Hanover Bancorp Inc.
11/06/2026 | Press release | Distributed by Public on 11/06/2026 15:01
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Statement Regarding Forward-Looking Statements - This document contains a number of forward-looking statements, including statements about the financial condition, results of operations, earnings outlook and prospects of the Company. Forward-looking statements are typically identified by words such as "should," "likely," "plan," "believe," "expect," "anticipate," "intend," "outlook," "estimate," "forecast," "target," "project," "goal" and other similar words and expressions. The forward-looking statements involve certain risks and uncertainties. The ability of the Company to predict results or the actual effects of its plans and strategies is subject to inherent uncertainty.
Factors that may cause actual results or earnings to differ materially from such forward-looking statements include those set forth in Part I, Item 1A. Risk Factors in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, as updated by the Company's subsequent filings with the SEC and, among others, the following:
| ● | Our ability to continue to successfully execute our business strategies; |
| ● | Changes in monetary and fiscal policies of the FRB and the U. S. Government, particularly related to changes in interest rates, money supply and inflation, may affect interest margins and the fair value of financial instruments; |
| ● | Changes in general economic conditions, either nationally or in our market areas, including due to increased market volatility related to government policy or the impact of tariffs or trade policy, that are different than expected and the impact of changing political conditions or federal government shutdowns; |
| ● | The ability to enhance revenue through increased market penetration, expanded lending capacity and product offerings; |
| ● | Occurrence of natural or man-made disasters or calamities, including health emergencies, the spread of infectious diseases, or outbreaks of hostilities, such as between Russia and Ukraine and in the Middle East, or the effects of climate change, and the ability of the Company to deal effectively with disruptions caused by the foregoing; |
| ● | Legislative, regulatory or policy changes, including those relating, but not limited, to banking, securities, rent regulation and housing, financial accounting and reporting, environmental protection and insurance matters and the impact of such changes, as well as our ability to comply with such changes in a timely manner; |
| ● | Downturns in demand for loan, deposit and other financial services in the Company's market area and the adequacy of the allowance for credit losses; |
| ● | Increased competition from other banks and non-bank providers of financial services; |
| ● | Technological changes and increased technology-related costs; |
| ● | Our ability to attract and retain qualified personnel; |
| ● | A breach of our information systems security, including the occurrence of a cyber incident or a deficiency in cyber security; and |
| ● | Changes in accounting principles, or the application of generally accepted accounting principles. |
Because these forward-looking statements are subject to assumptions and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. You are cautioned not to place undue reliance on these statements, which speak only as of the date of this document. All subsequent written and oral forward-looking statements concerning matters addressed in this document and attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this document. Except to the extent required by applicable law or regulation, the Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events.
Non-GAAP Disclosure - This discussion includes discussions of the Company's tangible common equity ("TCE") ratio, TCE, tangible assets and efficiency ratio, all of which are non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flows that excludes or modifies amounts that are required to be disclosed in the most directly comparable measure calculated and presented in accordance with U.S. GAAP. The Company believes that these non-GAAP financial measures provide both management and investors a more complete understanding of the underlying operational results and trends and the Company's marketplace performance. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the numbers prepared in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other financial institutions.
With respect to the calculations and reconciliations of TCE, tangible assets and the TCE ratio, please see Liquidity and Capital Resources contained herein for a reconciliation to the most directly comparable GAAP measure.
Executive Summary - The Company is a one-bank holding company incorporated in 2016. The Company operates as the parent for its wholly owned subsidiary, the Bank, which commenced operations in 2008. The income of the Company is primarily derived through the operations of the Bank. Unless the context otherwise requires, references herein to the Company include the Company and the Bank on a consolidated basis.
Kevin O'Connor was named to the position of President of the Company and the Bank effective July 27, 2026. Mr. O'Connor brings more than 35 years of banking experience to Hanover Bank, having most recently served as Long Island Market President at Valley Bank.
The Company was added to the Russell 2000 Index in late June 2025. The Russell 2000 Index tracks 2,000 small-cap U.S.-traded stocks by objective, market-capitalization rankings, and style attributes. The Russell Indexes are widely used by investment managers and institutional investors for index funds and as benchmarks for active investment strategies.
The Bank operates as a locally headquartered, community-oriented bank serving customers throughout the New York metro area from offices in Nassau, Suffolk, Queens, Kings (Brooklyn) and New York (Manhattan) Counties, New York, and Freehold, Monmouth County, New Jersey. We opened the Bank's Hauppauge Business Banking Center in Hauppauge, Suffolk County, New York in May 2023. This location is the nexus of our expanded commercial lending and deposit activities that are integral to the ongoing diversification of our balance sheet as we fill the void left by the diminishing number of commercial banks in the NYC Metro area. In June 2025, we opened a full-service branch in Port Jefferson, Suffolk County, New York to serve the thriving Suffolk County area. These new de novo branches in Hauppauge and Port Jefferson continue to demonstrate robust growth. As of September 30, 2026, the Hauppauge branch achieved $149.1 million in deposits with a 1.64% cost of funds, while the Port Jefferson location reached $52.1 million in deposits with a 1.85% cost of funds. Building on this momentum, our newest de novo full-service branch in downtown Riverhead, New York officially opened on September 30, 2026. This strategic expansion enables us to better serve the East End of Long Island with our complete suite of financial and banking services. We offer personal and business loans on a secured and unsecured basis, SBA and USDA guaranteed loans, revolving lines of credit, commercial mortgage loans, and one- to four-family non-qualified mortgages secured by primary and secondary residences that may be owner occupied or investment properties, home equity loans, bridge loans and other personal purpose loans.
The Bank works to provide more direct, personal attention to customers than management believes is offered by competing financial institutions, the majority of which are headquartered outside of the Bank's primary trade area and are represented locally by branch offices. By striving to employ professional, responsive and knowledgeable staff, the Bank believes it offers a superior level of service to its customers. As a result of senior management's availability for consultation on a daily basis, the Bank believes it offers customers quicker responses on loan applications and other banking transactions, as well as greater and earlier certainty as to whether these transactions will actually close, than competitors, whose decisions may take longer and be made in distant headquarters.
Historically, the Bank has generated additional income by strategically originating and selling residential and government guaranteed loans to other financial institutions at premiums, while also retaining servicing rights in some sales. However, with the higher market interest rates experienced in recent years, the appetite among the Bank's purchasers of residential loans for pools of loans declined, eliminating the Bank's ability to sell residential loans in its portfolio on desirable terms. In response, the Bank developed a flow origination program under which the Bank originates individual loans for sale to specific buyers, thereby positioning the Bank to resume residential loan sales and generate fee income to complement sale premiums earned from the sale of the guaranteed portion of SBA loans. The Bank is an approved SBA Preferred Lender, enabling the Bank to process SBA applications under delegated authority from the SBA and enhancing the Bank's ability to compete more effectively for SBA lending opportunities.
The Bank remains focused on expanding its core verticals and continues to originate loans for its portfolio and for sale in the secondary market under its residential flow origination program. During the quarters ended September 30, 2026 and 2025, the Company sold $18.7 million and $21.4 million, respectively, of residential loans under its flow origination program and recorded gains on sale of loans held-for-sale of $0.5 million and $0.5 million, respectively.
During the quarters ended September 30, 2026 and 2025, the Company sold approximately $1.3 million and $11.4 million, respectively, of government guaranteed SBA loans and recorded gains on sale of loans held-for-sale of $0.1 million and $0.9 million, respectively. SBA loan originations and gains on sale continue to be lower due to a less favorable economic outlook for many business owners along with the Bank's ongoing prudent decision to tighten credit. Together, these factors contributed to lower SBA loan volume, approval levels, and related gain-on-sale income.
In February 2026, the Bank executed a proactive wholesale funding optimization strategy, restructuring five FHLB advances maturing in 2027 and 2028 and totaling $60.3 million in two new advances of equal principal with embedded put features to enhance balance sheet flexibility. The transaction reduced the weighted average all-in borrowing cost from 4.27% to 3.47%, generating approximately $40 thousand in monthly interest expense savings while preserving appropriate term funding and call protection.
On March 12, 2026, the Company issued $35 million of 10-year fixed-to-floating rate subordinated notes with a fixed coupon rate of 7.25% for the first five years. The Company used the net proceeds to provide capital to support growth of the consolidated entity and redeemed in full its previously outstanding $25 million of 8.54% floating rate subordinated notes on April 15, 2026, thereby reducing the Company's cost of funds.
The Bank finances most of its activities through a combination of deposits, including non-interest-bearing demand, savings, NOW and money market deposits as well as time deposits, and both short- and long-term borrowings. The Company's chief competition includes local banks within its market area, New York City money center banks and regional banks, as well as non-bank lenders, including fintech lenders.
Financial Performance Summary
As of or for the three and nine months ended September 30, 2026 and 2025
(dollars in thousands, except per share data)
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Three months ended |
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Nine months ended |
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September 30, |
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September 30, |
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2026 |
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2025 |
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2026 |
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2025 |
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Revenue (1) |
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$ |
19,280 |
|
$ |
18,008 |
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$ |
57,953 |
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$ |
54,725 |
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Non-interest expense |
|
12,395 |
|
|
12,013 |
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41,649 |
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40,625 |
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Provision for credit losses |
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1,100 |
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1,325 |
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2,130 |
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4,282 |
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Net income |
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4,349 |
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3,491 |
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10,287 |
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7,455 |
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Net income per share - diluted |
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0.60 |
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0.47 |
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1.40 |
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1.00 |
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Return on average assets |
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0.75 |
% |
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0.61 |
% |
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0.60 |
% |
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0.44 |
% |
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Return on average stockholders' equity (2) |
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8.44 |
% |
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6.90 |
% |
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6.75 |
% |
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5.00 |
% |
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Tier 1 leverage ratio |
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9.43 |
% |
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9.15 |
% |
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9.43 |
% |
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9.15 |
% |
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Common equity tier 1 risk-based capital ratio |
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12.85 |
% |
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13.13 |
% |
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12.85 |
% |
|
13.13 |
% |
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Tier 1 risk-based capital ratio |
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12.85 |
% |
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13.13 |
% |
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12.85 |
% |
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13.13 |
% |
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Total risk-based capital ratio |
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14.07 |
% |
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14.38 |
% |
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14.07 |
% |
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14.38 |
% |
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Total stockholders' equity/total assets (3) |
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8.31 |
% |
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8.66 |
% |
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8.31 |
% |
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8.66 |
% |
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Tangible common equity ratio (non-GAAP) (2) |
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7.58 |
% |
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7.89 |
% |
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7.58 |
% |
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7.89 |
% |
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Efficiency ratio (4) |
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64.29 |
% |
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66.71 |
% |
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71.87 |
% |
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74.23 |
% |
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| (1) | Represents net interest income plus total non-interest income. |
| (2) | Includes common stock and Series A preferred stock. |
| (3) | The ratio of total stockholders' equity to total assets is the most comparable GAAP measure to the non-GAAP tangible common equity ratio presented herein. |
| (4) | Represents non-interest expense divided by the sum of net interest income and non-interest income. |
At September 30, 2026 the Company, on a consolidated basis, had total assets of $2.4 billion, total deposits of $2.1 billion and total stockholders' equity of $202.9 million. The Company recorded net income of $4.3 million, or $0.60 per diluted share (including Series A preferred shares) for the three months ended September 30, 2026 compared to net income of $3.5 million, or $0.47 per diluted share (including Series A preferred shares), for the same period in 2025.
During the quarter ended September 30, 2026, net interest income increased $1.8 million and provision for credit losses decreased $0.2 million, compared to the September 30, 2025 quarter. These were partially offset by a decrease of $0.5 million in non-interest income, particularly a decrease in gain on sale of loans held for sale of $0.9 million, a $0.4 million increase in non-interest expense and a $0.3 million increase in income tax expense, resulting in a $0.9 million increase in net income between these periods.
The Company's return on average assets and return on average stockholders' equity were 0.75% and 8.44%, respectively, for the three months ended September 30, 2026, versus 0.61% and 6.90%, respectively, for the comparable 2025 quarter.
Total non-accrual loans at September 30, 2026 were $29.1 million, or 1.40% of total loans, compared to $21.6 million, or 1.08% of total loans at December 31, 2025 and $17.2 million, or 0.86% of total loans, at September 30, 2025. The allowance for credit losses as a percentage of total non-accrual loans amounted to 68%, 87% and 130% at September 30, 2026, December 31, 2025 and September 30, 2025, respectively.
The Company's efficiency ratio was 64.29% for the three months ended September 30, 2026, versus 66.71% in the September 30, 2025 quarter.
Critical Accounting Policies, Judgments and Estimates - To prepare financial statements in conformity with U.S. GAAP, the Company's management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. Critical accounting estimates are accounting estimates where (a) the nature of the estimate is material due to levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and (b) the impact of the estimate on financial condition or operating performance is material. At September 30, 2026, there have been no material changes to the Company's critical accounting policies as compared to the critical accounting policies disclosed in Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's most recent Annual Report on Form 10-K for the year ended December 31, 2025.
Financial Condition - Total assets of the Company were $2.4 billion at September 30, 2026 and December 31, 2025. Total securities available for sale at September 30, 2026 were $138.2 million, an increase of $38.7 million from December 31, 2025, primarily driven by growth in U.S. GSE residential mortgage-backed securities, collateralized loan obligations and corporate bonds, offset by decreases in U.S. Treasury securities and collateralized mortgage obligations. Total loans were $2.1 billion at September 30, 2026 and $2.0 billion at December 31, 2025. Total deposits were $2.1 billion at September 30, 2026 and $2.0 billion at December 31, 2025. Total borrowings and subordinated debt at September 30, 2026 were $94.1 million, including $59.8 million (net of $410 thousand deferred prepayment penalty) of outstanding FHLB advances, compared to $125.5 million at December 31, 2025.
At September 30, 2026, the residential loan portfolio amounted to $806.5 million, or 38.7% of total loans. Commercial real estate loans, including multifamily loans and construction and land development loans, totaled $1.1 billion or 53.5% of total loans at September 30, 2026. Commercial and industrial loans totaled $161.9 million or 7.8% of total loans at September 30, 2026.
Total deposits were $2.1 billion at September 30, 2026 and $2.0 billion at December 31, 2025. Our loan to deposit ratio was 99% at September 30, 2026 and at December 31, 2025. Core deposit balances, which consist of demand, NOW, savings and money market deposits, represented 75.9% and 74.9% of total deposits at September 30, 2026 and December 31, 2025, respectively. At those dates, demand deposit balances represented 12.1% and 12.2% of total deposits. The Company's municipal deposit program is built on long-standing relationships developed in the local marketplace. We believe that this core deposit business will continue to provide a stable source of funding for the Company's lending products at costs lower than both consumer deposits and market-based borrowings. The Company continues to emphasize its municipal deposit program. At September 30, 2026, total municipal deposits were $558.1 million, representing 26.4% of total deposits, compared to $700.7 million, or 34.5% of total deposits at December 31, 2025. The weighted average rate on the municipal deposit portfolio was 3.11% at September 30, 2026 and 3.01% at December 31, 2025. The aggregate amount of the Company's outstanding uninsured deposits was $280.4 million or 13.3% of total deposits as of September 30, 2026 and $304.8 million or 15.0% of total deposits as of December 31, 2025.
Borrowings at September 30, 2026 and December 31, 2025 were $59.8 million (net of $410 thousand deferred prepayment penalty) and $100.7 million, respectively, comprised of outstanding FHLB advances. The Company had no borrowings outstanding under lines of credit with correspondent banks at September 30, 2026 and December 31, 2025.
Commercial Real Estate Statistics
The Company continues to actively manage its Multifamily and Commercial Real Estate portfolios which resulted in a reduction in the commercial real estate concentration ratio to 358% of capital at September 30, 2026 from 362% of capital at December 31, 2025.
Multifamily and CRE Investor-owned real estate are predominantly subject to fixed interest rates for an initial period of 5 years. The Bank's exposure to Land/Construction loans as of September 30, 2026 is not significant at $10.7 million, all of which are at floating interest rates. As shown below, as of September 30, 2026, 12% of the loan balances in these combined portfolios will either have a scheduled rate reset or mature in 2026, with another 51% with scheduled rate resets or maturing in 2027.
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Multifamily Market Rent Portfolio Fixed Rate Reset/Maturity Schedule |
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Multifamily Stabilized Rent Portfolio Fixed Rate Reset/Maturity Schedule |
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Calendar Period (Loan Data as of 9/30/2026) |
# Loans |
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Total O/S ($000's omitted) |
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Avg O/S ($000's omitted) |
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Avg Interest Rate |
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Calendar Period (Loan Data as of 9/30/2026) |
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# Loans |
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Total O/S ($000's omitted) |
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Avg O/S ($000's omitted) |
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Avg Interest Rate |
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2026 |
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16 |
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$ |
52,999 |
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$ |
3,312 |
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3.59 |
% |
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2026 |
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10 |
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$ |
24,390 |
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$ |
2,439 |
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3.97 |
% |
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2027 |
|
70 |
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|
182,428 |
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|
2,606 |
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4.40 |
% |
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2027 |
|
52 |
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|
126,803 |
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|
2,439 |
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4.32 |
% |
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2028 |
|
15 |
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|
20,398 |
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|
1,360 |
|
6.13 |
% |
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2028 |
|
10 |
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|
8,272 |
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|
827 |
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6.84 |
% |
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2029 |
|
7 |
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|
11,081 |
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|
1,583 |
|
6.58 |
% |
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2029 |
|
4 |
|
|
4,212 |
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|
1,053 |
|
6.38 |
% |
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2030 |
|
8 |
|
|
20,023 |
|
|
2,503 |
|
6.19 |
% |
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2030 |
|
7 |
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|
13,398 |
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|
1,914 |
|
6.32 |
% |
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2031+ |
|
28 |
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|
92,369 |
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|
3,299 |
|
6.48 |
% |
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2031+ |
|
8 |
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|
15,229 |
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|
1,904 |
|
7.05 |
% |
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Fixed Rate |
|
144 |
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|
379,298 |
|
|
2,634 |
|
5.04 |
% |
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Fixed Rate |
|
91 |
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|
192,304 |
|
|
2,113 |
|
4.78 |
% |
|
Floating Rate |
|
2 |
|
|
1,333 |
|
|
667 |
|
8.34 |
% |
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Floating Rate |
|
1 |
|
|
456 |
|
|
456 |
|
9.00 |
% |
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Total |
|
146 |
|
$ |
380,631 |
|
$ |
2,607 |
|
5.06 |
% |
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Total |
|
92 |
|
$ |
192,760 |
|
$ |
2,095 |
|
4.80 |
% |
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CRE Investor Portfolio Fixed Rate Reset/Maturity Schedule |
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Calendar Period (Loan Data as of 9/30/2026) |
# Loans |
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Total O/S ($000's omitted) |
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Avg O/S ($000's omitted) |
|
Avg Interest Rate |
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2026 |
|
11 |
|
$ |
27,620 |
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$ |
2,511 |
|
6.46 |
% |
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2027 |
|
81 |
|
|
125,336 |
|
|
1,547 |
|
4.75 |
% |
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2028 |
|
27 |
|
|
28,417 |
|
|
1,052 |
|
6.66 |
% |
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2029 |
|
7 |
|
|
23,587 |
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|
3,370 |
|
6.53 |
% |
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2030 |
|
14 |
|
|
13,229 |
|
|
945 |
|
6.98 |
% |
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2031+ |
|
32 |
|
|
49,344 |
|
|
1,542 |
|
6.78 |
% |
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Fixed Rate |
|
172 |
|
|
267,533 |
|
|
1,555 |
|
5.77 |
% |
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Floating Rate |
|
7 |
|
|
5,397 |
|
|
771 |
|
8.18 |
% |
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Total CRE-Inv. |
|
179 |
|
$ |
272,930 |
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$ |
1,525 |
|
5.82 |
% |
Stabilized Multifamily Pro Forma Stress Results
The table below reflects a pro forma stressed evaluation of the Bank's Multifamily stabilized loan portfolio as of September 30, 2026, using the primary assumption for a revised Debt Service Coverage Ratio ("DSCR") calculation, for all loans where the current interest rate is below 6.75%. The current balance for these loans is recast at 6.75% with a 30-year amortization. The chart below reflects the impact of these adjustments on the portfolio. The projected loan to value ("LTV") assumption resets all loans using a 6.25% cap rate and the last reported property net operating income ("NOI") to determine an implied property valuation and based on the current loan balance, the resultant LTV.
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Multifamily Stabilized Rent Portfolio (Loan Data as of 9/30/2026) |
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DSCR Range |
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# Loans |
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Total O/S ($000's omitted) |
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% of Total MF Portfolio |
|
Current Weighted Average LTV |
|
Projected Weighted Average LTV |
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< 1.0 |
|
8 |
|
$ |
21,739 |
|
4 |
% |
|
62 |
% |
|
98 |
% |
|
1.0 < x <1.2 |
|
18 |
|
|
57,734 |
|
10 |
% |
|
63 |
% |
|
73 |
% |
|
1.2 < x <1.3 |
|
16 |
|
|
36,518 |
|
6 |
% |
|
64 |
% |
|
66 |
% |
|
1.3 < x <1.5 |
|
21 |
|
|
44,929 |
|
8 |
% |
|
58 |
% |
|
59 |
% |
|
1.5 < x <2.0 |
|
19 |
|
|
26,055 |
|
5 |
% |
|
61 |
% |
|
52 |
% |
|
x > 2.0 |
|
10 |
|
|
5,785 |
|
1 |
% |
|
39 |
% |
|
29 |
% |
|
Total |
|
92 |
|
$ |
192,760 |
|
34 |
% |
|
61 |
% |
|
67 |
% |
As reflected above, as of September 30, 2026, only 8 loans totaling $22 million in the multifamily rent stabilized portfolio would have a pro forma DSCR less than 1x, which represents 4% of the total multifamily portfolio. The remainder of this portfolio, totaling $171 million and representing 30% of the entire multifamily portfolio, would possess pro forma DSCR's greater than 1x while maintaining a projected weighted average LTV well within our policy guidelines. Additionally, as of September 30, 2026, 72% of the rent stabilized loans and 74% of the entire multifamily portfolio are further enhanced with personal guarantees from the principals of the borrowers. Based on the maturities and rate resets in the previous 12 months, we believe the overall demand for multifamily housing in our market will allow our borrowers to address any adverse impact proactively. The Bank continues to successfully manage multifamily loans with scheduled rate repricing or maturities. Matured loans that qualified for renewal have been retained while others have paid off in full through refinances. The majority of the rate resetting loans remain as performing loans at the new higher interest rate.
Rental Breakdown of the Multifamily Portfolio
The table below segments our portfolio of loans secured by Multifamily properties based on rental terms and location as of September 30, 2026. As shown below, 66% of the combined portfolio is secured by properties subject to free market rental terms, which is the dominant tenant type. Both the Market Rent and Stabilized Rent segments of our portfolio present very similar average borrower profiles. The portfolio is primarily located in the New York City boroughs of Brooklyn, the Bronx and Queens.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multifamily Loan Portfolio - Loans by Rent Type (Loan Data as of 9/30/2026) |
||||||||||||||||||
|
Rent Type |
|
# Notes |
|
Outstanding Loan Balance |
|
% of Total Multi-Family |
|
Avg Loan Size |
|
LTV |
|
Current DSCR |
|
Avg # of Units |
||||
|
|
|
($000's omitted) |
|
|
|
($000's omitted) |
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market |
|
146 |
|
$ |
380,631 |
|
66 |
% |
|
$ |
2,607 |
|
60.8 |
% |
|
1.38 |
|
11 |
|
Location |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manhattan |
|
7 |
|
$ |
24,263 |
|
4 |
% |
|
$ |
3,466 |
|
62.5 |
% |
|
1.33 |
|
13 |
|
Other NYC |
|
97 |
|
$ |
274,357 |
|
48 |
% |
|
$ |
2,828 |
|
60.3 |
% |
|
1.35 |
|
9 |
|
Outside NYC |
|
42 |
|
$ |
82,011 |
|
14 |
% |
|
$ |
1,953 |
|
62.2 |
% |
|
1.50 |
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stabilized |
|
92 |
|
$ |
192,760 |
|
34 |
% |
|
$ |
2,095 |
|
60.8 |
% |
|
1.43 |
|
12 |
|
Location |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manhattan |
|
7 |
|
$ |
10,022 |
|
2 |
% |
|
$ |
1,432 |
|
49.6 |
% |
|
1.64 |
|
19 |
|
Other NYC |
|
74 |
|
$ |
165,978 |
|
29 |
% |
|
$ |
2,243 |
|
61.4 |
% |
|
1.40 |
|
11 |
|
Outside NYC |
|
11 |
|
$ |
16,760 |
|
3 |
% |
|
$ |
1,524 |
|
61.6 |
% |
|
1.62 |
|
14 |
Office Property Exposure
The Bank's exposure to the Office market is not significant. Loans secured by office space accounted for 2% of the total loan portfolio at September 30, 2026, with a total balance of $41.2 million, of which less than 1% is located in Manhattan. The pool has a 2.94x weighted average DSCR and a 55% weighted average LTV as of September 30, 2026.
Liquidity and Capital Resources - Liquidity management is defined as the ability of the Company and the Bank to meet their financial obligations on a continuous basis without material loss or disruption of normal operations. These obligations include the withdrawal of deposits on demand or at their contractual maturity, the repayment of borrowings as they mature, funding new and existing loan commitments and the ability to take advantage of business opportunities as they arise. Asset liquidity is provided by short-term investments, such as fed funds sold, the marketability of securities available for sale and interest-bearing deposits due from the Federal Reserve Bank of New York, FHLB and correspondent banks, which totaled $280.8 million and $308.5 million at September 30, 2026 and December 31, 2025, respectively. These liquid assets may include assets that have been pledged primarily against municipal deposits or borrowings. Liquidity is also provided by the maintenance of a base of core deposits, cash and non-interest-bearing deposits due from banks, the ability to sell or pledge marketable assets and access to lines of credit. At September 30, 2026, undrawn liquidity sources, which include cash and unencumbered securities and secured and unsecured funding capacity, totaled $830.4 million or approximately 296% of uninsured deposit balances.
Liquidity is continuously monitored, thereby allowing management to better understand and react to emerging balance sheet trends, including temporary mismatches with regard to sources and uses of funds. After assessing actual and projected cash flow needs, management seeks to obtain funding at the most economical cost. These funds can be obtained by converting liquid assets to cash or by attracting new deposits or other sources of funding. Many factors affect the Company's ability to meet liquidity needs, including variations in the markets served, loan demand, its asset/liability mix, its reputation and credit standing in its markets and general economic conditions. Borrowings and the scheduled amortization of investment securities and loans are more predictable funding sources. Deposit flows and securities prepayments are somewhat less predictable as they are often subject to external factors. Among these are changes in the local and national economies, competition from other financial institutions and changes in market interest rates.
The Company's primary sources of funds are cash provided by deposits, which may include brokered and listing service deposits, borrowings, proceeds from maturities and sales of securities and cash provided by operating activities. At September 30, 2026, total deposits were $2.1 billion, of which $487.1 million were time deposits scheduled to mature within the next 12 months. Based on historical experience, the Company expects to be able to replace a substantial portion of those maturing deposits with comparable deposit products. Insured and collateralized deposits, which include municipal deposits, accounted for approximately 87% of total deposits at September 30, 2026. At September 30, 2026 and December 31, 2025, the Company had $59.8 million (net of $410 thousand deferred prepayment penalty) and $100.7 million, respectively, in borrowings outstanding.
The Liquidity and Wholesale Funding Policy of the Bank establishes specific policies and operating procedures governing liquidity levels to assist management in developing plans to address future and current liquidity needs. Management monitors the rates and cash flows from loan and investment portfolios while also examining the maturity structure and volatility characteristics of liabilities to develop an optimum asset/liability mix. Available funding sources include retail, commercial and municipal deposits, purchased liabilities and stockholders' equity. Daily, management receives a current cash position update to ensure that all obligations are satisfied. On a weekly basis, appropriate senior management receives a current liquidity position report, and a ninety day forecasted cash flow to ensure that all short-term obligations will be met and there is sufficient liquidity available. At September 30, 2026, the Bank had a total borrowing capacity of $817.2 million at the Federal Home Loan Bank of New York, of which $546.3 million was used to collateralize municipal deposits, $60.3 million was utilized for term advances and $0.2 million was used for MPF-CMA Credit enhancements. At September 30, 2026, the Bank had a $79.7 million collateralized line of credit from the Federal Reserve Bank of New York's discount window with no outstanding borrowings. At September 30, 2026, the Bank had access to approximately $92 million in unsecured lines of credit extended by correspondent banks, if needed, for short-term funding purposes. No borrowings were outstanding under lines of credit with correspondent banks at September 30, 2026.
Our sources of wholesale funding include brokered deposits, listing service certificates of deposit and insured cash sweep ("ICS") reciprocal deposits in excess of 20% of total liabilities, which balances totaled approximately $75.0 million, $0.3 million and $0, or 3.6%, 0.0% and 0.0% of total deposits, respectively, at September 30, 2026. We utilized brokered certificates of deposit and listing service certificates of deposit as alternatives to other forms of wholesale funding, including borrowings, when interest rates and market conditions favor the use of such deposits. For a portion of our brokered certificates of deposit, we utilized interest rate swap contracts to effectively extend their duration and to fix their cost.
The Company strives to maintain an efficient level of capital, commensurate with its risk profile, on which a competitive rate of return to stockholders will be realized over the short and long terms. Capital is managed to enhance stockholder value while providing flexibility for management to act opportunistically in a changing marketplace. Management continually evaluates the Company's capital position in light of current and future growth objectives and regulatory guidelines. Total stockholders' equity was $202.9 million at September 30, 2026 and $200.3 million at December 31, 2025. Retained earnings increased by $8.1 million due primarily to net income of $10.3 million for the nine months ended September 30, 2026, which was offset by $2.2 million of dividends declared. The accumulated other comprehensive loss at September 30, 2026 was 1.13% of total equity and was comprised of a $2.3 million after tax net unrealized loss on the investment portfolio that was partially offset by a $0.1 million after tax net unrealized gain on derivatives.
The Bank is subject to regulatory capital requirements. The Bank's tier 1 leverage, common equity tier 1 risk-based, tier 1 risk-based and total risk-based capital ratios were 9.43%, 12.85%, 12.85% and 14.07%, respectively, at September 30, 2026, exceeding all regulatory guidelines for a well-capitalized institution, the highest regulatory capital category. Moreover, capital rules also place limits on capital distributions and certain discretionary bonus payments if a banking organization does not maintain a buffer of common equity tier 1 capital above the minimum capital requirements. At September 30, 2026, the Bank's capital buffer was in excess of requirements.
In October 2023, the Company announced that the Board of Directors approved a stock repurchase program. Under the repurchase program, the Company may repurchase up to 366,050 shares of its common stock, or approximately 5% of its then outstanding shares. The repurchase program permits shares to be repurchased in the open market as conditions allow, or in privately negotiated transactions, and pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission. During the nine months ended September 30, 2026, the Company repurchased 192,718 shares of its common stock at an aggregate cost of $4.8 million. The authorized dollar limit for the program was up to $6.6 million. The Company exhausted the program dollar limit on August 31, 2026. See "Part II - Item 2. - Unregistered Sales of Equity Securities and Use of Proceeds" for additional information about repurchases of common stock.
In August 2026, the Company announced the adoption of a new stock repurchase program, which will expire on August 17, 2027. Under this program, the Company may repurchase up to 370,000 shares of its common stock or up to $10.0 million. The stock repurchase program may be suspended, terminated, or modified at any time for any reason. There were no repurchases of common stock under this program for the quarter ended September 30, 2026.
The Company's total stockholders' equity to total assets ratio and tangible common equity to tangible assets ratio ("TCE ratio") were 8.31% and 7.58%, respectively, at September 30, 2026, versus 8.40% and 7.65%, respectively, at December 31, 2025. The TCE ratio is a non-GAAP ratio. The ratio of total stockholders' equity to total assets is the most comparable U.S. GAAP measure to this non-GAAP ratio. The ratio of tangible common equity to tangible assets, or TCE ratio, is calculated by dividing total stockholders' equity by total assets, after reducing both amounts by intangible assets. The TCE ratio is not required by U.S. GAAP or by applicable bank regulatory requirements, but is a metric used by management to evaluate the adequacy of our capital levels. Since there is no authoritative requirement to calculate the TCE ratio, our TCE ratio is not necessarily comparable to similar capital measures disclosed or used by other companies in the financial services industry. Tangible common equity and tangible assets are non-GAAP financial measures and should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with U.S. GAAP. Set forth below are the reconciliations of tangible common equity to U.S. GAAP total stockholders' equity and tangible assets to U.S. GAAP total assets at September 30, 2026 (in thousands). (See also Non-GAAP Disclosure contained herein.)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios |
|
|
Total stockholders' equity (3) |
|
$ |
202,915 |
|
Total assets |
|
$ |
2,441,817 |
8.31% |
(1) |
|
Less: goodwill |
|
(19,168) |
|
Less: goodwill |
|
|
(19,168) |
|
||
|
Less: core deposit intangible |
|
(160) |
|
Less: core deposit intangible |
|
|
(160) |
|
||
|
Tangible common equity (3) |
|
$ |
183,587 |
|
Tangible assets |
|
$ |
2,422,489 |
7.58% |
(2) |
| (1) | The ratio of total stockholders' equity to total assets is the most comparable GAAP measure to the non-GAAP tangible common equity ratio presented herein. |
| (2) | TCE ratio |
| (3) | Includes common stock and Series A preferred stock. |
All dividends must conform to applicable statutory and regulatory requirements. The Company's ability to pay dividends to stockholders depends on the Bank's ability to pay dividends to the Company. Additionally, the ability of the Bank to pay dividends to the Company is subject to certain regulatory restrictions. Under New York law, a bank may pay a dividend on its common stock only out of net profits, and must obtain the approval of the Superintendent of the DFS if the total of all dividends declared by a bank or trust company in any calendar year exceeds the total of its net profits for that year combined with its retained net profits for the preceding two years, less any required transfer to surplus or a fund for the retirement of any preferred stock.
The Company's Board of Directors approved the declaration of a $0.10 per share cash dividend on both common shares and Series A preferred shares payable on November 18, 2026 to stockholders of record on November 11, 2026.
Off-Balance Sheet Arrangements - The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated financial statements. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.
Commitments to extend credit are agreements to lend to customers provided there are no violations of material conditions established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management's credit evaluation of the customer. Collateral required varies, but may include accounts receivable, inventory, equipment, real estate and income-producing commercial properties. At September 30, 2026 and December 31, 2025, commitments to originate loans and commitments under unused lines of credit for which the Bank is obligated amounted to approximately $170.0 million and $160.9 million, respectively.
Letters of credit are conditional commitments guaranteeing payments of drafts in accordance with the terms of the letter of credit agreements. Commercial letters of credit are used primarily to facilitate trade or commerce and are also issued to support public and private borrowing arrangements, bond financings and similar transactions. Collateral may be required to support letters of credit based upon management's evaluation of the creditworthiness of each customer. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. At September 30, 2026 and December 31, 2025, letters of credit outstanding were approximately $1.0 million and $0.8 million, respectively.
Results of Operations - Comparison of the Three Months Ended September 30, 2026 and 2025 - The Company recorded net income of $4.3 million during the three months ended September 30, 2026, versus net income of $3.5 million in the 2025 comparable quarter. During the quarter ended September 30, 2026, net interest income increased $1.8 million and provision for credit losses decreased $0.2 million, compared to the September 30, 2025 quarter. These were partially offset by a decrease of $0.5 million in non-interest income, particularly a decrease in gain on sale of loans held for sale of $0.9 million due to a lower volume of SBA loan sales, a $0.4 million increase in non-interest expense, and a $0.3 million increase income tax expense.
Net Interest Income and Margin
The $1.8 million increase in net interest income for the three months ended September 30, 2026, versus the comparable 2025 quarter was due to improvement in the Company's net interest margin to 3.02% in the 2026 quarter from 2.74% in the comparable 2025 quarter. The cost of interest-bearing liabilities decreased to 3.50% in the 2026 quarter from 3.89% in the comparable 2025 quarter, a decrease of 39 basis points. This decrease was partially offset by a 5 basis point decrease in the yield on interest earning assets to 5.89% in the 2026 quarter from 5.94% in the third quarter of 2025. Net interest income on a linked quarter basis increased by $0.3 million or 1.52%.
The following table, "Net Interest Income Analysis", presents for the three months ended September 30, 2026 and 2025, the Company's average assets, liabilities and stockholders' equity. The Company's net interest income, net interest spread and net interest margin are also reflected.
NET INTEREST INCOME ANALYSIS
For the Three Months Ended September 30, 2026 and 2025
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2026 |
|
2025 |
|
||||||||||||
|
|
|
Average |
|
|
|
|
Average |
|
Average |
|
|
|
|
Average |
|
||
|
|
|
Balance |
|
Interest |
|
Yield/Cost(1) |
|
Balance |
|
Interest |
|
Yield/Cost(1) |
|
||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans(2) |
|
$ |
2,039,760 |
|
$ |
30,683 |
5.97 |
% |
$ |
1,978,375 |
|
$ |
29,951 |
6.01 |
% |
||
|
Investment securities |
|
133,891 |
|
1,907 |
5.65 |
% |
99,816 |
|
1,604 |
6.38 |
% |
||||||
|
Interest-earning cash |
|
56,123 |
|
526 |
3.72 |
% |
117,314 |
|
1,311 |
4.43 |
% |
||||||
|
FHLB stock and other investments |
|
|
5,924 |
|
|
85 |
|
5.69 |
% |
|
7,821 |
|
|
128 |
|
6.49 |
% |
|
Total interest-earning assets |
|
2,235,698 |
|
33,201 |
5.89 |
% |
2,203,326 |
|
32,994 |
5.94 |
% |
||||||
|
Non interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
11,509 |
|
|
|
|
10,083 |
|
|
|
|
||||||
|
Other assets |
|
62,428 |
|
|
|
|
53,860 |
|
|
|
|
||||||
|
Total assets |
|
$ |
2,309,635 |
|
|
|
|
$ |
2,267,269 |
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders' equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW and money market deposits |
|
$ |
1,264,508 |
|
$ |
10,381 |
3.26 |
% |
$ |
1,186,968 |
|
$ |
11,207 |
3.75 |
% |
||
|
Time deposits |
|
466,367 |
|
4,502 |
3.83 |
% |
493,724 |
|
5,097 |
4.10 |
% |
||||||
|
Total interest-bearing deposits |
|
1,730,875 |
|
14,883 |
3.41 |
% |
1,680,692 |
|
16,304 |
3.85 |
% |
||||||
|
Borrowings |
|
|
70,636 |
|
|
636 |
|
3.57 |
% |
|
106,866 |
|
|
1,141 |
|
4.24 |
% |
|
Subordinated debentures |
|
34,241 |
|
656 |
7.60 |
% |
24,720 |
|
326 |
5.23 |
% |
||||||
|
Total interest-bearing liabilities |
|
1,835,752 |
|
16,175 |
3.50 |
% |
1,812,278 |
|
17,771 |
3.89 |
% |
||||||
|
Demand deposits |
|
240,687 |
|
|
|
|
223,570 |
|
|
|
|
||||||
|
Other liabilities |
|
28,647 |
|
|
|
|
30,622 |
|
|
|
|
||||||
|
Total liabilities |
|
|
2,105,086 |
|
|
|
|
|
|
|
2,066,470 |
|
|
|
|
|
|
|
Stockholders' equity |
|
204,549 |
|
|
|
|
200,799 |
|
|
|
|
||||||
|
Total liabilities and stockholders' equity |
|
$ |
2,309,635 |
|
|
|
|
$ |
2,267,269 |
|
|
|
|
||||
|
Net interest rate spread(3) |
|
|
|
|
2.39 |
% |
|
|
|
2.05 |
% |
||||||
|
Net interest income/margin(4) |
|
|
|
$ |
17,026 |
3.02 |
% |
|
|
$ |
15,223 |
2.74 |
% |
||||
| (1) | Annualized. |
| (2) | Includes non-accrual loans. |
| (3) | Net interest spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities. |
| (4) | Net interest margin represents net interest income divided by average interest-earning assets. |
Provision and Allowance for Credit losses on Loans
The Company recorded a provision for credit losses of $1.1 million for the three months ended September 30, 2026, versus $1.3 million (net of a $50 thousand credit to provision for credit losses on unfunded commitments) in the quarter ended September 30, 2025. Net charge-offs of $322 thousand were incurred during the quarter ended September 30, 2026. The September 30, 2026 allowance for credit losses was $19.9 million versus $18.7 million at December 31, 2025. The allowance for credit losses as a percentage of total loans was 0.96% at September 30, 2026 and 0.93% at December 31, 2025. (See also Critical Accounting Policies, Judgments and Estimates and Asset Quality contained herein.)
Reserve for Unfunded Commitments
The Company maintains a reserve, recorded in other liabilities, associated with unfunded loan commitments accepted by borrowers. The amount of the reserve was $0.7 million at September 30, 2026 and $0.6 million at December 31, 2025. This reserve is determined based upon the outstanding volume of loan commitments at the end of each period. Any increases or reductions in this reserve are recognized in the provision for credit losses.
Non-interest Income
Non-interest income decreased by $0.5 million for the three months ended September 30, 2026 versus the comparable 2025 quarter. The decrease in non-interest income is primarily related to the decrease in the net gain on sale of loans held for sale of $0.9 million due to a lower volume of SBA loan sales, which was partially offset by increases in BOLI income and other income.
Non-Interest Income
For the three and nine months ended September 30, 2026 and 2025
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
||||||||
|
|
|
September 30, |
|
September 30, |
||||||||
|
(in thousands) |
|
2026 |
|
2025 |
|
2026 |
|
2025 |
||||
|
Loan servicing and fee income |
|
$ |
960 |
|
$ |
1,057 |
|
$ |
3,166 |
|
$ |
3,221 |
|
Service charges on deposit accounts |
|
146 |
|
237 |
|
515 |
|
516 |
||||
|
Net gain on sale of loans held for sale |
|
550 |
|
1,451 |
|
3,370 |
|
6,101 |
||||
|
BOLI income |
|
|
157 |
|
|
- |
|
|
157 |
|
|
- |
|
Other income |
|
441 |
|
40 |
|
586 |
|
240 |
||||
|
Total non-interest income |
|
$ |
2,254 |
|
$ |
2,785 |
|
$ |
7,794 |
|
$ |
10,078 |
Non-interest Expense
Total non-interest expense increased by $0.4 million for the three months ended September 30, 2026 versus the comparable 2025 quarter due to a $0.1 million increase in salaries and employee benefits, a $0.1 million increase in occupancy and equipment and a $0.2 million increase in data processing.
Non-Interest Expense
For the three and nine months ended September 30, 2026 and 2025
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
||||||||
|
|
|
September 30, |
|
September 30, |
||||||||
|
(in thousands) |
|
2026 |
|
2025 |
|
2026 |
|
2025 |
||||
|
Salaries and employee benefits |
|
$ |
6,919 |
|
$ |
6,774 |
|
$ |
24,414 |
|
$ |
21,009 |
|
Conversion expenses |
|
|
- |
|
|
- |
|
|
- |
|
|
3,180 |
|
Occupancy and equipment |
|
2,075 |
|
1,960 |
|
6,155 |
|
5,706 |
||||
|
Data processing |
|
481 |
|
313 |
|
1,334 |
|
1,414 |
||||
|
Professional fees |
|
687 |
|
732 |
|
2,490 |
|
2,397 |
||||
|
Federal deposit insurance premiums |
|
324 |
|
334 |
|
1,050 |
|
1,036 |
||||
|
Other expenses |
|
1,909 |
|
1,900 |
|
6,206 |
|
5,883 |
||||
|
Total non-interest expense |
|
$ |
12,395 |
|
$ |
12,013 |
|
$ |
41,649 |
|
$ |
40,625 |
The Company recorded income tax expense of $1.4 million for the three months ended September 30, 2026, versus income tax expense of $1.2 million in the comparable 2025 quarter.
Results of Operations - Comparison of the Nine Months Ended September 30, 2026 and 2025 - The Company recorded net income of $10.3 million during the nine months ended September 30, 2026, versus net income of $7.5 million in the comparable 2025 nine month period. The $2.8 million increase in earnings for the nine months ended September 30, 2026, versus the comparable 2025 period resulted from a $5.5 million increase in net interest income and a $2.2 million decrease in provision for credit losses. This was partially offset by a $2.3 million decrease in non-interest income, primarily the decrease in the net gain on sale of loans held for sale due to a lower volume of SBA loan sales, a $1.0 million increase in non-interest expense, and a $1.5 million increase in income tax expense.
Net Interest Income and Margin
The $5.5 million increase in net interest income for the nine months ended September 30, 2026, versus the comparable 2025 period was due to the improvement of the Company's net interest margin to 3.03% in the 2026 nine month period from 2.73% in the comparable 2025 period. The cost of interest-bearing liabilities decreased to 3.49% in the 2026 nine month period from 3.95% in the comparable 2025 period, a decrease of 46 basis points. This decrease was partially offset by a 9 basis point decrease in the yield on interest earning assets to 5.89% in the 2026 period from 5.98% in the comparable 2025 period.
The following table, "Net Interest Income Analysis", presents for the nine months ended September 30, 2026 and 2025, the Company's average assets, liabilities and stockholders' equity. The Company's net interest income, net interest spread and net interest margin are also reflected.
NET INTEREST INCOME ANALYSIS
For the Nine months Ended September 30, 2026 and 2025
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2026 |
|
2025 |
|
||||||||||||
|
|
|
Average |
|
|
|
|
Average |
|
Average |
|
|
|
|
Average |
|
||
|
|
|
Balance |
|
Interest |
|
Yield/Cost(1) |
|
Balance |
|
Interest |
|
Yield/Cost(1) |
|
||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans(2) |
|
$ |
2,012,379 |
|
$ |
90,089 |
5.99 |
% |
$ |
1,982,194 |
|
$ |
89,720 |
6.05 |
% |
||
|
Investment securities |
|
118,264 |
|
4,928 |
5.57 |
% |
95,086 |
|
4,223 |
5.94 |
% |
||||||
|
Interest-earning cash |
|
|
78,518 |
|
|
2,184 |
|
3.72 |
% |
|
104,452 |
|
|
3,488 |
|
4.46 |
% |
|
FHLB stock and other investments |
|
|
6,691 |
|
|
358 |
|
7.15 |
% |
|
7,957 |
|
|
449 |
|
7.54 |
% |
|
Total interest-earning assets |
|
2,215,852 |
|
97,559 |
5.89 |
% |
2,189,689 |
|
97,880 |
5.98 |
% |
||||||
|
Non interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
|
11,225 |
|
|
|
|
|
|
|
9,603 |
|
|
|
|
|
|
|
Other assets |
|
56,069 |
|
|
|
|
51,254 |
|
|
|
|
||||||
|
Total assets |
|
$ |
2,283,146 |
|
|
|
|
$ |
2,250,546 |
|
|
|
|
||||
|
Liabilities and stockholders' equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW and money market deposits |
|
$ |
1,220,782 |
|
$ |
29,062 |
3.18 |
% |
$ |
1,176,852 |
|
$ |
33,311 |
3.78 |
% |
||
|
Time deposits |
|
475,619 |
|
13,807 |
3.88 |
% |
490,607 |
|
15,475 |
4.22 |
% |
||||||
|
Total interest-bearing deposits |
|
1,696,401 |
|
42,869 |
3.38 |
% |
1,667,459 |
|
48,786 |
3.91 |
% |
||||||
|
Borrowings |
|
86,007 |
|
|
2,444 |
3.80 |
% |
111,280 |
|
3,469 |
4.17 |
% |
|||||
|
Subordinated debentures |
|
34,937 |
|
|
2,087 |
7.99 |
% |
24,707 |
|
978 |
5.29 |
% |
|||||
|
Total interest-bearing liabilities |
|
1,817,345 |
|
47,400 |
3.49 |
% |
1,803,446 |
|
53,233 |
3.95 |
% |
||||||
|
Demand deposits |
|
233,548 |
|
|
|
|
220,032 |
|
|
|
|
||||||
|
Other liabilities |
|
28,572 |
|
|
|
|
27,677 |
|
|
|
|
||||||
|
Total liabilities |
|
|
2,079,465 |
|
|
|
|
|
|
|
2,051,155 |
|
|
|
|
|
|
|
Stockholders' equity |
|
203,681 |
|
|
|
|
199,391 |
|
|
|
|
||||||
|
Total liabilities and stockholders' equity |
|
$ |
2,283,146 |
|
|
|
|
$ |
2,250,546 |
|
|
|
|
||||
|
Net interest rate spread(3) |
|
|
|
|
2.40 |
% |
|
|
|
2.03 |
% |
||||||
|
Net interest income/margin(4) |
|
|
|
$ |
50,159 |
3.03 |
% |
|
|
$ |
44,647 |
2.73 |
% |
||||
| (1) | Annualized. |
| (2) | Includes non-accrual loans. |
| (3) | Net interest spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities. |
| (4) | Net interest margin represents net interest income divided by average interest-earning assets. |
Provision for Credit Losses on Loans
The Company recorded a provision for credit losses of $2.1 million (including a $30 thousand provision for credit losses on unfunded commitments) for the nine months ended September 30, 2026, versus $4.3 million (including a $137 thousand provision for credit losses on unfunded commitments) recorded for the comparable period in 2025. (See also Critical Accounting Policies, Judgments and Estimates and Asset Quality contained herein.)
Non-interest Income
Non-interest income decreased by $2.3 million for the nine months ended September 30, 2026 versus the comparable 2025 period. This decrease was driven by a $2.7 million decrease in net gain on sale of loans held for sale due to a lower volume of SBA loan sales, and a $0.1 million decrease in loan servicing and fee income, which were partially offset by a total $0.5 million increase in BOLI income and other income.
Non-interest Expense
Total non-interest expense increased by $1.0 million for the nine months ended September 30, 2026 versus the comparable 2025 period. The increase in non-interest expense was primarily related to increases of $3.4 million in salaries and employee benefits, $0.4 million in occupancy and equipment and $0.3 million in other expenses, which included $240 thousand of debt extinguishment charges. Salaries and employee benefits for the nine months ended September 30, 2026 includes a severance benefit of approximately $2.2 million to the former President of the Company and the Bank whose last day of employment was March 31, 2026. Non-interest expense for the nine months ended September 30, 2025 includes a $3.2 million core system conversion expenses.
The Company recorded income tax expense of $3.9 million for the nine months ended September 30, 2026, versus income tax expense of $2.4 million in the comparable 2025 period. Income tax expense increased during 2026 due to a higher impact from non-deductible compensation costs subject to the limitations of Section 162(m) of the Internal Revenue Code. In addition, the prior year period benefited from excess tax benefits associated with the exercise of non-qualified stock options, which did not recur at the same level in the current period.
Asset Quality - Total non-accrual loans at September 30, 2026 were $29.1 million, or 1.40% of total loans, compared to $21.6 million, or 1.08% of total loans at December 31, 2025. The allowance for credit losses as a percentage of total non-accrual loans amounted to 68%, 87% and 130% at September 30, 2026, December 31, 2025 and September 30, 2025, respectively.
Total loans having credit risk ratings of Special Mention and Substandard were $59.6 million at September 30, 2026, versus $56.1 million at December 31, 2025. The Company's Special Mention and Substandard loans were comprised of residential real estate, multifamily, commercial real estate loans, commercial and industrial loans (including SBA facilities) and construction and land development loans at September 30, 2026. The Company had no loans with a credit risk rating of Doubtful for the periods presented. All loans not having credit risk ratings of Special Mention, Substandard or Doubtful are considered pass loans.
At September 30, 2026, the Company's allowance for credit losses amounted to $19.9 million or 0.96% of period-end total loans outstanding. The allowance as a percentage of loans outstanding was 0.93% at December 31, 2025 and 1.12% at September 30, 2025. Net loan charge-offs of $322 thousand were recorded during the three months ended September 30, 2026. The Company recorded net loan charge-offs of $592 thousand for the three months ended September 30, 2025.
The Company recorded a provision for credit losses of $1.1 million for the three months ended September 30, 2026, versus $1.3 million (net of a $50 thousand credit to provision for credit losses on unfunded commitments) for the September 30, 2025 quarter. Additional information regarding the ACL and the associated provisions recognized during the quarters ended September 30, 2026 and 2025 is presented in Note 4 to the unaudited consolidated financial statements. (See also Critical Accounting Policies, Judgments and Estimates contained herein).
ASSET QUALITY
September 30, 2026 versus December 31, 2025 and September 30, 2025
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of or for the three months ended |
|
|||||||
|
|
|
|
9/30/2026 |
|
|
12/31/2025 |
|
|
9/30/2025 |
|
|
Non-accrual loans |
|
$ |
29,108 |
|
$ |
21,604 |
|
$ |
17,169 |
|
|
Non-accrual loans held for sale |
|
|
- |
|
|
- |
|
|
- |
|
|
Loans greater than 90 days past due and accruing |
|
|
- |
|
|
- |
|
|
3,307 |
|
|
Other real estate owned |
|
|
650 |
|
|
650 |
|
|
- |
|
|
Total non-performing assets (1) |
|
$ |
29,758 |
|
$ |
22,254 |
|
$ |
20,476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans held for sale |
|
$ |
3,615 |
|
$ |
6,407 |
|
$ |
8,852 |
|
|
Loans held for investment |
|
|
2,084,650 |
|
|
2,000,749 |
|
|
1,988,683 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses: |
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
19,139 |
|
$ |
22,354 |
|
$ |
21,571 |
|
|
Provision |
|
|
1,100 |
|
|
5,925 |
|
|
1,375 |
|
|
Charge-offs |
|
|
(335) |
|
|
(9,590) |
|
|
(594) |
|
|
Recoveries |
|
|
13 |
|
|
5 |
|
|
2 |
|
|
Ending balance |
|
$ |
19,917 |
|
$ |
18,694 |
|
$ |
22,354 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses as a % of total loans (2) |
|
|
0.96 |
% |
|
0.93 |
% |
|
1.12 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses as a % of non-accrual loans (2) |
|
|
68 |
% |
|
87 |
% |
|
130 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-accrual loans as a % of total loans (2) |
|
|
1.40 |
% |
|
1.08 |
% |
|
0.86 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing assets as a % of total loans, loans held for sale and other real estate owned |
|
|
1.42 |
% |
|
1.11 |
% |
|
1.03 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing assets as a % of total assets |
|
|
1.22 |
% |
|
0.93 |
% |
|
0.88 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-performing assets to total loans held for sale and investment |
|
|
1.43 |
% |
|
1.11 |
% |
|
1.03 |
% |
| (1) | Non-performing assets defined as non-accrual loans, non-accrual loans held for sale, loans greater than 90 days past due and accruing and other real estate owned. |
| (2) | Excludes loans held for sale. |
Hanover Bancorp Inc. published this content on November 06, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 06, 2026 at 21:02 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]