To celebrate the opening, Hanover Bank invites business leaders, residents, and community stakeholders to stop by and meet the local banking team and learn about the range of financial services now available in the heart of Port Jefferson. A formal Grand Opening cocktail party will be held at a later date. About Hanover Community Bank and Hanover Bancorp, Inc. Hanover Bancorp, Inc. (NASDAQ: HNVR), is the bank holding company for Hanover Community Bank, a community commercial bank focusing on highly personal ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission File No. 001-41384 HANOVER BANCORP, INC. (Exact Name of Registrant as Specified in Its Charter) (State or Other Jurisdictio ...

Core Viewpoint - Hanover Bancorp, Inc. reported quarterly earnings of $0.55 per share, exceeding the Zacks Consensus Estimate of $0.51 per share, with a year-over-year comparison showing no change in earnings [1][2] Financial Performance - The company posted revenues of $18.36 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 2.58%, compared to revenues of $16.51 million a year ago [2] - Over the last four quarters, Hanover Bancorp has exceeded consensus EPS estimates three times and topped consensus revenue estimates four times [2] Stock Performance - Hanover Bancorp shares have declined approximately 7.6% since the beginning of the year, while the S&P 500 has seen a decline of 10.1% [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating expectations of underperformance in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.54 on revenues of $18.4 million, and for the current fiscal year, it is $2.33 on revenues of $75.3 million [7] - The estimate revisions trend for Hanover Bancorp has been unfavorable ahead of the earnings release [6] Industry Context - The Banks - Northeast industry, to which Hanover Bancorp belongs, is currently ranked in the top 23% of over 250 Zacks industries, suggesting a favorable industry outlook [8]

Financial Performance - Net income for Q1 2025 was $1.5 million or $0.20 per diluted share, while adjusted net income increased to $4.1 million or $0.55 per diluted share[1][3] - Net income for Q1 2025 was $1,521,000, a decrease of 62.5% from $4,061,000 in Q1 2024[34] - Basic earnings per share (EPS) for Q1 2025 was $0.20, down from $0.55 in Q1 2024, representing a decline of 63.6%[34] - Adjusted net income for Q1 2025, after accounting for conversion expenses, was $4,093,000, unchanged from Q1 2024[39] - The return on average assets decreased to 0.27% in Q1 2025 from 0.74% in Q1 2024[40] Income and Revenue - Interest income for Q1 2025 was $32,837,000, a slight increase from $32,432,000 in Q1 2024[34] - Net interest income after provision for credit losses rose to $14,029,000 in Q1 2025, compared to $12,635,000 in Q1 2024, reflecting a growth of 11.0%[34] - Non-interest income increased to $3,732,000 in Q1 2025, up from $3,576,000 in Q1 2024, marking a growth of 4.4%[34] - Net interest income for Q1 2025 was $14,629,000, an increase from $12,935,000 in Q1 2024, representing a growth of 13.1%[49] Asset Quality - Non-performing loans decreased by 28.5% to $11.7 million, representing 0.60% of the total loan portfolio[1][1] - The Bank's non-performing loans decreased to $11.7 million, down from $16.4 million at December 31, 2024, representing a reduction of $4.7 million[23] - Non-performing loans decreased to $11,697,000 in Q1 2025, down from $16,368,000 in Q4 2024, indicating improved asset quality[45] Loans and Deposits - Demand deposits increased by $12.6 million or 6.23% from March 31, 2024, and $3.9 million or 1.85% from December 31, 2024[1][9] - The loan portfolio decreased by $24.9 million to $1.96 billion, primarily due to the management of commercial real estate and multifamily loan concentrations[1][14] - Total deposits were $1.94 billion, a decrease of $17.8 million or 0.91% from December 31, 2024[1][9] - Total deposits decreased to $1.936 billion at March 31, 2025, from $1.954 billion at December 31, 2024[33] - Total loans decreased to $1,960,674,000 in Q1 2025, a sequential decline of 1.25% from $1,985,524,000 in Q4 2024[47] Capital and Equity - The company's tangible book value per share was $23.62 at March 31, 2025, down from $23.86 at December 31, 2024[1][12] - Stockholders' equity increased to $198,479,000 in Q1 2025, up from $187,693,000 in Q1 2024, reflecting a growth of 5.5%[49] - Tangible common equity ratio improved to 7.80% in Q1 2025 from 7.73% in Q4 2024, indicating stronger capital efficiency[48] - Book value per share decreased to $26.21 in Q1 2025 from $26.48 in Q4 2024, reflecting changes in equity value[45] Operational Efficiency - The operating efficiency ratio for Q1 2025 was reported at 87.12%, significantly higher than 65.44% in Q1 2024[39] - Total adjustments after income taxes for Q1 2025 amounted to $2,572,000, contributing to the adjusted operating efficiency ratio of 69.80%[39] Credit Losses - The allowance for credit losses increased to $22.9 million at March 31, 2025, compared to $22.8 million at December 31, 2024, with the allowance as a percentage of total loans at 1.17%[24] - Provision for credit losses on loans increased to $600,000 in Q1 2025 from $400,000 in Q4 2024, reflecting a significant rise in credit loss provisions[45] Future Plans - The core banking system conversion was completed in February 2025, expected to enhance operational efficiencies and customer benefits[1][6] - The Bank plans to open a new branch in Port Jefferson, New York, in mid-2025, expanding its market presence[26]

Core Insights - Hanover Bancorp, Inc. reported a net income of $1.5 million or $0.20 per diluted share for the quarter ended March 31, 2025, a decrease from $4.1 million or $0.55 per diluted share in the same quarter of 2024 [3][4][36] - The company declared a cash dividend of $0.10 per share on both common and Series A preferred shares, payable on May 14, 2025 [2][4] - Adjusted net income, excluding core system conversion expenses, was $4.1 million or $0.55 per diluted share for the quarter ended March 31, 2025, unchanged from the prior year [3][41] Financial Performance - Net interest income increased to $14.6 million for the quarter, up $1.7 million or 13.10% from the comparable quarter in 2024 [4][6] - The net interest margin expanded to 2.68% from 2.41% in the same quarter of 2024 [4][27] - The company's effective tax rate decreased to 13.8% in the first quarter of 2025 from 24.9% in the same quarter of 2024 [5] Asset Quality and Loan Portfolio - Non-performing loans decreased by 28.5% to $11.7 million, representing 0.60% of the total loan portfolio [4][25] - The allowance for credit losses increased to 1.17% of total loans as of March 31, 2025 [26] - The loan portfolio decreased by $24.9 million to $1.96 billion from December 31, 2024, primarily due to the management of commercial real estate and multifamily loan concentrations [14] Balance Sheet Highlights - Total assets were $2.29 billion as of March 31, 2025, compared to $2.31 billion at December 31, 2024 [8] - Total deposits decreased by $17.8 million or 0.91% from December 31, 2024, but increased by $19.2 million or 1.00% from March 31, 2024 [9] - Demand deposits increased by $12.6 million or 6.23% from March 31, 2024 [4][9] Strategic Initiatives - The company completed its core processing system conversion to FIS Horizon in February 2025, aimed at enhancing operational efficiencies and customer benefits [4][7] - Hanover continues to focus on niche residential, SBA, and C&I lending, with a loan pipeline of approximately $255 million as of March 31, 2025 [14][15] - The company is exploring opportunities for commercial real estate lending with an emphasis on relationship-based lending [4][7]

Core Banking System Upgrade - Hanover Bank has successfully completed its conversion to a new core banking system on February 18, 2025, aimed at enhancing the banking experience for clients and streamlining operations for employees [1][3][5] - The upgrade is part of Hanover Bank's evolution into a more business-focused financial institution, enabling the provision of digitally forward business banking solutions [2][5] Customer Experience and Service Enhancement - The new system is designed to improve customer experience by offering better functionality, enhanced user interfaces, and digital banking tools, which will increase convenience and responsiveness [7][8] - Comprehensive training has been provided to employees to maximize the capabilities of the new system, allowing for faster and more accurate service delivery [4][5] Security and Customization - The upgraded core banking system features state-of-the-art security protocols to safeguard client data and transactions, addressing the growing importance of security in digital banking [7] - It allows for customizable business solutions, enabling tailored product offerings and integrated banking solutions for clients [7] Operational Efficiency and Profitability - The new core system is expected to improve operational efficiency by better resource management, reducing operational costs, and enhancing profitability, positioning the bank for continued growth [8] - Enhanced reporting tools will provide real-time insights, supporting informed decision-making and business strategies [8]

Core Insights - Hanover Bank has introduced a new logo as part of a brand identity refresh, aiming to position itself as a leader in digital banking solutions while maintaining a commitment to exceptional service [1][2][3] Company Overview - Hanover Bancorp, Inc. operates Hanover Community Bank, which focuses on personalized and efficient banking services tailored to client needs [6] - The bank offers a comprehensive range of financial services, including consumer, commercial, and municipal banking products, as well as advanced mobile and internet banking technologies [6] Brand Identity and Vision - The new logo symbolizes a forward-thinking vision that emphasizes trust, stability, and progress, reflecting the bank's core values since its establishment in 2009 [2][5] - The refreshed identity is part of a broader initiative to enhance the banking experience for both individuals and businesses, with updates being implemented across various platforms [4] Leadership Perspective - The Chairman and CEO of Hanover Bank, Michael P. Puorro, highlighted the importance of the new logo in reinforcing the bank's commitment to innovation and client-focused services in a rapidly evolving financial landscape [3][5]

Financial Performance - For calendar 2024, the company recognized net income of $12.3 million, or $1.66 per diluted share, compared to net income of $15.2 million, or $2.05 per diluted share for fiscal 2023, reflecting a decrease in net interest income and an increase in the provision for credit losses [236]. - The company’s return on average equity for calendar 2024 was 6.45%, down from 8.10% in the previous year [239]. - The effective income tax rate for 2024 was 24.6%, slightly down from 24.9% in 2023, reflecting lower net income [252]. - The Company reported net income of $12.3 million for the year ended December 31, 2024, offset by $2.9 million in dividends declared [300]. - The net income for the three months ended December 31, 2024, was $12,346, compared to $3,763 for the same period in 2023, showing a significant increase of approximately 228.5% [323]. - Total comprehensive income for the three months ended December 31, 2024, was $13,462 thousand, up from $2,635 thousand in the prior year, reflecting a growth of 411% [327]. Asset and Liability Management - As of December 31, 2024, the company reported total assets of $2.31 billion, total stockholders' equity of $196.6 million, total loans of $1.99 billion, and total deposits of $1.95 billion [228]. - Total assets reached $2,233 million in 2024, compared to $1,976 million in 2023, marking an increase of 13.0% [242]. - The company's total liabilities as of December 31, 2024, were $2,115,472, an increase from $2,085,230 as of December 31, 2023, representing a growth of about 1.45% [320]. - Total deposits increased to $1.95 billion at December 31, 2024, up by $49.7 million from $1.90 billion at December 31, 2023 [284]. - Average total deposits for 2024 were $1,840,378 thousand with an average interest rate of 3.94% [286]. Interest Income and Expense - Net interest income for calendar 2024 was $53.1 million, a decrease of 2.6% from $54.5 million for fiscal 2023, with a net interest margin of 2.44%, down 41 basis points from 2.85% [241]. - Total interest income increased by $28.0 million, or 26.6%, with an average yield on interest-earning assets of 6.12%, up 63 basis points from 5.49% for fiscal 2023 [241]. - Total interest expense rose by $29.4 million, or 58.1%, with an average cost of interest-bearing liabilities at 4.40%, an increase of 122 basis points from 3.18% for fiscal 2023 [241]. - Total interest expense rose to $79.9 million in 2024, up from $50.6 million in 2023, driven by increased costs in deposits and borrowings [246]. Credit Losses and Provisions - The provision for credit losses increased to $4.0 million in June 2024, primarily due to an allowance for credit losses on an individually evaluated loan of $2.5 million [236]. - Provision for credit losses increased to $4.9 million in 2024 from $3.4 million in 2023, with total net charge-offs remaining stable at $1.6 million [248]. - The allowance for credit losses increased to $22.8 million at December 31, 2024, up from $19.7 million at December 31, 2023, with a ratio of 1.15% to total portfolio loans [277]. - The provision for credit losses for the three months ended December 31, 2024, was $4,940, significantly higher than $200 for the same period in 2023, reflecting a substantial increase in credit loss provisions [323]. Non-Interest Income and Expenses - The company’s total non-interest income for the three months ended December 31, 2024, was $15.3 million, compared to $3.3 million for the same period in 2023 [239]. - Non-interest income rose to $15.3 million in 2024, an increase of $6.5 million from $8.8 million in 2023, primarily driven by higher net gains on loan sales [249]. - Non-interest expense for 2024 was $47.1 million, an increase of $7.4 million from $39.7 million in 2023, mainly due to additional staffing [251]. Branch Expansion and Regulatory Approvals - The company expects to open a new full-service branch in Port Jefferson, New York, with operations anticipated to begin in the first half of 2025 [227]. - The company has received regulatory approval for the new branch, and business development staff have already joined in anticipation of the opening [227]. Investment Securities - The total investment securities available-for-sale amounted to $85.084 million with a fair value of $83.755 million as of December 31, 2024, compared to $63.292 million and $61.419 million respectively at December 31, 2023 [259]. - The weighted average yield on available-for-sale investment securities was 5.45% as of December 31, 2024, compared to 6.56% at December 31, 2023 [262]. - The total unrealized losses on available-for-sale securities were $1.605 million, with $13.849 million in gross unrealized losses for securities in a continuous unrealized loss position [414]. Loan Portfolio - As of December 31, 2024, the company's loan portfolio totaled $1.99 billion, an increase of $28.3 million from $1.96 billion at December 31, 2023, with growth concentrated in residential, SBA, and C&I loans [263]. - Loans as interest-earning assets amounted to $2,005 million in 2024, with an interest yield of 6.13%, compared to $1,772 million and 5.51% in 2023 [242]. - The total outstanding loans in the Multi-Family Market Rent Portfolio amount to $347.6 million, with an average outstanding loan size of $2.4 million and an average interest rate of 4.30% [270]. - The Company sold approximately $159.1 million of loans in the year ended December 31, 2024, recognizing gains of $10.9 million, compared to $51.8 million and $4.1 million in gains for the year ended September 30, 2023 [421]. Risk Management and Credit Quality - The Company categorizes loans into risk categories based on borrowers' ability to service their debt, using indicators such as current financial information and historical payment experience [424]. - The Company continuously monitors the credit quality of its loan receivables through assigned credit risk ratings by loan segment [422]. - The Company engages a third-party independent loan reviewer for semi-annual reviews of a sample of loans to validate credit risk ratings [423]. Changes in Accounting Standards - The company adopted ASC 326 for credit loss accounting effective October 1, 2023, changing its methodology for calculating credit losses [312]. - The Company recognized a one-time cumulative effect adjustment to retained earnings of $4.0 million, or $3.2 million net of tax effects, due to the adoption of ASU 2016-13 on October 1, 2023 [405]. - The Company adopted ASU 2022-02 concurrently with ASU 2016-13, which eliminates creditor accounting guidance for troubled debt restructurings [406].

Group 1: Earnings Performance - Hanover Bancorp, Inc. reported quarterly earnings of $0.52 per share, exceeding the Zacks Consensus Estimate of $0.49 per share, but down from $0.54 per share a year ago, representing an earnings surprise of 6.12% [1] - The company posted revenues of $18 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 2.83%, compared to year-ago revenues of $15.91 million [2] - Over the last four quarters, Hanover Bancorp has surpassed consensus EPS estimates three times and topped consensus revenue estimates four times [2] Group 2: Stock Performance and Outlook - Hanover Bancorp shares have increased approximately 14.1% since the beginning of the year, outperforming the S&P 500's gain of 3.2% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the coming quarter is $0.48 on revenues of $17.8 million, and for the current fiscal year, it is $2.36 on revenues of $75.3 million [7] Group 3: Industry Context - The Zacks Industry Rank indicates that the Banks - Northeast industry is currently in the top 9% of over 250 Zacks industries, suggesting a favorable environment for stocks in this sector [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5] - The estimate revisions trend for Hanover Bancorp is currently mixed, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6]

Financial Performance - Net income for Q4 2024 totaled $3.9 million, or $0.52 per diluted share, compared to $3.8 million, or $0.51 per diluted share in Q4 2023[4]. - Net income for the year ended December 31, 2024, was $12,346 thousand, a decrease of 9.14% from $13,589 thousand in 2023[35]. - Basic earnings per share (EPS) for the three months ended December 31, 2024, was $0.53, compared to $0.51 in the same period of 2023, reflecting a growth of 3.92%[35]. Income and Revenue - Record non-interest income of $4.2 million in Q4 2024, an increase of 5.89% from Q3 2024 and 28.67% from Q4 2023[1]. - Non-interest income for the year ended December 31, 2024, was $15,339 thousand, an increase of 43.36% from $10,691 thousand in 2023[35]. - Net interest income was $13.8 million in Q4 2024, up $1.1 million or 9.08% from Q4 2023, with a net interest margin of 2.53%[6]. - For Q4 2024, Hanover Bancorp reported net interest income of $13,808,000, an increase from $12,659,000 in Q4 2023, reflecting a margin of 2.53% compared to 2.40%[51]. - For the full year 2024, net interest income was $53,092,000, compared to $51,887,000 in 2023, with a margin of 2.44% versus 2.59%[52]. Assets and Deposits - Total assets increased to $2.31 billion at December 31, 2024, compared to $2.27 billion at December 31, 2023[12]. - Total deposits increased by $49.7 million or 2.61% year-over-year, reaching $1.95 billion at December 31, 2024[13]. - Total deposits reached $1,954,283 thousand as of December 31, 2024, compared to $1,904,595 thousand a year earlier, marking an increase of 2.62%[34]. - Total deposits slightly decreased to $1,954,283,000 in Q4 2024, with a sequential quarter growth rate of (0.17)%[48]. Loans and Credit Quality - The Bank's loan portfolio grew to $1.99 billion, an increase of $28.3 million or 1.45% for the year ended December 31, 2024[17]. - Total loans decreased to $1,985,524,000 in Q4 2024, reflecting a sequential quarter growth rate of (1.01)%[48]. - Non-performing loans totaled $16.4 million, representing 0.82% of total loans outstanding as of December 31, 2024[26]. - The allowance for credit losses was 1.15% of total loans, with non-performing loans totaling $16.4 million, representing 0.82% of the total loan portfolio[3]. - Provision for credit losses on loans increased to $400,000 in Q4 2024 from $200,000 in Q3 2024, while net charge-offs were $(1,027,000) in Q4 2024[44]. Equity and Book Value - Stockholders' equity rose to $196.6 million at December 31, 2024, an increase of $11.8 million from the previous year[16]. - The Company reported a tangible book value per share of $23.86 at December 31, 2024, a 9.97% annualized increase from $23.28 at September 30, 2024[3]. - Book value per share increased to $26.48 in Q4 2024, compared to $25.89 in Q3 2024[44]. - Tangible common equity (TCE) ratio improved to 7.73% in Q4 2024, up from 7.49% in Q3 2024[50]. Operational Efficiency and Future Outlook - The Company expects to complete a core processing system conversion by February 15, 2025, aimed at improving operational efficiency and customer experience[10]. - The Company expects the volume of SBA loan activity to increase in 2025, focusing on originations for sale over portfolio growth[19]. - The Company's loan pipeline with executed term sheets at December 31, 2024, is approximately $237 million, with 89% being niche-residential, conventional C&I, and SBA & USDA lending opportunities[17].