Form 10-K/A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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þ |
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended March 31, 2008
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from
_____
to
_____
Commission File Number: 1-13007
CARVER BANCORP, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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13-3904174 |
(State or Other Jurisdiction of Incorporation or Organization)
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(I.R.S. Employer Identification No.) |
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75 West 125th Street, New York, New York
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10027 |
(Address of Principal Executive Offices)
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(Zip Code) |
Registrants telephone number, including area code: (718) 230-2900
Securities Registered Pursuant to Section 12(b) of the Act:
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Common Stock, par value $.01 per share
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NASDAQ Global Market |
(Title of Class)
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(Name of each Exchange on which registered) |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. o Yes þ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act. o Yes þ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. þ Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files).
o Yes o No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
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o Large Accelerated Filer
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o Accelerated Filer
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o Non-accelerated Filer
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þ Smaller Reporting Company |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). o Yes þ No
As of June 20, 2008, there were 2,474,738 shares of common stock of the registrant
outstanding. The aggregate market value of the Registrants common stock held by non-affiliates,
as of September 28, 2007, the last day of registrants most recently completed second fiscal
quarter (based on the closing sales price of $15.85 per share of the registrants common stock on
September 28, 2007) was approximately $39,319,444.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of registrants proxy statement for the Annual Meeting of stockholders for the
fiscal year ended March 31, 2008 are incorporated by reference into Part III of this Form 10-K.
TABLE OF CONTENTS
EXPLANATORY NOTE
Carver Bancorp, Inc. (the Company or Carver) is filing this amendment No. 1 to its
Annual Report on Form 10-K for the year ended March 31, 2008 to reflect the restatement of its
Consolidated Financial Statements, as discussed in Note 2 of the Notes to the Consolidated
Financial Statements contained in Part II, Item 8: Financial statements and supplementary data.
Except for Items 6, 7, 8 and 9A of Part II, no other information in the Form 10-K is being
amended or updated. This restatement has been disclosed previously in
the Companys financial results as reported on Form 10-Q as of
December 31, 2008.
PART II
ITEM 6. SELECTED FINANCIAL DATA.
The following selected consolidated financial and other data is as of and for the years ended
March 31 and is derived in part from, and should be read in conjunction with the Companys
consolidated financial statements and related notes (dollars in thousands):
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2008 |
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2007 |
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2006 |
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2005 |
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2004 |
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(Restated) |
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(Restated) |
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Selected Financial Condition Data: |
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Assets |
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$ |
796,182 |
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$ |
739,530 |
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$ |
661,396 |
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$ |
626,377 |
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$ |
538,830 |
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Loans held-for-sale |
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23,767 |
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23,226 |
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Total loans receivable, net |
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627,231 |
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579,866 |
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493,432 |
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421,987 |
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351,900 |
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Securities |
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38,172 |
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67,117 |
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108,286 |
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149,335 |
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139,877 |
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Cash and cash equivalents |
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27,368 |
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17,350 |
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22,904 |
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20,420 |
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22,774 |
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Deposits |
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654,663 |
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615,122 |
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504,638 |
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455,870 |
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375,519 |
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Borrowed funds |
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58,625 |
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61,093 |
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93,792 |
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115,299 |
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104,282 |
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Stockholders equity |
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53,881 |
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51,142 |
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48,697 |
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45,801 |
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44,645 |
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Number of deposit accounts |
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46,771 |
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46,034 |
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41,614 |
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40,199 |
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38,578 |
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Number of branches |
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10 |
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10 |
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8 |
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8 |
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6 |
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Operating Data: |
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Interest income |
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$ |
48,132 |
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$ |
41,740 |
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$ |
32,385 |
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$ |
28,546 |
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$ |
26,234 |
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Interest expense |
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22,656 |
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19,234 |
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13,493 |
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9,758 |
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8,700 |
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Net interest income before provision for loan losses |
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25,476 |
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22,506 |
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18,892 |
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18,788 |
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17,534 |
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Provision for loan losses |
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222 |
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276 |
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Net interest income after provision for loan losses |
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25,254 |
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22,230 |
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18,892 |
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18,788 |
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17,534 |
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Non-interest income |
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7,861 |
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2,869 |
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5,341 |
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4,075 |
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5,278 |
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Non-interest expense |
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29,898 |
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24,100 |
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19,134 |
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18,696 |
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15,480 |
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Income before income taxes |
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3,217 |
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999 |
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5,099 |
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4,167 |
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7,332 |
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Income tax (benefit) expense |
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(892 |
) |
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(1,099 |
) |
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1,329 |
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1,518 |
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2,493 |
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Minority interest, net of taxes |
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146 |
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Net income |
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$ |
3,963 |
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$ |
2,098 |
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$ |
3,770 |
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$ |
2,649 |
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$ |
4,839 |
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Basic earnings per common share |
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$ |
1.59 |
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$ |
0.84 |
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$ |
1.50 |
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$ |
1.06 |
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$ |
2.03 |
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Diluted earnings per common share |
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$ |
1.55 |
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$ |
0.81 |
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$ |
1.45 |
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$ |
1.03 |
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$ |
1.87 |
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Cash dividends per common share |
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$ |
0.40 |
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$ |
0.35 |
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$ |
0.31 |
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$ |
0.26 |
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$ |
0.20 |
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Selected Statistical Data: |
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Return on average assets (1) |
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0.52 |
% |
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0.30 |
% |
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0.60 |
% |
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0.45 |
% |
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0.93 |
% |
Return on average equity (2) |
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7.23 |
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4.25 |
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7.93 |
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5.80 |
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11.40 |
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Net interest margin (3) |
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3.62 |
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3.44 |
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2.97 |
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3.41 |
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3.56 |
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Average interest rate spread (4) |
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3.34 |
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3.16 |
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3.18 |
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3.26 |
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3.40 |
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Efficiency ratio (5) |
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90.31 |
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94.98 |
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78.96 |
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81.77 |
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67.86 |
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Operating expense to average assets (6) |
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3.92 |
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3.34 |
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3.04 |
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3.21 |
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2.97 |
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Average equity to average assets |
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7.16 |
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7.05 |
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7.54 |
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7.84 |
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8.13 |
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Dividend payout ratio (7) |
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24.50 |
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34.04 |
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20.63 |
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24.64 |
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9.86 |
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Asset Quality Ratios: |
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Non-performing assets to total assets (8) |
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0.50 |
% |
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0.61 |
% |
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0.42 |
% |
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0.16 |
% |
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0.39 |
% |
Non-performing loans to total loans receivable (8) |
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0.43 |
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0.74 |
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0.55 |
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0.23 |
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0.60 |
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Allowance for loan losses to total loans receivable |
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0.74 |
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0.89 |
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0.81 |
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0.96 |
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1.16 |
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(1) |
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Net income divided by average total assets. |
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(2) |
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Net income divided by average total equity. |
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(3) |
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Net interest income divided by average interest-earning assets. |
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(4) |
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The difference between the weighted average yield on interest-earning assets and the weighted
average cost of interest-bearing liabilities. |
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(5) |
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Non-interest expense divided by the sum of net interest income and non-interest income. |
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(6) |
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Non-interest expense less real estate owned expenses, divided by average total assets. |
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(7) |
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Dividends paid to common stockholders as a percentage of net income available to common
stockholders. |
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(8) |
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Non performing assets consist of non-accrual loans, loans accruing 90 days or more past due,
and property acquired in settlement of loans. |
2
RESTATEMENT
During the quarter ended December 31, 2008, Carver became aware of certain adjustments to
suspense accounts related to check return processing and automated clearing house (ACH) return
processing that appeared to be incorrect. A review of the suspense account reconciliations
commenced and an analysis was performed on Carvers accounting and financial reporting
practices. The review raised questions regarding transactions since fiscal 2007, most of which
involved adjustments to various suspense accounts, and identified evidence that certain adjustments
were incorrect. The review found evidence that during fiscal 2007, suspense accounts adjustments
for check returns and ACH returns were improper and resulted in aged suspense items not being
properly cleared. As a result, an adjustment totaling $761,000 ($485,000 net of tax) was necessary to
correct the fiscal 2007 financial statements to reflect charge-offs that should have been recorded
in the appropriate period. This adjustment resulted in a reduction in diluted earnings per share
for fiscal 2007 from $1.00 to $0.81, a decrease of $0.19, or 19%. The errors and irregularities
identified in the course of the review revealed deficiencies in Carvers accounting and financial
control environment, some of which were determined to be a material weakness requiring corrective
and remedial actions.
Concurrently with the review, Carver also conducted extensive internal reviews for the purpose
of the preparation and certification of Carvers fiscal 2009 financial statements and its
assessment of internal controls over financial reporting. Carvers procedures included expanded
account reviews and expanded balance sheet reconciliations to ensure all accounts were fully
reconciled, supported, and appropriately documented. Carver also implemented improvements to its
quarterly and annual accounting close process to provide for more complete review of the financial
results.
As a result of the issues identified in the review, the Finance and Audit Committee, in
consultation with management and KPMG LLP, concluded on February 9, 2009 that Carvers previously
issued financial statements for fiscal 2007 and fiscal 2008 (including the interim periods within those years),
should no longer be relied upon because of certain accounting errors and irregularities in those
financial statements. Accordingly, Carver restated its previously issued financial statements for
those periods by filing this Amendment No. 1 to its Form 10-K for the year ended March 31, 2008.
Restated financial information is presented in this Amendment No. 1 to its Form 10-K for the year
ended March 31, 2008.
Set out below is the impact of the adjustment by financial statement line item in Carvers
consolidated statement of financial condition as of March 31,
2008 and 2007, the Consolidated Statements of Income and Cash Flows
for the year ended March 31, 2007 and the Consolidated
Statements of Changes in Stockholders Equity and Comprehensive
Income for the years ended March 31, 2008 and 2007. In addition,
the income tax effect of the above adjustment has been reflected in
footnote 11 of the consolidated financial statements.
Immaterial
Corrections
The
Consolidated Statement of Income for the year ended March 31, 2008 reflects
an immaterial correction to reflect additional audit expenses in the
amount of $28,000. After taxes
this resulted in a decrease in net income of $17,000. As a result the
corrected basic EPS remains unchanged at
$1.59 while the corrected diluted EPS remains unchanged at $1.55.
The
Consolidated Statement of Financial Position as of March 31,
2008 and 2007 also reflects an adjustment to reclassify
$0.7 million from commercial business loans to goodwill. This
adjustment was the result of a re-evaluation of goodwill in connection with the reconciliation
matters disclosed above and elsewhere herein.
Management believes these corrections to prior period mistatements to
be immaterial.
3
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except per share data)
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March 31, |
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March 31, |
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March 31, |
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March 31, |
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March 31, |
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March 31, |
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2008 |
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2008 |
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2008 |
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2007 |
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2007 |
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2007 |
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(As Previously |
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(As Previously |
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Reported)(1) |
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Adjustment |
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(As Restated) |
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Reported)(1) |
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Adjustment |
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(As Restated) |
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ASSETS |
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Cash and cash equivalents: |
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Cash and due from banks |
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$ |
15,920 |
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$ |
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$ |
15,920 |
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$ |
14,619 |
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$ |
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14,619 |
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Federal funds sold |
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10,500 |
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|
10,500 |
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|
1,300 |
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|
1,300 |
|
Interest earning deposits |
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|
948 |
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|
948 |
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|
1,431 |
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|
1,431 |
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Total cash and cash equivalents |
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27,368 |
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27,368 |
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|
|
17,350 |
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|
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|
17,350 |
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Securities: |
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Available-for-sale, at fair value |
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20,865 |
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20,865 |
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47,980 |
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47,980 |
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Held-to-maturity, at amortized cost |
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17,307 |
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17,307 |
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|
19,137 |
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19,137 |
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Total securities |
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38,172 |
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|
38,172 |
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|
67,117 |
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67,117 |
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Loans held-for-sale |
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23,767 |
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|
23,767 |
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|
23,226 |
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|
|
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|
23,226 |
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Loans receivable: |
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|
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|
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|
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|
|
|
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Real estate mortgage loans |
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|
578,957 |
|
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|
578,957 |
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|
533,667 |
|
|
|
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|
533,667 |
|
Commercial business loans |
|
|
51,424 |
|
|
|
|
|
|
|
51,424 |
|
|
|
50,541 |
|
|
|
|
|
|
|
50,541 |
|
Consumer loans |
|
|
1,728 |
|
|
|
|
|
|
|
1,728 |
|
|
|
1,067 |
|
|
|
|
|
|
|
1,067 |
|
Allowance for loan losses |
|
|
(4,878 |
) |
|
|
|
|
|
|
(4,878 |
) |
|
|
(5,409 |
) |
|
|
|
|
|
|
(5,409 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable, net |
|
|
627,231 |
|
|
|
|
|
|
|
627,231 |
|
|
|
579,866 |
|
|
|
|
|
|
|
579,866 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office properties and equipment, net |
|
|
15,780 |
|
|
|
|
|
|
|
15,780 |
|
|
|
14,626 |
|
|
|
|
|
|
|
14,626 |
|
Federal Home Loan Bank of New York stock, at cost |
|
|
1,625 |
|
|
|
|
|
|
|
1,625 |
|
|
|
3,239 |
|
|
|
|
|
|
|
3,239 |
|
Bank owned life insurance |
|
|
9,141 |
|
|
|
|
|
|
|
9,141 |
|
|
|
8,795 |
|
|
|
|
|
|
|
8,795 |
|
Accrued interest receivable |
|
|
4,063 |
|
|
|
|
|
|
|
4,063 |
|
|
|
4,335 |
|
|
|
|
|
|
|
4,335 |
|
Goodwill |
|
|
7,055 |
|
|
|
|
|
|
|
7,055 |
|
|
|
6,401 |
|
|
|
|
|
|
|
6,401 |
|
Core deposit intangibles, net |
|
|
532 |
|
|
|
|
|
|
|
532 |
|
|
|
684 |
|
|
|
|
|
|
|
684 |
|
Other assets |
|
|
41,870 |
|
|
|
(422 |
) |
|
|
41,448 |
|
|
|
14,313 |
|
|
|
(422 |
) |
|
|
13,891 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
796,604 |
|
|
$ |
(422 |
) |
|
$ |
796,182 |
|
|
$ |
739,952 |
|
|
$ |
(422 |
) |
|
$ |
739,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
$ |
654,663 |
|
|
$ |
|
|
|
$ |
654,663 |
|
|
$ |
615,122 |
|
|
$ |
|
|
|
|
615,122 |
|
Advances from the FHLB-NY and other borrowed
money |
|
|
58,625 |
|
|
|
|
|
|
|
58,625 |
|
|
|
61,093 |
|
|
|
|
|
|
|
61,093 |
|
Other liabilities |
|
|
9,800 |
|
|
|
63 |
|
|
|
9,863 |
|
|
|
12,110 |
|
|
|
63 |
|
|
|
12,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
723,088 |
|
|
|
63 |
|
|
|
723,151 |
|
|
|
688,325 |
|
|
|
63 |
|
|
|
688,388 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest |
|
|
19,150 |
|
|
|
|
|
|
|
19,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
25 |
|
|
|
|
|
|
|
25 |
|
|
|
25 |
|
|
|
|
|
|
|
25 |
|
Additional paid-in capital |
|
|
24,113 |
|
|
|
|
|
|
|
24,113 |
|
|
|
23,996 |
|
|
|
|
|
|
|
23,996 |
|
Retained earnings |
|
|
30,473 |
|
|
|
(485 |
) |
|
|
29,988 |
|
|
|
27,436 |
|
|
|
(485 |
) |
|
|
26,951 |
|
Unamortized awards of common stock under ESOP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4 |
) |
|
|
|
|
|
|
(4 |
) |
Treasury stock, at cost |
|
|
(670 |
) |
|
|
|
|
|
|
(670 |
) |
|
|
(277 |
) |
|
|
|
|
|
|
(277 |
) |
Accumulated other comprehensive income |
|
|
425 |
|
|
|
|
|
|
|
425 |
|
|
|
451 |
|
|
|
|
|
|
|
451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
54,366 |
|
|
|
(485 |
) |
|
|
53,881 |
|
|
|
51,627 |
|
|
|
(485 |
) |
|
|
51,142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
796,604 |
|
|
$ |
(422 |
) |
|
$ |
796,182 |
|
|
$ |
739,952 |
|
|
$ |
(422 |
) |
|
$ |
739,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes adjustments for
immaterial corrections to reclassify $685,000 from commercial
business loans to goodwill as of 3/31/07 and to reflect additional
audit expenses of $28,000
($17,000 after tax) in fiscal
2008 net income. |
4
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended March 31, |
|
|
|
2007 |
|
|
2007 |
|
|
2007 |
|
|
|
(As Previously |
|
|
|
|
|
|
|
|
|
Reported) |
|
|
Adjustment |
|
|
(As Restated) |
|
Interest Income: |
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
$ |
37,277 |
|
|
$ |
|
|
|
$ |
37,277 |
|
Mortgage-backed securities |
|
|
2,877 |
|
|
|
|
|
|
|
2,877 |
|
Investment securities |
|
|
1,325 |
|
|
|
|
|
|
|
1,325 |
|
Federal funds sold |
|
|
261 |
|
|
|
|
|
|
|
261 |
|
|
|
|
|
|
|
|
|
|
|
Total interest income |
|
|
41,740 |
|
|
|
|
|
|
|
41,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
15,227 |
|
|
|
|
|
|
|
15,227 |
|
Advances and other borrowed money |
|
|
4,007 |
|
|
|
|
|
|
|
4,007 |
|
|
|
|
|
|
|
|
|
|
|
Total interest expense |
|
|
19,234 |
|
|
|
|
|
|
|
19,234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
22,506 |
|
|
|
|
|
|
|
22,506 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses |
|
|
276 |
|
|
|
|
|
|
|
276 |
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses |
|
|
22,230 |
|
|
|
|
|
|
|
22,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
Depository fees and charges |
|
|
2,476 |
|
|
|
|
|
|
|
2,476 |
|
Loan fees and service charges |
|
|
1,238 |
|
|
|
|
|
|
|
1,238 |
|
Write-down of loans held for sale |
|
|
(702 |
) |
|
|
|
|
|
|
(702 |
) |
Gain (loss) on sale of securities |
|
|
(624 |
) |
|
|
|
|
|
|
(624 |
) |
Gain on sale of loans |
|
|
192 |
|
|
|
|
|
|
|
192 |
|
Loss on sale of real estate owned |
|
|
(108 |
) |
|
|
|
|
|
|
(108 |
) |
Other |
|
|
397 |
|
|
|
|
|
|
|
397 |
|
|
|
|
|
|
|
|
|
|
|
Total non-interest income |
|
|
2,869 |
|
|
|
|
|
|
|
2,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits |
|
|
10,470 |
|
|
|
|
|
|
|
10,470 |
|
Net occupancy expense |
|
|
2,667 |
|
|
|
|
|
|
|
2,667 |
|
Equipment, net |
|
|
2,071 |
|
|
|
|
|
|
|
2,071 |
|
Merger related expenses |
|
|
1,258 |
|
|
|
|
|
|
|
1,258 |
|
Consulting Expense |
|
|
496 |
|
|
|
|
|
|
|
496 |
|
Other |
|
|
6,377 |
|
|
|
761 |
|
|
|
7,138 |
|
|
|
|
|
|
|
|
|
|
|
Total non-interest expense |
|
|
23,339 |
|
|
|
761 |
|
|
|
24,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes and minority interes |
|
|
1,760 |
|
|
|
(761 |
) |
|
|
999 |
|
Income tax (benefit) expense |
|
|
(823 |
) |
|
|
(276 |
) |
|
|
(1,099 |
) |
Minority interest, net of taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
2,583 |
|
|
$ |
(485 |
) |
|
$ |
2,098 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.03 |
|
|
$ |
(0.19 |
) |
|
$ |
0.84 |
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
$ |
1.00 |
|
|
$ |
(0.19 |
) |
|
$ |
0.81 |
|
|
|
|
|
|
|
|
|
|
|
5
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME
(In thousands)
(As Previously Reported)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common |
|
|
Common |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
Stock |
|
|
Stock |
|
|
|
|
|
|
Accumulated Other |
|
|
Total Stock- |
|
|
|
Common |
|
|
Paid-In |
|
|
Treasury |
|
|
Acquired |
|
|
Acquired |
|
|
Retained |
|
|
Comprehensive |
|
|
Holders |
|
|
|
Stock |
|
|
Capital |
|
|
Stock |
|
|
By ESOP |
|
|
By MRP |
|
|
Earnings |
|
|
Income (Loss) |
|
|
Equity |
|
BalanceMarch 31, 2005 |
|
$ |
25 |
|
|
$ |
23,937 |
|
|
$ |
(420 |
) |
|
$ |
(126 |
) |
|
$ |
(128 |
) |
|
$ |
22,748 |
|
|
$ |
(235 |
) |
|
$ |
45,801 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,770 |
|
|
|
|
|
|
|
3,770 |
|
Loss on pension liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(281 |
) |
|
|
(281 |
) |
Change in net unrealized loss on
available-for-sale securities, net of
taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(158 |
) |
|
|
(158 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income, net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,770 |
|
|
|
(439 |
) |
|
|
3,331 |
|
Dividends paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(782 |
) |
|
|
|
|
|
|
(782 |
) |
Treasury stock activity |
|
|
|
|
|
|
(2 |
) |
|
|
117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115 |
|
Allocation of ESOP Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116 |
|
Purchase of shares for MRP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116 |
|
|
|
|
|
|
|
|
|
|
|
116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BalanceMarch 31, 2006 |
|
|
25 |
|
|
|
23,935 |
|
|
|
(303 |
) |
|
|
(10 |
) |
|
|
(12 |
) |
|
|
25,736 |
|
|
|
(674 |
) |
|
|
48,697 |
|
Adjustment to initially implement SFAS
158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
281 |
|
|
|
281 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance post implementation of SFAS 158 |
|
|
25 |
|
|
|
23,935 |
|
|
|
(303 |
) |
|
|
(10 |
) |
|
|
(12 |
) |
|
|
25,736 |
|
|
|
(393 |
) |
|
|
48,978 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,583 |
|
|
|
|
|
|
|
2,583 |
|
Minimum pension liability adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79 |
|
|
|
79 |
|
Change in net unrealized loss on
available-for-sale securities, net of
taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
765 |
|
|
|
765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income, net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,583 |
|
|
|
844 |
|
|
|
3,427 |
|
Dividends paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(883 |
) |
|
|
|
|
|
|
(883 |
) |
Treasury stock activity |
|
|
|
|
|
|
61 |
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87 |
|
Allocation of ESOP Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
Purchase of shares for MRP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BalanceMarch 31, 2007 |
|
|
25 |
|
|
|
23,996 |
|
|
|
(277 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
27,436 |
|
|
|
451 |
|
|
|
51,627 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,980 |
|
|
|
|
|
|
|
3,980 |
|
Minimum pension liability adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
195 |
|
|
|
195 |
|
Change in net unrealized loss on
available-for-sale securities, net of
taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(221 |
) |
|
|
(221 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income, net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,980 |
|
|
|
(26 |
) |
|
|
3,954 |
|
Adjustment to initially implement SFAS
156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49 |
|
|
|
|
|
|
|
49 |
|
Dividends paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(975 |
) |
|
|
|
|
|
|
(975 |
) |
Treasury stock activity |
|
|
|
|
|
|
117 |
|
|
|
(393 |
) |
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(272 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BalanceMarch 31, 2008 |
|
$ |
25 |
|
|
$ |
24,113 |
|
|
$ |
(670 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
30,490 |
|
|
$ |
425 |
|
|
$ |
54,383 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME
(In thousands)
(As Restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common |
|
|
Common |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
Stock |
|
|
Stock |
|
|
|
|
|
|
Accumulated Other |
|
|
Total Stock- |
|
|
|
Common |
|
|
Paid-In |
|
|
Treasury |
|
|
Acquired |
|
|
Acquired |
|
|
Retained |
|
|
Comprehensive |
|
|
Holders |
|
|
|
Stock |
|
|
Capital |
|
|
Stock |
|
|
By ESOP |
|
|
By MRP |
|
|
Earnings |
|
|
Income (Loss) |
|
|
Equity |
|
BalanceMarch 31, 2005 |
|
$ |
25 |
|
|
$ |
23,937 |
|
|
$ |
(420 |
) |
|
$ |
(126 |
) |
|
$ |
(128 |
) |
|
$ |
22,748 |
|
|
$ |
(235 |
) |
|
$ |
45,801 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,770 |
|
|
|
|
|
|
|
3,770 |
|
Loss on pension liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(281 |
) |
|
|
(281 |
) |
Change in net unrealized loss on
available-
for-sale securities, net of taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(158 |
) |
|
|
(158 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income, net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,770 |
|
|
|
(439 |
) |
|
|
3,331 |
|
Dividends paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(782 |
) |
|
|
|
|
|
|
(782 |
) |
Treasury stock activity |
|
|
|
|
|
|
(2 |
) |
|
|
117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115 |
|
Allocation of ESOP Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116 |
|
Purchase of shares for MRP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116 |
|
|
|
|
|
|
|
|
|
|
|
116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BalanceMarch 31, 2006 |
|
|
25 |
|
|
|
23,935 |
|
|
|
(303 |
) |
|
|
(10 |
) |
|
|
(12 |
) |
|
|
25,736 |
|
|
|
(674 |
) |
|
|
48,697 |
|
Adjustment to initially implement SFAS
158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
281 |
|
|
|
281 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance post implementation of SFAS
158 |
|
|
25 |
|
|
|
23,935 |
|
|
|
(303 |
) |
|
|
(10 |
) |
|
|
(12 |
) |
|
|
25,736 |
|
|
|
(393 |
) |
|
|
48,978 |
|
Net income (as restated) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,098 |
|
|
|
|
|
|
|
2,098 |
|
Minimum pension liability adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79 |
|
|
|
79 |
|
Change in net unrealized loss on
available-
for-sale securities, net of taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
765 |
|
|
|
765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income, net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,098 |
|
|
|
844 |
|
|
|
2,942 |
|
Dividends paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(883 |
) |
|
|
|
|
|
|
(883 |
) |
Treasury stock activity |
|
|
|
|
|
|
61 |
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87 |
|
Allocation of ESOP Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
Purchase of shares for MRP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BalanceMarch 31, 2007
(as restated) |
|
|
25 |
|
|
|
23,996 |
|
|
|
(277 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
26,951 |
|
|
|
451 |
|
|
|
51,142 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,963 |
|
|
|
|
|
|
|
3,963 |
|
Minimum pension liability adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
195 |
|
|
|
195 |
|
Change in net unrealized loss on
available-
for-sale securities, net of taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(221 |
) |
|
|
(221 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income, net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,963 |
|
|
|
(26 |
) |
|
|
3,937 |
|
Adjustment to initially implement SFAS
156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49 |
|
|
|
|
|
|
|
49 |
|
Dividends paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(975 |
) |
|
|
|
|
|
|
(975 |
) |
Treasury stock activity |
|
|
|
|
|
|
117 |
|
|
|
(393 |
) |
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(272 |
) |
Allocation of ESOP Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of shares for MRP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BalanceMarch 31, 2008
(as restated) |
|
$ |
25 |
|
|
$ |
24,113 |
|
|
$ |
(670 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
29,988 |
|
|
$ |
425 |
|
|
$ |
53,881 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended March 31, |
|
|
|
2007 |
|
|
2007 |
|
|
2007 |
|
|
|
(As Previously |
|
|
|
|
|
|
|
|
|
Reported) |
|
|
Adjustment |
|
|
(As Restated) |
|
Cash flows from operating activites: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
2,583 |
|
|
$ |
(485 |
) |
|
$ |
2,098 |
|
Adjustments to reconcile net income to net cash from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses |
|
|
276 |
|
|
|
|
|
|
|
276 |
|
Stock based compensation expense |
|
|
426 |
|
|
|
|
|
|
|
426 |
|
Depreciation and amortization expense |
|
|
1,581 |
|
|
|
|
|
|
|
1,581 |
|
Amortization of premiums and discounts |
|
|
(1,145 |
) |
|
|
|
|
|
|
(1,145 |
) |
Impairment charge on securities |
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) Loss from sale of securities |
|
|
624 |
|
|
|
|
|
|
|
624 |
|
Gain on sale of loans |
|
|
(192 |
) |
|
|
|
|
|
|
(192 |
) |
Writedown on loans held-for-sale |
|
|
702 |
|
|
|
|
|
|
|
702 |
|
Loss on sale of real estate owned |
|
|
108 |
|
|
|
|
|
|
|
108 |
|
Originations of loans held-for-sale |
|
|
(24,708 |
) |
|
|
|
|
|
|
(24,708 |
) |
Proceeds from sale of loans held-for-sale |
|
|
14,422 |
|
|
|
|
|
|
|
14,422 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in accrued interest receivable |
|
|
(1,365 |
) |
|
|
|
|
|
|
(1,365 |
) |
Increase in other assets |
|
|
(2,662 |
) |
|
|
422 |
|
|
|
(2,240 |
) |
(Decrease) increase in other liabilities |
|
|
(4,330 |
) |
|
|
63 |
|
|
|
(4,267 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities |
|
|
(13,680 |
) |
|
|
|
|
|
|
(13,680 |
) |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activites: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from principal payments, maturities and calls of securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale |
|
|
26,539 |
|
|
|
|
|
|
|
26,539 |
|
Held-to-maturity |
|
|
7,185 |
|
|
|
|
|
|
|
7,185 |
|
Proceeds from sales of available-for-sale securities |
|
|
57,942 |
|
|
|
|
|
|
|
57,942 |
|
Originations of loans held-for-investment |
|
|
(105,284 |
) |
|
|
|
|
|
|
(105,284 |
) |
Loans purchased from third parties |
|
|
(58,191 |
) |
|
|
|
|
|
|
(58,191 |
) |
Principal collections on loans |
|
|
146,410 |
|
|
|
|
|
|
|
146,410 |
|
Proceeds from sales of loan originations held-for-investment |
|
|
16,548 |
|
|
|
|
|
|
|
16,548 |
|
Redemption of FHLB-NY stock |
|
|
1,388 |
|
|
|
|
|
|
|
1,388 |
|
Additions to premises and equipment |
|
|
(1,869 |
) |
|
|
|
|
|
|
(1,869 |
) |
Proceeds from sale of real estate owned |
|
|
404 |
|
|
|
|
|
|
|
404 |
|
Payments for acquisition, net of cash acquired |
|
|
(2,425 |
) |
|
|
|
|
|
|
(2,425 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities |
|
|
88,647 |
|
|
|
|
|
|
|
88,647 |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activites: |
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in deposits |
|
|
(33,657 |
) |
|
|
|
|
|
|
(33,657 |
) |
Net repayment of FHLB advances and other borrowings |
|
|
(45,660 |
) |
|
|
|
|
|
|
(45,660 |
) |
Common stock repurchased |
|
|
(321 |
) |
|
|
|
|
|
|
(321 |
) |
Dividends paid |
|
|
(883 |
) |
|
|
|
|
|
|
(883 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
(80,521 |
) |
|
|
|
|
|
|
(80,521 |
) |
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
|
|
(5,554 |
) |
|
|
|
|
|
|
(5,554 |
) |
Cash and cash equivalents at beginning of period |
|
|
22,904 |
|
|
|
|
|
|
|
22,904 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
17,350 |
|
|
$ |
|
|
|
$ |
17,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental information: |
|
|
|
|
|
|
|
|
|
|
|
|
Noncash Transfers- |
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized loss on valuation of available-for-sale
investments, net |
|
$ |
765 |
|
|
$ |
|
|
|
$ |
765 |
|
|
Cash paid for- |
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
19,510 |
|
|
$ |
|
|
|
$ |
19,510 |
|
Income taxes |
|
$ |
652 |
|
|
$ |
|
|
|
$ |
652 |
|
8
PART II
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis should be read in conjunction with our Consolidated
Financial Statements and Notes to Consolidated Financial Statements presented elsewhere in this
report. The Companys results of operations are significantly affected by general economic and
competitive conditions, particularly changes in market interest rates, government policies, changes
in accounting standards and actions of regulatory agencies.
Executive Summary
Carver Bancorp, Inc. is a savings and loan holding company organized under the laws of the
state of Delaware. Carver is committed to providing superior customer service while offering a
range of banking products and financial services to our retail and commercial customers. The
Holding Companys primary subsidiary is Carver Federal Savings Bank, which operates from ten
branches in the New York City boroughs of Manhattan, Brooklyn and Queens.
Fiscal 2008
Fiscal 2008 was a particularly challenging year for Carver, driven in part by the yield curve
and disruptions in credit markets, followed by the threat of recession. Nevertheless, Carvers
business held up well, as the impact of national events has not been as apparent in our core
markets. Carver was spared the brunt of the turbulent credit environment, given our limited
exposure to loan and investment products of concern to the financial markets. Although the
Companys local markets have not experienced in any material respect the fallout impacting other
regions across the nation, management is intensely focused on any signs of weakening
conditions. The Company believes its small business and real estate lending teams are well
positioned to source attractive opportunities, and Carver remains committed to solid asset quality
and accretive asset growth as top priorities.
Reported earnings increased 90% from fiscal 2007, but were basically flat when removing the
impact of fiscal 2007s acquisition and balance sheet restructuring. The Companys net interest
income grew to a record level of over $25 million, following an increase in our net interest margin
of 18 basis points to 3.62%. This margin expansion resulted from a 7.8% increase in loans and
deposit growth of 6.4%, although consistent with peers, core deposits are migrating to higher
priced CDs. Additionally, credit quality remained strong with non-performing loans at 0.50% of
total assets. Securities and borrowings portfolios decreased during fiscal 2008, which is
consistent with the Companys strategy to reduce lower yielding securities and invest in higher
yielding mortgages and loans. Carvers fiscal 2008 performance was driven by three primary
factors: first, Carvers lending business continued to excel, and credit quality remained stable;
second, Carver leveraged its New Markets Tax Credit award to bolster bottom line performance;
and third, Carvers asset/liability management eased margin pressure.
The Banks non-interest income benefited from a significant New Markets Tax Credit transaction
generating a $1.7 million payment during the year, along with increased lending and retail fee
generation. With this transaction, the Banks $59 million award received in June 2006 has been
fully invested. Carvers NMTC award continues to provide a Federal income tax benefit to the
Companys bottom line. The Company expects to receive additional NMTC tax benefits of
approximately $12.1 million from its $40.0 million investment over approximately the next six
years.
Asset quality remained solid in fiscal 2008 notwithstanding the Banks loan portfolio growth
and diversification into small business lending. The Company believes that the Banks loan loss
provision recorded in fiscal 2008 and the Banks allowance for loan losses are adequate.
Expenses grew year over year, largely based on substantial expansion of non-interest expense
of $3.6 million. The increase in expense falls into three categories: regulatory requirements
(preparation for compliance with Sarbanes-Oxley Act Section 404 and recent Inter-Agency Guidance on
Allowances for Loan Losses); strengthening the Banks back office, including the accounting,
lending and retail operations departments, by adding new staff and providing temporary expertise;
and engaging consultants to assist the management team to analyze significant opportunities to
improve financial results. For example, the Bank engaged consultants to conduct a rigorous business
optimization review to help management identify further improvements in our operations, in part
through greater systems integration. While these investments impact near-term results, they are
fundamental to
building the scale and infrastructure necessary for the Company to grow profitably. During
fiscal 2009, management expects to outline specific steps to improve efficiency and return on
equity. The first step should occur in the second quarter of fiscal 2009 when the Bank expects to
complete outsourcing of its residential lending department. Management expects that this
arrangement will expand the Banks product base and improve customer service, while reducing costs
to the Company.
9
Fiscal 2009
The industry economic environment in fiscal 2009 is expected to be characterized by
continued constraint in credit markets combined with the threat of stagflation. The credit
issues relate to weaknesses in residential and commercial real estate due to subprime issues and
general economic conditions. Interest rates are expected to remain low in the near term as the
Federal Reserve lowered the Fed funds rate in efforts to stimulate growth. However, inflation
fears may constrain the Federal Reserves ability to lower rates from current levels, and
inflation concerns may have the impact of steepening the yield curve and encouraging the Federal
Reserve to consider raising the Fed funds rate later this year.
Thrifts, many of which have business models primarily dependent on spread income from real
estate loans, have been especially hard hit in this environment. The thrift industry posted a
record $5.2 billion loss in the December 2007 quarter. In calendar year 2008 (Carvers fiscal
2009), industry analysts expect earnings shrinkage for the sector, and expect smaller banks to
suffer more than larger banks. Carver Federals credit quality has been stable because its
neighborhood markets have not been as severely impacted by the credit issues impacting the
nation.
The outlook for fiscal 2009 reflects many of the economic and competitive factors that the
Bank and the banking industry faced in fiscal 2008. As a result, the Bank expects the operating
environment to remain challenging. In this challenging climate, the Bank will continue to focus
on growth in its traditional businesses, namely the expansion of real estate loans and core
deposits. The Bank expects its new business and marketing efforts to core customer groups
including small business owners, landlords, and churches and other non-profits, to drive the
Banks deposit gathering strategy.
Carver expects its business performance in fiscal 2009 and thereafter will be propelled by
several factors. First, the small business and non-residential markets offer the opportunity for
higher-yielding loans and lower costing deposits. Management believes serving these market niches
is critical to Carvers growth and future profitability. Second, Carvers focus on improving its
back-office operations should pay dividends in the form of efficiencies. Third, Carver enjoys a
venerable reputation in the world of community development financial institutions, and management
believes that Carver may leverage that reputation to its business advantage by broadening its new
business efforts to target a broader institutional audience. Finally, management believes that
growth and profitability may be accelerated by a prudent merger and acquisition strategy. The
importance of a strong and efficient operating platform has been amplified in the current
regulatory environment and Carvers competitive marketplace.
Acquisition of Community Capital Bank
On September 29, 2006, the Bank completed its acquisition of Community Capital Bank, a
Brooklyn-based New York State chartered commercial bank, with approximately $165.4 million in
assets and two branches, in a cash transaction totaling approximately $11.1 million. Under the
terms of the merger agreement, CCBs shareholders were paid $40.00 per outstanding share (including
options which immediately vested with the consummation of the merger) and the Bank incurred an
additional $0.9 million in transaction related costs. The combined entities operate under Carver
Federals thrift charter and Carver Federal continues to be supervised by the Office of Thrift
Supervision.
The transaction, which was accounted for under the purchase accounting method, included the
recognition of approximately $0.8 million of core deposit intangibles and $5.1 million representing
the excess of the purchase price over the fair value of identifiable net assets (goodwill). At
March 31, 2008, goodwill relating to the transaction and subsequent additional purchase accounting
adjustments, primarily income taxes, sales tax assessment and professional fees, totaled
approximately $7.1 million. A re-evaluation of goodwill in
connection with the reconciliation matter disclosed elsewhere herein
resulted in the reclassification of $0.7 million from loans to
goodwill as of March 31, 2008 and 2007.
10
New Markets Tax Credit Award
In June 2006, Carver Federal was selected by the U.S. Department of Treasury to receive an
award of $59 million in New Markets Tax Credits. The NMTC award is used to stimulate economic
development in low- to moderate-income communities. The NMTC award enables the Bank to invest with
community and development partners in economic development projects with attractive terms
including, in some cases, below market interest rates, which may have the effect of attracting
capital to underserved communities and facilitating the revitalization of the community, pursuant
to the goals of the NMTC program. The NMTC award provides a credit to Carver Federal against
Federal income taxes when the Bank makes qualified investments. The credits are allocated over
seven years from the time of the qualified investment. Recognition of the Banks NMTC award began
in December 2006 when the Bank invested $29.5 million, one-half of its $59 million award. In
December 2007, the Bank invested an additional $10.5 million and transferred rights to $19.0
million to an investor in a NMTC project. The Banks NMTC allocation was fully invested as of
December 31, 2007. During the seven year period, assuming the Bank meets compliance requirements,
the Bank will receive 39% of the $40.0 million invested award amount in tax benefits (5% over each
of the first three years, and 6% over each of the next four years). The Company expects to receive
the remaining NMTC tax benefits of approximately $12.1 million from its $40.0 million investment
over the next six years.
Critical Accounting Policies
Various elements of our accounting policies, by their nature, are inherently subject to
estimation techniques, valuation assumptions and other subjective assessments. Carvers policy
with respect to the methodologies used to determine the allowance for loan losses is the most
critical accounting policy. This policy is important to the presentation of Carvers financial
condition and results of operations, and it involves a higher degree of complexity and requires
management to make difficult and subjective judgments, which often require assumptions or estimates
about highly uncertain matters. The use of different judgments, assumptions and estimates could
result in material differences in our results of operations or financial condition.
See Note 2 of Notes to Consolidated Financial Statements for a description of our summary of
significant accounting policies, including those related to allowance for loan losses, and an
explanation of the methods and assumptions underlying their application.
Securities Impairment
The Banks available-for-sale securities portfolio is carried at estimated fair value, with
any unrealized gains and losses, net of taxes, reported as accumulated other comprehensive
income/loss in stockholders equity. Securities that the Bank has the positive intent and ability
to hold to maturity are classified as held-to-maturity and are carried at amortized cost. The fair
values of securities in the portfolio are based on published or securities dealers market values
and are affected by changes in interest rates. The Bank periodically reviews and evaluates the
securities portfolio to determine if the decline in the fair value of any security below its cost
basis is other-than-temporary. The Bank generally views changes in fair value caused by changes in
interest rates as temporary, which is consistent with its experience. However, if such a decline
is deemed to be other-than-temporary, the security is written down to a new cost basis and the
resulting loss is charged to earnings. At March 31, 2008, the Bank carried no other than
temporarily impaired securities.
Allowance for Loan Losses
The allowance for loan losses is maintained at a level considered adequate to provide for
probable loan losses inherent in the portfolio as of March 31, 2008. During the third quarter of
fiscal 2008, Carver changed its loan loss methodology to be consistent with the Interagency Policy
Statement on the Allowance for Loan and Lease Losses released by the Federal Financial Regulatory
Agencies on December 13, 2006. The change had an immaterial affect on the allowance for loan
losses at March 31, 2008. Management is responsible for determining the adequacy of the allowance
for loan losses and the periodic provisioning for estimated losses included in the consolidated
financial statements. The evaluation process is undertaken on a quarterly basis, but may increase
in frequency should conditions arise that would require managements prompt attention, such as
business combinations and opportunities to dispose of non-performing and marginally performing
loans by bulk sale or any development which may indicate an adverse trend.
11
Carver Federal maintains a loan review system, which includes periodic review of its loan
portfolio and the
early identification of potential problem loans. Such system takes into consideration, among
other things, delinquency status, size of loans, type of collateral and financial condition of the
borrowers. Loan loss allowances are established for problem loans based on a review of such
information and/or appraisals of the underlying collateral. On the remainder of its loan
portfolio, loan loss allowances are based upon a combination of factors including, but not limited
to, actual loan loss experience, composition of loan portfolio, current economic conditions and
managements judgment. Although management believes that adequate loan loss allowances have been
established, actual losses are dependent upon future events and, as such, further additions to the
level of the loan loss allowance may be necessary in the future.
The methodology employed for assessing the appropriateness of the allowance consists of the
following criteria:
|
|
|
Establishment of loan loss allowance amounts for all specifically
identified criticized and classified loans that have been designated as requiring
attention by managements internal loan review process, bank regulatory
examinations or Carver Federals external auditors. |
|
|
|
An average loss factor, giving effect to historical loss experience
over several years and other qualitative factors, is applied to all loans not
subject to specific review. |
|
|
|
Evaluation of any changes in risk profile brought about by business
combinations, customer knowledge, the results of ongoing credit quality monitoring
processes and the cyclical nature of economic and business conditions. An
important consideration in performing this evaluation is the concentration of real
estate related loans located in the New York City metropolitan area. |
All new loan originations are assigned a credit risk grade which commences with loan officers
and underwriters grading the quality of their loans one to five under a nine-category risk
classification scale, the first five categories of which represent performing loans. Reserves are
held based on actual loss factors based on several years of loss experience and other qualitative
factors applied to the outstanding balances in each loan category. All loans are subject to
continuous review and monitoring for changes in their credit grading. Grading that falls into
criticized or classified categories (credit grading six through nine) are further evaluated and
reserved amounts are established for each loan based on each loans potential for loss and include
consideration of the sufficiency of collateral. Any adverse trend in real estate markets could
seriously affect underlying values available to protect against loss.
Other evidence used to support the amount of the allowance and its components includes:
|
|
|
Amount and trend of criticized loans; |
|
|
|
Peer comparisons with other financial institutions; and |
|
|
|
Economic data associated with the real estate market in the Companys lending market areas. |
A loan is considered to be impaired, as defined by SFAS No. 114, Accounting by Creditors for
Impairment of a Loan (SFAS 114), when it is probable that Carver Federal will be unable to
collect all principal and interest amounts due according to the contractual terms of the loan
agreement. Carver Federal tests loans covered under SFAS 114 for impairment if they are on
non-accrual status or have been restructured. Consumer credit non-accrual loans are not tested for
impairment because they are included in large groups of smaller-balance homogeneous loans that, by
definition, are excluded from the scope of SFAS 114. Impaired loans are required to be measured
based upon (i) the present value of expected future cash flows, discounted at the loans initial
effective interest rate, (ii) the loans market price, or (iii) fair value of the collateral if the
loan is collateral dependent. If the loan valuation is less than the recorded value of the loan,
an allowance must be established for the difference. The allowance is established by either an
allocation of the existing allowance for loan losses or by a provision for loan losses, depending
on various circumstances. Allowances are not needed when credit losses have been recorded so that
the recorded investment in an impaired loan is less than the loan valuation.
12
Asset/Liability Management
The Companys primary earnings source is net interest income, which is affected by changes in
the level of
interest rates, the relationship between the rates on interest-earning assets and
interest-bearing liabilities, the impact of interest rate fluctuations on asset prepayments, the
level and composition of deposits and the credit quality of earning assets. Managements
asset/liability objectives are to maintain a strong, stable net interest margin, to utilize its
capital effectively without taking undue risks, to maintain adequate liquidity and to manage its
exposure to changes in interest rates.
The economic environment is uncertain regarding future interest rate trends. Management
monitors the Companys cumulative gap position, which is the difference between the sensitivity to
rate changes on the Companys interest-earning assets and interest-bearing liabilities. In
addition, the Company uses various tools to monitor and manage interest rate risk, such as a model
that projects net interest income based on increasing or decreasing interest rates.
Stock Repurchase Program
Refer to ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.
Discussion of Market RiskInterest Rate Sensitivity Analysis
As a financial institution, the Banks primary component of market risk is interest rate
volatility. Fluctuations in interest rates will ultimately impact both the level of income and
expense recorded on a large portion of the Banks assets and liabilities, and the market value of
all interest-earning assets, other than those which are short term in maturity. Since virtually
all of the Companys interest-bearing assets and liabilities are held by the Bank, most of the
Companys interest rate risk exposure is retained by the Bank. As a result, all significant
interest rate risk management procedures are performed at the Bank. Based upon the Banks nature
of operations, the Bank is not subject to foreign currency exchange or commodity price risk. The
Bank does not own any trading assets.
Carver Federal seeks to manage its interest rate risk by monitoring and controlling the
variation in repricing intervals between its assets and liabilities. To a lesser extent, Carver
Federal also monitors its interest rate sensitivity by analyzing the estimated changes in market
value of its assets and liabilities assuming various interest rate scenarios. As discussed more
fully below, there are a variety of factors that influence the repricing characteristics of any
given asset or liability.
The matching of assets and liabilities may be analyzed by examining the extent to which such
assets and liabilities are interest rate sensitive and by monitoring an institutions interest
rate sensitivity gap. An asset or liability is said to be interest rate sensitive within a
specific period if it will mature or reprice within that period. The interest rate sensitivity gap
is defined as the difference between the amount of interest-earning assets maturing or repricing
within a specific period of time and the amount of interest-bearing liabilities maturing or
repricing within that same time period. A gap is considered positive when the amount of interest
rate sensitive assets exceeds the amount of interest rate sensitive liabilities and is considered
negative when the amount of interest rate sensitive liabilities exceeds the amount of interest rate
sensitive assets. Generally, during a period of falling interest rates, a negative gap could
result in an increase in net interest income, while a positive gap could adversely affect net
interest income. Conversely, during a period of rising interest rates a negative gap could
adversely affect net interest income, while a positive gap could result in an increase in net
interest income. As illustrated below, Carver Federal had a negative one-year gap equal to 12.47%
of total rate sensitive assets at March 31, 2008. As a result, Carver Federals net interest
income could be negatively affected by rising interest rates and positively affected by falling
interest rates.
13
The following table sets forth information regarding the projected maturities, prepayments and
repricing of the major rate-sensitive asset and liability categories of Carver Federal as of March
31, 2008. Maturity repricing dates have been projected by applying estimated prepayment rates
based on the current rate environment. The information presented in the following table is derived
in part from data incorporated in Schedule CMR: Consolidated Maturity and Rate, which is part of
the Banks quarterly reports filed with the OTS. The repricing and other assumptions are not
necessarily representative of the Banks actual results. Classifications of items in the table
below are different from those presented in other tables and the financial statements and
accompanying notes included herein and do not reflect non-performing loans (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
< 3 Mos. |
|
|
4-12 Mos. |
|
|
1-3 Yrs. |
|
|
3-5 Yrs. |
|
|
5-10 Yrs. |
|
|
10+ Yrs. |
|
|
Total |
|
Rate Sensitive Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
$ |
171,142 |
|
|
$ |
65,102 |
|
|
$ |
113,724 |
|
|
$ |
127,919 |
|
|
$ |
70,390 |
|
|
$ |
107,599 |
|
|
$ |
655,876 |
|
Mortgage Backed Securities |
|
|
5,265 |
|
|
|
6,297 |
|
|
|
8,728 |
|
|
|
943 |
|
|
|
2,823 |
|
|
|
12,756 |
|
|
|
36,812 |
|
Federal Funds Sold |
|
|
10,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,500 |
|
Investment Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,360 |
|
|
|
|
|
|
|
1,360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets |
|
|
186,907 |
|
|
|
71,399 |
|
|
|
122,452 |
|
|
|
128,862 |
|
|
|
74,573 |
|
|
|
120,355 |
|
|
|
704,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate Sensitive Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW accounts |
|
|
2,167 |
|
|
|
2,500 |
|
|
|
5,999 |
|
|
|
5,086 |
|
|
|
6,726 |
|
|
|
5,689 |
|
|
|
28,167 |
|
Savings Accounts |
|
|
9,681 |
|
|
|
11,168 |
|
|
|
26,798 |
|
|
|
22,719 |
|
|
|
30,042 |
|
|
|
25,411 |
|
|
|
125,819 |
|
Money market accounts |
|
|
3,502 |
|
|
|
4,040 |
|
|
|
9,694 |
|
|
|
8,218 |
|
|
|
10,867 |
|
|
|
9,192 |
|
|
|
45,513 |
|
Certificate of Deposits |
|
|
136,426 |
|
|
|
162,345 |
|
|
|
25,690 |
|
|
|
12,739 |
|
|
|
399 |
|
|
|
6 |
|
|
|
337,604 |
|
Borrowings |
|
|
1,000 |
|
|
|
14,108 |
|
|
|
|
|
|
|
30,142 |
|
|
|
|
|
|
|
|
|
|
|
45,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
|
152,776 |
|
|
|
194,161 |
|
|
|
68,181 |
|
|
|
78,904 |
|
|
|
48,034 |
|
|
|
40,298 |
|
|
|
582,353 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Sensitivity Gap |
|
$ |
34,131 |
|
|
$ |
(122,762 |
) |
|
$ |
54,271 |
|
|
$ |
49,958 |
|
|
$ |
26,539 |
|
|
$ |
80,057 |
|
|
$ |
122,194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative Interest Sensitivity Gap |
|
$ |
34,131 |
|
|
$ |
(88,631 |
) |
|
$ |
(34,360 |
) |
|
$ |
15,598 |
|
|
$ |
42,137 |
|
|
$ |
122,194 |
|
|
|
|
|
Ratio of Cumulative Gap to Total
Rate
Sensitive assets |
|
|
4.84 |
% |
|
|
-12.58 |
% |
|
|
-4.88 |
% |
|
|
2.21 |
% |
|
|
5.98 |
% |
|
|
17.34 |
% |
|
|
|
|
The table above assumes that fixed maturity deposits are not withdrawn prior to maturity and
that transaction accounts will decay as disclosed in the table above.
Certain shortcomings are inherent in the method of analysis presented in the table
above. Although certain assets and liabilities may have similar maturities or periods of
repricing, they may react in different degrees to changes in the market interest rates. The
interest rates on certain types of assets and liabilities may fluctuate in advance of changes in
market interest rates, while rates on other types of assets and liabilities may lag behind changes
in market interest rates. Certain assets, such as adjustable-rate mortgages, generally have
features that restrict changes in interest rates on a short-term basis and over the life of the
asset. In the event of a change in interest rates, prepayments and early withdrawal levels would
likely deviate significantly from those assumed in calculating the table. Additionally, credit
risk may increase as many borrowers may experience an inability to service their debt in the event
of a rise in interest rate. Virtually all of the adjustable-rate loans in Carver Federals
portfolio contain conditions that restrict the periodic change in interest rate.
Net Portfolio Value (NPV) Analysis. As part of its efforts to maximize net interest income
while managing risks associated with changing interest rates, management also uses the NPV
methodology. NPV is the present value of expected net cash flows from existing assets less the
present value of expected cash flows from existing liabilities plus the present value of net
expected cash inflows from existing financial derivatives and off-balance-sheet contracts.
Under this methodology, interest rate risk exposure is assessed by reviewing the estimated
changes in NPV that would hypothetically occur if interest rates rapidly rise or fall along the
yield curve. Projected values of NPV at both higher and lower regulatory defined rate scenarios
are compared to base case values (no change in rates) to determine the sensitivity to changing
interest rates.
14
Presented below, as of March 31, 2008, is an analysis of the Banks interest rate risk as
measured by changes in NPV for instantaneous and sustained parallel shifts of 100 basis points and
50 basis points plus or minus changes in market interest rates. Such limits have been established
with consideration of the impact of various rate changes and the Banks current capital
position. The Bank considers its level of interest rate risk for fiscal 2008, as measured by
changes in NPV, to be minimal. The information set forth below relates solely to the Bank;
however, because virtually all of the Companys interest rate risk exposure lies at the Bank level,
management believes the table below also similarly reflects an analysis of the Companys interest
rate risk (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Portfolio Value |
|
|
NPV as % of PV of Assets |
|
Change in Rate |
|
$ Amount |
|
|
$ Change |
|
|
% Change |
|
|
NPV Ratio |
|
|
Change |
+300 bp |
|
|
99,028 |
|
|
|
-15,954 |
|
|
|
-14 |
% |
|
|
12.27 |
% |
|
-154 bp |
+200 bp |
|
|
102,962 |
|
|
|
-12,020 |
|
|
|
-10 |
% |
|
|
12.65 |
% |
|
-117 bp |
+100 bp |
|
|
108,631 |
|
|
|
-6,351 |
|
|
|
-6 |
% |
|
|
13.21 |
% |
|
- 60 bp |
+50 bp |
|
|
111,870 |
|
|
|
-3,112 |
|
|
|
-3 |
% |
|
|
13.52 |
% |
|
- 30 bp |
0 bp |
|
|
114,982 |
|
|
|
|
|
|
|
|
|
|
|
13.82 |
% |
|
bp |
(50) bp |
|
|
117,979 |
|
|
|
2,997 |
|
|
|
3 |
% |
|
|
14.10 |
% |
|
28 bp |
(100) bp |
|
|
120,788 |
|
|
|
5,806 |
|
|
|
5 |
% |
|
|
14.36 |
% |
|
54 bp |
|
|
|
|
|
|
|
March 31, |
|
|
|
2008 |
|
Risk Measures: +200 BP Rate Shock: |
|
|
|
|
Pre-Shock NPV Ratio: NPV as % of PV of Assets |
|
|
13.82 |
% |
Post-Shock NPV Ratio |
|
|
12.65 |
% |
Sensitivity Measure: Decline in NPV Ratio |
|
-117 bp |
|
Certain shortcomings are inherent in the methodology used in the above interest rate risk
measurements. Modeling changes in NPV require the making of certain assumptions, which may or may
not reflect the manner in which actual yields and costs respond to changes in market interest
rates. In this regard, the NPV table presented assumes that the composition of Carver Federals
interest sensitive assets and liabilities existing at the beginning of a period remains constant
over the period being measured and also assumes that a particular change in interest rates is
reflected uniformly across the yield curve regardless of the duration to maturity or repricing of
specific assets and liabilities. Accordingly, although the NPV table provides an indication
of Carver Federals interest rate risk exposure at a particular point in time, such measurements
are not intended to and do not provide a precise forecast of the effect of changes in market
interest rates on Carver Federals net interest income and may differ from actual results.
15
Average Balance, Interest and Average Yields and Rates
The following table sets forth certain information relating to Carver Federals average
interest-earning assets and average interest-bearing liabilities and related yields for the years
ended March 31. The table also presents information for the fiscal years indicated with respect to
the difference between the weighted average yield earned on interest-earning assets and the
weighted average rate paid on interest-bearing liabilities, or interest rate spread, which
savings institutions have traditionally used as an indicator of profitability. Another indicator
of an institutions profitability is its net interest margin, which is its net interest income
divided by the average balance of interest-earning assets. Net interest income is affected by the
interest rate spread and by the relative amounts of interest-earning assets and interest-bearing
liabilities. When interest-earning assets approximate or exceed interest-bearing liabilities, any
positive interest rate spread will generate net interest income (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
Average |
|
|
|
|
|
|
Yield/ |
|
|
Average |
|
|
|
|
|
|
Yield/ |
|
|
Average |
|
|
|
|
|
|
Yield/ |
|
|
|
Balance |
|
|
Interest |
|
|
Cost |
|
|
Balance |
|
|
Interest |
|
|
Cost |
|
|
Balance |
|
|
Interest |
|
|
Cost |
|
|
Interest Earning Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
$ |
639,583 |
|
|
$ |
44,499 |
|
|
|
6.96 |
% |
|
$ |
558,058 |
|
|
$ |
37,278 |
|
|
|
6.68 |
% |
|
$ |
443,461 |
|
|
$ |
26,563 |
|
|
|
5.99 |
% |
Mortgage-backed securities |
|
|
39,079 |
|
|
|
2,071 |
|
|
|
5.30 |
% |
|
|
64,682 |
|
|
|
2,877 |
|
|
|
4.45 |
% |
|
|
113,574 |
|
|
|
4,439 |
|
|
|
3.91 |
% |
Investment securities |
|
|
22,902 |
|
|
|
1,434 |
|
|
|
6.26 |
% |
|
|
27,161 |
|
|
|
1,325 |
|
|
|
4.88 |
% |
|
|
25,698 |
|
|
|
971 |
|
|
|
3.78 |
% |
Fed funds sold |
|
|
3,007 |
|
|
|
128 |
|
|
|
4.26 |
% |
|
|
5,145 |
|
|
|
261 |
|
|
|
5.07 |
% |
|
|
12,166 |
|
|
|
412 |
|
|
|
3.39 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest earning assets |
|
|
704,571 |
|
|
|
48,132 |
|
|
|
6.83 |
% |
|
|
655,046 |
|
|
|
41,741 |
|
|
|
6.37 |
% |
|
|
594,899 |
|
|
|
32,385 |
|
|
|
5.44 |
% |
Non-interest earning assets |
|
|
63,440 |
|
|
|
|
|
|
|
|
|
|
|
44,576 |
|
|
|
|
|
|
|
|
|
|
|
35,198 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
768,011 |
|
|
|
|
|
|
|
|
|
|
$ |
699,622 |
|
|
|
|
|
|
|
|
|
|
$ |
630,097 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Bearing Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW demand |
|
$ |
24,660 |
|
|
|
138 |
|
|
|
0.56 |
% |
|
$ |
25,313 |
|
|
|
98 |
|
|
|
0.39 |
% |
|
$ |
24,397 |
|
|
|
74 |
|
|
|
0.30 |
% |
Savings and clubs |
|
|
131,627 |
|
|
|
1,004 |
|
|
|
0.76 |
% |
|
|
136,785 |
|
|
|
931 |
|
|
|
0.68 |
% |
|
|
137,934 |
|
|
|
919 |
|
|
|
0.67 |
% |
Money market savings |
|
|
44,688 |
|
|
|
1,193 |
|
|
|
2.67 |
% |
|
|
43,303 |
|
|
|
1,133 |
|
|
|
2.62 |
% |
|
|
36,583 |
|
|
|
601 |
|
|
|
1.64 |
% |
Certificates of deposit |
|
|
370,933 |
|
|
|
16,489 |
|
|
|
4.45 |
% |
|
|
312,452 |
|
|
|
13,036 |
|
|
|
4.17 |
% |
|
|
237,992 |
|
|
|
7,297 |
|
|
|
3.07 |
% |
Mortgagors deposits |
|
|
2,687 |
|
|
|
42 |
|
|
|
1.56 |
% |
|
|
2,154 |
|
|
|
30 |
|
|
|
1.39 |
% |
|
|
2,044 |
|
|
|
30 |
|
|
|
1.47 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits |
|
|
574,595 |
|
|
|
18,866 |
|
|
|
3.28 |
% |
|
|
520,007 |
|
|
|
15,228 |
|
|
|
2.93 |
% |
|
|
438,950 |
|
|
|
8,921 |
|
|
|
2.03 |
% |
Borrowed money |
|
|
73,880 |
|
|
|
3,790 |
|
|
|
5.13 |
% |
|
|
78,853 |
|
|
|
4,007 |
|
|
|
5.08 |
% |
|
|
107,551 |
|
|
|
4,572 |
|
|
|
4.25 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest bearing liabilities |
|
|
648,475 |
|
|
|
22,656 |
|
|
|
3.49 |
% |
|
|
598,860 |
|
|
|
19,235 |
|
|
|
3.21 |
% |
|
|
546,501 |
|
|
|
13,493 |
|
|
|
2.47 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand |
|
|
51,713 |
|
|
|
|
|
|
|
|
|
|
|
40,676 |
|
|
|
|
|
|
|
|
|
|
|
29,079 |
|
|
|
|
|
|
|
|
|
Other liabilities |
|
|
12,803 |
|
|
|
|
|
|
|
|
|
|
|
10,739 |
|
|
|
|
|
|
|
|
|
|
|
6,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
712,991 |
|
|
|
|
|
|
|
|
|
|
|
650,275 |
|
|
|
|
|
|
|
|
|
|
|
582,560 |
|
|
|
|
|
|
|
|
|
Stockholders equity |
|
|
55,020 |
|
|
|
|
|
|
|
|
|
|
|
49,347 |
|
|
|
|
|
|
|
|
|
|
|
47,537 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
768,011 |
|
|
|
|
|
|
|
|
|
|
$ |
699,622 |
|
|
|
|
|
|
|
|
|
|
$ |
630,097 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
|
|
$ |
25,476 |
|
|
|
|
|
|
|
|
|
|
$ |
22,506 |
|
|
|
|
|
|
|
|
|
|
$ |
18,892 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest rate spread |
|
|
|
|
|
|
|
|
|
|
3.34 |
% |
|
|
|
|
|
|
|
|
|
|
3.16 |
% |
|
|
|
|
|
|
|
|
|
|
2.97 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin |
|
|
|
|
|
|
|
|
|
|
3.62 |
% |
|
|
|
|
|
|
|
|
|
|
3.44 |
% |
|
|
|
|
|
|
|
|
|
|
3.18 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of avgerage interest-earning assets
to interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
108.65 |
% |
|
|
|
|
|
|
|
|
|
|
109.38 |
% |
|
|
|
|
|
|
|
|
|
|
108.86 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
Rate/Volume Analysis
The following table sets forth information regarding the extent to which changes in interest
rates and changes in volume of interest related assets and liabilities have affected Carver
Federals interest income and expense during the fiscal years ended March 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 vs. 2007 |
|
|
2007 vs. 2006 |
|
|
|
Increase (Decrease) due to |
|
|
Increase (Decrease) due to |
|
|
|
Volume |
|
|
Rate |
|
|
Total |
|
|
Volume |
|
|
Rate |
|
|
Total |
|
Interest Earning Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
$ |
5,626 |
|
|
$ |
1,595 |
|
|
$ |
7,221 |
|
|
$ |
6,864 |
|
|
$ |
3,060 |
|
|
$ |
9,924 |
|
Investment securities |
|
|
(248 |
) |
|
|
357 |
|
|
|
109 |
|
|
|
1,473 |
|
|
|
172 |
|
|
|
1,645 |
|
Mortgage-backed securities |
|
|
(1,289 |
) |
|
|
483 |
|
|
|
(806 |
) |
|
|
(3,377 |
) |
|
|
1,102 |
|
|
|
(2,276 |
) |
Fed funds sold, FHLB stock & other |
|
|
(101 |
) |
|
|
(32 |
) |
|
|
(133 |
) |
|
|
(238 |
) |
|
|
205 |
|
|
|
(33 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest earning assets |
|
|
3,988 |
|
|
|
2,403 |
|
|
|
6,391 |
|
|
|
4,722 |
|
|
|
4,539 |
|
|
|
9,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Bearing Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW demand |
|
|
(4 |
) |
|
|
44 |
|
|
|
40 |
|
|
|
3 |
|
|
|
20 |
|
|
|
23 |
|
Savings and clubs |
|
|
(39 |
) |
|
|
112 |
|
|
|
73 |
|
|
|
(8 |
) |
|
|
20 |
|
|
|
12 |
|
Money market savings |
|
|
37 |
|
|
|
23 |
|
|
|
60 |
|
|
|
110 |
|
|
|
356 |
|
|
|
467 |
|
Certificates of deposit |
|
|
2,580 |
|
|
|
873 |
|
|
|
3,453 |
|
|
|
2,283 |
|
|
|
2,632 |
|
|
|
4,915 |
|
Mortgagors deposits |
|
|
8 |
|
|
|
4 |
|
|
|
12 |
|
|
|
2 |
|
|
|
(2 |
) |
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits |
|
|
2,582 |
|
|
|
1,056 |
|
|
|
3,638 |
|
|
|
2,390 |
|
|
|
3,026 |
|
|
|
5,417 |
|
Borrowed money |
|
|
(255 |
) |
|
|
38 |
|
|
|
(217 |
) |
|
|
(1,220 |
) |
|
|
893 |
|
|
|
(327 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest bearing liabilities |
|
|
2,327 |
|
|
|
1,094 |
|
|
|
3,421 |
|
|
|
1,170 |
|
|
|
3,919 |
|
|
|
5,090 |
|
|
Net change in interest income |
|
$ |
1,661 |
|
|
$ |
1,309 |
|
|
$ |
2,970 |
|
|
$ |
3,552 |
|
|
$ |
620 |
|
|
$ |
4,170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For each category of interest-earning assets and interest-bearing liabilities, information is
provided for changes attributable to: (1) changes in volume (changes in volume multiplied by prior
rate); (2) changes in rate (change in rate multiplied by old volume); and (3) changes in
rate/volume. Changes in rate/volume variance are allocated proportionately between changes in rate
and changes in volume.
Comparison of Financial Condition at March 31, 2008 and 2007
Assets
At March 31, 2008, total assets increased $56.6 million, or 7.7%, to $796.2 million compared
to $739.5 million at March 31, 2007, primarily the result of increases in loans receivable and
loans held-for-sale of $47.4 million, other assets of $27.4 million and cash and cash equivalents
of $10.0 million, partially offset by decreases in investment securities of $28.9 million
and FHLB-NY stock of $1.6 million.
Total loans receivable, including loans held-for-sale, increased $47.4 million, or 7.8%, to
$655.9 million at March 31, 2008 compared to $608.5 million at March 31, 2007. The increase was
primarily the result of an increase in commercial real estate loans of $35.3 million and an
increase in construction loans of $21.2 million, offset by a decrease of multi-family loans of
$13.2 million. The Bank continues to grow its loan portfolio through focusing on the origination of
loans in the markets it serves and will continue to augment these originations with loan
purchases.
At March 31, 2008, construction loans represented 25.1% of the loan portfolio. Approximately
67.5% of the Banks construction loans are participations in loans originated by Community
Preservation Corporation. CPC is a non-profit mortgage lender whose mission is to enhance the
quality and quantity of affordable housing in the New York, New Jersey, and Connecticut tri-state
area. The Banks construction lending activity is concentrated in the New York City market. At
this time, the New York City real estate market has been resilient relative to the real estate
downturn impacting other parts of the U.S. The economic environment is expected to be
characterized by continued constraint in credit markets for affordable housing. The credit issues
relate to weaknesses in residential and commercial real estate due to subprime issues and general
economic conditions. Based on recent reports, various factors including continuing demand,
relatively low proportion of subprime loans, interest from international buyers, and a lack of
affordable housing supply contribute to New York City real estates continuing strength. Despite
those favorable factors, the Bank will continue to closely monitor trends.
17
Other assets increased $27.5 million, or 198.3%, to $41.4 million at March 31, 2008 compared
to $13.9 million at March 31, 2007, primarily due to a $19.0 million NMTC transaction on December
31, 2007, which increased both other assets and minority interest. Additionally, other assets
consisted of a settlement receivable of
$7.6 million from the sale of certain investments.
Cash and cash equivalents increased $10.0 million, or 57.7%, to $27.4 million at March 31,
2008 compared to $17.4 million at March 31, 2007, primarily due to a $9.2 million increase in
Federal funds sold and a $1.3 million increase in cash and due from banks. Office properties and
equipment on a net basis increased by $1.2 million, or 7.9%, to $15.8 million at March 31,
2008 compared to $14.6 million at March 31, 2007, primarily the result of leasing new office space
to consolidate back-office operations and the opening of a new ATM center.
Total securities decreased $28.9 million, or 43.1%, to $38.2 million at March 31, 2008
compared to $67.1 million at March 31, 2007, reflecting a decline of $27.1 million in
available-for-sale securities and a $1.8 million decrease in held-to-maturity securities. The
decrease in total securities is primarily due to collection of normal principal repayments,
maturities of securities and the Banks strategy of reducing lower yielding securities and
replacing them with higher yielding loans. However, the Bank may invest in securities from time to
time to help diversify its asset portfolio, manage liquidity and satisfy collateral requirements
for certain deposits. There were $15.3 million purchases of securities during the fiscal
2008. Total securities also declined due to an increase in the net unrealized loss on securities
of $0.2 million resulting from the mark-to-market of the available for sale securities portfolio.
The Banks investment in FHLB-NY stock decreased by $1.6 million, or 49.8%, to $1.6 million at
March 31, 2008 compared to $3.2 million at March 31, 2007. The FHLB-NY requires banks to own
membership stock as well as borrowing activity-based stock. The decrease in investment in FHLB-NY
stock was the result of the repayment of FHLB-NY borrowings, resulting in the net redemption of
stock during the period.
Liabilities and Stockholders Equity
Liabilities
At March 31, 2008, total liabilities increased $34.7 million, or 5.0%, to $723.1 million at
March 31, 2008 compared to $688.4 million at March 31, 2007. The increase in total liabilities was
primarily the result of $39.5 million of additional customer deposits, offset by decreases of $2.5
million in advances and borrowed money and $2.3 million of other liabilities.
Deposits increased $39.5 million, or 6.4%, to $654.7 million at March 31, 2008 compared to
$615.1 million at March 31, 2007. The increase in deposit balances was primarily the result of an
increase in certificates of deposit of $52.8 million, which were offset by decreases of $12.1
million in savings and $1.5 million in money market accounts. At March 31, 2008, the Bank had
$63.0 million in brokered deposits.
Advances from the FHLB-NY and other borrowed money decreased $2.5 million, or 4.0%, to $58.6
million at March 31, 2008 compared to $61.1 million at March 31, 2007. The decrease in advances
and borrowed money was primarily the result of a reduction of $32.5 million in FHLB advances,
offset by an increase in repurchase obligations of $30.0 million at March 31, 2008 compared to no
repurchase obligations at March 31, 2007. Other liabilities decreased $2.3 million, or 19.3%, to
$9.8 million at March 31, 2008 compared to $12.1 million at March 31, 2007, primarily due to a
decrease of $1.5 million in retail liabilities.
On December 31, 2007, CCDC received an equity investment of $19.0 million related to a New
Markets Tax Credit transaction. On consolidation, this transaction is reflected as a $19.0 million
increase in other assets and minority interest.
18
Stockholders Equity
Total stockholders equity increased $2.8 million, or 5.4%, to $53.9 million at March 31, 2008
compared to $51.1 million at March 31, 2007. The increase in total stockholders equity was
primarily attributable to net income for fiscal 2008 totaling $4.0 million, partially offset by
dividends paid of $1.0 million, the repurchase of common stock totaling $0.4 million in accordance
with the Companys stock repurchase program and a favorable pension valuation adjustment of $0.2
million. The Banks capital levels meet regulatory requirements of a well-capitalized financial
institution.
Comparison of Operating Results for the Years Ended March 31, 2008 and 2007
Net Income
The Company reported net income of $4.0 million and diluted earnings per share of $1.55 for
fiscal 2008 compared to net income of $2.1 million and diluted earnings per share of $0.81 for
fiscal 2007. Net income rose $1.9 million, or 90.0%, to $4.0 million, primarily reflecting
increases in net interest income of $3.0 million and non-interest income of $5.0 million, offset by
an increase in non-interest expense of $5.8 million. The prior year period included special
pre-tax charges of $1.3 million related to CCB acquisition costs and $1.3 million related to the
balance sheet repositioning.
Interest Income
Interest income increased by $6.4 million, or 15.3%, to $48.1 million for fiscal 2008 compared
to $41.7 million for fiscal 2007. Interest income increased as a result of an increase in total
average balances of interest-earning assets of $49.5 million, which includes an increase in average
loan balances of $81.5 million offset by decreases in average balances of mortgage-backed
securities of $25.6 million, investment securities of $4.3 million and Federal funds sold of $2.1
million. Interest income increased as a result of an increase in average loan balances,
acquisition of CCBs higher yielding portfolio and origination of higher yielding
loans. Additionally, these results were pursuant to the Banks asset/liability strategy of
increasing the average loan balances and its higher yields offset by a decline in average balances
of mortgage-backed securities and investment securities. Yields on interest-earning assets
increased 46 basis points to 6.83% for fiscal 2008 compared to 6.37% for the prior year period,
reflecting increases in yields on loans of 28 basis points, mortgage-backed securities of 85 basis
points and investment securities of 138 basis points, offset by a decrease in yields on Federal
funds sold of 81 basis points.
Interest income on loans increased by $7.2 million, or 19.4%, to $44.5 million for fiscal 2008
compared to $37.3 million for fiscal 2007. These results were primarily driven by an increase in
average loan balances of $81.5 million to $639.6 million for fiscal 2008 compared to $558.1 million
for fiscal 2007, partly a reflection of the full year impact of the CCB acquisition. In addition,
yield increased 28 basis points to 6.96% for fiscal 2008 compared to 6.68% for fiscal 2007,
primarily due to growth in higher yielding construction and small business loans.
Interest income on securities decreased by $0.7 million, or 16.6%, to $3.5 million for fiscal
2008 compared to $4.2 million for fiscal 2007. Interest income on mortgage-backed securities
decreased by $0.8 million, or 28.0%, to $2.1 million for fiscal 2008 compared to $2.9 million for
fiscal 2007. The decrease in interest income on mortgage-backed securities for fiscal 2008 was
primarily the result of a $25.6 million, or 39.68%, reduction in the average balances of
mortgage-backed securities to $39.1 million, compared to $64.7 million for fiscal 2007. The net
decrease in the average balance of such securities demonstrates Managements commitment to invest
proceeds received from the cash flows from the repayment of securities into higher yielding assets
and the sale of lower yielding securities to reposition the balance sheet. The mortgage-backed
securities yield increased by 85 basis points to 5.30%, compared to 4.45% in fiscal 2007.
Additionally, the decrease in interest income on mortgage-backed securities was partially
offset by an increase in investment securities interest of $0.1 million, or 8.2%, to $1.4 million
for fiscal 2008 compared to $1.3 million for fiscal 2007. The increase was primarily the result of
an increase in the yield on investment securities by 138 basis points to 6.26% compared to 4.88% in
fiscal 2007, as adjustable rate securities in the portfolio repriced to higher coupon rates. The
increase in interest income on investment securities was offset by a reduction of $4.3 million, or
15.7%, in the average balances of investment securities to $22.9 million compared to $27.2 million
for fiscal 2007.
19
Interest income on federal funds decreased by $0.2 million, or 51.0%, to $0.1 million for
fiscal 2008 compared to $0.3 million for fiscal 2007. The decrease is primarily the result of $2.1
million decrease in the average balance of Federal funds year over year and an 81 basis point
decrease in the average rate earned on federal funds. This decrease in the average rate earned on
federal funds was realized as the FRB lowered the federal funds rate.
Interest Expense
Interest expense increased by $3.5 million, or 17.8%, to $22.7 million for fiscal 2008
compared to $19.2 million for fiscal 2007. The increase in interest expense reflects a 28 basis
point increase in the average cost of interest-bearing liabilities to 3.49% in fiscal 2008 compared
to 3.21% in fiscal 2007 and growth in the average balance of interest-bearing liabilities of $49.6
million, or 8.3%, to $648.5 million for fiscal 2008 compared to $598.9 million for fiscal
2007. The increase in interest expense was primarily the result of growth in the average balance
of certificates of deposit of $58.5 million over fiscal 2007 to $370.9 million.
Interest expense on deposits increased $3.7 million, or 10.5%, to $18.9 million for fiscal
2008 compared to $15.2 million for fiscal 2007. This increase was primarily the result of growth
in the average balance of certificates of deposit of $58.4 million, or 18.7%, to $370.9 million for
fiscal 2008 compared to $312.5 million for fiscal 2007. Interest paid on certificates of deposit
increased $3.5 million, or 10.2%, to $16.5 million for fiscal 2008 compared to 13.0 million for
fiscal 2007. Additionally, a 35 basis point increase in the rate paid on deposits to 3.28% in
fiscal 2008 compared to 2.93% in fiscal 2007 contributed to the increase. Historically, the Banks
customer deposits have provided a relatively low cost funding source from which its net interest
income and net interest margin have benefited. In addition, the Banks relationship with various
government entities has been a source of relatively stable and low cost funding.
Interest expense on advances and other borrowed money decreased $0.2 million, or 5.4%, to $3.8
million for fiscal 2008 compared to $4.0 million for fiscal 2007. The average balance of total
borrowed money outstanding declined, primarily as a result of a $5.0 million decrease in the
average balance of outstanding borrowings to $73.9 million for fiscal 2008 compared to $78.9
million in fiscal 2007. Partially offsetting the decrease in interest expense was a 5 basis point
increase in the cost of borrowed money to 5.13% in fiscal 2008 compared to 5.08% in fiscal
2007. This was partially offset by an increased cost of debt service on the $13.0 million in
floating rate junior subordinated notes issued by the Company in connection with issuance of trust
preferred securities by Carver Statutory Trust I in September 2003. Cash distributions on the
trust preferred debt securities are cumulative and payable at a floating rate per annum (reset
quarterly) equal to 3.05% over the 3-month LIBOR, with a rate at March 31, 2008 of 5.85%.
Net Interest Income Before Provision for Loan Losses
Net interest income represents the difference between income on interest-earning assets and
expense on interest-bearing liabilities. Net interest income depends primarily upon the volume of
interest-earning assets and interest-bearing liabilities and the corresponding interest rates
earned and paid. Our net interest income is significantly impacted by changes in interest rate and
market yield curves. See Discussion of Market RiskInterest Rate Sensitivity Analysis for
further discussion on the potential impact of changes in interest rates on our results of
operations.
Net interest income before the provision for loan losses increased $3.0 million, or 13.2%, to
$25.5 million for fiscal 2008 compared to $22.5 million for fiscal 2007. This increase was
achieved as a result of an increase in both the average balance and the yield on average
interest-earning assets of $49.5 million and 46 basis points, respectively. Offsetting the
increase in net interest income was an increase in the average balance and cost of interest-bearing
liabilities of $49.6 million and 28 basis points, respectively. The result was a 18 basis point
increase in the interest rate spread to 3.34% for fiscal 2008 compared to 3.16% for fiscal 2007.
The net interest margin also increased to 3.62% for fiscal 2008 compared to 3.44% for fiscal 2007.
20
Provision for Loan Losses and Asset Quality
The Bank provided $0.2 million in provision for loan losses for fiscal 2008 compared to $0.3
million for fiscal 2007, a decrease of $0.1 million. The Bank records provisions for loan losses,
which are charged to earnings, in order to maintain the allowance for loan losses at a level that
is considered appropriate to absorb probable losses inherent in the existing loan portfolio.
Factors considered when evaluating the adequacy of the allowance for loan losses include the volume
and type of lending conducted, the Banks previous loan loss experience, the known and inherent
risks in the loan portfolio, adverse situations that may affect the borrowers ability to repay,
the estimated value of any underlying collateral, trends in the local and national economy and
trends in the real estate market.
The Bank had net charge-offs of $0.8 million for fiscal 2008 compared to $0.1 million for
fiscal 2007. At March 31, 2008 and 2007, the Banks allowance for loan losses was $4.9 million and
$5.4 million, respectively. The ratio of the allowance for loan losses to non-performing loans
was 170.89% at March 31, 2008 compared to 119.9% at March 31, 2007. The ratio of the allowance for
loan losses to total loans was 0.74% at March 31, 2008 compared to 0.89% at March 31,
2007. Additionally, at a 0.43% ratio, the level of non-performing loans to total loans receivable
remains within the range the Bank has experienced over the trailing twelve quarters. The Banks
future levels of non-performing loans will be influenced by economic conditions, including the
impact of those conditions on the Banks customers, interest rates and other internal and external
factors existing at the time. The Bank believes its reported allowance for loan losses at March
31, 2008 is adequate to provide for estimated probable losses in the loan portfolio. For further
discussion of non-performing loans and allowance for loan losses, see Item 1BusinessGeneral
Description of BusinessAsset Quality and Note 1 of Notes to the Consolidated Financial
Statements.
Subprime Loans
On July 10, 2007, the OTS and other Federal bank regulatory authorities (the Agencies)
published the final Interagency Statement on Subprime Lending (the Statement) to address emerging
issues and questions relating to certain subprime mortgage lending practices. Although the
Agencies did not provide a specific definition of a subprime loan in the Statement, the Statement
did highlight the Agencies concerns with certain adjustable-rate mortgage products offered to
subprime borrowers that have one or more of the following characteristics:
|
|
|
Low initial payments based on a fixed introductory rate that
expires after a short period and then adjusts to a variable index rate plus a
margin for the remaining term of the loan; |
|
|
|
Very high or no limits on how much the payment amount or the
interest rate may increase (payment or rate caps) on reset dates; |
|
|
|
Limited or no documentation of borrowers income; |
|
|
|
Product features likely to result in frequent refinancing to
maintain an affordable monthly payment; and/or |
|
|
|
Substantial prepayment penalties and/or prepayment penalties that
extend beyond the initial fixed interest rate period. |
In the 2001 Expanded Guidance for Subprime Lending Programs, the Agencies determined that,
generally, subprime borrowers will display a range of credit risk characteristics that may include
one or more of the following:
|
|
|
Two or more 30-day delinquencies in the last 12 months, or one or
more 60-day delinquencies in the last 24 months; |
|
|
|
Judgment, foreclosure, repossession, or charge-off in the prior 24 months; |
|
|
|
Bankruptcy in the last 5 years; |
|
|
|
Relatively high default probability as evidenced by, for example,
a credit bureau risk score (FICO) of 660 or below (depending on the
product/collateral), or other bureau or proprietary scores with an equivalent
default probability likelihood; and/or |
|
|
|
Debt service-to-income ratio of 50% or greater, or otherwise
limited ability to cover family living expenses after deducting total monthly
debt-service requirements from monthly income. |
21
The Bank has minimal exposure to the subprime loan market and, therefore, we do not expect the
Statement to have a material impact on the Company. At March 31, 2008, the Banks loan portfolio
contained $1.5
million in subprime loans, all of which were performing loans.
Non-Interest Income
Non-interest income is comprised of depository fees and charges, loan fees and service
charges, fee income from banking services and charges, gains or losses from the sale of securities,
loans and other assets and other non-interest income. Non-interest income increased by $5.0
million, or 174.0%, to $7.9 million for fiscal 2008 compared to $2.9 for fiscal 2007. The increase
was primarily due to a NMTC transfer fee of $1.7 million, gain on sale of securities of $1.1
million, write-down for the prior year period of loans held for sale of $0.7 million, other income
of $0.7 million and an increase in loan fees and service charges of $0.4 million. The Bank will
receive additional non-interest income over approximately the next eight years from this
transaction. Further, as a result of the NMTC transaction, other income increased by $0.2 million
reflecting consolidation of income from minority interest. In addition, the prior year period
included a $1.3 million charge associated with a balance sheet restructuring implemented to improve
margins.
Non-Interest Expense
Non-interest expense increased by $5.8 million, or 23.9%, to $29.9 million for fiscal 2008
compared to $24.1 million for fiscal 2007. The increase was primarily due to increases in employee
compensation and benefits of $2.9 million, consulting expense of $2.2 million, net occupancy
expense of $0.9 million and other expenses of $0.6 million. The increase in employee compensation
and benefits is primarily due to the Community Capital Bank acquisition and investments in new
talent in the retail, lending and accounting units. The $2.2 million increase in consulting
expense falls into three categories: regulatory requirements (preparation for compliance with
Sarbanes-Oxley Act Section 404 and recent Inter-Agency Guidance on Allowances for Loan Losses);
strengthening our back office, including the accounting, lending and retail operations departments,
by adding new staff and providing temporary expertise; and engaging consultants to assist the
management team to analyze significant opportunities to improve financial results. For example, the
Bank engaged consultants to conduct a rigorous business optimization review to help management
identify further potential improvements in the Banks operations, in part through greater systems
integration. The $0.6 million increase in other expense primarily consists of the cost of
sub-servicing of loans, ATM expenses, charge-offs and regulatory reporting costs. The fiscal 2007
expense included $1.3 million in merger related expenses.
Income Tax Expense
Income
tax benefit decreased by $0.2 million, or 18.8%, to $0.9 million for fiscal 2008
compared to $1.1 million for fiscal 2007, resulting in a net tax benefit of $0.9 million, which
includes a minority interest tax expense of $0.1 million. The decrease in tax benefit reflects
income before income taxes of $3.2 million for fiscal 2008
compared to $1.0 million for fiscal
2007. The income tax expense of $1.1 million for fiscal 2008 was offset by the tax benefit
generated by the NMTC investment totaling $2.0 million. The Banks NMTC award received in June
2006 has been fully invested. The Company expects to receive additional NMTC tax benefits of
approximately $12.1 million from its $40.0 million investment over approximately the next six
years.
22
Comparison of Operating Results for the Years Ended March 31, 2007 and 2006
Net Income
For fiscal 2007, the Company recorded net income of $2.1 million, or $0.81 per diluted common
share, compared to $3.8 million, or $1.45 per diluted common share, for fiscal 2006. The $1.7
million decrease is primarily due to an increase of $5.0 million in non-interest expense and a
decrease of $2.5 million in non-interest income, partially offset by an increase of $3.3 million in
net interest income after provision for loan losses, and a decrease of $2.4 million in the
Companys income tax provision compared to fiscal 2006.
Interest Income
Interest income increased in fiscal 2007 by $9.4 million from fiscal 2006, or 28.9%, to $41.7
million. The average balance of interest-earning assets increased to $655.0 million for fiscal
2007 from $594.9 million for fiscal 2006. Adding to the increase was a rise in the average yield
on interest-earning assets to 6.37% for fiscal 2007 compared to 5.44% for fiscal 2006.
Interest income on loans increased by $10.7 million, or 40.3%, to $37.3 million for fiscal
2007 compared to $26.6 million for fiscal 2006. The increase in interest income from loans was
primarily the result of a $114.7 million increase in average loan balances to $558.1 million for
fiscal 2007 compared to $443.5 million for fiscal 2006, coupled with the effects of a 69 basis
point increase in the average rate earned on loans to 6.68% for fiscal 2007 from 5.99% for fiscal
2006. The increase in the average balance of loans reflects the acquisition of the CCB loan
portfolio. The increase in the average rate earned on loans was principally due to the acquisition
of the higher yielding CCB business loan portfolio and an increase in the average rate on mortgage
loans.
Interest income on mortgage-backed securities decreased by $1.6 million, or 35.2%, to $2.9
million for fiscal 2007 compared to $4.4 million for fiscal 2006, reflecting a decrease of $48.9
million in the average balance of mortgage-backed securities to $64.7 million for fiscal 2007
compared to $113.6 million for fiscal 2006. The decrease in the average balance was partially
offset by the CCB acquisition. Partially offsetting the decline in income was a 54 basis point
increase in the average rate earned on mortgage-backed securities to 4.45% for fiscal 2007 from
3.91% for fiscal 2006. The net decrease in the average balance of such securities demonstrates
Managements commitment to invest proceeds received from the cash flows from the repayment of
securities into higher yielding assets and the sale of lower yielding securities to reposition the
balance sheet.
Interest income on investment securities increased by approximately $0.3 million, or 36.5%, to
$1.3 million for fiscal 2007 compared to $1.0 million for fiscal 2006. The increase in interest
income on investment securities reflects a 71 basis point increase in the average rate earned on
investment securities to 4.67% for fiscal 2007 from 3.78% for fiscal 2006 and an increase of $1.5
million in the average balance of investment securities to $27.2 million for fiscal 2007 compared
to $25.7 million for fiscal 2006. The increase in the average balance results from the
acquisition of CCB, partially offset by maturities and the sale of securities with the
repositioning of the balance sheet.
Interest income on federal funds decreased $0.1 million, or 36.6%, to $0.3 for fiscal 2007
compared to $0.4 million for fiscal 2006. The decrease is primarily attributable to a $7.0 million
decrease in the average balance of federal funds year over year partially offset by a 169 basis
point increase in the average rate earned on federal funds. This large increase in the average
rate earned on federal funds was realized as the FRB raised the federal funds rate.
Interest Expense
Interest expense increased by $5.7 million, or 42.6%, to $19.2 million for fiscal 2007
compared to $13.5 million for fiscal 2006. The increase in interest expense reflects an increase
of $52.4 million in the average balance of interest-bearing liabilities to $598.9 million in fiscal
2007 from $546.5 million in fiscal 2006. Additionally, the total cost of interest-bearing
liabilities increased 74 basis points to 3.21% in fiscal 2007 compared to 2.47% in fiscal
2006. The increase in the average balance of interest-bearing liabilities in fiscal 2007 compared
to fiscal 2006 was primarily due to the acquisition of CCB partially offset by a decrease in
borrowed funds and the repayment of certain higher costing deposits with the repositioning of the
balance sheet.
23
Interest expense on deposits increased $6.3 million, or 70.7%, to $15.2 million for fiscal
2007 compared to $8.9 million for fiscal 2006. This increase is attributable to an $81.1 million,
or 18.5%, increase in the average balance of interest-bearing deposits to $520.0 million for fiscal
2007 compared to $439.0 million for fiscal 2006 coupled with a 90 basis point increase
year-over-year in the cost of average deposits. The increase in the average balance of
interest-bearing deposits was primarily due to the acquisition of CCB. The increase in the average
rate paid on deposits was principally due to the rise in the interest rate environment throughout
fiscal 2007.
Interest expense on advances and other borrowed money decreased by $0.6 million, or 12.4%, to
$4.0 million for fiscal 2007 compared to $4.6 million for fiscal 2006. The decrease in interest
expense on borrowed money for fiscal 2007 reflects a $28.7 million decline in the average balance
of borrowed money reflecting managements strategy of using deposit growth and cash flows from the
repayment of mortgage-backed securities to repay FHLB-NY advances. Partially offsetting the
decrease was a rise of 83 basis points in the average cost of borrowed money, primarily the result
of increases in the indexed rate of trust preferred debt securities which adjust quarterly and have
increased in the current interest rate environment.
Net Interest Income
Net interest income represents the difference between income on interest-earning assets and
expense on interest-bearing liabilities. Net interest income depends primarily upon the volume of
interest-earning assets and interest-bearing liabilities and the corresponding interest rates
earned and paid. Our net interest income is significantly impacted by changes in interest rate and
market yield curves. See Discussion of Market RiskInterest Rate Sensitivity Analysis for
further discussion on the potential impact of changes in interest rates on our results of
operations.
Net interest income before the provision for loan losses increased $3.6 million, or 19.1%, to
$22.5 million for fiscal 2007 compared to $18.9 million for fiscal 2006. This increase was achieved
as a result of an increase in both the average balance and the yield on average interest-earning
assets of $60.3 million and 93 basis points, respectively. Offsetting the increase in net interest
income was an increase in the average balance and cost of interest-bearing liabilities of $52.0
million and 74 basis points, respectively. The result was a 19 basis point increase in the
interest rate spread to 3.16% for fiscal 2007 compared to 2.97% for fiscal 2006. The net interest
margin also increased to 3.44% for fiscal 2007 compared to 3.18% for fiscal 2006.
Provision for Loan Losses
During fiscal 2007 a $0.3 million provision was recorded for loan losses. The Bank records
provisions for loan losses, which are charged to earnings, in order to maintain the allowance for
loan losses at a level that is considered appropriate to absorb probable losses inherent in the
existing loan portfolio. Factors considered when evaluating the adequacy of the allowance for loan
losses include the volume and type of lending conducted, the Banks previous loan loss experience,
the known and inherent risks in the loan portfolio, adverse situations that may affect the
borrowers ability to repay, the estimated value of any underlying collateral, trends in the local
and national economy and trends in the real estate market.
During fiscal 2007, the Bank had net charge-offs of $73,000 compared to $82,000 for fiscal
2006. At March 31, 2007, non-performing loans totaled $4.5 million, or 0.74% of total loans,
compared to $2.7 million, or 0.55% of total loans, at March 31, 2006. At March 31, 2007, the
Banks allowance for loan losses was $5.4 million compared to $4.0 million at March 31, 2006,
resulting in a ratio of the allowance to non-performing assets of 119.9% at March 31, 2007 compared
to 147.1% at March 31, 2006, and a ratio of allowance for possible loan losses to total loans of
0.89% and 0.81% at March 31, 2007 and March 31, 2006, respectively. The Bank believes its reported
allowance for loan losses at March 31, 2007 is adequate to provide for estimated probable losses in
the loan portfolio. For further discussion of non-performing loans and allowance for loan losses,
see Item 1BusinessGeneral Description of BusinessAsset Quality and Note 1 of Notes to the
Consolidated Financial Statements.
24
Non-Interest Income
Non-interest income is comprised of loan fees and service charges, fee income from banking
services and charges, gains or losses from the sale of securities, loans and other assets and
certain other miscellaneous non-interest income. Non-interest income decreased $2.5 million, or
46.3%, to $2.9 million for fiscal 2007 compared to $5.3 million for fiscal 2006. The decline in
non-interest income was comprised primarily of a decrease of $1.0 million in loan fees and service
charges due primarily to lower loan prepayment penalty income, $0.6 million in losses associated
with the repositioning of the balance sheet, $0.7 million in the write-down of loans held for sale,
a decrease of $0.2 million in the gain on the sale of loans and $0.1 million loss on the sale of
real estate
owned. Partially offsetting these decreases were increases in other non-interest income and
deposit fees and charges of $0.1 million and $18,000, respectively. The decline in the gain on
the sale of loans was primarily attributable to a gain on a bulk sale of loans during fiscal
2006.
Non-Interest
Expense
Non-interest
expense increased by $5.0 million, or 26.0%, to
$24.1 million for fiscal 2007 compared to $19.1 million for
fiscal 2006. The increase in non-interest expense was primarily
attributable to the acquisition of CCB and the resulting operating
and non-recurring merger related expenses. Non-recurring merger
related expenses represented $1.3 million of the increase, and
employee compensation and benefits, net occupancy expense, equipment,
net, and other non-interest expense increased $1.0 million,
$4.0 million, $0.1 million and $2.0 million, respectively.
Interest
Tax Expense
Income
tax benefit was $1.1 million for fiscal 2007, as compared to an
income tax expense of $1.3 million for fiscal 2006. The Bank
recognized a $1.5 million benefit in fiscal 2007 from the NMTC
program and pre-tax income was $4.1 million less in fiscal 2007
compared to fiscal 2006. The two items account for the
$2.4 million change in taxes from fiscal 2007 to fiscal 2006.
Liquidity and Capital Resources
Liquidity is a measure of the Banks ability to generate adequate cash to meet its financial
obligations. The principal cash requirements of a financial institution are to cover potential
deposit outflows, fund increases in its loan and investment portfolios and ongoing operating
expenses. The Banks primary sources of funds are deposits, borrowed funds and principal and
interest payments on loans, mortgage-backed securities and investment securities. While maturities
and scheduled amortization of loans, mortgage-backed securities and investment securities are
predictable sources of funds, deposit flows and loan and mortgage-backed securities prepayments are
strongly influenced by changes in general interest rates, economic conditions and competition.
Carver Federal monitors its liquidity utilizing guidelines that are contained in a policy
developed by its management and approved by its Board of Directors. Carver Federals several
liquidity measurements are evaluated on a frequent basis. The Bank was in compliance with this
policy as of March 31, 2008. Management believes Carver Federals short-term assets have
sufficient liquidity to cover loan demand, potential fluctuations in deposit accounts and to meet
other anticipated cash requirements. Additionally, Carver Federal has other sources of liquidity
including the ability to borrow from the FHLB-NY utilizing unpledged mortgage-backed securities and
certain mortgage loans, the sale of available-for-sale securities and the sale of certain mortgage
loans. At March 31, 2008, based on available collateral held at the FHLB-NY, Carver Federal had
the ability to borrow from the FHLB-NY an additional $29.4 million on a secured basis, utilizing
mortgage-related loans and securities as collateral.
Congress eliminated the statutory liquidity requirement that required federal savings banks to
maintain a minimum amount of liquid assets of between 4% and 10%, as determined by the Director of
the OTS, the Banks primary federal regulator. The Bank is required to maintain sufficient
liquidity to ensure its safe and sound operation. As a result of the elimination of the liquidity
requirement, the Bank manages its liquidity through a Board-approved liquidity policy. The Banks
most liquid assets are cash and short-term investments. The level of these assets is dependent on
the Banks operating, investing and financing activities during any given period. At March 31,
2008 and 2007, assets qualifying for short-term liquidity, including cash and short-term
investments, totaled $27.4 million and $17.4 million, respectively.
25
The levels of Carver Federals short-term liquid assets are dependent on Carver Federals
operating, investing and financing activities during any given period. The most significant
liquidity challenge the Bank faces is variability in its cash flows as a result of mortgage
refinance activity. When mortgage interest rates decline, customers refinance activities tend to
accelerate, causing the cash flow from both the mortgage loan portfolio and the mortgage-backed
securities portfolio to accelerate. In contrast, when mortgage interest rates increase, refinance
activities tend to slow, causing a reduction of liquidity. However, in a rising rate environment,
customers generally tend to prefer fixed rate mortgage loan products over variable rate
products. Because Carver Federal generally sells
its one- to four- family 15-year and 30-year fixed rate loan production into the secondary
mortgage market, the origination of such products for sale does not significantly reduce Carver
Federals liquidity.
The OTS requires that the Bank meet minimum capital requirements. Capital adequacy is one of
the most important factors used to determine the safety and soundness of individual banks and the
banking system. At March 31, 2008, the Bank exceeded all regulatory minimum capital requirements
and qualified, under OTS regulations, as a well-capitalized institution. See Regulatory Capital
Position below for certain information relating to the Banks regulatory capital compliance at
March 31, 2008.
The Consolidated Statements of Cash Flows present the change in cash from operating, investing
and financing activities. During fiscal 2008, total cash and cash equivalents increased by $10.0
million reflecting cash provided by financing activities of $54.9 million, offset by cash used in
operating of $26.8 million and investing activities of $18.1 million.
Net
cash provided by financing activities was $54.9 million, primarily resulting from
increased deposits of $39.5 million and consolidation of minority interest in a NMTC transaction of
$19.1 million, offset partially by reductions in borrowings of $2.5 million and the payment of
common dividends of $1.0 million. Net cash used in operating activities during this period was
$26.8 million, primarily representing funds used in originations of loans held-for-sale of $20.2
million, an increase in other assets of $29.7 million (primarily resulting from a NMTC
transaction), offset partially by proceeds from sales of loans held-for-sale $20.0 million. Net
cash used in investing activities was $18.1 million, primarily representing cash disbursed to fund
mortgage loan originations of $162.6 million, loans purchased from third parties of $29.7 million
and purchases of available-for-sale securities of $15.3 million, offset partially by principal
collections on loans of $145.5 million, proceeds from sale of available-for-sale securities of
$36.1 million and proceeds from principal payments/maturities/calls of securities of $9.2
million.
Off-Balance Sheet Arrangements and Contractual Obligations
The Bank is a party to financial instruments with off-balance sheet risk in the normal course
of business in order to meet the financing needs of its customers. These instruments involve, to
varying degrees, elements of credit, interest rate and liquidity risk. In accordance with
accounting principles generally accepted in the United States of America (GAAP), these
instruments are not recorded in the consolidated financial statements. Such instruments primarily
include lending commitments.
Lending commitments include commitments to originate mortgage and consumer loans and
commitments to fund unused lines of credit. The Bank also has contractual obligations related to
operating leases. Additionally, the Bank has a contingent liability related to a standby letter of
credit. See Note 14 of Notes to Consolidated Financial Statements for the Banks outstanding
lending commitments and contractual obligations at March 31, 2008.
26
The Bank has contractual obligations at March 31, 2008 as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due by period |
|
Contractual |
|
|
|
|
|
Less than |
|
|
1 3 |
|
|
3 5 |
|
|
More than |
|
Obligations |
|
Total |
|
|
1 year |
|
|
years |
|
|
years |
|
|
5 years |
|
Long term debt obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB advances |
|
$ |
15,249 |
|
|
$ |
15,107 |
|
|
$ |
|
|
|
$ |
142 |
|
|
$ |
|
|
Repo Borrowings |
|
|
30,141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,141 |
|
Guaranteed preferred beneficial
interest in
junior subordinated debentures |
|
|
13,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long term debt obligations |
|
|
58,765 |
|
|
|
15,107 |
|
|
|
|
|
|
|
142 |
|
|
|
43,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease obligations for rental properties |
|
|
11,456 |
|
|
|
1,517 |
|
|
|
3,014 |
|
|
|
2,262 |
|
|
|
4,663 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations |
|
$ |
70,221 |
|
|
$ |
16,624 |
|
|
$ |
3,014 |
|
|
$ |
2,404 |
|
|
$ |
48,179 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulatory Capital Position
The Bank must satisfy three minimum capital standards established by the OTS. For a
description of the OTS capital regulation, see Item 1Regulation and SupervisionFederal Banking
RegulationCapital Requirements.
The Bank presently exceeds all capital requirements as currently promulgated. At March 31,
2008, the Bank had tangible equity ratio, core capital ratio, and total risk-based capital ratio of
7.7%, 7.7% and 10.2%,
respectively, and was considered well capitalized. For additional information regarding
Carver Federals Regulatory Capital and Ratios, refer to Note 12 of Notes to Consolidated Financial
Statements, Stockholders Equity.
Impact of Inflation and Changing Prices
The financial statements and accompanying notes appearing elsewhere herein have been prepared
in accordance with GAAP, which require the measurement of financial position and operating results
in terms of historical dollars without considering the changes in the relative purchasing power of
money over time due to inflation. The impact of inflation is reflected in the increased cost of
Carver Federals operations. Unlike most industrial companies, nearly all the assets and
liabilities of the Bank are monetary in nature. As a result, interest rates have a greater impact
on Carver Federals performance than do the effects of the general level of inflation. Interest
rates do not necessarily move in the same direction or to the same extent as the prices of goods
and services.
27
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
Carver Bancorp, Inc.:
We have audited the accompanying consolidated statements of financial condition of Carver
Bancorp, Inc. and subsidiaries as of March 31, 2008 and 2007, and the related consolidated
statements of income, changes in stockholders equity and comprehensive income, and cash flows for
each of the years in the three-year period ended March 31, 2008. These consolidated financial
statements are the responsibility of the Companys management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Carver Bancorp, Inc. and subsidiaries as of March 31,
2008 and 2007, and the results of their operations and their cash flows for each of the years in
the three-year period ended March 31, 2008, in conformity with U.S. generally accepted accounting
principles.
/s/ KPMG LLP
New York, New York
July 1, 2008, except as to the restatement and subsequent events
discussed in Note 2 and Note 20, respectively, to the
consolidated financial statements which is as of July 2, 2009.
28
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2008 |
|
|
2007 |
|
|
|
(As Restated) |
|
|
(As Restated) |
|
ASSETS |
|
|
|
|
|
|
|
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
Cash and due from banks |
|
$ |
15,920 |
|
|
|
14,619 |
|
Federal funds sold |
|
|
10,500 |
|
|
|
1,300 |
|
Interest earning deposits |
|
|
948 |
|
|
|
1,431 |
|
|
|
|
|
|
|
|
Total cash and cash equivalents |
|
|
27,368 |
|
|
|
17,350 |
|
Securities: |
|
|
|
|
|
|
|
|
Available-for-sale, at fair value (including pledged as collateral of $20,621 and $34,649
at March 31, 2008 and 2007, respectively) |
|
|
20,865 |
|
|
|
47,980 |
|
Held-to-maturity, at amortized cost (including pledged as collateral of $16,643 and $18,581
at March 31, 2008 and 2007, respectively; fair value of $17,167 and $19,005 at March 31,
2008 and 2007, respectively) |
|
|
17,307 |
|
|
|
19,137 |
|
|
|
|
|
|
|
|
Total securities |
|
|
38,172 |
|
|
|
67,117 |
|
|
|
|
|
|
|
|
|
|
Loans held-for-sale |
|
|
23,767 |
|
|
|
23,226 |
|
|
|
|
|
|
|
|
|
|
Loans receivable: |
|
|
|
|
|
|
|
|
Real estate mortgage loans |
|
|
578,957 |
|
|
|
533,667 |
|
Commercial business loans |
|
|
51,424 |
|
|
|
50,541 |
|
Consumer loans |
|
|
1,728 |
|
|
|
1,067 |
|
Allowance for loan losses |
|
|
(4,878 |
) |
|
|
(5,409 |
) |
|
|
|
|
|
|
|
Total loans receivable, net |
|
|
627,231 |
|
|
|
579,866 |
|
Office properties and equipment, net |
|
|
15,780 |
|
|
|
14,626 |
|
Federal Home Loan Bank of New York stock, at cost |
|
|
1,625 |
|
|
|
3,239 |
|
Bank owned life insurance |
|
|
9,141 |
|
|
|
8,795 |
|
Accrued interest receivable |
|
|
4,063 |
|
|
|
4,335 |
|
Goodwill |
|
|
7,055 |
|
|
|
6,401 |
|
Core deposit intangibles, net |
|
|
532 |
|
|
|
684 |
|
Other assets |
|
|
41,448 |
|
|
|
13,891 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
796,182 |
|
|
$ |
739,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Deposits |
|
$ |
654,663 |
|
|
|
615,122 |
|
Advances from the FHLB-NY and other borrowed money |
|
|
58,625 |
|
|
|
61,093 |
|
Other liabilities |
|
|
9,863 |
|
|
|
12,173 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
723,151 |
|
|
|
688,388 |
|
Minority interest |
|
|
19,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
|
|
|
Preferred stock (par value $0.01 per share; 112 shares authorized; 112 issued and outstanding)
Common stock (par value $0.01 per share: 10,000,000 shares authorized; 2,524,691 shares
issued;
2,481,706 and 2,507,985 shares outstanding at March 31, 2008 and 2007, respectively) |
|
|
25 |
|
|
|
25 |
|
Additional paid-in capital |
|
|
24,113 |
|
|
|
23,996 |
|
Retained earnings |
|
|
29,988 |
|
|
|
26,951 |
|
Unamortized awards of common stock under ESOP |
|
|
|
|
|
|
(4 |
) |
Treasury stock, at cost (42,985 and 16,706 shares at March 31, 2008 and 2007, respectively) |
|
|
(670 |
) |
|
|
(277 |
) |
Accumulated other comprehensive income |
|
|
425 |
|
|
|
451 |
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
53,881 |
|
|
|
51,142 |
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
796,182 |
|
|
$ |
739,530 |
|
|
|
|
|
|
|
|
See
accompanying notes to consolidated financial statements.
29
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended March 31, |
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
|
|
|
(As Restated) |
|
|
|
|
|
Interest Income: |
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
$ |
44,499 |
|
|
$ |
37,277 |
|
|
$ |
26,563 |
|
Mortgage-backed securities |
|
|
2,071 |
|
|
|
2,877 |
|
|
|
4,439 |
|
Investment securities |
|
|
1,434 |
|
|
|
1,325 |
|
|
|
971 |
|
Federal funds sold |
|
|
128 |
|
|
|
261 |
|
|
|
412 |
|
|
|
|
|
|
|
|
|
|
|
Total interest income |
|
|
48,132 |
|
|
|
41,740 |
|
|
|
32,385 |
|
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
18,866 |
|
|
|
15,227 |
|
|
|
8,921 |
|
Advances and other borrowed money |
|
|
3,790 |
|
|
|
4,007 |
|
|
|
4,572 |
|
|
|
|
|
|
|
|
|
|
|
Total interest expense |
|
|
22,656 |
|
|
|
19,234 |
|
|
|
13,493 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
25,476 |
|
|
|
22,506 |
|
|
|
18,892 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses |
|
|
222 |
|
|
|
276 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after
provision for loan losses |
|
|
25,254 |
|
|
|
22,230 |
|
|
|
18,892 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
Depository fees and charges |
|
|
2,669 |
|
|
|
2,476 |
|
|
|
2,458 |
|
Loan fees and service charges |
|
|
1,628 |
|
|
|
1,238 |
|
|
|
2,231 |
|
Write-down of loans held for sale |
|
|
|
|
|
|
(702 |
) |
|
|
|
|
Gain (loss) on sale of securities |
|
|
431 |
|
|
|
(624 |
) |
|
|
|
|
Gain on sale of loans |
|
|
323 |
|
|
|
192 |
|
|
|
351 |
|
Loss on sale of real estate owned |
|
|
|
|
|
|
(108 |
) |
|
|
|
|
New Market Tax Credit Transfer Fee |
|
|
1,700 |
|
|
|
|
|
|
|
|
|
Other |
|
|
1,110 |
|
|
|
397 |
|
|
|
301 |
|
|
|
|
|
|
|
|
|
|
|
Total non-interest income |
|
|
7,861 |
|
|
|
2,869 |
|
|
|
5,341 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits |
|
|
13,323 |
|
|
|
10,470 |
|
|
|
9,512 |
|
Net occupancy expense |
|
|
3,590 |
|
|
|
2,667 |
|
|
|
2,284 |
|
Equipment, net |
|
|
2,451 |
|
|
|
2,071 |
|
|
|
1,939 |
|
Merger related expenses |
|
|
|
|
|
|
1,258 |
|
|
|
|
|
Consulting Expense |
|
|
2,733 |
|
|
|
496 |
|
|
|
307 |
|
Other |
|
|
7,801 |
|
|
|
7,138 |
|
|
|
5,092 |
|
|
|
|
|
|
|
|
|
|
|
Total non-interest expense |
|
|
29,898 |
|
|
|
24,100 |
|
|
|
19,134 |
|
|
Income before income taxes and
minority interest |
|
|
3,217 |
|
|
|
999 |
|
|
|
5,099 |
|
Income tax (benefit) expense |
|
|
(892 |
) |
|
|
(1,099 |
) |
|
|
1,329 |
|
Minority interest, net of taxes |
|
|
146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
3,963 |
|
|
$ |
2,098 |
|
|
$ |
3,770 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.59 |
|
|
$ |
0.84 |
|
|
$ |
1.50 |
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
$ |
1.55 |
|
|
$ |
0.81 |
|
|
$ |
1.45 |
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to consolidated financial statements.
30
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME
(In thousands)
(As Restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common |
|
|
Common |
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
Stock |
|
|
Stock |
|
|
|
|
|
|
Other |
|
|
Total Stock- |
|
|
|
Common |
|
|
Paid-In |
|
|
Treasury |
|
|
Acquired |
|
|
Acquired |
|
|
Retained |
|
|
Comprehensive |
|
|
Holders |
|
|
|
Stock |
|
|
Capital |
|
|
Stock |
|
|
By ESOP |
|
|
By MRP |
|
|
Earnings |
|
|
Income (Loss) |
|
|
Equity |
|
BalanceMarch 31, 2005 |
|
$ |
25 |
|
|
$ |
23,937 |
|
|
$ |
(420 |
) |
|
$ |
(126 |
) |
|
$ |
(128 |
) |
|
$ |
22,748 |
|
|
$ |
(235 |
) |
|
$ |
45,801 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,770 |
|
|
|
|
|
|
|
3,770 |
|
Loss on pension liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(281 |
) |
|
|
(281 |
) |
Change in net unrealized loss on
available-for-sale securities, net of
taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(158 |
) |
|
|
(158 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income, net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,770 |
|
|
|
(439 |
) |
|
|
3,331 |
|
Dividends paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(782 |
) |
|
|
|
|
|
|
(782 |
) |
Treasury stock activity |
|
|
|
|
|
|
(2 |
) |
|
|
117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115 |
|
Allocation of ESOP Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116 |
|
Purchase of shares for MRP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116 |
|
|
|
|
|
|
|
|
|
|
|
116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BalanceMarch 31, 2006 |
|
|
25 |
|
|
|
23,935 |
|
|
|
(303 |
) |
|
|
(10 |
) |
|
|
(12 |
) |
|
|
25,736 |
|
|
|
(674 |
) |
|
|
48,697 |
|
Adjustment to initially implement SFAS 158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
281 |
|
|
|
281 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance post implementation of SFAS 158 |
|
|
25 |
|
|
|
23,935 |
|
|
|
(303 |
) |
|
|
(10 |
) |
|
|
(12 |
) |
|
|
25,736 |
|
|
|
(393 |
) |
|
|
48,978 |
|
Net income (as restated) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,098 |
|
|
|
|
|
|
|
2,098 |
|
Minimum pension liability adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79 |
|
|
|
79 |
|
Change in net unrealized loss on
available-for-sale securities, net of
taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
765 |
|
|
|
765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income, net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,098 |
|
|
|
844 |
|
|
|
2,942 |
|
Dividends paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(883 |
) |
|
|
|
|
|
|
(883 |
) |
Treasury stock activity |
|
|
|
|
|
|
61 |
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87 |
|
Allocation of ESOP Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
Purchase of shares for MRP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BalanceMarch 31, 2007
(as restated) |
|
|
25 |
|
|
|
23,996 |
|
|
|
(277 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
26,951 |
|
|
|
451 |
|
|
|
51,142 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,963 |
|
|
|
|
|
|
|
3,963 |
|
Minimum pension liability adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
195 |
|
|
|
195 |
|
Change in net unrealized loss on
available-for-sale securities, net of
taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(221 |
) |
|
|
(221 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income, net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,963 |
|
|
|
(26 |
) |
|
|
3,937 |
|
Adjustment to initially implement SFAS 156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49 |
|
|
|
|
|
|
|
49 |
|
Dividends paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(975 |
) |
|
|
|
|
|
|
(975 |
) |
Treasury stock activity |
|
|
|
|
|
|
117 |
|
|
|
(393 |
) |
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(272 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BalanceMarch 31, 2008
(as restated) |
|
$ |
25 |
|
|
$ |
24,113 |
|
|
$ |
(670 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
29,988 |
|
|
$ |
425 |
|
|
$ |
53,881 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
31
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended March 31, |
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
|
|
|
(As Restated) |
|
|
|
|
|
Cash flows from operating activites: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
3,963 |
|
|
$ |
2,098 |
|
|
$ |
3,770 |
|
Adjustments to reconcile net income to net cash from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses |
|
|
222 |
|
|
|
276 |
|
|
|
|
|
Stock based compensation expense |
|
|
272 |
|
|
|
426 |
|
|
|
233 |
|
Depreciation and amortization expense |
|
|
1,709 |
|
|
|
1,581 |
|
|
|
1,546 |
|
Amortization of premiums and discounts |
|
|
(250 |
) |
|
|
(1,145 |
) |
|
|
863 |
|
(Gain) Loss from sale of securities |
|
|
(431 |
) |
|
|
624 |
|
|
|
|
|
Gain on sale of loans |
|
|
(323 |
) |
|
|
(192 |
) |
|
|
(351 |
) |
Writedown on loans held-for-sale |
|
|
|
|
|
|
702 |
|
|
|
|
|
Loss on sale of real estate owned |
|
|
|
|
|
|
108 |
|
|
|
|
|
Originations of loans held-for-sale |
|
|
(20,172 |
) |
|
|
(24,708 |
) |
|
|
(12,646 |
) |
Proceeds from sale of loans held-for-sale |
|
|
19,953 |
|
|
|
14,422 |
|
|
|
12,197 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in accrued interest receivable |
|
|
272 |
|
|
|
(1,365 |
) |
|
|
(268 |
) |
Increase in other assets |
|
|
(29,702 |
) |
|
|
(2,240 |
) |
|
|
(2,430 |
) |
(Decrease) increase in other liabilities |
|
|
(2,283 |
) |
|
|
(4,267 |
) |
|
|
4,249 |
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities |
|
|
(26,770 |
) |
|
|
(13,680 |
) |
|
|
7,163 |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activites: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale |
|
|
(15,265 |
) |
|
|
|
|
|
|
(26,811 |
) |
Held-to-maturity |
|
|
|
|
|
|
|
|
|
|
(19 |
) |
Proceeds from principal payments, maturities and calls of securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale |
|
|
7,358 |
|
|
|
26,539 |
|
|
|
60,645 |
|
Held-to-maturity |
|
|
1,803 |
|
|
|
7,185 |
|
|
|
4,816 |
|
Proceeds from sales of available-for-sale securities |
|
|
36,116 |
|
|
|
57,942 |
|
|
|
1,575 |
|
Originations of loans held-for-investment |
|
|
(162,556 |
) |
|
|
(105,284 |
) |
|
|
(98,704 |
) |
Loans purchased from third parties |
|
|
(29,736 |
) |
|
|
(58,191 |
) |
|
|
(96,140 |
) |
Principal collections on loans |
|
|
145,458 |
|
|
|
146,410 |
|
|
|
113,482 |
|
Proceeds from sales of loan originations held-for-investment |
|
|
|
|
|
|
16,548 |
|
|
|
10,697 |
|
Redemption of FHLB-NY stock |
|
|
1,614 |
|
|
|
1,388 |
|
|
|
498 |
|
Additions to premises and equipment |
|
|
(2,862 |
) |
|
|
(1,869 |
) |
|
|
(1,082 |
) |
Proceeds from sale of real estate owned |
|
|
|
|
|
|
404 |
|
|
|
|
|
Payments for acquisition, net of cash acquired |
|
|
|
|
|
|
(2,425 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities |
|
|
(18,070 |
) |
|
|
88,647 |
|
|
|
(31,043 |
) |
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activites: |
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in deposits |
|
|
39,541 |
|
|
|
(33,657 |
) |
|
|
48,768 |
|
Net repayment of FHLB advances and other borrowings |
|
|
(2,527 |
) |
|
|
(45,660 |
) |
|
|
(21,507 |
) |
Capital contribution by minority interest |
|
|
19,150 |
|
|
|
|
|
|
|
|
|
Common stock repurchased |
|
|
(331 |
) |
|
|
(321 |
) |
|
|
(115 |
) |
Dividends paid |
|
|
(975 |
) |
|
|
(883 |
) |
|
|
(782 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
54,858 |
|
|
|
(80,521 |
) |
|
|
26,364 |
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
|
|
10,018 |
|
|
|
(5,554 |
) |
|
|
2,484 |
|
Cash and cash equivalents at beginning of period |
|
|
17,350 |
|
|
|
22,904 |
|
|
|
20,420 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
27,368 |
|
|
$ |
17,350 |
|
|
$ |
22,904 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental information: |
|
|
|
|
|
|
|
|
|
|
|
|
Noncash Transfers- |
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized loss on valuation of available-for-sale
investments, net |
|
$ |
221 |
|
|
$ |
765 |
|
|
$ |
(158 |
) |
|
Cash paid for- |
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
21,973 |
|
|
$ |
19,510 |
|
|
$ |
13,502 |
|
Income taxes |
|
$ |
922 |
|
|
$ |
652 |
|
|
$ |
2,107 |
|
See
accompanying notes to consolidated financial statements.
32
CARVER BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
Nature of operations
Carver Bancorp, Inc. (on a stand-alone basis, the Holding Company or Registrant), was
incorporated in May 1996 and its principal wholly-owned subsidiary is Carver Federal Savings Bank
(the Bank or Carver Federal) ), Alhambra Holding Corp., an inactive Delaware corporation, and
Carver Federals wholly-owned subsidiaries, CFSB Realty Corp., Carver Municipal Bank (CMB),
Carver Community Development Corp. (CCDC) and CFSB Credit Corp. which is currently inactive. The
Bank has a majority owned interest in Carver Asset Corporation, a real estate investment trust
formed in February 2004.
Carver, the Company, we, us or our refers to the Holding Company along with its
consolidated subsidiaries. The Bank was chartered in 1948 and began operations in 1949 as Carver
Federal Savings and Loan Association, a federally chartered mutual savings and loan
association. The Bank converted to a federal savings bank in 1986. On October 24, 1994, the Bank
converted from mutual to stock form and issued 2,314,275 shares of its common stock, par value
$0.01 per share. On October 17, 1996, the Bank completed its reorganization into a holding company
structure (the Reorganization) and became a wholly owned subsidiary of the Holding
Company. Collectively, the Holding Company, the Bank and the Holding Companys other direct and
indirect subsidiaries are referred to herein as the Company or Carver.
In September 2003, the Holding Company formed Carver Statutory Trust I (the Trust) for the
sole purpose of issuing trust preferred securities and investing the proceeds in an equivalent
amount of floating rate junior subordinated debentures of the Holding Company. In accordance with
Financial Accounting Standards Board Interpretation No. 46, Consolidation of Variable Interest
Entities, an interpretation of ARB No. 51, Carver Statutory Trust I is not consolidated for
financial reporting purposes. In December 2007, Carver Federals subsidiary CCDC entered into a
NMTC venture in which it exerts a controlling influence.
On October 5, 2006, Carver Federal established Carver Municipal Bank (CMB), a
wholly-owned, New York State chartered limited purpose commercial bank, with the intention of
expanding Carver Federals ability to compete for municipal and state agency deposits and provide
other fee income based services. The Bank invested $2.0 million of capital into CMB at its
formation. In the State of New York, municipal entities may deposit funds only with commercial
banks, other than except through limited exceptions, and CMB provided Carver Federal with a
platform to enter into this line of business. As of March 31, 2008, Carver Federal has
discontinued the operations of CMB and is in the process of dissolution. The $2.0 million
capital invested will revert back to the Bank.
Carver Federals principal business consists of attracting deposit accounts through its
branches and investing those funds in mortgage loans and other investments permitted by federal
savings banks. The Bank has ten branches located throughout the City of New York that primarily
serve the communities in which they operate.
33
NOTE 2. RESTATEMENT
During the quarter ended December 31, 2008, Carver became aware of certain adjustments to
suspense accounts related to check return processing and automated clearing house (ACH) return
processing that appeared to be incorrect. A review of the suspense account reconciliations
commenced and an analysis was performed on Carvers accounting and financial reporting
practices. The review raised questions regarding transactions since fiscal 2007, most of which
involved adjustments to various suspense accounts, and identified evidence that certain adjustments
were incorrect. The review found evidence that during fiscal 2007, suspense accounts adjustments
for check returns and ACH returns were improper and resulted in aged suspense items not being
properly cleared. As a result, an adjustment totaling $761,000 ($485,000 net of tax) was necessary to
correct the fiscal 2007 financial statements to reflect charge-offs that should have been recorded
in the appropriate period. This adjustment resulted in a reduction in diluted earnings per share
for fiscal 2007 from $1.00 to $0.81, a decrease of $0.19, or 19%. The errors and irregularities
identified in the course of the review revealed deficiencies in Carvers accounting and financial
control environment, some of which were determined to be a material weakness requiring corrective
and remedial actions.
Concurrently with the review, Carver also conducted extensive internal reviews for the purpose
of the preparation and certification of Carvers fiscal 2009 financial statements and its
assessment of internal controls over financial reporting. Carvers procedures included expanded
account reviews and expanded balance sheet reconciliations to ensure all accounts were fully
reconciled, supported, and appropriately documented. Carver also implemented improvements to its
quarterly and annual accounting close process to provide for more complete review of the financial
results.
As
a result of the issues identified in the review, the Finance and Audit
Committee, in consultation with management and KPMG, concluded on
February 9, 2009 that Carvers previously issued financial
statements for fiscal 2007 and fiscal 2008 (including the interim
periods within those years), should no longer be relied upon because
of certain accounting errors and irregularities in those financial
statements. Accordingly, Carver restated its previously issued
financial statements for those periods by filing this Amendment
No. 1 to its Form 10-K for the year ended March 31,
2008. Restated financial information is presented in this Amendment
No. 1 to its Form 10-K for the year ended March 31,
2008.
Set
forth below is the impact of the adjustment by financial statement
line item in Carvers consolidated statement of financial condition as of
March 31, 2008 and 2007, the Consolidated Statements of Income
and Cash Flows for the year ended March 31, 2007 and the
Consolidated Statements of Changes in Stockholders Equity and
Comprehensive Income for the years ended March 31, 2008 and 2007.
In addition, the income tax effect of the above adjustment has been
reflected in footnote 11 of the Consolidated Financial
Statements.
Immaterial
Corrections
The
Consolidated Statement of Income for the year ended March 31, 2008 reflects
an immaterial correction to correctly reflect additional audit
expenses in the amount of $28,000. After taxes
this resulted in a decrease in net income of $17,000. As a result the
corrected basic EPS remains unchanged at
$1.59 while the corrected diluted EPS remains unchanged at $1.55.
The
Consolidated Statement of Financial Position as of March 31,
2008 and 2007 also reflects an adjustment to reclassify
$0.7 million from commercial business loans to goodwill. The
adjustment was the result of a re-evaluation of goodwill in connection with the reconciliation
matters disclosed above and elsewhere herein.
Management believes these corrections to prior period mistatements to
be immaterial.
34
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
|
2008 |
|
|
2008 |
|
|
2008 |
|
|
2007 |
|
|
2007 |
|
|
2007 |
|
|
|
(As Previously |
|
|
|
|
|
|
|
|
|
|
(As Previously |
|
|
|
|
|
|
|
|
|
Reported)(1) |
|
|
Adjustment |
|
|
(As Restated) |
|
|
Reported)(1) |
|
|
Adjustment |
|
|
(As Restated) |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
$ |
15,920 |
|
|
$ |
|
|
|
$ |
15,920 |
|
|
$ |
14,619 |
|
|
$ |
|
|
|
|
14,619 |
|
Federal funds sold |
|
|
10,500 |
|
|
|
|
|
|
|
10,500 |
|
|
|
1,300 |
|
|
|
|
|
|
|
1,300 |
|
Interest earning deposits |
|
|
948 |
|
|
|
|
|
|
|
948 |
|
|
|
1,431 |
|
|
|
|
|
|
|
1,431 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents |
|
|
27,368 |
|
|
|
|
|
|
|
27,368 |
|
|
|
17,350 |
|
|
|
|
|
|
|
17,350 |
|
Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale, at fair value |
|
|
20,865 |
|
|
|
|
|
|
|
20,865 |
|
|
|
47,980 |
|
|
|
|
|
|
|
47,980 |
|
Held-to-maturity, at amortized cost |
|
|
17,307 |
|
|
|
|
|
|
|
17,307 |
|
|
|
19,137 |
|
|
|
|
|
|
|
19,137 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities |
|
|
38,172 |
|
|
|
|
|
|
|
38,172 |
|
|
|
67,117 |
|
|
|
|
|
|
|
67,117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans held-for-sale |
|
|
23,767 |
|
|
|
|
|
|
|
23,767 |
|
|
|
23,226 |
|
|
|
|
|
|
|
23,226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate mortgage loans |
|
|
578,957 |
|
|
|
|
|
|
|
578,957 |
|
|
|
533,667 |
|
|
|
|
|
|
|
533,667 |
|
Commercial business loans |
|
|
51,424 |
|
|
|
|
|
|
|
51,424 |
|
|
|
50,541 |
|
|
|
|
|
|
|
50,541 |
|
Consumer loans |
|
|
1,728 |
|
|
|
|
|
|
|
1,728 |
|
|
|
1,067 |
|
|
|
|
|
|
|
1,067 |
|
Allowance for loan losses |
|
|
(4,878 |
) |
|
|
|
|
|
|
(4,878 |
) |
|
|
(5,409 |
) |
|
|
|
|
|
|
(5,409 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable, net |
|
|
627,231 |
|
|
|
|
|
|
|
627,231 |
|
|
|
579,866 |
|
|
|
|
|
|
|
579,866 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office properties and equipment, net |
|
|
15,780 |
|
|
|
|
|
|
|
15,780 |
|
|
|
14,626 |
|
|
|
|
|
|
|
14,626 |
|
Federal Home Loan Bank of New York stock, at cost |
|
|
1,625 |
|
|
|
|
|
|
|
1,625 |
|
|
|
3,239 |
|
|
|
|
|
|
|
3,239 |
|
Bank owned life insurance |
|
|
9,141 |
|
|
|
|
|
|
|
9,141 |
|
|
|
8,795 |
|
|
|
|
|
|
|
8,795 |
|
Accrued interest receivable |
|
|
4,063 |
|
|
|
|
|
|
|
4,063 |
|
|
|
4,335 |
|
|
|
|
|
|
|
4,335 |
|
Goodwill |
|
|
7,055 |
|
|
|
|
|
|
|
7,055 |
|
|
|
6,401 |
|
|
|
|
|
|
|
6,401 |
|
Core deposit intangibles, net |
|
|
532 |
|
|
|
|
|
|
|
532 |
|
|
|
684 |
|
|
|
|
|
|
|
684 |
|
Other assets |
|
|
41,870 |
|
|
|
(422 |
) |
|
|
41,448 |
|
|
|
14,313 |
|
|
|
(422 |
) |
|
|
13,891 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
796,604 |
|
|
$ |
(422 |
) |
|
$ |
796,182 |
|
|
$ |
739,952 |
|
|
$ |
(422 |
) |
|
$ |
739,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
$ |
654,663 |
|
|
$ |
|
|
|
$ |
654,663 |
|
|
$ |
615,122 |
|
|
$ |
|
|
|
|
615,122 |
|
Advances from the FHLB-NY and other borrowed
money |
|
|
58,625 |
|
|
|
|
|
|
|
58,625 |
|
|
|
61,093 |
|
|
|
|
|
|
|
61,093 |
|
Other liabilities |
|
|
9,800 |
|
|
|
63 |
|
|
|
9,863 |
|
|
|
12,110 |
|
|
|
63 |
|
|
|
12,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
723,088 |
|
|
|
63 |
|
|
|
723,151 |
|
|
|
688,325 |
|
|
|
63 |
|
|
|
688,388 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest |
|
|
19,150 |
|
|
|
|
|
|
|
19,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
25 |
|
|
|
|
|
|
|
25 |
|
|
|
25 |
|
|
|
|
|
|
|
25 |
|
Additional paid-in capital |
|
|
24,113 |
|
|
|
|
|
|
|
24,113 |
|
|
|
23,996 |
|
|
|
|
|
|
|
23,996 |
|
Retained earnings |
|
|
30,473 |
|
|
|
(485 |
) |
|
|
29,988 |
|
|
|
27,436 |
|
|
|
(485 |
) |
|
|
26,951 |
|
Unamortized awards of common stock under ESOP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4 |
) |
|
|
|
|
|
|
(4 |
) |
Treasury stock, at cost |
|
|
(670 |
) |
|
|
|
|
|
|
(670 |
) |
|
|
(277 |
) |
|
|
|
|
|
|
(277 |
) |
Accumulated other comprehensive income |
|
|
425 |
|
|
|
|
|
|
|
425 |
|
|
|
451 |
|
|
|
|
|
|
|
451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
54,366 |
|
|
|
(485 |
) |
|
|
53,881 |
|
|
|
51,627 |
|
|
|
(485 |
) |
|
|
51,142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
796,604 |
|
|
$ |
(422 |
) |
|
$ |
796,182 |
|
|
$ |
739,952 |
|
|
$ |
(422 |
) |
|
$ |
739,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes adjustments for
immaterial corrections to reclassify $685,000 from commercial
business loans to goodwill as of 3/31/07 and to reflect additional
audit expenses of $28,000 ($17,000 after tax) in fiscal
2008 net income. |
35
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended March 31, |
|
|
|
2007 |
|
|
2007 |
|
|
2007 |
|
|
|
(As Previously |
|
|
|
|
|
|
|
|
|
Reported) |
|
|
Adjustment |
|
|
(As Restated) |
|
Interest Income: |
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
$ |
37,277 |
|
|
$ |
|
|
|
$ |
37,277 |
|
Mortgage-backed securities |
|
|
2,877 |
|
|
|
|
|
|
|
2,877 |
|
Investment securities |
|
|
1,325 |
|
|
|
|
|
|
|
1,325 |
|
Federal funds sold |
|
|
261 |
|
|
|
|
|
|
|
261 |
|
|
|
|
|
|
|
|
|
|
|
Total interest income |
|
|
41,740 |
|
|
|
|
|
|
|
41,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
15,227 |
|
|
|
|
|
|
|
15,227 |
|
Advances and other borrowed money |
|
|
4,007 |
|
|
|
|
|
|
|
4,007 |
|
|
|
|
|
|
|
|
|
|
|
Total interest expense |
|
|
19,234 |
|
|
|
|
|
|
|
19,234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
22,506 |
|
|
|
|
|
|
|
22,506 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses |
|
|
276 |
|
|
|
|
|
|
|
276 |
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses |
|
|
22,230 |
|
|
|
|
|
|
|
22,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
Depository fees and charges |
|
|
2,476 |
|
|
|
|
|
|
|
2,476 |
|
Loan fees and service charges |
|
|
1,238 |
|
|
|
|
|
|
|
1,238 |
|
Write-down of loans held for sale |
|
|
(702 |
) |
|
|
|
|
|
|
(702 |
) |
Gain (loss) on sale of securities |
|
|
(624 |
) |
|
|
|
|
|
|
(624 |
) |
Gain on sale of loans |
|
|
192 |
|
|
|
|
|
|
|
192 |
|
Loss on sale of real estate owned |
|
|
(108 |
) |
|
|
|
|
|
|
(108 |
) |
Other |
|
|
397 |
|
|
|
|
|
|
|
397 |
|
|
|
|
|
|
|
|
|
|
|
Total non-interest income |
|
|
2,869 |
|
|
|
|
|
|
|
2,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits |
|
|
10,470 |
|
|
|
|
|
|
|
10,470 |
|
Net occupancy expense |
|
|
2,667 |
|
|
|
|
|
|
|
2,667 |
|
Equipment, net |
|
|
2,071 |
|
|
|
|
|
|
|
2,071 |
|
Merger related expenses |
|
|
1,258 |
|
|
|
|
|
|
|
1,258 |
|
Consulting Expense |
|
|
496 |
|
|
|
|
|
|
|
496 |
|
Other |
|
|
6,377 |
|
|
|
761 |
|
|
|
7,138 |
|
|
|
|
|
|
|
|
|
|
|
Total non-interest expense |
|
|
23,339 |
|
|
|
761 |
|
|
|
24,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes and minority interes |
|
|
1,760 |
|
|
|
(761 |
) |
|
|
999 |
|
Income tax (benefit) expense |
|
|
(823 |
) |
|
|
(276 |
) |
|
|
(1,099 |
) |
Minority interest, net of taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
2,583 |
|
|
$ |
(485 |
) |
|
$ |
2,098 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.03 |
|
|
$ |
(0.19 |
) |
|
$ |
0.84 |
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
$ |
1.00 |
|
|
$ |
(0.19 |
) |
|
$ |
0.81 |
|
|
|
|
|
|
|
|
|
|
|
36
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME
(In thousands)
(As Previously Reported)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common |
|
|
Common |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
Stock |
|
|
Stock |
|
|
|
|
|
|
Accumulated Other |
|
|
Total Stock- |
|
|
|
Common |
|
|
Paid-In |
|
|
Treasury |
|
|
Acquired |
|
|
Acquired |
|
|
Retained |
|
|
Comprehensive |
|
|
Holders |
|
|
|
Stock |
|
|
Capital |
|
|
Stock |
|
|
By ESOP |
|
|
By MRP |
|
|
Earnings |
|
|
Income (Loss) |
|
|
Equity |
|
BalanceMarch 31, 2005 |
|
$ |
25 |
|
|
$ |
23,937 |
|
|
$ |
(420 |
) |
|
$ |
(126 |
) |
|
$ |
(128 |
) |
|
$ |
22,748 |
|
|
$ |
(235 |
) |
|
$ |
45,801 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,770 |
|
|
|
|
|
|
|
3,770 |
|
Loss on pension liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(281 |
) |
|
|
(281 |
) |
Change in net unrealized loss on
available-for-sale securities, net of
taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(158 |
) |
|
|
(158 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income, net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,770 |
|
|
|
(439 |
) |
|
|
3,331 |
|
Dividends paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(782 |
) |
|
|
|
|
|
|
(782 |
) |
Treasury stock activity |
|
|
|
|
|
|
(2 |
) |
|
|
117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115 |
|
Allocation of ESOP Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116 |
|
Purchase of shares for MRP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116 |
|
|
|
|
|
|
|
|
|
|
|
116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BalanceMarch 31, 2006 |
|
|
25 |
|
|
|
23,935 |
|
|
|
(303 |
) |
|
|
(10 |
) |
|
|
(12 |
) |
|
|
25,736 |
|
|
|
(674 |
) |
|
|
48,697 |
|
Adjustment to initially implement SFAS
158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
281 |
|
|
|
281 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance post implementation of SFAS 158 |
|
|
25 |
|
|
|
23,935 |
|
|
|
(303 |
) |
|
|
(10 |
) |
|
|
(12 |
) |
|
|
25,736 |
|
|
|
(393 |
) |
|
|
48,978 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,583 |
|
|
|
|
|
|
|
2,583 |
|
Minimum pension liability adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79 |
|
|
|
79 |
|
Change in net unrealized loss on
available-for-sale securities, net of
taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
765 |
|
|
|
765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income, net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,583 |
|
|
|
844 |
|
|
|
3,427 |
|
Dividends paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(883 |
) |
|
|
|
|
|
|
(883 |
) |
Treasury stock activity |
|
|
|
|
|
|
61 |
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87 |
|
Allocation of ESOP Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
Purchase of shares for MRP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BalanceMarch 31, 2007 |
|
|
25 |
|
|
|
23,996 |
|
|
|
(277 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
27,436 |
|
|
|
451 |
|
|
|
51,627 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,980 |
|
|
|
|
|
|
|
3,980 |
|
Minimum pension liability adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
195 |
|
|
|
195 |
|
Change in net unrealized loss on
available-for-sale securities, net of
taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(221 |
) |
|
|
(221 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income, net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,980 |
|
|
|
(26 |
) |
|
|
3,954 |
|
Adjustment to initially implement SFAS
156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49 |
|
|
|
|
|
|
|
49 |
|
Dividends paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(975 |
) |
|
|
|
|
|
|
(975 |
) |
Treasury stock activity |
|
|
|
|
|
|
117 |
|
|
|
(393 |
) |
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(272 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BalanceMarch 31, 2008 |
|
$ |
25 |
|
|
$ |
24,113 |
|
|
$ |
(670 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
30,490 |
|
|
$ |
425 |
|
|
$ |
54,383 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME
(In thousands)
(As Restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common |
|
|
Common |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
Stock |
|
|
Stock |
|
|
|
|
|
|
Accumulated Other |
|
|
Total Stock- |
|
|
|
Common |
|
|
Paid-In |
|
|
Treasury |
|
|
Acquired |
|
|
Acquired |
|
|
Retained |
|
|
Comprehensive |
|
|
Holders |
|
|
|
Stock |
|
|
Capital |
|
|
Stock |
|
|
By ESOP |
|
|
By MRP |
|
|
Earnings |
|
|
Income (Loss) |
|
|
Equity |
|
BalanceMarch 31, 2005 |
|
$ |
25 |
|
|
$ |
23,937 |
|
|
$ |
(420 |
) |
|
$ |
(126 |
) |
|
$ |
(128 |
) |
|
$ |
22,748 |
|
|
$ |
(235 |
) |
|
$ |
45,801 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,770 |
|
|
|
|
|
|
|
3,770 |
|
Loss on pension liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(281 |
) |
|
|
(281 |
) |
Change in net unrealized loss on
available-
for-sale securities, net of taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(158 |
) |
|
|
(158 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income, net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,770 |
|
|
|
(439 |
) |
|
|
3,331 |
|
Dividends paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(782 |
) |
|
|
|
|
|
|
(782 |
) |
Treasury stock activity |
|
|
|
|
|
|
(2 |
) |
|
|
117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115 |
|
Allocation of ESOP Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116 |
|
Purchase of shares for MRP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116 |
|
|
|
|
|
|
|
|
|
|
|
116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BalanceMarch 31, 2006 |
|
|
25 |
|
|
|
23,935 |
|
|
|
(303 |
) |
|
|
(10 |
) |
|
|
(12 |
) |
|
|
25,736 |
|
|
|
(674 |
) |
|
|
48,697 |
|
Adjustment to initially implement SFAS
158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
281 |
|
|
|
281 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance post implementation of SFAS
158 |
|
|
25 |
|
|
|
23,935 |
|
|
|
(303 |
) |
|
|
(10 |
) |
|
|
(12 |
) |
|
|
25,736 |
|
|
|
(393 |
) |
|
|
48,978 |
|
Net income (as restated) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,098 |
|
|
|
|
|
|
|
2,098 |
|
Minimum pension liability adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79 |
|
|
|
79 |
|
Change in net unrealized loss on
available-
for-sale securities, net of taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
765 |
|
|
|
765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income, net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,098 |
|
|
|
844 |
|
|
|
2,942 |
|
Dividends paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(883 |
) |
|
|
|
|
|
|
(883 |
) |
Treasury stock activity |
|
|
|
|
|
|
61 |
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87 |
|
Allocation of ESOP Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
Purchase of shares for MRP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BalanceMarch 31, 2007
(as restated) |
|
|
25 |
|
|
|
23,996 |
|
|
|
(277 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
26,951 |
|
|
|
451 |
|
|
|
51,142 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,963 |
|
|
|
|
|
|
|
3,963 |
|
Minimum pension liability adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
195 |
|
|
|
195 |
|
Change in net unrealized loss on
available-
for-sale securities, net of taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(221 |
) |
|
|
(221 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income, net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,963 |
|
|
|
(26 |
) |
|
|
3,937 |
|
Adjustment to initially implement SFAS
156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49 |
|
|
|
|
|
|
|
49 |
|
Dividends paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(975 |
) |
|
|
|
|
|
|
(975 |
) |
Treasury stock activity |
|
|
|
|
|
|
117 |
|
|
|
(393 |
) |
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(272 |
) |
Allocation of ESOP Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of shares for MRP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BalanceMarch 31, 2008
(as restated) |
|
$ |
25 |
|
|
$ |
24,113 |
|
|
$ |
(670 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
29,988 |
|
|
$ |
425 |
|
|
$ |
53,881 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended March 31, |
|
|
|
2007 |
|
|
2007 |
|
|
2007 |
|
|
|
(As Previously |
|
|
|
|
|
|
|
|
|
Reported) |
|
|
Adjustment |
|
|
(As Restated) |
|
Cash flows from operating activites: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
2,583 |
|
|
$ |
(485 |
) |
|
$ |
2,098 |
|
Adjustments to reconcile net income to net cash from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses |
|
|
276 |
|
|
|
|
|
|
|
276 |
|
Stock based compensation expense |
|
|
426 |
|
|
|
|
|
|
|
426 |
|
Depreciation and amortization expense |
|
|
1,581 |
|
|
|
|
|
|
|
1,581 |
|
Amortization of premiums and discounts |
|
|
(1,145 |
) |
|
|
|
|
|
|
(1,145 |
) |
Impairment charge on securities |
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) Loss from sale of securities |
|
|
624 |
|
|
|
|
|
|
|
624 |
|
Gain on sale of loans |
|
|
(192 |
) |
|
|
|
|
|
|
(192 |
) |
Writedown on loans held-for-sale |
|
|
702 |
|
|
|
|
|
|
|
702 |
|
Loss on sale of real estate owned |
|
|
108 |
|
|
|
|
|
|
|
108 |
|
Originations of loans held-for-sale |
|
|
(24,708 |
) |
|
|
|
|
|
|
(24,708 |
) |
Proceeds from sale of loans held-for-sale |
|
|
14,422 |
|
|
|
|
|
|
|
14,422 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in accrued interest receivable |
|
|
(1,365 |
) |
|
|
|
|
|
|
(1,365 |
) |
Increase in other assets |
|
|
(2,662 |
) |
|
|
422 |
|
|
|
(2,240 |
) |
(Decrease) increase in other liabilities |
|
|
(4,330 |
) |
|
|
63 |
|
|
|
(4,267 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities |
|
|
(13,680 |
) |
|
|
|
|
|
|
(13,680 |
) |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activites: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from principal payments, maturities and calls of securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale |
|
|
26,539 |
|
|
|
|
|
|
|
26,539 |
|
Held-to-maturity |
|
|
7,185 |
|
|
|
|
|
|
|
7,185 |
|
Proceeds from sales of available-for-sale securities |
|
|
57,942 |
|
|
|
|
|
|
|
57,942 |
|
Originations of loans held-for-investment |
|
|
(105,284 |
) |
|
|
|
|
|
|
(105,284 |
) |
Loans purchased from third parties |
|
|
(58,191 |
) |
|
|
|
|
|
|
(58,191 |
) |
Principal collections on loans |
|
|
146,410 |
|
|
|
|
|
|
|
146,410 |
|
Proceeds from sales of loan originations held-for-investment |
|
|
16,548 |
|
|
|
|
|
|
|
16,548 |
|
Redemption of FHLB-NY stock |
|
|
1,388 |
|
|
|
|
|
|
|
1,388 |
|
Additions to premises and equipment |
|
|
(1,869 |
) |
|
|
|
|
|
|
(1,869 |
) |
Proceeds from sale of real estate owned |
|
|
404 |
|
|
|
|
|
|
|
404 |
|
Payments for acquisition, net of cash acquired |
|
|
(2,425 |
) |
|
|
|
|
|
|
(2,425 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities |
|
|
88,647 |
|
|
|
|
|
|
|
88,647 |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activites: |
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in deposits |
|
|
(33,657 |
) |
|
|
|
|
|
|
(33,657 |
) |
Net repayment of FHLB advances and other borrowings |
|
|
(45,660 |
) |
|
|
|
|
|
|
(45,660 |
) |
Common stock repurchased |
|
|
(321 |
) |
|
|
|
|
|
|
(321 |
) |
Dividends paid |
|
|
(883 |
) |
|
|
|
|
|
|
(883 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
(80,521 |
) |
|
|
|
|
|
|
(80,521 |
) |
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
|
|
(5,554 |
) |
|
|
|
|
|
|
(5,554 |
) |
Cash and cash equivalents at beginning of period |
|
|
22,904 |
|
|
|
|
|
|
|
22,904 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
17,350 |
|
|
$ |
|
|
|
$ |
17,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental information: |
|
|
|
|
|
|
|
|
|
|
|
|
Noncash Transfers- |
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized loss on valuation of available-for-sale
investments, net |
|
$ |
765 |
|
|
$ |
|
|
|
$ |
765 |
|
|
Cash paid for- |
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
19,510 |
|
|
$ |
|
|
|
$ |
19,510 |
|
Income taxes |
|
$ |
652 |
|
|
$ |
|
|
|
$ |
652 |
|
39
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of consolidated financial statement presentation
The consolidated financial statements include the accounts of the Holding Company, the Bank
and the Banks wholly-owned or majority owned subsidiaries, Carver Asset Corporation, CFSB Realty
Corp., CMB, Carver Community Development Corporation, and CFSB Credit Corp. All significant
intercompany accounts and transactions have been eliminated in consolidation.
The consolidated financial statements have been prepared in conformity with accounting
principles generally accepted in the United States of America. In preparing the consolidated
financial statements, management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date
of the consolidated statement of financial condition and revenues and expenses for the period
then ended. Amounts subject to significant estimates and assumptions are items such as the
allowance for loan losses, goodwill and intangibles, pensions and the fair value of financial
instruments. Management believes that prepayment assumptions on mortgage-backed securities and
mortgage loans are appropriate and the allowance for loan losses is adequate. While management
uses available information to recognize losses on loans, future additions to the allowance for loan
losses or future write downs of real estate owned may be necessary based on changes in economic
conditions in the areas where Carver Federal has extended mortgages and other credit instruments.
Actual results could differ significantly from those assumptions.
In addition, the Office of Thrift Supervision (OTS), Carver Federals regulator, as an
integral part of its examination process, periodically reviews Carver Federals allowance for loan
losses and, if applicable, real estate owned valuations. The OTS may require Carver Federal to
recognize additions to the allowance for loan losses or additional write downs of real estate owned
based on their judgments about information available to them at the time of their examination.
In June 2005, the Emerging Issues Task Force (EITF) of the FASB reached final consensus on
Issue No. 04-5, Determining Whether a General Partner, or General Partners as a Group, controls a
Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights (EITF Issue
No. 04-5). EITF Issue No. 04-5 set forth the criteria to determine whether partnerships are to be
consolidated for financial statement purposes or reported using the Equity Method. In accordance
with guidance set forth in EITF Issue No. 04-5, Carver CDC-Subsdiary CDE 10, LLC has been
consolidated for financial reporting purposes.
Cash and cash equivalents
For the purpose of reporting cash flows, cash and cash equivalents include cash, amounts due
from depository institutions, federal funds sold and other short-term instruments with original
maturities of three months or less. Federal funds sold are generally sold for one-day
periods. The amounts due from depository institutions include a non-interest bearing account held
at the Federal Reserve Bank (FRB) where any additional cash reserve required on demand deposits
would be maintained. Currently, this reserve requirement is zero since the Banks vault cash
satisfies cash reserve requirements for deposits.
Securities
When purchased, securities are designated as either securities held-to-maturity or securities
available-for-sale. Securities are classified as held-to-maturity and carried at amortized cost
only if the Bank has a positive intent and ability to hold such securities to maturity. Securities
held-to-maturity are carried at cost, adjusted for the amortization of premiums and the accretion
of discounts using the level-yield method over the remaining period until maturity.
If not classified as held-to-maturity, securities are classified as available-for-sale
demonstrating managements ability to sell in response to actual or anticipated changes in interest
rates and resulting prepayment risk or any other factors. Available-for-sale securities are
reported at fair value. Estimated fair values of securities are based on either published or
security dealers market value. Unrealized holding gains or losses for securities
available-for-sale are excluded from earnings and reported net of deferred income taxes as a
separate component of accumulated other comprehensive income (loss), a component of Stockholders
Equity. Any impairment in the available-for-sale securities deemed other-than-temporary, is
written down against the cost basis and charged to earnings. No impairment charge was recorded for
fiscal 2008, 2007 or 2006. Gains or losses on sales of securities of all classifications are
recognized based on the specific identification method.
Loans Held-for-Sale
Loans held-for-sale are carried at the lower of cost or market value as determined on an
aggregate loan basis. Premiums paid and discounts obtained on such loans held-for-sale are deferred
as an adjustment to the carrying value of the loans until the loans are sold.
Loans Receivable
Loans receivable are carried at unpaid principal balances plus unamortized premiums, purchase
accounting mark-to-market adjustments, certain deferred direct loan origination costs and deferred
loan origination fees and discounts, less the allowance for loan losses.
The Bank defers loan origination fees and certain direct loan origination costs and accretes
such amounts as an adjustment of yield over the expected lives of the related loans using
methodologies which approximate the interest method. Premiums and discounts on loans purchased are
amortized or accreted as an adjustment of yield over the contractual lives, of the related loans,
adjusted for prepayments when applicable, using methodologies which approximate the interest
method.
Loans are generally placed on non-accrual status when they are past due 90 days or more as to
contractual obligations or when other circumstances indicate that collection is questionable. When
a loan is placed on non-accrual status, any interest accrued but not received is reversed against
interest income. Payments received on a non-accrual loan are either applied to the outstanding
principal balance or recorded as interest income, depending on an assessment of the ability to
collect the loan. A non-accrual loan is restored to accrual status when principal and
interest payments become less than 90 days past due and its future collectibility is
reasonably assured.
40
Allowance for Loan Losses
The allowance for loan losses is maintained at a level considered adequate to provide for
probable loan losses inherent in the portfolio as of March 31, 2008. Management is responsible for
determining the adequacy of the allowance for loan losses and the periodic provisioning for
estimated losses included in the consolidated financial statements. The evaluation process is
undertaken on a quarterly basis, but may increase in frequency should conditions arise that would
require managements prompt attention, such as business combinations and opportunities to dispose
of non-performing and marginally performing loans by bulk sale or any development which may
indicate an adverse trend.
Carver Federal maintains a loan review system, which calls for a periodic review of its loan
portfolio and the early identification of potential problem loans. Such system takes into
consideration, among other things, delinquency status, size of loans, type of collateral and
financial condition of the borrowers. Loan loss allowances are established for problem loans based
on a review of such information and/or appraisals of the underlying collateral. On the remainder
of its loan portfolio, loan loss allowances are based upon a combination of factors including, but
not limited to, actual loan loss experience, composition of loan portfolio, current economic
conditions and managements judgment. Although management believes that adequate loan loss
allowances have been established, actual losses are dependent upon future events and, as such,
further additions to the level of the loan loss allowance may be necessary in the future.
The methodology employed for assessing the appropriateness of the allowance consists of the
following criteria:
|
|
|
Establishment of loan loss allowance amounts for all specifically
identified criticized and classified loans that have been designated as requiring
attention by managements internal loan review process, bank regulatory
examinations or Carver Federals external auditors. |
|
|
|
An average loss factor, giving effect to historical loss experience
over several years and other qualitative factors, is applied to all loans not
subject to specific review. |
|
|
|
Evaluation of any changes in risk profile brought about by business
combinations, customer knowledge, the results of ongoing credit quality monitoring
processes and the cyclical nature of economic and business conditions. An
important consideration in performing this evaluation is the concentration of real
estate related loans located in the New York City metropolitan area. |
All new loan originations are assigned a credit risk grade which commences with loan officers
and underwriters grading the quality of their loans one to five under a nine-category risk
classification scale, the first five categories of which represent performing loans. Reserves are
held based on actual loss factors based on several years of loss experience and other qualitative
factors applied to the outstanding balances. All loans are subject to continuous review and
monitoring for changes in their credit grading. Grading that falls into criticized or classified
categories (credit grading six through nine) are further evaluated and reserved amounts are
established for each loan based on each loans potential for loss and includes consideration of the
sufficiency of collateral. Any adverse trend in real estate markets could seriously affect
underlying values available to protect against loss.
Other evidence used to support the amount of the allowance and its components includes:
|
|
|
Amount and trend of criticized loans; |
|
|
|
Peer comparisons with other financial institutions; and |
|
|
|
Economic data associated with the real estate market in the Companys lending market areas. |
41
A loan is considered to be impaired, as defined by SFAS No. 114, Accounting by Creditors for
Impairment of a Loan (SFAS 114), when it is probable that Carver Federal will be unable to
collect all principal and interest amounts due according to the contractual terms of the loan
agreement. Carver Federal tests loans
covered under SFAS 114 for impairment if they are on non-accrual status or have been
restructured. Consumer credit non-accrual loans are not tested for impairment because they are
included in large groups of smaller-balance homogeneous loans that, by definition, are excluded
from the scope of SFAS 114. Impaired loans are required to be measured based upon (i) the present
value of expected future cash flows, discounted at the loans initial effective interest rate, (ii)
the loans market price, or (iii) fair value of the collateral if the loan is collateral
dependent. If the loan valuation is less than the recorded value of the loan, an allowance must be
established for the difference. The allowance is established by either an allocation of the
existing allowance for loan losses or by a provision for loan losses, depending on various
circumstances. Allowances are not needed when credit losses have been recorded so that the
recorded investment in an impaired loan is less than the loan valuation.
Segment Reporting
In accordance with Statement of Financial Accounting Standard No. 131, Disclosures about
Segments of an Enterprise and Related Information, the Company has determined that all of its
activities constitute one reportable operating segment.
Concentration of Risk
The Banks principal lending activities are concentrated in loans secured by real estate, a
substantial portion of which is located in New York City. Accordingly, the ultimate collectibility
of a substantial portion of the Companys loan portfolio is susceptible to changes in New Yorks
real estate market conditions.
Office Properties and Equipment
Office properties and equipment are comprised of land, at cost, and buildings, building
improvements, furnishings and equipment and leasehold improvements, at cost, less accumulated
depreciation and amortization. Depreciation and amortization charges are computed using the
straight-line method over the following estimated useful lives:
|
|
|
Buildings and improvements |
|
10 to 25 years |
Furnishings and equipment |
|
3 to 5 years |
Leasehold improvements |
|
Lesser of useful life or remaining term of lease |
Maintenance, repairs and minor improvements are charged to non-interest expense in the period
incurred.
Federal Home Loan Bank Stock
The Federal Home Loan Bank of New York (FHLB-NY) has assigned to the Bank a mandated
membership stock purchase, based on the Banks asset size. In addition, for all borrowing activity,
the Bank is required to purchase shares of FHLB-NY non-marketable capital stock at par. Such shares
are redeemed by FHLB-NY at par with reductions in the Banks borrowing levels. The Bank carries
this investment at historical cost.
Bank Owned Life Insurance
Bank Owned Life Insurance (BOLI) is carried at its cash surrender value on the balance sheet
and is classified as a non-interest-earning asset. Death benefits proceeds received in excess of
the policys cash surrender value are recognized in income. Returns on the BOLI assets are added
to the carrying value and included as non-interest income in the consolidated statement of
income. Any receipt of benefit proceeds is recorded as a reduction to the carrying value of the
BOLI asset. At March 31, 2008, Carver held no policy loans against its BOLI cash surrender values
or restrictions on the use of the proceeds.
42
Mortgage Servicing Rights
Mortgage servicing rights on originated loans that have been sold are capitalized by
allocating the total cost of the mortgage loans between the mortgage servicing rights and the loans
based on their relative fair values. Mortgage servicing rights are carried at the lower of the
initial carrying value, adjusted for amortization, or fair value, and are amortized in proportion
to, and over the period of, estimated net servicing income using a discounted analysis of future
cash flows, incorporating numerous assumptions including servicing income, servicing costs, market
discount rates, prepayment speeds and default rates. Mortgage servicing rights are evaluated
quarterly for impairment based on the difference between the carrying amount and current fair
value. If it is determined that impairment exists, the resulting loss is charged against earnings.
Real Estate Owned
Real estate acquired by foreclosure or deed in lieu of foreclosure is recorded at the fair
value at the date of acquisition and thereafter carried at the lower of cost or fair value less
estimated selling costs. The fair value of such assets is determined based primarily upon
independent appraisals and other relevant factors. The amounts ultimately recoverable from real
estate owned could differ from the net carrying value of these properties because of economic
conditions. Costs incurred to improve properties or prepare them for sale are
capitalized. Revenues and expenses related to the holding and operating of properties are
recognized in operations as earned or incurred. Gains or losses on sale of properties are
recognized as incurred.
Identifiable Intangible Assets
In accordance with Statement of Financial Accounting Standards No.142, Goodwill and Other
Intangible Assets goodwill and intangible assets with indefinite useful lives are no longer
amortized, rather they are assessed, at least annually, for impairment (See Note 3).
Identifiable intangible assets relate primarily to core deposit premiums, resulting from the
valuation of core deposit intangibles acquired in the purchase of branches of other financial
institutions. These identifiable intangible assets are amortized using the straight-line method
over a period of 5 years but not exceeding the estimated average remaining life of the existing
customer deposits acquired. Amortization periods for intangible assets are monitored to determine
if events and circumstances require such periods to be reduced.
Effective April 1, 2007, the Company adopted SFAS, No. 156, Accounting for Servicing of
Financial Assets an amendment of FASB Statement No. 140. SFAS No. 156 requires all separately
recognized servicing assets and servicing liabilities to be initially measured at fair value, if
practicable. For subsequent measurements, entities are permitted to choose either the amortization
method, which is consistent with the prior requirements of SFAS No. 140, or the fair value method.
Upon adoption of SFAS No. 156, the Company elected to adopt the fair value method for measurements
of mortgage servicing rights (MSR). The adoption of SFAS No. 156 did not have a material impact on
the Companys financial statements.
The Company recognizes as separate assets the rights to service mortgage loans and such assets
are included in other assets in the statements of financial condition.
Income Taxes
Carver Federal accounts for income taxes using the asset and liability method. Temporary
differences between the basis of assets and liabilities for financial reporting and tax purposes
are measured as of the balance sheet date. Deferred tax liabilities or recognizable deferred tax
assets are calculated on such differences, using current statutory rates, which result in future
taxable or deductible amounts. The effect on deferred taxes of a change in tax rates is recognized
in income in the period that includes the enactment date.
Effective January 1, 2007, the Company adopted the provisions of FIN 48, Accounting for
Uncertainty in Income Taxes- An Interpretation of FASB Statement No 109. FIN 48 clarifies the
accounting for uncertainty in income taxes recognized in an entitys financial statements in
accordance with SFAS No. 109, Accounting for Income Taxes. FIN 48 also prescribes a specified
recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be taken in a tax
return. The new interpretation also provides guidance on derecognition, classification, interest
and penalties, accounting in interim periods, disclosure, and transition. The adoption of FIN 48
did not have a material impact on the Companys financial statements.
43
Securities Impairment
The Banks available-for-sale securities portfolio is carried at estimated fair value, with
any unrealized gains and losses, net of taxes, reported as accumulated other comprehensive
income/loss in stockholders equity. Securities that the Bank has the positive intent and ability
to hold to maturity are classified as held-to-maturity and are carried at amortized cost. The fair
values of securities in portfolio are based on published or securities dealers market values and
are affected by changes in interest rates. The Bank periodically reviews and evaluates the
securities portfolio to determine if the decline in the fair value of any security below its cost
basis is other-than-temporary. The Bank generally views changes in fair value caused by changes in
interest rates as temporary, which is consistent with its experience. However, if such a decline
is deemed to be other-than-temporary, the security is written down to a new cost basis and the
resulting loss is charged to earnings. At March 31, 2008, the Bank carried no other than
temporarily impaired securities.
Earnings per Common Share
Basic earnings per share (EPS) is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding. Diluted EPS includes any
additional common shares as if all potentially dilutive common shares were issued (e.g.,
outstanding share awards under the Companys stock option plans). For the purpose of these
calculations, unreleased shares of the Carver Federal Savings Bank Employee Stock Ownership Plan
(ESOP) are not considered to be outstanding.
Treasury Stock
Treasury stock is recorded at cost and is presented as a reduction of stockholders equity.
Pension Plans
The Companys pension benefit and post-retirement health and welfare benefit obligations, and
the related costs, are calculated using actuarial concepts, within the framework of SFAS No. 87,
Employers Accounting for Pensions and SFAS No. 106, Employers Accounting for Post-retirement
Benefits Other than Pensions, respectively. The measurement of such obligations and expenses
requires that certain assumptions be made regarding several factors, most notably including the
discount rate and the expected return on plan assets. The Company evaluates these critical
assumptions on an annual basis. Other factors considered by the Company include retirement
patterns, mortality, turnover, and the rate of compensation increase.
Under Statement of Financial Accounting Standards No. 158, Employers Accounting for Defined
Benefits Pension and Other Post-retirement Plans- an amendment of SFAS Statement Nos. 87, 88, 106
and 132(R), actuarial gain and losses, prior services cost or credits, and any remaining
transition assets or obligations that have not been recognized under previous accounting standards
must be recognized in accumulated other comprehensive income or loss, net of taxes effects, until
they are amortized as a component of net of periodic benefit cost. In addition, under SFAS No. 158
the measurement date (i.e., the date at which plan assets and the benefit obligation are measured
for financial reporting purposes) is required to be the companys fiscal year end. The company
presently uses a December 31 measurement date for its pension, as permitted by SFAS Nos. 87 and
106. In accordance with SFAS No. 158, the Company will adopt a fiscal year-end measurement date on
March 31, 2009.
Stock-Based Compensation Plans
Effective April 1, 2006, the Company adopted Statement of Financial Accounting Standards No.
123R, Share-Based Payment, (SFAS No. 123R). This statement replaces Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation, and supersedes Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, (APB No. 25). SFAS
No. 123R requires that all stock-based
compensation be recognized as an expense in the financial statements and that such cost be
measured at the fair value of the award. This statement was adopted using the modified prospective
method of application, which requires the Company to recognize compensation expense on a
prospective basis. Therefore, prior period financial statements have not been restated. Under this
method, in addition to reflecting compensation expense for new share-based awards, expense is also
recognized to reflect the remaining service period of awards that had been included in pro forma
disclosures in prior periods. SFAS No. 123R also requires that excess tax benefits related to stock
option exercises be reflected as financing cash inflows instead of operating cash inflows.
44
Prior to the adoption of SFAS No. 123R on April 1, 2006, the Company applied APB No. 25 and
related interpretations in accounting for its stock option plans. As each granted stock option
entitled the holder to purchase shares of the Companys common stock at an exercise price equal to
100% of the fair market value of the stock on the date of grant, no compensation cost for such
options was recognized. Had compensation cost for the stock option plans been determined, using a
Black-Scholes option-pricing model, based on the fair value at the date of grant for awards made
under those plans, consistent with the method set forth in SFAS No. 123, Accounting for
Stock-based Compensation, as amended by Statement of Financial Accounting Standards No. 148,
Accounting for Stock-based Compensation Transition and Disclosure, (SFAS No. 148), the
Companys pro forma net income in the year ended March 31, 2006 would have been as follows:
|
|
|
|
|
|
|
2006 |
|
Net Income available to common shareholders: |
|
|
|
|
As reported |
|
$ |
3,770 |
|
Total stock-based employee compensation expense
determined under fair value based methods for
all awards, net of related tax effects |
|
|
(105 |
) |
|
|
|
|
Pro forma |
|
$ |
3,665 |
|
|
|
|
|
|
|
|
|
|
Basic earnings per share: |
|
|
|
|
As reported |
|
$ |
1.50 |
|
Pro forma |
|
|
1.46 |
|
|
|
|
|
|
Diluted earnings per share: |
|
|
|
|
As reported |
|
$ |
1.45 |
|
Pro forma |
|
|
1.43 |
|
|
Weighted average number of shares outstanding |
|
|
2,506,029 |
|
Compensation expense is recognized for the Banks ESOP equal to the fair value of shares
committed to be released for allocation to participant accounts. Any difference between the fair
value at that time and the ESOPs original acquisition cost is charged or credited to stockholders
equity (additional paid-in capital). The cost of unallocated ESOP shares (shares not yet committed
to be released) is reflected as a reduction of stockholders equity.
The Company grants incentive stock options only to its employees and grants nonqualified
stock options to employees and non-employee directors. All options granted, vested and
unexercised as of March 31, 2006 will still be accounted for under APB No. 25. No compensation
expense is recognized if the exercise price of the option is greater than or equal to the fair
market value of the underlying stock on the date of grant.
45
Reclassifications
Certain amounts in the consolidated financial statements presented for prior years have been
reclassified to conform to the current year presentation.
NOTE 4. IMPAIRMENT AND GOODWILL
The Company annually evaluates long-lived assets, certain identifiable intangibles and
deferred costs for indication of impairment in value. When required, asset impairment will be
recorded as an expense in the current period. The Company reported goodwill from its acquisition of
Community Capital Bank in 2006 in the amount of $7.1 million
In accordance with Statement of Financial Accounting Standards No.142, Goodwill and Other
Intangible Assets (SFAS No.142) goodwill and intangible assets with indefinite useful lives are
no longer amortized, rather they are assessed, at least annually, for impairment. The Company
tests goodwill for impairment on an annual basis as of January 31, or more often if events or
circumstances indicate there may be impairment. The Company has determined that all of its
activities constitute one reporting and operating segment.
The Company performed the annual goodwill impairment test as of January 31, 2008, and
determined that the fair value of the reporting unit was in excess of its carrying value, using the
guideline company and guideline transaction methodologies. There was no indication of goodwill
impairment as of the annual impairment test date.
46
NOTE 5. SECURITIES
The following is a summary of securities at March 31, 2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized |
|
|
Gross Unrealized |
|
|
Estimated |
|
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Fair-Value |
|
Available-for-Sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government National Mortgage
Association |
|
$ |
8,303 |
|
|
$ |
|
|
|
$ |
(123 |
) |
|
$ |
8,180 |
|
Federal Home Loan Mortgage Corporation |
|
|
4,077 |
|
|
|
19 |
|
|
|
|
|
|
|
4,096 |
|
Federal National Mortgage Association |
|
|
6,748 |
|
|
|
107 |
|
|
|
|
|
|
|
6,855 |
|
Other |
|
|
205 |
|
|
|
4 |
|
|
|
|
|
|
|
209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage-backed securities |
|
|
19,333 |
|
|
|
130 |
|
|
|
(123 |
) |
|
|
19,340 |
|
U.S. Government Agency Securities |
|
|
1,473 |
|
|
|
52 |
|
|
|
|
|
|
|
1,525 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale |
|
|
20,806 |
|
|
|
182 |
|
|
|
(123 |
) |
|
|
20,865 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-Maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government National Mortgage
Association |
|
|
573 |
|
|
|
34 |
|
|
|
|
|
|
|
607 |
|
Federal Home Loan Mortgage Corporation |
|
|
12,343 |
|
|
|
11 |
|
|
|
(230 |
) |
|
|
12,124 |
|
Federal National Mortgage Association |
|
|
4,216 |
|
|
|
78 |
|
|
|
(32 |
) |
|
|
4,262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage-backed securities |
|
|
17,132 |
|
|
|
123 |
|
|
|
(262 |
) |
|
|
16,993 |
|
Other |
|
|
175 |
|
|
|
|
|
|
|
(1 |
) |
|
|
174 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held-to-maturity |
|
|
17,307 |
|
|
|
123 |
|
|
|
(263 |
) |
|
|
17,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities |
|
$ |
38,113 |
|
|
$ |
305 |
|
|
$ |
(386 |
) |
|
$ |
38,032 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a summary of securities at March 31, 2007 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized |
|
|
Gross Unrealized |
|
|
Estimated |
|
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Fair-Value |
|
Available-for-Sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government National Mortgage Association |
|
$ |
13,637 |
|
|
$ |
47 |
|
|
$ |
(65 |
) |
|
$ |
13,619 |
|
Federal Home Loan Mortgage Corporation |
|
|
1,116 |
|
|
|
12 |
|
|
|
(3 |
) |
|
|
1,125 |
|
Federal National Mortgage Association |
|
|
5,905 |
|
|
|
30 |
|
|
|
(40 |
) |
|
|
5,895 |
|
Other |
|
|
517 |
|
|
|
20 |
|
|
|
|
|
|
|
537 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage-backed securities |
|
|
21,175 |
|
|
|
109 |
|
|
|
(108 |
) |
|
|
21,176 |
|
U.S. Government Agency Securities |
|
|
26,417 |
|
|
|
387 |
|
|
|
|
|
|
|
26,804 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale |
|
|
47,592 |
|
|
|
496 |
|
|
|
(108 |
) |
|
|
47,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-Maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government National Mortgage Association |
|
|
727 |
|
|
|
25 |
|
|
|
|
|
|
|
752 |
|
Federal Home Loan Mortgage Corporation |
|
|
13,308 |
|
|
|
9 |
|
|
|
(166 |
) |
|
|
13,151 |
|
Federal National Mortgage Association |
|
|
4,792 |
|
|
|
53 |
|
|
|
(50 |
) |
|
|
4,795 |
|
Other |
|
|
120 |
|
|
|
|
|
|
|
|
|
|
|
120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage-backed securities |
|
|
18,947 |
|
|
|
87 |
|
|
|
(216 |
) |
|
|
18,818 |
|
Other |
|
|
190 |
|
|
|
|
|
|
|
(3 |
) |
|
|
187 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held-to-maturity |
|
|
19,137 |
|
|
|
87 |
|
|
|
(219 |
) |
|
|
19,005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities |
|
$ |
66,729 |
|
|
$ |
583 |
|
|
$ |
(327 |
) |
|
$ |
66,985 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47
The following is a summary regarding securities and/or calls of available-for-sale portfolio at
March 31, 2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
Available-for-Sale: |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds |
|
$ |
22,428 |
|
|
$ |
14,422 |
|
|
$ |
12,197 |
|
Gross gains |
|
|
431 |
|
|
|
22 |
|
|
|
|
|
Gross losses |
|
|
|
|
|
|
646 |
|
|
|
|
|
The net unrealized gain on available-for-sale securities was $0.1 million ($36,000 after taxes) at
March 31, 2008 and net unrealized gain of $0.4 million ($0.2 million after taxes) at March 31,
2007. On November 30, 2002 the Bank transferred $22.8 million of mortgage-backed securities from
available-for-sale to held-to-maturity as a result of managements intention to hold these
securities in portfolio until maturity. A related unrealized gain of $0.5 million was recorded as
a separate component of stockholders equity and is being amortized over the remaining lives of the
securities as an adjustment to yield. As of March 31, 2008 the carrying value of these securities
was $8.8 million and a related net unrealized gain of $0.1 million continues to be reported. There
was a loss of $0.6 million resulting from the sale of available-for-sale securities in fiscal
2007. At March 31, 2008 the Bank pledged securities of $9.7 million as collateral for advances
from the FHLB-NY.
The following is a summary of the carrying value (amortized cost) and fair value of securities
at March 31, 2008, by remaining period to contractual maturity (ignoring earlier call dates, if
any). Actual maturities may differ from contractual maturities because certain security issuers
have the right to call or prepay their obligations. The table below does not consider the effects
of possible prepayments or unscheduled repayments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized |
|
|
|
|
|
|
Weighted |
|
|
|
Cost |
|
|
Fair Value |
|
|
Avg Rate |
|
Available-for-Sale: |
|
|
|
|
|
|
|
|
|
|
|
|
Less than one year |
|
$ |
42 |
|
|
$ |
43 |
|
|
|
5.44 |
% |
One through five years |
|
|
181 |
|
|
|
188 |
|
|
|
5.31 |
% |
Five through ten years |
|
|
6,706 |
|
|
|
6,264 |
|
|
|
5.42 |
% |
After ten years |
|
|
14,280 |
|
|
|
14,370 |
|
|
|
5.02 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
21,209 |
|
|
$ |
20,865 |
|
|
|
5.13 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
One through five years |
|
$ |
11 |
|
|
$ |
11 |
|
|
|
5.15 |
% |
Five through ten years |
|
|
493 |
|
|
|
486 |
|
|
|
5.00 |
% |
After ten years |
|
|
16,803 |
|
|
|
16,670 |
|
|
|
5.78 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
17,307 |
|
|
$ |
17,167 |
|
|
|
5.76 |
% |
|
|
|
|
|
|
|
|
|
|
48
The unrealized losses and fair value of securities in an unrealized loss position at March 31,
2008 for less than 12 months and 12 months or longer were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months |
|
|
12 months or longer |
|
|
Total |
|
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
|
Losses |
|
|
Value |
|
|
Losses |
|
|
Value |
|
|
Losses |
|
|
Value |
|
Available-for-Sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
$ |
(33 |
) |
|
$ |
3,857 |
|
|
$ |
(90 |
) |
|
$ |
4,033 |
|
|
$ |
(123 |
) |
|
$ |
7,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale |
|
|
(33 |
) |
|
|
3,857 |
|
|
|
(90 |
) |
|
|
4,033 |
|
|
|
(123 |
) |
|
|
7,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-Maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
|
(7 |
) |
|
|
451 |
|
|
|
(255 |
) |
|
|
13,800 |
|
|
|
(262 |
) |
|
|
14,251 |
|
U.S. Government Agency Securities |
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
174 |
|
|
|
(1 |
) |
|
|
174 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held-to-maturity |
|
|
(7 |
) |
|
|
451 |
|
|
|
(256 |
) |
|
|
13,974 |
|
|
|
(263 |
) |
|
|
14,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities |
|
$ |
(40 |
) |
|
$ |
4,308 |
|
|
$ |
(346 |
) |
|
$ |
18,007 |
|
|
$ |
(386 |
) |
|
$ |
22,315 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The unrealized losses and fair value of securities in an unrealized loss position at March 31,
2007 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months |
|
|
12 months or longer |
|
|
Total |
|
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
|
Losses |
|
|
Value |
|
|
Losses |
|
|
Value |
|
|
Losses |
|
|
Value |
|
|
|
(in thousands) |
|
Available-for-Sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
|
(108 |
) |
|
|
9,498 |
|
|
|
|
|
|
|
|
|
|
|
(108 |
) |
|
|
9,498 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale |
|
|
(108 |
) |
|
|
9,498 |
|
|
|
|
|
|
|
|
|
|
|
(108 |
) |
|
|
9,498 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-Maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities |
|
|
(216 |
) |
|
|
15,241 |
|
|
|
|
|
|
|
|
|
|
|
(216 |
) |
|
|
15,241 |
|
U.S. Government Agency Securities |
|
|
(3 |
) |
|
|
187 |
|
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|
|
187 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Held-to- Maturity |
|
|
(219 |
) |
|
|
15,428 |
|
|
|
|
|
|
|
|
|
|
|
(219 |
) |
|
|
15,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities |
|
|
(327 |
) |
|
|
24,926 |
|
|
|
|
|
|
|
|
|
|
|
(327 |
) |
|
|
24,926 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A total of 29 securities had an unrealized loss at March 31, 2008 compared to 24 at March 31,
2007. Based on estimated fair value, all the securities in an unrealized loss position were United
States government agency-backed securities, which represents 32.4% and 20.3% of total securities at
March 31, 2008 and 2007, respectively. The cause of the temporary impairment is directly related
to the change in interest rates. In general, as interest rates decline, the fair value of
securities will rise, and conversely as interest rates rise, the fair value of securities will
decline. Management considers fluctuations in fair value as a result of interest rate changes to
be temporary, which is consistent with the Banks experience. The impairments are deemed temporary
based on the direct relationship of the rise in fair value to movements in interest rates, the life
of the investments and their high credit quality.
49
NOTE 6. LOANS RECEIVABLE, NET
The following is a summary of loans receivable, net of allowance for loan losses at March 31
(dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
Gross loans receivable: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family |
|
$ |
103,419 |
|
|
|
16.33 |
% |
|
$ |
100,910 |
|
|
|
17.22 |
% |
Multifamily |
|
|
78,657 |
|
|
|
12.42 |
% |
|
|
91,877 |
|
|
|
15.68 |
% |
Non-residential |
|
|
238,508 |
|
|
|
37.66 |
% |
|
|
203,187 |
|
|
|
34.68 |
% |
Construction |
|
|
158,877 |
|
|
|
25.09 |
% |
|
|
137,697 |
|
|
|
23.50 |
% |
Business |
|
|
51,424 |
|
|
|
8.23 |
% |
|
|
51,226 |
|
|
|
8.74 |
% |
Consumer and other (1) |
|
|
1,728 |
|
|
|
0.27 |
% |
|
|
1,067 |
|
|
|
0.18 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable |
|
|
633,298 |
|
|
|
100.00 |
% |
|
|
585,964 |
|
|
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium on loans |
|
|
725 |
|
|
|
|
|
|
|
990 |
|
|
|
|
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred fees and loan discounts |
|
|
(1,229 |
) |
|
|
|
|
|
|
(994 |
) |
|
|
|
|
Allowance for loan losses |
|
|
(4,878 |
) |
|
|
|
|
|
|
(5,409 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable, net |
|
$ |
627,231 |
|
|
|
|
|
|
$ |
580,551 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes personal, credit
card, and home improvement. |
At March 31, 2008 and 2007, 89.3% and 89.9%, respectively, of the Banks real estate loans
receivable was principally secured by properties located in New York City.
Mortgage loan portfolios serviced for Federal National Mortgage Association (FNMA) and other
third parties are not included in the accompanying consolidated financial statements. The unpaid
principal balances of these loans aggregated $52.0 million, $38.8 million and $33.2 million at
March 31, 2008, 2007, and 2006, respectively. Custodial escrow balances, maintained in connection
with the above-mentioned loan servicing, were approximately $0.2 million, $0.1 million and $0.1
million at March 31, 2008, 2007 and 2006, respectively. During the years ended March 31, 2008,
2007 and 2006, the Bank recognized gains on the sale of loans of $0.3 million, $0.2 million and
$0.4 million, respectively.
At March 31, 2008 the Bank pledged $187.9 million in total mortgage loans as collateral for
advances from the FHLB-NY.
The following is an analysis of the allowance for loan losses for the years ended March 31 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
Balance at beginning of the year |
|
$ |
5,409 |
|
|
$ |
4,015 |
|
|
$ |
4,097 |
|
Provision charged to operations |
|
|
222 |
|
|
|
276 |
|
|
|
|
|
Recoveries of amounts previously charged-off |
|
|
153 |
|
|
|
47 |
|
|
|
35 |
|
Charge-offs of loans |
|
|
(906 |
) |
|
|
(120 |
) |
|
|
(117 |
) |
Acquisition of CCB |
|
|
|
|
|
|
1,191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of the year |
|
$ |
4,878 |
|
|
$ |
5,409 |
|
|
$ |
4,015 |
|
|
|
|
|
|
|
|
|
|
|
Non-accrual loans consist of loans for which the accrual of interest has been discontinued as
a result of such loans becoming 90 days or more delinquent as to principal and/or interest
payments. Interest income on non-accrual loans is recorded when received. Restructured loans
consist of loans where borrowers have been granted concessions in regards to the terms of their
loans due to financial or other difficulties, which rendered them unable to repay their loans under
the original contractual terms.
50
At March 31, 2008, 2007 and 2006, the recorded investment in impaired loans was $2.9 million,
$4.5 million and $2.8 million, respectively, all of which represented non-accrual loans. The
related allowance for loan losses for these impaired loans was approximately $0.3 million, $0.8
million and $0.3 million at March 31, 2008, 2007 and 2006, respectively. The impaired loan
portfolio is primarily collateral dependent. The average recorded investment in impaired loans
during the fiscal years ended March 31, 2008, 2007 and 2006 was approximately $4.7 million, $3.6
million and $2.2 million, respectively. For the fiscal years ended March 31, 2008, 2007 and 2006,
the Company did not recognize any interest income on these impaired loans. Interest income of $0.6
million, $0.3 million, and $0.1 million, for the fiscal years ended March 31, 2008, 2007 and 2006,
respectively, would have been recorded on impaired loans had they performed in accordance with
their original terms.
At March 31, 2008, other non-performing assets totaled $4.0 million which consists of
non-performing loans of $2.9 million and other real estate owned of $1.2 million. Other
non-performing loans of $2.9 million consist of 18 small business and SBA loans, two multi-family
loans and two 1-4 family loans. All are relatively small balance loans. Other real estate owned
of $1.2 million reflects four foreclosed properties.
At March 31, 2008 and 2007, there were no loans to officers or directors of the Company.
NOTE 7. OFFICE PROPERTIES AND EQUIPMENT, NET
The detail of office properties and equipment as of March 31 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Land |
|
$ |
415 |
|
|
$ |
415 |
|
Building and improvements |
|
|
9,874 |
|
|
|
9,834 |
|
Leasehold improvements |
|
|
6,041 |
|
|
|
5,262 |
|
Furniture and equipment |
|
|
12,079 |
|
|
|
10,039 |
|
|
|
|
|
|
|
|
|
|
|
28,409 |
|
|
|
25,550 |
|
Less accumulated depreciation and amortization |
|
|
(12,629 |
) |
|
|
(10,924 |
) |
|
|
|
|
|
|
|
Office properties and equipment, net |
|
$ |
15,780 |
|
|
$ |
14,626 |
|
|
|
|
|
|
|
|
Depreciation and amortization charged to operations for the fiscal years ended March 31, 2008,
2007 and 2006 amounted to $1.7 million, $1.6 million and $1.5 million, respectively.
NOTE 8. ACCRUED INTEREST RECEIVABLE
The detail of accrued interest receivable as of March 31 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Loans receivable |
|
$ |
3,751 |
|
|
$ |
3,689 |
|
Mortgage-backed securities |
|
|
273 |
|
|
|
590 |
|
Investments and other interest bearing assets |
|
|
39 |
|
|
|
56 |
|
|
|
|
|
|
|
|
Total accrued interest receivable |
|
$ |
4,063 |
|
|
$ |
4,335 |
|
|
|
|
|
|
|
|
51
NOTE 9. DEPOSITS
Deposit balances and weighted average stated interest rates as of March 31 are as follows
(dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
Percent |
|
|
Weighted |
|
|
|
|
|
|
Percent |
|
|
Weighted |
|
|
|
|
|
|
|
of Total |
|
|
Average |
|
|
|
|
|
|
of Total |
|
|
Average |
|
|
|
Amount |
|
|
Deposits |
|
|
Rate |
|
|
Amount |
|
|
Deposits |
|
|
Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest-bearing demand |
|
$ |
51,736 |
|
|
|
7.90 |
% |
|
|
0.00 |
% |
|
$ |
50,891 |
|
|
|
8.27 |
% |
|
|
0.00 |
% |
NOW accounts |
|
|
28,168 |
|
|
|
4.30 |
% |
|
|
0.20 |
% |
|
|
28,910 |
|
|
|
4.70 |
% |
|
|
0.31 |
% |
Savings and club |
|
|
125,819 |
|
|
|
19.22 |
% |
|
|
0.53 |
% |
|
|
137,960 |
|
|
|
22.43 |
% |
|
|
0.78 |
% |
Money market savings account |
|
|
45,514 |
|
|
|
6.95 |
% |
|
|
2.94 |
% |
|
|
46,996 |
|
|
|
7.64 |
% |
|
|
2.18 |
% |
Certificates of deposit |
|
|
400,587 |
|
|
|
61.20 |
% |
|
|
4.10 |
% |
|
|
347,753 |
|
|
|
56.53 |
% |
|
|
4.28 |
% |
Other |
|
|
2,839 |
|
|
|
0.43 |
% |
|
|
1.51 |
% |
|
|
2,612 |
|
|
|
0.43 |
% |
|
|
1.39 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
654,663 |
|
|
|
100.00 |
% |
|
|
2.83 |
% |
|
$ |
615,122 |
|
|
|
100.00 |
% |
|
|
2.78 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scheduled maturities of certificates of deposit are as follows for the year ended March 31,
2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period to Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Percent |
|
Rate |
|
< 1 Yr. |
|
|
1-2 Yrs. |
|
|
2-3 Yrs. |
|
|
3+ Yrs. |
|
|
2007 |
|
|
of Total |
|
0% 0.99% |
|
$ |
2,993 |
|
|
$ |
389 |
|
|
$ |
48 |
|
|
$ |
231 |
|
|
$ |
3,661 |
|
|
|
0.91 |
% |
1% 1.99% |
|
|
27,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,640 |
|
|
|
6.90 |
% |
2% 3.99% |
|
|
98,003 |
|
|
|
9,577 |
|
|
|
4,202 |
|
|
|
1,743 |
|
|
|
113,525 |
|
|
|
28.34 |
% |
4% and over |
|
|
231,542 |
|
|
|
9,054 |
|
|
|
3,995 |
|
|
|
11,170 |
|
|
|
255,761 |
|
|
|
63.85 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
360,178 |
|
|
$ |
19,020 |
|
|
$ |
8,245 |
|
|
$ |
13,144 |
|
|
$ |
400,587 |
|
|
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate amount of certificates of deposit with minimum denominations of $100,000 or more
was approximately $229.7 million at March 31, 2008 compared to $217.4 million at March 31,
2007. As of March 31, 2008 the Bank had pledged $1.3 million of investment securities as
collateral for certain large deposits.
Interest expense on deposits is as follows for the years ended March 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW demand |
|
$ |
138 |
|
|
$ |
98 |
|
|
$ |
74 |
|
Savings and clubs |
|
|
1,004 |
|
|
|
931 |
|
|
|
919 |
|
Money market savings |
|
|
1,193 |
|
|
|
1,133 |
|
|
|
601 |
|
Certificates of deposit |
|
|
16,522 |
|
|
|
13,079 |
|
|
|
7,321 |
|
Mortgagors deposits |
|
|
42 |
|
|
|
30 |
|
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,899 |
|
|
|
15,271 |
|
|
|
8,945 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Penalty for early withdrawal of
certificates of deposit |
|
|
(33 |
) |
|
|
(44 |
) |
|
|
(24 |
) |
|
|
|
|
|
|
|
|
|
|
Total interest expense |
|
$ |
18,866 |
|
|
$ |
15,227 |
|
|
$ |
8,921 |
|
|
|
|
|
|
|
|
|
|
|
52
NOTE 10. BORROWED MONEY
Federal Home Loan Bank Advances and Repurchase agreements. FHLB-NY advances and repurchase
agreements weighted average interest rates by remaining period to maturity at March 31 are as
follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturing |
|
2008 |
|
|
2007 |
|
Year Ended |
|
Weighted |
|
|
|
|
|
|
Weighted |
|
|
|
|
March 31, |
|
Average Rate |
|
|
Amount |
|
|
Average Rate |
|
|
Amount |
|
2008 |
|
|
0.00 |
% |
|
$ |
|
|
|
|
4.58 |
% |
|
$ |
32,500 |
|
2009 |
|
|
3.77 |
% |
|
$ |
15,107 |
|
|
|
3.78 |
% |
|
|
15,107 |
|
2012 |
|
|
4.63 |
% |
|
|
30,143 |
|
|
|
3.50 |
% |
|
|
168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.34 |
% |
|
$ |
45,250 |
|
|
|
4.32 |
% |
|
$ |
47,775 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a member of the FHLB-NY, the Bank may have outstanding FHLB-NY borrowings in a combination
of term advances and overnight funds of up to 25% of its total assets, or approximately $199.0
million at March 31, 2008. Borrowings are secured by the Banks investment in FHLB-NY stock and by
a blanket security agreement. This agreement requires the Bank to maintain as collateral certain
qualifying assets (principally mortgage loans and securities) not otherwise pledged. At March 31,
2008, advances were secured by pledges of the Banks investment in the capital stock of the FHLB-NY
totaling $1.6 million and a blanket assignment of the Banks unpledged qualifying mortgage loans of
$187.9 million and mortgage-backed and investment securities of $9.7 million. The Bank has
sufficient collateral at the FHLB-NY to be able to borrow an additional $29.4 million from the
FHLB-NY at March 31, 2008.
Repurchase agreements. Repurchase agreements (REPO) are contracts for the sale of securities
owned or borrowed by the Bank with an agreement to repurchase those securities at an agreed-upon
price and date. The Banks repurchase agreements are primarily collateralized by $30.0 million
obligations and other mortgage-related securities, and are entered into with either the Federal
Home Loan Bank of New York (the FHLB-NY) or selected brokerage firms. Repurchase agreements
totaled $30.0 million at March 31, 2008. At March 31, 2008, the accrued interest on repurchase
agreements amounted to $0.2 million and the interest expense was $1.1 million for the year ended
March 31, 2008. The Bank had no repurchase agreements at March 31, 2007 and no related interest
expense for fiscal 2007.
Subordinated Debt Securities. On September 17, 2003, Carver Statutory Trust I, issued 13,000
shares, liquidation amount $1,000 per share, of floating rate capital securities. Gross proceeds
from the sale of these trust preferred debt securities of $13.0 million, and proceeds from the sale
of the trusts common securities of $0.4 million, were used to purchase approximately $13.4 million
aggregate principal amount of the Holding Companys floating rate junior subordinated debt
securities due 2033. The trust preferred debt securities are redeemable at par quarterly at the
option of the Company beginning on or after September 17, 2008 and have a mandatory redemption date
of September 17, 2033. Cash distributions on the trust preferred debt securities are cumulative and
payable at a floating rate per annum resetting quarterly with a margin of 3.05% over the
three-month LIBOR.
53
The following table sets forth certain information regarding Carver Federals borrowings as of
and for the years ended March 31 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
Amounts outstanding at the end of year: |
|
|
|
|
|
|
|
|
|
|
|
|
FHLB advances |
|
$ |
15,250 |
|
|
$ |
47,775 |
|
|
$ |
80,935 |
|
Guaranteed preferred beneficial interest in
junior subordinated debentures |
|
$ |
13,375 |
|
|
$ |
13,318 |
|
|
$ |
13,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rate paid at year end: |
|
|
|
|
|
|
|
|
|
|
|
|
FHLB advances |
|
|
3.77 |
% |
|
|
4.32 |
% |
|
|
4.13 |
% |
Guaranteed preferred beneficial interest in
junior subordinated debentures |
|
|
5.85 |
% |
|
|
8.40 |
% |
|
|
7.97 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum amount of borrowing outstanding at any
month end: |
|
|
|
|
|
|
|
|
|
|
|
|
FHLB advances |
|
$ |
60,874 |
|
|
$ |
93,975 |
|
|
$ |
112,488 |
|
Guaranteed preferred beneficial interest in
junior subordinated debentures |
|
$ |
13,375 |
|
|
$ |
13,318 |
|
|
$ |
13,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximate average amounts outstanding for year: |
|
|
|
|
|
|
|
|
|
|
|
|
FHLB advances |
|
$ |
36,724 |
|
|
$ |
65,567 |
|
|
$ |
94,798 |
|
Guaranteed preferred beneficial interest in
junior subordinated debentures |
|
$ |
13,344 |
|
|
$ |
13,286 |
|
|
$ |
13,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximate weighted average rate paid during year: |
|
|
|
|
|
|
|
|
|
|
|
|
FHLB advances |
|
|
5.18 |
% |
|
|
4.36 |
% |
|
|
3.81 |
% |
Guaranteed preferred beneficial interest in
junior subordinated debentures |
|
|
7.76 |
% |
|
|
8.33 |
% |
|
|
7.50 |
% |
NOTE 11. INCOME TAXES
The components of income tax (benefit) expense for the years ended March 31 are as follow (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
(Restated) |
|
Federal income tax expense (benefit): |
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
$ |
70 |
|
|
$ |
1,628 |
|
|
$ |
1,155 |
|
Deferred |
|
|
(1,107 |
) |
|
|
(3,018 |
) |
|
|
35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,037 |
) |
|
|
(1,390 |
) |
|
|
1,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and local income tax expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
169 |
|
|
|
296 |
|
|
|
196 |
|
Deferred |
|
|
(24 |
) |
|
|
(5 |
) |
|
|
(57 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
145 |
|
|
|
291 |
|
|
|
139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total provision for income tax (benefit) expense |
|
$ |
(892 |
) |
|
$ |
(1,099 |
) |
|
$ |
1,329 |
|
|
|
|
|
|
|
|
|
|
|
The following is a reconciliation of the expected Federal income tax rate to the consolidated
effective tax rate for the years ended March 31 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
|
|
(Restated) |
|
Statutory Federal income tax |
|
$ |
1,094 |
|
|
|
34.0 |
% |
|
$ |
339 |
|
|
|
34.0 |
% |
|
$ |
1,734 |
|
|
|
34.0 |
% |
State and local income taxes,
net of
Federal tax benefit |
|
|
86 |
|
|
|
2.7 |
% |
|
|
187 |
|
|
|
11.6 |
% |
|
|
92 |
|
|
|
1.8 |
% |
New markets tax credit |
|
|
(2,000 |
) |
|
|
-61.6 |
% |
|
|
(1,475 |
) |
|
|
-83.8 |
% |
|
|
|
|
|
|
|
|
General business credit |
|
|
(41 |
) |
|
|
-1.3 |
% |
|
|
(69 |
) |
|
|
-3.9 |
% |
|
|
(73 |
) |
|
|
-1.5 |
% |
Release of contingency reserve |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(500 |
) |
|
|
-9.8 |
% |
Other |
|
|
(31 |
) |
|
|
-1.0 |
% |
|
|
(81 |
) |
|
|
-4.6 |
% |
|
|
76 |
|
|
|
1.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax (benefit)
expense |
|
$ |
(892 |
) |
|
|
-27.2 |
% |
|
$ |
(1,099 |
) |
|
|
-46.7 |
% |
|
$ |
1,329 |
|
|
|
26.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54
Carver Federals stockholders equity includes approximately $2.8 million at the end of each
year ended March 31, 2008, 2007 and 2006, which has been segregated for federal income tax purposes
as a bad debt reserve. The use of this amount for purposes other than to absorb losses on loans
may result in taxable income for federal income taxes at the then current tax rate.
Tax effects of existing temporary differences that give rise to significant portions of
deferred tax assets and deferred tax liabilities are included in other assets at March 31 are as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
Deferred Tax Assets: |
|
|
|
|
|
|
|
|
Income from affiliate |
|
$ |
|
|
|
$ |
1,876 |
|
Allowance for loan losses |
|
|
1,427 |
|
|
|
1,839 |
|
Deferred loan fees |
|
|
461 |
|
|
|
371 |
|
Compensation and benefits |
|
|
102 |
|
|
|
109 |
|
Non-accrual loan interest |
|
|
579 |
|
|
|
587 |
|
Capital loss carryforward |
|
|
591 |
|
|
|
591 |
|
Deferred rent |
|
|
111 |
|
|
|
111 |
|
Purchase accounting adjustment |
|
|
159 |
|
|
|
702 |
|
Net operating loss carry forward |
|
|
2,072 |
|
|
|
|
|
New markets tax credit |
|
|
3,227 |
|
|
|
1,242 |
|
Depreciation |
|
|
330 |
|
|
|
|
|
Other |
|
|
28 |
|
|
|
2 |
|
|
|
|
|
|
|
|
Total Deferred Tax Assets |
|
|
9,087 |
|
|
|
7,430 |
|
|
|
|
|
|
|
|
|
Deferred Tax Liabilities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
128 |
|
Income from affiliate |
|
|
690 |
|
|
|
|
|
Minimum pension liability |
|
|
170 |
|
|
|
50 |
|
Unrealized gain on available-for-sale securities |
|
|
92 |
|
|
|
228 |
|
|
|
|
|
|
|
|
Total Deferred Tax Liabilities |
|
|
952 |
|
|
|
406 |
|
|
|
|
|
|
|
|
|
Net Deferred Tax Assets |
|
$ |
8,135 |
|
|
$ |
7,024 |
|
|
|
|
|
|
|
|
In June 2006, Carver Federal was selected by the U.S. Department of Treasury to receive an
award of $59 million in New Markets Tax Credits. The NMTC award is used to stimulate economic
development in low- to moderate-income communities. The NMTC award enables the Bank to invest with
community and development partners in economic development projects with attractive terms
including, in some cases, below market interest rates, which may have the effect of attracting
capital to underserved communities and facilitating the revitalization of the community, pursuant
to the goals of the NMTC program. The NMTC award provides a credit to Carver
Federal against Federal income taxes when the Bank makes qualified investments. The credits
are allocated over seven years from the time of the qualified investment. Recognition of the
Banks NMTC award began in December 2006 when the Bank invested $29.5 million, one-half of its $59
million award. In December 2007, the Bank invested an additional $10.5 million and transferred
rights to $19.0 million of its $59 million NMTC award to an investor pursuant to its investment in
a NMTC project. The Banks NMTC allocation has been fully invested as of December 31, 2007. During
the seven year period, assuming the Bank meets compliance requirements, the Bank will receive 39%
of the $40.0 million invested award amount (5% over each of the first three years, and 6% over each
of the next four years). The Company expects to receive additional NMTC tax benefits of
approximately $12.1 million from its $40.0 million investment over approximately six years.
A valuation allowance against the deferred tax asset at March 31, 2008 and 2007 was not
required since it is more likely than not that the results of future operations will generate
sufficient taxable income to realize the deferred tax asset.
The Company has no uncertain tax positions. The Company and its subsidiaries are subject to
U.S. federal, New York State and New York City income taxation. The Company is no longer subject
to examination by taxing authorities for years before March 31, 2005. CCB, a subsidiary of the
Holding Company, which was purchased in 2006, is currently subject to a New York State examination
by the taxing authorities for tax years 2003 and 2004.
55
The Company adopted FASB Interpretation 48, Accounting for Uncertainty in Income Taxes (FIN
48), as of April 1, 2007. A tax position is recognized as a benefit only if it is more likely
than not that the tax position would be sustained in a tax examination, with a tax examination
being presumed to occur. The amount recognized is the largest amount of tax benefit that is
greater than 50% likely of being realized on examination. For tax positions not meeting the more
likely than not test, no tax benefit is recorded. FIN 48 had no affect on the Companys financial
statements.
NOTE 12. EARNINGS PER COMMON SHARE
The following table reconciles the earnings available to common shareholders (numerator) and
the weighted average common stock outstanding (denominator) for both basic and diluted earnings per
share for years ended March 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
(Restated) |
|
Net income basic and diluted |
|
$ |
3,963 |
|
|
$ |
2,098 |
|
|
$ |
3,770 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding basic |
|
|
2,492 |
|
|
|
2,511 |
|
|
|
2,506 |
|
Effect of dilutive options |
|
|
50 |
|
|
|
57 |
|
|
|
59 |
|
Effect of dilutive MRP shares |
|
|
19 |
|
|
|
18 |
|
|
|
27 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding diluted |
|
|
2,561 |
|
|
|
2,586 |
|
|
|
2,592 |
|
|
|
|
|
|
|
|
|
|
|
NOTE 13. STOCKHOLDERS EQUITY
Conversion and Stock Offering. On October 24, 1994, the Bank issued in an initial public
offering 2,314,375 shares of common stock, par value $0.01 (the Common Stock), at a price of $10
per share resulting in net proceeds of $21.5 million. As part of the initial public offering, the
Bank established a liquidation account at the time of conversion, in an amount equal to the surplus
and reserves of the Bank at September 30, 1994. In the unlikely event of a complete liquidation of
the Bank (and only in such event), eligible depositors who continue to maintain accounts shall be
entitled to receive a distribution from the liquidation account. The total amount of the
liquidation account may be decreased if the balances of eligible deposits decreased as measured on
the annual determination dates. The Bank is not permitted to pay dividends to the Holding Company
on its capital stock if the effect thereof would cause its net worth to be reduced below either:
(i) the amount required for the liquidation account, or (ii) the amount required for the Bank to
comply with applicable minimum regulatory capital requirements.
Regulatory Capital. The operations and profitability of the Bank are significantly affected
by legislation and the policies of the various regulatory agencies. The OTS has promulgated
capital requirements for financial institutions consisting of minimum tangible and core capital
ratios of 1.5% and 3.0%, respectively, of the institutions adjusted total assets and a minimum
risk-based capital ratio of 8.0% of the institutions risk weighted assets. Although the minimum
core capital ratio is 3.0%, the Federal Deposit Insurance Corporation Improvement Act (FDICIA),
as amended, stipulates that an institution with less than 4.0% core capital is deemed
undercapitalized. At March 31, 2008 and 2007, the Bank exceeded all of its regulatory capital
requirements.
56
The following is a summary of the Banks actual capital amounts as of March 31, 2008 compared
to the OTS requirements for minimum capital adequacy and for classification as a well-capitalized
institution (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP |
|
|
Tangible |
|
|
Leverage |
|
|
Risk-Based |
|
|
|
Capital |
|
|
Equity |
|
|
Capital |
|
|
Capital |
|
Stockholders
Equity at March 31, 2008
(1)
(As restated) |
|
$ |
68,184 |
|
|
$ |
68,184 |
|
|
$ |
68,184 |
|
|
$ |
68,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General valuation allowances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,878 |
|
Deduct: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on securities available-for-sale,
net |
|
|
|
|
|
|
(151 |
) |
|
|
(151 |
) |
|
|
(151 |
) |
Goodwill and qualifying intangible assets, net |
|
|
|
|
|
|
(7,587 |
) |
|
|
(7,587 |
) |
|
|
(7,587 |
) |
Other |
|
|
|
|
|
|
(33 |
) |
|
|
(33 |
) |
|
|
(33 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulatory Capital |
|
|
|
|
|
|
60,413 |
|
|
|
60,413 |
|
|
|
65,291 |
|
Minimum Capital requirement |
|
|
|
|
|
|
11,852 |
|
|
|
23,709 |
|
|
|
51,673 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulatory Capital Excess |
|
|
|
|
|
$ |
48,561 |
|
|
$ |
36,704 |
|
|
$ |
13,618 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income. Comprehensive income represents net income and certain amounts reported
directly in stockholders equity, such as the net unrealized gain or loss on securities available
for sale and loss on pension liability. The Holding Company has reported its comprehensive income
for fiscal 2008, 2007 and 2006 in the Consolidated Statements of Changes in Stockholders Equity
and Comprehensive Income. Carver Federals accumulated other comprehensive income or loss included
net unrealized losses on securities at March 31, 2008 and 2007 was $0.2 million and $0.4 million,
respectively. Included in the amounts at March 31, 2006 were unrealized gains of $0.2 million
relating to available-for-sale securities that were transferred during fiscal 2003 to
held-to-maturity. This unrealized gain is an unrealized gain reported as a separate component of
stockholders equity and is amortized over the remaining lives of the securities as an adjustment
to yield. Also included in accumulated other comprehensive income at March 31, 2008 and 2007 was
gains on the Banks pension plan liabilities of $0.3 million and $0.1 million, net of taxes,
respectively. At March 31, 2006, there was a loss on the Banks employee pension plan liability of
$0.3 million, net of taxes, included in accumulated other comprehensive loss.
NOTE 14. EMPLOYEE BENEFIT AND STOCK COMPENSATION PLANS
Pension Plan. Carver Federal has a non-contributory defined benefit pension plan covering all
who were participants prior to curtailment of the plan. The benefits are based on each employees
term of service through the date of curtailment. Carver Federals policy was to fund the plan with
contributions which equal the maximum amount deductible for federal income tax purposes. The plan
was curtailed during the fiscal year ended March 31, 2001.
57
The following table sets forth the plans changes in benefit obligation, changes in plan
assets and funded status and amounts recognized in Carver Federals consolidated financial
statements at March 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
Change in
projected benefit obligation during the year:
|
|
|
|
|
|
|
|
|
Projected benefit obligation at the beginning of year |
|
$ |
2,887 |
|
|
$ |
2,892 |
|
Interest cost |
|
|
163 |
|
|
|
159 |
|
Actuarial (gain) loss |
|
|
(308 |
) |
|
|
55 |
|
Benefits paid |
|
|
(170 |
) |
|
|
(219 |
) |
Settlements |
|
|
(173 |
) |
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation at end of year |
|
$ |
2,399 |
|
|
$ |
2,887 |
|
|
|
|
|
|
|
|
|
Change in
fair value of plan assets during the year: |
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year |
|
$ |
2,877 |
|
|
$ |
2,870 |
|
Actual return on plan assets |
|
|
232 |
|
|
|
226 |
|
Benefits paid |
|
|
(170 |
) |
|
|
(219 |
) |
Settlements |
|
|
(173 |
) |
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of year |
|
$ |
2,766 |
|
|
$ |
2,877 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status |
|
$ |
367 |
|
|
$ |
(10 |
) |
Unrecognized loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued pension cost |
|
$ |
367 |
|
|
$ |
(10 |
) |
|
|
|
|
|
|
|
Net periodic pension benefit includes the following components for the years ended March 31
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest cost |
|
$ |
163 |
|
|
$ |
159 |
|
|
$ |
163 |
|
Expected return on plan assets |
|
|
(221 |
) |
|
|
(220 |
) |
|
|
(227 |
) |
|
|
|
|
|
|
|
|
|
|
Net periodic pension (benefit) |
|
$ |
(58 |
) |
|
$ |
(61 |
) |
|
$ |
(64 |
) |
|
|
|
|
|
|
|
|
|
|
Significant actuarial assumptions used in determining plan benefits for the years ended March
31 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR ENDED MARCH 31, |
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
Annual salary increase (1) |
|
|
|
|
|
|
|
|
|
|
|
|
Expected long-term return on assets |
|
|
8.00 |
% |
|
|
8.00 |
% |
|
|
8.00 |
% |
Discount rate used in measurement of
benefit obligations |
|
|
6.50 |
% |
|
|
5.88 |
% |
|
|
5.75 |
% |
|
|
|
(1) |
|
The annual salary increase rate is not applicable as the plan is frozen and no new
benefits accrue. |
58
Directors Retirement Plan. Concurrent with the conversion to the stock form of ownership,
Carver Federal adopted a retirement plan for non-employee directors. The plan was curtailed during
the fiscal year ended March 31, 2001. The benefits are payable based on the term of service as a
director through the date of curtailment. The following table sets forth the plans changes in
benefit obligation, changes in plan assets and funded status and amounts recognized in Carver
Federals consolidated financial statements at March 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
Change in projected benefit obligation during the year: |
|
|
|
|
|
|
|
|
Projected benefit obligation at beginning of year |
|
$ |
36 |
|
|
$ |
102 |
|
Interest cost |
|
|
2 |
|
|
|
5 |
|
Actuarial gain |
|
|
|
|
|
|
(50 |
) |
Benefits paid |
|
|
(13 |
) |
|
|
(21 |
) |
|
|
|
|
|
|
|
Projected benefit obligation at end of year |
|
$ |
25 |
|
|
$ |
36 |
|
|
|
|
|
|
|
|
|
Change in
fair value of plan assets during the year: |
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year |
|
$ |
|
|
|
$ |
|
|
Employer contributions |
|
|
13 |
|
|
|
21 |
|
Benefits paid |
|
|
(13 |
) |
|
|
(21 |
) |
|
|
|
|
|
|
|
Fair value of plan assets at end of year |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status |
|
$ |
(25 |
) |
|
$ |
(36 |
) |
Unrecognized (gain) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued pension cost |
|
$ |
(25 |
) |
|
$ |
(36 |
) |
|
|
|
|
|
|
|
Savings Incentive Plan. Carver has a savings incentive plan, pursuant to Section 401(k) of the
Code, for all eligible employees of the Bank. The Bank matches contributions to the 401(k) Plan
equal to 100% of pre-tax contributions made by each employee up to a maximum of 4% of their pay,
subject to IRS limitations. All such matching contributions are fully vested and non-forfeitable at
all times regardless of the years of service with the Bank. Under the profit-sharing feature, if
the Bank achieves a minimum of 70% of its net income goal as mentioned previously, the Compensation
Committee may authorize an annual non-elective contribution to the 401(k) Plan on behalf of each
eligible employee up to 2% of the employees annual pay, subject to IRS limitations. This
non-elective contribution may be made regardless of whether the employee makes a contribution to
the 401(k) Plan. Non-elective Bank contributions, if awarded, vest 20% each year for the first five
years of employment and are fully vested thereafter. To be eligible for the matching contribution,
the employee must be 21 years of age and have completed at least one year of service. To be
eligible for the non-elective Carver contribution, the employee must also be employed as of the
last day of the plan year. Total savings incentive plan expenses for the years ended March 31,
2008, 2007 and 2006 were $0.1 million, $0.2 million and $0.2 million, respectively.
BOLI. The Bank owns one BOLI plan which was formed to offset future employee benefit costs
and provide additional benefits due to its tax exempt nature. Only officer level employees are
covered under this program.
An initial investment of $8.0 million was made to the BOLI program on September 21, 2004. At
March 31, 2008 the Consolidated Statement of Conditions reflects a net cash surrender value of $9.1
million. The related income is reflected in the Consolidated Statement of Operations as a
component of other non-interest income.
Management Recognition Plan (MRP). The MRP provided for grants of restricted stock to
certain employees at September 12, 1995 adoption of the MRP. On March 28, 2005 the plan was
amended for all future awards. The MRP provides for additional discretionary grants of restricted
stock to those employees selected by the committee established to administer the MRP. Awards
granted prior to March 28, 2005, generally vest in three to five equal annual installments
commencing on the first anniversary date of the award, provided the recipient is still an employee
of the Holding Company or the Bank on such date. Under the amended plan awards granted after March
28, 2005 vest based on a five-year performance-accelerated vesting schedule. Ten percent of the
awarded shares vest in each of the first four years and the remainder in the fifth year but the
Compensation Committee may accelerate vesting at any time. Awards will become 100% vested upon
termination of service due to death or
disability. When shares become vested and are distributed, the recipients will receive an
amount equal to any accrued dividends with respect thereto. There are no shares available to grant
under the MRP. Pursuant to the MRP, the Bank recognized $155,000, $118,000 and $134,000 as expense
for the years ended March 31, 2008, 2007and 2006, respectively.
59
Employee Stock Ownership Plan. Effective upon conversion, an ESOP was established for all
eligible employees. The ESOP used $1,821,000 in proceeds from a term loan obtained from a
third-party institution to purchase 182,132 shares of Bank common stock in the initial public
offering. Each year until the loan paid off in June of 2004, the Bank made discretionary
contributions to the ESOP, which was equal to principal and interest payments required on the term
loan less any dividends received by the ESOP on unallocated shares.
Shares purchased with the loan proceeds were initially pledged as collateral for the term
loan. Currently, shares are purchased in the open market in accordance with Carvers common stock
repurchase program and are held in a suspense account for future allocation among the participants
on the basis of compensation, as described by the Plan, in the year of allocation. In May 2006,
Carver amended the ESOP so that no new participants are eligible to enter after December 31, 2006
and the Compensation Committee voted to cease discretionary contributions after the 2006
allocation. ESOP compensation expense was $0.1 million, $0.1 million and $0.2 million for the years
ended March 31, 2008, 2007 and 2006, respectively.
The ESOP shares at March 31 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
Allocated shares |
|
|
69 |
|
|
|
73 |
|
Unallocated shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total ESOP shares |
|
|
69 |
|
|
|
73 |
|
|
|
|
|
|
|
|
Fair value of unallocated shares |
|
$ |
3 |
|
|
$ |
10 |
|
|
|
|
|
|
|
|
Stock Option Plans. During 1995, the Holding Company adopted the 1995 Stock Option Plan (the
Plan) to advance the interests of the Bank through providing stock options to select key
employees and directors of the Bank and its affiliates. The number of shares reserved for issuance
under the plan was 338,862. The 1995 plan expired by its term and no new options may be granted
under it, however, stock options granted under the 1995 Plan continue in accordance with their
terms. At March 31, 2008, there were 237,182 options outstanding and 198,088 were
exercisable. Options are granted at the fair market value of Carver Federal common stock at the
time of the grant for a period not to exceed ten years. Under the 1995 Plan option grants
generally vest on an annual basis ratably over either three or five years, commencing after one
year of service and, in some instances, portions of option grants vest at the time of the
grant. On March 28, 2005, the plan was amended and vesting of future awards is based on a
five-year performance-accelerated vesting schedule. Ten percent of the awarded options vest in
each of the first four years and the remainder in the fifth year, but the Committee may accelerate
vesting at any time. All options are exercisable immediately upon a participants disability, death
or a change in control, as defined in the Plan.
In September 2006, Carver stockholders approved the 2006 Stock Incentive Plan which provides
for the grant of stock options, stock appreciation rights and restricted stock to employees and
directors who are selected to receive awards by the Committee. The 2006 Incentive Plan authorizes
Carver to grant awards with respect to 300,000 shares, but no more than 150,000 shares of
restricted stock may be granted. Options are granted at a price not less than fair market value of
Carver Federal common stock at the time of the grant for a period not to exceed 10 years. Shares
generally vest in 20% increments over 5 years, however, the Committee may specify a different
vesting schedule. At March 31, 2008, there were 32,447 options outstanding under the 2006
Incentive Plan and none were exercisable. All options are exercisable immediately upon a
participants disability, death or a change in control, as defined in the Plan, if the person is
employed on that date.
60
Information regarding stock options as of and for the years ended March 31 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
Exercise |
|
|
|
|
|
|
Exercise |
|
|
|
|
|
|
Exercise |
|
|
|
Options |
|
|
Price |
|
|
Options |
|
|
Price |
|
|
Options |
|
|
Price |
|
Outstanding, beginning
of year |
|
|
240,087 |
|
|
$ |
13.24 |
|
|
|
238,061 |
|
|
$ |
12.90 |
|
|
|
225,292 |
|
|
$ |
12.37 |
|
Granted |
|
|
15,978 |
|
|
|
16.93 |
|
|
|
21,019 |
|
|
|
16.50 |
|
|
|
35,277 |
|
|
|
16.98 |
|
Exercised |
|
|
(3,475 |
) |
|
|
11.58 |
|
|
|
(11,776 |
) |
|
|
9.57 |
|
|
|
(9,903 |
) |
|
|
9.57 |
|
Forfeited |
|
|
(15,408 |
) |
|
|
17.72 |
|
|
|
(7,217 |
) |
|
|
17.44 |
|
|
|
(12,605 |
) |
|
|
17.44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, end of year |
|
|
237,182 |
|
|
$ |
13.22 |
|
|
|
240,087 |
|
|
$ |
13.24 |
|
|
|
238,061 |
|
|
$ |
12.90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, at year end |
|
|
198,088 |
|
|
|
|
|
|
|
192,110 |
|
|
|
|
|
|
|
144,836 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Information regarding stock options as of and for the year ended March 31, 2008 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding |
|
|
Options Exercisable |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Average |
|
|
|
|
|
|
Average |
|
Range of |
|
|
|
|
|
|
Remaining |
|
|
Exercise |
|
|
|
|
|
|
Exercise |
|
Exercise Prices |
|
|
Shares |
|
|
Life |
|
|
Price |
|
|
Shares |
|
|
Price |
|
$ |
8.00 |
|
|
$ |
8.99 |
|
|
|
60,000 |
|
|
2 years |
|
$ |
8.17 |
|
|
|
60,000 |
|
|
$ |
8.17 |
|
|
9.00 |
|
|
|
9.99 |
|
|
|
32,000 |
|
|
3 years |
|
|
9.93 |
|
|
|
32,000 |
|
|
|
9.93 |
|
|
10.00 |
|
|
|
10.99 |
|
|
|
2,000 |
|
|
2 years |
|
|
10.38 |
|
|
|
2,000 |
|
|
|
10.38 |
|
|
12.00 |
|
|
|
12.99 |
|
|
|
37,400 |
|
|
4 years |
|
|
12.10 |
|
|
|
37,400 |
|
|
|
12.10 |
|
|
16.00 |
|
|
|
16.99 |
|
|
|
54,721 |
|
|
7 years |
|
|
16.59 |
|
|
|
38,252 |
|
|
|
16.59 |
|
|
17.00 |
|
|
|
17.99 |
|
|
|
29,033 |
|
|
6 years |
|
|
17.18 |
|
|
|
6,408 |
|
|
|
17.18 |
|
|
19.00 |
|
|
|
19.99 |
|
|
|
20,918 |
|
|
6 years |
|
|
19.66 |
|
|
|
20,918 |
|
|
|
19.66 |
|
|
20.00 |
|
|
|
20.99 |
|
|
|
729 |
|
|
7 years |
|
|
20.00 |
|
|
|
729 |
|
|
|
20.00 |
|
|
21.00 |
|
|
|
21.99 |
|
|
|
381 |
|
|
6 years |
|
|
21.76 |
|
|
|
381 |
|
|
|
21.76 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
237,182 |
|
|
|
|
|
|
|
|
|
|
|
198,088 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value of the option grants was estimated on the date of the grant using the
Black-Scholes option pricing model applying the following weighted average assumptions for the
years ended March 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
Risk-free interest rate |
|
|
4.3 |
% |
|
|
4.5 |
% |
|
|
3.5 |
% |
Volatility |
|
|
31.2 |
% |
|
|
19.0 |
% |
|
|
35.0 |
% |
Annual dividends |
|
$ |
0.29 |
|
|
$ |
0.32 |
|
|
$ |
0.28 |
|
Expected life of option grants |
|
7 yrs |
|
|
7 yrs |
|
|
7 yrs |
|
Under the provisions of SFAS No. 123R, the Company recorded compensation expense of $0.3
million during the year ended March 31, 2008. As of March 31, 2008, the total remaining
unrecognized compensation cost related to stock options granted under the Companys plan was $0.1
million, which is expected to be recognized over a weighted-average vesting period of 1.3 years.
61
Performance Compensation Plan. In 2006, Carver adopted the Performance Compensation Plan of
Carver Bancorp, Inc. This plan provides for cash payments to officers or employees designated by
the Compensation Committee, which also determines the amount awarded to such participants. Vesting
is generally 20% a year over 5 years and awards are fully vested on a change in control (as
defined), or termination of employment by death or disability, but the Committee may accelerate
vesting at any time. Payments are made as soon as practicable after the end of the fiscal year in
which amounts vest. In fiscal year 2007, the Company granted its first awards under the new
Plan. The total fair value of options granted was $0.4 million. The amount of compensation expense
recognized in fiscal year 2008 was $0.1 million.
NOTE 14. COMMITMENTS AND CONTINGENCIES
Credit Related Commitments. The Bank is a party to financial instruments with off-balance
sheet risk in the normal course of business to meet the financing needs of its customers.
These financial instruments primarily include commitments to extend credit and to sell loans.
Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess
of the amount recognized in the statements of financial condition. The contract amounts of those
instruments reflect the extent of involvement the Bank has in particular classes of financial
instruments.
The Banks exposure to credit loss in the event of nonperformance by the other party to the
financial instrument for commitments to extend credit is represented by the contractual notional
amount of those instruments. The Bank uses the same credit policies making commitments as it does
for on-balance-sheet instruments.
The Bank had outstanding commitments at March 31 as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Commitments to originate mortgage loans |
|
$ |
81,754 |
|
|
$ |
107,115 |
|
Commitments to originate commercial
and consumer loans |
|
|
4,236 |
|
|
|
214 |
|
Lines of credit |
|
|
24,518 |
|
|
|
300 |
|
Letters of credit |
|
|
4,518 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
115,026 |
|
|
$ |
107,629 |
|
|
|
|
|
|
|
|
At March 31, 2008, of the $115.0 million in outstanding commitments to originate loans, $74.9
million represented construction loans at a weighted average rate of 6.44%, $37.3 million
represented commitments to originate non-residential mortgage loans at a weighted average rate of
6.03% and $2.8 million represented one- to four-family residential loans at a weighted average rate
of 6.24%.
The balance of commitments on commercial and consumer loans at March 31, 2008 is primarily
undisbursed funds from approved unsecured commercial lines of credit. All such lines carry
adjustable rates mainly tied to prime.
Commitments to extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments generally have fixed expiration
dates or other termination clauses and may require payment of a fee. Since some of the commitments
are expected to expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customers creditworthiness on a
case-by-case basis. The amount of collateral obtained if deemed necessary by the Bank upon
extension of credit is based on managements credit evaluation of the counter-party.
62
Lease Commitments. Rentals under long term operating leases for certain branches aggregated
approximately $1.4 million, $0.9 million and $0.7 million for the years ended March 31, 2008, 2007
and 2006, respectively. As of March 31, 2008, minimum rental commitments under all noncancellable
leases with initial or
remaining terms of more than one year and expiring through 2018 follow (in thousands):
|
|
|
|
|
Year Ending |
|
Minimum |
|
March 31, |
|
Rental |
|
2009 |
|
$ |
1,517 |
|
2010 |
|
|
1,556 |
|
2011 |
|
|
1,458 |
|
2012 |
|
|
1,137 |
|
2013 |
|
|
1,125 |
|
Thereafter |
|
|
4,663 |
|
|
|
|
|
|
|
$ |
11,456 |
|
|
|
|
|
The Bank also has, in the normal course of business, commitments for services and supplies.
Legal Proceedings. From time to time, Carver Federal is a party to various legal proceedings
incidental to its business. Certain claims, suits, complaints and investigations involving Carver
Federal, arising in the ordinary course of business, have been filed or are pending. The Company
is of the opinion, after discussion with legal counsel representing Carver Federal in these
proceedings, that the aggregate liability or loss, if any, arising from the ultimate disposition of
these matters would not have a material adverse effect on the Companys consolidated financial
position or results of operations. At March 31, 2008, there were no material legal proceedings to
which the Company or its subsidiaries was a party or to which any of their property was subject.
NOTE 16. FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS 107 Disclosures about Fair Value of Financial Instruments requires the Bank to
disclose, in addition to the carrying value, the fair value of certain financial instruments, both
assets and liabilities recorded on and off balance sheet, for which it is practicable to estimate
fair value. SFAS 107 defines financial instruments as cash, evidence of ownership of an entity, or
a contract that conveys or imposes on an entity the contractual right or obligation to either
receive or deliver cash or another financial instrument. The fair value of a financial instrument
is defined as the amount at which the instrument could be exchanged in a current transaction
between willing parties, other than a forced or liquidation sale and is best evidenced by a quoted
market price if one exists. In cases where quoted market prices are not available, estimated fair
values have been determined by the Bank using the best available data and estimation methodology
suitable for each such category of financial instruments. For those loans and deposits with
floating interest rates, it is presumed that estimated fair values generally approximate their
recorded carrying value. The estimation methodologies used and the estimated fair values and
carrying values of the Banks financial instruments are set forth below:
Cash and cash equivalents and accrued interest receivable
The carrying amounts for cash and cash equivalents and accrued interest receivable approximate
fair value because they mature in three months or less.
Securities
The fair values for securities available-for-sale, mortgage-backed securities held-to-maturity
and investment securities held-to-maturity are based on quoted market or dealer prices, if
available. If quoted market or dealer prices are not available, fair value is estimated using
quoted market or dealer prices for similar securities.
Loans receivable and loan held-for-sale
The fair value of loans receivable and held-for-sale is estimated by discounting future cash
flows, using current rates at which similar loans would be made to borrowers with similar credit
ratings and for the same remaining maturities of such loans.
63
Mortgage servicing rights
The fair value of mortgage servicing rights is determined by discounting the present value of
estimated future servicing cash flows using current market assumptions for prepayments, servicing
costs and other factors.
Deposits
The fair value of demand, savings and club accounts is equal to the amount payable on demand
at the reporting date. The fair value of certificates of deposit is estimated using rates currently
offered for deposits of similar remaining maturities. The fair value estimates do not include the
benefit that results from the low-cost funding provided by deposit liabilities compared to the cost
of borrowing funds in the market.
Borrowings
The fair values of advances from the Federal Home Loan Bank of New York and other borrowed
money are estimated using the rates currently available to the Bank for debt with similar terms and
remaining maturities.
Commitments
The fair market value of unearned fees associated with financial instruments with off-balance
sheet risk at March 31, 2008 approximates the fees received. The fair value is not considered
material.
The carrying amounts and estimated fair values of the Banks financial instruments at March 31
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
Carrying |
|
|
Estimated |
|
|
Carrying |
|
|
Estimated |
|
|
|
Amount |
|
|
Fair Value |
|
|
Amount |
|
|
Fair Value |
|
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
27,368 |
|
|
$ |
27,368 |
|
|
$ |
17,350 |
|
|
$ |
17,350 |
|
Investment securities available-for-sale |
|
|
1,735 |
|
|
|
1,525 |
|
|
|
26,804 |
|
|
|
26,804 |
|
Mortgage backed securities available-for-sale |
|
|
19,130 |
|
|
|
19,340 |
|
|
|
21,176 |
|
|
|
21,176 |
|
Mortgage backed securities held-to-maturity |
|
|
17,307 |
|
|
|
17,167 |
|
|
|
19,137 |
|
|
|
19,005 |
|
Loans receivable |
|
|
627,231 |
|
|
|
644,702 |
|
|
|
580,551 |
|
|
|
580,854 |
|
Loans held-for-sale |
|
|
23,767 |
|
|
|
24,084 |
|
|
|
23,226 |
|
|
|
23,226 |
|
Accrued interest receivable |
|
|
4,063 |
|
|
|
4,063 |
|
|
|
4,335 |
|
|
|
4,335 |
|
Mortgage servicing rights |
|
|
605 |
|
|
|
605 |
|
|
|
388 |
|
|
|
467 |
|
Financial Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
$ |
654,663 |
|
|
$ |
660,813 |
|
|
$ |
615,122 |
|
|
$ |
614,199 |
|
Advances from FHLB of New York |
|
|
15,249 |
|
|
|
15,191 |
|
|
|
47,775 |
|
|
|
47,307 |
|
Other borrowed money |
|
|
43,375 |
|
|
|
44,984 |
|
|
|
13,318 |
|
|
|
13,318 |
|
Limitations
The fair value estimates are made at a discrete point in time based on relevant market
information about the financial instruments. These estimates do not reflect any premium or discount
that could result from offering for sale at one time the entire holdings of a particular financial
instrument. Because no quoted market value exists for a significant portion of the Banks financial
instruments, fair value estimates are based on judgments regarding future expected loss experience,
current economic conditions, risk characteristics of various financial instruments, and other
factors. These estimates are subjective in nature and involve uncertainties and matters of
significant judgment and, therefore, cannot be determined with precision. Changes in assumptions
could significantly affect the estimates.
In addition, the fair value estimates are based on existing off balance sheet financial
instruments without attempting to value anticipated future business and the value of assets and
liabilities that are not considered financial
instruments. Other significant assets and liabilities that are not considered financial assets
and liabilities include premises and equipment. In addition, the tax ramifications related to the
realization of unrealized gains and losses can have a significant effect on fair value estimates
and have not been considered in any of the estimates.
Finally, reasonable comparability between financial institutions may not be likely due to the
wide range of permitted valuation techniques and numerous estimates which must be made given the
absence of active secondary markets for many of the financial instruments. This lack of uniform
valuation methodologies introduces a greater degree of subjectivity to these estimated fair values.
64
NOTE 17. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of unaudited quarterly financial data for fiscal years ended March
31, 2008 and 2007 (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30 |
|
|
September 30 |
|
|
December 30 |
|
|
March 31 |
|
Fiscal 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
$ |
11,968 |
|
|
$ |
12,088 |
|
|
$ |
12,309 |
|
|
$ |
11,767 |
|
Interest expense |
|
|
(5,315 |
) |
|
|
(5,625 |
) |
|
|
(5,992 |
) |
|
|
(5,724 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
6,653 |
|
|
|
6,463 |
|
|
|
6,317 |
|
|
|
6,043 |
|
Provision for loan losses |
|
|
|
|
|
|
|
|
|
|
(222 |
) |
|
|
|
|
Non-interest income |
|
|
1,137 |
|
|
|
1,453 |
|
|
|
3,178 |
|
|
|
2,093 |
|
Non-interest expense |
|
|
(6,504 |
) |
|
|
(7,196 |
) |
|
|
(7,963 |
) |
|
|
(8,235 |
) |
Income tax benefit (expense) |
|
|
(143 |
) |
|
|
44 |
|
|
|
268 |
|
|
|
723 |
|
Minority interest, net of taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(146 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,143 |
|
|
$ |
764 |
|
|
$ |
1,578 |
|
|
$ |
478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
. |
|
Basic |
|
$ |
0.46 |
|
|
$ |
0.31 |
|
|
$ |
0.63 |
|
|
$ |
0.19 |
|
Diluted |
|
$ |
0.44 |
|
|
$ |
0.30 |
|
|
$ |
0.62 |
|
|
$ |
0.19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2007 (As Previously Reported) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
$ |
9,120 |
|
|
$ |
9,380 |
|
|
$ |
11,770 |
|
|
$ |
11,470 |
|
Interest expense |
|
|
(4,085 |
) |
|
|
(4,169 |
) |
|
|
(5,643 |
) |
|
|
(5,337 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
5,035 |
|
|
|
5,211 |
|
|
|
6,127 |
|
|
|
6,133 |
|
Provision for loan losses |
|
|
|
|
|
|
|
|
|
|
(120 |
) |
|
|
(156 |
) |
Non-interest income |
|
|
945 |
|
|
|
(337 |
) |
|
|
966 |
|
|
|
1,295 |
|
Non-interest expense |
|
|
(4,733 |
) |
|
|
(6,242 |
) |
|
|
(5,884 |
) |
|
|
(6,479 |
) |
Income tax benefit (expense) |
|
|
(445 |
) |
|
|
464 |
|
|
|
311 |
|
|
|
493 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
802 |
|
|
$ |
(904 |
) |
|
$ |
1,400 |
|
|
$ |
1,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.32 |
|
|
$ |
(0.36 |
) |
|
$ |
0.56 |
|
|
$ |
0.51 |
|
Diluted |
|
$ |
0.31 |
|
|
$ |
(0.36 |
) |
|
$ |
0.54 |
|
|
$ |
0.50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2007 (Restated) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
$ |
9,120 |
|
|
$ |
9,380 |
|
|
$ |
11,770 |
|
|
$ |
11,470 |
|
Interest expense |
|
|
(4,085 |
) |
|
|
(4,169 |
) |
|
|
(5,643 |
) |
|
|
(5,337 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
5,035 |
|
|
|
5,211 |
|
|
|
6,127 |
|
|
|
6,133 |
|
Provision for loan losses |
|
|
|
|
|
|
|
|
|
|
(120 |
) |
|
|
(156 |
) |
Non-interest income |
|
|
945 |
|
|
|
(337 |
) |
|
|
966 |
|
|
|
1,295 |
|
Non-interest expense |
|
|
(4,861 |
) |
|
|
(6,305 |
) |
|
|
(6,001 |
) |
|
|
(6,933 |
) |
Income tax benefit (expense) |
|
|
(399 |
) |
|
|
487 |
|
|
|
354 |
|
|
|
657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
720 |
|
|
$ |
(944 |
) |
|
$ |
1,326 |
|
|
$ |
996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.29 |
|
|
$ |
(0.38 |
) |
|
$ |
0.53 |
|
|
$ |
0.40 |
|
Diluted |
|
$ |
0.28 |
|
|
$ |
(0.38 |
) |
|
$ |
0.52 |
|
|
$ |
0.39 |
|
65
NOTE 18. CARVER BANCORP, INC. PARENT COMPANY ONLY
CONDENSED STATEMENTS OF FINANCIAL CONDITION (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, |
|
|
|
2008 |
|
|
2008 |
|
|
2007 |
|
|
2007 |
|
|
|
(As Previously |
|
|
| | |
|
(As Previously |
|
| | |
|
|
|
Reported) |
|
|
(Restated) |
|
|
Reported) |
|
|
(Restated) |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash on deposit with subsidiaries |
|
$ |
384 |
|
|
$ |
384 |
|
|
$ |
399 |
|
|
$ |
399 |
|
Investment in subsidiaries |
|
|
69,401 |
|
|
|
68,916 |
|
|
|
64,996 |
|
|
|
64,511 |
|
Other assets |
|
|
32 |
|
|
|
32 |
|
|
|
16 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
69,817 |
|
|
$ |
69,332 |
|
|
$ |
65,411 |
|
|
$ |
64,926 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings |
|
$ |
13,376 |
|
|
$ |
13,376 |
|
|
$ |
13,318 |
|
|
$ |
13,318 |
|
Accounts payable to subsidiaries |
|
|
1,945 |
|
|
|
1,945 |
|
|
|
291 |
|
|
|
291 |
|
Other liabilities |
|
|
113 |
|
|
|
113 |
|
|
|
175 |
|
|
|
175 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
15,434 |
|
|
$ |
15,434 |
|
|
$ |
13,784 |
|
|
$ |
13,784 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity |
|
|
54,383 |
|
|
|
53,898 |
|
|
|
51,627 |
|
|
|
51,142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders
Equity |
|
$ |
69,817 |
|
|
$ |
69,332 |
|
|
$ |
65,411 |
|
|
$ |
64,926 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED STATEMENTS OF INCOME (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended March 31, |
|
|
|
2008 |
|
|
2007 |
|
|
2007 |
|
|
2006 |
|
|
|
|
|
|
|
(As Previously |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Reported) |
|
|
(Restated) |
|
|
|
|
|
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in net income from subsidiaries |
|
$ |
5,089 |
|
|
$ |
3,551 |
|
|
$ |
2,790 |
|
|
$ |
6,758 |
|
Interest income from deposit with
subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 |
|
Other income |
|
|
34 |
|
|
|
34 |
|
|
|
34 |
|
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income |
|
|
5,123 |
|
|
|
3,585 |
|
|
|
2,824 |
|
|
|
6,785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense on Borrowings |
|
|
1,185 |
|
|
|
1,196 |
|
|
|
1,196 |
|
|
|
985 |
|
Salaries and employee benefits |
|
|
157 |
|
|
|
180 |
|
|
|
180 |
|
|
|
287 |
|
Shareholder expense |
|
|
664 |
|
|
|
439 |
|
|
|
439 |
|
|
|
407 |
|
Other |
|
|
46 |
|
|
|
10 |
|
|
|
10 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expense |
|
|
2,052 |
|
|
|
1,825 |
|
|
|
1,825 |
|
|
|
1,686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
3,071 |
|
|
|
1,760 |
|
|
|
999 |
|
|
|
5,099 |
|
Income tax (benefit) expense |
|
|
(892 |
) |
|
|
(823 |
) |
|
|
(1,099 |
) |
|
|
1,329 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
3,963 |
|
|
$ |
2,583 |
|
|
$ |
2,098 |
|
|
$ |
3,770 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66
CONDENSED STATEMENTS OF CASH FLOWS (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended March 31, |
|
|
|
2008 |
|
|
2007 |
|
|
2007 |
|
|
2006 |
|
|
|
|
|
|
|
(As Previously |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Reported) |
|
|
(Restated) |
|
|
|
|
|
Cash Flows From Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
3,963 |
|
|
$ |
2,583 |
|
|
$ |
2,098 |
|
|
$ |
3,770 |
|
Adjustments to reconcile net income to net cash
from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in net income of Subsidiaries |
|
|
(5,224 |
) |
|
|
(3,551 |
) |
|
|
(2,790 |
) |
|
|
(6,758 |
) |
Income taxes from the Bank |
|
|
(881 |
) |
|
|
(823 |
) |
|
|
(1,099 |
) |
|
|
1,329 |
|
Increase in other assets |
|
|
(27 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in accounts payable to subsidiaries |
|
|
1,654 |
|
|
|
225 |
|
|
|
225 |
|
|
|
(443 |
) |
(Decrease) increase in other liabilities |
|
|
(34 |
) |
|
|
(83 |
) |
|
|
(83 |
) |
|
|
40 |
|
Other, net |
|
|
140 |
|
|
|
(13 |
) |
|
|
(13 |
) |
|
|
299 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(409 |
) |
|
|
(1,662 |
) |
|
|
(1,662 |
) |
|
|
(1,763 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends Received from Bank |
|
|
1,700 |
|
|
|
3,201 |
|
|
|
3,201 |
|
|
|
850 |
|
Proceeds from sale of investment securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash from investing activities |
|
|
1,700 |
|
|
|
3,201 |
|
|
|
3,201 |
|
|
|
2,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of treasury stock, net |
|
|
(331 |
) |
|
|
(321 |
) |
|
|
(321 |
) |
|
|
(115 |
) |
Dividends paid |
|
|
(975 |
) |
|
|
(878 |
) |
|
|
(878 |
) |
|
|
(777 |
) |
Net cash used in financing activities |
|
|
(1,306 |
) |
|
|
(1,199 |
) |
|
|
(1,199 |
) |
|
|
(892 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash |
|
|
(15 |
) |
|
|
340 |
|
|
|
340 |
|
|
|
(230 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents beginning |
|
|
399 |
|
|
|
59 |
|
|
|
59 |
|
|
|
289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents ending |
|
$ |
384 |
|
|
$ |
399 |
|
|
$ |
399 |
|
|
$ |
59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67
NOTE 19. RECENT ACCOUNTING PRONOUNCEMENTS
Accounting for Certain Hybrid Financial Instruments
In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial
Instruments. This statement amends FASB Statements No. 133, Accounting for Derivative Instruments
and Hedging Activities, and No. 140, Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities. This statement resolves issues addressed in Statement 133
Implementation Issue No. D1, Application of Statement 133 to Beneficial Interest in Securitized
Financial Assets. SFAS No. 155 is effective for fiscal years beginning after September 15,
2006. The adoption of SFAS No. 155 had no material impact on the Companys financial position or
its results of operations for fiscal 2008.
Accounting for Servicing of Financial Assets
In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets an
Amendment of FASB Statement No. 140 (SFAS No. 156), which amends SFAS No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities with respect to the
accounting for separately recognized servicing assets and servicing liabilities. SFAS No. 156
requires all separately recognized servicing assets and servicing liabilities to be initially
measured at fair value, if practicable, and permits an entity to choose either the amortization or
fair value measurement method for subsequent measurements. The Company determines the fair value
of its mortgage servicing rights on the basis of a third party market valuation of the Companys
servicing portfolio stratified by predominant risk characteristics loan type and coupon. The
valuation of the Companys mortgage servicing rights utilizes market derived assumptions for
discount rates, servicing costs, escrow earnings rate, and prepayments. The Company, upon adoption
of SFAS No. 156 as of April 1, 2007, recorded a cumulative effect adjustment of $49,000 to retained
earnings (net of tax) as of the beginning of fiscal 2008 for the difference between the mortgage
servicing rights fair value and its carrying amount as reflected in the consolidated statement of
changes in stockholders equity. At March 31, 2008, the fair value of mortgage servicing rights
totaled $0.6 million.
Fair Value Measurements
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No.
157). The Statement establishes a single definition of fair value, sets up a framework for
measuring it, and requires additional disclosures about the use of fair value to measure assets and
liabilities. SFAS No. 157 also emphasizes that fair value is a market-based measurement by
establishing a three level fair value hierarchy that ranks the quality and reliability of inputs
used in valuation models, i.e., the lower the level, the more reliable the input. The hierarchy
provides the basis for the Statements new disclosure requirements which are dependent upon the
frequency of an items measurement (recurring versus nonrecurring). SFAS No. 157 is effective for
fair-value measures already required or permitted by other standards for financial statements
issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal
years. Its provisions will generally be applied prospectively. The adoption of SFAS No. 157 had
no material impact on the Companys financial position or its results of operations for fiscal
2008.
The Fair Value Option for Financial Assets and Liabilities
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities including an amendment of FASB Statements No. 115 (SFAS No. 159). SFAS
No. 159 permits entities to choose to measure financial instruments and certain other items at fair
value that are not currently required to be measured at fair value. This Statement is effective
as of the beginning of an entitys first fiscal year beginning after November 15, 2007. Carver is
currently assessing the impact of this pronouncement.
As outlined in SFAS No.142 the Goodwill impairment analysis involves a two-step test. The
first step, used to identify potential impairment, involves comparing the fair value of the
reporting unit to its carrying value including goodwill. If the fair value of the reporting unit
exceeds its carrying value, goodwill is not considered impaired. If the carrying value exceeds
fair value, there is an indication of impairment and the second step is performed to measure the
amount of impairment. The second step involves calculating an implied fair value of goodwill for
the reporting unit, in the same manner as the amount of goodwill recognized in a business
combination, which is the excess of the fair value of the reporting unit, as determined in the
first step, over the aggregate fair values of the individual assets, liabilities and identifiable
intangibles as if the reporting unit was being acquired in a business combination. If the implied
fair value of goodwill exceeds the carrying value of reporting unit goodwill, there is no
impairment. If the carrying value of reporting unit goodwill exceeds the implied fair value of the
goodwill, an impairment charge is recorded in earnings for the excess. Subsequent reversal of
goodwill impairment losses is not permitted.
68
Accounting for Uncertainty in Income Taxes
In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income
Taxes an Interpretation of FASB Statement No. 109 (FIN 48). FIN 48 clarifies Statement 109 by
establishing a criterion
that an individual tax position would have to meet in order for some or all of the associated
benefit to be recognized in an entitys financial statements. The Interpretation applies to all
tax positions within the scope of Statement 109. In applying FIN 48, an entity is required to
evaluate each individual tax position using a two step-process. First, the entity should determine
whether the tax position is recognizable in its financial statements by assessing whether it is
more-likely-than-not that the position would be sustained by the taxing authority on
examination. The term more-likely-than-not means a likelihood of more than 50
percent. Second, the entity should measure the amount of benefit to recognize in its financial
statements by determining the largest amount of tax benefit that is greater than 50 percent likely
of being realized upon ultimate settlement with the taxing authority. Each tax position must be
re-evaluated at the end of each reporting period to determine whether recognition or derecognition
is warranted. The liability resulting from the difference between the tax return position and the
amount recognized and measured under FIN 48 should be classified as current or non-current
depending on the anticipated timing of settlement. An entity should also accrue interest and
penalties on unrecognized tax benefits in a manner consistent with the tax law. The Companys
Federal, New York State and City tax filings for years 2003 through the present are subject to
examination.
FIN 48 requires significant new annual disclosures in the notes to an entitys financial
statements that include a tabular roll-forward of the beginning to ending balances of an entitys
unrecognized tax benefits. The Interpretation is effective for fiscal years beginning after
December 15, 2006 and the cumulative effect of applying FIN 48 should be reported as an adjustment
to retained earnings at the beginning of the period in which it is adopted. The adoption and
evaluation under FAS 109 and FIN 48 had no material impact on the Companys financial position or
its results of operations for fiscal 2008.
Accounting for Purchases of Life Insurance
In September 2006, the Emerging Issues Task Force (EITF) of the FASB issued EITF No. 06-5,
Accounting for Purchases of Life Insurance Determining the Amount That Could Be Realized in
Accordance with FASB Technical Bulletin No. 85-4 (FTB No. 85-4), Accounting for Purchases of
Life Insurance (EITF No. 06-5). EITF No. 06-5 explains how to determine the amount that could
be realized from a life insurance contract, which is the measurement amount for the asset in
accordance with FTB No. 85-4. EITF No. 06-5 would require all amounts that would ultimately be
realized by a policyholder upon the assumed surrender of a final policy to be included in the
amount that could be realized under the insurance contract. Thus, contractual provisions that
limit the amount that could be realized in specified circumstances would be considered if it is
probable that those circumstances would occur. The consensus on EITF No. 06-5 is effective for
fiscal years beginning after December 15, 2006 and would be recognized through a cumulative-effect
adjustment to retained earnings as of the beginning of the year of adoption. The adoption of EITF
No. 06-5 had no material impact on the Companys financial position or its results of operations
for fiscal 2008.
Prior Year Misstatements
In September 2006, the SEC Staff issued Staff Accounting Bulletin (SAB) No. 108,
Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current
Year Financial Statements, which addresses how the effects of prior year uncorrected
misstatements should be considered when quantifying misstatements in current year financial
statements. SAB No. 108 will require registrants to quantify misstatements using both the balance
sheet and income-statement approaches and to evaluate whether either approach results in
quantifying an error that is material in light of relevant quantitative and qualitative factors.
When the effect of initial adoption is determined to be material, SAB No. 108 allows registrants
to record that effect as a cumulative effect adjustment to beginning retained earnings. The
requirements are effective for the Company beginning April 1, 2007. Carver has evaluated the
requirements of SAB No. 108 and determined that it did not have a material effect on its
financial condition or results of operations.
69
Application of Accounting Principles to Loan Commitments
In November 2007, the Securities and Exchange Commission (SEC) issued Staff Accounting
Bulletin No. 109 (SAB 109). SAB 109 supersedes Staff Accounting Bulletin No. 105 (SAB 105),
Application of Accounting Principles to Loan Commitments. It clarifies that the expected net
future cash flows related to the associated
servicing of a loan should be included in the measurement of all written loan commitments
that are accounted for at fair value through earnings. However, it retains the guidance in SAB
105 that internally-developed intangible assets should not be recorded as part of the fair value
of a derivative loan commitment. The guidance is effective on a prospective basis to derivative
loan commitments issued or modified in fiscal quarters beginning after December 15, 2007. In
conjunction with the adoption of SFAS 157 and SFAS 159, this guidance generally would result in
higher fair values being recorded upon initial recognition of derivative loan commitments. The
adoption of SAB 109 is not expected to have a material impact on the Banks financial condition
or results of operations.
Business Combinations
In December 2007, the FASB issued SFAS No. 141R, Business Combinations (revised 2007). SFAS
No. 141R improves reporting by creating greater consistency in the accounting and financial
reporting of business combinations, resulting in more complete, comparable, and relevant
information for investors and other users of financial statements. To achieve this goal, the new
standard requires the acquiring entity in a business combination to recognize all (and only) the
assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair
value as the measurement objective for all assets acquired and liabilities assumed; and requires
the acquirer to disclose the information necessary to evaluate and understand the nature and
financial effect of the business combination. SFAS No. 141R applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the first fiscal year
that commences after December 15, 2008.
Non-controlling Interests in Consolidated Financial Statements
In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated
Financial Statements. SFAS No. 160 improves the relevance, comparability, and transparency of
financial information provided to investors by requiring all entities to report non-controlling
(minority) interests in subsidiaries in the same way, i.e., as equity in the consolidated
financial statements. In addition, SFAS No. 160 eliminates the diversity that currently exists in
accounting for transactions between an entity and non-controlling interests by requiring that
they be treated as equity transactions. SFAS No. 160 is effective for fiscal years beginning
after December 15, 2008 and is not expected to have a material impact on the Banks financial
condition or results of operations.
Sale with Repurchase Financing Agreements
In February 2008, the FASB issued FASB Staff Position (FSP) FAS 140-3, Accounting for
Transfers of Financial Assets and Repurchase Financing Transactions. The objective of this FSP is
to provide implementation guidance on whether the security transfer and contemporaneous repurchase
financing involving the transferred financial asset must be evaluated as one linked transaction or
two separate de-linked transactions.
Current practice records the transfer as a sale and the repurchase agreement as a financing.
The FSP requires the recognition of the transfer and the repurchase agreement as one linked
transaction, unless all of the following criteria are met: (1) the initial transfer and the
repurchase financing are not contractually contingent on one another; (2) the initial transferor
has full recourse upon default, and the repurchase agreements price is fixed and not at fair
value; (3) the financial asset is readily obtainable in the marketplace and the transfer and
repurchase financing are executed at market rates; and (4) the maturity of the repurchase
financing is before the maturity of the financial asset. The scope of this FSP is limited to
transfers and subsequent repurchase financings that are entered into contemporaneously or in
contemplation of one another. The FSP will be effective for the Carver on March 31, 2009. Early
adoption is prohibited. The Company is currently evaluating the impact of adopting this FSP.
70
Disclosures about Derivative Instruments and Hedging Activities
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and
Hedging Activities (SFAS 161), an amendment of SFAS 133. The standard requires enhanced
disclosures about derivative instruments and hedged items that are accounted for under SFAS 133
and related interpretations. The standard will be effective for all of the Companys interim and
annual financial statements for periods beginning after November 15, 2008, with early adoption
permitted. The standard expands the disclosure requirements for
derivatives and hedged items and has no impact on how Carver accounts for these
instruments. The Bank is currently assessing the impact of this pronouncement.
Elimination of QSPEs and Changes in the FIN 46(R) Consolidation Model
In April of 2008, the FASB voted to eliminate Qualifying Special Purpose Entities (QSPEs) from
the guidance in SFAS 140, Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities. While the revised standard has not been finalized and the proposals
will be subject to a public comment period, this change may have a significant impact on Carvers
consolidated financial statements as the Company may lose sales treatment for future assets sales
to a QSPE. This proposed revision could be effective as early as April 2009.
In connection with the proposed changes to SFAS 140, the FASB also is proposing three key
changes to the consolidation model in FIN 46(R). First, former QSPEs would now be included in the
scope of FIN 46(R). In addition, the FASB supports amending FIN 46(R) to change the method of
analyzing which party to a variable interest entity (VIE) should consolidate the VIE to a primarily
qualitative determination of control instead of todays risks and rewards model. Finally, the
proposed amendment is expected to require all VIEs and their primary beneficiaries to be
reevaluated quarterly. The previous rules required reconsideration only when specified
reconsideration events occurred.
NOTE 20. SUBSEQUENT EVENT
As outlined in SFAS No.142 the Goodwill impairment analysis involves a two-step test. The
first step, used to identify potential impairment, involves comparing the fair value of the
reporting unit to its carrying value including goodwill. If the fair value of the reporting unit
exceeds its carrying value, goodwill is not considered impaired. If the carrying value exceeds
fair value, there is an indication of impairment and the second step is performed to measure the
amount of impairment. The second step involves calculating an implied fair value of goodwill for
the reporting unit, in the same manner as the amount of goodwill recognized in a business
combination, which is the excess of the fair value of the reporting unit, as determined in the
first step, over the aggregate fair values of the individual assets, liabilities and identifiable
intangibles as if the reporting unit was being acquired in a business combination. If the implied
fair value of goodwill exceeds the carrying value of reporting unit goodwill, there is no
impairment. If the carrying value of reporting unit goodwill exceeds the implied fair value of the
goodwill, an impairment charge is recorded in earnings for the excess. Subsequent reversal of
goodwill impairment losses is not permitted.
Subsequent
to the issuance of the Form 10-K for the year ended March 31, 2008 in the second quarter of fiscal 2009, the Company
commenced an interim goodwill impairment analysis, based on indications that the fair value of the Companys reporting unit may have declined
below its carrying value as a result of factors including the further decline in
the Companys market capitalization relative to the book value of shareholders equity and the
adverse market conditions impacting the financial services sector generally. This analysis, which
incorporates the second step test noted above, was completed during the
third fiscal quarter ended December 31, 2008. A valuation specialist was engaged to assist management in
its fair value assessment of goodwill. As a result of the finalization of the goodwill impairment
analysis the Company determined that goodwill was impaired and recorded an impairment charge of
$7.1 million as of December 31, 2008.
71
ITEM 9A. DISCLOSURE CONTROLS AND PROCEDURES.
The Company maintains controls and procedures designed to ensure that information required to
be disclosed in the reports that the Company files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the rules and forms of the
Securities and Exchange Commission (the SEC). As of March 31, 2007, the Company carried out an
evaluation, under the supervision and with the participation of the Companys management, including
the Companys Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
Companys disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Companys
disclosure controls and procedures were effective and timely in alerting them to material
information relating to the Company (including its consolidated subsidiaries) required to be
included in the Companys periodic SEC filings.
Subsequent to the original filing of the March 31, 2007 Form 10-K, the Companys management,
including the Companys Chief Executive Officer and acting Chief Accounting Officer, evaluated the
effectiveness of the Companys disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) under the Exchange Act), as of the end of the period covered by this report. Based
upon that evaluation, the Chief Executive Officer and Controller concluded that the Companys
disclosure controls and procedures were not effective as of March 31, 2007 and that the Companys
consolidated financial statements could not be relied on for the fiscal years ended March 31, 2007
and March 31, 2008. As a result of carrying out the remediation efforts described below, however,
the Chief Executive Officer and Principal Accounting Officer concluded that the Companys
disclosure controls and procedures were effective as of the date of this Form 10-K/A.
Material Weakness in Internal Control Over Financial Reporting
A material weakness is a significant deficiency, or combination of significant deficiencies,
that results in more than a remote likelihood that a material misstatement of the annual or interim
financial statements will not be prevented or detected. A significant deficiency is a control
deficiency, or combination of control deficiencies, that adversely affects the Companys ability to
initiate, authorize, record, process, or report external financial information reliably in
accordance with generally accepted accounting principles such that there is more than a remote
likelihood that a misstatement of the Companys annual or interim financial statements that is more
than inconsequential will not be prevented or detected.
During the period covered by this annual report, the Company identified a material weakness in
the internal control over financial reporting. Specifically, the Companys controls related to the
reconciliation and review of automatic clearing house transactions and checks issued and received
by the Banks customers existed during fiscal 2007 but was not discovered until February 9, 2009.
All charges to income occurred during the Companys 2007 fiscal year. As a result of this material
weakness, the Company is amending this report on Form 10-K to restate its Consolidated Financial
Statements for the fiscal years ended March 31, 2008 and 2007.
The restatements reflect the classification of the reconciliation matter presented in the
affected Consolidated Financial Statements.
Changes in Internal Control Over Financial Reporting
Since the Company identified the material weakness of internal control over financial
reporting described above, it has engaged in the following remediation efforts. The Company has
completed an analysis of the controls over the suspense reconciliation review process which
resulted in the above described restatements, and, as a result, it has redesigned and strengthened
the internal control processes as it pertains to the preparation of the Consolidated Financial
Statements.
72
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
I. |
|
List of Documents Filed as Part of this Annual Report on Form 10-K/A |
|
A. |
|
The following consolidated financial statements are included in Item 8 of this annual
report: |
|
1. |
|
Report of Independent Registered Public Accounting Firm |
|
|
2. |
|
Consolidated Statement of Financial Condition as of March 31, 2008 and 2007 |
|
|
3. |
|
Consolidated Statements of Income for the years ended as of March 31, 2008,
2007 and 2006 |
|
|
4. |
|
Consolidated Statements of Changes in Stockholders Equity and Comprehensive
Income for the years ended March 31, 2008, 2007 and 2006 |
|
|
5. |
|
Consolidated Statements of Cash Flows for the years ended March 31, 2008, 2007
and 2006 |
|
|
6. |
|
Notes to Consolidated Financial Statements. |
|
B. |
|
Financial Statement Schedules. All financial statement schedules have been omitted, as
the required information is either inapplicable or included under Item 8, Financial
Statement and Supplementary Data. |
II. |
|
Exhibits required by Item 601 of Regulation S-K: |
|
A. |
|
See Index of Exhibits on page E-1. |
73
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
|
|
|
|
|
CARVER BANCORP, INC.
|
|
June 29, 2009 |
By: |
/s/ Deborah C. Wright
|
|
|
|
Deborah C. Wright |
|
|
|
Chairman and Chief Executive Officer |
|
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has
been signed below on June 29, 2009 by the following persons on behalf of the Registrant and in the
capacities indicated.
|
|
|
|
|
Chairman and Chief Executive Officer |
Deborah C. Wright
|
|
(Principal Executive Officer) |
|
|
|
|
|
Senior Vice President and Controller |
Thomas Sperzel
|
|
(Principal Accounting Officer) |
|
|
|
|
|
Director |
Carol Baldwin Moody |
|
|
|
|
|
|
|
Director |
Samuel J. Daniel |
|
|
|
|
|
|
|
Director |
David L. Hinds |
|
|
|
|
|
|
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Lead Director |
Robert Holland, Jr. |
|
|
|
|
|
|
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Director |
Pazel G. Jackson, Jr. |
|
|
|
|
|
|
|
Director |
Edward B. Ruggiero |
|
|
|
|
|
|
|
Director |
Robert R. Tarter |
|
|
74
EXHIBIT INDEX
|
|
|
|
|
|
|
|
|
|
|
23.1 |
|
|
Consent
of KPMG LLP |
|
|
|
|
|
|
31.1 |
|
|
Certifications of Chief Executive Officer |
|
|
|
|
|
|
31.2 |
|
|
Certifications of Principal Accounting Officer |
|
|
|
|
|
|
32.1 |
|
|
Written Statement of Chief Executive Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
18 U.S.C. Section 1350 |
|
|
|
|
|
|
32.2 |
|
|
Written Statement of Principal Accounting Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
18 U.S.C. Section 1350 |
75