HNVR · Hanover Bancorp, Inc.

Performance Summary

Hanover Bancorp reported net income of $7.5 million for fiscal year 2025, representing a significant decrease from $12.3 million in 2024. Total interest income was $130.5 million, while total interest expense was $70.0 million, resulting in net interest income of $60.5 million. The provision for credit losses increased to $10.4 million from $4.9 million in the prior year. Non-interest income totaled $12.8 million, with gains on sale of loans held-for-sale contributing $7.3 million. Total non-interest expense was $53.0 million, including $3.2 million in conversion expenses related to the core processing system upgrade. The company's earnings per share decreased to $1.00 diluted from $1.66 in 2024.

Revenue Analysis

Interest income from loans was $119.7 million, while taxable securities contributed $5.7 million and other interest income added $5.1 million. On the expense side, savings, NOW and money market deposits accounted for $43.2 million of interest expense, time deposits contributed $20.6 million, and borrowings added $6.2 million. Non-interest income was driven by loan servicing and fee income of $4.3 million, service charges on deposit accounts of $0.8 million, and gains on sale of loans held-for-sale of $7.3 million. The company's revenue streams reflect its focus on lending activities, particularly in residential real estate, multifamily, and commercial real estate segments.

Margins & Profitability

Net interest margin, calculated as net interest income divided by average interest-earning assets, showed pressure as net interest income decreased from the prior year. The provision for credit losses increased significantly to $10.4 million, reflecting management's assessment of credit risk in the loan portfolio. Non-interest expense increased to $53.0 million from $47.1 million in 2024, with salaries and employee benefits representing the largest component at $27.9 million. Conversion expenses of $3.2 million related to the core processing system upgrade impacted profitability. The company's efficiency ratio, while not explicitly stated, was affected by these increased expenses.

Cash Flow & Balance Sheet

Net cash provided by operating activities was $13.1 million, while net cash used in investing activities was $27.9 million, primarily due to purchases of securities available-for-sale of $131.0 million and net increase in loans of $116.2 million. Net cash provided by financing activities was $60.9 million, driven by a net increase in deposits of $74.1 million. Total assets grew to $2.38 billion, with loans net of allowance for credit losses at $1.98 billion. The allowance for credit losses was $18.7 million, representing 0.93% of total loans held for investment. Total deposits were $2.03 billion, with municipal deposits comprising $700.7 million or 34.5% of the total. Total stockholders' equity was $200.3 million.

Outlook

The company faces several risk factors including economic vulnerability to the New York metro area, concentration in real estate-secured loans, and regulatory challenges. Management highlighted the completion of the core processing system conversion to FIS Horizon in February 2025 and the company's addition to the Russell 2000 Index in June 2025 as positive developments. The company plans to open a new branch in Riverhead, New York, subject to regulatory approvals, with a temporary office expected by the end of the first quarter of 2026. Strategic priorities include continued focus on niche lending products, municipal banking, and managing credit risk in the loan portfolio. The company remains subject to extensive banking regulations and must maintain adequate capital levels to support growth initiatives.