tm227216-1_s1 - none - 88.8599295s

As filed with the U.S. Securities and Exchange Commission on February 23, 2022

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

HANOVER BANCORP, INC.

(Exact Name of Registrant as specified in its Charter)

	New York			6022			81-3324480
	(State or other jurisdiction of incorporation or organization)			(Primary Standard Industrial Classification Code Number)			(IRS Employer Identification No.)

80 East Jericho Turnpike
Mineola, New York 11501
(516) 548-8500

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Michael P. Puorro
Chairman and Chief Executive Officer
Hanover Bancorp, Inc.
80 East Jericho Turnpike
Mineola, New York 11501
(516) 548-8500

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies of communications to:

Robert A. Schwartz, Esq.
Windels Marx Lane & Mittendorf, LLP
120 Albany Street Plaza, FL 6
New Brunswick, NJ 08901
(732) 448-2548

Paul M. Aguggia, Esq.
Shawn M. Turner, Esq.
Holland & Knight LLP
31 W. 52nd Street
New York, NY 10019
(212) 513-3352

Approximate date of commencement of proposed sale to the public: As soon as practical after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

	Large accelerated filer ☐			Accelerated filer ☐
	Non-accelerated filer ☒			Smaller reporting company ☒
				Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said section 8(a), may determine.

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The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and no offer to buy these securities is being solicited in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED , 2022

HANOVER BANCORP, INC.

shares of common stock

This prospectus describes the initial public offering of shares of common stock of Hanover Bancorp, Inc., a New York corporation and bank holding company headquartered in Mineola, New York. Prior to this offering, there has been no public market for the common stock. We currently estimate that the public offering price will be between $ and $ per share. We expect the common stock to be approved for listing on the Nasdaq Global Select Market under the symbol “HNVR”.

INVESTING IN THE COMMON STOCK IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. PLEASE SEE “RISK FACTORS” BEGINNING ON PAGE 25.

We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements.

Per Share

Total

Public offering price of common stock

Underwriting discounts and commissions

Proceeds to us, before expenses

We have granted the underwriters a 30-day option to purchase up to additional shares of our common stock at the public offering price, less underwriting discounts and commissions, to cover over-allotments, if any.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The securities are not savings accounts, deposits, or other obligations of any bank and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency.

We have not authorized anyone to provide any information or to make any representations other than those contained in this Prospectus. We take no responsibility for, and can provide no assurance as to the reliability of, any information that others may give you. This Prospectus is an offer to sell only the shares offered hereby and only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this Prospectus is current only as of its date.

The underwriters expect to deliver the shares of our common stock against payment on or about , 2022.

Stephens Inc.

Piper Sandler & Co.

The date of this Prospectus is , 2022

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ABOUT THIS PROSPECTUS

You should rely only on the information contained in this prospectus or in any free-writing prospectus we may authorize to be delivered or made available to you. We have not, and the underwriters have not, authorized any other person to provide you with additional, different, or inconsistent information. If anyone provides you with different or inconsistent information, you should not rely on it. For further information, please see the section of this prospectus entitled “Where You Can Find More Information.” We are not making an offer to sell the common stock in any jurisdiction where the offer or sale is not permitted.

You should not assume that the information appearing in this prospectus is accurate as of any date other than the date on the front cover of this prospectus, regardless of the time of delivery of this prospectus or any sale of the common stock. Our business, financial condition, results of operations and prospects may have changed since those dates.

“Hanover Bancorp”, “Hanover Bank” and their logos and other trademarks referred to and included in this prospectus belong to us. Solely for convenience, we refer to our trademarks in this prospectus without the ® or the ™ or symbols, but such references are not intended to indicate that we will not assert, to the fullest extent under applicable law, our rights to our trademarks. Other service marks, trademarks and trade names referred to in this prospectus, if any, are the property of their respective owners, although for presentational convenience we may not use the ® or the ™ symbols to identify such trademarks.

Until , 2022 (the 25th day after the date of this prospectus), all dealers that buy, sell or trade shares of our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to their unsold allotments or subscriptions.

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

This prospectus contains forward-looking statements, including in the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” These forward-looking statements reflect our current views with respect to, among other things, future events and our business and financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “project,” “projection,” “forecast,” “goal,” “target,” “would” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements include, but are not limited to:

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statements of our goals, intentions and expectations;

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statements regarding our business plans, prospects, growth and operating strategies;

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statements regarding the quality of our loan and investment portfolios; and

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estimates of our risks and future costs and benefits.

These forward-looking statements are not historical facts, and are based on current expectations, estimates, assumptions and projections about our industry and management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. The inclusion of these forward-looking statements should not be regarded as a representation by us, the selling shareholders, the underwriter or any other person that such expectations, estimates and projections will be achieved. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

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There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following:

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general economic conditions, either nationally or in our market areas, that are worse than expected;

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inflation and changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments;

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our ability to retain our existing customers;

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changes in consumer spending, borrowing and savings habits;

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fiscal and monetary policies;

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the unexpected loss of key personnel and the failure to attract and retain skilled people;

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our ability to implement and change our business strategies;

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our ability to enter new markets successfully and to capitalize on strategic growth opportunities;

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our ability to successfully integrate into our operations any assets, liabilities, customers, systems and management personnel we may acquire and our ability to realize related revenue synergies and cost savings within expected time frames, and any goodwill charges related thereto;

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competition and innovation with respect to financial products and services by banks, financial institutions and non-traditional providers, including retail businesses and technology companies;

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changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses;

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demand for loans and deposits in our market areas;

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fluctuations in real estate values and both residential and commercial real estate market conditions;

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our ability to access cost-effective funding;

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changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;

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changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;

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a breach in security of our information systems, including the occurrence of a cyber incident or a deficiency in cyber security;

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conditions relating to the continuing COVID-19 pandemic, including the severity and duration of the associated economic slowdown either nationally or in our market areas and the effectiveness of vaccination programs, that are worse than expected;

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other pandemics or public health crisis;

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acts of war or terrorism;

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political instability or civil unrest;

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climate change, including any enhanced regulatory, compliance, credit and reputational risks and costs; and

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other economic, competitive, governmental, regulatory and operational factors affecting our operations, pricing, products and services described elsewhere in this prospectus.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this prospectus, including those discussed in the section entitled “Risk Factors.”

iii

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PROSPECTUS SUMMARY

This summary highlights important features of this offering. Because this is a summary, it may not contain all of the information that you should consider before investing in our common stock. Therefore, you should read the entire prospectus carefully, especially the risks of investing in our common stock discussed under “Risk Factors,” as well as the consolidated financial statements included herein before making a decision to invest in our common stock. Unless the context otherwise requires, references in this prospectus to the “Company,” “we,” “us,” and “our” refer to Hanover Bancorp, Inc. and its wholly owned subsidiary, Hanover Community Bank.

Hanover Bancorp, Inc.

We are a New York corporation which, in 2016, became the holding company for Hanover Community Bank (the “Bank”) a New York-chartered community commercial bank focusing on highly personalized and efficient services and products responsive to local needs. The Bank operates as a locally headquartered, community-oriented bank serving customers throughout the New York metro area from offices in Nassau, Queens, Kings (Brooklyn) and New York (Manhattan) Counties, New York. We also have an administrative office in Hauppauge, Suffolk County New York which helps service our municipal deposit customers, and are in the process of opening a branch office in Freehold, New Jersey. As of December 31, 2021, we had total assets of $1.5 billion, total deposits of $1.2 billion and total stockholders’ equity of $129.4 million.

The Bank was originally organized in 2009, with a focus on serving the South Asian community in Nassau County. After incurring financial and regulatory setbacks, the Bank was recapitalized in 2012 by a group led by our current Chairman and CEO Michael Puorro and current members of our Board of Directors, which we refer to as the 2012 recapitalization. Following the 2012 recapitalization and hiring of Michael Puorro, the Bank adopted a strategic plan focused on providing differentiated consumer and commercial banking services to clients in the western Long Island markets and New York City boroughs, particularly the Queens and Brooklyn markets. As a result, the Bank has grown its balance sheet significantly both through organic loan and deposit growth, as well as opportunistic acquisitions. The Bank’s management team has utilized their strong local community ties along with their experience with both federal and New York bank regulatory agencies to create a bank that we believe emphasizes strong credit quality, a solid balance sheet without the burden of the troubled legacy assets of other banks, and a robust capital base.

As a bank holding company, we are subject to the supervision of the Board of Governors of the Federal Reserve System (“FRB”). We are required to file with the FRB reports and other information regarding our business operations and the business operations of our subsidiaries. As a New York State chartered bank, the Bank is subject to regulation by the New York State Department of Financial Services (“DFS”) and the Federal Deposit Insurance Corporation (“FDIC”).

Creating a Differentiated Community Bank

Hanover is a niche focused lender with multiple funding channels in one of the strongest metro markets in the United States. In the years following the 2012 recapitalization, our primary goal was to achieve economies of scale and profitability. From the outset, our strategic plan was focused on creating a differentiated community bank, with a particular focus on diversifying our lending capabilities away from commercial real estate and multi-family, which is prevalent in the New York City market. We successfully leveraged the original roots of Hanover Community Bank and developed a niche residential mortgage lending business focused on non-qualified, alternative documentation borrowers in the NYC boroughs.

Following the recapitalization in 2012, our total assets were approximately $70 million. From 2012 until 2018 we grew exclusively through an organic strategy focused primarily on the niche residential business (both on-balance sheet lending and selling into the secondary markets) and initially funding that business with an efficient single-branch deposit gathering operation. As we worked through our strategic plan and continued to grow, it became apparent that we needed to further diversify our niche lending activities and enhance our funding channels. Our acquisitions of Chinatown Federal Savings Bank (“CFSB”) in 2019 and Savoy Bank (“Savoy”) in 2021 were significant steps towards accomplishing these objectives.

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The summary below highlights our recent business accomplishments and milestones commencing with the 2012 recapitalization led by Chairman and CEO Michael Puorro and current members of our Board of Directors:

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The Bank’s total assets grew to over $150 million during 2014, and the Bank achieved sustainable profitability at this time.

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During 2014, the Bank initiated its niche residential real estate loan origination business with a focus on diversifying the portfolio away from commercial real estate.

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Our total consolidated assets grew to over $500 million during 2017, primarily through organic loan generation and deposit gathering, activities conducted from its single branch location. Our on-balance sheet lending was primarily focused in the residential mortgage business and supplemented with traditional multi-family and CRE lending. This loan mix allowed us to grow rapidly while remaining well within the regulatory CRE concentration guidelines. Our profitability was further supported by selling a portion of our residential mortgage production into the secondary markets,

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including sales to institutional buyers and REITs. We maintained one branch during this time period while we focused on profitability and our niche lending operation. As we moved into 2016 and 2017, we revised our strategic plan to focus on additional avenues of funding, both from a product and new location standpoint.

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In March 2017, we established an office in Forest Hills, Queens.

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In June 2017, Hanover and the Bank moved their administrative headquarters to Mineola, NY and opened a full service branch at that location in August 2017.

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The Bank further expanded in Queens County, New York with a de novo branch in Flushing, New York in February 2019.

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In 2019, we acquired CSFB for a total purchase price of $13.6 million. We acquired total assets of $141.3 million, total loans of $93.6 million and total deposits of $108.8 million, as well as three branches in Manhattan and Brooklyn, NY (one of which, the Canal Street branch, was subsequently closed). The transaction helped us enhance and diversify our funding profile and further enhance our visibility in the New York City market where much of our lending activities have taken place.

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In October 2020, we issued $25.0 million in subordinated notes to support our Savoy acquisition, which was announced in August 2020. The offering was rated investment grade by Egan-Jones, and we believe this is indicative of the market receptiveness to our story and business model.

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We began a municipal deposit program in late 2020. The program is based upon relationships of our management team, rather than bid based transactions. At December 31, 2021, total municipal deposits were $407.1 million, representing 18 separate governmental clients, compared to $74.3 million at December 31, 2020, representing 6 separate governmental clients. The average rate on the municipal deposit portfolio was 0.19% at December 31, 2021.

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On May 26, 2021, we completed the Savoy acquisition, which is described in greater detail on page 6.

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We have augmented and strengthened our management team significantly through our recruiting efforts, adding a new Chief Financial Officer (allowing the former Chief Financial Officer to concentrate on corporate strategy and oversee certain operations as President), Chief Credit Officer, Director of Loan Operations, Director of Commercial Real Estate, Director of Human Resources, and Chief Municipal Officer, the latter of whom helped us launch our municipal deposit program.

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In December 2021, the SBA approved the Bank’s application to process loans under the SBA’s Preferred Lender Program, 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.

Our Business Strategy

Our goal is to build the premier community bank franchise serving consumers and small to mid-size businesses in the New York City metro area and western Long Island. We believe our nimble and dynamic business model has significant advantages over larger competitors, and that we further differentiate ourselves by focusing on multiple niche areas. Our goal is to continue to penetrate the potential customer bases in each of these niche areas.

With the Savoy acquisition, we have expanded our commercial banking capabilities significantly, with a particular focus on small business clients and Small Business Administration (“SBA”) lending. Our one to four family residential mortgage segment has a particular niche focus on non-conforming loans, primarily secured by both owner-occupied and investment properties. The segment has proven particularly appealing to Asian American borrowers in the New York City boroughs. We offer a variety of deposit accounts to both businesses and consumers through our branch network, which we believe complements our niche lending efforts. Additionally, we have expanded our deposit products to include a full line of municipal banking accounts, which is allowing us to capture additional customers in our operating footprint.

We believe the local economies in our geographic footprint offer us significant growth opportunities that we can capitalize on through our focus on personalized service, our ability to realize greater economies of scale than smaller community banks, and our ability to provide better and more responsive service than larger regional banks.

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Diversifying Our Loan Portfolio through Niche Segments

We are focused on diversifying our loan portfolio through niche lending segments that we believe generate appropriate risk-adjusted returns. At December 31, 2021, the composition of our loan portfolio was as follows:

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We focus our niche lending activities primarily on three segments:

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Residential real estate — We initiated our residential lending platform, which consists of loans secured by owner-occupied and investment properties, in 2013 and focus on the boroughs of New York City. We originate mainly non-qualified, alternative documentation single-family residential mortgage loans through broker referrals, our branch network and retail channels to accommodate the needs of diverse communities in the New York City Metropolitan Statistical Area (“MSA”). We offer multiple products including those designed specifically for two- to four-family units. One- to four-family residential mortgages, including home equity lines of credit, compromised 36.27% of our total loan portfolio, excluding PPP loans, as of December 31, 2021.

We take a comprehensive approach to mortgage underwriting, as the average loan-to-value (“LTV”) of the portfolio at origination was 55.60% and the average FICO score was 745 as of December 31, 2021.

In addition to retaining production on our balance sheet, we generate additional non-interest revenue associated with one- to four-family loan origination and sale, and loan servicing fees.

Below is our historical level of residential originations and sales:

	As of or For the Years Ended September 30,
	2017			2018			2019			2020			2021
	(In thousands)
Residential real estate:
Loans originated		$	157,461		$	268,283		$	334,099		$	96,031		$	104,567
Loans sold			79,286			134,464			194,978			36,982			36,375

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Commercial Real Estate (including Multifamily) — CRE lending, which includes commercial real estate and multi-family lending, is an area of expertise for us, with the Savoy acquisition re-enforcing what we believe was an already strong CRE lending foothold in New York City. CRE loans are secured by first liens on commercial properties, with proceeds used to purchase such properties or

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refinance existing debt secured by such properties. We include in our CRE portfolio loans that are secured by multi-family properties, which are primarily rent controlled/stabilized multi-family properties located in New York City. Our CRE loan portfolio also contains loans secured by mixed-use properties loans, properties used solely for commercial purposes and construction loans secured by real estate. Our owner-occupied lending efforts were significantly enhanced with the Savoy Merger. Savoy’s lending team had focused on owner-occupied lending to small businesses in the New York City MSA and the broader four state area of New York, New Jersey, Connecticut and Pennsylvania. Commercial real estate loans including multi-family properties comprised 61% of total loans, excluding PPP loans, as of December 31, 2021. Included in that figure is a small construction portfolio representing $11 million in total balances and is primarily construction related to commercial properties.

Complementing Our Lending Efforts and Diversifying our Funding Sources

We believe our deposit and treasury management products and services complement our niche lending focus and help diversify our funding sources. The graphic below illustrates the impact our strategic initiatives have had on our deposit mix.

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Our funding strategy since the 2012 recapitalization has evolved as our business segments and branch network have increased. Our focus following the 2012 recapitalization was growing the balance sheet to achieve profitability and economies of scale. As we progressed beyond that point, we aimed to operate a branch-lite strategy and to open offices in strategic locations where we were lending, primarily in the residential mortgage segment. Our CFSB acquisition enhanced our footprint in the New York City boroughs and further complemented our lending efforts in those markets. Since 2019 we have focused on the following areas in an effort to bolster our core deposit levels and enhance our net interest margin:

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Implemented a core processor IT conversion that resulted in a platform with a comprehensive suite of commercial deposit account capabilities;

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Reduced wholesale funding levels (defined as Federal Home Loan Bank (“FHLB”) borrowings, brokered deposits and Qwick Rate accounts);

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Hired a Chief Municipal Officer and supporting personnel to initiate our municipal banking business, which has grown our municipal deposit balances from $74.3 million at December 31, 2020 to $407.1 million at December 31, 2021, with an average rate of 0.19%; and

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Currently exploring several FinTech related partnerships that, if completed, could help generate additional low-cost deposit funding.

In late 2020, we established a municipal banking business which we believe has the potential to produce a significant level of deposits at cost effective rates. The business provides banking services to public municipalities, including counties, cities, towns, and school districts throughout the Long Island area. This effort is being led by Michael Locorriere, EVP and Chief Municipal Officer. Mr. Locorriere has more than thirty years of banking and government experience and prior to joining the Bank in November, 2020, Mr. Locorriere previously served as EVP & Director of Municipal Banking at a recently consolidated

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competitor in the Long Island market. We believe this effort is differentiated in that the customers are long-term relationships of our team and are not transactional in nature. Furthermore, our focus is banking municipalities that are core to our branch footprint and where our brand resonates. This initiative also is consistent with our branch-lite and highly efficient approach to growing our balance sheet. The team and relationships we have allow us to compete throughout the Long Island market without the expense and constraints of physical locations.

Merger with Savoy Bank

Prior to our May 2021 merger, Savoy was a New York state chartered commercial bank with a single office located in Midtown Manhattan, New York City. As of May 26, 2021 (the date of acquisition), Savoy had total assets of $648.4 million, total loans of $573.1 million, and total deposits of $340.2 million.

Savoy was a privately held commercial bank founded to provide small business owners in and around New York City with unparalleled service and financial products. Located at 600 Fifth Avenue, Rockefeller Center, New York, NY, Savoy specialized in working with customers across a wide range of industries to understand and fulfill their deposit and lending needs. Combining technology and expertise, Savoy offered a comprehensive suite of business accounts and deposit services and a spectrum of creative lending solutions, including through SBA 7(a), SBA 504 and United States Department of Agriculture (“USDA”) lending programs.

We will continue to operate Savoy’s single midtown Manhattan branch office, which will become the focal point and headquarters for our business development efforts in the New York City market.

As part of the Savoy merger, Mr. Metin Negrin, Savoy’s Chairman, and Ms. Elena Sisti, founder of Savoy and a member of its Board of Directors, joined the Boards of Directors of Hanover and the Bank. In addition, as previously noted, Mr. McClelland Wilcox, who was Savoy’s President and CEO prior to the merger, joined the Bank as Senior Executive Vice President, Head of Commercial Lending and Chief Revenue Officer.

Overview of Savoy’s Financial Performance Prior to the Savoy Merger

The table below highlights certain key Savoy financial performance metrics for the years ended December 31, 2016 through 2021.

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Savoy Standalone Financial Performance

	As of or For the Three Months Ended March 31, 2021
Total Assets		$	693,720
Total Gross Loans			600,649
Total PPP Loans			271,938
Total Deposits			365,285
Total Equity			49,063
Net Income			3,040
Net Interest Margin			3.70%
Return on Average Assets			1.88%
Return on Average Equity			25.83%

Note: Dollars in thousands

Strategic Benefits of the Savoy Merger

Our Board of Directors and management team believe the Savoy merger will provide meaningful strategic benefits in the near-, medium- and long-terms, including:

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Powerful Combination with a High Degree of Scarcity Value. Creates a premier $1.5 billion asset institution serving the greater New York City metro market with a track record of strong profitability and balance sheet growth. We believe the combined institution will be uniquely positioned as the second largest community bank with assets under $5 billion operating in the New York City and Long Island marketplace.

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Highly Complementary with Multiple Niches. Savoy’s SBA and owner-occupied focused commercial lending businesses complement our residential lending business and commercial lending efforts. We believe this combination will allow us to accelerate our growth and expansion initiatives in both SBA and commercial and industrial (“C&I”) lending.

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Shifts and Diversifies Loan Portfolio Toward Commercial Lending. Savoy adds significant commercial loans, expertise and infrastructure to our overall commercial lending expansion effort.

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Significant Opportunity to Grow Customers Participating in the Paycheck Protection program (PPP). Savoy had significant success in the PPP program with over $330.6 million in total originated loans, which consisted over 2,300 individual loans. Approximately 85.0% of those individual loans were to borrowers who previously were not Savoy customers. We will focus on converting these borrowers to longer-term customers.

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Enhancing the Competitive Position. The combined institution’s capital and profitability will allow us to further invest in digital initiatives, build out treasury management capabilities and focus on capturing additional wallet share from existing customers via a higher legal lending limit.

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Mitigated Integration Risk. We believe that we have prudently mitigated integration risk typically present in strategic acquisitions because of:

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Savoy’s branch-lite business model;

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An anticipated elevated level of employee retention due to virtually no overlap in business lines

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Our intent to continue Savoy’s existing SBA business largely intact with minimal disruptions;

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Our executive management’s track record and experience in mergers and acquisitions, particularly with the successful integration of our 2019 CFSB; and

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Systems conversion completed in July of 2021.

Attacking the Market Area

Target Market Area & Current Footprint Overview

Our target market area includes the five (5) boroughs of New York City as well as Nassau County on Long Island, New York. Our banking offices are located in Kings, Nassau, New York and Queens Counties in New York. In addition, we intend to open a branch office in Freehold, New Jersey in March 2022 to leverage Savoy’s SBA lending activities in this market to enhance our market share.

We own our administrative headquarters in Mineola, NY and our Garden City Park, NY branch and lease our five other branch locations. Set forth below is certain information regarding our office locations *:

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While focused on driving growth across all of our markets and business segments, we believe our efforts to leverage the Savoy acquisition and expand our presence in the New York City market will be the largest contributor to our asset growth for the foreseeable future due to the significant population and number of small businesses in the market.

The SBA Payment Protection Program (PPP) was targeted at assisting small businesses throughout the United States. The total outstanding PPP loan balances at June 30, 2020 (peak balances for most banks) for all NYC metro area (New York, Queens, Kings, Richmond, Brooklyn, Nassau, and Suffolk counties) headquartered banks was $39.3 billion and represents approximately 388 thousand individual loans. When excluding the 10 largest banks (which are money center and regional banks), the outstanding balances are $4.7 billion and represents approximately 36 thousand individual loans. We believe this data shows the depth and breadth of the small business community in the New York City market. Furthermore, there are many small business customers currently being banked by the large money center and regional banks, which we think are less nimble and focused on the small business customer relative to our Bank. We believe this presents great opportunity for growth via enhancing our market share within the NYC footprint.

Capitalize on Market Disruption

Our market area has undergone significant consolidation, particularly in the last twelve months. We intend to take advantage of the recent disruption caused by M&A in our operating markets, which we believe has created an environment of underbanked customers and has created opportunities to hire seasoned bankers. We have successfully employed this strategy in the past, hiring experienced bankers from merged institutions, which has helped us enhance critical aspects of our operations. We believe the most recent wave of consolidations, together with what we anticipate will be further consolidation, will create additional opportunities for us to attract additional experienced bankers. Below are some of the merger transactions announced and/or closed in and around our geographic footprint since 2019:

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M&T Bank Corporation / Peoples United Financial, Inc.

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Citizens Financial Group, Inc. / Investors Bancorp, Inc.

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New York Community Bancorp, Inc. / Flagstar Bancorp, Inc.

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Sterling Bancorp / Webster Financial Corporation

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Bridge Bancorp, Inc. / Dime Community Bancshares, Inc.

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Provident Financial Services, Inc. / SB One Bancorp

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Flushing Financial Corporation / Empire Bancorp, Inc.

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Valley National Bancorp / Bank Leumi USA

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Valley National Bancorp / The Westchester Bank Holding Corporation

Our Competitive Strengths

The banking business, especially in the New York metropolitan area, is highly competitive. We face substantial immediate competition and potential future competition both in attracting deposits and in originating loans. We compete with numerous commercial banks, savings banks and savings and loan associations, many of which have assets, capital and lending limits larger than ours. Other competitors include money market mutual funds, mortgage bankers, insurance companies, stock brokerage firms, regulated small loan companies, credit unions and issuers of commercial paper and other securities.

We believe the following strengths differentiate us from our competitors and position us to execute our business strategy successfully:

High Degree of Franchise Scarcity Value. Recent market consolidation has resulted in a lack of sub-$5 billion asset sized banks in the Long Island and Greater New York City Metro Area. Since June 2020, there have been 15 bank transactions in the tri-state area, 10 of which involved targets with total assets less than $5 billion. We currently are the second largest sub-$5 billion community bank in this market area, as a result of both organic growth and our recent acquisitions of CFSB and Savoy, coupled with the heavy consolidation among larger institutions in the market. We believe we are uniquely positioned to continue to capitalize on this opportunity in the market. Most notably, we believe the opportunity to increase penetration into the small business community is very strong and highly compelling.

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Niche Lending & Funding Expertise Drives Pricing Power. A number of our business segments are focused on providing specialized lending and deposit products to specific customer groups within our markets. Unlike many of our competitors, we are not aiming to be a community bank for every consumer nor can we provide every commercial product and service. Rather, we are focused on providing expertise and excellent service in the chosen segments in which we operate. Since 2014 our residential mortgage operation has been highly focused on non-conforming lending in New York City. With Savoy, we acquired a niche SBA and small business commercial banking business. Our municipal deposit banking business is differentiated in that we are focused on long-term relationships that typically have less pricing volatility, particularly in rising rate environments. We may expand into additional niche segments as we grow and continue to add talent, but we feel that within each of our existing segments there is ample room to increase market share and grow.

Our focus on these differentiated areas has been a primary driver of above average yield on loans and overall net interest margin. Our focus on these areas has allowed us to price our services based on relationships

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instead of a transactional focus. Furthermore, our execution on our municipal deposit program and our addition of several branches over the last few years, including through the CFSB acquisition, have allowed us to lower our deposit costs in the current environment, which has produced meaningful enhancements to our net interest margin and we believe positions us well for continued net interest margin expansion.

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Efficient, Profitable and Scalable Business Model. We have invested heavily over the last several years in people and infrastructure to enhance and expand our capabilities so we can provide a number of specialized services to our commercial and consumer customers. These investments include both de novo and acquired branches, a core systems conversion, significant executive hiring in the front and back office, retention of most of the CFSB and Savoy employees and initiation of our municipal deposit banking business. While we have a demonstrated track record of investing in our business, we have been highly focused around profitability and a highly efficient operating platform and branch network. Our level of assets, loans, deposits and revenue relative to the number of branch offices is well above our peers. We believe that this continued focus on operating efficiently will result in above average levels of profitability over the long-term, independent of fluctuations in interest rates. While our direct funding costs are above peer levels, our yields and overall net interest margin have been above peers.

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Disciplined Underwriting and High Quality Balance Sheet. We have maintained a strong and disciplined risk management culture and credit administration process, which we believe are supported by comprehensive policies and procedures for credit underwriting, funding, and loan administration and monitoring. Below are some highlights of our demonstrated track record in credit performance:

•

Since 2016, we have incurred $907 thousand in cumulative net charge-off’s, representing less than 10 basis points of average loans over that cumulative time period;

•

Total non-accrual loans at December 31, 2021 were $6.1 million, or 0.51% of total loans, excluding loans Held-for-Sale and SBA PPP loans;

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The Bank’s legacy loan portfolio component of the December 31, 2021 non-accrual loans is $3.8 million while the balance ($2.3 million) comes from acquired Savoy loans;

•

As part of the Savoy merger, we recorded a purchase accounting fair value discount to the Savoy loan portfolio of $8.6 million, representing 1.5% of Savoy’s loans at the time of acquisition, excluding held-for-sale and SBA PPP loans; and

•

Our reserves and total fair value loan marks represent 1.17% of total loans, excluding held-for-sale and SBA PPP loans.

Experienced Management Team. We have a senior management team with many years of experience in our target markets, including:

•

Michael P. Puorro, Chairman and Chief Executive Officer. Mr. Puorro has over thirty years of banking experience, with over twenty-five years as a senior executive. Mr. Puorro previously served as the President of a Long Island based community bank, and as the Chief Financial Officer of a large, publicly traded thrift holding company.

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Brian K. Finneran, President. Mr. Finneran has over forty years of experience in the banking industry. Prior to joining us in 2017, Mr. Finneran was the former Executive Vice President and Chief Financial Officer and member of the Board of Directors at Suffolk Bancorp.

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McClelland (“Mac”) Wilcox, Senior Executive Vice President, Chief Lending & Revenue Officer. Mr. Wilcox was the former President and Chief Executive officer of Savoy. He has over twenty years of experience as a banking leader and entrepreneur.

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Lance P. Burke, Executive Vice President and Chief Financial Officer. Mr. Burke has over twenty years of experience in the banking industry. Prior to joining our team, Mr. Burke served as Senior Vice President and Controller of Dime Bank (formerly BNB Bank).

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Denise Chardavoyne, Executive Vice President and Chief Operations Officer. Ms. Chardavoyne has over twenty years of banking experience. Ms. Chardavoyne previously served as Executive Vice President and Chief Information Officer of Amalgamated Bank, and Chief Information Officer at Suffolk County National Bank.

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Kevin Corbett, Executive Vice President and Chief Credit Officer. Mr. Corbett has over thirty-five years of experience in the banking industry. Prior to joining us, Mr. Corbett served as Senior Vice President and Chief Credit Officer of Dime Community Bank and Senior Vice President and Chief Credit Officer of Astoria Bank.

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Michael Locorriere, Executive Vice President and Chief Municipal Officer. Mr. Locorriere has more than thirty years of banking and government experience. Mr. Locorriere previously served as Executive Vice President & Director of Municipal Banking at Empire National Bank.

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Alice T. Rouse, Executive Vice President & Chief Risk Officer. Ms. Rouse has over twenty-five years of banking experience. Prior to joining Hanover in 2017, she served in various financial and audit capacities at Astoria Bank.

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Lisa A. Diiorio, First Senior Vice President & Chief Accounting Officer. Ms. Diiorio has over twenty-five years of experience in the banking industry. Prior to joining Hanover in 2016, Ms. Diiorio served as Vice President and Principal Accounting Officer at Bridgehampton National Bank.

Demonstrated Ability to Integrate M&A Transactions. Our executive team, which is led by our Chairman and CEO Michael Puorro, and Brian Finneran, our President, has significant experience with M&A transactions and post-closing integration efforts. In August 2019, we closed the CFSB acquisition and have successfully grown the former CFSB deposit franchise. As anticipated, the CFSB acquisition provided a complementary core funding base to our legacy one- to four-family residential lending business as well as commercially attractive branch locations. In May 2021, we closed the Savoy Merger, an approximately $650.0 million total asset single branch commercial bank located in Midtown Manhattan, New York City, for a purchase price of $65.5 million. The transaction significantly diversified our revenue and lending mix while boosting profitability and leveraging Savoy’s expertise in commercial and SBA lending. We have already completed the systems integration with Savoy, and we now intend to pursue prudent and commercially attractive acquisitions that will position us to further capitalize on market opportunities.

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Summary of Risk Factors

Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors,” that represent challenges that we face in connection with the successful implementation of our strategy. The occurrence of one or more of the events or circumstances described in the section titled “Risk Factors,” alone or in combination with other events or circumstances, may adversely affect our ability to effect a business combination, and may have an adverse effect on our business, cash flows, financial condition and results of operations. Such risks include, but are not limited to:

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We are subject to risks associated with the COVID-19 pandemic, which could have an adverse effect on our business, financial condition and results of operations.

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Our reliance on one- to four- family residential mortgage lending and certain niche loan products could expose us to credit risks that may be different than would apply to a more diversified or traditional loan portfolio.

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Our business and operations are concentrated in the New York metropolitan area, and we are sensitive to adverse changes in the local economy.

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We are subject to the various risks associated with our banking business and operations, including, among others, credit, market, liquidity, interest rate and compliance risks, which may have an adverse effect on our business, financial condition and results of operations if we are unable to manage such risks.

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SBA lending is an increasingly important part our business, and changes to the SBA programs, or the rules governing such programs, may adversely affect our profitability.

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Our liquidity and capital needs, particularly given our growth strategy, may suffer if not managed effectively or if capital is not available on terms acceptable to us.

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Our ability to continue to grow will diminish if we are unable to continue to make commercially attractive acquisitions, or if we are unable to realize the benefits of prior or future acquisitions in a reasonable timeframe.

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We operate in a highly competitive market and face increasing competition from traditional and new financial services providers.

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We are dependent on key personnel and the unexpected loss of their services, or if we are unable to attract new personnel as we execute our growth strategy, will adversely impact our financial condition.

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We operate in a highly regulated industry, and the current regulatory framework and any future legislative and regulatory changes, may have an adverse effect on our business, financial condition and results of operations.

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We are subject to risks associated with our dependency on our information technology and telecommunications systems and third-party servicers including exposures to systems failures, interruptions or breaches of security.

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There are uncertainties with respect to the establishment of an active public market for our common stock, and in any event, our stock price may be volatile, resulting in substantial losses for investors.

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Investors will experience immediate dilution of their investment.

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Anti-takeover provisions in our charter and under New York law could limit certain shareholder actions.

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THE OFFERING

Common stock offered

Common stock outstanding after the offering(1)(2)

Underwriters’ option to purchase additional shares of common stock

Market for the common stock

We intend to apply to list our common stock on the Nasdaq Global Select Market under the trading symbol “HNVR”.

Dividend policy

On February 15, 2022, we paid a $0.10 per common share cash dividend to stockholders of record on February 8, 2022. This was the first cash dividend we have paid. Any future determination relating to our dividend policy will be made at the discretion of our Board of Directors. For additional information, see “Dividend Policy.”

Use of proceeds

We estimate that we will receive net proceeds of approximately $ million (or approximately $ million if the underwriter exercises its over-allotment option in full), based on an assumed initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriter discounts and commissions and estimated offering expenses payable by us.

We intend to contribute substantially all of the net proceeds from this offering to the Bank to enhance regulatory capital to support organic and future potential strategic growth. We do not have any current plans, arrangements or understandings relating to any specific acquisitions or similar transaction. See “Use of Proceeds” for additional information.

Purchases by Officers and Directors

Certain of our directors and officers have indicated an intent to participate in the offering through the purchase of approximately shares of our common stock. In anticipation of this participation, we have directed shares to be reserved specifically for purchases by such officers and directors.

Risk factors

An investment in the common stock involves certain risks. Prospective purchasers of the common stock should consider the information discussed under the heading “Risk Factors” on Page 26.

(1)

As of [•]

(2)

Unless otherwise indicated, the share information in the table above and in this prospectus excludes up to shares that may be purchased by the underwriters from us to cover over-allotments. Unless otherwise indicated, information contained in this prospectus regarding the number of outstanding shares of common stock does not include shares of common stock issuable upon the exercise of outstanding stock options or an aggregate of shares of common stock reserved for future issuance under our stock option plans.

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IMPLICATIONS OF BEING AN EMERGING GROWTH COMPANY

We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting requirements and is relieved of other significant requirements that are otherwise generally applicable to other public companies. Among other factors, as an emerging growth company:

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we may present only two years of audited financial statements and discuss only our results of operations for two years in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”;

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we are exempt from the requirement to provide an opinion from our auditors on the design and operating effectiveness of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act;

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we may choose not to comply with any new requirements adopted by the Public Company Accounting Oversight Board, or PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and our audited financial statements;

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we are permitted to provide less extensive disclosure regarding our executive compensation arrangements pursuant to the rules applicable to smaller reporting companies, which means we are not required to include a compensation discussion and analysis and certain other disclosure regarding our executive compensation in this prospectus; and

•

we are not required to hold nonbinding advisory votes on executive compensation or golden parachute arrangements.

We may take advantage of these provisions for up to five years unless we earlier cease to qualify as an emerging growth company. We would cease to be an emerging growth company upon the earliest of: (i) the first fiscal year following the fifth anniversary of this offering; (ii) the first fiscal year after our annual gross revenues are $1.07 billion or more; (iii) the date on which we have during the previous three-year period, issued more than $1 billion in non-convertible debt securities; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. We have elected to adopt the reduced disclosure requirements described above regarding the number of periods for which we are providing audited financial statements, and our executive compensation arrangements for purposes of the registration statement of which this prospectus is a part. In addition, we expect to take advantage of the reduced reporting and other requirements under the JOBS Act with respect to the periodic reports we will file with the SEC and proxy statements that we use to solicit proxies from our shareholders. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you invest.

The JOBS Act exempts emerging growth companies from compliance with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement declared effective under the Securities Act of 1933, as amended, or the Securities Act, or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of this extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make our consolidated financial statements not comparable with those of a public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period because of the potential differences in accounting standards used. We cannot predict if investors will find our common stock less attractive as a result of our election to rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

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SUMMARY OF SELECTED FINANCIAL DATA OF HANOVER

The following tables set forth selected consolidated historical financial data (i) as of and for the three months ended December 31, 2021 and 2020 and (ii) as of and for the five years ended September 30, 2021, 2020, 2019, 2018, and 2017. Selected consolidated financial data as of and for the years ended September 30, 2021 and 2020 has been derived from our audited financial statements. You should read the information as of and for the years ended September 30, 2021 and 2020 in conjunction with the audited financial statements and the related notes appearing in this prospectus beginning on Page F-1. Selected financial data as of and for the three months ended December 31, 2021 and 2020 has not been audited but, in the opinion of our management, contain all adjustments (consisting of only normal or recurring adjustments) necessary to present fairly our financial position and results of operations for such periods in accordance with generally accepted accounting principles. Our results of operations for the three months ended December 31, 2021 are not necessarily indicative of our results of operations that may be expected for the year ending September 30, 2022. The following selected consolidated financial data should be read in conjunction with our consolidated financial statements and related notes and our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

SUMMARY OF SELECTED STATISTICAL INFORMATION AND FINANCIAL DATA

	As of or For the Three Months Ended December 31,						As of or For the Years Ended September 30,
	2021			2020			2021			2020			2019			2018			2017
	(dollars in thousands)
Selected Financial Condition Data
Total assets		$	1,458,180		$	876,883		$	1,484,641		$	851,606		$	848,836		$	649,963		$	501,358
Loans, excluding PPP loans			1,203,505			711,428			1,105,948			707,729			720,977			560,403			423,385
PPP loans			72,944			17,322			140,657			17,622			—			—			—
Net deferred costs (fees)			985			2			520			(332)			(535)			(1,023)			(758)
Loans, net of deferred fees and costs			1,277,434			728,752			1,247,125			725,019			720,442			559,380			422,627
Allowance for loan losses			9,386			7,979			8,552			7,869			7,143			6,493			4,795
Securities – available-for-sale			7,536			7,434			7,747			6,035			911			185			1,526
Securities – held-to-maturity			4,834			10,001			8,611			10,727			12,030			12,931			13,872
Goodwill and other intangible assets			19,627			1,921			19,648			1,922			1,508			—			—
Borrowings			113,274			74,514			159,642			85,154			100,745			109,518			73,955
Note payable, net			—			—			—			14,984			14,981			14,978			8,414
Subordinated debt, net			24,504			24,468			24,513			—			—			—			—
Deposits			1,176,751			688,316			1,164,662			664,760			650,286			468,123			372,730
Total stockholders’ equity			129,379			80,024			122,529			78,043			71,950			54,230			41,778
Tangible common stockholders’ equity(1)			109,752			78,103			102,881			76,121			70,442			54,230			41,778
Selected Operating Data
Interest income		$	16,616		$	9,497		$	48,675		$	40,133		$	34,497		$	26,724		$	18,161
Interest expense			1,347			2,170			6,967			13,011			12,076			8,503			5,279
Net interest income			15,269			7,327			41,708			27,122			22,421			18,221			12,882
Provision for loan losses			900			100			1,000			1,250			650			1,698			1,376

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	As of or For the Three Months Ended December 31,						As of or For the Years Ended September 30,
	2021			2020			2021			2020			2019			2018			2017
	(dollars in thousands)
Net interest income after provision for loan losses			14,369			7,227			40,708			25,872			21,771			16,523			11,506
Non-interest income			2,375			286			3,349			1,364			4,770			2,733			1,543
Non-interest expense, excluding acquisition costs			8,264			5,445			25,575			20,572			15,150			11,783			9,584
Acquisition costs			—			145			4,430			450			737			97			—
Income before income tax expense			8,480			1,923			14,052			6,214			10,654			7,376			3,465
Income tax expense			1,943			404			3,201			1,240			2,569			2,775			1,313
Net income		$	6,537		$	1,519		$	10,851		$	4,974		$	8,085		$	4,601		$	2,152
Add back: acquisition costs, net of taxes			—			115			3,411			361			560			61			—
Adjusted net income(1)		$	6,537		$	1,634		$	14,262		$	5,335		$	8,645		$	4,662		$	2,152

(1)

This measure is not recognized under generally accepted accounting principles in the United States (“GAAP”) and is therefore considered to be a non-GAAP financial measure. See “Non-GAAP Reconciliation Table” for a reconciliation of this measure to its most comparable GAAP measure.

Tangible book value per common share(1)	19.73	18.66	18.49	18.23	16.92	15.14	13.41
Selected Performance Ratios
Return on average assets	1.80%	0.71%	0.99%	0.58%	1.16%	0.81%	0.51%
Adjusted return on average assets(1)	1.80%	0.77%	1.31%	0.63%	1.24%	0.82%	0.51%
Return on average common stockholders’ equity	20.52%	7.62%	11.53%	6.63%	12.71%	9.89%	6.09%
Adjusted return on average common stockholders’ equity(1)	20.52%	8.20%	15.16%	7.11%	13.59%	10.02%	6.09%
Return on average tangible common equity(1)	24.29%	7.81%	12.56%	6.77%	12.81%	9.89%	6.09%
Adjusted return on average tangible common equity(1)	24.29%	8.40%	16.51%	7.27%	13.70%	10.02%	6.09%
Operating efficiency ratio(1)	46.84%	73.43%	66.95%	73.79%	58.43%	56.75%	66.44%
Adjusted operating efficiency ratio(1)	46.84%	71.52%	57.07%	72.22%	55.72%	56.29%	66.44%
Non-interest expense to average assets	2.28%	2.60%	2.75%	2.47%	2.28%	2.09%	2.26%
Adjusted non-interest expense to average assets(1)	2.28%	0.85%	2.34%	2.41%	2.17%	2.08%	2.26%
Net interest margin	4.39%	3.53%	3.97%	3.29%	3.30%	3.30%	3.14%
Capital Ratios(3)
Tangible common equity to tangible assets(1)	7.63%	8.93%	7.02%	8.96%	8.31%	8.34%	8.33%
Tier 1 leverage ratio	9.92%	12.04%	9.45%	11.22%	10.47%	10.85%	10.06%
Common equity tier 1 risk-based capital ratio	14.44%	21.49%	14.54%	19.32%	17.81%	19.04%	16.56%

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Tier 1 risk-based capital ratio		14.44%		21.49%		14.54%		19.32%		17.81%		19.04%		16.56%
Total risk-based capital ratio		15.52%		22.75%		15.59%		20.57%		19.07%		20.30%		17.82%
Selected Asset Quality Data and Ratios
Nonaccrual loans (excluding loans held-for-sale “HFS”)	$	6,115	$	4,053	$	7,028	$	953	$	1,613	$	—	$	—
Loans 90 days or more past due and still accruing		2,501		318		2,519		296		629		—		—
Total non-performing loans/non-performing assets(2)		8,616		4,371		9,547		1,249		2,242		—		—
Performing troubled debt restructuring loans (“TDRs”)		455		454		455		454		454		354		562
Allowance for loan losses		9,386		7,979		8,552		7,869		7,143		6,493		4,795
Total loan fair value adjustment		4,702		(205)		6,117		(211)		(250)		—		—
Net loan charge-offs/(recoveries)		66		(10)		317		524		—		—		—
Nonaccrual loans as a percentage of total loans(4)		0.51%		0.57%		0.64%		0.13%		0.22%		N/A		N/A
Nonperforming loans as a percentage of total loans(4)		0.72%		0.61%		0.86%		0.18%		0.31%		N/A		N/A
Nonperforming assets(2) to total assets		0.59%		0.50%		0.64%		0.15%		0.26%		N/A		N/A
Net loan charge-offs/(recoveries) to average loans		0.02%		-0.01%		0.03%		0.07%		N/A		N/A		N/A
Allowance for loan losses as a percentage of total loans(4)		0.78%		1.12%		0.77%		1.11%		0.99%		1.16%		1.13%
Allowance for loan losses and total loan fair value mark as a percentage of total loans(4)		1.17%		1.09%		1.33%		1.08%		0.96%		1.16%		1.13%
Allowance for loan losses as a percentage of nonperforming loans (excluding loans HFS)		109%		183%		90%		630%		319%		N/A		N/A
Allowance for loan losses to nonaccrual loans (excluding loans HFS)		153%		197%		122%		826%		443%		N/A		N/A

(1)

These measures are not measures recognized under generally accepted accounting principles in the United States (“GAAP”), and are therefore considered to be non-GAAP financial measures. See — “Non-GAAP Reconciliation Table” for a reconciliation of these measures to their most comparable GAAP measures.

(2)

Nonperforming assets are defined as nonaccrual loans, loans 90 days or more past due and still accruing, and other real estate owned (“OREO”).

(3)

Represents the Bank Capital Ratios.

(4)

Excludes loans Held-for-Sale and Small Business Administration Paycheck Protection loans.

Non-GAAP Financial Measures

The tables that follow contain certain non-GAAP financial measures in addition to results presented in accordance with GAAP. The non-GAAP measures are intended to provide the reader with additional supplemental perspective on operating results, performance trends, and financial condition. Non-GAAP financial measures are not a substitute for GAAP measures; they should be read and used in conjunction with Hanover’s GAAP financial information. Hanover’s non-GAAP measures may not be comparable to similar non-GAAP information which may be presented by other companies. In all cases, it should be understood that non-GAAP operating measures do not depict amounts that accrue directly to the benefit of shareholders. An item that management excludes when computing non-GAAP adjusted earnings can be

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of substantial importance to Hanover’s results and condition for any particular year. A reconciliation of non-GAAP financial measures to GAAP measures is provided below.

Non-GAAP Reconciliation Table	As of December 31,						As of September 30,
Non-GAAP Reconciliation Table	2021			2020			2021			2020			2019			2018			2017
	(dollars in thousands, except share data)
Book value per common share		$	23.26		$	19.12		$	22.02		$	18.69		$	17.28		$	15.14		$	13.41
Less: goodwill and other intangible assets			(3.53)			(0.46)			(3.53)			(0.46)			(0.36)			—			—
Tangible book value per common share		$	19.73		$	18.66		$	18.49		$	18.23		$	16.92		$	15.14		$	13.41
Common stockholders’ equity		$	129,379		$	80,024		$	122,529		$	78,043		$	71,950		$	54,230		$	41,778
Less: goodwill and other intangible assets			(19,627)			(1,921)			(19,648)			(1,922)			(1,508)			—			—
Tangible common stockholders’ equity		$	109,752		$	78,103		$	102,881		$	76,121		$	70,442		$	54,230		$	41,778
Total assets		$	1,458,180		$	876,883		$	1,484,641		$	851,606		$	848,836		$	649,963		$	501,358
Less: goodwill and other intangible assets			(19,627)			(1,921)			(19,648)			(1,922)			(1,508)			—			—
Tangible assets		$	1,438,553		$	874,962		$	1,464,993		$	849,684		$	847,328		$	649,963		$	501,358
Tangible common equity ratio			7.63%			8.93%			7.02%			8.96%			8.31%			8.34%			8.33%

Non-GAAP Reconciliation Table	As of or For the Three Months Ended December 31,						As of or For the Years Ended September 30,
Non-GAAP Reconciliation Table	2021			2020			2021			2020			2019			2018			2017
	(dollars in thousands, except share data)
Net income		$	6,537		$	1,519		$	10,851		$	4,974		$	8,085		$	4,601		$	2,152
Adjustments:
Acquisition costs			—			145			4,430			450			737			97			—
Income tax effect of adjustment above			—			(30)			(1,019)			(89)			(177)			(36)			—
Adjusted net income (non-GAAP)		$	6,537		$	1,634		$	14,262		$	5,335		$	8,645		$	4,662		$	2,152
Diluted earnings per share		$	1.16		$	0.36		$	2.28		$	1.18		$	2.06		$	1.36		$	0.78
Adjustments:
Acquisition costs			—			0.03			0.93			0.11			0.19			0.03			—
Income tax effect of adjustment above			—			(0.01)			(0.21)			(0.03)			(0.04)			(0.01)			—
Adjusted diluted earnings per share (non-GAAP)		$	1.16		$	0.39		$	3.00		$	1.26		$	2.21		$	1.38		$	0.78
Return on average total assets			1.80%			0.71%			0.99%			0.58%			1.16%			0.81%			0.51%

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Non-GAAP Reconciliation Table	As of or For the Three Months Ended December 31,						As of or For the Years Ended September 30,
Non-GAAP Reconciliation Table	2021			2020			2021			2020			2019			2018			2017
	(dollars in thousands, except share data)
Acquisition costs			0.00%			0.07%			0.41%			0.06%			0.11%			0.02%			—
Income tax effect of adjustment above			0.00%			(0.01)%			(0.09)%			(0.01)%			(0.03)%			(0.01)%			—
Adjusted return on average total assets			1.80%			0.77%			1.31%			0.63%			1.24%			0.82%			0.51%
Average common stockholders’ equity		$	126,397		$	79,063		$	94,072		$	74,976		$	63,588		$	46,545		$	35,312
Less: goodwill and other intangible assets			(19,638)			(1,922)			(7,672)			(1,549)			(492)			—			—
Average tangible common stockholders’ equity		$	106,759		$	77,141		$	86,400		$	73,427		$	63,096		$	46,545		$	35,312
Return on average common stockholders’ equity			20.52%			7.62%			11.53%			6.63%			12.71%			9.89%			6.09%
Acquisition costs			0.00%			0.73%			4.71%			0.60%			1.16%			0.21%			—
Income tax effect of adjustment above			0.00%			(0.15)%			(1.08)%			(0.12)%			(0.28)%			(0.08)%			—
Adjusted return on average common stockholders’ equity			20.52%			8.20%			15.16%			7.11%			13.59%			10.02%			6.09%
Return on average tangible common stockholders’ equity			24.29%			7.81%			12.56%			6.77%			12.81%			9.89%			6.09%
Acquisition costs			0.00%			0.75%			5.13%			0.61%			1.17%			0.21%			—
Income tax effect of adjustment above			0.00%			(0.16)%			(1.18)%			(0.11)%			(0.28)%			(0.08)%			—
Adjusted return on average tangible common stockholders’ equity			24.29%			8.40%			16.51%			7.27%			13.70%			10.02%			6.09%

Non-GAAP Reconciliation Table	As of or For the Three Months Ended December 31,						As of or For the Years Ended September 30,
Non-GAAP Reconciliation Table	2021			2020			2021			2020			2019			2018			2017
	(dollars in thousands, except share data)
Operating efficiency ratio (non-GAAP)			46.84%			73.43%			66.95%			73.79%			58.43%			56.75%			66.44%
Non-interest expense		$	8,264		$	5,590		$	30,005		$	21,022		$	15,887		$	11,880		$	9,584
Adjustments:
Acquisition costs			—			145			4,430			450			737			97			—
Adjusted non-interest expense (non-GAAP)		$	8,264		$	5,445		$	25,575		$	20,572		$	15,150		$	11,783		$	9,584
Net interest income – as reported			15,269			7,327			41,708			27,122			22,421			18,221			12,882
Non-interest income – as reported			2,375			286			3,349			1,364			4,770			2,733			1,543
Less: Gain on sale of securities for sale			—			—			240			—			—			20			—

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SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA OF THE COMBINED COMPANY

The following sets forth summary unaudited pro forma financial data, which combines our historical financial information with Savoy for the twelve months ended September 30, 2021 after giving effect to closing the Savoy Merger on May 26, 2021. The summary unaudited pro forma financial data are provided for illustrative purposes only and do not purport to represent what the actual results of operations if combined with Savoy (the “Combined Company”) would have been had the Savoy merger occurred on the dates assumed, nor are they indicative of future results of operations or financial position of the Combined Company.

	Hanover for the Twelve Months Ended September 30, 2021(a)			Savoy for the Period from 10/1/2020 to 5/27/2021(b)			Adjustments			Pro Forma Combined for the Twelve Months Ended September 30, 2021
	(Dollars in thousands, except per share amounts)
Interest income:
Loans		$	45,175		$	17,405		$	2,252(c)		$	64,832
Investment securities			685			62						747
Federal funds sold			1			—						1
Other			304			36						340
Total interest income			46,165			17,503			2,252			65,920
Interest expense:
Deposits			5,290			2,700			(1,358)(d)			6,632
Borrowings			2,302			653			(180)(e)			2,775
Total interest expense			7,592			3,353			(1,538)			9,407
Net interest income before provision			38,573			14,150			3,790			56,513
Provision for loan losses			1,000			600						1,600
Net interest income after provision for loan losses			37,573			13,550			3,790			54,913
Non-interest income:
Loan fees and service charges			703			337						1,040
Loan servicing income			504			501						1,005
Service charges on deposit accounts			127			53						180
Gain on sale of investment securities available- for-sale, net			240			3						243
Gain on sale of loans held-for-sale			1,307			5,371						6,678
Other income			468			1,189						1,657
Total non-interest income			3,349			7,454			—			10,803
Non-interest expense:
Salaries and employee benefits			15,009			4,570						19,579
Occupancy and equipment			4,978			628						5,606
Data processing			1,280			724						2,004
Advertising and promotion			118			49						167
Acquisition costs			—			779						779
Professional fees			1,706			372						2,078
Other			2,456			1,419			80(f)			3,955
Total non-interest expense			25,547			8,541			80			34,168

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	Hanover for the Twelve Months Ended September 30, 2021(a)			Savoy for the Period from 10/1/2020 to 5/27/2021(b)			Adjustments			Pro Forma Combined for the Twelve Months Ended September 30, 2021
	(Dollars in thousands, except per share amounts)
Income before income tax expense			15,37			12,463			3,710			31,548
Income tax expense			1,508			3,754			816(g)			6,078
Net Income		$	13,867		$	8,709		$	2,894		$	25,470
Per share information:
Average basic shares outstanding			4,669,009						892,440(h)			5,561,449
Average fully diluted shares outstanding			4,758,669						892,440(h)			5,651,109
Basic earnings per share		$	2.97								$	4.58
Diluted earnings per share		$	2.91								$	4.51

(a)

Hanover financials are adjusted to exclude purchase accounting and merger costs recorded in relation to the Savoy acquisition. Hanover financials include the impact of the Savoy Bank acquisition, completed 5/27/2021.

(b)

Savoy financials are for the period from 10/1/2020 through acquisition close date at 5/27/2021.

(c)

Adjustment to loan interest income to recognize estimated amortization of ($0.09 million) and accretion of $2.34 million from loan interest rate and credit marks attributible to recording the Savoy Bank loans at fair value as of the hypothetical transaction date of 10/1/2020. The amortization and accretion is expected to be recognized over an estimated 2.4 year average life.

(d)

Adjustment to deposit interest expense to recognize amortization of ($1.36 million) from time deposit marks attributible to recording the Savoy Bank deposits at fair value as of the hypothetical transaction date of 10/1/2020. The amortization is expected to be recognized over an estimated 11 month average life.

(e)

Adjustment to borrowings interest expense to recognize amortization of ($0.2 million) from borrowings marks attributible to recording the Savoy Bank borrowings at fair value as of the hypothetical transaction date of 10/1/2020. The amortization is expected to be recognized over an estimated 10 month average life.

(f)

Adjustment to other non-interest expense of $0.08 million to reflect the amortization of acquired identifiable intangible assets based on an amortization period of 3.6 years using the sum-of-the-years-digits method of amortization.

(g)

Adjustment to income tax provision to reflect the income tax effect of the pro forma adjustments (22.0% estimated tax rate used).

(h)

Adjustment to reflect the issuance of 1.36 million shares of Hanover common stock associated with the merger and the elimination of 0.47 million shares representing the impact of the Savoy Bank acquistion (completed on 5/27/2021) on Hanover’s average basic and diluted shares outstanding for the year ended September 30, 2021, effectively adjusting for a hypothetical transaction date of 10/1/2020.

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RISK FACTORS

Investing in our common stock involves a significant degree of risk. You should carefully consider the following risk factors which we have identified as being material to us, in addition to the other information contained in this prospectus, including our consolidated financial statements and related notes, before deciding to invest in our common stock. Any of the following risks, as well as risks that we do not know or that we currently deem immaterial, could have a material adverse effect on our business, financial condition, results of operations and future prospects. As a result, the trading price of our common stock could decline, and you could lose all or part of your investment.

ECONOMIC, MARKET AND INVESTMENT RISKS

The ongoing global COVID-19 outbreak could harm our business and results of operations, and such effects will depend on future developments, which are highly uncertain and are difficult to predict.

The COVID-19 pandemic continues to negatively impact economic and commercial activity and financial markets, both globally and within the United States. In our market area, stay-at-home orders, travel restrictions and closure of non-essential businesses — and similar orders imposed across the United States to restrict the spread of COVID-19 — resulted in significant business and operational disruptions, including business closures, supply chain disruptions, and mass layoffs and furloughs. Although local jurisdictions have subsequently lifted stay-at-home orders and moved to phased opening of businesses, worker shortages, vaccine and testing requirements and other health and safety recommendations have impacted the ability of businesses to return to pre-pandemic levels of activity and employment.

The COVID-19 pandemic has had a specific impact on our business, including: (1) causing some of our borrowers to be unable to meet existing payment obligations, particularly borrowers disproportionately affected by business shutdowns and travel restrictions; (2) legal and regulatory requirements that require us to provide payment deferrals to certain customers adversely affected by the pandemic and which limit our ability to foreclose on certain property securing certain of our loans; (3) requiring us to increase our allowance for loan losses; and (4) affecting consumer and business spending, borrowing and savings habits. The ultimate risk posed by the COVID-19 pandemic remains highly uncertain; however, COVID-19 poses a material risk to our business, financial condition and results of operations. Other factors likely to have an adverse effect on our results of operations include:

•

risks to the capital markets due to the volatility in financial markets that may impact the performance of our investment securities portfolio;

•

effects on key employees, including operational management personnel and those charged with preparing, monitoring and evaluating our financial reporting and internal controls;

•

declines in demand for loans and other banking services and products, as well as increases in our non-performing loans, owing to the effects of COVID-19 in the markets served by the Bank and on the business of borrowers of the Bank;

•

declines in demand resulting from adverse impacts of the virus on businesses deemed to be “non-essential” by governments in the markets served by the Bank;

•

reduced fees as we waive certain fees for our customers impacted by the COVID-19 pandemic; and

•

higher operating costs, increased cybersecurity risks and potential loss of productivity while we work remotely.

Lastly, our commercial real estate and multi-family loans are dependent on the profitable operation and management of the properties securing such loans. The longer the pandemic persists, the stronger the likelihood that COVID-19 could have a significant adverse impact by reducing the revenue and cash flows of our borrowers, impacting the borrowers’ ability to repay their loans, increasing the risk of delinquencies and defaults, and reducing the collateral value underlying the loans.

The extent to which the COVID-19 pandemic will ultimately affect our financial condition and results of operations is unknown and will depend, among other things, on the duration of the pandemic, the actions undertaken by national, state and local governments and health officials to contain the virus or mitigate its

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effects, the safety and effectiveness of the vaccines that have been developed and the ability of pharmaceutical companies and governments to continue to manufacture and distribute those vaccines, changes to interest rates, and how quickly and to what extent economic conditions improve and normal business and operating conditions resume. Any one or a combination of these factors could negatively impact our business, financial condition and results of operations and prospects.

Customary means to collect non-performing assets may be prohibited, impractical or significantly delayed during the COVID-19 pandemic, and there is a risk that collateral securing a non-performing asset may deteriorate if we choose not to, or are unable to, foreclose on collateral in a timely manner.

Federal and state banking agencies and government entities, including New York State, have adopted regulations or put in place executive orders that restrict or limit our ability to take certain actions with respect to delinquent borrowers that we would otherwise have taken in the ordinary course of business, such as customary collection and foreclosure activities. Specifically, New York State had placed a “moratorium” on evictions and foreclosures for people experiencing a hardship related to COVID-19, which recently expired as of January 15, 2022. Although the moratorium has expired, it is unclear how the New York courts will process eviction proceedings, and whether a backlog of cases will develop. We may therefore experience substantial delays in gaining title to collateral properties. If any backlog of foreclosure cases are not processed efficiently, there is an increased risk that the collateral value may deteriorate if we choose not to, or are unable to, foreclose on the collateral on a timely basis.

A substantial portion of our business is in the New York metro area, therefore, our business is particularly vulnerable to an economic downturn in our primary market area.

We primarily serve businesses, municipalities and individuals located in the New York metro area. As a result, we are exposed to risks associated with lack of geographic diversification. The occurrence of an economic downturn in the New York metro area, or adverse changes in laws or regulations in New York due to the adverse effects of the COVID-19 pandemic or otherwise, could impact the credit quality of our assets, the businesses of our customers and the ability to expand our business. Our success significantly depends upon the growth in population, income levels, deposits and housing in our market area. If the communities in which we operate do not grow or if prevailing economic conditions locally or nationally are unfavorable, our business may be negatively affected.

In addition, the market value of the real estate securing loans as collateral could be adversely affected by unfavorable changes in market and economic conditions. As of December 31, 2021, 80.85% of our real estate loan portfolio was secured by real estate located in the five boroughs of New York City and Nassau County, New York. Adverse developments affecting commerce or real estate values in the local economies in our primary market areas could increase the credit risk associated with our loan portfolio and have an adverse impact on our revenues and financial condition. In particular, we may experience increased loan delinquencies, which could result in a higher provision for loan losses and increased charge-offs. Any sustained period of increased non-payment, delinquencies, foreclosures or losses caused by adverse market or economic conditions in our market area could adversely affect the value of our assets, revenues, financial condition and results of operations.

We also obtain a significant volume of deposits from municipal customers, primarily in Nassau and Suffolk Counties in New York. As of December 31, 2021, 35% of our deposits are from municipal customers, although no single municipal customer represents a concentration risk. A prolonged economic downturn which adversely effects tax revenues or other governmental funding sources could have an adverse impact on our ability to gather cost efficient deposits, and fund our loans and other investments, thereby adversely affecting our results of operations.

We have a significant number of loans secured by real estate, and a downturn in the local real estate market could negatively impact our profitability.

At December 31, 2021, approximately $1.2 billion, or 91%, of our total loan portfolio was secured by real estate, almost all of which is located in our primary lending market. Future declines in the real estate values in the New York metro area and Nassau County and surrounding markets could significantly impair the value of the particular collateral securing our loans and our ability to sell the collateral upon foreclosure

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for an amount necessary to satisfy the borrower’s obligations to us. This could require increasing our allowance for loan losses to address the decrease in the value of the real estate securing our loans, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Appraisals and other valuation techniques we use in evaluating and monitoring loans secured by real property, other real estate owned and repossessed personal property may not accurately describe the net value of the asset.

In considering whether to make a loan secured by real property, we generally require an appraisal of the property. However, an appraisal is only an estimate of the value of the property at the time the appraisal is made and, as real estate values may change significantly in value in relatively short periods of time (especially in periods of heightened economic uncertainty), this estimate may not accurately describe the net value of the real property collateral after the loan is made. As a result, we may not be able to realize the full amount of any remaining indebtedness when we foreclose on and sell the relevant property. In addition, we rely on appraisals and other valuation techniques to establish the value of our other real estate owned, or OREO, and personal property that we acquire through foreclosure proceedings and to determine certain loan impairments. If any of these valuations are inaccurate, our consolidated financial statements may not reflect the correct value of our OREO, and our allowance for loan losses may not reflect accurate loan impairments. This could have an adverse effect on our business, financial condition or results of operations.

We engage in lending secured by real estate and may be forced to foreclose on the collateral and own the underlying real estate, subjecting us to the costs and potential risks associated with the ownership of the real property, or consumer protection initiatives or changes in state or federal law may substantially raise the cost of foreclosure or prevent us from foreclosing at all.

Since we originate loans secured by real estate, we may have to foreclose on the collateral property to protect our investment and may thereafter own and operate such property, in which case we would be exposed to the risks inherent in the ownership of real estate. Although we held no OREO properties at December 31, 2021, it is possible that in future periods we may take title to OREO properties in the event of defaults on outstanding loans. The amount that we, as a mortgagee, may realize after a default depends on factors outside of our control, including, but not limited to, general or local economic conditions, environmental cleanup liabilities, assessments, interest rates, real estate tax rates, operating expenses of the mortgaged properties, our ability to obtain and maintain adequate occupancy of the properties, zoning laws, governmental and regulatory rules, and natural disasters. Our inability to manage the amount of costs or size of the risks associated with the ownership of real estate, or writedowns in the value of OREO, could have an adverse effect on our business, financial condition and results of operations.

Additionally, consumer protection initiatives or changes in state or federal law may substantially increase the time and expense associated with the foreclosure process or prevent us from foreclosing at all. A number of states in recent years have either considered or adopted foreclosure reform laws that make it substantially more difficult and expensive for lenders to foreclose on properties in default. Additionally, federal regulators have prosecuted a number of mortgage servicing companies for alleged consumer law violations. If new state or federal laws or regulations are ultimately enacted that significantly raise the cost of foreclosure or raise outright barriers, such could have an adverse effect on our business, financial condition and results of operation.

Other aspects of our business may be adversely affected by unfavorable economic, market, and political conditions.

An economic recession or a downturn in various markets could have one or more of the following adverse effects on our business:

•

a decrease in the demand for our loans and leases and other products we offer;

•

a decrease in our deposit balances due to overall reductions in the number or value of client accounts;

•

a decrease in the value of collateral securing our loans;

•

an increase in the level of nonperforming and classified loans;

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•

an increase in provisions for credit losses and loan charge-offs;

•

a decrease in net interest income derived from our lending and deposit gathering activities;

•

a decrease in our stock price;

•

a decrease in our ability to access the capital markets; and

•

an increase in our operating expenses associated with attending to the effects of certain circumstances listed above.

Various market conditions also affect our operating results. Real estate market conditions directly affect performance of our loans secured by real estate. Debt markets affect the availability of credit, which impacts the rates and terms at which we offer loans. Stock market downturns often reflect broader economic deterioration and/or a downward trend in business earnings which may adversely affect businesses’ ability to raise capital and/or service their debts. Political and electoral changes, developments, conflicts and conditions (such as fiscal policy changes proposed) have in the past introduced, and may in the future introduce, additional uncertainty that could also affect our operating results negatively.

LENDING ACTIVITIES RISKS

Small Business Administration lending is an increasingly important part of our business. Our SBA lending program is dependent upon the U.S. federal government, and we face specific risks associated with originating SBA loans.

Our SBA lending program is dependent upon the U.S. federal government. The SBA periodically reviews the lending operations of participating lenders to assess, among other things, whether the lender exhibits prudent risk management. When weaknesses are identified, the SBA may request corrective actions or impose enforcement actions. Any changes to the SBA program, including but not limited to changes to the level of guarantee provided by the federal government on SBA loans, changes to program specific rules impacting volume eligibility under the guaranty program, as well as changes to the program amounts authorized by Congress or funding for the SBA program may also have a material adverse effect on our business. In addition, any default by the U.S. government on its obligations or any prolonged government shutdown could, among other things, impede our ability to originate SBA loans or sell such loans in the secondary market, which could materially and adversely affect our business, results of operations and financial condition.

The SBA’s 7(a) Loan Program is the SBA’s primary program for helping start-up and existing small businesses, with financing guaranteed for a variety of general business purposes. Typically, we sell the guaranteed portion of our SBA 7(a) loans in the secondary market. These sales result in premium income for us at the time of sale and create a stream of future servicing income, as we retain the servicing rights to these loans. For the reasons described above, we may not be able to continue originating these loans or selling them in the secondary market. Furthermore, even if we are able to continue to originate and sell SBA 7(a) loans in the secondary market, we might not continue to realize premiums upon the sale of the guaranteed portion of these loans or the premiums may decline due to economic and competitive factors. When we originate SBA loans, we incur credit risk on the non-guaranteed portion of the loans, and if a customer defaults on a loan, we share any loss and recovery related to the loan pro-rata with the SBA. If the SBA establishes that a loss on an SBA guaranteed loan is attributable to significant technical deficiencies in the manner in which the loan was originated, funded or serviced by us, the SBA may seek recovery of the principal loss related to the deficiency from us. Generally, we do not maintain reserves or loss allowances for such potential claims and any such claims could materially and adversely affect our business, financial condition or results of operations.

The laws, regulations and standard operating procedures that are applicable to SBA loan products may change in the future. We cannot predict the effects of these changes on our business and profitability. Because government regulation greatly affects the business and financial results of all commercial banks and bank holding companies and especially our organization, changes in the laws, regulations and procedures applicable to SBA loans could adversely affect our ability to operate profitably.

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The non-guaranteed portion of SBA loans that we retain on our balance sheet as well as the guaranteed portion of SBA loans that we sell could expose us to various credit and default risks.

We have historically originated, primarily through Savoy, a significant number of SBA loans, and sell a significant portion of the guaranteed portions on the secondary market. We generally retain the non-guaranteed portions of the SBA loans that we originate. Consequently, as of December 31, 2021, we held $81 million of SBA and other government guaranteed loans on our balance sheet, $65 million of which consisted of the non-guaranteed portion of SBA loans and $16 million consisted of the guaranteed portion of SBA loans. The non-guaranteed portion of SBA loans have a higher degree of credit risk and risk of loss as compared to the guaranteed portion of such loans. We generally retain the non-guaranteed portions of the SBA loans that we originate and sell, and to the extent the borrowers of such loans experience financial difficulties, our financial condition and results of operations would be adversely impacted when we sell the guaranteed portion of SBA loans in the ordinary course of business, we are required to make certain representations and warranties to the purchaser about the SBA loans and the manner in which they were originated. Under these agreements, we may be required to repurchase the guaranteed portion of the SBA loan if we have breached any of these representations or warranties, in which case we may record a loss. In addition, if repurchase and indemnity demands increase on loans that we sell from our portfolio, our liquidity, results of operations and financial condition could be adversely affected.

The recognition of gains on the sale of loans and servicing asset valuations reflect certain assumptions.

We expect that gains on the sale of U.S. government guaranteed loans will comprise a meaningful component of our revenue. The gains on such sales recognized for the three months ended December 31, 2021 and for the twelve months ended September 30, 2021 (on a pro forma basis for Savoy and us combined) was $0.8 million and $5.5 million, respectively, reflecting $5.4 million of gains recognized by Savoy prior to the acquisition. The determination of these gains is based on assumptions regarding the value of unguaranteed loans retained, servicing rights retained and deferred fees and costs, and net premiums paid by purchasers of the guaranteed portions of U.S. government guaranteed loans. The value of the retained unguaranteed portion of the loans and servicing rights are determined based on market derived factors such as prepayment rates, current market conditions and recent loan sales. Deferred fees and costs are determined using internal analysis of the cost to originate loans. Significant errors in assumptions used to compute gains on sale of loans or servicing asset valuations could result in material revenue misstatements, which may have a material adverse effect on our business, results of operations and profitability. In addition, while we believe these valuations reflect fair value and such valuations are subject to validation by an independent third party, if such valuations are not reflective of fair market value then our business, results of operations and financial condition may be materially and adversely affected.

Imposition of limits by bank regulators on commercial real estate lending activities could curtail our growth and adversely affect our earnings.

In 2006, the Office of the Comptroller of the Currency, or the OCC, the Federal Deposit Insurance Corporation, or the FDIC, and the FRB, or collectively, the Agencies, issued joint guidance entitled “Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices,” or the CRE Guidance. Although the CRE Guidance did not establish specific lending limits, it provides that a bank’s commercial real estate lending exposure could receive increased supervisory scrutiny where total non-owner-occupied commercial real estate loans, including loans secured by apartment buildings, investor commercial real estate, and construction and land loans, represent 300% or more of an institution’s total risk-based capital, and the outstanding balance of the commercial real estate loan portfolio has increased by 50% or more during the preceding 36 months. Commercial real estate loans represent 408% of our risk-based capital at December 31, 2021 and the outstanding balance of our commercial real estate loan portfolio has increased over 300 % during the 36 months preceding December 31, 2021.

In December 2015, the Agencies released a new statement on prudent risk management for commercial real estate lending, or the 2015 Statement. In the 2015 Statement, the Agencies, among other things, indicated the intent to continue “to pay special attention” to commercial real estate lending activities and concentrations going forward. If the FDIC, our primary federal regulator, were to impose restrictions on

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the amount of such loans we can hold in our portfolio or require us to implement additional compliance measures, for reasons noted above or otherwise, our results of operations could be adversely affected as would our earnings per share.

The residential mortgage loans that we originate consist primarily of non-conforming residential mortgage loans which may be considered less liquid and more risky.

The residential mortgage loans that we originate consist primarily of non-conforming residential mortgage loans, which are typically considered to have a higher degree of risk and are less liquid than conforming residential mortgage loans. We attempt to address this enhanced risk through our underwriting process, by requiring three months principal, interest, taxes and insurance reserves These loans also present pricing risk as rates change, and our sale premiums cannot be guaranteed. Further, the criteria for our loans to be purchased by other financial institutions may change from time to time, which could result in a lower volume of corresponding loan originations. In addition, when we sell the non-conforming residential mortgage loans, we are required to make certain representations and warranties to the purchaser regarding such loans. Under those agreements, we may be required to repurchase the non-conforming residential mortgage loans if we have breached any of these representations or warranties, in which case we may record a loss. Additionally, if repurchase and indemnity demands increase on loans that we sell from our portfolio, our liquidity, results of operations and financial condition could be adversely affected.

Interest rate shifts may reduce net interest income and otherwise negatively impact our financial condition and results of operations.

The majority of our banking assets are monetary in nature and subject to risk from changes in interest rates. Like most banks, our earnings and cash flows depend to a great extent upon the level of our net interest income, or the difference between the interest income we earn on loans, investments and other interest-earning assets, and the interest we pay on interest-bearing liabilities, such as deposits and borrowings. Changes in interest rates can increase or decrease our net interest income, because different types of assets and liabilities may react differently, and at different times, to market interest rate changes.

When interest-bearing liabilities mature or reprice more quickly, or to a greater degree than interest-earning assets in a period, an increase in interest rates could reduce net interest income. Similarly, when interest-earning assets mature or reprice more quickly, or to a greater degree than interest-bearing liabilities, falling interest rates could reduce net interest income. An increase in interest rates may, among other things, reduce the demand for loans and our ability to originate loans and decrease loan repayment rates. Conversely, a decrease in the general level of interest rates may affect us through, among other things, increased prepayments on our loan portfolio and increased competition for deposits. Accordingly, changes in the level of market interest rates affect our net yield on interest-earning assets, loan origination volume and our overall results of operations. Although our asset-liability management strategy is designed to control and mitigate exposure to the risks related to changes in market interest rates, those rates are affected by many factors outside of our control, including governmental monetary policies, inflation, deflation, recession, changes in unemployment, the money supply, international disorder and instability in domestic and foreign financial markets.

CREDIT RISKS

We may not be able to measure and limit our credit risk adequately, which could lead to unexpected losses.

The primary component of our business involves making loans to our clients. The business of lending is inherently risky, including risks that the principal or interest on any loan will not be repaid in a timely manner or at all or that the value of any collateral supporting the loan will be insufficient to cover losses in the event of a default. These risks may be affected by the strength of the borrower’s business and industry, and local, regional and national market and economic conditions. Many of our loans are made to small- to medium-sized businesses that may be less able to withstand competitive, economic and financial pressures than larger borrowers. Our risk management practices, such as managing the concentration of our loans within specific industries, loan types and geographic areas, and our credit approval practices may not adequately reduce credit risk. Further, our credit administration personnel, policies and procedures may not

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adequately adapt to changes in economic or any other conditions affecting clients and the quality of the loan portfolio. A failure to effectively measure and manage the credit risk associated with our loan portfolio could lead to unexpected losses and have an adverse effect on our business, financial condition and results of operations.

Our emphasis on one- to four- family residential mortgage loans involves risks that could adversely affect our financial condition and results of operations.

Our loan portfolio includes a significant concentration of one- to four- family residential mortgage loans. As of December 31, 2021, we had $436.6 million in one- to four- family residential mortgage loans, representing 36.25% of our total loan portfolio (excluding PPP Loans). Approximately 91.27% of these loans are secured by properties in the five boroughs of New York City and Nassau County, New York and 58.44% of these loans are rental properties and are not owner-occupied. These loans expose us to significant credit risks that may be different from those related to loans secured by owner-occupied properties or commercial loans. Adverse developments affecting commerce or real estate values in the local economies in our primary market areas could increase the credit risk associated with our loan portfolio and have an adverse impact on our revenues and financial condition. In addition, economic downturns in New York City could affect levels of employment in the New York metro area, which may affect the demand for rental housing. Any increase in rental vacancies, or reductions in rental rates, could adversely impact our borrowers and their ability to repay their loans. Any sustained period of increased non-payment, delinquencies, foreclosures or losses caused by adverse market or economic conditions in our market area could adversely affect the value of our assets, revenues, financial condition and results of operations.

Our niche lending products may expose us to greater risk than traditional lending products.

A significant portion of our lending activity is related to certain niche lending products, such as loans secured by investor-owned, non-owner occupied one- to four- family properties and loans without third-party income verifications, which are considered non-qualified mortgage loans and which may expose us to greater risk of credit loss than that associated with more traditional lending products. Non-qualified mortgage loans are considered to have a higher degree of risk and are less liquid than qualified mortgage loans. For the three months ended December 31, 2021 and the year ended September 30, 2021, we originated $37 million and $104.6 million in non-qualified mortgage loans, respectively. During the three months ended December 31, 2021 and the year ended September 30, 2021, we sold into the secondary market $19.4 million and $36.4 million, respectively, of our non-qualified mortgages. We also have a concentration in the secondary market for our non-qualified mortgage loans, as a substantial portion of our non-qualified mortgage loans have been sold to one purchaser. If we lose this purchaser, or any other purchaser of our loans, our resale market may decline and we may not be able to sell our non-conforming residential mortgage loans at our current volume, which will significantly decrease our non-interest income as well as limit the number of non-conforming residential mortgage loans we can originate without excess interest rate risk Although we have developed underwriting standards and procedures designed to reduce the risk of loss, we can provide no assurance that these standards and procedures will be effective in reducing losses. Should we incur credit losses, it could adversely affect our results of operations.

The small- to medium-sized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair our borrowers’ ability to repay loans.

We target our business development and marketing strategy primarily to serve the banking and financial services needs of small- to medium-sized businesses and real estate owners. These small- to medium-sized businesses frequently have smaller market share than their competition, may be more vulnerable to economic downturns, often need substantial additional capital to expand or compete and may experience significant volatility in operating results. Any one or more of these factors may impair the borrower’s ability to repay a loan. In addition, the success of a small- to medium-sized business often depends on the management talents and efforts of one or two persons or a small group of persons, and the death, disability or resignation of one or more of these persons could have a material adverse impact on the business and its ability to repay a loan. Economic downturns and other events that negatively impact our market areas could cause us to incur substantial credit losses that could negatively affect our financial condition and results of operations.

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Our allowance for loan losses may not be adequate to cover actual losses.

We maintain an allowance for loan losses that represents management’s judgment of probable losses and risks inherent in our loan portfolio. As of December 31, 2021, our allowance for loan losses totaled $9.4 million, which represents approximately 0.78% of our total loans held for investment, excluding PPP loans. The level of the allowance reflects management’s continuing evaluation of general economic conditions, diversification and seasoning of the loan portfolio, historic loss experience, identified credit problems, delinquency levels, adequacy of collateral and historical peer charge-off data. The determination of the appropriate level of our allowance for loan losses is inherently highly subjective and requires management to make significant estimates of and assumptions regarding current credit risks and future trends, all of which may undergo material changes.

Effective October 1, 2023, we will be required to adopt the Financial Accounting Standards Board, or FASB, Accounting Standards Update 2016-13, “Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” commonly referred to as the “Current Expected Credit Losses” standard, or “CECL.” CECL changes the allowance for loan losses methodology from an incurred loss concept to an expected loss concept, which is more dependent on future economic forecasts, assumptions and models than previous accounting standards and could result in increases in, and add volatility to, our allowance for loan losses and future provisions for loan losses. These forecasts, assumptions, and models are inherently uncertain and are based upon management’s reasonable judgment in light of information currently available. Our allowance for loan losses may not be adequate to absorb actual credit losses, and future provisions for credit losses could materially and adversely affect our operating results.

Our federal and state regulators, as an integral part of their examination process, review our methodology for calculating, and the adequacy of, our allowance for loan losses and may direct us to make additions to the allowance based on their judgments about information available to them at the time of their examination. Further, if actual charge-offs in future periods exceed the amounts allocated to our allowance for loan losses, we may need additional provisions for loan losses to restore the adequacy of our allowance for loan losses. While we believe our allowance for loan losses is appropriate for the risk identified in our loan portfolio, we cannot provide assurance that we will not further increase the allowance for loan losses, that it will be sufficient to address losses, or that regulators will not require us to increase this allowance. We also cannot be certain that actual results will be consistent with forecasts and assumptions used in our modeling. Any of these occurrences could materially and adversely affect our financial condition and results of operations.

If our non-performing assets increase, our earnings will be adversely affected.

At December 31, 2021, our non-performing assets, which consist of non-accrual loans, loans 90 days or more past due and still accruing and other real estate owned, were $8.6 million, or 0.59% of total assets. Our non-performing assets adversely affect our net income in various ways:

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we record interest income only on the cash basis or cost-recovery method for non-accrual loans and we do not record interest income for other real estate owned;

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we must provide for probable loan losses through a current period charge to the provision for loan losses;

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noninterest expense increases when we write down the value of properties in our OREO portfolio to reflect changing market values;

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there are legal fees associated with the resolution of problem assets, as well as carrying costs, such as taxes, insurance, and maintenance fees; and

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the resolution of non-performing assets requires the active involvement of management, which can distract them from more profitable activity.

If additional borrowers become delinquent and do not pay their loans and we are unable to successfully manage our non-performing assets, our losses and troubled assets could increase, which could have a material adverse effect on our financial condition and results of operations.