Is Hanover Bancorp Inc. IPO a Good Buy?

• With economic and monetary conditions likely favoring continued rising interest rates, in theory, this environment should bolster financial institutions.
• At the same time, investors need to be careful as too much of a good thing can catalyze imbalances and other destabilizing events.
• Like any other new listing, prospective participants must conduct serious due diligence, particularly as broader market conditions have turned significantly volatile.

Absent of any other context, rising interest rates should be positive for financial institutions like Hanover Bancorp Inc. A holding company for Hanover Community Bank, which is a community commercial bank serving the greater New York metropolitan area and western Long Island, higher borrowing costs naturally benefit those entities that lend out money.

At the same time, power is concentrated not necessarily on those who own the gold but rather on those who lever the ability to enforce those ownership rights. Put another way, it doesn’t matter how high the U.S. Federal Reserve sets the benchmark interest rate if borrowers lack the wherewithal to pay back their debt obligations.

Thus, investors must contend with the tantalizing and simultaneously frustrating narrative behind Hanover Bancorp and its upcoming new public market listing. On one hand, Hanover represents one of the few institutions that may benefit from higher borrowing costs. But on the other hand, should the Fed excessively tighten the money supply, it could dampen business sentiment, with a recession being a potentially catastrophic outcome.

Adding to the surrounding complexities is the Fed’s policy under the paradigm of the post-pandemic era. The central bank has long signaled its desire to reduce the size of its balance sheet. Concurrently, though, it has also expressed the necessity to address soaring inflation. Attempting to achieve both goals could lead to unintended consequences.

Finally, all eyes will be on Hanover as it attempts to right the ship for new public offerings. While the business itself may be intriguing, the timing is unfortunate. Following the crisis of Russia’s invasion of Ukraine, the major equity indices have recently succumbed to global recession fears, making Hanover’s debut anything but uneventful.

What Does Hanover Bancorp do?

As mentioned at the top, Hanover Bancorp is the parent company of Hanover Community Bank, which is focused on the New York metro area and western Long Island. Specifically, Hanover operates seven branches in these two regions, with a recent one opening in Freehold, New Jersey. It also has an administrative office in Hauppauge, Suffolk County, New York.

Founded in 2009, Hanover serves the distinct needs of its clients. According to information provided by CensusReporter.org, the New York metro area commanded a median household income of $81,951, which is conspicuously higher than the $67,521 median household income for the entire country, per data from the U.S. Census Bureau.

Furthermore, Hanover Bancorp enjoys the following competitive advantages:

• Local needs, local solutions: Unlike big banking firms that must answer to a broader audience and a shareholder base that may have conflicting interests, Hanover is built exclusively to serve the needs of its local communities, thereby facilitating superior services.
• Robust technology: Local and regional financial institutions don’t have to sacrifice technological acumen and facilitated conveniences, as Hanover proves with its myriad financial products that cover personal and commercial banking needs.
• Limited outside exposure: Though raw expansion is often seen as a primary goal of most businesses, the fact that Hanover is locally focused translates to less exposure to outside factors such as global market headwinds.

Finally, while higher borrowing costs might spell immediate doom for many other regional banks, for Hanover, this dynamic could materialize into fiscal growth. As stated earlier, the company serves a higher-income base compared to most other markets. Additionally, the Empire State has the most Fortune 500 companies in the U.S., making its metropolitan areas a hub of robust economic activity.

When is the Hanover Bancorp IPO Date?

With interest gradually picking up for new equity listings, Hanover Bancorp’s initial public offering (IPO) — or the first time a private enterprise distributes its equity shares to retail investors — will almost surely generate substantial observer interest. First, that the company is listing at all is remarkable given the unpredictable nature of the new normal. Second, its status as a financial institution tied to one of the world’s most powerful cities serves as a useful benchmark.

Here are the core details. Hanover is scheduled to enter the IPO calendar on May 11, 2022. The Mineola, New York-based financial firm plans to raise $30 million through the distribution of 1.4 million shares at a price range between $21 to $23. At the midpoint of this estimate spectrum, the company will command a market capitalization of $158 million.

Shares will trade on the Nasdaq exchange under the ticker symbol HNVR. Privately held investment bank Stephens Inc. and Piper Sandler Companies (NYSE: PIPR) represent the joint bookrunners for this IPO.

On the optimistic front, Hanover’s public market debut may be an early sign of a potential recovery in the IPO arena. In 2020 and 2021, new listings soared to blistering records, aided significantly by the mass work-from-home experiment. As millions of white-collar workers found themselves clacking away at their laptops at home, this unique circumstance enabled free time for day trading and speculation.

However, as COVID-19 cases fade, employers see fewer incentives to allow workers free reign and thus risk potential productivity losses. Logically, then, volume from retail investors should decline. So, any new listings under this challenging environment are cause for celebration.

On the flipside, the dramatic selloff that investors have witnessed in recent sessions has understandably sparked severe anxieties. Plus, Hanover itself is a micro-cap IPO, which is an inherently volatile asset category.

What Analysts are Saying About Hanover Bancorp IPO

Heading into its IPO, analysts from major investment institutions have not yet weighed in on HNVR stock, which isn’t particularly surprising given its small market cap and thus riskier profile. Nevertheless, it’s not difficult to extract the critical pros and cons surrounding this financial firm.

On the bullish side of the opinion spectrum, Hanover benefits not only from a lack of exposure to global dynamics but also its focused ties to one of the most economically viable regions in the U.S. Aside from the powerhouse that is the New York metropolitan area, Long Island features an average annual household income of $113,292, which is significantly higher than the national average.

In a way, Hanover eschews quantity for quality. To put it into social media terms, Hanover prefers receiving 20% engagement from a thousand followers rather than 1% engagement from 10,000 followers. Because of the presently stressed economic environment, it’s a focused business model that could very well work out.

However, the main risk factor is that Hanover is legally defined as an “emerging growth company,” which is subject to reduced public company reporting requirements, per its Form S-1 disclosure. The lack of visibility to certain data could be a problem for some prospective investors.

Another problematic arena is Hanover’s lending business, which is secured by real estate. Under a possible foreclosure scenario, the company could own an underlying asset that loses value — ironically in part from a rising interest rate environment.

Hanover Bancorp Financial History

While Hanover Bancorp may be among the smaller capitalized financial institutions, it punches above its weight. As of December 31, 2021, the company had total assets of $1.5 billion. In addition, total deposits numbered $1.2 billion and total shareholder’s equity hit $129 million. For the full year in 2021, Hanover booked $55 million in revenue.

Hanover Bancorp Potential

Although the equities market overall has seen better days, Hanover Bancorp could be distinctly positioned to advantage the new normal. Mainly, the financial firm could enjoy greater profitability as the Fed carefully raises benchmark interest rates to attack inflation. Though higher borrowing costs would pose significant challenges in several markets, Hanover caters to a wealthier clientele. Thus, the shifting winds could be net favorable for HNVR stock.

On the other hand, risk-on sentiment for even the most recognized publicly traded securities has worryingly slumped. By logical deduction, investors might not even consider placing an order with an IPO stock, especially because new listings can be unpredictable during the best of times. With people seeking stability over outright returns, HNVR stock might suffer from an unfortunate timing issue.

Finally on this subject, it’s important to realize that political forces could push monetary policy in either direction, which may or may not benefit HNVR stock. Because of the unprecedented expansion of the money supply, everyday American households have suffered, thus incentivizing raising rates. However, doing so may hurt business sentiment, which in turn could lead to layoffs.

Without an easy answer, HNVR stakeholders will be constantly glued to the headlines.

Where to Buy Hanover Bancorp IPO Stock

If you want to participate in Hanover Bancorp’s IPO, you’ll need to know how to buy stocks. But before you take that step, you must sign up for a brokerage account. Below is a list of best brokers to consider.

HNVR Restrictions for Retail Investors

Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons before participating in an IPO. Don’t engage if you have privileged information.

HNVR Pre-IPO

Information regarding pre-IPO access for Hanover Bancorp is limited. However, those interested in participating in upcoming early bird opportunities should open an account with ClickIPO.com.