Performance Highlights

Transcription

1 Hanover Bancorp, Inc. Reports Calendar Third 2016 Results Highlighted by Record Operating and Cash Earnings, Solid Loan Growth, and Exceptional Asset Quality Performance Highlights Record Operating and Cash Earnings: Net income for the quarter ended September 30, 2016 was $593 thousand or $0.22 per share, compared to $469 thousand or $0.19 per share recorded in the prior year quarter ended September 30, 2015, representing a 26.4% increase in net income year-over-year. Cash earnings for the quarter ended September 30, 2016 were a record $1.3 million, or $0.50 per share, an increase of $412 thousand, or 45.0%, from $916 thousand, or $0.37 per share, for the prior year quarter. Balance Sheet Growth: Assets totaled $362.3 million at September 30, 2016, up $34.7 million, or 10.6%, from June 30, 2016 and up $138.7 million, or 62.1%, from September 30, 2015 due to strong loan growth. Continued Capital Strength: The Bank s Tier 1 capital ratio was 10.89% at September 30, 2016, significantly above the regulatory minimum for a wellcapitalized institution. Robust Year-over-Year Loan Growth: At September 30, 2016, total loans outstanding were $301.1 million or 83.1% of total assets, up $104.6 million, or 53.2%, from September 30, 2015 as the Bank continues to successfully leverage its capital into prudent loan originations. Excellent Asset Quality: At September 30, 2016, the Bank s asset quality was pristine and class leading among all financial institutions as the loan portfolio possessed no non-performing loans. Net Interest Income Growth: The Bank recorded record net interest income of $2.9 million for the quarter ended September 30, 2016, an increase of $1.2 million, or 70.0%, from the quarter ended September 30, 2015 and an increase of $316 thousand, or 12.2%, on a linked quarter basis. Strong Net Interest Margin and Spread: The Bank s net interest margin and spread for the current quarter was strong at 3.52% and 3.36%, respectively. New Branch Location: The Company has received all bank regulatory approvals to open a new branch in Forest Hills, Queens, NY. Management expects such branch to open early in the first quarter of Garden City Park, NY October 26, 2016 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 September 30, 2016, highlighted by the Bank s record operating and cash earnings, continued momentum in year-over-year loan growth, excellent asset quality, and record net interest income.

2 Strong Operating Earnings Momentum on both Cash and GAAP Basis The Bank s cash earnings were strong at $1.3 million, or $0.50 per share, for the quarter ended September 30, 2016, which represents an increase of $412 thousand, or 45.0% from the quarter ended September 30, On a GAAP basis, net income for the quarter ended September 30, 2016 was $593 thousand, or $0.22 per share, compared with net income of $469 thousand or $0.19 per share, for the quarter ended September 30, Due to the significant deferred tax asset recognized at December 31, 2014, the Bank is not required to pay federal income taxes until the Bank fully utilizes the remaining net operating loss carryforward position contained in its $3.0 million deferred tax asset. As such, significantly all of the federal income tax expense on the income statement is considered a non-cash expense. Michael P. Puorro, Chairman, President and Chief Executive Officer, reflected on the Bank s results, Our record operating and cash earnings continues to be driven by exceptional asset growth which yielded another quarter of record net interest income and net income growth of 26.4%. In the past year we have achieved loan growth of 53.2% and deposit growth of 38.4%. Further, as we remain steadfastly selective in our loan underwriting, our growth story continues to be highlighted by industry leading asset quality, and for the seventh consecutive quarter, our loan portfolio has no non-performing loans. Paul D. Hagan, Executive Vice President and Chief Financial Officer, noted, Hanover continues to build shareholder value in calendar 2016 by delivering continued earnings momentum and solid loan growth. In the most recent quarter, our cash earnings increased to a record $1.3 million for the quarter ended September 30, 2016, representing year over year growth of $412 thousand, or 45.0%, as we prudently grew interest earning assets. As we have grown the balance sheet, we have maintained strong expense control as indicated by our efficiency ratio of 60.91%. Our ability to prudently control expenses while continuing to deliver robust growth is indicative of management s commitment to creating shareholder value. It should be noted that we produced record earnings during the most recent quarter while incurring additional expenses to build talent infrastructure to support our future growth plans. Balance Sheet Growth Total assets for the quarter ended September 30, 2016 increased by $34.7 million to $362.3 million as the Bank continued to grow its loan portfolio. On a year-over-year basis, total assets grew by $138.7 million, or 62.1%, driven by the Bank s robust loan originations. Total loan portfolio growth at September 30, 2016 increased by $104.6 million, or 53.2%, from the loan balance September 30, This strong loan growth contributed to higher net interest income of $2.9 million during the quarter ended September 30, 2016, an increase of $1.2 million, or 70.0%, from the $1.7 million recorded in the prior year quarter. Funding for asset growth during the fiscal quarter ended September 30, 2016 was derived primarily from deposits and borrowings. Total deposits at September 30, 2016 totaled $266.5 million, representing deposit growth of $74.0 million, or 38.4% from September 30, The Bank has also used borrowings from the FHLB to fund loan growth. The Bank was successful in obtaining borrowing capacity from the Federal Home Loan Bank of New York ( FHLB ) which is strategically utilized to enhance the Bank s liquidity position and interest-rate-risk profile by allowing it the flexibility to strategically borrow from the FHLB with terms greater than 3 years. At times, the Bank will be pro-active in securing longer-term advances from the FHLB at current favorable rates as management believes it will better protect and enhance future earnings during the anticipated rising interest rate cycle in the years ahead. Total FHLB borrowings for the quarter ended September 30, 2016 were $51.9

3 million and these borrowings possessed a weighted rate and term of 1.37% and 42 months, respectively. Further, at September 30, 2016, the Bank had $10.8 million of additional borrowing capacity from the FHLB. The Bank s overall average cost of interest bearing liabilities decreased to 1.30% for the quarter ended September 30, 2016, from 1.31% for the quarter ended September 30, On a linked quarter basis, the Bank s overall average cost of interest bearing liabilities decreased three basis points from 1.33% for the quarter ended June 30, Management continues to be pro-active in securing longer-term certificates of deposit in the current low interest rate environment to better position the interest-rate-risk profile of the Bank in anticipation of higher rates in the upcoming years. While this strategy of securing current longer-term funding at current rates is more costly than shorter-term funding, management believes it will better protect and enhance future earnings during the anticipated rising interest rate cycle in the years ahead. The weighted average maturity of new certificates of deposit issued in both the twelve month and three month period ended September 30, 2016 was 36.7 months and 34.9 months, respectively. Loan Portfolio and Asset Quality For the twelve month period ended September 30, 2016, the Bank s loan portfolio grew by $104.6 million, or 53.2%, with the growth concentrated primarily in adjustable-rate two-tofour family residential loans, multi-family loans, and mixed-use commercial real estate loans. Management continues to employ a strategy of concentrating its loan growth in these products with short 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 the adjustable-rate specialty residential product amounted to $124.9 million with an average loan balance of approximately $486 thousand and a weighted average loan-to-value ratio of 53.95%. At September 30, 2016, the entire residential loan portfolio amounted to $146.8 million, with an average loan balance of $366 thousand and a weighted average loan-to-value ratio of 50.85%. During the same twelve month period, the Bank originated $76.4 million in commercial real estate loans, inclusive of multi-family loans, with an average loan balance of approximately $1.36 million and a weighted average loan-to-value ratio of 64.47%. The balance of this portfolio at September 30, 2016 was $147.3 million, with an average loan balance of $942 thousand and a weighted average loan-to-value ratio of 59.51%. As a result of the Bank s robust 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, retaining servicing rights. The Bank expects that it will continue to originate, for its own portfolio and others, which will result in a continued increase in interest income while also realizing gains on sale of loans to others and servicing income. The Bank s asset quality ratios are pristine and class leading among its peer group of community banks. At September 30, 2016, the loan portfolio had no non-performing loans. During the quarter ended September 30, 2016, the Bank s provision for loan losses was $375,000 and its total allowance for loan losses at September 30, 2016 was $3.4 million. The Bank increased its provision for loan losses due to the growth of the loan portfolio during the quarter. The allowance for loan losses as a percent of gross loans was 1.14% for the most recent quarter end.

4 Strong Net Interest Margin The Bank s net interest margin remained strong for the quarter ended September 30, 2016 at 3.52%. The increase in the Bank s net interest margin for the quarter ended September 30, 2016 from the prior quarter ended June 30, 2016 was primarily attributable to the Bank increasing its loan originations and maintaining a higher loans to deposit ratio. Opportunities for Hanover Community Bank The Bank s executive team and Board remain focused on enhancing shareholder value through prudent growth, tight expense control and further business opportunities. To date, the Bank s executive team and Board have made significant investments of their own capital into Hanover Community Bank which represents approximately 30% of shares outstanding. The Bank concluded its most recent capital raise in December 2015 which allows the Bank to continue its growth strategy and, pending regulatory approval, open additional locations in the future. The Bank rolled out its application based mobile banking software product in May 2016 which allows customers to perform various banking functions including check deposits, obtaining deposit account balances and transferring funds between accounts using their mobile phones. The implementation of the application based mobile banking software product enables the Bank to better compete with much larger financial institutions in the marketplace by offering the latest banking technology solutions. About Hanover Community Bank With assets of $362.3 million at September 30, 2016, Hanover Community Bank is a locally owned and operated 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 internet banking for our consumer and business customers, safe deposit boxes and much more. Hanover Community Bank maintains its corporate offices in Garden City Park, New York where it operates its sole branch office. Hanover Community Bank is a member of the Federal Deposit Insurance Corporation and is an Equal Housing/Equal Opportunity Lender. For further information, call or visit the Bank s state-of-the-art website at 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 Community Bank. Any or all of the forward-looking statements in this release and in any other public

5 statements made by Hanover Community Bank may turn out to be incorrect. They can be affected by inaccurate assumptions Hanover Community Bank might make or by known or unknown risks and uncertainties. Consequently, no forward-looking statement can be guaranteed. Hanover Community Bank 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: Michelle Mihas, V.P. Corporate Secretary Paul Hagan, E.V.P. & Chief Financial Officer

6 HANOVER BANCORP, INC. STATEMENTS OF CONDITION - (unaudited) (dollars in thousands) September 30, 2016 June 30, 2016 September 30, 2015 ASSETS Cash and cash equivalents $ 27,903 $ 14,758 $ 18,201 Investments-Held to Maturity 1,500 1,500 - Loans Held for Sale 18,272 4,292 - Loans, net of deferred loan fees and costs 301, , ,518 Less: allowance for loan losses (3,419) (3,045) (2,180) Loans, net 297, , ,338 Other assets 16,924 13,924 11,006 Total Assets $ 362,278 $ 327,567 $ 223,545 LIABILITIES AND SHAREHOLDERS' EQUITY Total Deposits $ 266,546 $ 264,251 $ 192,539 Borrowings 60,386 30,438 - Other Liabilities 3,283 1,418 1,772 Total Liabilities 330, , ,311 Total Shareholders' Equity 32,063 31,460 29,234 Total Liabilities and Shareholders' Equity $ 362,278 $ 327,567 $ 223,545

7 HANOVER BANCORP, INC. STATEMENTS OF INCOME - (unaudited) (dollars in thousands, except per share data) 09/30/16 09/30/15 Year 9/30/16 Year 9/30/15 Total interest income $ 3,834 $ 2,247 $ 12,956 $ 7,902 Total interest expense ,073 1,845 Net interest income 2,896 1,708 9,883 6,057 Provision for loan losses , Net interest income after provision for loan 2,521 1,558 8,658 5,214 Loan fees and service charges Service charges on deposit accounts Gain on sale of loans held-for-sale Total non-interest income Compensation and benefits 1, ,761 2,107 Occupancy and equipment Data processing Advertising Professional fees Other operating expenses Total non-interest expense 2,007 1,151 6,464 4,255 Income before income taxes ,040 1,856 Income tax expense (benefit) ,075 (3,753) Net income $ 593 $ 469 $ 1,965 $ 5,609 Basic Earnings per Share-GAAP basis $ 0.22 $ 0.19 $ 0.75 $ 2.42 Diluted Earnings per Share-GAAP basis $ 0.22 $ 0.19 $ 0.75 $ 2.42 Supplementary Information: Net income $ 593 $ 469 $ 1,965 $ 5,609 Add back non-cash charges: Provision for loan losses , Provision (Benefit) for federal income taxes ,025 (3,803) Depreciation expense Cash Net income $ 1,328 $ 916 $ 4,415 $ 2,864 Basic Earnings per Share- Cash basis $ 0.50 $ 0.37 $ 1.68 $ 1.23 Diluted Earnings per Share- Cash basis $ 0.50 $ 0.37 $ 1.68 $ 1.23 Note: Prior period quarterly information has been adjusted to conform to current period presentation. Per share earnings data has been adjusted for the 5-1 reverse stock split

8 HANOVER BANCORP, INC. STATEMENTS OF QUARTERLY INCOME - (unaudited) (dollars in thousands, except per share data) 09/30/16 06/30/16 03/31/16 12/31/15 Total interest income $ 3,834 $ 3,412 $ 3,083 $ 2,627 Total interest expense Net interest income 2,896 2,580 2,370 2,037 Provision for loan losses Net interest income after provision for loan loss 2,521 2,280 2,070 1,787 Loan fees and service charges Service charges on deposit accounts Gain on sale of loans held-for-sale Total non-interest income Compensation and benefits 1, Occupancy and equipment Data processing Advertising Professional fees Other operating expenses Total non-interest expense 2,007 1,722 1,469 1,266 Income before income taxes Income tax expense Net income $ 593 $ 511 $ 409 $ 452 Basic Earnings per Share-GAAP basis $ 0.22 $ 0.19 $ 0.15 $ 0.17 Diluted Earnings per Share-GAAP basis $ 0.22 $ 0.19 $ 0.15 $ 0.17 Supplementary Information: Net income $ 593 $ 511 $ 409 $ 452 Add back non-cash charges: Provision for loan losses Provision for federal income taxes Depreciation expense Cash Net income $ 1,328 $ 1,126 $ 968 $ 994 Basic Earnings per Share- Cash basis $ 0.50 $ 0.43 $ 0.37 $ 0.38 Diluted Earnings per Share- Cash basis $ 0.50 $ 0.43 $ 0.37 $ 0.38 Note: Prior period quarterly information has been adjusted to conform to current period presentation Per share earnings data has been adjusted for the 5-1 reverse stock split

9 HANOVER BANCORP, INC. SELECTED FINANCIAL DATA - (unaudited) (dollars in thousands) 09/30/16 06/30/16 09/30/15 Asset Quality: Allowance for Loan Losses $ 3,419 $ 3,045 $ 2,180 Allowance for Loan Losses to Total Loans (1) 1.14% 1.03% 1.11% Non-Performing Loans $ - $ - $ - Nonperforming Loans/Total Loans N/A N/A N/A Nonperforming Loans/Total Assets N/A N/A N/A Allowance for Loan Losses/ Nonperforming Loans N/A N/A N/A Capital: (dollars in thousands) Tier 1 Capital $ 37,673 $ 29,665 $ 26,362 Tier 1 Leverage Ratio 10.89% 9.58% 11.79% Common Equity Tier 1 Capital Ratio 17.75% 14.85% 19.16% Tier 1 Risk Based Capital Ratio 17.75% 14.85% 19.16% Total Risk Based Capital Ratio 19.01% 16.11% 20.14% Other: (in thousands) Average Interest-Earnings Assets $ 329,098 $ 295,737 $ 212,862 Average Interest-Bearing Liabilities 287, , ,652 Average Deposits and Borrowings 311, , ,075 Share Data: Common Shares Outsanding 2,641,995 2,641,995 2,579,010 Book Value per Share $12.14 $11.90 $ /30/16 06/30/16 09/30/15 Profitability: Yield on Average Assets 0.68% 0.66% 0.84% Yield on Average Equity 7.41% 6.54% 6.97% Yield on Average Interest Earning Assets 4.66% 4.62% 4.22% Cost of Average Interest Bearing Liabilities 1.30% 1.33% 1.31% Cost of Funds 1.20% 1.20% 1.11% Net Interest Rate Spread (2) 3.36% 3.29% 2.91% Net Interest Margin (3) 3.52% 3.49% 3.21% Non-Interest Expense to Average Assets 2.32% 2.22% 2.05% Efficiency Ratio 60.91% 61.24% 56.37% (1) Calculation excludes loans held for sale. (2) Net interest rate spread represents the difference between the average yield on average interest-earnings assets and the average cost of average interest-bearing liabilities. (3) Net interest margin represents net interest income divided by average interest bearing liabilities. Note: Prior period quarterly information has been adjusted to conform to current period presentation Share Data has been adjusted for the 5-1 reverse stock split N/A: Such ratios are not applicable as the Bank has no non-perrforming loans and assets