NEW YORK, Feb. 14, 2012 (GLOBE NEWSWIRE) -- Carver Bancorp, Inc. (the "Company") (Nasdaq:CARV), the holding company for Carver Federal Savings Bank ("Carver" or the "Bank"), today announced financial results for the three and nine month periods ended December 31, 2011, and the third quarter of its fiscal year ended March 31, 2012 ("fiscal 2012").

The Company reported a net loss of $0.7 million or a loss per share of $0.26 for the third quarter of fiscal 2012, compared to a net loss of $8.2 million or a loss per share of $49.58, for the prior year period.

"Carver continues to make meaningful progress addressing problem assets, as evidenced by the 18% reduction in nonperforming assets during the quarter," said Chairman and CEO Deborah C. Wright. "The improvement was driven by an 8% drop in non-performing loans and a 43% decrease in loans Held for Sale (HFS). Repayments from home sales in our construction portfolio also continue. Our performance was further bolstered by a $1.7 million recovery from repayment of a construction loan."

Ms. Wright continued: "As a result of our previously reported $55 million capital raise, Carver's capital level continues to exceed regulatory requirements, with a Tier 1 leverage capital ratio of 10.30% versus the required 9.00%, and a total risk-based capital ratio of 17.11% versus the required 13.00%."

"We continue to experience net interest income erosion caused principally by a reduction in the loan portfolio, and to a lesser extent, by the low interest rate environment compressing industry net interest margins. We are focused on increasing earnings through rebuilding Carver's loan portfolio, though this task will take time given the challenging lending environment. We are also working to increase fee income, principally through 'Carver Community Cash', our well received product line designed to serve the unbanked," noted Ms. Wright.

Income Statement Highlights

Third Quarter Results

The Company reported a net loss for the three months ended December 31, 2011 of $0.7 million compared to a net loss of $8.2 million for the prior year period. The primary drivers of the current quarter loss are valuation adjustments and charge offs taken to reflect loans HFS at the lower of cost or market.

Net Interest Income

Interest income decreased $1.7 million, or 19.7%, to $6.9 million in the third quarter, compared to the prior year quarter, the variance primarily attributed to a $110.8 million (15.94%) decrease in the average balance of interest earning assets. Interest income also decreased due to a decline in yield. The average yield on mortgage-backed securities fell 64 basis points to 2.52% from 3.16% during the quarter as higher yielding securities experienced early payoffs. The average yield on loans fell 18 basis points to 5.06% from 5.24%. The decline in average loan balances was the direct result of management's continuing efforts to reduce the level of non-performing real estate loans through transfer to HFS and ultimately disposition through sales. The reduction in real estate loans will continue over the next several quarters until troubled debt restructures are complete and the Company rebuilds its loan production capacity.

Interest expense decreased $0.4 million, or 20.3%, to $1.9 million for the third quarter, compared to $2.3 million for the prior year quarter. The decrease was primarily due to a decline in deposit interest expense and borrowings that matured during the quarter.

Provision for Loan Losses

The Company recorded a $0.1 million provision for loan losses for the third quarter compared to $6.2 million for the prior year quarter. For the three months ended December 31, 2011, net charge-offs of $1.1 million were recognized during the period compared to $2.3 million in the prior period. Charge-offs totaling $2.7 million were recognized on loans reclassified to held for sale at fair market value. These charges were partially offset by a $1.7 million recovery on a construction loan which paid off during the quarter.

Non-interest Income

Non-interest income decreased $1.2 million, or 68.1%, to $0.6 million for the third quarter, compared to $1.7 million for the prior year quarter, primarily due to $0.4 million of non-recurring fees that were earned on New Market Tax Credit (NMTC) transactions in the prior period and $0.5 million of held for sale valuation adjustments taken in the current period.

Non-interest Expense

Non-interest expense increased $0.1 million to $7.8 million compared to $7.7 million in the prior year quarter. Higher employee compensation and benefits were offset by lower consulting fees.

Income Taxes

The income tax benefit was $1.0 million for the third quarter compared to an expense of $2.3 million for the prior year period. The income tax benefit in the quarter is primarily due to net operating loss carrybacks that were the result of management reevaluating its tax position in light of the change in control and the company finalizing its current tax returns.

Nine Month Results

The Company reported a net loss for the nine months ended December 31, 2011 of $16.3 million compared to a net loss of $34.0 million for the prior year period. The net loss is primarily the result of $12.3 million in provision for loan losses which is $8 million less than the provision recorded in the prior year period and the reserve taken against the deferred tax asset in the prior year period.

Net Interest Income

Interest income decreased $6.0 million in the nine month period, compared to the prior year period, due to the drop in yields on interest bearing assets and the decrease in the average balance of interest earning assets. $3.8 million of the decrease in interest income was due to lower average balances and $2.2 million was due to lower yields. The average yield on mortgaged-backed securities fell 106 basis points to 2.79% from 3.85%. The average yield on loans fell 46 basis points to 4.91% from 5.37%. The current low interest rate environment, combined with the reduction in interest earning assets, continues to negatively impact interest income.

Interest expense decreased $1.8 million, or 24.4%, to $5.6 million in the nine month period, compared to $7.4 million in the prior year period. The decrease was primarily due to a decline in deposit interest expense of $1.4 million. $0.4 million of the decline was attributed to borrowings which were repaid at maturity during the period.

Provision for Loan Losses

The Company recorded a $12.3 million provision for loan losses for the nine month period, compared to $20.3 million for the prior year period. For the nine months ended December 31, 2011, net charge-offs were $15.0 million compared to net charge-offs of $11.0 million for the prior year period, as the Company moved non-performing loans into held for sale.

Non-interest Income

Non-interest income decreased $3.4 million, or 57.6%, to $2.5 million for the nine month period, compared to $5.8 million for the prior year period. The decline is primarily due to $1.7 million of non-recurring fees that were earned on New Market Tax Credit (NMTC) transactions and $0.8 million gain on sale of securities in the prior period. In addition the current period recognized a valuation adjustment on loans HFS of $0.9 million.

Non-interest Expense

Non-interest expense remained flat at $22.7 million during the period as higher employee compensation and benefits were offset by lower consulting expenses.

Income Taxes

The income tax benefit was $0.9 million for the nine month period compared to an expense of $ 17.0 million for the prior year period. The income tax benefit in the quarter is primarily due to net operating loss carrybacks that were the result of management reevaluating its tax position in light of the change in control and the company finalizing its current tax returns.

Financial Condition Highlights

At December 31, 2011, total assets decreased $38.5 million, or 5.4%, to $670.7 million compared to $709.2 million at March 31, 2011. Total loans receivable decreased $122.1 million, investment securities decreased $4.0 million and premises and equipment decreased by $1.2 million. These decreases were partially offset by cash and cash equivalents and restricted cash which increased $69 million, loans held for sale increased by $13.3 million, the loan loss provision increased by $2.7 million, and other assets increased by $3.7 million.

Cash and cash equivalents and restricted cash increased $69 million, to $113.1 million at December 31, 2011, compared to $44.1 million at March 31, 2011. This increase was primarily driven by the capital raise inflow of $55 million, net loan payoffs, pay downs and sales of $108.6 million, which were offset by repayment of institutional deposits totaling $75.5 million and loan originations of $19.3 million. Total securities decreased $4.0 million, or 5.7%, to $67.2 million at December 31, 2011, compared to $71.2 million at March 31, 2011. This change reflects an increase of $2.2 million in available-for-sale securities and $6.2 million decrease in held-to-maturity securities as the Company reinvested funds received from calls on held to maturity securities back into the available for sale portfolio.

Total loans receivable decreased $122.1 million, or 21.0%, to $458.2 million at December 31, 2011, compared to $580.3 million at March 31, 2011. $79.5 million of principal repayments across all loan classifications contributed to the majority of the decrease, with the largest impact from Commercial Real Estate, Construction and Business loans. Additionally $40.2 million of loans were transferred from held for investment to held for sale. Principal charge offs for the nine month period totaled $14.5 million. The decreases were offset by loan originations and advances of $19.3 million in the nine month period.

Loans held for sale increased $13.3 million during the nine month period. The Company has taken aggressive steps in working out its problem loans. During the period the portfolio increased $40.2 million which was offset by $26.9 million of sales and paydowns.

Total liabilities decreased $73.7 million, or 10.8%, to $607.8 million at December 31, 2011, compared to $681.5 million at March 31, 2011.

Deposits decreased $75.5 million, or 13.5%, to $485.2 million at December 31, 2011, compared to $560.7 million at March 31, 2011. Certificates of deposit and NOW balances have declined due to reductions in institutional deposits.

Advances from the FHLB-NY and other borrowed money increased $0.8 million, or 0.7%, to $113.4 million at December 31, 2011, compared to $112.6 million at March 31, 2011.

Total equity increased $35.2 million, or 126.9%, to $62.9 million at December 31, 2011, compared to $27.7 million at March 31, 2011. The key component of this increase was a $55 million capital raise closed on June 29, 2011 as previously reported in Form 8-K filed with the Securities and Exchange Commission on June 29, 2011. The increase in equity from the capital raise was partially offset by expenses of approximately $3.6 million related to the capital raise and the net loss for the nine month period of $16.3 million.

Asset Quality

At December 31, 2011, non-performing assets totaled $93.9 million, or 14.0% of total assets compared to $118.6 million or 17.5% of total assets at September 30, 2011. Non-performing assets at December 31, 2011 were comprised of $47.8 million of loans 90 days or more past due and non-accruing, $18.9 million of loans classified as a troubled debt restructuring, $2.6 million of loans that are either performing or less than 90 days past due and have been deemed to be impaired, $2.2 million of Real Estate Owned (REO) and $22.5 million of loans classified as HFS.

The allowance for loan losses was $20.4 million at December 31, 2011, which represents a ratio of the allowance for loan losses to non-performing loans of 29.46% compared to 27.15% at September 30, 2011. The ratio of the allowance for loan losses to total loans was 4.45% at December 31, 2011 compared to 4.38% at September 30, 2011.

About Carver Bancorp, Inc.

Carver Bancorp, Inc. is the holding company for Carver Federal Savings Bank, a federally chartered stock savings bank, founded in 1948 to serve African-American communities whose residents, businesses and institutions had limited access to mainstream financial services. Carver, the largest African- and Caribbean-American run bank in the United States, operates nine full-service branches in the New York City boroughs of Brooklyn, Manhattan and Queens. For further information, please visit the Company's website at www.carverbank.com.

Certain statements in this press release are "forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act. These statements are based on management's current expectations and are subject to
uncertainty and changes in circumstances. Actual results may differ materially from those included in these
statements due to a variety of factors, risks and uncertainties. More information about these factors, risks and
uncertainties is contained in our filings with the Securities and Exchange Commission.

CONTACT: Ruth Pachman/Michael Herley
         Kekst and Company
         (212) 521-4800

         Mark A. Ricca
         Carver Bancorp, Inc.
         (212) 360-8820