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Greater Hudson Bank Reports Results for the 2018 Second Quarter

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BARDONIA, N.Y., July 27, 2018 (GLOBE NEWSWIRE) -- Greater Hudson Bank (the "Bank") (OTCQX:GHDS), with assets of $519.6 million, today reported a net loss of $3.7 million, or $(0.30) per common share for the second quarter of 2018 compared to net income of $1.2 million, or $0.10 per common share for the 2017 second quarter.  For the six months ended June 30, 2018, the Bank had a net loss of $3.5 million, or $(0.29) per common share compared to net income of $1.9 million, or $0.15 per common share for the six months ended June 30, 2017.  Return on average common stockholders' equity was (29.1) percent and (13.6) percent for the three and six months ended June 30, 2018 compared to 8.7 percent and 6.8 percent for the three and six months ended June 30, 2017, respectively.

Edward T. Lutz, President and CEO stated, "First half results were overshadowed by our July 12, 2018 announcement of our pending merger with ConnectOne Bank. We strongly believe that the combination will be beneficial to our various constituencies – customers, shareholders and employees. We are focused on ensuring that the merger is effective and seamless for all concerned parties." Mr. Lutz further stated, "First half results reflect a number of one-time events, which mask important progress in loan and deposit generation as reported in the release. The provision for loan losses was augmented substantially due to the incidence of alleged fraudulent behavior involving a client developer and the diminution in collateral value in two long-standing loan relationships. We believe that the specific reserves recorded against these loans should substantially cover potential exposure to future loss in these assets. The progress in loan and deposit flows should position the Bank to recapture a material portion of the first half loss through enhanced net interest income, which will have a positive impact on bottom line results for the balance of the year."

Financial highlights as of June 30, 2018 compared to December 31, 2017 are as follows:

  • Deposits increased $33.9 million, or 8.9 percent, to $415.7 million.
  • Borrowings increased $6.8 million, or 17.4 percent, to $46.1 million.
  • Total assets increased $36.8 million, or 7.6 percent, to $519.6 million.
  • Loans, net of unearned income, increased $34.3 million or 10.6 percent, to $356.9 million.
  • Investments increased $9.7 million, or 8.0 percent to $130.7 million.

Performance highlights for the three months ended June 30, 2018 compared to the June 30, 2017 period are as follows:

  • Net interest income increased $236,000, or 5.7 percent, to $4.4 million.
  • Non-interest income decreased $110,000 to $245,000.
  • Non-interest expense increased $734,000, or 24.4 percent, to $3.7 million.
  • The provision for loan losses increased $6.0 million.
  • Security gains declined by $95,000.

Performance highlights for the six months ended June 30, 2018 compared to the June 30, 2017 period are as follows:

  • Net interest income increased $195,000, or 2.3 percent, to $8.5 million.
  • Non-interest expense increased $1.3 million, or 21.7 percent, to $7.4 million.
  • Non-interest income decreased $74,000 to $564,000.
  • The provision for loan losses increased $6.1 million.
  • Security gains declined by $95,000.

Kenneth J. Torsoe, Chairman of the Board commented, "Our merger with ConnectOne Bank will greatly enhance their competitive posture in our core markets and in other geographies where we do business. The first half provisions will likely put several large problem assets behind us. We are heartened by the work of our geographic teams, which have proven to be effective and highly successful in bringing lenders and deposit gatherers under the supervision of one senior official. This will in turn lead to growth in net interest income, the life blood of this Bank. The entire Bank staff has performed at a high level and the solid performance of the staff is both acknowledged and appreciated."

EARNINGS

*Results Unaudited   Three months Ended   Six month ended
    June 30,   June 30,
  (in thousands, except ratios)
SUMMARY OF OPERATIONS DATA:    2018     2017     2018     2017 
Net interest income   $ 4,372     $ 4,136     $ 8,537     $ 8,342  
Provision for loan losses     5,723       (228 )     6,315       232  
Noninterest income     245       355       564       638  
Gains on securities transactions     -       95       -       95  
Noninterest Expense     3,738       3,004       7,390       6,074  
Income before income taxes     (4,844 )     1,810       (4,604 )     2,769  
Provision for income taxes     (1,099 )     595       (1,064 )     890  
Net income   $ (3,745 )   $ 1,215     $ (3,540 )   $ 1,879  
                 
Efficiency Ratio     81.0 %     66.9 %     81.2 %     67.6 %
                 
AVERAGE BALANCE SHEET DATA:    2018     2017     2018     2017 
Earning Assets   $ 480,004     $ 468,567     $ 471,962     $ 476,966  
Total Interest Bearing Liabilities     368,658       370,423       364,203       375,215  
Net interest spread     3.54 %     3.44 %     3.53 %     3.42 %
Net interest margin     3.64 %     3.53 %     3.62 %     3.50 %

The decrease in net income for the three months ended June 30, 2018 compared to the three months ended June 30, 2017, is primarily attributable to increases in the provision for loan losses and non-interest expense.  The provision for loan losses increased $6.0 million, primarily as a result of $2.4 million in charge-offs and an increase in specific reserves of $2.8 million, as well as growth in the loan portfolio.  Non-interest expense increased primarily due to an increase in the reserve for unfunded commitments.

The decrease in net income for the six months ended June 30, 2018 compared to the six months ended June 30, 2017, is primarily attributable to an increase in the provision for loan losses of $6.1 million, primarily as a result of $2.8 million in charge-offs and an increase in specific reserves of $2.8 million, as well as growth in the loan portfolio.

While one-time charges and the increase in the provision for loan losses have negatively impacted the Bank's overall results in 2018, the Bank continues to experience healthy growth in its earnings assets, as well as improvement in its net interest margin.

BALANCE SHEET & CREDIT QUALITY

SELECTED BALANCE SHEET DATA – Unaudited:   As of
(in thousands, except ratios)   June 30,   December 31,    June 30,
    2018
  2017
  2017
Total Investments   $ 130,690     $ 120,990     $ 131,138  
Loans, net of unearned income     356,936       322,633       321,785  
Allowance for loan losses     7,441       3,873       3,943  
Total assets     519,643       482,867       483,656  
Total deposits     415,673       381,764       376,921  
Borrowings     46,099       39,276       45,451  
Nonperforming assets     5,422       8,261       9,178  
Allowance for loan losses to total net loans     2.08 %     1.20 %     1.23 %
Nonperforming assets to total assets     1.04 %     1.71 %     1.90 %

The Bank's investment and loan portfolios increased $9.7 million and $34.3 million, respectively as of June 30, 2018 compared to December 31, 2017.  These increases were primarily funded by the increase in deposits of $33.9 million and the increase in borrowings of $6.8 million as of June 30, 2018 compared to December 31, 2017.

Nonperforming assets decreased $2.8 million to $5.4 million as of June 30, 2018 from $8.3 million as of December 31, 2017.  The nonperforming assets are comprised of a limited number of relationships.  Management is diligently attempting to resolve these nonperforming loans and they continue to be monitored closely.

CAPITAL

EQUITY Unaudited   As of
(in thousands, except ratios)   June 30,
     2018     2017 
Tier 1 Capital   $   54,743     $ 56,844  
Total Stockholders' Equity       52,655       57,495  
Book value per common share       4.25         4.64  
Tier 1 Leverage Ratio     10.7 %     11.4 %

The Bank's leverage ratio was 10.7 percent at June 30, 2018 compared to 11.4 percent at June 30, 2017.  The Bank continues to be considered a well-capitalized institution under current Federal regulatory guidelines.

Greater Hudson Bank, founded in 2002, is headquartered in Bardonia, NY. The Bank, which specializes in providing customized banking services to Hudson Valley based businesses, non-profits and municipal agencies is chartered by the New York State Department of Financial Services and its deposits are insured by the FDIC. As evidence of the Bank's financial strength, Greater Hudson Bank has been recognized with a superior rating by the country's leading independent bank rating and research firm, BauerFinancial, Inc. Further information can be found on the Bank's website at www.GreaterHudsonBank.com or by calling 844-GREAT-11.

Forward-Looking Statements: This Press Release may contain certain statements which are not historical facts or which concern the Bank's future operations or economic performance and which are to be considered forward-looking statements.  Any such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Such statements may be identified by the use of words such as "expect," "estimate," "assume," "believe," "anticipate," "will," "forecast," "plan," "project" or similar words.  The Bank cautions that all forward-looking statements involve risk and uncertainties, and that actual results may differ from those indicated in the forward-looking statements as a result of various factors, such as changing economic and competitive conditions and other risk and uncertainties.  In addition, any statements in this news release regarding historical stock price performance are not indicative of or guarantees of future price performance.  Except as required by law, the Bank undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Contact:
Jenet Ferris
(845) 367-4998 

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