Hanover Bancorp earnings collapse 99% on $6.1M credit provision
Strategic credit cleanup with $9.6M charge-offs positions regional bank for 2026 recovery
Hanover Bancorp reported fourth-quarter earnings that collapsed 99% to just $33,000, down from $3.9 million in the year-ago period, as the New York-based regional lender undertook a strategic credit cleanup that included $9.6 million in net charge-offs.
Revenue for the quarter totaled $18.6 million, slightly missing analyst estimates of $18.8 million. The earnings deterioration was driven primarily by a $6.1 million provision for credit losses, a dramatic shift from the bank's earlier performance when non-performing loans had been declining to $11.7 million, or 0.60% of total loans, in the first quarter of 2025.
Despite the earnings hit, management maintained its quarterly dividend at $0.10 per share, signaling confidence in the bank's underlying financial health. The company also announced that its net interest margin expanded to 2.84%, while deposits grew 3.8% year-over-year, indicating continued core business strength even amid the credit quality challenges.
Chief Executive Officer Michael J. Burke characterized the quarter as part of a necessary cleanup process, telling investors the bank expects "sustained performance in 2026" after completing the strategic credit remediation. The $9.6 million in net charge-offs represents a proactive approach to addressing problem assets rather than allowing credit deterioration to persist.
Shares of Hanover Bancorp, which trades on NASDAQ under the ticker HNVR, have been under pressure but remain well above their 52-week low of $18.06, recently changing hands at around $23.95. The stock is currently trading below book value with a price-to-book ratio of 0.87, suggesting some investors may already be pricing in the temporary earnings weakness.
Analysts maintain a generally neutral outlook on the shares, with an average target price of $24.50 according to recent data. One analyst rates the stock a strong buy, while two recommend holding, reflecting uncertainty around how quickly the bank can resume normalized earnings after the credit cleanup.
Hanover Bancorp, which operates Hanover Community Bank across the New York metropolitan area, has a market capitalization of approximately $172 million. The regional bank has focused on serving small and medium-sized enterprises, municipalities, and individual clients in its market area.
The broader regional banking sector experienced generally improving conditions during the fourth quarter of 2025, with many peer institutions reporting expanding net interest margins and stable credit quality. However, Hanover's decision to address credit issues head-on through substantial charge-offs sets it apart from competitors who may be taking a more gradual approach to credit deterioration.
Investors will be watching closely for signs that the strategic credit cleanup has successfully addressed the bank's asset quality issues without signaling broader problems in its loan portfolio. The bank's ability to return to consistent profitability in 2026 while maintaining its dividend will be key factors in determining whether shares can regain ground toward their 52-week high of $26.53.