UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM 8-K

CURRENT REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):  April 27, 2021

HANOVER BANCORP, INC.
(Exact name of registrant as specified in its charter)

New York
333-252262
81-3324480
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification No.)

80 East Jericho Turnpike, Mineola, New York
 
11501
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number, including area code: (516) 548-8500

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 
Title of each class
 
Trading Symbol(s)
 
Name of each
exchange on which
registered
           

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ☒

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 pursuant to Section 13(a) of the Exchange Act. ☐



ITEM 2.02 - RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On April 27, 2021, the Company announced its earnings for the period ended March 31, 2021.

The press release issued by the Company on April 27, 2021 announcing the foregoing event is furnished herewith as Exhibit 99.1. This information is being “furnished” in accordance with General Instruction B.2. of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.

ITEM 9.01 - FINANCIAL STATEMENTS AND EXHIBITS

(d)
Exhibits

The following Exhibit is furnished as part of this report:

Exhibit 99.1 Press release issued by the Company on April 27, 2021

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
HANOVER BANCORP, INC.
   
Date: April 27, 2021
 
By:
/s/  Brian K. Finneran
 
 
Brian K. Finneran
     
President & Chief Financial Officer


INDEX OF EXHIBITS

Exhibit
Number
Description
   
Press release issued by the Company on April 27, 2021




Exhibit 99.1


FOR IMMEDIATE RELEASE
Investor and Press Contact:
Brian K. Finneran
President & Chief Financial Officer
(516) 548-8500

Hanover Bancorp, Inc. Reports Second Fiscal Quarter 2021
Results highlighted by Record Net Interest Income and
Record Net Interest Margin

Second Fiscal Quarter Performance Highlights


Net Income: Net income for the calendar quarter ended March 31, 2021 totaled $2.1 million or $0.48 per diluted common share, versus $249 thousand or $0.06 per diluted common share recorded in the comparable 2020 period. The Company recorded core (non-GAAP) net income and core diluted earnings per share of $2.2 million and $0.51, respectively, in the calendar quarter ended March 31, 2021 versus $661 thousand and $0.16, respectively, in the comparable quarter ended March 31, 2020. The Company recorded net income for the six months ended March 31, 2021 of $3.6 million or $0.84 per diluted common share compared with $2.0 million or $0.48 per diluted common share in the comparable 2020 six-month period. The Company recorded core (non-GAAP) net income and core diluted earnings per common share of $3.9 million and $0.91, respectively, for the six months ended March 31, 2021 versus $2.8 million and $0.66, respectively, in the six months ended March 31, 2020.

Balance Sheet: Assets totaled $890.4 million at March 31, 2021, down $5.2 million from March 31, 2020 and up $13.5 million from December 31, 2020.

Continued Capital Strength: Hanover Community Bank’s Tier 1 leverage ratio was 12.00% and its Total Risk-Based capital ratio was 22.49% at March 31, 2021, each significantly above the regulatory minimums for a well-capitalized institution.

Increase in Tangible Book Value Per Share:  Tangible book value per common share increased by 9.5% to $19.19 at March 31, 2021 from $17.53 at the comparable 2020 date.

Year-Over-Year Loan Growth: Total loans outstanding at March 31, 2021 were $763.6 million or 85.8% of total assets, an increase of $71.5 million (10.3%) from March 31, 2020 and up $34.8 million (4.8%) from December 31, 2020.

Record Net Interest Income: Net interest income grew to a record $7.8 million for the quarter ended March 31, 2021, an increase of $1.3 million, or 19.7%, versus the comparable 2020 quarter.

Record Net Interest Margin: The Company’s net interest margin increased significantly during the quarter ended March 31, 2021 to a record 3.79% versus 3.06% in the quarter ended March 31, 2020 and 3.53% in the quarter ended December 31, 2020.



Savoy Acquisition: On August 27, 2020, the Company announced that it had entered into a definitive agreement to acquire Savoy Bank (“Savoy”).  Savoy is a community commercial bank with total assets of $692 million, total loans of $607 million (including PPP loans) and total deposits of $365 million at March 31, 2021.  Savoy operates one branch in midtown Manhattan. This transaction is expected to be completed in the second quarter of 2021, subject to regulatory approvals and other customary closing conditions.

Mineola, NY – April 27, 2021 – Hanover Bancorp, Inc. (“Hanover” or “the Company”), the holding company for Hanover Community Bank (“the Bank”) today reported significant performance achievements for the quarter ended March 31, 2021, highlighted by strong capital and loan growth in addition to record levels of net interest income and net interest margin.

Earnings Summary for the Quarter Ended March 31, 2021

The Company reported net income for the calendar quarter ended March 31, 2021 of $2.1 million or $0.48 per diluted common share, representing an increase of $1.8 million from the comparable year ago period when net income totaled $249 thousand or $0.06 per diluted common share. Second fiscal quarter returns on average total assets and average stockholders’ equity were 0.97% and 10.28%, respectively, in 2021versus 0.11% and 1.34% in the year ago period.

The improvement in net income recorded in the second fiscal quarter of 2021 resulted from a $1.3 million or 19.7% increase in net interest income, an $800 thousand reduction in the provision for loan losses and a $254 thousand increase in non-interest income versus the comparable 2020 period. Partially offsetting these positive factors was a $94 thousand or 1.7% increase in total operating expenses in the second fiscal quarter of 2021 from the year ago quarter.  The year-over-year growth in net interest income was due to a substantial widening of the Company’s net interest margin to 3.79% in 2021 from 3.06% in the comparable 2020 quarter.  The margin improvement resulted principally from a 110 basis point reduction in the cost of average interest-bearing liabilities to 0.96% in 2021, largely due to a 125 basis point reduction in the average rate paid on savings and time deposits in the 2021 quarter. Also adding to the wider margin was a shift in the average interest-earning asset mix resulting from a $28.3 million increase in average loans outstanding coupled with a $55.2 million reduction in low yielding average interest-earning cash in the second fiscal quarter of 2021 versus the comparable 2020 period.  The reduction in the provision for loan losses in the second fiscal quarter of 2021 was due to the additional provision taken in the second fiscal quarter of 2020 due to economic concerns primarily related to the COVID-19 pandemic.  Although the economy in the Company’s market area appears to have stabilized in 2021, the Company did not reverse any previously recognized loan loss provisions due to continued economic uncertainty. The growth in non-interest income in the second fiscal quarter of 2021 resulted primarily from a $240 thousand gain on the sale of a security available for sale and a $68 thousand or 119.3% increase in loan fees and service charges.

2

Excluding merger-related charges recorded in the second fiscal quarter of 2021 and litigation and proxy contest expenses recorded in the comparable 2020 period, core (non-GAAP) operating net income was $2.2 million or $0.51 per diluted common share, up $1.5 million versus 2020 core operating net income. Second fiscal quarter core returns on average total assets and average stockholders’ equity, excluding merger, litigation, and proxy-related charges in each respective period, were 1.02% and 10.88%, respectively in 2021, versus 0.30% and 3.56% a year ago.

Earnings Summary for the Six Months Ended March 31, 2021

For the six months ended March 31, 2021, the Company reported net income of $3.6 million or $0.84 per diluted common share versus $2.0 million or $0.48 per diluted common share a year ago.

The improved level of earnings in 2021 resulted from a $1.9 million increase in net interest income, principally due to a 50 basis point widening of the company’s net interest margin to 3.66% in the six months ended March 31, 2021, a $700 thousand reduction in the provision for loan losses and a reduction in the effective tax rate to 20.4% in 2021 from 22.4% a year ago.  Partially offsetting these positive factors was a $152 thousand reduction in non-interest income in the 2021 period coupled with a $533 thousand increase in total operating expenses, principally resulting from growth in compensation and benefits related to increased headcount as the Company has continued to grow and create the infrastructure required for a public reporting company. Experienced executives have also been added to implement new product initiatives such as municipal banking along with expanded commercial real estate and commercial and industrial lending.

Michael P. Puorro, Chairman and Chief Executive Officer, commented on the Company’s results: “I am extremely pleased with Hanover’s second fiscal quarter 2021 financial results which produced record levels of net interest income and net interest margin and prudent loan growth. We will continue to be very cautious when extending credit until the economy shows signs of sustained improvement though I am confident that recent indications bode well for a strong recovery during the balance of 2021. As I have previously stated, we continue to work proactively with our borrowers who have been granted loan forbearances and we have had great success to date in returning the vast majority of these borrowers back to regular payment status.  I am also very excited about our strategic merger with Savoy Bank that we are confident will create one of the premier community banks in the metro New York City area with under $5 billion in total assets. We have highly complementary lending niches, and we believe that Savoy’s funding profile will benefit greatly from Hanover’s rapid progress in building out several niche core deposit businesses, including our municipal banking function, which fueled our record net interest margin this quarter. I am also looking forward to working closely with Mac Wilcox, Savoy’s President and CEO who will join Hanover as Senior Executive Vice President, Head of Commercial Lending and Chief Revenue Officer, as well as Metin Negrin and Elena Sisti from Savoy who will be joining Hanover’s Board of Directors. The merger is expected to close in the second quarter of 2021, subject to satisfaction of customary closing conditions, including receipt of required regulatory approvals and approval by Savoy’s shareholders.”

Mr. Puorro also noted, “Growth in shareholder value is always our highest priority at Hanover Bancorp. This hallmark of our success continues to be reflected by growth in tangible book value per share which increased by $1.66, or 9.5%, to $19.19 per share at March 31, 2021 versus the comparable 2020 date.”

3

Balance Sheet Growth

Total assets at March 31, 2021 were $890.4 million versus $895.6 million at the comparable 2020 date. Total deposits at the same date were largely flat at $718.2 million when compared to March 31, 2020, however, there was a significant shift in the deposit mix as core deposits (Demand, N.O.W., Savings and Money Market) increased year-over-year by $171.2 million while Time Deposits declined by $170.1 million. Management reduced usage of its Federal Home Loan Bank (“FHLB”) borrowing capacity in the second fiscal quarter of 2021 as other lower cost funding options were utilized to replace maturing FHLB advances. Borrowings at March 31, 2021 declined by $25.0 million to $56.4 million, with a weighted average rate and term of 1.23% and 24 months, respectively. At March 31, 2021, the Bank had $154.0 million of additional borrowing capacity from the FHLB.

Stockholders’ equity increased by $7.7 million to $82.2 million at March 31, 2021 from the comparable 2020 date resulting in an 9.5% increase in tangible book value per share over the past twelve months to $19.19 at March 31, 2021.

The Company’s average cost of interest-bearing liabilities decreased to 0.96% for the quarter ended March 31, 2021, from 2.06% a year ago and declined from 1.26% on a linked quarter basis. Partially offsetting the improvement in the Company’s average cost of interest-bearing liabilities from the March 2020 period was a 27 basis point reduction in the average yield on interest-earning assets to 4.56% during the calendar quarter ended March 31, 2021, primarily driven by lower average loan yields (down 49 basis points in 2021) resulting principally from the lower interest rate environment that continues to prevail in 2021.

Strong Loan Portfolio Growth

For the twelve months ended March 31, 2021, the Bank’s loan portfolio, net of sales, grew by $71.5 million, or 10.3%. Year over year growth was concentrated primarily in multi-family, commercial real estate, and PPP loans. At March 31, 2021, the Company’s residential loan portfolio amounted to $432.5 million, with an average loan balance of $430 thousand and a weighted average loan-to-value ratio of 52%. Commercial real estate loans totaled $293.7 million at March 31, 2021, with an average loan balance of $816 thousand and a weighted average loan-to-value ratio of 53%. The Company’s commercial real estate concentration ratio was 247% of capital at March 31, 2021 versus 235% of capital at the comparable 2020 date.

Historically, the Bank has been able to generate additional income by strategically originating and selling its primary lending products to other financial institutions at premiums, while also retaining servicing rights in some sales. The Bank expects that it will continue to originate loans, for its own portfolio and for sale, which will result in continued growth in interest income while also realizing gains on sale of loans to others and recording servicing income. The loan sale market was negatively impacted by the COVID-19 pandemic during much of 2020 although current indications are that it is again close to normalizing. During the quarter ended March 31, 2021, the Company sold $9.4 million in performing loans and recorded gains on the sale of loans held-for-sale of $295 thousand versus gains of $181 thousand in the quarter ended December 31, 2020 and gains of $339 thousand in the quarter ended March 31, 2020. During the twelve months ended March 31, 2021, the Company recorded cumulative gains of $491 thousand on the sale of performing loans held-for-sale.

4

At March 31, 2021, the Company reported $9.4 million in non-performing loans which represented 1.22% of total loans outstanding, as compared to $1.7 million in nonperforming loans, or 0.25% of total loans outstanding at March 31, 2020. The increase in non-performing loans in 2021 resulted from the addition of several credits where the borrowers had been granted forbearance in 2020 and where management believed it unlikely that the borrowers would be able to comply with the terms of their modified payment plans. The Company believes that each of these loans is well secured. During the second fiscal quarter of 2021, the Company recorded a provision for loan losses expense of $200 thousand. The March 31, 2021 allowance for loan losses balance was $8.2 million versus $7.8 million a year ago. The allowance for loan losses as a percent of total loans was 1.07% at March 31, 2021 versus 1.09% at December 31, 2020 and 1.13% at March 31, 2020. The allowance for loan losses as a percent of total originated loans was 1.18% at March 31, 2021.

Record Net Interest Margin

The Bank’s net interest margin improved to a record 3.79% during the second fiscal quarter of 2021, versus 3.06% in the comparable 2020 quarter and 3.53% in the quarter ended December 31, 2020. The 73 basis point increase in the Bank’s net interest margin versus the comparable 2020 quarter was primarily attributable to a 110 basis point reduction in the cost of average interest-bearing liabilities to 0.96% from 2.06% a year ago.  The lower cost of funds in 2021 was the result of a significant reduction in the cost of interest-bearing deposits in 2021 (down 125 basis points), accompanied by a shift in the Company’s deposit mix to a greater concentration of core deposit balances. Also contributing to the wider margin in the second fiscal quarter of 2021 was a decrease in lower-yielding average interest-bearing cash on the balance sheet (down $55.2 million). Partially offsetting the positive impact of the foregoing factors, the average rate on total interest-earning assets declined by 27 basis points to 4.56% in the second fiscal quarter of 2021 versus the comparable 2020 period. This reduction in yield was largely the result of a 49 basis point decrease in the average loan yield to 4.99% in 2021.

Operating Efficiency Ratio

The Bank’s operating efficiency ratio was 69.4% in the second fiscal quarter of 2021 versus 81.0% a year ago.  The second fiscal quarter 2021 core operating efficiency ratio, which excludes merger-related charges, was 67.5%.

About Hanover Community Bank and Hanover Bancorp, Inc.

Hanover Bancorp, Inc., is a locally owned and operated privately held stock bank holding company for Hanover Community Bank, a community commercial bank focusing on highly personalized and efficient services and products responsive to local needs. Management and the Board of Directors are comprised of a select group of successful local businessmen and women 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 and commercial 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, Forest Hills, Flushing, Sunset Park, and Chinatown, New York.

5

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 of the Company’s core net income, core net interest margin, core returns on average assets and shareholders’ equity, and core operating efficiency ratio. 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.  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 core operating net income and core 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 Hanover Bancorp, Inc. might make or by known or unknown risks and uncertainties. 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. 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.
 
6

HANOVER BANCORP, INC.
STATEMENTS OF CONDITION - (unaudited)
(dollars in thousands)

   
March 31,
2021
   
December 31,
2020
   
March 31,
2020
 
Assets
                 
Cash and cash equivalents
 
$
77,529
   
$
98,388
   
$
162,223
 
Securities available for sale, at fair value
   
7,801
     
7,434
     
966
 
Investments held to maturity
   
9,470
     
10,001
     
11,535
 
Loans held for sale
   
893
     
4,150
     
2,433
 
                         
Loans, net of deferred fees and costs
   
763,596
     
728,752
     
692,114
 
Less: allowance for loan losses
   
(8,179
)
   
(7,979
)
   
(7,843
)
Loans, net
   
755,417
     
720,773
     
684,271
 
                         
Goodwill
   
1,710
     
1,901
     
1,542
 
Premises & fixed assets
   
14,328
     
14,325
     
14,359
 
Other assets
   
23,284
     
19,911
     
18,277
 
Total assets
 
$
890,432
   
$
876,883
   
$
895,606
 
                         
Liabilities and stockholders' equity
                       
Core deposits
 
$
412,992
   
$
311,439
   
$
241,820
 
Time deposits
   
305,192
     
376,877
     
475,276
 
Total deposits
   
718,184
     
688,316
     
717,096
 
                         
Borrowings
   
56,417
     
74,514
     
81,446
 
Note payable
   
-
     
-
     
14,982
 
Subordinated debentures
   
24,482
     
24,468
     
-
 
Other liabilities
   
9,104
     
9,561
     
7,569
 
Total liabilities
   
808,187
     
796,859
     
821,093
 
                         
Stockholders' equity
   
82,245
     
80,024
     
74,513
 
Total liabilities and stockholders' equity
 
$
890,432
   
$
876,883
   
$
895,606
 
 
7

HANOVER BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(dollars in thousands, except per share data)

   
Three Months Ended
   
Six Months Ended
 
   
3/31/2021
   
3/31/2020
   
3/31/2021
   
3/31/2020
 
                         
Interest income
 
$
9,380
   
$
10,281
   
$
18,877
   
$
20,717
 
Interest expense
   
1,578
     
3,764
     
3,748
     
7,463
 
Net interest income
   
7,802
     
6,517
     
15,129
     
13,254
 
Provision for loan losses
   
200
     
1,000
     
300
     
1,000
 
Net interest income after provision for loan losses
   
7,602
     
5,517
     
14,829
     
12,254
 
                                 
Loan fees and service charges
   
125
     
57
     
191
     
137
 
Service charges on deposit accounts
   
17
     
15
     
32
     
35
 
Gain on sale of loans held for sale
   
295
     
339
     
476
     
902
 
Gain on sale of securities available for sale
   
240
     
-
     
240
     
-
 
Other operating income
   
15
     
27
     
39
     
56
 
Non-interest income
   
692
     
438
     
978
     
1,130
 
                                 
Compensation and benefits
   
3,325
     
2,886
     
6,501
     
5,474
 
Occupancy and equipment
   
1,209
     
1,083
     
2,380
     
2,215
 
Data processing
   
270
     
250
     
515
     
466
 
Marketing and advertising
   
19
     
111
     
67
     
217
 
Acquisition costs
   
151
     
-
     
296
     
236
 
Professional fees
   
308
     
837
     
720
     
1,342
 
Other operating expenses
   
443
     
464
     
836
     
832
 
Non-interest expense
   
5,725
     
5,631
     
11,315
     
10,782
 
                                 
Income before income taxes
   
2,569
     
324
     
4,492
     
2,602
 
Income tax expense
   
514
     
75
     
918
     
583
 
                                 
Net income
 
$
2,055
   
$
249
   
$
3,574
   
$
2,019
 
                                 
Basic earnings per share
 
$
0.49
   
$
0.06
   
$
0.85
   
$
0.49
 
Diluted earnings per share
 
$
0.48
   
$
0.06
   
$
0.84
   
$
0.48
 

Note: Prior period information has been adjusted to conform to current period presentation.
 
8

HANOVER BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
QUARTERLY TREND
(dollars in thousands, except per share data)

   
Three Months Ended
 
   
3/31/2021
   
12/31/2020
   
9/30/2020
   
6/30/2020
   
3/31/2020
 
                               
Interest income
 
$
9,380
   
$
9,497
   
$
9,751
   
$
9,665
   
$
10,281
 
Interest expense
   
1,578
     
2,170
     
2,385
     
3,163
     
3,764
 
Net interest income
   
7,802
     
7,327
     
7,366
     
6,502
     
6,517
 
Provision for loan losses
   
200
     
100
     
100
     
150
     
1,000
 
Net interest income after provision for loan losses
   
7,602
     
7,227
     
7,266
     
6,352
     
5,517
 
                                         
Loan fees and service charges
   
125
     
66
     
111
     
53
     
57
 
Service charges on deposit accounts
   
17
     
15
     
12
     
12
     
15
 
Gain on sale of loans held for sale
   
295
     
181
     
-
     
15
     
339
 
Gain on sale of securities available for sale
   
240
     
-
     
-
     
-
     
-
 
Other operating income
   
15
     
24
     
12
     
19
     
27
 
Non-interest income
   
692
     
286
     
135
     
99
     
438
 
                                         
Compensation and benefits
   
3,325
     
3,176
     
3,020
     
2,688
     
2,886
 
Occupancy and equipment
   
1,209
     
1,171
     
1,169
     
1,078
     
1,083
 
Data processing
   
270
     
245
     
234
     
211
     
250
 
Marketing and advertising
   
19
     
48
     
16
     
63
     
111
 
Acquisition costs
   
151
     
145
     
214
     
-
     
-
 
Professional fees
   
308
     
412
     
438
     
290
     
837
 
Other operating expenses
   
443
     
393
     
481
     
338
     
464
 
Non-interest expense
   
5,725
     
5,590
     
5,572
     
4,668
     
5,631
 
                                         
Income before income taxes
   
2,569
     
1,923
     
1,829
     
1,783
     
324
 
Income tax expense
   
514
     
404
     
283
     
374
     
75
 
                                         
Net income
 
$
2,055
   
$
1,519
   
$
1,546
   
$
1,409
   
$
249
 
                                         
Basic earnings per share
 
$
0.49
   
$
0.36
   
$
0.38
   
$
0.34
   
$
0.06
 
Diluted earnings per share
 
$
0.48
   
$
0.36
   
$
0.37
   
$
0.33
   
$
0.06
 

Note: Prior period information has been adjusted to conform to current period presentation.

9

HANOVER BANCORP, INC.
CONSOLIDATED NON-GAAP FINANCIAL INFORMATION (1) (unaudited)
(dollars in thousands, except per share data)

   
Three Months Ended
   
Six Months Ended
 
   
3/31/2021
   
3/31/2020
   
3/31/2021
   
3/31/2020
 
                         
CORE NET INCOME:
                       
Net income, as reported
 
$
2,055
   
$
249
   
$
3,574
   
$
2,019
 
Adjustments:
                               
Merger-related expenses
   
151
     
-
     
296
     
236
 
Debt extinguishment charges
   
-
     
-
     
54
     
-
 
Litigation and proxy-related expenses
   
-
     
536
     
-
     
742
 
Total adjustments, before income taxes
   
151
     
536
     
350
     
978
 
Adjustment for reported effective income tax rate
   
30
     
124
     
72
     
219
 
Total adjustments, after income taxes
   
121
     
412
     
278
     
759
 
Core net income
 
$
2,176
   
$
661
   
$
3,852
   
$
2,778
 
Basic earnings per share - core
 
$
0.52
   
$
0.16
   
$
0.92
   
$
0.67
 
Diluted earnings per share - core
 
$
0.51
   
$
0.16
   
$
0.91
   
$
0.66
 
                                 
CORE NET INTEREST INCOME:
                               
Net interest income, as reported
 
$
7,802
   
$
6,517
   
$
15,129
   
$
13,254
 
Adjustments:
                               
Debt extinguishment charges
   
-
     
-
     
54
     
-
 
Core net interest income
 
$
7,802
   
$
6,517
   
$
15,183
   
$
13,254
 
                                 
CORE NET INTEREST MARGIN:
                               
Net interest margin, as reported
   
3.79
%
   
3.06
%
   
3.66
%
   
3.16
%
Adjustments:
                               
Debt extinguishment charges
   
-
     
-
     
0.01
%
   
-
 
Core net interest margin
   
3.79
%
   
3.06
%
   
3.67
%
   
3.16
%
                                 
CORE OPERATING EFFICIENCY RATIO: (2)
                               
Operating efficiency ratio, as reported
   
69.36
%
   
80.96
%
   
71.31
%
   
74.96
%
Adjustments:
                               
Merger-related expenses
   
-1.83
%
   
-
     
-1.87
%
   
-1.64
%
Debt extinguishment charges
   
-
     
-
     
-0.24
%
   
-
 
Litigation and proxy-related expenses
   
-
     
-7.71
%
   
-
     
-5.16
%
Core operating efficiency ratio
   
67.53
%
   
73.25
%
   
69.20
%
   
68.16
%
                                 
CORE RETURN ON AVERAGE ASSETS
   
1.02
%
   
0.30
%
   
0.90
%
   
0.64
%
CORE RETURN ON AVERAGE EQUITY
   
10.88
%
   
3.56
%
   
9.65
%
   
7.53
%

(1)  This non-GAAP financial information contains measures 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) Excludes gain on sale of securities available for sale.
 
10

HANOVER BANCORP, INC.
SELECTED FINANCIAL DATA (unaudited)
(dollars in thousands, except per share data)

   
Three Months Ended
   
Six Months Ended
 
   
3/31/2021
   
3/31/2020
   
3/31/2021
   
3/31/2020
 
Profitability:












Return on average assets
   
0.97
%
   
0.11
%
   
0.84
%
   
0.47
%
Return on average equity
   
10.28
%
   
1.34
%
   
8.95
%
   
5.47
%
Yield on average interest-earning assets
   
4.56
%
   
4.83
%
   
4.57
%
   
4.94
%
Cost of average interest-bearing liabilities
   
0.96
%
   
2.06
%
   
1.12
%
   
2.09
%
Net interest rate spread (1)
   
3.60
%
   
2.77
%
   
3.45
%
   
2.85
%
Net interest margin (2)
   
3.79
%
   
3.06
%
   
3.66
%
   
3.16
%
Non-interest expense to average assets
   
2.69
%
   
2.56
%
   
2.64
%
   
2.49
%
Operating efficiency ratio (3)
   
69.36
%
   
80.96
%
   
71.31
%
   
74.96
%
                                 
Average balances:
                               
Interest-earning assets
 
$
833,778
   
$
856,961
   
$
828,912
   
$
838,321
 
Interest-bearing liabilities
   
665,423
     
734,129
     
673,537
     
713,770
 
Loans
   
742,004
     
713,712
     
733,283
     
723,191
 
Deposits
   
690,024
     
697,837
     
675,876
     
675,221
 
Total borrowings
   
83,283
     
104,706
     
93,320
     
109,019
 

(1) Represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(2) Represents net interest income divided by average interest-earning assets.
(3) Excludes gain on sale of securities available for sale.
 
11

HANOVER BANCORP, INC.
SELECTED FINANCIAL DATA (unaudited)
(dollars in thousands, except per share data)

   
At or For the Three Months Ended
 
   
3/31/2021
   
12/31/2020
   
9/30/2020
   
6/30/2020
 
Asset quality:












Provision for loan losses
 
$
200
   
$
100
   
$
100
   
$
150
 
Net (recoveries)/charge-offs
   
-
     
(10
)
   
224
     
-
 
Allowance for loan losses
   
8,179
     
7,979
     
7,869
     
7,993
 
Allowance for loan losses to total loans (1)
   
1.07
%
   
1.09
%
   
1.09
%
   
1.11
%
Allowance for loan losses to originated loans (1)
   
1.18
%
   
1.22
%
   
1.22
%
   
1.25
%
Non-performing loans
 
$
9,350
   
$
4,053
   
$
953
   
$
3,171
 
Non-performing loans/total loans (1)
   
1.22
%
   
0.56
%
   
0.13
%
   
0.44
%
Non-performing loans/total assets
   
1.05
%
   
0.46
%
   
0.11
%
   
0.38
%
Allowance for loan losses/non-performing loans
   
87.48
%
   
196.87
%
   
825.71
%
   
252.07
%
                                 
Capital  (Bank only):
                               
Tier 1 Capital
 
$
103,199
   
$
100,518
   
$
89,275
   
$
87,829
 
Tier 1 leverage ratio
   
12.00
%
   
12.04
%
   
11.22
%
   
10.21
%
Common equity tier 1 capital ratio
   
21.23
%
   
21.49
%
   
19.32
%
   
19.03
%
Tier 1 risk based capital ratio
   
21.23
%
   
21.49
%
   
19.32
%
   
19.03
%
Total risk based capital ratio
   
22.49
%
   
22.75
%
   
20.57
%
   
20.29
%
                                 
Equity data:
                               
Common shares outstanding
   
4,194,890
     
4,185,534
     
4,175,144
     
4,169,269
 
Stockholders' equity
 
$
82,245
   
$
80,024
   
$
78,043
   
$
76,156
 
Book value per common share
   
19.61
     
19.12
     
18.69
     
18.27
 
Tangible common equity
   
80,515
     
78,103
     
76,120
     
74,556
 
Tangible book value per common share
   
19.19
     
18.66
     
18.23
     
17.88
 
Tangible common equity ("TCE") ratio
   
9.06
%
   
8.93
%
   
8.96
%
   
8.91
%

(1) Calculation excludes loans held for sale.

Note: Prior period information has been adjusted to conform to current period presentation.
 
12

HANOVER BANCORP, INC.
STATISTICAL SUMMARY
QUARTERLY TREND
(unaudited,dollars in thousands, except share data)

   
3/31/2021
   
12/31/2020
   
9/30/2020
   
6/30/2020
 
 











Loan distribution (1):












Residential mortgages
 
$
408,729
   
$
424,479
   
$
432,988
   
$
439,876
 
Multi-family
   
175,779
     
147,266
     
136,737
     
125,597
 
Commercial real estate
   
117,966
     
115,358
     
113,758
     
111,068
 
Commercial and industrial
   
37,355
     
20,214
     
20,737
     
23,680
 
Home equity
   
23,747
     
21,405
     
20,772
     
20,056
 
Consumer
   
20
     
30
     
27
     
38
 
                                 
Total loans
 
$
763,596
   
$
728,752
   
$
725,019
   
$
720,315
 
                                 
Sequential quarter growth rate
   
4.78
%
   
0.51
%
   
0.65
%
   
4.07
%
                                 
Loans sold during the quarter
 
$
9,367
   
$
8,443
   
$
5,326
   
$
1,721
 
                                 
Funding distribution:
                               
Demand
 
$
122,388
   
$
86,266
   
$
82,350
   
$
84,049
 
NOW
   
150,017
     
93,258
     
34,086
     
33,364
 
Savings
   
44,386
     
44,072
     
43,218
     
42,469
 
Money market
   
96,201
     
87,843
     
110,353
     
96,190
 
Total core deposits
   
412,992
     
311,439
     
270,007
     
256,072
 
Time
   
305,192
     
376,877
     
394,753
     
403,260
 
Total deposits
   
718,184
     
688,316
     
664,760
     
659,332
 
Borrowings
   
56,417
     
74,514
     
85,154
     
78,766
 
Note payable
   
-
     
-
     
14,984
     
14,983
 
Subordinated debentures
   
24,482
     
24,468
     
-
     
-
 
                                 
Total funding sources
 
$
799,083
   
$
787,298
   
$
764,898
   
$
753,081
 
                                 
Sequential quarter growth rate - total deposits
   
4.34
%
   
3.54
%
   
0.82
%
   
-8.06
%
                                 
Period-end core deposits/total deposits ratio
   
57.51
%
   
45.25
%
   
40.62
%
   
38.84
%
                                 
Period-end demand deposits/total deposits ratio
   
17.04
%
   
12.53
%
   
12.39
%
   
12.75
%

(1) Excludes loans held for sale.
 
13

HANOVER BANCORP, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (1) (unaudited)
(dollars in thousands, except share and per share amounts)

   
3/31/2021
   
12/31/2020
   
9/30/2020
   
6/30/2020
   
3/31/2020
 
Tangible common equity
                             
Total equity
 
$
82,245
   
$
80,024
   
$
78,043
   
$
76,156
   
$
74,513
 
Less: goodwill
   
(1,710
)
   
(1,901
)
   
(1,901
)
   
(1,577
)
   
(1,542
)
Less: core deposit intangible
   
(19
)
   
(20
)
   
(22
)
   
(23
)
   
(24
)
Tangible common equity
 
$
80,516
   
$
78,103
   
$
76,120
   
$
74,556
   
$
72,947
 
                                         
Tangible common equity ("TCE") ratio
                                       
Tangible common equity
 
$
80,516
   
$
78,103
   
$
76,120
   
$
74,556
   
$
72,947
 
Total assets
   
890,432
     
876,883
     
851,606
     
838,014
     
895,606
 
Less: goodwill
   
(1,710
)
   
(1,901
)
   
(1,901
)
   
(1,577
)
   
(1,542
)
Less: core deposit intangible
   
(19
)
   
(20
)
   
(22
)
   
(23
)
   
(24
)
Tangible assets
 
$
888,703
   
$
874,962
   
$
849,683
   
$
836,414
   
$
894,040
 
TCE ratio
   
9.06
%
   
8.93
%
   
8.96
%
   
8.91
%
   
8.16
%
                                         
Tangible book value per share
                                       
Tangible common equity
 
$
80,516
   
$
78,103
   
$
76,120
   
$
74,556
   
$
72,947
 
Common shares outstanding
   
4,194,890
     
4,185,534
     
4,175,144
     
4,169,269
     
4,162,269
 
Tangible book value per share
 
$
19.19
   
$
18.66
   
$
18.23
   
$
17.88
   
$
17.53
 

(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.
 
14

HANOVER BANCORP, INC.
NET INTEREST INCOME ANALYSIS
For the Three Months Ended March 31, 2021 and 2020
(unaudited, dollars in thousands)

   
2021
   
2020
 

 
Average
Balance


Interest


Average
Rate


Average
Balance


Interest


Average
Rate
 
                                     
Assets:
                                   
Interest-earning assets:
                                   
Loans
 
$
742,004
   
$
9,133
     
4.99
%
 
$
713,712
   
$
9,728
     
5.48
%
Investment securities
   
17,595
     
182
     
4.20
%
   
12,532
     
111
     
3.56
%
Interest-earning cash
   
70,465
     
19
     
0.11
%
   
125,657
     
364
     
1.17
%
FHLB stock and other investments
   
3,714
     
46
     
5.02
%
   
5,060
     
78
     
6.20
%
Total interest-earning assets
   
833,778
     
9,380
     
4.56
%
   
856,961
     
10,281
     
4.83
%
Non interest-earning assets:
                                               
Cash and due from banks
   
5,576
                     
6,417
                 
Other assets
   
23,797
                     
21,268
                 
Total assets
 
$
863,151
                   
$
884,646
                 
                                                 
Liabilities and stockholders' equity:
                                               
Interest-bearing liabilities:
                                               
Savings, NOW and money market deposits
 
$
247,336
   
$
157
     
0.26
%
 
$
180,846
   
$
516
     
1.15
%
Time deposits
   
334,804
     
915
     
1.11
%
   
448,577
     
2,607
     
2.34
%
Total savings and time deposits
   
582,140
     
1,072
     
0.75
%
   
629,423
     
3,123
     
2.00
%
Fed funds purchased & FHLB & FRB advances
   
58,807
     
180
     
1.24
%
   
89,724
     
418
     
1.87
%
Note payable
   
-
     
-
     
0.00
%
   
14,982
     
223
     
5.99
%
Subordinated debentures
   
24,476
     
326
     
5.40
%
   
-
     
-
     
0.00
%
Total interest-bearing liabilities
   
665,423
     
1,578
     
0.96
%
   
734,129
     
3,764
     
2.06
%
Demand deposits
   
107,884
                     
68,414
                 
Other liabilities
   
8,764
                     
7,356
                 
Total liabilities
   
782,071
                     
809,899
                 
Stockholders' equity
   
81,080
                     
74,747
                 
Total liabilities & stockholders' equity
 
$
863,151
                   
$
884,646
                 
Net interest rate spread
                   
3.60
%
                   
2.77
%
Net interest income/margin
         
$
7,802
     
3.79
%
         
$
6,517
     
3.06
%
 
15

HANOVER BANCORP, INC.
NET INTEREST INCOME ANALYSIS
For the Six Months Ended March 31, 2021 and 2020
(unaudited, dollars in thousands)

   
2021
   
2020
 

 
Average
Balance


Interest


Average
Rate


Average
Balance


Interest


Average
Rate

                                     
Assets:
                                   
Interest-earning assets:
                                   
Loans
 
$
733,283
   
$
18,391
     
5.03
%
 
$
723,191
   
$
19,674
     
5.44
%
Investment securities
   
17,052
     
355
     
4.18
%
   
12,647
     
221
     
3.49
%
Interest-earning cash
   
74,758
     
40
     
0.11
%
   
97,228
     
655
     
1.35
%
FHLB stock and other investments
   
3,819
     
91
     
4.78
%
   
5,255
     
167
     
6.36
%
Total interest-earning assets
   
828,912
     
18,877
     
4.57
%
   
838,321
     
20,717
     
4.94
%
Non interest-earning assets:
                                               
Cash and due from banks
   
5,138
                     
6,398
                 
Other assets
   
24,051
                     
21,297
                 
Total assets
 
$
858,101
                   
$
866,016
                 
                                                 
Liabilities and stockholders' equity:
                                               
Interest-bearing liabilities:
                                               
Savings, NOW and money market deposits
 
$
216,783
   
$
274
     
0.25
%
 
$
183,701
   
$
1,152
     
1.25
%
Time deposits
   
363,434
     
2,369
     
1.31
%
   
421,050
     
4,977
     
2.36
%
Total savings and time deposits
   
580,217
     
2,643
     
0.91
%
   
604,751
     
6,129
     
2.03
%
Fed funds purchased & FHLB & FRB advances
   
68,983
     
401
     
1.17
%
   
94,038
     
886
     
1.88
%
Note payable
   
659
     
73
     
22.22
%*
   
14,981
     
448
     
5.98
%
Subordinated debentures
   
23,678
     
631
     
5.34
%
   
-
     
-
     
0.00
%
Total interest-bearing liabilities
   
673,537
     
3,748
     
1.12
%
   
713,770
     
7,463
     
2.09
%
Demand deposits
   
95,659
                     
70,470
                 
Other liabilities
   
8,844
                     
7,943
                 
Total liabilities
   
778,040
                     
792,183
                 
Stockholders' equity
   
80,061
                     
73,833
                 
Total liabilities & stockholders' equity
 
$
858,101
                   
$
866,016
                 
Net interest rate spread
                   
3.45
%
                   
2.85
%
Net interest income/margin
         
$
15,129
     
3.66
%
         
$
13,254
     
3.16
%

* Includes impact of debt extinguishment charges. Excluding the impact of these charges, the average rate was 5.78%.

 
16