Hanover Bancorp, Inc. Reports Earnings for the Fourth Calendar Quarter highlighted by Increased Net Income and Net Interest Income and Strong Non-interest Income

Fourth Calendar Quarter Performance Highlights

  • Net Income: Net income for the quarter ended December 31, 2023 totaled $3.8 million or $0.51 per diluted share (including Series A preferred shares), versus $3.5 million or $0.48 per diluted share (including Series A preferred shares) in the prior linked quarter. The Company recorded adjusted (non-GAAP) net income (excluding severance expense) of $4.0 million or $0.54 per diluted share for the quarter ended December 31, 2023, versus adjusted (non-GAAP) net income (excluding litigation settlement payment) of $2.8 million or $0.38 per diluted share for the quarter ended September 30, 2023.  
  • Net Interest Income: Net interest income was $12.7 million for the quarter ended December 31, 2023, an increase of $0.9 million, or 7.3% from the prior linked quarter as new loan growth at current, higher market rates began to mitigate increased funding costs.
  • Net Interest Margin: The Company’s net interest margin during the quarter ended December 31, 2023 increased to 2.40% from 2.29% in the quarter ended September 30, 2023.
  • Strong Non-interest Income: The Company’s non-interest income increased $0.5 million or 19.1% from the September 30, 2023 quarter (excluding litigation settlement payment) to a record high $3.3 million for the quarter ended December 31, 2023.
  • Strong Liquidity Position: At December 31, 2023, undrawn liquidity sources, which include cash and unencumbered securities and secured and unsecured funding capacity, totaled $684.3 million or approximately 262% of uninsured deposit balances.
  • Deposit Activity: Total deposits increased $169.5 million or 9.8% from September 30, 2023. Insured and collateralized deposits, which include municipal deposits, accounted for approximately 86% of total deposits at December 31, 2023.
  • Loan Growth: Loans totaled $1.96 billion, a net increase of $82.6 million, or 17.6% annualized, from September 30, 2023, primarily driven by growth in niche-residential, conventional C&I and SBA loans.
  • Asset Quality: At December 31, 2023, the Bank’s asset quality remained strong with non-performing loans representing 0.74% of the total loan portfolio and the allowance for credit losses to total loans increasing to 1% overall. Loans secured by office space accounted for approximately 2.4% of the total loan portfolio with a total balance of $46.5 million, of which less than 1% is located in Manhattan.
  • Banking Initiatives: At December 31, 2023, the Company’s banking initiatives reflected continuing momentum:
    • SBA & USDA Banking: Gains on sale of SBA loans totaled $2.3 million for the quarter ended December 31, 2023, representing a 302% increase over the comparable 2022 quarter. Total SBA loans sold were $29.7 million for the quarter ended December 31, 2023, representing a 270% increase over the comparable 2022 quarter. Total origination volume nearly doubled from $72 million in 2022 to $141 million in 2023.
    • C&I Banking: At December 31, 2023, the Bank’s C&I Banking Team, based out of our Hauppauge Business Banking Center, concluded its first year with $45 million in deposits and $104 million in loan originations.
    • Residential Lending: The Bank achieved $77.5 million in closed loans for the quarter ended December 31, 2023 with a weighted average yield of 7.27% before origination and other fees, which average 50-100 bps, and a weighted average LTV of 63%. Originations for the calendar year ended December 31, 2023 totaled $198.4 million and had a weighted average yield of 7.20%.
  • Tangible Book Value Per Share: Tangible book value per share (including Series A preferred shares) was $22.51 at December 31, 2023 (inclusive of one-time current expected credit loss (“CECL”) implementation adjustment of $3.2 million, net of tax, or $0.43 per share) compared to $22.73 at September 30, 2023 and $21.66 at December 31, 2022.
  • Quarterly Cash Dividend: The Company’s Board of Directors approved a $0.10 per share cash dividend on both common and Series A preferred shares payable on February 14, 2024 to stockholders of record on February 7, 2024.
  • Shelf Registration: In order to access the capital markets efficiently and expeditiously as needed to fuel the continued growth of our highly profitable and successful niche businesses and banking initiatives, the Company filed a shelf registration on Form S-3 concurrent with this earnings release.

MINEOLA, N.Y., Jan. 24, 2024 (GLOBE NEWSWIRE) -- Hanover Bancorp, Inc. (“Hanover” or “the Company” – NASDAQ: HNVR), the holding company for Hanover Community Bank (“the Bank”), today reported results for the quarter ended December 31, 2023 and the declaration of a $0.10 per share cash dividend on both common and Series A preferred shares payable on February 14, 2024 to stockholders of record on February 7, 2024.

Earnings Summary for the Quarter Ended December 31, 2023

The Company reported net income for the quarter ended December 31, 2023 of $3.8 million or $0.51 per diluted share (including Series A preferred shares), versus $5.3 million or $0.72 per diluted share (including Series A preferred shares) in the comparable period a year ago and $3.5 million or $0.48 per diluted share (including Series A preferred shares) for the quarter ended September 30, 2023. The Company recorded adjusted (non-GAAP) net income (excluding severance expense) of $4.0 million or $0.54 per diluted share for the quarter ended December 31, 2023, versus net income of $5.3 million or $0.72 per diluted share in the comparable 2022 quarter (which included no adjustments) and adjusted (non-GAAP) net income (excluding litigation settlement payment) of $2.8 million or $0.38 per diluted share for the quarter ended September 30, 2023, an increase of 43.4% over the linked quarter. Returns on average assets and average stockholders’ equity were 0.69% and 8.10%, respectively, in the quarter ended December 31, 2023, versus 1.18% and 12.04%, respectively, in the comparable quarter of 2022, and 0.66% and 7.58%, respectively, in the quarter ended September 30, 2023. Adjusted (non-GAAP) returns on average assets and average stockholders’ equity were 0.74% and 8.61%, respectively, in the quarter ended December 31, 2023, versus 1.18% and 12.04%, respectively, in the comparable quarter of 2022, and 0.53% and 6.00%, respectively, in the quarter ended September 30, 2023.

The reduction in net income recorded in the fourth calendar quarter of 2023 from the comparable 2022 quarter resulted from two primary factors. The first was a decrease in net interest income primarily related to the rapid rise in interest rates driven by the Federal Reserve as the cost of interest bearing deposits rose faster that the yield on interest earning assets. The second was an increase in non-interest expense largely due to growth related increases in compensation and benefits, occupancy and equipment, federal deposit insurance premiums and other operating expenses, which were partially offset by a decrease in the provision for credit losses and an increase in non-interest income. In addition, the Company’s effective tax rate increased to 25.4% in the fourth calendar quarter of 2023 from 22.7% in the comparable 2022 period due to increased business in other states, related to our SBA and USDA lending program, coupled with lower pre-tax income.

Net interest income was $12.7 million for the quarter ended December 31, 2023, a decrease of $2.6 million, or 17.1% versus the comparable 2022 period due to compression of the Company’s net interest margin to 2.40% in the 2023 quarter from 3.49% in the comparable 2022 quarter. The yield on interest earning assets increased to 5.91% in the 2023 quarter from 5.17% in the comparable 2022 quarter, an increase of 74 basis points, offset by a 211 basis point increase in the cost of interest-bearing liabilities to 4.19% in 2023 from 2.08% in the fourth calendar quarter of 2022. The rapid rise in interest rates driven by the Federal Reserve and, to a lesser extent, the Company’s decision to maintain increased liquidity resulted in the higher cost of funds. Net interest income on a linked quarter basis increased $0.9 million or 7.29%.

Michael P. Puorro, Chairman and Chief Executive Officer, commented on the Company’s quarterly results: “We are extremely pleased with our fourth calendar quarter results highlighted by a 42% increase in adjusted diluted EPS, driven by margin expansion and increasing returns from our investments in SBA and C&I Banking. Together with our sustained focus on cost management, these new initiatives will enhance earnings and capital growth into the future. We continue to focus on increasing fee income and cost management while we further build our business verticals. We believe the composition of our balance sheet, coupled with our growing initiatives, positions us well for the favorable interest rate environment in 2024 anticipated by economists for the financial sector.”

Balance Sheet Highlights

Total assets at December 31, 2023 were $2.27 billion versus $2.15 billion at September 30, 2023. Total securities available for sale at December 31, 2023 was $61.4 million, an increase of $50.5 million from September 30, 2023, primarily driven by growth in collateralized loan obligations (“CLO”). These CLOs are adjustable-rate investments tied to three-month SOFR, purchased at a weighted average yield of 7.05%. Total deposits at December 31, 2023 increased to $1.90 billion compared to $1.74 billion at September 30, 2023. During the quarter ended December 31, 2023, total deposits increased $169.5 million or 9.8% from September 30, 2023. This deposit growth has enabled us to lessen our reliance on higher cost wholesale borrowings while also lowering our loan to deposit ratio from 108% at September 30, 2023 to 103% at December 31, 2023.

The Company had $528.1 million in total municipal deposits at December 31, 2023, at a weighted average rate of 4.62% versus $313.2 million at a weighted average rate of 4.53% at September 30, 2023. The Company’s municipal deposit program is built on long-standing relationships developed in the local marketplace. This core deposit business will continue to provide a stable source of funding for the Company’s lending products at costs lower than those of consumer deposits and market-based borrowings. The Company continues to broaden its municipal deposit base and currently services 37 customer relationships.

Overall borrowings declined $50.9 million or 28.3% from September 30, 2023. Total borrowings at December 31, 2023 were $129.0 million, including $2.3 million in Federal Reserve Paycheck Protection Program Liquidity Facility advances, with a weighted average rate and term of 3.59% and 31 months, respectively. At December 31, 2023 and September 30, 2023, the Company had $126.7 million of term FHLB advances outstanding. The Company had $49.0 million of FHLB overnight borrowings outstanding at September 30, 2023 and none at December 31, 2023. The Company utilizes a number of strategies to manage interest rate risk, including interest rate swap agreements which currently provide a benefit to net interest income.

Stockholders’ equity was $184.8 million at December 31, 2023 compared to $185.9 million at September 30, 2023. The $1.1 million decrease was primarily due to an increase of $1.1 million in accumulated other comprehensive loss and a decrease of $0.1 million in retained earnings. The decrease in retained earnings was due primarily to a $4.0 million, or $3.2 million net of tax, one-time adjustment related to the implementation of the CECL accounting standard on October 1, 2023 and $0.7 million of dividends declared, which was offset by net income of $3.8 million for the quarter ended December 31, 2023. The CECL adjustment included $4.1 million additional allowance for credit losses on the loan portfolio and a $0.1 million reduction of allowance for credit losses on unfunded commitments. There was no adjustment recognized related to the securities portfolio. The accumulated other comprehensive loss at December 31, 2023 was 1.33% of total equity and was comprised of a $1.5 million after tax net unrealized loss on the investment portfolio and a $1.0 million after tax net unrealized loss on derivatives.

Loan Portfolio Growth, Asset Quality and Allowance for Credit Losses

On a linked quarter basis, the Company exhibited net loan growth of $82.6 million, a 17.6% increase on an annualized basis. For the twelve months ended December 31, 2023, the Bank’s loan portfolio grew to $1.96 billion, for an increase of 12.0%. Year over year growth was concentrated primarily in residential, SBA and C&I loans. At December 31, 2023, the Company’s residential loan portfolio (including home equity) amounted to $714.8 million, with an average loan balance of $488 thousand and a weighted average loan-to-value ratio of 57%. Commercial real estate and multifamily loans totaled $1.13 billion at December 31, 2023, with an average loan balance of $1.5 million and a weighted average loan-to-value ratio of 60%. The Company’s commercial real estate concentration ratio decreased to 432% of capital at December 31, 2023 versus 448% of capital at September 30, 2023, with loans secured by office space accounting for 2.4% of the total loan portfolio and totaling $47.8 million. The Company’s loan pipeline at December 31, 2023 is approximately $272 million, with approximately 93% being niche-residential, conventional C&I and SBA and USDA lending opportunities.

Historically, the Bank has generated additional income by strategically originating and selling residential and government guaranteed loans to other financial institutions at premiums, while also retaining servicing rights in some sales. However, due to the pace of interest rate increases since 2022, the Bank’s secondary market sale activity for residential loans remains less active, and the Bank continues originating residential loans for its own portfolio. During the quarter ended December 31, 2023 and 2022, the Company sold SBA loans of $29.7 million and $8.0 million, respectively and recorded gain on sale of loans held-for-sale of $2.3 million and $0.6 million.

The Bank’s asset quality ratios remain strong and among the best in its peer group of community banks. At December 31, 2023, the Company reported $14.5 million in non-performing loans which represented 0.74% of total loans outstanding. Of the non-performing loans, $8.2 million are legacy Savoy Bank originated loans that were either written down to fair value at the acquisition date or are 100% guaranteed by the SBA. Non-performing loans were $15.1 million at September 30, 2023. In October 2023, a $1.1 million non-performing non-owner occupied residential loan paid in full. During the fourth calendar quarter of 2023, the Bank recorded a provision for credit losses expense of $0.2 million. The December 31, 2023, allowance for credit losses balance was $19.7 million versus $14.7 million at September 30, 2023. The increase in the allowance for credit losses on loans is mostly attributable to the $4.1 million adjustment made upon adoption of ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), and additional provisioning related to increased loan volume. The allowance for credit losses as a percent of total loans was 1.00% at December 31, 2023 versus 0.78% at September 30, 2023.

Net Interest Margin

The Bank’s net interest margin increased to 2.40% for the quarter ended December 31, 2023 from 2.29% in the September 30, 2023 quarter. The increase from the prior linked quarter was primarily related to the increase in the average yield on loans and decrease in the average cost of borrowings, partially offset by the increase in the average cost of deposits. The Bank’s net interest margin was 3.49% in the December 31, 2022 quarter. The decrease from the prior year quarter was primarily related to the increase in the total cost of funds, partially offset by the increase in the average yield on loans and to a lesser extent, the Company’s decision to increase liquidity as a result of the recent industry events. The year over year margin compression reflects the effects of the rapid and significant rise in interest rates and the competitive deposit environment. We believe the Company is well positioned for the favorable interest rate environment anticipated by economic forecasts.

Fiscal Year Change

In October 2023, the Company’s Board of Directors approved a change in the Company’s fiscal year end from September 30 to December 31. Accordingly, the Company is reporting a transition quarter that runs from October 1, 2023 through December 31, 2023. The Company’s next full fiscal year began on January 1, 2024. This change will help our shareholders in reviewing our financial results and evaluating our performance. The change in the Company’s fiscal year had no impact on the Company’s historical consolidated financial position, results of operations, or cash flows.

About Hanover Community Bank and Hanover Bancorp, Inc.

Hanover Bancorp, Inc. (NASDAQ: HNVR), is the bank holding company for Hanover Community Bank, a community commercial bank focusing on highly personalized and efficient services and products responsive to client needs. Management and the Board of Directors are comprised of a select group of successful local businesspeople who are committed to the success of the Bank by knowing and understanding the metro-New York area’s financial needs and opportunities. Backed by state-of-the-art technology, Hanover offers a full range of financial services. Hanover employs a complete suite of consumer, commercial, and municipal banking products and services, including multi-family and commercial mortgages, residential loans, business loans and lines of credit. Hanover also offers its customers access to 24-hour ATM service with no fees attached, free checking with interest, telephone banking, advanced technologies in mobile and internet banking for our consumer and business customers, safe deposit boxes and much more. The Company’s corporate administrative office is located in Mineola, New York where it also operates a full-service branch office along with additional branch locations in Garden City Park, Hauppauge, Forest Hills, Flushing, Sunset Park, Rockefeller Center and Chinatown, New York, and Freehold, New Jersey.

Hanover Community Bank is a member of the Federal Deposit Insurance Corporation and is an Equal Housing/Equal Opportunity Lender. For further information, call (516) 548-8500 or visit the Bank’s website at www.hanoverbank.com.

Non-GAAP Disclosure

This discussion includes non-GAAP financial measures, including the Company’s adjusted net income, adjusted returns on average assets and shareholders’ equity, adjusted operating efficiency ratio, and tangible common equity. A non-GAAP financial measure is a numerical measure of historical or future performance, financial position or cash flows that excludes or includes amounts that are required to be disclosed in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). The Company’s management believes that the presentation of non-GAAP financial measures provides both management and investors with a greater understanding of the Company’s operating results and trends in addition to the results measured in accordance with GAAP, and provides greater comparability across time periods. While management uses non-GAAP financial measures in its analysis of the Company’s performance, this information is not meant to be considered in isolation or as a substitute for the numbers prepared in accordance with U.S. GAAP or considered to be more important than financial results determined in accordance with U.S. GAAP. The Company’s non-GAAP financial measures may not be comparable to similarly titled measures used by other financial institutions.

With respect to the calculations of adjusted net income and adjusted operating efficiency ratio for the periods presented in this discussion, reconciliations to the most comparable U.S. GAAP measures are provided in the tables that follow.

Forward-Looking Statements

This release may contain certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and may be identified by the use of such words as "may," "believe," "expect," "anticipate," "should," "plan," "estimate," "predict," "continue," and "potential" or the negative of these terms or other comparable terminology. Examples of forward-looking statements include, but are not limited to, estimates with respect to the financial condition, results of operations and business of Hanover Bancorp, Inc. Any or all of the forward-looking statements in this release and in any other public statements made by Hanover Bancorp, Inc. may turn out to be incorrect. They can be affected by inaccurate assumptions that Hanover Bancorp, Inc. might make or by known or unknown risks and uncertainties, including those discussed in our Annual Report on Form 10-K under Item 1A - Risk Factors, as updated by our subsequent filings with the Securities and Exchange Commission. Further, the adverse effect of the COVID-19 pandemic on the Company, its customers, and the communities where it operates may adversely affect the Company’s business, results of operations and financial condition for an indefinite period of time. Consequently, no forward-looking statement can be guaranteed. Hanover Bancorp, Inc. does not intend to update any of the forward-looking statements after the date of this release or to conform these statements to actual events.

This release does not constitute an offer of any securities for sale.

Investor and Press Contact:
Lance P. Burke
Chief Financial Officer
(516) 548-8500


HANOVER BANCORP, INC.            
STATEMENTS OF CONDITION (unaudited)            
(dollars in thousands)            
               
               
    December 31,   September 30,   December 31,  
      2023       2023       2022    
Assets              
Cash and cash equivalents $ 177,207     $ 192,624     $ 152,298    
Securities-available for sale, at fair value   61,419       10,889       12,151    
Investments-held to maturity   4,041       4,108       4,336    
Loans held for sale   8,332       -       -    
               
Loans, net of deferred loan fees and costs   1,957,199       1,874,562       1,746,810    
Less: allowance for credit losses(1)   (19,658 )     (14,686 )     (14,404 )  
Loans, net   1,937,541       1,859,876       1,732,406    
               
Goodwill     19,168       19,168       19,168    
Premises & fixed assets   15,886       16,057       14,886    
Operating lease assets   9,754       10,193       11,409    
Other assets   36,712       36,620       37,038    
  Assets $ 2,270,060     $ 2,149,535     $ 1,983,692    
               
Liabilities and stockholders' equity            
Core deposits $ 1,382,397     $ 1,204,994     $ 1,128,394    
Time deposits   522,198       530,076       389,256    
Total deposits   1,904,595       1,735,070       1,517,650    
               
Borrowings   128,953       179,849       238,273    
Subordinated debentures   24,635       24,621       24,581    
Operating lease liabilities   10,459       10,899       12,063    
Other liabilities   16,588       13,189       13,497    
  Liabilities   2,085,230       1,963,628       1,806,064    
               
Stockholders' equity   184,830       185,907       177,628    
  Liabilities and stockholders' equity $ 2,270,060     $ 2,149,535     $ 1,983,692    
               
(1) CECL was adopted effective 10/1/23. Prior periods were based on the incurred loss methodology.      


HANOVER BANCORP, INC.        
CONSOLIDATED STATEMENTS OF INCOME (unaudited)      
(dollars in thousands, except per share data)        
           
    Three Months Ended  
    12/31/2023   12/31/2022  
           
Interest income $ 31,155   $ 22,572  
Interest expense   18,496     7,308  
  Net interest income   12,659     15,264  
Provision for credit losses(1)   200     1,500  
  Net interest income after provision for credit losses   12,459     13,764  
           
Loan servicing and fee income   778     678  
Service charges on deposit accounts   85     63  
Gain on sale of loans held-for-sale   2,326     578  
Other operating income   65     92  
  Non-interest income   3,254     1,411  
           
Compensation and benefits   5,242     4,332  
Occupancy and equipment   1,746     1,477  
Data processing   530     418  
Professional fees   729     683  
Federal deposit insurance premiums   375     158  
Other operating expenses   2,048     1,203  
  Non-interest expense   10,670     8,271  
           
  Income before income taxes   5,043     6,904  
Income tax expense   1,280     1,566  
           
  Net income $ 3,763   $ 5,338  
           
Earnings per share ("EPS"):(2)        
Basic $ 0.51   $ 0.73  
Diluted $ 0.51   $ 0.72  
           
Average shares outstanding for basic EPS(2)(3)   7,324,133     7,292,940  
Average shares outstanding for diluted EPS(2)(3)   7,383,529     7,387,938  
           
(1) CECL was adopted effective 10/1/23. Prior periods were based on the incurred loss methodology.  
(2) Calculation includes common stock and Series A preferred stock.
 
(3) Average shares outstanding before subtracting participating securities.
 
           
Note: Prior period information has been adjusted to conform to current period presentation.  
           


HANOVER BANCORP, INC.                    
CONSOLIDATED STATEMENTS OF INCOME (unaudited)                  
QUARTERLY TREND                    
(dollars in thousands, except per share data)                    
                       
    Three Months Ended  
    12/31/2023   9/30/2023   6/30/2023   3/31/2023   12/31/2022  
                       
Interest income $ 31,155   $ 28,952   $ 28,459   $ 25,060   $ 22,572  
Interest expense   18,496     17,153     14,954     11,136     7,308  
  Net interest income   12,659     11,799     13,505     13,924     15,264  
Provision for credit losses(1)   200     500     500     932     1,500  
  Net interest income after provision for credit losses   12,459     11,299     13,005     12,992     13,764  
                       
Loan servicing and fee income   778     681     811     539     678  
Service charges on deposit accounts   85     75     70     67     63  
Gain on sale of loans held-for-sale   2,326     1,468     1,052     995     578  
Other operating income   65     1,483     41     155     92  
  Non-interest income   3,254     3,707     1,974     1,756     1,411  
                       
Compensation and benefits   5,242     5,351     5,405     5,564     4,332  
Occupancy and equipment   1,746     1,758     1,587     1,537     1,477  
Data processing   530     516     576     441     418  
Professional fees   729     800     781     881     683  
Federal deposit insurance premiums   375     386     357     358     158  
Other operating expenses   2,048     1,506     1,860     1,786     1,203  
  Non-interest expense   10,670     10,317     10,566     10,567     8,271  
                       
  Income before income taxes   5,043     4,689     4,413     4,181     6,904  
Income tax expense   1,280     1,166     1,319     972     1,566  
                       
  Net income $ 3,763   $ 3,523   $ 3,094   $ 3,209   $ 5,338  
                       
Earnings per share ("EPS"):(2)                    
Basic $ 0.51   $ 0.48   $ 0.42   $ 0.44   $ 0.73  
Diluted $ 0.51   $ 0.48   $ 0.42   $ 0.43   $ 0.72  
                       
Average shares outstanding for basic EPS(2)(3)   7,324,133     7,327,345     7,332,090     7,324,036     7,292,940  
Average shares outstanding for diluted EPS(2)(3)   7,383,529     7,407,483     7,407,613     7,406,933     7,387,938  
                       
(1) CECL was adopted effective 10/1/23. Prior periods were based on the incurred loss methodology.
 
(2) Calculation includes common stock and Series A preferred stock.
 
(3) Average shares outstanding before subtracting participating securities.
 
                       
Note: Prior period information has been adjusted to conform to current period presentation.
 
                       


HANOVER BANCORP, INC.            
CONSOLIDATED NON-GAAP FINANCIAL INFORMATION (1) (unaudited)      
(dollars in thousands, except per share data)            
             
  Three Months Ended  
  12/31/2023   9/30/2023   12/31/2022  
             
ADJUSTED NET INCOME:            
Net income, as reported $ 3,763     $ 3,523     $ 5,338    
Adjustments:            
Litigation settlement payment   -       (975 )     -    
Severance expense   321       -       -    
Total adjustments, before income taxes   321       (975 )     -    
Adjustment for reported effective income tax rate   81       (243 )     -    
Total adjustments, after income taxes   240       (732 )     -    
Adjusted net income $ 4,003     $ 2,791     $ 5,338    
Basic earnings per share - adjusted $ 0.55     $ 0.38     $ 0.73    
Diluted earnings per share - adjusted $ 0.54     $ 0.38     $ 0.72    
             
ADJUSTED OPERATING EFFICIENCY RATIO:            
Operating efficiency ratio, as reported   67.05 %     66.53 %     49.60 %  
Adjustments:            
Litigation settlement payment   0.00 %     4.47 %     0.00 %  
Severance expense   -2.02 %     0.00 %     0.00 %  
Adjusted operating efficiency ratio   65.03 %     71.00 %     49.60 %  
             
ADJUSTED RETURN ON AVERAGE ASSETS   0.74 %     0.53 %     1.18 %  
ADJUSTED RETURN ON AVERAGE EQUITY   8.61 %     6.00 %     12.04 %  
             
(1) A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are required to be disclosed in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). The Company’s management believes the presentation of non-GAAP financial measures provide investors with a greater understanding of the Company’s operating results in addition to the results measured in accordance with U.S. GAAP. While management uses non-GAAP measures in its analysis of the Company’s performance, this information should not be viewed as a substitute for financial results determined in accordance with U.S. GAAP or considered to be more important than financial results determined in accordance with U.S. GAAP.
             


HANOVER BANCORP, INC.      
SELECTED FINANCIAL DATA (unaudited)    
(dollars in thousands)      
       
       
  Three Months Ended
  12/31/2023   12/31/2022
Profitability:      
Return on average assets   0.69 %     1.18 %
Return on average equity(1)   8.10 %     12.04 %
Return on average tangible equity(1)   9.06 %     13.54 %
Pre-provision net revenue to average assets   0.97 %     1.86 %
Yield on average interest-earning assets   5.91 %     5.17 %
Cost of average interest-bearing liabilities   4.19 %     2.08 %
Net interest rate spread(2)   1.72 %     3.09 %
Net interest margin(3)   2.40 %     3.49 %
Non-interest expense to average assets   1.97 %     1.83 %
Operating efficiency ratio   67.05 %     49.60 %
       
Average balances:      
Interest-earning assets $ 2,090,839     $ 1,733,739  
Interest-bearing liabilities   1,751,330       1,391,875  
Loans   1,910,409       1,681,460  
Deposits   1,767,753       1,472,982  
Borrowings   170,793       123,149  
       
       
(1) Includes common stock and Series A preferred stock.    
(2) Represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(3) Represents net interest income divided by average interest-earning assets.
       


HANOVER BANCORP, INC.              
SELECTED FINANCIAL DATA (unaudited)              
(dollars in thousands, except share and per share data)            
               
  At or For the Three Months Ended
  12/31/2023   9/30/2023   6/30/2023   3/31/2023
Asset quality:              
Provision for credit losses $ 200     $ 500     $ 500     $ 932  
Net (charge-offs)/recoveries   677       (1,183 )     (10 )     (457 )
Allowance for credit losses   19,658       14,686       15,369       14,879  
Allowance for credit losses to total loans(1)   1.00 %     0.78 %     0.84 %     0.83 %
Non-performing loans(2)(3)(4) $ 14,451     $ 15,061     $ 10,785     $ 11,031  
Non-performing loans/total loans   0.74 %     0.80 %     0.59 %     0.62 %
Non-performing loans/total assets   0.64 %     0.70 %     0.51 %     0.53 %
Allowance for credit losses/non-performing loans   136.03 %     97.51 %     142.50 %     134.88 %
               
Capital (Bank only):              
Tier 1 Capital $ 193,324     $ 190,928     $ 188,568     $ 185,449  
Tier 1 leverage ratio   9.08 %     9.16 %     9.16 %     9.79 %
Common equity tier 1 capital ratio   13.09 %     13.55 %     13.16 %     12.88 %
Tier 1 risk based capital ratio   13.09 %     13.55 %     13.16 %     12.88 %
Total risk based capital ratio   14.22 %     14.60 %     14.24 %     13.93 %
               
Equity data:              
Shares outstanding(5)   7,345,012       7,320,419       7,334,120       7,331,092  
Stockholders' equity $ 184,830     $ 185,907     $ 182,806     $ 180,522  
Book value per share(5)   25.16       25.40       24.93       24.62  
Tangible common equity(5)   165,351       166,412       163,294       160,992  
Tangible book value per share(5)   22.51       22.73       22.26       21.96  
Tangible common equity ("TCE") ratio(5)   7.35 %     7.81 %     7.77 %     7.84 %
               
(1) Calculation excludes loans held for sale.
(2) Includes $0.1 million of Purchased Credit Impaired loans 90 days past due and still accruing and $0.4 million of loans fully guaranteed by the SBA at 9/30/23.  
(3) Includes $0.1 million of Purchased Credit Impaired loans 90 days past due and still accruing and $0.2 million of loans fully guaranteed by the SBA at 6/30/23.  
(4) Includes $0.7 million of Purchased Credit Impaired loans 90 days past due and still accruing and $0.2 million of loans fully guaranteed by the SBA at 3/31/23.  
(5) Includes common stock and Series A preferred stock.
               
Note: Prior period information has been adjusted to conform to current period presentation.        


HANOVER BANCORP, INC.                
STATISTICAL SUMMARY                
QUARTERLY TREND                
(unaudited, dollars in thousands, except share data)              
                   
    12/31/2023   9/30/2023   6/30/2023   3/31/2023  
                   
Loan distribution(1):                
Residential mortgages $ 689,211     $ 630,374     $ 598,747     $ 567,106    
Multifamily     572,849       578,895       583,837       588,244    
Commercial real estate   561,183       550,334       546,120       541,924    
Commercial & industrial   107,912       87,575       67,918       59,184    
Home equity   25,631       26,959       26,517       30,664    
Consumer     413       425       364       243    
                   
Total loans $ 1,957,199     $ 1,874,562     $ 1,823,503     $ 1,787,365    
                   
Sequential quarter growth rate   4.41 %     2.80 %     2.02 %     2.32 %  
                   
Loans sold during the quarter $ 29,740     $ 18,403     $ 12,610     $ 12,756    
                   
Funding distribution:                
Demand   $ 207,781     $ 185,731     $ 180,303     $ 178,592    
N.O.W.     661,276       503,704       480,108       627,102    
Savings     47,608       54,502       67,626       79,414    
Money market   465,732       461,057       409,097       391,314    
Total core deposits   1,382,397       1,204,994       1,137,134       1,276,422    
Time     522,198       530,076       456,505       430,852    
Total deposits   1,904,595       1,735,070       1,593,639       1,707,274    
Borrowings   128,953       179,849       293,849       136,962    
Subordinated debentures   24,635       24,621       24,608       24,594    
                   
Total funding sources $ 2,058,183     $ 1,939,540     $ 1,912,096     $ 1,868,830    
                   
Sequential quarter growth rate - total deposits   9.77 %     8.87 %     -6.66 %     12.49 %  
                   
Period-end core deposits/total deposits ratio   72.58 %     69.45 %     71.35 %     74.76 %  
                   
Period-end demand deposits/total deposits ratio   10.91 %     10.70 %     11.31 %     10.46 %  
                   
(1) Excluding loans held for sale                
                   


HANOVER BANCORP, INC.                    
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES(1)(unaudited)          
(dollars in thousands, except share and per share amounts)              
                     
                     
  12/31/2023   9/30/2023   6/30/2023   3/31/2023   12/31/2022  
Tangible common equity                    
Total equity(2) $ 184,830     $ 185,907     $ 182,806     $ 180,522     $ 177,628    
Less: goodwill   (19,168 )     (19,168 )     (19,168 )     (19,168 )     (19,168 )  
Less: core deposit intangible   (311 )     (327 )     (344 )     (362 )     (381 )  
Tangible common equity(2) $ 165,351     $ 166,412     $ 163,294     $ 160,992     $ 158,079    
                     
Tangible common equity ("TCE") ratio                  
Tangible common equity(2) $ 165,351     $ 166,412     $ 163,294     $ 160,992     $ 158,079    
Total assets   2,270,060       2,149,632       2,121,783       2,071,720       1,983,692    
Less: goodwill   (19,168 )     (19,168 )     (19,168 )     (19,168 )     (19,168 )  
Less: core deposit intangible   (311 )     (327 )     (344 )     (362 )     (381 )  
Tangible assets $ 2,250,581     $ 2,130,137     $ 2,102,271     $ 2,052,190     $ 1,964,143    
TCE ratio(2)   7.35 %     7.81 %     7.77 %     7.84 %     8.05 %  
                     
Tangible book value per share                    
Tangible equity(2) $ 165,351     $ 166,412     $ 163,294     $ 160,992     $ 158,079    
Shares outstanding(2)   7,345,012       7,320,419       7,334,120       7,331,092       7,299,000    
Tangible book value per share(2) $ 22.51     $ 22.73     $ 22.26     $ 21.96     $ 21.66    
                     
(1) A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flows that excludes or includes amounts that are required to be disclosed in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). The Company’s management believes the presentation of non-GAAP financial measures provide investors with a greater understanding of the Company’s operating results in addition to the results measured in accordance with U.S. GAAP. While management uses non-GAAP measures in its analysis of the Company’s performance, this information should not be viewed as a substitute for financial results determined in accordance with U.S. GAAP or considered to be more important than financial results determined in accordance with U.S. GAAP.  
                     
(2) Includes common stock and Series A preferred stock.  
   


HANOVER BANCORP, INC.                      
NET INTEREST INCOME ANALYSIS                      
For the Three Months Ended December 31, 2023 and 2022                    
(unaudited, dollars in thousands)                      
                       
                       
    2023       2022  
  Average       Average   Average       Average
  Balance   Interest   Yield/Cost Balance   Interest   Yield/Cost
                       
Assets:                      
Interest-earning assets:                      
Loans $ 1,910,409   $ 28,394   5.90 %   $ 1,681,460   $ 21,979   5.19 %
Investment securities   56,834     940   6.56 %     16,509     212   5.09 %
Interest-earning cash   114,033     1,570   5.46 %     29,281     275   3.73 %
FHLB stock and other investments   9,563     251   10.41 %     6,489     106   6.48 %
Total interest-earning assets   2,090,839     31,155   5.91 %     1,733,739     22,572   5.17 %
Non interest-earning assets:                      
Cash and due from banks   7,429             10,614        
Other assets   50,677             52,493        
Total assets $ 2,148,945           $ 1,796,846        
                       
Liabilities and stockholders' equity:                      
Interest-bearing liabilities:                      
Savings, N.O.W. and money market deposits $ 1,039,062   $ 11,547   4.41 %   $ 910,732   $ 4,764   2.08 %
Time deposits   541,475     5,231   3.83 %     357,994     1,547   1.71 %
Total savings and time deposits   1,580,537     16,778   4.21 %     1,268,726     6,311   1.97 %
Borrowings   146,167     1,392   3.78 %     98,576     663   2.67 %
Subordinated debentures   24,626     326   5.25 %     24,573     334   5.39 %
Total interest-bearing liabilities   1,751,330     18,496   4.19 %     1,391,875     7,308   2.08 %
Demand deposits   187,216             204,256        
Other liabilities   26,031             24,793        
Total liabilities   1,964,577             1,620,924        
Stockholders' equity   184,368             175,922        
Total liabilities & stockholders' equity $ 2,148,945           $ 1,796,846        
Net interest rate spread         1.72 %           3.09 %
Net interest income/margin     $ 12,659   2.40 %       $ 15,264   3.49 %
                       

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Source: Hanover Bancorp, Inc