13.

Income Taxes

Prior to the year ended June 30, 2024, the Bank qualified 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 June 30, 2025 and June 30, 2024 included approximately $5.3 million of such bad debt allowance for which federal income taxes have not been provided. After January 1, 1996, the 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.

The components of income tax expense are as follows for years ended June 30, 2025 and June 30, 2024:


	Year Ended June 30, 2025		Year Ended June 30, 2024
	(In thousands)
Current tax expense:
Federal income	$	117	$	269
State income		79		217
Total current		196		486
Deferred tax expense (benefit):
Federal income		612		(2,433	)
State income		183		(1,127	)
Total deferred		795		(3,560	)
Change in valuation allowance		—		2,165
Total	$	991	$	(909	)

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 years ended June 30, 2025 and June 30, 2024:


	Year Ended June 30, 2025			Year Ended June 30, 2024
	(In thousands)
Federal income tax expense (benefit), at the statutory rate		1,287		$	(2,472	)
Increases (decreases) in taxes resulting from:
New Jersey state tax, net of federal income tax effect		207			(233	)
Bank owned life insurance		(532	)		(194	)
Merger expenses		—			50
Other items, net		29			390
Change in valuation allowance		—			1,550
Effective income tax expense (benefit)	$	991		$	(909	)

The tax effects of existing temporary differences that give rise to deferred income tax assets and liabilities are as follows:


	June 30, 2025		June 30, 2024
	(In thousands)
Deferred tax assets:
ESOP	$	60	$	160
Capital loss carryover		586		586
Deferred compensation		570		693
Unrecognized pension losses		392		475
Deferred loan fees		13		13
Allowance for credit loss		1,749		1,470
Compensation		396		250
Depreciation		432		432
Federal net operating loss		624		772
State net operating loss		535		510
Charitable contributions		1,579		1,579
Uncollected interest		—		2
Fair value adjustments related to acquisition		941		2,201
Total deferred tax assets		7,877		9,143
Deferred tax liabilities:
Core deposit intangible		1,768		2,235
Prepaid pension		966		900
Deferred loan costs		178		178
Other		92		79
Total deferred tax liabilities		3,004		3,392
Valuation allowance		2,165		2,165
Net deferred income tax asset included in other assets	$	2,708	$	3,586

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. At June 30, 2025 and 2024, there was a valuation allowance of $2.2 million.

A corporation may carry forward net operating losses to the succeeding 20 taxable years for New Jersey state tax purposes. As of June 30, 2025, the Bank had total state net operating loss carryforwards of approximately $7.5 million that expire beginning in tax year 2044.

Management assesses the available evidence to estimate whether sufficient future taxable income will be generated to realize the existing deferred tax asset. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth.

On the basis of this evaluation, a valuation allowance of $2.2 million was established for the year ended June 30, 2025 attributable to the Company's five-year charitable contribution and capital loss carryforwards. The amount of the deferred tax asset considered realizable could be adjusted if estimates of future taxable income increased or if objective evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth. Net deferred tax assets are included in other assets on the Consolidated Statements of Financial Condition. At June 30, 2025 and June 30, 2024, the Company had a $2.2 million valuation allowance.

Historical Timeline

Fiscal Year	Filed
2025	Sep 29, 2025	Showing above
2024	Oct 16, 2024

2023	Sep 28, 2023

About Income Taxes Disclosures

The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.

Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.

SR Bancorp, Inc. Income Taxes Disclosure

Historical Timeline

About Income Taxes Disclosures

Other Available Disclosures