Hanover Bancorp, Inc. Reports Second Quarter 2020 Results

7/28, 7:10 PM (Source: GlobeNewswire)

MINEOLA, N.Y., July 28, 2020 (GLOBE NEWSWIRE) -- Hanover Bancorp, Inc. (“Hanover” or “the Company”), the holding company for Hanover Community Bank (“the Bank”) today reported results for the quarter ended June 30, 2020.

Second Quarter Performance Highlights

  • Net Income: GAAP net income for the quarter ended June 30, 2020 amounted to $1.4 million or $0.33 per diluted common share, versus $2.0 million or $0.51 per diluted common share recorded in the comparable year ago period. The Company’s second quarter results were impacted by a decrease in gain on sale of loans as the secondary market for whole loan sales was negatively impacted by the COVID-19 pandemic.  Management also continued to draw down liquidity from the Chinatown Federal Savings Bank (“CFSB”) acquisition to retain more loan originations in portfolio, reduced new loan originations and maintained additional liquidity until the impact of the COVID-19 pandemic becomes clearer.
  • Balance Sheet: Assets totaled $838.0 million at June 30, 2020, down $57.6 million from March 31, 2020 and up $133.3 million from June 30, 2019 as the Company redeployed much of its excess liquidity by June 30, 2020 through a reduction in maturing high-cost time deposits and a corresponding decline in low-yielding interest-earning cash balances.
  • Capital Strength: The Bank’s Tier 1 capital ratio was 10.21% and its Total Risk based capital ratio was 20.29% at June 30, 2020, each significantly above the regulatory minimums for a well-capitalized institution.
  • Tangible Book Value Per Share:  Tangible book value per common share increased by 7.3% to $17.88 at June 30, 2020 from $16.66 at the comparable 2019 date.
  • Year-Over-Year Loan Growth: Total loans outstanding at June 30, 2020 were $720.3 million or 86.0% of total assets, an increase of $28.2 million from March 31, 2020 and an increase of $102.8 million from June 30, 2019.  The growth in loans during the second calendar quarter of 2020 versus March 31, 2020 resulted principally from the Bank’s participation in the Small Business Administration’s Paycheck Protection Program (“PPP”), under which the Bank originated $16.4 million in loans. 
  • Excellent Asset Quality: At June 30, 2020, the Bank’s asset quality was excellent with non-performing loans representing only 0.44% of the total portfolio.
  • Net Interest Income Growth: Net interest income was $6.5 million in the quarter ended June 30, 2020, an increase of $1.1 million, or 21.4%, versus the comparable 2019 quarter.
  • Net Interest Margin and Liquidity: The Company’s net interest margin for the quarter ended June 30, 2020 was 3.13% versus 3.06% in the quarter ended March 31, 2020 and 3.20% in the quarter ended June 30, 2019. The improvement in margin versus the first quarter of 2020 was primarily attributable to a reduction in the Company’s cost of interest-bearing liabilities during the second calendar quarter of 2020. The Company’s net interest margin for the month of June 2020 was 3.36%.

Earnings Summary for the Quarter Ended June 30, 2020

The Company reported GAAP net income for the quarter ended June 30, 2020 of $1.4 million or $0.33 per diluted common share, versus $2.0 million or $0.51 per diluted common share in the comparable 2019 period. The decrease in net income and diluted earnings per common share versus the prior year quarter were primarily attributable to a $903 thousand reduction in gain on sales of loans held-for-sale as the secondary market for whole loan sales was negatively impacted by the COVID-19 pandemic, coupled with a $979 thousand increase in operating expenses, principally due to the Bank’s growth in personnel and branch facilities relating to the CFSB acquisition in August 2019. A $1.1 million increase in net interest income and a $75 thousand reduction in the provision for loan losses in 2020 versus the comparable 2019 quarter partially offset the aforementioned factors.

The $1.1 million improvement in net interest income during the second quarter of 2020 versus the comparable 2019 period resulted from an increase in average interest-earning assets of $163.3 million (up 24.3%) resulting principally from growth in average total loans of $97.6 million, (up 16.1%), and average interest-earning cash of $66.1 million (up 140.8%). As certain aspects of the economic risks resulting from the impact of the COVID-19 pandemic became clearer, the Company redeployed much of its excess liquidity by June 30, 2020 through a reduction in maturing high-cost time deposits and a corresponding decline in low-yielding interest-earning cash balances.  Core returns on average total assets and average stockholders’ equity were 0.66% and 7.55%, respectively, in the second calendar quarter of 2020, versus 1.19% and 12.63% a year ago.

Michael P. Puorro, Chairman and Chief Executive Officer, commented on the Company’s results: “Overall, I am pleased with our second quarter results, especially in light of the difficult economic and interest rate challenges that we continue to face. We continue to work closely with our borrowers that were granted loan forbearance requests in the first calendar quarter while also carefully managing our new extensions of credit.  As I noted last quarter, out of an abundance of caution, we made a decision to reduce originations in some of our traditional commercial and residential lending markets due to a combination of high valuations, cash-out refinance requests which we were unwilling to accommodate and the uncertainty of economic risks resulting from the impact of the COVID-19 pandemic. While those segments of our loan portfolio have either declined or grown very slowly in the second calendar quarter, I am happy to report that we were active participants in the SBA’s Paycheck Protection Program and were able to help support fifteen hundred jobs in the markets that we serve through over $16 million in loans that we approved.”

“During the month of June, we carefully re-entered our traditional commercial and residential lending markets with a very conservative outlook and enhanced underwriting standards.  We are cognizant of the continued impact of COVID-19 on the local economy and on our borrower base and are proceeding with an abundance of caution in that regard.”

“I am also happy to report that we were recently able to re-open our branches in Forest Hills and Mineola with safety precautions in place for both our customers and our staff. In addition, our executive team, officers and support staff have all returned to their office locations on a rotational basis in order to comply with Governor Cuomo’s regional guidelines for maximum building occupancy. We have a daily COVID-19 screening process in place and have made changes to our facilities and in-office procedures to ensure the health and safety of every member of the Hanover team.”

“We continue to augment our management team with talented executives who will further enhance our ability to execute Hanover’s business plan to prudently and profitably grow the franchise and position the Company for a potential initial public offering.”

Mr. Puorro also noted, “Growth in shareholder value remains our number one priority at Hanover Bancorp. This hallmark of our success is reflected by continued growth in tangible book value per share which increased by $1.22, or 7.3%, to $17.88 per share at June 30, 2020 versus the comparable year ago date.”

Balance Sheet Growth

Total assets for the quarter ended June 30, 2020 were $838.0 million, an increase of $133.3 million or 18.9% from the comparable 2019 date. The year-over-year balance sheet growth was funded by growth in deposits of $143.0 million.

Total deposits at June 30, 2020 increased by 27.7% to $659.3 million versus June 30, 2019, the result of strong growth in both core (Demand, N.O.W., Savings and Money Market) deposits (up $45.9 million) and time deposits (up $97.1 million). Total borrowings at June 30, 2020 were $78.8 million with a weighted average rate and term of 1.50% and 13 months, respectively. At March 31, 2020, total borrowings amounted to $81.4 million. At June 30, 2020, the Bank also had $77 million of additional borrowing capacity from the FHLB to draw on as needed.

Stockholders’ equity increased by $10.0 million to $76.2 million at June 30, 2020 from the comparable 2019 date resulting in a 7.3% increase in tangible book value per share over the past twelve months to $17.88 at quarter end. Insiders have made significant investments of their own capital into Hanover Bancorp, Inc. Insider ownership represented approximately 24% of total shares outstanding at June 30, 2020.

Loan Portfolio and Asset Quality

For the twelve months ended June 30, 2020, the Bank’s loan portfolio, net of sales, grew by $102.8 million, or 16.7%, with the growth due to a combination of new loan originations and loans acquired in the August 2019 CFSB transaction. During the first calendar quarter of 2020, management made a decision to reduce originations in some of our traditional commercial and residential lending markets due to a combination of high valuations, cash-out refinance requests which the Company was unwilling to accommodate and the uncertainty of economic risks resulting from the impact of the COVID-19 pandemic. As previously mentioned, during the month of June, we carefully re-entered those lending markets with a very conservative outlook and enhanced underwriting standards. We are cognizant of the continued impact of COVID-19 on the local economy and on our borrower base and although our combined commercial and residential pipeline is approximately $65 million, we are proceeding with an abundance of caution in that regard.

On a sequential quarter basis, second quarter loan growth of $28.2 million was primarily due to the Bank’s participation in the PPP. The Bank originated $16.4 million in PPP loans in phase two of the program which supported 1,500 local jobs.  In addition, the Bank recorded growth of $11.8 million in multi-family and commercial real estate loans in the second quarter of 2020. At June 30, 2020, the Company’s residential loan portfolio amounted to $460.1 million, with an average loan balance of $430 thousand and a weighted average loan-to-value ratio of 53%. Commercial real estate loans totaled $236.5 million at June 30, 2020, with an average loan balance of $696 thousand and a weighted average loan-to-value ratio of 50%. The Company’s commercial real estate concentration ratio was 242% of capital at June 30, 2020 versus 201% of capital at the comparable 2019 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 engage in loan sales, but on a more limited basis than in the past as it retains more of its loan originations in portfolio, 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 the second calendar quarter of 2020 although current indications are that it appears to once again be normalizing. During the quarter ended June 30, 2020, the Bank sold $1.7 million in loans, including a $740 thousand non-accrual loan at par, and recorded $15 thousand in gain on sale income. Sales of $9.9 million in performing loans and gains of $339 thousand were recorded in the quarter ended March 31, 2020 and sales of $40.1 million in performing loans and gains of $918 thousand were recorded in the quarter ended June 30, 2019. During the twelve months ended June 30, 2020, the Company sold $57.6 million in performing loans held-for-sale and recorded cumulative gains of $1.7 million.

The Bank’s asset quality ratios continue to remain strong and among the best in its community bank peer group. At June 30, 2020, the Company reported $3.2 million in non-performing loans which represented 0.44% of total loans outstanding. The June 30, 2020 allowance for loan losses balance was $8.0 million versus $7.1 million a year ago. The allowance for loan losses as a percent of total loans outstanding was 1.11% at June 30, 2020, 1.13% at March 31, 2020 and 1.16% at June 30, 2019. The allowance for loan losses as a percent of total originated loans was 1.25% at June 30, 2020.

Net Interest Margin and Liquidity

The Bank’s net interest margin was 3.13% during the second calendar quarter of 2020, a decline of seven basis points versus 3.20% in the comparable 2019 quarter but an improvement from 3.06% reported in the quarter ended March 31, 2020. The Company increased its cash liquidity position in 2020 in response to the uncertainties caused by the COVID-19 pandemic. The net interest margin has also been negatively impacted by management’s decision to temporarily reduce loan originations during the current economic uncertainty. These factors, coupled with strong organic deposit generation, resulted in a significant increase in the percentage of low yielding average interest-earning cash on the balance sheet in the second calendar quarter of 2020 versus the year ago period. Interest-earning cash represented 13.5% of average interest-earning assets in the second calendar quarter of 2020 at an average rate of 0.10% versus 7.0% and 2.33%, respectively, in the second calendar quarter of 2019. This shift in the asset mix resulted in a 39 basis point reduction in the average rate on interest-earning assets to 4.65% in the second calendar quarter of 2020. The Bank’s cost of interest-bearing liabilities declined by 36 basis points to 1.79% in the second calendar quarter of 2020 versus the comparable 2019 period. Year-over-year growth in average core deposits of 13.6%, including average demand deposit growth of 52.8%, coupled with lower market rates in 2020, accounted for the improvement in the Bank’s cost of funds. Management expects the average cost of interest-bearing liabilities to continue to decline in the coming quarters as significant volumes of FHLB borrowings and high-rate certificates of deposits are maturing in a much lower interest rate environment. Partially offsetting the impact of the elevated cash position in 2020, the average rate on the Company’s loan portfolio improved by 12 basis points to 5.40% in the second calendar quarter of 2020 versus the comparable 2019 period. These factors continue to enhance the Bank’s net interest rate margin which expanded to 3.36% in the month of June.

Operating Efficiency Ratio

The Bank’s GAAP operating efficiency ratio was 70.7% in the second calendar quarter of 2020 versus 58.5% a year ago, principally due to a reduction in noninterest income in the 2020 period resulting from the lower level of loan sales in the current year period.

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 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.

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 operating earnings, 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, core net interest income, core net interest margin 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 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.

 
HANOVER BANCORP, INC.
STATEMENTS OF CONDITION - (unaudited)
(dollars in thousands)
      
      
 June 30, March 31, June 30,
  2020   2020   2019 
Assets     
Cash and cash equivalents$68,965  $162,223  $56,571 
Securities-available for sale, at fair value 5,980   966   902 
Investments-held to maturity 11,178   11,535   12,299 
Loans held for sale 3,204   2,433   - 
      
Loans, net of deferred loan fees and costs 720,315   692,114   617,477 
Less: allowance for loan losses (7,993)  (7,843)  (7,143)
Loans, net 712,322   684,271   610,334 
      
Goodwill 1,577   1,542   - 
Premises & fixed assets 14,188   14,359   14,409 
Other assets 20,600   18,277   10,245 
Assets$838,014  $895,606  $704,760 
      
Liabilities and stockholders' equity     
Core deposits$256,072  $241,820  $210,179 
Time deposits 403,260   475,276   306,159 
Total deposits 659,332   717,096   516,338 
      
Borrowings 78,766   81,446   104,245 
Note payable 14,983   14,982   14,980 
Other liabilities 8,777   7,569   3,074 
Liabilities 761,858   821,093   638,637 
      
Stockholders' equity 76,156   74,513   66,123 
Liabilities and stockholders' equity$838,014  $895,606  $704,760 
      



        
HANOVER BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(dollars in thousands, except per share data)
        
 Three Months Ended Nine Months Ended
 6/30/2020 6/30/2019 6/30/2020 6/30/2019
        
Interest income$9,665 $8,444 $30,382 $24,609
Interest expense 3,163  3,089  10,626  8,501
Net interest income 6,502  5,355  19,756  16,108
Provision for loan losses 150  225  1,150  650
Net interest income after provision for loan losses 6,352  5,130  18,606  15,458
        
Loan fees and service charges 53  57  190  147
Service charges on deposit accounts 13  5  50  17
Gain on sale of investments -  -  -  -
Gain on sale of loans held-for-sale 15  918  917  3,543
Other operating income 18  37  72  126
Non-interest income 99  1,017  1,229  3,833
        
Compensation and benefits 2,688  2,134  8,162  6,228
Occupancy and equipment 1,078  682  3,293  1,895
Data processing 211  176  677  427
Marketing and advertising 63  108  280  375
Professional fees 290  205  924  565
Other operating expenses 339  385  1,136  943
Non-interest expense 4,669  3,690  14,472  10,433
        
Income before income taxes 1,782  2,457  5,363  8,858
Income tax expense 374  413  1,179  1,961
Core operating net income (1) 1,408  2,044  4,184  6,897
        
Litigation, proxy-related expenses and other non-recurring charges, net of tax -  33  756  222
        
Net income$1,408 $2,011 $3,428 $6,675
        
Basic earnings per share - GAAP$0.34 $0.51 $0.82 $1.77
Diluted earnings per share - GAAP$0.33 $0.51 $0.81 $1.73
        
Basic earnings per share - Core$0.34 $0.52 $1.01 $1.82
Diluted earnings per share - Core$0.33 $0.52 $0.99 $1.79
        
Note: Prior period information has been adjusted to conform to current period presentation.    
        
(1)  Core operating earnings is a non-GAAP financial measure. 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 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 GAAP or considered to be more important than financial results determined in accordance with GAAP.


 
HANOVER BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
QUARTERLY TREND
(dollars in thousands, except per share data)
          
          
 Three Months Ended
 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019
          
Interest income$9,665 $10,281 $10,436 $9,888 $8,444
Interest expense 3,163  3,764  3,699  3,558  3,089
Net interest income 6,502  6,517  6,737  6,330  5,355
Provision for loan losses 150  1,000  -  -  225
Net interest income after provision for loan losses 6,352  5,517  6,737  6,330  5,130
          
Loan fees and service charges 53  57  80  39  57
Service charges on deposit accounts 13  17  20  30  5
Gain on sale of investments -  -  -  -  -
Gain on sale of loans held-for-sale 15  339  563  818  918
Other operating income 18  25  29  33  37
Non-interest income 99  438  692  920  1,017
          
Compensation and benefits 2,688  2,886  2,588  2,813  2,134
Occupancy and equipment 1,078  1,083  1,132  940  682
Data processing 211  250  216  235  176
Marketing and advertising 63  111  106  112  108
Professional fees 290  327  307  210  205
Other operating expenses 339  437  360  288  385
Non-interest expense 4,669  5,094  4,709  4,598  3,690
          
Income before income taxes 1,782  861  2,720  2,652  2,457
Income tax expense 374  198  607  858  413
Core operating net income (1) 1,408  663  2,113  1,794  2,044
          
Litigation, proxy-related expenses and other non-recurring charges, net of tax -  413  343  384  33
Non-recurring tax expense -  -  -  -  -
          
Net income$1,408 $250 $1,770 $1,410 $2,011
          
Basic earnings per share - GAAP$0.34 $0.06 $0.43 $0.33 $0.51
Diluted earnings per share - GAAP$0.33 $0.06 $0.42 $0.32 $0.51
          
Basic earnings per share - Core$0.34 $0.16 $0.51 $0.44 $0.52
Diluted earnings per share - Core$0.33 $0.16 $0.50 $0.43 $0.52
          
Note: Prior period information has been adjusted to conform to current period presentation.    
          
(1)  Core operating earnings is a non-GAAP financial measure. 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 of America (“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 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 GAAP or considered to be more important than financial results determined in accordance with GAAP.
          



        
HANOVER BANCORP, INC.
SELECTED FINANCIAL DATA (unaudited)
(dollars in thousands, except per share data)
        
        
 6/30/2020 3/31/2020 12/31/2019 9/30/2019
Asset quality:       
Allowance for loan losses$7,993  $7,843  $7,143  $7,143 
Allowance for loan losses to total loans (1) 1.11%  1.13%  0.99%  0.99%
Allowance for loan losses to originated loans (1) 1.25%  1.29%  1.12%  1.13%
Non-performing loans$3,172  $1,730  $1,062  $2,242 
Non-performing loans/total loans 0.44%  0.25%  0.15%  0.31%
Non-performing loans/total assets 0.38%  0.19%  0.12%  0.26%
Allowance for loan losses/non-performing loans 251.99%  453.35%  672.60%  318.60%
        
Capital (Bank only):       
Tier 1 Capital$87,829  $86,211  $85,514  $83,423 
Tier 1 leverage ratio 10.21%  9.76%  10.11%  10.47%
Common equity tier 1 capital ratio 19.04%  19.26%  18.43%  17.81%
Tier 1 risk based capital ratio 19.04%  19.26%  18.43%  17.81%
Total risk based capital ratio 20.29%  20.52%  19.68%  19.07%
        
Equity data:       
Common shares outstanding 4,169,269   4,162,269   4,141,902   4,162,904 
Stockholders' equity$76,156  $74,513  $73,896  $71,950 
Book value per common share 18.27   17.90   17.84   17.28 
Tangible common equity 74,556   72,947   72,389   70,442 
Tangible book value per common share 17.88   17.53   17.48   16.92 
        
(1) Calculation excludes loans held for sale.       
        
Note: Prior period information has been adjusted to conform to current period presentation  


 
HANOVER BANCORP, INC.
SELECTED FINANCIAL DATA (unaudited)
(dollars in thousands, except per share data)
         
         
 Three Months Ended Nine Months Ended
 
 6/30/2020 6/30/2019 6/30/2020 6/30/2019 
Profitability:        
Return on average assets 0.66%  1.19%(1) 0.65%(3) 1.39%(5)
Return on average equity 7.55%  12.63%(1) 7.53%(3) 15.05%(5)
Yield on average interest-earning assets 4.65%  5.04%  4.85%  5.08% 
Cost of average interest-bearing liabilities 1.79%  2.15%  1.99%  2.04% 
Net interest rate spread (7) 2.86%  2.89%  2.86%  3.04% 
Net interest margin (8) 3.13%  3.20%  3.15%  3.32% 
Non-interest expense to average assets 2.18%  2.15%(2) 2.24%(4) 2.10%(6)
Operating efficiency ratio 70.73%  57.91%(2) 68.96%(4) 52.32%(6)
         
Average balances:        
Interest-earning assets$835,129  $671,830  $837,262  $648,172  
Interest-bearing liabilities 712,686   576,010   713,410   556,107  
Loans 704,132   606,522   716,861   592,704  
Deposits 689,470   498,835   679,953   477,403  
Borrowings 89,847   120,791   102,652   121,573  
         
         
(1) Calculation excludes the non-recurring after tax merger-related $33,000.
(2) Calculation excludes the non-recurring pre-tax merger-related expense of $38,000.
(3) Calculation excludes the non-recurring after tax merger-related, litigation and proxy contest expense of $756,000.
(4) Calculation excludes the non-recurring pre-tax merger-related, litigation and proxy contest expense of $978,000.
(5) Calculation excludes the non-recurring after tax write down of $90,000 and merger-related expense of $132,000.
(6) Calculation excludes the non-recurring pre-tax asset write down of $119,000 and merger-related expense of $169,000.
(7) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(8) Net interest margin represents net interest income divided by average interest-earning assets.
 


        
HANOVER BANCORP, INC.
STATISTICAL SUMMARY
QUARTERLY TREND
(unaudited, dollars in thousands, except share data)
        
        
        
 6/30/2020 3/31/2020 12/31/2019 9/30/2019
        
Loan distribution (1):       
Residential mortgages$439,996  $441,173  $461,034  $448,834 
Multifamily 125,597   121,307   131,474   139,685 
Commercial real estate 110,948   103,461   104,951   108,302 
Commercial & industrial 23,680   6,842   7,472   7,377 
Home equity 20,056   19,287   17,809   15,739 
Consumer 38   44   500   505 
        
  Total loans$ 720,315  $ 692,114  $ 723,240  $ 720,442 
        
Sequential quarter growth rate 4.07%  -4.30%  0.39%  16.68%
        
Loans sold during the quarter$1,721  $9,898  $20,198  $25,806 
        
Funding distribution :       
Demand$84,049  $65,841  $73,018  $69,606 
N.O.W. 33,364   32,943   42,432   53,564 
Savings 42,469   40,208   41,249   39,548 
Money market 96,190   102,828   101,680   102,054 
Total core deposits 256,072   241,820   258,379   264,772 
Time 403,260   475,276   411,144   385,514 
Total deposits 659,332   717,096   669,523   650,286 
Borrowings 78,766   81,446   95,086   100,745 
Note payable 14,983   14,982   14,982   14,981 
        
  Total funding sources$ 753,081  $ 813,524  $ 779,591  $ 766,012 
        
Sequential quarter growth rate - total deposits -8.06%  7.11%  2.96%  25.94%
        
Period-end core deposits/total deposits ratio 38.84%  33.72%  38.59%  40.72%
        
Period-end demand deposits/total deposits ratio 12.75%  9.18%  10.91%  10.70%
        
(1) Excluding loans held for sale
        


            
HANOVER BANCORP, INC.
NON-GAAP DISCLOSURE (unaudited)
(dollars in thousands)
Reconciliation of As Reported (GAAP) and Non-GAAP Financial Measures
            
            
 Three Months Ended 
 6/30/2020  3/31/2020  12/31/2019  9/30/2019 
                    
Net income, GAAP$1,408   $250   $1,770   $1,410  
                    
Adjustments, net of tax:                   
Merger-related expense -    -    183    384  
Litigation and proxy contest expenses -    413    160    -  
                    
Core operating net income$ 1,408   $ 663   $ 2,113   $ 1,794  
                    
                    
 Three Months Ended 
 6/30/2020
  3/31/2020
  12/31/2019
  9/30/2019
 
                    
Net-interest income, GAAP$6,502   $6,517   $6,737   $6,330  
Adjustments: -    -    -    -  
Core net interest income 6,502    6,517    6,737    6,330  
                    
Non-interest income, GAAP 99    438    692    920  
Adjustments: -    -    -    -  
Core non-interest income 99    438    692    920  
                    
Core total revenue$6,601   $6,955   $7,429   $7,250  
                    
Operating expenses, GAAP$4,669   $5,630   $5,151   $5,166  
Adjustments:                   
Litigation and proxy contest expenses -    536    206    -  
Merger-related expenses -    -    236    568  
Core operating expenses$4,669   $5,094   $4,709   $4,598  
                    
GAAP operating efficiency ratio 70.73%   80.95%   69.34%   71.26% 
Core operating efficiency ratio 70.73%   73.24%   63.39%   63.42% 
                    
                    
 Three Months Ended
 6/30/2020 3/31/2020 12/31/2019 9/30/2019
                    
Net interest income / margin$6,502 3.13% $6,517 3.06% $6,737 3.27% $6,330 3.24%
Adjustments: - 0.00%  - 0.00%  - 0.00%  - 0.00%
                    
Core net interest income / margin$ 6,502 3.13% $ 6,517 3.06% $ 6,737 3.27% $ 6,330 3.24%
                    


 
HANOVER BANCORP, INC.
NON-GAAP DISCLOSURE (unaudited)
(dollars in thousands)
Reconciliation of As Reported (GAAP) and Non-GAAP Financial Measures
      
 Nine Months
Ended
  Nine Months
Ended
 
 6/30/2020  6/30/2019 
      
Net income, GAAP$3,428   $6,675  
Adjustments:     
Merger-related expenses 236    169  
Litigation and proxy contest expenses 742    -  
Non-recurring asset writedown -    119  
Total adjustments, before income taxes 978    288  
Adjustment for reported effective tax rate 222    66  
Total adjustments, after income taxes$756   $222  
      
Core operating net income$ 4,184   $ 6,897  
      
 Nine Months
Ended
  Nine Months
Ended
 
 6/30/2020  6/30/2019 
      
Net-interest income, GAAP$19,756   $16,108  
      
Non-interest income, GAAP 1,229    3,833  
      
Core total revenue$20,985   $19,941  
      
Operating expenses, GAAP$15,450   $10,721  
Adjustments:     
Merger-related expenses 236    169  
Litigation and proxy contest expenses 742    -  
Non-recurring asset writedown -    119  
Core Operating expenses$14,472   $10,433  
      
GAAP operating efficiency ratio 73.62%   53.76% 
Core operating efficiency ratio 68.96%   52.32% 
      
 Nine Months Ended Nine Months Ended
 6/30/2020 6/30/2019
      
Net interest income / margin$19,756 3.15% $16,108 3.32%
Adjustments: - 0.00%  - 0.00%
      
Core net interest income / margin$ 19,756 3.15% $ 16,108 3.32%
      


 
HANOVER BANCORP, INC.
(unaudited, dollars in thousands)
            
            
  Net Interest Income Analysis
  For the Three Months Ended June 30, 2020 and 2019
            
            
 2020
 2019
 Average   Average Average   Average
 Balance Interest Rate Balance Interest Rate
            
Assets:           
Interest-earning assets:           
Loans$704,132 $9,450 5.40% $606,522 $7,982 5.28%
Investment securities 13,419  125 3.75%  12,658  107 3.39%
Interest-earning cash 113,132  29 0.10%  46,987  273 2.33%
FHLB stock and other investments 4,446  61 5.52%  5,663  82 5.81%
Total interest-earning assets 835,129  9,665 4.65%  671,830  8,444 5.04%
Non interest-earning assets:            
Cash and due from banks 4,912      4,121    
Other assets 22,330      11,798    
Total assets$862,371     $687,749    
             
Liabilities and stockholders' equity:            
Interest-bearing liabilities:            
Savings, N.O.W. and money market deposits$172,573 $155 0.36% $166,907 $689 1.66%
Time deposits 450,266  2,444 2.18%  288,312  1,683 2.34%
Total savings and time deposits 622,839  2,599 1.68%  455,219  2,372 2.09%
Fed funds purchased & FHLB advances 74,865  341 1.83%  105,811  495 1.88%
Note payable 14,982  223 5.99%  14,980  222 5.94%
Total interest-bearing liabilities 712,686  3,163 1.79%  576,010  3,089 2.15%
Demand deposits 66,631      43,616    
Other liabilities 7,953      3,191    
             
Total liabilities 787,270      622,817    
Stockholders' equity 75,101      64,932    
Total liabilities & stockholders' equity$862,371     $687,749    
Net interest rate spread    2.86%     2.89%
                
Net interest income / margin  $ 6,502 3.13%   $ 5,355 3.20%
            



HANOVER BANCORP, INC.
(unaudited, dollars in thousands)
            
            
 Net Interest Income Analysis
For the Nine Months Ended June 30, 2020 and 2019
            
            
 2020
 2019
 Average   Average Average   Average
 Balance Interest Rate Balance Interest Rate
            
Assets:           
Interest-earning assets: 0.00      0.00    
Loans$716,861 $29,124 5.43% $592,704 $23,351 5.27%
Investment securities 12,904  346 3.58%  12,792  323 3.38%
Interest-earning cash 102,510  684 0.89%  37,048  657 2.37%
FHLB stock and other investments 4,987  228 6.11%  5,628  278 6.60%
Total interest-earning assets 837,262  30,382 4.85%  648,172  24,609 5.08%
Non interest-earning assets:             
Cash and due from banks 5,905      4,107    
Other assets 21,638      11,563    
Total assets$864,805     $663,842    
              
Liabilities and stockholders' equity:             
Interest-bearing liabilities:             
Savings, N.O.W. and money market deposits$180,005 $1,307 0.97% $151,012 $1,830 1.62%
Time deposits 430,753  7,421 2.30%  283,522  4,537 2.14%
Total savings and time deposits 610,758  8,728 1.91%  434,534  6,367 1.96%
Fed funds purchased & FHLB advances 87,670  1,228 1.87%  106,594  1,467 1.84%
Note payable 14,982  670 5.97%  14,979  667 5.95%
Total interest-bearing liabilities 713,410  10,626 1.99%  556,107  8,501 2.04%
Demand deposits 69,195      42,869    
Other liabilities 7,946      3,584    
              
Total liabilities 790,551      602,560    
Stockholders' equity 74,254      61,282    
Total liabilities & stockholders' equity$864,805     $663,842    
Net interest rate spread    2.86%      3.04%
Net interest income / margin  $ 19,756 3.15%    $ 16,108 3.32%
            

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

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