13432 | 13180 |
|  **Interest Expense** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deposits: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Demand | 48 | 44 | 88 | 78 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Savings and time | 684 | 861 | 1447 | 2337 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest expense | 732 | 905 | 1535 | 2415 |
|  **Net Interest Income** | 6878 | 5635 | 11897 | 10765 |
|  **Provision for Loan Losses** |  |  |  |  |
|  **Net Interest Income After Provision For Loan Losses** | 6878 | 5635 | 11897 | 10765 |
|  **Noninterest Income** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Service charges and fees | 345 | 351 | 688 | 533 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Increase in cash surrender value of bank owned life insurance | 321 | 316 | 622 | 618 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fees and service charges on loans | 11 | 10 | 21 | 9 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Unrealized (loss) gain on equity securities | 2 |  | (8) | 27 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other | 15 | 14 | 28 | 25 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total noninterest income | 694 | 691 | 1351 | 1212 |
|  **Noninterest Expense** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Salaries and employee benefits | 4006 | 3208 | 6365 | 6061 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Occupancy | 362 | 364 | 710 | 807 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Furniture and equipment | 868 | 843 | 1737 | 1841 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Advertising | 108 | 105 | 266 | 167 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; FDIC premiums | 78 | 73 | 151 | 144 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Directors fees | 177 | 150 | 297 | 282 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Professional fees | 556 | 123 | 412 | 313 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Insurance | 85 | 89 | 168 | 150 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Telephone, postage and supplies | 156 | 156 | 323 | 303 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other | 302 | 338 | 585 | 514 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total noninterest expense | 6698 | 5449 | 11014 | 10582 |
|  **Income Before Income Tax Expense** | 874 | 877 | 2234 | 1395 |
|  **Income Tax Expense** | 121 | 114 | 363 | 145 |
|  **Net Income** | $753 | $763 | $1871 | $1250 |

---

*See notes to consolidated financial statements*

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##### [**Table of Contents**](#toc)
**Somerset Savings Bank, SLA and Subsidiaries** 

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Consolidated Statements of Comprehensive (Loss) Income

For the Six Months Ended December 31, 2022 and 2021 (Unaudited) and Years Ended June 30, 2022 and 2021

(Dollars in Thousands)

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Six Months Ended December 31,** | **Six Months Ended December 31,** | **Year Ended June 30,** | **Year Ended June 30,** |
|  | **2022** | **2021** | **2022** | **2021** |
|  | (Unaudited) | (Unaudited) | | |
|  **Net Income** | $753 | $763 | $1871 | $1250 |
|  **Other Comprehensive Income** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Unrealized holding (losses) gains on securities available-for-sale, net of income tax (benefit) expense of $(376), $(186), $(1353) and $(249), respectively. (a) | (1073) | (538) | (3865) | (713) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Change in defined pension plan for unrealized actuarial gains (losses) net of income tax expense (benefit) of $62, $241, $561 and $169, respectively. (b) | 160 | (899) | (1718) | 394 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total other comprehensive (loss) income | (913) | (1437) | (5583) | (319) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total comprehensive (loss) income | $(160) | $(674) | $(3712) | $931 |

---

(a) Income tax amounts on unrealized holding (losses) gains on securities available-for-sale are included in the net deferred tax asset described in Note 9.

(b) Income tax amounts on the change in the defined benefit pension plan for unrealized actuarial gains (losses)
are included in the net deferred tax asset described in Note 9.

*See notes to consolidated financial statements*

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##### [**Table of Contents**](#toc)
**Somerset Savings Bank, SLA and Subsidiaries** 

------

Consolidated Statements of Changes in Equity

For the Six Months Ended December 31, 2022 (Unaudited) and Years Ended June 30, 2022 and 2021

(Dollars in Thousands)

---

| | | | |
|:---|:---|:---|:---|
|  | **Retained<br>Earnings** | **Accumulated<br>Other<br>Comprehensive<br>Loss** | **Total** |
|  **Balance, July 1, 2020** | $122425 | $(1413) | $121012 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net income | 1250 |  | 1250 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other comprehensive loss, net of tax |  | (319) | (319) |
|  **Balance, June 30, 2021** | $123675 | $(1732) | $121943 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net income (unaudited) | 763 |  | 763 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other comprehensive loss, net of tax (unaudited) |  | (1437) | (1437) |
|  **Balance, December 31, 2021 (unaudited)** | $124438 | $(3169) | $121269 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net income | 1108 |  | 1108 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other comprehensive loss, net of tax |  | (4146) | (4146) |
|  **Balance, June 30, 2022** | $125546 | $(7315) | $118231 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net income (unaudited) | 753 |  | 753 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other comprehensive loss, net of tax (unaudited) |  | (913) | (913) |
|  **Balance, December 31, 2022 (unaudited)** | $126299 | $(8228) | $118071 |

---

*See notes to consolidated financial statements*

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##### [**Table of Contents**](#toc)
**Somerset Savings Bank, SLA and Subsidiaries** 

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Consolidated Statements of Cash Flows

For the Six Months Ended December 31, 2022 and 2021 (Unaudited) and Years Ended June 30, 2022 and 2021

(Dollars in Thousands)

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Six Months Ended December 31,** | **Six Months Ended December 31,** | **Year Ended June 30,** | **Year Ended June 30,** |
|  | **2022** | **2021** | **2022** | **2021** |
|  | (Unaudited) | (Unaudited) | | |
|  **Cash Flows from Operating Activities** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net income | 753 | $763 | $1871 | $1250 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Provision for loan losses |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Depreciation | 206 | 197 | 395 | 452 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred income tax (benefit) expense | (319) | 185 | 264 | (6) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net amortization of premiums and discounts on securities | 334 | 437 | 687 | 628 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net amortization of deferred loan fees, costs and discounts | 319 | 272 | 434 | 893 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Increase in cash surrender value of bank owned life insurance | (328) | (316) | (622) | (618) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Unrealized loss (gain) on equity securities | (2) |  | 8 | (27) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Increase) decrease in: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accrued interest receivable | (116) | 41 | (29) | (35) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other assets | (745) | 1066 | (218) | (403) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other liabilities | 625 | (1054) | (1755) | 252 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net cash provided by operating activities | 727 | 1591 | 1035 | 2386 |
|  **Cash Flows from Investing Activities** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceeds from maturities and principal repayments of securities available-for-sale | 5324 | 7010 | 13705 | 19920 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Purchase of securities held-to-maturity | (894) | (34910) | (34911) | (154826) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Purchase of securities available-for-sale |  | (19877) | (19875) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceeds from maturities and principal repayments of securities held-to-maturity | 9732 | 21897 | 34766 | 43838 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net (increase) decrease in loans receivable | (23377) | 2474 | (28194) | 19386 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Purchase of premises and equipment | (360) | (239) | (327) | (240) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Purchase of restricted equity securities |  |  | (67) | (28) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net cash used in investing activities | (9575) | (23644) | (34903) | (71950) |
|  **Cash Flows from Financing Activities** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net increase in interest bearing deposits | 1866 | 8546 | 8002 | 26713 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net increase (decrease) in non-interest bearing deposits | (1176) | 1626 | 4077 | 2064 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net (increase) decrease in advance payments by borrowers for taxes and insurance | (51) | (36) | 382 | (126) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net cash provided by financing activities | 639 | 10136 | 12461 | 28651 |
|  **Net decrease in cash and cash equivalents** | (8209) | (11917) | (21407) | (40913) |
|  **Cash and Cash Equivalents, Beginning of Year** | 35344 | 56751 | 56751 | 97664 |
|  **Cash and Cash Equivalents, End of Year** | $27135 | $44834 | $35344 | $56751 |
|  **Supplementary Cash Flow Information** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Interest paid | $732 | $905 | $1535 | $2415 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Income taxes paid | $90 | $50 | $370 | $100 |

---

*See notes to consolidated financial statements*

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##### [**Table of Contents**](#toc)
**Somerset Savings Bank, SLA and Subsidiaries** 

------

Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

**1.** **Summary of Significant Accounting Policies** 

**Business** 

Somerset Savings Bank, SLA has been serving the communities of Somerset, Middlesex, Hunterdon and Essex counties in New Jersey since 1887. The bank is a New Jersey chartered savings bank subject to the laws and regulations of federal and state agencies. A locally managed community bank, Somerset Savings Bank, SLA provides customary retail and commercial banking services to individuals, businesses and local municipalities through its 7 full-service branch locations.

**Principles of Consolidation** 

The consolidated financial statements include the accounts of Somerset Savings Bank, SLA and its wholly owned subsidiaries Somerset Investment Co. (the "Investment Co.") and Somerset Consumer Service Corp. ("SCS") (collectively, the "Savings Bank"). All significant intercompany accounts and transactions have been eliminated in consolidation.

The Investment Co. is a special purpose entity subject to the investment company provisions of the New Jersey Corporation Business Tax Act whose activities are limited to holding investment securities and recognizing income and other gains/losses thereon. SCS has had limited activity.

**Basis of Presentation and Use of Estimates** 

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") . In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amount of assets and liabilities as of the date of the consolidated statement of financial condition and revenues and expenses for the periods then ended. Actual results could differ significantly from those estimates. Prior period amounts have been reclassified when necessary to conform to the current year's presentation. Such reclassifications did not have a material impact on the operating results or financial position of the Savings Bank.

Material estimates that are particularly susceptible to significant changes relate to the identification of other-than-temporary impairment on securities, the allowance for loan losses and the valuation of deferred tax assets. Management believes that the evaluations of other-than-temporary impairment on securities, the allowance for loan losses and the valuation of deferred tax assets are adequate. While management uses available information to recognize losses on loans, future additions to the allowance for loan losses may be necessary based on changes in economic conditions in the market area.

**Concentrations of Credit Risk** 

The Savings Bank's lending activity is concentrated in loans secured by real estate located primarily in the State of New Jersey. Credit risk exposure in this area of lending are mitigated by adhering to conservative underwriting practices and policies, and close monitoring of the loan portfolio. Residential mortgage loans originated with a loan-to-value ratio in excess of 80% are generally insured by private mortgage insurance. The Savings Bank does not have any significant concentrations to any one industry or customer.

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

Notes 2 and 3 discuss the types of investment securities in which the Savings Bank invests. Credit risk as it relates to investment activities is mitigated through the monitoring of ratings and the purchase of government sponsored agency securities, backed by the full faith and credit of the United States. The Savings Bank maintains accounts with other financial institutions with balances in excess of federal deposit insurance limits. The Savings Bank has not experienced any loss in such accounts and management believes that these accounts do not expose the Savings Bank to any significant credit risk.

**Cash and Cash Equivalents** 

Cash and cash equivalents include cash on hand, amounts due from banks and interest-earning deposits in other banks with original maturities of three months or less. The Savings Bank maintains accounts at other financial institutions with balances in excess of federal deposit insurance limits. The Savings Bank has not experienced any loss in such accounts.

**Securities** 

Investments in debt securities that the Savings Bank has the positive intent and ability to hold to maturity are classified as held-to-maturity securities and reported at amortized cost. Debt and equity securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and reported at fair value, with unrealized holding gains and losses included in earnings. Debt and equity securities not classified as trading securities or as held-to-maturity securities are classified as available for-sale securities and reported at fair value, with unrealized holding gains or losses, net of deferred income taxes, reported in the accumulated other comprehensive income/loss component of equity.

Premiums/discounts on all securities are amortized/accreted to maturity by use of the level yield method. Gain or loss on sales of securities is based on the specific identification method.

Equity securities with readily determinable fair values are measured at fair value. Any realized or unrealized gains or losses are recognized in earnings. Dividends are included in interest income.

Individual securities are considered impaired when fair value is less than amortized cost. On a quarterly basis, management evaluates all securities with unrealized losses to determine if such impairments are "temporary" or "other than temporary" in accordance with applicable accounting guidance. As part of its evaluation, management considers many factors including, but not limited to, (1) the length of time and extent of impairment, (2) any adverse industry or macroeconomic conditions, (3) any changes to the financial condition or credit worthiness of the issuer, and (4) whether the Savings Bank has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery.

Accordingly, the Savings Bank accounts for temporary impairments based upon security classification as either trading, available-for-sale or held-to-maturity. Temporary impairments on "available-for-sale" securities are recognized, on a tax-effected basis, through other comprehensive income/loss with offsetting entries adjusting the carrying value of the security and the balance of deferred taxes. Temporary impairments of "held-to-maturity" securities are not recognized in the consolidated financial statements; however, information concerning the amount and duration of impairments on held-to-maturity securities is disclosed in the notes to the consolidated financial statements.

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

Other-than-temporary impairments on securities that the Savings Bank has decided to sell or will more likely than not be required to sell prior to the full recovery of their fair value to a level equal to or exceeding amortized cost are recognized in earnings. Otherwise, the other-than-temporary impairment is bifurcated into credit-related and noncredit-related components. The credit-related impairment generally represents the amount by which the present value of the cash flows expected to be collected on a debt security falls below its amortized cost. The noncredit-related component represents the remaining portion of the impairment not otherwise designated as credit-related. Credit-related other-than-temporary impairments are recognized in earnings while noncredit-related other-than-temporary impairments are recognized, net of deferred income taxes, in other comprehensive income/loss.

**Loans Receivable** 

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at their outstanding unpaid principal balances, net of an allowance for loan losses and any deferred fees and costs. Interest income is accrued on the unpaid principal balance and credited to income. Loan origination fees and costs are deferred and recognized over the life of the loans as an adjustment to yield (interest income). Discounts and premiums on purchased loans are amortized to income using the interest method over the expected lives of the loans.

The loans receivable portfolio is segmented into two segments, mortgage and consumer. Mortgage loans consist of the following classes: residential and non-residential. Consumer loans consist of the following classes: equity, passbook or certificate and personal.

The accrual of interest is generally discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectability of principal or interest, even when the loan is currently performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged against the allowance for loan losses. Interest received on nonaccrual loans generally is either applied against principal or reported as interest income, according to management's judgment as to the collectability of principal. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time (generally six months) and the ultimate collectability of the total contractual principal and interest is no longer in doubt. The past due status of all classes of loans receivable is determined based on contractual due dates for loan payments.

**Allowance for Loan Losses** 

The allowance for loan losses represents management's estimate of losses inherent in the loan portfolio as of the statement of financial condition date and is recorded as a reduction to loans. The allowance for loan losses is increased by the provision for loan losses, and decreased by charge- offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of loans receivable are charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely. Because all identified losses are immediately charged off, no portion of the allowance for loan losses is restricted to any individual loan or groups of loans, and the entire allowance is available to absorb any and all loan losses.

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a quarterly evaluation of the adequacy of the allowance. The allowance is based on the Savings Bank's past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available.

The allowance consists of specific and general components. The specific component relates to loans that are classified as impaired. For loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers pools of homogeneous loans by loan class, excluding loans classified as impaired. These pools of loans are evaluated for loss exposure based upon historical loss rates for each of these categories of loans, adjusted for qualitative factors.

These qualitative risk factors include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Lending policies and procedures, including underwriting standards and collection, charge-off, and recovery practices.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. National, regional, and local economic and business conditions as well as the condition of various market
segments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Nature and volume of the portfolio and terms of loans.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Volume and severity of past due, classified and nonaccrual loans as well as other loan modifications.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Existence and effect of any concentrations of credit and changes in the level of such concentrations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. Effect of external factors, such as competition and legal and regulatory requirements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. Value of underlying collateral for collateral dependent loans.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. The experience, ability, and depth of lending management and other relevant staff.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. Quality of the institution's loan review system.

Each factor is assigned a value to reflect improving, stable or declining conditions based on management's best judgment using relevant information available at the time of the evaluation. Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for loan loss calculation.

Mortgage loans are secured by the borrower's residential or non-residential real estate in a first lien position. Mortgage loans have varying loan rates depending on the financial condition of the borrower and the loan to value ratio. The Savings Bank makes construction loans to finance the construction of residential structures. These loans are made to individuals and are typically secured by the land and structure(s) under construction.

Consumer loans are primarily home equity loans and are generally secured by the borrower's personal residence in a second lien position.

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

A loan is considered impaired when, based on current information and events, it is probable that the Savings Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis by either the present value of expected future cash flows discounted at the loan's effective interest rate or the fair value of the collateral if the loan is collateral dependent.

A specific allowance is established for an impaired loan if its carrying value exceeds its estimated fair value. The estimated fair values of substantially all of the Savings Bank's impaired loans are measured based on the estimated fair value of the loan's collateral.

For loans secured by real estate, estimated fair values are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is based on various considerations, including the age of the most recent appraisal, the loan-to-value ratio based on the original appraisal and the condition of the property. Appraised values are discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property.

A loan is categorized as a troubled debt restructuring ("TDR") if a concession to contractual terms is granted to the borrower due to deterioration in the financial condition of the borrower. In situations where, for economic or legal reasons related to a borrower's financial difficulties, management may grant a concession for other than an insignificant period of time to the borrower that would not otherwise be considered, the related loan is classified as a TDR. Management strives to identify borrowers in financial difficulty early and work with them to modify to more affordable terms before their loan reaches nonaccrual status. These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. In cases where borrowers are granted new terms that provide for a reduction of either interest or principal, management measures any impairment on the restructuring as noted above for impaired loans. Generally, a nonaccrual loan that is restructured remains on nonaccrual until the obligation is brought current and has performed for a period of time (generally six months) to demonstrate that the borrower can meet the restructured terms. If the borrower's ability to meet the revised payment schedule is uncertain, the loan remains classified as a nonaccrual loan. TDRs are considered impaired loans for purposes of calculating the Savings Bank's allowance for loan loss until they are ultimately repaid in full or foreclosed and sold.

The allowance calculation methodology includes further segregation of loan classes into risk rating categories. The borrower's overall financial condition, repayment sources, guarantors and value of collateral, if appropriate, are evaluated when credit deficiencies arise, such as delinquent loan payments, for residential and consumer loans. Credit quality risk ratings include regulatory classifications of special mention, substandard, doubtful and loss. Loans classified as special mention have potential weaknesses that deserve management's

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

close attention. If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects. Loans classified substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They include loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified doubtful have all the weaknesses inherent in loans classified substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as a loss are considered uncollectible and are charged to the allowance for loan losses. Loans not classified are rated pass.

In addition, Federal regulatory agencies, as an integral part of their examination process, periodically review the Savings Bank's allowance for loan losses and may require the Savings Bank to recognize adjustments to the allowance based on their judgments about information available to them at the time of their examination, which may not be currently available to management. Based on management's comprehensive analysis of the loan portfolio, management believes the current level of the allowance for loan losses is adequate.

**Premises and Equipment** 

Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed on the straight-line method over the estimated useful lives of the related assets. Routine maintenance and repairs are expensed as incurred, while significant expenditures for improvements are capitalized. Gains or losses upon disposition are reflected in earnings as realized. Bank premises and equipment are reviewed by management for potential impairment whenever events or circumstances indicate that carrying amounts may not be recoverable.

**Restricted Equity Securities** 

Federal law requires a member institution of the Federal Home Loan Bank ("FHLB") system to hold stock of its district bank according to a predetermined formula. The restricted stock is carried at cost. At December 31, 2022 (unaudited), June 30, 2022 and 2021, the Savings Bank held $702, $702 and $635 respectively, in stock of the FHLB of New York.

Management evaluates the stock for impairment in accordance with guidance on accounting by certain entities that lend or finance the activities of others. Management's determination of whether these investments are impaired is based on their assessment of the ultimate recoverability of their cost rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability of their cost is influenced by criteria such as (1) the significance of the decline in net assets of the FHLB as compared to the capital stock amount for the FHLB and the length of time this situation has persisted; (2) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance of the FHLB; and (3) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the FHLB.

Management believes no impairment charge is necessary related to the FHLB stock as of December 31, 2022 (unaudited), June 30, 2022 and 2021.

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

**Bank Owned Life Insurance** 

The Savings Bank invests in bank owned life insurance ("BOLI") as a source of funding for employee benefit expenses. BOLI involves the purchasing of life insurance by the Savings Bank on a chosen group of employees. The Savings Bank is the owner and beneficiary of the policies. This investment is carried as an asset in the consolidated statement of financial condition at the cash surrender value of the underlying policies. Increases in the cash surrender value of the policies, as well as proceeds, are recorded as income in the consolidated statement of income.

**Revenue Recognition** 

The Savings Bank earns income from various sources, including loans, investment securities, bank-owned life insurance, deposit accounts, and sales of assets. The revenue is recognized as it is earned and when collectability is reasonably assured.

Interest income on loans is accrued on the unpaid principal balance and recorded daily. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment to the related loan yield using the interest method. Other loan fees, including late charges, are recognized as the transactions occur.

Interest income on debt securities, including purchase premiums and discounts, is also accrued using the interest method over the term of the securities. Income from dividends on equity securities are recorded when declared.

Fees and service charges related to deposit accounts are largely based on contracts with customers that are short-term in nature and where the performance obligations are satisfied as services are rendered. Fees are either fixed at a specific amount or assessed as a percentage of the transaction amount. No judgements or estimates are required by management to determine the amount and timing of the related revenue. Descriptions of the primary revenue contracts included as components of noninterest income are as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Monthly service charges - general service fees for monthly account maintenance. These fees are charged as earned
within the monthly statement period that the transactions occurred.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Account fees and charges - activity or transaction based fees for deposit related services including, but not
limited to, account overdraft fees, wire transfer fees and stop payment fees. Fees are received at the time of transaction execution concurrent with the fulfillment of performance obligations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• ATM debit card fees - include interchange fees from debit cardholder transactions or ATM surcharges for non-customer usage of Somerset Savings Bank, SLA ATMs. These fees are recognized as earned at the time of the transaction occurrence.

Other income items are transactional in nature and are recorded as they occur.

Gains or losses on sales of assets are generally recognized when the asset has been legally transferred to the buyer and the Savings Bank has no continuing involvement with the asset. The Savings Bank does not generally finance the sale of foreclosed assets.

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

**Comprehensive Income** 

U.S. generally accepted accounting principles (U.S. GAAP) require comprehensive income and its components to be reported when a company presents a full set of financial statements. The term comprehensive income refers to net income plus other comprehensive income, that is, certain revenues, expenses, gains, and losses that are reported as separate components of equity instead of net income. For the Savings Bank, the primary component of other comprehensive income (loss) is the unrealized holding gains or losses on available-for- sale investment securities. The Savings Bank has elected to report these effects on the consolidated statement of comprehensive income.

**Advertising Costs** 

Advertising costs are expensed in the period in which they are incurred and recorded as a non-interest expense in the consolidated statement of income. Advertising expense was approximately $108 and $105 for the six months ended December 31, 2022 and 2021, respectively (unaudited), and $266 and $167 for the years ended June 30, 2022 and 2021, respectively.

**Income Taxes** 

Somerset Savings Bank, SLA and its subsidiaries file a consolidated federal income tax return. Income taxes are allocated to Somerset Savings Bank, SLA and its subsidiaries based on their respective income or loss included in the consolidated income tax return. Separate state income tax returns are filed by Somerset Savings Bank, SLA and its subsidiaries.

Federal and state income taxes have been provided on the basis of reported income. The amounts reflected on Somerset Savings Bank, SLA and subsidiaries' tax returns differ from these provisions due principally to temporary differences in the reporting of certain items for financial reporting and income tax reporting purposes.

The Savings Bank accounts for income taxes using the asset and liability method in accordance with accounting guidance ASC Topic 740, *Income Taxes*. Under this guidance, deferred income tax expense or benefit is determined by recognizing deferred tax assets and liabilities for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date. The realization of deferred tax assets is assessed and a valuation allowance provided, when necessary, for that portion of the asset that is not likely to be realized. Management believes, based upon current facts, that it is more likely than not that there will be sufficient taxable income in future years to realize the deferred tax assets.

The Savings Bank accounts for uncertainty in income taxes recognized in the consolidated financial statements in accordance with accounting guidance which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the Savings Bank's evaluation, no significant income tax uncertainties were identified. Therefore, the Savings Bank recognized no adjustment for unrecognized tax benefits at December 31, 2022 (unaudited), June 30, 2022 and 2021.

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

The Savings Bank's policy is to recognize interest and penalties on unrecognized tax benefits in income tax expense in the consolidated statement of income. No interest and penalties were recorded during the six months ended December 31, 2022 (unaudited), June 30, 2022 and 2021.

**Retirement Benefits** 

Substantially all employees are covered by a defined benefit pension plan and participate in a 401(k) profit sharing plan. The cost of the pension plan is based on actuarial computations of current and future benefits for employees. It is the Savings Bank's policy to fund the recommended required contribution determined under the Employee Retirement Income Security Act. The 401(k) profit sharing plan's annual contribution is determined by matching part of the employee's contribution.

The Savings Bank follows the accounting guidance applicable to a defined benefit pension plan that requires an employer to: (a) recognize in its statement of financial condition an asset for a plan's overfunded status or a liability for a plan's underfunded status; (b) measure a plan's assets and its obligations that determine its funded status as of the end of the employer's fiscal year (with limited exceptions); and (c) recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur.

**Subsequent Events** 

The Savings Bank has evaluated subsequent events for recognition or disclosure through March 13, 2023, the date the financial statements were available to be issued.

**Accounting Pronouncements Adopted** 

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, *Revenue from Contracts with Customers (Topic 606)*. ASU No. 2014 -09 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. ASU 2014-09 was adopted by the Savings Bank in 2022. The Savings Bank adopted the guidance using the modified retrospective method. The adoption did not have a significant effect on the Saving Bank's consolidated financial statements as the recognition of interest income has been scoped out of the guidance and noninterest income recognition is similar to previous revenue recognition practices. The Savings Bank expanded its disclosures with respect to its noninterest income as a result of this guidance. See the "Revenue Recognition" section in Note 1.

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

amount, timing and uncertainty of cash flows arising from leases. The new disclosures will include both qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. ASU 2016-02 and all subsequent amendments (collectively, "ASC 842") required adoption by the Savings Bank on July 1, 2022, though early adoption was permitted. The Savings Bank adopted ASC 842 during the first quarter of the fiscal year ended June 30, 2023. The Savings Bank maintains only one equipment lease with an initial term greater than 12 months and has determined that the impact on its consolidated financial statements is not material. As of December 31, 2022 (unaudited), the Savings Bank had not entered into any material leases that have not yet commenced.

**Recent Accounting Pronouncements** 

In June 2016, the FASB issued ASU No. 2016-13, *Measurement of Credit Losses on Financial Instruments.* ASU No. 2016-13 requires financial assets measured at amortized cost to be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU No. 2016- 13 is effective for the Savings Bank on July 1, 2023. The Savings Bank is in the process of evaluating the potential impact of adopting this ASU.

In March 2022, the FASB issued ASU No. 2022-02, *Financial Instruments—Credit Losses—Troubled Debt Restructurings and Vintage Disclosures*. This standard eliminates the recognition and measurement guidance for troubled debt restructurings (TDRs) by creditors and enhances disclosure requirements for certain loan restructurings when a borrower is experiencing financial difficulty. In addition, the standard requires the disclosure of gross write-offs by year of origination. ASU No. 2022-02 is effective for the Savings Bank on July 1, 2023. The Savings Bank is in the process of evaluating the potential impact of adopting this ASU.

**2.** **Securities Available-for-Sale** 

The amortized cost and approximate fair value of securities available-for-sale at December 31,

2022 (unaudited) and June 30, 2022 are as follows:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** |
|  | **Amortized<br>Cost** | **Gross<br>Unrealized<br>Gains** | **Gross<br>Unrealized<br>Losses** | **Fair<br>Value** |
|  Federal National Mortgage Association | $26273 | $0 | $(2741) | $23532 |
|  Federal Home Loan Mortgage Corporation | 19829 | 0 | (2299) | 17530 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total securities available-for-sale | $46102 | $0 | $(5040) | $41062 |

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **June 30, 2022** | **June 30, 2022** | **June 30, 2022** | **June 30, 2022** |
|  | **Amortized<br>Cost** | **Gross<br>Unrealized<br>Gains** | **Gross<br>Unrealized<br>Losses** | **Fair<br>Value** |
|  Federal National Mortgage Association | $29623 | $0 | $(1946) | $27677 |
|  Federal Home Loan Mortgage Corporation | 21825 | 2 | (1647) | 20180 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total securities available-for-sale | $51448 | $2 | $(3593) | $47857 |

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **June 30, 2021** | **June 30, 2021** | **June 30, 2021** | **June 30, 2021** |
|  | **Amortized<br>Cost** | **Gross<br>Unrealized<br>Gains** | **Gross<br>Unrealized<br>Losses** | **Fair<br>Value** |
|  Federal National Mortgage Association | $28307 | $1007 | $(2) | $29312 |
|  Federal Home Loan Mortgage Corporation | 17164 | 622 |  | 17786 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total securities available-for-sale | $45471 | $1629 | $(2) | $47098 |

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The amortized cost and fair value of debt securities available-for-sale by contractual maturity at December 31, 2022 (unaudited) are shown in the following table. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities are assigned to categories based on contractual maturity except for mortgage-backed securities and CMOs which are based on the estimated average life of the securities.

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| | | |
|:---|:---|:---|
|  | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** |
|  | **Amortized<br>Cost** | **Fair<br>Value** |
|  Due within 1 year | $— | $— |
|  Due after 1 but within 5 years |  |  |
|  Due after 5 but within 10 years |  |  |
|  Due after 10 years |  |  |
|  Mortgage-backed securities | 46102 | 41062 |
|  Total securities available-for-sale | $46102 | $41062 |

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The unrealized losses as of December 31, 2022 (unaudited) and June 30, 2022 and 2021, categorized by the length of time of continuous loss position, and the fair value of related available-for-sale are as follows:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** |
|  | **Less than 12 Months** | **Less than 12 Months** | **More than 12 Months** | **More than 12 Months** | **Total** | **Total** |
|  | **Fair<br>Value** | **Unrealized<br>Losses** | **Fair<br>Value** | **Unrealized<br>Losses** | **Fair<br>Value** | **Unrealized<br>Losses** |
|  Federal National Mortgage Association | $16054 | $(1094) | $7478 | $(1647) | $23532 | $(2741) |
|  Federal Home Loan Mortgage Corporation | 9959 | (728) | 7571 | (1571) | 17530 | (2299) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $26013 | $(1822) | $15049 | $(3218) | $41062 | $(5040) |

---

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**Somerset Savings Bank, SLA and Subsidiaries** 

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **June 30, 2022** | **June 30, 2022** | **June 30, 2022** | **June 30, 2022** | **June 30, 2022** | **June 30, 2022** |
|  | **Less than 12 Months** | **Less than 12 Months** | **More than 12 Months** | **More than 12 Months** | **Total** | **Total** |
|  | **Fair<br>Value** | **Unrealized<br>Losses** | **Fair<br>Value** | **Unrealized<br>Losses** | **Fair<br>Value** | **Unrealized<br>Losses** |
|  Federal National Mortgage Association | $27677 | $(1946) | $— | $— | $27677 | $(1946) |
|  Federal Home Loan Mortgage Corporation | 20108 | (1647) |  |  | 20108 | (1647) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $47785 | $(3593) | $— | $— | $47785 | $(3593) |

---

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **June 30, 2021** | **June 30, 2021** | **June 30, 2021** | **June 30, 2021** | **June 30, 2021** | **June 30, 2021** |
|  | **Less than 12 Months** | **Less than 12 Months** | **More than 12 Months** | **More than 12 Months** | **Total** | **Total** |
|  | **Fair<br>Value** | **Unrealized<br>Losses** | **Fair<br>Value** | **Unrealized<br>Losses** | **Fair<br>Value** | **Unrealized<br>Losses** |
|  Federal National Mortgage Association | $— | $— | $11 | $(2) | $11 | $(2) |
|  Federal Home Loan Mortgage Corporation |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $— | $— | $11 | $(2) | $11 | $(2) |

---

All mortgage-backed securities are U.S. Government agency backed and collateralized by residential mortgages. During the years ended December 31, 2022 (unaudited) and June 30, 2022 and 2021, there were no sales of securities available-for-sale.

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**Somerset Savings Bank, SLA and Subsidiaries** 

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

**3.** **Securities Held-to-Maturity** 

The amortized cost and approximate fair values of securities held-to-maturity at December 31, 2022 (unaudited) and June 30, 2022 are as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** |
|  | **Amortized<br>Cost** | **Gross<br>Unrealized<br>Gains** | **Gross<br>Unrealized<br>Losses** | **Fair**<br>**Value** |
|  Federal National Mortgage Association | $113157 | $29 | $(18781) | $94405 |
|  Federal Home Loan Mortgage Corporation | 59409 | 222 | (9339) | 50292 |
|  Government National Mortgage Association | 363 |  | (7) | 356 |
|  Subordinated Debt | 7750 |  | (1094) | 6656 |
|  CMO | 3074 |  | (282) | 2792 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total securities held-to-maturity | $183753 | $251 | $(29503) | $154501 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **June 30, 2022** | **June 30, 2022** | **June 30, 2022** | **June 30, 2022** |
|  | **Amortized<br>Cost** | **Gross<br>Unrealized<br>Gains** | **Gross<br>Unrealized<br>Losses** | **Fair**<br>**Value** |
|  Federal National Mortgage Association | $119375 | $40 | $(15556) | $103859 |
|  Federal Home Loan Mortgage Corporation | 61990 | 160 | (7642) | 54508 |
|  Government National Mortgage Association | 403 | 1 |  | 404 |
|  Subordinated Debt | 7750 |  | (579) | 7171 |
|  CMO | 3385 |  | (147) | 3238 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total securities held-to-maturity | $192903 | $201 | $(23924) | $169180 |

---

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**Somerset Savings Bank, SLA and Subsidiaries** 

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **June 30, 2021** | **June 30, 2021** | **June 30, 2021** | **June 30, 2021** |
|  | **Amortized<br>Cost** | **Gross<br>Unrealized<br>Gains** | **Gross<br>Unrealized<br>Losses** | **Fair**<br>**Value** |
|  Federal National Mortgage Association | $109830 | $923 | $(1547) | $109206 |
|  Federal Home Loan Mortgage Corporation | 75666 | 767 | (445) | 75988 |
|  Government National Mortgage Association | 512 | 14 |  | 526 |
|  Subordinated Debt | 2750 |  |  | 2750 |
|  CMO | 4494 | 159 |  | 4653 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total securities held-to-maturity | $193252 | $1863 | $(1992) | $193123 |

---

The amortized cost and fair value of securities held-to-maturity by contractual maturity at December 31, 2022 (unaudited) are shown in the following table. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities are assigned to categories based on contractual maturity except for mortgage-backed securities and CMOs which are based on the estimated average life of the securities.

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**Somerset Savings Bank, SLA and Subsidiaries** 

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

---

| | | |
|:---|:---|:---|
|  | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** |
|  | **Amortized<br>Cost** | **Fair**<br>**Value** |
|  Due within 1 year | $— | $— |
|  Due after 1 but within 5 years |  |  |
|  Due after 5 but within 10 years | 7750 | 6656 |
|  Due after 10 years |  |  |
|  Mortgage-backed securities | 176003 | 147845 |
|  Total securities held-to-maturity | $183753 | $154501 |

---

The unrealized losses as of December 31, 2022 (unaudited), June 30, 2022 and June 30, 2021, categorized by the length of time of continuous loss position, and the fair value of related securities held-to-maturity are as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** |
|  | **Less than 12 Months** | **Less than 12 Months** | **More than 12 Months** | **More than 12 Months** | **Total** | **Total** |
|  | **Fair<br>Value** | **Unrealized<br>Losses** | **Fair**<br>**Value** | **Unrealized<br>Losses** | **Fair**<br>**Value** | **Unrealized<br>Losses** |
|  Federal National Mortgage Association | $16377 | $(1338) | $78028 | $(17443) | $94405 | $(18781) |
|  Federal Home Loan Mortgage Corporation | 7925 | (737) | 42367 | (8602) | 50292 | (9339) |
|  Government National Mortgage Association | 356 | (7) |  |  | 356 | (7) |
|  Subordinated Debt |  |  | 6656 | (1094) | 6656 | (1094) |
|  CMO | 2792 | (282) |  |  | 2792 | (282) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $27450 | $(2364) | $127051 | $(27139) | $154501 | $(29503) |
|  | **June 30, 2022** | **June 30, 2022** | **June 30, 2022** | **June 30, 2022** | **June 30, 2022** | **June 30, 2022** |
|  | **Less than 12 Months** | **Less than 12 Months** | **More than 12 Months** | **More than 12 Months** | **Total** | **Total** |
|  | **Fair<br>Value** | **Unrealized<br>Losses** | **Fair Value** | **Unrealized<br>Losses** | **Fair**<br>**Value** | **Unrealized<br>Losses** |
|  Federal National Mortgage Association | $38707 | $(4879) | $60895 | $(10677) | $99602 | $(15556) |
|  Federal Home Loan Mortgage Corporation | 14597 | (1758) | 38727 | (5884) | 53324 | (7642) |
|  Subordinated Debt | 7171 | (579) |  |  | 7171 | (579) |
|  CMO | 3238 | (147) |  |  | 3238 | (147) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $63713 | $(7363) | $99622 | $(16561) | $163335 | $(23924) |

---

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**Somerset Savings Bank, SLA and Subsidiaries** 

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **2021** | **2021** | **2021** | **2021** | **2021** | **2021** |
|  | **Less than 12 Months** | **Less than 12 Months** | **More than 12 Months** | **More than 12 Months** | **Total** | **Total** |
|  | **Fair Value** | **Unrealized<br>Losses** | **Fair<br>Value** | **Unrealized<br>Losses** | **Fair**<br>**Value** | **Unrealized<br>Losses** |
|  Federal National Mortgage Association | $80135 | $(1474) | $2363 | $(73) | $82498 | $(1547) |
|  Federal Home Loan Mortgage Corporation | 53589 | (445) |  |  | 53589 | (445) |
|  Government National Mortgage Association |  |  |  |  |  |  |
|  CMO |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $133724 | $(1919) | $2363 | $(73) | $136087 | $(1992) |

---

At December 31, 2022 (unaudited) and June 30, 2022 and 2021, the Savings Bank had $21, $19 and $27, respectively, in equity securities recorded at fair value. The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities for the six months ended December 31, 2022 and 2021 (unaudited) and for the years ended June 30, 2022 and 2021:

---

| | | |
|:---|:---|:---|
|  | **December 31,<br>2022** | **December 31,<br>2021** |
|  | (Unaudited) | (Unaudited) |
|  Net gains (losses) recognized equity securities | $2 | $— |
|  Less: Net gains (losses) recognized on equity securities sold/acquired |  |  |
|  Net unrealized gains (losses) recognized on equity securities | $2 | $— |
|  | **June 30,**<br>**2022** | **June 30,**<br>**2021** |
|  Net gains (losses) recognized equity securities | $(8) | $17 |
|  Less: Net gains (losses) recognized on equity securities sold/acquired |  |  |
|  Net unrealized gains (losses) recognized on equity securities | $(8) | $17 |

---

Management does not believe that the unrealized losses represent an other-than-temporary impairment and believes these unrealized losses (which are related to four mortgage-backed securities issued by the Federal National Mortgage Association) are the result of market rates and not related to the underlying credit quality of the issuer of the securities. The Savings Bank does not intend to sell these securities and it is not more-likely -than-not that the Savings Bank would be required to sell these securities prior to full recovery of fair value to a level which equals or exceeds amortized cost.

At December 31, 2022 (unaudited) and June 30, 2022 and 2021, a mortgage- backed security with a carrying value of approximately $3 was pledged as collateral to secure public funds on deposit.

During the six months ended December 31, 2022 and 2021 (unaudited), and during the years ended June 30, 2022 and 2021, there were no sales of securities held-to-maturity.

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**Somerset Savings Bank, SLA and Subsidiaries** 

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

**4.** **Loans Receivable** 

Loans at December 31, 2022 (unaudited) and June 30, 2022 and 2021 are summarized as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | **December 31,<br>2022** | **June 30,<br>2022** | **June 30,<br>2021** |
|  Mortgage loans: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Residential | $348795 | $325722 | $297557 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-residential | 449 | 459 | 476 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total mortgage | 349244 | 326181 | 298033 |
|  Consumer: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Equity | 7444 | 7542 | 8282 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Passbook or certificate and personal | 4 | 1 | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total consumer | 7448 | 7543 | 8285 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total loans | 356692 | 333724 | 306318 |
|  Allowance for loan losses | (1116) | (1116) | (1116) |
|  Deferred loan costs, net | 2040 | 1950 | 1596 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loans receivable, net | $357616 | $334558 | $306798 |

---

The Savings Bank engages primarily in the lending of residential real estate and consumer loans. Lending activities are targeted to individuals within the Savings Bank's geographic footprint. Risks associated with lending activities include economic conditions and changes in interest rates, which can adversely impact both the ability of borrowers to repay their loans and the value of the associated collateral.

The Savings Bank engages primarily in the lending of fixed-rate and adjustable-rate real estate residential mortgage loans. Lending activities are targeted to individuals within the Savings Bank's geographic footprint. Risks associated with lending activities include economic conditions and changes in interest rates, which can adversely impact both the ability of borrowers to repay their loans and the value of the associated collateral. Credit risk exposure in this area of lending is minimized by the evaluation of the credit worthiness of the borrower, including debt-to-income ratios, credit scores and conservative underwriting standards that emphasize conservative loan-to-value ratios of generally no more than 80%. Residential mortgage loans granted in excess of the 80% loan-to-value ratio criterion are generally insured by private mortgage insurance.

The real estate home equity portfolio consists of fixed-rate home equity loans and variable-rate home equity lines of credit. Risks associated with second lien loans secured by residential properties are generally lower than commercial loans and include general economic risks, such as the strength of the job market, employment stability and the strength of the housing market.

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**Somerset Savings Bank, SLA and Subsidiaries** 

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

Management reviews all loans that are delinquent 90- days or more for possible impairment. Loans are considered to be impaired when, based on current information and events, it is probable that the Savings Bank will be unable to collect the scheduled payments of principal or interest in accordance with the contractual terms of the loan agreement. Factors considered by management in evaluating impairment include payment status, collateral value, and the likelihood of collecting scheduled principal and interest payments when due. Management determines the significance of payment delays and shortfalls on a case-by-case basis, taking into consideration the unique facts and circumstances surrounding the loan and borrower, including the borrower's payment history, the reasons for the delay and the amount of the shortfall in relation to the principal and interest owed.

The following tables summarize the activity in the allowance for loan losses by loan class for the six months ended December 31, 2022 (unaudited) and for the years ended June 30, 2022 and 2021, and information in regards to the allowance for loan losses and the recorded investment in loans receivable by loan class as of December 31, 2022 (unaudited) and June 30, 2022 and 2021:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** |
|  | **Residential** | **Non-<br>Residential** | **Equity** | **Passbook,<br>Certificate<br>or Personal** | **Total** |
|  **Allowance for Loan Losses:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Beginning balance | $1036 | $5 | $75 | $— | $1116 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Charge-offs |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Recoveries |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Provisions | 2 | (1) | (1) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ending balance | $1038 | $4 | $74 | $— | $1116 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ending balance, |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Individually evaluated for impairment | $— | $— | $— | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ending balance, |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Collectively evaluated for impairment | $1038 | $4 | $74 | $— | $1116 |
|  **Loans Receivable:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ending balance | $348795 | $449 | $7444 | $4 | $356692 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ending balance, |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Individually evaluated for impairment | $150 | $— | $— | $— | $150 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ending balance, |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Collectively evaluated for impairment | $348645 | $449 | $7444 | $4 | $356542 |

---

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**Somerset Savings Bank, SLA and Subsidiaries** 

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **June 30, 2022** | **June 30, 2022** | **June 30, 2022** | **June 30, 2022** | **June 30, 2022** |
|  | **Residential** | **Non-<br>Residential** | **Equity** | **Passbook,<br>Certificate<br>or Personal** | **Total** |
|  **Allowance for Loan Losses:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Beginning balance | $1036 | $5 | $75 | $— | $1116 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Charge-offs |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Recoveries |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Provisions |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ending balance | $1036 | $5 | $75 | $— | $1116 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ending balance, |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Individually evaluated for impairment | $— | $— | $— | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ending balance, |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Collectively evaluated for impairment | $1036 | $5 | $75 | $— | $1116 |
|  **Loans Receivable:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ending balance | $325722 | $459 | $7542 | $1 | $333724 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ending balance, |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Individually evaluated for impairment | $— | $— | $— | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ending balance, |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Collectively evaluated for impairment | $325722 | $459 | $7542 | $1 | $333724 |

---

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**Somerset Savings Bank, SLA and Subsidiaries** 

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **June 30, 2021** | **June 30, 2021** | **June 30, 2021** | **June 30, 2021** | **June 30, 2021** |
|  | **Residential** | **Non-<br>Residential** | **Equity** | **Passbook,<br>Certificate<br>or Personal** | **Total** |
|  **Allowance for Loan Losses:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Beginning balance | $1028 | $5 | $83 | $— | $1116 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Charge-offs |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Recoveries |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Provisions |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ending balance | $1028 | $5 | $83 | $— | $1116 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ending balance, |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Individually evaluated for impairment | $— | $— | $— | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ending balance, |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Collectively evaluated for impairment | $1028 | $5 | $83 | $— | $1116 |
|  **Loans Receivable:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ending balance | $297557 | $476 | $8282 | $3 | $306318 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ending balance, |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Individually evaluated for impairment | $340 | $— | $— | $— | $340 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ending balance, |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Collectively evaluated for impairment | $297557 | $476 | $8282 | $3 | $306318 |

---

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##### [**Table of Contents**](#toc)
**Somerset Savings Bank, SLA and Subsidiaries** 

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

The following tables present the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Savings Bank's internal risk rating system as of December 31, 2022 (unaudited) and June 30, 2022 and 2021:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** |
|  | **Pass** | **Special<br>Mention** | **Substandard** | **Doubtful** | **Total** |
|  Residential | $348645 | $— | $150 | $— | $348795 |
|  Non-residential | 449 |  |  |  | 449 |
|  Equity | 7444 |  |  |  | 7444 |
|  Passbook, certificate or personal | 4 |  |  |  | 4 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $356542 | $— | $150 | $— | $356692 |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **June 30, 2022** | **June 30, 2022** | **June 30, 2022** | **June 30, 2022** | **June 30, 2022** |
|  | **Pass** | **Special<br>Mention** | **Substandard** | **Doubtful** | **Total** |
|  Residential | $325722 | $— | $— | $— | $325722 |
|  Non-residential | 459 |  |  |  | 459 |
|  Equity | 7542 |  |  |  | 7542 |
|  Passbook, certificate or personal | 1 |  |  |  | 1 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $333724 | $— | $— | $— | $333724 |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **June 30, 2021** | **June 30, 2021** | **June 30, 2021** | **June 30, 2021** | **June 30, 2021** |
|  | **Pass** | **Special<br>Mention** | **Substandard** | **Doubtful** | **Total** |
|  Residential | $297217 | $— | $340 | $— | $297557 |
|  Non-residential | 476 |  |  |  | 476 |
|  Equity | 8282 |  |  |  | 8282 |
|  Passbook, certificate or personal | 3 |  |  |  | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $305978 | $— | $340 | $— | $306318 |

---

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**Somerset Savings Bank, SLA and Subsidiaries** 

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

The following tables provide a breakdown of impaired loans by loan portfolio class as of December 31, 2022 (unaudited) and June 30, 2022 and 2021:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** |
|  | **Unpaid<br>Principal<br>Balance** | **Recorded<br>Investment** | **Related<br>Allowance** | **Average<br>Recorded<br>Investment** | **Interest<br>Income<br>Recognized** |
|  With no related allowance recorded: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Residential | $150 | $150 | $— | $86 | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-residential |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Equity |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Passbook, certificate or personal |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | 150 | 150 |  | 86 |  |
|  With an allowance recorded: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Residential | $— | $— | $— | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-residential |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Equity |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Passbook, certificate or personal |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total |  |  |  |  |  |
|  Total: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Residential | $150 | $150 | $— | $86 | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-residential |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Equity |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Passbook, certificate or personal |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $150 | $150 | $— | $86 | $— |

---

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##### [**Table of Contents**](#toc)
**Somerset Savings Bank, SLA and Subsidiaries** 

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **June 30, 2022** | **June 30, 2022** | **June 30, 2022** | **June 30, 2022** | **June 30, 2022** |
|  | | **Recorded** | **Related** | | |
|  | | **Recorded** | **Related** | | |
|  | **Unpaid**<br>**Principal**<br>**Balance** | **Investment** | **Allowance** | **Average**<br>**Recorded**<br>**Investment** | **Interest**<br>**Income**<br>**Recognized** |
|  With no related allowance recorded: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Residential | $— | $— | $— | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-residential |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Equity |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Passbook, certificate or personal |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total |  |  |  |  |  |
|  With an allowance recorded: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Residential | $— | $— | $— | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-residential |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Equity |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Passbook, certificate or personal |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total |  |  |  |  |  |
|  Total: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Residential | $— | $— | $— | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-residential |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Equity |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Passbook, certificate or personal |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $— | $— | $— | $— | $— |

---

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##### [**Table of Contents**](#toc)
**Somerset Savings Bank, SLA and Subsidiaries** 

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **June 30, 2021** | **June 30, 2021** | **June 30, 2021** | **June 30, 2021** | **June 30, 2021** |
|  | | **Recorded** | **Related** | | |
|  | | **Recorded** | **Related** | | |
|  | **Unpaid**<br>**Principal**<br>**Balance** | **Investment** | **Allowance** | **Average**<br>**Recorded**<br>**Investment** | **Interest**<br>**Income**<br>**Recognized** |
|  With no related allowance recorded: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Residential | $340 | $340 | $— | $347 | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-residential |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Equity |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Passbook, certificate or personal |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | 340 | 340 |  | 347 |  |
|  With an allowance recorded: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Residential |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-residential |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Equity |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Passbook, certificate or personal |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total |  |  |  |  |  |
|  Total: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Residential | 340 | 340 |  | 347 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-residential |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Equity |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Passbook, certificate or personal |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $340 | $340 | $— | $347 | $— |

---

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##### [**Table of Contents**](#toc)
**Somerset Savings Bank, SLA and Subsidiaries** 

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

The following tables present the classes of loans summarized by the past due status as of December 31, 2022 (unaudited) and June 30, 2022 and 2021:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** |
|  | **Current** | **30-59 Days<br>Past Due** | **60-89 Days<br>Past Due** | **90+ Days<br>Past Due** | **Total Loans** | **>90 Days<br>and<br>Accruing** | **Non-<br>Accrual** |
|  Residential | $348179 | $466 | $— | $150 | $348795 | $— | $150 |
|  Non-residential | 449 |  |  |  | 449 |  |  |
|  Equity | 7444 |  |  |  | 7444 |  |  |
|  Passbook, certificate or personal | 4 |  |  |  | 4 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $356076 | $466 | $— | $150 | $356692 | $— | $150 |

---

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **June 30, 2022** | **June 30, 2022** | **June 30, 2022** | **June 30, 2022** | **June 30, 2022** | **June 30, 2022** | **June 30, 2022** |
| | **Current** | **30-59 Days<br>Past Due** | **60-89 Days<br>Past Due** | **90+ Days<br>Past Due** | **Total Loans** | **>90 Days<br>and<br>Accruing** | **Non-<br>Accrual** |
|  Residential | $325443 | $279 | $— | $— | $325722 | $— | $— |
|  Non-residential | 459 |  |  |  | 459 |  |  |
|  Equity | 7542 |  |  |  | 7542 |  |  |
|  Passbook, certificate or personal | 1 |  |  |  | 1 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $333445 | $279 | $— | $— | $333724 | $— | $— |

---

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **June 30, 2021** | **June 30, 2021** | **June 30, 2021** | **June 30, 2021** | **June 30, 2021** | **June 30, 2021** | **June 30, 2021** |
| | **Current** | **30-59 Days<br>Past Due** | **60-89 Days<br>Past Due** | **90+ Days<br>Past Due** | **Total Loans** | **>90 Days<br>and<br>Accruing** | **Non-<br>Accrual** |
|  Residential | $296507 | $710 | $— | $340 | $297557 | $— | $340 |
|  Non-residential | 476 |  |  |  | 476 |  |  |
|  Equity | 8282 |  |  |  | 8282 |  |  |
|  Passbook, certificate or personal | 3 |  |  |  | 3 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $305268 | $710 | $— | $340 | $306318 | $— | $340 |

---

If nonaccrual loans had performed in accordance with their contractual terms, the Savings Bank would have recognized additional income of $3 for the six months ended December 31, 2022 (unaudited) and $0 and $4 on these loans during the years ended June 30, 2022 and 2021, respectively.

The Savings Bank may grant a concession or modification for economic or legal reasons related to a borrower's financial condition that it would not otherwise consider resulting in a modified loan which is then identified as a TDR. The Savings Bank may modify loans through rate reductions, extensions of maturity, interest only payments or payment modifications to better match the timing of cash flows due under the modified terms with the cash flows from the borrowers' operations.

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##### [**Table of Contents**](#toc)
**Somerset Savings Bank, SLA and Subsidiaries** 

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

Loan modifications are intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. TDRs are generally considered impaired loans for purposes of calculating the Savings Bank's allowance for loan losses. The Savings Bank identifies loans for potential restructure primarily through direct communication with the borrower and evaluation of the borrower's financial statements, revenue projections, tax returns and credit reports. Even if the borrower is not presently in default, management will consider the likelihood that cash flow shortages, adverse economic conditions, and negative trends may result in a payment default in the near future.

At and for the six months ended December 31, 2022 (unaudited), the Savings Bank had no troubled debt restructurings outstanding and/or granted. At and for the years ended June 30, 2022 and 2021, the Savings Bank had no troubled debt restructurings outstanding and/or granted.

At and for the six months ended December 31, 2022 (unaudited), the Savings Bank had no foreclosed real estate owned. At and for the years ended June 30, 2022 and 2021, the Savings Bank had no foreclosed real estate owned.

**5.** **Premises and Equipment** 

Premises and equipment at December 31, 2022 (unaudited), June 30, 2022 and June 30, 2021 are summarized as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | **December 31,<br>2022** | **June 30,<br>2022** | **June 30,<br>2021** |
|  | (Unaudited) | | |
|  Land | $926 | $926 | $926 |
|  Buildings and improvements | 7732 | 7498 | 7258 |
|  Accumulated depreciation | (5597) | (5483) | (5209) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net | 2135 | 2015 | 2049 |
|  Furnishings and equipment | 4516 | 4390 | 4303 |
|  Accumulated depreciation | (3980) | (3888) | (3767) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net | 536 | 502 | 536 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $3597 | $3443 | $3511 |

---

Depreciation expense amounted to $203 and $197 for the six months ended December 31, 2022 and 2021, respectively (unaudited), and $395 and $452 for the years ended June 30, 2022 and 2021, respectively.

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**Somerset Savings Bank, SLA and Subsidiaries** 

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

**6.** **Deposits** 

Deposits at December 31, 2022 (unaudited) and June 30, 2022 and 2021 consist of the following:

---

| | | | |
|:---|:---|:---|:---|
|  | **December 31,**<br>**2022** | **June 30,**<br>**2022** | **June 30,**<br>**2021** |
|  | (Unaudited) | | |
|  Demand accounts: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Interest-bearing | $150794 | $146408 | $138732 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Noninterest-bearing | 42546 | 43722 | 39645 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total demand accounts | 193340 | 190130 | 178377 |
|  Savings and club | 182166 | 188115 | 172588 |
|  Certificates of deposit | 147256 | 143827 | 159028 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $522762 | $522072 | $509993 |

---

Certificates of deposit with balances in excess of the FDIC insurance limit of $250 at December 31, 2022 (unaudited), June 30, 2022 and June 30, 2021 amounted to approximately $13,047, $10,625 and $10,345, respectively.

Scheduled maturities of certificates of deposit are as follows:

---

| | |
|:---|:---|
|  | **2022** |
| 2023 | $98624 |
| 2024 | 30355 |
| 2025 | 10720 |
| 2026 | 2845 |
| 2027 | 4712 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $147256 |

---

**7.** **Borrowings** 

At December 31, 2022 (unaudited), June 30, 2022 and June 30, 2021, there were no borrowings from the FHLB-NY.

At December 31, 2022 (unaudited), June 30, 2022 and June 30, 2021, the Savings Bank can borrow overnight funds from the FHLB-NY under a redesigned overnight advance program up to the Savings Bank's maximum borrowing capacity based on the Savings Bank's ability to collateralize such borrowings. At December 31, 2022 (unaudited) and June 30, 2022, the Savings Bank's maximum borrowing capacity was $100,000.

At December 31, 2022 (unaudited), June 30, 2022 and June 30, 2021, the Savings Bank's Board of Directors has authorized borrowings of up to $25,000 from the Federal Reserve Bank of New York ("FRB-NY"). All borrowings are secured by pledges of the Savings Bank's qualifying loan portfolio and are generally on overnight terms with interest rate quoted at the time of the borrowing. There were no outstanding borrowings with the FRB-NY at December 31, 2022 (unaudited) and June 30, 2022.

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**Somerset Savings Bank, SLA and Subsidiaries** 

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

**8.** **Benefit Plans** 

**Retirement Plan** 

The Savings Bank has a non-contributory pension plan covering all eligible employees. The plan is a defined benefit plan that provides benefits based on a participant's years of service and overall annual compensation.

The following tables set forth the plan's funded status and components of net periodic pension:

---

| | | | |
|:---|:---|:---|:---|
|  | **Six Months<br>Ended<br>December<br>31, 2022** | **Year Ended<br>June 30,<br>2022** | **Year Ended<br>June 30,<br>2021** |
|  | (Unaudited) | | |
|  Change in benefit obligation: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Obligation, beginning | $19066 | $20339 | $19068 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Service cost | 200 | 476 | 395 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Interest cost | 351 | 435 | 353 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Actuarial loss | (846) | (1675) | 1206 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Benefit payments | (668) | (509) | (683) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Obligation, ending | $18103 | $19066 | $20339 |
|  Change in plan assets: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fair value of plan assets, beginning | $16395 | $18120 | $16356 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Actual gain on plan assets | (550) | (3416) | 2147 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Employer contributions | 0 | 2200 | 300 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Benefit payments | (668) | (509) | (683) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fair value of plan assets, ending | $15177 | $16395 | $18120 |
|  Funded status, |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accumulated benefit obligation | $15852 | $16411 | $17211 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Projected benefit obligation | $(18103) | $(19066) | $(20339) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fair value of assets | 15177 | 16395 | 18120 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Funded status and prepaid pension cost included in other liabilities | $(2926) | $(2671) | $(2219) |
|  Assumptions used to determine benefit obligation: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Discount rate | 4.83% | 4.18% | 2.20% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Rate of increase in compensation | 4.75% | 4.75% | 4.75% |

---

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##### [**Table of Contents**](#toc)
**Somerset Savings Bank, SLA and Subsidiaries** 

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

---

| | | | |
|:---|:---|:---|:---|
|  | **Six Months<br>Ended<br>December 31,<br>2022** | **Year Ended<br>June 30,<br>2022** | **Year Ended<br>June 30,<br>2021** |
|  | (Unaudited) | | |
|  Net periodic pension cost included the following: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Service cost | $200 | $476 | $395 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Interest cost | 351 | 435 | 353 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Expected return on plan assets | (411) | (964) | (876) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Settlement loss |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net amortization | 337 | 426 | 499 |
|  Net periodic pension cost included in salaries and employee benefits | $477 | $373 | $371 |
|  Assumptions used to determine net periodic pension cost: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Discount rate | 4.18% | 4.18% | 2.20% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Rate of increase in compensation | 4.75% | 4.75% | 4.75% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Rate of return on plan assets | 5.75% | 5.75% | 5.75% |

---

For the six months ended December 31, 2022 (unaudited), the plan's assets realized an annualized return of approximately -12%. For the years ended June 30, 2022 and 2021, the plan's assets realized an annual return of approximately -24% and 8%, respectively. The weighted-average allocation by asset category is as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | **December 31,<br>2022<br>(Unaudited)** | **June 30,<br>2022** | **June 30,<br>2021** |
|  Cash and equivalents | 1% | 5% | 1% |
|  Fixed income securities and mutual funds | 53 | 53 | 52 |
|  Equity securities and mutual funds | 46 | 42 | 47 |
|  | 100% | 100% | 100% |

---

For the coming year, the Savings Bank intends to maintain the current asset mix and seeks to achieve an optimal risk/reward profile by limiting market exposure to present levels. Based on an analysis of the current market environment, management projects a 1% return from cash and equivalents, a 5% return from fixed income and a 7% return from equities, for an overall expected return of approximately 6%.

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**Somerset Savings Bank, SLA and Subsidiaries** 

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

The long-term rate-of -return-on-assets assumption is set based on historical returns earned by equities and fixed income securities, adjusted to reflect expectations of future returns as applied to the plan's actual target allocation of asset classes. Equities and fixed income securities are assumed to earn real rates of return in the ranges of 5-9% and 2-6%, respectively. Additionally, the long-term inflation rate is projected to be 2%. When these overall return expectations are applied to a typical plan's target allocation, the result is an expected return of 5% to 7%.

The fair values of the Savings Bank's pension plan assets at December 31, 2022 (unaudited), June 30, 2022 and June 30, 2021, by asset category (see Note 12 for the definitions of levels), are as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Assets at Fair Value as of December 31, 2022 (Unaudited)** | **Assets at Fair Value as of December 31, 2022 (Unaudited)** | **Assets at Fair Value as of December 31, 2022 (Unaudited)** | **Assets at Fair Value as of December 31, 2022 (Unaudited)** |
| **Asset Category** | **(Level 1)** | **(Level 2)** | **(Level 3)** | **Fair**<br>**Value** |
|  Cash | $204 | $— | $— | $204 |
|  Equity securities | 2319 |  |  | 2319 |
|  Mutual funds - fixed income | 4579 |  |  | 4579 |
|  Mutual funds - equity | 8075 |  |  | 8075 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $15177 | $— | $— | $15177 |
|  | **Assets at Fair Value as of June 30, 2022** | **Assets at Fair Value as of June 30, 2022** | **Assets at Fair Value as of June 30, 2022** | **Assets at Fair Value as of June 30, 2022** |
| **Asset Category** | **(Level 1)** | **(Level 2)** | **(Level 3)** | **Fair**<br>**Value** |
|  Cash | $884 | $— | $— | $884 |
|  Equity securities | 3035 |  |  | 3035 |
|  Mutual funds - fixed income | 8608 |  |  | 8608 |
|  Mutual funds - equity | 3868 |  |  | 3868 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $16395 | $— | $— | $16395 |
|  | **Assets at Fair Value as of June 30, 2021** | **Assets at Fair Value as of June 30, 2021** | **Assets at Fair Value as of June 30, 2021** | **Assets at Fair Value as of June 30, 2021** |
| **Asset Category** | **(Level 1)** | **(Level 2)** | **(Level 3)** | **Fair**<br>**Value** |
|  Cash | $241 | $— | $— | $241 |
|  Equity securities | 3875 |  |  | 3875 |
|  Mutual funds - fixed income | 9500 |  |  | 9500 |
|  Mutual funds - equity | 4504 |  |  | 4504 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $18120 | $— | $— | $18120 |

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**Somerset Savings Bank, SLA and Subsidiaries** 

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

The Savings Bank does not expect to contribute to the pension plan during the year ending June 30, 2023. Benefit payments, which reflect expected future service, are expected to be paid as follows:

---

| | |
|:---|:---|
|  Year ending June 30: |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2024 | $4803.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2025 | 1798.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2026 | 898.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2027 | 1302.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2028 | 1240.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2029-2033 | 6905.0 |
|  | $16946.0 |

---

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**Somerset Savings Bank, SLA and Subsidiaries** 

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

As of December 31, 2022 (unaudited), June 30, 2022 and June 30, 2021, unrecognized net loss of $6,250, $6,472 and $4,192, respectively was included in accumulated other comprehensive income. For the six months ending December 31, 2022 (unaudited), approximately $337 of the net loss is expected to be recognized as a component of net periodic pension cost.

**Savings and Investment Plan** 

The Savings Bank has a savings and investment plan, pursuant to Section 401(k) of the Internal Revenue Code, for all eligible employees. Under this plan, employees may make voluntary contributions in an amount equal to not less than 2% of their eligible compensation during a plan year. In addition, the Savings Bank will make contributions equal to 3% of the plan year compensation for all eligible employees. The Savings Bank, at its discretion, may make an additional matching contribution to those participants employed at each plan year end. Plan contributions approximated $57 for the six months ended December 31, 2022 (unaudited) and $119 and $112 for the years ended June 30, 2022 and 2021, respectively. No additional matching contributions were made during the six months ended December 31, 2022 and December 31, 2021 (unaudited).

**Deferred Compensation** 

The Savings Bank has deferred compensation plans for directors and certain officers that permit the deferral of director fees and officer compensation. Amounts deferred earn interest at rates comparable to rates the Savings Bank pays on deposit accounts. At December 31, 2022 (unaudited), June 30, 2022 and June 30, 2021, liabilities under the plans totaled approximately $760, $754 and $602, respectively. Interest expense approximated $17 for the six months ended December 31, 2022 (unaudited), and $8 and $3 for the years ended June 30, 2022 and 2021, respectively.

**9. Income Taxes** 

The Savings Bank qualifies as a Savings Institution under the provisions of the Internal Revenue Code and, therefore, prior to January 1, 1996, was permitted to calculate its bad debt deduction using either the experience method or the specific charge off method. Retained earnings at December 31, 2022 (unaudited), June 30, 2022 and June 30, 2021 included approximately $5,300 of such bad debt allowance for which federal income taxes have not been provided. After January 1, 1996, the Savings Bank was only permitted to deduct actual charge offs. If such amount is used for purposes other than for bad debt losses, including distributions in liquidation, it will be subject to income tax at the then current rate.

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**Somerset Savings Bank, SLA and Subsidiaries** 

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

The components of income tax expense are as follows for the six months ended December 31, 2022 (unaudited) and the years ended June 30, 2022 and June 30, 2021:

---

| | | | |
|:---|:---|:---|:---|
|  | **Six Months**<br>**Ended**<br>**December 31,**<br>**2022** | **Year Ended**<br>**June 30,**<br>**2022** | **Year Ended**<br>**June 30,**<br>**2021** |
|  | (Unaudited) | | |
|  Current tax expense (benefit): |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Federal income | $251 | $37 | $171 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; State income | 44 | 62 | (20) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total current | 295 | 99 | 151 |
|  Deferred tax expense (benefit): |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Federal income | (137) | 289 | 23 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; State income | (37) | (25) | (29) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total deferred | (174) | 264 | (6) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $121 | $363 | $145 |

---

The following table presents a reconciliation between the effective income tax expense and the income tax expense which would be computed by applying the federal statutory tax rate of 21% for the six months ended December 31, 2022 (unaudited) and for the years ended June 30, 2022 and June 30, 2021:

---

| | | | |
|:---|:---|:---|:---|
|  | **Six Months<br>Ended<br>December 31,<br>2022** | **Year Ended<br>June 30,<br>2022** | **Year Ended<br>June 30,<br>2021** |
|  | (Unaudited) | | |
|  Federal income tax, at the statutory rate | $184 | $469 | $293 |
|  Increases (decreases) in taxes resulting from: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; New Jersey state tax, net of federal income tax effect | 7 | 37 | (37) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Bank owned life insurance | (67) | (131) | (130) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other items, net | (3) | (12) | 19 |
|  Effective income tax expense | $121 | $363 | $145 |

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**Somerset Savings Bank, SLA and Subsidiaries** 

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

The tax effects of existing temporary differences that give rise to deferred income tax assets and liabilities are as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | **December 31,**<br>**2022** | **June 30,**<br>**2022** | **June 30,**<br>**2022** |
|  | (Unaudited) | | |
|  Deferred tax assets: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred compensation | $214 | $226 | $181 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Unrecognized pension losses | 1757 | 1819 | 1187 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred loan fees | 13 | 14 | 17 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Allowance for loan loss | 314 | 314 | 314 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Unrealized loss on securities available-for-sale | 1305 | 929 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Compensation | 84 | 74 | 73 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Depreciation | 234 | 192 | 191 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; State net operating loss | 197 | 206 | 70 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Charitable contributions | 39 | 19 | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Uncollected interest | 1 | 3 | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total deferred tax assets | 4157 | 3796 | 2045 |
|  Deferred tax liabilities: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Prepaid pension | 880 | 1068 | 554 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred loan costs | 190 | 200 | 219 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Unrealized gain on securities available-for-sale |  |  | 424 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other | 3 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total deferred tax liabilities | 1073 | 1268 | 1197 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net deferred income tax asset included in other assets | $3084 | $2528 | $848 |

---

A deferred tax asset or liability is recognized for the estimated future tax effects attributable to temporary differences and carryforwards. The measurement of such deferred tax items is reduced by the amount that is more likely than not to be realized based on available evidence. The ultimate realization of the deferred tax asset is dependent upon the generation of future taxable income during the periods in which those temporary differences and carryforwards become deductible. A valuation allowance is recorded for tax benefits which management has determined are not more likely than not to be realized. At December 31, 2022 (unaudited), June 30, 2022 and June 30, 2021, there was no valuation allowance.

A corporation may carry forward net operating losses to the succeeding 20 taxable years for New Jersey state tax purposes. As of December 31, 2022 (unaudited), the Savings Bank had total state net operating loss carryforwards of $2,777.

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**Somerset Savings Bank, SLA and Subsidiaries** 

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

Based upon projections of future taxable income and the ability to carry forward net operating losses, management believes it is more likely than not the Savings Bank will realize the remaining deferred tax asset.

**10.** **Commitments and Contingencies** 

The Savings Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the statement of financial position.

The Savings Bank's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual notional amount of those instruments. The Savings Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

At December 31, 2022 (unaudited), total unfunded loan related commitments, including lines of credit, amounted to $29,242, including $23,483 for unused equity lines of credit and $5,759 to originate and purchase loans, expiring within three months.

At June 30, 2022, total unfunded loan related commitments, including lines of credit, amounted to $28,904, including $23,718 for unused equity lines of credit and $5,186 to originate and purchase loans, expiring within three months.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Savings Bank evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Savings Bank upon extension of credit is based on management's credit evaluation of the counterparty.

**11.** **Regulatory Capital** 

The Savings Bank is subject to regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Savings Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities and certain off-balance sheet items calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk-weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the maintenance of minimum amounts and ratios (set forth in the following table) of total capital, Tier 1 capital (as defined in the regulations) and common equity Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. A capital conservation buffer of 2.50%, comprised of common equity Tier I capital, is also established above the regulatory minimum capital requirements and must be maintained to avoid limitations on capital distributions.

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**Somerset Savings Bank, SLA and Subsidiaries** 

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

In 2021, the Savings Bank adopted the new community bank leverage ratio framework. This framework simplifies the regulatory capital requirements by requiring the Savings Bank to meet only the Tier 1 capital to average assets (leverage) ratio. The Savings Bank must only maintain a leverage ratio greater than the 9% required minimum to be considered well capitalized under this framework. The Savings Bank can opt out of the new framework and return to the risk-weighting framework at any time.

Market risk, credit risk, operational risk and deposits are some of the factors that can impact the capital adequacy ratio and in turn, adversely affect the performance of the Savings Bank. As of December 31, 2022 (unaudited), management believes that the Savings Bank meets all capital adequacy requirements to which they are subject. As of December 31, 2022 (unaudited), the most recent notification from the Federal Deposit Insurance Corporation categorized the Savings Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum ratios as set forth in the following tables. There are no conditions or events since that notification that management believes have changed the Savings Bank's category. The Bank's actual capital amounts and ratios are as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | | | | | **To be Well Capitalized** | **To be Well Capitalized** |
|  | | | **For Capital Adequacy** | **For Capital Adequacy** | **under Prompt Corrective** | **under Prompt Corrective** |
|  | **Actual** | **Actual** | **Purposes** | **Purposes** | **Action Provisions** | **Action Provisions** |
|  | **Amount** | **Ratio** | **Amount** | **Ratio** | **Amount** | **Ratio** |
|  | | | **(Dollar Amounts in Thousands)** | **(Dollar Amounts in Thousands)** | | |
|  <u>December 31, 2022 (Unaudited):</u> |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Tier 1 capital (to average total assets) | $126299 | 19.51% |  |  | $58251 | 9.00% |
|  <u>June 30, 2022:</u> |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Tier 1 capital (to average total assets) | $125546 | 19.36% |  |  | $58354 | 9.00% |
|  <u>June 30, 2021:</u> |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Tier 1 capital (to average total assets) | $123675 | 19.90% |  |  | $52814 | 8.50% |

---

**12.** **Related-Party Transactions** 

In the ordinary course of business, the Savings Bank has engaged, and continues to engage, in banking transactions with its directors, officers and their related parties.

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**Somerset Savings Bank, SLA and Subsidiaries** 

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

At December 31, 2022 (unaudited), the Savings Bank had $471 in outstanding loans to directors, officers and their related parties.

---

| | | | |
|:---|:---|:---|:---|
|  | **December 31,**<br>**2022** | **June 30,**<br>**2022** | **June 30,**<br>**2021** |
|  | (Unaudited) | | |
|  Balance, beginning of period | $495 | $460 | $484 |
|  Additions, new loans and advances |  | 102 |  |
|  Repayments | (24) | (67) | (24) |
|  Balance, end of period | $471 | $495 | $460 |

---

Deposits from directors, officers and their related parties held by the Savings Bank at December 31, 2022 (unaudited), June 30, 2022 and June 30, 2021 amounted to $856, $798 and $834, respectively.

**13.** **Fair Value Measurements and Disclosures** 

The Savings Bank uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The Savings Bank's securities available-for-sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Savings Bank may be required to record at fair value other assets or liabilities on a non-recurring basis. These non-recurring fair value adjustments involve the application of lower-of-cost-or-market accounting or write-downs of individual assets.

FASB ASC 820, *Fair Value Measurements and Disclosures*, defines fair value as an exit price representing the amount that would be received to sell an asset or settle a liability in an orderly transaction between market participants. A three-level hierarchy has been established for fair value measurements based upon the inputs to the valuation of an asset or liability.

Level 1 - Valuation is based on quoted prices in active markets for identical assets or liabilities;

Level 2 - Valuation is determined from quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument;

Level 3 - Valuation is derived from model-based and other techniques in which at least one significant input is unobservable and which may be based on the Company's own estimates about the assumptions that a market participant would use to value the asset or liability.

The Savings Banks' available-for-sale portfolio is carried at estimated fair value on a recurring basis, with any unrealized gains and losses, net of taxes, reported as accumulated other comprehensive income or loss. The securities available-for-sale portfolio consists of U.S. government-sponsored enterprise and mortgage-backed securities. The fair values of these securities were obtained from an independent nationally recognized pricing service. The independent pricing service provided prices categorized as Level 2, as quoted prices in active markets for identical assets are generally not available for the securities.

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**Somerset Savings Bank, SLA and Subsidiaries** 

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

For financial assets measured at fair value on a recurring basis as of December 31, 2022 (unaudited), June 30, 2022 and June 30, 2021, the fair value measurements by level within the fair value hierarchy used are as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** | **December 31, 2022 (Unaudited)** |
| **Description** | **(Level 1)** | **(Level 2)** | **(Level 3)** | **Total** |
|  Securities available-for-sale: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Federal National Mortgage Association | $— | $23532 | $— | $23532 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Federal Home Loan Mortgage Corporation |  | 17530 |  | 17530 |
|  Equity securities | 21 |  |  | 21 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $21 | $41062 | $— | $41083 |
|  | **June 30, 2022** | **June 30, 2022** | **June 30, 2022** | **June 30, 2022** |
| **Description** | **(Level 1)** | **(Level 2)** | **(Level 3)** | **Total** |
|  Securities available-for-sale: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Federal National Mortgage Association | $— | $27677 | $— | $27677 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Federal Home Loan Mortgage Corporation |  | 20180 |  | 20180 |
|  Equity securities | 19 |  |  | 19 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $19 | $47857 | $— | $47876 |
|  | **June 30, 2021** | **June 30, 2021** | **June 30, 2021** | **June 30, 2021** |
| **Description** | **(Level 1)** | **(Level 2)** | **(Level 3)** | **Total** |
|  Securities available-for-sale: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Federal National Mortgage Association | $— | $29312 | $— | $29312 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Federal Home Loan Mortgage Corporation |  | 17786 |  | 17786 |
|  Equity securities | 27 |  |  | 27 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $27 | $47098 | $— | $47125 |

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**Somerset Savings Bank, SLA and Subsidiaries** 

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Notes to Consolidated Financial Statements

December 31, 2022 (Unaudited) and June 30, 2022 and 2021

(Dollars in Thousands)

The classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

Other securities are measured at fair value using quoted market prices in an active market for identical assets and are classified as Level 1 in the hierarchy. The estimated fair values of equity securities are determined by obtaining quoted prices on nationally recognized exchanges (Level 1 inputs).

All debt securities are measured at fair value using matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities' relationship to other benchmark quoted prices and are classified as Level 2 in the hierarchy.

The fair value of deposits with no defined maturities (e.g. demand deposits, interest-bearing demand accounts, money market accounts and savings accounts) is the amount payable on demand of the liabilities at the reporting date (i.e. their carrying amounts). This approach to estimating fair value excludes the significant benefit that results from the low -cost funding provided by such deposit liabilities, as compared to alternative sources of funding. Deposits with stated maturities (time deposits) have been valued using the present value of cash flows discounted at rates approximating the current market for similar deposits.

The Savings Bank had no assets or liabilities measured at fair value on a non-recurring basis at December 31, 2022 (unaudited), June 30, 2022 and June 30, 2021.

There were no transfers between levels within the fair value hierarchy during the six months ended December 31, 2022 (unaudited) and years ended June 30, 2022 and 2021.

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##### [**Table of Contents**](#toc)
**INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF REGAL BANCORP, INC. AND SUBSIDIARY** 

---

| | |
|:---|:---|
|  [Report of Independent Registered Public Accounting Firm](#fing352312_1) | G-2 |
|  [Consolidated Balance Sheets at December 31, 2022 and 2021](#fing352312_3) | G-3 |
|  [Consolidated Statements of Income for the Years Ended December 31, 2022 and 2021](#fing352312_4) | G-4 |
|  [Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2022 and 2021](#fing352312_5) | G-5 |
|  [Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 2022 and 2021](#fing352312_6) | G-6 |
|  [Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021](#fing352312_7) | G-7 |
|  [Notes to Consolidated Financial Statements](#fing352312_8) | G-8-G-36 |

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**Report of Independent Registered Public Accounting Firm** 

To the Stakeholders and the Board of

Directors of Regal Bancorp, Inc. and Subsidiary

**Opinion on the Financial Statements**

We have audited the accompanying consolidated balance sheet of Regal Bancorp, Inc. and Subsidiary (the Company) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, changes in stockholders' equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

**Basis for Opinion**

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have not been able to determine the specific year that we began serving as the Company's auditor; however, we are aware that we have served as the Company's auditor since at least 2009.

/s/ BAKER TILLY US, LLP

Iselin, New Jersey

March 8, 2023

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Regal Bancorp, Inc. and Subsidiary

Consolidated Balance Sheets

December 31, 2022 and 2021

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| | | |
|:---|:---|:---|
|  | December 31, | December 31, |
|  | 2022 | 2021 |
|  | (In thousands, except | (In thousands, except |
|  | share data) | share data) |
|  Assets |  |  |
|  Cash and due from banks | $6740 | $4620 |
|  Interest-bearing deposits at other banks | 93833 | 157255 |
|  Federal funds sold | 6274 | 5959 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cash and cash equivalents | 106847 | 167834 |
|  Time deposits in other financial institutions | 12640 | 16568 |
|  Securities available-for-sale, at fair value | 15477 | 15463 |
|  Securities held-to-maturity | 2592 | 2591 |
|  Loans receivable, net of allowance for loan losses of $5,611 and $5,611, respectively | 339259 | 356009 |
|  Restricted equity investments | 784 | 810 |
|  Goodwill and core deposit intangibles | 1085 | 1104 |
|  Premises and equipment, net | 1819 | 2105 |
|  Accrued interest receivable | 1167 | 1303 |
|  Bank owned life insurance | 7346 | 7196 |
|  Right of use asset | 3675 |  |
|  Deferred income taxes | 2308 | 2076 |
|  Other assets | 680 | 713 |
|  | $495679 | $573772 |
|  Liabilities and Stockholders' Equity |  |  |
|  Deposits: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-interest bearing | $105652 | $124507 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Interest bearing | 320356 | 385085 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total deposits | 426008 | 509592 |
|  FHLBNY borrowings | 5000 | 5000 |
|  Subordinated debentures | 9915 | 9900 |
|  Accrued interest payable | 233 | 157 |
|  Lease liability | 4163 |  |
|  Other liabilities | 1217 | 2426 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities | 446536 | 527075 |
|  Shareholders' equity: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Preferred stock, no par value, shares authorized - 1,000,000; no shares issued and outstanding |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Common stock, no par value; shares authorized - 5,000,000; 3,023,369 shares issued and outstanding in 2022 and 2021 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Surplus | 34358 | 34358 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Retained earnings | 15411 | 12317 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accumulated other comprehensive income (loss) | (626) | 22 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total stockholders' equity | 49143 | 46697 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities and stockholders' equity | $495679 | $573772 |

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See notes to consolidated financial statements.

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Regal Bancorp, Inc. and Subsidiary

Consolidated Statements of Income

Years Ended December 31, 2022 and 2021

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| | | |
|:---|:---|:---|
|  | Years Ended December 31, | Years Ended December 31, |
|  | 2022 | 2021 |
|  | (In thousands) | (In thousands) |
|  Interest income: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loans, including fees | $15666 | $17221 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Securities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Taxable | 275 | 241 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-taxable | 5 | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Federal funds sold | 122 | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other | 2206 | 509 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest income | 18274 | 17979 |
|  Interest expense: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deposits | 1299 | 2375 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Borrowings | 945 | 957 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total interest expense | 2244 | 3332 |
|  Net interest income | 16030 | 14647 |
|  Provision for loan losses |  | 45 |
|  Net interest income, after provision for loan losses | 16030 | 14602 |
|  Non-interest income: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fees and service charges | 179 | 177 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Income from bank owned life insurance | 150 | 150 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Gain on sale of loans | 133 | 376 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other | 294 | 266 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total non-interest income | 756 | 969 |
|  Non-interest expenses: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Salaries and employee benefits | 7027 | 6590 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Occupancy | 1664 | 1746 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Furniture and equipment | 476 | 459 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Data processing related operations | 1143 | 1041 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Telecommunications | 335 | 369 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; FDIC deposit insurance premiums | 88 | 129 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Professional fees | 691 | 258 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other | 874 | 957 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total non-interest expenses | 12298 | 11549 |
|  Income before income taxes expense | 4488 | 4022 |
|  Income tax expense | 1394 | 1125 |
|  Net income | $3094 | $2897 |
|  Net income per share - basic | 1.02 | 0.96 |
|  Net income per share - diluted | 1.02 | 0.96 |

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See notes to consolidated financial statements.

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Regal Bancorp, Inc. and Subsidiary

Consolidated Statements of Comprehensive Income

Years Ended December 31, 2022 and 2021

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| | | |
|:---|:---|:---|
|  | Years Ended December 31, | Years Ended December 31, |
|  | 2022 | 2021 |
|  | (In thousands) | (In thousands) |
|  Net income | $3094 | $2897 |
|  Other comprehensive loss: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Unrealized loss on securities available-for-sale | (901) | (331) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net unrealized losses on securities available-for-sale | (901) | (331) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Tax effect | 253 | 94 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total other comprehensive loss | (648) | (237) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total comprehensive income | $2446 | $2660 |

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See notes to consolidated financial statements.

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Regal Bancorp, Inc. and Subsidiary

Consolidated Statements of Changes in Stockholders' Equity

Years Ended December 31, 2022 and 2021

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | Preferred<br>Stock | Common<br>Stock | Surplus | Retained<br>Earnings | Accumulated<br>Other<br>Comprehensive<br>Income/(Loss) | Total |
|  Balance, January 1, 2021 | $– $|  | $34358 | $9420 | $259 | $44037 |
|  Net income | – |  |  | 2897 |  | 2897 |
|  Other comprehensive loss | – |  |  |  | (237) | (237) |
|  Balance at December 31, 2021 | $– $|  | $34358 | $12317 | $22 | $46697 |
|  Net income | – |  |  | 3094 |  | 3094 |
|  Other comprehensive loss | – |  |  |  | (648) | (648) |
|  Balance at December 31, 2022 | $– $|  | $34358 | $15411 | $(626) | $49143 |

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See notes to consolidated financial statements.

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Regal Bancorp, Inc. and Subsidiary

Consolidated Statements of Cash Flows

Years Ended December 31, 2022 and 2021

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| | | |
|:---|:---|:---|
|  | Years Ended December 31, | Years Ended December 31, |
|  | 2022 | 2021 |
|  | (In thousands) | (In thousands) |
|  Cash flows from operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net income | $3094 | $2897 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Adjustments to reconcile net income to net cash provided by operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Provision for loan losses |  | 45 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Depreciation | 359 | 394 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Amortization of right of use asset | 1076 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net amortization of premiums and discounts on securities and time deposits | 174 | 131 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net accretion on deposits |  | (7) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net amortization of loan fees | (128) | (135) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Amortization of intangibles | 19 | 22 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Amortization of issue costs on subordinated debt | 15 | 16 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceeds from sale of loans | 1602 | 3751 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Originations of loans held for sale | (1469) | (3375) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Gain on sale of loans | (133) | (376) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred income tax expense | 21 | 162 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Income from bank owned life insurance | (150) | (150) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Change in lease liability | (1106) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Change in accrued interest receivable | 136 | 377 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Change in other assets | 32 | (636) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Change in accrued interest payable | 76 | (97) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Change in other liabilities | (690) | (650) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net cash provided by operating activities | 2928 | 2369 |
|  Cash flows from investing activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Maturities and calls of time deposits in other financial institutions | 3881 | 3233 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceeds from maturities, calls and paydowns of securities available-for-sale | 4957 | 11002 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Purchase of securities available-for-sale | (6000) | (7288) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceeds from redemption of restricted equity securities | 26 | 201 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Change in loans | 16878 | 31772 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Purchase of premises and equipment | (73) | (160) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net cash provided by investing activities | 19669 | 38760 |
|  Cash flows from financing activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Change in deposits | (83584) | 13320 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Repayment of FHLB borrowings |  | (3500) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net cash (used in) provided by financing activities | (83584) | 9820 |
|  Net change in cash and cash equivalents | (60987) | 50949 |
|  Cash and cash equivalents at beginning of year | 167834 | 116885 |
|  Cash and cash equivalents at end of year | $106847 | $167834 |

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See notes to consolidated financial statements.

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Regal Bancorp, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Years Ended December 31, 2022 and 2021

**1.** **SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** 

***Principles of Consolidation***

The consolidated financial statements include the accounts of Regal Bancorp, Inc. (the "Bancorp") and its wholly-owned subsidiary, Regal Bank (the "Bank") and the Bank's wholly-owned subsidiary, RB Properties, LLC (collectively, the "Company"). All significant intercompany accounts and transactions have been eliminated in consolidation.

***Organization and Nature of Operations***

The only activity of the Bancorp is the ownership of the Bank. The Bancorp is subject to the supervision and regulation of the Board of Governors of the Federal Reserve System (the "FRB").

The Bank was incorporated under the laws of and chartered by the State of New Jersey. The Bank is a full service bank providing personal and business lending and deposit services. As a state chartered bank, the Bank is subject to regulation by the New Jersey State Department of Banking and Insurance and the Federal Deposit Insurance Corporation. Its primary service area is northern New Jersey. RB Properties, LLC was formed to hold properties acquired through foreclosure by the Bank.

***Use of Estimates***

The Company's financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). As such, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of available-for-sale securities and determination of other-than-temporary impairment thereon, and the valuation of deferred tax assets.

***Significant Group Concentrations of Credit Risk***

Most of the Company's activities are with customers located in northern New Jersey. Note 2 discusses the types of securities that the Company invests in. Note 3 discusses the types of lending that the Company engages in. Although the Company has a diversified loan portfolio, its debtors' ability to honor their contracts is influenced by the region's economy. The Company does not have any significant concentrations to any one industry or customer.

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Regal Bancorp, Inc. and Subsidiary

***Net Income Per Share***

Basic net income per common share was computed by dividing net income by the weighted average number of shares of common stock outstanding (3,023,369 in 2022 and 2021). There were no outstanding stock options at December 31, 2022 and 2021.

***Time Deposits in Other Financial Institutions***

Time deposits in other financial institutions consist of certificates of deposit which are carried at cost which approximates fair value.

***Securities***

Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates such designation as of each balance sheet date.

Securities classified as available-for-sale are those securities that the Company intends to hold for an indefinite period of time but not necessarily to maturity. Securities available-for-sale are carried at fair value. Any decision to sell a security classified as available-for-sale would be based on various factors, including significant movement in interest rates, changes in maturity mix of the Company's assets and liabilities, liquidity needs, regulatory capital considerations and other similar factors. Unrealized gains and losses are reported as increases or decreases in other comprehensive income ("OCI"). Realized gains or losses, determined on the basis of the cost of the specific securities sold, are included in earnings. Premiums and discounts are recognized in interest income using the interest method over the terms of the securities.

Securities classified as held-to-maturity are those securities the Company has both the intent and ability to hold to maturity regardless of changes in market conditions, liquidity needs or changes in general economic conditions. These securities are carried at cost adjusted for the amortization of premium and accretion of discount, computed by the interest method over the terms of the securities.

If the fair value of a security is less than its amortized cost, the security is deemed to be impaired. Management evaluates all securities with unrealized losses quarterly to determine if such impairments are temporary or other-than-temporary. Temporary impairments on available-for-sale securities are recognized, on a tax-effected basis, through OCI with offsetting adjustments to the carrying value of the security and the balance of related deferred taxes. Temporary impairments of securities held-to-maturity are not recorded in the financial statements; however, information concerning the amount and duration of impairments on held-to-maturity securities is disclosed.

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Regal Bancorp, Inc. and Subsidiary

Other-than-temporary impairments on debt securities that the Company has decided to sell, or will, more likely than not, be required to sell prior to the full recovery of fair value to a level equal to or exceeding amortized cost, are recognized in earnings. If neither of these conditions regarding the likelihood of sale for a debt security apply, the other-than-temporary impairment is bifurcated into credit-related and noncredit-related components. Credit-related impairment generally represents the amount by which the present value of the cash flows that are expected to be collected on a debt security fall below its amortized cost. The noncredit-related component represents the remaining portion of the impairment not otherwise designated as credit-related. The Company recognizes credit-related other-than-temporary impairments in earnings. Noncredit-related other-than-temporary impairments on debt securities are recognized in OCI.

Premiums and discounts on all securities are amortized/accreted to maturity by use of the level-yield method considering the impact of principal amortization and prepayments.

***Loans Receivable***

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at their outstanding unpaid principal balances, net of an allowance for loan losses and any deferred fees or costs. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the yield (interest income) of the related loans. The Company is generally amortizing these amounts over the contractual life of the loan.

The loans receivable portfolio is segmented into commercial and consumer loans. Commercial loans consist of the following classes: owner occupied commercial real estate, other commercial real estate, multi-family real estate, and commercial and industrial. Consumer loans consist of one class including the loan types: residential real estate, home equity, and other consumer.

For all classes of loans receivable, the accrual of interest is discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectability of principal or interest, even though the loan is currently performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid interest credited to income in the current year is reversed and unpaid interest accrued in prior years is charged against the allowance for loan losses. Interest received on nonaccrual loans, including impaired loans, generally is either applied against principal or reported as interest income, according to management's judgment as to the collectability of principal. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time (generally six months) and the ultimate collectability of the total contractual principal and interest is no longer in doubt. The past due status of all classes of loans receivable is determined based on contractual due dates for loan payments.

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Regal Bancorp, Inc. and Subsidiary

***Allowance for Loan Losses***

The allowance for loan losses represents management's estimate of losses inherent in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The allowance for loan losses is increased by the provision for loan losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of loans receivable are charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely. Because all identified losses are immediately charged off, no portion of the allowance for loan losses is restricted to any individual loan or groups of loans, and the entire allowance is available to absorb any and all loan losses.

The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a quarterly evaluation of the adequacy of the allowance. The allowance is based on the Company's past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available.

The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as impaired. For loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers pools of loans by loan class including commercial loans not considered impaired, as well as smaller balance homogeneous consumer loans. These pools of loans are evaluated for loss exposure based upon historical loss rates for each of these categories of loans, adjusted for qualitative factors. These qualitative risk factors include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Lending policies and procedures, including underwriting standards and collection, charge-off, and recovery practices.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. National, regional, and local economic and business conditions as well as the condition of various market
segments, including the value of underlying collateral for collateral dependent loans.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Nature and volume of the portfolio and terms of loans.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Volume and severity of past due, classified and nonaccrual loans as well as other loan modifications.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Existence and effect of any concentrations of credit and changes in the level of such concentrations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. Effect of external factors, such as competition and legal and regulatory requirements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. Changes in the experience, ability and depth of lending management and other relevant staff.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. Changes in the quality of the loan review system.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. Changes in the value of collateral for collateral-dependent loans.

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Regal Bancorp, Inc. and Subsidiary

Each factor is assigned a value to reflect improving, stable or declining conditions based on management's best judgment using relevant information available at the time of the evaluation. Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for loan loss calculation.

The Company's credit policies determine advance rates against the different forms of collateral that can be pledged against commercial loans. Typically, the majority of loans will be limited to a percentage of their underlying collateral values such as real estate values, equipment, eligible accounts receivable and inventory. Individual loan advance rates may be higher or lower depending upon the financial strength of the borrower and/or term of the loan. The assets financed through commercial loans are used within the business for its ongoing operation. Repayment of these kinds of loans generally comes from the cash flow of the business or the ongoing conversions of assets. Commercial real estate loans encompassing owner occupied, other commercial or multi-family properties include long-term loans financing commercial properties. Repayment of this kind of loan is dependent upon either the ongoing cash flow of the borrowing entity or the resale or lease of the subject property. Commercial real estate loans typically require a loan to value ratio of not greater than 75% and vary in terms.

Consumer loans may be either secured or unsecured and repayment is generally dependent on the credit quality of the individual borrower. Therefore, the overall health of the economy, including unemployment rates, may have a significant effect on the credit quality in this loan class.

An unallocated component is maintained to cover uncertainties that could affect management's estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and industrial loans, commercial real estate loans and commercial construction loans by either the present value of expected future cash flows discounted at the loan's effective interest rate or the fair value of the collateral if the loan is collateral dependent.

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Regal Bancorp, Inc. and Subsidiary

An allowance for loan losses is established for an impaired loan if its carrying value exceeds its estimated fair value. The estimated fair values of substantially all of the Company's impaired loans are measured based on the estimated fair value of the loan's collateral.

For commercial loans secured by real estate, estimated fair values are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is based on various considerations, including the age of the most recent appraisal, the loan-to-value ratio based on the original appraisal and the condition of the property. Appraised values are discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property.

For commercial and industrial loans secured by non-real estate collateral, such as accounts receivable, inventory and equipment, estimated fair values are determined based on the borrower's financial statements, inventory reports, accounts receivable aging or equipment appraisals or invoices. Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer loans for impairment disclosures, unless such loans are the subject of a troubled debt restructuring agreement.

The Company may grant a concession or modification for economic or legal reasons related to a borrower's financial condition that it would not otherwise consider resulting in a modified loan which is then identified as a troubled debt restructuring ("TDR"). The Company may modify loans through rate reductions, extensions of maturity, interest only payments, or payment modifications to better match the timing of cash flows due under the modified terms with the cash flows from the borrowers' operations. Loan modifications are intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. TDRs are considered impaired loans for purposes of calculating the Company's allowance for loan losses. Nonaccrual troubled debt restructurings are restored to accrual status if principal and interest payments, under the modified terms, are current for six consecutive months after modification and the ultimate collectability of the modified principal and interest is no longer in doubt.

The allowance calculation methodology includes further segregation of loan classes into risk rating categories. The borrower's overall financial condition, repayment sources, guarantors and value of collateral, if appropriate, are evaluated annually for commercial loans or when credit deficiencies arise, such as delinquent loan payments, for commercial and consumer loans. Credit quality risk ratings include regulatory classifications of special mention, substandard, doubtful and loss. Loans criticized special mention have potential

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Regal Bancorp, Inc. and Subsidiary

weaknesses that deserve management's close attention. If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects. Loans classified substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They include loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified doubtful have all the weaknesses inherent in loans classified substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as a loss are considered uncollectible and are charged to the allowance for loan losses. Loans not classified are rated pass.

In addition, federal and state regulatory agencies, as an integral part of their examination process, periodically review the Company's allowance for loan losses and may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination, which may not be currently available to management. Based on management's comprehensive analysis of the loan portfolio, management believes the current level of the allowance for loan losses is adequate.

***Other Real Estate Owned***

Real estate properties acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less cost to sell at the foreclosure date, establishing a new cost basis. Any losses based on the property's fair value at the date of foreclosure are charged to the allowance for loan losses. Subsequent to foreclosure, valuations are periodically performed and the property is carried at the lower of carrying amount or fair value less cost to sell. Costs incurred in maintaining foreclosed properties and subsequent adjustments to the carrying amount of the properties are included in other noninterest expenses. There was no other real estate owned as of December 31, 2022 and 2021. There were no residential mortgages in process of foreclosure at December 31, 2022 and 2021.

***Bank Premises and Equipment***

Bank premises (including leasehold improvements) and equipment are stated at cost less accumulated depreciation. Depreciation is computed on the straight-line method over the lesser of the lease term or the estimated useful lives of the related assets.

***Leases***

The Company determines if an arrangement is a lease at inception. Operating lease right-of-use ("ROU") assets and operating lease liabilities are included in the consolidated balance sheets. The Company does not have any finance leases.

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ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate, which is generally the Federal Home Loan Bank classic advance rate, based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. For operating leases, lease expense is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components, which are generally accounted for separately. We have not elected the practical expedient to account for lease and non-lease components as one lease component.

The Company accounts for its operating leases in accordance with Accounting Standards Update ("ASU") No. 2016-02, (Topic 842 - "Leases"). The Company elected to adopt the lease guidance using the modified retrospective approach as of the beginning of 2022. The adoption did not result in any cumulative-effect adjustment to beginning retained earnings. The Company has elected certain practical expedients upon adoption and therefore has not reassessed whether any expired or existing contracts contain leases, has not reassessed the lease classification for any expired or existing leases and has not reassessed initial direct costs for any existing leases.

***Transfers of Financial Assets***

Transfers of financial assets, including loan and loan participation sales, are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

***Restricted Equity Investments***

Restricted equity securities consist of investments in the Federal Home Loan Bank of New York ("FHLB") and the Atlantic Community Bankers Bank ("ACBB"). Investments in these entities are restricted and carried at cost.

The Company, as a member of the FHLB system, is required to maintain an investment in capital stock of the FHLB. The carrying value of this stock was $664 at December 31, 2022 and $690 at December 31, 2021. Based on redemption provisions of the FHLB, the stock has no quoted market value. The Company also maintains an investment in the stock of ACBB of $120 at December 31, 2022 and 2021, respectively.

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Regal Bancorp, Inc. and Subsidiary

Management considers whether these investments are impaired based on the ultimate recoverability of the cost basis rather than by recognizing temporary declines in value. Management believes no impairment charge is necessary related to its investment in FHLB and ACBB stock.

***Stock-Based Compensation***

The Company recognizes stock-based compensation over the service period. The grant-date fair values of stock options are determined using the Black-Scholes option-pricing model and the value of stock awards is based on the estimated fair value of the stock.

***Bank Owned Life Insurance***

The Company is the owner and beneficiary of life insurance policies on certain employees. The earnings on the policies are recognized as a component of non-interest income. The policies can be liquidated, if necessary, with associated tax costs. However, the Company intends to hold these policies and, accordingly, has not provided for deferred income taxes on the earnings.

***Goodwill and Intangible Assets***

Goodwill resulting from business combinations is generally determined as the excess of the fair value of the consideration transferred over the fair value of the assets acquired and liabilities assumed as of the acquisition date. Goodwill has an indefinite useful life and is not amortized, but tested for impairment at least annually in the third quarter or more frequently if events and circumstances exists that indicate that a goodwill impairment test should be performed. Goodwill was $1,047 at December 31, 2022 and 2021. Based on the results of the annual qualitative impairment test, it was not determined to be more likely than not that fair was less than carrying value, and the Company did not recognize any impairment in 2022 and 2021.

Intangible assets with definite useful lives are amortized over their estimated useful lives. The Company has recognized core deposit intangibles in connection with its business combinations. Intangibles assets were $38 at December 31, 2022 and $57 at December 31, 2021. Amortization expense was $19 in 2022 and $22 in 2021. The Company expects to amortize its core deposit intangibles approximately $19 each year for the next two years.

***Advertising Costs***

Advertising costs are expensed as incurred.

***Comprehensive Income***

U.S. GAAP generally requires recognized revenue, expenses, gains and losses be included in net income. However, certain changes in assets and liabilities, such as unrealized gains and losses on securities available-for-sale, are reported in the accumulated other comprehensive income component of the equity section of the consolidated balance sheet. The periodic changes in such items, along with net income, are components of comprehensive income.

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Regal Bancorp, Inc. and Subsidiary

Other comprehensive income consists solely of the unrealized losses on securities available-for-sale, net of deferred income taxes. Accumulated other comprehensive income consists of net unrealized loss of $871 less deferred income taxes of $245 at December 31, 2022 and net unrealized gain of $30 less deferred income taxes of $8 at December 31, 2021.

***Income Taxes***

Deferred income taxes are provided on the liability method whereby deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and net operating loss carryforwards and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The Company has not identified any significant income tax uncertainties through the evaluation of its income tax positions for the years ended December 31, 2022 and 2021, and has not recognized any liabilities for tax uncertainties as of December 31, 2022 and 2021. Our policy is to recognize interest and penalties on unrecognized tax benefits in income tax expense. There were no such amounts recognized in 2022 and 2021

***Revenue Recognition***

The Company earns income from various sources, including loans, investment securities, bank-owned life insurance, deposit accounts, and sales of assets.

Interest income on loans is accrued on the unpaid principal balance and recorded daily. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method. Other loan fees, including late charges, are recognized as they occur.

Interest income on debt securities, including purchase premiums and discounts, is calculated using the interest method over the term of the securities. Dividends on equity securities are recorded when declared.

Fees and service charges primarily consist of deposit account fees. The Company offers various deposit account products to its customers governed by specific deposit agreements. These agreements identify the general conditions and obligations of both parties, and include standard information regarding deposit account related fees.

Deposit account services include providing access to deposit accounts as well as access to the various deposit transactional services of the Company. These transactional services are primarily those that are identified in the standard fee schedule, and include, but are not limited to, services such as overdraft protection, wire transfer, and check collection. Revenue is recognized in conjunction with the various services being provided. For example, the Company may assess monthly fixed service fees associated with the customer

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Regal Bancorp, Inc. and Subsidiary

having access to a deposit account, which can vary depending on the account type and daily account balance. In addition, the Company may also assess separate fixed fees associated with and at the time specific transactions are entered into by the customer. As such, the Company considers its performance obligations to be met concurrently with providing the account access or completing the requested deposit transaction. Other income items are transactional in nature and are recorded as they occur.

Gains or losses on sales of assets are generally recognized when the asset has been legally transferred to the buyer and the Company has no continuing involvement with the asset. The Company does not generally finance the sale.

***Statement of Cash Flows***

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks and federal funds sold all of which mature within 90 days. Generally, federal funds are purchased or sold for one-day periods.

The Company recorded an adjustment needed to reflect the opening balance of the Company's ROU assets and lease liabilities pursuant to the adoption of ASU 2016-02 effective January 1, 2022. Upon adoption, the Company recognized on its balance sheet ROU assets of $4,749, with a corresponding operating lease liability of $5,268 with an adjustment to remove the Company's existing deferred rent liability of approximately $519.

Interest paid was $2,168 in 2022 and $3,429 in 2021. There were no amounts transferred from loans to other real estate owned in 2022 and 2021. Income taxes paid in 2022 were $1,400 and $1,336 in 2021.

***Subsequent Events***

The Company evaluated its December 31, 2022 consolidated financial statements for subsequent events through March 8, 2023, the date the financial statements were available to be issued.

***Recent Accounting Standards***

In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-13, Financial Instruments —Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Among other things, these amendments require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Management adopted this ASU on January 1, 2023 with a $1,536, or 27%, reduction in the allowance for credit losses, an increase to retained earnings of $1,106 and a decrease to the deferred tax asset of $430.

In March 2022, the FASB issued ASU 2022-02, *Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures*. The amendments in this ASU eliminate the existing accounting guidance for troubled debt restructures

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Regal Bancorp, Inc. and Subsidiary

("TDRs") by creditors in Subtopic 310-40, Receivables - Troubled Debt Restructurings by Creditors and instead requires that an entity evaluate whether a modification represents a new loan or a continuation of an existing loan. The amendments also enhance disclosure requirements for certain loan refinancing and restructuring by creditors when a borrower is experiencing financial difficulty. All amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company does not believe there will be a significant impact from the adoption of this standard based on the immaterial amount of TDR activity.

**2.** **SECURITIES** 

The amortized cost and fair value of securities at December 31 are as follows:

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| | | | | |
|:---|:---|:---|:---|:---|
|  |<br>Amortized<br>Cost | Gross<br>Unrealized<br>Gains | Gross<br>Unrealized<br>Losses |<br>Fair<br>Value |
|  | (In Thousands) | (In Thousands) | (In Thousands) | (In Thousands) |
|  <u>December 31, 2022</u>: |  |  |  |  |
|  Securities available-for-sale: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; U.S. government agencies | $7999 | $— | $172 | $7827 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Corporate bonds | 3900 |  | 227 | 3673 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Municipal bonds | 1651 |  | 15 | 1636 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Mortgage-backed securities, GSE residential | 2798 |  | 457 | 2341 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total securities available-for-sale | 16348 |  | 871 | 15477 |
|  Securities held-to maturity: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Foreign government bond | 300 |  |  | 300 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Annuities | 2292 |  |  | 2292 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total securities held-to-maturity | 2592 |  |  | 2592 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total securities | $18940 | $— | $871 | $18069 |
|  <u>December 31, 2021</u>: |  |  |  |  |
|  Securities available-for-sale: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; U.S. government agencies | $2000 | $— | $1 | $1999 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Corporate bonds | 5456 | 35 | 26 | 5465 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Municipal bonds | 4456 | 51 |  | 4507 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Mortgage-backed securities, GSE residential | 3521 | 21 | 50 | 3492 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total securities available-for-sale | 15433 | 107 | 77 | 15463 |
|  Securities held-to maturity: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Foreign government bond | 300 |  |  | 300 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Annuities | 2291 |  |  | 2291 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total securities held-to-maturity | 2591 |  |  | 2591 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total securities | $18024 | $107 | $77 | $18054 |

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Securities with a carrying value of $2,190 and $2,106 at December 31, 2022 and 2021, respectively, were pledged as collateral to secure deposits as required or permitted by law.

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Regal Bancorp, Inc. and Subsidiary

The amortized cost and fair value of debt securities at December 31, 2022, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | Available for Sale | Available for Sale | Held to Maturity | Held to Maturity |
|  | Amortized<br>Cost | Fair Value | Amortized<br>Cost | Fair Value |
|  | (In thousands) | (In thousands) | (In thousands) | (In thousands) |
|  Due less than one year | $5259 | $5129 | $200 | $200 |
|  Due after one year through five years | 8351 | 8065 | 100 | 100 |
|  Due after five years through ten years | 301 | 282 | 2292 | 2292 |
|  Due after ten years | 2437 | 2001 |  |  |
|  | $16348 | $15477 | $2592 | $2592 |

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The age of unrealized losses and the fair value of related securities as of December 31, 2022 and 2021 were as follows.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | Less Than Twelve Months | Less Than Twelve Months | Over Twelve Months | Over Twelve Months |
|  | Fair<br>Value | Unrealized<br>Losses | Fair<br>Value | Unrealized<br>Losses |
|  | (In Thousands) | (In Thousands) | (In Thousands) | (In Thousands) |
|  <u>December 31, 2022</u> |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; U.S. government agencies | $5922 | $78 | $1905 | $94 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Corporate bonds | 896 | 4 | 2777 | 223 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Municipal Bonds | 1636 | 15 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Mortgage-backed securities, GSE residential | 851 | 85 | 1490 | 372 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $9305 | $182 | $6172 | $689 |
|  <u>December 31, 2021</u> |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; U.S. government agencies | $1999 | $1 | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Corporate bonds | 2973 | 26 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Mortgage-backed securities, GSE residential | 2230 | 50 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $7202 | $77 | $— | $— |

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Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition, cash flows, interest rates, the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value and whether the Company expects to sell or could be required to sell the securities.

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Regal Bancorp, Inc. and Subsidiary

The Company had 40 and 7 securities in unrealized loss positions at December 31, 2022 and 2021, respectively. 3 of the 40 securities in unrealized loss positions at December 31, 2022 were at losses for greater than 12 months. The unrealized losses are considered to result from changes in interest rates and not from downgrades in the creditworthiness of the issuers. In analyzing an issuer's financial condition, management considers whether the securities are general obligation or revenue bonds, whether they are issued by the U.S. government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer's financial condition. The Company does not intend to sell these securities nor is it more likely than not that it will be required to sell these securities prior to recovery. No declines are deemed to be other-than-temporary.

**3.** **LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES** 

Loans at December 31 are summarized as follows:

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| | | |
|:---|:---|:---|
|  | 2022 | 2021 |
|  | (In thousands) | (In thousands) |
|  Owner occupied commercial real estate | $55693 | $57294 |
|  Other commercial real estate | 87732 | 101744 |
|  Multi-family | 181725 | 172831 |
|  Commercial and industrial | 13374 | 22805 |
|  Consumer | 6082 | 6919 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total gross loans | 344606 | 361593 |
|  Deferred loan fees and costs, net | 264 | 27 |
|  Allowance for loan losses | (5611) | (5611) |
|  Loans, net | $339259 | $356009 |

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In 2020, the Company elected to participate in the Payroll Protection Program ("PPP") administered by the Small Business Administration ("SBA"). $0 and $9,923 of PPP loans were outstanding as of December 31, 2022 and 2021, respectively, and are included in commercial and industrial loans. PPP loans are considered current and pass-rated in the following tables and no allowance has been allocated to these loans based on their SBA guarantee.

The SBA paid a fee to the Company to originate each PPP loan based on the amount of the loan. Such fees, net of deferred loan origination costs, totaled $0 and $702 as of December 31, 2022 and 2021, respectively. The net fee is being recognized in interest income, as an adjustment of yield, over the life of the related loan. However, upon receipt of a loan's SBA forgiveness payment, any remaining fee for the loan is fully recognized into income.

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Regal Bancorp, Inc. and Subsidiary

Changes in the allowance for loan losses by loan class for 2022 and 2021 and related loan information are as follows:

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | Owner<br>Occupied<br>Commercial<br>Real Estate |<br>Other<br>Commercial<br>Real Estate |<br><br>Multi-Family |<br>Commercial<br>and<br>Industrial |<br><br>Consumer |<br><br>Unallocated |<br><br>Total |
|  | (In thousands) | (In thousands) | (In thousands) | (In thousands) | (In thousands) | (In thousands) | (In thousands) |
|  As of and for the Year Ended |  |  |  |  |  |  |  |
|  <u>December 31, 2022</u> |  |  |  |  |  |  |  |
|  Allowance for loan losses: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Beginning balance | $802 | $1630 | $2271 | $214 | $114 | $580 | $5611 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Charge-offs |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Recoveries |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Provisions | 6 | (181) | 182 | 40 | (26) | (21) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ending balance | $808 | $1449 | $2453 | $254 | $88 | $559 | $5611 |
|  Ending balance, individually evaluated for impairment | $— | $— | $— | $— | $— | $— | $— |
|  Ending balance, collectively evaluated for impairment | $808 | $1449 | $2453 | $254 | $88 | $559 | $5611 |
|  Loans receivable: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ending balance | $55693 | $87732 | $181725 | $13374 | $6082 | $— | $344606 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ending balance, individually evaluated for impairment | $— | $337 | $— | $— | $— | $— | $337 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ending balance, collectively evaluated for impairment | $55693 | $87395 | $181725 | $13374 | $6082 | $— | $344269 |
|  As of and for the Year Ended |  |  |  |  |  |  |  |
|  <u>December 31, 2021</u> |  |  |  |  |  |  |  |
|  Allowance for loan losses: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Beginning balance | $755 | $1771 | $2406 | $262 | $148 | $236 | $5578 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Charge-offs |  |  |  | (12) |  |  | (12) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Recoveries |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Provisions | 47 | (141) | (135) | (36) | (34) | 344 | 45 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ending balance | $802 | $1630 | $2271 | $214 | $114 | $580 | $5611 |
|  Ending balance, individually evaluated for impairment | $— | $— | $— | $— | $— | $— | $— |
|  Ending balance, collectively evaluated for impairment | $802 | $1630 | $2271 | $214 | $114 | $580 | $5611 |
|  Loans receivable: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ending balance | $57294 | $101744 | $172831 | $22805 | $6919 | $— | $361593 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ending balance, individually evaluated |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities and stockholders' equity | $— | $— | $— | $— | $— | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ending balance, collectively evaluated for impairment | $57294 | $101744 | $172831 | $22805 | $6919 | $— | $361593 |

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Regal Bancorp, Inc. and Subsidiary

There was one impaired commercial loan as of December 31, 2022. There were no impaired loans as of December 31, 2021.

The following tables present information on commercial loans by the Company's internal risk rating system at December 31:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  |<br>Pass | Special<br>Mention |<br>Substandard |<br>Doubtful |<br>Total |
|  | (In thousands) | (In thousands) | (In thousands) | (In thousands) | (In thousands) |
|  <u>December 31, 2022</u> |  |  |  |  |  |
|  Owner occupied commercial real estate | $55693 | $— | $— | $— | $55693 |
|  Other commercial real estate | 87395 | 337 |  |  | 87732 |
|  Multi-family | 181725 |  |  |  | 181725 |
|  Commercial and industrial | 13374 |  |  |  | 13374 |
|  | $338187 | $337 | $— | $— | $338524 |
|  <u>December 31, 2021</u> |  |  |  |  |  |
|  Owner occupied commercial real estate | $57294 | $— | $— | $— | $57294 |
|  Other commercial real estate | 101744 |  |  |  | 101744 |
|  Multi-family | 172831 |  |  |  | 172831 |
|  Commercial and industrial | 22805 |  |  |  | 22805 |
|  | $354674 | $— | $— | $— | $354674 |

---

The following tables present information on consumer loans summarized by whether such loans are performing or non-performing as of December 31:

---

| | | | |
|:---|:---|:---|:---|
|  |<br>Performing | Non-<br>Performing |<br>Total |
|  | (In thousands) | (In thousands) | (In thousands) |
|  <u>December 31, 2022</u> |  |  |  |
|  Consumer | $5878 | $204 | $6082 |
|  <u>December 31, 2021</u> |  |  |  |
|  Consumer | $6703 | $216 | $6919 |

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The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following tables present information on past due status at December 31:

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | 30 - 59 Days<br>Past Due | 60 - 89 Days<br>Past Due | Greater than<br>90 Days | Total Past<br>Due | Current | Total<br>Loans<br>Receivables | Past Due > 90<br>Days and Still<br>Accruing | Loans on<br>Non-accrual |
|  <u>December 31, 2022</u> |  |  |  |  |  |  |  |  |
|  Owner occupied commercial real estate | $— | $— | $— | $— | $55693 | $55693 | $— | $— |
|  Other commercial real estate |  |  | 337 | 337 | 87395 | 87732 |  | 337 |
|  Multi-family |  |  |  |  | 181725 | 181725 |  |  |
|  Commercial and industrial |  |  |  |  | 13374 | 13374 |  |  |
|  Consumer |  |  | 204 | 204 | 5878 | 6082 |  | 204 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $— | $— | $541 | $541 | $344065 | $344606 | $— | $541 |
|  <u>December 31, 2021</u> |  |  |  |  |  |  |  |  |
|  Owner occupied commercial real estate | $— | $— | $— | $— | $57294 | $57294 | $— | $— |
|  Other commercial real estate |  |  |  |  | 101744 | 101744 |  |  |
|  Multi-family |  |  |  |  | 172831 | 172831 |  |  |
|  Commercial and industrial |  |  |  |  | 22805 | 22805 |  |  |
|  Consumer |  |  | 216 | 216 | 6703 | 6919 |  | 216 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $— | $— | $216 | $216 | $361377 | $361593 | $— | $216 |

---

The Company identifies loans for potential restructuring primarily through direct communication with the borrower and evaluation of the borrower's financial statements, revenue projections, tax returns, and credit reports. Even if the borrower is not presently in default, management will consider the likelihood that cash flow shortages, adverse economic conditions, and negative trends may result in a payment default in the near future.

There were no loans identified as troubled debt restructurings as of or during the years ended December 31, 2022 and 2021.

As of December 31, 2022 and 2021, the Company serviced $7,666 and $10,533, respectively, in loans for the benefit of others.

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**4.** **PREMISES AND EQUIPMENT** 

The components of premises and equipment at December 31 are as follows:

---

| | | |
|:---|:---|:---|
|  | 2022 | 2021 |
|  | (In thousands) | (In thousands) |
|  Leasehold improvements | $3242 | $3223 |
|  Furniture, fixtures and equipment | 2228 | 2174 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | 5470 | 5397 |
|  Less: accumulated depreciation | (3651) | (3292) |
|  Premises and equipment, net | $1819 | $2105 |

---

**5.** **LEASES** 

We have operating leases for our operations center and branch locations. These leases have remaining lease terms of two years to ten years and certain of these leases have options to extend the lease for up to five years. Lease options have been included in the lease term if it was determined that it was reasonably certain that we will exercise the option. The Company does not have any material short-term leases.

The operating lease cost component of lease expense for the year ended December 31, 2022 was $1,153.

Supplemental cash flow and other information related to leases as of and for the year ended December 31, 2022 is as follows (dollars in thousands):

---

| | |
|:---|:---|
|  Cash paid for amounts included in the measurement of lease liabilities | $1138 |
|  Weighted average remaining lease term in years | 4.8 |
|  Weighted average discount rate based on incremental borrowing rate | 1.8 |

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Maturities of lease liabilities are as follows (in thousands):

---

| | |
|:---|:---|
| Year Ending |  |
| December 31, | Operating |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2023 | $1142 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2024 | 1047 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2025 | 832 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2026 | 502 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2027 | 393 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Thereafter | 454 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total lease payments | 4370 |
|  Less imputed interest | (207) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total lease liability | $4163 |

---

Rent expense for all leases was $1,193 in 2021.

**6.** **DEPOSITS** 

The components of deposits at December 31 are as follows:

---

| | | |
|:---|:---|:---|
|  | 2022 | 2021 |
|  | (In thousands) | (In thousands) |
|  Demand, non-interest bearing | $105658 | $124507 |
|  Demand, interest-bearing | 91140 | 100198 |
|  Money market | 52730 | 68280 |
|  Savings | 52025 | 53041 |
|  Time, $250,000 and over | 85249 | 43821 |
|  Time, under $250,000 | 39206 | 119745 |
|  | $426008 | $509592 |

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Scheduled maturities of time deposits are as follows:

---

| | |
|:---|:---|
| Year Ending |  |
| December 31, | Amount |
|  | (In thousands) |
| 2023 | $71852 |
| 2024 | 46055 |
| 2025 | 542 |
| 2026 | 5796 |
| 2027 | 210 |
|  | $124455 |

---

**7.** **FHLBNY BORROWINGS** 

The Company has an unsecured borrowing facility for $5,000 with ACBB. There were no outstanding borrowings on this facility at December 31, 2022 and 2021.

As a member of the FHLBNY, the Company has the ability to borrow up to the amount of eligible mortgages and securities that have been pledged as collateral under a blanket security agreement. At December 31, 2022, the Company has pledged commercial real estate loans totaling $294,514.

FHLB borrowings consisted of the following at December 31:

---

| | | |
|:---|:---|:---|
|  | 2022 | 2021 |
|  | (In thousands) | (In thousands) |
|  Fixed rate advance due August 2023 (3.14%) | $5000 | $5000 |
|  | $5000 | $5000 |

---

**8.** **SUBORDINATED DEBT** 

In June 2017, the Company completed a $10,000 private placement of unsecured subordinated debt (the "Notes"). The Notes bear an initial interest rate of 7.25% and mature on July 1, 2027. The interest rate on the Notes was fixed from June 21, 2017 until June 30, 2022. Interest is paid semi-annually during the fixed period. Thereafter, the Company pays quarterly interest on the Notes at a variable rate equal to three month LIBOR plus 5.405%. The three month LIBOR is being discontinued in 2023. The Company is currently reviewing its options in replacing this index. The subordinated debt is reported net of debt issuance costs of $85 and $100 at December 31, 2022 and December 31, 2021, respectively.

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**9.** **STOCK-BASED COMPENSATION** 

In 2013, the Company adopted the 2013 Equity Compensation Plan ("the 2013 Plan"). The 2013 Plan provides for the issuance of up to 42,255 options or shares of restricted stock to directors, employees and service providers. The 2013 Plan provides that option lives and vesting are at the discretion of the Board of Directors, but in no case shall the option life exceed ten years. Stock options may be either incentive stock options or non-statutory options. All options become fully vested upon death or disability of the holder.

There are no outstanding stock options at December 31, 2022 and 2021 and no stock compensation expense in 2022 and 2021.

**10.** **INCOME TAXES** 

The components of income tax expense are summarized as follows:

---

| | | |
|:---|:---|:---|
|  | 2022 | 2021 |
|  | (In thousands) | (In thousands) |
|  Current | $1373 | $963 |
|  Deferred | 21 | 162 |
|  | $1394 | $1125 |

---

The following is a reconciliation between the provision using the expected federal statutory income tax rate of 21% and the Company's actual income tax expense:

---

| | | |
|:---|:---|:---|
|  | 2022 | 2021 |
|  Provision at statutory rate | $942 | $845 |
|  Add (deduct) effect of: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; State income taxes, net of federal income tax effect | 433 | 343 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Bank owned life insurance income | (32) | (31) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Tax-exempt municipal interest | (9) | (24) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other items, net | 60 | (8) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Income tax expense | $1394 | $1125 |

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The components of the net deferred tax asset at December 31, 2022 and 2021 are as follows:

---

| | | |
|:---|:---|:---|
|  | 2022 | 2021 |
|  | (In thousands) | (In thousands) |
|  Deferred tax provision: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Allowance for loan losses | $1577 | $1577 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Lease liability | 1170 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Unrealized loss on securities available for sale | 245 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Federal net operating loss carryforwards | 82 | 122 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Start-up expenses | 16 | 51 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Depreciation | 207 | 139 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other | 243 | 195 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Purchase accounting |  | 41 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total deferred tax assets | 3540 | 2125 |
|  Deferred tax liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Right of use asset | (1033) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Purchase accounting | (101) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Unrealized gain on securities available for sale |  | (8) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred loan costs | (98) | (41) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total deferred tax liabilities | (1232) | (49) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net deferred tax asset | $2308 | $2076 |

---

At December 31, 2022, the Company had $389 of federal net operating loss carryforwards which begin to expire in 2030 unless previously used. These net operating loss carryforwards arose primarily from the merger with Community First Bank in 2017. The Company's use of the Community First Bank's net operating loss carryforward is limited by statute to a maximum of $194 each year.

**11.** **TRANSACTIONS WITH EXECUTIVE OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS** 

The Company has had, and may be expected to have in the future, banking transactions in the ordinary course of business with its executive officers, directors, principal stockholders, their immediate families and affiliated companies (commonly referred to as related parties). Deposits of related parties totaled $7,062 and $8,938 at December 31, 2022 and 2021, respectively. Loans to related parties were $1,460 and $255 at December 31, 2022 and 2021, respectively.

The Company leases its main office and administrative facility and another branch facility from a related party. Rent expense under these leases was $293 in 2022 and 2021.

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The following information represents annual activity of loans to related parties for the periods indicated:

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| | | |
|:---|:---|:---|
|  | 2022 | 2021 |
|  Principal balance of loans outstanding at beginning of year | $255 | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loan advances | 1460 | 255 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loan payments/payoffs | (255) |  |
|  Principal balance of loans outstanding at end of year | $1460 | $255 |

---

**12.** **FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK** 

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments primarily consist of commitments to extend credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet.

The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Total unfunded loan related commitments, including lines of credit, amounted to $14,566 and $17,539 at December 31, 2022 and 2021, respectively, including $6,753 and $10,609 of commercial real estate loans, and $7,813 and $6,930, respectively, for unused lines of credit.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The Company evaluates each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management's credit evaluation. Collateral held varies but may include personal or commercial real estate, accounts receivable, inventory and equipment.

**13.** **REGULATORY CAPITAL MATTERS** 

The Bank is subject to regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet

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specific capital guidelines that involve quantitative measures of its assets, liabilities and certain off-balance sheet items calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the maintenance of minimum amounts and ratios (set forth in the following table) of total capital, Tier 1 capital (as defined in the regulations) and common equity Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. A capital conservation buffer of 2.50%, comprised of common equity Tier I capital, is also established above the regulatory minimum capital requirements and must be maintained to avoid limitations on capital distributions.

The Bank adopted the community bank leverage ratio framework. This framework simplifies the regulatory capital requirements by requiring the Bank meet only the Tier 1 capital to average assets (leverage) ratio. The Bank must only maintain a leverage ratio greater than the 9% required minimum to be considered well capitalized under this framework. The Bank can opt out of the new framework and return to the risk-weighting framework at any time.

The Federal Reserve Bank has established capital guidelines for bank holding companies. These guidelines allow small bank holding companies, as defined, an exemption from regulatory capital requirements. The Bancorp meets the eligibility criteria and is exempt from regulatory capital requirements.

Management believes, as of December 31, 2022, that the Bank meets all capital adequacy requirements to which they are subject.

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The Bank's actual and required capital amounts and ratios are presented below:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | Actual | Actual | Minimum to Be Well<br>Capitalized Under Prompt<br>Corrective Action Provisions | Minimum to Be Well<br>Capitalized Under Prompt<br>Corrective Action Provisions |
|  | Amount | Ratio | Amount | Ratio |
|  | (Dollars in thousands) | (Dollars in thousands) | (Dollars in thousands) | (Dollars in thousands) |
|  <u>December 31, 2022</u> |  |  |  |  |
|  Tier 1 Capital (to Average Assets) | $57837 | 11.78% | $44182 | 9.00% |
|  <u>December 31, 2021</u> |  |  |  |  |
|  Tier 1 Capital (to Average Assets) | $54924 | 9.63% | $48503 | 8.50% |

---

The Bank is subject to certain restrictions on the amount of dividends that it may declare without regulatory approval. Although the Company is not subject to these same restrictions, unless the Company expands its operations, the operations of the Bank will be the only source of cash dividends for shareholders of the Company. Therefore, as a practical matter, the ability of the Company to pay cash dividends is subject to any restrictions on the Bank's ability to pay dividends to the Company.

**14.** **RETIREMENT BENEFITS** 

The Company sponsors a 401(k) retirement savings plan for its employees. Retirement plan expense was $161 in 2022 and $160 in 2021.

The Company has individual deferred compensation arrangements with certain key officers which provide supplemental retirement benefits. The Company purchased annuities to fund the benefits. See Note 2. The annuities are returned to the Company at the key officer's projected retirement date. The liability was $1,072 at December 31, 2022 and $976 at December 31, 2021 and is included in other liabilities in the consolidated balance sheet. Related expense was $96 in 2022 and $56 in 2021.

Upon a change in control, as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, the key officers will fully vest in the normal retirement benefit, with such benefit payable the later of normal retirement age or separation from service. The employer will establish a "rabbi trust", to which assets will be contributed to provide the Company with a source of funds for purposes of satisfying the obligations of the Company under the Plan.

**15.** **FAIR VALUE MEASUREMENTS** 

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available-for-sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets and liabilities on a non-

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recurring basis, such as securities held-to-maturity with other-than-temporary impairment, impaired loans and other real estate owned. U.S. GAAP has established a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

The three levels of the fair value hierarchy are as follows:

**Level 1** - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

**Level 2** - Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

**Level 3** - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).

An asset's or liability's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The Company had no assets or liabilities measured at fair value on a nonrecurring basis in 2022 and 2021.

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at December 31 are as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | Total | Quoted Prices<br>in Active<br>Markets for<br>Identical<br>Assets<br>Level 1 | Significant<br>Other<br>Observable<br>Inputs<br>Level 2 | Significant<br>Unobservable<br>Inputs<br>Level 3 |
|  | | (In thousands) | (In thousands) | |
|  <u>December 31, 2022:</u> |  |  |  |  |
|  U.S. government agencies | $7827 | $— | $7827 | $— |
|  Corporate bonds | 3673 |  | 3673 |  |
|  Municipal bonds | 1636 |  | 1636 |  |
|  Mortgage-backed securities, GSE residential | 2341 |  | 2341 |  |
|  Total | $15477 | $— | $15477 | $— |
|  <u>December 31, 2021:</u> |  |  |  |  |
|  U.S. government agencies | $1999 | $— | $1999 | $— |
|  Corporate bonds | 5465 |  | 5465 |  |
|  Municipal bonds | 4507 |  | 4507 |  |
|  Mortgage-backed securities, GSE residential | 3492 |  | 3492 |  |
|  Total | $15463 | $— | $15463 | $— |

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The estimated fair values, and related carrying amounts, of the Company's financial instruments are as follows. Certain financial instruments and all nonfinancial instruments are exempt from disclosure requirements. Accordingly, the aggregate fair value amounts presented herein do not represent the underlying fair value of the Company.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 |
|  | | Fair Value | Fair Value | Fair Value | Fair Value |
|  | Carrying<br>Amount | Level 1 | Level 2 | Level 3 | Total |
|  | *(in Thousands)* | *(in Thousands)* | *(in Thousands)* | *(in Thousands)* | *(in Thousands)* |
|  Financial assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cash and cash equivalents | $106847 | $— | $106847 | $— | $106847 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Time deposits in other financial institutions | 12640 |  | 12640 |  | 12640 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Securities available-for-sale, at fair value | 15477 |  | 15477 |  | 15477 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Securities held-to-maturity | 2592 |  | 2592 |  | 2592 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loans receivable, net | 339259 |  |  | 316257 | 316257 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Restricted equity investments | 784 |  | 784 |  | 784 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accrued interest receivable | 1167 |  | 1167 |  | 1167 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Bank owned life insurance | 7346 |  | 7346 |  | 7346 |
|  Financial liabilities: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deposits: | 426008 |  |  | 423024 | 423024 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; FHLBNY borrowings | 5000 |  |  | 4937 | 4937 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Subordinated debentures | 9915 |  |  | 9915 | 9915 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accrued interest payable | 233 |  | 233 |  | 233 |

---

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | December 31, 2021 | December 31, 2021 | December 31, 2021 | December 31, 2021 | December 31, 2021 |
|  | | Fair Value | Fair Value | Fair Value | Fair Value |
|  | Carrying<br>Amount | Level 1 | Level 2 | Level 3 | Total |
|  | *(in Thousands)* | *(in Thousands)* | *(in Thousands)* | *(in Thousands)* | *(in Thousands)* |
|  Financial assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cash and due from banks | $167834 | $— | $167834 | $— | $167834 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Time deposits in other financial institutions | 16568 |  | 16568 |  | 16568 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Securities available-for-sale, at fair value | 15463 |  | 15463 |  | 15463 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Securities held-to-maturity | 2591 |  | 2591 |  | 2591 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loans receivable, net | 356009 |  |  | 359237 | 359237 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Restricted equity investments | 810 |  | 810 |  | 810 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accrued interest receivable | 1303 |  | 1303 |  | 1303 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Bank owned life insurance | 7196 |  | 7196 |  | 7196 |
|  Financial liabilities: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deposits: | 509592 |  |  | 507880 | 507880 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; FHLBNY borrowings | 5000 |  |  | 5183 | 5183 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Subordinated debentures | 9900 |  |  | 9884 | 9884 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accrued interest payable | 157 |  | 157 |  | 157 |

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Regal Bancorp, Inc. and Subsidiary

**16.** **CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY** 

Financial information pertaining only to Regal Bancorp, Inc. is as follows:

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| | | |
|:---|:---|:---|
|  | December 31,<br>2022 | December 31,<br>2021 |
|  | (In thousands) | (In thousands) |
|  **BALANCE SHEETS** |  |  |
|  <u>Assets</u> |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cash and cash equivalents from bank subsidiary | $170 | $187 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Investment in bank subsidiary | 58296 | 56050 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Tax Receivable | 714 | 537 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total assets | 59180 | 56774 |
|  <u>Liabilities and Stockholders' Equity</u> |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accrued expenses and other liabilities | 122 | 177 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Subordinated debentures | 9915 | 9900 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Stockholders' equity | 49143 | 46697 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities and stockholders' equity | $59180 | $56774 |

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| | | |
|:---|:---|:---|
|  | Year ended December 31, | Year ended December 31, |
|  | 2022 | 2021 |
|  | (In thousands) | (In thousands) |
|  **STATEMENTS OF INCOME** |  |  |
|  Income: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Distributed Earnings of Bank | $742 | $725 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total income | 742 | 725 |
|  Expenses: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Interest expense | 788 | 742 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other general and administrative | (6) | 13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total operating expenses | 782 | 755 |
|  Income (loss) before income taxes and equity in undistributed earnings of subsidiary | (40) | (30) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Applicable income tax benefit | 241 | 9 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Income (loss) before equity in undistributed earnings of subsidiary | 201 | (21) |
|  Equity in undistributed earnings of subsidiary | 2893 | 2918 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net income | $3094 | $2897 |

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Regal Bancorp, Inc. and Subsidiary

---

| | | |
|:---|:---|:---|
|  | Year ended December 31, | Year ended December 31, |
|  | 2022 | 2021 |
|  | (In thousands) | (In thousands) |
|  **STATEMENTS OF CASH FLOWS** |  |  |
|  Cash flows from operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net income | $3094 | $2897 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Equity in undistributed earnings of subsidiaries | (2893) | (2918) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Change in tax receivable | (177) | (25) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Change in accrued expenses and other liabilities | (56) | (2) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Amortization of issue costs on subordinated debt | 15 | 16 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net cash used in operating activities | (17) | (32) |
|  Net change in cash and cash equivalents | (17) | (32) |
|  Cash and cash equivalents at beginning of period | 187 | 219 |
|  Cash and cash equivalents at end of period | $170 | $187 |

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##### [**Table of Contents**](#toc)

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**No person has been authorized to give any information or to make any representation other than as contained in this prospectus and, if given or made, such other information or representation must not be relied upon as having been authorized by SR Bancorp or Somerset Regal Bank. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby to any person in any jurisdiction in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. Neither the delivery of this prospectus nor any sale hereunder shall under any circumstances create any implication that there has been no change in the affairs of SR Bancorp or Somerset Regal Bank since any of the dates as of which information is furnished herein or since the date hereof.** 

**Up to 11,500,000 Shares** 

**(Subject to Increase to up to 13,225,000 Shares)**![LOGO](g352312g91n05.jpg)

## SR Bancorp, Inc.
**(Proposed Holding Company for** 

**Somerset Regal Bank)** 

**COMMON STOCK** 

**par value $0.01 per share** 

------

**PROSPECTUS** 

------

![LOGO](g352312g0309130151800.jpg)

[Prospectus Date]

------

**These securities are not deposits or accounts and are not federally insured or guaranteed.** 

------

**Until _________, 2023, all dealers that effect transactions in these securities, whether or not participating in this stock offering, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.** 

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##### [**Table of Contents**](#toc)
**PART II: INFORMATION NOT REQUIRED IN PROSPECTUS** 

**Item 13.** **Other Expenses of Issuance and Distribution** <br>

The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable in connection with the sale of shares of our common stock being registered.

---

| | | |
|:---|:---|:---|
| \* | Registrant's Legal Fees and Expenses | $800000.0 |
| \* | Registrant's Accounting Fees and Expenses, Including |  |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Tax Opinion Fees | 350000.0 |
| \* | Marketing Agent Fees and Expenses<sup>(1)</sup> | 1321000.0 |
| \* | Records Management Agent's Fees and Expenses | 45000.0 |
| \* | Appraisal Fees and Expenses | 165000.0 |
| \* | Printing, Postage, Mailing and EDGAR Fees | 600000.0 |
| \* | Filing Fees (Nasdaq, FINRA, SEC)<sup>(1)</sup> | 118000.0 |
| \* | Transfer Agent Fees and Expenses | 35000.0 |
| \* | Business Plan Fees and Expenses | 67000.0 |
| \* | Other | 20000.0 |
| \* | Total | $3521000.0 |

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\* Estimated.

(1) Estimated at the adjusted maximum of the offering range, assuming 100% of the shares are sold in the
subscription offering.

**Item 14.** **Indemnification of Directors and Officers** <br>

Articles 10 and 11 of the Articles of Incorporation of SR Bancorp, Inc. (the "Corporation") set forth circumstances under which directors, officers, employees and agents of the Corporation may be insured or indemnified against liability which they incur in their capacities as such. References to the MGCL refer to Maryland General Corporation Law:

**<u>ARTICLE</u> <u>10. Indemnification, etc. of Directors and Officers.</u>** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**A. Indemnification.** The Corporation shall indemnify (1) its current and former directors and officers, whether serving the Corporation or at its request any other entity, to the fullest extent required or permitted by the MGCL now or hereafter in force and (2) other employees and agents to such extent as shall be authorized by the Board of Directors and permitted by law; provided, however, that, except as provided in Section B of this Article 10 with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in Section A of this Article 10 shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition (hereinafter an "advancement of expenses"); provided, however, that, if the MGCL requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director of officer, indemnification shall be made only upon delivery to the Corporation of an undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a "final adjudication") that such indemnitee is not entitled to be indemnified for such expenses under this Section or otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**B. Procedure.** If a claim under Section A of this Article 10 is not paid in full by the Corporation within 60 days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be 20 days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall also be entitled to be reimbursed the expense of prosecuting or

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##### [**Table of Contents**](#toc)
defending such suit. It shall be a defense to any action for advancement of expenses that the Corporation has not received both (i) an undertaking as required by law to repay such advances in the event it shall ultimately be determined that the standard of conduct has not been met and (ii) a written affirmation by the indemnitee of his or her good faith belief that the standard of conduct necessary for indemnification by the Corporation has been met. In (i) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (ii) any suit by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met the applicable standard for indemnification set forth in the MGCL. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the MGCL, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article 10 or otherwise shall be on the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**C. Non-Exclusivity.** The rights to indemnification and to the advancement of expenses conferred in this Article 10 shall not be exclusive of any other right that any Person may have or hereafter acquire under any statute, these Articles, the Corporation's Bylaws, any agreement, any vote of stockholders or the Board of Directors, or otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**D. Insurance.** The Corporation may maintain insurance, at its expense, to insure itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such Person against such expense, liability or loss under the MGCL.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**E. Miscellaneous.** The Corporation shall not be liable for any payment under this Article 10 in connection with a claim made by any indemnitee to the extent such indemnitee has otherwise actually received payment under any insurance policy, agreement, or otherwise, of the amounts otherwise indemnifiable hereunder. The rights to indemnification and to the advancement of expenses conferred in Sections A and B of this Article 10 shall be contractual rights and such rights shall continue as to an indemnitee who has ceased to be a director or officer and shall inure to the benefit of the indemnitee's heirs, executors and administrators.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**F. Limitations Imposed by Federal Law.** Notwithstanding any other provision set forth in this Article 10, in no event shall any payments made by the Corporation pursuant to this Article 10 exceed the amount permissible under applicable federal law, including, without limitation, Section 18(k) of the Federal Deposit Insurance Act and the regulations promulgated thereunder.

Any repeal or modification of this Article 10 shall not in any way diminish any rights to indemnification or to an advancement of expenses of such director or officer or the obligations of the Corporation arising hereunder with respect to events occurring, or claims made, while this Article 10 is in force.

**ARTICLE 11. Limitation of Liability.** An officer or director of the Corporation, as such, shall not be liable to the Corporation or its stockholders for money damages, except (A) to the extent that it is proved that the Person actually received an improper benefit or profit in money, property or services, for the amount of the benefit or profit in money, property or services actually received; or (B) to the extent that a judgment or other final adjudication adverse to the Person is entered in a proceeding based on a finding in the proceeding that the Person's action, or failure to act, was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding; or (C) to the extent otherwise provided by the MGCL. If the MGCL is amended to further eliminate or limit the personal liability of officers and directors, then the personal liability of officers and directors of the Corporation shall be eliminated or limited to the fullest extent permitted by the MGCL, as so amended.

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Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a director or officer of the Corporation existing at the time of such repeal or modification.

**Item 15.** **Recent Sales of Unregistered Securities** <br>

Not applicable.

**Item 16.** **Exhibits and Financial Statement Schedules:** <br>

The exhibits and financial statement schedules filed as part of this registration statement are as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)** **List of Exhibits** 

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| | |
|:---|:---|
| 1.1 | [Engagement Letters between Somerset Savings Bank, SLA and Keefe Bruyette & Woods, Inc.](d352312dex11.htm) |
| 1.2 | Form of Agency Agreement between Somerset Savings Bank, SLA, SR Bancorp, Inc. and Keefe Bruyette & Woods, Inc.\* |
| 2.1 | [Amended and Restated Plan of Conversion of Somerset Savings Bank, SLA](d352312dex21.htm) |
| 2.2 | [Agreement and Plan of Merger, and Amendment thereto, By and Among SR Bancorp, Inc., Somerset Savings Bank, SLA, Regal Bancorp, Inc., and Regal Bank](d352312dex22.htm) |
| 3.1 | [Articles of Incorporation of SR Bancorp, Inc.](d352312dex31.htm) |
| 3.2 | [Bylaws of SR Bancorp, Inc.](d352312dex32.htm) |
| 4 | [Form of Common Stock Certificate of SR Bancorp, Inc.](d352312dex4.htm) |
| 5 | [Opinion of Luse Gorman, PC regarding legality of securities being registered](d352312dex5.htm) |
| 8.1 | [Federal Tax Opinion of Luse Gorman, PC](d352312dex81.htm) |
| 8.2 | [State Tax Opinion of Baker Tilly US, LLP](d352312dex82.htm) |
| 10.1 | [Employment Agreement, dated July 25, 2022, by and between Somerset Savings Bank, SLA and William P. Taylor](d352312dex101.htm) |
| 10.2 | [Employment Agreement, dated July 25, 2022, by and between Somerset Savings Bank, SLA and Christopher J. Pribula](d352312dex102.htm) |
| 10.3 | [Employment Agreement, dated July 25, 2022, by and between Somerset Savings Bank, SLA and David Orbach](d352312dex103.htm) |
| 10.4 | [Somerset Savings Bank Supplemental Executive Retirement Plan](d352312dex104.htm) |
| 10.5 | [Somerset Savings Bank, SLA Deferred Compensation Plan](d352312dex105.htm) |
| 21 | [Subsidiaries of SR Bancorp, Inc.](d352312dex211.htm) |
| 23.1 | Consent of Luse Gorman, PC (set forth in Exhibits [5](d352312dex5.htm) and [8.1](d352312dex81.htm)) |
| 23.2 | [Consent of Baker Tilly US, LLP re: Somerset Savings Bank](d352312dex232.htm) |
| 23.3 | [Consent of Baker Tilly US, LLP with respect to state tax opinion (set forth in Exhibit 8.2)](d352312dex82.htm) |
| 23.4 | [Consent of RP Financial, LC.](d352312dex234.htm) |
| 23.5 | [Consent of Baker Tilly US, LLP re: Regal Bancorp](d352312dex235.htm) |
| 23.6 | [Consent of David Orbach](d352312dex236.htm) |
| 24 | [Power of Attorney (set forth on the signature page to this Registration Statement)](d352312ds1.htm#sig) |
| 99.1 | [Engagement Letter with RP Financial, LC. to serve as appraiser](d352312dex991.htm) |
| 99.2 | [Letter of RP Financial, LC. with respect to subscription rights](d352312dex992.htm) |
| 99.3 | [Appraisal Report of RP Financial, LC.](d352312dex993.htm) |
| 99.4 | Marketing Materials\* |
| 99.5 | Stock Order and Certification Form\* |
| 99.6 | [Letter of RP Financial, LC. with respect to liquidation rights](d352312dex996.htm) |
| 107 | [Filing Fee Table](d352312dexfilingfees.htm) |

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\* To be filed by amendment.

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##### [**Table of Contents**](#toc)
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b) Financial Statement Schedules** 

No financial statement schedules are filed because the required information is not applicable or is included in the consolidated financial statements or related notes.

**Item 17.** **Undertakings** <br>

The undersigned registrant hereby undertakes:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:

The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (§230.424 of this chapter);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5) That, for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6) That, for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7) The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

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**SIGNATURES** 

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Bound Brook, State of New Jersey, on March 13, 2023.

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| | |
|:---|:---|
| **SR BANCORP, INC.** | **SR BANCORP, INC.** |
| By: | /s/ William P. Taylor |
|  | William P. Taylor |
|  | Chairman and Chief Executive Officer |
|  | (Duly Authorized Representative) |

---

**POWER OF ATTORNEY** 

We, the undersigned directors of SR Bancorp, Inc. (the "Company"), severally constitute and appoint William P. Taylor with full power of substitution, our true and lawful attorney and agent, to do any and all things and acts in our names in the capacities indicated below which said William Taylor may deem necessary or advisable to enable the Company to comply with the Securities Act of 1933, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with the Registration Statement on Form S-1 relating to the offering of the Company common stock, including specifically, but not limited to, power and authority to sign for us or any of us in our names in the capacities indicated below the registration statement and any and all amendments (including post-effective amendments) thereto; and we hereby approve, ratify and confirm all that said William Taylor shall do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

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| | | |
|:---|:---|:---|
| **Signatures** | **Title** | **Date** |
| /s/ William P. Taylor<br> William P. Taylor | Chairman and Chief Executive Officer and Director<br> (Principal Executive Officer) | March 13, 2023 |
| /s/ Harris M. Faqueri<br> Harris M. Faqueri | Vice President and Chief Financial Officer<br> (Principal Financial and Accounting Officer) | March 13, 2023 |
| /s/ Christopher J. Pribula<br> Christopher J. Pribula | Director, President and Chief Operating Officer | March 13, 2023 |
| /s/ Mary E. Davey<br> Mary E. Davey | Director | March 13, 2023 |
| /s/ John W. Mooney<br> John W. Mooney | Director | March 13, 2023 |
| /s/ James R. Silkensen<br> James R. Silkensen | Director | March 13, 2023 |
| /s/ Douglas M. Sonier<br> Douglas M. Sonier | Director | March 13, 2023 |

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## Exhibit 1.1

**Exhibit 1.1**![LOGO](g352312page049.jpg)

June 6, 2022

Somerset Savings Bank, SLA

220 West Union Avenue

Bound Brook, NJ 08805

Attention: Mr. William P. Taylor <br> Chairman and Chief Executive Officer

Ladies and Gentlemen:

This letter confirms the engagement of Keefe, Bruyette & Woods, Inc. ("KBW") to act as the exclusive financial advisor to Somerset Savings Bank, SLA's (the "Bank") proposed conversion from the mutual to stock form of organization pursuant to the Bank's proposed Plan of Conversion (the "Conversion"), including the offer and sale of certain shares of the common stock (the "Common Stock") of a holding company (the "Holding Company") to be formed by the Bank to eligible persons in a Subscription Offering, with any remaining shares offered to the general public in a Community Offering (as defined herein) (a Subscription Offering, a Community Offering and any Syndicated Community Offering (as defined herein) are collectively referred to herein as the "Offerings") solely in connection with and in furtherance of the Acquisition Transaction (as defined below). In addition, KBW will act as: i) Conversion Agent and Data Processing Records Management Agent in connection with the Offerings pursuant to the terms of a separate agreement between the Bank and KBW; and ii) exclusive financial advisor in the acquisition of Regal Bancorp, Inc. (the "Acquisition Transaction"). The Bank and the Holding Company are collectively referred to herein as the "Company". This letter sets forth the terms and conditions of our engagement.

1. <u>Advisory/Offering Services</u> 

As the Company's exclusive financial advisor, KBW will provide financial and logistical advice to the Company and will assist the Company's management, legal counsel, accountants and other advisors in connection with the Conversion and the Offerings, and related issues. We anticipate our services will include the following, each as may be necessary and as the Company may reasonably request:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Providing advice on the financial and securities market implications of the Conversion and any related
corporate documents, including the Plan of Conversion;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Assisting in structuring the Offerings, including developing and assisting in implementing a marketing strategy
for the Offerings;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Serving as sole bookrunning manager in connection with the Offerings;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Reviewing all offering documents related to the Offerings, including the prospectus (the
"Prospectus") and any related offering materials, stock order forms, letters, brochures and other related offering materials (it being understood that preparation and filing of such documents will be the responsibility of the Company and
its counsel);

Keefe, Bruyette & Woods • 18 Columbia Turnpike, Suite 100 • Florham Park, NJ 07932

973.549.4036 • Fax 973.549.4034 • www.kbw.com

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Somerset Savings Bank, SLA

May 19, 2022

Page 2 of 8

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Assisting the Company in preparing for and scheduling meetings with potential investors and broker-dealers, as
necessary;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. Assisting the Company in analyzing proposals from outside vendors retained in connection with the Offerings,
including printers, transfer agents and appraisal firms;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. Assisting the Company in the drafting and distribution of press releases as required or appropriate in
connection with the Offerings;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. Meeting with the board of directors of the Company (the "Board of Directors") and/or management of
the Company to discuss any of the above services; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. Performing such other financial advisory and investment banking services in connection with the Conversion and
the Offerings as may be agreed upon by KBW and the Company.

2. <u>Due Diligence Review</u> 

The Company acknowledges and agrees that KBW's obligation to perform the services contemplated by this Agreement shall be subject to the satisfactory completion of such investigations and inquiries relating to the Company, and its directors, officers, agents and employees, as KBW and their counsel in their sole discretion may deem appropriate under the circumstances (the "Due Diligence Review").

The Company agrees it will make available to KBW all information, whether or not publicly available, which KBW reasonably requests (the "Information"), and will permit KBW to discuss with the Board of Directors and management the operations and prospects of the Company. KBW will treat all Confidential Information (as defined herein) as confidential in accordance with the provisions of Section 8 hereof. The Company recognizes and confirms that KBW (a) will use and rely on and assume the accuracy and completeness of the Information in performing the services contemplated by this Agreement without having independently verified or analyzed the accuracy or completeness of same, and (b) does not assume responsibility or liability for the accuracy or completeness of the Information or to conduct any independent verification or any appraisal or physical inspection of properties or assets. The Company acknowledges and agrees that KBW will rely upon Company management as to the reasonableness and achievability of any financial and operating forecasts and projections provided to KBW or which KBW is directed to use, and that KBW will assume, at the Company's direction, that all financial forecasts and projections have been reasonably prepared by Company management on a basis reflecting the best then currently available estimates and judgments of management as to the expected future financial performance of the Company, and that such forecasts and projections will be realized in the amounts and in the time periods currently estimated.

3. <u>Regulatory Filings</u> 

The Company will cause the registration statement (the "Registration Statement") and the Prospectus to be filed with the Securities and Exchange Commission (the "SEC") and will cause all other offering documents in respect of the Conversion and the Offerings to be filed, as necessary or appropriate, with applicable regulatory agencies including the SEC, the Financial Industry Regulatory Authority ("FINRA"), and the appropriate federal and/or state bank regulatory agencies. In addition, the

Keefe, Bruyette & Woods • 18 Columbia Turnpike, Suite 100 • Florham Park, NJ 07932

973.549.4036 • Fax 973.549.4034 • www.kbw.com

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May 19, 2022

Page 3 of 8

Company and KBW agree that the Company's counsel shall serve as counsel with respect to blue sky matters in connection with the Offerings, and that the Company shall cause such counsel to prepare a Blue Sky Memorandum related to the Offerings including KBW's participation therein and shall furnish KBW a copy thereof addressed to KBW or upon which counsel shall state KBW may rely.

4. <u>Fees</u> 

For the services hereunder, the Company shall pay the following non-refundable cash fees to KBW, in the amounts and at the times set forth below:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Success Fee:</u> A Success Fee shall be paid based on 1% of the aggregate purchase price of Common Stock
sold in the Subscription Offering and 1% of the aggregate purchase price of Common Stock sold in the Community Offering. Shares contributed to any charitable foundation established by the Company are excluded from the Success Fee. The Success Fee
shall be paid upon the completion of the Offerings. The obligation to pay to KBW the full Success Fee upon completion of the Subscription Offering and any Community Offering shall survive any termination of this agreement, including any termination
occurring prior to the completion of such Offerings.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Fees for Syndicated Community Offering</u>: If any shares of the Common Stock remain unsold after the
completion of the Subscription Offering and any Community Offering, at the request of the Company, KBW will seek to form a syndicate of registered broker-dealers to assist in a Syndicated Community Offering, on a best efforts basis, subject to the
terms and conditions set forth in a selected dealers agreement to be entered into by and between the Company and KBW. KBW will endeavor to distribute the Common Stock among broker-dealers in a fashion which best meets the distribution objectives of
the Company and the Conversion. In the event of a Syndicated Community Offering, KBW will be paid a transaction fee not to exceed 6% of the aggregate purchase price of the shares of Common Stock sold in the Syndicated Community Offering. The Success
Fee described in Section 4(a) will be credited against the transaction fee. From this fee, KBW will pass onto selected broker-dealers (if any), who assist in the Syndicated Community Offering, an amount competitive with gross underwriting
discounts charged at such time for comparable amounts of stock sold at a comparable price per share in a similar market environment. Fees with respect to purchases affected with the assistance of a broker/dealer other than KBW shall be transmitted
by KBW to such broker/dealer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) In connection with the Subscription Offering, if, as a result of any resolicitation of subscribers undertaken
by the Company, KBW reasonably determines that it is required or requested to provide significant services, KBW will be entitled to additional compensation for such services, which additional compensation will not exceed $30,000.

The terms of any Agency Agreement (as defined herein) to be entered into between the Company and KBW in connection with the Offerings shall contain fee provisions no less favorable to KBW

Keefe, Bruyette & Woods • 18 Columbia Turnpike, Suite 100 • Florham Park, NJ 07932

973.549.4036 • Fax 973.549.4034 • www.kbw.com

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Somerset Savings Bank, SLA

May 19, 2022

Page 4 of 8

than those set forth above. To the extent required under applicable FINRA rules and regulations, the payment of compensation by the Company to KBW pursuant to this Section 4 is subject to FINRA's review thereof.

5. <u>Expenses</u> 

The Company will bear all expenses of the proposed Offerings customarily borne by issuers, including, without limitation, regulatory filing fees, SEC, "Blue Sky," and FINRA filing and registration fees; the fees of the Company's accountants, attorneys, appraiser, business plan consultant, transfer agent and registrar, printing, mailing and marketing and syndicate expenses associated with the Offerings; the fees set forth in Section 4; and fees for "Blue Sky" legal work. If KBW incurs any expenses on behalf of Company in connection with the matters contemplated by this Agreement, the Company will reimburse KBW for such expenses.

KBW will also be reimbursed for its reasonable out-of-pocket expenses, not to exceed $30,000 (subject to the provisions of this paragraph), related to the Offerings, including, but not limited to, costs of travel, meals and lodging, clerical assistance, photocopying, telephone, facsimile, and couriers. Clerical assistance and/or temporary staff will be billed separately. KBW will also be reimbursed for fees and expenses of its counsel not to exceed $200,000 (subject to the provisions of this paragraph). These expense caps assume no unusual circumstances or delays, and no resolicitation in connection with the Offerings. The Company acknowledges and agrees that, in the event unusual circumstances arise or a delay or resolicitation occurs (including but not limited to a delay in the Offerings which would require an update of the financial information in tabular form to reflect a period later than that set forth in the original filing of the offering documents), such expense caps may be increased by additional amounts, not to exceed an additional $20,000 in the case of additional out-of-pocket expenses of KBW and an additional $35,000 in the case of additional fees and expenses of KBW's legal counsel. In no event shall out-of-pocket expenses, including fees and expenses of counsel, exceed $285,000. The provisions of this paragraph shall not apply to or in any way impair or limit the indemnification or contribution provisions contained herein.

6. <u>Limitations</u> 

The Company acknowledges that all opinions and advice (written or oral) given by KBW to the Company in connection with KBW's engagement are intended solely for the benefit and use of the Company for the purposes of its evaluation of the proposed Offerings. Unless otherwise expressly stated in an opinion letter issued by KBW or otherwise expressly agreed, no one other than the Company is authorized to rely upon this engagement of KBW or any statements or conduct by KBW. The Company agrees that any such opinion or advice, as well as this Agreement (including any of the terms hereof) shall not be used, reproduced, disseminated, quoted or referred to at any time, in any manner, or for any purpose, nor shall any public references to KBW be made by the Company or any of its representatives, without the prior written consent of KBW, which consent will not be unreasonably denied, withheld or conditioned.

It is expressly understood and agreed that KBW is not undertaking to provide any advice relating to legal, regulatory, accounting or tax matters. In furtherance thereof, the Company acknowledges and

Keefe, Bruyette & Woods • 18 Columbia Turnpike, Suite 100 • Florham Park, NJ 07932

973.549.4036 • Fax 973.549.4034 • www.kbw.com

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Somerset Savings Bank, SLA

May 19, 2022

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agrees that (a) it and its affiliates have relied and will continue to rely on the advice of its own legal, tax and accounting advisors for all matters relating to the Conversion and the Offerings, and all other matters and (b) neither it, or any of its affiliates, has received, or has relied upon, the advice of KBW or any of its affiliates regarding matters of law, regulation, taxation or accounting.

The Company acknowledges and agrees that KBW has been retained to act solely as financial advisor to the Company and not as an advisor to or agent of any other person, and the Company's engagement of KBW is not intended to confer rights upon any person not a party to this Agreement (including shareholders, employees or creditors of the Company) as against KBW or its affiliates, or their respective directors, officers, employees or agents. In such capacity, KBW shall act as an independent contractor, and any duties arising out of its engagement shall be owed solely to the Company. It is understood that KBW's responsibility to the Company is solely contractual in nature and KBW does not owe the Company, or any other party, any fiduciary duty as a result of this Agreement.

The Company acknowledges that KBW is a securities firm engaged in securities trading and brokerage activities and providing investment banking and financial advisory services. In the ordinary course of business, KBW and its affiliates may at any time hold long or short positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in the Company's debt or equity securities, or the debt or equity securities of the Company's affiliates or other entities that may be involved in the transactions contemplated by this Agreement. In addition, KBW and its affiliates may from time to time perform various investment banking and financial advisory services for other clients and customers who may have conflicting interests with respect to the Company. The Company acknowledges that KBW and its affiliates have no obligation to use in connection with this engagement or to furnish the Company confidential information obtained from other companies.

7. <u>Benefit</u> 

This Agreement shall inure to the benefit of the parties hereto and their respective successors, and the obligations and liabilities assumed hereunder by the parties hereto shall be binding upon their respective successors; provided, however, that this Agreement shall not be assignable without the mutual consent of KBW and the Bank.

8. <u>Confidentiality</u> 

KBW acknowledges that a portion of the Information provided to it in connection with its engagement hereunder may contain confidential and proprietary business information concerning the Company (such Information, the "Confidential Information"). KBW agrees that, except as contemplated in connection with the performance of its Services under this Agreement, as authorized by the Company or as required by law, regulation or legal process, it will treat as confidential all Confidential Information and will not use the Confidential Information for any purpose unrelated to its engagement hereunder; provided, however, that KBW may disclose such Confidential Information to its agents and advisors who are assisting or advising KBW in performing its services hereunder and who have been instructed to be bound by the terms and conditions of this paragraph. As used herein,

Keefe, Bruyette & Woods • 18 Columbia Turnpike, Suite 100 • Florham Park, NJ 07932

973.549.4036 • Fax 973.549.4034 • www.kbw.com

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Somerset Savings Bank, SLA

May 19, 2022

Page 6 of 8

the term "Confidential Information" shall not include information which (a) is or becomes available to the public other than as a result of a disclosure by KBW or its representatives in violation of this Agreement, (b) was available to KBW on a non-confidential basis prior to its disclosure to KBW or its representatives by the Company, or (c) becomes available to KBW on a non-confidential basis from a person other than the Company who is not known to KBW to be bound not to disclose such information pursuant to a contractual obligation of confidentiality to the Company.

The Company hereby acknowledges and agrees that all presentation materials and financial models used by KBW in performing its services hereunder have been developed by and are proprietary to KBW. The Company agrees that it will not reproduce or distribute all or any portion of such models or presentations without the prior written consent of KBW.

9. <u>Advertisements</u> 

The Company agrees that, following the closing of the Offerings, KBW has the right to place advertisements in financial and other newspapers and journals at its own expense, describing its services to the Company and a general description of such offering. In addition, the Company agrees to include in any press release or public announcement announcing any such offering a reference to KBW's role as financial advisor and sole bookrunning manager with respect to such offering (unless prohibited by law or applicable regulation), provided that the Company will submit a copy of any such press release or public announcement to KBW for its prior approval, which approval shall not be unreasonably withheld or delayed.

10. <u>Indemnification</u> 

As KBW will be acting on behalf of the Company in connection with the Conversion and the Offerings, the Company agrees to indemnify and hold harmless KBW and its affiliates, the respective partners, directors, officers, employees and agents of KBW and its affiliates and each other person, if any, controlling KBW or any of its affiliates and each of their successors and assigns (KBW and each such person being an "Indemnified Party") to the fullest extent permitted by law, from and against any and all losses, claims, damages and liabilities, joint or several, to which such Indemnified Party may become subject under applicable federal or state law, or otherwise related to or arising out of the Conversion or the Offerings or the engagement of KBW pursuant to, or the performance by KBW of the Services contemplated by, this Agreement, and will reimburse any Indemnified Party for all expenses (including legal fees and expenses) as they are incurred, including expenses incurred in connection with the investigation, preparing for or defending any such action or claim whether or not in connection with pending or threatened litigation, or any action or proceeding arising therefrom, whether or not KBW is a party; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage, liability or expense (a) arises out of or is based upon any untrue statement of a material fact or the omission of a material fact required to be stated therein or necessary to make not misleading any statements contained in any final prospectus, or any amendment or supplement thereto, made in reliance on and in conformity with written information furnished to the Company by KBW expressly for use therein or (b) to the extent that any loss, claim, damage, liability or expense is found in a final judgment by a court of competent jurisdiction to have resulted primarily from KBW's gross negligence, bad faith or willful misconduct of KBW.

Keefe, Bruyette & Woods • 18 Columbia Turnpike, Suite 100 • Florham Park, NJ 07932

973.549.4036 • Fax 973.549.4034 • www.kbw.com

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Somerset Savings Bank, SLA

May 19, 2022

Page 7 of 8

If the indemnification provided for in the foregoing paragraph is judicially determined to be unavailable (other than in accordance with the terms hereof) to any person otherwise entitled to indemnity in respect of any losses, claims, damages or liabilities referred to herein, then, in lieu of indemnifying such person hereunder, the Company shall contribute to the amount paid or payable by such person as a result of such losses, claims, damages or liabilities (and expenses relating thereto) (i) in such proportion as is appropriate to reflect the relative benefits to the Company, on the one hand, and KBW, on the other hand, of the engagement provided for in this Agreement or (ii) if the allocation provided for in clause (i) above is not available, in such proportion as is appropriate to reflect not only the relative benefits referred to in such clause (i) but also the relative fault of each of the Company and KBW, as well as any other relevant equitable considerations; <u>provided</u>, <u>however</u>, in no event shall KBW's aggregate contribution to the amount paid or payable exceed the aggregate amount of fees actually received by KBW under this Agreement. For the purposes of this Agreement, the relative benefits to the Company and to KBW of the engagement under this Agreement shall be deemed to be in the same proportion as (a) the total value paid or contemplated to be paid or received or contemplated to be received by the Company in the Conversion and the Offerings that are the subject of the engagement hereunder, whether or not consummated, bears to (b) the fees paid or to be paid to KBW under this Agreement.

The Company also agrees that neither KBW, nor any of its affiliates nor any officer, director, employee or agent of KBW or any of its affiliates, nor any person controlling KBW or any of its affiliates, shall have any liability to the Company for or in connection with such engagement except for any such liability for losses, claims, damages, liabilities or expenses incurred by the Company which are finally judicially determined to have resulted primarily from KBW's bad faith, gross negligence or willful misconduct. The foregoing agreement shall be in addition to any rights that KBW, the Company or any Indemnified Party may have at common law or otherwise, including, but not limited to, any right to contribution. For the sole purpose of enforcing and otherwise giving effect to the indemnification and contribution provisions of this Agreement, the Company hereby consents to personal jurisdiction and service and venue in any court in which any claim which is subject to this Agreement is brought against KBW or any other indemnified party.

The Company agrees that it will not, without the prior written consent of KBW, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not KBW is an actual or potential party to such claim, action, suit, or proceeding) unless such settlement, compromise or consent includes an unconditional release of KBW from all liability arising out of such claim, action, suit or proceeding.

11. <u>Definitive Agreement</u> 

This Agreement reflects KBW's present intention of proceeding to work with the Company on the proposed Offerings. No legal and binding obligation is created on the part of the Company or KBW with respect to the subject matter hereof, except as to (i) the agreement to maintain the confidentiality of Confidential Information set forth in Section 8, (ii) the payment of certain fees as set forth in Section 4, (iii) the payment of expenses as set forth in Section 5, (iv) the limitations set forth in Section 6, (v)

Keefe, Bruyette & Woods • 18 Columbia Turnpike, Suite 100 • Florham Park, NJ 07932

973.549.4036 • Fax 973.549.4034 • www.kbw.com

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Somerset Savings Bank, SLA

May 19, 2022

Page 8 of 8

the limitations of liability, the indemnification and contribution obligations and the other provisions set forth in Section I 0 and (iv) those terms as may be set forth in a mutually agreed upon agency agreement between KBW and the Company to be executed prior to commencement of the Offerings (the "Agency Agreement"), all of which, notwithstanding anything to the contrary that may be contained herein, shall constitute the binding obligations of the parties hereto and which shall survive any termination of this Agreement or the completion of the services furnished hereunder and shall remain operative and in full force and effect.

The Company acknowledges and agrees that KBW's provision of services in connection with the Conversion and the Offerings, as contemplated herein, is expressly subject to (a) satisfactory completion of Due Diligence Review by KBW, (b) the preparation of a Registration Statement and Prospectus and other offering materials that are satisfactory to KBW in form and substance, (c) compliance with all applicable legal and regulatory requirements to the reasonable satisfaction of KBW and its counsel, (d) market conditions (including at the time of any of the proposed Offerings), (e) approval of KBW's internal committee and (f) any other conditions that KBW may deem appropriate for the transactions contemplated hereby.

This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and can be altered only by written consent signed by the parties. This Agreement may be executed in several counterparts, which taken together, shall constitute one and the same document. This Agreement shall be construed and enforced in accordance with the laws of the State of New York, without regard to the conflicts of laws principles thereof. **Any right to trial by jury with respect to any claim or action arising out of this Agreement or conduct in connection with the engagement is hereby waived by the parties hereto.** 

If the foregoing correctly sets forth our mutual understanding, please so indicate by signing and returning an original copy of this Agreement to the undersigned.

Very truly yours,

KEEFE, BRUYETTE & WOODS, INC.

---

| | | | |
|:---|:---|:---|:---|
| By: | /s/ Robin Suskind | Date: | 6.6.2022 |
|  | Robin Suskind |  |  |
|  | Managing Director |  |  |
| SOMERSET SAVINGS BANK, SLA | SOMERSET SAVINGS BANK, SLA |  |  |
| By: | /s/ William P. Taylor | Date: | June 7, 2022 |
|  | William P. Taylor |  |  |
|  | Chairman and Chief Executive Officer |  |  |

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Keefe, Bruyette & Woods • 18 Columbia Turnpike, Suite 100 • Florham Park, NJ 07932

973.549.4036 • Fax 973.549.4034 • www.kbw.com

## Exhibit 2.1

**Exhibit 2.1** 

Adopted: July 25, 2022

Amended: March 7, 2023

**SOMERSET SAVINGS BANK, SLA** 

**BOUND BROOK, NEW JERSEY** 

**AMENDED AND RESTATED PLAN OF CONVERSION** 

**FROM MUTUAL TO STOCK FORM OF ORGANIZATION** 

------

**TABLE OF CONTENTS** 

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| | | |
|:---|:---|:---|
|  |  | Page |
| 1. | General | 1 |
| 2. | Definitions | 2 |
| 3. | Regulatory and Member Approvals | 8 |
| 4. | Conversion Procedures | 9 |
| 5. | Stock Offering | 11 |
| 6. | Stock Certificate of Incorporation and Bylaws | 22 |
| 7. | Holding Company Articles of Incorporation | 22 |
| 8. | Directors of the Bank | 23 |
| 9. | Stock Benefit Plans | 23 |
| 10. | Contributions to Tax-Qualified Employee Plans | 23 |
| 11. | Status of Deposit Accounts and Loans Subsequent to Conversion | 23 |
| 12. | Liquidation Account | 23 |
| 13. | Establishment and Funding of Charitable Foundation. | 24 |
| 14. | Restrictions on Acquisition of the Bank | 25 |
| 15. | Amendment or Termination of the Plan | 25 |
| 16. | Expenses of the Conversion | 26 |
| 17. | Tax Matters | 26 |
| 18. | Extension of Credit for Purchase of Common Stock | 26 |
| 19. | Registration Under Securities Exchange Act of 1934 and Market Making | 26 |
| 20. | Conversion Stock Not Insured | 26 |
| 21. | Interpretation | 26 |
| 22. | Severability | 27 |

---

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**1.**  **<u>General</u>** 

This Plan of Conversion provides for the conversion of Somerset Savings Bank, SLA (the "Bank") from a New Jersey chartered mutual savings association to a New Jersey chartered stock savings association pursuant to the rules and regulations of the Department and the FDIC. As part of the Conversion, the Plan provides for the concurrent formation of a holding company (the "Holding Company") that will own 100% of the common stock of the Bank. It is contemplated that the Bank will convert its charter to that of a New Jersey commercial bank, to be effective immediately following the completion of the Conversion. As the result of the Charter Conversion, the Holding Company will register with the FRB under the BHCA as a bank holding company (if the Charter Conversion cannot be completed immediately following the Conversion, the Bank may proceed with the Conversion, Merger and Bank Merger and the Holding Company may proceed as a savings and loan holding company registered with the FRB).

The Board of Directors has considered the alternatives available to the Bank with respect to its corporate structure, and has determined that a mutual-to-stock conversion as described in this Plan will be in the best interests of the Bank and the communities in which the Bank operates. Restructuring the Bank into the capital stock form of organization will increase its capital base and enhance the Bank's ability to expand its franchise and the range of products and services it offers. The Conversion will provide the Bank with greater flexibility to structure and finance the expansion of its operations, including the potential acquisition of other financial institutions. The Conversion will also provide the Bank and the Holding Company with the necessary capital to pay the merger consideration (which will be comprised solely of cash) to Acquiree Corporation's stockholders pursuant to the Merger Agreement. The stock form of organization will also enable the Bank or the Holding Company to adopt stock-based incentive plans as a means of attracting, retaining and compensating management and other key personnel. The stock holding company form of organization will also offer the Bank greater organizational and operating flexibility, as well as broader investment powers.

The Plan provides that non-transferable subscription rights to purchase Conversion Stock will be offered first to Eligible Account Holders, then to the Bank's Tax-Qualified Employee Plans, then to Supplemental Eligible Account Holders and then to Voting Members. Concurrently with, at any time during, or promptly after the Subscription Offering, and subject to availability after the satisfaction of subscription rights, an opportunity to subscribe may also be offered to the general public in a Community Offering with a preference given to natural persons residing in the Bank's Local Community. The price of the Conversion Stock will be based upon an independent appraisal of the Bank and the Holding Company and will reflect its estimated pro forma market value, as converted and giving effect to the Merger.

In furtherance of the Bank's commitment to its community, this Plan provides for the establishment of a charitable foundation as part of the Conversion. The Foundation is intended to complement the Bank's existing community reinvestment activities in a manner that will allow the Bank's local communities to share in the growth and profitability of the Holding Company and the Bank over the long term. Consistent with the Bank's goal, the Holding Company intends to donate to the Foundation cash and shares of Common Stock, in an aggregate amount up to 8% of the value of the shares of Conversion Stock.

------

Upon the Conversion, the legal existence of the Bank will not terminate, and the stock Bank will be the successor of the mutual Bank. All property of the mutual Bank, including its right, title and interest in and to all property of whatever kind and nature, whether real, personal, or mixed, and choses in action, and every right, privilege, interest and asset of every conceivable value or benefit then existing or pertaining to the Bank in mutual form, or that would inure to it, immediately by operation of law and without the necessity of any conveyance or transfer and without any further act or deed, will vest in the stock Bank. The stock Bank will have, hold, and enjoy the same in its own right as fully and to the same extent as the same was possessed, held and enjoyed by the mutual Bank. All pending actions and other judicial or administrative proceedings to which the Bank was a party will not be discontinued by reason of the Conversion, but may be prosecuted to final judgment or order in the same manner as if the Conversion had not been made and the stock Bank resulting from the Conversion may continue the actions in its name notwithstanding the Conversion.

Upon effectiveness of the Conversion, each Person having a Deposit Account at the Bank prior to the Conversion will continue to have a Deposit Account, without further payment therefor, in the same amount and subject to the same terms and conditions (except for liquidation rights) as in effect prior to the Conversion. All of the Bank's insured Deposit Accounts will continue to be insured by the FDIC to the extent provided by applicable law.

This Plan has been unanimously approved by the Board of Directors of the Bank and must be approved by the affirmative vote of at least a majority of the eligible votes of Voting Members. Each Voting Depositor will be entitled to cast one vote for each $100 or fraction thereof of deposits in the Bank on the Voting Record Date, provided that no Voting Depositor will be entitled to cast more than 1,000 votes. Each borrower member will be entitled to cast, as a borrower, one vote, regardless of the number of borrowings such member has. By approving the Plan, the Voting Members will also be approving all steps necessary and incidental to the formation of the Bank (in stock form) and the Holding Company. The Conversion is also subject to the approval of the Department and the FDIC, and the formation of the Holding Company as the parent company of the Bank is subject to the approval of the FRB and the Department, if required.

Following the Conversion, the Acquiree Corporation will merge with and into the Holding Company or a subsidiary of the Holding Company and Acquiree Bank shall merge with and into the Bank. In connection with the Merger, the Holding Company will pay cash to Acquiree Corporation's stockholders, pursuant to the Merger Agreement. The Conversion is not subject to the completion of the Merger, and the Board of Directors may proceed with the Conversion whether or not the Merger is consummated.

**2.**  **<u>Definitions</u>** 

**Acting in Concert:** The term Acting in Concert means (i) knowing participation in a joint activity or interdependent conscious parallel action towards a common goal whether or not pursuant to an express agreement; or (ii) a combination or pooling of voting or other interests in the securities of an issuer for a common purpose pursuant to any contract, understanding, relationship, agreement or other arrangement, whether written or otherwise. Persons living at the

------

same address as indicated on the records of the Bank, whether or not related, will be deemed to be Acting in Concert, unless otherwise determined by the Board of Directors of the Bank or the Holding Company. A person or company which acts in concert with another person or company ("other party") shall also be deemed to be acting in concert with any person or company who is also acting in concert with that other party, except that any Tax-Qualified Employee Stock Benefit Plan will not be deemed to be acting in concert with its trustee or a person who serves in a similar capacity solely for the purpose of determining whether stock held by the trustee and stock held by the plan will be aggregated. The determination of whether a group is Acting in Concert shall be made solely by the Board of Directors of the Bank or the Holding Company or Officers delegated such authority by the Boards, and may be based on any evidence upon which the Boards or such delegates choose to rely including, without limitation, the fact that such Persons have joint accounts at the Bank or that such Persons have filed joint Schedules 13D or Schedules 13G with the SEC with respect to other companies. Directors, Officers and Employees of the Holding Company and the Bank, shall not be deemed to be Acting in Concert solely as a result of their capacities as such.

**Acquiree Bank:** Regal Bank, Livingston, New Jersey.

**Acquiree Corporation:** Regal Bancorp, Inc., Livingston, New Jersey.

**Affiliate:** Any company that controls, is controlled by, or is under common control with a Person.

**Applications:** The applications to be filed with the Department and the FDIC by the Bank, and with the FRB and the Department, if required, by the Holding Company, in connection with the Conversion.

**Associate:** The term Associate when used to indicate a relationship with any Person, means (i) any person who is related by blood or marriage to such Person and who (A) lives in the same home as such Person, or (B) is a Director or Officer of the Bank or the Holding Company, or a subsidiary of the Bank or the Holding Company, (ii) any corporation or organization (other than the Holding Company, the Bank or a majority-owned subsidiary of any of such entities) if the person is an officer, director, or owner, directly or indirectly, of more than 10% of any class of voting stock of the corporation or organization, (iii) any trust or other estate, if the person has a substantial beneficial interest in the trust or estate or is a trustee or fiduciary of the trust or estate except that for the purposes of this Plan relating to subscriptions in the Stock Offering, a person who has a substantial beneficial interest in any Non-Tax-Qualified Employee Stock Benefit Plan or any Tax-Qualified Employee Stock Benefit Plan, or who is a trustee or fiduciary of such plan, is not an Associate of such plan, and except that, for purposes of aggregating total shares that may be held by Officers and Directors the term "Associate" does not include any Tax-Qualified Employee Stock Benefit Plan, and (iv) any partnership in which the Person is a general or limited partner.

**Bank:** Somerset Savings Bank, SLA, Bound Brook, New Jersey, in its pre-Conversion mutual form or post-Conversion stock form (including, as appropriate, as a stock commercial bank), as indicated by the context in which it is used.

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**Bank Merger:** The merger of Acquiree Bank with and into the Bank, pursuant to a bank merger agreement that is an exhibit to the Merger Agreement.

**BHCA:** The Bank Holding Company Act of 1948, as amended.

**Charter Conversion:** The conversion of the charter of the Bank from a New Jersey savings association to a New Jersey commercial bank.

**Common Stock:** Shares of common stock that will be issued by the Holding Company as part of the Conversion, including the Conversion Stock and the shares issued to the Foundation.

**Community Offering:** The offering of Conversion Stock not subscribed for in the Subscription Offering for sale to certain members of the Local Community then to the general public directly by the Holding Company, as provided in Section 5 hereof. The Community Offering, if any, may occur concurrently with the Subscription Offering or any Syndicated Community Offering or Public Offering, or upon conclusion of the Subscription Offering.

**Control:** (Including the terms "controlling," "controlled by," and "under common control with") means the direct or indirect power to direct or exercise a controlling influence over the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise as described in 12 C.F.R. Section 225.41.

**Conversion:** The conversion and reorganization of the Bank to stock form pursuant to this Plan, and all steps incident or necessary thereto including, but not limited to, the formation of the Holding Company and the Stock Offering.

**Conversion Stock:** Shares of common stock that will be sold by the Holding Company as a part of the Conversion.

**Department:** The New Jersey Department of Banking and Insurance, or any successor thereto, and as appropriate, the New Jersey Commissioner of Banking and Insurance.

**Deposit Account:** Any withdrawable account maintained at the Bank, including without limitation, savings, time, demand, negotiable orders of withdrawal (NOW), certificates of deposit, money market and passbook accounts, but excluding tax, insurance and other escrow accounts.

**Depositor:** Any Person maintaining a Deposit Account at the Bank.

**Director:** A member of the Board of Directors of the Bank before or after the Conversion or a member of the Board of Directors of the Holding Company.

**Eligible Account Holder:** Any Person holding a Qualifying Deposit in the Bank on the Eligibility Record Date.

**Eligibility Record Date:** The close of business on June 30, 2021.

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**Employee:** Any individual who is employed by the Bank on a full-time basis.

**ESOP:** The Employee Stock Ownership Plan established by the Bank.

**Estimated Price Range:** The range of the minimum and maximum aggregate values of the Conversion Stock to be sold in the Stock Offering, determined by the Board of Directors of the Bank and the Board of Directors of the Holding Company. The Estimated Price Range will be based upon the estimated pro forma market value of the Conversion Stock as determined by the Independent Appraiser prior to the Subscription Offering as updated from time to time thereafter.

**Exchange Act:** The Securities Exchange Act of 1934, as amended.

**FDIC:** The Federal Deposit Insurance Corporation.

**Foundation:** The charitable foundation (to be established by the Bank in connection with the Conversion) that will qualify as an exempt organization under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, the establishment and funding of which is contemplated by Section 13 hereof.

**FRB:** The Board of Governors of the Federal Reserve System.

**Holding Company:** The Maryland or other state corporation that will own all of the outstanding common stock of the Bank upon completion of the Conversion.

**Independent Appraiser:** An appraiser retained by the Bank to prepare an appraisal of the pro forma market value of the Conversion Stock.

**Internal Revenue Code:** The Internal Revenue Code of 1986, as amended.

**Liquidation Account:** The interest in the Bank received by Eligible Account Holders and Supplemental Eligible Account Holders in connection with the Conversion, as set forth in Section 12 of this Plan.

**Local Community:** The following counties in the State of New Jersey: Hunterdon, Middlesex and Somerset.

**Market Maker:** A dealer (*i.e.*, any Person who engages directly or indirectly as agent, broker or principal in the business of offering, buying, selling, or otherwise dealing or trading in securities issued by another Person) who, with respect to a particular security, (i) regularly publishes *bona fide*, competitive bid and offer quotations in a recognized inter-dealer quotation system; (ii) furnishes *bona fide* competitive bid and offer quotations on request; and (iii) is ready, willing, and able to effect transactions in reasonable quantities at his quoted prices with other brokers or dealers.

**Member:** Any Person that qualifies as a member of the Bank pursuant to its charter and bylaws, which shall include Voting Members and, to the extent applicable, borrower members.

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**Merger:** The merger of Acquiree Corporation with and into the Holding Company or a subsidiary of the Holding Company, pursuant to which the Holding Company will pay cash to Acquiree Corporation's stockholders**.**

**Merger Agreement:** The Agreement and Plan of Merger by and among SR Bancorp, Inc., Somerset Savings Bank, SLA, Regal Bancorp, Inc. and Regal Bank, dated July 25, 2022, as amended in March, 2023.

**Non-Tax-Qualified Employee Benefit Plan:** Any stock option, bonus stock or restricted stock plan or other employee benefit plan that is not a "Tax-Qualified Employee Benefit Plan" and that is maintained by the Bank or the Holding Company for the benefit of Officers, Employees or Directors of the Bank or of the Holding Company, or any Affiliate of any of them.

**Officer:** An executive officer of the Holding Company or the Bank, including the Chief Executive Officer, President, Executive or Senior Vice Presidents in charge of principal business functions, Secretary, Treasurer and any other person performing similar functions.

**Order Form:** Any form (together with any cover letter and acknowledgements) to be used to purchase Conversion Stock in the Subscription Offering, the Community Offering or in the Syndicated Community Offering.

**Person:** An individual, a corporation, a partnership, an association, a joint-stock company, a limited liability company, a trust, any unincorporated organization, or a government or a political subdivision of a government.

**Plan:** This Plan of Conversion from Mutual to Stock Form of Organization of the Bank, including any amendment approved as provided in this Plan.

**Prospectus:** One or more documents used in the offering of the Conversion Stock and as defined under the Securities Act and as filed with the SEC.

**Public Offering:** The offering for sale by the Underwriters to the general public of any shares of Conversion Stock not subscribed for in the Subscription Offering or the Community Offering. The Public Offering is an alternative to the Syndicated Community Offering.

**Purchase Price:** The price per share at which the Conversion Stock will be sold in accordance with the terms hereof. The Purchase Price will be determined by the Boards of Directors of the Bank and the Holding Company and fixed prior to the commencement of the Subscription Offering.

**Qualifying Deposit:** The aggregate balance of all Deposit Accounts of an Eligible Account Holder as of the Eligibility Record Date or a Supplemental Eligible Account Holder as of the Supplemental Eligibility Record Date, in each case provided such aggregate balance is not less than $50.

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**Resident and Residence:** The terms "resident," "residence," "reside," "resided" or "residing" as used herein with respect to any person means any person who occupied a dwelling within the Bank's Local Community, has an intent to remain within the Local Community for a period of time, and manifests the genuineness of that intent by establishing an ongoing physical presence within the Local Community together with an indication that such presence within the Local Community is something other than merely transitory in nature. To the extent the Person is a corporation or other business entity, the principal place of business or headquarters must be in the Local Community. To the extent a Person is a personal benefit plan, the circumstances of the beneficiary will apply with respect to this definition. In the case of all other benefit plans, the circumstances of the trustee will be examined for purposes of this definition. The Bank may utilize deposit or loan records or such other evidence provided to it to make a determination as to whether a Person is a resident. In all cases, however, such a determination will be in the sole discretion of the Holding Company and the Bank. A Person must be a "Resident" for purposes of determining whether such Person "resides" in the Local Community as such term is used in the Plan.

**SEC:** Securities and Exchange Commission.

**Securities Act:** The Securities Act of 1933, as amended.

**Special Meeting:** The Special Meeting of Voting Members called to consider and vote on the Plan of Conversion.

**Stock Offering:** The offering and issuance, pursuant to this Plan, of the Conversion Stock in the Subscription Offering, Community Offering, Syndicated Community Offering or Public Offering, as the case may be.

**Subscription Offering:** The offering of shares of Conversion Stock for subscription and purchase pursuant to Section 5 of the Plan.

**Subscription Rights:** Non-transferable, non-negotiable, personal rights of the Bank's Eligible Account Holders, Tax-Qualified Employee Plans, Supplemental Eligible Account Holders and Voting Members, to subscribe for shares of Conversion Stock in the Subscription Offering.

**Supplemental Eligibility Record Date:** The close of business on the last day of the calendar quarter preceding approval of the Plan by the Department and the FDIC.

**Supplemental Eligible Account Holder:** Any person holding a Qualifying Deposit (other than an officer or Director of the Bank and their Associates) on the Supplemental Eligibility Record Date.

**Syndicated Community Offering:** The offering of Conversion Stock through a syndicate of broker-dealers. The Syndicated Community Offering may occur following or concurrently with the Subscription Offering or any Community Offering or Public Offering.

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**Tax-Qualified Employee Plans:** Any defined benefit plan or defined contribution plan of the Bank or the Holding Company, such as the ESOP and the Bank's 401(k) savings plan, which with its related trust meets the requirements to be "qualified" under Section 401 of the Internal Revenue Code.

**Underwriters:** The investment banking firm or firms agreeing to purchase Conversion Stock in order to offer and sell such Conversion Stock in the Public Offering.

**Voting Depositor:** Any Depositor of the Bank who owns a Deposit Account on the Voting Record Date.

**Voting Member:** Any Person who at the close of business on the Voting Record Date is entitled to vote as a Member of the Bank pursuant to its charter and bylaws.

**Voting Record Date:** The date fixed by the Board of Directors as the date for determining Depositors of the Bank entitled to notice of and to vote at the Special Meeting, which date shall not be less than 90 days before the date of the Special Meeting.

**3.**  **<u>Regulatory</u> <u>and Member Approvals</u> <u> </u>** 

This Plan and the related Applications will be submitted for approval to the Department, the FDIC and the FRB. The Bank will post a notice of the adoption of the Plan, and of its intention to convert to stock form, at its home office and each of its branch offices. The Bank will also publish a notice containing all of the material terms of the proposed Conversion, and may place an advertisement containing such material terms, in a newspaper having general circulation in the communities in which the principal office and branches of the Bank are located.

Following (i) approval of the Application by the FDIC, the Department and the FRB and (ii) the receipt of any necessary waivers from the FDIC or the Department, the Bank will submit the Plan to the Bank's Voting Members for approval at the Special Meeting. The Bank will mail to each Voting Member, at his or her last known address appearing on the records of the Bank, a Notice of Special Meeting, a proxy card and a proxy statement and certain other documents relating to the Bank and its Conversion.

The Special Meeting will be held upon written notice given no less than 20 days nor more than 45 days prior to the date of the Special Meeting. At the Special Meeting, each Voting Depositor will be entitled to cast one vote in person or by proxy for every one hundred dollars ($100.00) of Deposit Accounts such Voting Depositor had with the Bank as of the Voting Record Date. No Voting Depositor, however, will be entitled to cast more than 1,000 votes. Additionally, each borrower member will be entitled to cast, as a borrower, one vote, regardless of the number of borrowings such member has. The Board of Directors will appoint an independent custodian and tabulator to receive and hold proxies to be voted at the Special Meeting and count the votes cast in favor of and against the Plan.

The Department and the FDIC will be notified of the results of the Special Meeting by a certificate signed by the appropriate Officers of the Bank promptly after the conclusion of the Special Meeting. The Plan must be approved by the affirmative vote of at least a majority of the number of votes entitled to be cast by Voting Members at the Special Meeting. If the Plan is so

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approved, the Bank will take all other necessary steps to effect the Conversion subject to the terms and conditions of the Plan. If the Plan is not so approved, upon conclusion of the Special Meeting and any adjournment or postponement thereof, the Plan will not be implemented without further vote and all funds submitted in the Subscription Offering and Community Offering will be returned to subscribers, with interest as provided herein, and all withdrawal authorizations will be canceled.

The Board of Directors of the Bank intends to take all necessary steps to form the Holding Company. The Holding Company will make timely Applications for any requisite regulatory approvals, including the bank holding company application with the FRB and the Department, if required, and a Registration Statement on Form S-1 with the SEC. In the event that the Charter Conversion is not or cannot be completed in connection with the Conversion, the Holding Company will register with the FRB as a savings and loan holding company.

**4.**  **<u>Conversion</u> <u>Procedures</u> <u> </u>** 

The Conversion Stock will be offered for sale in the Subscription Offering to Eligible Account Holders, the Tax-Qualified Employee Plans, Supplemental Eligible Account Holders and Voting Members in the priorities set forth in Section 5.C of this Plan. The Subscription Offering may begin as early as the mailing of the proxy statement for the Special Meeting. The Bank may, either concurrently with, at any time during, or promptly after the Subscription Offering, also offer the Conversion Stock to and accept orders from other Persons in a Community Offering to the Local Community with preferences given to natural persons then to the general public; provided that the Bank's Eligible Account Holders, Tax-Qualified Employee Plans, Supplemental Eligible Account Holders and Voting Members shall have the priority rights to subscribe for Conversion Stock set forth in Section 5 of this Plan. The Holding Company and the Bank may delay commencing the Subscription Offering beyond such 45-day period in the event there exists unforeseen material adverse market or financial conditions. If the Subscription Offering commences prior to the Special Meeting, subscriptions will be accepted subject to the approval of the Plan at the Special Meeting.

The period for the Subscription Offering will be not less than 20 days nor more than 45 days and the period for the Community Offering will be not more than 45 days, unless extended by the Bank. If, upon completion of the Subscription Offering and any Community Offering, any shares of Conversion Stock remain available for sale, such shares may, if feasible, be offered for sale in a Syndicated Community Offering or sold to the Underwriters for resale to the general public in the Public Offering. If for any reason a Syndicated Community Offering or Public Offering of all shares not sold in the Subscription Offering and Community Offering cannot be effected, the Holding Company and the Bank will use their best efforts to obtain other purchasers, subject to regulatory approval. Completion of the sale of all shares of Conversion Stock not sold in the Subscription Offering and Community Offering is required within 45 days after termination of the Subscription Offering, subject to extension of such 45-day period by the Holding Company and the Bank with the approval of the Department and/or the FDIC if required. The Holding Company and the Bank may jointly seek one or more extensions of such 45-day period if necessary to complete the sale of all shares of Conversion Stock. In connection with such extensions, subscribers and other purchasers will be permitted to increase, decrease or

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rescind their subscriptions or purchase orders to the extent required by the FDIC and/or the Department in approving the extensions. Completion of the sale of all shares of Conversion Stock is required within 24 months after the date of the Special Meeting. The Bank may elect to pay fees on a per share basis to brokers who assist Persons in purchasing Conversion Stock in the Community Offering and Syndicated Community Offering.

The Boards of Directors of the Holding Company and the Bank also intend to take all necessary steps to establish the Foundation and to fund the Foundation in the manner set forth in Section 13 hereof. In connection with the Conversion, the Holding Company will purchase all of the capital stock of the Bank in exchange for at least 50% of the net proceeds of the Stock Offering.

The Board of Directors of the Bank may determine for any reason at any time prior to the issuance of the Conversion Stock not to utilize a holding company form of organization in the Conversion. If the Board of Directors determines not to complete the Conversion utilizing a holding company form of organization, the stock of the Bank will be issued and sold in accordance with the Plan. In such case, the Holding Company's registration statement will be withdrawn from the SEC, the Bank will take steps necessary to complete the Conversion, including filing any necessary documents with the Department and the FDIC and will issue and sell the Conversion Stock in accordance with this Plan. In such event, any subscriptions or orders received for Conversion Stock of the Holding Company shall be deemed to be subscriptions or orders for Conversion Stock of the Bank, and the Bank shall take such steps as permitted or required by the FDIC, the Department and the SEC.

The Conversion will be effected as follows, or in any other manner that is consistent with the purposes of this Plan and applicable laws and regulations. Each of the steps set forth below shall be deemed to occur in such order as is necessary to consummate the Conversion pursuant to this Plan, the intent of the Board of Directors of the Holding Company and the Board of Directors of the Bank, and applicable federal and state regulations and policy. Approval of this Plan by Voting Members also shall constitute approval of each of the transactions necessary to implement this Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) The Bank will convert its charter to a stock savings association charter, which authorizes the issuance of
capital stock;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) The Holding Company will purchase all of the capital stock issued by the Bank in exchange for at least 50% of
the net proceeds of the Stock Offering; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) The Holding Company will issue the Conversion Stock sold in the Stock Offering and issue shares of Common Stock
to the Foundation, each as provided in this Plan.

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**5.**  **<u>Stock</u> <u>Offering</u>** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**A.**  **<u>Total Number of Shares and Purchase Price of Conversion Stock</u>** 

The total number of shares of Conversion Stock to be issued and sold in the Conversion will be determined jointly by the Board of Directors of the Holding Company and the Board of Directors of the Bank prior to the commencement of the Subscription Offering, subject to adjustment if necessitated by market or financial conditions prior to consummation of the Conversion. In particular, the total number of shares to be sold in the Stock Offering may be increased by up to 15% of the number of shares offered in the Subscription and Community Offering if the Estimated Price Range is increased subsequent to the commencement of the Subscription and Community Offering to reflect changes in market and financial conditions, demand for the shares, and regulatory considerations.

All shares of Conversion Stock offered for sale in the Stock Offering will be sold at a uniform price per share referred to in this Plan as the Purchase Price. The aggregate price for which all shares of Conversion Stock will be sold will be based on an independent appraisal of the estimated total pro forma market value of the Conversion Stock. The appraisal will be performed in accordance with regulatory guidelines and will be made by an Independent Appraiser experienced in the area of mutual to stock conversion appraisals. The appraisal will include, among other things, an analysis of the historical and pro forma operating results and capital of the Bank and a comparison of the Holding Company, the Bank and the Conversion Stock with comparable thrift institutions and holding companies and their respective outstanding capital stock.

Prior to the commencement of the Subscription and Community Offerings, an Estimated Price Range for the Stock Offering will be established, which range will vary within 15% above to 15% below the midpoint of such range. The number of shares of Conversion Stock to be issued and the Purchase Price per share in the Stock Offering may be increased or decreased by the Bank. In the event that the subscriptions to purchase Conversion Stock to be sold in the Stock Offering are below the minimum of the Estimated Price Range, or materially above the maximum of the Estimated Price Range, resolicitation of purchasers may be required; provided that up to a 15% increase above the maximum of the Estimated Price Range will not be deemed material so as to require a resolicitation. In the event that the subscriptions to purchase Conversion Stock sold in the Stock Offering are below the minimum of the Estimated Price Range or in excess of 15% above the maximum of the Estimated Price Range, and a resolicitation is required, such resolicitation shall be effected in such manner and within such time as the Bank shall establish, with the approval of the FDIC and/or the Department, if required. Based upon the independent appraisal, the Board of Directors of the Holding Company and the Board of Directors of the Bank will jointly fix the Purchase Price. The total number of shares to be issued and sold by the Holding Company in the Conversion, including shares of Common Stock issued to the Foundation, will be determined by dividing the estimated appraised aggregate pro forma market value of the Conversion Stock, based on the independent appraisal, by the Purchase Price. If, following completion of the Subscription Offering and any Community Offering, a Syndicated Community Offering or a Public Offering is effected, the Purchase Price for each share of Conversion Stock in the Syndicated Community Offering or Public Offering will be the same as the Purchase Price in the Subscription and Community Offering. The price paid by the Underwriters for each share of Conversion Stock in the Public Offering will be the Purchase Price less a negotiated underwriting discount.

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Notwithstanding the foregoing, no sale of Conversion Stock may be consummated unless, prior to such consummation, the Independent Appraiser confirms to the Bank, the Holding Company and to the Department and/or the FDIC that, to the best knowledge of the Independent Appraiser, nothing of a material nature has occurred that, taking into account all relevant factors, would cause the Independent Appraiser to conclude that the aggregate value of the Conversion Stock at the Purchase Price is incompatible with its estimate of the aggregate consolidated pro forma market value of the Holding Company and the Bank. If such confirmation is not received, the Bank may cancel the Subscription and Community Offerings and any Syndicated Community Offering or Public Offering, extend the Conversion, establish a new Estimated Price Range or hold a new Stock Offering, or take such other action as the Department and the FDIC may permit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**B.**  **<u>Purchase by the Holding Company of the Stock of the Bank</u>** 

Upon the consummation of the sale of all of the Conversion Stock in the Stock Offering, the Holding Company will purchase all of the capital stock of the Bank in exchange for at least 50% of the net proceeds of the Stock Offering.

The Holding Company may retain up to 50% of the net proceeds of the Stock Offering. The net proceeds of the Stock Offering and the Conversion will fund the cash to be paid in the Merger, provide economic strength to the Holding Company and the Bank for the future in a highly competitive and regulated environment, and would facilitate expansion through acquisitions, diversification into other related businesses and for other business and investment purposes, including the payment of dividends and future repurchases of Conversion Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**C.**  **<u>Subscription Rights</u>** 

Non-transferable Subscription Rights to purchase shares will be issued without payment therefor to Eligible Account Holders, the Tax-Qualified Employee Plans, Supplemental Eligible Account Holders and Voting Members as set forth below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.**  **<u>Preference Category No.</u> <u>1: Eligible Account Holders</u>** 

Each Eligible Account Holder will receive non-transferable Subscription Rights to subscribe for shares of Conversion Stock in an amount equal to the greater of $250,000, one-tenth of one percent (0.10%) of the total number of shares issued in the Stock Offering, or 15 times the product (rounded down to the next whole number) obtained by multiplying the total number of shares to be issued in the Stock Offering by a fraction, the numerator of which is the amount of the Qualifying Deposit of the Eligible Account Holder and the denominator is the total amount of Qualifying Deposits of all Eligible Account Holders, in each case as of the Eligibility Record Date. In the event that Eligible Account Holders exercise subscription rights for a number of shares in excess of the total number of such shares eligible for subscription, the shares shall be allocated

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among the subscribing Eligible Account Holders so as to permit each subscribing Eligible Account Holder to purchase a number of shares sufficient to make his or her total allocation of subscription shares equal to the lesser of 100 shares or the number of shares for which such Eligible Account Holder has subscribed. Any remaining shares will be allocated among the subscribing Eligible Account Holders whose subscriptions remain unsatisfied in the proportion that the amount of the Qualifying Deposit of each Eligible Account Holder whose subscription remains unsatisfied bears to the total amount of the Qualifying Deposits of all Eligible Account Holders whose subscriptions remain unsatisfied. If the amount so allocated exceeds the amount subscribed for by any one or more Eligible Account Holders, the excess shall be reallocated (one or more times as necessary) among those Eligible Account Holders whose subscriptions are still not fully satisfied on the same principle until all available shares have been allocated. To ensure proper allocation of stock, each Eligible Account Holder must list on his Order Form all accounts in which he had an ownership interest as of the Eligibility Record Date.

Officers and Directors of the Bank, and their Associates, may qualify as Eligible Account Holders. Non-transferable Subscription Rights to purchase Conversion Stock received by Directors and Officers of the Bank and their Associates, based on their increased deposits in the Bank in the one-year period preceding the Eligibility Record Date, will be subordinated to all other subscriptions involving the exercise of non-transferable Subscription Rights of Eligible Account Holders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.**  **<u>Preference Category No.</u> <u>2: Tax-Qualified Employee Plans</u>** 

The Tax-Qualified Employee Plans will be given the opportunity to purchase in the aggregate up to 10% of the Conversion Stock. In the event of an oversubscription in the Stock Offering, subscriptions for shares by the Tax-Qualified Employee Plans may be satisfied, in whole or in part, out of authorized but unissued shares of the Holding Company subject to the maximum purchase limitations applicable to such plans as set forth in Section 5E. If after the satisfaction of subscriptions of Eligible Account Holders, a sufficient number of shares are not available to fill the subscriptions of the Tax-Qualified Employee Plans, the subscriptions by the Tax-Qualified Employee Plans will be filled to the maximum extent possible. Alternatively, the Tax-Qualified Employee Plans may purchase all or a portion of such shares in the open market after the completion of the Conversion, subject to the approval of the FDIC and the Department, if required. Consistent with applicable laws and regulations and practices and policies, the Tax-Qualified Employee Plans may use funds contributed by the Holding Company or the Bank and/or borrowed from an independent financial institution to exercise such subscription rights, and the Holding Company and the Bank may make scheduled discretionary contributions thereto, provided that such contributions do not cause the Holding Company or the Bank to fail to meet any applicable regulatory capital requirements.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.**  **<u>Preference Category No.</u> <u>3: Supplemental Eligible Account Holders</u>** 

Each Supplemental Eligible Account Holder will receive non-transferable Subscription Rights to subscribe for shares of Conversion Stock in an amount equal to the greater of $250,000, one-tenth of one percent (0.10%) of the total number of shares issued in the Stock Offering, or 15 times the product (rounded down to the next whole number) obtained by multiplying the total number of shares to be issued in the Stock Offering by a fraction, the numerator of which is the amount of the qualifying deposit of the Supplemental Eligible Account Holder and the denominator is the total amount of qualifying deposits of all Supplemental Eligible Account Holders, in each case as of the Supplemental Eligibility Record Date.

Subscription Rights received pursuant to this category will be subordinated to all Subscription Rights received by Eligible Account Holders and the Tax-Qualified Employee Plans pursuant to Category Nos. 1 and 2 above.

In the event that Supplemental Eligible Account Holders exercise subscription rights for a number of shares in excess of the total number of such shares eligible for subscription, the shares shall be allocated among the subscribing Supplemental Eligible Account Holders so as to permit each subscribing Supplemental Eligible Account Holder, to the extent possible, to purchase a number of shares sufficient to make his or her total allocation of subscription shares equal to the lesser of 100 shares or the number of shares for which such Supplemental Eligible Account Holder has subscribed. Any remaining shares will be allocated among the subscribing Supplemental Eligible Account Holders whose subscriptions remain unsatisfied in the proportion that the amount of the Qualifying Deposit of such Supplemental Eligible Account Holder whose subscription remains unsatisfied bears to the total amount of the Qualifying Deposits of all Supplemental Eligible Account Holders whose subscriptions remain unsatisfied. If the amount so allocated exceeds the amount subscribed for by any one or more Supplemental Eligible Account Holders, the excess shall be reallocated (one or more times as necessary) among those Supplemental Eligible Account Holders whose subscriptions are still not fully satisfied on the same principle until all available shares have been allocated. To ensure proper allocation of stock, each Supplemental Eligible Account Holder must list on his Order Form all accounts in which he had an ownership interest as of the Eligibility Record Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.**  **<u>Preference Category No.</u> <u>4: Voting Members</u>** 

To the extent there are sufficient shares remaining after satisfaction of subscriptions by Eligible Account Holders, the Tax-Qualified Employee Plans, and Supplemental Eligible Account Holders, each Voting Member, who is not an Eligible Account Holder or Supplemental Eligible Account Holder, shall receive, non-transferable subscription rights to subscribe for shares of Conversion Stock in an amount equal to the greater of $250,000, or one-tenth of one percent (0.10%) of the total shares issued in the Stock Offering. In the event Voting Members subscribe for a number of shares that, when added to the shares subscribed for by Eligible Account Holders, the Tax-Qualified

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Employee Plans, and Supplemental Eligible Account Holders, is in excess of the total shares offered in the Stock Offering, the subscriptions of Voting Members will be allocated among subscribing Voting Members so as to permit each subscribing Voting Members to purchase a number of shares sufficient to make his or her total allocation equal to the lesser of 100 shares or the number of shares for which such person has subscribed. Thereafter, unallocated shares will be allocated to each subscribing Voting Member whose subscription remains unfilled on a pro rata basis based on the size of the order of each subscribing Voting Member. To ensure proper allocation of stock, each Voting Member must list on his Order Form all accounts in which he or she had an ownership interest as of the Voting Record Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**D.**  **<u>Community Offering, Syndicated Offering and Public Offering</u>** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.** Any remaining shares of Conversion Stock not sold in the Subscription Offering may be offered for sale to the general public through a Community Offering, first to natural persons residing in the Bank's Local Community, and then to the public at large. The Community Offering, if any, may commence simultaneously, during or after the commencement of the Subscription Offering, as the Board of Directors of the Holding Company and the Bank so determine. The right to subscribe for shares of Conversion Stock in the Community Offering is subject to the right of the Bank and Holding Company to accept or reject such subscriptions in whole or in part in their sole discretion. Conversion Stock being sold in the Community Offering will be offered and sold in a manner that will achieve the widest distribution of the Conversion Stock. No person may subscribe for or purchase more than $250,000 of Conversion Stock offered in the Community Offering, subject to the overall purchase limitations; provided, however, that the amount permitted to be purchased in the Community Offering may be increased to 5% of the total shares sold in the Stock Offering (excluding shares issued to the Foundation) without the resolicitation of subscribers, unless required by the Department, and/or the FDIC. If the maximum purchase limit is so increased, in the event of an oversubscription in the Community Offering, orders accepted in the Community Offering shall be filled up to a maximum of 2% of the total shares sold in the Stock Offering (excluding shares issued to the Foundation) and thereafter remaining shares shall be allocated to those whose orders remain unfilled on an equal number of shares basis per order until all available shares have been allocated. Further, the Bank may limit total subscriptions under this Section 5.D.1 so as to assure that the number of shares available for a Syndicated or Public Offering may be up to a specified percentage of the number of shares of Conversion Stock. The Community Offering shall be completed within 45 days after the termination of the Subscription Offering, unless such period is extended.

**2**. If any Conversion Stock remains unsold after the close of the Subscription and Community Offerings, the Holding Company and the Bank may use the services of a syndicate of registered broker-dealers to sell such unsold shares on a best efforts basis in a Syndicated Community Offering. The syndicate of registered broker-dealers may be managed by one of the syndicate members who will act as agent of the Holding Company and the Bank to assist the Holding Company and the Bank in the sale of the Conversion Stock. Neither the syndicate manager nor any other syndicate member shall have any

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obligation to take or purchase any of the shares of Conversion Stock in the Syndicated Community Offering. In the Syndicated Community Offering, no person may subscribe for or purchase more than 9.99% of the Conversion Stock sold in the Stock Offering, subject to the overall purchase limitations set forth in Section 5.E hereof. Any Syndicated Community Offering shall be completed within 45 days after the termination of the Subscription Offering, unless such period is extended.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.** As an alternative to a Syndicated Community Offering, any shares of Conversion Stock not sold in the Subscription Offering or the Community Offering may then be sold to the Underwriters for resale to the general public in the Public Offering. It is expected that the Public Offering would begin as soon as practicable after termination of the Subscription Offering and any Community Offering. In any Public Offering, no person may subscribe for or purchase more than 9.99% of the Conversion Stock sold in the Stock Offering, subject to the overall purchase limitations set forth in Section 5.E hereof. The Public Offering shall be completed within 45 days after the termination of the Subscription Offering, unless such period is extended as provided in Section 5 hereof. Each share of Conversion Stock will be offered for sale in the Public Offering at the Purchase Price less any underwriting discount as provided in Section 5.A hereof, and set forth in the underwriting agreement between the Holding Company, the Bank and the Underwriters. Such underwriting agreement shall be filed with the Department, the FDIC and the SEC.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.** If for any reason a Syndicated Community Offering or Public Offering of unsubscribed shares of Conversion Stock cannot be effected and any shares remain unsold after the Subscription Offering and any Community Offering, the Boards of Directors of the Holding Company and the Bank will seek to make other arrangements for the sale of the remaining shares. Such other arrangements will be subject to the approval of the Department and/or the FDIC and to compliance with applicable securities laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**E.**  **<u>Additional Limitations Upon Purchases of Shares of Conversion Stock</u>** 

The following additional limitations will be imposed on all purchases of Conversion Stock in the Stock Offering:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.** The maximum purchase of common stock in the subscription offering by a Person or group of Persons through a single deposit account is $250,000 (25,000 shares). The maximum number of shares of Common Stock that may be subscribed for or purchased in all categories in the Stock Offering by any Person, together with any Associate or group of Persons Acting in Concert, shall not exceed $250,000 (25,000 shares), except that the Employee Plans may subscribe for up to 10% of the Common Stock issued in the Stock Offering and contributed to the Foundation.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.** The maximum number of shares of Common Stock that may be issued to or purchased in all categories of the Stock Offering by Officers and Directors and their Associates in the aggregate shall not exceed 25% of the shares of issued in the Stock Offering and contributed to the Foundation.

**3**. A minimum of 25 shares of Common Stock must be purchased by each Person purchasing shares in the Stock Offering to the extent those shares are available; *provided, however*, that in the event the minimum number of shares of Common Stock purchased times the Purchase Price exceeds $500, then such minimum purchase requirement shall be reduced to such number of shares which when multiplied by the price per share shall not exceed $500, as determined by the Board.

**4**. If the number of shares of Common Stock otherwise allocable pursuant to Section 5.C, to any Person or that Person's Associates would be in excess of the maximum number of shares permitted as set forth above, the number of shares of Common Stock allocated to each such person shall be reduced to the lowest limitation applicable to that Person, and then the number of shares allocated to each group consisting of a Person and that Person's Associates shall be reduced so that the aggregate allocation to that Person and his or her Associates complies with the above limits.

Depending upon market or financial conditions, the Boards of Directors, with the receipt of any required approvals of the FDIC and/or the Department, and without further approval of Voting Members, may decrease or increase the purchase limitations in this Plan, *provided* that the maximum purchase limitations may not be increased to a percentage in excess of 5% of the shares issued in the Stock Offering except as provided below. If the Holding Company increases the maximum purchase limitations, the Holding Company is only required to resolicit Persons who subscribed for the maximum purchase amount in the Subscription Offering and may, in the sole discretion of the Holding Company, resolicit certain other large purchasers. In the event of such a resolicitation, the Holding Company shall have the right, in its sole discretion, to require such persons to supply immediately available funds for the purchase of additional shares of Common Stock. In the event that the maximum purchase limitation is increased to 5% of the shares issued in the Stock Offering, such limitation may be further increased to 9.99%, subject to approval, and *provided* that orders for Common Stock exceeding 5% of the shares of Common Stock issued in the Stock Offering shall not exceed in the aggregate 10% of the total shares of Common Stock issued in the Stock Offering. Requests to purchase additional shares of the Common Stock in the event that the purchase limitation is so increased will be determined by the Board of Directors of the Holding Company in its sole discretion.

For purposes of this Section 5.E, (i) Directors, Officers and Employees of the Bank and the Holding Company or any of their subsidiaries shall not be deemed to be Associates or a group affiliated with each other or otherwise Acting in Concert solely as a result of their capacities as such, (ii) shares purchased by Tax-Qualified Employee Stock Benefit Plans shall not be attributable to the individual trustees or beneficiaries of any such plans for purposes of determining compliance with the limitations set forth in sections 1 and 2 of this Section 5.E, and (iii) shares purchased by a Tax-Qualified Employee Stock Benefit Plan pursuant to instructions of an individual in an account in such plan in which the individual has the right to direct the investment, including any plan of the Bank qualified under Section 401(k) of the Code, shall be aggregated and included in that individual's purchases and not attributed to the Tax-Qualified Employee Stock Benefit Plan.

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Each Person purchasing Common Stock in the Stock Offering shall be deemed to confirm that such purchase does not conflict with the above purchase limitations contained in this Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**F.**  **<u>Restrictions and Other Characteristics of Conversion Stock Being Sold</u>** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1. <u>Transferability of Shares Purchased by Officers and Directors</u>.** Shares purchased by Directors or Officers in the Stock Offering may not be sold or otherwise disposed of for value for a period of one year from the date of the completion of the Conversion, except for any disposition of such shares following the death of the original purchaser.

The shares of Conversion Stock issued to Directors and Officers will bear a legend giving appropriate notice of the one-year holding period restriction. Appropriate instructions will be given to the transfer agent for such stock with respect to the applicable restrictions relating to the transfer of restricted stock. Any shares of common stock of the Holding Company subsequently issued as a stock dividend, stock split, or otherwise, with respect to any such restricted stock, will be subject to the same holding period restrictions for Holding Company or Bank Directors or Officers as may be then applicable to such restricted stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2. <u>Purchases After Conversion by Officers and Directors</u>**. No Director or Officer of the Holding Company or the Bank, or Associate of such a Director or Officer, shall purchase any outstanding shares of common stock of the Holding Company, except through a broker or dealer registered with the SEC, for a period of three years following the Conversion without the prior written approval of the Department and/or the FDIC. This restriction does not apply, however, to: (a) negotiated transactions involving more than one percent of the outstanding common stock; (b) the purchase of common stock made pursuant to an employee stock option plan or employee stock purchase plan that meets the requirements of Section 423 of the Internal Revenue Code; or (c) the purchase of common stock pursuant to a non-tax-qualified employee stock benefit plan that may be attributable to individual Officers and Directors of the Bank or Holding Company. As used herein, the term "negotiated transaction" means a transaction in which the securities are offered and the terms and arrangements relating to any sale are arrived at through direct communications between the seller or any Person acting on its behalf and the purchaser or his investment representative. The term "investment representative" means a professional investment advisor acting as agent for the purchaser and independent of the seller and not acting on behalf of the seller in connection with the transaction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3. <u>Stock Repurchases by the Holding Company</u>.** Applicable regulations prohibit the Holding Company from repurchasing its capital stock within one year following the Conversion, except that open market stock repurchases of up to 5% of its outstanding capital stock may be permitted if compelling and valid business reasons are established, to the satisfaction of the FDIC. The Holding Company must establish, to the

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satisfaction of the FDIC, compelling and valid business purposes for any repurchases within one year of the Conversion, and provide notice to the FDIC. The FDIC will not object to a repurchase program if (i) the repurchase program does not adversely affect the Bank's financial condition, (ii) the Holding Company submits sufficient information to the FDIC to evaluate the repurchase program; (iii) the Bank demonstrates extraordinary circumstances and a compelling and valid business purpose for the repurchase program consistent with the Bank's business plan; and (iii) the repurchase program is not contrary to other applicable regulations. Purchases to fund Tax-Qualified Employee Plans do not count toward this repurchase limitation. Repurchases to fund restricted stock plans that have been approved by stockholders do not count toward the repurchase limitations.

**4**. **<u>Voting Rights</u>.** After the Conversion, holders of deposit accounts will not have voting rights in the Bank or the Holding Company. Exclusive voting rights as to the Bank will be vested in the Holding Company, as the sole stockholder of the Bank. Voting rights as to the Holding Company will be held exclusively by its stockholders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**G.**  **<u>Exercise of Subscription Rights; Order Forms</u>** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.** If the Subscription Offering occurs concurrently with the solicitation of proxies for the Special Meeting, the subscription prospectus and Order Form may be sent to each Eligible Account Holder, the Tax-Qualified Employee Plans, Supplemental Eligible Account Holder and Voting Member at their last known address as shown on the records of the Bank as of the Voting Record Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.** Each Order Form will be preceded or accompanied by a prospectus describing the Holding Company and the Bank and the shares of Conversion Stock being offered for subscription and containing all other information required by the FDIC, the Department, or the SEC or necessary to enable Persons to make informed investment decisions regarding the purchase of Conversion Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.** The Order Forms (or accompanying instructions) used for the Subscription Offering and any Community Offering will contain, among other things, the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(i)** An explanation of the Subscription Rights granted under the Plan to Eligible Account Holders, the Tax-Qualified Employee Plans, Supplemental Eligible Account Holders and Voting Members;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(ii)** A specified expiration date by which Order Forms must be returned to and actually received by the Bank or its representative for purposes of exercising Subscription Rights, which date will be not less than 20 days after the Order Forms are mailed by the Bank;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(iii)** The Purchase Price to be paid for each share subscribed for when the Order Form is returned;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(iv)** A statement that 25 shares is the minimum number of shares of Conversion Stock that may be subscribed for under the Plan;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(v)** A specifically designated blank space for indicating the number of shares being subscribed for;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(vi)** A set of detailed instructions as to how to complete the Order Form including a statement as to the available alternative methods of payment for the shares being subscribed for;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(vii)** Specifically designated blank spaces for dating and signing the Order Form;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(viii)** An acknowledgment that the subscriber has received the subscription prospectus;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(ix)** A statement of the consequences of failing to properly complete and return the Order Form, including a statement that the Subscription Rights will expire on the expiration date specified on the Order Form unless such expiration date is extended by the Holding Company and the Bank, and that the Subscription Rights may be exercised only by delivering the Order Form, properly completed and executed, to the Bank or its representative by the expiration date, together with required payment of the Purchase Price for all shares of Conversion Stock subscribed for;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(x)** A statement that the Subscription Rights are non-transferable and that all shares of Conversion Stock subscribed for upon exercise of Subscription Rights must be purchased on behalf of the Person exercising the Subscription Rights for his own account; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(xi)** A statement that, after receipt by the Bank or its representative, an order may not be modified, withdrawn or canceled without the consent of the Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**H.**  **<u>Method of Payment</u>** 

Full payment for all shares of Conversion Stock at the Purchase Price per share must accompany all completed Order Forms. Payment may be made by check, bank draft or money order from the subscriber, or if the subscriber has a Deposit Account in the Bank (including a certificate of deposit), the subscriber may authorize the Bank to withdraw from designated types of accounts. Payment may not be made by wire transfer or any other electronic transfer of funds.

If a subscriber authorizes the Bank to withdraw from his or her account, the funds will continue to earn interest, but may not be used by the subscriber (a hold will be placed on the account) until all Conversion Stock has been sold or the Plan is terminated, whichever is earlier. The Bank will allow subscribers to purchase shares by withdrawing funds from certificate accounts without the assessment of early withdrawal penalties. In the case of early withdrawal of only a portion of such account, the certificate evidencing such account shall be canceled if the remaining balance of the account is less than the applicable minimum balance requirement, in

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which event the remaining balance will earn interest at the passbook rate. This waiver of the early withdrawal penalty is applicable only to withdrawals made in connection with the purchase of Conversion Stock under the Plan. Interest will also be paid, at not less than the then-current passbook rate, on all orders paid by check, bank draft or money order, from the date payment is processed until consummation of the Conversion. Payments made by check, bank draft or money order will be placed by the Bank in an escrow account at the Bank, or in our discretion at another insured depository institution, or other account established specifically for this purpose.

In the event of an unfilled amount of any order, the Bank will make an appropriate refund or cancel an appropriate portion of the related withdrawal authorization, after consummation of the Conversion. If for any reason the Conversion is not consummated, purchasers will have refunded to them all payments made (with applicable interest) and all withdrawal authorizations will be canceled in the case of subscription payments authorized from accounts at the Bank.

If any Tax-Qualified Employee Plans or Non-Tax-Qualified Employee Plans subscribe for shares during the Subscription Offering, such plans will not be required to pay for the shares subscribed for at the time they subscribe, but must pay for such shares of Conversion Stock subscribed for upon consummation of the Conversion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**I.**  **<u>Undelivered, Defective or Late Order Forms; Insufficient Payment</u>** 

In the event Order Forms (a) are not delivered or are not timely delivered by the United States Postal Service, (b) are not received back by the Holding Company or its agent or are received by the Holding Company or its agent after the expiration date specified thereon, (c) are defectively filled out or executed, (d) are not accompanied by the full required payment, unless waived by the Holding Company, for the shares of Common Stock subscribed for (including cases in which deposit accounts from which withdrawals are authorized are insufficient to cover the amount of the required payment), or (e) are not mailed pursuant to a "no mail" order placed in effect by the account holder, the Subscription Rights of the Person to whom such rights have been granted will lapse as though such Person failed to return the completed Order Form within the time period specified thereon; *provided, however*, that the Holding Company may, but will not be required to, waive any immaterial irregularity on any Order Form or require the submission of a corrected Order Form or the remittance of full payment for subscribed shares by such date as the Holding Company may specify. The interpretation of the Holding Company of terms and conditions of this Plan and of the Order Forms will be final, subject to the authority of the FDIC and the Department.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**J.**  **<u>Transfer of Subscriptions Prohibited</u>** 

Subscription Rights are non-transferable, and it is a violation of Federal and state law to either transfer or attempt to transfer Subscription Rights. Persons who transfer or attempt to transfer their Subscription Rights may be prosecuted and will risk forfeiture of such Subscription Rights.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**K.**  **<u>Members in Non-Qualified States or in Foreign Countries</u>** 

The Holding Company will make reasonable efforts to comply with the securities laws of all States in the United States in which Persons entitled to subscribe for shares of Conversion Stock in the Stock Offering pursuant to this Plan reside. However, no such Person will be issued subscription rights or be permitted to purchase shares of Common Stock in the Subscription Offering if such Person resides in a foreign country; or in a State of the United States with respect to which any of the following apply: (a) a small number of Persons otherwise eligible to subscribe for shares under this Plan reside in such state; (b) the issuance of Subscription Rights or the offer or sale of shares of Common Stock to such Persons would require the Holding Company under the securities laws of such state, to register as a broker, dealer, salesman or agent or to register or otherwise qualify its securities for sale in such state; or (c) such registration or qualification would be impracticable for reasons of cost or otherwise. No payments will be made in lieu of the granting of Subscription Rights to any such Person.

**6.**  **<u>Stock</u> <u>Certificate of Incorporation and Bylaws</u>** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**A.** As part of the Conversion, the Bank will take all appropriate steps to amend its certificate of incorporation to read in the form of a New Jersey stock savings association certificate of incorporation, and, following the Charter Conversion, in the form as a New Jersey commercial bank certificate of incorporation, as prescribed by New Jersey Banking Law. A copy of the proposed stock certificate of incorporation is available upon request (as well as a copy of the proposed Certificate of Incorporation for the stock commercial bank to be effective upon the Charter Conversion).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**B.** The Bank will also take appropriate steps to amend its bylaws to read in the form prescribed by New Jersey law for a capital stock savings association and, following the Charter Conversion, in the form prescribed by New Jersey for a commercial bank. A copy of the proposed stock bylaws shall be made available upon request (as well as a copy of the proposed bylaws for the stock commercial bank to be effective upon the Charter Conversion).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**C.** The effective date of the adoption of the Bank's stock certificate of incorporation and bylaws will be the date of the issuance and sale of the Conversion Stock as specified by the Department.

**7.**  **<u>Holding</u> <u>Company Articles of Incorporation</u>** 

A copy of the proposed articles of incorporation and bylaws of the Holding Company will be made available from the Bank upon request.

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**8.**  **<u>Directors</u> <u>of the Bank</u>** 

Each Person serving as a member of the Board of Directors of the Bank at the time of the Conversion will thereupon become a Director of the Bank after the Conversion.

**9.**  **<u>Stock</u> <u>Benefit Plans</u>** 

In order to provide an incentive for Directors, Officers and Employees of the Holding Company and its subsidiaries (including the Bank), the Board of Directors of the Holding Company intends to adopt, subject to stockholder approval, one or more stock-based incentive plans following completion of the Conversion, subject to applicable regulatory requirements. If any such stock-based incentive plan is implemented within one year after completion of the Conversion, the plan may not authorize options in excess of 10% of the Conversion Stock, including shares issued to the Foundation, and the plan may not provide for stock awards in excess of 4% of the Conversion Stock including shares issued to the Foundation.

**10.**  **<u>Contributions</u> <u>to Tax-Qualified Employee Plans</u>** 

The Bank and the Holding Company may in their discretion make scheduled contributions to any Tax-Qualified Employee Plans, provided that any such contributions that are for the acquisition of Conversion Stock, or the repayment of debt incurred for such an acquisition, do not cause the Bank to fail to meet its regulatory capital requirements.

**11.**  **<u>Status</u> <u>of Deposit Accounts and Loans Subsequent to Conversion</u>** 

Each Deposit Account holder will retain, without payment, a withdrawable Deposit Account or Accounts in the Bank, equal in amount to the withdrawable value of such account holder's Deposit Account or Accounts prior to the Conversion. All Deposit Accounts will continue to be insured by the FDIC up to the applicable limits of insurance coverage, and will be subject to the same terms and conditions (except as to voting and liquidation rights) as such Deposit Account in the Bank at the time of the Conversion. All loans will retain the same status after Conversion as these loans had prior to Conversion.

**12.**  **<u>Liquidation</u> <u>Account</u>** 

For purposes of granting to Eligible Account Holders and Supplemental Eligible Account Holders who continue to maintain Deposit Accounts at the Bank a priority in the event of a complete liquidation of the Bank, the Bank will, at the time of Conversion, establish a liquidation account in an amount equal to the total equity of the Bank as shown on its latest statement of financial condition contained in the Holding Company's final prospectus used in connection with the Conversion. The creation and maintenance of the liquidation account will not operate to restrict the use or application of any of the capital accounts of the Bank; provided, however, that such capital accounts will not be voluntarily reduced below the required dollar amount of the liquidation account. Each Eligible Account Holder and Supplemental Eligible Account Holder shall, with respect to the Deposit Account held, have a related inchoate interest in a portion of the liquidation account balance ("subaccount balance").

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The initial subaccount balance of an Eligible Account Holder or Supplemental Eligible Account Holder will be determined by multiplying the opening balance in the liquidation account by a fraction, the numerator of which is the amount of the Qualifying Deposit of the Eligible Account Holder on the Eligibility Record Date or the Supplemental Eligible Account Holder on the Supplemental Eligibility Record Date and the denominator is the total amount of the Qualifying Deposits of all Eligible Account Holders or Supplemental Eligible Account Holders on such record dates in the Bank. Such initial subaccount balance will not be increased, and it will be subject to downward adjustment as provided below.

If the deposit balance in any Deposit Account of an Eligible Account Holder or Supplemental Eligible Account Holder at the close of business on any annual closing date subsequent to the record date is less than the lesser of (i) the deposit balance in such Deposit Account at the close of business on any other annual closing date subsequent to the Eligibility Record Date or the Supplemental Eligibility Record Date or (ii) the amount of the Qualifying Deposit in such Deposit Account on the Eligibility Record Date or the Supplemental Eligibility Record Date, the subaccount balance will be reduced in an amount proportionate to the reduction in such deposit balance. In the event of a downward adjustment, the subaccount balance will not be subsequently increased, notwithstanding any increase in the deposit balance of the related Deposit Account. If all funds in such Deposit Account are withdrawn, the related subaccount balance will be reduced to zero.

In the event of a complete liquidation of the Bank (and only in such event), each Eligible Account Holder and Supplemental Eligible Account Holder will be entitled to receive a liquidation distribution from the liquidation account in the amount of the then-current adjusted subaccount balances for Deposit Accounts then held before any liquidation distribution may be made to stockholders. No merger, consolidation, bulk purchase of assets with assumptions of Deposit Accounts and other liabilities, or similar transactions with another institution the accounts of which are insured by the FDIC, will be considered to be a complete liquidation. In such transactions, the liquidation account will be assumed by the surviving institution.

**13.**  **<u>Establishment</u> <u>and Funding of Charitable Foundation</u>** 

As part of the Conversion, the Holding Company and the Bank intend to establish the Foundation, which will qualify as an exempt organization under Section 501(c)(3) of the Internal Revenue Code, and to donate to the Foundation cash and shares of Common Stock, in an aggregate amount up to 8% of the value of the shares of Conversion Stock sold in the Stock Offering. The Foundation is being formed in connection with the Conversion in order to complement the Bank's existing community reinvestment activities and to share with the Bank's local community a part of the Bank's financial success as a community-based financial institution. The funding of the Foundation with Common Stock accomplishes this goal as it enables the community to share in the growth and profitability of the Holding Company and the Bank over the long- term.

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The Foundation will be dedicated to the promotion of charitable purposes including community development, grants or donations to support housing assistance, not-for-profit community groups and other types of organizations or civic-minded projects. The Foundation will annually distribute total grants to assist charitable organizations or to fund projects within its local community of not less than 5% of the average fair market value of Foundation assets each year, less certain expenses. In order to serve the purposes for which it was formed and maintain its Section 501(c)(3) qualification, the Foundation may sell, on an annual basis, a limited portion of the Common Stock contributed to it by the Holding Company.

The board of directors of the Foundation will include persons who are Officers or Directors of the Holding Company or the Bank. For at least five years after the organization of the Holding Company, except for temporary periods resulting from death, resignation, removal or disqualification, (i) at least one director of the Foundation will be an independent director who is unaffiliated with the Bank or the Holding Company, who is from the Bank's local community and who has experience with local community charitable organizations and grant making, and (ii) at least one director will be a person who is also a member of the Board of Directors of the Bank.

The board of directors of the Foundation will be responsible for establishing the policies of the Foundation with respect to grants or donations, consistent with the stated purposes of the Foundation.

The establishment of the Foundation and contribution of stock and cash to the Foundation in connection with the Conversion will require the prior approval of the FDIC and/or the Department.

**14.**  **<u>Restrictions</u> <u>on Acquisition of the Bank</u>** 

Banking regulations limit acquisitions and offers to acquire, direct or indirect beneficial ownership of more than 10% of any class of an equity security of the Bank or the Holding Company. In addition, the stock certificate of incorporation of the Bank will provide that for a period of five years following completion of the Conversion: (i) no Person (*i.e.*, no individual, group Acting in Concert, corporation, partnership, association, joint stock company, trust, or unincorporated organization or similar company, syndicate, or any other group formed for the purpose of acquiring, holding or disposing of securities of an insured institution) will directly or indirectly offer to acquire or acquire beneficial ownership of more than 10% of any class of the Bank's equity securities. Shares beneficially owned in violation of this charter provision will not be counted as shares entitled to vote and will not be voted by any Person or counted as voting shares in connection with any matter submitted to the stockholders for a vote.

**15.**  **<u>Amendment</u> <u>or Termination of the Plan</u>** 

If deemed necessary or desirable, the Plan may be amended at any time prior to submission of the Plan and proxy materials to the Voting Members by a two-thirds vote of the Board of Directors of the Bank. After submission of the Plan and proxy materials to the Voting Members, the Plan may be amended by a two-thirds vote of the Board of Directors of the Bank only with the concurrence of the FDIC and/or the Department. Any amendments to the Plan made after approval by the Voting Members with the concurrence of the FDIC and/or the Department will not necessitate further approval by the Voting Members unless otherwise required by the FDIC or the Department. The Board of Directors of the Bank may terminate this Plan at any time prior to the Special Meeting to vote on this Plan, and at any time thereafter with the concurrence of the FDIC and the Department.

------

The Plan will terminate if the sale of all shares of Conversion Stock is not completed within 24 months of the date of the Special Meeting.

**16.**  **<u>Expenses</u> <u>of the Conversion</u>** 

The Holding Company and the Bank will use their best efforts to assure that expenses of the Conversion are reasonable.

**17.**  **<u>Tax</u> <u> </u> <u>Matters</u>** 

Consummation of the Conversion is expressly conditioned upon prior receipt of either a ruling of the United States Internal Revenue Service or an opinion of tax counsel or other tax advisor with respect to federal taxation, and either a ruling of the New Jersey taxation authorities or an opinion of tax counsel or other tax advisor with respect to New Jersey taxation, to the effect that the Conversion and the transactions provided for in this Plan will not be taxable to the Holding Company or the Bank.

**18.**  **<u>Extension</u> <u>of Credit for Purchase of Common Stock</u>** 

The Bank may not loan funds or otherwise extend credit to any Person to purchase Conversion Stock.

**19.**  **<u>Registration</u> <u>Under Securities Exchange Act of 1934 and Market Making</u>** 

The Holding Company will register its Conversion Stock under the Securities Exchange Act of 1934, as amended, concurrently with or promptly following the Conversion. The Holding Company will not deregister such securities for a period of three years thereafter.

The Holding Company will use its best efforts to encourage and assist a market maker to establish and maintain a market for its common stock promptly following the Conversion. The Holding Company will also use its best efforts to cause its common stock to be quoted on the Nasdaq System or to be listed on another securities exchange.

**20.**  **<u>Conversion</u> <u>Stock Not Insured</u>** 

The Conversion Stock will not be insured by the FDIC or any other federal or state government agency or authority.

**21.**  **<u>Interpretation</u>** 

All interpretations of this Plan and all applications of the provisions of this Plan to particular circumstances by a majority of the Board of Directors of the Bank will be final, subject to the authority of the FDIC and the Department.

------

**22.**  **<u>Severability</u>** 

If any term, provision, covenant or restriction contained in this Plan is held by a court or a federal or state regulatory agency of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions contained in this Plan will remain in full force and effect, and will in no way be affected, impaired or invalidated.

Dated March 7, 2023

## Exhibit 2.2

**EXHIBIT 2.2** 

**AGREEMENT AND PLAN OF MERGER** 

**BY AND AMONG** 

**SR BANCORP, INC.,** 

**SOMERSET SAVINGS BANK, SLA** 

**AND** 

**REGAL BANCORP, INC. AND** 

**REGAL BANK** 

**JULY 25, 2022** 

------

**TABLE OF CONTENTS** 

---

| | | |
|:---|:---|:---|
|  ARTICLE I CERTAIN DEFINITIONS | ARTICLE I CERTAIN DEFINITIONS | 1 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1. | Certain Definitions | 1 |
|  ARTICLE II THE MERGER | ARTICLE II THE MERGER | 11 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1. | Merger | 11 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2. | Effective Time | 11 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3. | Articles of Incorporation and Bylaws | 12 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4. | Directors and Officers of Surviving Corporation | 12 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5. | Additional Directors of SR Bancorp and Somerset Bank | 12 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.6. | Effects of the Merger | 12 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.7. | Tax Consequences | 12 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.8. | Possible Alternative Structures | 13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.9. | The Conversion | 13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.10. | Additional Actions | 13 |
|  ARTICLE III CONVERSION OF SHARES | ARTICLE III CONVERSION OF SHARES | 14 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1. | Conversion of Regal Bancorp Common Stock; Merger Consideration | 14 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2. | Election Procedures | 14 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3. | Procedures for Exchange of Regal Bancorp Common Stock | 18 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4. | Reservation of Shares | 21 |
|  ARTICLE IV REPRESENTATIONS AND WARRANTIES OF REGAL BANCORP AND REGAL BANK | ARTICLE IV REPRESENTATIONS AND WARRANTIES OF REGAL BANCORP AND REGAL BANK | 21 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1. | Organization | 21 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2. | Capitalization | 23 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3. | Authority; No Violation | 24 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4. | Consents | 24 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5. | Financial Statements and Regulatory Reports | 25 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6. | Taxes | 26 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7. | No Material Adverse Effect | 27 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.8. | Material Contracts; Leases; Defaults | 27 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.9. | Ownership of Property; Insurance Coverage | 30 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.10. | Legal Proceedings | 31 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.11. | Compliance With Applicable Law | 31 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.12. | Employee Benefit Plans | 33 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.13. | Brokers, Finders and Financial Advisors | 36 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.14. | Environmental Matters | 36 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.15. | Loan Portfolio and Investment Securities | 37 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.16. | Related Party Transactions | 39 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.17. | Schedule of Termination Benefits | 39 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.18. | Deposits | 40 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.19. | Antitakeover Provisions Inapplicable; Required Vote of Stockholders | 40 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.20. | Registration Obligations | 40 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.21. | Derivative Transactions | 40 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.22. | Fairness Opinion | 40 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.23. | Trust Accounts | 41 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.24. | Securities Documents | 41 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.25. | Intellectual Property | 41 |

---

(i) ------

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.26. | Labor Matters | 41 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.27. | Regal Bancorp Information Supplied | 42 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.28. | No Other Representations or Warranties | 42 |
|  ARTICLE V REPRESENTATIONS AND WARRANTIES OF SR BANCORP AND SOMERSET SAVINGS | ARTICLE V REPRESENTATIONS AND WARRANTIES OF SR BANCORP AND SOMERSET SAVINGS | 42 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1. | Organization | 43 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2. | Capitalization | 44 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3. | Authority; No Violation | 44 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4. | Consents | 45 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.5. | Financial Statements and Regulatory Reports | 46 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.6. | Taxes | 47 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.7. | No Material Adverse Effect | 48 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.8. | Ownership of Property; Insurance Coverage | 48 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.9. | Legal Proceedings | 49 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.10. | Compliance With Applicable Law | 49 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.11. | Employee Benefit Plans | 51 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.12. | Environmental Matters | 52 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.13. | Loan Portfolio and Investment Securities | 53 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.14. | Deposits | 54 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.15. | Related Party Transaction | 54 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.16. | Antitakeover Provisions | 55 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.17. | Trust Accounts | 55 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.18. | SR Bancorp Common Stock | 55 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.19. | Intellectual Property | 55 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.20. | Labor | 55 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.21. | Somerset Bank Information Supplied | 56 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.22. | No Other Representations or Warranties | 56 |
|  ARTICLE VI COVENANTS OF REGAL BANCORP AND REGAL BANK | ARTICLE VI COVENANTS OF REGAL BANCORP AND REGAL BANK | 56 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1. | Conduct of Business | 56 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2. | Current Information | 60 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3. | Access to Properties and Records | 61 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4. | Financial and Other Statements | 62 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.5. | Maintenance of Insurance | 62 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.6. | Disclosure Supplements | 63 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.7. | Consents and Approvals of Third Parties | 63 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.8. | All Reasonable Efforts | 63 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.9. | Failure to Fulfill Conditions | 63 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.10. | Acquisition Proposals | 63 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.11. | Additional Agreements | 66 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.12. | Stockholder Litigation | 66 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.13. | Control | 67 |
|  ARTICLE VII COVENANTS OF SR BANCORP AND SOMERSET SAVINGS | ARTICLE VII COVENANTS OF SR BANCORP AND SOMERSET SAVINGS | 67 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1. | Conduct of Business | 67 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2. | Current Information | 67 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.3. | Regulatory Applications | 68 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.4. | Disclosure Supplements | 68 |

---

(ii) ------

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.5. | Consents and Approvals of Third Parties | 68.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.6. | All Reasonable Efforts | 68.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.7. | Failure to Fulfill Conditions | 68.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.8. | Employee Benefits | 69.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.9. | Directors and Officers Indemnification and Insurance | 71.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.10. | Stock Listing | 73.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.11. | Maintenance of Insurance | 73.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.12. | Access to Properties and Records | 73.0 |
|  ARTICLE VIII REGULATORY AND OTHER MATTERS | ARTICLE VIII REGULATORY AND OTHER MATTERS | 74.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1. | Regal Bancorp Stockholders Meeting | 74.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2. | Proxy Statement-Prospectus | 74.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3. | The Conversion | 76.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.4. | Regulatory Approvals | 78.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.5. | Treatment of Regal Bancorp Subordinated Notes | 78.0 |
|  ARTICLE IX CLOSING CONDITIONS | ARTICLE IX CLOSING CONDITIONS | 79.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1. | Conditions to Each Party's Obligations under this Agreement | 79.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2. | Conditions to the Obligations of SR Bancorp and Somerset Bank under this Agreement | 80.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3. | Conditions to the Obligations of Regal Bancorp and Regal Bank under this Agreement | 81.0 |
|  ARTICLE X THE CLOSING | ARTICLE X THE CLOSING | 83.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1. | Time and Place | 83.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2. | Deliveries at the Pre-Closing and the Closing | 83.0 |
|  ARTICLE XI TERMINATION, AMENDMENT AND WAIVER | ARTICLE XI TERMINATION, AMENDMENT AND WAIVER | 83.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1. | Termination | 83.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.2. | Effect of Termination | 84.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.3. | Amendment, Extension and Waiver | 85.0 |
|  ARTICLE XII MISCELLANEOUS | ARTICLE XII MISCELLANEOUS | 86.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1. | Expenses | 86.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.2. | Confidentiality | 86.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.3. | Public Announcements | 86.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.4. | Survival | 86.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.5. | Notices | 87.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.6. | Parties in Interest | 88.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.7. | Complete Agreement | 88.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.8. | Counterparts | 88.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.9. | Severability | 89.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.10. | Governing Law | 89.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.11. | Interpretation | 89.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.12. | Specific Performance | 90.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.13. | Confidential Supervisory Information | 90.0 |

---

Exhibit A Form of Voting Agreement

Exhibit B Bank Merger Agreement

(iii) ------

**AGREEMENT AND PLAN OF MERGER** 

This AGREEMENT AND PLAN OF MERGER (this "Agreement"), is dated as of July 25, 2022, by and among Somerset Savings Bank, SLA, a New Jersey-chartered mutual savings association ("Somerset Bank"), SR Bancorp, Inc., a Maryland corporation that will become the holding company for Somerset Bank upon completion of the transactions contemplated by this Agreement ("SR Bancorp"), Regal Bancorp, Inc., a New Jersey corporation ("Regal Bancorp"), and its wholly owned subsidiary, Regal Bank, a New Jersey state bank (Somerset Bank and SR Bancorp, on the one hand, and Regal Bancorp and Regal Bank, on the other hand, are hereinafter referred to individually as a "Party" and collectively as the "Parties").

**WHEREAS,** the Board of Directors of each of the Parties has approved this Agreement and determined that this Agreement and the business combination and related transactions contemplated hereby are in the best interests of the respective Parties; and

**WHEREAS,** in connection with the transactions described in this Agreement, Somerset Bank will convert from the mutual form of organization to the capital stock form of organization, and in connection with such Conversion, SR Bancorp will conduct a subscription offering of its common stock, and if necessary, a community and/or syndicated community offering; and

**WHEREAS**, as a condition to the willingness of Somerset Bank and SR Bancorp to enter into this Agreement, each of the directors and executive officers of Regal Bancorp have entered into a Voting Agreement, substantially in the form of Exhibit A hereto, dated as of the date hereof, with Somerset Bank (the "Voting Agreements"), pursuant to which each such director and executive officer has agreed, among other things, to vote all shares of common stock of Regal Bancorp owned by such person or entity in favor of the approval of this Agreement and the transactions contemplated hereby, upon the terms and subject to the conditions set forth in the Voting Agreements; and

**WHEREAS,** the Parties desire to make certain representations, warranties and agreements in connection with the business transactions described in this Agreement and to prescribe certain conditions thereto.

**NOW, THEREFORE,** in consideration of the mutual covenants, representations, warranties and agreements herein contained, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as follows:

**ARTICLE I** 

**CERTAIN DEFINITIONS** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*1.1. Certain Definitions.* 

As used in this Agreement, the following terms have the following meanings (unless the context otherwise requires, both here and throughout this Agreement, references to Articles and Sections refer to Articles and Sections of this Agreement).

"Acquisition Proposal" shall have the meaning set forth in Section 6.10.1.

------

"Affiliate" means, with respect to any Person, any Person who directly, or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person and, without limiting the generality of the foregoing, includes any executive officer or director of such Person and any Affiliate of such executive officer or director.

"Agreement" means this agreement, and any amendment or supplement hereto.

"Appraised Value Range" means the range of the estimated consolidated pro forma market value of SR Bancorp upon consummation of the Conversion and the Merger, as determined by the Independent Valuation.

"BHCA" shall mean the Bank Holding Company Act of 1956, as amended.

"Bank Merger" shall have the meaning set forth in Section 2.1.

"Bank Merger Agreement" shall mean the merger agreement between Somerset Bank and Regal Bank, the form of which is attached as Exhibit B to this Agreement.

"Bank Regulator" shall mean any federal or state banking regulator, including but not limited to the FDIC, the NJDOBI, and the FRB, which regulates Somerset Bank or Regal Bank, or any of their respective holding companies or subsidiaries, as the case may be.

"BOLI" shall have the meaning set forth in Section 4.12.13.

"Burdensome Condition" shall have the meaning set forth in Section 8.4.

"Cash Consideration" shall have the meaning set forth in Section 3.1.2.

"Cash Election" shall have the meaning set forth in Section 3.2.2.

"Cash Election Shares" shall have the meaning set forth in Section 3.2.1.

"Certificate" shall mean certificates or book entry shares evidencing shares of Regal Bancorp Common Stock.

"Charter Conversion" shall have the meaning set forth in Section 2.9.

"Claim" shall have the meaning set forth in Section 7.9.2.

"Closing" shall have the meaning set forth in Section 2.2.

"Closing Date" shall have the meaning set forth in Section 2.2.

"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

"Code" shall mean the Internal Revenue Code of 1986, as amended.

------

"Confidentiality Agreement" shall mean the confidentiality agreement referred to in Section 12.1.

"Continuing Employees" shall have the meaning set forth in Section 7.8.3.

"Conversion" shall mean the conversion from mutual to stock form of Somerset Bank, pursuant to the Plan of Conversion adopted by Somerset Bank.

"Conversion Offering" shall mean the offering, in connection with the Conversion, of shares of SR Bancorp Common Stock in a subscription offering and, if necessary, a community offering and/or a syndicated community offering.

"Conversion Price Per Share" shall have the meaning set forth in Section 2.9.

"Conversion Prospectus" shall mean a prospectus issued by SR Bancorp in connection with the Offering that meets all of the requirements of the Securities Act, applicable state securities laws and banking laws and regulations.

"Conversion Registration Statement" shall mean the registration statement, together with all amendments, filed with the SEC under the Securities Act to register shares of SR Bancorp Common Stock to be offered and issued in connection with the Conversion Offering. The Merger Registration Statement and the Conversion Registration Statement may be separate registration statements or may be combined in one registration statement that shall register shares of SR Bancorp Common Stock to be offered and issued in connection with the Conversion Offering and to be offered and issued to holders of Regal Bancorp Common Stock in connection with the Merger.

"Depositor(s)" shall mean a former or current depositor of Somerset Bank that under the Plan of Conversion is given, as indicated by the context, the priority opportunity to purchase SR Bancorp Common Stock in the Conversion Offering or the opportunity to vote on the Plan of Conversion.

"Depositors Meeting" shall have the meaning set forth in Section 8.3.1.

"Derivative Transaction" means any swap transactions, option, warrant, forward purchase or sale transactions, futures transactions, cap transactions, floor transactions, or collar transactions relating to one or more currencies, commodities, bonds, equity securities, loans, interest rates, catastrophe events, weather-related events, credit-related events, or conditions or any indexes, or any other similar transactions (including any option with respect to any of these transactions) or combination of any of these transactions, including collateralized mortgage obligations or other similar instruments or any debt or equity instruments evidencing or embedding any such types of transactions, and any related credit support, collateral or other similar arrangements related to them.

"Effective Time" shall mean the date and time specified pursuant to Section 2.2 as the effective time of the Merger.

"Election Deadline" shall have the meaning set forth in Section 3.2.3.

------

"Election Form" shall have the meaning set forth in Section 3.2.2.

"Election Form Record Date" shall have the meaning set forth in Section 3.2.2.

"Enforceability Exceptions" shall have the meaning set forth in Section 4.3.1.

"Environmental Laws" means any federal, state or local law, statute, ordinance, rule, regulation, code, license, permit, authorization, approval, consent, order, judgment, decree, injunction or agreement with any governmental entity relating to (1) the protection, preservation or restoration of the environment (including, without limitation, air, water vapor, surface water, groundwater, drinking water supply, surface soil, subsurface soil, plant and animal life or any other natural resource), and/or (2) the use, storage, recycling, treatment, presence, generation, transportation, processing, handling, labeling, production, release or disposal of Materials of Environmental Concern. The term Environmental Laws include without limitation (a) the Comprehensive Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. §9601, et seq; the Resource Conservation and Recovery Act, as amended, 42 U.S.C. §6901, et seq; the Clean Air Act, as amended, 42 U.S.C. §7401, et seq; the Federal Water Pollution Control Act, as amended, 33 U.S.C. §1251, et seq; the Toxic Substances Control Act, as amended, 15 U.S.C. §2601, et seq; the Emergency Planning and Community Right to Know Act, 42 U.S.C. §11001, et seq; the Safe Drinking Water Act, 42 U.S.C. §300f, et seq; and all comparable state and local laws, and (b) any common law (including without limitation common law that may impose strict liability) that may impose liability or obligations for injuries or damages due to the presence of or exposure to any Materials of Environmental Concern.

"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended.

"ERISA Affiliate" shall have the meaning set for in Section 4.12.3.

"ERISA Affiliate Plan" shall have the meaning set for in Section 4.12.3.

"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

"Exchange Agent" shall mean a bank or trust company, or other agent designated by SR Bancorp, and reasonably acceptable to Regal Bancorp, which shall act as agent for SR Bancorp in connection with the exchange procedures for converting Certificates into the Merger Consideration.

"Exchange Fund" shall have the meaning set forth in Section 3.3.1.

"Exchange Ratio" shall have the meaning set forth in Section 3.1.2.

"FDIA" shall mean the Federal Deposit Insurance Act, as amended.

"FDIC" shall mean the Federal Deposit Insurance Corporation or any successor thereto.

"Fee" shall have the meaning set forth in Section 11.2.2(C).

------

"FHLB" shall mean the Federal Home Loan Bank of New York.

"FRB" shall mean the Board of Governors of the Federal Reserve System or any successor thereto.

"GAAP" shall mean Generally Accepted Accounting Principles, consistently applied and as in effect from time to time in the United States of America.

"Governmental Entity" shall mean any federal or state court, administrative agency or commission or other governmental authority or instrumentality.

"HOLA" shall mean the Home Owners' Loan Act, as amended.

"Immediate Family Members" of a Person who is an individual shall mean any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of such Person, and any individual Person (other than a tenant or employee) sharing the household of such Person.

"Indemnified Liabilities" shall have the meaning set forth in Section 7.9.2.

"Indemnified Parties" shall have the meaning set forth in Section 7.9.2.

"Independent Valuation" shall mean the appraised pro forma market value of the SR Bancorp Common Stock issued in the Conversion and in the Merger, and any updates, as determined by an independent appraiser.

"Insurance Amount" shall have the meaning set forth in Section 7.9.1.

"IRS" shall mean the United States Internal Revenue Service.

"Knowledge" means those facts that are known, or should have been known after inquiry reasonable in the circumstances, by (i) in the case of Somerset Bank, the executive officers listed on SOMERSET SAVINGS DISCLOSURE SCHEDULE 1.1, and (ii) as to Regal Bancorp, those executive officers listed on REGAL BANCORP DISCLOSURE SCHEDULE 1.1, and with respect to both Somerset Bank and Regal Bancorp, includes any facts, matters or circumstances set forth in any written notice from any Bank Regulator or any other material written notice received by that Person.

"Liens" shall have the meaning set forth in Section 4.1.3.

"Mailing Date" shall have the meaning set forth in Section 3.2.2.

"Material Adverse Effect" means any fact, development, effect, circumstance, occurrence or change that, individually or in the aggregate, (i) is material and adverse to the financial condition, results of operations or business of such Party and its Subsidiaries taken as a whole, or (ii) does or would materially impair the ability of such Party to perform its obligations under this Agreement or otherwise materially threaten or materially impair the ability of such Party to consummate the transactions contemplated by this Agreement; provided, that a "Material

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Adverse Effect" shall not be deemed to include the impact of (i) changes after the date hereof in laws, rules or regulations, or published interpretations thereof by courts or Governmental Entities, affecting financial institutions and their holding companies generally, including Pandemic Measures; (ii) changes, after the date hereof, in GAAP or regulatory accounting requirements applicable to financial institutions and their holding companies generally; (iii) changes after the date of this Agreement in general economic or capital market conditions affecting financial institutions or their market prices generally, including, but not limited to, changes in levels of interest rates generally; (iv) the effects of compliance with this Agreement on the operating performance, business, or financial condition of a Party, including the expenses incurred by a Party in negotiating, documenting, effecting, and consummating the transactions contemplated by this Agreement; (v) the effects of any action or omission required by this Agreement or taken by a Party with the prior written consent of the other Party, or as otherwise expressly permitted or contemplated by this Agreement; (vi) the impact of the public announcement of this Agreement (including the impact of such announcement on relationships with customers or employees, such as the loss of personnel subsequent to the date of this Agreement); (vii) changes, after the date hereof, in national or international political or social conditions, including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon or within the United States; and (viii) natural disasters, pandemics (including the clusters, outbreaks, epidemics or pandemics relating to COVID-19, and the governmental and other responses thereto) or other force majeure events; except, with respect to subclauses (i), (ii), (iii), (vii) and (viii), to the extent that the effects of such change are materially disproportionately adverse to the business, properties, assets, liabilities, results of operations or financial condition of such Party and its Subsidiaries, taken as a whole, as compared to other companies in the industry in which such Party and its Subsidiaries operate.

"Materials of Environmental Concern" shall mean pollutants, contaminants, wastes, toxic substances, petroleum and petroleum products, and any other materials regulated under Environmental Laws.

"Merger" shall mean the merger of Regal Bancorp with and into SR Bancorp (or a subsidiary thereof) pursuant to the terms hereof.

"Merger Consideration" shall mean the cash or SR Bancorp Common Stock, or combination thereof, to be paid by SR Bancorp for each share of Regal Bancorp Common Stock, as set forth in Section 3.1.

"Merger Registration Statement" shall mean the registration statement, together with all amendments, filed with the SEC under the Securities Act to register shares of SR Bancorp Common Stock to be offered and issued to holders of Regal Bancorp Common Stock in connection with the Merger. The Merger Registration Statement and the Conversion Registration Statement may be separate registration statements or may be combined in one registration statement that shall register shares of SR Bancorp Common Stock to be offered and sold in connection with the Conversion Offering and to be offered and issued to holders of Regal Bancorp Common Stock in connection with the Merger.

"MGCL" shall mean the Maryland General Corporation Law.

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"Mixed Election" shall have the meaning set forth in Section 3.2.2.

"NASDAQ" shall mean the Nasdaq Stock Market, LLC.

"NJBCA" shall mean the New Jersey Business Corporation Act, as amended.

"NJDOBI" shall mean the New Jersey Department of Banking and Insurance.

"Non-Election" shall have the meaning set forth in Section 3.2.2.

"Non-Election Shares" shall have the meaning set forth in Section 3.2.1.

"Notice of Superior Proposal" shall have the meaning set forth in Section 6.10.4.

"Orbach Agreement" shall have the meaning set forth in Section 2.5

"Pandemic Measures" means any quarantine, "shelter in place," "stay at home," workface reduction, social distancing, shutdown, closure, sequester or other directive, guideline, ordinance or recommendation promulgated by any Governmental Entity, including the Centers for Disease Control and Prevention and the World Health Organization, in each case, in connection with or in response to the clusters, outbreaks, epidemics or pandemics related to SARS-CoV-2 or the Novel Coronavirus, commonly referred to as "COVID-19."

"Pension Plan" shall have the meaning set forth in Section 4.12.2.

"Person" shall mean any individual, corporation, partnership, joint venture, association, trust or "group" (as that term is defined under the Exchange Act).

"Personal Data" shall have the meaning set forth in Section 4.11.1.

"Plan of Conversion" shall mean the Plan of Conversion and Reorganization pursuant to which Somerset Bank will convert from the mutual form of organization to the capital stock form of organization.

"Pre-Closing" shall have the meaning set forth in Section 10.1.

"Pre-Closing Date" shall have the meaning set forth in Section 10.1.

"Proxy Statement-Prospectus" means the proxy statement/prospectus, as amended or supplemented, to be delivered to stockholders of Regal Bancorp in connection with the solicitation of their approval of this Agreement and the transactions contemplated hereby and the offering of the SR Bancorp Common Stock to them as Merger Consideration. The Proxy Statement-Prospectus may be combined with the Conversion Prospectus delivered to offerees in the Conversion Offering.

"Regal Bancorp" means Regal Bancorp, Inc., a New Jersey corporation, with its principal offices located at 570 West Mount Pleasant Avenue, Livingston, New Jersey 07039.

"Regal Bancorp Common Stock" shall have the meaning set forth in Section 4.2.1.

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"Regal Bancorp Compensation and Benefit Plans" shall have the meaning set forth in Section 4.12.1.

"Regal Bancorp Designees" shall have the meaning set forth in Section 2.5.

"Regal Bancorp Disclosure Schedule" shall mean a written disclosure schedule delivered by Regal Bancorp to SR Bancorp prior to execution of this Agreement setting forth, among other things, facts, circumstances, and events the disclosure of which is required or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more of the representations and warranties or covenants, in each case specifically referring to the appropriate section of this Agreement and describing in reasonable detail the matters described therein.

"Regal Bancorp Financial Statements" shall mean (i) the audited consolidated balance sheet (including related notes and schedules, if any) of Regal Bancorp as of December 31, 2021 and 2020 and the consolidated statements of income, comprehensive income, stockholders' equity, and cash flows (including related notes and schedules, if any) of Regal Bancorp for each of the two years ended December 31, 2021 and 2020 and (ii) the unaudited interim consolidated financial statements of Regal Bancorp as of the end of each calendar quarter following December 31, 2021 and for the periods then ended.

"Regal Bancorp Preferred Stock" shall have the meaning set forth in Section 4.2.1.

"Regal Bancorp Recommendation" shall have the meaning set forth in Section 8.1.

"Regal Bancorp Regulatory Reports" means (i) the Call Reports, including any accompanying schedules, as filed by Regal Bank with the FDIC, for each calendar quarter beginning with the quarter ended March 31, 2021 through the Closing Date, and all other reports and filings submitted by Regal Bank to a Bank Regulator from March 31, 2022 through the Closing Date and permitted to be shared with third parties (or such portions as are permitted to be shared with third parties); and (ii) all Reports filed with the FRB by Regal Bancorp from December 31, 2021 through the Closing Date and permitted to be shared with third parties (or such portions as are permitted to be shared with third parties).

"Regal Bancorp Stockholder Approval" means the approval of this Agreement and the Merger by the affirmative vote or requisite consent of the holders of a majority of the shares of Regal Bancorp Common Stock voting thereon at the Regal Bancorp Stockholders Meeting.

"Regal Bancorp Stockholders Meeting" means the meeting of stockholders of Regal Bancorp to be held to consider and approve this Agreement and the Merger.

"Regal Bancorp Stock Benefit Plan" shall mean the Regal Bancorp 2013 Equity Compensation Plan and any and all amendments thereto.

"Regal Bancorp Subordinated Notes" means the Regal Bancorp's 7.25% Fixed to Floating Rate Subordinated Notes due July 1, 2027 in an aggregate principal amount of $10,000,000.

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"Regal Bancorp Subsequent Determination shall have the meaning set forth in Section 6.10.4.

"Regal Bancorp Subsidiary" means any corporation, 50% or more of the capital stock of which is owned, either directly or indirectly, by Regal Bancorp or Regal Bank, except any corporation the stock of which is held in the ordinary course of the lending activities of Regal Bank.

"Regal Bank" shall mean Regal Bank, a New Jersey-chartered bank, with its principal offices located at 570 West Mount Pleasant Avenue, Livingston, New Jersey 07039, which is a wholly owned subsidiary of Regal Bancorp.

"Regal Bank Preferred Stock" shall have the meaning set forth in Section 4.2.4.

"Release" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing into the indoor or outdoor environment of Materials of Environmental Concern, to the extent giving rise to liability under Environmental Laws.

"Regulatory Agreement" shall have the meaning set forth in Section 4.11.5.

"Representative" shall have the meaning set forth in Section 3.2.2.

"Rights" shall mean warrants, options, rights, convertible securities, stock appreciation rights and other arrangements or commitments that obligate an entity to issue or dispose of any of its capital stock or other ownership interests or that provide for compensation based on the equity appreciation of its capital stock.

"SEC" shall mean the Securities and Exchange Commission or any successor thereto.

"Securities Act" shall mean the Securities Act of 1933, as amended.

"Securities Documents" shall mean all reports, offering circulars, proxy statements, registration statements and all similar documents filed, or required to be filed, pursuant to the Securities Laws.

"Securities Laws" shall mean the Securities Act; the Exchange Act; the Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940, as amended; the Trust Indenture Act of 1939, as amended, and the rules and regulations of the SEC promulgated thereunder.

"Security Breach" shall have the meaning set forth in Section 4.11.3.

"Shortfall Number" shall have the meaning set forth in Section 3.2.5.

"SR Bancorp" shall mean SR Bancorp, Inc., a Maryland corporation in formation with its principal executive offices located at 220 West Union Avenue, Bound Brook, New Jersey 08805, which was organized in connection with the Conversion.

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"SR Bancorp Common Stock" shall mean the common stock, par value $0.01 per share, of SR Bancorp that will be issued in the Conversion Offering and the Merger.

"SR Bancorp Disclosure Schedule" shall mean a written disclosure schedule delivered by SR Bancorp to Regal Bancorp prior to execution of this Agreement setting forth, among other things, facts, circumstances, and events the disclosure of which is required or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more of the representations and warranties or covenants, in each case specifically referring to the appropriate section of this Agreement and describing in reasonable detail the matters contained therein.

"Somerset Bank" shall mean Somerset Savings Bank, SLA, a New Jersey chartered savings association, with its principal offices located at 220 West Union Avenue, Bound Brook, New Jersey 08805 and shall include Somerset Bank in either mutual or stock form, and shall include, as appropriate, Somerset Bank as a New Jersey commercial bank following the Charter Conversion.

"Somerset Bank Compensation and Benefit Plans" shall have the meaning set forth in Section 5.11.1.

"Somerset Bank Defined Benefit Plan" shall have the meaning set forth in Section 5.11.3.

"Somerset Bank Financial Statements" shall mean the (i) the audited consolidated statements of financial condition (including related notes and schedules) of Somerset Bank as of June 30, 2021 and 2020 and the consolidated statements of income, changes in equity and cash flows (including related notes and schedules, if any) of Somerset Bank for each of the two years ended June 30, 2021 and 2020, and (ii) the unaudited interim consolidated financial statements of Somerset Bank as of the end of each quarter following June 30, 2021, and for the periods then ended.

"Somerset Bank Regulatory Reports" means the Call Reports of Somerset Bank and accompanying schedules, as filed with the FDIC and NJDOBI, for each calendar quarter beginning with the quarter ended March 31, 2021 through the Closing Date and all other reports and filings submitted by Somerset Bank to a Bank Regulator from March 31, 2022 through the Closing Date and permitted to be shared with third parties (or such portions as are permitted to be shared with third parties).

"Somerset Bank Subsidiary" means any corporation, 50% or more of the capital stock of which is owned, either directly or indirectly, by Somerset Bank or any Affiliate, except any corporation the stock of which is held in the ordinary course of the lending activities of Somerset Bank.

"Stock Consideration" shall have the meaning set forth in Section 3.1.2.

"Stock Conversion Number" shall have the meaning set forth in Section 3.2.1.

"Stock Election" shall have the meaning set forth in Section 3.2.2.

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"Stock Election Number" shall have the meaning set forth in Section 3.2.1.

"Stock Election Shares" shall have the meaning set forth in Section 3.2.1.

"Subsidiary" shall have the meaning set forth in Rule 1-02 of Regulation S-X of the SEC.

"Superior Proposal" shall have the meaning set forth in Section 6.10.1.

"Surviving Corporation" shall have the meaning set forth in Section 2.1.

"Termination Date" shall mean August 31, 2023.

Other terms used herein are defined in the preamble or elsewhere in this Agreement.

**ARTICLE II** 

**THE MERGER** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*2.1. Merger.* 

As promptly as practicable following the satisfaction or waiver of the conditions to each Party's respective obligations hereunder, and immediately following the consummation of the Conversion and the issuance of shares thereunder, and subject to the terms and conditions of this Agreement, at the Effective Time: (a) Regal Bancorp shall merge with and into SR Bancorp, or a to-be-formed subsidiary of SR Bancorp, with SR Bancorp (or the subsidiary) as the resulting or surviving corporation (the "Surviving Corporation"); and (b) the separate existence of Regal Bancorp shall cease and all of the rights, privileges, powers, franchises, properties, assets, liabilities and obligations of Regal Bancorp shall be vested in and assumed by the Surviving Corporation. As part of the Merger, each share of Regal Bancorp Common Stock will be converted into the right to receive the Merger Consideration pursuant to the terms of Article III. Immediately after the Merger and the Charter Conversion, Regal Bank shall merge with and into Somerset Bank, with Somerset Bank as the resulting institution under the name "Somerset Regal Bank" (the "Bank Merger"), which name shall be effective at the time of the consummation of the Bank Merger, pursuant to the terms of the Bank Merger Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*2.2. Effective Time.* 

The Merger shall be effected by the filing of a certificate of merger with the New Jersey Department of Treasury in accordance with the NJBCA, and the filing of articles of merger with the Maryland Department of Assessments and Taxation in accordance with the MGCL, on the day of the closing (the "Closing Date") following the satisfaction, or if permissible, waiver of the conditions provided for in Article X (the "Closing"). The "Effective Time" means the date and time upon which the certificate of merger is filed with the New Jersey Department of Treasury and the articles of merger are filed with the Maryland Department of Assessments and Taxation or at such later date or time as the Parties agree and specify in the certificate of merger and articles of merger. The Closing of the Merger shall immediately follow the closing of the Conversion Offering and completion of the Conversion.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*2.3. Articles of Incorporation and Bylaws.* 

The Articles of Incorporation and Bylaws of SR Bancorp (or any subsidiary into which Regal Bancorp is merged) as in effect immediately prior to the Effective Time, shall be the Articles of Incorporation and Bylaws of the Surviving Corporation until thereafter amended as provided therein and by applicable law. A copy of the Articles of Incorporation and Bylaws of SR Bancorp, substantially to be in effect on the Closing Date, are included in SR BANCORP DISCLOSURE SCHEDULE 2.3.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*2.4. Directors and Officers of Surviving Corporation.* 

Except as provided in Section 2.5, the directors of SR Bancorp immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Articles of Incorporation and Bylaws of the Surviving Corporation. Except as provided in Section 2.5, the officers of SR Bancorp immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*2.5. Additional Directors of SR Bancorp and Somerset Bank.* 

Each of the directors of SR Bancorp and Somerset Bank immediately prior to the Effective Time shall continue as directors of SR Bancorp and Somerset Bank immediately after the Effective Time. Effective as of the Effective Time, SR Bancorp and Somerset Bank shall (i) increase the size of their Board of Directors by three members, and (ii) appoint David M. Orbach, and two other persons from the Regal Bancorp board to be selected by SR Bancorp in consultation with Regal Bancorp (the "Regal Bancorp Designees"), to the Board of Directors of SR Bancorp and Somerset Bank, with one former Regal Bancorp director being appointed to each of the three terms of directors comprising the SR Bancorp and Somerset Bank Boards. Additionally, effective as of the Effective Time, David M. Orbach shall serve as an employee of Somerset Bank and as the Executive Chairman of the Board of Directors of SR Bancorp and Executive Vice Chairman of Somerset Bank, with such duties and on such terms as set forth in SR BANCORP DISCLOSURE SCHEDULE 2.5, pursuant to an employment agreement between David M. Orbach and each of SR Bancorp and Somerset Bank to be executed concurrently with the execution and delivery of this Agreement and to be effective as of the Effective Time (the "Orbach Agreement").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*2.6. Effects of the Merger.* 

At and after the Effective Time, the Merger shall have the effects as set forth in the NJBCA and MGCL.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*2.7. Tax Consequences.* 

It is intended that the Merger shall constitute a reorganization within the meaning of Section 368(a) of the Code, and that this Agreement shall constitute a "plan of reorganization" as that term is used in Sections 354 and 361 of the Code. From and after the date of this Agreement and until the Closing, each Party hereto shall use its reasonable best efforts to cause the Merger to qualify, and will not knowingly take any action, cause any action to be taken, fail to take any action or cause any action to fail to be taken, which action or failure to act could prevent the Merger from qualifying as a reorganization under Section 368(a) of the Code.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*2.8. Possible Alternative Structures.* 

Notwithstanding anything to the contrary contained in this Agreement, prior to the Effective Time, Somerset Bank or SR Bancorp shall be entitled to revise the structure of the Merger, the Bank Merger or the Conversion, provided that (i) there are no adverse federal or state income tax consequences to Regal Bancorp stockholders as a result of the modification; (ii) the consideration to be paid to the holders of Regal Bancorp Common Stock under this Agreement is not thereby changed in kind or value or reduced in amount as a result of such change in structure and, in the case of revision to the structure of the Conversion, the pro forma capitalization of SR Bancorp shall not be materially different than that contemplated by the Conversion Prospectus; provided however, a change in the Independent Valuation shall not be deemed to be a change in the consideration to be paid to the holders of Regal Bancorp Common Stock; and (iii) such modification will not materially delay or jeopardize receipt of any required regulatory approvals or other consents and approvals relating to the consummation of the Merger. Each of SR Bancorp, Somerset Bank, Regal Bancorp and Regal Bank agrees to appropriately amend this Agreement and any related documents to reflect any such revised structure.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*2.9. The Conversion.* 

Contemporaneous with the adoption of this Agreement, the Board of Directors of Somerset Bank is adopting a Plan of Conversion for Somerset Bank to convert to the capital stock form of organization. SR Bancorp is being organized to act as the holding company for Somerset Bank, and to offer for sale shares of common stock to Depositors in the Conversion, based on the Independent Valuation. The price per share of the shares of SR Bancorp Common Stock to be issued in the Conversion is referred to as the "Conversion Price Per Share," which is expected to be $10.00. The shares of SR Bancorp Common Stock to be issued in connection with the Merger will be from authorized but unissued shares of SR Bancorp Common Stock, which shares shall be issued immediately following completion of the Conversion. In addition, it is contemplated that Somerset Bank will convert its charter to that of a New Jersey commercial bank, to be effective immediately upon the completion of the Conversion (the "Charter Conversion").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*2.10. Additional Actions.* 

If, at any time after the Effective Time, SR Bancorp shall consider or be advised that any further deeds, assignments or assurances in law or any other acts are necessary or desirable to (i) vest, perfect or confirm, of record or otherwise, in SR Bancorp or Somerset Bank its right, title or interest in, to or under any of the rights, properties or assets of Regal Bancorp or Regal Bank, or (ii) otherwise carry out the purposes of this Agreement, Regal Bancorp and Regal Bank each shall be deemed to have granted to SR Bancorp an irrevocable power of attorney to execute and deliver, in such official corporate capacities, all such deeds, assignments or assurances in law or any other acts as are necessary or desirable to (a) vest, perfect or confirm, of record or otherwise, in SR Bancorp its right, title or interest in, to or under any of the rights, properties or assets of Regal Bancorp or Regal Bank, or (b) otherwise carry out the purposes of this Agreement, and the officers and directors of SR Bancorp are authorized in the name of Regal Bancorp or Regal Bank or otherwise to take any and all such action.

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**ARTICLE III** 

**CONVERSION OF SHARES** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*3.1. Conversion of Regal Bancorp Common Stock; Merger Consideration.* 

At the Effective Time, by virtue of the Merger and without any action on the part of SR Bancorp, Regal Bancorp or the holders of any of the shares of Regal Bancorp Common Stock, the Merger shall be effected in accordance with the following terms:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1.1. All shares of Regal Bancorp Common Stock held in the treasury of Regal Bancorp and each share of Regal Bancorp Common Stock owned by SR Bancorp, Somerset Bank, any Somerset Bank Subsidiary or Regal Bancorp Subsidiary immediately prior to the Effective Time (other than shares held in a fiduciary capacity or in connection with debts previously contracted) shall, at the Effective Time, cease to exist, and the Certificates for such shares shall be canceled as promptly as practicable thereafter, and no payment or distribution shall be made in consideration therefor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1.2. Each outstanding share of Regal Bancorp Common Stock outstanding immediately prior to the Effective Time (except for shares of Regal Bancorp Common Stock cancelled or retired pursuant to Section 3.1.1) shall become and be converted into, as provided in and subject to the limitations set forth in this Agreement, the right to receive at the election of the holder thereof as provided in Section 3.2 either (A) 1.93 shares of SR Bancorp Common Stock (the "Exchange Ratio," and such shares, the "Stock Consideration"), or (B) $19.30 in cash (the "Cash Consideration").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1.3. In the event SR Bancorp changes the Conversion Price Per Share prior to the Effective Time from $10.00, the Exchange Ratio shall be proportionately and appropriately adjusted.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1.4. After the Effective Time, shares of Regal Bancorp Common Stock shall be no longer outstanding and shall be canceled automatically and shall cease to exist, and shall thereafter by operation of this Section 3.1 be converted into the right to receive the Merger Consideration.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1.5. Each share of SR Bancorp Common Stock that is issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding following the Effective Time and shall be unchanged by the Merger.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*3.2. Election Procedures.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2.1. Holders of Regal Bancorp Common Stock may elect to receive shares of SR Bancorp Common Stock or cash, or a combination thereof (in all cases without interest) in exchange for their shares of Regal Bancorp Common Stock in accordance with the following procedures, provided that, in the aggregate, and subject to the provisions of

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Section 3.2.6, 80% of the total number of shares of Regal Bancorp Common Stock issued and outstanding at the Effective Time shall be converted into the Stock Consideration (the "Stock Conversion Number") and the remaining outstanding shares of Regal Bancorp Common Stock shall be converted into the Cash Consideration; provided; however, if the number of shares to be issued by SR Bancorp in the Conversion exceeds the amount representing the midpoint of the offering range in the Conversion Offering based on the Independent Valuation, then the Stock Conversion Number shall be increased to 90%. Shares of Regal Bancorp Common Stock as to which a Cash Election (including, pursuant to a Mixed Election) has been made are referred to herein as "Cash Election Shares." Shares of Regal Bancorp Common Stock as to which a Stock Election has been made (including, pursuant to a Mixed Election) are referred to herein as "Stock Election Shares." Shares of Regal Bancorp Common Stock as to which no election has been made (or as to which an Election Form is not returned properly completed) are referred to herein as "Non-Election Shares." The aggregate number of shares of Regal Bancorp Common Stock with respect to which a Stock Election has been made is referred to herein as the "Stock Election Number."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2.2. An election form and other appropriate and customary transmittal materials (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of such Certificates to the Exchange Agent), in such form as Regal Bancorp and SR Bancorp shall mutually agree (the "Election Form"), shall be mailed no more than 40 business days and no less than 20 business days prior to the anticipated Effective Time or on such earlier date as Regal Bancorp and SR Bancorp shall mutually agree (the "Mailing Date") to each holder of record of Regal Bancorp Common Stock as of five (5) business days prior to the Mailing Date (the "Election Form Record Date"). The Exchange Agent shall make available an additional Election Form to all Persons who become record holders of Regal Bancorp Common Stock between the Election Form Record Date and the Election Deadline. Each Election Form shall permit such holder, subject to the allocation and election procedures set forth in this Section 3.2, (i) to elect to receive the Cash Consideration for all of the shares of Regal Bancorp Common Stock held by such holder (a "Cash Election"), in accordance with Section 3.1.2, (ii) to elect to receive the Stock Consideration for all of such shares (a "Stock Election"), in accordance with Section 3.1.2, (iii) to elect to receive the Stock Consideration for a portion of such holder's Regal Bancorp Common Stock and the Cash Consideration for the remaining portion of such holder's Regal Bancorp Common Stock (a "Mixed Election"), or (iv) to indicate that such record holder has no preference as to the receipt of cash or SR Bancorp Common Stock for such shares (a "Non-Election"). A holder of record of shares of Regal Bancorp Common Stock who holds such shares as nominee, trustee or in another representative capacity (a "Representative") may submit multiple Election Forms, provided that each such Election Form covers all the shares of Regal Bancorp Common Stock held by such Representative for a particular beneficial owner. Any shares of Regal Bancorp Common Stock with respect to which the holder thereof shall not, as of the Election Deadline, have made an election by submission to the Exchange Agent of an effective, properly completed Election Form shall be deemed Non-Election Shares.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2.3. To be effective, a properly completed Election Form shall be submitted to the Exchange Agent on or before 4:00 p.m., New Jersey time, on the 25<sup>th</sup> day following the Mailing Date (or such other time and date as SR Bancorp and Regal Bancorp may mutually agree) (the "Election Deadline"); provided, however, that the Election Deadline may not occur on or after the Closing Date. SR Bancorp shall use all reasonable efforts to make available as promptly as possible an Election Form to any holder of record of Regal Bancorp Common Stock who requests such Election Form following the initial mailing of the Election Forms and prior to the Election Deadline. Regal Bancorp shall provide to the Exchange Agent all information reasonably necessary for it to perform as specified herein. An election shall have been properly made only if the Exchange Agent shall have actually received a properly completed Election Form by the Election Deadline. An Election Form shall be deemed properly completed only if accompanied by one or more Certificates (or customary affidavits and indemnification regarding the loss or destruction of such Certificates or the guaranteed delivery of such Certificates) representing all shares of Regal Bancorp Common Stock covered by such Election Form in certificate form, together with duly executed transmittal materials included with the Election Form. If a Regal Bancorp stockholder either (i) does not submit a properly completed Election Form in a timely fashion or (ii) revokes its Election Form prior to the Election Deadline (without later submitting a properly completed Election Form prior to the Election Deadline), the shares of Regal Bancorp Common Stock held by such stockholder shall be designated as Non-Election Shares. Any Election Form may be revoked or changed by the person submitting such Election Form to the Exchange Agent by written notice to the Exchange Agent only if such notice of revocation or change is actually received by the Exchange Agent at or prior to the Election Deadline. SR Bancorp shall cause the Certificate or Certificates relating to any revoked Election Form to be promptly returned without charge to the person submitting the Election Form to the Exchange Agent. Subject to the terms of this Agreement and of the Election Form, SR Bancorp shall have reasonable discretion, which it may delegate in whole or in part to the Exchange Agent, to determine whether Election Forms have been properly completed, signed and submitted or revoked and to disregard immaterial defects in Election Forms. The good faith decision of SR Bancorp or the Exchange Agent in such matters shall be conclusive and binding. Neither SR Bancorp nor the Exchange Agent shall be under any obligation to notify any Person of any defect in an Election Form submitted to the Exchange Agent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2.4. In the event of the termination of this Agreement after holders of shares of Regal Bancorp Common Stock have deposited their Certificates with the Exchange Agent, SR Bancorp, Somerset Bank and Regal Bancorp shall jointly and promptly instruct the Exchange Agent to return all Certificates to the Persons who deposited the same.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2.5. Not more than five (5) business days after the Election Deadline, the Exchange Agent shall calculate the allocation among holders of shares of Regal Bancorp Common Stock of rights to receive Stock Consideration and/or Cash Consideration in the Merger as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) If the Stock Election Number equals the Stock Conversion Number, then all Cash Election Shares and all Non-Election Shares shall be converted into the right to receive the Cash Consideration, and each holder of Stock Election Shares will be entitled to receive the Stock Consideration.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) If the Stock Election Number exceeds the Stock Conversion Number, then all Cash Election Shares and all Non-Election Shares shall be converted into the right to receive the Cash Consideration, and, subject to Section 3.2.6 hereof, each holder of Stock Election Shares will be entitled to receive the Stock Consideration only with respect to that number of Stock Election Shares held by such holder (rounded to the nearest whole share) equal to the product obtained by multiplying (x) the number of Stock Election Shares held by such holder by (y) a fraction, the numerator of which is the Stock Conversion Number and the denominator of which is the Stock Election Number, with the remaining number of such holder's Stock Election Shares being converted into the right to receive the Cash Consideration.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) If the Stock Election Number is less than the Stock Conversion Number (the amount by which the Stock Conversion Number exceeds the Stock Election Number being referred to herein as the "Shortfall Number"), then all Stock Election Shares shall be converted into the right to receive the Stock Consideration and the Non-Election Shares and Cash Election Shares shall be treated in the following manner:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) if the Shortfall Number is less than or equal to the number of Non-Election Shares, then all Cash Election Shares shall be converted into the right to receive the Cash Consideration and, subject to Section 3.2.6 hereof, each holder of Non-Election Shares shall receive the Stock Consideration in respect of that number of Non-Election Shares held by such holder (rounded to the nearest whole share) equal to the product obtained by multiplying (x) the number of Non-Election Shares held by such holder by (y) a fraction, the numerator of which is the Shortfall Number and the denominator of which is the total number of Non-Election Shares, with the remaining number of such holder's Non-Election Shares being converted into the right to receive the Cash Consideration; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) if the Shortfall Number exceeds the number of Non-Election Shares, then, subject to Section 3.2.6 hereof, all Non-Election Shares shall be converted into the right to receive the Stock Consideration, and each holder of Cash Election Shares shall receive the Stock Consideration in respect of that number of Cash Election Shares held by such holder (rounded to the nearest whole share) equal to the product obtained by multiplying (x) the number of Cash Election Shares held by such holder by (y) a fraction, the numerator of which is the amount by which (1) the Shortfall Number exceeds (2) the total number of Non-Election Shares and the denominator of which is the total number of Cash Election Shares, with the remaining number of such holder's Cash Election Shares being converted into the right to receive the Cash Consideration.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2.6. *No Fractional Shares*. Notwithstanding anything to the contrary contained herein, no certificates or scrip representing fractional shares of SR Bancorp Common Stock shall be issued upon the surrender for exchange of Certificates, no dividend or distribution with respect to SR Bancorp Common Stock shall be payable on or with

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respect to any fractional share interest, and such fractional share interests shall not entitle the owner thereof to vote or to any other rights of a stockholder of SR Bancorp. In lieu of the issuance of any such fractional share, SR Bancorp shall pay to each former holder of Regal Bancorp Common Stock who otherwise would be entitled to receive a fractional share of SR Bancorp Common Stock, an amount in cash determined by multiplying the Conversion Price Per Share by the fraction of a share of SR Bancorp Common Stock, which such holder would otherwise be entitled to receive pursuant to Section 3.1.2. No interest will be paid on the cash that holders of such fractional shares shall be entitled to receive upon such delivery. For purposes of determining any fractional share interest, all shares of Regal Bancorp Common Stock owned by a Regal Bancorp stockholder shall be combined so as to calculate the maximum number of whole shares of SR Bancorp Common Stock issuable to such Regal Bancorp stockholder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*3.3. Procedures for Exchange of Regal Bancorp Common Stock.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3.1. *SR Bancorp or Somerset Bank to Make Merger Consideration Available.* After the Election Deadline and prior to the Effective Time, SR Bancorp or Somerset Bank shall deposit, or shall cause to be deposited, with the Exchange Agent for the benefit of the holders of Regal Bancorp Common Stock, for exchange in accordance with this Section 3.3, an estimated amount of cash sufficient to pay the aggregate amount of cash payable pursuant to this Article III (including the estimated amount of cash to be paid in lieu of fractional shares of SR Bancorp Common Stock) and an estimated number of shares of SR Bancorp Common Stock to satisfy SR Bancorp's obligation to issue the Stock Consideration (such cash for shares of Regal Bancorp Common Stock, together with any dividends or distributions with respect thereto, and the shares of SR Bancorp Common Stock being hereinafter referred to as the "Exchange Fund").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3.2. *Exchange Procedures for Effective Election Forms Submitted by Election Deadline*. As soon as practicable after the Effective Time (and in any case no later than five (5) business days thereafter), SR Bancorp shall cause the Exchange Agent to mail the Merger Consideration to holders of Regal Bancorp Common Stock who have submitted effective Election Forms prior to the Election Deadline.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3.3. *Exchange Procedures in Absence of Effective Election Forms Submitted Prior to Election Deadline*. Within five (5) business days after the Effective Time, SR Bancorp shall take all steps necessary to cause the Exchange Agent to mail to each record holder of Regal Bancorp Common Stock immediately prior to the Effective Time who has not surrendered an Election Form representing all of the shares of Regal Bancorp Common Stock owned by such holder pursuant to Section 3.2.3, a form letter of transmittal for return to the Exchange Agent and instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration and cash in lieu of fractional shares into which the Regal Bancorp Common Stock represented by such Certificates shall have been converted as a result of the Merger. The letter of transmittal (which shall be subject to the reasonable approval of Regal Bancorp) shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent. Promptly, but no more than five (5) business days after proper surrender of a Certificate for exchange and cancellation to the

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Exchange Agent, together with a properly completed letter of transmittal, duly executed, and such other documents as may reasonably be required by the Exchange Agent, the holder of such Certificate shall be entitled to receive in exchange therefor, as applicable, (i) a statement evidencing shares of SR Bancorp Common stock held in book-entry form, or at SR Bancorp's sole discretion, a certificate, in either case representing, in the aggregate, that number of shares of SR Bancorp Common Stock (if any) to which such former holder of Regal Bancorp Common Stock shall have become entitled pursuant to the provisions of Section 3.1.2, (ii) a check representing that amount of cash (if any) to which such former holder of Regal Bancorp Common Stock shall have become entitled pursuant to the provisions of Section 3.1.2, and (iii) a check representing the amount of cash (if any) payable in lieu of fractional shares of SR Bancorp Common Stock, which such former holder has the right to receive in respect of the Certificate surrendered pursuant to the provisions of this Section 3.3.3, and the Certificate so surrendered shall forthwith be canceled. Each outstanding Certificate which prior to the Effective Time represented Regal Bancorp Common Stock and that was not surrendered to the Exchange Agent in accordance with the procedures provided for herein shall, except as otherwise herein provided, until duly surrendered to the Exchange Agent be deemed to evidence ownership (including, without limitation, for purposes of voting and dividends) of the number of shares of SR Bancorp Common Stock and/or the right to receive the amount of Cash Consideration that such Regal Bancorp Common Stock shall have been converted. In the event of a transfer of ownership of Regal Bancorp Common Stock that is not registered in the transfer records of Regal Bancorp, a book-entry statement, or at SR Bancorp's sole discretion, a certificate representing, in the aggregate, the proper number of shares of Regal Bancorp Common Stock and/or check in the proper amount pursuant to Section 3.1.2 may be issued with respect to such Regal Bancorp Common Stock, as the case may be, to such a transferee if the Certificate formerly representing such shares of Regal Bancorp Common Stock is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid. No interest will be paid or accrued on the cash payable in lieu of fractional shares. Persons who have submitted an effective Election Form as provided in Section 3.2.3 and surrendered Certificates as provided therein shall be treated as if they have properly surrendered Certificates together with the letter of transmittal pursuant to this Section 3.3.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3.4. *Rights of Certificate Holders after the Effective Time*. The holder of a Certificate that prior to the Merger represented issued and outstanding Regal Bancorp Common Stock shall have no rights, after the Effective Time, with respect to such Regal Bancorp Common Stock except to surrender the Certificate in exchange for the Merger Consideration as provided in this Agreement. No dividends or other distributions declared after the Effective Time with respect to SR Bancorp Common Stock shall be paid to the holder of any unsurrendered Certificate until the holder thereof shall surrender such Certificate in accordance with this Section 3.3. After the surrender of a Certificate in accordance with this Section 3.3, the record holder thereof shall be entitled to receive any such dividends or other distributions, without any interest thereon, which theretofore had become payable with respect to shares of SR Bancorp Common Stock represented by such Certificate.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3.5. *Surrender by Persons Other than Record Holders*. If the Person surrendering a Certificate and signing the accompanying letter of transmittal is not the record holder thereof, then it shall be a condition of the payment of the Merger Consideration that: (i) such Certificate is properly endorsed to such Person or is accompanied by appropriate stock powers, in either case signed exactly as the name of the record holder appears on such Certificate, and is otherwise in proper form for transfer, or is accompanied by appropriate evidence of the authority of the Person surrendering such Certificate and signing the letter of transmittal to do so on behalf of the record holder; and (ii) the person requesting such exchange shall pay to the Exchange Agent in advance any transfer or other taxes required by reason of the payment to a person other than the registered holder of the Certificate surrendered, or required for any other reason, or shall establish to the satisfaction of the Exchange Agent that such tax has been paid or is not payable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3.6. *Closing of Transfer Books*. From and after the Effective Time, there shall be no transfers on the stock transfer books of Regal Bancorp of the Regal Bancorp Common Stock that was outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates representing such shares are presented for transfer to the Exchange Agent, they shall be exchanged for the Merger Consideration and canceled as provided in this Section 3.3.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3.7. *Return of Exchange Fund*. At any time following the twelve (12) month period after the Effective Time, SR Bancorp shall be entitled to require the Exchange Agent to deliver to it any portions of the Exchange Fund that had been made available to the Exchange Agent and not disbursed to holders of Certificates (including, without limitation, all interest and other income received by the Exchange Agent in respect of all funds made available to it), and thereafter such holders shall be entitled to look to SR Bancorp (subject to abandoned property, escheat and other similar laws) with respect to any Merger Consideration that may be payable upon due surrender of the Certificates held by them, any cash in lieu of fractional shares of SR Bancorp Common Stock to which such holders are entitled pursuant to Section 3.2.6 and any dividends or distributions with respect to shares of SR Bancorp Common Stock to which such holders are entitled pursuant to Section 3.3.4.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3.8. *No Liability*. None of SR Bancorp, Regal Bancorp, any of their respective Affiliates or the Exchange Agent shall be liable to any Person in respect of any Merger Consideration from the Exchange Fund delivered in good faith to a public official pursuant to any applicable abandoned property, escheat or other similar law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3.9. *Lost, Stolen or Destroyed Certificates*. In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by SR Bancorp, the posting by such Person of a bond in such customary amount as SR Bancorp may reasonably direct as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate, the Merger Consideration deliverable in respect thereof.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3.10. *Withholding.* SR Bancorp or the Exchange Agent will be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement or the transactions contemplated hereby to any holder of Regal Bancorp Common Stock such amounts as SR Bancorp (or any Affiliate thereof) or the Exchange Agent are required to deduct and withhold with respect to the making of such payment under the Code, or any applicable provision of U.S. federal, state, local or non-U.S. tax law. To the extent that such amounts are properly withheld by SR Bancorp or the Exchange Agent, such withheld amounts will be treated for all purposes of this Agreement as having been paid to the holder of the Regal Bancorp Common Stock in respect of whom such deduction and withholding were made by SR Bancorp or the Exchange Agent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*3.4. Reservation of Shares.* 

SR Bancorp shall reserve for issuance a sufficient number of shares of the SR Bancorp Common Stock to issue shares of SR Bancorp Common Stock to the Regal Bancorp stockholders in accordance with this Article III.

**ARTICLE IV** 

**REPRESENTATIONS AND WARRANTIES OF REGAL BANCORP AND REGAL** 

**BANK** 

Regal Bancorp and Regal Bank represent and warrant to SR Bancorp and Somerset Bank that the statements contained in this Article IV are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article IV), except as set forth in the REGAL BANCORP DISCLOSURE SCHEDULE, and except as to any representation or warranty that specifically relates to an earlier date. Regal Bancorp and Regal Bank have made a good faith effort to ensure that the disclosure on each schedule of the REGAL BANCORP DISCLOSURE SCHEDULE corresponds to the section referenced herein. However, for purposes of the REGAL BANCORP DISCLOSURE SCHEDULE, any item disclosed on any schedule therein is deemed to be fully disclosed with respect to all schedules under which such item may be relevant and to the extent that it is reasonably clear on the face of such schedule that such item applies to such other schedule. References to the Knowledge of Regal Bancorp shall include the Knowledge of Regal Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*4.1. Organization.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1.1. Regal Bancorp is a corporation duly organized, validly existing and in good standing under the laws of the State of New Jersey, and is duly registered as a bank holding company under the BHCA. Regal Bancorp has full corporate power and authority to own, lease and operate its properties and to conduct its business as now conducted and is duly licensed or qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which the character of the properties owned or leased by it or the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so licensed or qualified and in good standing would not have a Material Adverse Effect on Regal Bancorp.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1.2. Regal Bank is a state bank duly organized, validly existing and in good standing under New Jersey law. Regal Bank has the full corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted, and is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing would not have a Material Adverse Effect on Regal Bancorp. The deposits of Regal Bank are insured by the FDIC to the fullest extent permitted by law, and all premiums and assessments required to be paid in connection therewith have been paid when due. Regal Bank is a member in good standing of the FHLB and owns the requisite amount of stock therein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1.3. REGAL BANCORP DISCLOSURE SCHEDULE 4.1.3 lists every Regal Bancorp Subsidiary, and for each Regal Bancorp Subsidiary, its jurisdiction of incorporation. Except as set forth on REGAL BANCORP DISCLOSURE SCHEDULE 4.1.3, Regal Bancorp owns, directly or indirectly, all of the capital stock of each Regal Bancorp Subsidiary, free and clear of any liens, claims, title defects, mortgages, pledges, charges, encumbrances and security interests whatsoever ("Liens"). Each Regal Bancorp Subsidiary (other than Regal Bank) is a corporation, limited liability company or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization and each has all requisite company, partnership or corporate (as applicable) power and authority to own or lease its properties and assets and to carry on its business as now conducted. Other than shares of capital stock of the Regal Bancorp Subsidiaries listed on REGAL BANCORP DISCLOSURE SCHEDULE 4.1.3, Regal Bancorp does not own or control, directly or indirectly, or have the right to acquire directly or indirectly, an equity interest in any corporation, company, association, partnership, joint venture or other entity, except for FHLB stock, permissible equity interests held in the investment portfolios of Regal Bancorp or any Regal Bancorp Subsidiary, equity interests held by any Regal Bancorp Subsidiary in a fiduciary capacity and equity interests held in connection with the lending activities of Regal Bancorp or its Subsidiaries. There are no restrictions on the ability of any Regal Bancorp Subsidiary to pay dividends or distributions except, in the case of a Regal Bancorp Subsidiary that is a regulated entity, for restrictions on dividends or distributions generally applicable to all such regulated entities. There are no contracts, commitments, understandings, or arrangements by which any Regal Bancorp Subsidiary is or may be bound to sell or otherwise transfer any of its equity securities (other than to Regal Bancorp or a wholly owned Subsidiary of Regal Bancorp), and there are no contracts, commitments, understandings, or arrangements relating to Regal Bancorp's right to vote or to dispose of the securities of any Regal Bancorp Subsidiary.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1.4. The respective minute books of Regal Bancorp and each Regal Bancorp Subsidiary accurately record, in all material respects, all material corporate actions of their respective stockholders and boards of directors (including committees).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1.5. Prior to the date of this Agreement, Regal Bancorp has made available to Somerset Bank true and correct copies of the certificate of incorporation and bylaws of Regal Bancorp and Regal Bank.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*4.2. Capitalization.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2.1. The authorized capital stock of Regal Bancorp consists of (i) five million (5,000,000) shares of common stock, no par value per share ("Regal Bancorp Common Stock") and (ii) one million (1,000,000) shares of preferred stock, no par value ("Regal Bancorp Preferred Stock"). As of the date hereof, there are (i) 3,023,369 shares of Regal Bancorp Common Stock issued and outstanding, (ii) no shares of Regal Bancorp Preferred Stock issued and outstanding, (iii) no shares of Regal Bancorp Common Stock reserved for issuance under the Regal Bancorp Stock Benefit Plan, and (iv) no other shares of capital stock or other voting securities of Regal Bancorp are issued, reserved for issuance or outstanding. All of the issued and outstanding shares of Regal Bancorp Common Stock have been duly authorized and validly issued, and are fully paid and nonassessable and free of preemptive rights. There are no shares of Regal Bancorp Common Stock held by Regal Bancorp as treasury stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2.2. There are no outstanding equity awards that have been granted under the Regal Bancorp Stock Benefit Plan or otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2.3. Neither Regal Bancorp nor any Regal Bancorp Subsidiary is bound by any Rights of any character relating to the purchase, sale or issuance or voting of, or right to receive dividends or other distributions on any shares of Regal Bancorp Common Stock, or any other security of Regal Bancorp or any securities representing the right to vote, purchase or otherwise receive any shares of Regal Bancorp Common Stock or any other security of Regal Bancorp.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2.4. The authorized capital stock of Regal Bank consists of five million (5,000,000) shares of common stock, par value $5.00 per share ("Regal Bank Common Stock") and one million (1,000,000) shares of preferred stock, $2.00 par value per share ("Regal Bank Preferred Stock"). All the issued and outstanding shares of Regal Bank Common Stock are (i) validly issued, fully paid and nonassessable and free of preemptive rights, and (ii) owned by Regal Bancorp free and clear of any Liens. There are no shares of Regal Bank Preferred Stock issued and outstanding.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2.5. To Regal Bancorp's Knowledge, except as disclosed in Regal Bancorp's proxy statement dated April 26, 2022, no Person or "group" (as that term is used in Section 13(d)(3) of the Exchange Act), is the beneficial owner (as defined in Section 13(d) of the Exchange Act) of 5% or more of the outstanding shares of Regal Bancorp Common Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2.6. Except as set forth in REGAL BANCORP DISCLOSURE SCHEDULE 4.2.6, no bonds, debentures, trust preferred securities or other similar indebtedness of Regal Bancorp or any Regal Bancorp Subsidiary are outstanding.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*4.3. Authority; No Violation.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3.1. Regal Bancorp and Regal Bank each has full corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Regal Bancorp and Regal Bank, and the completion by Regal Bancorp and Regal Bank of the transactions contemplated hereby, up to and including the Merger and the Bank Merger, have been duly and validly approved by the Boards of Directors of Regal Bancorp and Regal Bank, respectively, and, except for approval of the stockholders of Regal Bancorp, no other corporate proceedings on the part of Regal Bancorp or Regal Bank are necessary to complete the transactions contemplated hereby, up to and including the Merger. This Agreement has been duly and validly executed and delivered by Regal Bancorp and Regal Bank, and the Bank Merger and Bank Merger Agreement has been duly and validly approved by the Board of Directors of Regal Bank, and by Regal Bancorp in its capacity as sole stockholder of Regal Bank, and subject to approval by the stockholders of Regal Bancorp of the Agreement and receipt of the required approvals of the Bank Regulators described in Section 8.4, constitutes the valid and binding obligations of Regal Bancorp and Regal Bank, enforceable against Regal Bancorp and Regal Bank in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally, and as to Regal Bank, the conservatorship or receivership provisions of the FDIA, and subject, as to enforceability, to general principles of equity (the "Enforceability Exceptions").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3.2. (A) The execution and delivery of this Agreement by Regal Bancorp and Regal Bank, (B) subject to receipt of the approvals and consents referred to in Sections 4.4 and 8.4 and compliance with any conditions contained therein, and subject to the receipt of the approval of Regal Bancorp's stockholders, the consummation of the transactions contemplated hereby, and (C) compliance by Regal Bancorp and Regal Bank with any of the terms or provisions hereof: will not (i) conflict with or result in a breach of any provision of the certificate of incorporation or bylaws of Regal Bancorp or any Regal Bancorp Subsidiary or the certificate of incorporation and bylaws of Regal Bank; (ii) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to Regal Bancorp or any Regal Bancorp Subsidiary or any of their respective properties or assets; or (iii) violate, conflict with, result in a breach of any provisions of, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of, accelerate the performance required by, or result in a right of termination or acceleration or the creation of any lien, security interest, charge or other encumbrance upon any of the properties or assets of Regal Bancorp or any Regal Bancorp Subsidiary under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other investment or obligation to which any of them is a party, or by which they or any of their respective properties or assets may be bound or affected, except for such violations, conflicts, breaches or defaults under clause (ii) or (iii) hereof which, either individually or in the aggregate, will not have a Material Adverse Effect on Regal Bancorp and the Regal Bancorp Subsidiaries taken as a whole.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*4.4. Consents.* 

Except for (A) the consents, waivers, approvals, filings and registrations from or with the Bank Regulators referred to in Section 8.4 and compliance with any conditions contained therein, (B) the filing of the Merger Registration Statement and the declaration of effectiveness of the Merger Registration Statement by the SEC, and such proxy solicitation materials and reports, schedules and forms under the Exchange Act as may be required in connection with this

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Agreement and the transactions contemplated by this Agreement, (C) the filing of the articles of merger and certificate of merger as referred to in Section 2.2 hereof, (D) such filings with Governmental Entities to satisfy the applicable requirements of the laws of states in which Regal Bancorp and the Regal Bancorp Subsidiaries are qualified or licensed to do business or state securities or "blue sky" laws, and (E) the approval of this Agreement by the requisite vote of the stockholders of Regal Bancorp, no consents, waivers or approvals of, or filings or registrations with, any Governmental Entity or other third parties are necessary, in connection with (a) the execution and delivery of this Agreement by Regal Bancorp and Regal Bank, and (b) the completion by Regal Bancorp and Regal Bank of the Merger and the Bank Merger. Regal Bancorp and Regal Bank have no reason to believe that (i) any required approvals from a Bank Regulator or other required consents or approvals will not be received, or that (ii) any Government Entity, the consent or approval of which is not required or to which a filing is not required, will object to the completion of the transactions contemplated by this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*4.5. Financial Statements and Regulatory Reports.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5.1. Regal Bancorp has previously made available to Somerset Bank the Regal Bancorp Regulatory Reports. The Regal Bancorp Regulatory Reports have been prepared in all material respects in accordance with applicable regulatory accounting principles and practices throughout the periods covered by such statements, and fairly present in all material respects, the consolidated financial position, results of operations and changes in stockholders' equity of Regal Bancorp as of and for the periods ended on the dates thereof, in accordance with applicable regulatory accounting principles applied on a consistent basis.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5.2. Regal Bancorp has previously made available to Somerset Bank the Regal Bancorp Financial Statements. The Regal Bancorp Financial Statements have been prepared in accordance with GAAP, and (including the related notes where applicable) fairly present in each case in all material respects (subject in the case of the unaudited interim statements to normal year-end adjustments), the consolidated financial position, results of operations, changes in stockholders' equity and comprehensive income (loss), and cash flows of Regal Bancorp and the Regal Bancorp Subsidiaries on a consolidated basis as of and for the respective periods ending on the dates thereof, in accordance with GAAP during the periods involved, except as indicated in the notes thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5.3. At the date of each balance sheet included in the Regal Bancorp Financial Statements and Regal Bancorp Regulatory Reports, Regal Bancorp did not have any liabilities, obligations or loss contingencies of any nature (whether absolute, accrued, contingent or otherwise) of a type required to be reflected in such Regal Bancorp Financial Statements or Regal Bancorp Regulatory Reports, or in the footnotes thereto, which are not fully reflected or reserved against therein or fully disclosed in a footnote thereto, except for (A) liabilities, obligations and loss contingencies that are not material individually or in the aggregate or that were incurred in the ordinary course of business, consistent with past practice, (B) liabilities incurred for legal, accounting, financial advisory fees, out-of-pocket and other expenses in connection with the transactions contemplated by this Agreement, and (C) liabilities, obligations and loss contingencies that are within the subject matter of a specific representation and warranty herein and subject, in the case of any unaudited statements, to normal, recurring audit adjustments and the absence of footnotes.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5.4. The records, systems, controls, data and information of Regal Bancorp are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of Regal Bancorp or its accountants (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control that would not reasonably be expected to have a material adverse effect on the system of internal accounting controls described below in this Section 4.5.4. Regal Bancorp has devised and maintained a system of internal accounting controls sufficient to provide reasonable assurance that: (A) all material transactions are executed in accordance with general or specific authorization of the Board of Directors and the duly authorized executive officers of Regal Bancorp; (B) all material transactions are recorded as necessary to permit the preparation of financial statements in conformity with GAAP consistently applied; and (C) access to the material properties and assets of Regal Bancorp is permitted only in accordance with general or specific authorization of the Board of Directors and the duly authorized executive officers of Regal Bancorp. Regal Bancorp has disclosed to Regal Bancorp's outside auditors and the audit committee of Regal Bancorp's Board of Directors any fraud, whether or not material, that involves management or other employees who have a significant role in Regal Bancorp's internal control over financial reporting. These disclosures (if any) were made in writing by management to Regal Bancorp's auditors and audit committee and a copy has previously been made available to Somerset Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5.5. Since January 1, 2019 (i) Regal Bancorp has not, nor to the Knowledge of Regal Bancorp, has any director, officer, employee, auditor, accountant or representative of Regal Bancorp, received any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of Regal Bancorp or its internal accounting controls, including any material complaint, allegation, assertion or claim that Regal Bancorp has engaged in illegal accounting or auditing practices, and (ii) no attorney representing Regal Bancorp has reported evidence of a material violation of Securities Laws, breach of fiduciary duty or similar violation with respect to Regal Bancorp, or any of its officers, directors, employees or agents to the Board of Directors of Regal Bancorp.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*4.6. Taxes.* 

Regal Bancorp and the Regal Bancorp Subsidiaries are members of the same affiliated group within the meaning of Code Section 1504(a). Regal Bancorp, or the appropriate Regal Bancorp Subsidiary, has duly filed all federal, state and material local tax returns required to be filed by or with respect to Regal Bancorp and each Regal Bancorp Subsidiary on or prior to the Closing Date (all such returns being accurate and correct in all material respects) and has duly paid or made provisions for the payment of all material federal, state and local taxes that (i) have been incurred by Regal Bancorp and any Regal Bancorp Subsidiary; (ii) are due or claimed to be due from Regal Bancorp or any Regal Bancorp Subsidiary by any taxing authority; or (iii) are due pursuant to any written tax sharing agreement, in each case on or prior to the Closing Date, other than taxes or other charges that (x) are not delinquent, (y) are being contested in good faith,

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or (z) have not yet been fully determined. As of the date of this Agreement, Regal Bancorp has received no written notice of, and to Regal Bancorp's Knowledge, there is no audit examination, deficiency assessment, tax investigation or refund litigation with respect to any taxes of Regal Bancorp or any of its Subsidiaries, and no claim has been made by any authority in a jurisdiction where Regal Bancorp or any of its Subsidiaries do not file tax returns that Regal Bancorp or any such Subsidiary is subject to taxation in that jurisdiction. Regal Bancorp and its Subsidiaries have not executed an extension or waiver of any statute of limitations on the assessment or collection of any material tax due that is currently in effect. Regal Bancorp and each of its Subsidiaries has withheld and paid all material taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party, and Regal Bancorp and each of its Subsidiaries, to Regal Bancorp's Knowledge, has timely complied with all applicable information reporting requirements under Part III, Subchapter A of Chapter 61 of the Code and similar applicable state and local information reporting requirements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*4.7. No Material Adverse Effect.* 

Regal Bancorp and the Regal Bancorp Subsidiaries, taken as a whole, have not suffered any Material Adverse Effect since December 31, 2021, and no event has occurred or circumstance arisen since that date that, in the aggregate, has had or is reasonably likely to have a Material Adverse Effect on Regal Bancorp and the Regal Bancorp Subsidiaries, taken as a whole.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*4.8. Material Contracts; Leases; Defaults.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.8.1. Except as set forth in REGAL BANCORP DISCLOSURE SCHEDULE 4.8.1, neither Regal Bancorp nor any Regal Bancorp Subsidiary is a party to or subject to: (i) any employment, consulting or severance contract or material arrangement with any past or present officer, director or employee of Regal Bancorp or any Regal Bancorp Subsidiary, except for "at will" arrangements; (ii) any plan, material arrangement or contract providing for bonuses, pensions, options, equity awards, deferred compensation, retirement payments, profit sharing or similar material arrangements for or with any past or present officers, directors or employees of Regal Bancorp or any Regal Bancorp Subsidiary; (iii) any collective bargaining agreement with any labor union relating to employees of Regal Bancorp or any Regal Bancorp Subsidiary; (iv) any agreement that by its terms limits the payment of dividends by Regal Bancorp or any Regal Bancorp Subsidiary; (v) any instrument evidencing or related to material indebtedness for borrowed money whether directly or indirectly, by way of purchase money obligation, conditional sale, lease purchase, guaranty or otherwise, in respect of which Regal Bancorp or any Regal Bancorp Subsidiary is an obligor to any person, which instrument evidences or relates to indebtedness other than deposits, repurchase agreements, bankers' acceptances, Federal Home Loan Bank advances and "treasury tax and loan" accounts established in the ordinary course of business and transactions in "federal funds" or that contains financial covenants or other restrictions (other than those relating to the payment of principal and interest when due) that would be applicable on or after the Closing Date to SR Bancorp or any SR Bancorp Subsidiary; (vi) any agreement that relates to capital expenditures and involves future payments in excess of $50,000, (vii) any agreement that relates to the disposition or

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acquisition of assets or any interest in any business enterprise outside the ordinary course of it business, (viii) any other agreement, written or oral, that obligates Regal Bancorp or any Regal Bancorp Subsidiary to pay more than $25,000 annually or to pay more than $50,000 over its remaining term, which is not terminable without cause on 60 days' or less notice without penalty or payment (other than agreements for commercially available "off-the-shelf" software), (ix) that is a lease or license with respect to any property, real or personal, whether as landlord, tenant, licensor or licensee, involving a liability or obligation as obligor in excess of $50,000 on an annual basis; (x) that is a consulting agreement or data processing, software programming or licensing contract involving the payment of more than $50,000 per annum; (xi) that provides for indemnification by Regal Bancorp or any of its Subsidiaries of any person or entity, except for contracts in the ordinary course of business providing for customary indemnification and provisions of Regal Bancorp or Regal Bank's certificate of incorporation of organization, bylaws or employment agreements with executive officers of Regal Bancorp or Regal Bank providing for indemnification; (xii) that, to Regal Bancorp's Knowledge, would prevent, materially delay or materially impede Regal Bancorp's ability to consummate the Merger or the other transactions contemplated hereby; (xiii) any agreement (other than this Agreement), contract, arrangement, commitment or understanding (whether written or oral) that restricts or limits in any material way the conduct of business by Regal Bancorp or any Regal Bancorp Subsidiary (it being understood that any non-compete or similar provision shall be deemed material); or that is not of the type described in clauses (i) through (xii) above and that involved payments by, or to, Regal Bancorp or any of its Subsidiaries in the year ended December 31, 2021, or that could reasonably be expected to involve such payments during the year ending December 31, 2022, of more than $50,000 (excluding Loans) or the termination of which would require payment by Regal Bancorp or any of its Subsidiaries in excess of $50,000.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.8.2. Each real estate lease that requires the consent of the lessor or its agent resulting from the Merger or the Bank Merger, is listed in REGAL BANCORP DISCLOSURE SCHEDULE 4.8.2 identifying the section of the lease that contains such requirement. Subject to any consents that may be required as a result of the transactions contemplated by this Agreement, to its Knowledge, neither Regal Bancorp nor any Regal Bancorp Subsidiary is in default in any material respect under any material contract, agreement, commitment, arrangement, lease, insurance policy or other instrument to which it is a party, by which its assets, business, or operations may be bound or affected, or under which it or its assets, business, or operations receive benefits, and there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute such a default.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.8.3. True and correct copies of agreements, contracts, arrangements and instruments referred to in Section 4.8.1 and 4.8.2 have been made available to Somerset Bank on or before the date hereof, are listed on REGAL BANCORP DISCLOSURE SCHEDULE 4.8.1 and 4.8.2 and are in full force and effect on the date hereof, and neither Regal Bancorp nor any Regal Bancorp Subsidiary (nor, to the Knowledge of Regal Bancorp, any other party to any such contract, arrangement or instrument) has materially breached any provision of, or is in default in any respect under any term of, any such contract, arrangement or instrument. No party to any material contract, arrangement or instrument will have the right to terminate any or all of the provisions of any such contract,

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arrangement or instrument as a result of the execution of, and the consummation of the transactions contemplated by, this Agreement. No plan, contract, employment agreement, termination agreement, or similar agreement or arrangement to which Regal Bancorp or any Regal Bancorp Subsidiary is a party or under which Regal Bancorp or any Regal Bancorp Subsidiary may be liable contains provisions that permit an employee or independent contractor to terminate it without cause and continue to accrue future benefits thereunder. No such agreement, plan, contract, or arrangement (x) provides for acceleration in the vesting of benefits or payments due thereunder upon the occurrence of a change in ownership or control of Regal Bancorp or any Regal Bancorp Subsidiary or upon the occurrence of a subsequent event; or (y) requires Regal Bancorp or any Regal Bancorp Subsidiary to provide a benefit in the form of Regal Bancorp Common Stock or determined by reference to the value of Regal Bancorp Common Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.8.4. Except as set forth in REGAL BANCORP DISCLOSURE SCHEDULE 4.8.4, since December 31, 2021, through and including the date of this Agreement, neither Regal Bancorp nor Regal Bank has (i) except for (A) normal increases for employees made in the ordinary course of business consistent with past practice, or (B) as required by applicable law or the terms of agreements listed on REGAL BANCORP DISCLOSURE SCHEDULE 4.12.1, increased the wages, salaries, compensation, pension, or other fringe benefits or perquisites payable to any executive officer, employee, or director from the amount thereof in effect as of December 31, 2021 (which amounts have been previously made available to Somerset Bank), granted any severance or termination pay, entered into any contract to make or grant any severance or termination pay (except as required under the terms of agreements or as required or permitted under the terms of severance plans or policies listed on REGAL BANCORP DISCLOSURE SCHEDULE 4.12.1, as in effect as of the date hereof), or paid any bonus other than the customary year-end bonuses in amounts consistent with past practice, (ii) granted any options to purchase shares of Regal Bancorp Common Stock, or any right to acquire any shares of its capital stock to any executive officer, director or employee, (iii) established or increased the benefits payable under any bonus, insurance, severance, deferred compensation, pension, retirement, profit sharing, stock option (including, without limitation, the granting of stock options, stock appreciation rights, performance awards, or restricted stock awards), stock purchase or other employee benefit plan, except to the extent required by law, (iv) made or changed any material election for federal or state income tax purposes, (v) made any material change in the credit policies or procedures of Regal Bancorp or Regal Bank, the effect of which was or is to make any such policy or procedure less restrictive in any material respect, (vi) made any material acquisition or disposition of any assets or properties, or entered into any contract for any such acquisition or disposition other than loans and loan commitments, (vii) entered into any lease of real or personal property requiring annual payments in excess of $50,000, other than in connection with foreclosed property or in the ordinary course of business consistent with past practice, (viii) changed any accounting methods, principles or practices of Regal Bancorp or Regal Bank affecting its assets, liabilities or businesses, including any reserving, renewal or residual method, practice or policy or (ix) suffered any strike, work stoppage, slow-down, or other labor disturbance.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*4.9. Ownership of Property; Insurance Coverage.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.9.1. Regal Bancorp and each Regal Bancorp Subsidiary has good and, as to real property, marketable title to all material assets and properties owned by Regal Bancorp or each Regal Bancorp Subsidiary in the conduct of its businesses, whether such assets and properties are real or personal, tangible or intangible, including assets and property reflected in the balance sheets contained in the Regal Bancorp Financial Statements or acquired subsequent thereto (except to the extent that such assets and properties have been disposed of in the ordinary course of business, since the date of such balance sheets), subject to no material Liens, and except for (i) those items that secure liabilities for public or statutory obligations or any discount with, borrowing from or other obligations to the FHLB, inter-bank credit facilities, or any transaction by a Regal Bancorp Subsidiary acting in a fiduciary capacity, and (ii) statutory liens for amounts not yet delinquent or that are being contested in good faith. Regal Bancorp and the Regal Bancorp Subsidiaries, as lessee, have the right under valid and existing leases of real and personal properties used by Regal Bancorp and its Subsidiaries in the conduct of their businesses to occupy or use all such properties as presently occupied and used by each of them. Such existing leases and commitments to lease constitute or will constitute operating leases for both tax and financial accounting purposes and the lease expense and minimum rental commitments with respect to such leases and lease commitments are as disclosed in all material respects in the notes to the Regal Bancorp Financial Statements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.9.2. With respect to all material agreements pursuant to which Regal Bancorp or any Regal Bancorp Subsidiary has purchased securities subject to an agreement to resell, if any, Regal Bancorp or such Regal Bancorp Subsidiary, as the case may be, has a lien or security interest (which to Regal Bancorp's Knowledge is a valid, perfected first lien) in the securities or other collateral securing the repurchase agreement, and the value of such collateral equals or exceeds the amount of the debt secured thereby.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.9.3. Regal Bancorp and each Regal Bancorp Subsidiary currently maintain insurance considered by each of them to be reasonable for their respective operations. Neither Regal Bancorp nor any Regal Bancorp Subsidiary has received notice from any insurance carrier that (i) such insurance will be canceled or that coverage thereunder will be reduced or eliminated, or (ii) premium costs with respect to such policies of insurance will be substantially increased. There are presently no material claims pending under such policies of insurance and no notices have been given by Regal Bancorp or any Regal Bancorp Subsidiary under such policies. All such insurance is valid and enforceable and in full force and effect, and within the last three years Regal Bancorp and each Regal Bancorp Subsidiary has received each type of insurance coverage for which it has applied and during such periods has not been denied indemnification for any material claims submitted under any of its insurance policies. REGAL BANCORP DISCLOSURE SCHEDULE 4.9.3 identifies all policies of insurance maintained by Regal Bancorp and each Regal Bancorp Subsidiary.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*4.10. Legal Proceedings.* 

Except as set forth in REGAL BANCORP DISCLOSURE SCHEDULE 4.10, there is no suit, action, investigation or proceeding pending or, to Regal Bancorp's Knowledge, threatened against or affecting Regal Bancorp or any Regal Bancorp Subsidiary (and to Regal Bancorp's Knowledge there are no facts or circumstances that reasonably could be expected to be the basis for any such suit, action or proceeding) (1) that involves a Governmental Entity or Bank Regulator, or (2) that, individually or in the aggregate, if determined adversely to Regal Bancorp or any such Regal Bancorp Subsidiary, would be (A) material to its business, or (B) reasonably likely to prevent or delay it from performing its obligations under, or consummating the transactions contemplated by, this Agreement. Subject to Section 12.13, there is no injunction, order, award, judgment, settlement, decree or regulatory restriction imposed upon or entered into by Regal Bancorp or any Regal Bancorp Subsidiary that, upon consummation of the Merger, would apply to the Surviving Corporation or any of its Affiliates, or to which their respective assets would be subject.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*4.11. Compliance With Applicable Law.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.11.1. Except as set forth in REGAL BANCORP DISCLOSURE SCHEDULE 4.11.1, to Regal Bancorp's Knowledge, Regal Bancorp and each Regal Bancorp Subsidiary is in compliance in all material respects with all applicable federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or decrees applicable to it, its properties, assets and deposits, its business, and its conduct of business and its relationship with its employees, including, without limitation, the Bank Secrecy Act, the USA PATRIOT Act, the Equal Credit Opportunity Act and Regulation B, the Fair Housing Act, the Community Reinvestment Act of 1977, the Fair Credit Reporting Act, the Truth in Lending Act, Regulation Z, the Home Mortgage Disclosure Act, the Fair Debt Collection Practices Act, the Electronic Fund Transfer Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, any regulations promulgated by the Consumer Financial Protection Bureau and all other applicable fair lending laws and other laws relating to discriminatory business practices and to the origination, sale and servicing of mortgage and consumer loans, and including laws relating to the privacy and security of data or information that constitutes personal data or personal information under applicable law ("Personal Data"). The Board of Directors of Regal Bank have adopted and Regal Bank have implemented an anti-money laundering program that contains adequate and appropriate customer identification verification procedures, that has not been declared ineffective by any Governmental Entity and that meets the requirements of Sections 352 and 326 of the USA PATRIOT Act and the regulations thereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.11.2. Neither Regal Bancorp nor any Regal Bancorp Subsidiary has any Knowledge of, nor has Regal Bancorp or any Regal Bancorp Subsidiary been advised of, or has any reason to believe that any facts or circumstances exist, which would cause Regal Bancorp or any Regal Bancorp Subsidiary: (a) to be deemed not to be in satisfactory compliance with the CRA, and the regulations promulgated thereunder, or to be assigned a rating for CRA purposes by Bank Regulators of lower than "satisfactory"; (b) to be deemed to be operating in violation of the federal Bank Secrecy Act, as amended, and its implementing regulations, the USA PATRIOT Act, and the regulations promulgated

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thereunder, any order issued with respect to anti-money laundering by the U.S. Department of the Treasury's Office of Foreign Assets Control, or any other applicable anti-money laundering statute, rule or regulation; or (c) to be deemed not to be in satisfactory compliance with the applicable requirements contained in any federal and state privacy or data security laws and regulations. Neither Regal Bancorp nor any Regal Bancorp Subsidiary is a party to any agreement with any individual or group regarding CRA matters.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.11.3. Regal Bancorp (including Regal Bank) maintains a written information privacy and security program that maintains reasonable measures to protect the privacy, confidentiality and security of all Personal Data against any (i) loss or misuse of Personal Data, (ii) unauthorized or unlawful operations performed upon Personal Data, or (iii) other act or omission that compromises the security or confidentiality of Personal Data (clauses (i) through (iii), a "Security Breach"). To the Knowledge of Regal Bancorp, neither Regal Bancorp nor any Regal Bancorp Subsidiary has experienced any Security Breach that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Regal Bancorp. To the Knowledge of Regal Bancorp, there are no data security or other technological vulnerabilities with respect to its information technology systems or networks that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on Regal Bancorp.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.11.4. Regal Bancorp and each Regal Bancorp Subsidiary has all material permits, licenses, authorizations, orders and approvals of, and has made all filings, applications and registrations with, all Governmental Entities and Bank Regulators that are required in order to permit it to own or lease its properties and to conduct its business as presently conducted, except where the failure to hold such permits, licensees, authorizations, orders or approvals, or the failure to make such filings, applications or registrations would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Regal Bancorp or Regal Bank; all such permits, licenses, certificates of authority, orders and approvals are in full force and effect in all material respects and, to the Knowledge of Regal Bancorp, no suspension or cancellation of any such permit, license, certificate, order or approval is threatened or will result from the consummation of the transactions contemplated by this Agreement, subject to obtaining the approvals referenced in Section 8.4.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.11.5. Except as set forth in REGAL BANCORP DISCLOSURE SCHEDULE 4.11.5 and subject to Section 12.13, neither Regal Bancorp nor any Regal Bancorp Subsidiary is, or since January 1, 2019 has been, subject to any cease-and-desist or other order or enforcement action issued by, or a party to any written agreement, consent agreement or memorandum of understanding with, or a party to any commitment letter or similar undertaking to, or subject to any order or directive by, or ordered to pay any civil money penalty by, any Bank Regulator (a "Regulatory Agreement") or has adopted any board resolutions at the request of any Bank Regulator. Subject to Section 12.13, and except as set forth in REGAL BANCORP DISCLOSURE SCHEDULE 4.11.5, for the period beginning January 1, 2019, neither Regal Bancorp nor any Regal Bancorp Subsidiary has received any written notification or to Regal Bancorp's Knowledge any other communication from any Bank Regulator (i) asserting that Regal Bancorp or any Regal Bancorp Subsidiary is not in material compliance with any of the statutes, regulations or

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ordinances that such Bank Regulator enforces; (ii) threatening to revoke any license, franchise, permit or governmental authorization that is material to Regal Bancorp or any Regal Bancorp Subsidiary; (iii) requiring or threatening to require Regal Bancorp or any Regal Bancorp Subsidiary, or indicating that Regal Bancorp or any Regal Bancorp Subsidiary may be required, to enter into a Regulatory Agreement; or (iv) directing, restricting or limiting, or purporting to direct, restrict or limit, in any manner the operations of Regal Bancorp or any Regal Bancorp Subsidiary, including without limitation any restriction on the payment of dividends. Neither Regal Bancorp nor any Regal Bancorp Subsidiary has consented to or entered into any currently effective Regulatory Agreement. Subject to Section 12.13, there are no unresolved violations, criticisms or exceptions by any Governmental Entity with respect to any report or statement relating to any examinations of Regal Bancorp, Regal Bank or any Regal Bancorp Subsidiary. The most recent regulatory rating given to Regal Bank as to compliance with the Community Reinvestment Act is satisfactory or better.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.11.6. Neither Regal Bancorp nor any Regal Bancorp Subsidiary, or to the Knowledge of Regal Bancorp, any director, officer, employee, agent or other person acting on behalf of Regal Bancorp or any Regal Bancorp Subsidiary has, directly or indirectly, (i) used any funds of Regal Bancorp or any Regal Bancorp Subsidiary for unlawful contributions, unlawful gifts, unlawful entertainment or other expenses relating to political activity, (ii) made any unlawful payment to foreign or domestic governmental officials or employees or to foreign or domestic political parties or campaigns from funds of Regal Bancorp or any Regal Bancorp Subsidiary, (iii) violated any provision that would result in the violation of the Foreign Corrupt Practices Act of 1977, as amended, or any similar law, (iv) established or maintained any unlawful fund of monies or other assets of Regal Bancorp or any Regal Bancorp Subsidiary, (v) made any fraudulent entry on the books or records of Regal Bancorp or any Regal Bancorp Subsidiary, or (vi) made any unlawful bribe, unlawful rebate, unlawful payoff, unlawful influence payment, unlawful kickback or other unlawful payment to any person, private or public, regardless of form, whether in money, property or services, to obtain favorable treatment in securing business, to obtain special concessions for Regal Bancorp or any Regal Bancorp Subsidiary, to pay for favorable treatment for business secured or to pay for special concessions already obtained for Regal Bancorp or any Regal Bancorp Subsidiary, or is currently subject to any United States sanctions administered by the Office of Foreign Assets Control of the United States Treasury Department, except, in each case, as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Regal Bancorp and the Regal Bancorp Subsidiaries, taken as a whole.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*4.12. Employee Benefit Plans.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.12.1. REGAL BANCORP DISCLOSURE SCHEDULE 4.12.1 includes a list of all existing bonus, incentive, deferred compensation, pension, retirement, profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock purchase, restricted stock, stock option, stock appreciation, phantom stock, severance, welfare and fringe benefit plans, employment, severance and change in control agreements and all other material benefit practices, policies and arrangements maintained by Regal Bancorp or any Regal Bancorp Subsidiary in which any employee or former employee, consultant or former

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consultant or director or former director of Regal Bancorp or any Regal Bancorp Subsidiary participates or to which any such employee, consultant or director is a party or is otherwise entitled to receive benefits (the "Regal Bancorp Compensation and Benefit Plans"). Neither Regal Bancorp nor any of its Subsidiaries has any commitment to create any additional Regal Bancorp Compensation and Benefit Plan or to materially modify, change or renew any existing Regal Bancorp Compensation and Benefit Plan (any modification or change that increases the cost of such plans would be deemed material), except as required to maintain the qualified status thereof. Regal Bancorp has made available to Somerset Bank true and correct copies of the Regal Bancorp Compensation and Benefit Plans.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.12.2. Each Regal Bancorp Compensation and Benefit Plan has been operated and administered in all material respects in accordance with its terms and with applicable law, including, but not limited to, ERISA, the Code, the Age Discrimination in Employment Act, COBRA, the Health Insurance Portability and Accountability Act and any regulations or rules promulgated thereunder, and all material filings, disclosures and notices required by ERISA, the Code, the Age Discrimination in Employment Act and any other applicable law have been timely made or any interest, fines, penalties or other impositions for late filings have been paid in full. Each Regal Bancorp Compensation and Benefit Plan that is an "employee pension benefit plan" within the meaning of Section 3(2) of ERISA (a "Pension Plan") and that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the IRS, and to the Knowledge of Regal Bancorp, no circumstances exist that are reasonably likely to result in revocation of any such favorable determination letter. There is no material pending or, to the Knowledge of Regal Bancorp, threatened action, suit or claim relating to any Regal Bancorp Compensation and Benefit Plan (other than routine claims for benefits). Neither Regal Bancorp nor any Regal Bancorp Subsidiary has engaged in a transaction, or omitted to take any action, with respect to any Regal Bancorp Compensation and Benefit Plan that would reasonably be expected to subject Regal Bancorp or any Regal Bancorp Subsidiary to an unpaid tax or penalty imposed by either Section 4975 of the Code or Section 502 of ERISA.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.12.3. Neither Regal Bancorp nor any of its ERISA Affiliates has ever maintained, contributed to, or been required to contribute to or had any liability (whether contingent or otherwise) or obligation with respect to: (i) any employee benefit plan that is or was subject to Title IV of ERISA, Section 412 of the Code, or Section 302 of ERISA, (ii) a Multiemployer Plan (as such term is defined in Section 3(37) of ERISA, (iii) any funded welfare benefit plan within the meaning of Section 419 of the Code, (iv) any "multiple employer plan" (within the meaning of Section 210 of ERISA or Section 413(c) of the Code), or (v) any "multiple employer welfare arrangement" (as such term is defined in Section 3(40) of ERISA), and neither the Regal Bancorp nor any ERISA Affiliate has ever incurred any liability under Title IV of ERISA that has not been paid in full. An "ERISA Affiliate" of one entity means any other entity, trade or business that is, or at any applicable time was, a member of a group described in Sections 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes the first entity.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.12.4. All material contributions required to be made under the terms of any Regal Bancorp Compensation and Benefit Plan or ERISA Affiliate Plan to which Regal Bancorp or any Regal Bancorp Subsidiary is a party or a sponsor have been timely made, and all anticipated contributions and funding obligations are accrued on Regal Bancorp's consolidated financial statements to the extent required by GAAP. Regal Bancorp and its Subsidiaries have expensed and accrued as a liability the present value of future benefits under each applicable Regal Bancorp Compensation and Benefit Plan for financial reporting purposes to the extent required by GAAP.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.12.5. Neither Regal Bancorp nor any Regal Bancorp Subsidiary has any obligations to provide retiree health, life insurance, disability insurance, or other retiree death benefits under any Regal Bancorp Compensation and Benefit Plan, other than benefits mandated by Section 4980B of the Code. There has been no communication to employees by Regal Bancorp or any Regal Bancorp Subsidiary that would reasonably be expected to promise or guarantee such employees retiree health, life insurance, disability insurance, or other retiree death benefits.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.12.6. Regal Bancorp and its Subsidiaries do not maintain any Regal Bancorp Compensation and Benefit Plans covering employees who are not United States residents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.12.7. With respect to each Regal Bancorp Compensation and Benefit Plan that is a Pension Plan that is intended to be qualified under Section 401(a) of the Code, Regal Bancorp has provided or made available to Somerset Bank copies of the: (A) trust instruments and insurance contracts; (B) two most recent Forms 5500 filed with the IRS; (C) most recent actuarial report and financial statement; (D) most recent summary plan description; (E) most recent determination letter issued by the IRS; (F) Form 5310 or Form 5330 filed with the IRS within the last two years; and (G) most recent nondiscrimination tests performed under ERISA and the Code (including 401(k) and 401(m) tests).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.12.8. Except as disclosed in REGAL BANCORP DISCLOSURE SCHEDULE 4.12.8, the consummation of the Merger will not, directly or indirectly (including, without limitation, as a result of any termination of employment or service at any time prior to or following the Effective Time) (A) entitle any employee, consultant or director to any payment or benefit (including severance pay, change in control benefit, or similar compensation) or any increase in compensation, (B) result in the vesting or acceleration of any benefits under any Regal Bancorp Compensation and Benefit Plan or (C) result in any material increase in benefits payable under any Regal Bancorp Compensation and Benefit Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.12.9. Neither Regal Bancorp nor any Regal Bancorp Subsidiary maintains any compensation plans, programs or arrangements under which (i) any payment is reasonably likely to become non-deductible, in whole or in part, for tax reporting purposes as a result of the limitations under Section 162(m) of the Code and the regulations issued thereunder or (ii) any payment is reasonably likely to become taxable or result in any penalties under Section 409A of the Code.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.12.10. Except as disclosed in REGAL BANCORP DISCLOSURE SCHEDULE 4.12.10, the consummation of the Merger will not, directly or indirectly (including without limitation, as a result of any termination of employment or service at any time prior to or following the Effective Time), entitle any current or former employee, director or independent contractor of Regal Bancorp or any Regal Bancorp Subsidiary to any actual or deemed payment (or benefit) that could constitute a "parachute payment" (as such term is defined in Section 280G of the Code).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.12.11. There are no restricted stock, restricted stock units, stock options, stock appreciation or similar awards or rights, earned dividends or dividend equivalents outstanding under the Regal Bancorp Compensation and Benefit Plans or otherwise as of the date hereof and none will be granted, awarded, or credited after the date hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.12.12. REGAL BANCORP DISCLOSURE SCHEDULE 4.12.12 sets forth, as of the payroll date immediately preceding the date of this Agreement, a list of the full names of all employees of Regal Bank or Regal Bancorp, their title and rate of salary, their date of hire and any changes in their rate of salary or title effected since December 31, 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.12.13. REGAL BANCORP DISCLOSURE SCHEDULE 4.12.13 lists all bank-owned life insurance ("BOLI") policies. The BOLI reflected on Regal Bancorp's balance sheet is, and will at the Effective Time be, with the exception of the underlying split-dollar arrangements as set forth in REGAL BANCORP DISCLOSURE SCHEDULE 4.12.13 *,* owned by Regal Bancorp or its Subsidiary, as the case may be, free and clear of any claims thereon by the officers, directors or members of their families. Regal Bancorp and its Subsidiaries have obtained the informed, written consent of each employee in whose name BOLI has been purchased. Regal Bancorp and its Subsidiaries have taken all necessary actions necessary to comply with applicable law in connection with its purchase of BOLI. A breakdown of the estimated cash surrender values for each policy, the purpose for which each policy was purchased, the beneficiaries under each policy and a list of the lives insured thereunder has been made available to Somerset Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*4.13. Brokers, Finders and Financial Advisors.* 

Neither Regal Bancorp nor any Regal Bancorp Subsidiary, nor any of their respective officers, directors, employees or agents, has employed any broker, finder or financial advisor in connection with the transactions contemplated by this Agreement, or incurred any liability or commitment for any fees or commissions to any such person in connection with the transactions contemplated by this Agreement except for the retention of The Kafafian Group, Inc. by Regal Bancorp and the fee payable pursuant thereto. A true and complete copy of the engagement agreement with The Kafafian Group, Inc. has been made available to SR Bancorp.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*4.14. Environmental Matters.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.14.1. Except as set forth in REGAL BANCORP DISCLOSURE SCHEDULE 4.14:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) To Regal Bancorp's Knowledge, no real property (including buildings or other structures) currently or formerly owned, leased or operated by Regal Bancorp or any Regal Bancorp Subsidiary has had any Release of any Materials of Environmental Concern in contravention of Environmental Laws.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) To Regal Bancorp's Knowledge, each of Regal Bancorp and each Regal Bancorp Subsidiary is in compliance, in all material respects, with applicable Environmental Laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) Neither Regal Bancorp nor any Regal Bancorp Subsidiary has received (i) any written notice, demand letter, or claim alleging any material violation of, any Environmental Laws or (ii) any written request for information pursuant to Environmental Laws, which, in each case, either remains pending or unresolved, as of the Closing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D) Neither Regal Bancorp nor any Regal Bancorp Subsidiary is, or has been, subject to any order, decree, or injunction relating to a violation of or allegation of liability under any Environmental Laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(E) Regal Bancorp has previously made available to SR Bancorp any environmental reports, studies, audits, records, sampling data, site assessments and other similar documents prepared within the last five (5) years that relate to environmental matters concerning any current or formerly owned, operated or leased real property.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(F) There is no litigation pending or, to the Knowledge of Regal Bancorp, threatened against Regal Bancorp or any Regal Bancorp Subsidiary relating to any property currently or formerly owned, leased or operated by Regal Bancorp or any Regal Bancorp Subsidiary before any court, or Governmental Entity (i) for alleged noncompliance with any Environmental Laws or (ii) relating to the Release of any Materials of Environmental Concern in contravention of Environmental Laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*4.15. Loan Portfolio and Investment Securities.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.15.1. The allowance for loan losses reflected in Regal Bancorp's audited consolidated statement of financial condition at December 31, 2021 was, and the allowance for loan losses shown on the balance sheets in Regal Bancorp's Securities Documents for periods ending after December 31, 2021 will be, adequate, as of the dates thereof, under GAAP.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.15.2. REGAL BANCORP DISCLOSURE SCHEDULE 4.15.2 sets forth a listing, as of June 30, 2022, by account, of: (A) all loans (including loan participations, which shall be separately identified) of Regal Bank or any other Regal Bancorp Subsidiary that have been accelerated during the past twelve months; (B) all loan commitments or lines of credit of Regal Bank or any other Regal Bancorp Subsidiary that have been terminated by Regal Bank or any other Regal Bancorp Subsidiary during the past twelve months by reason of a default or adverse developments in the condition of the borrower or other events or circumstances affecting the credit of the borrower; (C) all loans, lines of credit and loan commitments as to which Regal Bank or any other Regal Bancorp Subsidiary has given written notice of its intent to terminate during the past twelve months; (D) with respect to all commercial loans (including commercial real estate loans), all notification letters and other written communications from Regal Bank or any other Regal Bancorp Subsidiary to any of their respective borrowers, customers or other parties during the past twelve months wherein Regal Bank or any other Regal Bancorp Subsidiary has requested or demanded that actions

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be taken to correct existing defaults or facts or circumstances that may become defaults (other than with regard to requests or demands for current financial information from borrowers); (E) each borrower, customer or other party that has notified Regal Bank or any other Regal Bancorp Subsidiary during the past twelve months of, or has asserted against Regal Bank or any other Regal Bancorp Subsidiary, in each case in writing, any "lender liability" or similar claim, and, to the Knowledge of Regal Bank, each borrower, customer or other party that has given Regal Bank or any other Regal Bancorp Subsidiary any oral notification of, or orally asserted to or against Regal Bank or any other Regal Bancorp Subsidiary, any such claim; (F) all loans, (1) that are contractually past due 60 days or more in the payment of principal and/or interest, (2) that are on non-accrual status, (3) that are contractually past due 90 days or more in the payment of principal and/or interest days or more and still accruing; (4) classified as troubled debt restructurings; (5) that as of the date of this Agreement are classified as "Other Loans Specially Mentioned," "Special Mention," "Substandard," "Doubtful," "Loss," "Classified," "Criticized," "Watch list" or words of similar import, together with the principal amount of and accrued and unpaid interest on each such loan and the identity of the obligor thereunder, (5) where a reasonable doubt exists as to the timely future collectability of principal and/or interest, whether or not interest is still accruing or the loans are less than 90 days past due, (6) where, during the past three years, the interest rate terms have been reduced and/or the maturity dates have been extended subsequent to the agreement under which the loan was originally created due to concerns regarding the borrower's ability to pay in accordance with such initial terms (other than loans for which deferrals were granted under the terms of Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act or similar regulatory guidance), or (7) where a specific reserve allocation exists in connection therewith, and (G) all assets classified by Regal Bank or any Regal Bank Subsidiary as real estate acquired through foreclosure or in lieu of foreclosure, including in-substance foreclosures, and all other assets currently held that were acquired through foreclosure or in lieu of foreclosure. REGAL BANCORP DISCLOSURE SCHEDULE 4.15.2 may exclude any individual loan with a principal outstanding balance of less than $50,000, provided that REGAL BANCORP DISCLOSURE SCHEDULE 4.15.2 includes, for each category described, the aggregate amount of individual loans with a principal outstanding balance of less than $50,000 that have been excluded.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.15.3. All loans receivable (including discounts) and accrued interest entered on the books of Regal Bancorp and the Regal Bancorp Subsidiaries arose out of bona fide arm's-length transactions, were made for good and valuable consideration in the ordinary course of business. To the Knowledge of Regal Bancorp, the loans, discounts and the accrued interest reflected on the books of Regal Bancorp and the Regal Bancorp Subsidiaries are subject to no defenses, set-offs or counterclaims (including, without limitation, those afforded by usury or truth-in-lending laws), subject to the Enforceability Exceptions. Except for loans pledged for collateral for FHLB borrowings or government deposits, all such loans are owned by Regal Bancorp or the appropriate Regal Bancorp Subsidiary free and clear of any Liens.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.15.4. (a) The notes and other evidences of indebtedness evidencing the loans described above, and all pledges, mortgages, deeds of trust and other collateral documents or security instruments relating thereto are, in all material respects, valid, true and genuine, and what they purport to be, (b) to the extent carried on the books and records of Regal Bancorp and any Regal Bancorp Subsidiary as secured loans, the loans described above have been secured by valid charges, mortgages, pledges, security interests, restrictions, claims, liens or encumbrances, as applicable, which have been perfected and (c) each loan described above is the legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms, (except as may be limited by the Enforceability Exceptions).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.15.5. Regal Bancorp and each Regal Bancorp Subsidiary has good and marketable title to all securities owned by it, free and clear of any liens, except to the extent such securities are pledged in the ordinary course of business to secure obligations of Regal Bancorp or such Regal Bancorp Subsidiary. Such securities are valued on the books of Regal Bancorp in accordance with GAAP in all material respects. Regal Bancorp and each Regal Bancorp Subsidiary employs investment, securities, risk management and other policies, practices and procedures that Regal Bancorp believes are prudent and reasonable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.15.6. Neither Regal Bancorp nor Regal Bank is a party to any agreement or arrangement with (or otherwise obligated to) any Person that obligates Regal Bancorp or Regal Bank to repurchase from that Person any loan or other asset solely on account of a payment default by the obligor on any such loan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*4.16. Related Party Transactions.* 

Except as set forth in REGAL BANCORP DISCLOSURE SCHEDULE 4.16, neither Regal Bancorp nor any Regal Bancorp Subsidiary is a party, directly or indirectly, to any transaction (including any loan or other credit accommodation but excluding deposit relationships in the ordinary course of business) with any current or former Affiliate of Regal Bancorp or of any Regal Bancorp Subsidiary). All such transactions set forth in REGAL BANCORP DISCLOSURE SCHEDULE 4.16 (a) were made in the ordinary course of business, (b) were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other Persons, and (c) did not involve more than the normal risk of collectability or present other unfavorable features. No loan or credit accommodation to any Affiliate of Regal Bancorp or any Regal Bancorp Subsidiary is presently in default or, during the three-year period prior to the date of this Agreement, has been in default or has been restructured, modified or extended. Neither Regal Bancorp nor any Regal Bancorp Subsidiary has been notified that principal and interest with respect to any such loan or other credit accommodation will not be paid when due or that the loan grade classification accorded such loan or credit accommodation by Regal Bancorp is inappropriate. All transactions between Regal Bank or any of its Subsidiaries and any of their respective Affiliates comply in all material respects, to the extent applicable, with Regulation W of the FRB.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*4.17. Schedule of Termination Benefits.* 

REGAL BANCORP DISCLOSURE SCHEDULE 4.17 includes a schedule of all termination benefits and related payments that would be payable to the individuals identified thereon, under any and all employment agreements, special termination agreements, change in control agreements, supplemental executive retirement plans, deferred bonus plans, deferred

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compensation plans, salary continuation plans, or any compensation arrangement, or other pension benefit or welfare benefit plan maintained by Regal Bancorp or any Regal Bancorp Subsidiary for the benefit of officers or directors of Regal Bancorp or any Regal Bancorp Subsidiary (the "Benefits Schedule") other than benefits payable under a Pension Plan that is tax-qualified under Code Section 401(a), assuming their employment or service is terminated as of December 31, 2022 and the Closing Date occurs on such date and based on the other assumptions specified in such schedule. No other individuals are entitled to benefits under any such plans.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*4.18. Deposits.* 

Except as set forth in REGAL BANCORP DISCLOSURE SCHEDULE 4.18, none of the deposits of Regal Bancorp or any Regal Bancorp Subsidiary is a "brokered deposit" as defined in 12 CFR Section 337.6(a)(2).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*4.19. Antitakeover Provisions Inapplicable; Required Vote of Stockholders.* 

The Merger and the transactions contemplated hereby are exempt from Section 14A:10A of the NJBCA (the New Jersey Shareholders Protection Act). The affirmative vote of a majority of the votes cast by holders of Regal Bancorp Common Stock entitled to vote on the Agreement and the Merger is required to approve this Agreement and the Merger under Regal Bancorp's certificate of incorporation and the NJBCA.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*4.20. Registration Obligations.* 

Neither Regal Bancorp nor any Regal Bancorp Subsidiary is under any obligation, contingent or otherwise, which will survive the Effective Time by reason of any agreement to register any transaction involving any of its securities under the Securities Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*4.21. Derivative Transactions.* 

Except for those Derivative Transactions and other instruments legally purchased or entered into in the ordinary course of business consistent with past practice, consistent with regulatory requirements and listed (as of the date hereof) on REGAL BANCORP DISCLOSURE SCHEDULE 4.21, neither Regal Bancorp, Regal Bank nor any Regal Bancorp Subsidiary is a party to or has agreed to enter into any Derivative Transaction or owns securities that (A) are referred to generically as "structured notes," "high risk mortgage derivatives," "capped floating rate notes" or "capped floating rate mortgage derivatives" or (B) are likely to have changes in value as a result of interest or exchange rate changes that significantly exceed normal changes in value attributable to interest or exchange rate changes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*4.22. Fairness Opinion.* 

The Board of Directors of Regal Bancorp has received an opinion from The Kafafian Group, Inc. to the effect that, subject to the terms, conditions and qualifications set forth therein, as of the date thereof, the Merger Consideration to be received by the stockholders of Regal Bancorp pursuant to this Agreement is fair to such stockholders from a financial point of view. Such opinion has not been amended or rescinded as of the date of this Agreement.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*4.23. Trust Accounts.* 

Neither Regal Bancorp, Regal Bank nor any Regal Bancorp Subsidiary conducts any trust business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*4.24. Securities Documents.* 

Regal Bancorp has made available to SR Bancorp copies of its (i) proxy statement and annual report provided to stockholders in 2022 and for the past three completed fiscal years, (ii) all other communication provided to its stockholders during the course of 2022 and the prior three completed fiscal years.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*4.25. Intellectual Property.* 

Regal Bancorp and each Regal Bancorp Subsidiary owns, or to Regal Bancorp's Knowledge, possesses valid and binding licenses and other rights (subject to expirations in accordance with their terms) to use all patents, copyrights, trade secrets, trade names, servicemarks and trademarks used in their business, each without payment (except as set forth in REGAL BANCORP DISCLOSURE SCHEDULE 4.25), and neither Regal Bancorp, Regal Bank nor any Regal Bancorp Subsidiary has received any notice of conflict with respect thereto that asserts the rights of others. Regal Bancorp and each Regal Bancorp Subsidiary have performed all the obligations required to be performed, and are not in default in any respect, under any contract, agreement, arrangement or commitment relating to any of the foregoing. To the Knowledge of Regal Bancorp, the conduct of the business of Regal Bancorp and each Regal Bancorp Subsidiary as currently conducted or proposed to be conducted does not, in any respect, infringe upon, dilute, misappropriate or otherwise violate any intellectual property owned or controlled by any third party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*4.26. Labor Matters.* 

There are no labor or collective bargaining agreements to which Regal Bancorp or any Regal Bancorp Subsidiary is a party. To the Knowledge of Regal Bancorp, there is no union organizing effort pending or, to the Knowledge of Regal Bancorp, threatened against Regal Bancorp or any Regal Bancorp Subsidiary. There is no labor strike, labor dispute (other than routine employee grievances that are not related to union employees), work slowdown, stoppage or lockout pending or, to the Knowledge of Regal Bancorp, threatened against Regal Bancorp or any Regal Bancorp Subsidiary. There is no unfair labor practice proceeding pending or, to the Knowledge of Regal Bancorp, threatened against Regal Bancorp or any Regal Bancorp Subsidiary (other than routine employee grievances that are not related to union employees). To the Knowledge of Regal Bancorp, Regal Bancorp and each Regal Bancorp Subsidiary is in compliance in all material respects with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, and is not engaged in any unfair labor practice.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*4.27. Regal Bancorp Information Supplied.* 

The information relating to Regal Bancorp, the Regal Bancorp Subsidiaries and its and their respective directors and officers that is provided by Regal Bancorp or its representatives and is specifically called for inclusion in the Proxy Statement-Prospectus, Merger Registration Statement, or in any other document filed with any Bank Regulator, the SEC or other Governmental Entity in connection herewith, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they are made, not misleading.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*4.28. No Other Representations or Warranties.* 

Except for the representations and warranties made by Regal Bancorp and Regal Bank in this Article IV, neither Regal Bancorp, Regal Bank nor any other Person makes any express or implied representation or warranty with respect to Regal Bancorp, Regal Bank and their respective businesses, operations, assets, liabilities, conditions (financial or otherwise) or prospects, and Regal Bancorp and Regal Bank hereby disclaim any such other representations or warranties. In particular, without limiting the foregoing disclaimer, neither Regal Bancorp, Regal Bank nor any other Person makes or has made any representation or warranty to SR Bancorp, Somerset Bank or any of its Affiliates or representatives with respect to (i) any financial projection, forecast, estimate, budget or prospective information relating to Regal Bancorp, the Regal Bancorp Subsidiaries, or any of their businesses, or (ii) except for the representations and warranties made by Regal Bancorp and Regal Bank in this Article IV, any oral or written information presented to SR Bancorp or Somerset Bank or any of their Affiliates or representatives in the course of their due diligence investigation of Regal Bancorp and Regal Bank, the negotiation of this Agreement or in the course of the transactions contemplated hereby. SR Bancorp and Somerset Bank acknowledge and agree that neither Regal Bancorp, Regal Bank nor any other Person has made or is making any express or implied representation or warranty other than those contained in Article IV.

**ARTICLE V** 

**REPRESENTATIONS AND WARRANTIES OF SR BANCORP AND SOMERSET** 

**SAVINGS** 

SR Bancorp and Somerset Bank represent and warrant to Regal Bancorp and Regal Bank that the statements contained in this Article V are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article V), except as set forth in the SR BANCORP DISCLOSURE SCHEDULE and except to any representation or warranty that specifically relates to an earlier date. SR Bancorp has made a good faith effort to ensure that the disclosure on each schedule of the SR BANCORP DISCLOSURE SCHEDULE corresponds to the section referenced herein. However, for purposes of the SR BANCORP DISCLOSURE SCHEDULE, any item disclosed on any schedule therein is deemed to be fully disclosed with respect to all schedules under which such item may be relevant as and to the extent that it is reasonably clear on the face of such schedule that such item applies to such other schedule. References to the Knowledge of SR Bancorp shall include the Knowledge of Somerset Bank.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*5.1. Organization.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1.1. SR Bancorp is a corporation duly organized, validly existing and in good standing under the laws of the State of Maryland, and upon completion of the Conversion and Charter Conversion, will be duly registered as a bank holding company under the BHCA (and if the Charter Conversion is not completed, will be duly registered as a savings and loan holding company under the HOLA). SR Bancorp has, and upon completion of the Conversion will have, full corporate power and authority to own, lease and operate its properties and to conduct its business. SR Bancorp is, and upon completion of the Conversion will be, duly qualified or licensed as a foreign corporation to transact business and is in good standing in each jurisdiction in which the character of the properties owned or leased by it or the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so qualified or licensed and in good standing would not have a Material Adverse Effect on SR Bancorp. SR Bancorp has no Subsidiaries and upon completion of the Conversion will have one direct Subsidiary, Somerset Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1.2. Somerset Bank is a savings association in mutual form and is duly organized, validly existing and in good standing under New Jersey law. Upon completion of the Conversion, Somerset Bank will be a savings association in stock form and will be duly organized, validly existing and in good standing under New Jersey law. Upon the Charter Conversion, Somerset Bank will be a commercial bank in stock form and will be duly organized, validly existing and in good standing under New Jersey law. Somerset Bank has the full corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted, and is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing would not have a Material Adverse Effect on Somerset Bank. The deposits of Somerset Bank are insured by the FDIC to the fullest extent permitted by law, and all premiums and assessments required to be paid in connection therewith have been paid when due. Somerset Bank is a member in good standing of the FHLB and owns the requisite amount of stock therein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1.3. SR BANCORP DISCLOSURE SCHEDULE 5.1.3 lists every Somerset Bank Subsidiary, and for each Somerset Bank Subsidiary, its jurisdiction of incorporation. Somerset Bank owns all the capital stock of each Somerset Bank Subsidiary, free and clear of any Liens. Each Somerset Bank Subsidiary is a corporation, limited liability company or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization and each has all requisite company, partnership or corporate (as applicable) power and authority to own or lease its properties and assets and to carry on its business as now conducted. Other than shares of capital stock of the Somerset Bank Subsidiaries listed on SR BANCORP DISCLOSURE SCHEDULE 5.1.3, Somerset Bank does not own or control, directly or indirectly, or have the right to acquire directly or indirectly, an equity interest in any corporation, company, association, partnership, joint venture or other entity, except for FHLB stock, permissible equity interests held in the investment portfolios of Somerset Bank or any Somerset Bank Subsidiary, equity interests held by any Somerset Bank Subsidiary in a fiduciary capacity and equity interests held in connection with the lending activities of Somerset Bank. There are no restrictions on the ability of any Somerset Bank Subsidiary to pay dividends or distributions.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1.4. The respective minute books of Somerset Bank and each Somerset Bank Subsidiary accurately record, in all material respects, all material corporate actions of its board of directors (including committees).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1.5. Prior to the date of this Agreement, Somerset Bank has made available to Regal Bancorp true and correct copies of the certificate of incorporation and bylaws of Somerset Bank, and the Articles of Incorporation and bylaws of SR Bancorp.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*5.2. Capitalization.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2.1. The authorized capital stock of SR Bancorp consists of (i) fifty million (50,000,000) shares of common stock, $0.01 per share and (ii) five million (5,000,000) shares of preferred stock, $0.01 per share. As of the date hereof, no shares of SR Bancorp common stock or preferred stock were outstanding. Somerset Bank has no authorized capital stock as of the date of this Agreement. Neither SR Bancorp, Somerset Bank nor any Somerset Bank Subsidiary has or is bound by any Rights of any character relating to the purchase, sale or issuance or voting of, or right to receive dividends or other distributions on any shares of SR Bancorp Common Stock, or any other security of SR Bancorp or any securities representing the right to vote, purchase or otherwise receive any shares of SR Bancorp Common Stock or any other security of SR Bancorp, other than, as to SR Bancorp, subscription rights issuable in connection with the Conversion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2.2. Following completion of the Conversion, SR Bancorp will own of record and beneficially all of the capital stock of Somerset Bank free and clear of any Lien.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*5.3. Authority; No Violation.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3.1. SR Bancorp and Somerset Bank each has all full corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby, and each has full corporate power and authority to consummate the Conversion. The execution and delivery of this Agreement by SR Bancorp and Somerset Bank and the completion by SR Bancorp and Somerset Bank of the transactions contemplated hereby, up to and including the Conversion, the Charter Conversion, the Merger and the Bank Merger, have been duly and validly approved by the Boards of Directors of SR Bancorp and Somerset Bank, respectively, and, except for approval of the Conversion by the Depositors of Somerset Bank, no other corporate proceedings on the part of SR Bancorp or Somerset Bank are necessary to complete the transactions contemplated hereby, up to and including the Conversion, the Charter Conversion and the Merger. This Agreement has been duly and validly executed and delivered by SR Bancorp and Somerset Bank, and the Bank Merger and Bank Merger Agreement has been duly and validly approved by the Board of Directors of Somerset Bank, and subject to approval of the Conversion by the Depositors of Somerset Bank and receipt of the required approvals of Bank Regulators described in Section 8.4, constitutes the valid and binding obligations of SR Bancorp and Somerset Bank, enforceable against SR Bancorp and Somerset Bank in accordance with its terms, subject to the Enforceability Exceptions.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3.2. (A) The execution and delivery of this Agreement by SR Bancorp, and Somerset Bank, (B) subject to receipt of the approvals and consents referred to in Sections 5.4 and 8.4, and compliance with any conditions contained therein, and subject to the receipt of the approval of the Conversion by the Depositors of Somerset Bank, the consummation of the transactions contemplated hereby, and (C) compliance by SR Bancorp and Somerset Bank with any of the terms or provisions hereof: will not (i) conflict with or result in a breach of any provision of the articles of incorporation or bylaws of SR Bancorp, the certificate of incorporation and bylaws of Somerset Bank, or the charter and bylaws of any Somerset Bank Subsidiary or; (ii) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to SR Bancorp, Somerset Bank or any Somerset Bank Subsidiary or any of their respective properties or assets; or (iii) violate, conflict with, result in a breach of any provisions of, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of, accelerate the performance required by, or result in a right of termination or acceleration or the creation of any lien, security interest, charge or other encumbrance upon any of the properties or assets of SR Bancorp, Somerset Bank or any Somerset Bank Subsidiary under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other investment or obligation to which any of them is a party, or by which they or any of their respective properties or assets may be bound or affected, except for such violations, conflicts, breaches or defaults under clause (ii) or (iii) hereof which, either individually or in the aggregate, will not have a Material Adverse Effect on SR Bancorp or Somerset Bank taken as a whole.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*5.4. Consents.* 

Except for (A) the consents, waivers, approvals, filings and registrations from or with the Bank Regulators referred to in Section 8.4 and compliance with any conditions contained therein, (B) the filing of the Merger Registration Statement and the declaration of effectiveness of the Merger Registration Statement by the SEC, and such proxy solicitation materials and reports, schedules and forms under the Exchange Act as may be required in connection with this Agreement and the transactions contemplated by this Agreement, (C) the regulatory approvals required for the completion of the Conversion, as described in the Plan of Conversion, and the Charter Conversion, (D) the filing of the articles of merger and certificate of merger as referred to in Section 2.2 hereof, (E) such filings with Governmental Entities to satisfy the applicable requirements of the laws of states in which SR Bancorp and its Subsidiaries are qualified or licensed to do business or state securities or "blue sky" laws, and (F) and the requisite vote on the Conversion by the Depositors of Somerset Bank, no consents, waivers or approvals of, or filings or registrations with, any Bank Regulator, Governmental Entity or third party are necessary, and no consents, waivers or approvals of, or filings or registrations with, any other third parties are necessary, in connection with (a) the execution and delivery of this Agreement by SR Bancorp and Somerset Bank, and (b) the completion by SR Bancorp and Somerset Bank of Conversion, the Charter Conversion, the Merger and the Bank Merger. Somerset Bank has no reason to believe that (i) any required approvals from a Bank Regulator or other required consents or approvals will not be received, or that (ii) any Government Entity, the consent or approval of which is not required or to which a filing is not required, will object to the completion of the transactions contemplated by this Agreement.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*5.5. Financial Statements and Regulatory Reports.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.5.1. Somerset Bank has previously made available to Regal Bancorp the Somerset Bank Regulatory Reports. The Somerset Bank Regulatory Reports have been prepared in all material respects in accordance with applicable regulatory accounting principles and practices throughout the periods covered by such statements, and fairly present in all material respects, the consolidated financial position, results of operations and changes in equity of Somerset Bank as of and for the periods ended on the dates thereof, in accordance with applicable regulatory accounting principles applied on a consistent basis.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.5.2. Somerset Bank has previously made available to Regal Bancorp the Somerset Bank Financial Statements. The Somerset Bank Financial Statements have been prepared in accordance with GAAP, and (including the related notes where applicable) fairly present in each case in all material respects (subject in the case of the unaudited interim statements to normal year-end adjustments) the consolidated financial position, results of operations, changes in equity and cash flows of Somerset Bank and the Somerset Bank Subsidiaries on a consolidated basis as of and for the respective periods ending on the dates thereof, in accordance with GAAP during the periods involved, except as indicated in the notes thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.5.3. At the date of each balance sheet included in the Somerset Bank Financial Statements and Somerset Bank Regulatory Reports, Somerset Bank did not have any liabilities, obligations or loss contingencies of any nature (whether absolute, accrued, contingent or otherwise) of a type required to be reflected in such Somerset Bank Financial Statements or Somerset Bank Regulatory Reports or in the footnotes thereto, which are not fully reflected or reserved against therein or fully disclosed in a footnote thereto, except for (A) liabilities, obligations and loss contingencies that are not material individually or in the aggregate or that were incurred in the ordinary course of business, consistent with past practice, (B) liabilities incurred for legal, accounting, financial advisory fees, out-of-pocket and other expenses in connection with the transactions contemplated by this Agreement, and (C) liabilities, obligations and loss contingencies that are within the subject matter of a specific representation and warranty herein and subject, in the case of any unaudited statements, to normal, recurring audit adjustments and the absence of footnotes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.5.4. The records, systems, controls, data and information of Somerset Bank are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of Somerset Bank or its accountants (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control that would not reasonably be expected to have a material adverse effect on the system of internal accounting controls described below in this Section 5.5.4. Somerset Bank has devised and maintained a system of internal accounting controls sufficient to provide reasonable assurance that: (A) all material transactions are executed in accordance with

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general or specific authorization of the Board of Directors and the duly authorized executive officers of Somerset Bank; (B) all material transactions are recorded as necessary to permit the preparation of financial statements in conformity with GAAP consistently applied; and (C) access to the material properties and assets of Somerset Bank is permitted only in accordance with general or specific authorization of the Board of Directors and the duly authorized executive officers of Somerset Bank. Somerset Bank has disclosed to Somerset Bank's outside auditors and the audit committee of Somerset Bank's Board of Directors any fraud, whether or not material, that involves management or other employees who have a significant role in Somerset Bank's internal control over financial reporting. These disclosures (if any) were made in writing by management to Somerset Bank's auditors and audit committee and a copy has previously been made available to Somerset Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.5.5. Since January 1, 2019 (i) Somerset Bank has not, nor to the Knowledge of Somerset Bank, has any director, officer, employee, auditor, accountant or representative of Somerset Bank, received any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of Somerset Bank or its internal accounting controls, including any material complaint, allegation, assertion or claim that Somerset Bank has engaged in illegal accounting or auditing practices, and (ii) no attorney representing Somerset Bank has reported evidence of a material violation of law, breach of fiduciary duty or similar violation with respect to Somerset Bank, or any of its officers, directors, employees or agents to the Board of Directors of Somerset Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*5.6. Taxes.* 

Somerset Bank and the Somerset Bank Subsidiaries are members of the same affiliated group within the meaning of Code Section 1504(a). Somerset Bank, or the appropriate Somerset Bank Subsidiary, has duly filed all federal, state and material local tax returns required to be filed by or with respect to Somerset Bank and each Somerset Bank Subsidiary on or prior to the Closing Date (all such returns being accurate and correct in all material respects) and has duly paid or made provisions for the payment of all material federal, state and local taxes that (i) have been incurred by Somerset Bank and any Somerset Bank Subsidiary, (ii) are due or claimed to be due from Somerset Bank and any Somerset Bank Subsidiary by any taxing authority, or (iii) are due pursuant to any written tax sharing agreement, in each case on or prior to the Closing Date, other than taxes or other charges that (x) are not delinquent, (y) are being contested in good faith, or (z) have not yet been fully determined. As of the date of this Agreement, Somerset Bank has received no notice of, and to the Knowledge of Somerset Bank, there is no audit examination, deficiency assessment, tax investigation or refund litigation with respect to any taxes of Somerset Bank or any of its Subsidiaries, and no claim has been made by any authority in a jurisdiction where Somerset Bank or any of its Subsidiaries do not file tax returns that Somerset Bank or any such Subsidiary is subject to taxation in that jurisdiction. Somerset Bank and its Subsidiaries have not executed an extension or waiver of any statute of limitations on the assessment or collection of any material tax due that is currently in effect. Somerset Bank and each of its Subsidiaries has withheld and paid all material taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party, and Somerset Bank and each of its Subsidiaries, to the Knowledge of Somerset Bank, has timely complied with all applicable information reporting requirements under Part III, Subchapter A of Chapter 61 of the Code and similar applicable state and local information reporting requirements.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*5.7. No Material Adverse Effect.* 

SR Bancorp, Somerset Bank and the Somerset Bank Subsidiaries, taken as a whole, have not suffered any Material Adverse Effect since June 30, 2021, and no event has occurred or circumstance arisen since that date that, in the aggregate, has had or is reasonably likely to have a Material Adverse Effect on SR Bancorp, or on Somerset Bank and the Somerset Bank Subsidiaries, taken as a whole.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*5.8. Ownership of Property; Insurance Coverage.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.8.1. Somerset Bank and each Somerset Bank Subsidiary has good and, as to real property, marketable title to all material assets and properties owned by Somerset Bank or each Somerset Bank Subsidiary in the conduct of its businesses, whether such assets and properties are real or personal, tangible or intangible, including assets and property reflected in the balance sheets contained in the Somerset Bank Financial Statements or acquired subsequent thereto (except to the extent that such assets and properties have been disposed of in the ordinary course of business, since the date of such balance sheets), subject to no material Liens, except (i) those items that secure liabilities for public or statutory obligations or any discount with, borrowing from or other obligations to the FHLB, inter-bank credit facilities, or any transaction by a Somerset Bank Subsidiary acting in a fiduciary capacity, and (ii) statutory liens for amounts not yet delinquent or that are being contested in good faith. Somerset Bank and the Somerset Bank Subsidiaries, as lessee, have the right under valid and subsisting leases of real and personal properties used by Somerset Bank and its Subsidiaries in the conduct of their businesses to occupy or use all such properties as presently occupied and used by each of them.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.8.2. Somerset Bank and each Somerset Bank Subsidiary currently maintain insurance considered by Somerset Bank to be reasonable for their respective operations. Neither Somerset Bank nor any Somerset Bank Subsidiary has received notice from any insurance carrier that (i) such insurance will be canceled or that coverage thereunder will be reduced or eliminated, or (ii) premium costs with respect to such policies of insurance will be substantially increased. There are presently no material claims pending under such policies of insurance and no notices have been given by Somerset Bank or any Somerset Bank Subsidiary under such policies. All such insurance is valid and enforceable and in full force and effect, and within the last three years Somerset Bank and each Somerset Bank Subsidiary has received each type of insurance coverage for which it has applied and during such periods has not been denied indemnification for any material claims submitted under any of its insurance policies. SR BANCORP DISCLOSURE SCHEDULE 5.8.2 identifies all policies of insurance maintained by Somerset Bank and each Somerset Bank Subsidiary.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*5.9. Legal Proceedings.* 

There is no suit, action, investigation or proceeding pending or, to SR Bancorp's Knowledge, threatened against or affecting SR Bancorp, Somerset Bank or any Somerset Bank Subsidiary (and to SR Bancorp's Knowledge there are no facts or circumstances that reasonably could be expected to be the basis for any such suit, action or proceeding) (1) that involves a Governmental Entity or Bank Regulator, or (2) that, individually or in the aggregate, if determined adversely to SR Bancorp, Somerset Bank or any such Somerset Bank Subsidiary, would be (A) material to its business, or (B) reasonably likely to prevent or delay it from performing its obligations under, or consummating the transactions contemplated by, this Agreement. Subject to Section 12.13, neither SR Bancorp nor Somerset Bank are subject to any injunction, order, award, judgment, settlement, decree or regulatory restriction (other than restrictions which may be imposed in connection with the approval of the Conversion or the Merger) that, upon consummation of the Merger, would apply to the Surviving Corporation of any of its Affiliates, or to their respective assets.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*5.10. Compliance With Applicable Law.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.10.1. To SR Bancorp's Knowledge, Somerset Bank and each Somerset Bank Subsidiary is in compliance in all material respects with all applicable federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or decrees applicable to it, its properties, assets and deposits, its business, and its conduct of business and its relationship with its employees, including, without limitation, the Bank Secrecy Act, the USA PATRIOT Act, the Equal Credit Opportunity Act and Regulation B, the Fair Housing Act, the Community Reinvestment Act of 1977, the Fair Credit Reporting Act, the Truth in Lending Act, Regulation Z, the Home Mortgage Disclosure Act, the Fair Debt Collection Practices Act, the Electronic Fund Transfer Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, any regulations promulgated by the Consumer Financial Protection Bureau and all other applicable fair lending laws and other laws relating to discriminatory business practices and to the origination, sale and servicing of mortgage and consumer loans, and including laws relating to Personal Data. The Board of Directors of Somerset Bank has adopted and Somerset Bank has implemented an anti-money laundering program that contains adequate and appropriate customer identification verification procedures, that has not been declared ineffective by any Governmental Entity and that meets the requirements of Sections 352 and 326 of the USA PATRIOT Act and the regulations thereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.10.2. Neither Somerset Bank nor any Somerset Bank Subsidiary has any Knowledge of, nor has Somerset Bank or any Somerset Bank Subsidiary been advised of, or has any reason to believe that any facts or circumstances exist, which would cause Somerset Bank or any Somerset Bank Subsidiary: (a) to be deemed not to be in satisfactory compliance with the CRA, and the regulations promulgated thereunder, or to be assigned a rating for CRA purposes by Bank Regulators of lower than "satisfactory"; (b) to be deemed to be operating in violation of the federal Bank Secrecy Act, as amended, and its implementing regulations, the USA PATRIOT Act, and the regulations promulgated thereunder, any order issued with respect to anti-money laundering by the U.S. Department of the Treasury's Office of Foreign Assets Control, or any other applicable anti-money laundering statute, rule or regulation; or (c) to be deemed not to be in satisfactory compliance with the applicable requirements contained in any federal and state privacy or data security laws and regulations. Somerset Bank is not a party to any agreement with any individual or group regarding CRA matters.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.10.3. Somerset Bank maintains a written information privacy and security program that maintains reasonable measures to protect the privacy, confidentiality and security of all Personal Data against any Security Breach. To the Knowledge of Somerset Bank, neither Somerset Bank nor any Somerset Bank Subsidiary has experienced any Security Breach that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Somerset Bank. To the Knowledge of Somerset Bank, there are no data security or other technological vulnerabilities with respect to its information technology systems or networks that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on Somerset Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.10.4. Somerset Bank and each Somerset Bank Subsidiary has all material permits, licenses, authorizations, orders and approvals of, and has made all filings, applications and registrations with, all Governmental Entities and Bank Regulators that are required in order to permit it to own or lease its properties and to conduct its business as presently conducted, except where the failure to hold such permits, licensees, authorizations, orders or approvals, or the failure to make such filings, applications or registrations would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Somerset Bank; all such permits, licenses, certificates of authority, orders and approvals are in full force and effect in all material respects and, to the Knowledge of SR Bancorp, no suspension or cancellation of any such permit, license, certificate, order or approval is threatened or will result from the consummation of the transactions contemplated by this Agreement, subject to obtaining the approvals referenced in Section 8.4.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.10.5. Subject to Section 12.13, neither Somerset Bank nor any Somerset Bank Subsidiary is, or since January 1, 2019 has been, subject to Regulatory Agreement. Subject to Section 12.13, for the period beginning January 1, 2019, neither Somerset Bank nor any Somerset Bank Subsidiary has received any written notification or to Somerset Bank's Knowledge any other communication from any Bank Regulator (i) asserting that Somerset Bank or any Somerset Bank Subsidiary is not in material compliance with any of the statutes, regulations or ordinances that such Bank Regulator enforces; (ii) threatening to revoke any license, franchise, permit or governmental authorization that is material to Somerset Bank or any Somerset Bank Subsidiary; (iii) requiring or threatening to require Somerset Bank or any Somerset Bank Subsidiary, or indicating that Somerset Bank or any Somerset Bank Subsidiary may be required, to enter into a Regulatory Agreement; or (iv) directing, restricting or limiting, or purporting to direct, restrict or limit, in any manner the operations of Somerset Bank or any Somerset Bank Subsidiary, including without limitation any restriction on the payment of dividends. Neither Somerset Bank nor any Somerset Bank Subsidiary has consented to or entered into any currently effective Regulatory Agreement. Subject to Section 12.13, there are no unresolved violations, criticisms or exceptions by any Governmental Entity with respect to any report or statement relating to any examinations of Somerset Bank or any Somerset Bank Subsidiary. The most recent regulatory rating given to Somerset Bank as to compliance with the Community Reinvestment Act is satisfactory or better.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.10.6. Neither Somerset Bank nor any Somerset Bank Subsidiary, or to the Knowledge of Somerset Bank, any director, officer, employee, agent or other person acting on behalf of Somerset Bank or any Somerset Bank Subsidiary has, directly or indirectly, (i) used any funds of Somerset Bank or any Somerset Bank Subsidiary for unlawful contributions, unlawful gifts, unlawful entertainment or other expenses relating to political activity, (ii) made any unlawful payment to foreign or domestic governmental officials or employees or to foreign or domestic political parties or campaigns from funds of Somerset Bank or any Somerset Bank Subsidiary, (iii) violated any provision that would result in the violation of the Foreign Corrupt Practices Act of 1977, as amended, or any similar law, (iv) established or maintained any unlawful fund of monies or other assets of Somerset Bank or any Somerset Bank Subsidiary, (v) made any fraudulent entry on the books or records of Somerset Bank or any Somerset Bank Subsidiary, or (vi) made any unlawful bribe, unlawful rebate, unlawful payoff, unlawful influence payment, unlawful kickback or other unlawful payment to any person, private or public, regardless of form, whether in money, property or services, to obtain favorable treatment in securing business, to obtain special concessions for Somerset Bank or any Somerset Bank Subsidiary, to pay for favorable treatment for business secured or to pay for special concessions already obtained for Somerset Bank or any Somerset Bank Subsidiary, or is currently subject to any United States sanctions administered by the Office of Foreign Assets Control of the United States Treasury Department, except, in each case, as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Somerset Bank and the Somerset Subsidiaries, taken as a whole.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*5.11. Employee Benefit Plans.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.11.1. SOMERSET BANCORP DISCLOSURE SCHEDULE 5.11.1 includes a list of all existing bonus, incentive, deferred compensation, pension, retirement, profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock purchase, restricted stock, stock option, stock appreciation, phantom stock, severance, welfare and fringe benefit plans, and all other material benefit practices, policies and arrangements maintained by Somerset Bank or any Somerset Bank Subsidiary in which any employee or former employee, consultant or former consultant or director or former director of Somerset Bank or any Somerset Bank Subsidiary participates or to which any such employee, consultant or director is a party or is otherwise entitled to receive benefits (the "Somerset Bank Compensation and Benefit Plans"). Somerset Bank has made available to Regal Bancorp true and correct copies of the Somerset Bank Compensation and Benefit Plans.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.11.2. Each Somerset Bank Compensation and Benefit Plan has been operated and administered in all material respects in accordance with its terms and with applicable law, including, but not limited to, ERISA, the Code, the Age Discrimination in Employment Act, COBRA, the Health Insurance Portability and Accountability Act and any regulations or rules promulgated thereunder, and all material filings, disclosures and notices required by ERISA, the Code, the Age Discrimination in Employment Act and any other applicable law have been timely made or any interest, fines, penalties or other impositions for late filings have been paid in full. Each Somerset Bank Compensation and Benefit Plan that is a Pension Plan and that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the IRS, and, to the Knowledge of Somerset Bank, no circumstances exist that are reasonably likely to result in revocation of any such favorable determination letter. There is no material pending or, to the Knowledge

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of Somerset Bank, threatened action, suit or claim relating to any of the Somerset Bank Compensation and Benefit Plans (other than routine claims for benefits). Neither Somerset Bank nor any Somerset Bank Subsidiary has engaged in a transaction, or omitted to take any action, with respect to any Somerset Bank Compensation and Benefit Plan that would reasonably be expected to subject Somerset Bank or any Somerset Bank Subsidiary to an unpaid tax or penalty imposed by either Section 4975 of the Code or Section 502 of ERISA.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.11.3. No Somerset Bank Compensation and Benefit Plan that is a defined benefit plan subject to Title IV of ERISA ("Somerset Bank Defined Benefit Plan") had an "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, as of the last day of the end of the most recent plan year ending prior to the date hereof. The fair market value of the assets of each Somerset Bank Defined Benefit Plan exceeds the present value of the "benefit liabilities" (as defined in Section 4001(a)(16) of ERISA) under such Somerset Bank Defined Benefit Plan as of the end of the most recent plan year with respect to the respective Somerset Bank Defined Benefit Plan ending prior to the date hereof, calculated on the basis of the actuarial assumptions used in the most recent actuarial valuation for such Somerset Bank Defined Benefit Plan as of the date hereof; and no notice of a "reportable event" (as defined in Section 4043 of ERISA) for which the 30-day reporting requirement has not been waived has been required to be filed for any Somerset Bank Defined Benefit Plan within the 12-month period ending on the date hereof. There is no pending investigation or, to the Knowledge of Somerset Bank, threatened, enforcement action by any Governmental Entity with respect to any Somerset Bank Compensation and Benefit Plan or any ERISA Affiliate Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.11.4. All material contributions required to be made under the terms of any Somerset Bank Compensation and Benefit Plan or ERISA Affiliate Plan to which Somerset Bank or any Somerset Bank Subsidiary is a party or sponsor have been timely made, and all anticipated contributions and funding obligations are accrued on Somerset Bank's consolidated financial statements to the extent required by GAAP. Somerset Bank and its Subsidiaries have expensed and accrued as a liability the present value of future benefits under each applicable Somerset Bank Compensation and Benefit Plan for financial reporting purposes to the extent required by GAAP.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*5.12. Environmental Matters.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.12.1. Except as set forth in SR BANCORP DISCLOSURE SCHEDULE 5.12:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) To Somerset Bank's Knowledge, no real property (including buildings or other structures) currently or formerly owned, leased or operated by Somerset Bank or any Somerset Bank Subsidiary has had any Release of any Materials of Environmental Concern in contravention of Environmental Laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) To Somerset Bank's Knowledge, each of Somerset Bank and each Somerset Bank Subsidiary is in compliance, in all material respects, with applicable Environmental Laws.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) Neither Somerset Bank nor any Somerset Bank Subsidiary has received (i) any written notice, demand letter, or claim alleging any material violation of, any Environmental Law or (ii) any written request for information pursuant to Environmental Laws, which, in each case, either remains pending or unresolved, as of the Closing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D) Neither Somerset Bank nor any Somerset Bank Subsidiary is, or has been, subject to any order, decree, or injunction relating to a violation of or allegation of liability under any Environmental Laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(E) Somerset Bank has previously made available to Regal Bancorp any environmental reports, studies, audits, records, sampling data, site assessments and other similar documents prepared within the last five (5) years that relate to environmental matters concerning any current or formerly owned, operated or leased real property.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(F) There is no litigation pending or, to the Knowledge of Somerset Bank, threatened against Somerset Bank or any Somerset Bank Subsidiary relating to any property currently or formerly owned, leased or operated by Somerset Bank or any Somerset Bank Subsidiary before any court, or Governmental Entity (i) for alleged noncompliance with any Environmental Laws or (ii) relating to the Release of any Materials of Environmental Concern in contravention of Environmental Laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*5.13. Loan Portfolio and Investment Securities.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.13.1. The allowance for loan losses reflected in Somerset Bank's audited consolidated statement of financial condition at June 30, 2021 was, and the allowance for loan losses shown on the balance sheets in Somerset Bank's Financial Statements for periods ending after June 30, 2021 will be, adequate, as of the dates thereof, under GAAP.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.13.2. SOMERSET BANCORP DISCLOSURE SCHEDULE 5.13.2 sets forth a listing, as of June 30, 2022, (A) of all loans of Somerset Bank and any Somerset Bank Subsidiary, (1) that are contractually past due 90 days or more in the payment of principal and/or interest, (2) that are on non-accrual status, (3) that are classified as "Other Loans Specially Mentioned," "Special Mention," "Substandard," "Doubtful," "Loss," "Classified," "Criticized," "Watch list" or words of similar import, together with the principal amount of and accrued and unpaid interest on each such Loan and the identity of the obligor thereunder, (4) where a reasonable doubt exists as to the timely future collectability of principal and/or interest, whether or not interest is still accruing or the loans are less than 90 days past due, or (5) where a specific reserve allocation exists in connection therewith; and (B) all assets classified by Somerset Bank or any Somerset Bank Subsidiary as real estate acquired through foreclosure or in lieu of foreclosure, including in-substance foreclosures, and all other assets currently held that were acquired through foreclosure or in lieu of foreclosure. SR BANCORP DISCLOSURE SCHEDULE 5.13.2 may exclude any individual loan with a principal outstanding balance of less than $50,000, provided that SR BANCORP DISCLOSURE SCHEDULE 5.13.2 includes, for each category described, the aggregate amount of individual loans with a principal outstanding balance of less than $50,000 that has been excluded.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.13.3. All loans receivable (including discounts) and accrued interest entered on the books of Somerset Bank and each Somerset Bank Subsidiary arose out of bona fide arm's-length transactions, were made for good and valuable consideration in the ordinary course of business. To the Knowledge of SR Bancorp, the loans, discounts and the accrued interest reflected on the books of Somerset Bank and the Somerset Bank Subsidiaries are subject to no defenses, set-offs or counterclaims (including, without limitation, those afforded by usury or truth-in-lending laws), subject to the Enforceability Exceptions. Except for loans pledged for collateral for FHLB borrowings, Federal Reserve Bank of New York borrowings or government deposits, all such loans are owned by Somerset Bank or the appropriate Somerset Bank Subsidiary free and clear of any Liens.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.13.4. The notes and other evidences of indebtedness evidencing the loans described above, and all pledges, mortgages, deeds of trust and other collateral documents or security instruments relating thereto are, in all material respects, valid, true and genuine, and what they purport to be.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.13.5. Somerset Bank and each Somerset Bank Subsidiary has good and marketable title to all securities owned by it, free and clear of any Liens, except to the extent such securities are pledged in the ordinary course of business to secure obligations of Somerset Bank or such Somerset Bank Subsidiary or as pledged for collateral for FHLB borrowings. Such securities are valued on the books of Somerset Bank in accordance with GAAP in all material respects. Somerset Bank and each Somerset Bank Subsidiary employs investment, securities, risk management and other policies, practices and procedures that Somerset Bank believes are prudent and reasonable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*5.14. Deposits.* 

None of the deposits of Somerset Bank is a "brokered deposit" as defined in 12 CFR Section 337.6(a)(2).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*5.15. Related Party Transaction.* 

All transactions between Somerset Bank and any of its Affiliates (a) were made in the ordinary course of business, (b) were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other Persons, and (c) did not involve more than the normal risk of collectability or present other unfavorable features. No loan or credit accommodation to any Affiliate of Somerset Bank or any Somerset Bank Subsidiary is presently in default or, during the three-year period prior to the date of this Agreement, has been in default or has been restructured, modified or extended. Neither Somerset Bank nor any Somerset Bank Subsidiary has been notified that principal and interest with respect to any such loan or other credit accommodation will not be paid when due or that the loan grade classification accorded such loan or credit accommodation by Somerset Bank is inappropriate.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*5.16. Antitakeover Provisions.* 

The transactions contemplated by this Agreement is not subject to the requirements of any "moratorium," "control share," "fair price," "affiliate transactions," "business combination" or other antitakeover laws and regulations of any state.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*5.17. Trust Accounts.* 

Neither Somerset Bank nor any Somerset Bank Subsidiary conducts any trust business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*5.18. SR Bancorp Common Stock.* 

The shares of SR Bancorp Common Stock to be issued pursuant this Agreement, when issued in accordance with the terms of this Agreement, will be duly authorized, validly issued, fully paid and non-assessable and subject to no preemptive rights.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*5.19. Intellectual Property.* 

Somerset Bank and each Somerset Bank Subsidiary owns, or to Somerset Bank's Knowledge, possesses valid and binding licenses and other rights (subject to expirations in accordance with their terms) to use all patents, copyrights, trade secrets, trade names, servicemarks and trademarks used in their business, each without payment (except as set forth in SOMERSET BANCORP DISCLOSURE SCHEDULE 5.20), and neither SR Bancorp, Somerset Bank nor any Somerset Bank Subsidiary has received any notice of conflict with respect thereto that asserts the rights of others. Somerset Bank and each Somerset Bank Subsidiary have performed all the obligations required to be performed, and are not in default in any respect, under any contract, agreement, arrangement or commitment relating to any of the foregoing. To the Knowledge of SR Bancorp, the conduct of the business of Somerset Bank and each Somerset Bank Subsidiary as currently conducted or proposed to be conducted does not, in any respect, infringe upon, dilute, misappropriate or otherwise violate any intellectual property owned or controlled by any third party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*5.20. Labor* 

There are no labor or collective bargaining agreements to which Somerset Bank or any Somerset Bank Subsidiary is a party. To the Knowledge of Somerset Bank, there is no union organizing effort pending or, to the Knowledge of Somerset Bank, threatened against Somerset Bank or any Somerset Bank Subsidiary. There is no labor strike, labor dispute (other than routine employee grievances that are not related to union employees), work slowdown, stoppage or lockout pending or, to the Knowledge of Somerset Bank, threatened against Somerset Bank or any Somerset Bank Subsidiary. There is no unfair labor practice proceeding pending or, to the Knowledge of Somerset Bank, threatened against Somerset Bank or any Somerset Bank Subsidiary (other than routine employee grievances that are not related to union employees). To the Knowledge of SR Bancorp, Somerset Bank and each Somerset Bank Subsidiary is in compliance in all material respects with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, and is not engaged in any unfair labor practice.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*5.21. Somerset Bank Information Supplied* 

The information relating to SR Bancorp, Somerset Bank, the Somerset Bank Subsidiaries and its and their respective directors and officers that is provided by SR Bancorp, Somerset Bank or their representatives and is specifically called for inclusion in the Joint Proxy Statement-Prospectus, Merger Registration Statement, or in any other document filed with any Bank Regulator, the SEC or other Governmental Entity in connection herewith, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they are made, not misleading

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*5.22. No Other Representations or Warranties.* 

Except for the representations and warranties made by SR Bancorp and Somerset Bank in this Article V, neither SR Bancorp, Somerset Bank nor any other Person makes any express or implied representation or warranty with respect to SR Bancorp, Somerset Bank and their respective businesses, operations, assets, liabilities, conditions (financial or otherwise) or prospects, and SR Bancorp and Somerset Bank hereby disclaim any such other representations or warranties. In particular, without limiting the foregoing disclaimer, neither SR Bancorp, Somerset Bank nor any other Person makes or has made any representation or warranty to Regal Bancorp, Regal Bank or any of their respective Affiliates or representatives with respect to (i) any financial projection, forecast, estimate, budget or prospective information relating to SR Bancorp, Somerset Bank or the Somerset Bank Subsidiaries, or any of their businesses, or (ii) except for the representations and warranties made by SR Bancorp and Somerset Bank in this Article V, any oral or written information presented to Regal Bancorp or Regal Bank or any of their Affiliates or representatives in the course of their due diligence investigation of SR Bancorp and Somerset Bank, the negotiation of this Agreement or in the course of the transactions contemplated hereby. Regal Bancorp and Regal Bank acknowledge and agree that neither SR Bancorp, Somerset Bank nor any other Person has made or is making any express or implied representation or warranty other than those contained in Article V.

**ARTICLE VI** 

**COVENANTS OF REGAL BANCORP AND REGAL BANK** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*6.1. Conduct of Business.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1.1. *Affirmative Covenants*. During the period from the date of this Agreement to the Effective Time, except with the written consent of Somerset Bank (which consent will not be unreasonably withheld, conditioned or delayed), Regal Bancorp and Regal Bank will: operate its business, and it will cause each of the Regal Bancorp Subsidiaries to operate its business, only in the usual, regular and ordinary course of business; use reasonable efforts to preserve intact its business organization and assets and advantageous business relationships and maintain its rights and franchises; and voluntarily take no action that would (i) adversely affect the ability of Regal Bancorp, Regal Bank, SR Bancorp or Somerset Bank to obtain any necessary approvals of the Bank Regulators and Governmental Entities required for the transactions contemplated hereby or materially increase the period of time necessary to obtain such approvals, or (ii) adversely affect its ability to perform its covenants and agreements under this Agreement.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1.2. *Negative Covenants*. Regal Bancorp and Regal Bank agree that from the date of this Agreement to the Effective Time, except as otherwise specifically permitted or required by this Agreement, or consented to by Somerset Bank in writing (which consent shall not be unreasonably withheld, conditioned or delayed) Regal Bancorp and Regal Bank will not, and will cause each of the Regal Bancorp Subsidiaries not to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) amend or waive any provision of its Certificate of Incorporation or Bylaws, except as required by law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) change the number of authorized or issued shares of its capital stock, issue any shares that are held as "treasury shares" as of the date of this Agreement, or issue or grant any Right or agreement of any character relating to its authorized or issued capital stock or any securities convertible into shares of such stock, make any grant or award under the Regal Bancorp Stock Benefit Plan or split, combine or reclassify any shares of capital stock, or declare, set aside or pay any dividend or other distribution in respect of capital stock, or redeem or otherwise acquire any shares of capital stock, except that any Regal Bancorp Subsidiary may pay dividends to its parent company (as permitted under applicable law or regulations) consistent with past practice.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) enter into, amend in any material respect or terminate any contract or agreement (including without limitation any settlement agreement with respect to litigation) except in the ordinary course of business consistent with past practice;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D) except as set forth on REGAL BANCORP DISCLOSURE SCHEDULE 6.1.2(D), make application for the opening or closing of any, or open or close any, branch or automated banking facility;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(E) grant or agree to pay any increase in salary, bonus, severance or termination to, or enter into, renew or amend any employment agreement, severance agreement and/or supplemental executive agreement with, or increase in any manner the compensation or fringe benefits of, any of its directors, officers or employees, except (i) as may be required pursuant to commitments existing on the date hereof and set forth on REGAL BANCORP DISCLOSURE SCHEDULE 4.8.1 and 4.12.1; (ii) merit pay increases in the ordinary course of business consistent with past practice; (iii) bonus payments consistent with accruals that have been made on the Regal Bancorp Financial Statements for 2022 and that are in the ordinary course of business consistent with past practice, and a pro rata (based upon the number of months elapsed in 2023 prior to the Effective Time) targeted bonus for 2023 (consistent with past practice), all as set forth in REGAL BANCORP DISCLOSURE SCHEDULE 6.1.2(E); (iv) profit sharing contributions to the Regal Bank 401(k) Profit Sharing Plan for calendar year 2022 and pro rata based on the timing of the Effective Time for calendar year 2023, consistent with past practice or (v) as may be necessary to comply with Section 409A of the Code. Neither Regal Bancorp nor any Regal Bancorp Subsidiary shall hire any new employee with annual compensation in excess of $75,000, provided that Regal Bancorp or a Regal Bancorp Subsidiary may hire at-will employees to fill vacancies that may from time to time arise in the ordinary course of business in consultation with Somerset Bank;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(F) enter into or, except as may be required by law (including amendments or modifications necessary to comply with Section 409A of the Code), materially modify any pension, retirement, stock option, stock purchase, stock appreciation right, stock grant, savings, profit sharing, deferred compensation, supplemental retirement, consulting, bonus, group insurance or other employee benefit, incentive or welfare contract, plan or arrangement, or any trust agreement related thereto, in respect of any of its directors, officers or employees; or make any contributions to any defined contribution or defined benefit plan not in the ordinary course of business consistent with past practice;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(G) merge or consolidate Regal Bancorp or any Regal Bancorp Subsidiary with any other corporation or restructure, reorganize or completely or partially liquidate or dissolve itself or any of its Subsidiaries; sell or lease all or any substantial portion of the assets or business of Regal Bancorp or any Regal Bancorp Subsidiary; make any acquisition of all or any substantial portion of the business or assets of any other Person, firm, association, corporation or business organization other than in connection with foreclosures, settlements in lieu of foreclosure, troubled loan or debt restructuring, or the collection of any loan or credit arrangement between Regal Bancorp, or any Regal Bancorp Subsidiary, and any other person; enter into a purchase and assumption transaction with respect to deposits and liabilities; permit the revocation or surrender by any Regal Bancorp Subsidiary of its certificate of authority to maintain, or file an application for the relocation of, any existing branch office;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(H) sell or otherwise dispose of the capital stock of Regal Bancorp or Regal Bank, or sell or otherwise dispose of any asset of Regal Bancorp or of any Regal Bancorp Subsidiary other than in the ordinary course of business consistent with past practice; subject any asset of Regal Bancorp or of any Regal Bancorp Subsidiary to a Lien (other than in connection with deposits, FHLB advances, repurchase agreements, bankers acceptances, "treasury tax and loan" accounts established in the ordinary course of business and transactions in "federal funds" and the satisfaction of legal requirements in the exercise of trust powers) other than in the ordinary course of business consistent with past practice; incur any indebtedness for borrowed money (or assume guarantee any indebtedness for borrowed money), except in the ordinary course of business consistent with past practice;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(I) take any action which would result in any of the representations and warranties of Regal Bancorp or Regal Bank set forth in this Agreement becoming untrue as of any date after the date hereof or in any of the conditions set forth in Article IX not being satisfied, except in each case as may be required by applicable law or regulation or by any Bank Regulators; or knowingly take any action that could reasonably be expected to prevent or impede the Merger or Bank Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(J) change any method, practice or principle of accounting (tax or financial), except as may be required from time to time by GAAP (without regard to any optional early adoption date) or any Bank Regulator responsible for regulating Regal Bancorp or Regal Bank;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(K) waive, release, grant or transfer any material rights of value or modify or change in any material respect any existing material agreement or indebtedness to which Regal Bancorp or any Regal Bancorp Subsidiary is a party, other than in the ordinary course of business, consistent with past practice;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(L) purchase any equity securities, or purchase any security for its investment portfolio inconsistent with Regal Bancorp's or Regal Bank's current investment policy, or otherwise alter, in any material respect, the mix, maturity, credit or interest rate risk profile of its portfolio of investment securities or its portfolio of mortgage-backed securities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(M) except for commitments issued prior to the date of this Agreement that have not yet expired and that have been disclosed on the Regal Bancorp DISCLOSURE SCHEDULE 6.1.2(M), make any loans other than loans that are consistent with Regal Bank's current policies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(N) except pursuant to agreements or arrangements in effect on the date of this Agreement and set forth on REGAL BANCORP DISCLOSURE SCHEDULE 4.16, pay, loan, or advance any amount to, or sell, transfer or lease any properties or assets (real, personal or mixed, tangible or intangible) to, or as applicable from, or enter into any agreement or arrangement with, any Affiliates or associates (as such terms are defined under the Exchange Act) (or in the case of individuals who are Affiliates, any of their Immediate Family Members), other than compensation or business expense reimbursement in the ordinary course of business consistent with past practice;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(O) enter into any Derivative Transaction other than in the ordinary course of business consistent with past practice;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(P) except for the execution of this Agreement, and actions taken or that will be taken in accordance with this Agreement and performance thereunder, take any action that would give rise to a right of payment to any individual under any employment, change in control, severance or similar agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Q) enter into any new line of business; make any material change in policies in existence on the date of this Agreement with regard to: the extension of credit, or the establishment of reserves with respect to the possible loss thereon or the charge off of losses incurred thereon; investments; securitization and servicing policies; risk and asset liability management; deposit pricing or gathering; or other material banking policies (including any change in the maximum ratio or similar limits as a percentage of its capital exposure applicable with respect to its loan portfolio or any segment thereof, or individual loans), except as may be required by changes in applicable law or regulations or by a Bank Regulator;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(R) except for the execution of this Agreement, and the transactions contemplated therein, take any action that would give rise to an acceleration of the right to payment to any individual under any Regal Bancorp Compensation and Benefit Plan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(S) make any capital expenditures in excess of $50,000 individually or $100,000 in the aggregate, other than pursuant to binding commitments existing on the date hereof and other than expenditures necessary to maintain existing assets in good repair;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(T) purchase or otherwise acquire, or sell or otherwise dispose of, any assets or incur any liabilities other than in the ordinary course of business consistent with past practices and policies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(U) sell any participation interest in any loan, or purchase or sell any mortgage loan servicing rights, other than in the ordinary course of business consistent with past practice;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(V) undertake or enter into any lease, contract or other commitment for its account, other than in the normal course of providing credit to customers as part of its banking business, involving a payment by Regal Bancorp or Regal Bank of more than $25,000 annually, or containing any financial commitment extending beyond 12 months from the date hereof; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(W) pay, discharge, settle or compromise any claim, action, litigation, arbitration or proceeding, other than any such payment, discharge, settlement or compromise in the ordinary course of business consistent with past practice that involves solely money damages in the amount not in excess of $50,000 individually or $100,000 in the aggregate, and that does not create negative precedent for other pending or potential claims, actions, litigation, arbitration or proceedings;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(X) foreclose upon or take a deed or title to any commercial real estate without first conducting a Phase I environmental assessment of the property or foreclose upon any commercial real estate if such environmental assessment indicates the presence of a Materials of Environmental Concern;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Y) issue any broadly distributed communication of a general nature to employees (including general communications relating to benefits and compensation) without prior consultation with Somerset Bank and, to the extent relating to post-Closing employment, benefit or compensation information without the prior written consent of Somerset Bank (which shall not be unreasonably withheld, delayed or conditioned) or issue any broadly distributed communication of a general nature to customers without the prior written approval of Somerset Bank (which shall not be unreasonably withheld, delayed or conditioned), except as required by law or for communications in the ordinary course of business consistent with past practice that do not relate to the Merger or other transactions contemplated hereby;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Z) except as otherwise provided in Section 8.5, redeem the Regal Bancorp Subordinated Notes; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(AA) agree or commit to do any of the foregoing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*6.2. Current Information.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2.1 During the period from the date of this Agreement to the Effective Time, Regal Bancorp and Regal Bank will cause one or more of its representatives to confer with representatives of Somerset Bank and report the general status of its ongoing operations at such times as Somerset Bank may reasonably request. Regal Bank and Somerset Bank shall meet on a regular basis to discuss and plan for the conversion of Regal Bank's data processing and related electronic informational systems to those of Somerset Bank, which planning shall include, but

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not be limited to, discussion of the possible termination by Regal Bancorp and Regal Bank of third-party service provider arrangements effective at the Effective Time or at a date thereafter, non-renewal of personal property leases and software licenses used by Regal Bancorp or any of its Subsidiaries in connection with its systems operations, retention of outside consultants and additional employees to assist with the conversion, and outsourcing, as appropriate, of proprietary or self-provided system services, it being understood that Regal Bancorp shall not be obligated to take any such action prior to the Effective Time and, unless Regal Bancorp otherwise agrees, no conversion shall take place prior to the Effective Time. Regal Bancorp will promptly notify Somerset Bank of any material change in the normal course of its business or in the operation of its properties and, to the extent permitted by applicable law and subject to Section 12.13, of any governmental complaints, investigations or hearings (or communications indicating that the same may be contemplated), or the institution or the threat of material litigation involving Regal Bancorp or any Regal Bancorp Subsidiary.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2.2. Regal Bank shall provide Somerset Bank, within ten (10) business days of the end of each calendar month, a written list of (A) nonperforming assets (the term "nonperforming assets," for purposes of this subsection, means (i) loans that are "troubled debt restructuring" as defined in Statement of Financial Accounting Standards No. 15, "Accounting by Debtors and Creditors for Troubled Debt Restructuring," (ii) loans on nonaccrual, (iii) real estate owned, (iv) all loans ninety (90) days or more past due as of the end of such month and (iv) all impaired loans) and (B) a written list of loans that are classified as "Other Loans Specifically Mentioned," "Special Mention," "Substandard," "Doubtful," "Loss," "Classified," "Criticized," "Watch List" or words of similar impact. On a monthly basis, Regal Bank shall provide Somerset Bank with a schedule of all loan approvals, which schedule shall indicate the loan amount, loan type and other material features of the loan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*6.3. Access to Properties and Records.* 

Subject to Sections 12.2 and 12.13, Regal Bancorp and Regal Bank shall permit Somerset Bank reasonable access upon reasonable notice to its employees and properties and those of the Regal Bancorp Subsidiaries, and shall disclose and make available to Somerset Bank during normal business hours all of its books, papers and records relating to the assets, properties, operations, obligations and liabilities, including, but not limited to, all books of account (including the general ledger), tax records, minute books of directors' (other than minutes that discuss any of the transactions contemplated by this Agreement or other strategic alternatives) and stockholders' meetings, organizational documents, Bylaws, material contracts and agreements, filings with any regulatory authority, litigation files, plans affecting employees, and any other business activities or prospects in which Somerset Bank may have a reasonable interest in connection with the transactions contemplated by this Agreement; provided, however, that Regal Bancorp shall not be required to take any action that would provide access to or to disclose information where such access or disclosure would violate or prejudice the rights or business interests or confidences of any customer or other person or would result in the waiver by it of the privilege protecting communications between it and any of its counsel, or where such disclosure would violate the regulations or policy of any Bank Regulator. Regal Bancorp shall provide and shall request its auditors to provide Somerset Bank with such historical financial information regarding it (and related audit reports and consents) as Somerset Bank may reasonably request for securities disclosure purposes. Somerset Bank shall use commercially reasonable efforts to

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minimize any interference with Regal Bancorp's regular business operations during any such access to Regal Bancorp's employees, property, books and records. Regal Bancorp and each Regal Bancorp Subsidiary shall permit Somerset Bank, at its expense, to cause a "Phase I environmental audit" to be performed at any physical location owned by Regal Bancorp or any Regal Bancorp Subsidiary.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*6.4. Financial and Other Statements.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4.1. Promptly upon receipt thereof, Regal Bancorp will furnish to Somerset Bank copies of each annual, interim or special audit of the books of Regal Bancorp and the Regal Bancorp Subsidiaries made by its independent accountants and copies of all internal control reports submitted to Regal Bancorp by such accountants in connection with each annual, interim or special audit of the books of Regal Bancorp and the Regal Bancorp Subsidiaries made by such accountants.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4.2. As soon as reasonably available, but in no event later than the date such documents are filed with the appropriate Bank Regulator, Regal Bancorp will deliver to Somerset Bank the Regal Bancorp Regulatory Reports filed by it with the Bank Regulators. Regal Bancorp will furnish to Somerset Bank copies of all documents, statements and reports as it or any Regal Bancorp Subsidiary shall send to its stockholders, the Bank Regulators or any other regulatory authority, except as legally prohibited thereby. Within twenty-five (25) days after the end of each month, Regal Bancorp will deliver to Somerset Bank a consolidated balance sheet and a consolidated statement of operations, without related notes, for such month prepared in accordance with GAAP and current financial reporting practices.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4.3. Regal Bancorp will advise Somerset Bank promptly of the receipt of any examination report of any Bank Regulator with respect to the condition or activities of Regal Bancorp or any of the Regal Bancorp Subsidiaries.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4.4. With reasonable promptness, Regal Bancorp will furnish to Somerset Bank such additional financial data as Somerset Bank may reasonably request, including without limitation, detailed monthly financial statements and loan reports in the forms prepared for internal use by Regal Bancorp management.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*6.5. Maintenance of Insurance.* 

Regal Bancorp and Regal Bank shall maintain, and cause their respective Subsidiaries to maintain, insurance in such amounts as are reasonable to cover such risks as are customary in relation to the character and location of its properties and the nature of its business, with such coverage and in such amounts not less than that currently maintained by Regal Bancorp and Regal Bank.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*6.6. Disclosure Supplements.* 

From time to time prior to the Effective Time, Regal Bancorp and Regal Bank will promptly supplement or amend the REGAL BANCORP DISCLOSURE SCHEDULE delivered in connection herewith with respect to any matter hereafter arising that, if existing, occurring or known at the date of this Agreement, would have been required to be set forth or described in such REGAL BANCORP DISCLOSURE SCHEDULE or that is necessary to correct any information in such REGAL BANCORP DISCLOSURE SCHEDULE that has been rendered materially inaccurate thereby. No supplement or amendment to such REGAL BANCORP DISCLOSURE SCHEDULE shall have any effect for the purpose of determining satisfaction of the conditions set forth in Article IX.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*6.7. Consents and Approvals of Third Parties.* 

Regal Bancorp and Regal Bank shall use all commercially reasonable efforts to obtain as soon as practicable all consents and approvals of any other Persons necessary or desirable for the consummation of the transactions contemplated by this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*6.8. All Reasonable Efforts.* 

Subject to the terms and conditions herein provided, Regal Bancorp and Regal Bank agree to use all commercially reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*6.9. Failure to Fulfill Conditions.* 

In the event that Regal Bancorp determines that a condition to its obligation to complete the Merger cannot be fulfilled and that it will not waive that condition, it will promptly notify Somerset Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*6.10. Acquisition Proposals.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.10.1. From and after the date hereof until the termination of this Agreement, neither Regal Bancorp, nor any Regal Bancorp Subsidiary, shall, and Regal Bancorp will direct their respective officers, directors, employees, representatives, agents, advisors or affiliates (including, without limitation, any investment banker, attorney or accountant retained by Regal Bancorp or any of its Subsidiaries), not to, directly or indirectly, (i) initiate, solicit, knowingly encourage or knowingly facilitate any inquiries or proposals with respect to any Acquisition Proposal (as defined below), (ii) engage or participate in any negotiations with any Person concerning any Acquisition Proposal, (iii) provide any confidential or non-public information or data to, or have or participate in any discussions with, any Person relating to any Acquisition Proposal or (iv) unless this Agreement has been terminated in accordance with its terms, approve or enter into any term sheet, letter of intent, commitment, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement or other agreement (whether written or oral, binding or nonbinding) (other than a confidentiality agreement referred to and entered into in accordance with this Section 6.10.1) in connection with or relating to any Acquisition Proposal. Notwithstanding the foregoing, after the date of this Agreement and before the receipt of the approval of the Merger and the Merger Agreement by the Regal Bancorp stockholders, Regal Bancorp may furnish non-public information regarding Regal Bancorp and its Subsidiaries to, or enter into discussions with, any Person in response to an Acquisition Proposal if, (i) Regal Bancorp has received a bona fide unsolicited written

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Acquisition Proposal from a person or entity that did not result from a breach of this Section 6.10; (ii) the Regal Bancorp Board determines in good faith, after consultation with and having considered the advice of its outside legal counsel and, with respect to financial matters, its independent financial advisor, that such Acquisition Proposal constitutes or is reasonably likely to lead to a Superior Proposal (as defined below) and that the failure to furnish information to or enter into discussions with such Person may cause the Board of Directors of Regal Bancorp to breach its fiduciary duties to stockholders under applicable law; (iii) Regal Bancorp has provided SR Bancorp with at least two Business Days' prior notice of such determination; and (iv) prior to furnishing or affording access to any information or data with respect to Regal Bancorp or otherwise relating to an Acquisition Proposal, Regal Bancorp receives from such Person a confidentiality agreement with terms no less favorable to Regal Bancorp than those contained in the Confidentiality Agreement. Regal Bancorp shall promptly provide to Somerset Bank any non-public information regarding Regal Bancorp or its Subsidiaries provided to any other Person that was not previously provided to Somerset Bank, such additional information to be provided no later than the date of provision of such information to such other Person.

For purposes of this Agreement, "Acquisition Proposal" shall mean any inquiry, offer or proposal (other than an inquiry, offer or proposal from SR Bancorp or Somerset Bank), whether or not in writing, contemplating, relating to, or that could reasonably be expected to lead to, (A) any transaction or series of transactions involving any merger, consolidation, business combination, reorganization, recapitalization, share exchange, liquidation, dissolution or similar transaction involving Regal Bancorp; (B) any transaction pursuant to which any third party or group acquires or would acquire (whether through sale, lease or other disposition), directly or indirectly, 25% or more of the assets of Regal Bancorp and its Subsidiaries on a consolidated basis; (C) any issuance, sale or other disposition of (including by way of merger, consolidation, share exchange or any similar transaction) securities (or options, rights or warrants to purchase or securities convertible into, such securities) representing 25% or more of the votes attached to the outstanding securities of Regal Bancorp; (D) any tender offer or exchange offer that, if consummated, would result in any third party or group beneficially owning 25% or more of any class of equity securities of Regal Bancorp; or (E) any transaction that is similar in form, substance or purpose to any of the foregoing transactions, or any combination of the foregoing.

For purposes of this Agreement, "Superior Proposal" shall mean any bona fide written Acquisition Proposal (on its most recently amended or modified terms, if amended or modified) (*provided*, that for purposes of the definition of "Superior Proposal" the reference to 25% in the definition of "Acquisition Proposal" shall instead refer to 50%) made by a third party to enter into an Acquisition Proposal on terms that the Regal Bancorp Board determines in its good faith judgment, after consultation with and having considered the advice of outside legal counsel and, with respect to financial matters, its financial advisor (i) would result in a transaction that involves consideration to the holders of the shares of Regal Bancorp Common Stock that is more favorable, from a financial point of view, than the consideration to be paid to Regal Bancorp's stockholders pursuant to this Agreement, considering, among other things, the nature of the consideration being offered; and (ii) is reasonably likely to be completed on the terms proposed, in each case taking into account all legal, financial, regulatory and other aspects of the proposal.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.10.2. Regal Bancorp will immediately cease and cause to be terminated any activities, discussions or negotiations conducted before the date of this Agreement with any Person with respect to any or that could reasonably be expected to lead to an Acquisition Proposal. Regal Bancorp shall promptly (and in any event within 24 hours) notify Somerset Bank in writing if any proposals or offers (or modified offers or proposals) are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued with Regal Bancorp or any Regal Bancorp Representatives, in each case in connection with any Acquisition Proposal, and such notice shall indicate the name of the Person initiating such discussions or negotiations or making such proposal, offer or information request and the material terms and conditions of any proposals or offers and an unredacted copy of any such proposal, offer or information request. Regal Bancorp will keep SR Bancorp apprised of any related developments, discussions and negotiations on a current basis, including any amendments to or revisions of the terms of such inquiry or Acquisition Proposal. Regal Bancorp shall use its reasonable best efforts to enforce any existing confidentiality or standstill agreements to which it or any of its Subsidiaries is a party in accordance with the terms thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.10.3. Subject to Section 6.10.4, neither the Regal Bancorp Board nor any committee thereof shall (i) withdraw, qualify or modify, or propose to withdraw, qualify or modify, in a manner adverse to SR Bancorp in connection with the transactions contemplated by this Agreement (including the Merger), the Regal Bancorp Recommendation (as defined in Section 8.1), or make any statement, filing or release, in connection with the Regal Bancorp Stockholders Meeting or otherwise, inconsistent with the Regal Bancorp Recommendation (it being understood that taking a neutral position or no position with respect to an Acquisition Proposal shall be considered an adverse modification of the Regal Bancorp Recommendation); (ii) approve or recommend, or publicly propose to approve or recommend, any Acquisition Proposal; or (iii) enter into (or cause Regal Bancorp or Regal Bank to enter into) any letter of intent, agreement in principle, acquisition agreement or other agreement (A) related to any Acquisition Proposal (other than a confidentiality agreement entered into in accordance with the provisions of Section 6.10) or (B) requiring Regal Bancorp to abandon, terminate or fail to consummate the Merger or any other transaction contemplated by this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.10.4. Notwithstanding Section 6.10.3, prior to the date of the Regal Bancorp Stockholders Meeting, the Regal Bancorp Board may approve or recommend to the stockholders of Regal Bancorp a Superior Proposal and withdraw, qualify or modify in a manner adverse to SR Bancorp, the Regal Bancorp Recommendation in connection therewith (a "Regal Bancorp Subsequent Determination") after the fifth Business Day following SR Bancorp's receipt of a notice from Regal Bancorp advising SR Bancorp that the Regal Bancorp Board has decided that a bona fide unsolicited written Acquisition Proposal that it received (that did not result from a breach of this Section 6.10) constitutes a Superior Proposal (the "Notice of Superior Proposal") (it being understood that Regal Bancorp shall be required to deliver a new Notice of Superior Proposal in respect of any revised Superior Proposal from such third party or its affiliates that Regal Bancorp proposes to accept and the subsequent notice period shall also be two Business Days) if, but only if (i) the Regal Bancorp board of directors has reasonably determined in good faith, after consultation with and having considered the advice of outside legal counsel, that the failure

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to take such actions would be reasonably likely to violate its fiduciary duties to the Regal Bancorp shareholders under applicable law, and (ii) at the end of such five Business Day period, after taking into account any such adjusted, modified or amended terms as may have been committed to in writing by SR Bancorp since its receipt of such Notice of Superior Proposal (<u>provided</u>, <u>however</u>, that SR Bancorp shall not have any obligation to propose any adjustments, modifications or amendments to the terms and conditions of this Agreement), Regal Bancorp Board has again in good faith made the determination that such Acquisition Proposal constitutes a Superior Proposal.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.10.5. Nothing contained in this Agreement shall prevent Regal Bancorp or its board of directors from complying with Rule 14d-9 and Rule 14-e2 under the Exchange Act with respect to an Acquisition Proposal (or any similar communication to stockholders in connection with the making or amendment of a tender offer or exchange offer) or from making any legally required disclosure to stockholders with regard to an Acquisition Proposal; provided, however, that any such disclosure relating to an Acquisition Proposal shall be deemed a Regal Bancorp Subsequent Determination unless it is limited to a stop, look and listen communication or the Regal Bancorp board of directors reaffirms the Regal Bancorp Recommendation in such disclosure.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*6.11. Additional Agreements.* 

If, at any time after the Effective Time, Regal Bancorp shall consider or be advised that any further deeds, assignments or assurances in law or any other acts are necessary or desirable to (i) vest, perfect or confirm, of record or otherwise, in SR Bancorp its right, title or interest in, to or under any of the rights, properties or assets of Regal Bancorp, or (ii) otherwise carry out the purposes of this Agreement, Regal Bancorp and its officers and directors shall be deemed to have granted to SR Bancorp an irrevocable power of attorney to execute and deliver, in such official corporate capacities, all such deeds, assignments or assurances in law or any other acts as are necessary or desirable to (a) vest, perfect or confirm, of record or otherwise, in SR Bancorp its right, title or interest in, to or under any of the rights, properties or assets of Regal Bancorp or (b) otherwise carry out the purposes of this Agreement, and the officers and directors of SR Bancorp are authorized in the name of Regal Bancorp or otherwise to take any and all such action.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*6.12. Stockholder Litigation.* 

Regal Bancorp shall give SR Bancorp prompt notice of any stockholder litigation against Regal Bancorp or its directors or officers relating to the transactions contemplated by this Agreement, and shall give SR Bancorp the opportunity to participate (at SR Bancorp's expense) in the defense or settlement of any such litigation. Regal Bancorp shall give SR Bancorp the right to review and comment on all filings or responses to be made by Regal Bancorp in connection with any such litigation, and will in good faith take such comments into account. Regal Bancorp shall not agree to settle any such litigation without SR Bancorp's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, that SR Bancorp shall not be obligated to consent to any settlement that does not include a full release of Regal Bancorp and its Affiliates or that imposes an injunction or other equitable relief after the Effective Time upon the Surviving Corporation or any of its Affiliates.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*6.13. Control* 

Nothing contained in this Agreement shall give SR Bancorp, directly or indirectly, the right to control or direct the operations of Regal Bancorp or any Regal Bancorp Subsidiary prior to the Effective Time. Prior to the Effective Time, each of SR Bancorp, Somerset Bank, Regal Bancorp and Regal Bank shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its and its Subsidiaries' respective operations.

**ARTICLE VII** 

**COVENANTS OF SR BANCORP AND SOMERSET SAVINGS** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*7.1. Conduct of Business.* 

During the period from the date of this Agreement to the Effective Time, except with the written consent of Regal Bancorp, which consent will not be unreasonably withheld, conditioned or delayed, Somerset Bank will operate its business in the ordinary course of business and will not take any action that would: (i) adversely affect the ability of any Party to obtain the approvals from any Governmental Entity or the Bank Regulators required for the transactions contemplated hereby or materially increase the period of time necessary to obtain such approvals; (ii) adversely affect its ability to perform its covenants and agreements under this Agreement; or (iii) result in the representations and warranties contained in Article V not being true and correct on the date of this Agreement or at any future date on or prior to the Effective Time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*7.2. Current Information.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2.1. During the period from the date of this Agreement to the Effective Time, Somerset Bank will cause one or more of its representatives to confer with representatives of Regal Bancorp and report the general status of its ongoing operations, including the progress of the Merger and Conversion and furnish copies of such documents to Regal Bancorp in connection therewith, at such times as Regal Bancorp may reasonably request. Somerset Bank will promptly notify Regal Bancorp of any material change in the normal course of its business or in the operation of its properties and, to the extent permitted by applicable law and subject to Section 12.13, of any governmental complaints, investigations or hearings (or communications indicating that the same may be contemplated), or the institution or the threat of material litigation involving Somerset Bank and any Somerset Bank Subsidiary.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2.2. Regal Bank and Somerset Bank shall meet on a regular basis to discuss and plan for the conversion of Regal Bank's data processing and related electronic informational systems to those used by Somerset Bank, which planning shall include, but not be limited to, discussion of the possible termination by Regal Bank of third-party service provider arrangements effective at the Effective Time or at a date thereafter, non-renewal of personal property leases and software licenses used by Regal Bank in connection with its systems operations, retention of outside consultants and additional employees to assist with the conversion, and outsourcing, as appropriate, of proprietary or self-provided system services, it being understood that Regal Bank shall not be obligated to take any such action prior to the Effective Time and, unless Regal Bank otherwise agrees, no conversion shall take place prior to the Effective Time.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2.3. Somerset Bank will advise Regal Bancorp promptly of the receipt of any examination report of any Bank Regulator with respect to the condition or activities of Somerset Bank or any of the Somerset Bank Subsidiaries.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2.4. With reasonable promptness, Somerset Bank will furnish to Regal Bancorp such additional financial data as Regal Bancorp may reasonably request, including without limitation, monthly financial statements and loan reports.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*7.3. Regulatory Applications.* 

Somerset Bank will furnish to Regal Bancorp copies of all documents, statements and reports as it or SR Bancorp file with the NJDOBI, the FDIC, the FRB or any other regulatory authority with respect to the Merger and the Conversion and the Charter Conversion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*7.4. Disclosure Supplements.* 

From time to time prior to the Effective Time, SR Bancorp and Somerset Bank will promptly supplement or amend the SR BANCORP DISCLOSURE SCHEDULE delivered in connection herewith with respect to any matter hereafter arising that, if existing, occurring or known at the date of this Agreement, would have been required to be set forth or described in such SR BANCORP DISCLOSURE SCHEDULE or that is necessary to correct any information in such SR BANCORP DISCLOSURE SCHEDULE that has been rendered inaccurate thereby. No supplement or amendment to such SR BANCORP DISCLOSURE SCHEDULE shall have any effect for the purpose of determining satisfaction of the conditions set forth in Article IX.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*7.5. Consents and Approvals of Third Parties.* 

Somerset Bank shall use all commercially reasonable efforts to obtain as soon as practicable all consents and approvals of any other Persons, including the Depositors, necessary or desirable for the consummation of the transactions contemplated by this Agreement, including the Conversion and the Charter Conversion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*7.6. All Reasonable Efforts.* 

Subject to the terms and conditions herein provided, the SR Bancorp and Somerset Bank agree to use all commercially reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, including the Conversion and the Charter Conversion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*7.7. Failure to Fulfill Conditions.* 

In the event that SR Bancorp or Somerset Bank determines that a condition to its obligation to complete the Merger or Conversion cannot be fulfilled and that it will not waive that condition, it will promptly notify Regal Bancorp.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*7.8. Employee Benefits.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.8.1. Somerset Bank will review all Regal Bancorp Compensation and Benefit Plans and may, after the Effective Date, in its sole discretion, terminate or continue such plans, provided, however, that any termination of a Regal Bancorp Compensation and Benefit Plan will comply with Code Section 409A, as applicable. Except as set forth below, all Regal Bancorp Employees who become participants in a Somerset Bank Compensation and Benefit Plan shall be given credit for meeting eligibility and vesting requirements in such plans (but not for benefit accrual purposes) for service as an employee of Regal Bancorp or a Regal Bancorp Subsidiary or any predecessor thereto prior to the Effective Time. Continuing Employees (as defined below) shall be considered new employees for purposes of eligibility and vesting in the defined benefit pension plan and shall be considered as existing employees of Somerset Bank for purposes of eligibility and vesting in the tax-qualified Somerset Bank employee stock ownership plan ("ESOP") to be formed in connection with the Conversion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.8.2. Except as set forth in this Section 7.8, SR Bancorp and/or Somerset Bank shall assume and honor in accordance with their terms, all employment, change in control, severance and other compensation agreements, plans and arrangements existing prior to the execution of this Agreement that are between Regal Bancorp or any of its Subsidiaries and any director, officer or employee thereof and that have been disclosed in REGAL BANCORP DISCLOSURE SCHEDULE 4.12.1. Concurrently with the execution and delivery of this Agreement each executive of Regal Bank that is a party to an employment agreement or change in control agreement shall execute and deliver to Somerset Bank an agreement ("Settlement Agreement") setting forth the manner in which his or her rights under said employment agreement or change in control agreement will be settled by Regal Bank or Somerset Bank or assumed and honored by Somerset Bank, as applicable. Except as expressly provided otherwise in this Agreement or in REGAL BANCORP DISCLOSURE SCHEDULE 7.8.2, Regal Bancorp shall not accelerate the payment of any amounts or benefits that are or may become payable under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.8.3. In the event of any termination of any Regal Bank health, disability or life insurance plan or consolidation of such plan with any Somerset Bank health, disability or life insurance plan, Somerset Bank shall make available to employees of Regal Bank who continue employment with Somerset Bank ("Continuing Employees") and their dependents employer-provided health, disability or life insurance coverage on the same basis as it provides such coverage to Somerset Bank employees. Unless a Continuing Employee affirmatively terminates coverage under a Regal Bank health, disability or life insurance plan prior to the time that such Continuing Employee becomes eligible to participate in the Somerset Bank health, disability or life insurance plan, no coverage of any of the Continuing Employees or their dependents shall terminate under any of the Regal Bank health, disability or life insurance plans prior to the time such Continuing Employees and their dependents become eligible to participate in the health, disability or life insurance plans, programs and benefits common to all employees of Somerset Bank and their dependents. With respect to any employee benefit plans of Somerset Bank in which any Continuing Employee becomes eligible to participate on or after the Effective Time, Somerset Bank agrees to use commercially reasonable efforts to: (i) cause to be waived all

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pre-existing conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to such employees and their eligible dependents under the Somerset Bank plan, except to the extent such pre-existing conditions, exclusions or waiting period would apply under the analogous Regal Bancorp Compensation and Benefit Plan; and (ii) provide each such employee and their eligible dependents with credit for any eligible expenses incurred by such employee or dependent prior to the Effective Time under a Regal Bancorp Compensation and Benefit Plan (to the same extent that such credit was given under the analogous Regal Bancorp Compensation and Benefit Plan prior to the Effective Time) in satisfying any applicable deductible, co-payment or out-of-pocket requirements under any Somerset Bank plan. In the event of any termination of any Regal Bank health plan, or consolidation of any Regal Bank health plan with any health plan of Somerset Bank and/or any SR Bancorp Subsidiary, the Health Insurance Portability Accountability Act of 1996 will govern any coverage limitations due to pre-existing conditions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.8.4. Immediately prior to the Effective Time, Regal Bancorp shall take such action as may be necessary to terminate the Regal Bancorp Stock Benefit Plan as of the Effective Time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.8.5. [RESERVED]

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.8.6. Somerset Bank agrees that each Regal Bancorp or Regal Bank employee whose employment is involuntarily terminated (other than for cause) at or within 12 months of the Effective Time and who is not covered by a separate employment agreement, change in control agreement or severance agreement shall receive a severance payment equal to two weeks of base pay (at the rate in effect on the termination date) for each full year of service at Regal Bancorp or Regal Bank, with a minimum payment equal to four weeks of base pay for Regal Bancorp or Regal Bank employees who have at least one full year of service as of their date of termination and a maximum of 26 weeks of base pay. For purposes of calculating the number of years of service, fractional years of service shall be rounded up or down to the nearest full year, except for purposes of determining eligibility to receive a severance payment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.8.7. [RESERVED]

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.8.8. Regal Bank shall, effective as of one (1) day prior to the Effective Time, terminate the Regal Bank 401(k) Profit Sharing Plan (the "401(k) Plan") and no further contributions shall be made to the 401(k) Plan except as required by law. Regal Bank shall provide to Somerset Bank (a) executed resolutions of the board of directors of Regal Bank authorizing such termination, and (b) executed amendments to the 401(k) Plan which (i) in Somerset Bank's reasonable judgment are sufficient to assure compliance with all applicable requirements of the Code and regulations thereunder, including such that the tax-qualified status of the 401(k) Plan will be maintained at the time of termination, and (ii) provide for the payment of participants' accounts upon plan termination in the form of a lump-sum. Somerset Bank shall use commercially reasonable efforts to take any and all actions as may be required, including adopting amendments to Somerset Savings Bank, SLA Savings and Investment Plan, to permit Regal Bank Employees to participate in

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Somerset Savings Bank, SLA Savings and Investment Plan immediately following the Effective Time with prior service with Regal Bank credited for eligibility and vesting purposes and to permit Continuing Employees to rollover any eligible distributions from the 401(k) Plan into the Somerset Savings Bank, SLA Savings and Investment Plan, including plan loan balances.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.8.9. Nothing in this Agreement shall confer upon any employee of Regal Bancorp or any of its Subsidiaries any right to continue in the employ or service of Somerset Bank, or shall interfere with or restrict in any way the rights of Somerset Bank, which rights are hereby expressly reserved, to discharge or terminate the services of any employee at any time for any reason whatsoever, with or without cause. Notwithstanding any provision in this Agreement to the contrary, nothing in this Section 7.8 shall (i) be deemed or construed to be an amendment or other modification of any Regal Bancorp Compensation and Benefit Plan or Somerset Bank Compensation and Benefit Plan, or (ii) create any third-party rights in any current or former employee, director or other service provider of and Party (or any beneficiaries or dependents thereof).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.8.10. Regal Bancorp shall have the right to pay retention bonuses to certain key employees as set forth on REGAL BANCORP DISCLOSURE SCHEDULE 7.8.10.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*7.9. Directors and Officers Indemnification and Insurance.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.9.1. SR Bancorp shall maintain, or shall cause Somerset Bank to maintain, in effect for six years following the Effective Time, the current directors' and officers' liability insurance policies (or an extended reporting period endorsement of the same) maintained by Regal Bancorp and the Regal Bancorp Subsidiaries (provided, that SR Bancorp may substitute therefor policies of at least the same coverage containing terms and conditions which are not less favorable) with respect to claims arising from matters or acts or omissions occurring prior to the Effective Time; provided, however, that in no event shall SR Bancorp be required to expend in the aggregate pursuant to this Section 7.9.1 an amount greater than 250% of the annual premium currently expended by Regal Bancorp (the "Insurance Amount") with respect to such insurance, provided, that if such expenditure would exceed the Insurance Amount, SR Bancorp shall use its reasonable best efforts to obtain as much comparable insurance as is available for the Insurance Amount. In connection with the foregoing, Regal Bancorp agrees in order for SR Bancorp to fulfill its agreement to provide directors and officers liability insurance policies for six years to provide such insurer or substitute insurer with such representations as such insurer may request.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.9.2. In addition to Section 7.9.1, SR Bancorp and Somerset Bank shall indemnify and hold harmless each person who is now, or who has been at any time before the date hereof or who becomes before the Effective Time, an officer, director or employee of Regal Bancorp or a Regal Bancorp Subsidiary (the "Indemnified Parties") against all losses, claims, damages, costs, expenses (including attorneys' fees), liabilities or judgments or amounts that are paid in settlement (which settlement shall require the prior written consent of SR Bancorp, which consent shall not be unreasonably withheld, conditioned or delayed) of or in connection with any claim, action, suit, proceeding or investigation,

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whether civil, criminal, or administrative (each a "Claim"), in which an Indemnified Party is, or is threatened to be made, a party or witness in whole or in part on or arising in whole or in part out of the fact that such person is or was a director, officer or employee of Regal Bancorp or a Regal Bancorp Subsidiary if such Claim pertains to any matter of fact arising, existing or occurring before the Effective Time (including, without limitation, the Merger and the other transactions contemplated hereby), regardless of whether such Claim is asserted or claimed before, or after, the Effective Time (the "Indemnified Liabilities"), to the fullest extent as would have been permitted by Regal Bancorp and any Regal Bancorp Subsidiary under applicable state or federal law, and Regal Bancorp's and Regal Bank's Certificate of Incorporation and Bylaws. SR Bancorp shall pay expenses in advance of the final disposition of any such action or proceeding to each Indemnified Party to the fullest extent as would have been required under Regal Bancorp or Regal Bank's Certificate of Incorporation and Bylaws, upon receipt of an undertaking to repay such advance payments if such Indemnified Party shall be adjudicated to be not entitled to indemnification. Any Indemnified Party wishing to claim indemnification under this Section 7.9.2 upon learning of any Claim, shall promptly notify SR Bancorp (but the failure so to notify SR Bancorp shall not relieve it from any liability that it may have under this Section 7.9.2, except to the extent such failure materially prejudices SR Bancorp) and shall deliver to SR Bancorp the undertaking referred to in the previous sentence. In the event of any such Claim (whether arising before or after the Effective Time) (1) SR Bancorp shall have the right to assume the defense thereof with counsel reasonably acceptable to the Indemnified Party, which may be SR Bancorp's counsel (in which event the Indemnified Parties will cooperate in the defense of any such matter) and upon such assumption SR Bancorp shall not be liable to any Indemnified Party for any legal expenses of other counsel or any other expenses subsequently incurred by any Indemnified Party in connection with the defense thereof, except that if SR Bancorp elects not to assume such defense, or counsel for the Indemnified Parties reasonably advises the Indemnified Parties that there are or may be (whether or not any have yet actually arisen) issues that raise conflicts of interest between SR Bancorp and the Indemnified Parties, the Indemnified Parties may retain counsel reasonably satisfactory to them, and SR Bancorp shall pay the reasonable fees and expenses of such counsel for the Indemnified Parties, (2) except to the extent otherwise required due to conflicts of interest, SR Bancorp shall be obligated pursuant to this paragraph to pay for only one firm of counsel for all Indemnified Parties, whose reasonable fees and expenses shall be paid promptly as statements are received unless there is a conflict of interest that necessitates more than one law firm, and (3) SR Bancorp shall not be liable for any settlement effected without its prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.9.3. In the event that either SR Bancorp or any of its successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving bank or entity of such consolidation or merger or (ii) liquidates, dissolves, or transfers all or substantially all of its properties and assets to any person, then, and in each such case, proper provision shall be made so that the successors and assigns of SR Bancorp shall assume the obligations set forth in this Section 7.9.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.9.4. The obligations of SR Bancorp provided under this Section 7.9 are intended to be enforceable against SR Bancorp directly by the Indemnified Parties and shall be binding on all respective successors and permitted assigns of SR Bancorp. SR Bancorp shall pay all reasonable costs and expenses, including attorneys' fees, that may be incurred by any Indemnified Party in successfully enforcing the indemnity and other obligations provided for in this Section 7.9 to the fullest extent permitted by applicable law.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.9.5. Any indemnification payments made pursuant to this Section 7.9 are subject to and conditioned upon their compliance with Section 18(k) of the Federal Deposit Insurance Act (12 U.S.C. § 1828(k)) and the regulations promulgated thereunder by the Federal Deposit Insurance Corporation (12 C.F.R. Part 359).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*7.10. Stock Listing.* 

SR Bancorp agrees to list on the NASDAQ, subject to official notice of issuance, the shares of SR Bancorp Common Stock to be issued in the Merger.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*7.11. Maintenance of Insurance.* 

Somerset Bank shall maintain, and cause its Subsidiaries to maintain, insurance in such amounts as is reasonable to cover such risks as are customary in relation to the character and location of its properties and the nature of its business, with such coverage and in such amounts not less than that currently maintained by Somerset Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*7.12. Access to Properties and Records.* 

Subject to Sections 12.2 and 12.13, Somerset Bank shall permit Regal Bancorp and Regal Bank reasonable access upon reasonable notice to its properties and those of the Somerset Bank Subsidiaries, and shall disclose and make available to Regal Bancorp during normal business hours all of its books, papers and records relating to the assets, properties, operations, obligations and liabilities, including, but not limited to, all books of account (including the general ledger), tax records, minute books of directors' (other than minutes that discuss any of the transactions contemplated by this Agreement or other strategic alternatives) and organizational documents, Bylaws, material contracts and agreements, filings with any regulatory authority, litigation files, plans affecting employees, and any other business activities or prospects in which Regal Bancorp may have a reasonable interest in connection with the transactions contemplated by this Agreement; provided, however, that Somerset Bank shall not be required to take any action that would provide access to or to disclose information where such access or disclosure would violate or prejudice the rights or business interests or confidences of any customer or other person or would result in the waiver by it of the privilege protecting communications between it and any of its counsel. Regal Bancorp shall use commercially reasonable efforts to minimize any interference with Somerset Bank's regular business operations during any such access to Somerset Bank's property, books and records.

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**ARTICLE VIII** 

**REGULATORY AND OTHER MATTERS** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*8.1. Regal Bancorp Stockholders Meeting.* 

Regal Bancorp will (i) as promptly as practicable after the Merger Registration Statement is declared effective by the SEC, take all steps necessary to duly call, give notice of, convene and hold a meeting of its stockholders (the "Regal Bancorp Stockholders Meeting"), for the purpose of considering this Agreement and the Merger, and for such other purposes as may be, in Regal Bancorp's reasonable judgment, necessary or desirable, (ii) subject to Section 6.10, have its Board of Directors recommend approval of this Agreement to the Regal Bancorp stockholders (the "Regal Bancorp Recommendation"), (iii) include such recommendation in Proxy Statement-Prospectus and (iv) use commercially reasonable efforts to obtain from its stockholders the approval of the Merger and the Merger Agreement. The Regal Bancorp Stockholders Meeting shall not be held until the Conversion Registration Statement has been declared effective by the SEC. Without limiting the generality of the foregoing, unless this Agreement has terminated in accordance with its terms, this Agreement and the Merger shall be submitted to the Regal Bancorp's stockholders at the Regal Bancorp Stockholders Meeting whether or not (x) the Regal Bancorp's Board of Directors shall have effected a Regal Bancorp Subsequent Determination, or (y) any Acquisition Proposal shall have been publicly proposed or announced or otherwise submitted to Regal Bancorp or any of its advisors. Regal Bancorp shall not, without the prior written consent of SR Bancorp, adjourn or postpone the Regal Bancorp Stockholders Meeting; *provided* that Regal Bancorp may, without the prior written consent of SR Bancorp, adjourn or postpone the Regal Bancorp Stockholders Meeting (A) if, as of the time for which the Regal Bancorp Stockholders Meeting is originally scheduled (as set forth in the Proxy Statement-Prospectus), there are insufficient shares of Regal Bancorp Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of the Regal Bancorp Stockholders Meeting, (B) after consultation with SR Bancorp, if the failure to adjourn or postpone the Regal Bancorp Stockholders Meeting would reasonably be expected to be a violation of applicable law without the distribution of any required supplement or amendment to the Proxy Statement-Prospectus, or (C) after consultation with SR Bancorp, for a single period not to exceed ten (10) Business Days, to solicit additional proxies if necessary to obtain the required approval of Regal Bancorp stockholders. SR Bancorp may require Regal Bancorp to adjourn, delay or postpone the Regal Bancorp Stockholders Meeting once for a period not to exceed thirty (30) calendar days to solicit additional proxies necessary to obtain the required approval of Regal Bancorp stockholders. Once Regal Bancorp has established a record date for the Regal Bancorp Stockholders Meeting, Regal Bancorp shall not change such record date or establish a different record date for the Regal Bancorp Stockholders Meeting without the prior written consent of SR Bancorp, unless required to do so by applicable law or the Regal Bancorp Certificate of Incorporation or Bylaws or in connection with a postponement or adjournment of the Regal Bancorp Stockholders Meeting permitted by this Section 8.1. Without the prior written consent of SR Bancorp, the approval of the Merger and this Agreement shall be the only matter that Regal Bancorp shall propose to be acted on by the stockholders of Regal Bancorp at the Regal Bancorp Stockholders Meeting (other than other matters of the type customarily brought before a meeting of stockholders in connection with the approval of a merger agreement or the transactions contemplated thereby).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*8.2. Proxy Statement-Prospectus.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2.1. For the purposes (a) of registering SR Bancorp Common Stock to be offered to holders of Regal Bancorp Common Stock in connection with the Merger with the SEC under the Securities Act and applicable state securities laws, and (b) of holding the Regal Bancorp Stockholders Meeting, SR Bancorp shall draft and prepare, and Regal Bancorp shall cooperate in the preparation of, the Merger Registration Statement, including

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a combined proxy statement and prospectus or statements, satisfying all applicable requirements of state securities and banking laws, and of the Securities Act and the Exchange Act, and the rules and regulations thereunder (such proxy statement/prospectus in the form mailed by Regal Bancorp to the Regal Bancorp stockholders, together with any and all amendments or supplements thereto, being herein referred to as the "Proxy Statement-Prospectus"). SR Bancorp shall file the Merger Registration Statement, including the Proxy Statement-Prospectus, with the SEC. Each of SR Bancorp and Regal Bancorp shall use their best efforts to have the Merger Registration Statement declared effective under the Securities Act as promptly as practicable after such filing, and Regal Bancorp shall thereafter promptly mail the Proxy Statement-Prospectus to its stockholders; provided, such mailing shall not occur until the Conversion Registration Statement has been declared effective by the SEC. SR Bancorp shall also use its best efforts to obtain all necessary state securities law or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement, and Regal Bancorp shall furnish all information concerning Regal Bancorp and the holders of Regal Bancorp Common Stock as may be reasonably requested in connection with any such action. SR Bancorp shall use reasonable best efforts to keep the Merger Registration Statement effective as long as is necessary to consummate the transactions contemplated hereby.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2.2. Regal Bancorp shall provide SR Bancorp with any information concerning itself that Somerset Bank may reasonably request in connection with the drafting and preparation of the Proxy Statement-Prospectus, and Somerset Bank shall notify Regal Bancorp promptly of the receipt of any comments of the SEC with respect to the Proxy Statement-Prospectus and of any requests by the SEC for any amendment or supplement thereto or for additional information and shall provide to Regal Bancorp promptly copies of all correspondence between SR Bancorp, Somerset Bank or any of their representatives and the SEC. The information to be provided by Regal Bancorp, Regal Bank, SR Bancorp and Somerset Bank for inclusion in the Proxy-Statement Prospectus and the Conversion Prospectus will, at the time such documents are filed, be accurate in all material aspects and shall not contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. SR Bancorp and Somerset Bank shall give Regal Bancorp and its counsel the opportunity to review, comment on and approve the Proxy Statement-Prospectus prior to its being filed with the SEC and shall give Regal Bancorp and its counsel the opportunity to review, comment on and approve all amendments and supplements to the Proxy Statement-Prospectus and all responses to requests for additional information and replies to comments prior to their being filed with, or sent to, the SEC, provided that the requirement to provide the opportunity to review, comment on and approve pursuant to this Section 8.2.2 shall be, subject to Section 12.13, limited to information with respect to Regal Bancorp, Regal Bank, the Merger and this Merger Agreement. Each of Somerset Bank, SR Bancorp and Regal Bancorp agrees to use all reasonable efforts, after consultation with the other Party hereto, to respond promptly to all such comments of and requests by the SEC.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2.3. Each Party hereto shall promptly notify the other Party if at any time it becomes aware that the Proxy Statement-Prospectus or the Merger Registration Statement contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. In such event, the Parties shall cooperate in the preparation of a supplement or amendment to such Proxy Statement-Prospectus that corrects such misstatement or omission, and SR Bancorp shall file an amended Merger Registration Statement with the SEC, and Regal Bancorp shall mail an amended Proxy Statement-Prospectus to Regal Bancorp's stockholders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*8.3. The Conversion.* 

Commencing promptly after the date of this Agreement, SR Bancorp and Somerset Bank will take all reasonable steps necessary to effect the Conversion. In addition, without limiting the generality of the foregoing, Somerset Bank and Regal Bancorp shall cause the following to be done:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3.1. Somerset Bank will (i) as promptly as practicable after the Conversion Registration Statement is declared effective by the SEC, and the requisite approvals from the Bank Regulators have been obtained, take all steps necessary to duly call, give notice of, convene and hold a meeting of Depositors (the "Depositors Meeting") for the purpose of approving the Plan of Conversion, and for such other purposes as may be, in the reasonable judgment of Somerset Bank, necessary or desirable, (ii) recommend to Depositors the approval of the aforementioned matters to be submitted by it to Depositors, and (iii) use commercially reasonable efforts to obtain from its depositors the approval of the Conversion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3.2. Somerset Bank and SR Bancorp will use all reasonable efforts to prepare and file all regulatory applications required in connection with the Conversion. SR Bancorp and Somerset Bank shall give Regal Bancorp and its counsel the opportunity to review and comment on all such applications prior to their being filed with any Bank Regulator and shall give Regal Bancorp and its counsel the opportunity to review and comment on all amendments and supplements to such applications and all responses to regulatory comments and requests for additional information prior to their being filed with, or sent to, any Bank Regulator, provided that the requirement to provide the opportunity to review and comment pursuant to this Section 8.3.2 shall be subject to Section 12.13 and limited to information with respect to Regal Bancorp, Regal Bank, the Merger and this Merger Agreement. Somerset Bank shall notify Regal Bancorp promptly of the receipt of any comments of any Bank Regulator with respect to such applications and of any requests by any Bank Regulator for any amendment or supplement thereto or for additional information and shall provide to Regal Bancorp promptly copies of all correspondence between SR Bancorp, Somerset Bank or any of their representatives and any Bank Regulator.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3.3. Somerset Bank and SR Bancorp shall prepare as promptly as practicable, and Regal Bancorp shall cooperate in the preparation of, the Conversion Prospectus. Such Conversion Prospectus shall be a part of the Conversion Registration Statement. SR Bancorp shall file the Conversion Registration Statement with the SEC. SR Bancorp shall use its reasonable best efforts to have the Conversion Registration Statement declared effective under the Securities Act as promptly as practicable after such filing.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3.4. Regal Bancorp shall provide Somerset Bank and SR Bancorp with any information concerning it that Somerset Bank or SR Bancorp may reasonably request in connection with the Conversion Prospectus, and Somerset Bank shall notify Regal Bancorp promptly of the receipt of any comments of the SEC, and any Bank Regulator with respect to the Conversion Prospectus and of any requests by the SEC, any Bank Regulator for any amendment or supplement thereto or for additional information, and, subject to Section 12.13, shall provide to Regal Bancorp promptly copies of all correspondence between SR Bancorp or any representative of SR Bancorp and the SEC, or any Bank Regulator. SR Bancorp shall give Regal Bancorp and its counsel the opportunity to review and comment on the Conversion Prospectus prior to its being filed with the SEC, and any Bank Regulator and shall give Regal Bancorp and its counsel the opportunity to review and comment on all amendments and supplements to the Conversion Prospectus and all responses to regulatory comments and requests for additional information prior to their being filed with, or sent to, the SEC and any Bank Regulator, provided that the requirement to provide the opportunity to review and comment pursuant to this Section 8.3.4 shall be subject to Section 12.13 and limited to information with respect to Regal Bancorp, Regal Bank, the Merger and this Merger Agreement. Each of Somerset Bank, SR Bancorp, Regal Bancorp and Regal Bank agrees to use all reasonable efforts, after consultation with the other Parties hereto, to respond promptly to all such comments of and requests by the SEC, and any Bank Regulator.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3.5. Each Party hereto shall promptly notify the other Party if at any time it becomes aware that the Conversion Prospectus or the Conversion Registration Statement contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. In such event, Regal Bancorp shall cooperate with Somerset Bank and SR Bancorp in the preparation of a supplement or amendment to such Conversion Prospectus, which corrects such misstatement or omission, and SR Bancorp shall file an amended Conversion Registration Statement with the SEC. Regal Bancorp shall provide to SR Bancorp, Somerset Bank and the underwriter for the sale of SR Bancorp Common Stock in the Conversion Offering a "comfort" letter from the independent certified public accountants for Regal Bancorp, dated as of the date of the Conversion Prospectus and updated as of the date of consummation of the Conversion, with respect to certain financial information regarding Regal Bancorp, each in form and substance that is customary in transactions such as the Conversion, and shall cause its counsel to deliver to the underwriter for the Conversion such opinions as Somerset Bank and SR Bancorp may reasonably request.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3.6. The aggregate price for which the shares of SR Bancorp Common Stock are sold to purchasers in the Conversion Offering shall be based on the Independent Valuation. The Independent Valuation shall be expressed as a range, the maximum and minimum of which shall vary 15% above and below the midpoint of such range. The maximum of such range may be increased by an additional 15%.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3.7. The Merger and Bank Merger shall occur immediately following the consummation of the Conversion and the issuance of shares thereunder.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*8.4. Regulatory Approvals.* 

Each of Regal Bancorp, Regal Bank, SR Bancorp and Somerset Bank will cooperate with the other and use their best efforts to promptly prepare all necessary documentation, to effect all necessary filings and to obtain all necessary permits, consents, waivers, approvals and authorizations of the SEC, the Bank Regulators and any other third parties and Governmental Entities necessary to consummate the transactions contemplated by this Agreement, including the Merger, the Conversion and the Charter Conversion. Notwithstanding the foregoing, in no event shall Somerset Bank nor SR Bancorp be required to agree to any prohibition, limitation, or other requirement that (A) would prohibit or materially limit the ownership or operation by either of them of the business or assets of Regal Bancorp or Regal Bank, (B) materially limit the business currently conducted by Somerset Bank, (C) compel either of them to dispose of or hold separate all or any material portion of the business or assets of Regal Bancorp or Regal Bank or (D) compel SR Bancorp or Somerset Bank to take any action or commit to take any action or agree to any condition or request, if the prohibition, limitation, condition or other requirement could reasonably be expected to have a material adverse effect on the future operations of SR Bancorp and Somerset Bank (together, a "Burdensome Condition"). Regal Bancorp and Somerset Bank will furnish each other and each other's counsel with all information concerning themselves, their subsidiaries, directors, officers and stockholders and such other matters as may be necessary or advisable in connection with the Conversion Prospectus, the Proxy Statement-Prospectus and any application, petition or any other statement or application made by or on behalf of Regal Bancorp, SR Bancorp or Somerset Bank to any governmental body in connection with the Conversion, the Merger, the Charter Conversion and the other transactions contemplated by this Agreement. Regal Bancorp shall have the right to review and approve in advance all characterizations of the information relating to Regal Bancorp and any of its Subsidiaries, which appear in any filing made in connection with the transactions contemplated by this Agreement with any governmental body. In addition, Regal Bancorp, Regal Bank, Somerset Bank and SR Bancorp shall each furnish to the other for review a copy of each such filing made in connection with the transactions contemplated by this Agreement with any governmental body prior to its filing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*8.5. Treatment of Regal Bancorp Subordinated Notes* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.5.1. If requested by Somerset Bank, following (A) the receipt of all necessary approvals, authorizations and consents of all Bank Regulators and Governmental Entities required to consummate the transactions contemplated by this Agreement, including the Merger and the Conversion; (B) the approval by the requisite vote of the stockholders of Regal Bancorp of this Agreement and the transactions contemplated hereby; and (C) the approval by the requisite vote of Depositors of Somerset Bank of the Conversion and the Plan of Conversion, Regal Bancorp shall take all necessary steps to redeem the Regal Bancorp Subordinated Notes at or prior to the Effective Time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.5.2. If the Regal Bancorp Subordinated Notes are not redeemed in accordance with Section 8.5.2, SR Bancorp agrees to execute and deliver, or cause to be executed and delivered, by or on behalf of SR Bancorp at or prior to the Effective Time, one or more supplemental indentures, guarantees, and/or other instruments required for the due assumption of the Regal Bancorp Subordinated Notes. Regal Bancorp shall obtain the

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consents of the holders of the Regal Bancorp Subordinated Notes for the assignment and assumption of the Regal Bancorp Subordinated Notes by SR Bancorp, to the extent such consent is required under the Regal Bancorp Subordinated Notes and/or the Regal Bancorp Subordinated Note Purchase Agreement, dated as of July 1, 2017, by and between the Regal Bancorp and the purchasers of the Subordinated Notes.

**ARTICLE IX** 

**CLOSING CONDITIONS** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*9.1. Conditions to Each Party's Obligations under this Agreement.* 

The respective obligations of each Party under this Agreement shall be subject to the fulfillment at or prior to the Pre-Closing Date of the following conditions, none of which may be waived:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.1. *Stockholder and Depositor Approval*.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) This Agreement and the transactions contemplated hereby shall have been approved by the requisite vote of the stockholders of Regal Bancorp.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) The Conversion and the Plan of Conversion shall have been approved by the requisite vote of Depositors of Somerset Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.2. *No Injunctions or Restraints; Illegality*. None of the parties hereto shall be subject to any order, decree or injunction of a court or agency of competent jurisdiction that enjoins or prohibits the consummation of the transactions contemplated by this Agreement and no Governmental Entity shall have instituted any proceeding for the purpose of enjoining or prohibiting the consummation of the Merger or any transactions contemplated by this Agreement. No statute, rule or regulation shall have been enacted, entered, promulgated or enforced by any Governmental Entity that prohibits or makes illegal consummation of the Merger.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.3. *Regulatory Approvals*. All necessary approvals, authorizations and consents of all Bank Regulators and Governmental Entities required to consummate the transactions contemplated by this Agreement, including the Merger and the Conversion, shall have been obtained and shall remain in full force and effect and all waiting periods relating to such approvals, authorizations or consents shall have expired.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.4. *Effectiveness of the Merger and the Conversion Registration Statements*. The Merger Registration Statement and the Conversion Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Merger Registration Statement shall have been issued, and no proceedings for that purpose shall have been initiated or threatened by the SEC and, if the offer and sale of SR Bancorp Common Stock in the Merger is subject to the Blue Sky laws of any state, it shall not be subject to a stop order of any state securities commissioner.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.5. *NASDAQ Listing*. The shares of SR Bancorp Common Stock to be issued in the Merger shall have been authorized for listing on the NASDAQ, subject to official notice of issuance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.6. *Tax Opinion*. On the basis of facts, representations and assumptions, which shall be consistent with the state of facts existing at the Closing Date, Somerset Bank, SR Bancorp and Regal Bancorp shall have received an opinion of Luse Gorman, PC reasonably acceptable in form and substance to Somerset Bank, SR Bancorp and Regal Bancorp dated as of the Closing Date, substantially to the effect that, for Federal income tax purposes, the Merger will be a reorganization within the meaning of Section 368(a)(1)(A) of the Code. Each of Somerset Bank, SR Bancorp, Regal Bank and Regal Bancorp shall provide a letter setting forth the facts, assumptions and representations on which such counsel may rely in rendering its opinion, provided such facts, assumptions and representations are consistent with the facts existing at the Effective Time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1.7. *Conversion*. The Conversion shall have been completed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*9.2. Conditions to the Obligations of SR Bancorp and Somerset Bank under this Agreement.* 

The obligations of Somerset Bank and SR Bancorp under this Agreement shall be further subject to the satisfaction of the conditions set forth in Sections 9.2.1 through 9.2.5 at or prior to the Closing, any of which may be waived by Somerset Bank:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2.1. *Representations and Warranties*. Except as otherwise contemplated by this Agreement or consented to in writing by Somerset Bank, each of the representations and warranties of Regal Bancorp and Regal Bank set forth in this Agreement shall be true and correct in all material respects, in each case as of the date of this Agreement, and as of the Closing Date, and Regal Bancorp shall have delivered to Somerset Bank a certificate of Regal Bancorp to such effect signed by the Chief Executive Officer and the Chief Financial Officer of Regal Bancorp as of the Closing Date, except that those representations and warranties that address matters only as of a particular date need only be true and correct as of such date. Notwithstanding the preceding sentence, no representation or warranty of Regal Bancorp and Regal Bank shall be deemed untrue and incorrect for purposes hereunder as a consequence of any fact, event or circumstance inconsistent with such representation and warranty, unless such fact, event or circumstance, individually or taken together with all other facts, events or circumstances inconsistent with any representations or warranties of Regal Bancorp and Regal Bank, has had or would result in a Material Adverse Effect on Regal Bancorp or Regal Bank, disregarding for these purposes, (x) any qualification or exception for, or reference to, materiality in any such representation or warranty and (y) any use of the terms "material," "materially," "in all material respects," "Material Adverse Effect" or similar terms or phrases in any such representation or warranty. The foregoing standard shall not apply to representations and warranties contained in 4.2.1, 4.7, and 4.13, which shall be true and correct and Sections 4.1.1, 4.1.2, 4.2.4, 4.3, 4.12.1, 4.12.8 and 4.12.10, which shall be deemed untrue, incorrect and breached if they are not true and correct in all material respects based on the qualifications and standards therein contained.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2.2. *Agreements and Covenants*. Regal Bancorp, Regal Bank and each Regal Bancorp Subsidiary shall have performed in all material respects all obligations and complied in all material respects with all agreements or covenants to be performed or complied with by each of them at or prior to the Effective Time, and Somerset Bank shall have received a certificate signed on behalf of Regal Bancorp, without personal liability, by the Chief Executive Officer and Chief Financial Officer of Regal Bancorp to such effect dated as of the Closing Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2.3. *Permits, Authorizations, Etc*. Regal Bancorp and the Regal Bancorp Subsidiaries shall have obtained any and all material permits, authorizations, consents, waivers, clearances or approvals required for the lawful consummation of the Merger by Regal Bancorp, the failure to obtain which would have a Material Adverse Effect on Somerset Bank and any Subsidiary of Somerset Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2.4. *Accountants' Letter*. SR Bancorp shall have received a "comfort" letter from the independent certified public accountants for Regal Bancorp, dated (i) the effective date of the Conversion Registration Statement and (ii) the Closing Date, with respect to certain financial information regarding Regal Bancorp, each in form and substance which is customary in transactions of the nature contemplated by this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2.5. *No Material Adverse Effect*. Since December 31, 2021, no event has occurred or circumstance arisen that, individually or in the aggregate, has had or is reasonably likely to have a Material Adverse Effect on Regal Bancorp or Regal Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2.6. *No Burdensome Condition.* No required approval of a Bank Regulator or Governmental Entity shall contain a Burdensome Condition.

Regal Bancorp and Regal Bank will furnish SR Bancorp with such certificates of its officers or others and such other documents to evidence fulfillment of the conditions set forth in this Section 9.2 as Somerset Bank may reasonably request.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*9.3. Conditions to the Obligations of Regal Bancorp and Regal Bank under this Agreement.* 

The obligations of Regal Bancorp under this Agreement shall be further subject to the satisfaction of the conditions set forth in Sections 9.3.1 through 9.3.5 at or prior to the Closing, any of which may be waived by Regal Bancorp:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3.1. *Representations and Warranties*. Except as otherwise contemplated by this Agreement or consented to in writing by Regal Bancorp, each of the representations and warranties of SR Bancorp and Somerset Bank set forth in this Agreement shall be true and correct in all material respects, in each case as of the date of this Agreement, and as of the Closing Time, and Somerset Bank shall have delivered to Regal Bancorp a certificate of Somerset Bank to such effect signed by the Chief Executive Officer and the Chief Financial Officer of Somerset Bank as of the Closing Date, except that those representations and warranties that address matters only as of a particular date need only be true and correct as of such date. Notwithstanding the preceding sentence, no representation or warranty of SR Bancorp and Somerset Bank shall be deemed untrue and incorrect for purposes hereunder as

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a consequence of any fact, event or circumstance inconsistent with such representation and warranty, unless such fact, event or circumstance, individually or taken together with all other facts, events or circumstances inconsistent with any representations or warranties of SR Bancorp and Somerset Bank, has had or would result in a Material Adverse Effect on SR Bancorp or Somerset Bank, disregarding for these purposes, (x) any qualification or exception for, or reference to, materiality in any such representation or warranty and (y) any use of the terms "material," "materially," "in all material respects," "Material Adverse Effect" or similar terms or phrases in any such representation or warranty. The foregoing standard shall not apply to representations and warranties contained in Sections 5.1.1, 5.1.2, 5.3. and 5.7, which shall be deemed untrue, incorrect and breached if they are not true and correct in all material respects based on the qualifications and standards therein contained.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3.2. *Agreements and Covenants*. SR Bancorp and Somerset Bank shall have performed in all material respects all obligations and complied in all material respects with all agreements or covenants to be performed or complied with by each of them at or prior to the Effective Time, and Regal Bancorp shall have received a certificate signed on behalf of Somerset Bank, without personal liability, by the Chief Executive Officer and Chief Financial Officer of Somerset Bank to such effect dated as of the Closing Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3.3. *Permits, Authorizations, Etc*. SR Bancorp and Somerset Bank shall have obtained any and all material permits, authorizations, consents, waivers, clearances or approvals required for the lawful consummation of the Merger by Somerset Bank and SR Bancorp, the failure to obtain which would have a Material Adverse Effect on Somerset Bank and its Subsidiaries, taken as a whole.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3.4. *Payment of Merger Consideration*. SR Bancorp or Somerset Bank shall have delivered the Exchange Fund to the Exchange Agent on or before the Closing and the Exchange Agent shall provide Regal Bancorp with a certificate evidencing such delivery.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3.5. *No Material Adverse Effect*. Since December 31, 2021, no event has occurred or circumstance arisen that, individually or in the aggregate, has had or is reasonably likely to have a Material Adverse Effect on SR Bancorp or Somerset Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3.6. *Orbach Employment Agreement*. Neither SR Bancorp nor Somerset Bank shall have terminated the Orbach Employment Agreement.

Somerset Bank and SR Bancorp will furnish Regal Bancorp with such certificates of their officers or others and such other documents to evidence fulfillment of the conditions set forth in this Section 9.3 as Regal Bancorp may reasonably request.

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**ARTICLE X** 

**THE CLOSING** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*10.1. Time and Place.* 

The closing of the transactions contemplated hereby shall take place by electronic delivery of executed documents or at the offices of Luse Gorman, PC, 5335 Wisconsin Avenue, Suite 780, Washington, D.C. no later than the fifth (5th) business day after the last condition precedent pursuant to this Agreement has been fulfilled or waived (including the expiration of any applicable waiting period), or at such other place, date or time upon which SR Bancorp and Regal Bancorp mutually agree. A pre-closing of the transactions contemplated hereby (the "Pre-Closing") shall take place by electronic delivery of executed documents or at the offices of Luse Gorman, PC, 5335 Wisconsin Avenue, Suite 780, Washington, D.C on the day prior to the Closing Date (the "Pre-Closing Date").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*10.2. Deliveries at the Pre-Closing and the Closing.* 

At the Pre-Closing there shall be delivered to Somerset Bank, SR Bancorp, Regal Bank and Regal Bancorp the opinions, certificates, and other documents and instruments required to be delivered at the Pre-Closing under Article IX. At or prior to the Closing, Somerset Bank or SR Bancorp shall deliver the Merger Consideration as set forth under Section 9.3.4.

**ARTICLE XI** 

**TERMINATION, AMENDMENT AND WAIVER** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*11.1. Termination.* 

This Agreement may be terminated at any time prior to the Pre-Closing Date, whether before or after approval of the Merger by the stockholders of Regal Bancorp:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1.1. At any time by the mutual written agreement of SR Bancorp and Regal Bancorp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1.2. By either Regal Bancorp or SR Bancorp (provided, that the terminating Party is not then in material breach of any representation or warranty contained herein) if there shall have been a breach of any of the representations or warranties set forth in this Agreement on the part of the other Party, such that the conditions set forth in Sections 9.2.1 or 9.3.1, as the case may be, would not be satisfied and which breach by its nature cannot be cured prior to the Pre-Closing Date or, provided that the breach is curable in nature, shall not have been cured within the first to occur of the Pre-Closing, or 30 days after written notice by Somerset Bank to Regal Bancorp (or by Regal Bancorp to Somerset Bank) of such breach;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1.3. By either Regal Bancorp or SR Bancorp (provided, that the terminating Party is not then in material breach of any covenant or other agreement contained herein) if there shall have been a material failure to perform or comply with any of the covenants or agreements set forth in this Agreement on the part of the other Party, which failure by its nature cannot be cured prior to the Pre-Closing Date or, provided that the failure is curable in nature, shall not have been cured within the first to occur of the Pre-Closing, or 30 days after written notice by SR Bancorp to Regal Bancorp (or by Regal Bancorp to SR Bancorp) of such failure;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1.4. At the election of either SR Bancorp or Regal Bancorp, if the Closing shall not have occurred by the Termination Date, or such later date as shall have been agreed to in writing by SR Bancorp and Regal Bancorp; provided, that no Party may terminate this Agreement pursuant to this Section 11.1.4 if the failure of the Closing to have occurred on or before said date was due to such Party's breach of any of its obligations under this Agreement;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1.5. By either Regal Bancorp or SR Bancorp if (i) the stockholders of Regal Bancorp shall have voted at the Regal Bancorp stockholders meeting on the transactions contemplated by this Agreement and such vote shall not have been sufficient to approve such transactions; provided, however, that Regal Bancorp shall only be entitled to terminate the Agreement pursuant to this clause if it has complied in all material respects with its obligations under Section 8.1, or (ii) the Depositors shall have voted at the Somerset Bank Depositors Meeting on the Conversion and such vote shall not have been sufficient to approve the Conversion; provided, however, that Somerset Bank shall only be entitled to terminate the Agreement pursuant to this clause if it has complied in all material respects with its obligations under Section 8.3.1;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1.6. By either Regal Bancorp or Somerset Bank if (i) final action has been taken by a Bank Regulator whose approval is required in connection with this Agreement and the transactions contemplated hereby, which final action (x) has become unappealable and (y) does not approve this Agreement or the transactions contemplated hereby or (iii) any court of competent jurisdiction or other Governmental Entity shall have issued an order, decree, ruling or taken any other action restraining, enjoining or otherwise prohibiting the Merger or Conversion and such order, decree, ruling or other action shall have become final and nonappealable;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1.7. By SR Bancorp if Regal Bancorp has (i) materially breached its obligations under Section 6.10 or 8.1 or (ii) received a Superior Proposal, and in accordance with Section 6.10, the Board of Directors of Regal Bancorp has made a Regal Bancorp Subsequent Determination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*11.2. Effect of Termination.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.2.1. In the event of termination of this Agreement pursuant to any provision of Section 11.1, this Agreement shall forthwith become void and have no further force, except that the provisions of Sections 11.2, 12.1, 12.2, 12.3, 12.7, 12.10, 12.11 and any other Section that, by its terms, relates to post-termination rights or obligations, shall survive such termination of this Agreement and remain in full force and effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.2.2. If this Agreement is terminated, expenses and damages of the parties hereto shall be determined as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) Except as provided below, whether or not the Merger is consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be paid by the Party incurring such expenses.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) In the event of a termination of this Agreement because of a willful breach of any representation, warranty, covenant or agreement contained in this Agreement, the breaching Party shall remain liable for any and all damages, costs and expenses, including all reasonable attorneys' fees, sustained or incurred by the non-breaching Party as a result thereof or in connection therewith or with respect to the enforcement of its rights hereunder.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) As a condition of Somerset Bank's willingness, and in order to induce Somerset Bank to enter into this Agreement, and to reimburse Somerset Bank for incurring the costs and expenses related to entering into this Agreement and consummating the transactions contemplated by this Agreement, Regal Bancorp and Regal Bank hereby agree to pay Somerset Bank or SR Bancorp, and Somerset Bank or SR Bancorp shall be entitled to payment of a fee of $2,336,000 (the "Fee") plus an amount equal to the out of pocket expenses (including the fees of its legal, financial and other advisors) incurred by SR Bancorp and Somerset Bank in connection with the Merger and the Conversion in amount not to exceed $550,000, within three (3) business days after written demand for payment is made by Somerset Bank or SR Bancorp, following the occurrence of any of the events set forth below:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) SR Bancorp terminates this Agreement pursuant to Section 11.1.7; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) If (i) this Agreement is terminated by SR Bancorp pursuant to Sections 11.1.2, 11.1.3 or 11.1.5 and the breach giving rise to such termination was knowing or intentional, and (ii) at the time of such termination Somerset Bank is not in material breach of any representation, warranty or material covenant contained herein, and (iii) prior to the Regal Bancorp Stockholder Meeting (in the case of termination pursuant to Section 11.1.5) or the date of termination (in the case of termination pursuant to Sections 11.1.2 or 11.1.3), an Acquisition Proposal has been publicly announced or disclosed, or communicated to Regal Bancorp, and (iv) within twelve (12) months of such termination Regal Bancorp enters into any agreement with respect to an Acquisition Proposal, Regal Bancorp shall make payment to Somerset Bank of the Fee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D) If demand for payment of the Fee is made pursuant to Section 11.2.2(C) and payment is timely made, then neither Somerset Bank nor SR Bancorp will have any other rights or claims against Regal Bancorp or Regal Bank, their Subsidiaries, and their respective officers and directors, under this Agreement, it being agreed that the acceptance of the Fee under Section 11.2.2(C) will constitute the sole and exclusive remedy of Somerset Bank and SR Bancorp against Regal Bancorp and Regal Bank, their Subsidiaries and their respective officers and directors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*11.3. Amendment, Extension and Waiver.* 

Subject to applicable law, at any time prior to the Effective Time (whether before or after approval thereof by the stockholders of Regal Bancorp), the Parties hereto by action of their respective Boards of Directors, may (a) amend this Agreement, (b) extend the time for the performance of any of the obligations or other acts of any other Party hereto, (c) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto, or (d) waive compliance with any of the agreements or conditions contained herein; provided, however, that after any approval of this Agreement and the transactions contemplated hereby by the stockholders of Regal Bancorp, there may not be, without further approval of such stockholders, any amendment of this Agreement that reduces the amount, value or changes the form of consideration to be delivered to Regal Bancorp's stockholders pursuant to

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this Agreement. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the Parties hereto. Any agreement on the part of a Party hereto to any extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such Party, but such waiver or failure to insist on strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.

**ARTICLE XII** 

**MISCELLANEOUS** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*12.1. Expenses.* 

Except as otherwise provided in Section 11.2 and except for the cost of printing and mailing the Merger Proxy Statement-Prospectus which shall be shared equally, each Party hereto shall bear and pay all costs and expenses incurred by it in connection with the transactions contemplated hereby, including fees and expenses of its own financial consultants, accountants and counsel and, in the case of SR Bancorp, the registration fee to be paid to the SEC in connection with the Merger Registration Statement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*12.2. Confidentiality.* 

Except as specifically set forth herein, Somerset Bank and Regal Bancorp agree to be bound by the terms of the reciprocal confidentiality agreement dated as of May 2, 2022, previously executed by the Parties hereto (the "Confidentiality Agreement") that relate to the confidentiality of information. The Parties hereto agree that such Confidentiality Agreement shall continue in accordance with their respective terms, notwithstanding the termination of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*12.3. Public Announcements.* 

Regal Bancorp and Somerset Bank shall cooperate with each other in the development and distribution of all news releases and other public information disclosures with respect to this Agreement, and except as may be otherwise required by law, neither Regal Bancorp, Regal Bank nor Somerset Bank or SR Bancorp shall issue any news release, or other public announcement or communication with respect to this Agreement unless such news release, public announcement or communication has been mutually agreed upon by the Parties hereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*12.4. Survival.* 

All representations, warranties and covenants in this Agreement or in any instrument delivered pursuant hereto or thereto shall expire on and be terminated and extinguished at the Effective Time, other than those covenants set forth in Sections 2.5, 7.8, 7.9, 12.1, and 12.2, which shall survive or be performed after the Effective Time.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*12.5. Notices.* 

All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or if by facsimile, upon written confirmation of receipt by facsimile, or otherwise, (b) on the first (1<sup>st</sup>) Business Day after being sent if delivered utilizing a next-day service by an internationally recognized overnight courier that issues a receipt or other confirmation of delivery, (c) on the earlier of confirmed receipt or the third (3<sup>rd</sup>) Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid or (d) when transmitted to the email address set out below, as applicable (<u>provided</u>, that no "error" message or other notification of non-delivery is generated). All notices hereunder shall be delivered to the addresses set forth below, or pursuant to such other instructions as may be designated in writing by the Party to receive such notice.

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| If to Regal Bancorp or Regal Bank, to:<br>Thomas Lupo<br> President and Chief Executive Officer<br> Regal Bank<br> 570 West Mt. Pleasant Avenue <br>Livingston, New Jersey 07039<br> Email: <u>tlupo@regalbanknj.com</u> |
| With copies to:<br>Robert A. Schwartz, Esq. <br>Windels Marx Lane & Mittendorf, LLP <br>120 Albany Street Plaza<br> New Brunswick, New Jersey 08901 <br>Email: <u>rschwartz@windelsmarx.com</u> |
| If to SR Bancorp or Somerset Bank, to:<br>William P. Taylor<br> Chairman and Chief Executive Officer<br> Somerset Savings Bank, SLA<br> 220 West Union Avenue<br> Bound Brook, New Jersey 08805<br> Email: <u>wm_taylor@somersetsavings.com</u> |
| With copies to:<br>John J. Gorman, Esq.<br> Marc P. Levy, Esq.<br> Luse Gorman, PC<br> 5335 Wisconsin Avenue, N.W., Suite 780<br> Washington, D.C. 20015<br> Email: <u>jgorman@luselaw.com</u><br> Email: <u>mlevy@luselaw.com</u> |

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or such other address as shall be furnished in writing by any Party, and any such notice or communication shall be deemed to have been given: (a) as of the date delivered by hand; (b) three (3) business days after being delivered to the U.S. mail, postage prepaid; or (c) one (1) business day after being delivered to the overnight courier.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*12.6. Parties in Interest.* 

This Agreement shall be binding upon and shall inure to the benefit of the Parties hereto and their respective successors and assigns; provided, however, that neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any Party hereto without the prior written consent of the other Party. Except for Sections 7.8 and 7.9, nothing in this Agreement, expressed or implied, is intended to confer upon any Person, other than the Parties hereto or their respective successors, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*12.7. Complete Agreement.* 

This Agreement, including the Exhibits and Disclosure Schedules hereto and the documents and other writings referred to herein or therein or delivered pursuant hereto, and the Confidentiality Agreement, referred to in Section 12.1, contains the entire agreement and understanding of the Parties with respect to its subject matter. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the Parties other than those expressly set forth herein or therein. This Agreement supersedes all prior agreements and understandings (other than the Confidentiality Agreement referred to in Section 12.1) between the Parties, both written and oral, with respect to its subject matter. None of the Parties to this Agreement has entered into this Agreement in reliance on any representation by any other Party or any other person, except as expressly set forth in this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*12.8. Counterparts.* 

This Agreement and any signed agreement or instrument entered into in connection with this Agreement, and any amendments or waivers hereto or thereto, may be executed by means of a facsimile machine, by e-mail delivery of a ".pdf" format data file or via DocuSign or other means of electronic transmission and in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Party, it being understood that all Parties need not sign the same counterpart. Signatures delivered by facsimile machine, e-mail delivery of a ".pdf" format data file or via DocuSign or other means of electronic transmission shall have the same effect as originals. No Party hereto or to any such agreement or instrument shall raise the use of a facsimile machine, e-mail delivery of a ".pdf" format data file or DocuSign or other means of electronic transmission to deliver a signature to this Agreement and any signed agreement or instrument entered into in connection with this Agreement or any amendment or waivers hereto or thereto or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine, e-mail delivery of a ".pdf" format data file or DocuSign or other means of electronic transmission as a defense to the formation of a contract and each Party hereto forever waives any such defense.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*12.9. Severability.* 

In the event that any one or more provisions of this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, by any court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement and the Parties shall use their reasonable efforts to substitute a valid, legal and enforceable provision which, insofar as practical, implements the purposes and intents of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*12.10. Governing Law.* 

This Agreement shall be governed by the laws of New Jersey, without giving effect to its principles of conflicts of laws. Each Party acknowledges and agrees that any controversy that may arise under this Agreement is likely to involve complicated and difficult issues, and therefore each Party irrevocably and unconditionally waives any right such Party may have to a trial by jury in any litigation directly or indirectly arising out of or relating to this Agreement, or the transactions it contemplates. Each Party certifies and acknowledges that (i) no Representative of any other Party has represented, expressly or otherwise, that any other Party would not, in the event of litigation, seek to enforce the foregoing waiver, (ii) each Party understands and has considered the implications of this waiver, (iii) each Party makes this waiver voluntarily, and (iv) each Party has been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 12.10.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*12.11. Interpretation.* 

When a reference is made in this Agreement to Sections or Exhibits, such reference shall be to a Section of or Exhibit to this Agreement unless otherwise indicated. The recitals hereto constitute an integral part of this Agreement. References to Sections include subsections, which are part of the related Section (e.g., a section numbered "Section 5.5.1" would be part of "Section 5.5" and references to "Section 5.5" would also refer to material contained in the subsection described as "Section 5.5.1"). The table of contents, index and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." The phrases "the date of this Agreement," "the date hereof" and terms of similar import, unless the context otherwise requires, shall be deemed to refer to the date set forth in the Recitals to this Agreement. The term "made available" or "provided to" means any document or other information that was included in the virtual data room of a Party at least two (2) business days prior to the date hereof. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*12.12. Specific Performance.* 

The Parties hereto agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and, accordingly, that the parties shall be entitled to an injunction or injunctions to prevent breaches or threatened breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof (including the Parties' obligation to consummate the Merger), in addition to any other remedy to which they are entitled at law or in equity. Each of the Parties hereby further waives (a) any defense in any action for specific performance that a remedy at law would be adequate, and (b) any requirement under any law to post security or a bond as a prerequisite to obtaining equitable relief.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*12.13. Confidential Supervisory Information* 

Notwithstanding any other provision of this Agreement, no disclosure, representation or warranty shall be made (or other action taken) pursuant to this Agreement that would involve the disclosure of confidential supervisory information (including confidential supervisory information as defined in 12 C.F.R. § 261.2(c) and as identified in 12 C.F.R. § 309.5(g)(8)) of a Governmental Entity by any Party to this Agreement to the extent prohibited by applicable law. To the extent legally permissible, appropriate substitute disclosures or actions shall be made or taken under circumstances in which the limitations of the preceding sentence apply.

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IN WITNESS WHEREOF, SR Bancorp, Somerset Bank, Regal Bancorp and Regal Bank have caused this Agreement to be executed under seal by their duly authorized officers as of the date first set forth above.

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| | |
|:---|:---|
|  | **SR BANCORP, INC.** |
| By: | /s/ William P. Taylor |
|  | Name: William P. Taylor |
|  | Title: Chief Executive Officer |
|  | **SOMERSET SAVINGS, SLA** |
| By: | /s/ William P. Taylor |
|  | Name: William P. Taylor |
|  | Title: Chief Executive Officer |
|  | **REGAL BANCORP, INC.** |
| By: | /s/ Thomas Lupo |
|  | Name: Thomas Lupo |
|  | Title: Chief Executive Officer |
|  | **REGAL BANK** |
| By: | /s/ Thomas Lupo |
|  | Name: Thomas Lupo |
|  | Title: Chief Executive Officer |

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**AMENDMENT TO THE AGREEMENT AND PLAN OF MERGER** 

THIS AMENDMENT TO THE AGREEMENT AND PLAN OF MERGER, dated as of March 7, 2023 (the "Amendment"), is made by and among Somerset Savings Bank, SLA, a New Jersey-chartered mutual savings association ("Somerset Bank"), SR Bancorp, Inc., a Maryland corporation that will become the holding company for Somerset Bank upon completion of the transactions contemplated by the Agreement ("SR Bancorp"), SRB Interim Corporation, a Maryland corporation and wholly-owned subsidiary of SR Bancorp ("Merger Sub"), Regal Bancorp, Inc., a New Jersey corporation ("Regal Bancorp"), and its wholly owned subsidiary, Regal Bank, a New Jersey state bank (Somerset Bank and SR Bancorp, on the one hand, and Regal Bancorp and Regal Bank, on the other hand, are hereinafter referred to individually as a "Party" and collectively as the "Parties"). All capitalized terms contained in this Amendment, but not specifically defined in this Amendment, shall have the meanings ascribed to such terms in the Agreement.

**RECITALS** 

WHEREAS, SR Bancorp, Somerset Bank, Regal Bancorp and Regal Bank are parties to that certain Agreement and Plan of Merger, dated as of July 25, 2022 (the "Agreement"); and

WHEREAS, Merger Sub has been formed as a Maryland corporation to facilitate the Merger and hereby agrees, ratifies and confirms that, effective as of the date hereof, Merger Sub shall become a party to the Agreement; and

WHEREAS, the parties to the Agreement desire to amend the Agreement as set forth herein.

NOW, THEREFORE, in consideration of the premises, and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. <u>Amendments to Section 1.1</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Section 1.1 is hereby amended to remove the following defined terms, "Cash Election," "Cash
Election Shares," "Election Deadline," "Election Form," "Election Form Record Date," "Exchange Fund," "Exchange Ratio," "Mailing Date," "Merger Registration Statement,"
"Mixed Election," "Non-Election," "Non-Election Shares," "Proxy Statement-Prospectus," "Shortfall Number," "Stock
Consideration," "Stock Conversion Number," "Stock Election," "Stock Election Number," and "Stock Election Shares."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Section 1.1 is hereby amended to add the following terms:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*i.* "Business Day" means any day other than a Saturday, Sunday, federal holiday or any day on
which banking institutions in the State of New Jersey are authorized or obligated to close.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*ii.* "First Effective Time" shall mean the date and time specified pursuant to Section 2.2 as
the effective time of the Merger."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*iii.* "Letter of Transmittal" shall have the meaning set forth in Section 3.2.1.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*iv.* "Merger Sub" shall mean SRB Interim Corporation, a Maryland corporation and wholly-owned
subsidiary of SR Bancorp formed to facilitate the Merger.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*v.* "Proxy Statement" shall have the meaning set forth in Section 8.2.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*vi.* "Second Step Merger" shall have the meaning set forth in Section 2.11.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;vii. "Second Step Merger Surviving Corporation" shall have the meaning set forth in Section 2.11.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. The term "Conversion Registration Statement" in Section 1.1 is hereby replaced in its entirety
with the following: "'Conversion Registration Statement" shall mean the registration statement, together with all amendments, filed with the SEC under the Securities Act to register shares of SR Bancorp Common Stock to be offered and
issued in connection with the Conversion Offering."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. The term "Effective Time" in Section 1.1 is hereby replaced in its entirety with the following:
"Effective Time" shall mean the date and time specified pursuant to Section 2.2 as the effective time of the Second Step Merger."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e. The term "Independent Valuation" in Section 1.1 is hereby replaced in its entirety with the
following: "'Independent Valuation" shall mean the appraised pro forma market value of the SR Bancorp Common Stock issued in the Conversion, and any updates, as determined by an independent appraiser."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;f. The term "Merger" in Section 1.1 is hereby replaced in its entirety with the following:
"'Merger" shall mean the merger of Merger Sub with and into Regal Bancorp pursuant to the terms hereof."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;g. The term "Merger Consideration" in Section 1.1 is hereby replaced in its entirety with the
following: "'Merger Consideration" shall mean the cash to be paid by SR Bancorp for each share of Regal Bancorp Common Stock, as set forth in Section 3.1."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;h. The term "Proxy Statement-Prospectus" in Section 1.1 is hereby replaced in its entirety with the
following: "'Proxy Statement" means the proxy statement, as amended or supplemented, to be delivered to stockholders of Regal Bancorp in connection with the solicitation of their approval of this Agreement and the transactions
contemplated hereby."

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;i. The term "SR Bancorp Common Stock" in Section 1.1 is hereby replaced in its entirety with the
following: "'SR Bancorp Common Stock" shall mean the common stock, par value $0.01 per share, of SR Bancorp that will be issued in the Conversion Offering."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. <u>Amendment to Section 2.1</u>. Section 2.1 is hereby replaced in its entirety with the following: "As promptly as practicable following the satisfaction or waiver of the conditions to each Party's respective obligations hereunder, and immediately following the consummation of the Conversion and the issuance of shares thereunder, and subject to the terms and conditions of this Agreement, at the First Effective Time: (a) Merger Sub shall merge with and into Regal Bancorp, with Regal Bancorp as the resulting or surviving corporation (the "Surviving Corporation"); and (b) the separate existence of Merger Sub shall cease and all of the rights, privileges, powers, franchises, properties, assets, liabilities and obligations of Merger Sub shall be vested in and assumed by Regal Bancorp. The Articles of Incorporation and Bylaws of Merger Sub as in effect immediately prior to the First Effective Time shall be the Articles of Incorporation and Bylaws of the Surviving Corporation, until thereafter amended as provided therein and by applicable law. The directors and officers of Merger Sub immediately prior to the First Effective Time shall be the directors and officers of the Surviving Corporation, each to hold office in accordance with the Articles of Incorporation and Bylaws of the Surviving Corporation. As part of the Merger, each share of Regal Bancorp Common Stock will be converted into the right to receive the Merger Consideration pursuant to the terms of Article III. Immediately after the Merger, the Second Step Merger, and the Charter Conversion, Regal Bank shall merge with and into Somerset Bank, with Somerset Bank as the resulting institution under the name "Somerset Regal Bank" (the "Bank Merger"), which name shall be effective at the time of the consummation of the Bank Merger, pursuant to the terms of the Bank Merger Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. <u>Amendment to Section 2.2</u>. Section 2.2 is hereby replaced in its entirety with the following: "The Merger shall be effected by the filing of a certificate of merger with the New Jersey Department of Treasury in accordance with the NJBCA, and the filing of articles of merger with the Maryland Department of Assessments and Taxation in accordance with the MGCL, on the day of the closing (the "Closing Date") following the satisfaction, or if permissible, waiver of the conditions provided for in Article X (the "Closing"). The "First Effective Time" means the date and time upon which the certificate of merger is filed with the New Jersey Department of Treasury and the articles of merger are filed with the Maryland Department of Assessments and Taxation or at such later date or time as the Parties agree and specify in the certificate of merger and articles of merger. The Closing of the Merger shall occur as promptly as possible following the closing of the Conversion Offering and completion of the Conversion."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. <u>Amendment to Section 2.3</u>. Section 2.3 is hereby replaced in its entirety with the following: "The Articles of Incorporation and Bylaws of SR Bancorp (or any subsidiary into which Regal Bancorp is merged) as in effect immediately prior to the Effective Time, shall be the Articles of Incorporation and Bylaws of the Second Step Merger Surviving Corporation until thereafter amended as provided therein and by applicable law. A copy of the Articles of Incorporation and Bylaws of SR Bancorp, substantially to be in effect on the Closing Date, are included in SR BANCORP DISCLOSURE SCHEDULE 2.3."

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. <u>Amendment to Section 2.4</u>. Section 2.4 is hereby replaced in its entirety with the following: "Except as provided in Section 2.5, the directors of SR Bancorp immediately prior to the Effective Time shall be the initial directors of the Second Step Merger Surviving Corporation, each to hold office in accordance with the Articles of Incorporation and Bylaws of the Second Step Merger Surviving Corporation. Except as provided in Section 2.5, the officers of SR Bancorp immediately prior to the Effective Time shall be the initial officers of the Second Step Merger Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. <u>Amendment to Section 2.6</u>. Section 2.6 is hereby replaced in its entirety with the following: "At and after the First Effective Time, the Merger shall have the effects as set forth in the NJBCA and MGCL."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. <u>Addition of Section 2.11</u>. The following language is added as a new Section 2.11: "*Section 2.11 The Second Step Merger*. Immediately following the First Effective Time, in accordance with the MGCL, SR Bancorp shall cause the Surviving Corporation to be merged with and into SR Bancorp (the "Second Step Merger"), with SR Bancorp surviving the Second Step Merger (the "Second Step Merger Surviving Corporation") and continuing its corporate existence under its Articles of Incorporation, Bylaws and the laws of the State of Maryland and its name and separate corporate existence, with all of its rights, privileges, immunities, powers and franchises, shall continue unaffected by the Second Step Merger, and the separate corporate existence of the Surviving Corporation shall cease as of the Effective Time. In furtherance of the foregoing, SR Bancorp shall cause to be filed with the Maryland Department of Assessments and Taxation articles of merger relating to the Second Step Merger. The Second Step Merger shall become effective as of the date and time specified in such articles of merger (such date and time, the "Effective Time"). At and after the Effective Time, the Second Step Merger shall have the effects set forth in the applicable provisions of the MGCL.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. <u>Amendment to Article III</u>. Article III is hereby replaced in its entirety with the following:

**ARTICLE III** 

**CONVERSION OF SHARES** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 Conversion of Regal Bancorp Common Stock; Merger Consideration.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1.1 At the First Effective Time, by virtue of the Merger and without any action on the part of SR Bancorp, Regal Bancorp or the holders of any shares of Regal Bancorp Common Stock, each share of Regal Bancorp Common Stock issued and outstanding immediately prior to the First Effective Time, shall become and be converted into the right to receive $23.00 in cash, without interest (the "Merger Consideration").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1.2. All shares of Regal Bancorp Common Stock held in the treasury of Regal Bancorp and each share of Regal Bancorp Common Stock owned by SR Bancorp, Somerset Bank, any Somerset Bank Subsidiary or Regal Bancorp Subsidiary immediately prior to the First Effective Time (other than shares held in a fiduciary capacity or in connection with debts previously contracted) shall, at the First Effective Time, cease to exist, and the Certificates for such shares shall be canceled as promptly as practicable thereafter, and no payment or distribution shall be made in consideration therefor.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1.3. After the First Effective Time, shares of Regal Bancorp Common Stock shall be no longer outstanding and shall be canceled automatically and shall cease to exist, and shall thereafter by operation of this Section 3.1 be converted into the right to receive the Merger Consideration.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1.4. Each share of SR Bancorp Common Stock that is issued and outstanding immediately prior to the First Effective Time shall remain issued and outstanding following the First Effective Time and shall be unchanged by the Merger.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 Payment Procedures.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2.1. Customary transmittal materials ("Letter of Transmittal") in a form satisfactory to SR Bancorp and Regal Bancorp shall be mailed as soon as practicable after the First Effective Time, but in no event later than five (5) Business Days thereafter, to each holder of record of Regal Bancorp Common Stock as of the First Effective Time. A Letter of Transmittal will be deemed properly completed only if, in the case of holders of certificated shares of Regal Bancorp Common Stock, the completed Letter of Transmittal is accompanied by one or more Certificates (or customary affidavits and, if required pursuant to Section 3.2.8, indemnification regarding the loss or destruction of such Certificates or the guaranteed delivery of such Certificates) representing all shares of Regal Bancorp Common Stock to be converted thereby.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2.2. At and after the First Effective Time, each Certificate shall represent only the right to receive the Merger Consideration (it being understood that any reference herein to "Certificate" shall be deemed to include reference to book-entry account statements relating to the ownership of shares of Regal Bancorp Common Stock) and any dividends or distributions with respect thereto or any dividends or distributions with a record date prior to the First Effective Time that were declared or made by Regal Bancorp on such shares of Regal Bancorp Common Stock in accordance with the terms of this Agreement on or prior to the First Effective Time and that remain unpaid at the First Effective Time, in each case without interest.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2.3. Prior to, or immediately after, the Closing, SR Bancorp shall deposit, or cause to be deposited, with the Exchange Agent for the benefit of the holders of shares of Regal Bancorp Common Stock, for exchange in accordance with this Section 3.2, an amount of cash sufficient to pay the aggregate Merger Consideration.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2.4. The Letter of Transmittal shall (i) specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent, (ii) be in a form and contain any other provisions as SR Bancorp may reasonably determine and (iii) include instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. Upon the proper surrender of the Certificates to the Exchange Agent, together with a properly completed and duly executed Letter of Transmittal, the holder of such Certificates shall be entitled to receive in exchange therefore a check in the amount equal to the cash that such holder has the right to receive pursuant to Section 3.1. Certificates so surrendered shall forthwith be canceled. As soon as practicable following receipt of the properly completed Letter of Transmittal and any necessary accompanying documentation, the Exchange Agent shall distribute the Merger Consideration as provided herein, in each case without interest. If there is a transfer of ownership of any shares of Regal Bancorp Common Stock not registered in the transfer records of Regal Bancorp, the Merger Consideration shall be issued to the transferee thereof if the Certificates representing such Regal Bancorp Common Stock are presented to the Exchange Agent, accompanied by all documents required, in the reasonable judgment of SR Bancorp and the Exchange Agent, to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2.5. The stock transfer books of Regal Bancorp shall be closed immediately upon the First Effective Time and from and after the First Effective Time there shall be no transfers on the stock transfer records of Regal Bancorp of any shares of Regal Bancorp Common Stock. If, after the First Effective Time, Certificates are presented to SR Bancorp, they shall be canceled and exchanged for the Merger Consideration deliverable in respect thereof pursuant to this Agreement in accordance with the procedures set forth in this Section 3.2.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2.6. Any portion of the aggregate amount of cash to be paid pursuant to Section 3.1 or any proceeds from any investments thereof that remains unclaimed by the stockholders of Regal Bancorp for six (6) months after the First Effective Time shall be repaid by the Exchange Agent to SR Bancorp upon the written request of SR Bancorp. After such request is made, any stockholders of Regal Bancorp who have not theretofore complied with this Section 3.2 shall look only to SR Bancorp for the Merger Consideration deliverable in respect of each share of Regal Bancorp Common Stock such stockholder holds, as determined pursuant to Section 3.1 of this Agreement, without any interest thereon. If outstanding Certificates are not surrendered prior to the date on which such payments would otherwise escheat to or become the property of any governmental unit or agency, the unclaimed items shall, to the extent permitted by any abandoned property, escheat or other applicable laws, become the property of SR Bancorp (and, to the extent not in its possession, shall be paid over to it), free and clear of all claims or interest of any person previously entitled to such claims. Notwithstanding the foregoing, neither the Exchange Agent nor any party to this Agreement (or any affiliate thereof) shall be liable to any former holder of Regal Bancorp Common Stock for any amount delivered to a public official pursuant to applicable abandoned property, escheat or similar laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2.7 SR Bancorp and the Exchange Agent shall be entitled to rely upon Regal Bancorp's stock transfer books to establish the identity of those persons entitled to receive the Merger Consideration, which books shall be conclusive with respect thereto. In the event of a dispute with respect to ownership of stock represented by any Certificate, SR Bancorp and the Exchange Agent shall be entitled to deposit any Merger Consideration represented thereby in escrow with an independent third party and thereafter be relieved with respect to any claims thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2.8. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by the Exchange Agent or SR Bancorp, the posting by such person of a bond in such amount as the Exchange Agent may reasonably direct as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration deliverable in respect thereof pursuant to Section 3.1.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2.9. The Exchange Agent or SR Bancorp will be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement or the transactions contemplated hereby to any holder of Regal Bancorp Common Stock such amounts as the Exchange Agent is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code, or any applicable provision of U.S. federal, state, local or non-U.S. tax law. To the extent that such amounts are properly withheld by the Exchange Agent or SR Bancorp, such withheld amounts will be treated for all purposes of this Agreement as having been paid to the holder of Regal Bancorp Common Stock in respect of whom such deduction and withholding were made by the Exchange Agent or SR Bancorp.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. <u>Amendment to Section 4.4</u>. The first sentence of Section 4.4 is hereby replaced in its entirety with the following: "Except for (A) the consents, waivers, approvals, filings and registrations from or with the Bank Regulators referred to in Section 8.4 and compliance with any conditions contained therein, (B) the filing of the articles of merger and certificate of merger as referred to in Section 2.2 hereof, (C) such filings with Governmental Entities to satisfy the applicable requirements of the laws of states in which Regal Bancorp and the Regal Bancorp Subsidiaries are qualified or licensed to do business or state securities or "blue sky" laws, and (D) the approval of this Agreement by the requisite vote of the stockholders of Regal Bancorp, no consents, waivers or approvals of, or filings or registrations with, any Governmental Entity or other third parties are necessary, in connection with (a) the execution and delivery of this Agreement by Regal Bancorp and Regal Bank, and (b) the completion by Regal Bancorp and Regal Bank of the Merger and the Bank Merger."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10. <u>Amendment to Section 4.22</u>. Section 4.22 is hereby replaced in its entirety with the following: "The Board of Directors of Regal Bancorp has received an opinion from The Kafafian Group, Inc., as of the date of this Agreement, as amended, to the effect that, subject to the terms, conditions and qualifications set forth therein, as of the date thereof, the Merger Consideration to be received by the stockholders of Regal Bancorp pursuant to this Agreement, as amended, is fair to such stockholders from a financial point of view.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11. <u>Amendment to Section 4.27</u>. Section 4.27 is hereby replaced in its entirety with the following: "The information relating to Regal Bancorp, the Regal Bancorp Subsidiaries and its and their respective directors and officers that is provided by Regal Bancorp or its representatives and is specifically called for inclusion in the Conversion Registration Statement, Conversion Prospectus, Proxy Statement or in any other document filed with any Bank Regulator, the SEC or other Governmental Entity in connection herewith, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they are made, not misleading."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12. <u>Amendment to Section 5.4</u>. The first sentence of Section 5.4 is hereby replaced in its entirety with the following: "Except for (A) the consents, waivers, approvals, filings and registrations from or with the Bank Regulators referred to in Section 8.4 and compliance with any conditions contained therein, (B) the regulatory approvals required for the completion of the Conversion, as described in the Plan of Conversion, and the Charter Conversion, (C) the filing of the articles of merger and certificate of merger as referred to in Section 2.2 hereof, (D) such filings with Governmental Entities to satisfy the applicable requirements of the laws of states in which SR Bancorp and its Subsidiaries are qualified or licensed to do business or state securities or "blue sky" laws, and (E) and the requisite vote on the Conversion by the Depositors of Somerset Bank, no consents, waivers or approvals of, or filings or registrations with, any Bank Regulator, Governmental Entity or third party are necessary, and no consents, waivers or approvals of, or filings or registrations with, any other third parties are necessary, in connection with (a) the execution and delivery of this Agreement by SR Bancorp and Somerset Bank, and (b) the completion by SR Bancorp and Somerset Bank of Conversion, the Charter Conversion, the Merger and the Bank Merger."

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13. <u>Amendment to Section 5.7</u>. Section 5.7 is hereby replaced in its entirety with the following: "5.7 [Reserved]."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14. <u>Amendment to Section 5.21</u>. Section 5.21 is hereby replaced in its entirety with the following: "The information relating to SR Bancorp, Somerset Bank, the Somerset Bank Subsidiaries and its and their respective directors and officers that is provided by SR Bancorp, Somerset Bank or their representatives and is specifically called for inclusion in the Proxy Statement or in any other document filed with any Bank Regulator, the SEC or other Governmental Entity in connection herewith, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they are made, not misleading."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15. <u>Amendment to Section 6.13</u>. Section 6.13 is hereby replaced in its entirety with the following: "Nothing contained in this Agreement shall give SR Bancorp, directly or indirectly, the right to control or direct the operations of Regal Bancorp or any Regal Bancorp Subsidiary prior to the First Effective Time. Prior to the First Effective Time, each of SR Bancorp, Somerset Bank, Regal Bancorp and Regal Bank shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its and its Subsidiaries' respective operations."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16. <u>Amendment to Section 7.10</u>. Section 7.10 is hereby replaced in its entirety with the following: "7.10 [Reserved]."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17. <u>Addition of Section 7.13</u>. The following language is added as a new Section 7.13: "*Section 7.13. Dividend from Regal Bank to Regal Bancorp*. Immediately prior to the Closing of the Merger, Regal Bank shall pay a cash dividend to Regal Bancorp in an amount equal to the maximum cash dividend payment that is permissible under New Jersey Revised Statutes Section 17:9A-52, as mutually determined by Regal Bancorp and SR Bancorp."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18. <u>Amendment to Section 8.1</u>. Section 8.1 is hereby replaced in its entirety with the following: "Regal Bancorp will (i) as promptly as practicable, take all steps necessary to duly call, give notice of, convene and hold a meeting of its stockholders (the "Regal Bancorp Stockholders Meeting"), for the purpose of considering this Agreement and the Merger, and for such other purposes as may be, in Regal Bancorp's reasonable judgment, necessary or desirable, (ii) subject to Section 6.10, have its Board of Directors recommend approval of this Agreement to the Regal Bancorp stockholders (the "Regal Bancorp Recommendation"), (iii) include such recommendation in Proxy Statement and (iv) use commercially reasonable efforts to obtain from its stockholders the approval of the Merger and the Merger Agreement. Without limiting the generality of the foregoing, unless this Agreement has terminated in accordance with its terms, this Agreement and the Merger shall be submitted to the Regal Bancorp's stockholders at the Regal Bancorp Stockholders Meeting whether or not (x) the Regal Bancorp's Board of Directors shall have effected a Regal Bancorp Subsequent Determination, or (y) any Acquisition Proposal shall have been publicly proposed or announced or otherwise submitted to Regal Bancorp or any of its advisors. Regal Bancorp shall not, without the prior written consent of SR Bancorp, adjourn or postpone the Regal Bancorp Stockholders Meeting; *provided* that Regal Bancorp may, without the prior written consent of SR Bancorp, adjourn or postpone the Regal Bancorp

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Stockholders Meeting (A) if, as of the time for which the Regal Bancorp Stockholders Meeting is originally scheduled (as set forth in the Proxy Statement), there are insufficient shares of Regal Bancorp Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of the Regal Bancorp Stockholders Meeting, (B) after consultation with SR Bancorp, if the failure to adjourn or postpone the Regal Bancorp Stockholders Meeting would reasonably be expected to be a violation of applicable law without the distribution of any required supplement or amendment to the Proxy Statement, or (C) after consultation with SR Bancorp, for a single period not to exceed ten (10) Business Days, to solicit additional proxies if necessary to obtain the required approval of Regal Bancorp stockholders. SR Bancorp may require Regal Bancorp to adjourn, delay or postpone the Regal Bancorp Stockholders Meeting once for a period not to exceed thirty (30) calendar days to solicit additional proxies necessary to obtain the required approval of Regal Bancorp stockholders. Once Regal Bancorp has established a record date for the Regal Bancorp Stockholders Meeting, Regal Bancorp shall not change such record date or establish a different record date for the Regal Bancorp Stockholders Meeting without the prior written consent of SR Bancorp, unless required to do so by applicable law or the Regal Bancorp Certificate of Incorporation or Bylaws or in connection with a postponement or adjournment of the Regal Bancorp Stockholders Meeting permitted by this Section 8.1. Without the prior written consent of SR Bancorp, the approval of the Merger and this Agreement shall be the only matter that Regal Bancorp shall propose to be acted on by the stockholders of Regal Bancorp at the Regal Bancorp Stockholders Meeting (other than other matters of the type customarily brought before a meeting of stockholders in connection with the approval of a merger agreement or the transactions contemplated thereby)."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19. <u>Amendment to Section 8.2</u>. Section 8.2 is hereby replaced in its entirety with the following: "Regal Bancorp shall prepare a proxy statement and related materials relating to the matters to be submitted to the Regal Bancorp stockholders at the Regal Bancorp Stockholders Meeting (such proxy statement and related materials and any amendments or supplements thereto, the "Proxy Statement"). Upon request, SR Bancorp will furnish to Regal Bancorp the information required to be included in the Proxy Statement with respect to SR Bancorp and Somerset Bank and their business and affairs and shall have the right to review and consult with Regal Bancorp and approve the form of, and any characterizations of such information included in, the Proxy Statement. Regal Bancorp shall provide SR Bancorp and its counsel a reasonable opportunity for review and comment on the Proxy Statement prior to its being mailed to the holders of Regal Bancorp. If at any time prior to the Effective Time any information relating to Somerset Bank, SR Bancorp or Regal Bancorp, or any of their respective affiliates, officers or directors, should be discovered by Somerset Bank, SR Bancorp or Regal Bancorp, which should be set forth in an amendment or supplement to the Proxy Statement so that such document would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the Party that discovers such information shall promptly notify the other Party hereto and, to the extent required by law, rules or regulations, an appropriate amendment or supplement describing such information shall be promptly disseminated to the stockholders of Regal Bancorp."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20. <u>Amendment to Section 8.3.7</u>. Section 8.3.7 is hereby replaced in its entirety with the following: "The Merger, the Second Step Merger and the Bank Merger shall occur as promptly as practicable following the consummation of the Conversion and the receipt of all required approvals."

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21. <u>Amendment to Section 8.4</u>. The third sentence of Section 8.4 is hereby replaced in its entirety with the following: "Regal Bancorp and Somerset Bank will furnish each other and each other's counsel with all information concerning themselves, their subsidiaries, directors, officers and stockholders and such other matters as may be necessary or advisable in connection with the Conversion Prospectus, the Proxy Statement and any application, petition or any other statement or application made by or on behalf of Regal Bancorp, SR Bancorp or Somerset Bank to any governmental body in connection with the Conversion, the Merger, the Charter Conversion and the other transactions contemplated by this Agreement."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22. <u>Amendment to Section</u> <u>9.1.4.</u> Section 9.1.4 is hereby replaced in its entirety with the following: "*Effectiveness of the Conversion Registration Statement.* The Conversion Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Conversion Registration Statement shall have been issued, and no proceedings for that purpose shall have been initiated or threatened by the SEC.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23. <u>Amendment to Section 9.1.5</u>. Section 9.1.5 is hereby replaced in its entirety with the following: "9.1.5 [Reserved]."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;24. <u>Amendment to Section 9.1.6</u>. Section 9.1.6 is hereby replaced in its entirety with the following: "9.1.6 [Reserved]."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25. <u>Amendment to Section 9.3.4</u>. Section 9.3.4 is hereby replaced in its entirety with the following: "9.3.4 [Reserved]."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;26. <u>Amendment to Section 12.1</u>. Section 12.1 is hereby replaced in its entirety with the following: "Except as otherwise provided in Section 11.2, each Party hereto shall bear and pay all costs and expenses incurred by it in connection with the transactions contemplated hereby, including fees and expenses of its own financial consultants, accountants and counsel."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;27. <u>No Further Amendments</u>. Except as expressly amended hereby, the Agreement is in all respects ratified and confirmed, and all the terms, conditions and provisions thereof shall remain in full force and effect. This Amendment is limited precisely as written and shall not be deemed to be an amendment to any other term or condition of the Agreement or any of the documents referred to therein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;28. <u>Effect of Amendment</u>. This Amendment shall form a part of the Agreement for all purposes, and each party thereto and hereto shall be bound hereby. From and after the execution of this Amendment by the parties hereto, any reference to the Agreement shall be deemed a reference to the Agreement as amended hereby.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;29. <u>Counterparts</u>. This Amendment may be executed in two or more counterparts (including by facsimile or other electronic means), all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties and delivered to the other party, it being understood that each party need not sign the same counterpart.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;30. <u>Severability</u>. Whenever possible, each provision or portion of any provision of this Amendment shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision or portion of any provision of this Amendment is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this Amendment shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;31. <u>Governing Law</u>. This Amendment and all disputes or controversies arising out of or relating to this Amendment or the transactions contemplated hereby shall be governed by, and construed in accordance with, the laws of the State of New Jersey, without regard to the conflict of law principles thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;32. <u>Headings</u>. The headings used in this Amendment are inserted for purposes of convenience of reference only and shall not limit or define the meaning of any provisions of this Amendment.

*[Remainder of page intentionally left blank]* 

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**IN WITNESS WHEREOF**, the Parties have caused this Amendment to be executed by their duly authorized officers as of the day and year first above written.

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| | |
|:---|:---|
| **SR BANCORP, INC.** | **SR BANCORP, INC.** |
| By: | /s/ William P. Taylor |
|  | William P. Taylor |
|  | Chief Executive Officer |
| **SOMERSET SAVINGS BANK, SLA** | **SOMERSET SAVINGS BANK, SLA** |
| By: | /s/ William P. Taylor |
|  | William P. Taylor |
|  | Chief Executive Officer |
| **SRB INTERIM CORPORATION** | **SRB INTERIM CORPORATION** |
| By: | /s/ William P. Taylor |
|  | William P. Taylor |
|  | Chief Executive Officer |
| **REGAL BANCORP, INC.** | **REGAL BANCORP, INC.** |
| By: | /s/ Thomas Lupo |
|  | Thomas Lupo |
|  | Chief Executive Officer |
| **REGAL BANK** | **REGAL BANK** |
| By: | /s/ Thomas Lupo |
|  | Thomas Lupo |
|  | Chief Executive Officer |

---

## Exhibit 3.1

**Exhibit 3.1** 

**ARTICLES OF INCORPORATION** 

**SR BANCORP, INC.** 

The undersigned, Marc P. Levy, whose address is 5335 Wisconsin Avenue, N.W., Suite 780, Washington, D.C. 20015, being at least eighteen years of age, acting as incorporator, does hereby form a corporation under the general laws of the State of Maryland, having the following Articles of Incorporation (the "Articles"):

**ARTICLE 1. Name.** The name of the corporation is SR Bancorp, Inc. (herein, the "Corporation").

**ARTICLE 2. Principal Office.** The address of the principal office of the Corporation in the State of Maryland is c/o CSC-Lawyers Incorporating Service Company, 7 St. Paul Street, Suite 820, Baltimore, Maryland 21202.

**ARTICLE 3. Purpose.** The purpose for which the Corporation is formed is to engage in any lawful act or activity for which corporations may be organized under the general laws of the State of Maryland as now or hereafter in force.

**ARTICLE 4. Resident Agent.** The name and address of the registered agent of the Corporation in the State of Maryland is CSC-Lawyers Incorporating Service Company, 7 St. Paul Street, Suite 820, Baltimore, Maryland 21202. Said resident agent is a Maryland corporation.

**ARTICLE 5. Capital Stock** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**A. Authorized Stock.** The total number of shares of capital stock of all classes that the Corporation has authority to issue is fifty-five million (55,000,000) shares, consisting of:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. five million (5,000,000) shares of preferred stock, par value one cent ($0.01) per share (the "Preferred Stock"); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. fifty million (50,000,000) shares of common stock, par value one cent ($0.01) per share (the "Common Stock").

The aggregate par value of all the authorized shares of capital stock is five hundred thousand dollars ($550,000). Except to the extent required by governing law, rule or regulation, the shares of capital stock may be issued from time to time by the Board of Directors without further approval of the stockholders of the Corporation. The Corporation shall have the authority to purchase its capital stock out of funds lawfully available therefor, which funds shall include, without limitation, the Corporation's unreserved and unrestricted capital surplus. The Board of Directors, pursuant to a resolution approved by a majority of the Whole Board (rounded up to the nearest whole number), and without action by the stockholders, may amend these Articles to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that the Corporation has authority to issue. For the purposes of these Articles, the term "Whole Board" shall mean the total number of directors that the Corporation would have if there were no vacancies on the Board of Directors at the time any such resolution is presented to the Board of Directors for adoption.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**B. Common Stock.** Except as provided under the terms of any series of Preferred Stock and as limited by Section D of this Article 5, exclusive voting power shall be vested in the Common Stock. Except as otherwise provided in these Articles, each holder of Common Stock shall be entitled to one vote for each share of Common Stock standing in the holder's name on the books of the Corporation. Subject to any rights and preferences of any series of Preferred Stock, holders of Common Stock shall be entitled to such dividends as may be declared by the Board of Directors out of funds lawfully available therefor. Upon the liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, holders of Common Stock shall be entitled to receive all the remaining assets of the Corporation available for distribution to its stockholders ratably in proportion to the number of shares held by them, respectively, after: (i) payment or provision for payment of the Corporation's debts and liabilities; (ii) distributions or provisions for distributions to holders of any class or series of stock having a preference over the Common Stock in the liquidation, dissolution or winding up of the Corporation; and (iii) distributions or provision for distributions in settlement of the Liquidation Account established by the Corporation as described in Section G of this Article 5.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**C. Preferred Stock.** The Board of Directors is hereby expressly authorized, subject to any limitations prescribed by law, to provide for the issuance of shares of Preferred Stock in series, to establish from time to time the number of shares to be included in each such series, and to fix the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption of the shares of each such series. The number of authorized shares of the Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the Common Stock, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required by law or pursuant to the terms of such Preferred Stock. The power of the stockholders to increase or decrease the authorized shares of Preferred Stock shall not limit any of the powers of the Board of Directors provided under these Articles.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**D. Restrictions on Voting Rights of the Corporation's Equity Securities.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Notwithstanding any other provision of these Articles, in no event shall the record owner (or if more than one record owner, all such record owners taken as a group) of any outstanding Common Stock that is beneficially owned, directly or indirectly, by a Person who, as of any record date for the determination of stockholders entitled to vote on any matter, beneficially owns in excess of 10% of the then-outstanding shares of Common Stock (the "Limit"), be entitled, or permitted to any vote in respect of the shares held in excess of the Limit. The number of votes that may be cast by any particular record owner by virtue of the provisions hereof in respect of Common Stock beneficially owned by such Person owning shares in excess of the Limit (a "Holder in Excess") shall be a number equal to the total number of votes that a single record owner of all Common Stock owned by such Holder in Excess would be entitled to cast after giving effect to the provisions hereof, multiplied by a fraction, the numerator of which is the number of shares of such class or series that are both (i) beneficially owned by such Holder in Excess and (ii) owned of record by such particular record owner, and the denominator of

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which is the total number of shares of Common Stock beneficially owned by such Holder in Excess. The provisions of this Section D of this Article 5 shall not be applicable if, before the Holder in Excess acquired beneficial ownership of such shares in excess of the Limit, such acquisition was approved by a majority of the "Unaffiliated Directors." For this purpose, the term "Unaffiliated Director" means any member of the Board of Directors who is unaffiliated with the Holder in Excess and (i) was a member of the Board of Directors prior to the time that the Holder in Excess became such, or (ii) who is thereafter chosen to fill any vacancy on the Board of Directors and who is elected by stockholders of the Corporation and in connection with his or her initial assumption of office is recommended for appointment or election by a majority of the Unaffiliated Directors then serving on the Board of Directors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. The following definitions shall apply to this Section D of this Article 5.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) An "affiliate" of a specified Person shall mean a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control with, the Person specified.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) "Beneficial ownership" shall be determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934 (or any successor rule or statutory provision), or, if said Rule 13d-3 shall be
rescinded and there shall be no successor rule or statutory provision thereto, pursuant to said Rule 13d-3 as in effect on December 31, 2021; provided, however, that a Person shall, in any event, also be
deemed the "beneficial owner" of any Common Stock:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) that such Person or any of its affiliates beneficially owns, directly or indirectly; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) that such Person or any of its affiliates has (i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding (but shall not be deemed to be the beneficial owner of any voting shares solely by reason of an agreement, contract, or other arrangement with
the Corporation to effect any transaction of the type described in clause (i) or (ii) of the first sentence of Article 9 hereof) or upon the exercise of conversion rights, exchange rights, warrants, or options or otherwise, or (ii) sole or
shared voting or investment power with respect thereto pursuant to any agreement, arrangement, understanding, relationship or otherwise (but shall not be deemed to be the beneficial owner of any voting shares solely by reason of a revocable proxy
granted for a particular meeting of stockholders, pursuant to a public solicitation of proxies for such meeting, with respect to shares of which neither such Person nor any such affiliate is otherwise deemed the beneficial owner); or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) that are beneficially owned, directly or indirectly, by any other Person with which such first mentioned Person
or any of its affiliates acts as a

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partnership, limited partnership, syndicate or other group pursuant to any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of capital stock of the Corporation; and provided further, however, that (i) no director or officer of the Corporation (or any affiliate of any such director or officer) shall, solely by reason of any or all of such directors or officers acting in their capacities as such, be deemed, for any purposes hereof, to beneficially own any Common Stock beneficially owned by any other such director or officer (or any affiliate thereof), and (ii) neither any employee stock ownership or similar plan of the Corporation or any subsidiary of the Corporation nor any trustee with respect thereto (or any affiliate of such trustee) shall, solely by reason of such capacity of such trustee, be deemed, for any purposes hereof, to beneficially own any Common Stock held under any such plan. For purposes of computing the percentage of beneficial ownership of Common Stock of a Person, the outstanding Common Stock shall include shares deemed owned by such Person through application of this subsection but shall not include any other shares of Common Stock that may be issuable by the Corporation pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise. For all other purposes, the outstanding Common Stock shall include only Common Stock then outstanding and shall not include any Common Stock that may be issuable by the Corporation pursuant to any agreement, or upon the exercise of conversion rights, warrants or options, or otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) A "Person" shall mean any individual, firm, corporation, or other entity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) The Board of Directors shall have the power to construe and apply the provisions of this Section D and to make
all determinations necessary or desirable to implement such provisions including, but not limited to, matters with respect to (i) the number of shares of Common Stock beneficially owned by any Person, (ii) whether a Person is an affiliate
of another, (iii) whether a Person has an agreement, arrangement, or understanding with another as to the matters referred to in the definition of beneficial ownership, (iv) the application of any other definition or operative provision of
this Section D to the given facts, or (v) any other matter relating to the applicability or effect of this Section D.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. The Board of Directors shall have the right to demand that any Person reasonably believed by the Board of Directors to be a Holder in Excess (or holder of record of Common Stock beneficially owned by any Holder in Excess) supply the Corporation with complete information as to (i) the record owner(s) of all shares beneficially owned by such Holder in Excess, and (ii) any other factual matter relating to the applicability or effect of this section as may reasonably be requested of such Holder in Excess. The Board of Directors shall further have the right to receive from any Holder in Excess reimbursement for all expenses incurred by the Board of Directors in connection with its investigation of any matters relating to the

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applicability or effect of this section on such Holder in Excess, to the extent such investigation is deemed appropriate by the Board of Directors as a result of the Holder in Excess refusing to supply the Corporation with the information described in the previous sentence.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Any constructions, applications, or determinations made by the Board of Directors pursuant to this Section D in good faith and on the basis of such information and assistance as was then reasonably available for such purpose, shall be conclusive and binding upon the Corporation and its stockholders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. If any provision (or portion thereof) of this Section D shall be found to be invalid, prohibited or unenforceable for any reason, the remaining provisions (or portions thereof) of this Section D shall remain in full force and effect, and shall be construed as if such invalid, prohibited or unenforceable provision had been stricken herefrom or otherwise rendered inapplicable, it being the intent of the Corporation and its stockholders that each such remaining provision (or portion thereof) of this Section D remain, to the fullest extent permitted by law, applicable and enforceable as to all stockholders, including Holders in Excess, notwithstanding any such finding.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**E. Majority Vote for Certain Actions.** With respect to those actions as to which any provision of the Maryland General Corporation Law (the "MGCL") requires stockholder authorization by a greater proportion than a majority of the total number of shares of all classes of capital stock or of the total number of shares of any class of capital stock, any such action shall be valid and effective if authorized by the affirmative vote of the holders of a majority of the total number of shares of all classes outstanding and entitled to vote thereon, except as otherwise provided in these Articles.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**F. Quorum.** Except as otherwise provided by law or expressly provided in these Articles, the presence, in person or by proxy, of the holders of record of shares of capital stock of the Corporation entitling the holders thereof to cast a majority of the votes (after giving effect, if required, to the provisions of Article 5, Section D) entitled to be cast by the holders of shares of capital stock of the Corporation entitled to vote shall constitute a quorum at all meetings of the stockholders, and every reference in these Articles to a majority or other proportion of capital stock (or the holders thereof) for purposes of determining any quorum requirement or any requirement for stockholder consent or approval shall be deemed to refer to such majority or other proportion of the votes (or the holders thereof) then entitled to be cast in respect of such capital stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**G. Liquidation Account.** Under regulations of the Board of Governors of the Federal Reserve System, the Corporation must establish and maintain a liquidation account (the "Liquidation Account") for the benefit of Eligible Account Holders and Supplemental Eligible Account Holders as defined in the Plan of Conversion from Mutual to Stock Form of Organization of Somerset Savings Bank, SLA, as may be amended from time to time (the "Plan of Conversion"). In the event of a complete liquidation involving Somerset Savings Bank, SLA, a New Jersey chartered bank that will be a wholly-owned subsidiary of the Corporation, the Corporation must comply with the regulations of the Board of Governors of the Federal Reserve System and the provisions of the Plan of Conversion with respect to the amount and priorities of each Eligible Account Holder's and Supplemental Eligible Account Holder's interests in the Liquidation Account. The interest of an Eligible Account Holder or Supplemental Eligible Account Holder in the Liquidation Account does not entitle such account holders to voting rights.

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**ARTICLE 6. Preemptive Rights and Appraisal Rights.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**A. Preemptive Rights.** Except for preemptive rights approved by the Board of Directors pursuant to a resolution approved by a majority of the directors then in office, no holder of the capital stock of the Corporation or series of stock or of options, warrants or other rights to purchase shares of any class or series of stock or of other securities of the Corporation shall have any preemptive right to purchase or subscribe for any unissued capital stock of any class or series, or any unissued bonds, certificates of indebtedness, debentures or other securities convertible into or exchangeable for capital stock of any class or series or carrying any right to purchase stock of any class or series.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**B. Appraisal Rights.** Holders of shares of stock shall not be entitled to exercise any rights of an objecting stockholder provided for under Title 3, Subtitle 2 of the MGCL or any successor statute unless the Board of Directors, pursuant to a resolution approved by a majority of the directors then in office, shall determine that such rights apply with respect to all or any classes or series of stock, to one or more transactions occurring after the date of such determination in connection with which holders of such shares would otherwise be entitled to exercise such rights.

**ARTICLE 7. Directors.** The following provisions are made a part of these Articles for the management of the business and the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**A. Management of the Corporation.** The business and affairs of the Corporation shall be managed under the direction of the Board of Directors. All powers of the Corporation may be exercised by or under the authority of the Board of Directors, except as conferred on or as reserved to the stockholders by law or by these Articles or the Bylaws of the Corporation; provided, however, that any limitations on the Board of Directors' management or direction of the affairs of the Corporation shall reserve the directors' full power to discharge their fiduciary duties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**B. Number, Class and Terms of Directors; No Cumulative Voting.** The number of directors constituting the Board of Directors of the Corporation, which shall initially be six, shall be fixed from time to time exclusively by a majority vote of the Board of Directors; provided, however, that such number shall never be less than the minimum number of directors required by the MGCL now or hereafter in force.

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The names of the individuals who will serve as the initial directors of the Corporation until their successors are elected and qualify are as follows:

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| |
|:---|
| Mary E. Davey |
| John Mooney |
| Christopher Pribula |
| James Silkensen |
| Douglas Sonier |
| William Taylor |

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The classes, if any, for the terms of office for directors will be as described in the Bylaws of the Corporation.

Stockholders shall not be permitted to cumulate their votes in the election of directors. A plurality of all the votes cast at a meeting at which a quorum is present is sufficient to elect a director, unless the bylaws otherwise provide.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**C. Vacancies.** Any vacancies in the Board of Directors resulting from an increase in the size of the Board of Directors or the death, resignation or removal of a director may be filled only by the affirmative vote of a majority of the remaining Board of Directors (whether or not they constitute a quorum) for the remainder of the full term of the director in which the vacancy occurred (as applicable) and until a successor is duly elected and qualifies.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**D. Removal.** Subject to the rights of the holders of any series of Preferred Stock then outstanding, any director, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least two-thirds of the voting power of all of the then-outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (after giving effect to the provisions of Article 5 hereof) voting together as a single class.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**E. Stockholder Proposals and Nominations of Directors.** Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation. Stockholder proposals to be presented in connection with a special meeting of stockholders shall be presented by the Corporation only to the extent required by Section 2-502 of the MGCL and the Bylaws of the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**F. Special Meetings of Stockholders.** Special meetings of stockholders shall be called by the Secretary only as otherwise permitted by the Bylaws or at the written request of stockholders entitled to cast at least a majority of all the votes entitled to be cast at the meeting addressed to the Corporation's Secretary. Such written request shall state the purpose or purposes of the meeting and the matters proposed to be acted upon at the meeting, and shall be delivered at the principal office of the Corporation addressed to the President or the Secretary. The Secretary shall inform the stockholders who make the request of the reasonably estimated cost of preparing and mailing a notice of the meeting and, upon payment of these costs to the Corporation, notify each stockholder entitled to notice of the meeting.

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**ARTICLE 8. Bylaws.** The Board of Directors is expressly empowered to adopt, amend or repeal the Bylaws of the Corporation. Any adoption, amendment or repeal of the Bylaws of the Corporation by the Board of Directors shall require the approval of a majority of the Whole Board. The stockholders shall also have power to adopt, amend or repeal the Bylaws of the Corporation. In addition to any vote of the holders of any class or series of stock of the Corporation required by law or by these Articles, the affirmative vote of the holders of at least 80% of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors (after giving effect to the provisions of Article 5 hereof), voting together as a single class, shall be required for the adoption, amendment or repeal of any provisions of the Bylaws of the Corporation by the stockholders.

**ARTICLE 9. Evaluation of Certain Offers.** The Board of Directors, when evaluating (i) any offer of another Person (as defined below) to (A) make a tender or exchange offer for any equity security of the Corporation, (B) merge or consolidate the Corporation with another corporation or entity, or (C) purchase or otherwise acquire all or substantially all of the properties and assets of the Corporation or (ii) any other actual or proposed transaction that would or may involve a change in control of the Corporation (whether by purchases of shares of stock or any other securities of the Corporation in the open market or otherwise, tender offer, merger, consolidation, share exchange, dissolution, liquidation, sale of all or substantially all of the assets of the Corporation, proxy solicitation or otherwise), may, but is not required to, in connection with the exercise of its business judgment in determining what is in the best interests of the Corporation and its stockholders and in making any recommendation to the Corporation's stockholders, give due consideration to all relevant factors, including, but not limited to: (A) the economic effect, both immediate and long-term, upon the Corporation's stockholders, including stockholders, if any, who do not participate in the transaction; (B) the social and economic effect on the present and future employees, creditors and customers of, and others dealing with, the Corporation and its subsidiaries and on the communities in which the Corporation and its subsidiaries operate or are located; (C) whether the proposal is acceptable based on the historical, current or projected future operating results or financial condition of the Corporation; (D) whether a more favorable price could be obtained for the Corporation's stock or other securities in the future; (E) the reputation and business practices of the other entity to be involved in the transaction and its management and affiliates as they would affect the employees of the Corporation and its subsidiaries; (F) the future value of the stock or any other securities of the Corporation or the other entity to be involved in the proposed transaction; (G) any antitrust or other legal and regulatory issues that are raised by the proposal; (H) the business and historical, current or expected future financial condition or operating results of the other entity to be involved in the transaction, including, but not limited to, debt service and other existing financial obligations, financial obligations to be incurred in connection with the proposed transaction, and other likely financial obligations of the other entity to be involved in the proposed transaction; and (I) the ability of the Corporation to fulfill its objectives as a financial institution holding company and on the ability of its subsidiary financial institution(s) to fulfill the objectives of a federally insured financial institution under applicable statutes and regulations. If the Board of Directors determines that any proposed transaction of the type described in clause (i) or (ii) of the immediately preceding sentence should be rejected, it may take any lawful action to defeat such transaction, including, but not limited to, any or all of the following: advising stockholders not to accept the proposal; instituting litigation against the party making the proposal; filing

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complaints with governmental and regulatory authorities; acquiring the stock or any of the securities of the Corporation; selling or otherwise issuing authorized but unissued stock or other securities or granting options or rights with respect thereto; and/or obtaining a more favorable offer from another Person. This Article 9 sets forth certain factors that may be considered by the Board of Directors, but does not create any implication concerning the factors that must be considered, or any other factors that may or may not be considered, by the Board of Directors regarding any proposed transaction of the type described in clause (i) or (ii) of the first sentence of this Article 9.

For purposes of this Article 9, a "Person" shall include an individual, a group acting in concert, a corporation, a partnership, an association, a joint venture, a pool, a joint stock company, a trust, an unincorporated organization or similar company, a syndicate or any other group or entity formed for the purpose of acquiring, holding or disposing of securities.

**ARTICLE 10. Indemnification, etc. of Directors and Officers.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**A. Indemnification.** The Corporation shall indemnify (1) its current and former directors and officers, whether serving the Corporation or at its request any other entity, to the fullest extent required or permitted by the MGCL now or hereafter in force and (2) other employees and agents to such extent as shall be authorized by the Board of Directors and permitted by law; provided, however, that, except as provided in Section B of this Article 10 with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in Section A of this Article 10 shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition (hereinafter an "advancement of expenses"); provided, however, that, if the MGCL requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director of officer, indemnification shall be made only upon delivery to the Corporation of an undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a "final adjudication") that such indemnitee is not entitled to be indemnified for such expenses under this Section or otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**B. Procedure.** If a claim under Section A of this Article 10 is not paid in full by the Corporation within 60 days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be 20 days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall also be entitled to be reimbursed the expense of prosecuting or defending such suit. It shall be a defense to any action for advancement of expenses that the Corporation has not received both (i) an undertaking as required by law to repay such advances in the event it shall ultimately be determined that the standard of conduct has not been met and (ii) a written affirmation by the indemnitee of his or her good faith belief that the standard of conduct necessary for indemnification by the Corporation has been met. In (i) any suit brought

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by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (ii) any suit by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met the applicable standard for indemnification set forth in the MGCL. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the MGCL, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article 10 or otherwise shall be on the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**C. Non-Exclusivity.** The rights to indemnification and to the advancement of expenses conferred in this Article 10 shall not be exclusive of any other right that any Person may have or hereafter acquire under any statute, these Articles, the Corporation's Bylaws, any agreement, any vote of stockholders or the Board of Directors, or otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**D. Insurance.** The Corporation may maintain insurance, at its expense, to insure itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such Person against such expense, liability or loss under the MGCL.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**E. Miscellaneous.** The Corporation shall not be liable for any payment under this Article 10 in connection with a claim made by any indemnitee to the extent such indemnitee has otherwise actually received payment under any insurance policy, agreement, or otherwise, of the amounts otherwise indemnifiable hereunder. The rights to indemnification and to the advancement of expenses conferred in Sections A and B of this Article 10 shall be contractual rights and such rights shall continue as to an indemnitee who has ceased to be a director or officer and shall inure to the benefit of the indemnitee's heirs, executors and administrators.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**F. Limitations Imposed by Federal Law.** Notwithstanding any other provision set forth in this Article 10, in no event shall any payments made by the Corporation pursuant to this Article 10 exceed the amount permissible under applicable federal law, including, without limitation, Section 18(k) of the Federal Deposit Insurance Act and the regulations promulgated thereunder.

Any repeal or modification of this Article 10 shall not in any way diminish any rights to indemnification or to an advancement of expenses of such director or officer or the obligations of the Corporation arising hereunder with respect to events occurring, or claims made, while this Article 10 is in force.

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**ARTICLE 11. Limitation of Liability.** An officer or director of the Corporation, as such, shall not be liable to the Corporation or its stockholders for money damages, except (A) to the extent that it is proved that the Person actually received an improper benefit or profit in money, property or services, for the amount of the benefit or profit in money, property or services actually received; or (B) to the extent that a judgment or other final adjudication adverse to the Person is entered in a proceeding based on a finding in the proceeding that the Person's action, or failure to act, was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding; or (C) to the extent otherwise provided by the MGCL. If the MGCL is amended to further eliminate or limit the personal liability of officers and directors, then the personal liability of officers and directors of the Corporation shall be eliminated or limited to the fullest extent permitted by the MGCL, as so amended.

Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a director or officer of the Corporation existing at the time of such repeal or modification.

**ARTICLE 12**: **Amendment of the Articles of Incorporation.** The Corporation reserves the right to amend or repeal any provision contained in these Articles in the manner prescribed by the MGCL, including any amendment altering the terms or contractual rights, as expressly set forth in these Articles, of any of the Corporation's outstanding stock by classification, reclassification or otherwise, and no stockholder approval shall be required if the approval of stockholders is not required for the proposed amendment or repeal by the MGCL, and all rights conferred upon stockholders are granted subject to this reservation.

No proposed amendment or repeal of any provision of these Articles shall be submitted to a stockholder vote unless the Board of Directors shall have (1) approved the proposed amendment or repeal, (2) determined that it is advisable, and (3) directed that it be submitted for consideration at either an annual or special meeting of the stockholders pursuant to a resolution approved by the Board of Directors. Any proposed amendment or repeal of any provision of these Articles may be abandoned by the Board of Directors at any time before its effective time upon the adoption of a resolution approved by a majority of the Whole Board (rounded up to the nearest whole number).

The amendment or repeal of any provision of these Articles shall be approved by at least two-thirds of all votes entitled to be cast by the holders of shares of capital stock of the Corporation entitled to vote on the matter (after giving due effect to the provisions of Article 5 of these Articles), except that the proposed amendment or repeal of any provision of these Articles need only be approved by the vote of a majority of all the votes entitled to be cast by the holders of shares of capital stock of the Corporation entitled to vote on the matter (after giving due effect to the provisions of Article 5 of these Articles) if the amendment or repeal of such provision is approved by the Board of Directors pursuant to a resolution approved by at least two-thirds of the Whole Board (rounded up to the nearest whole number).

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**ARTICLE 14. Name and Address of Incorporator.** The name and mailing address of the sole incorporator are as follows:

Marc P. Levy

5335 Wisconsin Ave., N.W., Suite 780

Washington, D.C. 20015

**[Remainder of Page Intentionally Left Blank]** 

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I, the undersigned, being the incorporator, for the purpose of forming a corporation under the laws of the State of Maryland, do make, file and record these Articles of Incorporation, do certify that the facts herein stated are true, and, accordingly, have hereto set my hand this 19<sup>th</sup> day of July, 2022.

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| |
|:---|
| /s/ Marc P. Levy |
| Marc P. Levy |
| Incorporator |

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## Exhibit 3.2

**Exhibit 3.2** 

**SR BANCORP, INC.** 

**BYLAWS** 

**ARTICLE I** 

**STOCKHOLDERS** 

**Section 1. Annual Meeting.** 

SR Bancorp, Inc. (the "Corporation") shall hold an annual meeting of its stockholders to elect directors and to transact any other business within its powers, at such place, on such date and at such time as the Board of Directors (or the "Board") of the Corporation shall fix. Failure to hold an annual meeting does not invalidate the Corporation's existence or affect any otherwise valid corporate act.

**Section 2. Special Meetings.** 

Special meetings of stockholders of the Corporation may be called by the President, the Chief Executive Officer, the Chairperson of the Board or by the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors that the Corporation would have if there were no vacancies on the Board of Directors (hereinafter the "Whole Board"). Special meetings of the stockholders shall be called by the Secretary at the written request of stockholders only as required by law or as provided in the Articles of Incorporation of the Corporation. Such written request shall state the purpose or purposes of the meeting and the matters proposed to be acted upon at the meeting, and shall be delivered at the principal office of the Corporation addressed to the President or the Secretary. The Secretary shall inform the stockholders who make the request of the reasonably estimated cost of preparing and mailing a notice of the meeting and, upon payment of these costs to the Corporation, notify each stockholder entitled to notice of the meeting. The Board of Directors shall have the sole power to fix (a) the record date for determining stockholders entitled to notice of and to vote at the special meeting and (b) the date, time and place of the special meeting and the means of remote communication, if any, by which stockholders and proxy holders may be considered present in person and may vote at the special meeting.

**Section 3. Notice of Meetings; Adjournment or Postponement.** 

Not less than 10 nor more than 90 days before each stockholders' meeting, the Secretary shall give notice of the meeting in writing or by electronic transmission to each stockholder entitled to vote at the meeting and to each other stockholder entitled to notice of the meeting. The notice shall state the time and place of the meeting, the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and may vote at the meeting, and, if the meeting is a special meeting, or notice of the purpose is required by statute, the purpose of the meeting. Notice is given to a stockholder when it is personally delivered to the stockholder, left at the stockholder's residence or usual place of business, mailed to the stockholder at his or her address as it appears on the records of the Corporation, or transmitted to the stockholder by an electronic transmission to any address or number of the stockholder at which the stockholder receives electronic transmissions. If the Corporation has

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received a request from a stockholder that notice not be sent by electronic transmission, the Corporation may not provide notice to the stockholder by electronic transmission. Notwithstanding the foregoing provisions, each person who is entitled to notice waives notice if such person, before or after the meeting, delivers a written waiver or waiver by electronic transmission that is filed with the records of the stockholders' meetings, or if such person is present at the meeting in person or by proxy.

A meeting of stockholders convened on the date for which it was called may be adjourned from time to time without further notice to a date not more than 120 days after the original record date. A meeting may be adjourned by a resolution adopted by a majority of the Whole Board or by the vote of a majority of the stockholders present at the meeting, whether or not a quorum is present at such meeting. At any adjourned meeting, any business may be transacted that might have been transacted at the original meeting.

A meeting of stockholders may be postponed to a date not more than 120 days after the original record date. A meeting may be postponed by a resolution adopted by a majority of the Whole Board. Notice of the date, time and place to which the meeting is postponed shall be given not less than ten days prior to the date of such meeting and otherwise in the manner set forth in this Section 3. At any postponed meeting, any business may be transacted that might have been transacted at the meeting as originally scheduled.

If a meeting shall be adjourned or postponed to a date not more than 120 days after the original record date, a new record date need not be established, and the original record date may be used to determine which stockholders are entitled to notice of, and to vote at, the adjourned or postponed meeting. Any writing authorizing another person to act as proxy at a meeting of stockholders shall remain valid for use at any adjournment or postponement of such meeting unless such proxy is revoked or a later dated proxy is provided by such stockholder.

As used in these Bylaws, the term "electronic transmission" shall have the meaning given to such term by Section 1-101 of the Maryland General Corporation Law (the "MGCL") or any successor provision.

**Section 4. Quorum.** 

Unless the Articles of Incorporation of the Corporation provide otherwise, where a separate vote by a class or classes is required, a majority of the shares of such class or classes, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter.

If a quorum shall fail to attend any meeting, the chairperson of the meeting or the holders of a majority of the shares of stock who are present at the meeting, in person or by proxy, may, in accordance with Section 3 of this Article I, adjourn the meeting to another place, date or time.

**Section 5. Organization and Conduct of Business.** 

The Chairperson of the Board of Directors or the Vice Chairperson of the Board of Directors, if any, or in their absence, the Chief Executive Officer, or in his or her absence, such other person as may be designated by a majority of the Whole Board, shall call to order any

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meeting of the stockholders and act as chairperson of the meeting. In the absence of the Secretary, the secretary of the meeting shall be such person as the chairperson of the meeting appoints. The chairperson of any meeting of the stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion.

**Section 6. Advance Notice Provisions for Business to be Transacted at Annual Meetings and Elections of Directors.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) At any annual meeting of the stockholders, unless otherwise required by law, only such business shall be conducted as shall have been brought before the meeting: (i) as specified in the Corporation's notice of the meeting; (ii) by or at the direction of the Board of Directors; or (iii) by any stockholder of the Corporation who (1) is a stockholder of record on the date such stockholder gives the notice provided for in this Section 6(a) and on the record date for the determination of stockholders entitled to vote at such annual meeting, and (2) complies with the notice procedures set forth in this Section 6(a). For business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of the immediately preceding sentence, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and such business must otherwise be a proper matter for action by stockholders. To be timely, a stockholder's notice must be delivered or mailed to and received by the Secretary at the principal executive office of the Corporation not less than 90 days nor more than 120 days prior to the anniversary of the prior year's annual meeting of stockholders; *provided*, *however,* that if the date of the annual meeting is advanced more than 30 days prior to the anniversary of the prior year's annual meeting of stockholders, such written notice shall be timely if delivered or mailed to and received by the Secretary of the Corporation at the principal executive office of the Corporation no earlier than (i) the day on which public disclosure of the date of such annual meeting is first made and (ii) not later than the tenth day following the earlier of (x) the day notice of the meeting was mailed to stockholders or (y) such public disclosure was made.

With respect to the first annual meeting of stockholders of the Corporation following the Corporation becoming the sole stockholder of Somerset Savings Bank, SLA, notice by the stockholder shall be timely if delivered or mailed to and received by the Secretary of the Corporation not later than the close of business on the later of (i) the 120<sup>th</sup> day prior to the date of the annual meeting and (ii) the tenth day following the day on which public disclosure of the date of the annual meeting is first made.

The advance notice periods provided in this Section 6(a), once established on the date initial notice was mailed or public disclosure of a date for the annual meeting of stockholders was made, shall remain in effect regardless of whether a subsequent notice or public disclosure shall provide that the meeting shall have been adjourned or that the date of the meeting shall have been postponed or otherwise changed from the date provided in the initial notice or public disclosure.

A stockholder's notice to the Secretary must set forth as to each matter such stockholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be

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brought before the annual meeting and the reasons for conducting such business at the annual meeting; (ii) the name and address of such stockholder as they appear on the Corporation's books and of the beneficial owner, if any, on whose behalf the proposal is made; (iii) the class or series and number of shares of capital stock of the Corporation that are owned beneficially or of record by such stockholder and such beneficial owner; (iv) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder in such business; and (v) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting.

Notwithstanding anything in these Bylaws to the contrary, no business shall be brought before or conducted at an annual meeting except in accordance with the provisions of this Section 6(a). The chairperson of the meeting shall, if the facts so warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 6(a) and, if he or she should so determine, he or she shall so declare to the meeting and any such business so determined to be not properly brought before the meeting shall not be transacted.

At any special meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting pursuant to the Corporation's notice of the meeting.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders at which directors are to be elected only: (i) by or at the direction of the Board of Directors; or (ii) by any stockholder of the Corporation who (1) is a stockholder of record on the date such stockholder gives the notice provided for in this Section 6(b) and on the record date for the determination of stockholders entitled to vote at such meeting, and (2) complies with the notice procedures set forth in this Section 6(b). Such nominations, other than those made by or at the direction of the Board of Directors, shall be made by timely notice in writing to the Secretary of the Corporation.

To be timely, a stockholder's notice must be delivered or mailed to and received by the Secretary at the principal executive office of the Corporation not less than 90 days nor more than 120 days prior to the anniversary of the prior year's annual meeting of stockholders; *provided*, *however,* that if the date of the annual meeting is advanced more than 30 days prior to the anniversary of the prior year's annual meeting of stockholders, such written notice shall be timely if delivered or mailed to and received by the Secretary of the Corporation at the principal executive office of the Corporation no earlier than the day on which public disclosure of the date of such annual meeting is first made and not later than the tenth day following the earlier of the day notice of the meeting was mailed to stockholders or such public disclosure was made.

With respect to the first annual meeting of stockholders of the Corporation following the Corporation becoming the sole stockholder of Somerset Savings Bank, SLA, notice by the stockholder shall be timely if delivered or mailed to and received by the Secretary of the Corporation not later than the close of business on the later of (i) the 120<sup>th</sup> day prior to the date of the annual meeting and (ii) the tenth day following the day on which public disclosure of the date of the annual meeting is first made.

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The advance notice periods provided in this Section 6(b), once established by the initial date notice was mailed or public disclosure of a date for the annual meeting of stockholders was made, shall remain in effect regardless of whether a subsequent notice or public disclosure shall provide that the meeting shall have been adjourned or that the date of the meeting shall have been postponed or otherwise changed from the date provided in the initial notice or public disclosure.

A stockholder's notice must be in writing and set forth (a) as to each person whom the stockholder proposes to nominate for election as a director, (i) all information relating to such person that would indicate such person's qualification to serve on the Board of Directors of the Corporation; (ii) such information relating to such person that is required to be disclosed in connection with solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any successor rule or regulation; and (iii) a written consent of each proposed nominee to be named as a nominee and to serve as a director if elected; and (b) as to the stockholder giving the notice: (i) the name and address of such stockholder as they appear on the Corporation's books and of the beneficial owner, if any, on whose behalf the nomination is made; (ii) the class or series and number of shares of capital stock of the Corporation that are owned beneficially or of record by such stockholder and such beneficial owner; (iii) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder; (iv) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice; and (v) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies for election of directors pursuant to Regulation 14A under the Exchange Act or any successor rule or regulation. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the provisions of this Section 6(b). The chairperson of the meeting shall, if the facts so warrant, determine that a nomination was not made in accordance with such provisions and, if he or she should so determine, he or she shall so declare to the meeting and the defective nomination shall be disregarded.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) For purposes of subsections (a) and (b) of this Section 6, the term "public disclosure" shall mean disclosure (i) in a press release issued through a nationally recognized news service, (ii) in a document publicly filed or furnished by the Corporation with the U.S. Securities and Exchange Commission or (iii) on a website maintained by the Corporation. The timely notice requirements provided in subsections (a) and (b) of this Section 6 shall apply to all stockholder nominations for election as a director and all stockholder proposals for business to be conducted at an annual meeting regardless of whether such proposal is submitted for inclusion in the Corporation's proxy materials pursuant to Rule 14a-8 of Regulation 14A under the Exchange Act.

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**Section 7. Proxies and Voting.** 

Unless the Articles of Incorporation of the Corporation provide for a greater or lesser number of votes per share or limits or denies voting rights, each outstanding share of stock, regardless of class, is entitled to one vote on each matter submitted to a vote at a meeting of stockholders; however, a share is not entitled to be voted if any installment payable on it is overdue and unpaid. In all elections for directors, directors shall be determined by a plurality of the votes cast, and except as otherwise required by law or as provided in the Articles of Incorporation of the Corporation, all other matters voted on by stockholders shall be determined by a majority of the votes cast on the matter.

A stockholder may vote the stock the stockholder owns of record either in person or by proxy. A stockholder may sign a writing authorizing another person to act as proxy. Signing may be accomplished by the stockholder or the stockholder's authorized agent signing the writing or causing the stockholder's signature to be affixed to the writing by any reasonable means, including facsimile signature. A stockholder may authorize another person to act as proxy by transmitting, or authorizing the transmission of, an authorization for the person to act as the proxy to the person authorized to act as proxy or to any other person authorized to receive the proxy authorization on behalf of the person authorized to act as the proxy, including a proxy solicitation firm or proxy support service organization. The authorization may be transmitted by a telegram, cablegram, datagram, electronic mail or any other electronic or telephonic means. Unless a proxy provides otherwise, it is not valid more than 11 months after its date. A proxy is revocable by a stockholder at any time without condition or qualification unless the proxy states that it is irrevocable and the proxy is coupled with an interest. A proxy may be made irrevocable for as long as it is coupled with an interest. The interest with which a proxy may be coupled includes an interest in the stock to be voted under the proxy or another general interest in the Corporation or its assets or liabilities.

**Section 8. Conduct of Voting** 

The chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seem to him or her in order. The Board of Directors shall, in advance of any meeting of stockholders, appoint one or more persons as inspectors of election, to act at the meeting or any adjournment thereof and make a written report thereof, in accordance with applicable law. If one or more inspectors are not so elected, the chairperson of the meeting shall make such appointment at the meeting of stockholders. At all meetings of stockholders, the proxies and ballots shall be received, and all questions relating to the qualification of voters and the validity of proxies and the acceptance or rejection of votes shall be decided or determined by the inspector of election. All voting, including on the election of directors, except where otherwise required by law, may be by a voice vote; *provided, however,* that upon demand therefor by a stockholder entitled to vote or his or her proxy or the chairperson of the meeting, a written vote shall be taken. Every written vote shall be taken by ballot, each of which shall state the name of the stockholder or proxy voting and such other information as may be required under the procedure established for the meeting. No candidate for election as a director at a meeting shall serve as an inspector at such meeting.

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**Section 9. Control Share Acquisition Act.** 

Notwithstanding any other provision of the Articles of Incorporation of the Corporation or these Bylaws, Title 3, Subtitle 7 of the MGCL (or any successor statute) shall not apply to any acquisition by any person of shares of stock of the Corporation. This Section 9 may be repealed by a majority of the Whole Board, in whole or in part, at any time, whether before or after an acquisition of Control Shares (as defined in Section 3-701(e) of the MGCL, or any successor provision) and, upon such repeal, may, to the extent provided by any successor bylaw, apply to any prior or subsequent Control Share Acquisition (as defined in Section 3-701(d) of the MGCL, or any successor provision).

**ARTICLE II** 

**BOARD OF DIRECTORS** 

**Section 1. General Powers, Number and Term of Office.** 

The business and affairs of the Corporation shall be managed under the direction of the Board of Directors. The number of directors of the Corporation shall, by virtue of the Corporation's election made hereby to be governed by Section 3-804(b) of the MGCL, be fixed from time to time exclusively by vote of the Board of Directors; provided, however, that such number shall be less than the minimum number of directors required by the MGCL now or hereafter in force. The Board of Directors shall annually elect a Chairperson of the Board from among its members and shall designate the Chairperson of the Board or his or her designee to preside at its meetings. The Board of Directors may also annually elect a Vice Chairperson. In the absence of the Chairperson of the Board, the Vice Chairperson of the Board shall preside at the meetings of the Board of Directors, and in his or her absence, such other person as may be designated by a majority of the Whole Board shall preside at the meetings of the Board of Directors.

The directors, other than those who may be elected by the holders of any series of preferred stock of the Corporation, shall be divided into three classes, as nearly equal in number as reasonably possible, with the term of office of the first class to expire at the first annual meeting of stockholders, the term of office of the second class to expire at the annual meeting of stockholders one year thereafter and the term of office of the third class to expire at the annual meeting of stockholders two years thereafter, with each director to hold office until his or her successor shall have been duly elected and qualified. At each annual meeting of stockholders, commencing with the first annual meeting, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election or for such shorter period of time as the Board of Directors may determine, with each director to hold office until his or her successor shall have been duly elected and qualified.

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The names of the individuals who will serve as the initial directors of the Corporation until their successors are elected and qualify are as follows:

**Term to Expire in 2023** 

Mary E. Davey

John Mooney

**Term to Expire in 2024** 

Christopher Pribula

James Silkensen

**Term to Expire in 2025** 

Douglas Sonier

William Taylor

**Section 2. Regular Meetings.** 

Regular meetings of the Board of Directors shall be held at such place or places or by means of remote communication, on such date or dates, and at such time or times as shall have been established by the Board of Directors and publicized among all directors. A notice of each regular meeting shall not be required. Any regular meeting of the Board of Directors may adjourn from time to time to reconvene at the same or some other place, and no notice need be given of any such adjourned meeting other than by announcement.

**Section 3. Special Meetings.** 

Special meetings of the Board of Directors may be called by one-third (1/3) of the directors then in office (rounded up to the nearest whole number), by the Chairperson of the Board, by the Vice Chairperson of the Board or by the Chief Executive Officer, and shall be held at such place or by means of remote communication, on such date, and at such time as they or he or she shall fix. Notice of the place, date, and time of each such special meeting shall be given to each director who has not waived notice by mailing and post-marking written notice not less than five days before the meeting, or by facsimile or other electronic transmission of the same not less than 24 hours before the meeting. Any director may waive notice of any special meeting, either before or after such meeting, by delivering a written waiver or a waiver by electronic transmission that is filed with the records of the meeting. Attendance of a director at a special meeting shall constitute a waiver of notice of such meeting, except where the director attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted nor the purpose of any special meeting of the Board of Directors need be specified in the notice of such meeting. Any special meeting of the Board of Directors may adjourn from time to time to reconvene at the same or some other place, and no notice need be given of any such adjourned meeting other than by announcement.

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**Section 4. Quorum.** 

At any meeting of the Board of Directors, a majority of the Whole Board shall constitute a quorum for all purposes. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date, or time, without further notice or waiver thereof.

**Section 5. Participation in Meetings By Conference Telephone.** 

Members of the Board of Directors, or of any committee thereof, may participate in a meeting of such Board or committee by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time. Such participation shall constitute presence in person at such meeting.

**Section 6. Conduct of Business.** 

At any meeting of the Board of Directors, business shall be transacted in such order and manner as the Board may from time to time determine, and all matters shall be determined by the vote of a majority of the directors present, except as otherwise provided in these Bylaws or the Corporation's Articles of Incorporation or required by law. Action may be taken by the Board of Directors without a meeting if a unanimous consent that sets forth the action is given in writing or by electronic transmission by each member of the Board of Directors and filed in paper or electronic form with the minutes of proceedings of the Board of Directors.

**Section 7. Powers.** 

All powers of the Corporation may be exercised by or under the authority of the Board of Directors except as provided by law or the Articles of Incorporation of the Corporation. Consistent with the foregoing, the Board of Directors shall have, among other powers, the unqualified power to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Declare dividends from time to time in accordance with law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Purchase or otherwise acquire any property, rights or privileges on such terms as it shall determine;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Authorize the creation, making and issuance, in such form as it may determine, of written obligations of every
kind, negotiable or non-negotiable, secured or unsecured, and to do all things necessary in connection therewith;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) Remove any officer of the Corporation with or without cause, and from time to time to devolve the powers and
duties of any officer upon any other person for the time being;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) Confer upon any officer of the Corporation the power to appoint, remove and suspend subordinate officers,
employees and agents;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) Adopt from time to time such stock, option, stock purchase, bonus or other compensation plans for directors,
officers, employees and agents of the Corporation and its subsidiaries as it may determine;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) Adopt from time to time such insurance, retirement, and other benefit plans for directors, officers, employees
and agents of the Corporation and its subsidiaries as it may determine; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) Adopt from time to time regulations, not inconsistent with these Bylaws, for the management of the
Corporation's business and affairs.

**Section 8. Compensation of Directors.** 

Directors, as such, may receive, pursuant to a resolution of the Board of Directors, fixed fees and other compensation for their services as directors, including, without limitation, their services as members of committees of the Board of Directors.

**Section 9. Resignation.** 

Any director may resign at any time by giving written notice of such resignation to the President or the Secretary at the principal office of the Corporation. Unless otherwise specified therein, such resignation shall take effect upon receipt thereof.

**Section 10. Presumption of Assent.** 

A director of the Corporation who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to such action unless such director announces his or her dissent at the meeting and (a) such director's dissent is entered in the minutes of the meeting, (b) such director files his or her written dissent to such action with the secretary of the meeting before the adjournment thereof, or (c) such director forwards his or her written dissent within 24 hours after the meeting is adjourned, by certified mail, return receipt requested, bearing a postmark from the United States Postal Service, to the secretary of the meeting or the Secretary of the Corporation. Such right to dissent shall not apply to a director who voted in favor of such action or failed to make his or her dissent known at the meeting.

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**ARTICLE III** 

**COMMITTEES** 

**Section 1. Committees of the Board of Directors.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) *General Provisions.* The Board of Directors may appoint from among its members an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee, and such other committees as the Board of Directors deems necessary or desirable. The Board of Directors may delegate to any committee so appointed any of the powers and authorities of the Board of Directors to the fullest extent permitted by the MGCL and any other applicable law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) *Composition.* Each committee shall be composed of one or more directors or any other number of members specified in these Bylaws or required by applicable regulations or stock exchange rules. The Chairperson of the Board may recommend committees, committee memberships, and committee chairs to the Board of Directors. The Board of Directors shall have the power at any time to appoint the chairperson and the members of any committee, change the membership of any committee, to fill all vacancies on committees, to designate alternate members to replace or act in the place of any absent or disqualified member of a committee, or to dissolve any committee. A member of a committee may resign from that committee at any time by giving written notice of such resignation to the Chairperson of the Board. Unless otherwise specified therein, such resignation from the committee shall take effect upon receipt thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) *Issuance of Stock.* If the Board of Directors has given general authorization for the issuance of stock, a committee of the Board of Directors, in accordance with that general authorization, may authorize or fix the terms of stock subject to classification or reclassification and the terms on which any stock may be issued, including all terms and conditions required or permitted to be established or authorized by the Board of Directors. Any committee so designated may exercise the power and authority of the Board of Directors if the resolution that designated the committee or a supplemental resolution of the Board of Directors shall so provide.

**Section 2. Conduct of Business.** 

Each committee may determine the procedural rules for meeting and conducting its business and shall act in accordance therewith, except as otherwise provided herein or required by law. Adequate provision shall be made for notice to members of all meetings; one-third (1/3) of the members shall constitute a quorum unless the committee shall consist of one or two members, in which event one member shall constitute a quorum; and all matters shall be determined by a majority vote of the members present. Action may be taken by any committee without a meeting if a unanimous consent that sets forth the action is given in writing or by electronic transmission by each member of the committee and filed in paper or electronic form with the minutes of the proceedings of such committee. The members of any committee may conduct any meeting thereof by conference telephone or other communications equipment in accordance with the provisions of Section 5 of Article II.

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**ARTICLE IV** 

**OFFICERS** 

**Section 1. Generally.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Board of Directors as soon as may be practicable after the annual meeting of stockholders shall choose a Chairperson of the Board, Chief Executive Officer, President, one or more Vice Presidents, a Secretary and a Chief Financial Officer/Treasurer and from time to time may choose such other officers as it may deem proper. Any number of offices may be held by the same person, except that no person may concurrently serve as both President and Vice President of the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The term of office of all officers shall be until the next annual election of officers and until their respective successors are chosen, but any officer may be removed from office at any time by the affirmative vote of a majority of the Whole Board.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) All officers chosen by the Board of Directors shall each have such powers and duties as generally pertain to their respective offices, subject to the specific provisions of this Article IV. Such officers shall also have such powers and duties as from time to time may be conferred by the Board of Directors or by any committee thereof.

**Section 2. Chairperson of the Board of Directors.** 

The Chairperson of the Board of Directors of the Corporation shall perform all duties and have all powers that are commonly incident to the office of Chairperson of the Board or that are delegated to him or her by the Board of Directors. He or she shall have power to sign all stock certificates, contracts and other instruments of the Corporation that are authorized.

**Section 3. Vice Chairperson of the Board of Directors.** 

If appointed, the Vice Chairperson of the Board of Directors of the Corporation shall perform all duties and have all powers which are commonly incident to the office of Chairperson of the Board, with such duties to be performed and powers to be held in the absence of the Chairperson of the Board, or which are delegated to him or her by the Board of Directors.

**Section 4. Chief Executive Officer.** 

The Chief Executive Officer, subject to the control of the Board of Directors, shall serve in a general executive capacity and have general power over the management and oversight of the administration and operation of the Corporation's business and general supervisory power and authority over its policies and affairs. The Chief Executive Officer shall see that all orders and resolutions of the Board of Directors and of any committee thereof are carried into effect.

**Section 5. President.** 

The President shall perform the duties of the Chief Executive Officer in the Chief Executive Officer's absence or during his or her disability to act. In addition, the President shall perform the duties and exercise the powers usually incident to such office and/or such other duties and powers as may be properly assigned to the President from time to time by the Board of Directors, the Chairperson of the Board or the Chief Executive Officer.

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**Section 6. Vice President.** 

The Vice President or Vice Presidents (including Executive Vice Presidents or other levels of Vice President designated by the Board of Directors) shall perform the duties and exercise the powers usually incident to their respective office and/or such other duties and powers as may be properly assigned to the Vice Presidents from time to time by the Board of Directors, the Chairperson of the Board or the Chief Executive Officer.

**Section 7. Secretary.** 

The Secretary or an Assistant Secretary shall issue notices of meetings, shall keep the minutes of meetings, shall have charge of the seal and the corporate books, shall perform such other duties and exercise such other powers as are usually incident to such offices and/or such other duties and powers as are properly assigned thereto by the Board of Directors, the Chairperson of the Board or the Chief Executive Officer.

**Section 8. Chief Financial Officer/Treasurer.** 

The Chief Financial Officer/Treasurer shall have charge of all monies and securities of the Corporation, other than monies and securities of any division of the Corporation that has a treasurer or financial officer appointed by the Board of Directors, and shall keep regular books of account. The funds of the Corporation shall be deposited in the name of the Corporation by the Chief Financial Officer/Treasurer with such banks or trust companies or other entities as the Board of Directors from time to time shall designate. The Chief Financial Officer/Treasurer shall sign or countersign such instruments as require his or her signature, shall perform all such duties and have all such powers as are usually incident to such office and/or such other duties and powers as are properly assigned to him or her by the Board of Directors, the Chairperson of the Board or the Chief Executive Officer, and may be required to give bond for the faithful performance of his or her duties in such sum and with such surety as may be required by the Board of Directors.

**Section 9. Other Officers.** 

The Board of Directors may designate and fill such other offices in its discretion and the persons holding such other offices shall have such powers and shall perform such duties as the Board of Directors or Chief Executive Officer may from time to time assign.

**Section 10. Action with Respect to Securities of Other Corporations** 

Stock of other corporations or associations, registered in the name of the Corporation, may be voted by the Chief Executive Officer or the President or a proxy appointed by either of them. The Board of Directors, however, may by resolution appoint some other person to vote such shares, in which case such person shall be entitled to vote such shares upon the production of a certified copy of such resolution.

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**ARTICLE V** 

**STOCK** 

**Section 1. Certificates of Stock.** 

The Board of Directors may determine to issue certificated or uncertificated shares of capital stock and other securities of the Corporation. For certificated stock, each stockholder is entitled to certificates that represent and certify the shares of stock he or she holds in the Corporation. Each stock certificate shall include on its face the name of the Corporation, the name of the stockholder or other person to whom it is issued, and the class of stock and number of shares it represents. It shall also include on its face or back (a) a statement of any restrictions on transferability and a statement of the designations and any preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption of the stock of each class that the Corporation is authorized to issue, of the differences in the relative rights and preferences between the shares of each series of preferred stock that the Corporation is authorized to issue, to the extent they have been set, and of the authority of the Board of Directors to set the relative rights and preferences of subsequent series of preferred stock; or (b) a statement which provides in substance that the Corporation will furnish a full statement of such information to any stockholder on request and without charge. Such request may be made to the Secretary or to the Corporation's transfer agent. Upon the issuance of uncertificated shares of capital stock, the Corporation shall send the stockholder a written statement of the same information required above with respect to stock certificates. Each stock certificate shall be in such form, not inconsistent with law or with the Corporation's Articles of Incorporation, as shall be approved by the Board of Directors or any officer or officers designated for such purpose by resolution of the Board of Directors. Each stock certificate shall be signed by the Chairperson of the Board or the President and countersigned by the Secretary, an Assistant Secretary, the Treasurer, or an Assistant Treasurer. Each certificate may be sealed with the actual corporate seal or a facsimile of it or in any other form and the signatures may be either manual or facsimile signatures. A certificate is valid and may be issued whether or not an officer who signed it is still an officer when it is issued. A certificate may not be issued until the stock represented by it is fully paid.

**Section 2. Transfers of Stock.** 

Transfers of stock shall be made only upon the transfer books of the Corporation kept at an office of the Corporation or by transfer agents designated to transfer shares of the stock of the Corporation. Except where a certificate is issued in accordance with Section 4 of Article V of these Bylaws or in the case where shares are held in uncertificated form, an outstanding certificate for the number of shares involved shall be surrendered for cancellation before a new certificate is issued therefor.

**Section 3. Record Dates or Closing of Transfer Books.** 

The Board of Directors may, and shall have the power to, set a record date or direct that the stock transfer books be closed for a stated period for the purpose of making any proper determination with respect to stockholders, including which stockholders are entitled to notice of a meeting, vote at a meeting, receive a dividend, or be allotted other rights. The record date may

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not be prior to the close of business on the day the record date is fixed nor, subject to Section 3 of Article I of these Bylaws, more than 90 days before the date on which the action requiring the determination will be taken. The transfer books may not be closed for a period longer than 20 days. In the case of a meeting of stockholders, the record date or the closing of the transfer books shall be at least ten days before the date of the meeting. Any shares of the Corporation's own stock acquired by the Corporation between the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders and the time of the meeting may be voted at the meeting by the holder of record as of the record date and shall be counted in determining the total number of outstanding shares entitled to be voted at the meeting.

**Section 4. Lost, Stolen or Destroyed Certificates.** 

The Board of Directors of the Corporation may determine the conditions for issuing a new stock certificate in place of one that is alleged to have been lost, stolen, or destroyed, or the Board of Directors may delegate such power to any officer or officers of the Corporation or to the transfer agent designated to transfer shares of the stock of the Corporation. In their discretion, the Board of Directors or such officer or officers may require the owner of the certificate to give a bond, with sufficient surety, to indemnify the Corporation against any loss or claim arising as a result of the issuance of a new certificate. In their discretion, the Board of Directors or such officer or officers may refuse to issue such new certificate without the order of a court having jurisdiction over the matter.

**Section 5. Stock Ledger.** 

The Corporation shall maintain a stock ledger that contains the name and address of each stockholder and the number of shares of stock of each class that the stockholder holds. The stock ledger may be in written form or in any other form that can be converted within a reasonable time into written form for visual inspection. The original or a duplicate of the stock ledger shall be kept at the offices of a transfer agent for the particular class of stock or, if none, at the principal executive office of the Corporation.

**Section 6. Regulations.** 

The issue, transfer, conversion and registration of certificates of stock shall be governed by such other regulations as the Board of Directors may establish.

**ARTICLE VI** 

**MISCELLANEOUS** 

**Section 1. Facsimile Signatures.** 

In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these Bylaws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors or a committee thereof.

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**Section 2. Corporate Seal.** 

The Board of Directors may provide a suitable seal, bearing the name of the Corporation, which shall be in the charge of the Secretary. The Board of Directors may authorize one or more duplicate seals and provide for the custody thereof. If the Corporation is required to place its corporate seal to a document, it is sufficient to meet the requirement of any law, rule, or regulation relating to a corporate seal to place the word "(seal)" adjacent to the signature of the person authorized to sign the document on behalf of the Corporation.

**Section 3. Books and Records.** 

The Corporation shall keep correct and complete books and records of its accounts and transactions and minutes of the proceedings of its stockholders and Board of Directors and of any committee when exercising any of the powers of the Board of Directors. The books and records of the Corporation may be in written form or in any other form that can be converted within a reasonable time into written form for visual inspection. Minutes shall be recorded in written form but may be maintained in the form of a reproduction. The original or a certified copy of these Bylaws shall be kept at the principal office of the Corporation.

**Section 4. Reliance upon Books, Reports and Records.** 

Each director, each member of any committee designated by the Board of Directors, and each officer and agent of the Corporation shall, in the performance of his or her duties, in addition to any protections conferred upon him or her by law, be fully protected in relying in good faith upon the books of account or other records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of its officers or employees, or committees of the Board of Directors so designated, or by any other person as to matters that such director, committee member, officer or agent reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.

**Section 5. Fiscal Year.** 

The fiscal year of the Corporation shall commence on the first day of July and end on the last day of June in each year.

**Section 6. Time Periods.** 

In applying any provision of these Bylaws that requires that an act be done or not be done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded and the day of the event shall be included.

**Section 7. Checks, Drafts, Etc.** 

All checks, drafts and orders for the payment of money, notes and other evidences of indebtedness, issued in the name of the Corporation, shall be signed by any officer, employee or agent of the Corporation that is authorized by the Board of Directors.

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**Section 8. Mail.** 

Any notice or other document that is required by these Bylaws to be mailed shall be deposited in the United States mail, postage prepaid.

**Section 9. Contracts and Agreements.** 

To the extent permitted by applicable law, and except as otherwise prescribed by the Articles of Incorporation or these Bylaws, the Board of Directors may authorize any officer, employee or agent of the Corporation to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation. Such authority may be general or confined to specific instances. A person who holds more than one office in the Corporation may not act in more than one capacity to execute, acknowledge, or verify an instrument required by law to be executed, acknowledged, or verified by more than one officer.

**ARTICLE VII** 

**AMENDMENTS** 

These Bylaws may be adopted, amended or repealed as provided in the Articles of Incorporation of the Corporation.

## Ex-4

**Exhibit 4**![LOGO](g352312page211.jpg)

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The Board of Directors of SR Bancorp, Inc. (the "Company") is authorized by resolution or resolutions, from time to time adopted, to provide for the issuance of more than one class of stock, including preferred stock in series, and to fix and state the voting powers, designations, preferences, limitations and restrictions thereof. The Company will furnish to any stockholder upon request and without charge a full description of each class of stock and any series thereof.

The shares represented by this certificate are subject to a limitation contained in the Articles of Incorporation to the effect that in no event shall any record owner of any outstanding shares of common stock that is beneficially owned, directly or indirectly, by a person who beneficially owns in excess of 10% of the outstanding shares of common stock (the "Limit") be entitled or permitted to any vote in respect of shares held in excess of the Limit.

The shares represented by this certificate may not be cumulatively voted on any matter. The Articles of Incorporation require that, with limited exceptions, no amendment, addition, alteration, change or repeal of the Articles of Incorporation shall be made, unless such is first approved by the Board of Directors of the Company and approved by the stockholders by a majority of the total shares entitled to vote, or in certain circumstances approved by the affirmative vote of up to 80% of the shares entitled to vote.

The following abbreviations when used in the inscription on the face of this certificate shall be construed as though they were written out in full according to applicable laws or regulations.

---

| | | | |
|:---|:---|:---|:---|
| TEN COM | - as tenants in common | UNIF GIFT MIN ACT | -<u> </u> Custodian<u> </u><br> *(Cust) (Minor)* |
| TEN ENT | - as tenants by the entireties |  | Under Uniform Gifts to Minors Act |
| JT TEN | - as joint tenants with right of survivorship and not as tenants in common |  | <br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*(State)* |

---

Additional abbreviations may also be used though not in the above list

For value received,<u> </u><u> </u> hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY NUMBER OR OTHER IDENTIFYING NUMBER

------

*(please print or typewrite name and address including postal zip code of assignee)* 

------

<u> </u> Shares of the Common Stock represented by the within Certificate, and do hereby irrevocably constitute and appoint<u> </u> Attorney to transfer the said shares on the books of the within named corporation with full power of substitution in the premises.

Dated,<u> </u>

In the presence of Signature: <br>

NOTE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME OF THE STOCKHOLDER(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATSOEVER. THE SIGNATURE SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS ASSOCIATIONS, AND CREDIT UNIONS) WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM PURSUANT TO SEC RULE 17Ad-15.

## Ex-5

**Exhibit 5** 

**LUSE GORMAN, PC** 

ATTORNEYS AT LAW

5335 Wisconsin Avenue, NW, Suite 780

Washington, D.C. 20015

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Telephone (202) 274-2000

Facsimile (202) 362-2902

www.luselaw.com

March 13, 2023

The Board of Directors

SR Bancorp, Inc.

220 West Union Avenue

Bound Brook, New Jersey 08805

**Re: SR Bancorp, Inc.** 

**<u>Common Stock, Par Value $0.01 Per Share</u>**

Ladies and Gentlemen:

You have requested the opinion of this firm as to certain matters in connection with the offer, sale and issuance of shares of common stock, par value $0.01 per share ("Common Stock"), of SR Bancorp, Inc. (the "Company").

We have reviewed the Company's Articles of Incorporation and its Registration Statement on Form S-1 (the "Form S-1"), the Plan of Conversion of Somerset Savings Bank, SLA (the "Plan"), as well as applicable statutes and regulations governing the Company and the offer and sale of the Common Stock. The opinion expressed below is limited to the laws of the State of Maryland (which includes applicable provisions of Maryland General Corporation Law, the Maryland Constitution and reported judicial decisions interpreting the Maryland General Corporation Law and the Maryland Constitution).

We are of the opinion that upon the declaration of effectiveness of the Form S-1, the Common Stock, when issued and sold, and in the case of Somerset Regal Charitable Foundation, Inc., when contributed, in each case in accordance with the Plan, will be legally issued, fully paid and non-assessable.

We hereby consent to our firm being referenced under the caption "Legal Matters" in the prospectus contained in the Form S-1 and to the filing of this opinion as an exhibit to the Form S-1. By giving such consent, we do not hereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended.

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| |
|:---|
| Very truly yours, |
| /s/ Luse Gorman, PC |
| LUSE GORMAN, PC |

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## Exhibit 8.1

**Exhibit 8.1** 

**LUSE GORMAN, PC** 

**ATTORNEYS AT LAW** 

**5335 WISCONSIN AVENUE, N.W., SUITE 780** 

**WASHINGTON, D.C. 20015** 

**TELEPHONE (202) 274-2000** 

**FACSIMILE (202) 362-2902** 

**<u>www.luselaw.com</u>**

March 13, 2023

Boards of Directors

Somerset Savings Bank, SLA

SR Bancorp, Inc.

220 West Union Avenue

Bound Brook, New Jersey 08805

Boards of Directors:

You have requested this firm's opinion regarding the material federal income tax consequences of the proposed conversion (the "<u>Conversion</u>") of Somerset Savings Bank, SLA (the "<u>Bank</u>") from a New-Jersey-chartered mutual savings and loan association to a New Jersey-chartered stock savings bank ("<u>Stock Bank</u>"), pursuant to the Plan of Conversion of Somerset Savings Bank, SLA adopted by the Board of Directors of the Bank on July 25, 2022, as amended on March 7, 2023 (the "<u>Plan</u>"). In the Conversion, all of the Bank's to-be-issued capital stock, consisting entirely of voting common stock, will be acquired by SR Bancorp, Inc., a Maryland corporation (the "<u>Holding Company</u>"). All capitalized terms used but not defined herein shall have the same meaning as set forth in the Plan.

In connection with our opinion, we have made such investigations as we have deemed relevant or necessary for the purpose of this opinion. In our examination, we have assumed the authenticity of original documents, the accuracy of copies and the genuineness of signatures. We have further assumed the absence of adverse facts not apparent from the face of the instruments and documents we examined and we have relied upon the accuracy of the factual matters set forth in the Plan, the Holding Company's Registration Statement on Form S-1 to be filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "<u>Registration Statement</u>") and the applications or notices for approval of/non-objection to of the Conversion and the formation of a new bank holding company filed with the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the New Jersey Department of Banking and Insurance, respectively (collectively, the "<u>Applications</u>"). In addition, we are relying on a letter from RP Financial, LC. to you, dated March 13, 2023, stating its belief as to certain valuation matters described below. In rendering this opinion, we assume that each of the parties to the Conversion will comply with all reporting obligations with respect to the Conversion required under the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations promulgated thereunder (the "Treasury Regulations").

------

**LUSE GORMAN, PC** 

**ATTORNEYS AT LAW** 

Boards of Directors

Somerset Savings Bank, SLA

SR Bancorp, Inc.

March 13, 2023

Our opinion is based upon the existing provisions of the Code, and the Treasury Regulations, and upon current Internal Revenue Service ("IRS") published rulings and existing court decisions, any of which could be changed at any time. Any such changes may be retroactive and could significantly modify the statements and opinions expressed herein. Similarly, any change in the facts and assumptions stated herein, upon which this opinion is based, could modify the conclusions herein. This opinion is as of the date hereof, and we disclaim any obligation to advise you of any change in any matter considered herein after the date hereof.

We opine only as to the matters we expressly set forth herein, and no opinions should be inferred as to any other matters or as to the tax treatment of the transactions that we do not specifically address. We express no opinion as to other federal laws and regulations, or as to laws and regulations of other jurisdictions, or as to factual or legal matters other than as set forth herein.

For purposes of this opinion, we are relying, without independent verification, on the representations as to factual matters provided to us by the Bank and the Holding Company, as set forth in the joint certificate for both of those aforementioned entities, which has been signed by an authorized officer of each of the aforementioned entities and incorporated herein by reference.

We emphasize that the outcome of litigation cannot be predicted with certainty and, although we have attempted in good faith to opine as to the probable outcome of the merits of each tax issue with respect to which an opinion was requested, there can be no assurance that our conclusions are correct or that they would be adopted by the Internal Revenue Service or a court.

**<u>BACKGROUND</u>**

The Bank is a New Jersey-charted mutual savings and loan association that is in the process of converting to a New-Jersey-chartered stock savings association. As a New Jersey mutual savings and loan association, the Bank has no authorized capital stock. Instead the Bank, in mutual form, has a unique equity structure. A depositor in the Bank is entitled to payment of interest on his or her account balance as declared and paid by the Bank. A depositor has no right to a distribution of any earnings of the Bank, except for interest paid on the deposit balance, and such earnings that become retained earnings of the Bank. However, a depositor has a pro-rata ownership interest in the net worth of the Bank based upon the deposit balance in his or her account. This interest may only be realized in the event of a complete liquidation of the Bank. A depositor who reduces or closes his or her deposit account with the Bank receives solely the balance of his or her deposit account. In connection with and at the time of the Conversion, Eligible Account Holders and Supplemental Eligible Account Holders will exchange their liquidation rights in the Bank for an interest in a liquidation account ("<u>Liquidation Account</u>") established at the Stock Bank.

------

**LUSE GORMAN, PC** 

**ATTORNEYS AT LAW** 

Boards of Directors

Somerset Savings Bank, SLA

SR Bancorp, Inc.

March 13, 2023

**<u>PROPOSED TRANSACTION</u>**

The Holding Company has been formed under the laws of the State of Maryland for the purpose of the proposed transactions described herein, to engage in business as a holding company and to own all of the outstanding capital stock of the Stock Bank. The Holding Company will issue shares of its voting common stock ("<u>Common Stock</u>"), upon completion of the mutual-to-stock conversion of the Bank, to persons purchasing such shares as described in greater detail below.

Following regulatory approval, the Plan provides for the offer and sale of shares of Common Stock in a Subscription Offering pursuant to nontransferable subscription rights on the basis of the following preference categories enumerated in order of preference: (1) Eligible Account Holders; (2) the Bank's Tax-Qualified Plans, including the newly to-be adopted employee stock ownership plan; (3) Supplemental Eligible Account Holders; and (4) Voting Members, all as described in the Plan. The number of shares at the minimum of the offering range must be sold for the Conversion to be completed. If shares remain after all orders are filled in the categories described above, the Plan calls for a community offering to the general public with preference given to natural persons residing in the Counties of Hunterdon, Middlesex and Somerset in the State of New Jersey ("Community Offering"), followed, at the discretion of the Bank and the Holding Company, by a syndicated community offering for the shares not sold in the Community Offering.

Pursuant to the Plan, all such shares will be issued and sold at a uniform price per share. The aggregate purchase price at which all shares of Common Stock will be offered and sold pursuant to the Plan will be equal to the estimated *pro forma* market value of the Holding Company and Bank, as converted. The estimated *pro forma* market value will be determined by RP Financial LC., an independent appraiser. The conversion of the Bank from mutual-to-stock form and the sale of newly issued shares of the stock of the Stock Bank to the Holding Company will be deemed effective concurrently with the closing of the sale of Common Stock.

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**LUSE GORMAN, PC** 

**ATTORNEYS AT LAW** 

Boards of Directors

Somerset Savings Bank, SLA

SR Bancorp, Inc.

March 13, 2023

**<u>OPINION OF COUNSEL</u>**

Based solely upon the foregoing information, we render the following opinion:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The change in the form of operation of the Bank from a New Jersey mutual savings and loan association to a New Jersey stock savings association, as described above, will constitute a reorganization within the meaning of Code Section 368(a)(1)(F), and no gain or loss will be recognized to either the Bank or to Stock Bank as a result of such Conversion. <u>See</u> Rev. Rul. 80-105, 1980-1 C.B. 78. The Bank and Stock Bank will each be a party to a reorganization within the meaning of Code Section 368(b). Rev. Rul. 72-206, 1972-1 C.B. 104.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. No gain or loss will be recognized by Stock Bank on the receipt of money from the Holding Company in exchange for its shares of common stock or by the Holding Company upon the receipt of money from the sale of Common Stock. Code Section 1032(a).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. The assets of the Bank will have the same basis in the hands of Stock Bank as they had in the hands of the Bank immediately prior to the Conversion. Code Section 362(b).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. The holding period of the Bank's assets to be received by Stock Bank will include the period during which the assets were held by the Bank prior to the Conversion. Code Section 1223(2).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. No gain or loss will be recognized by the account holders of the Bank upon the issuance to them of withdrawable deposit accounts in Stock Bank in the same dollar amount and under the same terms as their deposit accounts in the Bank, and no gain or loss will be recognized by Eligible Account Holders or Supplemental Eligible Account Holders upon receipt by them of an interest in the Liquidation Account of Stock Bank, in exchange for their ownership interests in the Bank. Code Section 354(a).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. The basis of the account holders' deposit accounts in the Stock Bank will be the same as the basis of their deposit accounts in the Bank surrendered in exchange therefor. The basis of each Eligible Account Holder's and Supplemental Eligible Account Holder's interests in the Liquidation Account of the Stock Bank will be zero, that being the cost of such property.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. It is more likely than not that the fair market value of the nontransferable subscription rights to purchase Common Stock will be zero. Accordingly, no gain or loss will be recognized by Eligible Account Holders or Supplemental Eligible Account Holders or Voting Members upon the distribution to them of the nontransferable subscription rights to purchase Common Stock. No taxable income will be realized by the Eligible Account Holders, Supplemental Eligible Account Holders or Voting Members as a result of the exercise of the nontransferable subscription rights. Rev. Rul. 56-572, 1956-2 C.B. 182.

------

**LUSE GORMAN, PC** 

**ATTORNEYS AT LAW** 

Boards of Directors

Somerset Savings Bank, SLA

SR Bancorp, Inc.

March 13, 2023

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. It is more likely than not that the basis of the Common Stock to a stockholder of the Holding Company will be the purchase price thereof. (Section 1012 of the Code). The stockholder's holding period will commence upon the exercise of the subscription rights. (Section 1223(5) of the Code).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. For purposes of Section 381 of the Code, the Stock Bank will be treated as if there had been no reorganization. Accordingly, the taxable year of the Bank will not end on the effective date of the Conversion merely because of the transfer of assets of the Bank to the Stock Bank, and the tax attributes of the Bank will be taken into account by the Stock Bank as if there had been no reorganization. (Treas. Reg. Section 1.381(b)-(1)(a)(2)).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10. The part of the taxable year of the Bank before the reorganization and the part of the taxable year of Stock Bank after the reorganization will constitute a single taxable year of Stock Bank. <u>See</u> Rev. Rul. 57-276, 1957-1 C.B. 126. Consequently, the Bank will not be required to file a federal income tax return for any portion of that taxable year solely by reason of the Conversion. (Treas. Reg. Section 1.381(b)-1(a)(2)).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11. The tax attributes of the Bank enumerated in Code Section 381(c) will be taken into account by Stock Bank. (Treas. Reg. Section 1.381(b)-1(a)(2)).

Notwithstanding any reference to Code Section 381 above, no opinion is expressed or intended to be expressed herein as to the effect, if any, of this transaction on the continued existence of, the carryover or carryback of, or the limitation on, any net operating losses of the Bank or its successor, Stock Bank, under the Code.

------

**LUSE GORMAN, PC** 

**ATTORNEYS AT LAW** 

Boards of Directors

Somerset Savings Bank, SLA

SR Bancorp, Inc.

March 13, 2023

Our opinion in paragraph 5 above is based on the premise that the benefit provided by the Liquidation Account in the Stock Bank has a fair market value of zero at the time of the Conversion. The Liquidation Account payment obligation arises only in a liquidation of the Stock Bank including if the Stock Bank enters into a transaction to transfer its assets and liabilities to a credit union. We understand that: (i) no holder of an interest in a liquidation account has ever received payment of an interest in a liquidation account attributable to the liquidation of a solvent bank (other than as set forth below); (ii) the interests in the Liquidation Account are not transferable by an Eligible Account Holder or Supplemental Eligible Account Holder; (iii) the amounts due under the Liquidation Account with respect to each Eligible Account Holder and Supplemental Eligible Account Holder will be reduced as their deposits in the Stock Bank are reduced, as described in the Plan; and (iv) holders of an interest in a liquidation account have received payments of their interest in only a limited number of instances (out of hundreds of transactions involving mergers, acquisitions and the purchase of assets and assumptions of liabilities of holding companies and subsidiary banks). These instances involved the purchase of a bank's assets and assumption of a bank's liabilities by a credit union. However, not all states permit the sale of a bank's assets to a credit union, further limiting the opportunity for this type of transaction. We also note that the U.S. Supreme Court in *Paulsen v. Commissioner,* 469 U.S. 131 (1985) stated the following:

The right to participate in the net proceeds of a solvent liquidation is also not a significant part of the value of the shares. Referring to the possibility of a solvent liquidation of a mutual savings association, this Court observed: "It stretches the imagination very far to attribute any real value to such a remote contingency, and when coupled with the fact that it represents nothing which the depositor can readily transfer, any theoretical value reduces almost to the vanishing point." *Society for Savings v. Bowers,* 349 U.S. 143, 150 (1955).

In the present case, we believe that the same analysis as was applied in *Paulsen* and *Society for Savings* can be applied to the extremely remote contingency that a depositor will, at some undetermined time in the future, realize value from the sale of the Stock Bank's assets to a credit union. First, some states prohibit a credit union from acquiring a bank's assets through a purchase and assumption transaction. Second, although others do permit such a transaction, as noted above, there have been only a limited number of instances where a credit union has acquired the assets of a bank where an amount representing the then-value of a liquidation account has been (or will be) paid to the bank's eligible depositors. These instances all involved former mutual banks that were required to establish liquidation accounts in a conversion to a stock bank and who later engaged in a purchase and assumption transaction with a credit union. Less than ten instances out of hundreds of converted former mutual banks since 1816 (the date the first mutual bank was chartered, in Massachusetts) have engaged in purchase and assumption transactions with credit unions and have been required to distribute to their depositors the remains of any liquidation accounts. Under these circumstances, we agree with the statement by the Supreme Court in *Society for Savings* that "any theoretical value reduces almost to the vanishing point."

------

**LUSE GORMAN, PC** 

**ATTORNEYS AT LAW** 

Boards of Directors

Somerset Savings Bank, SLA

SR Bancorp, Inc.

March 13, 2023

In addition, we are relying on a letter from RP Financial, LC., dated March 13, 2023, to you stating its belief that the benefit provided by the Liquidation Account does not have any economic value at the time of the Conversion. Based on the foregoing, we believe it is more likely than not that liquidation rights in the Liquidation Account have no value.

If the IRS were to subsequently find that the Liquidation Account had economic value as of the time of the Conversion, each Eligible Account Holder and Supplemental Eligible Account Holder may need to recognize income in the amount of the fair market value of their interest in the Liquidation Account as of the effective date of the Conversion. However, we are not aware of any situation where rights in a bank liquidation account have been found to have an economic value at the time of a mutual-to-stock conversion or a second-step conversion of a mutual holding company.

Our opinion in paragraph 7 above is predicated on the representation that no person shall receive any payment, whether in money or property, in lieu of the issuance of subscription rights. Our opinions in paragraphs 7 and 8 are based on the facts that the subscription rights will be granted at no cost to the recipients, will be legally non-transferable and of short duration, and will provide the recipient with the right only to purchase shares of Common Stock at the same price to be paid by members of the general public in any Community Offering. We also note that RP Financial, LC. has issued a letter dated March 13, 2023, stating that the subscription rights will have no ascertainable market value. We further note that the IRS has not in the past reached a different conclusion with respect to the value of nontransferable subscription rights. If the subscription rights are subsequently found to have value, income may be recognized by various recipients of the subscription rights (in certain cases, whether or not the rights are exercised) and the Holding Company and/or Stock Bank may be taxable on the distribution of the subscription rights.

**<u>CONSENT</u>**

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement, and as an exhibit to the Applications with respect to the Conversion, as applicable. We also hereby consent to the references to this firm under the caption "Legal Matters" in the prospectus which is a part of the Registration Statement and the Applications.

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**LUSE GORMAN, PC** 

**ATTORNEYS AT LAW** 

Boards of Directors

Somerset Savings Bank, SLA

SR Bancorp, Inc.

March 13, 2023

**<u>USE OF OPINION</u>**

We hereby consent to the use of and reliance on this opinion by Baker Tilly US, LLP, in issuing its state tax opinion to the Bank related to the Conversion.

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| |
|:---|
| Very truly yours, |
| /s/ Luse Gorman, PC |
| LUSE GORMAN, PC |

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## Exhibit 8.2

**Exhibit 8.2** 

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|:---|
| ![LOGO](g352312g0311045209558.jpg) |
| Baker Tilly US, LLP<br> 777 E Wisconsin Ave, 32nd Fl<br> Milwaukee, WI 53202-5313<br> United States of America<br>T: +1 (414) 777 5500<br> F: +1 (414) 777 5555<br>bakertilly.com |

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March 13, 2023

Boards of Directors

Somerset Savings Bank, SLA

SR Bancorp, Inc.

220 West Union Avenue

Bound Brook, New Jersey 08805

**NEW JERSEY STATE TAX OPINION** 

Members of the Boards of Directors:

You requested Baker Tilly US, LLP ("Baker Tilly") to express an opinion concerning material state income tax consequences of the proposed conversion (the "Conversion") of Somerset Savings Bank, SLA (the "Bank") from a New Jersey-chartered mutual savings and loan association to a New Jersey-chartered stock savings bank (and then to a New Jersey-chartered commercial bank immediately following the Conversion) ("Stock Bank"), pursuant to the Plan of Conversion of Somerset Savings Bank, SLA adopted by the Board of Directors of the Bank on July 25, 2022, as amended on March 7, 2023 (the "Plan"). In the Conversion, all of the Bank's to-be-issued capital stock, consisting entirely of voting common stock, will be acquired by SR Bancorp, Inc., a Maryland corporation (the "Holding Company"). All capitalized terms used but not defined herein shall have the same meaning as set forth in the Plan.

In rendering our opinion, we have relied on the facts, assumptions, and federal income tax conclusions set forth in the March 13, 2023, federal tax opinion issued by Luse Gorman, P.C. (the "Law Firm") that was included in the regulatory filings pertaining to the Plan of Reorganization (the "Federal Tax Opinion"). If any of the facts, assumptions, or federal income tax conclusions in the Law Firm's Federal Tax Opinion are inaccurate or incorrect, the opinion we express herein may require modification. Any terms used in this opinion letter but not defined herein will have the same meaning as set forth in the Federal Tax Opinion.

We have not considered any non-income tax consequences, or state, local or foreign income tax consequences, other than the New Jersey State Corporate Franchise Tax measured by business income and under the fixed dollar minimum tax formula matters directly addressed in our opinion, and therefore, do not express any opinion regarding the treatment that would be given the transaction by the applicable authorities on any other federal, state, local or foreign tax issues.

We also express no opinion on nontax issues such as corporate law matters. Neither this opinion nor any prior statements are intended to imply or to be an opinion on any other matters.

The opinion expressed herein is based solely upon our interpretation of New Jersey State Tax Law as interpreted by court decisions, rulings and policies issued by the New Jersey State Department of Taxation and Finance (the "Department") as of the date of this letter.

The opinion expressed herein reflects our assessment of the probable outcome of litigation and other adversarial proceedings based solely on an analysis of the existing New Jersey State tax authorities relating to the issues. It is important to note that negotiation and practical solutions are frequently considered in arriving at the final outcome of potential litigation or other adversarial proceedings.

Baker Tilly US, LLP, trading as Baker Tilly, is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. <sup>©</sup> 2022 Baker Tilly US, LLP

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Should it finally be determined that the facts or the federal income tax consequences are not as described in the Federal Tax Opinion, the New Jersey State Corporate Franchise Tax consequences and our New Jersey State tax opinion may differ from what is contained herein. If any fact contained in this opinion letter or the Federal Tax Opinion changes to alter the federal income tax treatment, it is imperative that we are notified in order to determine the effect, if any, on the New Jersey State tax consequences. We have no responsibility to update this opinion for events, changes to the federal income tax and/or New Jersey tax law, transactions, circumstances, or changes in any of the facts, assumptions or representations occurring after the date of this letter.

This opinion is given solely for the benefit of the parties described above and may not be relied upon by anyone else without our express written consent.

Nothing contained in this communication was intended or written to be used by any taxpayer for avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service or the New Jersey State Department of Taxation and Finance, and it cannot be used by any taxpayer for such purpose. No one, without our express prior written permission, may use or refer to any tax advice in this communication in promoting, marketing, or recommending a partnership or other entity, investment plan or arrangement to any other party.

**PROPOSED TRANSACTION** 

The Holding Company has been formed under the laws of the State of Maryland for the purpose of the proposed transactions described herein, to engage in business as a bank holding company and to own all of the outstanding capital stock of the Stock Bank. The Holding Company will issue shares of its voting common stock ("Common Stock"), upon completion of the mutual-to-stock conversion of the Bank, to persons purchasing such shares as described in greater detail below.

Following regulatory approval, the Plan provides for the offer and sale of shares of Common Stock in a Subscription Offering pursuant to nontransferable subscription rights on the basis of the following preference categories enumerated in order of preference: (1) Eligible Account Holders; (2) the Bank's Tax-Qualified Plans, including the newly to-be adopted employee stock ownership plan; (3) Supplemental Eligible Account Holders; and (4) Voting Members, all as described in the Plan. The minimum amount of shares in the offering range must be sold. If shares remain after all orders are filled in the categories described above, the Plan calls for a community offering to the general public with preference given to natural persons residing in the Counties of Hunterdon, Middlesex and Somerset in the State of New Jersey ("Community Offering"), followed, at the discretion of the Bank and the Holding Company, by a syndicated community offering for the shares not sold in the Community Offering.

Pursuant to the Plan, all such shares will be issued and sold at a uniform price per share. The aggregate purchase price at which all shares of Common Stock will be offered and sold pursuant to the Plan will be equal to the estimated pro forma market value of the Holding Company and Bank, as converted. The estimated pro forma market value will be determined by RP Financial LC., an independent appraiser. The conversion of the Bank from mutual-to-stock form and the sale of newly issued shares of the stock of the Stock Bank to the Holding Company will be deemed effective concurrently with the closing of the sale of Common Stock.

**Assumptions** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Forms and definitions issued by the state for a financial banking corporation will stay the same with the
issuance of new form CBT-1.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Upon release of new form CBT-1 in 2022, the Bank and its tax preparer
will review the form and instructions to opinions provided below.

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**NEW JERSEY STATE BANKING AND FINANCICAL BUSINESS TAX** 

New Jersey defines Financial Business Corporation (FBC) as a corporation that is in substantial competition for business with other national banks and uses moneyed capital to generate profit by engaging in activities such as:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Buying and selling exchange,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Discounting/negotiating promissory note, drafts, bills of exchange and other evidence of debt,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Making or dealing of secured loans and discount,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Dealing in securities, shares of corporate stock without recourse, solely on the order and the account of
customers,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Investing or reinvesting in marketable obligations of person, co-partnership, association, or corporation in the form of bonds, notes, or debentures, also known as investment securities,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Dealing in or underwriting obligations for U.S. or any political subdivision of a corporate instrumentality, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Engaging in leasing obligations of secured loans.<sup>1</sup>

New Jersey defines Financial Institution as a state or federally charged bank, savings bank, savings and loan or credit union; A benefit association; insurance company; safe deposit company, money market mutual fund, or investment and loan corporation if permitted by federal law. <sup>2</sup>

The term "corporation" includes: any corporation, joint-stock company or association and any business conducted by a trustee or trustees wherein interest or ownership is evidenced by a certificate of interest or ownership or similar written instrument, any other entity classified as a corporation for federal income tax purposes, and any state or federally charted building and loan association or savings and loan association.<sup>3</sup>

A corporation qualify as financial business if it derives 75% of their gross income from financial activities listed. A banking or financial institution must file the New jersey Corporation Business Tax Return for Banking and Financial Business (Form BFC-1). <sup>4</sup> New Jersey will issue a standard tax form all types of corporations requiring replacement of Form BFC-1 with CBT-1. The department of revenue anticipates the new form and instructions to be available however at the writing of this opinion, the new form for 2022 has not yet been released.

A Corporate Business Tax is imposed on every corporation existing and doing business under the laws of New Jersey state. Doing business is defined as "all activities that occupy the time or labor of men or women for profit, regardless of the nature of its activities and irrespective of its profitability in the state.<sup>5</sup>

A corporation's New Jersey tax liability is computed as the highest of two alternative bases:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Corporate net business income or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) Gross Receipts Tax.

An additional fixed tax rate of 2.5% sur tax is imposed to the grater of (1) or (2) for corporations that have an allocated taxable net income of more than $1,000,000. <sup>6</sup>

The scope of this opinion is limited to the state consequences of the impact of application of Internal Revenue Code Section 368(a)(1)(F) and Internal Revenue Code Section 381 on the Corporate Tax.

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<sup>1</sup> N.J.A.C. 18:7-1.16 (a)

<sup>2</sup> NJ: N.J. Rev. Stat. § 54:50-37

<sup>3</sup> NJ: N.J. Rev. Stat. § 54:10A-4

<sup>4</sup> Form Instructions From BFC-1 

<sup>5</sup> NJ: N.J. Admin. Code 18:7-1.9

<sup>6</sup> Form Instructions From BFC-1 

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**a.** **New Jersey Adoption of Code Section 368(a)(1)(F)** 

Under code section 368(a)(1)(F) federal law does not recognize any gain or loss for the reorganization of the Bank from a New Jersey mutual savings and loan association to a New Jersey stock savings association.

In computing New Jersey's entire net business income for base (1) (described above) the state starts at the "taxable income before net operating loss deduction and special deductions" also referred to as "federal taxable income". New Jersey provides modifications and adjustments (both additions and subtractions) required in computing entire net income from the federal starting point to calculate the New Jersey taxable income base. There are no New Jersey modifications or adjustments that explicitly decouple from federal code section 368(a)(1)(F). <sup>7</sup>

Accordingly, with regards to the Corporate Income Tax determined on business income, the reorganization should be treated in the same manner as it is treated for federal income tax purposes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**b.** **New Jersey's Adoption of Federal Code Section 381 – Net Operating Loss Application After Reorganization** 

Federal code section 381 federal law defines how net operating loss is applied when there is an acquisition of assets in mergers, acquisitions, and reorganizations. For federal purposes, the Stock Bank will be treated as if there had been no reorganizations. New Jersey explicitly states that for the period ending after January 1, 2020, the state adopts federal code section 381 and treats (limitations, restrictions, and carry over) to the net operating loss same as the federal treatment. <sup>8</sup> However, this adoption for code section 381 is not impacted by reorganization activities stated in federal code section 368(a)(1)(F). <sup>9</sup>

Notwithstanding any reference to Code Section 381 above, no opinion is expressed or intended to be expressed herein as to the effect, if any, of this transaction on the continued existence of, the carryover or carryback of, or the limitation on, any net operating losses of the Bank or its successor, Stock Bank, under the Code.

**OPINION** 

We have received from you a copy of the Federal Tax Opinion in which Law Firm has opined on the federal income tax treatment of the proposed transactions detailed above.

Our opinion concerning the New Jersey State Corporate and Franchise Tax relies on the facts, representations, assumptions, and conclusions, and incorporates the terms set out in the Federal Tax Opinion. Our opinion presumes that the final federal income tax consequences of the reorganization will be as described in the Federal Tax Opinion.

Based on this information, we furnish you with the opinion below as to the New Jersey Corporate Income Tax effects of the proposed transaction described above:

1. The federal income tax treatment of no gain or loss for reorganization under code section 368(a)(1)(F) would be
applicable for the purposes of the Corporate Income Tax calculation based on the business income.

2. For tax period starting January 1, 2020, reorganization activities stated in federal code section
368(a)(1)(F) should also have no effect on New Jersey's adoption for code section 381.

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<sup>7</sup> NJ: N.J. Admin. Code 18:7-5.2

<sup>8</sup> N.J. Rev. Stat. § 54:10A-4.5 (a) and (c)

<sup>9</sup> TB-102(R) - Revised April 27, 2021

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\*\*\*\*\*

The opinions expressed above are rendered only with respect to the specific matters discussed herein and we express no opinion with respect to any other federal or state income tax or legal aspect of the transaction. If any of the above-stated facts, circumstances, or assumptions is not entirely complete or accurate, it is imperative that we be informed immediately because inaccuracy or incompleteness could have a material effect on our conclusions.

In rendering our opinion, we are relying upon the relevant provisions of New Jersey State statutes, the regulations thereunder, and judicial and administrative interpretations thereof, which are subject to change or modification by subsequent legislative, regulatory, administrative, or judicial decisions. Any such changes also could have an effect on the validity of our opinion. Further, we have relied on the facts, assumptions, and federal income tax conclusions set forth in the Federal Tax Opinion issued by the Law Firm. If any of the facts, assumptions, federal income tax conclusions in the Law Firm's Federal Tax Opinion are inaccurate or incorrect, or if there is a change in the federal or New Jersey law, the opinion we express herein may require modification. Unlike private letter rulings, our opinion is not binding on the Department and there can be no assurance that the Department will not take a position contrary to any of the opinion expressed herein.

Very truly yours,

BAKER TILLY US, LLP

![LOGO](g352312g08s81.jpg)

Donna R. Scaffidi

Partner

Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. <sup>©</sup> 2020 Baker Tilly US, LLP

## Exhibit 10.1

**Exhibit 10.1** 

**EXECUTION VERSION** 

**EMPLOYMENT AGREEMENT** 

This Employment Agreement (the "<u>Agreement</u>") is made and entered into as of the 25<sup>th</sup> day of July, 2022, to be effective as of the Effective Date as defined in Section 19 below, by and between Somerset Savings Bank, SLA, a New Jersey-chartered savings association (the "Bank") and William P. Taylor (the "<u>Executive</u>"). Any reference to the "Company" shall mean SR Bancorp, Inc., the proposed holding company of the Bank.

**RECITALS** 

**WHEREAS,** the Executive is presently serving as the Chief Executive Officer and Chairman of the Board of Directors of the Bank and is a party to an employment agreement with the Bank, dated as of December 18, 2019 (the "Prior Agreement"); and

**WHEREAS,** the Bank has adopted a Plan of Conversion to convert the Bank from the mutual to the stock form of organization (the "Conversion") and has adopted a plan of Charter Conversion to convert the Bank from a New Jersey chartered savings association to a New Jersey chartered commercial bank under the name "Somerset Regal Bank" (the "Charter Conversion')(references in this Agreement to the Bank shall include the Bank as a New Jersey chartered commercial bank); and

**WHEREAS,** in connection with the Conversion, the Bank and the Company have entered into an Agreement and Plan of Merger, dated as of July 25, 2022 (the "Merger Agreement"), with Regal Bank and Regal Bancorp, Inc., pursuant to which Regal Bank will merge with and into the Bank, with the Bank as the surviving entity, and Regal Bancorp, Inc. will merge with and into the Company, with the Company as the surviving entity (collectively referred to as the "Merger"); and

**WHEREAS,** the parties desire to enter into this Agreement to induce Executive to continue employment with the Bank, and to provide further incentive for the Executive to achieve the financial and performance objectives of the Bank and the Company; and

**WHEREAS,** this Agreement shall supersede and replace the Prior Agreement as of the Effective Date.

**NOW, THEREFORE,** in consideration of the mutual covenants herein contained, and upon the other terms and conditions hereinafter provided, the parties hereby agree as follows:

**1.** **POSITION AND RESPONSIBILITIES.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **<u>Employment</u>.** During the Term (as defined in Section 2(a)) of this Agreement, the Executive agrees to serve as Chief Executive Officer of the Bank and the Company or any successor executive position with the Bank and the Company that is consented to, in writing, by the Executive (the "<u>Executive Position</u>"), and will perform the duties of and have all powers associated with the Executive Position as are appropriate for a person in the position of the Executive Position, as well as those as shall be assigned by the Board of Directors of the Bank (the

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"<u>Board of Directors</u>"). As Chief Executive Officer, the Executive will report directly to the Board of Directors. The Executive currently serves and shall continue to serve as a Chairman of the Board of Directors of the Bank and as a member of the Board of Directors of the Company. During the term of this Agreement, the Executive also agrees to serve, if elected, as an officer, director or trustee of any affiliate of the Bank and the Company and in such capacity to carry out the duties and responsibilities reasonably appropriate to any such position.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **<u>Responsibilities</u>.** During the Executive's employment hereunder, the Executive will be employed on a full-time basis and devote the Executive's full business time and best efforts, business judgment, skill and knowledge to the performance of the Executive's duties and responsibilities related to the Executive Position. Except as otherwise provided in Section I (c), or as may be approved by the Board of Directors, the Executive will not engage in any other business activity during the term of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) **<u>Service on Other Boards and Committees</u>.** The Bank encourages participation by the Executive on community boards and committees and in activities generally considered to be in the public interest, but the Board of Directors shall have the right to approve or disapprove, in its sole discretion, the Executive's participation on those boards and committees.

**2.** **TERM.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **<u>Term and Renewal</u>.** The term of this Agreement will begin as of the Effective Date and continue for a period of three (3) years (the "<u>Term</u>"). Upon notice to Executive at least thirty (30) days before the expiration of the Term, the Bank may extend the Term for an additional twelve months. For avoidance of doubt, any extension to the Term will become the new "Term" for purposes of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **<u>Change in Control</u>.** Notwithstanding the foregoing, in the event the Bank or the Company has entered into an agreement to effect a transaction that would be considered a Change in Control, as defined in Section 5, the Term of this Agreement will automatically extend so that it expires no less than two (2) years beyond the effective date of the Change in Control, subject to extensions as set forth in Section 2(a).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) **<u>Continued Employment Following Expiration of Term</u>.** Nothing in this Agreement will mandate or prohibit a continuation of the Executive's employment following the expiration of the Term.

**3.** **COMPENSATION, BENEFITS AND REIMBURSEMENT.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **<u>Base Salary</u>.** In consideration of the Executive's performance of the responsibilities and duties set forth in this Agreement, the Executive will receive an annual base salary of $460,000 per year ("<u>Base Salary</u>"). The Bank will pay the Base Salary in accordance with its customary payroll practices. During the term of this Agreement, the Board of Directors (or the Compensation Committee of the Board of Directors (the "<u>Compensation Committee</u>")) may increase, but not decrease, the Executive's Base Salary. Any increase in Base Salary will become the new "Base Salary" for purposes of this Agreement.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **<u>Bonus and Incentive Compensation</u>**. The Executive (1) shall be eligible to participate in any bonus plan or arrangement of the Bank in which senior management is eligible to participate, pursuant to which a bonus may be paid to the Executive in accordance with the plan or arrangement; and/or (2) may receive a bonus, if any, on a discretionary basis, as determined by the Board of Directors or the Compensation Committee. The Bank shall provide the Executive an annual cash bonus opportunity in an amount at least equal to twenty five percent (25%) of Base Salary at target, less required tax withholding, on an annual basis during the Term of this Agreement (the "Annual Cash Bonus"), subject to terms and conditions, including performance conditions, as shall be determined by the Board of Directors or the Compensation Committee. Each Annual Cash Bonus shall be paid to the Executive as a single lump sum cash payment (less required withholding) as soon as practicable after the last day of the applicable bonus period, but in no event later than March 15th of the calendar year following the year in which the last day of the performance period occurs (or as soon as administratively practicable thereafter).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <u>**Benefit Plans**</u>. The Executive will be entitled to participate in all employee benefit plans, arrangements and perquisites offered to senior management of the Bank, on terms and conditions no less favorable than the plans, arrangements and perquisites available to other members of senior management of the Bank. Without limiting the generality of the foregoing provisions of this Section 3(c), the Executive also will be entitled to participate in any employee benefit plans including but not limited to retirement plans, pension plans, profit-sharing plans, health-and-accident plans, or any other employee benefit plan or arrangement made available by the Bank in the future to management employees, subject to and on a basis consistent with the terms, conditions and overall administration of the plans and arrangements as applicable to other management employees.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) **<u>Leave and Paid Time Off</u>**. The Executive will be entitled to paid time off each year during the term of this Agreement measured on a calendar year basis, in accordance with the Bank's customary practices and in accordance with the Bank's policies and procedures for officers, in addition to all holidays observed by the Bank. Any unused paid time off during an annual period will be treated in accordance with the Bank's personnel policies as in effect from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) **<u>Automobile</u>**. The Bank will provide the Executive with the use of an automobile and shall reimburse Executive or pay for automobile-related expenses.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) **<u>Expense Reimbursements</u>**. The Bank will reimburse the Executive for all reasonable travel, entertainment and other expenses incurred by the Executive in performing the Executive's obligations under this Agreement, including, without limitation, fees for memberships in organizations that the Executive and the Board of Directors or the Compensation Committee mutually agree are necessary and appropriate in connection with the performance of the Executive's duties under this Agreement. All reimbursements will be made as soon as practicable upon substantiation of the expenses by the Executive in accordance with the applicable policies and procedures of the Bank and, in any event, not later than the last day of the calendar year immediately following the calendar year in which the Executive incurred the expense.

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**4.** **TERMINATION AND TERMINATION PAY.** 

Subject to Section 5, which governs the occurrence of a Change in Control, the Executive's employment under this Agreement will terminate under the circumstances set forth in this Section 4.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **<u>Definition of Accrued Obligations</u>**. For purposes of this Agreement, the term "<u>Accrued Obligations</u>" means the sum of: (i) any Base Salary earned but unpaid through the Executive's Date of Termination, (ii) unpaid expense reimbursements (subject to, and in accordance with, Section 3(£)), (iii) unused paid time off accrued through the Date of Termination (subject to an in accordance with Section 3(d)), (iv) any earned but unpaid short-term and long-term incentive compensation for the year immediately preceding the year of termination and (v) any vested benefits the Executive may have under any employee benefit plan of the Bank through the Date of Termination, which vested benefits will be paid and/or provided in accordance with the terms of the employee benefit plans. Unless otherwise provided by the applicable employee benefit plan, the Accrued Obligations, if any, will be paid to the Executive (or the Executive's estate or beneficiary) within thirty (30) days following the Executive's Date of Termination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **<u>Death</u>**. This Agreement and the Executive's employment with the Bank will terminate upon the Executive's death, in which event the Bank's sole obligation will be to pay or provide the Executive's estate or beneficiary any Accrued Obligations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) **<u>Disability</u>**. The Bank shall be entitled to terminate the Executive's employment and this Agreement due to the Executive's Disability. If the Bank terminates the Executive's employment due to the Executive's Disability, the Bank's sole obligation under this Agreement shall be to pay or provide the Executive any Accrued Obligations. For these purposes, the term "<u>Disability</u>" means the Executive is deemed disabled for purposes of the Bank's long-term disability plan or policy that covers the Executive or is determined to be disabled by the Social Security Administration.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) **<u>Termination for Cause</u>**. The Board of Directors may immediately terminate the Executive's employment and this Agreement at any time for "Cause." In the event the Executive's employment is terminated for Cause, the Bank's sole obligation will be to pay or provide to the Executive any Accrued Obligations. For purposes of this Agreement, the term "<u>Cause</u>" means termination because of, in the good faith determination of the Board of Directors:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the conviction of the Executive of a felony or of any lesser criminal offense involving moral turpitude (other than for traffic violations);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the willful commission by the Executive of a criminal or other act that, in the judgment of the Board of Directors will likely cause substantial economic damage to the Company, the Bank or any subsidiary or substantial injury to the business reputation of the Company, the Bank or any subsidiary;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the commission by the Executive of an act of fraud in the performance of his duties on behalf of the Company, the Bank or any subsidiary;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) the continuing willful failure of the Executive to perform his duties to the Company, the Bank or any subsidiary (other than any such failure resulting from the Executive's incapacity due to physical or mental illness or the Executive declining to perform any assigned duties to the extent such assignment or duties would constitute a violation of law) after written notice thereof;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) a material breach by the Executive of the Bank's or the Company's Code of Ethics; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) an order of a federal or state regulatory agency or a court of competent jurisdiction requiring the termination of the Executive's employment with the Bank or the Company.

Any determination of Cause under this Agreement will be made by resolution adopted by the Board of Directors at a meeting called and held for that purpose. The Executive will be provided with reasonable notice of the meeting and the Executive will be given an opportunity to be heard before a vote is taken by the disinterested members of the Board of Director regarding the termination of employment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) **<u>Resignation by Executive without Good Reason</u>.** The Executive may resign from employment during the term of this Agreement without Good Reason upon at least thirty (30) days prior written notice to the Board of Directors, provided, however, that the Bank may accelerate the Date of Termination upon receipt of written notice of the Executive's resignation. In the event the Executive resigns without Good Reason, the Bank's sole obligation under this Agreement will be to pay or provide any Accrued Obligations to the Executive.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) **<u>Termination Without Cause or With Good Reason</u>.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) The Board of Directors may immediately terminate the Executive's employment at any time for a reason other
than Cause (a termination " <u>Without Cause</u> "), and the Executive may, by written notice to the Board of Directors, terminate his employment at any time within ninety (90) days following an event constituting "Good
Reason" (a termination " <u>With Good Reason</u> "); provided, however, that the Bank will have thirty (30) days to cure the "Good Reason" condition, but the Bank may waive its right to cure. In the event of a termination
of employment described under this Section 4(f)(i) during the Term and subject to the requirements of Section 4(f)(iii), the Bank will pay or provide the Executive the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) any Accrued Obligations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) a cash payment equal to the greater of: (i) remaining Base Salary and total annual incentive bonus opportunity (based on the highest bonus earned by the Executive for the three most recently completed calendar years prior to the Executive's Date of Termination) that would have been paid to the Executive during the remaining Term of the Agreement; or (ii) two (2) times the sum of Base Salary and the average

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total annual incentive bonus paid to Executive for the three most recently completed calendar years prior to the Executive's Date of Termination; in either case payable in a lump sum within sixty (60) days of the Executive's Date of Termination; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) provided that the Executive has elected continued health care coverage in accordance with the Consolidated Omnibus Budget Reconciliation Act ("<u>COBRA</u>"), reimbursement of the Executive's COBRA health care costs for the greater of (i) the remaining Term of the Agreement, or (ii) eighteen (18) months (in either case commencing with the first month following the Executive's Date of Termination).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) "<u>Good Reason</u>" exists if, without the Executive's express written consent, any of the following occur:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) a material reduction in the Executive's Base Salary and/or aggregate incentive compensation opportunities
under the Bank's annual and long-term incentive plans or programs, as applicable; notwithstanding the foregoing, the Bank or Company may eliminate and/or modify existing employee benefit, retirement, or fringe benefit plans and coverage levels
on a consistent and non-discriminatory basis applicable to all executive officers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) a material reduction in the Executive's authority, duties or responsibilities from the position and
attributes associated with the Executive Position;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) the failure to re-appoint the Executive to the Executive Position set
forth under Section l(a), or a failure to nominate and recommend the election of the Executive to the Board of Directors of the Company and if elected by the stockholders of the Company, appoint him Chairman of the Board of Directors of the Company,
or to appoint or nominate and elect the Executive to the Board of Directors of the Bank;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D) a relocation of the Executive's principal place of employment by more than twenty (20) miles from the
Bank's main office; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(E) a material breach of this Agreement by the Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Notwithstanding anything to the contrary in Section 4(f)(i), the Executive will not receive any payments
or benefits under Sections 4(f)(i)(B) or 4(f)(i)(C) unless and until the Executive executes a release of claims (the " <u>Release</u> ") against the Bank and any affiliate, and their officers, directors, successors and assigns, releasing
said persons from any and all claims, rights, demands, causes of action, suits, arbitrations or grievances relating to the employment relationship, including claims under the Age

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Discrimination in Employment Act, but not including claims for benefits under tax-qualified plans or other benefit plans in which the Executive is vested, claims for benefits required by applicable law or claims with respect to obligations set forth in this Agreement that survive the termination of this Agreement. The Release must be executed and become irrevocable by the 60th day following the Date of Termination, provided that if the 60-day period spans two (2) calendar years, then, to the extent necessary to comply with Section 409A of the Internal Revenue Code of 1986, as amended ("<u>Code</u>"), the payments and benefits described in this Section 4(f) will be paid, or commence, in the second calendar year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) **<u>Effect on Status as a Director</u>**. In the event of the Executive's termination of employment under this Agreement for any reason, whether by the Bank and the Company or by the Executive, and unless otherwise agreed to by the mutual consent of the Executive and the Bank and the Company, the termination will also constitute the Executive's resignation as a director of the Bank and the Company, as well as a director of any subsidiary or affiliate thereof, to the extent the Executive is serving as a director of any of the aforementioned entities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) **<u>Notice; Effective Date of Termination</u>**. Any Notice of Termination of employment under this Agreement must be communicated by or to the Executive or the Bank, as applicable, in accordance with Section 17. For purposes of this Agreement, the term "<u>Date of Termination</u>" means the Executive's termination of employment pursuant to this Agreement, which will be effective on the earliest of: (i) immediately after the Bank gives notice to the Executive of the Executive's termination Without Cause, unless the parties agree to a later date, in which case, termination will be effective as of such later date; (ii) immediately upon approval by the Board of Directors of termination of the Executive's employment for Cause; (iii) immediately upon the Executive's death or Disability; (iv) thirty (30) days after the Executive gives written notice to the Bank of the Executive's resignation from employment (including With Good Reason), provided that the Bank may set an earlier termination date at any time prior to the date of termination of employment, in which case the Executive's resignation shall be effective as of that date; or (v) in the event of the Executive's termination With Good Reason due to a material reduction in Base Salary, the date on which the Executive provides Notice of Termination in accordance with Section 4(f)(i). If, within 30 days after any Notice of Termination of employment by the Bank, the Executive notifies the Bank that a dispute exists concerning the termination, the parties shall promptly proceed to arbitration, as provided in Section 14. Notwithstanding the pendency of any such dispute, the Bank may discontinue paying the Executive's compensation until the dispute is finally resolved in accordance with this Agreement. If it is determined that the Executive is entitled to compensation and benefits under this Agreement, the payment of such compensation and benefits by the Bank shall commence immediately following the date of resolution by arbitration, with interest due the Executive on the cash amount that would have been paid pending arbitration (at the prime rate as published in *The Wall Street Journal* from time to time).

**5.** **CHANGE IN CONTROL.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **<u>Change in Control Defined</u>**. For purposes of this Agreement, the term "<u>Change in Control</u>" means: (i) a change in the ownership of the Corporation; (ii) a change in the effective

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control of the Corporation; or (iii} a change in the ownership of a substantial portion of the assets of the Corporation as defined in accordance with Code Section 409A. For purposes of this Section 5(a), the term "<u>Corporation</u>" means the Bank, the Company or any of their successors, as applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) A change in the ownership of a Corporation occurs on the date that any one person, or more than one person
acting as a group (as defined in Treasury Regulation 1.409A-3(i)(5)(v)(B)), acquires ownership of stock of the Corporation that, together with stock held by such person or group, constitutes more than fifty
(50) percent of the total fair market value or total voting power of the stock of the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) A change in the effective control of the Corporation occurs on the date that either (A) any one person, or
more than one person acting as a group (as defined in Treasury Regulation 1.409A-3(i)(5)(vi)(D)) acquires (or has acquired during the 12-month period ending on the date
of the most recent acquisition by such person or persons) ownership of stock of the Corporation possessing thirty (30) percent or more of the total voting power of the stock of the Corporation, or (B) a majority of the members of the board
of directors of the Corporation is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the board of directors prior to the date of the appointment or election,
provided that this subsection "(B)" is inapplicable where a majority stockholder of the Corporation is another corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) A change in a substantial portion of the Corporation's assets occurs on the date that any one person or
more than one person acting as a group (as defined in Treasury Regulation 1.409A-3(i)(5)(vii)(C)) acquires (or has acquired during the twelve (12) month period ending on the date of the most recent
acquisition by such person or persons) assets from the Corporation that have a total gross fair market value equal to or more than forty (40) percent of the total gross fair market value of (A) all of the assets of the Corporation, or
(B) the value of the assets being disposed of, either of which is determined without regard to any liabilities associated with such assets.

For all purposes hereunder, the definition of Change in Control shall be construed to be consistent with the requirements of Treasury Regulation 1.409A-3(i)(5), except to the extent that such regulations are superseded by subsequent guidance.

For the avoidance of doubt, and notwithstanding anything herein to the contrary, a Change in Control will not be deemed to have occurred for purposes of this Agreement as a result of the Conversion, Charter Conversion or Merger.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **<u>Change in Control Benefits</u>.** Upon the termination of the Executive's employment by the Bank or the Company (or any successor) Without Cause or by the Executive With Good Reason during the Term on or within two years after the effective time of a Change in

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Control, the Bank (or any successor) will pay or provide the Executive, or the Executive's estate in the event of the Executive's death, with the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) any Accrued Obligations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) a cash payment (the " <u>Change in Control Severance</u> ") equal to three (3) times the sum of:
(A) the Executive's Base Salary at the Date of Termination (or the Executive's Base Salary in effect during any of the prior three years, if higher); and (B) the average annual total incentive bonus earned by the Executive for
three (3) most recently completed calendar years prior to the Change Control, or if greater, the annual total incentive bonus that would have been earned in the year of the Change of Control at target bonus opportunity; which cash payment shall
be paid in a lump sum within thirty (30) days of the Executive's Date of Termination; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the value of health care costs for thirty-six (36) months (based
on the COBRA cost in effect for continued insurance coverage at the Date of Termination, whether or not the Executive elects COBRA); which shall be paid in cash in a lump sum within thirty (30) days of the Executive's Date of Termination.

Notwithstanding the foregoing, the payments and benefits provided in this Section 5(b) will be payable to the Executive in lieu of any payments or benefits that are payable under Section 4(f).

**6.** **COVENANTS OF EXECUTIVE.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **<u>Non-Solicitation/Non-Compete</u>.** The Executive hereby covenants and agrees that during the "<u>Restricted Period</u>," the Executive will not, without the written consent of the Bank, either directly or indirectly:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) solicit, offer employment to, or take any other action intended (or that a reasonable person acting in like
circumstances would expect) to have the effect of causing any officer or employee of the Bank, or any of its respective subsidiaries or affiliates, to terminate his or her employment with the Bank and/or accept employment with another employer; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) become an officer, employee, consultant, director, trustee, independent contractor, agent, joint venturer,
partner or trustee of any commercial bank, savings bank, savings and loan association, savings and loan holding company, credit union, bank or bank holding company, insurance company or agency, any mortgage or loan broker or any other entity that
competes with the business of the Bank or any of its direct or indirect subsidiaries or affiliates that: (A) has a headquarters within thirty-five (35) miles of the Bank's headquarters (the " <u>Restricted Territory</u> "), or
(B) has one or more offices, but is not headquartered, within the Restricted Territory, but in the latter case, only if the Executive would be employed, conduct business or have other responsibilities or duties within the Restricted Territory;
or

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) solicit, provide any information, advice or recommendation or take any other action intended (or that a
reasonable person acting in like circumstances would expect) to have the effect of causing any customer of the Bank to terminate an existing business or commercial relationship with the Bank.

Except as otherwise provided for in Section 18, for purposes of this Section 6(a), the "<u>Restricted Period</u>" will be: (i) at all times during Executive's period of employment with the Bank; and (ii) except as provided above, during the period beginning on Executive's Date of Termination and ending on the one-year anniversary of the Date of Termination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **<u>Confidentiality</u>.** The Executive recognizes and acknowledges that the Executive has been and will be the recipient of confidential and proprietary business information concerning the Bank, including without limitation, past, present, planned or considered business activities of the Bank, and the Executive acknowledges and agrees that the Executive will not, during or after the term of the Executive's employment, disclose such confidential and proprietary information for any purposes whatsoever, except as may be expressly permitted in a writing signed by the Bank, or as may be required by regulatory inquiry, law or court order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) **<u>Information/Cooperation</u>.** The Executive will, upon reasonable notice, furnish any information and assistance to the Bank as may be reasonably required by the Bank, at the expense of the Bank, in connection with any litigation in which it or any of its subsidiaries or affiliates is, or may become, a party; provided, however, that the Executive shall not be required to provide information or assistance with respect to any litigation between the Executive and the Bank or any other subsidiaries or affiliates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) **<u>Reliance</u>.** Except as otherwise provided, all payments and benefits to the Executive under this Agreement will be subject to the Executive's compliance with this Section 6, to the extent applicable. The parties hereto, recognizing that irreparable injury will result to the Bank, its business and property in the event of the Executive's breach of this Section 6, agree that, in the event of any such breach by the Executive, the Bank will be entitled, in addition to any other remedies and damages available, to an injunction to restrain the violation hereof by the Executive and all persons acting for or with the Executive. The Executive represents and admits that the Executive's experience and capabilities are such that the Executive can obtain employment in a business engaged in other lines of business than the Bank, and that the enforcement of a remedy by way of injunction will not prevent Executive from earning a livelihood. Nothing herein will be construed as prohibiting the Bank from pursuing any other remedies available to them for such breach or threatened breach, including the recovery of damages from the Executive.

**7.** **SOURCE OF PAYMENTS.** 

All payments provided in this Agreement shall be timely paid by check or direct deposit from the general funds of the Bank (or any successor of the Bank).

**8.** **EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.** 

This Agreement contains the entire understanding between the parties hereto and supersedes any prior employment agreement between the Bank or any predecessor of the Bank

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and the Executive, including the Prior Agreement as provided for in Section 19(b), except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to the Executive under another plan, program or agreement (other than an employment agreement) between the Bank and the Executive.

**9.** **NO ATTACHMENT; BINDING ON SUCCESSORS.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assigmnent, encumbrance, charge, pledge, or hypothecation, or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to affect any such action shall be null, void, and of no effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Bank shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all the business or assets of the Bank, expressly and unconditionally to assume and agree to perform the Bank's obligations under this Agreement, in the same manner and to the same extent that the Bank would be required to perform if no such succession or assignment had taken place. A successor's failure to assent to this Agreement following a Change in Control shall be deemed to be a material breach of this Agreement under Section 4(f) hereof.

**10.** **MODIFICATION AND WAIVER.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of the term or condition for the future as to any act other than that specifically waived.

**11.** **CERTAIN APPLICABLE LAW.** 

Notwithstanding anything herein contained to the contrary, the following provisions shall apply:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Bank may terminate the Executive's employment at any time, but any termination by the Bank other than termination for Cause shall not prejudice the Executive's right to compensation or other benefits under this Agreement. The Executive shall have no right to receive compensation or other benefits under this Agreement for any period after the Executive's termination for Cause, other than the Accrued Obligations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) In no event shall the Bank (nor any affiliate) be obligated to make any payment pursuant to this Agreement that is prohibited by Section 18(k) of the Federal Deposit Insurance Act (codified at 12 U.S.C. sec. 1828(k)), 12 C.F.R. Part 359, or any other applicable law.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Notwithstanding anything in this Agreement to the contrary, to the extent that a payment or benefit described in this Agreement constitutes "non-qualified deferred compensation" under Section 409 A of the Code, and to the extent that the payment or benefit is payable upon the Executive's termination of employment, then the payments or benefits will be payable only upon the Executive's "<u>Separation from Service</u>." For purposes of this Agreement, a "Separation from Service" will have occurred if the Bank and the Executive reasonably anticipate that either no further services will be performed by the Executive after the Date of Termination (whether as an employee or as an independent contractor) or the level of further services performed is less than fifty (50) percent of the average level of bona fide services in the thirty-six (36) months immediately preceding the termination. For all purposes hereunder, the definition of Separation from Service shall be interpreted consistent with Treasury Regulation Section 1.409A-l(h)(ii).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Notwithstanding the foregoing, if the Executive is a "<u>Specified Employee</u>" (i.e., a "key employee" of a publicly traded company within the meaning of Section 409A of the Code and the regulations issued thereunder) and any payment under this Agreement is triggered due to the Executive's Separation from Service, then solely to the extent necessary to avoid penalties under Section 409 A of the Code, no payment will be made during the first six (6) months following the Executive's Separation from Service. Rather, any payment which would otherwise be paid to the Executive during such period shall be accumulated and paid to the Executive in a lump sum on the first day of the seventh month following the Separation from Service. All subsequent payments shall be paid in the manner specified in this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) To the extent not specifically provided in this Agreement, any compensation or reimbursements payable to Executive shall be paid or provided no later than two and one-half (2.5) months after the calendar year in which such compensation is no longer subject to a substantial risk of forfeiture within the meaning of Treasury Regulation Section 1.409A-l(d).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes Treasury Regulation Section 1.409A-2(b)(2).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) Notwithstanding anything in this Agreement to the contrary, the Executive understands that nothing contained in this Agreement limits the Executive's ability to file a charge or complaint with the Securities and Exchange Commission or any other federal, state or local governmental agency or commission ("<u>Government Agencies</u>") about a possible securities law violation without approval of the Bank (or any affiliate). The Executive further understands that this Agreement does not limit the Executive's ability to communicate with any Government Agency or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Bank (or any affiliate) related to the possible securities law violation. This Agreement does not limit the Executive's right to receive any resulting monetary award for information provided to any Government Agency. In addition, pursuant to the Defend Trade Secrets Act of 2016, the Executive understands that an individual may not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (i) is made (A) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney; and (B) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. Further, an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation

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of law may disclose the employer's trade secrets to the attorney and use the trade secret information in the court proceeding if the individual (y) files any document containing the trade secret under seal; and (z) does not disclose the trade secret, except pursuant to court order.

**12.** **SEVERABILITY.** 

If any provision of this Agreement is determined to be void or unenforceable, then the remaining provisions of this Agreement will remain in full force and effect.

**13.** **GOVERNING LAW.** 

This Agreement shall be governed by the laws of the State of New Jersey, but only to the extent not superseded by federal law.

**14.** **ARBITRATION.** 

In the event that any dispute should arise between the parties as to the meaning, effect, performance, enforcement, or other issue in connection with this Agreement, which dispute cannot be resolved by the parties, the dispute shall be decided by final and binding arbitration of a panel of three arbitrators. Proceedings in arbitration and its conduct shall be governed by the rules of the American Arbitration Association ("AAA") applicable to commercial arbitrations (the "Rules") except as modified by this Section 14. The Executive shall appoint one arbitrator, the Bank shall appoint one arbitrator, and the third shall be appointed by the two arbitrators appointed by the parties. The third arbitrator shall be impartial and shall serve as chairman of the panel. The parties shall appoint their arbitrators within thirty (30) days after the demand for arbitration is served, failing which the AAA promptly shall appoint a defaulting party's arbitrator, and the two arbitrators shall select the third arbitrator within fifteen (15) days after their appointment, or if they cannot agree or fail to so appoint, then the AAA promptly shall appoint the third arbitrator. The arbitrators shall render their decision in writing within thirty (30) days after the close of evidence or other termination of the proceedings by the panel, and the decision of a majority of the arbitrators shall be final and binding upon the parties, nonappealable, except in accordance with the Rules and enforceable in accordance with the applicable state law. Any hearings in the arbitration shall be held in Middlesex County, New Jersey unless the parties shall agree upon a different venue, and shall be private and not open to the public. Each party shall bear the fees and expenses of its arbitrator, counsel, and witnesses, and the fees and expenses of the third arbitrator shall be shared equally by the parties. The other costs of the arbitration, including the fees of AAA, shall be borne as directed in the decision of the panel. If the Executive is successful on the merits of the dispute, as determined in the arbitration, all legal fees and such other expenses as reasonably incurred by the Executive as a result of or in connection with or arising out of the dispute, shall be paid by the Bank, provided that such payment or reimbursement is made by the Bank not later than two and one-half months after the end of the year in which such dispute is resolved in Executive's favor.

**15.** **INDEMNIFICATION.** 

The Bank will provide the Executive (including the Executive's heirs, executors and administrators) with coverage under a standard directors' and officers' liability insurance policy at its expense, and will indemnify the Executive (and the Executive's heirs, executors and

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administrators) in accordance with the charter and bylaws of the Bank and to the fullest extent permitted under applicable law against all expenses and liabilities reasonably incurred by the Executive in connection with or arising out of any action, suit or proceeding in which the Executive may be involved by reason of having been a trustee, director or officer of the Bank or any subsidiary or affiliate of the Bank.

**16.** **TAX WITHHOLDING.** 

The Bank may withhold from any amounts payable to the Executive hereunder all federal, state, local or other taxes that the Bank may reasonably determine are required to be withheld pursuant to any applicable law or regulation (it being understood that Executive is responsible for payment of all taxes in respect of the payments and benefits provided herein).

**17.** **NOTICE.** 

For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth bel6w or if sent by facsimile or email, on the date it is actually received.

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| | |
|:---|:---|
| To the Bank: | Somerset Savings Bank, SLA |
|  | 220 West Union Avenue |
|  | Bound Brook, NJ 08805 |
|  | Attention: Corporate Secretary |
| To Executive: | Most recent address on file with the Bank |

---

**18.** **TAX MATTERS.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) If the Executive's employment is terminated following a Change in Control, the non-competition and non-solicitation restrictions set forth in Section 6(a) of this Agreement shall apply for the period of time mutually agreed to by the parties, and in no event shall the time period be less than six months or exceed two years. The Bank and the Executive hereby recognize that: (i) the non-solicitation restriction and non-competition restriction under Sections 6(a) have value, and (ii) the value shall be recognized in any calculations the Bank and the Executive perform with respect to determining the affect, if any, of the parachute payment provisions of Section 280G of the Code ("Section 280G"), by allocating a portion of any payments, benefits or distributions in the nature of compensation (within the meaning of Section 280G(b)(2)), including the payments under Section 5(b) of this Agreement, to the fair value of the non-solicitation and non-competition restriction under Section 6(a) of this Agreement (the "Appraised Value"). The Bank, at the Bank's expense, shall obtain an independent appraisal to determine the Appraised Value no later than forty-five (45) days after entering into an agreement, that if completed, would constitute a Change in Control as defined in Section 5(a). The Appraised Value will be considered reasonable compensation for post change in control services within the meaning of Q&A -40 of the regulations under Section 280G; and accordingly, any aggregate parachute payments, as defined in Section 280G, will be reduced by the Appraised Value.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) After taking into account the Appraised Value, in the event the receipt of all payments, benefits or distributions in the nature of compensation (within the meaning of Section 280G(b)(2)), whether paid or payable pursuant to Section 5(b) of this Agreement or otherwise (the "Change in Control Benefits") would subject the Executive to an excise tax imposed by Code Sections 280G and 4999, then the payments and/or benefits payable under this Agreement (the "Payments") shall be reduced by the minimum amount necessary so that no portion of the Payments under this Agreement are non-deductible to the Bank pursuant to Code Section 280G and subject to the excise tax imposed under Code Section 4999 (the "Reduced Amount"). Notwithstanding the foregoing, the Payments will not be reduced if it is determined that without such reduction, the Change in Control Benefits received by the Executive on a net after-tax basis (including without limitation, any excise taxes payable under Code Section 4999) is greater than the Change in Control Benefits that the Executive would receive, on a net after-tax benefit, if the Executive is paid the Reduced Amount under the Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Unless otherwise agreed in writing by the parties, all calculations with respect to Sections 280G and 4999 of the Code required under this Section 18 shall be determined by a nationally recognized firm with appropriate expertise mutually agreeable to the Bank and the Executive (the "Firm") whose determination will be conclusive and binding on all parties. The Bank shall pay all fees charged by the Firm for this purpose. The Bank and the Executive shall provide the Firm with all information or documents it reasonably requests, and the Firm will be entitled to rely on such information and on reasonable estimates and assumptions and interpretations of the provisions of Sections 280G and 4999 of the Code. If it is determined that the Payments should be reduced as a result of the Section 280G calculations performed by the Firm, the Bank shall promptly give (or cause the Firm to give) the Executive notice to that effect (and a copy of the detailed calculations thereof) and, to the extent consistent with Section 409 A of the Code, the Executive may determine which benefits are to be reduced. All determinations made under this Section 18 shall be made as soon as reasonably practicable and in no event later than ten (I 0) days prior to the Date of Termination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**19.** **EFFECTIVE DATE AND TERMINATION OF PRIOR AGREEMENT.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Effective Date</u>. Notwithstanding anything to the contrary contained herein, this Agreement shall be subject to the completion of the Conversion, and shall become effective as of the effective date of the Conversion (which for purposes of this Agreement shall be referred to as the "Effective Date"). In the event the Conversion is terminated for any reason, or in the event the Executive fails to remain an employee of the Bank as of the Effective Date, this Agreement shall automatically terminate and become null and void.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Termination of Prior Agreement</u>. The Prior Agreement shall remain in full force and effect until the Effective Date. On the Effective Date, the Executive and the Bank hereby agree that the Prior Agreement shall be terminated without any further action of any of the parties hereto or thereto. The Executive hereby acknowledges and agrees that the Executive has no contractual rights to any payments or benefits under the Prior Agreement as of the Effective Date.

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**IN WITNESS WHEREOF,** the parties have executed this Agreement as of the date first written above.

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| | |
|:---|:---|
| **SOMERSET SAVINGS BANK, SLA** | **SOMERSET SAVINGS BANK, SLA** |
| By: | /s/ Mary E. Davey |
| Name: | Mary E. Davey |
| Title: | Chair, Personnel Committee |
| **EXECUTIVE** | **EXECUTIVE** |
| /s/ William P. Taylor | /s/ William P. Taylor |
| William P. Taylor | William P. Taylor |

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## Exhibit 10.2

**Exhibit 10.2** 

**EXEUCTION VERSION** 

**EMPLOYMENT AGREEMENT** 

This Employment Agreement (the "<u>Agreement</u>") is made and entered into as of the 25th day of July, 2022, to be effective as of the Effective Date as defined in Section 19 below, by and between Somerset Savings Bank, SLA, a New Jersey-chartered savings association (the "<u>Bank</u>") and Christopher J. Pribula (the "<u>Executive</u>"). Any reference to the "Company" shall mean SR Bancorp, Inc., the proposed holding company of the Bank.

**RECITALS** 

**WHEREAS,** the Executive is presently serving as the President and Chief Operating Officer, and as a Director, of the Bank and is a party to an employment agreement with the Bank, dated as of December 18, 2019 (the "Prior Agreement"); and

**WHEREAS,** the Bank has adopted a Plan of Conversion to convert the Bank from the mutual to the stock form of organization (the "Conversion") and has adopted a plan of Charter Conversion to convert the Bank from a New Jersey chartered savings association to a New Jersey chartered commercial bank under the name "Somerset Regal Bank" (the "Charter Conversion')(references in this Agreement to the Bank shall include the Bank as a New Jersey chartered commercial bank); and

**WHEREAS,** in connection with the Conversion, the Bank and the Company have entered into an Agreement and Plan of Merger, dated as of July 25, 2022 (the "Merger Agreement"), with Regal Bank and Regal Bancorp, Inc., pursuant to which Regal Bank will merge with and into the Bank, with the Bank as the surviving entity, and Regal Bancorp, Inc. will merge with and into the Company, with the Company as the surviving entity (collectively referred to as the "Merger"); and

**WHEREAS,** the parties desire to enter into this Agreement to induce the Executive to continue employment with the Bank, and to provide further incentive for Executive to achieve the financial and performance objectives of the Bank and the Company; and

**WHEREAS,** this Agreement shall supersede and replace the Prior Agreement as of the Effective Date.

**NOW, THEREFORE,** in consideration of the mutual covenants herein contained, and upon the other terms and conditions hereinafter provided, the parties hereby agree as follows:

**1.** **POSITION AND RESPONSIBILITIES.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **<u>Employment</u>.** During the Term (as defined in Section 2(a)) of this Agreement, the Executive agrees to serve as President and Chief Operating Officer of the Bank and the Company or any successor executive position with the Bank and the Company that is consented to, in writing, by the Executive (the "<u>Executive Position</u>"), and will perform the duties of and have all powers associated with the Executive Position as are appropriate for a person in the position of the Executive Position, as well as those as shall be assigned by the Board of Directors of the Bank (the

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"<u>Board of Directors</u>"). As President and Chief Operating Officer, the Executive will report directly to the Chief Executive Officer. The Executive currently serves and shall continue to serve as a member of the Board of the Directors of the Bank and the Company. During the term of this Agreement, the Executive also agrees to serve, if elected, as an officer, director or trustee of any affiliate of the Bank and the Company and in such capacity to carry out the duties and responsibilities reasonably appropriate to any such position.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **<u>Responsibilities</u>.** During the Executive's employment hereunder, the Executive will be employed on a full-time basis and devote the Executive's full business time and best efforts, business judgment, skill and knowledge to the performance of the Executive's duties and responsibilities related to the Executive Position. Except as otherwise provided in Section I (c), or as may be approved by the Board of Directors, the Executive will not engage in any other business activity during the term of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) **<u>Service on Other Boards and Committees</u>.** The Bank encourages participation by the Executive on community boards and committees and in activities generally considered to be in the public interest, but the Board of Directors shall have the right to approve or disapprove, in its sole discretion, the Executive's participation on those boards and committees.

**2.** **TERM.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **<u>Term and Annual Renewal</u>.** The initial term of this Agreement will begin as of the Effective Date and continue for a period of three (3) years (the "<u>Term</u>"). Commencing on the first anniversary of the Effective Date and continuing on each subsequent anniversary of the Effective Date (each anniversary referred to as a "<u>Renewal Date</u>"), the Term will extend automatically for one additional year, so that the Term will be three (3) years from the applicable Renewal Date, unless either the Bank or the Executive, by written notice to the other given at least thirty (30) days prior to the Renewal Date, notifies the other of its intent not to extend the Term. In the event either party provides notice not to extend the Term, the Term will become fixed and terminate as of the last day of the then current Term. For avoidance of doubt, any extension to the Term will become the new "Term" for purposes of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **<u>Change in Control</u>.** Notwithstanding the foregoing, in the event the Bank or the Company has entered into an agreement to effect a transaction that would be considered a Change in Control, as defined in Section 5, the Term of this Agreement will automatically extend so that it expires no less than two (2) years beyond the effective date of the Change in Control, subject to extensions as set forth in Section 2(a).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) **<u>Continued Employment Following Expiration of Term</u>.** Nothing in this Agreement will mandate or prohibit a continuation of the Executive's employment following the expiration of the Term.

**3.** **COMPENSATION, BENEFITS AND REIMBURSEMENT.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **<u>Base Salary</u>.** In consideration of the Executive's performance of the responsibilities and duties set forth in this Agreement, the Executive will receive an annual base salary of $400,000 per year ("<u>Base Salary</u>"). The Bank will pay the Base Salary in accordance

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with its customary payroll practices. During the term of this Agreement, the Board of Directors (or the Compensation Committee of the Board of Directors (the "<u>Compensation Committee</u>")) may increase, but not decrease, the Executive's Base Salary. Any increase in Base Salary will become the new "Base Salary" for purposes of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **<u>Bonus and Incentive Compensation</u>.** The Executive (1) shall be eligible to participate in any bonus plan or arrangement of the Bank in which senior management is eligible to participate, pursuant to which a bonus may be paid to the Executive in accordance with the plan or arrangement; and/or (2) may receive a bonus, if any, on a discretionary basis, as determined by the Board of Directors or the Compensation Committee. The Bank shall provide the Executive an annual cash bonus opportunity in an amount at least equal to twenty percent (20%) of Base Salary at target, less required tax withholding, on an annual basis during the Term of this Agreement (the "Annual Cash Bonus"), subject to terms and conditions, including performance conditions, as shall be determined by the Board of Directors or the Compensation Committee. Each Annual Cash Bonus shall be paid to the Executive as a single lump sum cash payment (less required withholding) as soon as practicable after the last day of the applicable bonus period, but in no event later than March 15th of the calendar year following the year in which the last day of the performance period occurs (or as soon as administratively practicable thereafter).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) **<u>Benefit Plans</u>.** The Executive will be entitled to participate in all employee benefit plans, arrangements and perquisites offered to senior management of the Bank, on terms and conditions no less favorable than the plans, arrangements and perquisites available to other members of senior management of the Bank. Without limiting the generality of the foregoing provisions of this Section 3(c), the Executive also will be entitled to participate in any employee benefit plans including but not limited to retirement plans, pension plans, profit-sharing plans, health-and-accident plans, or any other employee benefit plan or arrangement made available by the Bank in the future to management employees, subject to and on a basis consistent with the terms, conditions and overall administration of the plans and arrangements as applicable to other management employees.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) **<u>Leave and Paid Time Off</u>.** The Executive will be entitled to paid time off each year during the term of this Agreement measured on a calendar year basis, in accordance with the Bank's customary practices and in accordance with the Bank's policies and procedures for officers, in addition to all holidays observed by the Bank. Any unused paid time off during an annual period will be treated in accordance with the Bank's personnel policies as in effect from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) **<u>Automobile</u>.** The Bank will provide the Executive with the use of an automobile and shall reimburse Executive or pay for automobile-related expenses.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) **<u>Expense Reimbursements</u>.** The Bank will reimburse the Executive for all reasonable travel, entertainment and other expenses incurred by the Executive in performing the Executive's obligations under this Agreement, including, without limitation, fees for memberships in organizations that the Executive and the Board of Directors or the Compensation Committee mutually agree are necessary and appropriate in connection with the performance of the Executive's duties under this Agreement. All reimbursements will be made as soon as practicable upon substantiation of the expenses by the Executive in accordance with the applicable policies and procedures of the Bank and, in any event, not later than the last day of the calendar year immediately following the calendar year in which the Executive incurred the expense.

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**4.** **TERMINATION AND TERMINATION PAY.** 

Subject to Section 5, which governs the occurrence of a Change in Control, the Executive's employment under this Agreement will terminate under the circumstances set forth in this Section 4.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **<u>Definition of Accrued Obligations</u>.** For purposes of this Agreement, the term "<u>Accrued Obligations</u>" means the sum of: (i) any Base Salary earned but unpaid through the Executive's Date of Termination, (ii) unpaid expense reimbursements (subject to, and in accordance with, Section 3(f)), (iii) unused paid time off accrued through the Date of Termination (subject to an in accordance with Section 3(d)), (iv) any earned but unpaid short-term and long-term incentive compensation for the year immediately preceding the year of termination and (v) any vested benefits the Executive may have under any employee benefit plan of the Bank through the Date of Termination, which vested benefits will be paid and/or provided in accordance with the terms of the employee benefit plans. Unless otherwise provided by the applicable employee benefit plan, the Accrued Obligations, if any, will be paid to the Executive (or the Executive's estate or beneficiary) within thirty (30) days following the Executive's Date of Termination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **<u>Death</u>.** This Agreement and the Executive's employment with the Bank will terminate upon the Executive's death, in which event the Bank's sole obligation will be to pay or provide the Executive's estate or beneficiary any Accrued Obligations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) **<u>Disability</u>.** The Bank shall be entitled to terminate the Executive's employment and this Agreement due to the Executive's Disability. If the Bank terminates the Executive's employment due to the Executive's Disability, the Bank's sole obligation under this Agreement shall be to pay or provide the Executive any Accrued Obligations. For these purposes, the term "<u>Disability</u>" means the Executive is deemed disabled for purposes of the Bank's long-term disability plan or policy that covers the Executive or is determined to be disabled by the Social Security Administration.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) **<u>Termination for Cause</u>.** The Board of Directors may immediately terminate the Executive's employment and this Agreement at any time for "Cause." In the event the Executive's employment is terminated for Cause, the Bank's sole obligation will be to pay or provide to the Executive any Accrued Obligations. For purposes of this Agreement, the term "<u>Cause</u>" means termination because of, in the good faith determination of the Board of Directors:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the conviction of the Executive of a felony or of any lesser criminal offense involving moral turpitude (other than for traffic violations);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the willful commission by the Executive of a criminal or other act that, in the judgment of the Board of Directors will likely cause substantial economic damage to the Company, the Bank or any subsidiary or substantial injury to the business reputation of the Company, the Bank or any subsidiary;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the commission by the Executive of an act of fraud in the performance of his duties on behalf of the Company, the Bank or any subsidiary;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) the continuing willful failure of the Executive to perform his duties to the Company, the Bank or any subsidiary (other than any such failure resulting from the Executive's incapacity due to physical or mental illness or the Executive declining to perform any assigned duties to the extent such assignment or duties would constitute a violation of law) after written notice thereof;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) a material breach by the Executive of the Bank's or the Company's Code of Ethics; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) an order of a federal or state regulatory agency or a court of competent jurisdiction requiring the termination of the Executive's employment with the Bank or the Company.

Any determination of Cause under this Agreement will be made by resolution adopted by the Board of Directors at a meeting called and held for that purpose. The Executive will be provided with reasonable notice of the meeting and the Executive will be given an opportunity to be heard before a vote is taken by the disinterested members of the Board of Director regarding the termination of employment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) **<u>Resignation by Executive without Good Reason</u>.** The Executive may resign from employment during the term of this Agreement without Good Reason upon at least thirty (30) days prior written notice to the Board of Directors, provided, however, that the Bank may accelerate the Date of Termination upon receipt of written notice of the Executive's resignation. In the event the Executive resigns without Good Reason, the Bank's sole obligation under this Agreement will be to pay or provide any Accrued Obligations to the Executive.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) **<u>Termination Without Cause or With Good Reason</u>.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) The Board of Directors may immediately terminate the Executive's employment at any time for a reason other
than Cause (a termination " <u>Without Cause</u> "), and the Executive may, by written notice to the Board of Directors, terminate his employment at any time within ninety (90) days following an event constituting "Good
Reason" (a termination " <u>With Good Reason</u> "); provided, however, that the Bank will have thirty (30) days to cure the "Good Reason" condition, but the Bank may waive its right to cure. In the event of a termination
of employment described under this Section 4(f)(i) during the Term and subject to the requirements of Section 4(f)(iii), the Bank will pay or provide the Executive the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) any Accrued Obligations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) a cash payment equal to the greater of: (i) remaining Base Salary and total annual incentive bonus opportunity (based on the highest bonus earned by the Executive for the three most recently completed calendar years prior to the Executive's Date of Termination) that would have been paid to the Executive during the remaining Term of the Agreement; or (ii) two (2) times the sum of Base Salary and the average

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total annual incentive bonus paid to Executive for the three most recently completed calendar years prior to the Executive's Date of Termination; in either case payable in a lump sum within sixty (60) days of the Executive's Date of Termination; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) provided that the Executive has elected continued health care coverage in accordance with the Consolidated Omnibus Budget Reconciliation Act ("<u>COBRA")</u>, reimbursement of the Executive's COBRA health care costs for the greater of (i) the remaining Term of the Agreement, or (ii) eighteen (18) months (in either case commencing with the first month following the Executive's Date of Termination).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) "<u>Good Reason</u>" exists if, without the Executive's express written consent, any of the following occur:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) a material reduction in the Executive's Base Salary and/or aggregate incentive compensation opportunities
under the Bank's annual and long-term incentive plans or programs, as applicable; notwithstanding the foregoing, the Bank or Company may eliminate and/or modify existing employee benefit, retirement, or fringe benefit plans and coverage levels
on a consistent and non-discriminatory basis applicable to all executive officers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) a material reduction in the Executive's authority, duties or responsibilities from the position and
attributes associated with the Executive Position;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) the failure to re-appoint the Executive to the Executive Position set
forth under Section !(a), or a failure to nominate and recommend the election of the Executive to the Board of Directors of the Company or to appoint or nominate and elect the Executive to the Board of Directors of the Bank;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D) a relocation of the Executive's principal place of employment by more than twenty (20) miles from the
Bank's main office; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(E) a material breach of this Agreement by the Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Notwithstanding anything to the contrary in Section 4(f)(i), the Executive will not receive any payments
or benefits under Sections 4(f)(i)(B) or 4(f)(i)(C) unless and until the Executive executes a release of claims (the " <u>Release</u> ") against the Bank and any affiliate, and their officers, directors, successors and assigns, releasing
said persons from any and all claims, rights, demands, causes of action, suits, arbitrations or grievances relating to the employment relationship, including claims under the Age Discrimination in Employment Act, but not including claims for
benefits under tax-qualified plans or other benefit plans in which the Executive is

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vested, claims for benefits required by applicable law or claims with respect to obligations set forth in this Agreement that survive the termination of this Agreement. The Release must be executed and become irrevocable by the 60th day following the Date of Termination, provided that if the 60-day period spans two (2) calendar years, then, to the extent necessary to comply with Section 409A of the Internal Revenue Code of 1986, as amended ("<u>Code</u>"), the payments and benefits described in this Section 4(f) will be paid, or commence, in the second calendar year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) **<u>Effect on Status as a Director</u>.** In the event of the Executive's termination of employment under this Agreement for any reason, whether by the Bank and the Company or by the Executive, and unless otherwise agreed to by the mutual consent of the Executive and the Bank and the Company, the termination will also constitute the Executive's resignation as a director of the Bank and the Company, as well as a director of any subsidiary or affiliate thereof, to the extent the Executive is serving as a director of any of the aforementioned entities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) **<u>Notice; Effective Date of Termination</u>.** Any Notice of Termination of employment under this Agreement must be communicated by or to the Executive or the Bank, as applicable, in accordance with Section 17. For purposes of this Agreement, the term "<u>Date of Termination</u>" means the Executive's termination of employment pursuant to this Agreement, which will be effective on the earliest of: (i) immediately after the Bank gives notice to the Executive of the Executive's termination Without Cause, unless the parties agree to a later date, in which case, termination will be effective as of such later date; (ii) immediately upon approval by the Board of Directors of termination of the Executive's employment for Cause; (iii) immediately upon the Executive's death or Disability; (iv) thirty (30) days after the Executive gives written notice to the Bank of the Executive's resignation from employment (including With Good Reason), provided that the Bank may set an earlier termination date at any time prior to the date of termination of employment, in which case the Executive's resignation shall be effective as of that date; or (v) in the event of the Executive's termination With Good Reason due to a material reduction in Base Salary, the date on which the Executive provides Notice of Termination in accordance with Section 4(f)(i). If, within 30 days after any Notice of Termination of employment by the Bank, the Executive notifies the Bank that a dispute exists concerning the termination, the parties shall promptly proceed to arbitration, as provided in Section 14. Notwithstanding the pendency of any such dispute, the Bank may discontinue paying the Executive's compensation until the dispute is finally resolved in accordance with this Agreement. If it is determined that the Executive is entitled to compensation and benefits under this Agreement, the payment of such compensation and benefits by the Bank shall commence immediately following the date of resolution by arbitration, with interest due the Executive on the cash amount that would have been paid pending arbitration (at the prime rate as published in *The Wall Street Journal* from time to time).

**5.** **CHANGE IN CONTROL.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **<u>Change in Control Defined</u>.** For purposes of this Agreement, the term "<u>Change in Control</u>" means: (i) a change in the ownership of the Corporation; (ii) a change in the effective control of the Corporation; or (iii) a change in the ownership of a substantial portion of the assets of the Corporation as defined in accordance with Code Section 409 A. For purposes of this Section 5(a), the term "<u>Corporation</u>" means the Bank, the Company or any of their successors, as applicable.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) A change in the ownership of a Corporation occurs on the date that any one person, or more than one person
acting as a group (as defined in Treasury Regulation 1.409A-3(i)(5)(v)(B)), acquires ownership of stock of the Corporation that, together with stock held by such person or group, constitutes more than fifty
(50) percent of the total fair market value or total voting power of the stock of the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) A change in the effective control of the Corporation occurs on the date that either (A) any one person, or
more than one person acting as a group (as defined in Treasury Regulation 1.409A-3(i)(5)(vi)(D)) acquires (or has acquired during the 12-month period ending on the date
of the most recent acquisition by such person or persons) ownership of stock of the Corporation possessing thirty (30) percent or more of the total voting power of the stock of the Corporation, or (B) a majority of the members of the board
of directors of the Corporation is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the board of directors prior to the date of the appointment or election,
provided that this subsection "(B)" is inapplicable where a majority stockholder of the Corporation is another corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) A change in a substantial portion of the Corporation's assets occurs on the date that any one person or
more than one person acting as a group (as defined in Treasury Regulation 1.409A-3(i)(5)(vii)(C)) acquires (or has acquired during the twelve (12) month period ending on the date of the most recent
acquisition by such person or persons) assets from the Corporation that have a total gross fair market value equal to or more than forty (40) percent of the total gross fair market value of (A) all of the assets of the Corporation, or
(B) the value of the assets being disposed of, either of which is determined without regard to any liabilities associated with such assets.

For all purposes hereunder, the definition of Change in Control shall be construed to be consistent with the requirements of Treasury Regulation 1.409A-3(i)(5), except to the extent that such regulations are superseded by subsequent guidance.

For the avoidance of doubt and notwithstanding anything herein to the contrary, a Change in Control will not be deemed to have occurred for purposes of this Agreement as a result of the Conversion, Charter Conversion or Merger.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **<u>Change in Control Benefits</u>.** Upon the termination of the Executive's employment by the Bank or the Company (or any successor) Without Cause or by the Executive With Good Reason during the Term on or within two years after the effective time of a Change in Control, the Bank (or any successor) will pay or provide the Executive, or the Executive's estate in the event of the Executive's death, with the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) any Accrued Obligations;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) a cash payment (the " <u>Change in Control Severance</u> ") equal to three (3) times the sum of:
(A) the Executive's Base Salary at the Date of Termination (or the Executive's Base Salary in effect during any of the prior three years, if higher); and (B) the average annual total incentive bonus earned by the Executive for
three (3) most recently completed calendar years prior to the Change Control, or if greater, the annual total incentive bonus that would have been earned in the year of the Change of Control at target bonus opportunity; which cash payment shall
be paid in a lump sum within thirty (30) days of the Executive's Date of Termination; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the value of health care costs for thirty-six (36) months (based
on the COBRA cost in effect for continued insurance coverage at the Date of Termination, whether or not the Executive elects COBRA); which shall be paid in cash in a lump sum within thirty (30) days of the Executive's Date of Termination.

Notwithstanding the foregoing, the payments and benefits provided in this Section 5(b) will be payable to the Executive in lieu of any payments or benefits that are payable under Section 4(f).

**6.** **COVENANTS OF EXECUTIVE.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **<u>Non-Solicitation/Non-Compete</u>.** The Executive hereby covenants and agrees that during the "<u>Restricted Period</u>," the Executive will not, without the written consent of the Bank, either directly or indirectly:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) solicit, offer employment to, or take any other action intended (or that a reasonable person acting in like
circumstances would expect) to have the effect of causing any officer or employee of the Bank, or any of its respective subsidiaries or affiliates, to terminate his or her employment with the Bank and/or accept employment with another employer; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) become an officer, employee, consultant, director, trustee, independent contractor, agent, joint venturer,
partner or trustee of any commercial bank, savings bank, savings and loan association, savings and loan holding company, credit union, bank or bank holding company, insurance company or agency, any mortgage or loan broker or any other entity that
competes with the business of the Bank or any of its direct or indirect subsidiaries or affiliates that: (A) has a headquarters within thirty-five (35) miles of the Bank's headquarters (the " <u>Restricted Territory</u> "), or
(B) has one or more offices, but is not headquartered, within the Restricted Territory, but in the latter case, only if the Executive would be employed, conduct business or have other responsibilities or duties within the Restricted Territory;
or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) solicit, provide any information, advice or recommendation or take any other action intended (or that a
reasonable person acting in like circumstances would expect) to have the effect of causing any customer of the Bank to terminate an existing business or commercial relationship with the Bank.

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Except as otherwise provided for in Section 18, for purposes of this Section 6(a), the "<u>Restricted Period</u>" will be: (i) at all times during Executive's period of employment with the Bank; and (ii) except as provided above, during the period beginning on Executive's Date of Termination and ending on the one-year anniversary of the Date of Termination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **<u>Confidentiality</u>.** The Executive recognizes and acknowledges that the Executive has been and will be the recipient of confidential and proprietary business information concerning the Bank, including without limitation, past, present, planned or considered business activities of the Bank, and the Executive acknowledges and agrees that the Executive will not, during or after the term of the Executive's employment, disclose such confidential and proprietary information for any purposes whatsoever, except as may be expressly permitted in a writing signed by the Bank, or as may be required by regulatory inquiry, law or court order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) **<u>Information/Cooperation</u>.** The Executive will, upon reasonable notice, furnish any information and assistance to the Bank as may be reasonably required by the Bank, at the expense of the Bank, in connection with any litigation in which it or any of its subsidiaries or affiliates is, or may become, a party; provided, however, that the Executive shall not be required to provide information or assistance with respect to any litigation between the Executive and the Bank or any other subsidiaries or affiliates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) **<u>Reliance</u>.** Except as otherwise provided, all payments and benefits to the Executive under this Agreement will be subject to the Executive's compliance with this Section 6, to the extent applicable. The parties hereto, recognizing that irreparable injury will result to the Bank, its business and property in the event of the Executive's breach of this Section 6, agree that, in the event of any such breach by the Executive, the Bank will be entitled, in addition to any other remedies and damages available, to an injunction to restrain the violation hereof by the Executive and all persons acting for or with the Executive. The Executive represents and admits that the Executive's experience and capabilities are such that the Executive can obtain employment in a business engaged in other lines of business than the Bank, and that the enforcement of a remedy by way of injunction will not prevent Executive from earning a livelihood. Nothing herein will be construed as prohibiting the Bank from pursuing any other remedies available to them for such breach or threatened breach, including the recovery of damages from the Executive.

**7.** **SOURCE OF PAYMENTS.** 

All payments provided in this Agreement shall be timely paid by check or direct deposit from the general funds of the Bank (or any successor of the Bank).

**8.** **EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.** 

This Agreement contains the entire understanding between the parties hereto and supersedes any prior employment agreement between the Bank or any predecessor of the Bank and the Executive, including the Prior Agreement as provided for in Section 19(b), except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to the Executive under another plan, program or agreement (other than an employment agreement) between the Bank and the Executive.

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**9.** **NO ATTACHMENT; BINDING ON SUCCESSORS.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation, or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to affect any such action shall be null, void, and of no effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Bank shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all the business or assets of the Bank, expressly and unconditionally to assume and agree to perform the Bank's obligations under this Agreement, in the same manner and to the same extent that the Bank would be required to perform if no such succession or assignment had taken place. A successor's failure to assent to this Agreement following a Change in Control shall be deemed to be a material breach of this Agreement under Section 4(f) hereof.

**10.** **MODIFICATION AND WAIVER.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of the term or condition for the future as to any act other than that specifically waived.

**11.** **CERTAIN APPLICABLE LAW.** 

Notwithstanding anything herein contained to the contrary, the following provisions shall apply:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Bank may terminate the Executive's employment at any time, but any termination by the Bank other than termination for Cause shall not prejudice the Executive's right to compensation or other benefits under this Agreement. The Executive shall have no right to receive compensation or other benefits under this Agreement for any period after the Executive's termination for Cause, other than the Accrued Obligations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) In no event shall the Bank (nor any affiliate) be obligated to make any payment pursuant to this Agreement that is prohibited by Section 18(k) of the Federal Deposit Insurance Act (codified at 12 U.S.C. sec. 1828(k)), 12 C.F.R. Part 359, or any other applicable law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Notwithstanding anything in this Agreement to the contrary, to the extent that a payment or benefit described in this Agreement constitutes "non-qualified deferred compensation"

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under Section 409 A of the Code, and to the extent that the payment or benefit is payable upon the Executive's termination of employment, then the payments or benefits will be payable only upon the Executive's "Separation from Service." For purposes of this Agreement, a "<u>Separation from Service</u>" will have occurred if the Bank and the Executive reasonably anticipate that either no further services will be performed by the Executive after the Date of Termination (whether as an employee or as an independent contractor) or the level of further services performed is less than fifty (50) percent of the average level of bona fide services in the thirty-six (36) months immediately preceding the termination. For all purposes hereunder, the definition of Separation from Service shall be interpreted consistent with Treasury Regulation Section 1.409A-l(h)(ii).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Notwithstanding the foregoing, if the Executive is a "<u>Specified Employee</u>" (i.e., a "key employee" of a publicly traded company within the meaning of Section 409A of the Code and the regulations issued thereunder) and any payment under this Agreement is triggered due to the Executive's Separation from Service, then solely to the extent necessary to avoid penalties under Section 409A of the Code, no payment will be made during the first six (6) months following the Executive's Separation from Service. Rather, any payment which would otherwise be paid to the Executive during such period shall be accumulated and paid to the Executive in a lump sum on the first day of the seventh month following the Separation from Service. All subsequent payments shall be paid in the manner specified in this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) To the extent not specifically provided in this Agreement, any compensation or reimbursements payable to Executive shall be paid or provided no later than two and one-half (2.5) months after the calendar year in which such compensation is no longer subject to a substantial risk of forfeiture within the meaning of Treasury Regulation Section 1.409A-l(d).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes Treasury Regulation Section 1.409A-2(b)(2).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) Notwithstanding anything in this Agreement to the contrary, the Executive understands that nothing contained in this Agreement limits the Executive's ability to file a charge or complaint with the Securities and Exchange Commission or any other federal, state or local governmental agency or commission ("<u>Government Agencies</u>") about a possible securities law violation without approval of the Bank (or any affiliate). The Executive further understands that this Agreement does not limit the Executive's ability to communicate with any Government Agency or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Bank (or any affiliate) related to the possible securities law violation. This Agreement does not limit the Executive's right to receive any resulting monetary award for information provided to any Government Agency. In addition, pursuant to the Defend Trade Secrets Act of 2016, the Executive understands that an individual may not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (i) is made (A) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney; and (B) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. Further, an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the employer's trade secrets to the attorney and use the trade secret information in the court proceeding if the individual (y) files any document containing the trade secret under seal; and (z) does not disclose the trade secret, except pursuant to court order.

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**12.** **SEVERABILITY.** 

If any provision of this Agreement is determined to be void or unenforceable, then the remaining provisions of this Agreement will remain in full force and effect.

**13.** **GOVERNING LAW.** 

This Agreement shall be governed by the laws of the State of New Jersey, but only to the extent not superseded by federal law.

**14.** **ARBITRATION.** 

In the event that any dispute should arise between the parties as to the meaning, effect, performance, enforcement, or other issue in connection with this Agreement, which dispute cannot be resolved by the parties, the dispute shall be decided by final and binding arbitration of a panel of three arbitrators. Proceedings in arbitration and its conduct shall be governed by the rules of the American Arbitration Association.("AAA") applicable to commercial arbitrations (the "Rules") except as modified by this Section 14. The Executive shall appoint one arbitrator, the Bank shall appoint one arbitrator, and the third shall be appointed by the two arbitrators appointed by the parties. The third arbitrator shall be impartial and shall serve as chairman of the panel. The parties shall appoint their arbitrators within thirty (30) days after the demand for arbitration is served, failing which the AAA promptly shall appoint a defaulting party's arbitrator, and the two arbitrators shall select the third arbitrator within fifteen (15) days after their appointment, or if they cannot agree or fail to so appoint, then the AAA promptly shall appoint the third arbitrator. The arbitrators shall render their decision in writing within thirty (30) days after the close of evidence or other termination of the proceedings by the panel, and the decision of a majority of the arbitrators shall be final and binding upon the parties, nonappealable, except in accordance with the Rules and enforceable in accordance with the applicable state law. Any hearings in the arbitration shall be held in Middlesex County, New Jersey unless the parties shall agree upon a different venue, and shall be private and not open to the public. Each party shall bear the fees and expenses of its arbitrator, counsel, and witnesses, and the fees and expenses of the third arbitrator shall be shared equally by the parties. The other costs of the arbitration, including the fees of AAA, shall be borne as directed in the decision of the panel. If the Executive is successful on the merits of the dispute, as determined in the arbitration, all legal fees and such other expenses as reasonably incurred by the Executive as a result of or in connection with or arising out of the dispute, shall be paid by the Bank, provided that such payment or reimbursement is made by the Bank not later than two and one-half months after the end of the year in which such dispute is resolved in Executive's favor.

**15.** **INDEMNIFICATION.** 

The Bank will provide the Executive (including the Executive's heirs, executors and administrators) with coverage under a standard directors' and officers' liability insurance policy at its expense, and will indemnify the Executive (and the Executive's heirs, executors and administrators) in accordance with the charter and bylaws of the Bank and to the fullest extent permitted under applicable law against all expenses and liabilities reasonably incurred by the

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Executive in connection with or arising out of any action, suit or proceeding in which the Executive may be involved by reason of having been a trustee, director or officer of the Bank or any subsidiary or affiliate of the Bank.

**16.** **TAX WITHHOLDING.** 

The Bank may withhold from any amounts payable to the Executive hereunder all federal, state, local or other taxes that the Bank may reasonably determine are required to be withheld pursuant to any applicable law or regulation (it being understood that Executive is responsible for payment of all taxes in respect of the payments and benefits provided herein).

**17.** **NOTICE.** 

For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below or if sent by facsimile or email, on the date it is actually received.

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| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; To the Bank: | Somerset Savings Bank, SLA |
|  | 220 West Union Avenue |
|  | Bound Brook, NJ 08805 |
|  | Attention: Corporate Secretary |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; To Executive: | Most recent address on file with the Bank |

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**18.** **TAX MATTERS.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) If the Executive's employment is terminated following a Change in Control, the non-competition and non-solicitation restrictions set forth in Section 6(a) of this Agreement shall apply for the period of time mutually agreed to by the parties, and in no event shall the time period be less than six months or exceed two years. The Bank and the Executive hereby recognize that: (i) the non-solicitation restriction and non-competition restriction under Sections 6(a) have value, and (ii) the value shall be recognized in any calculations the Bank and the Executive perform with respect to determining the affect, if any, of the parachute payment provisions of Section 280G of the Code ("Section 280G"), by allocating a portion of any payments, benefits or distributions in the nature of compensation (within the meaning of Section 280G(b)(2)), including the payments under Section 5(b) of this Agreement, to the fair value of the non-solicitation and non-competition restriction under Section 6(a) of this Agreement (the "Appraised Value"). The Bank, at the Bank's expense, shall obtain an independent appraisal to determine the Appraised Value no later than forty-five (45) days after entering into an agreement, that if completed, would constitute a Change in Control as defined in Section 5(a). The Appraised Value will be considered reasonable compensation for post change in control services within the meaning of Q&A -40 of the regulations under Section 280G; and accordingly, any aggregate parachute payments, as defined in Section 280G, will be reduced by the Appraised Value.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) After taking into account the Appraised Value, in the event the receipt of all payments, benefits or distributions in the nature of compensation (within the meaning of Section 280G(b)(2)), whether paid or payable pursuant to Section 5(b) of this Agreement or otherwise (the "Change in Control Benefits") would subject the Executive to an excise tax imposed by Code Sections 280G and 4999, then the payments and/or benefits payable under this Agreement (the "Payments") shall be reduced by the minimum amount necessary so that no portion of the Payments under this Agreement are non-deductible to the Bank pursuant to Code Section 280G and subject to the excise tax imposed under Code Section 4999 (the "Reduced Amount"). Notwithstanding the foregoing, the Payments will not be reduced if it is determined that without such reduction, the Change in Control Benefits received by the Executive on a net after-tax basis (including without limitation, any excise taxes payable under Code Section 4999) is greater than the Change in Control Benefits that the Executive would receive, on a net after-tax benefit, if the Executive is paid the Reduced Amount under the Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Unless otherwise agreed in writing by the parties, all calculations with respect to Sections 280G and 4999 of the Code required under this Section 18 shall be determined by a nationally recognized firm with appropriate expertise mutually agreeable to the Bank and the Executive (the "Firm") whose determination will be conclusive and binding on all parties. The Bank shall pay all fees charged by the Firm for this purpose. The Bank and the Executive shall provide the Firm with all information or documents it reasonably requests, and the Firm will be entitled to rely on such information and on reasonable estimates and assumptions and interpretations of the provisions of Sections 280G and 4999 of the Code. If it is determined that the Payments should be reduced as a result of the Section 280G calculations performed by the Firm, the Bank shall promptly give (or cause the Firm to give) the Executive notice to that effect (and a copy of the detailed calculations thereof) and, to the extent consistent with Section 409 A of the Code, the Executive may determine which benefits are to be reduced. All determinations made under this Section 18 shall be made as soon as reasonably practicable and in no event later than ten (10) days prior to the Date of Termination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**19.** **EFFECTIVE DATE AND TERMINATION OF PRIOR AGREEMENT.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Effective Date</u>. Notwithstanding anything to the contrary contained herein, this Agreement shall be subject to the completion of the Conversion, and shall become effective as of the effective date of the Conversion (which for purposes of this Agreement shall be referred to as the "Effective Date"). In the event the Conversion is terminated for any reason, or in the event the Executive fails to remain an employee of the Bank as of the Effective Date, this Agreement shall automatically terminate and become null and void.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Termination of Prior Agreement</u>. The Prior Agreement shall remain in full force and effect until the Effective Date. On the Effective Date, the Executive and the Bank hereby agree that the Prior Agreement shall be terminated without any further action of any of the parties hereto or thereto. The Executive hereby acknowledges and agrees that the Executive has no contractual rights to any payments or benefits under the Prior Agreement as of the Effective Date.

**[Signature Page Follows]** 

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**IN WITNESS WHEREOF,** the parties have executed this Agreement as of the date first written above.

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| | |
|:---|:---|
| **SOMERSET SAVINGS BANK, SLA** | **SOMERSET SAVINGS BANK, SLA** |
| By: | /s/ William P. Taylor |
| Name: | William P. Taylor |
| Title: | Chairman of the Board and Chief Executive Officer |

---

---

| |
|:---|
| **EXECUTIVE** |
| /s/ Christopher J. Pribula |
| Christopher J. Pribula |

---

## Exhibit 10.3

**Exhibit 10.3** 

**EXECUTION VERSION** 

**EMPLOYMENT AGREEMENT** 

This Employment Agreement (the "<u>Agreement</u>") is made and entered into as of the 25111 day of July, 2022, to be effective as of the Effective Date as defined in Section 19 below, by and between Somerset Savings Bank, SLA, a New Jersey-chartered savings association (the "<u>Bank</u>") and David Orbach (the "<u>Executive</u>"). Any reference to the "Company" shall mean SR Bancorp, Inc., the proposed holding company of the Bank.

**RECITALS** 

**WHEREAS,** the Bank has adopted a Plan of Conversion to convert the Bank from the mutual to the stock form of organization (the "Conversion") and has adopted a plan of Charter Conversion to convert the Bank from a New Jersey chartered savings association to a New Jersey chartered commercial bank under the name "Somerset Regal Bank" (the "Charter Conversion") (references in this Agreement to the Bank shall include the Bank as a New Jersey chartered commercial bank); and

**WHEREAS,** in connection with the Conversion, the Bank and the Company have entered into an Agreement and Plan of Merger, dated as of July 25, 2022 (the "Merger Agreement"), with Regal Bank and Regal Bancorp, Inc., pursuant to which Regal Bank will merge with and into the Bank, with the Bank as the surviving entity, and Regal Bancorp, Inc. will merge with and into the Company, with the Company as the surviving entity (collectively referred to as the "Merger"); and

**WHEREAS,** Executive is presently serving as an employee and Executive Chairman of the Board of Directors of Regal Bank and Regal Bancorp, Inc.; and

**WHEREAS,** the parties desire to enter into this Agreement to induce the Executive to continue to accept employment with the Bank following the Conversion and the Merger, and to provide further incentive for Executive to achieve the financial and performance objectives of the Bank and the Company; and

**NOW, THEREFORE,** in consideration of the mutual covenants herein contained, and upon the other terms and conditions hereinafter provided, the parties hereby agree as follows:

**1.** **POSITION AND RESPONSIBILITIES.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **<u>Employment</u>.** During the Term (as defined in Section 2(a)) of this Agreement, the Executive agrees to serve as Executive Chairman of the Board of Directors of the Company and as Executive Vice Chairman of the Board of Directors of the Bank (the "<u>Executive Position</u>"), or any successor executive position with the Bank and the Company that is consented to in writing by the Executive, and will perform the duties of and have all powers associated with the Executive Position as are appropriate for a person in the position of the Executive Position, as well as those as shall be assigned by the Board of Directors of the Bank and/or the Company (the "<u>Board of Directors</u>"). As an executive officer, the Executive will report directly to the Chief Executive Officer. During the term of this Agreement, the Executive also agrees to serve, if elected, as an officer, director or trustee of any affiliate of the Bank and the Company and in such capacity to carry out the duties and responsibilities reasonably appropriate to any such position.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **<u>Responsibilities</u>.** During the Executive's employment hereunder, the Executive will be employed on a full-time basis and devote the Executive's full business time and best efforts, business judgment, skill and knowledge to the performance of the Executive's duties and responsibilities related to the Executive Position, as set forth in Exhibit A. Except as otherwise provided in Section 1(c), or as may be approved by the Board of Directors, the Executive will not engage in any other business activity during the term of this Agreement; provided, however, that the foregoing shall not prohibit Executive from making passive investments in public or private entities that do not compete with Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) **<u>Service on Other Boards and Committees</u>.** The Bank encourages participation by the Executive on community boards and committees and in activities generally considered to be in the public interest, but the Board of Directors shall have the right to approve or disapprove, in its sole discretion, the Executive's participation on those boards and committees. Attached hereto as Exhibit B is a list of the community boards and committees on which Executive currently serves, which are deemed approved by the Board of Directors.

**2.** **TERM.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **<u>Term and Annual Renewal</u>.** The initial term of this Agreement will begin as of the Effective Date and continue for a period of three (3) years (the "<u>Term</u>"). Commencing on the first anniversary of the Effective Date and continuing on each subsequent anniversary of the Effective Date (each anniversary referred to as a "<u>Renewal Date</u>"), the Term will extend automatically for one additional year, so that the Term will be three (3) years from the applicable Renewal Date, unless either the Bank or the Executive, by written notice to the other given at least thirty (30) days prior to the Renewal Date, notifies the other of its intent not to extend the Term. In the event either party provides notice not to extend the Term, the Term will become fixed and terminate as of the last day of the then current Term. For avoidance of doubt, any extension to the Term will become the new "Term" for purposes of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **<u>Change in Contro</u>l.** Notwithstanding the foregoing, in the event the Bank or the Company has entered into an agreement to effect a transaction that would be considered a Change in Control, as defined in Section 5, the Term of this Agreement will automatically extend so that it expires no less than two (2) years beyond the effective date of the Change in Control, subject to extensions as set forth in Section 2(a).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) **<u>Continued Employment Following Expiration of Term</u>.** Nothing in this Agreement will mandate or prohibit a continuation of the Executive's employment following the expiration of the Term.

**3.** **COMPENSATION, BENEFITS AND REIMBURSEMENT.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **<u>Base Salarv</u>.** In consideration of the Executive's performance of the responsibilities and duties set forth in this Agreement, the Executive will receive an annual base salary of $375,000 per year ("<u>Base Salary</u>"). The Bank will pay the Base Salary in accordance

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with its customary payroll practices. During the term of this Agreement, the Board of Directors (or the Compensation Committee of the Board of Directors (the "C<u>ompenation Commirte</u>")) may increase, but not decrease, the Executive's Base Salary. Any increase in Base Salary will become the new "Base Salary" for purposes of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **<u>Bonus and Incentive Compensation</u>.** The Executive (1) shall be eligible to participate in any bonus plan or arrangement of the Bank in which senior management is eligible to participate, pursuant to which a bonus may be paid to the Executive in accordance with the plan or arrangement; and/or (2) may receive a bonus, if any, on a discretionary basis, as determined by the Board of Directors or the Compensation Committee. The Bank shall provide the Executive an annual cash bonus opportunity in an amount at least equal to twenty percent (20%) of Base Salary at target, less required tax withholding, on an annual basis during the Term of this Agreement (the "Annual Cash Bonus"), subject to terms and conditions, including performance conditions, as shall be determined by the Board of Directors or the Compensation Committee. Each Annual Cash Bonus shall be paid to the Executive as a single lump sum cash payment (less required withholding) as soon as practicable after the last day of the applicable bonus period, but in no event later than March 15th of the calendar year following the year in which the last day of the performance period occurs (or as soon as administratively practicable thereafter).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) **<u>Benefit Plans</u>.** The Executive will be entitled to participate in all employee benefit plans, arrangements and perquisites offered to senior management of the Bank, on terms and conditions no less favorable than the plans, arrangements and perquisites available to other members of senior management of the Bank. Without limiting the generality of the foregoing provisions of this Section 3(c), the Executive also will be entitled to participate in any employee benefit plans including but not limited to retirement plans, pension plans, profit-sharing plans, health-and-accident plans, or any other employee benefit plan or arrangement made available by the Bank in the future to management employees, subject to and on a basis consistent with the terms, conditions and overall administration of the plans and arrangements as applicable to other management employees.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) **<u>Leave and Paid Time Off</u>.** The Executive will be entitled to paid time off each year during the term of this Agreement measured on a calendar year basis, in accordance with the Bank's customary practices and in accordance with the Bank's policies and procedures for officers, in addition to all holidays observed by the Bank. Any unused paid time off during an annual period will be treated in accordance with the Bank's personnel policies as in effect from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) **<u>Automobile</u>.** The Bank will provide the Executive with the use of an automobile and shall reimburse Executive or pay for automobile-related expenses.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) **<u>Expense Reimbursements</u>.** The Bank will reimburse the Executive for all reasonable travel, entertainment and other expenses incurred by the Executive in performing the Executive's obligations under this Agreement, including, without limitation, fees for memberships in organizations that the Executive and the Board of Directors or the Compensation Committee mutually agree are necessary and appropriate in connection with the performance of the Executive's duties under this Agreement. All reimbursements will be made as soon as practicable upon substantiation of the expenses by the Executive in accordance with the applicable policies and procedures of the Bank and, in any event, not later than the last day of the calendar year immediately following the calendar year in which the Executive incurred the expense.

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**4.** **TERMINATION AND TERMINATION PAY.** 

Subject to Section 5, which governs the occurrence of a Change in Control, the Executive's employment under this Agreement will terminate under the circumstances set forth in this Section 4.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **<u>Definition of Accrued Obligations</u>.** For purposes of this Agreement, the term "<u>Accrued Obligations</u>" means the sum of: (i) any Base Salary earned but unpaid through the Executive's Date of Termination, (ii) unpaid expense reimbursements (subject to, and in accordance with, Section 3(f)), (iii) unused paid time off accrued through the Date of Termination (subject to an in accordance with Section 3(d)), (iv) any earned but unpaid short-term and long-term incentive compensation for the year immediately preceding the year of termination and (v) any vested benefits the Executive may have under any employee benefit plan of the Bank through the Date of Termination, which vested benefits will be paid and/or provided in accordance with the terms of the employee benefit plans. Unless otherwise provided by the applicable employee benefit plan, the Accrued Obligations, if any, will be paid to the Executive (or the Executive's estate or beneficiary) within thirty (30) days following the Executive's Date of Termination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **<u>Death</u>.** This Agreement and the Executive's employment with the Bank will terminate upon the Executive's death, in which event the Bank's sole obligation will be to pay or provide the Executive's estate or beneficiary any Accrued Obligations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) **<u>Disability</u>.** The Bank shall be entitled to terminate the Executive's employment and this Agreement due to the Executive's Disability. If the Bank terminates the Executive's employment due to the Executive's Disability, the Bank's sole obligation under this Agreement shall be to pay or provide the Executive any Accrued Obligations. For these purposes, the term "<u>Disability</u>" means the Executive is deemed disabled for purposes of the Bank's long-term disability plan or policy that covers the Executive or is determined to be disabled by the Social Security Administration.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) **<u>Termination for Cause</u>.** The Board of Directors may immediately terminate the Executive's employment and this Agreement at any time for "<u>Cause</u>." In the event the Executive's employment is terminated for Cause, the Bank's sole obligation will be to pay or provide to the Executive any Accrued Obligations. For purposes of this Agreement, the term "Cause" means termination because of, in the good faith determination of the Board of Directors:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the conviction of the Executive of a felony or of any lesser criminal offense involving moral turpitude (other than for traffic violations);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the willful commission by the Executive of a criminal or other act that, in the judgment of the Board of Directors will likely cause substantial economic damage to the Company, the Bank or any subsidiary or substantial injury to the business reputation of the Company, the Bank or any subsidiary;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the commission by the Executive of an act of fraud in the performance of his duties on behalf of the Company, the Bank or any subsidiary;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) the continuing willful failure of the Executive to perform his duties to the Company, the Bank or any subsidiary (other than any such failure resulting from the Executive's incapacity due to physical or mental illness or the Executive declining to perform any assigned duties to the extent such assignment or duties would constitute a violation of law) after written notice thereof;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) a material breach by the Executive of the Bank's or the Company's Code of Ethics; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) an order of a federal or state regulatory agency or a court of competent jurisdiction requiring the termination of the Executive's employment with the Bank or the Company.

Any determination of Cause under this Agreement will be made by resolution adopted by the Board of Directors at a meeting called and held for that purpose. The Executive will be provided with reasonable notice of the meeting and the Executive will be given an opportunity to be heard before a vote is taken by the disinterested members of the Board of Director regarding the termination of employment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) **<u>Resignation bv Executive without Good Reason</u>.** The Executive may resign from employment during the term of this Agreement without Good Reason upon at least thirty (30) days prior written notice to the Board of Directors, provided, however, that the Bank may accelerate the Date of Termination upon receipt of written notice of the Executive's resignation. In the event the Executive resigns without Good Reason, the Bank's sole obligation under this Agreement will be to pay or provide any Accrued Obligations to the Executive.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) **<u>Termination Without Cause or With Good Reason</u>.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) The Board of Directors may immediately terminate the Executive's employment at any time for a reason other
than Cause (a termination " <u>Without Cause</u> "), and the Executive may, by written notice to the Board of Directors, terminate his employment at any time within ninety (90) days following an event constituting "Good
Reason" (a termination " <u>With Good Reason</u> "); provided, however, that the Bank will have thirty (30) days to cure the "Good Reason" condition, but the Bank may waive its right to cure. In the event of a termination
of employment described under this Section 4(f)(i) during the Term and subject to the requirements of Section 4(f)(iii), the Bank will pay or provide the Executive the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) any Accrued Obligations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) a cash payment equal to the greater of: (i) remaining Base Salary and total annual incentive bonus opportunity (based on the highest bonus earned by the Executive for the three most recently completed calendar years prior to the Executive's Date of Termination) that would have been paid to the Executive during the remaining Term of the Agreement; or (ii) two (2) times the sum of Base Salary and the average

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total annual incentive bonus paid to Executive for the three most recently completed calendar years prior to the Executive's Date of Termination; in either case payable in a lump sum within sixty (60) days of the Executive's Date of Termination; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) provided that the Executive has elected continued health care coverage in accordance with the Consolidated Omnibus Budget Reconciliation Act ("<u>COBRA</u>"), reimbursement of the Executive's COBRA health care costs for the greater of (i) the remaining Term of the Agreement, or (ii) eighteen (18) months (in either case commencing with the first month following the Executive's Date of Termination).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) " <u>Good Reason</u> " exists if, without the Executive's express written consent, any of the
following occur:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) a material reduction in the Executive's Base Salary and/or aggregate incentive compensation opportunities
under the Bank's annual and long-term incentive plans or programs, as applicable; notwithstanding the foregoing, the Bank or Company may eliminate and/or modify existing employee benefit, retirement, or fringe benefit plans and coverage levels
on a consistent and non-discriminatory basis applicable to all executive officers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) a material reduction in the Executive's authority, duties or responsibilities from the position and
attributes associated with the Executive Position;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) the failure to re-appoint the Executive to the Executive Position set
forth under Section l(a), or a failure to nominate and recommend the election of the Executive to the Board of Directors of the Company or to appoint or nominate and elect the Executive to the Board of Directors of the Bank;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D) a relocation of the Executive's principal place of employment by more than twenty (20) miles from the
Executive's primary place of business; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(E) a material breach of this Agreement by the Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Notwithstanding anything to the contrary in Section 4(f)(i), the Executive will not receive any payments
or benefits under Sections 4(f)(i)(B) or 4(f)(i)(C) unless and until the Executive executes a release of claims (the " <u>Release</u> ") against the Bank and any affiliate, and their officers, directors, successors and assigns, releasing
said persons from any and all claims, rights, demands, causes of action, suits, arbitrations or grievances relating to the employment relationship, including claims under the Age Discrimination in Employment Act, but not including claims for
benefits

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under tax-qualified plans or other benefit plans in which the Executive is vested, claims for benefits required by applicable law or claims with respect to obligations set forth in this Agreement that survive the termination of this Agreement. The Release must be executed and become irrevocable by the 60111 day following the Date of Termination, provided that if the 60-day period spans two (2) calendar years, then, to the extent necessary to comply with Section 409A of the Internal Revenue Code of 1986, as amended ("<u>Code</u>"), the payments and benefits described in this Section 4(f) will be paid, or commence, in the second calendar year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) **<u>Effect on Status as a Director</u>**. In the event of the Executive's termination of employment under this Agreement for any reason, whether by the Bank and the Company or by the Executive, and unless otherwise agreed to by the mutual consent of the Executive and the Bank and the Company, the termination will also constitute the Executive's resignation as a director of the Bank and the Company, as well as a director of any subsidiary or affiliate thereof, to the extent the Executive is serving as a director of any of the aforementioned entities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) **<u>Notice; Effective Date of Termination</u>**. Any Notice of Termination of employment under this Agreement must be communicated by or to the Executive or the Bank, as applicable, in accordance with Section 17. For purposes of this Agreement, the term "<u>Date of Termination</u>" means the Executive's termination of employment pursuant to this Agreement, which will be effective on the earliest of: (i) immediately after the Bank gives notice to the Executive of the Executive's termination Without Cause, unless the parties agree to a later date, in which case, termination will be effective as of such later date; (ii) immediately upon approval by the Board of Directors of termination of the Executive's employment for Cause; (iii) immediately upon the Executive's death or Disability; (iv) thirty (30) days after the Executive gives written notice to the Bank of the Executive's resignation from employment (including With Good Reason), provided that the Bank may set an earlier termination date at any time prior to the date of termination of employment, in which case the Executive's resignation shall be effective as of that date; or (v) in the event of the Executive's termination With Good Reason due to a material reduction in Base Salary, the date on which the Executive provides Notice of Termination in accordance with Section 4(f)(i). If, within 30 days after any Notice of Termination of employment by the Bank, the Executive notifies the Bank that a dispute exists concerning the termination, the parties shall promptly proceed to arbitration, as provided in Section 14. Notwithstanding the pendency of any such dispute, the Bank may discontinue paying the Executive's compensation until the dispute is finally resolved in accordance with this Agreement. If it is determined that the Executive is entitled to compensation and benefits under this Agreement, the payment of such compensation and benefits by the Bank shall commence immediately following the date of resolution by arbitration, with interest due the Executive on the cash amount that would have been paid pending arbitration (at the prime rate as published in *The Wall Street Journal* from time to time).

**5.** **CHANGE IN CONTROL.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **<u>Change in Control Defined</u>**. For purposes of this Agreement, the term "<u>Change in Control</u>" means: (i) a change in the ownership of the Corporation; (ii) a change in the effective control of the Corporation; or (iii) a change in the ownership of a substantial portion of the assets of the Corporation as defined in accordance with Code Section 409A. For purposes of this Section 5(a), the term "<u>Corporation</u>" means the Bank, the Company or any of their successors, as applicable.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) A change in the ownership of a Corporation occurs on the date that any one person, or more than one person
acting as a group (as defined in Treasury Regulation 1.409A-3(i)(5)(v)(B)), acquires ownership of stock of the Corporation that, together with stock held by such person or group, constitutes more than fifty
(50) percent of the total fair market value or total voting power of the stock of the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) A change in the effective control of the Corporation occurs on the date that either (A) any one person, or
more than one person acting as a group (as defined in Treasury Regulation 1.409A-3(i)(5)(vi)(D)) acquires (or has acquired during the 12-month period ending on the date
of the most recent acquisition by such person or persons) ownership of stock of the Corporation possessing thirty (30) percent or more of the total voting power of the stock of the Corporation, or (B) a majority of the members of the board
of directors of the Corporation is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the board of directors prior to the date of the appointment or election,
provided that this subsection "(B)" is inapplicable where a majority stockholder of the Corporation is another corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) A change in a substantial portion of the Corporation's assets occurs on the date that any one person or
more than one person acting as a group (as defined in Treasury Regulation 1.409A-3(i)(5)(vii)(C)) acquires (or has acquired during the twelve (12) month period ending on the date of the most recent
acquisition by such person or persons) assets from the Corporation that have a total gross fair market value equal to or more than forty (40) percent of the total gross fair market value of (A) all of the assets of the Corporation, or
(B) the value of the assets being disposed of, either of which is determined without regard to any liabilities associated with such assets.

For all purposes hereunder, the definition of Change in Control shall be construed to be consistent with the requirements of Treasury Regulation 1.409A-3(i)(5), except to the extent that such regulations are superseded by subsequent guidance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **<u>Change in Control Benefits</u>.** Upon the termination of the Executive's employment by the Bank or the Company (or any successor) Without Cause or by the Executive With Good Reason during the Term on or within two years after the effective time of a Change in Control, the Bank (or any successor) will pay or provide the Executive, or the Executive's estate in the event of the Executive's death, with the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) any Accrued Obligations;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) a cash payment (the " <u>Change in Control Severance</u> ") equal to three (3) times the sum of:
(A) the Executive's Base Salary at the Date of Termination (or the Executive's Base Salary in effect during any of the prior three years, if higher); and (B) the average annual total incentive bonus earned by the Executive for
three (3) most recently completed calendar years prior to the Change Control, or if greater, the annual total incentive bonus that would have been earned in the year of the Change of Control at target bonus opportunity; which cash payment shall
be paid in a lump sum within thirty (30) days of the Executive's Date of Termination; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the value of health care costs for thirty-six (36) months (based
on the COBRA cost in effect for continued insurance coverage at the Date of Termination, whether or not the Executive elects COBRA); which shall be paid in cash in a lump sum within thirty (30) days of the Executive's Date of Termination.

Notwithstanding the foregoing, the payments and benefits provided in this Section 5(b) will be payable to the Executive in lieu of any payments or benefits that are payable under Section 4(f).

**6.** **COVENANTS OF EXECUTIVE.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **<u>Non-Solicitation/Non-Compete</u>.** The Executive hereby covenants and agrees that during the "<u>Restricted Period</u>," the Executive will not, without the written consent of the Bank, either directly or indirectly:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) solicit, offer employment to, or take any other action intended (or that a reasonable person acting in like
circumstances would expect) to have the effect of causing any officer or employee of the Bank, or any of its respective subsidiaries or affiliates, to terminate his or her employment with the Bank and/or accept employment with another employer; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) become an officer, employee, consultant, director, trustee, independent contractor, agent, joint venturer,
partner or trustee of any commercial bank, savings bank, savings and loan association, savings and loan holding company, credit union, bank or bank holding company, insurance company or agency, any mortgage or loan broker or any other entity that
competes with the business of the Bank or any of its direct or indirect subsidiaries or affiliates that: (A) has a headquarters within thirty-five (35) miles of the Bank's headquarters (the ' <u>Restricted</u> Territory"), or
(B) has one or more offices, but is not headquartered, within the Restricted Territory, but in the latter case, only if the Executive would be employed, conduct business or have other responsibilities or duties within the Restricted Territory;
or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) solicit, provide any information, advice or recommendation or take any other action intended (or that a
reasonable person acting in like circumstances would expect) to have the effect of causing any customer of the Bank to terminate an existing business or commercial relationship with the Bank.

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Except as otherwise provided for in Section 18, for purposes of this Section 6(a), the "<u>Restricted Period</u>" will be: (i) at all times during Executive's period of employment with the Bank; and (ii) except as provided above, during the period beginning on Executive's Date of Termination and ending on the one-year anniversary ofthe Date of Termination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **<u>Confidentiality</u>.** The Executive recognizes and acknowledges that the Executive has been and will be the recipient of confidential and proprietary business information concerning the Bank, including without limitation, past, present, planned or considered business activities of the Bank, and the Executive acknowledges and agrees that the Executive will not, during or after the term of the Executive's employment, disclose such confidential and proprietary information for any purposes whatsoever, except as may be expressly permitted in a writing signed by the Bank, or as may be required by regulatory inquiry, law or court order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) **<u>Information/Cooperation</u>.** The Executive will, upon reasonable notice, furnish any information and assistance to the Bank as may be reasonably required by the Bank, at the expense of the Bank, in connection with any litigation in which it or any of its subsidiaries or affiliates is, or may become, a party; provided, however, that the Executive shall not be required to provide information or assistance with respect to any litigation between the Executive and the Bank or any other subsidiaries or affiliates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) **<u>Reliance</u>.** Except as otherwise provided, all payments and benefits to the Executive under this Agreement will be subject to the Executive's compliance with this Section 6, to the extent applicable. The parties hereto, recognizing that irreparable injury will result to the Bank, its business and property in the event of the Executive's breach of this Section 6, agree that, in the event of any such breach by the Executive, the Bank will be entitled, in addition to any other remedies and damages available, to an injunction to restrain the violation hereof by the Executive and all persons acting for or with the Executive. The Executive represents and admits that the Executive's experience and capabilities are such that the Executive can obtain employment in a business engaged in other lines of business than the Bank, and that the enforcement of a remedy by way of injunction will not prevent Executive from earning a livelihood. Nothing herein will be construed as prohibiting the Bank from pursuing any other remedies available to them for such breach or threatened breach, including the recovery of damages from the Executive.

**7.** **SOURCE OF PAYMENTS.** 

All payments provided in this Agreement shall be timely paid by check or direct deposit from the general funds of the Bank (or any successor of the Bank).

**8.** **EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.** 

This Agreement contains the entire understanding between the parties hereto and supersedes any prior employment agreement between the Bank or any predecessor of the Bank and the Executive, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to the Executive under another plan, program or agreement (other than an employment agreement) between the Bank and the Executive.

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**9.** **NO ATTACHMENT; BINDING ON SUCCESSORS.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation, or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to affect any such action shall be null, void, and of no effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Bank shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all the business or assets of the Bank, expressly and unconditionally to assume and agree to perform the Bank's obligations under this Agreement, in the same manner and to the same extent that the Bank would be required to perform if no such succession or assignment had taken place. A successor's failure to assent to this Agreement following a Change in Control shall be deemed to be a material breach of this Agreement under Section 4(f) hereof.

**10.** **MODIFICATION AND WAIVER.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of the term or condition for the future as to any act other than that specifically waived.

**11.** **CERTAIN APPLICABLE LAW.** 

Notwithstanding anything herein contained to the contrary, the following provisions shall apply:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Bank may terminate the Executive's employment at any time, but any termination by the Bank other than termination for Cause shall not prejudice the Executive's right to compensation or other benefits under this Agreement. The Executive shall have no right to receive compensation or other benefits under this Agreement for any period after the Executive's termination for Cause, other than the Accrued Obligations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) In no event shall the Bank (nor any affiliate) be obligated to make any payment pursuant to this Agreement that is prohibited by Section 18(k) of the Federal Deposit Insurance Act (codified at 12 U.S.C. sec. 1828(k)), 12 C.F.R. Part 359, or any other applicable law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Notwithstanding anything in this Agreement to the contrary, to the extent that a payment or benefit described in this Agreement constitutes "non-qualified deferred compensation" under Section 409A of the Code, and to the extent that the payment or benefit is payable upon the Executive's termination of employment, then the payments or benefits will be payable only upon the Executive's "Separation from Service." For purposes of this Agreement, a "<u>Separation from</u>

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<u>Service</u>" will have occurred if the Bank and the Executive reasonably anticipate that either no further services will be performed by the Executive after the Date of Termination (whether as an employee or as an independent contractor) or the level of further services performed is less than fifty (50) percent of the average level of bona fide services in the thirty-six (36) months immediately preceding the termination. For all purposes hereunder, the definition of Separation from Service shall be interpreted consistent with Treasury Regulation Section 1.409A-1 (h)(ii).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Notwithstanding the foregoing, if the Executive is a "<u>Specified Employee</u>" (i.e., a "key employee" of a publicly traded company within the meaning of Section 409A of the Code and the regulations issued thereunder) and any payment under this Agreement is triggered due to the Executive's Separation from Service, then solely to the extent necessary to avoid penalties under Section 409A of the Code, no payment will be made during the first six (6) months following the Executive's Separation from Service. Rather, any payment which would otherwise be paid to the Executive during such period shall be accumulated and paid to the Executive in a lump sum on the first day of the seventh month following the Separation from Service. All subsequent payments shall be paid in the manner specified in this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) To the extent not specifically provided in this Agreement, any compensation or reimbursements payable to Executive shall be paid or provided no later than two and one-half (2.5) months after the calendar year in which such compensation is no longer subject to a substantial risk of forfeiture within the meaning of Treasury Regulation Section 1.409A-l(d).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes Treasury Regulation Section 1.409A-2(b)(2).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) Notwithstanding anything in this Agreement to the contrary, the Executive understands that nothing contained in this Agreement limits the Executive's ability to file a charge or complaint with the Securities and Exchange Commission or any other federal, state or local governmental agency or commission ("<u>Government Agencies</u>") about a possible securities law violation without approval of the Bank (or any affiliate). The Executive further understands that this Agreement does not limit the Executive's ability to communicate with any Government Agency or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Bank (or any affiliate) related to the possible securities law violation. This Agreement does not limit the Executive's right to receive any resulting monetary award for information provided to any Government Agency. In addition, pursuant to the Defend Trade Secrets Act of 2016, the Executive understands that an individual may not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (i) is made (A) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney; and (B) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. Further, an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the employer's trade secrets to the attorney and use the trade secret information in the court proceeding if the individual (y) files any document containing the trade secret under seal; and (z) does not disclose the trade secret, except pursuant to court order.

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**12.** **SEVERABILITY.** 

If any provision of this Agreement is determined to be void or unenforceable, then the remaining provisions of this Agreement will remain in full force and effect.

**13.** **GOVERNING LAW.** 

This Agreement shall be governed by the laws of the State of New Jersey, but only to the extent not superseded by federal law.

**14.** **ARBITRATION.** 

In the event that any dispute should arise between the parties as to the meaning, effect, performance, enforcement, or other issue in connection with this Agreement, which dispute cannot be resolved by the parties, the dispute shall be decided by final and binding arbitration of a panel of three arbitrators. Proceedings in arbitration and its conduct shall be governed by the rules of the American Arbitration Association ("AAA") applicable to commercial arbitrations (the "Rules") except as modified by this Section 14. The Executive shall appoint one arbitrator, the Bank shall appoint one arbitrator, and the third shall be appointed by the two arbitrators appointed by the parties. The third arbitrator shall be impartial and shall serve as chairman of the panel. The parties shall appoint their arbitrators within thirty (30) days after the demand for arbitration is served, failing which the AAA promptly shall appoint a defaulting party's arbitrator, and the two arbitrators shall select the third arbitrator within fifteen (15) days after their appointment, or if they cannot agree or fail to so appoint, then the AAA promptly shall appoint the third arbitrator. The arbitrators shall render their decision in writing within thirty (30) days after the close of evidence or other termination of the proceedings by the panel, and the decision of a majority of the arbitrators shall be final and binding upon the parties, nonappealable, except in accordance with the Rules and enforceable in accordance with the applicable state law. Any hearings in the arbitration shall be held in Middlesex County, New Jersey unless the parties shall agree upon a different venue, and shall be private and not open to the public. Each party shall bear the fees and expenses of its arbitrator, counsel, and witnesses, and the fees and expenses of the third arbitrator shall be shared equally by the parties. The other costs of the arbitration, including the fees of AAA, shall be borne as directed in the decision of the panel. If the Executive is successful on the merits of the dispute, as determined in the arbitration, all legal fees and such other expenses as reasonably incurred by the Executive as a result of or in connection with or arising out of the dispute, shall be paid by the Bank, provided that such payment or reimbursement is made by the Bank not later than two and one-half months after the end of the year in which such dispute is resolved in Executive's favor.

**15.** **INDEMNIFICATION.** 

The Bank will provide the Executive (including the Executive's heirs, executors and administrators) with coverage under a standard directors' and officers' liability insurance policy at its expense, and will indemnify the Executive (and the Executive's heirs, executors and administrators) in accordance with the charter and bylaws of the Bank and to the fullest extent permitted under applicable law against all expenses and liabilities reasonably incurred by the Executive in connection with or arising out of any action, suit or proceeding **in** which the Executive may be involved by reason of having been a trustee, director or officer of the Bank or any subsidiary or affiliate of the Bank.

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**16.** **TAX WITHHOLDING.** 

The Bank may withhold from any amounts payable to the Executive hereunder all federal, state, local or other taxes that the Bank may reasonably determine are required to be withheld pursuant to any applicable law or regulation (it being understood that Executive is responsible for payment of all taxes in respect of the payments and benefits provided herein).

**17.** **NOTICE.** 

For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set fm1h below or if sent by facsimile or email, on the date it is actually received.

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| | |
|:---|:---|
| To the Bank: | Somerset Savings Bank, SLA |
|  | 220 West Union Avenue |
|  | Bound Brook, NJ 08805 |
|  | Attention: Corporate Secretary |
| To Executive: | Most recent address on file with the Bank |

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**18.** **TAX MATTERS.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) If the Executive's employment is terminated following a Change in Control, the non-competition and non-solicitation restrictions set forth in Section 6(a) of this Agreement shall apply for the period of time mutually agreed to by the parties, and in no event shall the time period be less than six months or exceed two years. The Bank and the Executive hereby recognize that: (i) the non-solicitation restriction and non-competition restriction under Sections 6(a) have value, and (ii) the value shall be recognized in any calculations the Bank and the Executive perform with respect to determining the affect, if any, of the parachute payment provisions of Section 280G of the Code ("Section 280G"), by allocating a portion of any payments, benefits or distributions in the nature of compensation (within the meaning of Section 280G(b)(2)), including the payments under Section 5(b) of this Agreement, to the fair value of the non-solicitation and non-competition restriction under Section 6(a) of this Agreement (the "Appraised Value"). The Bank, at the Bank's expense, shall obtain an independent appraisal to determine the Appraised Value no later than forty-five (45) days after entering into an agreement, that if completed, would constitute a Change in Control as defined in Section 5(a). The Appraised Value will be considered reasonable compensation for post change in control services within the meaning of Q&A -40 of the regulations under Section 280G; and accordingly, any aggregate parachute payments, as defined in Section 280G, will be reduced by the Appraised Value.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) After taking into account the Appraised Value, in the event the receipt of all payments, benefits or distributions in the nature of compensation (within the meaning of Section 280G(b)(2)),

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whether paid or payable pursuant to Section 5(b) of this Agreement or otherwise (the "Change in Control Benefits") would subject the Executive to an excise tax imposed by Code Sections 280G and 4999, then the payments and/or benefits payable under this Agreement (the "Payments") shall be reduced by the minimum amount necessary so that no portion of the Payments under this Agreement are non-deductible to the Bank pursuant to Code Section 280G and subject to the excise tax imposed under Code Section 4999 (the "Reduced Amount"). Notwithstanding the foregoing, the Payments will not be reduced if it is determined that without such reduction, the Change in Control Benefits received by the Executive on a net after-tax basis (including without limitation, any excise taxes payable under Code Section 4999) is greater than the Change in Control Benefits that the Executive would receive, on a net after-tax benefit, if the Executive is paid the Reduced Amount under the Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Unless otherwise agreed in writing by the parties, all calculations with respect to Sections 280G and 4999 of the Code required under this Section 18 shall be determined by a nationally recognized firm with appropriate expertise mutually agreeable to the Bank and the Executive (the "Firm") whose determination will be conclusive and binding on all parties. The Bank shall pay all fees charged by the Firm for this purpose. The Bank and the Executive shall provide the Firm with all information or documents it reasonably requests, and the Firm will be entitled to rely on such information and on reasonable estimates and assumptions and interpretations of the provisions of Sections 280G and 4999 of the Code. If it is determined that the Payments should be reduced as a result of the Section 280G calculations performed by the Firm, the Bank shall promptly give (or cause the Firm to give) the Executive notice to that effect (and a copy of the detailed calculations thereof) and, to the extent consistent with Section 409A of the Code, the Executive may determine which benefits are to be reduced. All determinations made under this Section 18 shall be made as soon as reasonably practicable and in no event later than ten (10) days prior to the Date of Termination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**19.** **EFFECTIVE DATE AND TERMINATION OF PRIOR AGREEMENT.** 

Notwithstanding anything to the contrary contained herein, this Agreement shall be subject to the completion of the Conversion and the Merger, and shall become effective as of the effective date of the Merger (which for purposes of this Agreement shall be referred to as the "Effective Date"). In the event the Merger is terminated for any reason, or in the event Executive fails to remain an employee of Regal Bank and Regal Bancorp as of the Effective Date, this Agreement shall automatically terminate and become null and void.

**[Signature Page Follows]** 

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**IN WITNESS WHEREOF,** the patties have executed this Agreement as of the date first written above.

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| | |
|:---|:---|
| **SOMERSET SAVINGS BANK, SLA** | **SOMERSET SAVINGS BANK, SLA** |
| By: | /s/ William P. Taylor |
| Name: | William P. Taylor |
| Title: | CEO |
| **EXECUTIVE** | **EXECUTIVE** |
| /s/ David Orbach | /s/ David Orbach |
| David Orbach | David Orbach |

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## Exhibit 10.4

**Exhibit 10.4** 

**SOMERSET SAVINGS BANK** 

**SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN** 

**Amended and Restated as of January 1, 2005** 

**(Originally effective as of May 1, 1994)** 

December 10, 2007

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**<u>**TABLE OF CONTENTS**</u>** 

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| | |
|:---|:---|
|  | Page |
|  **ARTICLE I** | 2 |
|  **<u>DEFINITIONS</u>** | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 **"<u>Account</u>"** | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 **"<u>Bank</u>"** | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3 **"<u>Beneficiary</u>"** | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4 **"<u>Board</u>"** | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5 **"<u>Code</u>"** | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.6 **"<u>Committee</u>"** | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.7 **"<u>Compensation</u>"** | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.8 **"<u>Disability</u>"** | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.9 **"<u>Effective Date</u>"** | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.10 **"<u>Highly Compensated Employee</u>"** | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.11 **"<u>Highly Compensated Participant</u>"** | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.12 **"<u>Key Employee</u>"** | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.13 **"<u>Participant</u>"** | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.14 **"<u>Pension Plan</u>"** | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.15 **"<u>Plan</u>"** | 4 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.16 **"<u>Plan Year</u>"** | 4 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.17 **"<u>Separation from Service</u>"** | 4 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.18 **"<u>Specified Employee</u>"** | 4 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.19 **"<u>Spouse</u>"** | 5 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.20 **"<u>Supplemental Employer Contributions</u>"** | 5 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.21 **"<u>Unforeseeable Emergency</u>"** | 5 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.22 **"<u>Valuation Date</u>"** | 5 |
|  **ARTICLE II** | 5 |
|  **<u>ELIGIBILITY TO PARTICIPATE</u>** | 5 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 **<u>Eligibility to Participate in Supplemental Employer and Supplemental Matching Contributions</u>** | 5 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 **<u>No Employee Deferral Contributions Permitted</u>** | 5 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3 **<u>Re-employment</u>** | 5 |
|  **ARTICLE III** | 6 |
|  **<u>CONTRIBUTIONS TO THE PLAN</u>** | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 **<u>Supplemental Employer Contributions</u>** | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 **<u>Linked Plan Procedures</u>** | 6 |

---

i

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---

| | |
|:---|:---|
|  **ARTICLE IV** | 6 |
|  **<u>PARTICIPANT ACCOUNTS</u>** | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 **<u>Accounts</u>** | 6 |
|  **ARTICLE V** | 7 |
|  **<u>DISTRIBUTIONS</u>** | 7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 **<u>Normal Time and Form of Distribution</u>** | 7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 **<u>Alternative Forms of Distributions</u>** | 7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3 **<u>Time and Form of Payment Upon Death</u>** | 7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4 **<u>Withdrawal for Unforeseeable Emergencies</u>** | 7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.5 **<u>Compliance with Section 409A</u>** | 8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.6 **<u>Installment Payments</u>** | 8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.7 **<u>Changes in Time and From of Distribution</u>** | 8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.8 **<u>Special Election for 2006, 2007 and 2008 Contributions</u>** | 9 |
|  **ARTICLE VI** | 9 |
|  **<u>VESTING</u>** | 9 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1 **<u>Nonforfeitable Amounts</u>** | 9 |
|  **ARTICLE VII** | 9 |
|  **<u>CLAIMS PROCEDURES</u>** | 9 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1 **<u>Claims and Review Procedures</u>** | 9 |
|  **ARTICLE VIII** | 10 |
|  **<u>GENERAL PROVISIONS</u>** | 10 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1 **<u>Former Employees</u>** | 10 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2 **<u>Plan Unfunded</u>** | 11 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3 **<u>Unsecured Creditor</u>** | 11 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.4 **<u>Administration</u>** | 11 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.5 **<u>Plan Interpretation</u>** | 12 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.6 **<u>Benefits Non-Assignable</u>** | 12 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.7 **<u>Amendment and Termination</u>** | 13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.8 **<u>Employment Not Guaranteed by Plan</u>** | 13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.9 **<u>Compliance With a Code</u>** | 13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.10 **<u>Consequences of a Violation</u>** | 13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.11 **<u>FICA Taxes</u>** | 13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.12 **<u>Taxes</u>** | 13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.13 **<u>Effective Date of Linked Plan Rules</u>** | 14 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.14 **<u>No Specified Employees</u>** | 14 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.15 **<u>Top Hat Plan</u>** | 14 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.16 **<u>Merger or Acquisition</u>** | 14 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.17 **<u>Satisfaction of Liability</u>** | 14 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.18 **<u>Substitute Payee</u>** | 14 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.19 **<u>Required Information</u>** | 14 |

---

ii

------

---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.20 **<u>Binding Upon Successors</u>** | 14.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.21 **<u>Annual Statement</u>** | 14.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.22 **<u>Expenses</u>** | 15.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.23 **<u>Form of Communication</u>** | 15.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.24 **<u>Gender and Number</u>** | 15.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.25 **<u>Captions</u>** | 15.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.26 **<u>Severability</u>** | 15.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.27 **<u>Binding Agreement</u>** | 15.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.28 **<u>Governing Laws</u>** | 15.0 |

---

iii

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**<u>PREAMBLE</u>**

WHEREAS, Somerset Savings Bank, SLA (the "Bank") adopted a nonqualified retirement plan, known as the Somerset Savings Bank Supplemental Retirement Plan effective as of May 1, 1994 (the "1994 Plan" or the "Plan"), for the benefit of certain highly compensated employees; and

WHEREAS, the Bank intended for benefits under the Plan to replace certain benefits eligible employees may not receive under the Somerset Savings Bank, SLA Pension Plan (the "Pension Plan") due to the application of the annual compensation limitations under Section 401(a)(17) of the Internal Revenue Code, as adjusted for cost of living increases, which is **$225,000** in 2007; and

WHEREAS, the Bank maintains a Compensation limit of **$170,000** under the Pension Plan, which is therefore the level beyond which benefits are available under the 1994 Plan; and

WHEREAS, all employees whose Compensation exceeds the applicable limitation as adjusted, and who are losing benefits under the Pension Plan shall participate in the Plan; and

WHEREAS, Section 409A of the Internal Revenue Code, as enacted under the American Jobs Creation Act of 2004 ("AJCA") imposes new rules regarding the **time** and **form** of distributions under nonqualified retirement plans, such as the 1994 Plan; and

WHEREAS, all benefits to which employees had a legally binding right, and no substantial risk of forfeiture effective as of December 31, 2004, could be governed by the terms of the 1994 Plan and need not be subject to Section 409A under a special **"grandfather rule"**; and

WHEREAS, to avoid excess administration for the 1994 Plan, the Bank has determined that no benefits shall be grandfathered under the grandfather rule; and

WHEREAS, to comply with Section 409A of the Code the Bank wishes to amend and restate the 1994 Plan effective as of January 1, 2005, for all deferred compensation benefits, including benefits accrued and vested prior to 2004, in accordance with all transition relief under IRS Notice 2005-1 and the Final Regulations issued under Section 409A; and

WHEREAS, the intent of the SERP is to comply with all IRS announcements and notices, including Notice 2005-1 and the Final Regulations issued under Section 409A.

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NOW, THEREFORE, effective January 1 2005, the Somerset Savings Bank Supplemental Retirement Plan is hereby amended and restated as follows, and renamed the Somerset Savings Bank Supplemental Executive Retirement Plan (the "SERP" or the "Plan"):

**ARTICLE I** 

**<u>DEFINITIONS</u>** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 **"<u>Acc</u>ount**" means the bookkeeping entry maintained in the records of the Bank for each Participant representing the amount of Supplemental Employer Contributions deferred under the Plan, and all interest, earnings, appreciation, depreciation, losses, expenses, or distributions credited or debited to such account.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 **"<u>B</u>ank**" means Somerset Savings Bank, SLA and any successor bank or other entity which adopts and continues this Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3 **"<u>Be</u>neficiary**" means any person entitled to receive benefits under the this Plan upon the death of a Participant, as designated in a Beneficiary Designation Form executed by each Participant. A Participant's Beneficiary Designation Form may be revoked or changed by the Participant at any time, without the consent of any Spouse or any previous Beneficiary. Any such designation, revocation or change shall be in writing, signed by the Participant and delivered to the Bank. In the event no Beneficiary is designated, or if any designated Beneficiary does not survive a Participant, all payments shall be made to the Participant's Spouse, if any, or to the Participant's estate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4 **"<u>Board</u>"** means the Board of Directors of Somerset Savings Bank, SLA as in office from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5 **"<u>Code</u>"** means the Internal Revenue Code of 1986, as amended, and any regulations issued thereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.6 **"<u>Committee</u>"** means the senior member of the Human Resources Department, unless other individuals are appointed by the Bank to supervise the administration of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.7 **"<u>Com</u>pensation**" means the total remuneration paid by the Bank during the calendar year, plus any contributions made by the Bank under any salary reduction or similar arrangement to a qualified plan under Sections 401(k) or Section 125 of the Code, but **exclusive** of any (i) commissions and bonuses, and (ii) cost to the Bank for fringe benefits.

Compensation for a Participant who solely as the result of an approved leave of absence or Disability receives remuneration from the Bank for a portion of, but not the entire calendar year shall be his last basic rate of pay, multiplied by (i) his customary Hours of Employment with the Bank as defined in the Pension Plan, if paid hourly; (ii) **52**, if paid weekly; (iii) **26** if paid bi-weekly; (iv) **24**, if paid semi-monthly; or (v) **12**, if paid monthly, or, if greater, his Compensation as defined in the preceding paragraph. This definition is intended to conform with the definition of Compensation under the Pension Plan, including any additional limitations required under the Plan; but without regard to any Compensation limitation under Section 401(a)(17) of the Code. To the extent any changes are made to the definition of Compensation under the Pension Plan, such changes shall automatically be made to the Supplemental Plan.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.8 **"<u>Disability</u>**" means a Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment, which can be expected to result in death or can be expected to last for a continuous period of not less than **12** months, as determined by an independent third party physician, selected within the discretion of the Committee.

The determination of whether a Participant is disabled shall be determined by the Committee, in its sole discretion, but subject to the provisions of Section 409A.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.9 **"<u>Effective Date</u>**" means May 1, 1994. The effective date of the amendment and restatement is January 1, 2005.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.10 **"<u>Highly Compensated Employee</u>**" means an individual who is characterized as a highly compensated employee under Section 414(q) of the Code, or any other level established by the Committee. To the extent required by Department of Labor Regulation Section 2520.104-23, to permit the Plan to qualify as a "Top Hat" plan for a select group of highly compensated employees, the term Highly Compensated Employee shall be restricted by the Committee to satisfy this Department of Labor Regulation. To the extent any Participant is determined to no longer be a Highly Compensated Employee while actively participating in the Plan, all future benefits shall terminate until such time as the Participant is once again determined to be a Highly Compensated Employee. The Committee shall have the discretion to take all actions necessary to preserve the "Top Hat" status of the Plan, including but not limited to distributing any benefits and terminating the participation of any Participant in the Plan, except to the extent such action would violate Section 409A.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.11 **"<u>Highly Compensated Participant</u>**" means a Highly Compensated Employee who is selected to participate in the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.12 **"<u>Key Employee</u>**" means an individual as described in Section 416(i) of the Code, determined without regard to Section 416(i)(5) thereof. For purposes of this provision, a Key Employee is an officer earning more than **$140,000** in 2006 and **$145,000** in 2007 (with a limit of no more than **50** employees, or if less, the greater of **3** or **10%** of all employees being treated as officers); a **5%** owner; or a **1%** owner having annual compensation of more than **$150,000**. All amounts shall automatically be increased as provided under the Code for cost of living or other changes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.13 **"<u>Participant</u>**" means a Highly Compensated Employee who is entitled to receive a Supplemental Employer Contribution. Notwithstanding any provisions of the Plan, an individual for whom an Account is maintained under the Plan shall be considered a Participant, whether such individual is no longer a Highly Compensated Employee, if he or she is still employed by the Bank or has not received all benefits payable under the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.14 **"<u>Pension Plan</u>**" means the Somerset Savings Bank, SLA Pension, and as amended and restated in the future.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.15 "**<u>Plan</u>**" means the Somerset Savings Bank Supplemental Executive Retirement Plan, as set forth herein, and as amended from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.16 "**<u>Plan Year</u>**" means each **12**-consecutive month period that begins on each May 1 and ends on the following April 30. The Plan Year shall continue as established, even though the Plan is being amended as of January 1, 2005 for purposes of Section 409A.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.17 "**<u>Separation from Service</u>**" means a Participant is no longer employed by the Bank or any Related Entities The term "Separation from Service" generally means a Participant is no longer employed by the Bank or any Related Entity on account of a termination of employment, Retirement, Disability or death. Consistent with the Final Treasury Regulation, or any subsequent guidance under Section 409A of the Code, no Separation from Service shall occur if a Participant continues to perform services as a consultant or an employee in excess of any amount of time permitted under such guidance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. **<u>Leave of Absence</u>**. For purposes of Section 409A, the employment relationship is treated as continuing in effect while a Participant is on military leave, sick leave, or other bona fide leave of absence, as long as the period of leave does not exceed **6** months, or if longer, as long as the Participant's right to reemployment with the Employer provided either by statute or contract. Otherwise, after a **6** month leave of absence, the employment relationship if deemed terminated.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. **<u>Part-Time Status</u>**. Whether or not a termination of employment occurs is determined based upon all facts and circumstances. However, in the event that services provided by a Participant are **insignificant**, a Separation from Service shall be deemed to have occurred. For purposes of Section 409A, if a Participant is providing services to the Bank or any Related Entities at a rate that is at least equal to **20%** of the services rendered, on average, during the immediately preceding **3** full calendar years of employment (or such lesser period), and the annual compensation for such services is at least **20%** of the average annual compensation earned during the final **3** full calendar years of employment (or such lesser period), no termination shall be deemed to have occurred since such services are **not insignificant**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. **<u>Consulting Services</u>**. Where a Participant continues to provide services to the Bank or any Related Entities in a capacity other than as an employee, a Separation from Service shall **not be deemed to have occurred** if the Participant is providing services at an annual rate that is **50%** or more of the services rendered, on average, during the immediately preceding **3** full calendar years of employment (or such lesser period) and the annual remuneration for such services is **50%** or more of the annual remuneration earned during the final **3** full calendar years of employment (or such lesser period).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.18 **"<u>Specified Employee</u>"** means a Key Employee as defined under Section 416 of the Code, who is employed by the Bank or any Related Entity which has its stock publicly traded on an established securities market. Since the Bank does not have any publicly traded stock, no Specified Employees exist.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.19 **"<u>Spouse</u>"** means the individual who is legally married to a Participant at the earlier of the Participant's Benefit Commencement Date or death.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.20 **"<u>Supplemental Employer Contributions</u>"** means the Supplemental Employer Contributions made under Section 3.1.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.21 **"<u>Unforeseeable Emergency</u>"** means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant's Spouse, or a dependent (as defined in section 152(a) of the Code) of the Participant; loss of the Participant's property due to casualty; or any other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, as determined under Section 409A of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.22 **"<u>Valuation Date</u>"** means the last date of each Plan Year, or more frequent periods as determined within the discretion of the Committee.

**ARTICLE II** 

**<u>ELIGIBILITY TO PARTICIPATE</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 **<u>Eligibility to Participate in Supplemental Employer and Supplemental Matching Contributions</u>**. Each Highly Compensated Employee whose Compensation exceeds the lesser of the Compensation limitation in effect under Section 401(a)(17) of the Code or Compensation as taken into consideration under the Pension Plan (i.e., **$170,000** in 2007), as adjusted for any cost of living or other increases, shall **automatically** become eligible to receive a Supplemental Employer Contribution in the Plan Year in which the Compensation limit is exceeded for purposes of benefits under the Pension Plan. For example, if Compensation for the 2007 calendar year exceeds the compensation limitation (<u>i.e.</u>, **$170,000**), a Highly Compensated Employee would enter the SERP as of May 1, 2008.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 **<u>No Employee Deferral Contributions Permitted</u>**. Highly Compensated Employees who are eligible to participate in the Plan shall **not be eligible** to make any employee deferral contributions to the Supplemental Plan, by execution of any salary reduction agreements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3 **<u>Re-employment</u>**. If a Highly Compensated Employee who participated in the Plan terminates his employment but is subsequently re-employed by the Bank, the Participant shall be entitled to resume receiving Supplemental Employer Contributions if such individual's Compensation exceeds the applicable limitation, as adjusted.

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**ARTICLE III** 

**<u>CONTRIBUTIONS TO THE PLAN</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 **<u>Supplemental Employer Contributions</u>**. On the first day of each Plan Year, the Bank shall credit to the Account of each Participant an amount equal to a **"designated percentage"** of that portion of the Participant's Compensation for the calendar year which includes the first day of such Plan Year. Once a Participant becomes eligible in accordance with Section 2.1 of the Plan for any Supplemental Benefits, the Participant shall be entitled to a Supplemental Employer Contribution regardless of whether a Participant works **1,000** hours in each Plan Year or if such individual is employed on the last day of any Plan Year.

The **"designated percentage"** shall be determined at the sole discretion of the Bank after receipt of an actuarial report prepared by an actuary selected by the Bank to determine the amount necessary to replace the benefits Participants may not receive under the Pension Plan for total Compensation over **$170,000** (or other limit established by the Bank in the Pension Plan) based upon all actuarial assumption taken into consideration under the Pension Plan. A different percentage shall be established for each Participant. All designated percentages may be changed by the Bank, within its discretion, for any reasons, including but not limited to increases in Compensation under Section 401(a)(17) of the Code, and changes in a Participants Compensation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 **<u>Linked Plan Procedures</u>**. The Bank also maintains the Pension Plan as noted above. Employee elections under the SERP are made independent of any elections under the Pension Plan. In addition, distribution elections are made separately between the Plan and the Pension Plan. Accordingly, for purposes of Section 409A of the Code, the SERP and the Pension Plans are **not** linked plans.

**ARTICLE IV** 

**<u>PARTICIPANT ACCOUNTS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 **<u>Accounts</u>**. All Supplemental Employer Contributions made pursuant to Article III shall be credited to an Account maintained for each Participant. These Accounts shall be administered by the Committee and shall represent each Participant's benefit under the Plan. Each Participant's Account shall be credited with Supplemental Employer Contributions on an annual basis after receipt of a report prepared by an actuary selected by the Bank to determine the annual benefit for each Participant. Each Participant's Account shall also be credited with earnings and each Account shall be valued on an semi-annual or more frequent basis, as determined by the Committee (the "Valuation Date"). On every Valuation Date each Account shall be credited with the **greater of** (a) the highest certificate of deposit rate in effect each May 1 and November 1; or the weighted average cost of all deposits of the Bank as of May 1 and November 1, compounded semi-annually. All earnings shall be prorated through the first day of any month in which a distribution occurs. In no event shall the creation of any sinking fund to satisfy the Bank's obligations under the Plan be deemed to create any right to any specific assets for any Participant, or to otherwise cause the Plan to be funded. The earnings to be credited to Accounts under the Plan may be changed from time to time, within the discretion of the Board.

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**ARTICLE V** 

**<u>DISTRIBUTIONS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 **<u>Normal Time and Form of Distribution</u>**. The normal form of distribution is quarterly cash installments over a period of **5** years following a Participant's voluntary or involuntary Separation from Service with the Bank, retirement, or upon the occurrence of a Disability. All payments shall commence within **90** days following any event entitling a Participant to a distribution. All payments will be based on the most recent Valuation Date preceding the payment of any benefit or occurrence of any payment event, as appropriate. A Participant shall continue to receive earnings on any balance remaining in the Participant's Account until all benefits are paid.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 **<u>Alternative Forms of Distributions</u>**. In lieu of the normal form of distribution, Participants may elect, in accordance with procedures established by the Committee within **30** days of being notified of eligibility to participate in the Plan, to elect to receive their benefits in accordance with one of the following forms of distribution:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Equal quarterly installments over a period of **10** years;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) A single lump sum payment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3 **<u>Time and Form of Payment Upon Death</u>**. In the event of a Participant's death, prior to retirement, Disability or any other voluntary or involuntary Separation from Service, such Participant's Account shall be paid in quarterly cash installments over a period of **5** years. All payments shall commence within **90** days following the occurrence of such event. All payments will be based on the most recent Valuation Date preceding the payment of any benefit or occurrence of any payment event, as appropriate. A Beneficiary shall continue to receive earnings on any balance remaining in the Participant's Account, until all benefits are paid. A Participant shall also be given the ability to elect, as permitted under Section 409A and IRS Notice 2007-87, for a Beneficiary to receive all death benefits in the form of a single lump sum cash payment within **90** days after the date of death. Any change in this election after December 31, 2008 must comply with Section 409A and any guidance issued thereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4 **<u>Withdrawals for Unforeseeable Emergencies</u>**. A Participant shall be permitted to receive a withdrawal, prior to the occurrence of a Separation from Service, from the Participant's Account, in the event of an Unforeseeable Emergency. A distribution shall only be permitted under this Section 5.4 if, consistent with the Final Regulations issued under Section 409A of the Code, the amount distributed with respect to an emergency does not exceed the amount necessary to satisfy such emergency, plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into consideration the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise, or by liquidation of the Participant's assets (to the extent the liquidation of such assets would not in and of itself cause severe financial hardship).

A Participant shall be required to submit proper documentation of any Unforeseeable Emergency, and the amount needed to meet the needs to the Committee. The Committee shall determine, in its sole discretion, whether the events constitute an Unforeseeable Emergency, and the amount needed to meet the needs of the Participant, in accordance with the provisions of section 409A of the Code and all regulations issued thereunder. Payment shall be made as soon as administratively possible in the month following the month in which the Committee makes its determination regarding a Participant's request for a distribution for an Unforeseeable Emergency. Any distribution under this provision shall be made in a single lump sum cash payment.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.5 **<u>Compliance with Section</u> <u>409A</u>**. Participants do not have any discretion to elect any time or form of payment that is different than the payment methods established under the terms of the Plan, as originally drafted in 1994. Accordingly, no discretion exists regarding the **time** and **form** of payment and the SERP is intended to comply with all provisions of Section 409A.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.6 **<u>Installment Payments</u>**. Each installment payment shall be treated as a **separate payment** for purposes of any change in distribution elections under Section 5.4.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.7 **<u>Changes in the Time and Form of</u> <u>Distributions</u>**. In accordance with Section 409A of the Code, a Participant may generally not change the **time** and/or **form** of a distribution under the Plan, except as provided in IRS Notice 2005-1 and the Proposed or Final Regulations issued under Section 409A, or subsequent guidance.

In accordance with Final Treasury Regulations, a Participant may make a "subsequent election" to **delay a payment** or **change the form** of payment of an amount of deferred compensation. In order for such an election to be effective the election must be made **12** months prior to the date the payment is scheduled to be paid; the election cannot take effect until at least **12** months after the date upon which the election is made; and the payment with regard to such election must be deferred for a period of not less than **5** years from the date such payment would otherwise have been made. For purposes of this provision, consistent with the Final Treasury Regulations or any other guidance, each installment payment to which any Participant shall be entitled shall be treated as a right to a series of separate payments, thereby permitting a Participant to elect to defer the payment of any quarterly installment, as long as such a deferral election is made consistent with the **12** month election rule and the **5** year delay in payment requirements of this Plan and Section 409A of the Code.

Consistent with the provisions of this Section 5.7, a Participant may elect an alternative date upon which to have benefits commence under the normal form of distribution or under any other manner of distribution permitted in accordance with Section 5.2 of the Plan.

The Committee shall establish uniform procedures, including a Distribution Election Form, in order to allow Participants to elect alternative forms of distributions. The Committee shall make best efforts to ensure that all procedures are established in a manner to allow Participants to elect alternative forms of distributions prior to the date that benefits would otherwise commence, in order to minimize any unintended taxation to Participants under the constructive receipt rule and Section 409A. The Committee may also establish reasonable procedures to allow Participants to elect the form of distribution at the time they become Participants in the Plan, or any time thereafter prior to entitlement to benefits. Participants may be allowed to change their form of distribution within the discretion of the Committee, as long as such action is taken in accordance with Section 409A of the Code.

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.8 **<u>Special Election for 2006, 2007 and 2008 Contributions</u>**. This Plan is being amended and restated effective as of January 1, 2005, to comply with the provisions of Section 409A of the Code. In accordance with IRS Notice 2005-1, Q&A-19(c), Final Treasury Regulation issued under Section 409A, as extended until December 31, 2008 under IRS Notice 2007-86, a Plan may be amended to provide for new payment elections without violating the "subsequent deferral" and "anti-acceleration rules" under Section 409A, as long as a Plan is so amended by December 31, 2008. However, a Participant may not, in 2006, 2007 or 2008 change a payment election with respect to payments that a Participant would otherwise receive in 2006, 2007 or 2008 or cause a payment to be accelerated into 2006, 2007 or 2008. Accordingly, with respect to all contributions made to the 2005 SERP for the 2005, 2006, 2007 or 2008 Plan Years, the Plan shall allow all Participants to make new payment elections on or before December 31, 2008, with respect to both the **time** and **form** of payment of the 2005, 2006, 2007 or 2008 contributions, and prior contributions. This **"second election opportunity"** is being granted in accordance with all applicable IRS guidance.

**ARTICLE VI** 

**<u>VESTING</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1 **<u>Nonforfeitable Amounts</u>**. A Participant shall have a **100%** nonforfeitable interest in all Supplemental Employer Contributions which are credited under the Plan.

**<u>ARTICLE VII</u>**

**<u>CLAIMS PROCEDURES</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1 **<u>Claims and Review Procedures</u>**. The Corporation hereby adopts the following claims procedures to review all claims for benefits under the Plan, in accordance with Department of Labor Regulation 29 CFR §2560.503-1:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **<u>Benefit Claims</u>**. Claims for benefits shall be made in writing to the Corporation through the Human Resources Department. In the event the Corporation contracts with a person or corporation to process claims for any benefits, claims for such benefits shall be forwarded to such person or corporation as designated by the Corporation. Whoever processes claims for benefits shall be referred to as the Claim Coordinator in this claims procedure.

The Claim Coordinator shall make all determinations as to the right of any claimant to a benefit under the Plan. If the Claim Coordinator denies in whole or in part any claim for a benefit under the Plan, the Claim Coordinator shall furnish the claimant with notice of the decision not later than **90** days after receipt of the claim by the Claim Coordinator, unless special circumstances require an extension of time for processing the claim. If such an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial **90** day period. In no event shall such extension exceed the period of **90** days from the end of such initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Claim Coordinator expects to render the final decision. If no notice of a decision or extension is provided, the claimant shall assume the claim has been denied.

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The written notice, which the Claims Coordinator shall provide to every claimant who is denied a claim for benefits, shall be set forth in a manner calculated to be understood by the claimant:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) The specific reason or reasons for the denial;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Specific reference to pertinent Plan provisions on which the denial is based;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) Appropriate information as to the steps to be taken if the claimant wishes to submit his claim for review.

A claimant or his authorized representative may request that the Committee review the denial of a claim by the Claim Coordinator. The Committee shall be established by the Corporation as the "Named Appeals Fiduciary," as required under ERISA for reviewing claims, and shall serve as the Appeals Committee. Such request shall be made in writing and shall be presented to the Appeals Committee not more than **60** days after receipt by the claimant of written notification of the denial of a claim. The claimant shall have the right to review pertinent documents and to submit issues and comments in writing. The Appeals Committee shall make its decision on review not later than **60** days after receipt by the Appeals Committee of the claimant's request for review, unless special circumstances require an extension of time, in which case a decision shall be rendered as soon as possible but no later than **120** days after receipt by the Appeals Committee of the request for review. If such an extension of time for review is required because of special circumstances, written notice of the extension shall be furnished to the claimant prior to the commencement of the extension. The decision of review shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent Plan provisions on which the decision is based.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **Compliance with Regulations**. It is intended that the claims procedure of this Plan be administered in accordance with the claims procedure regulations of the Department of Labor set forth in 29 CFR §2560.503-1.

**ARTICLE VIII** 

**<u>GENERAL PROVISIONS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1 **<u>Former Employees</u>**. <u>Any</u> Participants in the Plan who has commenced to receive benefits on or before the Effective Date of this Plan or who has terminated employment before the Effective Date of this Plan shall be governed by the provisions of the 1994 Plan.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2 **<u>Plan Unfunded</u>**. The Plan shall be unfunded for purposes of the Code and Title I of the Employee Retirement Income Security Act of 1974 ("ERISA"), and no assets shall be set aside for the payment of benefits under the Plan, even if a trust is established to provide for the payment of any or all benefits hereunder. All benefits shall be paid from the general assets of the Bank, which remain subject to the claims of all general creditors of the Bank and to unrestricted use by the Bank until benefit payments are made. To the extent the Bank decides, within its discretion, to establish any trust or other internal funding vehicles, such as a sinking fund, to provide for the payment of benefits to Participants and assist in meeting the Bank's obligations under the Plan, any such trusts shall be grantor trusts established in accordance with the provisions of Revenue Procedure 92-64. Any provisions which would cause any trust to fail to comply with Revenue Procedure 92-64, or any subsequent Internal Revenue Service rulings or pronouncements, shall be null and void, and the closest alternative provision contained in Revenue Procedure 92-64 shall apply, if appropriate. Notwithstanding any provisions to the contrary, in the event of a "Change in Control" of the Bank, if any benefits under the Plan are held in a "Rabbi Trust", the assets transferred to the Rabbi Trust shall become **irrevocably** held by the Rabbi Trust and may not be recovered by the Bank or any Related Entities, or used by the Bank or any Related Entities for any corporate or other purposes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3 **<u>Unsecured Creditor</u>**. The right of a Participant or his Beneficiaries to benefits under this Plan shall be solely that of unsecured creditors of the Bank. The benefits payable under the Plan constitute a mere promise by the Bank to make payments in the future, and does not otherwise create any rights in the Participant or any Beneficiaries.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.4 **<u>Administration</u>**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **<u>General</u>**. The Committee shall be in charge of the operation and the administration of the Plan. The Committee shall have the power to delegate specific responsibilities. Such delegations may be to other officers or employees of the Bank or to other individuals, all of whom shall serve at the pleasure of the Committee and, if full-time employees of the Company, without additional compensation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **<u>Decision Process</u>**. The Committee shall act by a majority of its members unless unanimous consent is required by the Plan or by unanimous approval of its members if there are two or less members in office at the time. In the event of a Committee deadlock, the Committee shall determine the method for resolving such deadlock. No Committee member shall act upon any question pertaining solely to himself, and the other member or members shall make any determination required by the Plan in respect to such member.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) **<u>Delegation</u>**. The Committee may, by unanimous consent, delegate specific authority and responsibilities to one or more of its members. The member or members so designated shall be solely liable, jointly and severally, for their acts or omissions with respect to such delegated authority and responsibilities. Committee members not so designated shall be relieved from liability for any act or omission resulting from such delegation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) **<u>Authority and Responsibility</u>**. The Committee shall have full authority and responsibility to interpret and construe the Plan and determine all questions of the status and rights

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of the Members and the amounts of their contributions. Its interpretation, construction or determination, as the case may be, shall be final and conclusive on both the Bank and the Participants and their respective successors, assigns, personal representatives and Beneficiaries. Such authority and responsibility shall include, but shall not be limited to, the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Appointment of qualified accountants, consultants, administrators, counsel, appraisers, or other persons it deems necessary or advisable who shall serve the Committee as advisors only and shall not exercise any discretionary authority, responsibility or control with respect to the management or administration of the Plan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Determination of all benefits, and resolution of all questions arising from the administration, interpretation and application of the Plan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Adoption of forms and regulations for the administration of the Plan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) Remedy of all inequity resulting from incorrect information received or communicated, or from administrative error;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) Settlement or compromise of any claims or debts arising from the operation of the Plan and the commencement of any legal actions or administrative proceeding.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) **<u>Indemnification</u>**. The Bank shall indemnify and hold the members of the Committee harmless against liability incurred in the administration of the Plan, except for the gross negligence or willful misconduct of any member.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.5 **<u>Plan Interpretation</u>**. The Board, or the Committee if such responsibility is delegated, shall have complete discretion to interpret all provisions of the Plan and to establish reasonable rules and procedures to facilitate the administration of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.6 **<u>Benefits Non-Assignable</u>**. Neither a Participant nor any Beneficiary under the Plan shall have any right to assign, transfer, pledge or otherwise encumber the right to receive any benefits hereunder, and any attempted assignment, transfer, pledge or other encumbrance shall be null and void, and have no effect. Similarly, no rights under the Plan shall be subject to attachment or garnishment, or otherwise subject to liability for the debts, contracts, liabilities or torts by the creditors of any Participant or Beneficiary.

Notwithstanding the general inability to assign benefits under the Plan, consistent with IRS Notice 2002-31 and Revenue Ruling 2002-22, to the extent that a valid Property Settlement or Divorce Decree directs that any portion of a Participant's benefits under the Plan be designated to a former Spouse, benefits shall be paid to the Spouse, at the same time benefits would otherwise have been payable to the Participant. In no event, shall any former Spouse obtain any additional rights to receive any form of distribution, or benefits payable in any manner not permitted under the Plan, or at any time earlier than when a Participant would otherwise have been entitled to receive such benefits.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.7 **<u>Amendment and Termination</u>**. The Board shall have the right, at any time, to amend or terminate the Plan, in whole or in part, provided that such amendment or termination shall not adversely affect any benefits which have been credited to Participant Accounts. The Board may not reduce or modify any benefit which has vested under Article VI without the written consent of each Participant, or if any Participant has died, the Participant's Beneficiaries. The ability of the Bank to terminate the Plan, and the timing and manner of distributing benefits in connection with any termination of the Plan, shall in all respects comply with Section 409A of the Code. Within **60** days following the termination of the Plan, the Committee shall distribute the amount in each Account in a single lump sum cash payment, to or on behalf of the Participant or Beneficiary entitled thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.8 **<u>Employment Not Guaranteed by Plan</u>**. Participation in the Plan shall not be deemed to be consideration for, or an inducement to, or a condition of the employment of any employee. Nothing contained in this Plan shall be deemed to give any Participants the right to be retained in the employment of the Bank, nor shall any Participant, retired Participant, deceased Participant, disabled Participant, or terminated Participant have any right to any payment, except as such payment may be provided under the terms of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.9 **<u>Compliance With the Code</u>**. The SERP is intended to comply with the provisions of Section 409A of the Code, and all other provisions. If there is any discrepancy between the provisions of this SERP and the provisions of Section 409A, this discrepancy shall be resolved in a manner as to give full effect to the provisions of Section 409A of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.10 **<u>Consequences of a Violation</u>**. All Participants shall be informed that they may voluntarily participate in the SERP, after being notified of their eligibility to participate in the SERP. All Participants shall be notified of the potential tax consequences under Section 409A, if the provisions of the Plan and Section 409A are not followed, including the imposition of immediate income taxes, a **20%** excise tax, underpayment of interest penalties, and Form W-2 reporting. All Participants shall also be informed that the amount of their benefits under the Plan shall be reported to the IRS, as required for nonqualified deferred compensation programs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.11 **<u>FICA Taxes</u>**. All Participants shall be informed that when their benefits become **vested** under the Plan, and not subject to any substantial risk of forfeiture under Sections 3121(v) and 3306(r) and other provisions of the Code, the Participants shall be subject to FICA and all related taxes. The Bank shall have the right to withhold from a Participant's other wages, any FICA or other related taxes required to be withheld as provided in Section 8.12.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.12 **<u>Taxes</u>**. The Bank shall be entitled to deduct from all benefit payments made to a Participant or any Beneficiary all applicable federal, state or local taxes required by law to be withheld from such payments.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.13 **<u>Effective Date of Linked Plan Rules</u>**. Notwithstanding any provisions to the contrary, effective as of January 1, 2008, all linked nonqualified deferred compensation plans must conform with the Section 409A rules regarding the **timing** and **form** of distributions. However, transition rules permit Participants in plans that are subject to Section 409A of the Code to make elections, or new elections, as to the time and form of payment in 2007, provided such elections do not accelerate payment to 2007 of amounts that would otherwise have been paid in a later year, or defer to a later year a payment that would otherwise have been made in 2007.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.14 **<u>No Specified Employees</u>**. Since the Bank is not a publicly traded company, no "Specified Employees," exist to be subject to the **6** month delay in payment rules under section 409A.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.15 **<u>Top Hat Plan</u>**. ERISA generally applies to protect the interests of "employees", and DOL Regulation Section 2520.104-23 establishes rules for certain arrangements that provide benefits for a select group of management or Highly Compensated Employees, referred to as "Top Hat" programs. This Plan is intended to be a Top Hat program under ERISA. In determining if the Plan satisfies all rules to be classified as a Top Hat program, or in reviewing the number of Participants in the Plan for any reasons, all employees of the Bank and any Related Entities, whether foreign or domestic, shall be taken into consideration.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.16 **<u>Merger or Acquisition</u>**. Nothing contained herein shall preclude the Bank from merging into or with, or being acquired by, another business entity which assumes this Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.17 **<u>Satisfaction of Liability</u>**. After all benefits have been distributed in full to a Participant or to his Beneficiary, all liability to such Participant or to his Beneficiary shall cease.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.18 **<u>Substitute Payee</u>**. If a Participant or Beneficiary entitled to receive any benefits hereunder is in his minority, or is, in the judgment of the Committee, legally, physically, or mentally incapable of personally receiving and receipting any distribution, the Committee may make distributions to a legally appointed guardian or to such other person or institution as, in the judgments of the Committee, is then maintaining or has custody of the payee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.19 **<u>Required Information</u>**. The Bank, Participants, or Beneficiaries entitled to benefits shall furnish forms and any information or evidence as requested by the Committee for the proper administration of the Plan. Failure on the part of any Participant or Beneficiary to comply with such request within a reasonable period of time shall be sufficient grounds for delay in the payment of benefits, until the information or evidence requested is received, as long as such a delay does not result in any violations under Section 409A of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.20 **<u>Binding Upon Successors</u>**. The liabilities under the Plan shall be binding upon any successor or assign of the Bank and any purchaser of the Bank or substantially all of the assets of the Bank, and this Plan shall continue in full force and effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.21 **<u>Annual Statement</u>**. Participants shall receive an annual statement after the end of each Plan Year, confirming the amounts credited to each Participant's Account.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.22 **<u>Expenses</u>**. All expenses incurred in administering the Plan shall be paid by the Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.23 **<u>Form of Communication</u>**. Any election, claims, notice or other communication required or permitted to be made a Participant under this Plan shall be made in writing and in such form as shall be prescribed by the Committee. Such communication shall be effective upon receipt, if hand delivered or sent by first class mail, postage pre-paid, return receipt requested to Somerset Savings Bank, SLA, 220 West Union Avenue, P.O. Box 220, Bound Brook, New Jersey 08805.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.24 **<u>Gender and Number</u>**. The masculine gender, where appearing herein, shall be deemed to include the feminine gender, and the singular shall be deemed to include the plural, unless the context clearly indicates to the contrary.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.25 **<u>Captions</u>**. The captions at the head of a paragraph of this Plan are designed for convenience of reference only and are not to be resorted to for the purpose of interpreting any provision of this Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.26 **<u>Severability</u>**. The invalidity of any portion of this Plan shall not invalidate the remainder, and the remainder shall continue in full force and effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.27 **<u>Binding Agreement</u>**. The provisions of this Plan shall be binding upon the Participant and the Bank and their successors, assigns, heirs, executors and beneficiaries.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.28 **<u>Governing Laws</u>**<u>.</u> The Plan shall be governed and construed in accordance with the laws of the State of New Jersey, except to the extent preempted by federal law.

The Plan is amended and restated effective as of January 1, 2005.

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| | | |
|:---|:---|:---|
| ATTEST: | SOMERSET SAVINGS BANK, SLA | SOMERSET SAVINGS BANK, SLA |
| /s/ Christopher J. Pribula | BY: | /s/ David Prugh |
| Secretary |  | David Prugh, President |
| [SEAL] |  |  |

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## Exhibit 10.5

**Exhibit 10.5** 

**SOMERSET SAVINGS BANK, SLA** 

**DEFERRED COMPENSATION PLAN** 

**Amended and Restated as of January 1, 2019** 

**(Originally effective as of February 1, 1988)** 

December, 2018

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**<u>**TABLE OF CONTENTS**</u>**

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| | |
|:---|:---|
|  | <u>Page</u> |
|  **ARTICLE I** | 2 |
|  **<u>DEFINITIONS</u>** | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 **"<u>Account</u>"** | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 **"<u>Bank</u>"** | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3 **"<u>Beneficiary</u>"** | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4 **"<u>Benefit Commencement Date</u>"** | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5 **"<u>Board</u>"** | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.6 **"<u>Code</u>"** | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.7 **"<u>Committee</u>"** | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.8 **"<u>Compensation</u>"** | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.9 **"<u>Deferred Retirement Date</u>"** | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.10 **"<u>Director</u>"** | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.11 **"<u>Disability</u>"** | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.12 **"<u>Effective Date</u>"** | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.13 **"<u>Employee</u>"** | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.14 **"<u>Highly Compensated Employee</u>"** | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.15 **"<u>Highly Compensated Participant</u>"** | 4 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.16 **"<u>Key Employee</u>"** | 4 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.17 **"<u>Normal Retirement Date</u>"** | 4 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.18 **"<u>Participant</u>"** | 4 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.19 **"<u>Performance-Based Compensation</u>"** | 4 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.20 **"<u>Plan</u>"** | 5 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.21 **"<u>Plan Year</u>"** | 5 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.22 **"<u>Retirement</u>"** | 5 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.23 **"<u>Salary Deferral Contributions</u>"** | 5 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.24 **"<u>Separation from Service</u>"** | 5 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.25 **"<u>Specified Employees</u>"** | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.26 **"<u>Spouse</u>"** | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.27 **"<u>Unforeseeable Emergency</u>"** | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.28 **"<u>Valuation Date</u>"** | 6 |
|  **ARTICLE II** | 6 |
|  **<u>ELIGIBILITY TO PARTICIPATE</u>** | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 **<u>Eligibility to Participate in a Salary and Bonus Deferral or Director's Fee Contributions</u>** | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2  **<u>Re-employment</u>** | 7 |

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i

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| | |
|:---|:---|
|  **ARTICLE III** | 7 |
|  **<u>CONTRIBUTIONS TO THE PLAN</u>** | 7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 **<u>Salary Deferral Contributions</u>** | 7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 **<u>Change or Revocation of Salary Deferral Elections</u>** | 7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3 **<u>Linked Plan Procedures</u>** | 7 |
|  **ARTICLE IV** | 8 |
|  **<u>PARTICIPANT ACCOUNTS</u>** | 8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 **<u>Accounts</u>** | 8 |
|  **ARTICLE V** | 8 |
|  **<u>DISTRIBUTIONS</u>** | 8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 **<u>Time and Form of Payment</u>** | 8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 **<u>Time and Form of Payment Upon Death</u>** | 9 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3 **<u>Time and Form of Payment Upon Disability</u>** | 10 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4 **<u>RESERVED</u>** | 10 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.5 **<u>Withdrawals for Unforeseeable Emergencies</u>** | 10 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.6 **<u>Compliance with Section 409A</u>** | 10 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.7 <u>**Changes in the Time and Form of Distributions**</u> | 10 |
|  **ARTICLE VI** | 11 |
|  **<u>VESTING</u>** | 11 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1 **<u>Nonforfeitable Amounts</u>** | 11 |
|  **ARTICLE VII** | 11 |
|  **<u>CLAIMS PROCEDURES</u>** | 11 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1 **<u>Claims and Review Procedures</u>** | 11 |
|  **ARTICLE VIII** | 13 |
|  **<u>GENERAL PROVISIONS</u>** | 13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1 **<u>Former Employees</u>** | 13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2 **<u>Plan Unfunded</u>** | 13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3 **<u>Unsecured Creditor</u>** | 13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.4 **<u>Administration</u>** | 14 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.5 **<u>Plan Interpretation</u>** | 15 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.6 **<u>Benefits Non-Assignable</u>** | 15 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.7 **<u>Amendment and Termination</u>** | 15 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.8 **<u>Employment Not Guaranteed by Plan</u>** | 15 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.9 **<u>Compliance With a Code</u>** | 15 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.10 **<u>Consequences of a Violation</u>** | 16 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.11 **<u>FICA Taxes</u>** | 16 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.12 **<u>Taxes</u>** | 16 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.13 **<u>Effective Date of Linked Plan Rules</u>** | 16 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.14 **<u>No Specified Employees</u>** | 16 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.15 **<u>Top Hat Plan</u>** | 16 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.16 **<u>Merger or Acquisition</u>** | 16 |

---

ii

------

---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.17 **<u>Satisfaction of Liability</u>** | 17.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.18 **<u>Substitute Payee</u>** | 17.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.19 **<u>Required Information</u>** | 17.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.20 **<u>Binding Upon Successors</u>** | 17.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.21 **<u>Annual Statement</u>** | 17.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.22 **<u>Expenses</u>** | 17.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.23 **<u>Form of Communication</u>** | 17.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.24 **<u>Gender and Number</u>** | 17.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.25 **<u>Captions</u>** | 17.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.26 **<u>Severability</u>** | 17.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.27 **<u>Binding Agreement</u>** | 18.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.28 **<u>Governing Laws</u>** | 18.0 |

---

iii

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**<u>PREAMBLE</u>**

WHEREAS, Somerset Savings Bank, SLA (the "Bank" or the "Company") adopted a nonqualified retirement plan, known as the Somerset Savings Bank, SLA Executive Deferred Compensation Plan effective as of February 1, 1988 (the "1988 Plan" or the "Plan") for the benefit of certain key employees and directors of the Bank; and

WHEREAS, the purpose of the Plan was to permit eligible Highly Compensated Employees and Directors to elect to defer current compensation until after a termination of employment or service as a Director; and

WHEREAS, Section 409A of the Internal Revenue Code (the "Code"), as enacted under the American Jobs Creation Act of 2004 ("AJCA") imposed new rules regarding employee salary deferrals, and the **time** and **form** of distributions under nonqualified retirement plans, such as the 1988 Plan; and

WHEREAS, all benefits to which employees had a legally binding right, and no substantial risk of forfeiture effective as of December 31, 2004, could have been governed by the terms of the 1988 Plan and did not need to be subject to Section 409A under a special **"grandfather rule"**; and

WHEREAS, to avoid excess administration for the 1988 Plan, the Bank elected to administer the benefits accrued before January 1, 2005 under the 1988 Plan as if Section 409A applied to them, so that no benefits were treated as "grandfathered" under the "grandfather rule"; and

WHEREAS, to comply with Section 409A of the Code the Bank amended and restated the 1988 Plan effective as of January 1, 2005, for all deferred compensation benefits, including benefits accrued and vested prior to 2005, in accordance with all transition relief under IRS Notice 2005-1 and the Final Regulations issued under Section 409A; and

WHEREAS, to make additional changes and clarifications to the Plan, as more fully described herein, the Bank wishes to amend and restate the Plan effective as of January 1, 2019; and

WHEREAS, the intent of the Plan is to comply with the Final Regulations issued under Section 409A of the Code, including all IRS announcements, notices and any other guidance issued under Section 409A.

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NOW, THEREFORE, effective January 1, 2019, the Somerset Savings Bank, SLA Deferred Compensation Plan (the "Deferred Compensation Plan" or the "Plan") is amended and restated as follows:

**ARTICLE I** 

**<u>DEFINITIONS</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 "**<u>Account</u>**" means the bookkeeping entry maintained in the records of the Bank for each Participant representing the amount of Salary Deferral Contributions deferred under the Plan, and all interest, earnings, appreciation, depreciation, losses, expenses, or distributions credited or debited to such account. In connection with the administration and operation of the Plan, the Committee may elect to establish one or more Subaccounts within a Participant's Account, including, without limitation, a Subaccount for Salary Deferral Contributions (and related amounts) made while serving in different capacities with the Bank and a Subaccount for Salary Deferral Contributions (and related amounts) to which a separate time and/or form of payment applies.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 **"<u>Bank</u>"** means Somerset Savings Bank, SLA and any successor bank or other entity which adopts and continues this Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3 "**<u>Beneficiary</u>**" means any person entitled to receive benefits under the Plan upon the death of a Participant, as designated in a Beneficiary Designation Form executed by each Participant. A Participant's Beneficiary Designation Form may be revoked or changed by the Participant at any time, without the consent of any Spouse or any previous Beneficiary. Any such designation, revocation or change shall be in writing, signed by the Participant and delivered to the Bank. In the event no Beneficiary is designated, or if any designated Beneficiary does not survive a Participant, all payments shall be made to the Participant's Spouse, if any, or to the Participant's estate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4 **"<u>Benefit Commencement Date</u>"** means the commencement of benefits within **60** days after the earliest to occur of the following events:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) A Participant's Separation from Service, if an officer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) A Participant's removal or resignation from the Board of Directors or, if earlier, the date the Participant selected for commencement of benefits in accordance with any elections made under Article 5 of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The fixed date (if any) specified by the Participant in the Distribution Election Form provided by the Committee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) The Participant's Disability.

In no event shall the Benefit Commencement Date be later than the end of the Plan Year in which a payment event occurs or, if later, **2<sup>1</sup>⁄<sub>2</sub>** months after the date on which the payment event occurs.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5 "**<u>Board</u>**" means the Board of Directors of Somerset Savings Bank, SLA as in office from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.6 "**<u>Code</u>**" means the Internal Revenue Code of 1986, as amended, and any regulations issued thereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.7 "**<u>Committee</u>**" means the senior members of the Human Resources Department, unless other individuals are appointed by the Bank to supervise the administration of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.8 "**<u>Compensation</u>**" means the total remuneration paid by the Bank during the calendar year, plus any contributions made by the Bank under any salary reduction or similar arrangement to a qualified plan under Sections 401(k) or Section 125 of the Code, but **exclusive** of any cost to the Bank for fringe benefits.

For a Participant who is a member of the Board of Directors, Compensation means the total annual cash fees paid to the Participant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.9 **"<u>Deferred Retirement Date</u>"** shall mean the first day of any month subsequent to the Participant's Normal Retirement Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.10 **"<u>Director</u>"** means a Participant who is a member of the Board of Directors of the Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.11 "**<u>Disability</u>**" means a Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment, which can be expected to result in death or can be expected to last for a continuous period of not less than **12** months, as determined by an independent third party physician, selected within the discretion of the Committee. The determination of whether a Participant is disabled shall be determined by the Committee, in its sole discretion, but subject to the provisions of Section 409A.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.12 **"<u>Effective Date</u>"** shall mean February 1, 1988. The effective date of the amendment and restatement of the Plan is January 1, 2019.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.13 **"<u>Employee</u>"** shall mean a person who is employed by the Bank and who falls under the usual common law rules applicable in determining the employer-employee relationship.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.14 "**<u>Highly Compensated Employee</u>**" means an individual who is characterized as a highly compensated employee under Section 414(q) of the Code, or any other level established by the Committee. To the extent required by Department of Labor Regulation Section 2520.104-23, to permit the Plan to qualify as a "Top Hat" plan for a select group of highly compensated employees, the term Highly Compensated Employee shall be restricted by the Committee to satisfy this Department of Labor Regulation. To the extent any Participant is determined to no longer be

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a Highly Compensated Employee while actively participating in the Plan, all future deferrals shall terminate until such time as the Participant is once again determined to be a Highly Compensated Employee. The Committee shall have the discretion to take all actions necessary to preserve the "Top Hat" status of the Plan, including but not limited to distributing any benefits and terminating the participation of any Participant in the Plan, except to the extent such action would violate Section 409A.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.15 "**<u>Highly Compensated Participant</u>**" means a Highly Compensated Employee or Director who is selected to participate in the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.16 "**<u>Key Employee</u>**" means an individual as described in Section 416(i) of the Code, determined without regard to Section 416(i)(5) thereof. For purposes of this provision, a Key Employee is an officer earning more than **$180,000** in 2019 (with a limit of no more than **50** employees, or if less, the greater of **3** or **10%** of all employees being treated as officers); a **5%** owner; or a **1%** owner having annual compensation of more than **$150,000**. All amounts shall automatically be increased as provided under the Code for cost of living or other changes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.17 **"<u>Normal Retirement Date</u>"** means;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) For a Participant who is an officer of the Bank, the Normal Retirement Date as defined in the Somerset Savings Bank, SLA Association Pension Plan (<u>i.e.</u>, age **65**);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) For a Participant who is a Director, the date on which the Participant's benefits are to commence in accordance with Article V; or

For a Participant who is both an officer and a Director, the term Normal Retirement Date shall apply separately to amounts deferred as a result of each separate position.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.18 "**<u>Participant</u>**" means a Highly Compensated Employee or Director who participates in the Plan. Notwithstanding any provisions of the Plan, an individual for whom an Account is maintained under the Plan shall be considered a Participant, whether such individual is no longer a Highly Compensated Employee or Director, if he or she is still employed by the Bank or is a Director or has not received all benefits payable under the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.19 **"<u>Performance-Based Compensation</u>"** means Compensation where the amount of, or entitlement to the Compensation is contingent on the satisfaction of pre-established organizational or individual performance criteria relating to a performance period of at least **12** months in which the Participant performs services. Organizational or individual performance criteria are considered established, in writing, by not later than **90** days after the commencement of the period of service to which the criteria relates, provided that the outcome is substantially uncertain at the time the criteria are established. Performance-Based Compensation may include payments based on performance criteria that are not approved by the Committee or the Board of Directors, or similar entity in the case of a noncorporate service recipient, or by the shareholders

------

or members of the Company. Notwithstanding any provisions above to the contrary, Performance-Based Compensation does not include any amount or portion of any amount that shall be paid either regardless of performance, or based upon the level of performance that is substantially certain to be met at the time the criteria is established. For purposes of the Bank, the Performance Period is July 1 to June 30.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.20 **"<u>Plan</u>"** means the Somerset Savings Bank, SLA Deferred Compensation Plan, as established on February 1, 1988, as set forth herein and as amended from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.21 "**<u>Plan Year</u>**" means each **12**-consecutive month period that begins on each January 1 and ends on the following December 31.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.22 **"<u>Retirement</u>"** shall mean the termination of employment of a Participant on the Participant's Normal or Deferred Retirement Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.23 **"<u>Salary Deferral Contributions</u>"** means the amount of Compensation a Participant elects to defer under the terms of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.24 "**<u>Separation from Service</u>**" means a Participant is no longer employed by the Bank or any Related Entities. The term "Separation from Service" generally means a Participant is no longer employed by the Bank or any Related Entity on account of a termination of employment, Retirement, Disability or death, and is no longer serving as a Director. Consistent with the Final Treasury Regulation, or any subsequent guidance under Section 409A of the Code, no Separation from Service shall occur if a Participant continues to perform services as a consultant or an employee in excess of any amount of time permitted under such guidance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. **<u>Leave of Absence</u>**. For purposes of Section 409A, the employment relationship is treated as continuing in effect while a Participant is on military leave, sick leave, or other bona fide leave of absence, as long as the period of leave does not exceed **6** months, or if longer, as long as the Participant has a right to reemployment with the Employer provided either by statute or contract. Otherwise, after a **6** month leave of absence, the employment relationship is deemed terminated, unless provided otherwise in any employment policies and procedures.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. **<u>Part-Time Status</u>**. Whether or not a termination of employment occurs is determined based upon all facts and circumstances. However, in the event that services provided by a Participant are **insignificant**, a Separation from Service shall be deemed to have occurred. For purposes of Section 409A, if a Participant is providing services to the Bank or any Related Entities at a rate that is at least equal to **20%** of the services rendered, on average, during the immediately preceding **3** full calendar years of employment (or such lesser period), and the annual compensation for such services is at least **20%** of the average annual compensation earned during the final **3** full calendar years of employment (or such lesser period), no termination shall be deemed to have occurred since such services are **not insignificant**.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. **<u>Consulting Services</u>**. Where a Participant continues to provide services to the Bank or any Related Entities in a capacity other than as an employee, a Separation from Service shall **not be deemed to have occurred** if the Participant is providing services at an annual rate that is **50%** or more of the services rendered, on average, during the immediately preceding **3** full calendar years of employment (or such lesser period) and the annual remuneration for such services is **50%** or more of the annual remuneration earned during the final **3** full calendar years of employment (or such lesser period).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. **<u>Directors</u>**. For Directors, a Separation from Service shall occur when the Director is no longer receiving any fees or performing any services as a Director.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.25 **"<u>Specified Employee</u>"** means a Key Employee as defined under Section 416 of the Code, who is employed by the Bank or any Related Entity which has its stock publicly traded on an established securities market. Since the Bank **does not have any publicly traded stock**, no Specified Employees exist.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.26 "**<u>Spouse</u>**" means the individual who is legally married to a Participant at the earlier of the Participant's Benefit Commencement Date or death.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.27 **"<u>Unforeseeable Emergency</u>"** means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant's Spouse, or a dependent (as defined in section 152(a) of the Code) of the Participant; loss of the Participant's property due to casualty; or any other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, as determined under section 409A of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.28 "**<u>Valuation Date</u>**" means the last date of each Plan Year, or more frequent periods as determined within the discretion of the Committee.

**ARTICLE II** 

**<u>ELIGIBILITY TO PARTICIPATE</u>** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 **<u>Eligibility to Participate in Salary and Bonus Deferral or Director's Fee Contributions</u>**. Each Highly Compensated Employee or Director who is participating in the Plan on the date of this amended and restated Plan shall be eligible to continue to participate in the Plan on such date.

Participants shall be eligible to participate in the Plan and make Salary Deferral Contributions or Director Fee's Contributions upon being notified of their eligibility by the Committee, within its discretion. Each Participant may elect to participate in the Salary Deferral Contribution portion of the Plan by filing a written Salary Deferral Contribution Election Form with the Bank, within **30** days of being **notified** of the ability to make Salary Deferral Contributions to the Plan (the "Individual Election Period") or during the annual election period established by the Committee prior to the beginning of any Plan Year (the "Open Election Period"). For purposes of the Plan, the Open Election Period shall be the December of each Plan Year.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 **<u>Re-employment</u>**. If a Participant Separates from Service with the Bank, but is subsequently re-employed by the Bank, the Participant shall be entitled to resume participating in the Plan only in accordance with the procedures established under Section 2.1, within the discretion of the Board.

**ARTICLE III** 

**<u>CONTRIBUTIONS TO THE PLAN</u>** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 **<u>Salary Deferral Contributions</u>**. Each Participant in the Plan who is a Highly Compensated Employee or Director shall be eligible to elect to voluntarily defer the payment of all or any portion of any Compensation when such amounts would otherwise be payable to a Participant. Each Eligible Employee may elect to make Salary Deferral Contributions to the Plan by filing a written Salary Deferral Contribution Election Form with the Bank within the Individual Election Period after being notified of the ability to make Salary Deferral Contributions to the Plan, or during the Open Election Period prior to the beginning of each Plan Year.

Any election to defer any Bonus Payment hereunder must be made prior to the date fixed for the payment of such bonus and prior to the final determination of the amount of such bonus. Such election must also be made before the beginning of the Plan Year in which the services shall be performed to which the Bonus Payment relates. In no event shall any election be given effect unless it complies with the provisions of this Plan and Section 409A of the Code.

Consistent with the Open Election Period, with regard to any Performance-Based Compensation, the Committee may, within its discretion, allow a Participant to elect to defer a bonus payable in the following Plan Year, up until December 31 of the current Plan Year (<u>i.e.</u>, more than **6** months from the end of the performance period ending the following June 30), as permitted under Section 409A of the Code. In no event, however, may an election to defer Performance-Based Compensation be made after such Compensation has become substantially certain to be paid and readily ascertainable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 **<u>Change or Revocation of Salary Deferral Elections</u>**. A Participant who does not elect to participate in the Plan during the Individual Election Period, or who wishes to change or suspend any Salary Deferral Contribution election for any future Plan Years must **wait** until the next Open Election Period in order to elect to participate in the Plan, or to change or suspend any elections. Once an election is made for any Plan Year, it **may not otherwise be changed or suspended** during the Plan Year in which such election is effective. Any efforts to change or suspend any Salary Deferral Contributions shall only become effective as of the first day of the next Plan Year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3 **<u>Linked Plan Procedures</u>**. The Bank also maintains the Somerset Savings Bank,

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SLA Section 401(k) Savings Plan (the "SSB 401(k) Plan"). Salary Deferral Elections under this Plan are made independent of any elections under the SSB 401(k) Plan. In addition, distribution elections are made separately between this Plan and the SSB 401(k) Plan. Accordingly, for purposes of Section 409A of the Code, the Plan and the SSB 401(k) Plan are **"not" linked plans**.

**ARTICLE IV** 

**<u>PARTICIPANT ACCOUNTS</u>** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 **<u>Accounts</u>**. All Salary Deferral Contributions made pursuant to Article III shall be credited to an Account maintained for each Participant. These Accounts shall be administered by the Committee and shall represent each Participant's benefit under the Plan. Each Participant's Account shall be credited with Salary Deferral Contributions on an annual basis. Each Participant's Account shall also be credited with earnings and each Account shall be valued on a semi-annual or more frequent basis, as determined by the Committee (the "Valuation Date"). On every Valuation Date each Account shall be credited with the **greater of** (a) the highest certificate of deposit rate in effect each June 30 and December 31; or (b) the weighted average cost of all deposits of the Bank as of June 30 and December 31, compounded semi-annually. All earnings shall be **prorated** through the first day of any month in which a distribution occurs. In no event shall the creation of any sinking fund to satisfy the Bank's obligations under the Plan be deemed to create any right to any specific assets for any Participant, or to otherwise cause the Plan to be funded. The earnings to be credited to Accounts under the Plan may be changed from time to time, within the discretion of the Board.

Any Account may also be valued by the Bank as of any other date as the Committee may authorize for (i) the purpose of determining the Account of any Participant entitled to payment of benefits or (ii) any other reason the Committee deems appropriate.

**ARTICLE V** 

**<u>DISTRIBUTIONS</u>** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 **<u>Time and Form of Payment</u>**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **<u>Normal Form of Distribution</u>**. Except as provided in Section 5.2 (death) and Section 5.3 (disability), the normal form of distribution under the Plan, unless elected otherwise, shall be equal **quarterly** installments over a **10** year period of time, commencing on the Participant's Benefit Commencement Date. Participants may elect, on forms in the manner prescribed by the Committee, to receive their benefits under one of the alternative methods of distribution.

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All Accounts shall be paid (or commence to be paid) to the Participant upon voluntary or involuntary Separation from Service with the Bank, Retirement, or upon the occurrence of a Disability. All payments shall be based on the most recent Valuation Date preceding the payment of any benefit or occurrence of any payment event, as appropriate. A Participant shall continue to receive earnings on any balance remaining in the Participant's Account, until all benefits are paid.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **<u>Elections</u>**. A Participant may, on forms and in the manner prescribed by the Committee, elect a specified date or time in which his benefits that are payable in accordance with Section 5.1 shall commence. Such election must be made when the Participant elects to participate in the Plan in accordance with Article III.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) **<u>Elections Irrevocable</u>**. Any election made prior to the application of Section 409A was irrevocable. Elections may be changed only as permitted under Section 409A.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) **<u>Alternative Forms of Distributions</u>**. In lieu of the normal form of distribution, Participants may elect, in accordance with procedures established by the Committee within **30** days of being notified of eligibility to participate in the Plan, to elect to receive their benefits in accordance with one of the following forms of distribution:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Equal quarterly installments over a period of **5** or **10** years; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) A single lump sum cash payment.

The above payments shall commence as of any date selected by the Participant, in accordance with procedures established by the Plan Administrator.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) **<u>Installment Payments</u>**. Each installment payment shall be treated as a **separate payment** for purposes of any change in distribution elections under Section 5.7.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 **<u>Time and Form of Payment Upon Death</u>**. In the event of a Participant's death, **prior to** Retirement, Disability or any other voluntary or involuntary Separation from Service, such Participant's Account shall be paid in a single lump sum in cash. All payments shall commence or be paid by the Benefit Commencement Date (i.e., within **60** days following the occurrence of such event). All payments shall be based on the most recent Valuation Date preceding the payment of any benefit or occurrence of any payment event, as appropriate. A Beneficiary shall continue to receive earnings on any balance remaining in the Participant's Account, until all benefits are paid.

If a Participant dies while receiving a series of installment payments under the Plan, all remaining amounts payable at the time of death shall be paid to the Participant's Beneficiary in a single lump sum cash payment.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3 **<u>Time and Form of Payment Upon Disability</u>**. In the event of a Participant's Disability prior to payment of a Participant's entire Account, whether or not any benefits have commenced to be paid, and notwithstanding any other provisions of the Plan, the Bank shall make a single **lump sum cash** payment of the Participant's Account, to the Participant or the Participant's designated representative as soon as administratively practicable, but in no event later than the end of the Plan Year in which a Disability occurs or if later, **2<sup>1</sup>⁄<sub>2</sub>** months after the date on which a Disability occurs .<u> </u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4 **RESERVED. [To consider acceleration under Section 409A. Not impermissible since automatically required.]**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.5 **<u>Withdrawals for Unforeseeable Emergencies</u>**. A Participant **shall be permitted** to receive a withdrawal, prior to the occurrence of a Separation from Service, from the Participant's Account, in the event of an Unforeseeable Emergency. A distribution shall only be permitted under this Section 5.5 if, consistent with the Final Regulations issued under Section 409A of the Code, the amount distributed with respect to an emergency does not exceed the amount necessary to satisfy such emergency, plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into consideration the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise, or by liquidation of the Participant's assets (to the extent the liquidation of such assets would not in and of itself cause severe financial hardship).

A Participant shall be required to submit proper documentation of any Unforeseeable Emergency, and the amount required to meet the Participant's needs to the Committee. The Committee shall determine, in its sole discretion, whether the events constitute an Unforeseeable Emergency, and the amount required to meet the needs of the Participant, in accordance with the provisions of section 409A of the Code and all regulations issued thereunder. Payment shall be made as soon as administratively possible in the month following the month in which the Committee makes its determination regarding a Participant's request for a distribution for an Unforeseeable Emergency. Any distribution under this provision shall be made in a single lump sum cash payment.

After a withdrawal under this Section 5.5, any and all Salary Deferral Contributions shall **automatically** be suspended for the Plan Year in which a distribution occurs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.6 **<u>Compliance with Section</u> <u>409A</u>**. Participants do not have any discretion to elect any time or form of payment that is different than the payment methods established under the terms of the Plan. Accordingly, **no discretion exists** regarding the **time** and **form** of payment and the Plan is intended to comply with all provisions of Section 409A.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.7 **<u>Changes in the Time and Form of</u> <u>Distributions</u>**. In accordance with Section 409A of the Code, a Participant may generally not change the **time** and/or **form** of a distribution under the Plan, except as provided in IRS Notice 2005-1 and the Final Regulations issued under Section 409A, or subsequent guidance.

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In accordance with Final Treasury Regulations, a Participant may make a "subsequent election" to **delay a payment** or **change the form** of payment of an amount of deferred compensation. In order for such an election to be effective the election must be made **12** months prior to the date the payment is scheduled to be paid; the election cannot take effect until at least **12** months after the date upon which the election is made; and the payment with regard to such election must be deferred for a period of not less than **5** years from the date such payment would otherwise have been made. For purposes of this provision, consistent with the Final Treasury Regulations or any other guidance, each installment payment to which any Participant shall be entitled shall be treated as a right to a series of separate payments, thereby permitting a Participant to elect to defer the payment of any quarterly installment, as long as such a deferral election is made consistent with the **12** month election rule and the **5** year delay in payment requirements of this Plan and Section 409A of the Code.

Consistent with the provisions of this Section 5.7, a Participant may elect an alternative date upon which to have benefits commence under the normal form of distribution or under any other manner of distribution permitted in accordance with Section 5.1 of the Plan.

The Committee shall establish uniform procedures, including a Distribution Election Form, in order to allow Participants to elect alternative forms of distributions. The Committee may also establish reasonable procedures to allow Participants to elect the form of distribution at the time they become Participants in the Plan. Participants may be allowed to change their form of distribution within the discretion of the Committee, as long as such action is taken in accordance with Section 409A of the Code.

**ARTICLE VI** 

**<u>VESTING</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1 **<u>Nonforfeitable Amounts</u>**. A Participant shall have a **100%** nonforfeitable interest in all Salary Deferral Contributions which are credited under the Plan.

**ARTICLE VII** 

**<u>CLAIMS PROCEDURES</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1 **<u>Claims and Review Procedures</u>**. The Bank hereby adopts the following claims procedures to review all claims for benefits under the Plan, in accordance with Department of Labor Regulation 29 CFR §2560.503-1:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **<u>Benefit Claims</u>**. Claims for benefits shall be made in writing to the Bank through the Human Resources Department. In the event the Bank contracts with a person or corporation to process claims for any benefits, claims for such benefits shall be forwarded to such person or corporation as designated by the Bank. Whoever processes claims for benefits shall be referred to as the Claim Coordinator in this claims procedure.

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The Claim Coordinator shall make all determinations as to the right of any claimant to a benefit under the Plan. If the Claim Coordinator denies in whole or in part any claim for a benefit under the Plan, the Claim Coordinator shall furnish the claimant with notice of the decision not later than **90** days after receipt of the claim by the Claim Coordinator, unless special circumstances require an extension of time for processing the claim. If such an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial **90** day period. In no event shall such extension exceed the period of **90** days from the end of such initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Claim Coordinator expects to render the final decision. If no notice of a decision or extension is provided, the claimant shall assume the claim has been denied.

The written notice, which the Claim Coordinator shall provide to every claimant who is denied a claim for benefits, shall be set forth in a manner calculated to be understood by the claimant:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) The specific reason or reasons for the denial;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Specific reference to pertinent Plan provisions on which the denial is based;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) Appropriate information as to the steps to be taken if the claimant wishes to submit his claim for review; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) A description of the Plan's appeal procedures and the time limits applicable to such procedures, including a statement of the claimant's right to bring a civil action under Section 502(a) of ERISA following an adverse determination on the claimant's appeal.

A claimant or his authorized representative may request that the Committee review the denial of a claim by the Claim Coordinator. The Committee shall be established by the Corporation as the "Named Appeals Fiduciary," as required under ERISA for reviewing claims, and shall serve as the Appeals Committee. Such request shall be made in writing and shall be presented to the Appeals Committee not more than **60** days after receipt by the claimant of written notification of the denial of a claim. The claimant shall have the right to review pertinent documents and to submit issues and comments in writing. The Appeals Committee shall make its decision on review not later than **60** days after receipt by the Appeals Committee of the claimant's request for review, unless special circumstances require an extension of time, in which case a

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decision shall be rendered as soon as possible but no later than **120** days after receipt by the Appeals Committee of the request for review. If such an extension of time for review is required because of special circumstances, written notice of the extension shall be furnished to the claimant prior to the commencement of the extension. The decision of review shall be in writing, shall be written in a manner calculated to be understood by the claimant, and shall include specific reasons for the decision, a statement of the claimant's right to bring an action under Section 502(a) of ERISA, and specific references to the pertinent Plan provisions on which the decision is based.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **<u>Compliance with Regulations</u>**. It is intended that the claims procedure of this Plan be administered in accordance with the claims procedure regulations of the Department of Labor set forth in 29 CFR §2560.503-1.

**ARTICLE VIII** 

**<u>GENERAL PROVISIONS</u>** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1 **<u>Former Employees</u>**. Any Participant in the Plan who has commenced to receive benefits on or before the Effective Date of this Plan or who has Separated from Service before the Effective Date of this Plan shall be governed by the provisions of the prior plans.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2 **<u>Plan Unfunded</u>**. The Plan shall be unfunded for purposes of the Code and Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and no assets shall be set aside for the payment of benefits under the Plan, even if a trust is established to provide for the payment of any or all benefits hereunder. All benefits shall be paid from the general assets of the Bank, which remain subject to the claims of all general creditors of the Bank and to unrestricted use by the Bank until benefit payments are made. To the extent the Bank decides, within its discretion, to establish any trust or other internal funding vehicles, such as a sinking fund, to provide for the payment of benefits to Participants and assist in meeting the Bank's obligations under the Plan, any such trusts shall be grantor trusts established in accordance with the provisions of Revenue Procedure 92-64. Any provisions which would cause any trust to fail to comply with Revenue Procedure 92-64, or any subsequent Internal Revenue Service rulings or pronouncements, shall be null and void, and the closest alternative provision contained in Revenue Procedure 92-64 shall apply, if appropriate. Notwithstanding any provisions to the contrary, in the event of a "Change in Control" of the Bank, if any benefits under the Plan are held in a "Rabbi Trust", the assets transferred to the Rabbi Trust shall become **irrevocably** held by the Rabbi Trust and may not be recovered by the Bank or any Related Entities, or used by the Bank or any Related Entities for any corporate or other purposes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3 **<u>Unsecured Creditor</u>**. The right of a Participant or his Beneficiaries to benefits under this Plan shall be solely that of unsecured creditors of the Bank. The benefits payable under the Plan constitute a mere promise by the Bank to make payments in the future, and does not otherwise create any rights in the Participant or any Beneficiaries.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.4 **<u>Administration</u>**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **<u>General</u>**. The Committee shall be in charge of the operation and the administration of the Plan. The Committee shall have the power to delegate specific responsibilities. Such delegations may be to other officers or employees of the Bank or to other individuals, all of whom shall serve at the pleasure of the Committee and, if full-time employees of the Company, without additional compensation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **<u>Decision Process</u>**. The Committee shall act by a majority of its members unless unanimous consent is required by the Plan or by unanimous approval of its members if there are two or less members in office at the time. In the event of a Committee deadlock, the Committee shall determine the method for resolving such deadlock. No Committee member shall act upon any question pertaining solely to himself, and the other member or members shall make any determination required by the Plan in respect to such member.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) **<u>Delegation</u>**. The Committee may, by unanimous consent, delegate specific authority and responsibilities to one or more of its members. The member or members so designated shall be solely liable, jointly and severally, for their acts or omissions with respect to such delegated authority and responsibilities. Committee members not so designated shall be relieved from liability for any act or omission resulting from such delegation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) **<u>Authority and Responsibility</u>**. The Committee shall have full authority and responsibility to interpret and construe the Plan and determine all questions of the status and rights of the Participants and the amounts of their contributions. Its interpretation, construction or determination, as the case may be, shall be final and conclusive on both the Bank and the Participants and their respective successors, assigns, personal representatives and Beneficiaries. Such authority and responsibility shall include, but shall not be limited to, the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Appointment of qualified accountants, consultants, administrators, counsel, appraisers, or other persons it deems necessary or advisable who shall serve the Committee as advisors only and shall not exercise any discretionary authority, responsibility or control with respect to the management or administration of the Plan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Determination of all benefits, and resolution of all questions arising from the administration, interpretation and application of the Plan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Adoption of forms and regulations for the administration of the Plan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) Remedy of all inequity resulting from incorrect information received or communicated, or from administrative error;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) Settlement or compromise of any claims or debts arising from the operation of the Plan and the commencement of any legal actions or administrative proceeding.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) **<u>Indemnification</u>**. The Bank shall indemnify and hold the members of the Committee harmless against liability incurred in the administration of the Plan, except for the gross negligence or willful misconduct of any member.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.5 **<u>Plan Interpretation</u>**. The Board, or the Committee if such responsibility is delegated, shall have complete discretion to interpret all provisions of the Plan and to establish reasonable rules and procedures to facilitate the administration of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.6 **<u>Benefits Non-Assignable</u>**. Neither a Participant nor any Beneficiary under the Plan shall have any right to assign, transfer, pledge or otherwise encumber the right to receive any benefits hereunder, and any attempted assignment, transfer, pledge or other encumbrance shall be null and void, and have no effect. Similarly, no rights under the Plan shall be subject to attachment or garnishment, or otherwise subject to liability for the debts, contracts, liabilities or torts by the creditors of any Participant or Beneficiary.

Notwithstanding the general inability to assign benefits under the Plan, consistent with IRS Notice 2002-31 and Revenue Ruling 2002-22, to the extent that a valid Property Settlement or Divorce Decree directs that any portion of a Participant's benefits under the Plan be designated to a former Spouse, benefits shall be paid to the Spouse, at the same time benefits would otherwise have been payable to the Participant. In no event, shall any former Spouse obtain any additional rights to receive any form of distribution, or benefits payable in any manner not permitted under the Plan, or at any time earlier than when a Participant would otherwise have been entitled to receive such benefits.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.7 **<u>Amendment and Termination</u>**. The Board shall have the right, at any time, to amend or terminate the Plan, in whole or in part, provided that such amendment or termination shall not adversely affect any benefits which have been credited to Participant Accounts. The Board may not reduce or modify any benefit which has vested under Article VI without the written consent of each Participant, or if any Participant has died, the Participant's Beneficiaries. The ability of the Bank to terminate the Plan, and the timing and manner of distributing benefits in connection with any termination of the Plan, shall in all respects comply with Section 409A of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.8 **<u>Employment Not Guaranteed by Plan</u>**. Participation in the Plan shall not be deemed to be consideration for, or an inducement to, or a condition of the employment of any employee. Nothing contained in this Plan shall be deemed to give any Participants the right to be retained in the employment of the Bank, nor shall any Participant, retired Participant, deceased Participant, disabled Participant, or terminated Participant have any right to any payment, except as such payment may be provided under the terms of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.9 **<u>Compliance With the Code</u>**. The Plan is intended to comply with the provisions of Section 409A of the Code, and all other provisions. If there is any discrepancy between the provisions of this Plan and the provisions of Section 409A, this discrepancy shall be resolved in a manner as to give full effect to the provisions of Section 409A of the Code.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.10 **<u>Consequences of a Violation</u>**. All Participants shall be informed that they may voluntarily participate in the Plan, after being notified of their eligibility to participate in the Plan. All Participants shall be notified of the potential tax consequences under Section 409A, if the provisions of the Plan and Section 409A are not followed, including the imposition of immediate income taxes, a **20%** excise tax, underpayment of interest penalties, and Form W-2 reporting. All Participants shall also be informed that the amount of their benefits under the Plan shall be reported to the IRS, as required for nonqualified deferred compensation programs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.11 **<u>FICA Taxes</u>**. All Participants shall be informed that when their benefits become **vested** under the Plan, and not subject to any substantial risk of forfeiture under Sections 3121(v) and 3306(r) and other provisions of the Code, the Participants shall be subject to FICA and all related taxes. The Bank shall have the right to withhold from a Participant's other wages, any FICA or other related taxes required to be withheld as provided in Section 8.12.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.12 **<u>Taxes</u>**. The Bank shall be entitled to deduct from all benefit payments made to a Participant or any Beneficiary all applicable federal, state or local taxes required by law to be withheld from such payments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.13 **<u>Effective Date of Linked Plan Rules</u>**. Notwithstanding any provisions to the contrary, effective as of January 1, 2008, all linked nonqualified deferred compensation plans must conform with the Section 409A rules regarding the **timing** and **form** of distributions. However, transition rules permit Participants in plans that are subject to section 409A of the Code to make elections, or new elections, as to the time and form of payment in 2007, provided such elections do not accelerate payment to 2007 of amounts that would otherwise have been paid in a later year, or defer to a later year a payment that would otherwise have been made in 2007.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.14 **<u>No Specified Employees</u>**. Since the Bank is **not a publicly traded** company, no "Specified Employees," exist to be subject to the **6** month delay in payment or other rules under Section 409A.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.15 **<u>Top Hat Plan</u>**. ERISA generally applies to protect the interests of "employees", and DOL Regulation Section 2520.104-23 establishes rules for certain arrangements that provide benefits for a select group of management or Highly Compensated Employees, referred to as "Top Hat" programs. This Plan is intended to be a Top Hat program under ERISA. In determining if the Plan satisfies all rules to be classified as a Top Hat program, or in reviewing the number of Participants in the Plan for any reasons, all employees of the Bank and any Related Entities, whether foreign or domestic, shall be taken into consideration.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.16 **<u>Merger or Acquisition</u>**. Nothing contained herein shall preclude the Bank from merging into or with, or being acquired by, another business entity which assumes this Plan.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.17 **<u>Satisfaction of Liability</u>**. After all benefits have been distributed in full to a Participant, his Beneficiary, or a Substitute Payee (as provided below in section 8.18), all liability to such Participant or to his Beneficiary shall cease.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.18 **<u>Substitute Payee</u>**. If a Participant or Beneficiary entitled to receive any benefits hereunder is in his minority, or is, in the judgment of the Committee, legally, physically, or mentally incapable of personally receiving and receipting any distribution, the Committee may make distributions to a legally appointed guardian or to such other person or institution as, in the judgment of the Committee, is then maintaining or has custody of the payee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.19 **<u>Required Information</u>**. The Bank, Participants, or Beneficiaries entitled to benefits shall furnish forms and any information or evidence as requested by the Committee for the proper administration of the Plan. Failure on the part of any Participant or Beneficiary to comply with such request within a reasonable period of time shall be sufficient grounds for delay in the payment of benefits, until the information or evidence requested is received, as long as such a delay does not result in any violations under Section 409A of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.20 **<u>Binding Upon Successors</u>**. The liabilities under the Plan shall be binding upon any successor or assign of the Bank and any purchaser of the Bank or purchaser of substantially all of the assets of the Bank, and this Plan shall continue in full force and effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.21 **<u>Annual Statement</u>**. Participants shall receive an annual statement after the end of each Plan Year, confirming the amounts credited to each Participant's Account.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.22 **<u>Expenses</u>**. All expenses incurred in administering the Plan shall be paid by the Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.23 **<u>Form of Communication</u>**. Any election, claims, notice or other communication required or permitted to be made by a Participant under this Plan shall be made in writing and in such form as shall be prescribed by the Committee. Such communication shall be effective upon receipt, if hand delivered or sent by first class mail, postage pre-paid, return receipt requested to Somerset Savings Bank SLA, 220 West Union Avenue, P.O. Box 220, Bound Brook, New Jersey 08805.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.24 **<u>Gender and Number</u>**. The masculine gender, where appearing herein, shall be deemed to include the feminine gender, and the singular shall be deemed to include the plural, unless the context clearly indicates to the contrary.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.25 **<u>Captions</u>**. The captions at the head of a paragraph of this Plan are designed for convenience of reference only and are not to be resorted to for the purpose of interpreting any provision of this Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.26 **<u>Severability</u>**. The invalidity of any portion of this Plan shall not invalidate the remainder, and the remainder shall continue in full force and effect.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.27 **<u>Binding Agreement</u>**. The provisions of this Plan shall be binding upon the Participant and the Bank and their successors, assigns, heirs, executors and beneficiaries.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.28 **<u>Governing Laws</u>**<u>.</u> The Plan shall be governed and construed in accordance with the laws of the State of New Jersey, except to the extent preempted by federal law.

The Plan is amended and restated effective as of January 1, 2019.

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| | |
|:---|:---|
| SOMERSET SAVINGS BANK, SLA | SOMERSET SAVINGS BANK, SLA |
| BY: | /s/ William Taylor |
|  | William Taylor |

---

## Ex-21

**Exhibit 21** 

**Subsidiaries of the Registrant** 

The following is a list of the subsidiaries of SR Bancorp, Inc.:

Name State of Incorporation <br> Somerset Savings Bank, SLA SRB Interim Corporation New Jersey Maryland

## Exhibit 23.2

**Exhibit 23.2** 

**Consent of Independent Registered Public Accounting Firm** 

We consent to the use of our report dated October 21, 2022, with respect to the consolidated financial statements of Somerset Savings Bank, SLA and Subsidiaries, incorporated herein by reference, and to the reference to our firm under the heading "Experts" in the prospectus.

/s/ BAKER TILLY US, LLP

Iselin, New Jersey

March 13, 2023

## Exhibit 23.4

**Exhibit 23.4** 

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| | |
|:---|:---|
| ![LOGO](g352312page355a.jpg) | **RP<sup>®</sup> FINANCIAL, LC.** |
| ![LOGO](g352312page355a.jpg) | **Advisory \| Planning \| Valuation** |

---

March 13, 2023

Boards of Directors

SR Bancorp, Inc.

Somerset Savings Bank, SLA

220 West Union Avenue

Bound Brook New Jersey 08805

Members of the Boards of Directors:

We hereby consent to the use of our firm's name in the Notice of Intent to Convert, and any amendments thereto, to be filed with Federal Deposit Insurance Corporation, and in the Registration Statement on Form S-1, and any amendments thereto, to be filed with the Securities and Exchange Commission. We also hereby consent to the inclusion of, summary of and references to our Valuation Appraisal Report and any Valuation Appraisal Report Updates in such filings including the prospectus of SR Bancorp, Inc. We also consent to the reference to our firm being named as an expert in the prospectus.

Sincerely,

RP<sup>®</sup> FINANCIAL, LC.

![LOGO](g352312page355b.jpg)

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| | |
|:---|:---|
| **Washington Headquarters** |  |
| 1311-A Dolley Madison Boulevard | Telephone: (703)528-1700 |
| Suite 2A | Fax No.: (703) 528-1788 |
| McLean, VA 22101 | Toll-Free No.: (866)723-0594 |
| www.rpfinancial.com | E-Mail: mail@rpfinancial.com |

---

## Exhibit 23.5

**Exhibit 23.5** 

**Consent of Independent Registered Public Accounting Firm** 

We consent to the use of our report dated March 8, 2023, with respect to the consolidated financial statements of Regal Bancorp, Inc. and Subsidiary, incorporated herein by reference, and to the reference to our firm under the heading "Experts" in the prospectus.

/s/ BAKER TILLY US, LLP

Iselin, New Jersey

March 13, 2023

## Exhibit 23.6

**Exhibit 23.6** 

**CONSENT OF PERSON TO BE NAMED DIRECTOR** 

In accordance with Rule 438 under the Securities Act of 1933, as amended (the "Securities Act"), the undersigned hereby consents to being named as person about to become a director of SR Bancorp, Inc. ("SR") in the Registration Statement on Form S-1 of SR filed pursuant to Section 5 of the Securities Act. I also consent to the filing of this consent as an exhibit to such Registration Statement and any amendments thereto.

---

| | |
|:---|:---|
| March 13, 2023 | ![LOGO](g352312page356a.jpg) |

---

## Exhibit 99.1

**Exhibit 99.1**![LOGO](g352312dsp43.jpg)

May 27, 2022

Mr. William Taylor

Chairman and Chief Executive Officer

Somerset Savings Bank, SLA

220 West Union Avenue I

Bound Brook, NJ 08805

Dear Mr. Taylor:

This letter sets forth the agreement between Somerset Savings Bank, SLA, Bound Brook, New Jersey (the "Company") and RP<sup>®</sup> Financial, LC. ("RP Financial"), whereby the Company has engaged RP Financial to provide conversion appraisal and related services in conjunction with the proposed standard stock conversion transaction and simultaneous merger with a commercial bank in New Jersey ("Target"). The scope, timing and fee structure for these appraisal services are described below.

These appraisal services and fee schedule are described in greater detail below. The undersigned will direct this engagement and will be assisted by other members of our staff, including Gregory E. Dunn, Director.

***<u>Description of Appraisal Services</u>***

For both the Company and the Target, RP Financial will conduct financial due diligence, including interviews of senior management and reviews of historical and pro forma financial information and other documents and records, to gain insight into the operations, financial condition, profitability, market area, risks and various internal and external factors impacting the Company and the Target. In addition, RP Financial will review the terms of the merger agreement between the Company and the Target, including an evaluation of the proposed merger consideration, the preliminary fair value and accounting adjustments related to the merger, and the pro forma pre-conversion balance sheet and income statement for the Company giving effect to the merger. This review will be considered in determining the pro forma market value of the Company in accordance with the applicable regulatory appraisal guidelines. RP Financial will prepare a detailed written valuation report that will be fully consistent with applicable regulatory appraisal guidelines and standard pro forma valuation practices, taking into consideration the intended stock offering and merger. The appraisal report will include an analysis of the Company's pre-conversion financial condition and operating results, as well as an assessment of the key risks and operating strategy. The appraisal report will incorporate an evaluation of the Company's business strategies, market area, prospects for the future and the intended use of proceeds including the merger with the Target. A peer group analysis relative to certain relatively comparable publicly-traded banking companies will be conducted for the purpose of determining appropriate valuation adjustments for the Company relative to the peer group's pricing ratios.

---

| | |
|:---|:---|
| 1311-A Dolley Madison Boulevard | Direct: (703) 647-6546 |
| Suite 2A | Main: (703) 528-1700 |
| McLean, VA 22101 | Fax: (703) 528-1788 |
| wpommerening@rpfinancial.com | www.rpfinancial.com |

---

------

*Mr. William Taylor* 

*May 27, 2022* 

 *Page 2* 

We will review pertinent sections of the prospectus and conduct discussions with the Company and the Company's representatives to obtain key information for the appraisal report, including key deal elements such as holding company formation, dividend policy, use of proceeds, reinvestment rate, tax rate, offering expenses, stock plans characteristics (such as employee stock ownership plan and stock grant plan), and, if applicable, a charitable foundation contribution.

The original appraisal report will establish a midpoint pro forma market value in accordance with the applicable regulatory requirements. The appraisal report will provide the valuation basis for the size of the stock offering. The appraisal report may be periodically updated during the application and offering process, and, in accordance with the applicable regulations, there will be at least one updated appraisal prepared at the closing of the stock offering to determine the number of shares to be issued. In the event of a syndicated community offering, it may be necessary to file an update in conjunction with the close of the subscription offering and prior to the pricing phase in the syndicated community offering. In the event of a syndicated community offering phase, RP Financial will participate in the various all hands calls regarding the offering results, pricing discussions and timing.

RP Financial agrees to deliver the original appraisal report and subsequent updates, in writing, to the Company at the above address, in conjunction with the filing of the regulatory applications and amendments thereto. With prior approval by the Company, subsequent updates will be filed promptly as certain events occur which would warrant the preparation and filing of such appraisal updates pursuant to regulatory guidelines. Further, RP Financial agrees to perform such other services as are necessary or required in connection with the regulatory review of the appraisal and respond to the regulatory comments, if any, regarding the original appraisal report and subsequent updates. RP Financial will also prepare the pro forma presentations for inclusion in the prospectus, reflecting the original appraisal and subsequent updates, as appropriate.

RP Financial expects to formally present the original appraisal report, including the appraisal methodology, peer group selection and assumptions, to the Board of Directors for review prior to the filing with the regulatory application. If appropriate, RP Financial will present subsequent updates to the Board. It is understood that this appraisal review may be presented by telephone or videoconference.

***<u>Description of Related Support Services</u>***

In connection with evaluating the pro forma impact of the merger, RP Financial will estimate the preliminary fair value adjustments for the Target's financial assets and liabilities. These adjustments will include, at a minimum, adjustments to investment securities, loans receivable, time deposits, borrowings and the core deposit intangible. The fair value analyses will be estimated based upon financial data as of the same date as utilized in the appraisal and interest rates on or around the effective date of the appraisal. The fair value adjustments will be incorporated into pro forma effect of the merger, for purposes of inclusion in the appraisal, reflected in the pro forma data of the Prospectus and for purposes of inclusion in pro forma tables filed with the required regulatory applications for the conversion and the merger. It is expected that a final fair value analysis will be required as of the closing date of the merger, and such analysis will be subject to a separate engagement letter with RP Financial.

------

*Mr. William Taylor* 

*May 27, 2022* 

 *Page 3* 

Utilizing the fair value adjustments and the appraisal conclusions, RP Financial will assist in the preparation of pro forma merger tables included in the Company's Prospectus and regulatory applications. Such tables will reflect the pro forma impact of the transactions on historical balance sheets, income statements and regulatory capital ratios and will, additionally, incorporate projected financial information (as needed) from the Company's and the Target's budgets and business plans prepared separately by the Company and the Target.

***<u>Fee Structure and Payment Schedule</u>***

The Company agrees to pay RP Financial the following fees for preparation and delivery of the original appraisal report, subsequent appraisal updates and related support services, plus reimbursable expenses. Payment of these fees shall be made according to the following schedule:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• $25,000 upon execution of this letter of agreement engaging RP Financial's appraisal services;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• $125,000 upon delivery of the completed original appraisal report;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• $15,000 upon completion of estimated fair value adjustments to be included the appraisal and pro forma merger
tables and, if an update to the fair value adjustments is required prior to going effective, such update will be prepared at an additional price of $7,500 per updated analysis;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• $25,000 upon delivery of the merger pro forma tables for the prospectus and regulatory applications; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• $25,000 upon delivery of each subsequent appraisal update report required in conjunction with the regulatory
application and stock offering. It is understood that there will be at least one appraisal update report required by regulations upon completion of the stock offering.

The Company will reimburse RP Financial for reasonable out-of-pocket expenses incurred in preparation of the original appraisal and subsequent updates. Such out-of-pocket expenses will likely include travel, printing, communications, shipping, reasonable counsel fees, computer and data services, and will not exceed $10,000 in the aggregate, without the Company's authorization to exceed this level.

In the event the Company shall, for any reason, discontinue the proposed transaction prior to delivery of the completed original appraisal report or subsequent updates and payment of the corresponding fees, the Company agrees to compensate RP Financial according to RP Financial's standard billing rates for consulting services based on accumulated and verifiable time expenses, not to exceed the respective fee caps noted above, after applying full credit to the initial retainer fee towards such payment, together with reasonable out-of-pocket expenses, subject to the cap on such expenses as set forth above. RP Financial's standard billing rates range from $75 per hour for Associates to $500 per hour for Managing Directors.

------

*Mr. William Taylor* 

*May 27, 2022* 

 *Page 4* 

If during the course of the proposed transaction, unforeseen events occur so as to materially change the nature or the work content of the services described in this contract, the terms of said contract shall be subject to renegotiation by the Company and RP Financial. Such unforeseen events shall include, but not be limited to, material changes to the structure of the transaction such as exclusion of the simultaneous business combination transaction, material changes in the applicable regulations, appraisal guidelines or processing procedures as they relate to such appraisals, material changes in management or procedures, operating policies or philosophies, and excessive delays or suspension of processing of applications by the regulators such that completion of the transaction requires the preparation by RP Financial of a new appraisal.

***<u>Covenants, Representations and Warranties</u>***

The Company and RP Financial agree to the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The Company agrees to make available or to supply to RP Financial such information with respect to its business and financial condition as RP Financial may reasonably request in order to provide the aforesaid valuation. Such information heretofore or hereafter supplied or made available to RP Financial shall include, but not be limited to: annual audited and unaudited internal financial statements and management reports, business plan and budget, periodic regulatory filings and material agreements, debt instruments, off balance sheet assets or liabilities, commitments and contingencies, and other corporate books and records. All information provided by the Company to RP Financial shall remain strictly confidential (unless such information is otherwise made available to the public), and if the reorganization and stock offering is not consummated, or the services of RP Financial are terminated hereunder, RP Financial shall promptly return to the Company the original and any copies of such information.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. RP Financial represents that it will comply with any and all federal, state and local laws, regulations and ordinances governing or relating to the privacy, security, confidentiality or integrity of personal information, data, and confidential information ("Privacy Laws"). RP Financial shall implement such physical, administrative and technical safeguards as shall be necessary to ensure the security and confidentiality of any personal information, data, and confidential information it receives, including maintaining written policies and procedures detailing its compliance with any applicable Privacy Laws. Such written policies and procedures shall be made available to the Company for review upon request. The Company represents and warrants to RP Financial that any information provided to RP Financial does not and will not, to the best of the Company's knowledge, at the times it is provided to RP Financial, contain any untrue statement of a material fact or in response to informational requests by RP Financial fail to state a material fact necessary to make the statements therein not false or misleading in light of the circumstances under which they were made.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. (a) The Company agrees that it will indemnify and hold harmless RP Financial, any affiliates of RP Financial, the respective members, officers, agents and employees of RP Financial or their successors and assigns who act for or on behalf of RP Financial in connection with the services called for under this agreement (hereinafter referred to as "RP Financial"), from and against any and all losses, claims, damages and liabilities (including, but not limited to, reasonable attorney's fees, and all losses and expenses in connection with claims under the federal securities laws) attributable to (i) any untrue statement of a material fact contained in the financial

------

*Mr. William Taylor* 

*May 27, 2022* 

 *Page 5* 

statements or other information furnished or otherwise provided by the Company to RP Financial, either orally or in writing; (ii) the omission of a material fact from the financial statements or other information furnished or otherwise made available by the Company to RP Financial; or (iii) any action or omission to act by the Company, or the Company's respective officers, directors, employees or agents, which action or omission is undertaken in bad faith or is negligent. The Company will be under no obligation to indemnify RP Financial hereunder if a court determines that RP Financial was negligent or acted in bad faith with respect to any actions or omissions of RP Financial related to a matter for which indemnification is sought hereunder. Reasonable time devoted by RP Financial to situations for which RP Financial is deemed entitled to indemnification hereunder, shall be an indemnifiable cost payable by the Company at the normal hourly professional rate chargeable by such employee.

Notwithstanding anything in this agreement to the contrary, RP Financial shall notify the Company immediately via telephone, to be followed up in writing, of any actual, suspected or threatened security breach incident involving confidential information, and shall cooperate fully in investigating and responding to each successful or attempted security breach. RP Financial will defend, indemnify and hold the Company harmless from and against all third party claims, losses, damages and liabilities arising out of a security breach and shall pay for all costs associated with responding to such breach, including without limitation, all legal, forensic, public relations, consultancy and other expert fees incurred by the Company, the costs of any and all notifications that the Company sends to individuals whose information was affected by any incident, and the cost of an annual credit monitoring services subscription for all such individuals.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) RP Financial shall give written notice to the Company of such claim or facts within thirty days of the assertion of any claim or discovery of material facts upon which RP Financial intends to base a claim for indemnification hereunder, including the name of counsel that RP Financial intends to engage in connection with any indemnification related matter. In the event the Company elects, within seven days of the receipt of the original notice thereof, to contest such claim by written notice to RP Financial, the Company shall not be obligated to make payments under Section 3(c), but RP Financial will be entitled to be paid any amounts payable by the Company hereunder within five days after the final non-appealable determination of such contest either by written acknowledgement of the Company or a decision of a court of competent jurisdiction or alternative adjudication forum, unless it is determined in accordance with Section 3(c) hereof that RP Financial is not entitled to indemnity hereunder. If the Company does not so elect to contest a claim for indemnification by RP Financial hereunder, RP Financial shall (subject to the Company's receipt of the written statement and undertaking under Section 3(c) hereof) be paid promptly and in any event within thirty days after receipt by the Company of detailed billing statements or invoices for which RP Financial is entitled to reimbursement under Section 3(c) hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Subject to the Company's right to contest under Section 3(b) hereof, the Company shall pay for or reimburse the reasonable expenses, including reasonable attorneys' fees, incurred by RP Financial in advance of the final disposition of any proceeding within thirty days of the receipt of such request if RP Financial furnishes the Company: (1) a written statement of RP Financial's good faith belief that it is entitled to indemnification hereunder; (2) a written undertaking to repay the advance if it ultimately is determined in a final, non-appealable adjudication of such proceeding that it or he is not entitled to such indemnification; and (3) a detailed invoice of the expenses for which reimbursement is sought.

------

*Mr. William Taylor* 

*May 27, 2022* 

 *Page 6* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) In the event the Company does not pay any indemnified loss or make advance reimbursements of expenses in accordance with the terms of this agreement, RP Financial shall have all remedies available at law or in equity to enforce such obligation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Notwithstanding any other provision set forth in this Agreement, in no event shall any payments made by the Company pursuant to this agreement exceed the amount permissible under applicable federal law, including, without limitation, Section 18(k) of the Federal Deposit Insurance Act and the regulations promulgated thereunder.

This agreement constitutes the entire understanding of the Company and RP Financial concerning the subject matter addressed herein, and such contract shall be governed and construed in accordance with the State of New Jersey. This agreement may not be modified, supplemented or amended except by written agreement executed by both parties.

The Company and RP Financial are not affiliated, and neither the Company nor RP Financial has an economic interest in, or is held in common with, the other and has not derived a significant portion of its gross revenues, receipts or net income for any period from transactions with the other. RP Financial represents and warrants that it is not aware of any fact or circumstance that would cause it not to be "independent" within the meaning of the conversion regulations of the federal banking agencies or otherwise prohibit or restrict in anyway RP Financial from serving in the role of independent appraiser for the Company.

\* \* \* \* \* \* \* \* \* \* \*

Please acknowledge your agreement to the foregoing by signing as indicated below and returning to RP Financial a signed copy of this letter, together with the engagement fee of $25,000.

---

| |
|:---|
| Sincerely, |
| /s/ William E. Pommerening |
| William E. Pommerening |
| Managing Director |

---

---

| | | |
|:---|:---|:---|
| Agreed to and Accepted by: | William Taylor | /s/ William Taylor |
|  | Chairman and Chief Executive Officer | Chairman and Chief Executive Officer |
|  | Somerset Savings Bank, SLA | Somerset Savings Bank, SLA |
| Date Executed: | June 15, 2022 | June 15, 2022 |

---

## Exhibit 99.2

**Exhibit 99.2** 

---

| | |
|:---|:---|
| ![LOGO](g352312g0309093317037.jpg) | **RP<sup>®</sup> FINANCIAL, LC.** |
| ![LOGO](g352312g0309093317037.jpg) | **Advisory \| Planning \| Valuation** |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;March 13, 2023

Boards of Directors

SR Bancorp, Inc.

Somerset Savings Bank, SLA

220 West Union Avenue

Bound Brook, New Jersey 08805

Re: Plan of Conversion

<u>Somerset Savings Bank, SLA</u> 

Members of the Boards of Directors:

All capitalized terms not otherwise defined in this letter have the meanings given such terms in the Plan of Conversion (the "Plan") adopted by the Board of Directors of Somerset Savings Bank, SLA (the "Bank"). Pursuant to the Plan, the Bank will convert from the mutual form of organization to the stock form of organization. In connection with the Plan, the Bank has organized a new Maryland stock holding company named SR Bancorp, Inc. (the "Company"), which will sell shares of common stock in a public offering. When the conversion is completed, all of the capital stock of the Bank will be owned by the Company and all of the common stock of the Company will be owned by public stockholders.

We understand that in accordance with the Plan, subscription rights to purchase shares of common stock in the Company are to be issued to: (1) Eligible Account Holders; (2) Tax-Qualified Employee Plans including the Bank's employee stock ownership plan (the "ESOP"); (3) Supplemental Eligible Account Holders; and (4) Voting Members. Based solely upon our observation that the subscription rights will be available to such parties without cost, will be legally non-transferable and of short duration, and will afford such parties the right only to purchase shares of common stock at the same price as will be paid by members of the general public in the community and syndicated community offerings but without undertaking any independent investigation of state or federal law or the position of the Internal Revenue Service with respect to this issue, we are of the belief that, as a factual matter:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) the subscription rights will have no ascertainable market value; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) the price at which the subscription rights are exercisable will not be more or less than the pro forma market
value of the shares upon issuance.

Changes in the local and national economy, the legislative and regulatory environment, the stock market, interest rates, and other external forces (such as natural disasters or significant world events) may occur from time to time, often with great unpredictability and may materially impact the value of thrift stocks as a whole or the Company's value alone. Accordingly, no assurance can be given that persons who subscribe to shares of common stock in the subscription offering will thereafter be able to buy or sell such shares at the same price paid in the subscription offering.

---

| |
|:---|
| Sincerely, |
| ![LOGO](g352312page355b.jpg) |
| RP Financial, LC. |

---

------

---

| | |
|:---|:---|
| Washington Headquarters<br> 1311-A Dolley Madison Boulevard | Telephone: (703) 528-1700 |
| Suite 2A | Fax No.: (703) 528-1788 |
| McLean, VA 22101 | Toll-Free No.: (866) 723-0594 |
| www.rpfinancial.com | E-Mail: mail@rpfinancial.com |

---

## Exhibit 99.3

**Exhibit 99.3**![LOGO](g352312g87k64.jpg)

PRO FORMA VALUATION REPORT STANDARD CONVERSION SR Bancorp, Inc. Bound Brook, New Jersey HOLDING COMPANY FOR: Somerset Savings Bank, SLA Bound Brook, New Jersey Dated as of February 21, 2023 1311-A Dolley Madison Boulevard Suite 2A McLean, Virginia 22101 703.528.1700 rpfinancial.com

------

**Exhibit 99.3**![LOGO](g352312dsp43.jpg)

February 21, 2023

Board of Directors

SR Bancorp, Inc.

Somerset Savings Bank, SLA

220 West Union Avenue

Bound Brook, New Jersey 08805

Members of the Boards of Directors:

We have completed and hereby provide an updated appraisal of the estimated pro forma market value of the common stock which is to be issued in connection with the mutual-to-stock conversion described below.

This updated appraisal is furnished pursuant to the requirements stipulated in the Code of Federal Regulations and has been prepared in accordance with the "Guidelines for Appraisal Reports for the Valuation of Savings and Loan Associations Converting from Mutual to Stock Form of Organization" (the "Valuation Guidelines") of the Office of Thrift Supervision ("OTS") and accepted by the Federal Reserve Board ("FRB"), the Office of the Comptroller of the Currency ("OCC"), the Federal Deposit Insurance Corporation ("FDIC") and the New Jersey Department of Banking and Insurance (the "Department"), and applicable regulatory interpretations thereof. Our original appraisal report, dated September 19, 2022 (the "Original Appraisal"), is incorporated herein by reference. As in the preparation of our Original Appraisal, we believe the data and information used herein is reliable; however, we cannot guarantee the accuracy and completeness of such information.

On July 25, 2022, the Board of Directors of Somerset Savings Bank, SLA, Bound Brook, New Jersey ("Somerset Savings" or the "Bank") adopted a plan of conversion, incorporated herein by reference, in which the Bank will convert from a New Jersey-chartered mutual savings association to a New Jersey-chartered stock savings association and become a wholly-owned subsidiary of SR Bancorp, Inc. ("SR Bancorp" or the "Company"), a newly formed Maryland corporation organized by Somerset Savings.

SR Bancorp will offer its common stock in a subscription offering to Eligible Account Holders, Tax-Qualified Employee Plans including Somerset Savings' employee stock ownership plan (the "ESOP"), Supplemental Eligible Account Holders and Voting Members, as such terms are defined for purposes of applicable federal regulatory guidelines governing mutual-to-stock conversions. To the extent that shares remain available for purchase after satisfaction of all subscriptions received in the subscription offering, the shares may be offered for sale to members of the general public in a community offering and/or a syndicated community offering. A portion of the net proceeds received from the sale of common stock will be used to purchase all of the then to be issued and outstanding capital stock of the Bank and the balance of the net proceeds will be retained by the Company.

------

---

| | |
|:---|:---|
| **Washington Headquarters** |  |
| 1311-A Dolley Madison Boulevard | Telephone: (703) 528-1700 |
| Suite 2A | Fax No.: (703) 528-1788 |
| McLean, VA 22101 | Toll-Free No.: (866) 723-0594 |
| www.rpfinancial.com | E-Mail: mail@rpfinancial.com |

---

------

***Boards of Directors***

***February 21, 2023***

 ***Page 2***

The plan of conversion provides for the establishment of a new charitable foundation (the "Foundation"). The Foundation contribution will equal 6% of the shares of common stock sold in the offering and will be funded with SR Bancorp common stock contributed by the Company in an amount equal to 5.0% of the shares of common stock sold in the offering and cash in an amount equal to 1.0% of the shares of common stock sold in the offering. The purpose of the Foundation is to provide financial support to charitable organizations in the communities in which Somerset Savings operates and to enable those communities to share in the Bank's long-term growth. The Foundation will be dedicated completely to community activities and the promotion of charitable causes.

Following completion of the conversion and related stock offering, pursuant to an Agreement and Plan of Merger, the Boards of Directors of Somerset Savings and SR Bancorp entered into a definitive agreement to acquire Regal Bancorp, Inc., Livingston, New Jersey ("Regal Bancorp") and its subsidiary Regal Bank. In the acquisition, Regal Bancorp will merge with and into SR Bancorp, with SR Bancorp as the surviving entity, and Regal Bank will merge with and into Somerset Savings, with Somerset Savings as the surviving institution under the name Somerset Regal Bank. In connection with the conversion and acquisition, Somerset Savings also intends to convert to a New Jersey chartered commercial bank.

In connection with the proposed merger, Regal Bancorp shareholders will receive $23.00 in cash in exchange for each share of Regal Bancorp common stock that they own. The aggregate transaction value of the acquisition is approximately $69.5 million.

This updated appraisal reflects the following noteworthy items: (1) a review of recent developments in Somerset Savings' and Regal Bancorp's financial condition, including financial data through December 31, 2022; (2) an updated comparison of Somerset Savings' financial condition and operating results versus the Peer Group companies identified in the Original Appraisal; and (3) a review of stock market conditions since the date of the Original Appraisal.

The estimated pro forma market value is defined as the price at which Somerset Savings' common stock, immediately upon completion of the public stock offering, would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.

Our valuation is not intended, and must not be construed, as a recommendation of any kind as to the advisability of purchasing shares of the common stock. Moreover, because such valuation is necessarily based upon estimates and projections of a number of matters, all of which are subject to change from time to time, no assurance can be given that persons who purchase shares of common stock in the conversion will thereafter be able to buy or sell such shares at prices related to the foregoing valuation of the pro forma market value thereof. RP Financial is not a seller of securities within the meaning of any federal and state securities laws and any report prepared by RP Financial shall not be used as an offer or solicitation with respect to the purchase or sale of any securities. RP Financial maintains a policy which prohibits the company, its principals or employees from purchasing stock of its client institutions.

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***Boards of Directors***

***February 21, 2023***

 ***Page 3***

*<u>Discussion of Relevant Considerations</u>*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. <u>Financial Results</u> 

Table 1 presents summary balance sheet and income statement details for the twelve months ended June 30, 2022 and updated financial information through December 31, 2022. Somerset Savings' assets increased by $882,000 or 0.14% from June 30, 2022 to December 31, 2022. Loan growth accounted for most of the increase in assets during the six months ended December 31, 2022, which was largely funded with redeployment of cash and investments. Overall, cash and investments (inclusive of FHLB stock) decreased from $276.8 million or 42.68% of assets at June 30, 2022 to $252.7 million or 38.90% of assets at December 31, 2022. Net loans receivable increased from $334.6 million or 51.58% of assets at June 30, 2022 to $357.6 million or 55.06% of assets at December 31, 2022. The balance for bank-owned life insurance increased slightly during the six months ended December 31, 2022 to equal $28.4 million or 4.37% of assets at December 31, 2022.

Updated credit quality measures for the Bank remained favorable, with the balance of non-performing assets increasing slightly during the six months ended December 31, 2022. Somerset Savings' non-performing assets increased from a zero balance at June 30, 2022 to $150,000 or 0.02% of assets at December 31, 2022.

Deposits increased from $522.1 million or 80.49% of assets at June 30, 2022 to $522.8 million or 80.49% of assets at December 31, 2022. Deposit growth was driven by an increase in certificates of deposit ("CDs"), which was partially offset by a decrease in transaction and savings account deposits. Somerset Savings' equity decreased from $118.2 million June 30, 2022 to $118.1 million at December 31, 2022, which combined with asset growth provided for a slight decrease in the Bank's equity-to-assets ratio from 18.23% at June 30, 2022 to 18.18% at December 31, 2022.

Somerset Savings' operating results for the twelve months ended June 30, 2022 and December 31, 2022 are also set forth in Table 1. The Bank's updated reported earnings were nominally lower, equaling $1.9 million or 0.29% of average assets for both the twelve months ended June 30, 2022 and the twelve months ended December 31, 2022. The slight decline in earnings was the result of higher operating expenses more than offsetting higher net interest income.

Somerset Savings' net interest income was higher during the most recent twelve month period, which was realized through an increase in interest income and a decrease in interest expense. Growth in interest income was driven by loan growth, which also facilitated an increase in the average yield on interest-earning assets to 2.53% for the six months ended December 31, 2022 as compared to 2.16% for the six months ended December 31, 2021. Comparatively, the decrease in interest expense was facilitated by a seven basis point decrease in the average cost of interest-bearing liabilities to 0.31% for the six months ended December 31, 2022 as compared to 0.38% for the six months ended December 31, 2021, as well as increase in the average balance of non-interest bearing deposits during the six months ended December 31, 2022 compared to the six months ended December 31, 2021. Overall, net interest income increased from $11.9 million or 1.83% of average assets during the twelve months ended June 30, 2022 to $13.1 million or 2.03% of average assets during the twelve months ended December 31, 2022.

------

***Boards of Directors***

***February 21, 2023***

 ***Page 4***

Table 1

Somerset Savings Bank, SLA

Recent Financial Data

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | At June 30, 2022 | At June 30, 2022 | At December 31, 2022 | At December 31, 2022 |
|  | Amount | Assets | Amount | Assets |
|  | ($000) | (%) | ($000) | (%) |
|  <u>Balance Sheet Data</u> |  |  |  |  |
|  Total assets | $648631 | 100.00% | $649513 | 100.00% |
|  Cash, cash equivalents | 35344 | 5.45 | 27135 | 4.18 |
|  Investment securities | 240779 | 37.12 | 224836 | 34.62 |
|  Loans receivable, net | 334558 | 51.58 | 357616 | 55.06 |
|  FHLB stock | 702 | 0.11 | 702 | 0.11 |
|  Bank-owned life insurance | 28056 | 4.33 | 28384 | 4.37 |
|  Deposits | 522072 | 80.49 | 522762 | 80.49 |
|  Total equity | 118231 | 18.23 | 118071 | 18.18 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | 12 Months Ended | 12 Months Ended | 12 Months Ended | 12 Months Ended |
|  | June 30, 2022 | June 30, 2022 | December 31, 2022 | December 31, 2022 |
|  | Amount | Avg. Assets | Amount | Avg. Assets |
|  | ($000) | (%) | ($000) | (%) |
|  <u>Summary Income Statement</u> |  |  |  |  |
|  Interest income | $13432 | 2.07% | $14502 | 2.24% |
|  Interest expense | (1535) | (0.24) | (1362) | (0.21) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net interest income | 11897 | 1.83 | 13140 | 2.03 |
|  Provisions for loan losses | 0 | 0.00 | 0 | 0.00 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net interest income after prov. | 11897 | 1.83 | 13140 | 2.03 |
|  Non-interest operating income | 1359 | 0.21 | 1360 | 0.21 |
|  Gain (loss) on securities | (8) | 0.00 | (6) | 0.00 |
|  Non-interest operating expense | (11014) | (1.70) | (12263) | (1.89) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Income before income tax expense | 2234 | 0.34 | 2231 | 0.35 |
|  Income taxes | (363) | (0.06) | (370) | (0.06) |
|  Net income | $1871 | 0.29% | $1861 | 0.29% |

---

Sources: Somerset Savings' prospectus, audited and unaudited financial statements, and RP Financial calculations.

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***Boards of Directors***

***February 21, 2023***

 ***Page 5***

Operating expenses increased from $11.0 million or 1.70% of average assets during the twelve months ended June 30, 2022 to $12.3 million or 1.89% of average assets during the twelve months ended December 31, 2022. Increases in compensation expenses and professional fees accounted for most of the increase in operating expenses during the most recent twelve month period. Overall, Somerset Savings' updated ratios for net interest income and operating expenses provided for a nominally lower expense coverage ratio (net interest income divided by operating expenses). Somerset Savings' expense coverage ratio decreased from 1.08x for the twelve months ended June 30, 2022 to 1.07x for the twelve months ended December 31, 2022.

Non-interest operating income remained stable during the most recent twelve month period, equaling $1.4 million or 0.21% of average assets for both twelve month periods shown in Table 1. Overall, when factoring non-interest operating income into core earnings, the Bank's updated efficiency ratio of 84.36% (operating expenses as a percent of net interest income and non-interest operating income) was slightly higher than 83.33% efficiency ratio recorded for the twelve months ended June 30, 2022.

Loan loss provisions were not a factor in the Bank's earnings during both twelve month periods shown in Table 1. The Bank maintained allowances for loan losses of $1.1 million at December 31, 2022, equal to 0.31% of total loans and 744.00% of non-performing loans.

Non-operating income and losses remained a nominal factor in the Bank's updated earnings, equaling a loss of $6,000 for the twelve months ended December 31, 2022. The non-operating loss consisted of an unrealize loss on equity securities.

The income tax expense increased from $363,000 or 0.06% of average assets for the twelve months ended June 30, 2022 to $370,000 or 0.06% of average assets for the twelve months ended December 31, 2022.

<u>Pro Forma Impact of Regal Bancorp Acquisition</u>

Table 2 presents the pro forma balance sheet and income statement impact of the Regal Bancorp acquisition, as of and for the twelve months ended June 30, 2022 and updated financial information through December 31, 2022.

Somerset Savings' pro forma assets decreased by $90.2 million or 7.69% from June 30, 2022 to December 31, 2022. Cash and cash equivalents and investment securities accounted for most of the decline in pro forma assets during the six months ended December 31, 2022, which was partially offset by an increase in net loans receivable. The decrease in cash and investments was due to declines in the balances of Somerset Savings' and Regal Bancorp's cash and investments, as well as an increase in the cash consideration utilized to fund the Regal Bancorp acquisition. Overall, cash and investments (inclusive of FHLB stock) decreased from $436.0 million or 37.15% of assets at June 30, 2022 to $306.2 million or 28.26% of assets at December 31, 2022. Net loans receivable increased from $668.1 million or 56.92% of assets at June 30, 2022 to $689.1 million or 63.60% of assets at December 31, 2022. Goodwill/intangibles increased from $19.9 million or 1.70% of assets at June 30, 2022 to $32.1 million or 2.96% of assets at December 31, 2022, with most of the increase related to a change in consideration used for the acquisition of Regal Bancorp from a cash and stock transaction to an all cash transaction. The balance for bank-owned life insurance increased slightly during the six months ended December 31, 2022 to equal $35.7 million or 3.30% of assets at December 31, 2022.

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***Boards of Directors***

***February 21, 2023***

 ***Page 6***

Table 2

Somerset Savings Bank, SLA

Pro Forma Combined Recent Financial Data

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| | | | | |
|:---|:---|:---|:---|:---|
|  | At June 30, 2022 | At June 30, 2022 | At December 31, 2022 | At December 31, 2022 |
|  | Amount | Assets | Amount | Assets |
|  | ($000) | (%) | ($000) | (%) |
|  <u>Balance Sheet Data</u> |  |  |  |  |
|  Total assets | $1173743 | 100.00% | $1083507 | 100.00% |
|  Cash, cash equivalents | 175592 | 14.96 | 61847 | 5.71 |
|  Investment securities | 258951 | 22.06 | 242905 | 22.42 |
|  Loans receivable, net | 668118 | 56.92 | 689138 | 63.60 |
|  FHLB stock | 1486 | 0.13 | 1486 | 0.14 |
|  Goodwill and core deposit intangible | 19897 | 1.70 | 32075 | 2.96 |
|  Bank-owned life insurance | 35326 | 3.01 | 35730 | 3.30 |
|  Deposits | 994584 | 84.74 | 947163 | 87.42 |
|  Borrowings | 5000 | 0.43 | 5000 | 0.46 |
|  Total equity | 164042 | 13.98 | 117051 | 10.80 |
|  Tangible equity | 118231 | 12.28 | 84976 | 7.84 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | 12 Months Ended | 12 Months Ended | 12 Months Ended | 12 Months Ended |
|  | June 30, 2022 | June 30, 2022 | December 31, 2022 | December 31, 2022 |
|  | Amount | Avg. Assets | Amount | Avg. Assets |
|  | ($000) | (%) | ($000) | (%) |
|  <u>Summary Income Statement</u> |  |  |  |  |
|  Interest income | $35599 | 2.98% | $40066 | 3.70% |
|  Interest expense | (4399) | (0.37) | (4767) | (0.44) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net interest income | 31200 | 2.61 | 35299 | 3.26 |
|  Provisions for loan losses | 0 | 0.00 | 0 | 0.00) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net interest income after prov. | 31200 | 2.61 | 35299 | 3.26 |
|  Non-interest operating income | 2508 | 0.21 | 2116 | 0.20 |
|  Gain (loss) on securities | (8) | 0.00 | (6) | 0.00 |
|  Non-interest operating expense | (23351) | (1.95) | (25375) | (2.34) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Income before income tax expense | 10349 | 0.87 | 12034 | 1.11 |
|  Income taxes | (2554) | (0.21) | (3093) | (0.29) |
|  Net income | $7795 | 0.65% | $8941 | 0.83% |

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Sources: Somerset Savings' prospectus, Somerset Savings' and Regal Bancorp's audited and unaudited financial statements, and RP Financial calculations.

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***Boards of Directors***

***February 21, 2023***

 ***Page 7***

Updated pro forma credit quality measures remained favorable, although the balance of non-performing assets increased slightly during the six months ended December 31, 2022. Pro forma non-performing assets increased from $204,000 or 0.02% of assets at June 30, 2022 to $691,000 or 0.06% of assets at December 31, 2022. Both Regal Bancorp and Somerset Savings experienced slight increases in non-performing loans during the six months ended December 31, 2022, which comprised the entire balance of pro forma non-performing assets at December 31, 2022.

Somerset Savings' pro forma funding composition showed a decrease in deposits and no change in borrowings during the six months ended December 31, 2022. The decrease in deposits was primarily due to a $47.7 million decline in Regal Bancorp's deposits, with deposit run-off consisting primarily of transaction and savings account deposits. Overall, pro forma deposits decreased from $994.6 million or 84.74% of assets at June 30, 2022 to $947.2 million or 87.42% of assets at December 31, 2022. The pro forma balance of borrowings remained at $5.0 million, equal to 0.46% of pro forma assets at December 31, 2022. Somerset Savings' pro forma tangible equity decreased from $118.2 million or 12.28% of assets at June 30, 2022 to $85.0 million or 7.84% of assets at December 31, 2022. The primary factor accounting for most of the decrease in tangible equity was the result of the change in consideration used for the acquisition of Regal Bancorp from a cash and stock transaction to an all cash transaction, which reduced pro forma equity and increased goodwill/intangibles.

Pro forma operating results for the twelve months ended June 30, 2022 and December 31, 2022 are also set forth in Table 1. As set forth in the Original Appraisal, pro forma net interest income reflects the yield adjustments for interest rate sensitive assets and liabilities, based on mark-to-market valuation adjustments on Regal Bancorp's balance sheet as of June 30, 2022 and December 31, 2022. Pro forma net interest income was also adjusted for the cash cost of the acquisition. Non-interest expense was adjusted to account for the amortization of intangibles. The Bank's reported pro forma earnings increased from $7.8 million or 0.65% of average assets for the twelve months ended June 30, 2022 to $8.9 million or 0.83% of average assets for the twelve months ended December 31, 2022. The increase in pro forma net income was realized through an increase in net interest income, which was partially offset by a decrease in non-interest operating income and an increase in operating expenses.

The increase in Somerset Savings' pro forma net interest income during the most recent twelve month period was realized through increases in net interest income recorded by both Somerset Savings and Regal Bancorp, as well as an increase in the net interest income that was attributable to the net earnings impact of Regal Bancorp's fair value accounting adjustments, less the cash cost of the merger consideration and expenses incurred for the acquisition of Regal Bancorp The net interest income earnings impact from the fair value accounting adjustments and cash costs related to the acquisition increased from $4.5 million to $6.1 million. Overall, pro forma net interest income increased from $31.2 million or 2.61% of average assets during the twelve months ended June 30, 2022 to $35.3 million or 3.26% of average assets during the twelve months ended December 31, 2022.

Pro forma operating expenses increased from $23.4 million or 1.95% of average assets during the twelve months ended June 30, 2022 to $25.4 million or 2.34% of average assets during the twelve months ended December 31, 2022. Most of the increase in pro forma operating expenses was due to an increase in Somerset Savings' operating expenses during

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***Boards of Directors***

***February 21, 2023***

 ***Page 8***

the most recent twelve month period, while a slight increase in Regal Bancorp's updated operating expenses and a slight increase in the intangible amortization expense were less significant factors that accounted for the increase in pro forma operating expenses during the twelve months ended December 31, 2022. Overall, Somerset Savings' updated pro forma ratios for net interest income and operating expenses provided for a slightly higher expense coverage ratio (net interest income divided by operating expenses). Somerset Savings' pro forma expense coverage ratio increased from 1.34x for the twelve months ended June 30, 2022 to 1.39x for the twelve months ended December 31, 2022.

Pro forma non-interest operating income decreased from $2.5 million or 0.21% of average assets during the twelve months ended June 30, 2022 to $2.1 million or 0.20% of average assets during the twelve months ended December 31, 2022. A decrease in Regal Bancorp's non-interest operating income accounted for the decline in pro forma non-interest operating income, which was largely due to a reduction in loan sale gains. Overall, when factoring non-interest operating income into pro forma core earnings, the Bank's updated pro forma efficiency ratio of 67.63% (operating expenses as a percent of net interest income and non-interest operating income) was slightly more favorable than the 69.15% pro forma efficiency ratio recorded for the twelve months ended June 30, 2022.

Loan loss provisions remained a non-factor in Somerset Savings' updated pro forma earnings and a non-operating loss on investment securities remained a nominal factor in Somerset Savings' updated pro forma earnings.

The pro forma income tax expense increased from $2.6 million or 0.21% of average assets for the twelve months ended June 30, 2022 to $3.1 million or 0.29% of average assets for the twelve months ended December 31, 2022. Higher pro forma pre-tax earnings largely accounted for the increase in the pro forma income tax expense.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. <u>Peer Group Financial Comparisons</u> 

Tables 3 and 4 present updated financial characteristics and operating results for Somerset Savings, the Peer Group and all publicly-traded thrifts. The financial data presented for Somerset Savings includes the estimated pro forma impact of the acquisition of Regal Bancorp, with the exception of the Bank's regulatory capital ratio. The Bank's and the Peer Group's ratios are based on financial results through December 31, 2022. HV Bancorp, Inc. of Pennsylvania, which was one of the companies selected for the Peer Group in the Original Appraisal, is the target of a pending acquisition to sell control and, therefore, has been eliminated from the Peer Group.

In general, the comparative balance sheet ratios for the Bank and the Peer Group did not vary significantly from the ratios exhibited in the Original Appraisal. Consistent with the Original Appraisal, the Bank's updated interest-earning asset composition reflected a lower concentration of loans and a higher concentration of cash and investments. Overall, the Bank's and the Peer Group's updated interest-earning assets-to-assets ratios equaled 91.87% and 94.24%, respectively.

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***Boards of Directors***

***February 21, 2023***

 ***Page 9***

Table 3

Balance Sheet Composition and Growth Rates

Comparable Institution Analysis

For the 12 Months Ended December 31, 2022 or the Most Recent 12 Months Available

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| | | | | | | | | | | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  |  | Balance Sheet as a Percent of Assets | Balance Sheet as a Percent of Assets | Balance Sheet as a Percent of Assets | Balance Sheet as a Percent of Assets | Balance Sheet as a Percent of Assets | Balance Sheet as a Percent of Assets | Balance Sheet as a Percent of Assets | Balance Sheet as a Percent of Assets | Balance Sheet as a Percent of Assets | Balance Sheet as a Percent of Assets | Balance Sheet Annual Growth Rates | Balance Sheet Annual Growth Rates | Balance Sheet Annual Growth Rates | Balance Sheet Annual Growth Rates | Balance Sheet Annual Growth Rates | Balance Sheet Annual Growth Rates | Balance Sheet Annual Growth Rates | Regulatory Capital | Regulatory Capital | Regulatory Capital |
|  |  |  | Cash &<br>Equival. | MBS &<br>Invest | BOLI | Net<br>Loans (1) | Deposits | Borrowed<br>Funds | Sub.<br>Debt | Total<br>Equity | Goodwill<br>& Intang | Tangible<br>Equity | Assets | MBS, Cash<br>Invests | Loans | Deposits | Borrows.<br>& Subdebt | Total<br>Equity | Tangible<br>Equity | Tier 1<br>Leverage | Tier 1<br>Risk-Based | Risk-Based<br>Capital |
|  **<u>Somerset Savings Bank, SLA</u>** | **<u>Somerset Savings Bank, SLA</u>** | NJ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; December 31, 2022 | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; December 31, 2022 |  | 5.71% | 22.56% | 3.30% | 63.60% | 87.42% | 0.46% | 0.00% | 10.80% | 2.96% | 7.84% | 40.77% | 2.03% | 67.77% | 49.11% | NM | -2.70% | -21.79% | 19.54% | NA | NA |
|  <u>All Non-MHC Public Thrifts</u> | <u>All Non-MHC Public Thrifts</u> |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Averages | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Averages |  | 4.18% | 16.38% | 1.83% | 73.07% | 75.74% | 8.91% | 0.40% | 13.55% | 0.69% | 12.97% | 7.54% | -10.23% | 14.57% | 4.73% | 41.26% | 3.75% | 3.67% | 12.63% | 15.85% | 17.18% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Medians | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Medians |  | 2.32% | 14.44% | 1.79% | 76.55% | 76.88% | 7.57% | 0.00% | 11.71% | 0.03% | 11.31% | 4.56% | -21.21% | 13.29% | 1.69% | 42.88% | -4.46% | -5.49% | 11.46% | 13.86% | 14.93% |
|  <u>Comparable Group</u> | <u>Comparable Group</u> |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Averages | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Averages |  | 3.08% | 15.61% | 2.01% | 75.55% | 80.50% | 5.52% | 0.00% | 12.86% | 0.42% | 12.44% | 3.80% | -25.96% | 12.77% | 2.25% | 15.23% | -6.55% | -6.57% | 11.96% | 12.70% | 13.78% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Medians | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Medians |  | 3.31% | 14.44% | 1.99% | 78.06% | 81.01% | 4.04% | 0.00% | 12.16% | 0.01% | 12.16% | 3.15% | -26.57% | 13.45% | 3.91% | 30.30% | -8.84% | -8.84% | 10.97% | 12.34% | 13.50% |
|  <u>Comparable Group</u> | <u>Comparable Group</u> |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  AFBI | Affinity Bancshares, Inc. | GA | 3.33% | 9.33% | 1.99% | 80.49% | 83.05% | 1.27% | 0.00% | 14.80% | 2.35% | 12.45% | 0.41% | -38.50% | 10.61% | 7.24% | -79.54% | -3.20% | -3.59% | 10.97% | 11.86% | 13.11% |
|  ESSA | ESSA Bancorp, Inc. | PA | 1.49% | 14.44% | 1.99% | 78.06% | 71.09% | 16.17% | 0.00% | 11.22% | 0.73% | 10.49% | 3.15% | -28.81% | 12.29% | -16.20% | NM | 4.12% | 4.54% | 10.50% | 12.34% | 13.51% |
|  HMNF | HMN Financial, Inc. | MN | 3.31% | 22.56% | 0.00% | 71.01% | 89.58% | 0.00% | 0.00% | 8.88% | 0.07% | 8.81% | 2.49% | -26.57% | 18.28% | 3.29% | -100.00% | -11.54% | -11.61% | 9.14% | 11.48% | 12.65% |
|  HFBL | Home Federal Bancorp, Inc. of Louisiana | LA | 3.55% | 18.62% | 1.15% | 73.10% | 89.88% | 1.43% | 0.00% | 8.44% | 0.00% | 8.44% | 0.92% | -26.15% | 13.45% | 1.18% | 94.91% | -8.84% | -8.84% | 9.99% | 14.08% | 15.25% |
|  IROQ | IF Bancorp, Inc. | IL | 1.18% | 25.73% | 1.77% | 68.14% | 81.01% | 9.22% | 0.00% | 8.63% | 0.00% | 8.63% | 6.62% | -12.43% | 14.13% | 3.91% | 117.37% | -17.81% | -17.81% | 9.88% | NA | NA |
|  MGYR | Magyar Bancorp, Inc. | NJ | 0.96% | 12.41% | 2.16% | 81.07% | 82.29% | 4.04% | 0.00% | 12.16% | 0.00% | 12.16% | 5.25% | -32.45% | 15.99% | 4.39% | 30.30% | 1.50% | 1.50% | 11.23% | 14.58% | 15.83% |
|  NECB | Northeast Community Bancorp, Inc. | NY | 6.70% | 3.21% | 1.82% | 85.07% | 78.73% | 1.68% | 0.00% | 18.39% | 0.01% | 18.38% | 16.32% | -26.43% | 25.22% | 21.01% | -23.16% | 4.25% | 4.44% | 16.50% | 13.17% | 13.50% |
|  PVBC | Provident Bancorp, Inc. | MA | 4.93% | 2.01% | 2.67% | 86.54% | 78.20% | 8.01% | 0.00% | 12.68% | 0.00% | 12.68% | -5.37% | -40.50% | -2.79% | -12.35% | NM | -11.22% | -11.22% | 11.17% | 11.37% | 12.63% |
|  WMPN | William Penn Bancorporation | PA | 2.27% | 32.22% | 4.56% | 56.51% | 70.66% | 7.86% | 0.00% | 20.58% | 0.63% | 19.95% | 4.43% | -1.80% | 7.75% | 7.82% | 66.72% | -16.20% | -16.54% | 18.26% | NA | NA |

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(1) Includes loans held for sale.

Source: S&P Global Market Intelligence and RP<sup>®</sup> Financial, LC. calculations. The information provided in this table has been obtained from sources we believe are reliable, but we cannot guarantee the accuracy or completeness of such information.

Copyright (c) 2023 by RP<sup>®</sup> Financial, LC.

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***Boards of Directors***

***February 21, 2023***

 ***Page 10***

Table 4

Income as Percent of Average Assets and Yields, Costs, Spreads

Comparable Institution Analysis

For the 12 Months Ended December 31, 2022 or the Most Recent 12 Months Available

---

| | | | | | | | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  |  | | Net Interest Income | Net Interest Income | Net Interest Income | Net Interest Income | | Non-Interest Income | Non-Interest Income | | NonOp Items | NonOp Items | | Yields, Costs, and Spreads | Yields, Costs, and Spreads | Yields, Costs, and Spreads | | |
|  |  |  |<br>Net<br>Income | Income | Expense | NII | Loss<br>Provis.<br>on IEA |<br>NII<br>After<br>Provis. | Gain<br>on Sale of<br>Loans | Other<br>Non-Int<br>Income |<br>Total<br>Non-Int<br>Expense | Net Gains/<br>Losses (1) | Extrao.<br>Items |<br>Provision<br>for<br>Taxes | Yield<br>On IEA | Cost<br>Of IBL | Yld-Cost<br>Spread |<br>MEMO:<br>Assets/<br>FTE Emp. |<br>MEMO:<br>Effective<br>Tax Rate |
|  |  |  | (%) | (%) | (%) | (%) | (%) | (%) | (%) | (%) | (%) | (%) | (%) | (%) | (%) | (%) | (%) | ($000) | (%) |
|  **<u>Somerset Savings Bank, SLA</u>** | **<u>Somerset Savings Bank, SLA</u>** | NJ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; December 31, 2022 | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; December 31, 2022 |  | 0.83% | 3.70% | 0.44% | 3.26% | 0.00% | 3.26% | 0.02% | 0.18% | 2.34% | 0.00% | 0.00% | 0.29% | 2.40% | 0.29% | 2.11% | $8208 | 25.70% |
|  <u>All Non-MHC Public Thrifts</u> | <u>All Non-MHC Public Thrifts</u> |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Averages | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Averages |  | 0.68% | 3.66% | 0.47% | 3.19% | 0.16% | 3.06% | 0.05% | 0.40% | 2.62% | -0.02% | 0.00% | 0.22% | 3.87% | 0.69% | 3.18% | $9288 | 22.27% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Medians | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Medians |  | 0.73% | 3.44% | 0.39% | 3.04% | 0.06% | 2.95% | 0.01% | 0.37% | 2.53% | 0.00% | 0.00% | 0.25% | 3.65% | 0.58% | 3.04% | $8011 | 23.34% |
|  <u>Comparable Group</u> | <u>Comparable Group</u> |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Averages | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Averages |  | 0.74% | 3.94% | 0.37% | 3.57% | 0.42% | 3.14% | 0.06% | 0.37% | 2.56% | -0.03% | 0.00% | 0.24% | 4.18% | 0.61% | 3.57% | $8183 | 22.76% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Medians | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Medians |  | 0.93% | 3.74% | 0.36% | 3.38% | 0.09% | 3.24% | 0.02% | 0.31% | 2.53% | -0.02% | 0.00% | 0.27% | 4.03% | 0.56% | 3.40% | $8043 | 24.87% |
|  <u>Comparable Group</u> | <u>Comparable Group</u> |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  AFBI | Affinity Bancshares, Inc. | GA | 0.93% | 4.17% | 0.31% | 3.86% | 0.09% | 3.77% | 0.00% | 0.31% | 2.79% | -0.08% | 0.00% | 0.28% | 4.47% | 0.56% | 3.91% | $8608 | 23.51% |
|  ESSA | ESSA Bancorp, Inc. | PA | 1.09% | 3.59% | 0.28% | 3.31% | 0.01% | 3.30% | 0.00% | 0.43% | 2.38% | 0.00% | 0.00% | 0.27% | 3.80% | 0.40% | 3.40% | $7941 | 20.02% |
|  HMNF | HMN Financial, Inc. | MN | 0.75% | 3.21% | 0.19% | 3.02% | 0.10% | 2.92% | 0.22% | 0.60% | 2.69% | 0.00% | 0.00% | 0.30% | 3.30% | 0.31% | 2.99% | $6643 | 28.62% |
|  HFBL | Home Federal Bancorp, Inc. of Louisiana | LA | 0.99% | 3.74% | 0.36% | 3.38% | 0.15% | 3.24% | 0.15% | 0.29% | 2.53% | 0.00% | 0.00% | 0.16% | 4.03% | 0.50% | 3.53% | $7589 | 13.93% |
|  IROQ | IF Bancorp, Inc. | IL | 0.69% | 3.40% | 0.51% | 2.89% | 0.10% | 2.80% | 0.03% | 0.60% | 2.44% | -0.06% | 0.00% | 0.25% | 3.50% | 0.62% | 2.88% | $7421 | 26.22% |
|  MGYR | Magyar Bancorp, Inc. | NJ | 1.01% | 3.88% | 0.44% | 3.44% | 0.07% | 3.37% | 0.10% | 0.22% | 2.27% | 0.00% | 0.00% | 0.42% | 4.09% | 0.71% | 3.38% | $9029 | 29.46% |
|  NECB | Northeast Community Bancorp, Inc. | NY | 1.95% | 5.65% | 0.64% | 5.01% | 0.03% | 4.98% | 0.00% | 0.26% | 2.41% | -0.12% | 0.00% | 0.75% | 6.00% | 1.31% | 4.69% | $10311 | 27.84% |
|  PVBC | Provident Bancorp, Inc. | MA | -1.24% | 4.59% | 0.25% | 4.34% | 3.27% | 1.08% | 0.02% | 0.34% | 2.99% | -0.02% | 0.00% | -0.34% | 4.87% | 0.53% | 4.34% | $8060 | NM |
|  WMPN | William Penn Bancorporation | PA | 0.46% | 3.25% | 0.41% | 2.84% | 0.00% | 2.84% | 0.00% | 0.25% | 2.54% | -0.02% | 0.00% | 0.07% | 3.59% | 0.57% | 3.02% | $8043 | 12.46% |

---

(1) Net gains/losses includes gain/loss on sale of securities and nonrecurring income and expense.

Source: S&P Global Market Intelligence and RP<sup>®</sup> Financial, LC. calculations. The information provided in this table has been obtained from sources we believe are reliable, but we cannot guarantee the accuracy or completeness of such information.

Copyright (c) 2023 by RP<sup>®</sup> Financial, LC.

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***Boards of Directors***

***February 21, 2023***

 ***Page 11***

Consistent with the Original Appraisal, Somerset Savings' funding composition showed a higher concentration of deposits and a lower concentration of borrowings relative to the comparable Peer Group measures. Updated interest-bearing liabilities-to-assets ratios equaled 87.88% and 86.02% for the Bank and the Peer Group, respectively. Somerset Savings' updated tangible equity-to-assets ratio equaled 7.84%, which remained below the comparable Peer Group ratio of 12.44%. Overall, Somerset Savings' updated interest-earning assets-to-interest-bearing liabilities ("IEA/IBL") ratio equaled 104.54%, which remained below the comparable Peer Group ratio of 109.56%. As discussed in the Original Appraisal, the additional capital realized from stock proceeds should serve to increase Somerset Savings' IEA/IBL ratio, as the level of interest-bearing liabilities funding assets will be lower due to the increase in capital realized from the offering.

Updated growth rates for Somerset Savings are based on annualized growth rates for the 18 months ended December 31, 2022 and the Peer Group's growth rates are based on growth for the twelve months ended December 31, 2022. The Bank's growth rates reflect Somerset Savings' growth and the pro forma growth resulting from the acquisition of Regal Bancorp. Somerset Savings recorded a 40.77% increase in assets, versus a 3.80% increase in assets for the Peer Group. Asset growth by the Bank was largely sustained by a 67.77% increase in loans, which was supplemented with a 2.03% increase in cash and investments. Similarly, the Peer Group's asset growth was primarily realized through a 12.77% increase in loans, which was in part funded by a 25.96% decrease in cash and investments.

Table 4 displays comparative operating results for Somerset Savings and the Peer Group, based on earnings for the twelve months ended December 31, 2022. The Bank's earnings have been adjusted to reflect the pro forma impact of the Regal Bancorp acquisition, with the exception of the Bank's yield-cost interest rate spread. Somerset Savings and the Peer Group reported net income to average assets ratios of 0.83% and 0.74%, respectively. The Bank's higher return was realized through lower operating expenses, lower loan loss provisions and higher non-operating income, while the Peer Group maintained earnings advantages with respect to higher net interest income, higher non-interest operating income and lower effective tax rate.

Updated expense coverage ratios posted by Somerset Savings and the Peer Group both equaled 1.39x, as the Peer Group's higher net interest income ratio was offset by the Bank's lower operating expense ratio. The Peer Group's higher net interest income ratio was realized through a higher interest income ratio and a lower interest expense ratio.

Non-interest operating income remained a larger contributor to the Peer Group's earnings, as such income amounted to 0.20% and 0.43% of the Bank's and the Peer Group's average assets, respectively. Accordingly, taking non-interest operating income into account in assessing Somerset Savings' core earnings strength relative to the Peer Group's, the Bank's updated efficiency ratio of 67.63% remained slightly less favorable than the Peer Group's efficiency ratio of 64.00%.

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***Boards of Directors***

***February 21, 2023***

 ***Page 12***

Loan loss provisions remained a larger factor in the Peer Group's updated earnings, as no loan loss provisions were established by the Bank. Comparatively, loan loss provisions for the Peer Group equaled 0.42% of average assets.

Non-operating gains and losses realized from the sale of assets and other non-operating items remained a slightly larger factor in the Peer Group's updated earnings. The Bank recorded a nominal non-operating loss, versus a non-operating loss equal to 0.03% of average assets for the Peer Group. As set forth in the Original Appraisal, typically, such gains and losses are discounted in valuation analyses as they tend to have a relatively high degree of volatility, and, thus, are not considered part of core operations. Extraordinary items remained a non-factor in the Bank's and the Peer Group's updated earnings.

The Bank's effective tax rate of 25.70% remained slightly above the Peer Group's effective tax rate of 22.76%.

The Bank's updated credit quality measures continued to imply a slightly lower degree of credit risk exposure relative to the comparable Peer Group measures. Somerset Savings' ratios include the pro forma impact of the Regal Bancorp acquisition. As shown in Table 5, the Bank's non-performing assets/assets and non-performing loans/loans ratios of 0.06% and 0.10%, respectively, were lower than the comparable Peer Group ratios of 0.67% and 0.76%. The Bank's updated reserve coverage ratios indicated a lower level of reserves as a percent of non-performing loans (161.51% versus 181.27% for the Peer Group) and a lower level of reserves as a percent of loans (0.16% versus 1.19% for the Peer Group). The Bank's lower reserve ratios reflect fair value accounting for the acquisition of Regal Bancorp. Net loan charge-offs remained a more significant factor for the Peer Group, with net loan charge-offs as a percent of loans equal to 0.38% for the Peer Group compared to no net charge-offs for the Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. <u>Stock Market Conditions</u>

Since the date of the Original Appraisal, the performance of the broader stock market has been mixed. The broader stock market traded sharply lower at the conclusion of the Federal Reserve's policy meeting in late-September 2022, in which the Federal Reserve raised its target rate by 0.75% and signaled the need for further rate increases. The Dow Jones Industrial Average ("DJIA") slid into bear market territory to close out the third quarter, as investors confronted new signs of slowing global economic growth, Russia's attempt to escalate the war in Ukraine and growing certainty that the Federal Reserve would continue to raise rates to fight inflation.

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***Boards of Directors***

***February 21, 2023***

 ***Page 13***

Table 5

Credit Risk Measures and Related Information

Comparable Institution Analysis

For the 12 Months Ended December 31, 2022 or the Most Recent 12 Months Available

---

| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  |  | REO/<br>Assets | NPAs &<br>90+Del/<br>Assets (1) | NPLs/<br>Loans (2) | Rsrves/<br>Loans HFI | Rsrves/<br>NPLs (2) | Rsrves/<br>NPAs &<br>90+Del (1) | Net Loan<br>Chargeoffs (3) | NLCs/<br>Loans |
|  |  |  | (%) | (%) | (%) | (%) | (%) | (%) | ($000) | (%) |
|  **<u>Somerset Savings Bank, SLA</u>** | **<u>Somerset Savings Bank, SLA</u>** | NJ |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; December 31, 2022 | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; December 31, 2022 |  | 0.00% | 0.06% | 0.10% | 0.16% | 161.51% | 161.51% | $0 | 0.00% |
|  <u>All Non-MHC Public Thrifts</u> | <u>All Non-MHC Public Thrifts</u> |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Averages | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Averages |  | 0.04% | 0.52% | 0.78% | 1.04% | 214.54% | 172.88% | $2076 | 0.11% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Medians | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Medians |  | 0.01% | 0.42% | 0.61% | 1.00% | 179.10% | 141.10% | $42 | 0.01% |
|  <u>Comparable Group</u> | <u>Comparable Group</u> |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Averages | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Averages |  | 0.06% | 0.67% | 0.76% | 1.19% | 181.27% | 194.97% | $5357 | 0.38% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Medians | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Medians |  | 0.00% | 0.56% | 0.97% | 1.26% | 122.04% | 112.86% | $73 | 0.01% |
|  <u>Comparable Group</u> | <u>Comparable Group</u> |  |  |  |  |  |  |  |  |  |
|  AFBI | Affinity Bancshares, Inc. | GA | 0.37% | 1.27% | 1.07% | 1.45% | 134.97% | 92.75% | 62 | 0.00% |
|  ESSA | ESSA Bancorp, Inc. | PA | 0.00% | 0.95% | 1.19% | 1.23% | 102.97% | 102.83% | 381 | -0.03% |
|  HMNF | HMN Financial, Inc. | MN | 0.00% | 0.20% | 0.27% | 1.31% | 480.01% | 480.01% | $73 | 0.01% |
|  HFBL | Home Federal Bancorp, Inc. of Louisiana | LA | 0.05% | 0.39% | 0.45% | 1.13% | 251.47% | 215.38% | $239 | 0.06% |
|  IROQ | IF Bancorp, Inc. | IL | 0.00% | 0.05% | 0.05% | 1.26% | NM | NM | $46 | 0.01% |
|  MGYR | Magyar Bancorp, Inc. | NJ | 0.04% | 0.91% | 1.06% | 1.30% | 122.04% | 117.28% | 2 | 0.00% |
|  NECB | Northeast Community Bancorp, Inc. | NY | 0.10% | 0.10% | 0.00% | 0.45% | NM | 374.04% | $207 | 0.02% |
|  PVBC | Provident Bancorp, Inc. | MA | 0.00% | 1.58% | 1.79% | 1.94% | 108.44% | 108.44% | $47855 | 3.26% |
|  WMPN | William Penn Bancorporation | PA | 0.00% | 0.56% | 0.97% | 0.67% | 69.01% | 69.01% | $240 | 0.05% |

---

(1) NPAs are defined as nonaccrual loans, accruing loans 90 days or more past due, performing TDRs, and OREO.

(2) NPLs are defined as nonaccrual loans, accruing loans 90 days or more past due and performing TDRs.

(3) Net loan chargeoffs are shown on a last twelve month basis.

Source: S&P Global Market Intelligence and RP<sup>®</sup> Financial, LC. calculations. The information provided in this table has been obrained from sources we believe are reliable, but we cannot guarantee the accuracy or completeness of such information.

Copyright (c) 2023 by RP<sup>®</sup> Financial, LC.

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***Boards of Directors***

***February 21, 2023***

 ***Page 14***

The broader stock market rebounded at the start of the fourth quarter of 2022, with the DJIA posting its best two-day gain since April 2020. A relatively strong jobs report for September 2022 translated into stocks trading lower following the early-October rally, as hopes faded that the Federal Reserve would pursue a less aggressive monetary policy. After NASDAQ moved into bear territory for the second time of 2022, some favorable third quarter earnings reports fueled a broader stock market rally in the second half of October. Overall, the DJIA was up 14% for the month of October, which was its best month since 1976. Stocks traded lower at the start of November in conjunction with the Federal Reserve raising its target rate by another 0.75% and plans to keep raising rates, but potentially in smaller increments. A favorable employment report for October boosted stocks ahead of the mid-term elections, which was followed by a one-day selloff after election day amid uncertainty around the mid-term election results and turmoil in cryptocurrency markets. With the release of the October CPI showing a smaller-than-expected increase, stocks posted their biggest gains in more than two years on November 10<sup>th</sup>. Trading in the broader stock market was mixed through mid-November, as investor enthusiasm over a potential slowdown in interest rate increases faded. The up and down market continued through the second half of November, with stocks trading lower on worries about a rise in Covid-19 cases in China and then rallying after the Federal Reserve Chairman signaled a potential slowdown in interest rate increases. Economically sensitive shares led the market lower in early-December, as strong economic data increased expectations that the Federal Reserve would continue to raise interest rates throughout 2023. Slowing inflation indicated by November's CPI fueled a stock market rally heading into mid-December, which was followed by a selloff in mid-December as weak data for retail sales and manufacturing output heightened recession fears. A jump in consumer confidence data for December sparked a one-day rally heading into the last week of 2022, which was followed by an up and down stock market during the final week of the year. Overall, the DJIA closed at 33147.25 on the last day of trading in 2022, a decrease of 8.8% for 2022, while the S&P 500 and the NASDAQ Composite ended 2022 with respective declines of 19.4% and 33.1%.

Signs that inflation was moderating and the December jobs report showing a slowdown in hiring translated into stocks trending higher during the first two weeks of 2023. A sharp drop in December retail sales prompted a selloff in the broader stock market heading into the second half of January. Some favorable fourth quarter earnings reports and indications that inflation was moderating contributed to stocks trading higher during the second half of January. All three of the major U.S. stock indexes recorded strong monthly gains for January, as investors became more confident that Federal Reserve interest rate increases were nearing an end. After a stronger-than-expected jobs report for January stoked fears that interest rate increases could continue longer than anticipated, stocks pulled back in early-February. A general downward trend continued in the broader stock market going into the second half of February, as stronger than expected inflation data further heightened concerns that Federal Reserve tightening would last longer than investors had anticipated. On February 21, 2023 the DJIA closed at 33129.59 or 6.80% higher since the date of the Original Appraisal and the NASDAQ closed at 11492.30 or 0.37% lower since the date of the Original Appraisal.

The market for financial shares has been mixed as well since the date of the Original Appraisal. Selling pressure in bank stocks mounted in the second half of September 2022, as fears of an economic slowdown intensified following the Federal Reserve's 0.75% rate hike and expectations that the Federal Reserve would continue to raise rates for the balance of 2022. Financial shares paralleled trends in the broader stock market at the beginning of the fourth quarter of 2022, initially trading up and then retreating with the strong jobs report for September diminishing expectations of an easing in the Federal Reserve's monetary policy. Bank shares led a mid-October stock market rally, as some large banks posted better-than-expected third quarter earnings. Generally favorable third quarter earnings reports coming out of the banking sector and indications by some Federal Reserve officials that they were

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***Boards of Directors***

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considering whether to slow the pace of monetary tightening helped to sustain the positive trend for bank stocks through the end of October. After trading in a narrow range at the beginning of November and through the mid-term elections, bank stocks traded up on the lower-than-expected increase in the October CPI. Financial shares eased lower heading into the second half of November, as stronger-than-expected retail sales for October increased expectations that the Federal Reserve would keep raising interest rates to reduce persistently high inflation. Signs of inflation cooling and the possibility of smaller interest rate increases by the Federal Reserve contributed to bank stocks edging higher during the second half of November, which was followed by bank stocks and other economically sensitive shares leading the market lower during the first half of December. Recession worries elevated by indications from the Federal Reserve that it may have to hold interest rates higher for longer than expected was a driving factor that fueled the downturn in bank stocks. In the closing weeks of 2022, bank stocks traded in a narrow range and then edged higher at the end of December. For 2022 overall, the S&P U.S. BMI Banks Index was down 19.4%.

Bank stocks followed the broader stock market's positive trend during the first half of January 2023 and then retreated heading into the second half of January, as recession worries came into focus on the report that retail sales for December posted their biggest decline in 2022. Prospects that the Federal Reserve would begin to dial back its interest rate increases and fourth quarter GDP data that showed economic growth slowed less than expected provided for a mildly positive trend for bank stocks in the second half of January, which continued into early-February as the quarter-point rate hike by the Federal Reserve was in line with expectations. Fourth quarter earnings season translated into a narrow trading range for bank stocks through mid-February, which was followed by bank stocks trading lower along with the selloff in the broader stock market as inflation data raised expectations that the Federal Reserve would keep interest rates higher for longer than had been anticipated. On February 21, 2023, the S&P U.S. BMI Banks Index closed at 156.7, an increase of 3.09% since September 19, 2022.

Since the date of the Original Appraisal, the updated pricing measures for the Peer Group were lower. Comparatively, the updated pricing measures for all publicly-traded thrifts were generally little changed, with the exception of a decrease in the core P/E multiple and an increase in the average market capitalization. The significant increase in the average market capitalization for all publicly-traded thrifts was largely due to the completion of the merger of New York Community Bancorp and Flagstar Bancorp, which is the largest publicly-traded thrift with a market capitalization of $6.2 billion as of February 21, 2023. The decrease in the Peer Group's pricing measures was primarily related to a decline in Provident Bancorp's stock price since the date of the Original Appraisal, which was related to a net loss reported by Provident Bancorp in the third quarter of 2022. Since the date of the Original Appraisal, the stock prices of six out of the remaining nine Peer Group companies were lower as of February 21, 2023. A comparative pricing analysis of the Peer Group and all publicly-traded thrifts is shown in the following table, based on closing stock market prices as of September 19, 2022 and February 21, 2023.

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***Boards of Directors***

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 ***Page 16***

Average Pricing Characteristics

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| | | | |
|:---|:---|:---|:---|
|  | At Sept. 19,<br>2022 | At Feb. 21,<br>2023 | %<br>Change |
|  <u>Peer Group(1)</u> |  |  |  |
|  Price/Earnings (x) | 12.58x | 11.11x | (11.69%) |
|  Price/Core Earnings (x) | 12.19 | 10.74 | (11.90) |
|  Price/Book (%) | 97.86% | 93.52% | (4.43) |
|  Price/Tangible Book(%) | 100.89 | 96.61 | (4.24) |
|  Price/Assets (%) | 12.83 | 11.98 | (6.63) |
|  Avg. Mkt. Capitalization ($Mil) | $135.70 | $127.27 | (6.21) |
|  <u>All Publicly-Traded Thrifts</u> |  |  |  |
|  Price/Earnings (x) | 14.17x | 14.26x | 0.64% |
|  Price/Core Earnings (x) | 14.33 | 13.05 | (8.93) |
|  Price/Book (%) | 98.19% | 98.95% | 0.77 |
|  Price/Tangible Book(%) | 108.28 | 108.81 | 0.49 |
|  Price/Assets (%) | 13.04 | 12.51 | (4.06) |
|  Avg. Mkt. Capitalization ($Mil) | $484.19 | $544.64 | 12.48 |

---

(1) HV Bancorp, Inc. of Pennsylvania has been excluded from the Peer Group averages for both dates shown, as the
result of becoming the target of a proposed acquisition that was announced subsequent to the date of the Original Appraisal.

As set forth in the Original Appraisal, the "new issue" market is separate and distinct from the market for seasoned issues like the Peer Group companies in that the pricing ratios for converting issues are computed on a pro forma basis, specifically: (1) the numerator and denominator are both impacted by the conversion offering amount, unlike existing stock issues in which price change affects only the numerator; and (2) the pro forma pricing ratio incorporates assumptions regarding source and use of proceeds, effective tax rates, stock plan purchases, etc. which impact pro forma financials, whereas pricing for existing issues are based on reported financials. The distinction between the pricing of converting and existing issues is perhaps most evident in the case of the price/book ("P/B") ratio in that the P/B ratio of a converting thrift will typically result in a discount to book value, whereas in the current market for existing thrifts the P/B ratio may reflect a premium to book value. Therefore, it is appropriate to also consider the market for new issues, both at the time of the conversion and in the aftermarket.

As shown in Table 6, three standard conversion offerings were completed during 2022 and no standard conversion offerings have been completed year-to-date in 2023. The average closing pro forma price/tangible book ratio of the three standard conversion offerings completed during 2022 equaled 56.9%. On average, the three standard conversion offerings reflected price appreciation of 36.4% after the first week of trading. As of February 21, 2023, the three standard conversion offerings reflected a 37.2% increase in price on average from their IPO prices. Of the three standard conversion offerings completed during 2022, the offering completed by ECB Bancorp, Inc. of Massachusetts ("ECB Bancorp") on July 28, 2022 was considered to be most comparable to Somerset Savings' offering. ECB Bancorp raised gross proceeds of $89.2 million, which was slightly below the midpoint of its offering range. ECB Bancorp's closing pro forma price/tangible book ratio equaled 59.3%. ECB Bancorp's stock price was up 41.3% after the first week of trading. As of February 21, 2023, ECB Bancorp's stock price was up 56.3% from its IPO price.

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***Boards of Directors***

***February 21, 2023***

 ***Page 17***

**Table 6** 

**Pricing Characteristics and After-Market Trends** 

**Conversions Completed in 2022 and Year-to-Date 2023** 

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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| Institutional Information | Institutional Information | Institutional Information | Pre-Conversion Data | Pre-Conversion Data | Pre-Conversion Data | Pre-Conversion Data | Offering Information | Offering Information | Offering Information | Offering Information | Contribution to<br>Char. Found. | Contribution to<br>Char. Found. | Insider Purchases | Insider Purchases | Insider Purchases | Insider Purchases |  | Pro Forma Data | Pro Forma Data | Pro Forma Data | Pro Forma Data | Pro Forma Data | Pro Forma Data |  | Post-IPO Pricing Trends | Post-IPO Pricing Trends | Post-IPO Pricing Trends | Post-IPO Pricing Trends | Post-IPO Pricing Trends | Post-IPO Pricing Trends | Post-IPO Pricing Trends | Post-IPO Pricing Trends |
|  |  |  | Financial Info. | Financial Info. | Asset Quality | Asset Quality | Excluding Foundation | Excluding Foundation | Excluding Foundation | Excluding Foundation | Contribution to<br>Char. Found. | Contribution to<br>Char. Found. | % Off Incl. Fdn.+Merger Shares | % Off Incl. Fdn.+Merger Shares | % Off Incl. Fdn.+Merger Shares | % Off Incl. Fdn.+Merger Shares |  | Pricing Ratios(2)(5) | Pricing Ratios(2)(5) | Pricing Ratios(2)(5) | Financial Charac. | Financial Charac. | Financial Charac. |  | Closing Price: | Closing Price: | Closing Price: | Closing Price: | Closing Price: | Closing Price: | Closing Price: | Closing Price: |
|  |  |  |  |  |  |  |  |  |  |  |  |  | Benefit Plans | Benefit Plans | Benefit Plans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Institution | Conversion<br>Date | Ticker | Assets<br>($Mil) | Equity/<br>Assets<br>(%) | NPAs/<br>Assets<br>(%) | Res.<br>Cov.<br>(%) | Gross<br>Proc.<br>($Mil.) | %<br>Offer<br>(%) | % of<br>Mid.<br>(%) | Exp./Proc.<br>(%) | Form | % of<br>Public Off.<br>Inc. Fdn.<br>(%) | ESOP<br>(%) | Recog.<br>Plans<br>(%) | Stk<br>Option<br>(%) | Mgmt.&<br>Dirs.<br>(%)(1) | Initial<br>Div.<br>Yield<br>(%) | P/TB<br>(%) | Core<br>P/E<br>(x) | P/A<br>(%) | Core<br>ROA<br>(%) | TE/A<br>(%) | Core<br>ROE<br>(%) | IPO<br>Price<br>($) | First<br>Trading<br>Day<br>($) | %<br>Chg<br>(%) | After<br>First<br>Week(3)<br>($) | %<br>Chg<br>(%) | After<br>First<br>Month(4)<br>($) | %<br>Chg<br>(%) | **Thru<br>2/21/23<br>($)** | %<br>Chg<br>(%) |
|  ***<u>Standard Conversions</u>*** |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  **ECB Bancorp, Inc., MA** | 7/28/22 | ECBK-<br>NASDAQ | $689 | 11.42% | 0.11% | 589% | $89.2 | 100% | 96% | 2.7% | **C/S** | **$600/2.83%** | 8.0% | 4.0% | 10.0% | 3.8% | 0.00% | 59.3% | 19.1x | 12.0% | 0.6% | 20.2% | 3.1% | $10.00 | $14.09 | 40.9% | $14.13 | 41.3% | $14.06 | 40.6% | $**15.63** | 56.3% |
|  **VWF Bancorp, Inc., OH** | 7/14/22 | VWFB-<br>OTCQB | $137 | 17.62% | 0.17% | 96% | $19.2 | 100% | 87% | 7.8% | **N.A.** | **N.A.** | 8.0% | 4.0% | 10.0% | 25.1% | 0.00% | 51.8% | NM | 12.8% | 0.1% | 24.8% | 0.3% | $10.00 | $12.90 | 29.0% | $14.50 | 45.0% | $14.90 | 49.0% | $**15.09** | 50.9% |
|  **NSTS Bancorp, Inc., IL** | 1/19/22 | NSTS-<br>NASDAQ | $260 | 17.68% | 0.70% | 529% | $52.9 | 100% | 132% | 3.7% | **C/S** | **$150/2.00%** | 8.0% | 4.0% | 10.0% | 5.0% | 0.00% | 59.5% | NM | 17.7% | -0.2% | 29.8% | -0.6% | $10.00 | $12.59 | 25.9% | $12.30 | 23.0% | $12.50 | 25.0% | $**10.45** | 4.5% |
|  |  | **Averages -<br>Standard<br>Conversions:** | $**362** | **15.57%** | **0.33%** | **405%** | $**53.8** | **100%** | **105%** | **4.7%** | **N.A.** | **N.A.** | **8.0%** | **4.0%** | **10.0%** | **11.3%** | **0.00%** | **56.9%** | **19.1x** | **14.2%** | **0.2%** | **24.9%** | **0.9%** | $**10.00** | $**13.19** | **31.9%** | $**13.64** | **36.4%** | $**13.82** | **38.2%** | $**13.72** | **37.2%** |
|  |  | **Medians -<br>Standard<br>Conversions:** | $**260** | **17.62%** | **0.17%** | **529%** | $**52.9** | **100%** | **96%** | **3.7%** | **N.A.** | **N.A.** | **8.0%** | **4.0%** | **10.0%** | **5.0%** | **0.00%** | **59.3%** | **19.1x** | **12.8%** | **0.1%** | **24.8%** | **0.3%** | $**10.00** | $**12.90** | **29.0%** | $**14.13** | **41.3%** | $**14.06** | **40.6%** | $**15.09** | **50.9%** |
|  ***<u>Second Step Conversions</u>*** |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  **First Seacoast Bancorp, Inc., NH** | 1/20/23 | FSEA-<br>NASDAQ | $524 | 9.11% | 0.00% | 717% | $28.1 | 55% | 85% | 5.7% | N.A. | N.A. | 8.0% | 4.0% | 10.0% | 1.5% | 0.00% | 74.1% | 30.6x | 9.3% | 0.3% | 12.6% | 2.4% | $10.00 | $10.35 | 3.5% | $10.39 | 3.9% | $10.28 | 2.8% | $10.29 | 2.9% |
|  Ponce Financial Group, Inc., NY\* | 1/28/22 | PDLB-<br>NASDAQ | $1561 | 11.14% | 1.05% | 157% | $133.2 | 54% | 127% | 3.0% | **C/S** | **$1.0M/2.91%** | 8.0% | 4.0% | 10.0% | 0.9% | 0.00% | 85.9% | 34.6x | 14.8% | 0.4% | 17.2% | 2.5% | $10.00 | $10.79 | 7.9% | $10.65 | 6.5% | $10.65 | 6.5% | $**9.22** | -7.8% |
|  |  | **Averages -<br>Second Step<br>Conversions:** | $**1042** | **10.13%** | **0.53%** | **437%** | $**80.6** | **55%** | **106%** | **4.3%** | **N.A.** | **N.A.** | **8.0%** | **4.0%** | **10.0%** | **1.2%** | **0.00%** | **80.0%** | **32.6x** | **12.0%** | **0.4%** | **14.9%** | **2.4%** | $**10.00** | $**10.57** | **5.7%** | $**10.52** | **5.2%** | $**10.47** | **4.7%** | $**9.76** | **-2.5%** |
|  |  | **Medians -<br>Second Step<br>Conversions:** | $**1042** | **10.13%** | **0.53%** | **437%** | $**80.6** | **106%** | **4%** | **4.3%** | **N.A.** | **N.A.** | **8.0%** | **4.0%** | **10.0%** | **1.2%** | **0.00%** | **80.0%** | **32.6x** | **12.0%** | **0.4%** | **14.9%** | **2.4%** | $**10.00** | $**10.57** | **5.7%** | $**10.52** | **5.2%** | $**10.47** | **4.7%** | $**9.76** | **-2.5%** |
|  ***<u>Mutual Holding Companies</u>*** |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  CFSB Bancorp, Inc., MA\* | 1/13/22 | CFSB-<br>NASDAQ | $337 | 14.56% | 0.00% | NM | $28 | 43% | 130% | 5.4% | **C/S** | **$250/4.44%** | 8.7% | 4.4% | 10.9% | 5.2% | 0.00% | 63.2% | 75.4x | 16.7% | 0.3% | 20.0% | 1.6% | $10.00 | $10.18 | 1.8% | $10.65 | 6.5% | $10.63 | 6.3% | $**9.00** | -10.0% |
|  |  | **Averages -<br>MHC<br>Conversions:** | $**337** | **14.56%** | **0.00%** | **NM** | $**28.0** | **43%** | **130%** | **5.4%** | **N.A.** | **N.A.** | **8.7%** | **4.4%** | **10.9%** | **5.2%** | **0.00%** | **63.2%** | **75.4x** | **16.7%** | **0.3%** | **20.0%** | **1.6%** | $**10.00** | $**10.18** | **1.8%** | $**10.65** | **6.5%** | $**10.63** | **6.3%** | $**8.86** | **-11.4%** |
|  |  | **Medians -<br>MHC<br>Conversions:** | $**337** | **14.56%** | **0.00%** | **NM** | $**28.0** | **43%** | **130%** | **5.4%** | **N.A.** | **N.A.** | **8.7%** | **4.4%** | **10.9%** | **5.2%** | **0.00%** | **63.2%** | **75.4x** | **16.7%** | **0.3%** | **20.0%** | **1.6%** | $**10.00** | $**10.18** | **1.8%** | $**10.65** | **6.5%** | $**10.63** | **6.3%** | $**8.86** | **-11.4%** |
|  |  | **Averages -<br>All<br>Conversions:** | $**584** | **14.08%** | **0.34%** | **418%** | $**58.4** | **75%** | **110%** | **4.5%** | **N.A.** | **N.A.** | **8.1%** | **4.1%** | **10.2%** | **8.0%** | **0.00%** | **65.6%** | **33.0x** | **14.8%** | **0.3%** | **20.8%** | **1.4%** | $**10.00** | $**11.82** | **21.1%** | $**12.10** | **24.5%** | $**12.17** | **25.5%** | $**11.61** | **18.8%** |
|  |  | **Medians -<br>All<br>Conversions:** | $**430** | **12.99%** | **0.17%** | **529%** | $**40.5** | **78%** | **112%** | **4.5%** | **N.A.** | **N.A.** | **8.0%** | **4.0%** | **10.0%** | **4.4%** | **0.00%** | **61.3%** | **34.6x** | **13.8%** | **0.3%** | **20.1%** | **2.0%** | $**10.00** | $**11.69** | **16.9%** | $**11.48** | **14.8%** | $**11.58** | **15.8%** | $**10.37** | **3.7%** |

---

Note: \* - Appraisal performed by RP Financial; BOLD = RP Financial assisted in the business plan preparation, "NT" - Not Traded; "NA" - Not Applicable, Not Available; C/S-Cash/Stock.

(1) As a percent of MHC offering for MHC transactions.

(2) Does not take into account the adoption of SOP 93-6.

(3) Latest price if offering is less than one week old.

(4) Latest price if offering is more than one week but less than one month old.

(5) Mutual holding company pro forma data on full conversion basis.

(6) Simultaneously completed acquisition of another financial institution.

(7) Simultaneously converted to a commercial bank charter.

(8) Former credit union.

February 21, 2023

------

***Boards of Directors***

***February 21, 2023***

 ***Page 18***

*<u>Summary of Adjustments</u>*

In the Original Appraisal, we made the following adjustments to Somerset Savings' pro forma value based upon our comparative analysis to the Peer Group:

---

| | |
|:---|:---|
| Key Valuation Parameters: | PreviousValuation<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Adjustment |
| Financial Condition | Slight Upward |
| Profitability, Growth and Viability of Earnings | Slight Downward |
| Asset Growth | Slight Upward |
| Primary Market Area | No Adjustment |
| Dividends | No Adjustment |
| Liquidity of the Shares | No Adjustment |
| Marketing of the Issue | Slight Downward |
| Management | No Adjustment |
| Effect of Govt. Regulations and Regulatory Reform | No Adjustment |

---

The factors concerning the valuation parameters of primary market area, dividends, liquidity of the shares, management and effect of government regulations and regulatory reform did not change since the Original Appraisal. Accordingly, those parameters were not discussed further in this update.

A slight upward adjustment remained appropriate for financial condition, based largely on the upward adjustments applied for the Bank's balance sheet liquidity, credit quality and stronger pro forma capital position. Likewise, a slightly upward adjustment remained appropriate for the Bank's asset growth, as acquisition related growth provided the Bank with stronger historical asset growth, which was driven by loan growth, and on a pro forma basis the Bank's leverage capacity will be greater than the Peer Group's leverage capacity. A slight downward adjustment remained appropriate for earnings, based on the Bank's less favorable efficiency ratio and lower pro forma core ROE.

Consistent with the broader stock market, the general market for thrift stocks was up since the date of the Original Appraisal. The DJIA increased 6.80% since the date of the Original Appraisal, which exceeded the 3.09% increase recorded in the S&P U.S. BMI Banks Index. Comparatively, the updated pricing measures for the Peer Group were lower since the date of the Original Appraisal, with the Peer Group's updated pricing measures reflecting more significant decreases relative to the updated pricing measures for all publicly-traded thrifts that were generally little changed since the date of the Original Appraisal. The three standard conversion offerings that were completed during 2022 showed an average price increase of 37.2% from their respective IPO prices, as of February 21, 2023.

Overall, taking into account the foregoing factors, including the all-cash acquisition of Regal Bancorp, we believe that an increase in the Bank's conversion offering as set forth in the Original Appraisal is appropriate.

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***Boards of Directors***

***February 21, 2023***

 ***Page 19***

*<u>Valuation Approaches</u>*

In applying the accepted valuation methodology promulgated by the regulatory agencies, i.e., the pro forma market value approach, we considered the three key pricing ratios in valuing Somerset Savings' to-be-issued stock — price/earnings ("P/E"), price/book ("P/B"), and price/assets ("P/A") approaches — all performed on a pro forma basis including the effects of the conversion proceeds.

In computing the pro forma impact of the offering and the related pricing ratios, the valuation parameters utilized in the Original Appraisal were updated with financial data as of December 31, 2022.

Consistent with the Original Appraisal, this updated appraisal continues to be based primarily on fundamental analysis techniques applied to the Peer Group, including the P/E approach, the P/B approach and the P/A approach. Also consistent with the Original Appraisal, this updated appraisal incorporates a "technical" analysis of recently completed offerings, including principally the P/B approach which (as discussed in the Original Appraisal) is the most meaningful pricing ratio as the pro forma P/E ratios reflect an assumed reinvestment rate and do not yet reflect the actual use of proceeds.

The Bank will adopt "Employers' Accounting for Employee Stock Ownership Plans" ("ASC 718-40"), which will cause earnings per share computations to be based on shares issued and outstanding excluding unreleased ESOP shares. For purposes of preparing the pro forma pricing analyses, we have reflected all shares issued in the offering, including all ESOP shares, to capture the full dilutive impact, particularly since the ESOP shares are economically dilutive, receive dividends and can be voted. However, we did consider the impact of the adoption of ASC 718-40 in the valuation.

Based on the foregoing, we have concluded that an increase in Somerset Savings' conversion offering is appropriate. Therefore, as of February 21, 2023, the pro forma market value of Somerset Savings' conversion stock, taking into account the dilutive impact of the stock contribution to the Foundation, equaled $105,000,000 at the midpoint, equal to 10,500,000 at $10.00 per share.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. <u>P/E Approach</u>. In applying the P/E approach, RP Financial's valuation conclusions considered both reported earnings and a recurring or "core" earnings base, that is, earnings adjusted to exclude any one time non-operating gains and losses and extraordinary items, plus the estimated after tax-earnings benefit from reinvestment of net stock proceeds. The Bank's reported earnings, including the estimated pro forma earnings impact of Regal Bancorp acquisition, equaled $8.941 million for the twelve months ended December 31, 2022. In deriving Somerset Savings' core earnings, the only adjustments made to reported earnings was to eliminate a loss on equity securities of $6,000. As shown below, on a tax effected basis, assuming application of an effective marginal tax rate of 25.0%, the Bank's core earnings were determined to equal $8.946 million for the twelve months ended December 31, 2022.

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***Boards of Directors***

***February 21, 2023***

 ***Page 20***

---

| | |
|:---|:---|
|  | Amount |
|  | ($000) |
|  Net income | $8941 |
|  Add: Loss on equity securities 1) | 5 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Core earnings estimate | $8946 |

---

(1) Tax effected at 25.0%.

Based on Somerset Savings' reported and estimated core earnings, and incorporating the impact of the pro forma assumptions discussed previously, the Bank's reported and core P/E multiples at the $105.0 million updated midpoint value equaled 11.07 times and 11.06 times, respectively. The Bank's updated reported and core P/E multiples provided for a discount of 0.36% and a premium of 2.98% relative to the Peer Group's average reported and core P/E multiples of 11.11 times and 10.74 times, respectively (versus premiums of 38.55% and 40.23% relative to the Peer Group's average reported and core P/E multiples as indicated in the Original Appraisal). The Bank's updated reported and core P/E multiples indicated premiums of 7.16% and 11.83% relative to the Peer Group's median reported and core P/E multiples, which equaled 10.33 times and 9.89 times, respectively (versus premiums of 45.74% and 46.05% relative to the Peer Group's median reported and core P/E multiples as indicated in the Original Appraisal). The Bank's pro forma P/E ratios based on reported earnings at the minimum and the super maximum equaled 9.50 times and 14.33 times, respectively, and based on core earnings at the minimum and the super maximum equaled 9.49 times and 14.32 times, respectively. The Bank's implied conversion pricing ratios relative to the Peer Group's pricing ratios are indicated in Table 7, and the pro forma calculations are detailed in Exhibits 2 and 3.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. <u>P/B Approach</u>. P/B ratios have generally served as a useful benchmark in the valuation of thrift stocks, with the greater determinant of long term value being earnings. In applying the P/B approach, we considered both reported book value and tangible book value. Based on the $105.0 million updated midpoint value, the Bank's P/B and P/TB ratios equaled 52.11% and 61.96%, respectively. In comparison to the average P/B and P/TB ratios indicated for the Peer Group of 93.52% and 96.61%, respectively, Somerset Savings' updated ratios indicated discounts of 44.28% on a P/B basis and 35.87% on a P/TB basis (versus discounts of 42.61% and 38.95% from the Peer Group's average P/B and P/TB ratios as indicated in the Original Appraisal). In comparison to the median P/B and P/TB ratios indicated for the Peer Group of 94.22% and 97.45%, respectively, Somerset Savings' updated ratios at the updated midpoint value indicated discounts of 44.69% and 36.42% (versus discounts of 40.32% and 39.59% from the Peer Group's median P/B and P/TB ratios as indicated in the Original Appraisal). At the top of the super range, the Bank's P/B and P/TB ratios equaled 60.50% and 70.32%, respectively. In comparison to the Peer Group's average P/B and P/TB ratios, the Bank's P/B and P/TB ratios at the top of the super range indicated discounts of 35.31% and 27.21%, respectively. In comparison to the Peer Group's median P/B and P/TB ratios, the Bank's updated P/B and P/TB ratios at the top of the super range indicated discounts of 35.79% and 27.84%, respectively.

In addition to the fundamental analysis applied to the Peer Group, RP Financial utilized a technical analysis of recent conversion offerings. As indicated in the Original Appraisal, the pricing characteristics of recent conversion offerings are not the primary determinate of value. Consistent with the Original Appraisal, particular focus was placed on the P/TB approach in this analysis since the P/E multiples do not reflect the actual impact of reinvestment and the source of the conversion funds (i.e., external funds versus deposit withdrawals).

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***Boards of Directors***

***February 21, 2023***

 ***Page 21***

Table 7

Market Pricing Versus Peer Group

Somerset Savings Bank, SLA

As of February 21, 2023

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| | | | | | | | | | | | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  |  | Market | Market | Per Share Data | Per Share Data | | | | | | | | | | | | | | | | | |
|  |  |  | Capitalization | Capitalization | | | | | | | | Dividends(3) | Dividends(3) | Dividends(3) | Financial Characteristics(5) | Financial Characteristics(5) | Financial Characteristics(5) | Financial Characteristics(5) | Financial Characteristics(5) | Financial Characteristics(5) | Financial Characteristics(5) | Financial Characteristics(5) | |
|  |  |  | | | | | Pricing Ratios(2) | Pricing Ratios(2) | Pricing Ratios(2) | Pricing Ratios(2) | Pricing Ratios(2) | | | | | | | | Reported | Reported | Core | Core |<br>Offering<br>Size |
| | |  | Price/<br>Share | Market<br>Value | Core<br>12 Month<br>EPS(1) | Book<br>Value/<br>Share | P/E | P/B | P/A | P/TB | P/Core | Amount/<br>Share |<br>Yield | Payout<br>Ratio(4) | Total<br>Assets | Equity/<br>Assets | Tang. Eq./<br>T. Assets | NPAs/<br>Assets | ROAA | ROAE | ROAA | ROAE | ($Mil) |
|  |  |  | ($) | ($Mil) | ($) | ($) | (x) | (%) | (%) | (%) | (x) | ($) | (%) | (%) | ($Mil) | (%) | (%) | (%) | (%) | (%) | (%) | (%) | |
|  **<u>Somerset Savings Bank, SLA</u>** | **<u>Somerset Savings Bank, SLA</u>** | NJ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Super Maximum | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Super Maximum |  | $10.00 | $138.86 | $0.70 | $16.53 | 14.33x | 60.50% | 11.61% | 70.32% | 14.32x | $0.00 | 0.00% | 0.00% | $1196 | 19.19% | 16.96% | 0.06% | 0.81% | 4.22% | 0.81% | 4.22% | $132.25 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Maximum | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Maximum |  | $10.00 | $120.75 | $0.79 | $17.76 | 12.60x | 56.31% | 10.22% | 66.23% | 12.59x | $0.00 | 0.00% | 0.00% | $1181 | 18.16% | 15.88% | 0.06% | 0.81% | 4.47% | 0.81% | 4.47% | $115.00 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Midpoint | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Midpoint |  | $10.00 | $105.00 | $0.90 | $19.19 | 11.07x | 52.11% | 8.99% | 61.96% | 11.06x | $0.00 | 0.00% | 0.00% | $1168 | 17.25% | 14.91% | 0.06% | 0.81% | 4.71% | 0.81% | 4.71% | $100.00 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Minimum | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Minimum |  | $10.00 | $89.25 | $1.05 | $21.11 | 9.50x | 47.37% | 7.73% | 57.08% | 9.49x | $0.00 | 0.00% | 0.00% | $1155 | 16.32% | 13.93% | 0.06% | 0.81% | 4.99% | 0.81% | 4.99% | $85.00 |
|  <u>All Non-MHC Public Thrifts(6)</u> | <u>All Non-MHC Public Thrifts(6)</u> |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Averages | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Averages |  | $23.44 | $544.64 | $2.08 | $20.61 | 14.26x | 98.95% | 12.51% | 108.81% | 13.05x | $0.50 | 2.38% | 37% | $5123 | 13.55% | 13.03% | 0.55% | 0.68% | 5.68% | 0.79% | 6.55% |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Median |  |  | $14.22 | $162.45 | $1.15 | $16.09 | 12.46x | 93.80% | 11.64% | 97.19% | 11.19x | $0.34 | 2.21% | 29% | $1636 | 11.71% | 11.41% | 0.39% | 0.73% | 6.27% | 0.91% | 6.80% |  |
|  <u>All Non-MHC State of NJ(6)</u> | <u>All Non-MHC State of NJ(6)</u> |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Averages | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Averages |  | $14.51 | $704.74 | $1.17 | $15.62 | 11.45x | 90.88% | 11.93% | 106.20% | 10.71x | $0.51 | 3.25% | 40% | $6108 | 13.21% | 12.95% | 0.56% | 0.83% | 6.66% | 0.86% | 6.94% |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Medians | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Medians |  | $12.60 | $643.35 | $1.20 | $14.78 | 10.81x | 85.03% | 12.43% | 101.85% | 10.81x | $0.48 | 3.81% | 40% | $5601 | 12.16% | 12.02% | 0.56% | 1.01% | 8.11% | 1.01% | 8.11% |  |
|  <u>Comparable Group</u> | <u>Comparable Group</u> |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Averages | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Averages |  | $15.94 | $127.27 | $1.18 | $16.97 | 11.11x | 93.52% | 11.98% | 96.61% | 10.74x | $0.26 | 1.58% | 18.79% | $1108 | 12.86% | 12.50% | 0.61% | 0.74% | 5.78% | 0.77% | 6.01% |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Medians | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Medians |  | $16.25 | $107.34 | $1.68 | $16.33 | 10.33x | 94.22% | 10.34% | 97.45% | 9.89x | $0.24 | 1.51% | 15.48% | $871 | 12.16% | 12.16% | 0.55% | 0.93% | 7.51% | 0.99% | 8.00% |  |
|  <u>Comparable Group</u> | <u>Comparable Group</u> |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  AFBI | Affinity Bancshares, Inc. | GA | $16.25 | $107.34 | $1.16 | $17.73 | 15.33x | 91.66% | 13.56% | 108.92% | 14.03x | $0.00 | 0.00% | 0.00% | $791 | 14.80% | 12.75% | 1.27% | 0.93% | 6.05% | 1.01% | 6.61% |  |
|  ESSA | ESSA Bancorp, Inc. | PA | $20.20 | $196.12 | $2.10 | $20.78 | 9.71x | 97.17% | 10.90% | 103.92% | 9.63x | $0.60 | 2.97% | 28.57% | $1927 | 11.22% | 10.57% | 0.77% | 1.09% | 9.48% | 1.10% | 9.56% |  |
|  HMNF | HMN Financial, Inc. | MN | $21.86 | $94.50 | $1.83 | $21.72 | 11.95x | 100.64% | 8.94% | 101.47% | 11.95x | $0.24 | 1.10% | 13.11% | $1096 | 8.88% | 8.81% | 0.20% | 0.75% | 7.03% | 0.75% | 7.03% |  |
|  HFBL | Home Federal Bancorp, Inc. of Louisiana | LA | $17.31 | $51.86 | $1.75 | $15.60 | 9.89x | 110.97% | 9.37% | 110.97% | 9.89x | $0.48 | 2.77% | 26.29% | $577 | 8.44% | 8.44% | 0.05% | 0.99% | 11.45% | 0.99% | 11.45% |  |
|  IROQ | IF Bancorp, Inc. | IL | $18.08 | $57.39 | $1.86 | $21.30 | 10.33x | 84.88% | 7.33% | 84.88% | 9.70x | $0.40 | 2.21% | 11.43% | $824 | 8.63% | 8.63% | 0.04% | 0.69% | 7.51% | 0.74% | 8.00% |  |
|  MGYR | Magyar Bancorp, Inc. | NJ | $12.60 | $84.96 | $1.20 | $14.82 | 10.50x | 85.03% | 10.34% | 85.03% | 10.50x | $0.12 | 0.95% | 16.67% | $822 | 12.16% | 12.16% | 0.91% | 1.01% | 8.11% | 1.01% | 8.11% |  |
|  NECB | Northeast Community Bancorp, Inc. | NY | $15.90 | $234.61 | $1.68 | $16.33 | 10.06x | 97.38% | 17.91% | 97.45% | 9.45x | $0.24 | 1.51% | 14.29% | $1425 | 18.39% | 18.38% | 0.10% | 1.95% | 9.60% | 2.07% | 10.22% |  |
|  PVBC | Provident Bancorp, Inc. | MA | $9.36 | $162.45 | 1.28) | $11.75 | NM | 79.69% | 10.11% | 79.69% | NM | $0.16 | 1.71% | NM | $1636 | 12.68% | 12.68% | 1.58% | -1.24% | -9.26% | -1.23% | -9.12% |  |
|  WMPN | William Penn Bancorporation | PA | $11.94 | $156.20 | $0.32 | $12.67 | NM | 94.22% | 19.39% | 97.19% | NM | $0.12 | 1.01% | 40.00% | $871 | 20.58% | 20.08% | 0.55% | 0.46% | 2.05% | 0.50% | 2.21% |  |

---

(1) Core income, on a diluted per-share basis. Core income is net income
after taxes and before extraordinary items, less net income attributable to noncontrolling interest, gain on the sale of securities, amortization of intangibles, goodwill and nonrecurring items. Assumed tax rate is 35%.

(2) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB = Price to tangible book value; and
P/Core = Price to core earnings. P/E and P/Core =NM if the ratio is negative or above 35x.

(3) Indicated 12 month dividend, based on last quarterly dividend declared.

(4) Indicated 12 month dividend as a percent of trailing 12 month earnings.

(5) Equity and tangible equity equal common equity and tangible common equity, respectively. ROAA (return on
average assets) and ROAE (return on average equity) are indicated ratios based on trailing 12 month earnings and average equity and assets balances.

(6) Excludes from averages and medians those companies the subject of actual or rumored acquisition activities or
unusual operating characteristics.

Source: S&P Global Market Intelligence and RP Financial, LC. calculations. The information provided in this report has been obtained from sources we believe are reliable, but we cannot guarantee the accuracy or completeness of such information.

Copyright (c) 2023 by RP<sup>®</sup> Financial, LC.

------

***Boards of Directors***

***February 21, 2023***

 ***Page 22***

As discussed previously, three standard conversion offerings were completed during 2022 and no standard conversions have been completed year-to-date through February 21, 2023. In comparison to the 56.90% average closing forma P/TB ratio of the three recent standard conversions completed in 2022, the Bank's P/TB ratio of 61.96% at the midpoint value reflects an implied premium of 8.89%. At the top of the super maximum, the Bank's P/TB ratio of 70.32% reflects an implied premium of 23.59% relative to the recent standard conversions average P/TB ratio at closing. In comparison to the 59.30% closing forma P/TB ratio of ECB Bancorp's standard conversion offering, the Bank's P/TB ratio of 61.96% at the midpoint value reflects an implied premium of 4.49%. At the top of the super maximum, the Bank's P/TB ratio of 70.32% reflects an implied premium of 18.58% relative to ECB Bancorp's pro forma P/TB ratio at closing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. <u>P/A Approach</u>. P/A ratios are generally not as a reliable indicator of market value, as investors do not place significant weight on total assets as a determinant of market value. Investors place significantly greater weight on book value and earnings — which have received greater weight in our valuation analysis. At the $105.0 million updated midpoint value, Somerset Savings' pro forma P/A ratio equaled 8.99%. In comparison to the Peer Group's average P/A ratio of 11.98%, Somerset Savings' P/A ratio indicated a discount of 24.96% (versus a discount of 13.34% at the midpoint valuation in the Original Appraisal). In comparison to the Peer Group's median P/A ratio of 10.34%, Somerset Savings' P/A ratio at the $105.0 million updated midpoint value indicated a discount of 13.06% (versus a discount of 9.69% at the midpoint valuation in the Original Appraisal).

*<u>Valuation Conclusion</u>*

We have concluded that the Bank's estimated conversion offering value should be increased since the date of the Original Appraisal. Accordingly, it is our opinion, as of February 21, 2023, the estimated aggregate pro forma market value of the shares to be issued immediately following the conversion, including shares to be issued to the Foundation, equaled $105,000,000 at the midpoint, equal to 10,500,000 shares offered at a per share value of $10.00. Pursuant to conversion guidelines, the 15% valuation range indicates a minimum value of $89,250,000 and a maximum value of $120,750,000. Based on the $10.00 per share offering price determined by the Board, this valuation range equates to total shares outstanding of 8,925,000 at the minimum and 12,075,000 at the maximum. In the event the appraised value is subject to an increase, the aggregate pro forma market value may be increased up to a super maximum value of $138,862,500 without a resolicitation. Based on the $10.00 per share offering price, the super maximum value would result in total shares outstanding of 13,886,250. Based on this valuation range, the offering range is as follows: $85,000,000 at the minimum, $100,000,000 at the midpoint, $115,000,000 at the maximum and $132,250,000 at the super maximum. Based on the $10.00 per share offering price, the number of offering shares is as follows: 8,500,000 at the minimum, 10,000,000 at the midpoint, 11,500,000 at the maximum and 13,225,000 at the super maximum. The pro forma valuation calculations relative to the Peer Group are shown in Table 7 and are detailed in Exhibit 2 and Exhibit 3.

------

***Boards of Directors***

***February 21, 2023***

 ***Page 23***

---

| |
|:---|
| Respectfully submitted, |
| ![LOGO](g352312dsp385jpg.jpg) |
| William E. Pommerening |
| Chief Executive Officer and |
| Managing Director |
| ![LOGO](g352312page385b.jpg) |
| Gregory E. Dunn |
| Director |

---

------

EXHIBITS

------

*LIST OF EXHIBITS* 

---

| | |
|:---|:---|
| Exhibit<br>Number | Description |
| 1 | Stock Prices: As of February 21, 2023 |
| 2 | Pro Forma Analysis Sheet |
| 3 | Pro Forma Effect of Conversion Proceeds |
| 4 | Firm Qualifications Statement |

---

------

EXHIBIT 1

Stock Prices

As of February 21, 2023

------

***RP<sup>®</sup> Financial, LC.***

Exhibit 1-A

Weekly Thrift Market Line - Part One

Prices As of February 21, 2023

---

| | | | | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  | | Market Capitalization | Market Capitalization | Market Capitalization | Price Change Data | Price Change Data | Price Change Data | Price Change Data | Price Change Data | Price Change Data | Current Per Share Financials | Current Per Share Financials | Current Per Share Financials | Current Per Share Financials | Current Per Share Financials |
|  |  | | | | | 52 Week (1) | 52 Week (1) | | % Change From | % Change From | % Change From | | | | | |
| | | | Price/<br>Share(1) | Shares<br>Outstanding | Market<br>Capitalization | High | Low |<br>Last Wk | Last Wk | 52 Wks (2) | MRY (2) | LTM<br>EPS (3) | LTM<br>Core<br>EPS (3) | BV/<br>Share | TBV/<br>Share (4) | Assets/<br>Share |
|  |  | | ($) | (000) | ($Mil) | ($) | ($) | ($) | (%) | (%) | (%) | ($) | ($) | ($) | ($) | ($) |
|  **<u>Companies</u>** | **<u>Companies</u>** |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  BCOW | 1895 Bancorp of Wisconsin, Inc. | MW | 9.90 | 6475 | 64.1 | 11.64 | 9.71 | 9.98 | -0.78 | -14.95 | -1.00 | NA | NA | 12.20 | 12.20 | 81.75 |
|  AFBI | Affinity Bancshares, Inc. | SE | 16.25 | 6634 | 107.3 | 16.50 | 13.81 | 15.80 | 2.85 | 3.55 | 7.62 | 1.06 | 1.16 | 17.73 | 14.92 | 119.27 |
|  AX | Axos Financial, Inc. | WE | 47.33 | 59999 | 2839.8 | 55.00 | 33.91 | 49.77 | -4.90 | -12.55 | 23.84 | 4.30 | 4.91 | 29.79 | 27.17 | 312.35 |
|  BLFY | Blue Foundry Bancorp | MA | 11.86 | 27882 | 330.7 | 14.49 | 11.01 | 11.75 | 0.94 | -17.24 | -7.70 | 0.09 | 0.09 | 14.30 | 14.28 | 73.29 |
|  BYFC | Broadway Financial Corporation | WE | 1.30 | 76281 | 99.2 | 1.89 | 0.83 | 1.33 | -2.26 | -22.16 | 28.71 | 0.08 | NA | 1.76 | 1.37 | 15.53 |
|  CFFN | Capitol Federal Financial, Inc. | MW | 8.42 | 132425 | 1120.5 | 11.30 | 7.19 | 8.40 | 0.24 | -24.42 | -2.66 | 0.58 | 0.59 | 7.75 | 7.66 | 74.98 |
|  CARV | Carver Bancorp, Inc. | MA | 4.42 | 4226 | 18.7 | 12.30 | 3.62 | 4.46 | -0.82 | -47.44 | 7.54 | -0.63 | -0.63 | 4.60 | 4.60 | 168.52 |
|  CLST | Catalyst Bancorp, Inc. | SW | 13.00 | 4867 | 63.3 | 13.90 | 12.03 | 13.00 | 0.00 | -6.07 | 2.36 | 0.04 | NA | NA | NA | 54.11 |
|  CULL | Cullman Bancorp, Inc. | SE | 11.71 | 7406 | 86.7 | 13.25 | 10.40 | 11.78 | -0.59 | -2.09 | 1.91 | 0.53 | 0.53 | 13.30 | 13.30 | 54.83 |
|  ECBK | ECB Bancorp, Inc. | NE | 15.63 | 9175 | 143.4 | 16.91 | 13.82 | 15.45 | 1.17 | 10.93 | -2.62 | NA | NA | 17.55 | 17.55 | 95.21 |
|  ESSA | ESSA Bancorp, Inc. | MA | 20.20 | 9721 | 196.1 | 21.80 | 15.63 | 20.28 | -0.42 | 11.88 | -3.23 | 2.08 | 2.10 | 20.78 | 19.43 | 198.25 |
|  FNWB | First Northwest Bancorp | WE | 14.87 | 9095 | 135.2 | 23.77 | 14.22 | 15.08 | -1.39 | -35.24 | -3.19 | 1.71 | 1.57 | 16.65 | 16.54 | 224.52 |
|  FSEA | First Seacoast Bancorp, Inc. | NE | 10.29 | #VALUE! | 52.2 | 13.40 | 10.00 | 10.30 | -0.10 | -17.78 | -9.94 | 0.30 | 0.29 | 9.42 | 9.42 | #VALUE! |
|  FSBW | FS Bancorp, Inc. | WE | 36.41 | 7586 | 277.4 | 37.39 | 26.80 | 36.84 | -1.17 | 12.65 | 8.88 | 3.70 | 3.81 | 29.95 | 29.22 | 347.08 |
|  GBNY | Generations Bancorp NY, Inc. | MA | 10.98 | 2365 | 26 | 12.07 | 10.51 | 11.04 | -0.54 | -8.35 | 1.67 | 0.67 | 0.71 | 15.89 | 15.24 | 157.98 |
|  HONE | HarborOne Bancorp, Inc. | NE | 13.69 | 45990 | 629.6 | 15.57 | 12.82 | 13.64 | 0.37 | -7.50 | -1.51 | 0.97 | 1.00 | 12.60 | 11.13 | 116.54 |
|  HIFS | Hingham Institution for Savings | NE | 287.20 | 2145 | 616.7 | 368.58 | 242.99 | 295.20 | -2.71 | -21.47 | 4.07 | 17.04 | 24.85 | 179.74 | 179.74 | 1954.79 |
|  HMNF | HMN Financial, Inc. | MW | 21.86 | 4323 | 94.5 | 25.95 | 20.95 | 21.96 | -0.45 | -13.46 | 2.44 | 1.83 | NA | 21.72 | 21.54 | 253.58 |
|  HFBL | Home Federal Bancorp, Inc. of Louisiana | SW | 17.31 | 2987 | 51.9 | 23.55 | 16.49 | 19.95 | -13.23 | -16.17 | 1.17 | 1.75 | 1.75 | 15.60 | 15.60 | 193.04 |
|  IROQ | IF Bancorp, Inc. | MW | 18.08 | 3169 | 57.4 | 25.18 | 17.00 | 18.08 | 0.00 | -24.82 | 4.81 | 1.75 | 1.86 | 21.30 | 21.30 | 259.91 |
|  KRNY | Kearny Financial Corp. | MA | 9.91 | 65059 | 643.4 | 13.70 | 9.00 | 9.80 | 1.12 | -24.87 | -2.36 | 0.70 | 0.87 | 12.95 | NA | 127.41 |
|  MGYR | Magyar Bancorp, Inc. | MA | 12.60 | 6899 | 85 | 13.45 | 11.32 | 13.00 | -3.08 | 4.56 | -1.72 | 1.20 | 1.20 | 14.82 | 14.82 | 119.09 |
|  MSVB | Mid-Southern Bancorp, Inc. | MW | 13.08 | 2705 | 35.4 | 15.44 | 12.61 | 13.08 | 0.00 | -12.83 | 0.50 | 0.69 | 0.69 | 11.55 | 11.55 | 99.54 |
|  NYCB | New York Community Bancorp, Inc. | MA | 9.13 | 681136 | 6219.5 | 11.75 | 8.17 | 9.58 | -4.70 | -21.16 | 6.16 | 1.26 | 1.13 | 12.21 | 8.23 | 132.34 |
|  NECB | Northeast Community Bancorp, Inc. | MA | 15.90 | 14755 | 234.6 | 15.99 | 10.67 | 15.85 | 0.32 | 24.41 | 6.57 | 1.58 | 1.68 | 16.33 | 16.32 | 96.58 |
|  NFBK | Northfield Bancorp, Inc. (Staten Island, NY) | MA | 14.67 | 47771 | 696 | 16.13 | 11.87 | 14.47 | 1.38 | -6.68 | -6.74 | 1.32 | 1.32 | 14.78 | 13.91 | 117.25 |
|  NSTS | NSTS Bancorp, Inc. | MW | 10.45 | 5398 | 56.4 | 12.58 | 9.82 | 10.69 | -2.25 | -16.40 | 3.16 | NA | NA | 14.66 | 14.66 | 49.68 |
|  PBBK | PB Bankshares, Inc. | MA | 13.40 | 2528 | 33.9 | 14.49 | 12.07 | 13.45 | -0.37 | -4.29 | -1.33 | 0.50 | 0.54 | 16.29 | 16.29 | 149.00 |
|  PDLB | Ponce Financial Group, Inc. | MA | 9.22 | 23131 | 213.3 | 10.72 | 9.04 | 9.17 | 0.55 | -13.35 | -1.07 | -1.32 | NA | 10.77 | 10.77 | 99.95 |
|  PVBC | Provident Bancorp, Inc. | NE | 9.36 | 17356 | 162.5 | 17.24 | 6.10 | 9.01 | 3.88 | -44.94 | 28.57 | -1.30 | -1.28 | 11.75 | 11.75 | 94.28 |
|  PROV | Provident Financial Holdings, Inc. | WE | 14.22 | 7203 | 100.9 | 16.84 | 13.29 | 14.25 | -0.21 | -15.10 | 3.27 | 1.19 | 1.19 | 18.12 | 18.12 | 176.47 |
|  PFS | Provident Financial Services, Inc. | MA | 23.53 | 74377 | 1768.7 | 25.61 | 19.18 | 23.49 | 0.17 | -0.97 | 10.16 | 2.35 | 2.39 | 21.25 | 15.12 | 185.32 |
|  RVSB | Riverview Bancorp, Inc. | WE | 7.12 | 21507 | 153.1 | 8.00 | 6.08 | 7.20 | -1.11 | -8.72 | -7.29 | 0.88 | 0.88 | 7.07 | 5.79 | 74.34 |
|  SBT | Sterling Bancorp, Inc. (Southfield, MI) | MW | 6.11 | 50800 | 310.4 | 7.26 | 5.61 | 6.21 | -1.61 | 0.00 | 0.33 | 0.08 | 0.09 | 6.51 | 6.51 | 48.12 |
|  TCBC | TC Bancshares, Inc. | SE | 16.32 | 4475 | 73 | 17.28 | 12.00 | 16.28 | 0.28 | 18.70 | 9.54 | NA | NA | 17.46 | 17.46 | 90.79 |
|  TBNK | Territorial Bancorp Inc. | WE | 23.33 | 8808 | 205.5 | 25.60 | 17.93 | 23.91 | -2.43 | -6.79 | -2.83 | 1.80 | 1.71 | 28.28 | 28.28 | 246.23 |
|  TCBS | Texas Community Bancshares, Inc. | SW | 15.73 | 3059 | 48.1 | 19.61 | 14.96 | 15.62 | 0.73 | -11.34 | 2.50 | 0.54 | 0.58 | 16.87 | 16.74 | 122.82 |
|  TCBX | Third Coast Bancshares, Inc. | SW | 18.82 | 13532 | 254.7 | 26.75 | 16.35 | 18.95 | -0.69 | -19.98 | 2.12 | 1.25 | NA | 23.32 | 21.90 | 278.84 |
|  TSBK | Timberland Bancorp, Inc. | WE | 34.45 | 8240 | 283.3 | 35.62 | 24.05 | 35.45 | -2.82 | 24.95 | 0.94 | 3.07 | 3.10 | 27.16 | 25.21 | 222.76 |
|  TFIN | Triumph Financial, Inc. | SW | 61.92 | 24478 | 1415.5 | 100.98 | 45.08 | 63.82 | -2.98 | -34.78 | 26.70 | 3.96 | 3.39 | 35.09 | 24.04 | 217.90 |
|  TRST | TrustCo Bank Corp NY | MA | 36.70 | 19052 | 698.2 | 39.36 | 29.50 | 36.46 | 0.66 | 7.06 | -2.37 | 3.93 | 3.92 | 31.54 | 31.51 | 314.93 |
|  WSBF | Waterstone Financial, Inc. | MW | 16.02 | 22304 | 345.8 | 20.21 | 15.14 | 15.91 | 0.69 | -17.93 | -7.08 | 0.89 | 0.88 | 16.71 | 16.68 | 91.09 |
|  WNEB | Western New England Bancorp, Inc. | NE | 10.04 | 22176 | 223.1 | 10.25 | 7.13 | 9.71 | 3.40 | 7.38 | 6.13 | 1.18 | 1.10 | 10.27 | 9.61 | 115.13 |
|  WMPN | William Penn Bancorporation | MA | 11.94 | 13465 | 156.2 | 12.87 | 11.20 | 11.84 | 0.84 | -4.56 | -1.49 | 0.30 | 0.32 | 12.67 | 12.29 | 64.68 |
|  WSFS | WSFS Financial Corporation | MA | 50.02 | 61587 | 3081.8 | 52.75 | 37.03 | 50.72 | -1.38 | -4.27 | 10.32 | 3.49 | 4.45 | 35.79 | 19.36 | 323.36 |
|  **<u>MHCs</u>** |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  BSBK | Bogota Financial Corp. | MA | 11.22 | 13616 | 148.8 | 11.75 | 10.20 | 11.32 | -0.88 | 9.88 | 0.36 | 0.51 | 0.51 | 10.19 | 10.18 | 69.85 |
|  CFSB | CFSB Bancorp, Inc. | NE | 9.00 | 6266 | 56.5 | 10.75 | 7.27 | 9.04 | -0.44 | -15.41 | 11.25 | NA | NA | 11.54 | 11.54 | 56.95 |
|  CLBK | Columbia Financial, Inc. | MA | 20.70 | 109575 | 2255.7 | 22.86 | 18.77 | 20.45 | 1.22 | -3.81 | -4.26 | 0.81 | 0.86 | 9.67 | 8.53 | 94.99 |
|  GCBC | Greene County Bancorp, Inc. | MA | 53.65 | 8513 | 456.7 | 89.79 | 38.45 | 51.21 | 4.76 | 38.77 | -6.57 | 3.55 | 3.69 | 19.76 | 19.76 | 307.32 |
|  KFFB | Kentucky First Federal Bancorp | MW | 7.06 | 8145 | 57.6 | 8.69 | 6.60 | 7.15 | -1.28 | -11.77 | 5.98 | 0.15 | 0.15 | 6.34 | 6.23 | 41.18 |
|  LSBK | Lake Shore Bancorp, Inc. | MA | 12.05 | 5596 | 67.4 | 15.24 | 11.82 | 12.60 | -4.37 | -20.46 | -0.17 | 0.97 | NA | 14.23 | 14.23 | 125.07 |
|  OFED | Oconee Federal Financial Corp. | SE | 23.02 | 5609 | 129.1 | 27.00 | 20.24 | 24.74 | -6.95 | -0.99 | -7.92 | 0.80 | 0.82 | 12.77 | 12.30 | 100.76 |
|  PBFS | Pioneer Bancorp, Inc. | MA | 11.50 | 25150 | 289.3 | 11.97 | 9.13 | 11.52 | -0.17 | 5.50 | 0.88 | 0.57 | 0.59 | 9.61 | 9.19 | 72.94 |
|  RBKB | Rhinebeck Bancorp, Inc. | MA | 9.45 | 10930 | 103.3 | 11.20 | 8.46 | 9.56 | -1.12 | -13.09 | 3.74 | 0.64 | 0.66 | 9.58 | 9.35 | 122.23 |
|  TFSL | TFS Financial Corporation | MW | 14.25 | 280494 | 3951.4 | 17.39 | 12.45 | 14.34 | -0.63 | -16.62 | -1.11 | 0.29 | 0.29 | 6.60 | 6.56 | 57.50 |
|  **<u>Under Merger/Acquisition</u>** | **<u>Under Merger/Acquisition</u>** |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  HVBC | HV Bancorp, Inc. | MA | 32.31 | 2239 | 72.5 | 34.00 | 18.52 | 31.86 | 1.40 | 50.70 | 13.61 | 1.06 | NA | 18.77 | 18.77 | 275.03 |

---

(1) Average of High/Low or Bid/Ask price per share.

(2) Or since offering price if converted of first listed in the past 52 weeks. Percent change figures are actual year-to-date and are not annualized.

(3) EPS (earnings per share) is based on actual trailing 12 month data and is not shown on a pro forma basis.

(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).

(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based on trailing 12 month common
earnings and average common equity and total assets balances.

(6) Annualized based on last regular quarterly cash dividend announcement.

(7) Indicated dividend as a percent of trailing 12 month earnings.

(8) Excluded from averages due to actual or rumored acquisition activities or unusual operating characteristics.

(9) For MHC institutions, market value reflects share price multiplied by public (non-MHC) shares.

Source: S&P Global Market Intelligence and RP<sup>®</sup> Financial, LC. calculations. The information provided in this table has been obtained from sources we believe are reliable, but we cannot guarantee the accuracy or completeness of such information.

Copyright (c) 2023 by RP<sup>®</sup> Financial, LC.

------

***RP<sup>®</sup> Financial, LC.***

Exhibit 1-B

Weekly Thrift Market Line - Part Two

Prices As of February 21, 2023

---

| | | | | | | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  |  | Key Financial Ratios | Key Financial Ratios | Key Financial Ratios | Key Financial Ratios | Key Financial Ratios | Key Financial Ratios | Asset Quality Ratios | Asset Quality Ratios | Pricing Ratios | Pricing Ratios | Pricing Ratios | Pricing Ratios | Pricing Ratios | Dividend Data (6) | Dividend Data (6) | Dividend Data (6) |
|  |  |  | | | Reported Earnings | Reported Earnings | Core Earnings | Core Earnings | | | | | | | | | | |
| | |  | Equity/<br>Assets(1) | Tang Equity/<br>Assets(1) | ROA(5) | ROE(5) | ROA(5) | ROE(5) | NPAs/<br>Assets | Rsvs/<br>NPLs | Price/<br>Earnings | Price/<br>Book | Price/<br>Assets | Price/<br>Tang Book | Price/<br>Core Earnings | Div/<br>Share | Dividend<br>Yield | Payout<br>Ratio (7) |
|  |  |  | (%) | (%) | (%) | (%) | (%) | (%) | (%) | (%) | (x) | (%) | (%) | (%) | (x) | ($) | (%) | (%) |
|  **<u>Companies</u>** | **<u>Companies</u>** |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  BCOW | 1895 Bancorp of Wisconsin, Inc. | MW | 14.34 | 14.34 | -0.08 | -0.52 | 0.02 | 0.10 | NA | 272.96 | NA | 81.18 | 11.64 | 81.18 | NA | NA | NA | NA |
|  AFBI | Affinity Bancshares, Inc. | SE | 14.80 | 12.75 | 0.93 | 6.05 | 1.01 | 6.61 | NA | NA | 15.33 | 91.66 | 13.56 | 108.92 | 14.03 | NA | NA | NM |
|  AX | Axos Financial, Inc. | WE | 9.54 | 8.77 | 1.52 | 15.69 | 1.70 | 17.50 | 0.54 | 165.51 | 11.01 | 158.86 | 15.15 | 174.22 | 9.65 | NA | NA | NM |
|  BLFY | Blue Foundry Bancorp | MA | 19.27 | 19.24 | 0.12 | 0.58 | 0.12 | 0.58 | NA | NA | 131.78 | 82.91 | 15.98 | 83.08 | 132.39 | NA | NA | NM |
|  BYFC | Broadway Financial Corporation | WE | NA | NA | 0.50 | 2.55 | NA | NA | NA | NA | 16.25 | 73.86 | NA | 94.58 | NA | 0.00 | 0.00 | NM |
|  CFFN | Capitol Federal Financial, Inc. | MW | 10.62 | 10.52 | 0.67 | 6.83 | 0.68 | 6.92 | NA | NA | 14.52 | 108.67 | 11.54 | 109.88 | 14.33 | 0.34 | 4.04 | 126.72 |
|  CARV | Carver Bancorp, Inc. | MA | 6.34 | 6.34 | -0.39 | -5.38 | -0.39 | -5.38 | 2.59 | 28.03 | NM | 96.12 | 2.76 | 96.12 | NM | 0.00 | 0.00 | NM |
|  CLST | Catalyst Bancorp, Inc. | SW | 33.60 | 33.60 | 0.06 | 0.19 | NA | NA | NA | NA | NM | 76.82 | NA | 76.82 | NA | NA | NA | NM |
|  CULL | Cullman Bancorp, Inc. | SE | 24.26 | 24.26 | 1.05 | 3.91 | 1.05 | 3.91 | 0.75 | 91.29 | 22.09 | 88.02 | 21.36 | 88.02 | 22.11 | 0.12 | 1.02 | 22.64 |
|  ECBK | ECB Bancorp, Inc. | NE | 18.44 | 18.44 | NA | 1.86 | NA | 5.55 | NA | 863.66 | NA | 89.04 | 16.42 | 89.04 | NA | NA | NA | NA |
|  ESSA | ESSA Bancorp, Inc. | MA | 11.22 | 10.57 | 1.09 | 9.48 | 1.10 | 9.56 | 0.77 | 126.43 | 9.71 | 97.17 | 10.90 | 103.92 | 9.63 | 0.60 | 2.97 | NA |
|  FNWB | First Northwest Bancorp | WE | 7.75 | 7.70 | 0.68 | 7.84 | 0.73 | 8.45 | NA | NA | 8.70 | 89.30 | 7.05 | 89.91 | 9.46 | 0.28 | 1.88 | 16.37 |
|  FSEA | First Seacoast Bancorp, Inc. | NE | 9.11 | 9.11 | 0.29 | 2.58 | 0.28 | 2.50 | NA | NA | 34.40 | 109.28 | 9.96 | 109.28 | 35.44 | NA | NA | NM |
|  FSBW | FS Bancorp, Inc. | WE | 8.80 | 8.60 | 1.22 | 11.66 | 1.25 | 12.01 | NA | NA | 9.84 | 121.57 | 10.70 | 124.63 | 9.56 | 1.00 | 2.75 | NA |
|  GBNY | Generations Bancorp NY, Inc. | MA | 10.08 | 9.71 | 0.42 | 3.74 | 0.44 | 3.98 | 1.65 | 38.16 | 16.39 | 69.11 | 6.96 | 72.03 | 15.44 | NA | NA | NM |
|  HONE | HarborOne Bancorp, Inc. | NE | 11.51 | 10.31 | 0.95 | 7.14 | 0.99 | 7.37 | NA | NA | 14.11 | 108.64 | 12.51 | 123.01 | 13.68 | 0.28 | 2.05 | 28.87 |
|  HIFS | Hingham Institution for Savings | NE | 9.20 | 9.20 | 0.98 | 10.01 | 1.43 | 14.60 | NA | NA | 16.85 | 159.79 | 14.71 | 159.79 | 11.56 | 2.52 | 0.88 | 17.78 |
|  HMNF | HMN Financial, Inc. | MW | 8.88 | 8.81 | 0.75 | 7.03 | NA | NA | NA | NA | 11.95 | 100.64 | 8.94 | 101.47 | NA | 0.24 | 1.10 | 13.11 |
|  HFBL | Home Federal Bancorp, Inc. of Louisiana | SW | 8.44 | 8.44 | 0.99 | 11.45 | 0.99 | 11.45 | 0.05 | NM | 9.89 | 110.97 | 9.37 | 110.97 | 9.89 | 0.48 | 2.77 | 26.29 |
|  IROQ | IF Bancorp, Inc. | MW | 8.63 | 8.63 | 0.69 | 7.51 | 0.74 | 8.00 | 0.04 | NM | 10.33 | 84.88 | 7.33 | 84.88 | 9.70 | 0.40 | 2.21 | 11.43 |
|  KRNY | Kearny Financial Corp. | MA | 10.53 | NA | 0.62 | 5.19 | 0.77 | 6.42 | 0.88 | 81.90 | 14.16 | 76.53 | 8.06 | 101.85 | 11.36 | 0.44 | 4.44 | 62.86 |
|  MGYR | Magyar Bancorp, Inc. | MA | 12.16 | 12.16 | 1.01 | 8.11 | 1.01 | 8.11 | NA | NA | 10.50 | 85.03 | 10.34 | 85.03 | 10.50 | 0.12 | 0.95 | 16.67 |
|  MSVB | Mid-Southern Bancorp, Inc. | MW | 12.38 | 12.38 | 0.71 | 5.15 | 0.71 | 5.15 | NA | 118.16 | 19.23 | 121.78 | 14.18 | 121.78 | 19.23 | 0.24 | 1.84 | 28.99 |
|  NYCB | New York Community Bancorp, Inc. | MA | 9.79 | 6.99 | 1.01 | 9.18 | 0.91 | 8.30 | NA | NA | 7.25 | 74.74 | 6.94 | 110.90 | 8.06 | 0.68 | 7.45 | 40.48 |
|  NECB | Northeast Community Bancorp, Inc. | MA | 18.39 | 18.38 | 1.95 | 9.60 | 2.07 | 10.22 | NA | NA | 10.06 | 97.38 | 17.91 | 97.45 | 9.45 | 0.24 | 1.51 | NA |
|  NFBK | Northfield Bancorp, Inc. (Staten Island, NY) | MA | 12.52 | 11.87 | 1.09 | 8.57 | 1.09 | 8.56 | 0.24 | 314.19 | 11.11 | 99.23 | 12.43 | 105.43 | 11.13 | 0.52 | 3.54 | 39.39 |
|  NSTS | NSTS Bancorp, Inc. | MW | 29.52 | 29.52 | -0.02 | -0.09 | -0.16 | -0.63 | 0.40 | 64.08 | NA | 71.26 | 21.03 | 71.26 | NA | NA | NA | NA |
|  PBBK | PB Bankshares, Inc. | MA | 11.84 | 11.84 | 0.35 | 2.66 | 0.38 | 2.86 | 0.50 | 199.95 | 26.80 | 82.27 | 9.74 | 82.27 | 24.92 | NA | NA | NM |
|  PDLB | Ponce Financial Group, Inc. | MA | 21.31 | 21.31 | -1.55 | -7.47 | NA | NA | NA | 192.69 | NM | 85.62 | 10.98 | 85.62 | NA | NA | NA | NM |
|  PVBC | Provident Bancorp, Inc. | NE | 12.68 | 12.68 | -1.24 | -9.26 | -1.23 | -9.12 | NA | NA | NM | 79.69 | 10.11 | 79.69 | NM | 0.16 | 0.00 | NM |
|  PROV | Provident Financial Holdings, Inc. | WE | 10.17 | 10.17 | 0.71 | 6.69 | 0.71 | 6.69 | 0.10 | 480.23 | 11.95 | 78.47 | 7.98 | 78.47 | 11.95 | 0.56 | 3.94 | 47.06 |
|  PFS | Provident Financial Services, Inc. | MA | 11.59 | 8.53 | 1.29 | 10.86 | 1.31 | 11.05 | NA | NA | 10.01 | 110.70 | 12.83 | 155.59 | 9.84 | 0.96 | 4.08 | 40.85 |
|  RVSB | Riverview Bancorp, Inc. | WE | 9.51 | 7.93 | 1.13 | 12.29 | 1.14 | 12.35 | 0.04 | NM | 8.09 | 100.68 | 9.57 | 122.89 | 8.05 | 0.24 | 3.37 | 26.70 |
|  SBT | Sterling Bancorp, Inc. (Southfield, MI) | MW | 13.53 | 13.53 | 0.15 | 1.19 | 0.17 | 1.32 | NA | 121.99 | 76.38 | 93.80 | 12.70 | 93.80 | 68.99 | 0.00 | 0.00 | NM |
|  TCBC | TC Bancshares, Inc. | SE | 20.84 | 20.84 | 0.68 | 3.13 | 0.68 | 3.13 | NA | NA | NA | 93.45 | 19.47 | 93.45 | NA | 0.10 | 0.61 | NA |
|  TBNK | Territorial Bancorp Inc. | WE | 11.83 | 11.83 | 0.75 | 6.27 | 0.71 | 5.95 | NA | NA | 12.96 | 82.49 | 9.76 | 82.49 | 13.65 | 0.92 | 3.94 | 56.67 |
|  TCBS | Texas Community Bancshares, Inc. | SW | 14.81 | 14.71 | 0.44 | 3.37 | 0.48 | 3.63 | 0.43 | 103.25 | 29.14 | 93.25 | 13.81 | 93.97 | 27.03 | NA | NA | NM |
|  TCBX | Third Coast Bancshares, Inc. | SW | 10.12 | 9.66 | 0.58 | 5.76 | NA | NA | 0.31 | 258.46 | 15.06 | 80.70 | 6.87 | 85.92 | NA | NA | NA | NM |
|  TSBK | Timberland Bancorp, Inc. | WE | 12.18 | 11.41 | 1.38 | 11.92 | 1.39 | 12.03 | 0.25 | 316.34 | 11.22 | 126.85 | 15.45 | 136.63 | 11.12 | 0.92 | 2.67 | 39.41 |
|  TFIN | Triumph Financial, Inc. | SW | 16.67 | 12.30 | 1.79 | 11.46 | 1.54 | 9.86 | 0.38 | 227.71 | 15.64 | 176.48 | 28.16 | 257.59 | 18.26 | NA | NA | NM |
|  TRST | TrustCo Bank Corp NY | MA | 10.00 | 9.99 | 1.22 | 12.60 | 1.22 | 12.56 | NA | NA | 9.34 | 116.37 | 11.64 | 116.47 | 9.36 | 1.44 | 3.92 | 26.97 |
|  WSBF | Waterstone Financial, Inc. | MW | 18.24 | 18.21 | 0.96 | 4.88 | 0.95 | 4.81 | NA | NA | 18.00 | 95.88 | 17.48 | 96.04 | 18.25 | 0.80 | 4.99 | 89.89 |
|  WNEB | Western New England Bancorp, Inc. | NE | 8.94 | 8.41 | 1.02 | 11.85 | 0.95 | 11.08 | 0.34 | 228.80 | 8.51 | 97.77 | 8.74 | 104.49 | 9.10 | 0.28 | 2.79 | 15.25 |
|  WMPN | William Penn Bancorporation | MA | 20.58 | 20.08 | 0.46 | 2.05 | 0.50 | 2.21 | 0.55 | 69.01 | 39.80 | 94.22 | 19.39 | 97.19 | 36.86 | 0.12 | 1.01 | 40.00 |
|  WSFS | WSFS Financial Corporation | MA | 11.06 | 6.29 | 1.09 | 9.28 | 1.39 | 11.83 | 0.22 | 357.02 | 14.33 | 139.76 | 15.47 | 258.35 | 11.24 | 0.60 | 1.20 | 12.32 |
|  **<u>MHCs</u>** |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  BSBK | Bogota Financial Corp. | MA | 14.68 | 14.66 | 0.77 | 4.76 | 0.78 | 4.80 | NA | NA | 22.00 | 110.06 | 16.16 | 110.27 | 21.83 | NA | NA | NM |
|  CFSB | CFSB Bancorp, Inc. | NE | 21.10 | 21.10 | 0.19 | 0.95 | 0.19 | 0.94 | NA | NA | NA | 77.97 | 16.45 | 77.97 | NA | NA | NA | NA |
|  CLBK | Columbia Financial, Inc. | MA | 10.12 | 9.04 | 0.88 | 8.09 | 0.94 | 8.62 | NA | NA | 25.56 | 214.09 | 21.67 | 242.71 | 23.98 | NA | NA | NM |
|  GCBC | Greene County Bancorp, Inc. | MA | 6.43 | 6.43 | 1.20 | 18.90 | 1.25 | 19.62 | 0.30 | 279.42 | 15.11 | 271.54 | 17.46 | 271.54 | 14.55 | 0.56 | 1.04 | 19.15 |
|  KFFB | Kentucky First Federal Bancorp | MW | 15.40 | 15.16 | 0.39 | 2.47 | 0.39 | 2.47 | 1.61 | 30.69 | 47.05 | 111.25 | 17.13 | 113.33 | 47.05 | 0.40 | 5.67 | 266.67 |
|  LSBK | Lake Shore Bancorp, Inc. | MA | 11.60 | 11.60 | 0.82 | 6.90 | NA | NA | NA | NA | 12.42 | 84.68 | 9.82 | 84.68 | NA | 0.72 | 5.98 | 53.61 |
|  OFED | Oconee Federal Financial Corp. | SE | 12.68 | 12.27 | 0.83 | 5.84 | 0.85 | 6.02 | 0.19 | 150.21 | 28.78 | 180.23 | 22.85 | 187.13 | 27.92 | 0.40 | 1.74 | 50.00 |
|  PBFS | Pioneer Bancorp, Inc. | MA | 13.61 | 13.09 | 0.72 | 5.79 | 0.75 | 6.00 | 0.45 | 268.15 | 20.18 | 119.63 | 16.28 | 125.19 | 19.49 | NA | NA | NM |
|  RBKB | Rhinebeck Bancorp, Inc. | MA | 8.09 | 7.92 | 0.54 | 6.44 | 0.56 | 6.66 | NA | NA | 14.77 | 98.63 | 7.98 | 101.03 | 14.27 | NA | NA | NM |
|  TFSL | TFS Financial Corporation | MW | 11.47 | 11.41 | 0.53 | 4.40 | 0.53 | 4.40 | 0.73 | 63.66 | 49.14 | 216.01 | 24.77 | 217.15 | 49.14 | 1.13 | 7.93 | 389.66 |
|  **<u>Under Merger/Acquisition</u>** | **<u>Under Merger/Acquisition</u>** |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  HVBC | HV Bancorp, Inc. | MA | 6.84 | 6.84 | 0.39 | 5.42 | NA | NA | NA | NA | 30.48 | 172.13 | 11.77 | 172.13 | NA | NA | NA | NM |

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(1) Average of High/Low or Bid/Ask price per share.

(2) Or since offering price if converted of first listed in the past 52 weeks. Percent change figures are actual year-to-date and are not annualized.

(3) EPS (earnings per share) is based on actual trailing 12 month data and is not shown on a pro forma basis.

(4) Exludes intangibles (such as goodwill, value of core deposits, etc.).

(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based on trailing 12 month common
earnings and average common equity and total assets balances.

(6) Annualized based on last regular quarterly cash dividend announcement.

(7) Indicated dividend as a percent of trailing 12 month earnings.

(8) Excluded from averages due to actual or rumored acquisition activities or unusual operating
characteristics.

(9) For MHC institutions, market value reflects share price multiplied by public (non-MHC) shares.

Source: S&P Global Market Intelligence and RP<sup>®</sup> Financial, LC. calculations. The information provided in this table has been obtained from sources we believe are reliable, but we cannot guarantee the accuracy or completeness of such information.

Copyright (c) 2023 by RP<sup>®</sup> Financial, LC.

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EXHIBIT 2

Pro Forma Analysis Sheet

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Exhibit 2

PRO FORMA ANALYSIS SHEET

Somerset Savings Bank, SLA

Prices as of February 21, 2023

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  | | Peer Group | Peer Group | New Jersey Companies | New Jersey Companies | All Publicly-Traded | All Publicly-Traded |
| Price Multiple | Symbol | Subject (1) | Mean | Median | Mean | Median | Mean | Median |
|  Price-earnings ratio (x) | P/E | 11.07 x | 11.11x | 10.33x | 11.45x | 10.81x | 14.26x | 12.46x |
|  Price-core earnings ratio (x) | P/Core | 11.06 x | 10.74x | 9.89x | 10.71x | 10.81x | 13.05x | 11.19x |
|  Price-book ratio (%) | P/B | 52.11% | 93.52% | 94.22% | 90.88% | 85.03% | 98.95% | 108.81% |
|  Price-tangible book ratio (%) | P/TB | 61.96% | 96.61% | 97.45% | 106.20% | 101.85% | 93.80% | 97.19% |
|  Price-assets ratio (%) | P/A | 8.99% | 11.98% | 10.34% | 11.93% | 12.43% | 12.51% | 11.64% |

---

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| | | | |
|:---|:---|:---|:---|
|  <u>Valuation Parameters</u> |  |  |  |
|  Pre-Conversion Earnings (2)(Y) | $8941000.0 | ESOP Stock Purchases (E) | 8.0% |
|  Pre-Conversion Earnings (2)(CY) | $8946000.0 | Cost of ESOP Borrowings (S) | 0.0% |
|  Pre-Conversion Book Value (2)(B) | $117051000.0 | ESOP Amortization (T) | 20.0 |
|  Pre-Conv. Tang. Book Value (2)(TB) | $84976000.0 | RRP Amount (M) | 4.0% |
|  Pre-Conversion Assets(2) (A) | $1083507000.0 | RRP Vesting (N) | 5.0 |
|  Reinvestment Rate (3)(R) | 3.99% | Foundation (F) | 5.71% |
|  Est. Conversion Expenses (4)(X) | 3.49% | Tax Benefit (Z) | 1500000.0 |
|  Tax Rate (TAX) | 25.0% | Merger Shares (PATD) | 0.0% |
|  |  | Percentage Sold (PCT) | 100.0% |
|  |  | Option (O1) | 10.0% |
|  |  | Estimated Option Value (O2) | 50.2% |
|  |  | Option vesting (O3) | 5.0 |
|  |  | Option pct taxable (O4) | 25.0% |

---

<u>Calculation of Pro Forma Value After Conversion</u> 

---

| | | | |
|:---|:---|:---|:---|
| 1. V= | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; P/E \* (Y) | V= | $105000000 |
|  | 1 - P/E \* PCT \* ((1-X-E-M-F-PATD)\*R\*(1-TAX) - (1-TAX)\*E/T (1-TAX)\*M/N) - (1-(TAX\*O4))\*(O1\*O2)/O3) | 1 - P/E \* PCT \* ((1-X-E-M-F-PATD)\*R\*(1-TAX) - (1-TAX)\*E/T (1-TAX)\*M/N) - (1-(TAX\*O4))\*(O1\*O2)/O3) |  |
| 2. V= | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; P/Core \* (Y) | V= | $105000000 |
|  | 1 - P/core \* PCT \* ((1-X-E-M-F-PATD)\*R\*(1-TAX) - (1-TAX)\*E/T (1-TAX)\*M/N) - (1-(TAX\*O4))\*(O1\*O2)/O3) | 1 - P/core \* PCT \* ((1-X-E-M-F-PATD)\*R\*(1-TAX) - (1-TAX)\*E/T (1-TAX)\*M/N) - (1-(TAX\*O4))\*(O1\*O2)/O3) |  |
| 3. V= | <u>P/B \* (B+Z)</u> | V= | $105000000 |
|  | 1 - P/B \* PCT \* (1-X-E-M-F-PATD) |  |  |
| 4. V= | <u>P/TB \* (TB+Z)</u> | V= | $105000000 |
|  | 1 - P/TB \* PCT \* (1-X-E-M-F-PATD) |  |  |
| 5. V= | <u>P/A \* (A+Z)</u> | V= | $105000000 |
|  | 1 - P/A \* PCT \* (1-X-E-M-F-PATD) |  |  |

---

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | | | | Merger | | |
|  | Offering Valuation Range | Offering Valuation Range | Offering Valuation Range | Shares | Shares | |
|  | Shares Issued | Price Per | Gross Offering | Issued To | Issued To | Total Shares |
| Conclusion | To the Public | Share | Proceeds | Regal | Foundation | Issued |
|  Supermaximum | 13225000 | 10.00 | $132250000 | 0 | 661250 | 13886250 |
|  Maximum | 11500000 | 10.00 | 115000000 | 0 | 575000 | 12075000 |
|  Midpoint | 10000000 | 10.00 | 100000000 | 0 | 500000 | 10500000 |
|  Minimum | 8500000 | 10.00 | 85000000 | 0 | 425000 | 8925000 |

---

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(1) Pricing ratios shown reflect the midpoint value.

(2) Historical Somerset Savings and Regal Bancorp combined, including merger adjustments.

(3) Net return equals a reinvestment rate of 3.99%, and a tax rate of 25.0%.

(4) Offering expenses shown at estimated midpoint value as a percent of total offering proceeds.

(5) No cost is applicable since holding company will fund the ESOP loan.

(6) ESOP and RRP amortize over 20 years and 5 years, respectively; amortization expenses tax effected at 25.0%.

(7) 10% option plan with an estimated Black-Scholes valuation of 50.20% of the exercise price, including a 5 year
vesting with 25% of the options (granted to directors) tax effected at 25.00%.

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EXHIBIT 3

Pro Forma Effect of Conversion Proceeds

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Exhibit 3

PRO FORMA EFFECT OF CONVERSION PROCEEDS

Somerset Savings Bank, SLA

At the Minimum

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| | | |
|:---|:---|:---|
| 1. | Pro Forma Market Capitalization | $89250000.0 |
|  | Less: Foundation Shares | 4250000.0 |
| 2. | Offering Proceeds | $85000000.0 |
|  | Less: Estimated Offering Expenses | 3337000.0 |
|  | Net Conversion Proceeds | $81663000.0 |
| 3. | Estimated Additional Income from Conversion Proceeds |  |
|  | Net Conversion Proceeds | $81663000.0 |
|  | Less: Cash Contribution to Foundation | 850000.0 |
|  | Less: Non-Cash Stock Purchases (1) | 10710000.0 |
|  | Net Proceeds Reinvested | $70103000.0 |
|  | Estimated net incremental rate of return | 2.99% |
|  | Reinvestment Income | $2097832.0 |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: Estimated cost of ESOP borrowings (2) | 0.0 |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: Amortization of ESOP borrowings (3) | 267750.0 |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: Amortization of Options (4) | 840066.0 |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: Restricted Stock Plan Vesting (5) | 535500.0 |
|  | Net Earnings Impact | $454517.0 |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  |  | | Before<br>Conversion | Net<br>Earnings<br>Increase | After<br>Conversion |
| 4. | Pro Forma Earnings |  |  |  |  |
|  | 12 Months ended December 31, 2022 (reported) | 12 Months ended December 31, 2022 (reported) | $8941000 | $454517 | $9395517 |
|  | 12 Months ended December 31, 2022 (core) | 12 Months ended December 31, 2022 (core) | $8946000 | $454517 | $9400517 |
|  |  | Before<br>Conversion | Net Cash<br>Proceeds | Tax Benefit (6)<br>Of Contribution | After<br>Conversion |
| 5. | Pro Forma Net Worth |  |  |  |  |
|  | December 31, 2022 | $117051000 | $70103000 | $1275000 | $188429000 |
|  | December 31, 2022 (Tangible) | $84976000 | $70103000 | $1275000 | $156354000 |
|  |  | Before<br>Conversion | Net Cash<br>Proceeds | Tax Benefit (6)<br>Of Contribution | After<br>Conversion |
| 6. | Pro Forma Assets |  |  |  |  |
|  | December 31, 2022 | $1083507000 | $70103000 | $1275000 | $1154885000 |

---

(1) Includes ESOP and RRP stock purchases equal to 8.0% and 4.0% of the offering and foundation shares issued,
respectively.

(2) ESOP stock purchases are internally financed by a loan from the holding company.

(3) ESOP borrowings are amortized over 20 Years, amortization expense is tax-effected at a 25.0% rate.

(4) Option valuation based on Black-Scholes model, 5 year vesting, and assuming 25% taxable.

(5) RRP is amortized over 5 years, and amortization expense is tax effected at 25.0%.

(6) Reflects tax benefit of contribution to Foundation.

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Exhibit 3

PRO FORMA EFFECT OF CONVERSION PROCEEDS

Somerset Savings Bank, SLA

At the Midpoint

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| | | |
|:---|:---|:---|
| 1. | Pro Forma Market Capitalization | $105000000.0 |
|  | Less: Foundation Shares | 5000000.0 |
| 2. | Offering Proceeds | $100000000.0 |
|  | Less: Estimated Offering Expenses | 3487000.0 |
|  | Net Conversion Proceeds | $96513000.0 |
| 3. | Estimated Additional Income from Conversion Proceeds |  |
|  | Net Conversion Proceeds | $96513000.0 |
|  | Less: Cash Contribution to Foundation | 1000000.0 |
|  | Less: Non-Cash Stock Purchases (1) | 12600000.0 |
|  | Net Proceeds Reinvested | $82913000.0 |
|  | Estimated net incremental rate of return | 2.99% |
|  | Reinvestment Income | $2481172.0 |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: Estimated cost of ESOP borrowings (2) | 0.0 |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: Amortization of ESOP borrowings (3) | 315000.0 |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: Amortization of Options (4) | 988313.0 |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: Restricted Stock Plan Vesting (5) | 630000.0 |
|  | Net Earnings Impact | $547859.0 |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  |  | | Before<br>Conversion | Net<br>Earnings<br>Increase | After<br>Conversion |
| 4. | Pro Forma Earnings |  |  |  |  |
|  | 12 Months ended December 31, 2022 (reported) | 12 Months ended December 31, 2022 (reported) | $8941000 | $547859 | $9488859 |
|  | 12 Months ended December 31, 2022 (core) | 12 Months ended December 31, 2022 (core) | $8946000 | $547859 | $9493859 |
|  |  | Before<br>Conversion | Net Cash<br>Proceeds | Tax Benefit (6)<br>Of Contribution | After<br>Conversion |
| 5. | Pro Forma Net Worth |  |  |  |  |
|  | December 31, 2022 | $117051000 | $82913000 | $1500000 | $201464000 |
|  | December 31, 2022 (Tangible) | $84976000 | $82913000 | $1500000 | $169389000 |
|  |  | Before<br>Conversion | Net Cash<br>Proceeds | Tax Benefit (6)<br>Of Contribution | After<br>Conversion |
| 6. | Pro Forma Assets |  |  |  |  |
|  | December 31, 2022 | $1083507000 | $82913000 | $1500000 | $1167920000 |

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(1) Includes ESOP and RRP stock purchases equal to 8.0% and 4.0% of the offering and foundation shares issued,
respectively.

(2) ESOP stock purchases are internally financed by a loan from the holding company.

(3) ESOP borrowings are amortized over 20 Years, amortization expense is tax-effected at a 25.0% rate.

(4) Option valuation based on Black-Scholes model, 5 year vesting, and assuming 25% taxable.

(5) RRP is amortized over 5 years, and amortization expense is tax effected at 25.0%.

(6) Reflects tax benefit of contribution to Foundation.

------

Exhibit 3

PRO FORMA EFFECT OF CONVERSION PROCEEDS

Somerset Savings Bank, SLA

At the Maximum

---

| | | |
|:---|:---|:---|
| 1. | Pro Forma Market Capitalization | $120750000.0 |
|  | Less: Foundation Shares | 5750000.0 |
| 2. | Offering Proceeds | $115000000.0 |
|  | Less: Estimated Offering Expenses | 3637000.0 |
|  | Net Conversion Proceeds | $111363000.0 |
| 3. | Estimated Additional Income from Conversion Proceeds |  |
|  | Net Conversion Proceeds | $111363000.0 |
|  | Less: Cash Contribution to Foundation | 1150000.0 |
|  | Less: Non-Cash Stock Purchases (1) | 14490000.0 |
|  | Net Proceeds Reinvested | $95723000.0 |
|  | Estimated net incremental rate of return | 2.99% |
|  | Reinvestment Income | $2864511.0 |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: Estimated cost of ESOP borrowings (2) | 0.0 |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: Amortization of ESOP borrowings (3) | 362250.0 |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: Amortization of Options (4) | 1136559.0 |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: Restricted Stock Plan Vesting (5) | 724500.0 |
|  | Net Earnings Impact | $641201.0 |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  |  | | Before<br>Conversion | Net<br>Earnings<br>Increase | After<br>Conversion |
| 4. | Pro Forma Earnings |  |  |  |  |
|  | 12 Months ended December 31, 2022 (reported) | 12 Months ended December 31, 2022 (reported) | $8941000 | $641201 | $9582201 |
|  | 12 Months ended December 31, 2022 (core) | 12 Months ended December 31, 2022 (core) | $8946000 | $641201 | $9587201 |
|  |  | Before<br>Conversion | Net Cash<br>Proceeds | Tax Benefit (6)<br>Of Contribution | After<br>Conversion |
| 5. | Pro Forma Net Worth |  |  |  |  |
|  | December 31, 2022 | $117051000 | $95723000 | $1725000 | $214499000 |
|  | December 31, 2022 (Tangible) | $84976000 | $95723000 | $1725000 | $182424000 |
|  |  | Before<br>Conversion | Net Cash<br>Proceeds | Tax Benefit (6)<br>Of Contribution | After<br>Conversion |
| 6. | Pro Forma Assets |  |  |  |  |
|  | December 31, 2022 | $1083507000 | $95723000 | $1725000 | $1180955000 |

---

(1) Includes ESOP and RRP stock purchases equal to 8.0% and 4.0% of the offering and foundation shares issued,
respectively.

(2) ESOP stock purchases are internally financed by a loan from the holding company.

(3) ESOP borrowings are amortized over 20 Years, amortization expense is tax-effected at a 25.0% rate.

(4) Option valuation based on Black-Scholes model, 5 year vesting, and assuming 25% taxable.

(5) RRP is amortized over 5 years, and amortization expense is tax effected at 25.0%.

(6) Reflects tax benefit of contribution to Foundation.

------

Exhibit 3

PRO FORMA EFFECT OF CONVERSION PROCEEDS

Somerset Savings Bank, SLA

At the Supermaximum Value

---

| | | |
|:---|:---|:---|
| 1. | Pro Forma Market Capitalization | $138862500.0 |
|  | Less: Foundation Shares | 6612500.0 |
| 2. | Offering Proceeds | $132250000.0 |
|  | Less: Estimated Offering Expenses | 3810000.0 |
|  | Net Conversion Proceeds | $128440000.0 |
| 3. | Estimated Additional Income from Conversion Proceeds |  |
|  | Net Conversion Proceeds | $128440000.0 |
|  | Less: Cash Contribution to Foundation | 1322500.0 |
|  | Less: Non-Cash Stock Purchases (1) | 16663500.0 |
|  | Net Proceeds Reinvested | $110454000.0 |
|  | Estimated net incremental rate of return | 2.99% |
|  | Reinvestment Income | $3305336.0 |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: Estimated cost of ESOP borrowings (2) | 0.0 |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: Amortization of ESOP borrowings (3) | 416588.0 |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: Amortization of Options (4) | 1307043.0 |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: Restricted Stock Plan Vesting (5) | 833175.0 |
|  | Net Earnings Impact | $748530.0 |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  |  | | Before<br>Conversion | Net<br>Earnings<br>Increase | After<br>Conversion |
| 4. | Pro Forma Earnings |  |  |  |  |
|  | 12 Months ended December 31, 2022 (reported) | 12 Months ended December 31, 2022 (reported) | $8941000 | $748530 | $9689530 |
|  | 12 Months ended December 31, 2022 (core) | 12 Months ended December 31, 2022 (core) | $8946000 | $748530 | $9694530 |
|  |  | Before<br>Conversion | Net Cash<br>Proceeds | Tax Benefit (6)<br>Of Contribution | After<br>Conversion |
| 5. | Pro Forma Net Worth |  |  |  |  |
|  | December 31, 2022 | $117051000 | $110454000 | $1983750 | $229488750 |
|  | December 31, 2022 (Tangible) | $84976000 | $110454000 | $1983750 | $197413750 |
|  |  | Before<br>Conversion | Net Cash<br>Proceeds | Tax Benefit (6)<br>Of Contribution | After<br>Conversion |
| 6. | Pro Forma Assets |  |  |  |  |
|  | December 31, 2022 | $1083507000 | $110454000 | $1983750 | $1195944750 |

---

(1) Includes ESOP and RRP stock purchases equal to 8.0% and 4.0% of the offering and foundation shares issued,
respectively.

(2) ESOP stock purchases are internally financed by a loan from the holding company.

(3) ESOP borrowings are amortized over 20 Years, amortization expense is tax-effected at a 25.0% rate.

(4) Option valuation based on Black-Scholes model, 5 year vesting, and assuming 25% taxable.

(5) RRP is amortized over 5 years, and amortization expense is tax effected at 25.0%.

(6) Reflects tax benefit of contribution to Foundation.

------

EXHIBIT 4

Firm Qualifications Statement

------

![LOGO](g352312dsp43.jpg)

&nbsp;&nbsp;&nbsp;**FIRM QUALIFICATION STATEMENT**

RP<sup>®</sup> Financial ("RP<sup>®</sup>) provides financial and management consulting, merger advisory and valuation services to the financial services industry nationwide. We offer a broad array of services, high quality and prompt service, hands-on involvement by principals and senior staff, careful structuring of strategic initiatives and sophisticated valuation and other analyses consistent with industry practices and regulatory requirements. Our staff maintains extensive background in financial and management consulting, valuation and investment banking. Our clients include commercial banks, thrifts, credit unions, mortgage companies, insurance companies and other financial services companies.

&nbsp;&nbsp;&nbsp;***STRATEGIC PLANNING SERVICES***

RP<sup>®</sup>'s strategic planning services are designed to provide effective feasible plans with quantifiable results. We analyze strategic options to enhance shareholder value, achieve regulatory approval or realize other objectives. Such services involve conducting situation analyses; establishing mission/vision statements, developing strategic goals and objectives; and identifying strategies to enhance franchise and/or market value, capital management, earnings enhancement, operational matters and organizational issues. Strategic recommendations typically focus on: capital formation and management, asset/liability targets, profitability, return on equity and stock pricing. Our proprietary financial simulation models provide the basis for evaluating the impact of various strategies and assessing their feasibility and compatibility with regulations.

&nbsp;&nbsp;&nbsp;***MERGER ADVISORY SERVICES***

RP<sup>®</sup>'s merger advisory services include targeting potential buyers and sellers, assessing acquisition merit, conducting due diligence, negotiating and structuring merger transactions, preparing merger business plans and financial simulations, rendering fairness opinions, preparing mark-to-market analyses, valuing intangible assets and supporting the implementation of post-acquisition strategies. Our merger advisory services involve transactions of financially healthy companies and failed bank deals. RP<sup>®</sup> is also expert in de novo charters and shelf charters. Through financial simulations, comprehensive data bases, valuation proficiency and regulatory familiarity, RP<sup>®</sup>'s merger advisory services center on enhancing shareholder returns.

&nbsp;&nbsp;&nbsp;***VALUATION SERVICES***

RP<sup>®</sup>'s extensive valuation practice includes bank and thrift mergers, thrift mutual-to-stock conversions, goodwill impairment, insurance company demutualizations, ESOPs, subsidiary companies, merger accounting and other purposes. We are highly experienced in performing appraisals which conform to regulatory guidelines and appraisal standards. RP<sup>®</sup> is the nation's leading valuation firm for thrift mutual-to-stock conversions, with appraised values ranging up to $4 billion.

&nbsp;&nbsp;&nbsp;***OTHER CONSULTING SERVICES***

RP<sup>®</sup> offers other consulting services including evaluating the impact of regulatory changes (TARP, etc.), branching and diversification strategies, feasibility studies and special research. We assist banks/thrifts in preparing CRA plans and evaluating wealth management activities on a de novo or merger basis. Our other consulting services are facilitated by proprietary valuation and financial simulation models.

&nbsp;&nbsp;&nbsp;***KEY PERSONNEL (Years of Relevant Experience & Contact Information)***

---

| | | |
|:---|:---|:---|
| Ronald S. Riggins, Managing Director (42) | (703) 647-6543 | rriggins@rpfinancial.com |
| William E. Pommerening, Managing Director (38) | (703) 647-6546 | wpommerening@rpfinancial.com |
| Gregory E. Dunn, Director (39) | (703) 647-6548 | gdunn@rpfinancial.com |
| James P. Hennessey, Director (35) | (703) 647-6544 | jhennessey@rpfinancial.com |
| James J. Oren, Director (35) | (703) 647-6549 | joren@rpfinancial.com |

---

------

---

| | |
|:---|:---|
| **Washington Headquarters** |  |
| 1311-A Dolley Madison Boulevard | Telephone: (703) 528-1700 |
| Suite 2A | Fax No.: (703) 528-1788 |
| McLean, VA 22101 | Toll-Free No.: (866) 723-0594 |
| www.rpfinancial.com | E-Mail: mail@rpfinancial.com |

---

## Exhibit 99.6

**Exhibit 99.6** 

---

| | |
|:---|:---|
| ![LOGO](g352312page355a.jpg) | **RP<sup>®</sup> FINANCIAL, LC.** |
| ![LOGO](g352312page355a.jpg) | **Advisory \| Planning \| Valuation** |

---

March 13, 2023

Boards of Directors

SR Bancorp, Inc.

Somerset Savings Bank, SLA

220 West Union Avenue

Bound Brook, New Jersey 08805

Re: Plan of Conversion

<u>Somerset Savings Bank, SLA</u> 

Members of the Boards of Directors:

All capitalized terms not otherwise defined in this letter have the meanings given such terms in the Plan of Conversion (the "Plan") adopted by the Board of Directors of Somerset Savings Bank, SLA ("Somerset Savings"). Pursuant to the Plan, the Bank will convert from the mutual form of organization to the stock form of organization. In connection with the Plan, the Bank has organized a new Maryland stock holding company named SR Bancorp, Inc. (the "Company"), which will sell shares of common stock in a public offering. When the conversion is completed, all of the capital stock of the Bank will be owned by the Company and all of the common stock of the Company will be owned by public stockholders.

We understand that in accordance with the Plan, depositors will receive rights in a liquidation account maintained by the Company. The Company shall continue to hold the liquidation account for the benefit of Eligible Account Holders and Supplemental Eligible Account Holders who continue to maintain deposits in Somerset Savings. The liquidation account is designed to provide payments to depositors of their liquidation interests in the event of liquidation of Somerset Savings (or the Company and Somerset Savings).

In the unlikely event that either Somerset Savings (or the Company and Somerset Savings) were to liquidate after the conversion (including, a liquidation of Somerset Savings following a purchase and assumption transaction with a credit union acquiror), all claims of creditors, including those of depositors, would be paid first, followed by distribution to depositors as of June 30, 2021 and depositors as of the date of record for Supplemental Eligible Account Holders. Also, in a complete liquidation of both entities, or of Somerset Savings, when the Company has insufficient assets (other than the stock of Somerset Savings), or of Somerset Savings following a purchase and assumption transaction with a credit union acquiror, to fund the liquidation account distribution due to Eligible Account Holders and Supplemental Eligible Account Holders and Somerset Savings has positive net worth, Somerset Savings shall immediately make a distribution to fund the Company's remaining obligations under the liquidation account. The Plan further provides that if the Company is completely liquidated or sold apart from a sale or liquidation of Somerset Savings, then the rights of Eligible Account Holders and Supplemental Eligible Account Holders in the liquidation account maintained by the Company shall be surrendered and treated as a liquidation account in Somerset Savings, the bank liquidation account and depositors shall have an equivalent interest in such bank liquidation account, subject to the same rights and terms as the liquidation account.

------

---

| | |
|:---|:---|
| **Washington Headquarters** |  |
| 1311-A Dolley Madison Boulevard | Telephone: (703) 528-1700 |
| Suite 2A | Fax No.: (703) 528-1788 |
| McLean, VA 22101 | Toll Free No.: (866) 723-0594 |
| www.rpfinancial.com | E-Mail: mail@rpfinancial.com |

---

------

*RP<sup>®</sup> Financial, LC.* 

*Boards of Directors* 

*March 13, 2023* 

*Page 2* 

Based upon our review of the Plan and our observations that the liquidation rights become payable only upon the unlikely event of the liquidation of Somerset Savings (or the Company and Somerset Savings), that liquidation rights in the Company automatically transfer to Somerset Savings in the event the Company is completely liquidated or sold apart from a sale or liquidation of Somerset Savings, and that after two years from the date of conversion and upon written request of the Federal Reserve, the Company will transfer the liquidation account and depositors' interest in such account to Somerset Savings and the liquidation account shall thereupon become the liquidation account of Somerset Savings no longer subject to the Company's creditors, we are of the belief that: the benefit provided by the Somerset Savings liquidation account supporting the payment of the liquidation account in the event the Company lacks sufficient net assets or following a purchase and assumption transaction with a credit union acquiror does not have any economic value at the time of the transactions contemplated in the first and second paragraphs above. We note that we have not undertaken any independent investigation of state or federal law or the position of the Internal Revenue Service with respect to this issue.

Sincerely,

![LOGO](g352312page355b.jpg)

RP<sup>®</sup> Financial, LC.

## Ex-Filing

**Exhibit 107** 

**Calculation of Filing Fee Tables** 

**Form S-1** 

(Form Type)

**SR Bancorp, Inc.** 

(Exact Name of Registrant as Specified in its Charter)

<u>Table 1: Newly Registered Securities</u> 

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | Security<br>Type | Security<br>Class Title | Fee<br>Calculation<br>Rule | Amount<br>Registered | Proposed<br>Maximum<br>Aggregate<br>Offering<br>Price Per<br>Unit | Maximum<br>Aggregate<br>Offering<br>Price | Fee Rate | Amount of<br>Registration<br>Fee |
| &nbsp;&nbsp;&nbsp;Fees to be paid | Equity | Common stock, $0.01 par value per share | Rule 457(a) | 13886250<sup>(1)</sup> | $10.00 | $10.00 | 0.0001102 | $15303 |
|  | Other | Participation Interests | Rule 457(h) | 1146810 |  |  |  | (2) |
|  | Total Offering Amounts | Total Offering Amounts | Total Offering Amounts | Total Offering Amounts |  |  |  | $15303 |
|  | Total Fees Previously Paid | Total Fees Previously Paid | Total Fees Previously Paid | Total Fees Previously Paid |  |  |  |  |
|  | Total Fee Offsets | Total Fee Offsets | Total Fee Offsets | Total Fee Offsets |  |  |  |  |
|  | Net Fee Due | Net Fee Due | Net Fee Due | Net Fee Due |  |  |  | $15303 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Includes 13,225,000 shares to be offered for sale in the stock offering and 661,250 shares to be issued to
Somerset Regal Charitable Foundation, Inc.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) The securities of SR Bancorp, Inc. to be purchased by the Somerset Savings Bank, SLA 401(k) Plan are
included in the amount shown for common stock. However, pursuant to Rule 457(h) of the Securities Act of 1933, as amended, no separate fee is required for the participation interests. Pursuant to such rule, the amount being registered has been
calculated on the basis of the number of shares of common stock that may be purchased with the current assets of such plan.

## Corresp

**LUSE GORMAN, PC** 

**ATTORNEYS AT LAW** 

**5335 WISCONSIN AVENUE, N.W., SUITE 780** 

**WASHINGTON, D.C. 20015** 

**TELEPHONE (202) 274-2000** 

**FACSIMILE (202) 362-2902** 

**www.luselaw.com** 

---

| | |
|:---|:---|
| **WRITER'S DIRECT DIAL NUMBER**<br> (202) 274-2009 | **WRITER'S E-MAIL**<br> mlevy@luselaw.com |

---

March 13, 2023

Madeleine Mateo, Staff Attorney

Division of Corporation Finance

U.S. Securities and Exchange Commission

100 F Street, NE

Washington, D.C. 20549

---

| | |
|:---|:---|
| **Re:** | **SR Bancorp, Inc. <br>Draft Registration Statement on Form S-1 <br>Submitted on October 28, 2022 <br><u>CIK No. 0001951276</u>**  |

---

Dear Ms. Mateo:

On behalf of SR Bancorp, Inc. ("SR Bancorp") and in accordance with Rule 101 of Regulation S-T, we are hereby transmitting SR Bancorp's Registration Statement on Form S-1. Set forth below are SR Bancorp's responses to the Staff's comments set forth in your letter dated November 22, 2022. The Form S-1 has been blacklined to reflect changes from the original filing, including updating the document for financial and other information as of December 31, 2022, reflecting a revised independent valuation and reflecting the merger consideration in the proposed merger with Regal Bancorp, Inc. will consist solely of cash instead of stock and cash.

**<u>Draft Registration Statement on Form S-1 submitted October 28, 2022</u>**

**<u>Cover Page</u>**

**1. We note your disclosure on page 13 that generally, no individual may purchase more than 25,000 shares of common stock. Please add this maximum purchase amount to the cover page of the prospectus.** 

Response: The requested disclosure has been added to the cover page of the prospectus.

------

**LUSE GORMAN, PC** 

Madeleine Mateo

Division of Corporation Finance

Office of Finance

March 13, 2023

**<u>Summary, page 1</u>**

**2. Refer to page 141. We note your disclosure that all depositors have voting rights in Somerset Savings Bank as to all matters requiring depositor action and that upon completion of the conversion depositors will cease to have any voting rights. Please disclose this in the summary section or include a cross reference to this section.** 

Response: The requested disclosure has been added to the cover page of the prospectus.

**3. We note that your business strategy includes 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 your primary market area and expand its existing loan relationship. Please balance the discussion by disclosing the added risks of such lending, as disclosed on pages 22-24.** 

Response: A cross-reference to the relevant Risk Factor has been added to "Summary—The Companies—Our Business Strategy."

**<u>Risk Factors</u>**

**<u>The geographic concentration of our loan portfolio and lending activities, page 21</u>**

**4. Please disclose whether your local market area has experienced any material declines in real estate values during the last year or a material increase in the number of foreclosures. Please make conforming changes for the risk factor starting with "[a]lmost all of our loans are secured by real estate..." on page 22.** 

Response: The requested disclosure has been added to "Risk Factors—Risks Related to Economic Conditions—The geographic concentration of our loan portfolio and lending activities" and "—Risks Related to Lending Activities—Almost all of our loans are secured by real estate, and a downturn in the local real estate market could negatively impact our profitability."

**<u>Changes in interest rates or the shape of the yield curve, page 21</u>**

**5. Please expand your discussion of interest rates to specifically identify the impact of rate increases on your operations and how your business has been affected.** 

Response: The requested disclosure has been added to "Risk Factors—Risks Related to Interest Rates—Changes in interest rates or the shape of the yield curve may adversely affect our profitability and financial condition."

------

**LUSE GORMAN, PC** 

Madeleine Mateo

Division of Corporation Finance

Office of Finance

March 13, 2023

**<u>We are an emerging growth company, page 28</u>**

**6. Since you are also a smaller reporting company, please add a separate risk factor disclosing that even if you no longer qualify as an emerging growth company, you may still be subject to reduced reporting requirements as long as you are a smaller reporting company. Please make conforming changes throughout the registration statement as applicable.** 

Response: The requested disclosure has been added to "Risk Factors—Risks Related to Regulatory Matters" and conforming changes have been made in the registration statement.

**<u>Comparison of Financial Condition at June 30, 2022 and June 30, 2021, page 65</u>**

**7. In the last sentence on page 65, please clarify, if true, that the "$5.6 increase in accumulated other comprehensive lost" means millions.** 

Response: The above-referenced disclosure has been clarified.

**<u>Directors of Somerset Savings Bank and SR Bancorp, page 107</u>**

**8. We note your disclosure on page 157 that your board of directors will be divided into three classes. Please revise this section to reflect this information. Please also disclose what directors will serve in each class and the period of time for each class to serve on the board.** 

Response: The "Management of SR Bancorp—Directors of Somerset Savings Bank and SR Bancorp" has been revised to clarify that the table disclosing the members of the board of directors and their terms refers their directorships on SR Bancorp as well as Somerset Savings Bank boards of directors.

**<u>The Merger with Regal Bancorp, page 125</u>**

**9. Please discuss material aspects of the background of the transaction, including who initiated discussions, whether the registrant considered other targets and, if so, a summary of the discussions, why the registrant chose this target, whether the registrant considered other transaction structures and, if so, why the registrant chose to proceed with a merger.** 

Response: Please note that the proposed merger between SR Bancorp and Regal Bancorp has been revised to be an all-cash transaction. Therefore, the Form S-1 remains as a prospectus to register the SR Bancorp common stock pursuant to its initial public offering but no longer is a proxy statement for Regal Bancorp that would require disclosure of Regal Bancorp's background of the transaction.

------

**LUSE GORMAN, PC** 

Madeleine Mateo

Division of Corporation Finance

Office of Finance

March 13, 2023

**<u>List of Exhibits, page 11-3</u>**

**10. You state that certain exhibits listed in the exhibit index are denoted by an asterisk "to be filed supplementally." Please clarify in the exhibit index that these exhibits will be filed by amendment.** 

Response: The Exhibit Index has been clarified.

If you have any questions, please contact the undersigned.

---

| |
|:---|
| Very truly yours, |
| ![LOGO](g352312g37y25.jpg) |
| Marc Levy |

---

cc: William P. Taylor, Chairman and Chief Executive Officer, SR Bancorp, Inc.

Shannon Davis, Securities and Exchange Commission

William Schroeder, Securities and Exchange Commission

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;J. Nolan McWilliams, Securities and Exchange Commission

John Gorman, Esq., Luse Gorman, PC