Hanover Bancorp, Inc. and Savoy Bank Announce Strategic Merger Combination to Create a Premier NYC Metro Community Bank

• Creates $1.6 billion asset bank with a franchise footprint spanning from New York City to western Long Island
• Highly complementary companies with attractive lending niches
• Combined company well-positioned for growth and expansion in an evolving market
• Compelling value creation for all shareholders via increased size, capitalization, revenue diversification and profitability

MINEOLA, N.Y. - August 27, 2020 -- Hanover Bancorp, Inc. (“Hanover” or “the Company”), parent company of Hanover Community Bank, and Savoy Bank (“Savoy”) are pleased to jointly announce that Hanover and Savoy have entered into a definitive agreement pursuant to which Savoy Bank will merge into Hanover Community Bank in a stock and cash transaction valued at approximately $63 million. The agreement was unanimously approved by the boards of directors of both companies. Directors of Savoy have executed voting agreements in favor of this combination. The Savoy directors own approximately 49% of Savoy’s outstanding shares.

The merger combines two complementary banking platforms to create one of the premier sub $5 billion asset sized community banks serving the greater New York City metro market. The combined company will be uniquely positioned to capitalize on market opportunities due to recent and ongoing consolidation and broaden the channels and customers it serves through increased scale, expanded product offerings and employment of digital initiatives. The combined company will have approximately $1.6 billion in assets, $1.1 billion in total deposits and 8 branches, including 6 branches in the New York City market, with the expectation that an additional branch in New Jersey will be opened prior to closing. Hanover will continue to 2 operate Savoy’s single midtown Manhattan branch office and it will become the focal point and headquarters for Hanover’s business development efforts in the New York City (“NYC”) market.

The Hanover shares to be received by Savoy shareholders as part of the transaction will be registered by Hanover with the Securities and Exchange Commission (“SEC”) and will therefore be freely transferable. Hanover will then become a reporting company with the SEC under the Securities Exchange Act of 1934, as amended, and will publicly file its future quarterly and annual results.

“We are very pleased to announce this transformational partnership with Savoy Bank, which accelerates each company’s expansion efforts and strategic initiatives while truly creating a best-in-class community bank in the New York City market,” said Michael Puorro, Hanover’s Chairman and CEO. “At Hanover, we have been focused on a high growth and high profitability strategy that has created significant shareholder value since the company was recapitalized in 2012. With Savoy, we found a true partner who shares in this value creation focus and as a combined company we will better be able to compete in this fast-evolving marketplace and position the combined company for the next steps in our corporate evolution. We believe that becoming a public reporting company will improve our visibility to the investment community and enhance our shareholder liquidity options going forward.”

Hanover’s President and CFO, Brian Finneran said, “The combination of Hanover and Savoy creates a sizable community bank operating in the greater NYC metro market that is poised to provide top-tier return on equity metrics, revenue and cost synergies, a more diversified balance sheet and a lower risk profile, all while maintaining an impressive double-digit balance sheet growth rate.”

“Hanover is an excellent cultural fit with Savoy Bank, as we have complementary business models and a shared focus on the small business customers and individuals behind them. We believe the larger capital base and expanded depth of financial products and services that will be available to our customers and the opportunity for both our employees and shareholders to be part of a high growth, high performing company provides significant value for all of our stakeholders,” said Metin Negrin, Chairman of Savoy Bank. “As a major shareholder and customer of Savoy Bank, I very much look forward to being part of the Hanover organization and watching the combined company continue to scale.”

As Savoy’s largest shareholder, Mr. Negrin will become a significant shareholder of Hanover.
As part of the transaction, he has agreed to a Voting Agreement under which he will vote his
shares of Hanover stock as recommended by the Board of Hanover for the term of the Voting
Agreement.

Additionally, Elena Sisti, a former Citibank executive and the founding force behind Savoy
Bank, will also be a significant shareholder of Hanover. Ms. Sisti said, “I am looking forward
to sustaining and expanding my original vision for Savoy to be a leading provider of financial
services to entrepreneurs in the New York City Metro Area. With the Hanover combination,
we will achieve greater scale and impact for our customer base, and that is extremely
exciting.”

Savoy’s President and CEO, Mac Wilcox, who will join Hanover as Senior Executive Vice
President, Head of Commercial Lending, and Chief Revenue Officer said, “Through top-tier
profitability and earnings predictability, we will be able to reinvest in the business to drive
multiple growth engines, enhance our ability to compete in the fast-evolving banking
landscape and sustain consistent returns on capital for shareholders. We believe the combined company will also create new opportunities for our employees and enable us to
attract and retain top talent.”

Strategic Benefits of the Merger

• Powerful Combination with a High Degree of Scarcity Value. Creates a premier$1.6 billion asset bank serving the greater NYC metro market with a track record of top-tier profitability and balance sheet growth. The combined bank will be uniquely positioned as the 3rd largest community bank with assets under $5 billion in the New York City and Long Island marketplace.
• Highly Complementary with Multiple Niches. Savoy’s SBA and owner-occupied focused commercial lending businesses complement Hanover’s residential lending business and commercial lending efforts. This combination will allow Savoy to accelerate its growth and expansion initiatives in both SBA and C&I lending.
• Funding Synergies. Savoy’s funding profile will benefit from Hanover’s rapid progress in building out several niche core deposit businesses, most notably with its recent expansion into the Manhattan and Brooklyn markets through the 2019 acquisition of Chinatown Federal Savings Bank. Approximately 40% of the combined company’s funding is maturing and repricing over the next 12 months.
• Enhancing the Competitive Position. The combined company’s capital and profitability will allow it to further invest in digital initiatives, build-out Treasury Management capabilities, and capture additional wallet share from existing customers via a higher legal lending limit.
• Low-Risk Integration. The combined company expects this to be a low-risk merger integration given:
  • Savoy’s branch-lite business model
  • High level of anticipated employee retention with virtually no overlap in business lines
  • Continuation of and no disruption to Savoy’s existing SBA business lines
  • Hanover’s executive management track record and experience in mergers and acquisitions, particularly with the successful integration of its 2019 acquisition of Chinatown Federal Savings Bank

Key Financial Impact Highlights

• Top-Tier Profitability: Combined entity is projected to have a return on assets ratio
  above 1.00% and a double-digit annual return on tangible equity capital
• EPS accretive: Transaction is projected to be 20%+ accretive to Hanover’s annual
  earnings per share
• Short Earn Back Period: Projected earn back of tangible book value dilution of
  approximately 2 years using the cross-over method
• Strong Internal Rate of Return: Projected to be over 30%
• Estimated pro forma profitability metrics and per share impacts include modest operating expense synergies and do not include any identified revenue enhancement strategies

Transaction Details

Under the terms of the agreement, Savoy will merge with and into Hanover Community Bank and each outstanding share of Savoy common stock will be exchanged for a combination of cash consideration and Hanover common stock. The aggregate merger consideration being paid to Savoy shareholders is estimated to be $63 million. Savoy shareholders will receive merger consideration based on a purchase price equal to 1.25x Tangible Book Value at the month-end prior to the closing of the merger, which is anticipated to be in early-to-mid 2021. The $63 million estimated purchase price is based on the 1.25x multiple and Savoy’s estimated equity capital at the closing time period. The actual merger consideration will be determined as of the month-end prior to closing. The merger consideration provided to Savoy will be payable 50% in cash and 50% in Hanover common stock. Hanover will issue shares of its common stock in connection with the merger at a valuation equal to 1.20x Tangible Book Value at the month-end prior to the closing of the merger. The calculation of Tangible Book Value for both entities and the purchase price are subject to certain adjustments stipulated in the definitive agreement including minimum and maximum capital thresholds. Savoy shareholders will own approximately 23% of the pro forma combined entity at closing.

Governance & Leadership

The combined company will be headquartered in Mineola, New York and will maintain Savoy’s existing single branch office in Rockefeller Center, New York City. As previously noted, Savoy’s current President & CEO Mac Wilcox will join the Hanover executive management team as Senior Executive Vice President, Head of Commercial Lending and Chief Revenue Officer. Given Hanover’s high growth rate and Savoy’s complementary business lines, there is anticipated to be significant retention of the Savoy employee base.

Two members of Savoy’s board of directors will join the Hanover board of directors. Savoy directors not joining Hanover’s board, many of whom were instrumental in organizing the Bank with Ms. Sisti, will join a newly established New York City Advisory Board which will be focused on customer retention and further expansion of the combined company’s brand.

Timing & Approvals

The merger is expected to close in the first half of 2021, subject to satisfaction of customary closing conditions, including receipt of required regulatory approvals and approval by the Savoy shareholders. In addition to customary closing conditions, Hanover will become an SEC registrant at the closing of the transaction.