Hanover Bancorp, Inc. Reports Calendar First Quarter 2018 Results Highlighted by Record Net Income, Continued Strong Loan Growth and Exceptional Asset Quality

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MINEOLA, N.Y., April 16, 2018 (GLOBE NEWSWIRE) -- 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, 2018, highlighted by record net income, continued momentum in year-over-year loan growth, outstanding asset quality, and record net interest income.

The Company recorded record net income for the quarter ended March 31, 2018 of $1.4 million or $0.42 per diluted common share, versus $554 thousand or $0.20 per diluted common share in the comparable 2017 quarter, which represents an increase of $871 thousand, or 157.2%.

The significant improvement in net income achieved in the quarter ended March 31, 2018 resulted principally from a $1.3 million or 43.9% increase in net interest income versus the comparable 2017 period.  A strong year-over-year increase in average interest-earning assets (up $153.8 million or 40.5%) resulting from robust growth in average total loans of $151.8 million or 45.3%, coupled with an eight basis point widening of the net interest margin to 3.30% in the first quarter of 2018, accounted for the improvement in net interest income. An increase in non-interest income of $528 thousand or 220.9%, resulting from significant growth in gains on the sale of loans held-for-sale, and a lower effective tax rate in 2018, also contributed to the increase in earnings. Partially offsetting the foregoing improvements were increases in non-interest expenses (up $846 thousand) and the provision for loan losses (up $25 thousand).  The increase in non-interest expenses resulted principally from growth in compensation and benefits, occupancy and equipment and professional fees in connection with an increase in staff to support ongoing growth and operations, additional branch locations and risk and compliance costs.

For the six months ended March 31, 2018, the Company reported GAAP net income of $1.3 million or $0.42 per diluted common share versus $1.1 million or $0.39 per diluted common share a year ago. Excluding non-recurring deferred tax asset and debt restructuring charges totaling $931 thousand, the Company reported record core operating net income of $2.3 million in the six months ended March 31, 2018, an increase of 113.3% from $1.1 million in the prior year period. Core operating earnings per diluted common share were $0.70 in 2018 versus $0.39 in 2017.

The increase in core operating earnings in 2018 was due to significant improvements in net interest income (up $2.8 million) and noninterest income (up $585 thousand) coupled with a lower effective tax rate in 2018 (28.7% versus 36.9% a year ago).  Partially offsetting the foregoing positive factors were higher operating expenses (up $1.5 million) and an increase in the provision for loan losses (up $350 thousand) in 2018.

Michael P. Puorro, Chairman, President and Chief Executive Officer, commented on the Company’s results, “Over the past year we have achieved asset growth exceeding $153 million and we continue to expand our ability to generate non-interest income which has led to another quarter of record earnings and net interest income.  In the past year, we have been able to achieve a 157.2% increase in net income and a corresponding increase of 110.0% in earnings per common share while we continue to invest in the Company’s future through talent acquisition, franchise building and the recent opening of our new corporate administrative office in Mineola.  Further, we have achieved year-over-year net interest income growth of 43.9%, loan growth of 46.8% and deposit growth of 30.6%.  As we remain steadfastly selective in our loan underwriting, our growth story continues to be highlighted by industry leading asset quality.  At March 31, 2018, for the thirteenth consecutive quarter, our loan portfolio had no non-performing loans.  We believe that our growth outlook remains robust as evidenced by our most recent quarter-end originations of $56.8 million and our current loan pipeline of $69.7 million.  In addition, we are pleased to report that the Company expects to open our fourth branch in Flushing, Queens, N.Y. this summer and we are currently identifying a potential additional location in Brooklyn, N.Y.

Mr. Puorro further noted, “Our ability to generate shareholder value is reflected by our success to date in each capital raising effort at successively higher stock prices coupled with robust growth in book value per share which increased by $1.22, or 9.6%, to $13.91 per share at March 31, 2018 from the comparable 2017 date. We achieved these results while maintaining a core operating efficiency ratio that is also class-leading amongst peers our size.”

Total assets for the quarter ended March 31, 2018 amounted to $566.1 million, an increase of $153.4 million from the comparable 2017 date as the Bank continued to expand its loan portfolio (up $159.3 million) without sacrificing asset quality. The year-over-year balance sheet growth was funded by increases in total deposits (up $95.3 million), borrowings (up $39.8 million) and shareholders’ equity (up $11.9 million).

Total deposits at March 31, 2018 grew by 30.6% to $406.9 million, an increase of $95.3 million versus March 31, 2017, the result of an increase in time certificates of deposit of $122.2 million. Management remains pro-active in securing longer-term certificates of deposit and Federal Home Loan Bank of New York (“FHLB”) advances to fund loan growth at prevailing favorable rates in the early to middle stages of a sustained rising rate environment. Management has been successful in expanding its FHLB borrowing capacity which is strategically utilized to enhance both the Bank’s liquidity position and its interest rate risk profile by providing the flexibility to borrow from the FHLB for terms of two to four years. When prudent to do so, the Bank will be pro-active in securing longer-term advances from the FHLB at favorable rates as management believes it will better protect and enhance future earnings during the anticipated rising interest rate cycle in the years ahead. This strategy is being used selectively to supplement management’s ongoing effort to build low cost core deposit balances through relationship banking at each of its branch locations. Total FHLB borrowings at March 31, 2018 were $94.7 million with a weighted average rate and term of 1.64% and 28 months, respectively. At March 31, 2018, the Bank had $33.0 million of additional borrowing capacity from the FHLB.

Shareholders’ equity grew by $11.9 million to $46.8 million at March 31, 2018 from $34.9 million at the comparable 2017 date resulting in a $1.22 or 9.6% increase in book value per share over the past twelve months to $13.91 at March 31, 2018.  The Company’s executive management team and Board of Directors remain focused on continued enhancement of shareholder value through prudent asset growth, effective expense management and the development of long-term customer relationships in its primary markets.  Insiders continue to make significant investments of their own capital into Hanover Bancorp, Inc. Such ownership investments represent approximately 27% of total shares outstanding at March 31, 2018.

The Company’s average cost of interest-bearing liabilities increased to 1.68% for the quarter ended March 31, 2018, from 1.42% a year ago and 1.63% on a linked quarter basis. This increase primarily relates to a combination of higher interest rates in 2018, intense competition for deposits in the Bank’s core geographic area and management’s strategic objective of obtaining longer term certificates of deposit funding in anticipation of even higher rates expected in the future.  Offsetting the 26 basis point increase in the Company’s average cost of interest-bearing deposits from the March 2017 quarter was a corresponding 31 basis point improvement in the average yield on interest-earning assets to 4.79% during the first quarter of 2018, primarily driven by higher loan yields and a change in the loan portfolio mix in 2018.

For the twelve month period ended March 31, 2018, the Bank’s loan portfolio grew by $159.3 million, or 46.8%, with the growth concentrated primarily in adjustable-rate two-to-four family residential loans and multi-family loans. Management employs a strategy of concentrating its loan growth in these products with shorter durations, which provides the Bank with traditionally safe credit quality at acceptable credit spreads, greater liquidity and an enhanced interest-rate-risk profile. Over the past twelve months, originations of our niche adjustable-rate residential product amounted to $165.4 million with an average loan balance of approximately $523 thousand and a weighted average loan-to-value ratio of 56%. At March 31, 2018, the Company’s residential loan portfolio amounted to $309.4 million, with an average loan balance of $421 thousand and a weighted average loan-to-value ratio of 53%. During the same twelve month period, the Bank originated $51.2 million in commercial real estate loans, inclusive of multi-family loans, with an average loan balance of approximately $1.1 million and a weighted average loan-to-value ratio of 61%. Commercial real estate loans totaled $182.9 million at March 31, 2018, with an average loan balance of $941 thousand and a weighted average loan-to-value ratio of 58%. The Company’s commercial real estate concentration ratio was 275% at March 31, 2018 versus 350% at the comparable 2017 date.

Through its strong asset generation capabilities, 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 in certain transactions, also retaining servicing rights. 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. During the quarter ended March 31, 2018, gains on the sale of loans held-for-sale amounted to $665 thousand versus $370 thousand in the quarter ended December 31, 2017 and $168 thousand in the quarter ended March 31, 2017.

The Bank’s asset quality ratios remain pristine and class leading among its peer group of community banks. At March 31, 2018, the loan portfolio, for the thirteenth consecutive quarter, had no non-performing loans. During the quarter ended March 31, 2018, the Bank’s provision for loan losses was $250 thousand and the March 31, 2018 allowance for loan losses balance was $5.60 million versus $3.87 million a year ago. The Bank continues to record a quarterly provision for loan losses expense due to the ongoing growth in the loan portfolio. The allowance for loan losses as a percent of total loans was 1.12% at March 31, 2018 versus 1.14% at March 31, 2017. 

The Bank’s core net interest margin remained strong for the quarter ended March 31, 2018 at 3.30% versus 3.22% in the comparable 2017 quarter and 3.35% in the quarter ended December 30, 2017. The eight basis point increase in the Bank’s net interest margin versus 2017 was primarily attributable to a 31 basis point increase in the yield on average interest-earning assets to 4.79% from 4.48% a year ago.  This improvement was largely the result of a 20 basis point increase in the average loan yield to 5.00% in 2018. The Company’s average cost of interest-bearing liabilities rose by 26 basis points to 1.68% in the first quarter of 2018 as the result of an increased reliance on non-core funding sources, principally time certificates of deposit and FHLB borrowings.

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 modern 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 customers 24-hour ATM service with no fees attached, free checking with interest, telephone banking, the most advanced technologies in mobile and internet banking for our consumer and business customers, safe deposit boxes and much more. The Company recently moved its corporate administrative office to Mineola, New York where it operates a full service branch location along with branch locations in Garden City Park, N.Y. and Forest Hills, Queens, N.Y.

Hanover Community Bank is a member of the Federal Deposit Insurance Corporation and is an Equal Housing/Equal Opportunity Lender. For further information, call 516-248-4868 or visit the Bank’s website at

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 provide 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 these 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 GAAP or considered to be more important than financial results determined in accordance with 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.

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. 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.

Contact:Brian K. Finneran, EVP & Chief Financial OfficerMichelle Mihas, VP & Corporate Secretary516-548-8500 

 

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Globe Newswire: 16:01 GMT Monday 16th April 2018

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