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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004
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: 0-21487
CARVER BANCORP, INC.
--------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3904174
- ---------------------------------------------------------- ------------------------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
75 WEST 125TH STREET, NEW YORK, NEW YORK 10027
- ---------------------------------------------------------- ------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 876-4747
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.
Yes X No
---- ----
Indicate by check mark whether the registrant is an accelerated filer
(as defined in rule 12b-2 of the Exchange Act).
Yes No X
---- ----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
COMMON STOCK, PAR VALUE $.01 2,291,957
- ------------------------------------------------------- -----------------------------------------------------
Class Outstanding at July 31, 2004
TABLE OF CONTENTS
Page
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PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of
June 30, 2004 (unaudited) and March 31, 2004...........................................1
Consolidated Statements of Income for the Three Months
Ended June 30, 2004 and 2003 (unaudited)...............................................2
Consolidated Statement of Changes in Stockholders' Equity and
Comprehensive Income for the Three Months Ended June 30, 2004 (unaudited) .............3
Consolidated Statements of Cash Flows for the Three Months
Ended June 30, 2004 and 2003 (unaudited)...............................................4
Notes to Consolidated Financial Statements (unaudited).................................5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................................................8
Item 3. Quantitative and Qualitative Disclosures About Market Risk.....................................18
Item 4. Controls and Procedures........................................................................18
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings..............................................................................19
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities...............19
Item 3. Defaults Upon Senior Securities................................................................20
Item 4. Submission of Matters to a Vote of Security Holders............................................20
Item 5. Other Information..............................................................................20
Item 6. Exhibits and Reports on Form 8-K...............................................................20
SIGNATURES.......................................................................................................21
EXHIBITS........................................................................................................E-1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT SHARE DATA)
JUNE 30, MARCH 31,
2004 2004
------------- ------------
(UNAUDITED)
ASSETS
Cash and cash equivalents:
Cash and due from banks $ 9,908 $ 11,574
Federal funds sold
15,400 8,200
Interest earning deposits 600 3,000
------------- ------------
Total cash and cash equivalents 25,908 22,774
------------- ------------
Securities:
Available-for-sale, at fair value (including pledged as collateral of
$73,753 at June 30, 2004 and $82,325 at March 31, 2004) 90,932 96,403
Held-to-maturity, at amortized cost (including pledged as collateral of $39,588 at June
30, 2004
and $42,189 at March 31, 2004; fair value of $40,183 at June 30, 2004 and $43,794
at March 31, 2004) 40,414 43,474
------------- ------------
Total securities 131,346 139,877
------------- ------------
Loans receivable:
Real estate mortgage loans 369,141 350,015
Consumer and commercial business loans 5,770 6,010
Allowance for loan losses (4,105) (4,125)
------------- ------------
Total loans receivable, net 370,806 351,900
------------- ------------
Office properties and equipment, net 13,173 11,826
Federal Home Loan Bank of New York stock, at cost 4,576 4,576
Accrued interest receivable 2,433 2,489
Other assets 4,600 5,388
------------- ------------
Total assets $ 552,842 $ 538,830
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 397,430 $ 373,665
Advances from the Federal Home Loan Bank of New York and other borrowed money 102,266 104,282
Other liabilities 8,723 16,238
------------- ------------
Total liabilities 508,419 494,185
------------- ------------
Stockholders' equity:
Preferred stock (par value $0.01 per share; 1,000,000
shares authorized; 100,000 issued and outstanding) 1 1
Common stock (par value $0.01 per share: 5,000,000 shares authorized; 2,316,358 shares issued;
2,290,780 and 2,285,267 outstanding at June 30, 2004 and March 31, 2004, 23 23
respectively)
Additional paid-in capital 23,922 23,882
Retained earnings 21,761 20,892
Unamortized awards of common stock under management recognition plan ("MRP") (102) (21)
Treasury stock, at cost (25,578 shares at June 30, 2004 and 31,091 at March 31, 2004) (330) (390)
Accumulated other comprehensive income (852) 258
------------- ------------
Total stockholders' equity 44,423 44,645
------------- ------------
Total liabilities and stockholders' equity $ 552,842 $ 538,830
============= ============
See accompanying notes to consolidated financial statements.
1
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED
JUNE 30,
2004 2003
-------------- --------------
Interest income:
Loans $ 5,416 $ 4,866
Mortgage-backed securities 1,027 1,226
Investment securities 233 370
Federal funds sold 36 54
-------------- --------------
Total interest income 6,712 6,516
-------------- --------------
Interest expense:
Deposits 1,125 1,276
Advances and other borrowed money 1,043 954
-------------- --------------
Total interest expense 2,168 2,230
-------------- --------------
Net interest income 4,544 4,286
Provision for loan losses - -
-------------- --------------
Net interest income after provision for loan losses 4,544 4,286
-------------- --------------
Non-interest income:
Depository fees and charges 520 484
Loan fees and service charges 523 646
Gain on sale of investment securities 94 -
Gain from sale of loans 2 -
Other - 10
-------------- --------------
Total non-interest income 1,139 1,140
-------------- --------------
Non-interest expense:
Compensation and benefits 2,001 1,805
Net occupancy 404 325
Equipment 370 382
Other 1,163 1,268
-------------- --------------
Total non-interest expense 3,938 3,780
-------------- --------------
Income before income taxes 1,745 1,646
Income taxes 663 559
-------------- --------------
Net income $ 1,082 $ 1,087
-------------- --------------
Dividends applicable to preferred stock 49 49
-------------- --------------
Net income available to common stockholders $ 1,033 $ 1,038
============== ==============
Earnings per common share:
Basic $ 0.45 $ 0.45
============== ==============
Diluted $ 0.42 $ 0.42
============== ==============
See accompanying notes to consolidated financial statements.
2
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
(UNAUDITED)
(IN THOUSANDS)
ACCUMULATED COMMON TOTAL
ADDITIONAL OTHER STOCK STOCK-
PREFERRED COMMON PAID-IN RETAINED TREASURY COMPREHENSIVE ACQUIRED HOLDERS'
STOCK STOCK CAPITAL EARNINGS STOCK INCOME BY MRP EQUITY
----- ----- ------- -------- ----- ------ ------ ------
Balance-March 31, 2004 $ 1 $ 23 $ 23,882 $ 20,892 ($ 390) $ 258 ($ 21) $ 44,645
Comprehensive income:
Net Income for the three months
ended June 30, 2004 -- -- -- 1,082 -- -- -- $ 1,082
Change in net unrealized
gain on securities, net of taxes -- -- -- -- -- (1,110) -- ($ 1,110)
Dividends paid -- -- -- (213) -- -- -- ($ 213)
Treasury stock activity -- -- 6 -- 60 -- (81) ($ 15)
Allocation of shares for MRP -- -- 34 -- -- -- -- $ 34
----- ----- -------- -------- -------- -------- -------- --------
Balance-June 30, 2004 $ 1 $ 23 $ 23,922 $ 21,761 ($ 330) ($ 852) ($ 102) $ 44,423
===== ===== ======== ======== ======== ======== ======== ========
See accompanying notes to consolidated financial statements.
3
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED JUNE 30,
2004 2003
-------------- --------------
Cash flows from operating activities:
Net income $ 1,082 $ 1,087
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses - -
ESOP and MRP expense 23 14
Depreciation expense 335 284
Amortization of intangibles - 54
Other amortization 2,422 752
Gain from sale of securities (94) -
Changes in assets and liabilities:
Decrease in accrued interest receivable 56 584
(Increase) decrease in other assets (298) 3,271
Decrease in other liabilities (7,490) (4,227)
(Decrease) increase in accrued interest payable (10) 24
-------------- --------------
Net cash (used in) provided by operating activities (3,974) 1,843
-------------- --------------
Cash flows from investing activities:
Purchases of securities:
Available-for-sale (17,932) (23,307)
Held-to-maturity - -
Proceeds from principal payments, maturities and calls of securities:
Available-for-sale 14,109 25,461
Held-to-maturity 3,009 2,028
Proceeds from sale of available-for-sale securities 7,194 -
Disbursements for loan originations (27,710) (12,618)
Loans purchased from third parties (18,745) (27,536)
Principal collections on loans 27,206 30,256
Redemption (Purchase) of FHLB-NY stock - 338
Proceeds from loans sold 166 -
Additions to premises and equipment (1,682) (311)
-------------- --------------
Net cash used in investing activities (14,385) (5,689)
-------------- --------------
Cash flows from financing activities:
Net increase in deposits 23,765 15,684
Net repayment of FHLB-NY advances and other borrowed money (2,031) (6,801)
Common stock repurchased (28) (303)
Dividends paid (213) (213)
-------------- --------------
Net cash provided by financing activities 21,493 8,367
-------------- --------------
Net (decrease) increase in cash and cash equivalents 3,134 4,521
Cash and cash equivalents at beginning of the period 22,774 23,160
-------------- --------------
Cash and cash equivalents at end of the period $ 25,908 $ 27,681
============== ==============
Supplemental information:
Noncash Transfers-
Change in unrealized gain on valuation of available-for-sale
investments, net $ (1,110) $ (36)
Cash paid for-
Interest $ 2,177 $ 2,206
Income taxes $ 1,935 $ 2,825
See accompanying notes to consolidated financial statements
4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Carver
Bancorp, Inc. (the "Holding Company") have been prepared in accordance with
accounting principles generally accepted in the United States of America
("GAAP") for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X promulgated by the Securities and Exchange
Commission ("SEC"). Accordingly, they do not include all of the information and
footnotes required by GAAP for complete consolidated financial statements.
Certain information and note disclosures normally included in financial
statements prepared in accordance with GAAP have been condensed or omitted
pursuant to the rules and regulations of the SEC. Certain reclassifications have
been made to prior period amounts to conform to the current period presentation.
In the opinion of management, all adjustments (consisting of only normal
recurring adjustments) necessary for a fair presentation of the financial
condition, results of operations, changes in stockholders' equity and cash flows
of the Holding Company and subsidiaries on a consolidated basis as of and for
the periods shown have been included.
The unaudited consolidated financial statements presented herein should
be read in conjunction with the consolidated financial statements and notes
thereto included in the Holding Company's Annual Report on Form 10-K for the
year ended March 31, 2004 ("2004 10-K") previously filed with the SEC. The
consolidated results of operations and other data for the three-month period
ended June 30, 2004 are not necessarily indicative of results that may be
expected for the entire fiscal year ending March 31, 2005 ("fiscal 2005").
The accompanying unaudited consolidated financial statements include
the accounts of the Holding Company and its wholly owned subsidiaries, Carver
Federal Savings Bank (the "Bank" or "Carver Federal"), Alhambra Holding Corp.,
an inactive Delaware corporation, and the Bank's wholly-owned subsidiaries, CFSB
Realty Corp. and CFSB Credit Corp., and the Bank's majority owned subsidiary,
Carver Asset Corporation. The Holding Company and its consolidated subsidiaries
are referred to herein collectively as "Carver" or the "Company." All
significant inter-company accounts and transactions have been eliminated in
consolidation.
(2) NET INCOME PER COMMON SHARE
Basic earnings per common share is computed by dividing income
available to common stockholders by the weighted-average number of common shares
outstanding. Diluted earnings per common share include any additional common
shares as if all potentially dilutive common shares were issued (for instance,
convertible preferred stock and stock options with an exercise price that is
less than the average market price of the common shares for the periods stated).
For the purpose of these calculations, unreleased ESOP shares are not considered
to be outstanding. For each of the three-month periods ended June 30, 2004 and
2003, preferred dividends of $49,000 were deducted from net income to arrive at
the amount of net income available to common stockholders. Additionally, for
both the three-month periods ended June 30, 2004 and 2003, 208,333 shares of
common stock potentially issuable from the conversion of preferred stock and
108,208 shares of common stock at June 30, 2004 and 63,094 shares of common
stock at June 30, 2003 potentially issuable from the exercise of stock options
with an exercise price that is less than the average market price of the common
shares for the three-months ended June 30, 2004 and June 30, 2003, respectively,
were considered in determining the diluted net income per common share.
(3) STOCK OPTION PLAN
ACCOUNTING FOR STOCK BASED COMPENSATION
Since we have elected to apply the intrinsic value method, we are
required to disclose the pro-forma impact on net income and earnings per share
that the fair value-based method would have had if it were applied rather than
the intrinsic value method. Our policy with regard to stock-based compensation
has been to grant stock options and restricted stock awards after fiscal
year-end. Since stock options are typically awarded after fiscal year-end and
contain a nominal vesting period, no pro-forma compensation expense and its
related effect on net income and earnings per share have been reported herein.
Further disclosure is presented in Note 1 - "Summary of Significant Accounting
Policies -- Stock Based Compensation Plans" of our audited consolidated
financial statements in Carver's 2004 10-K which is incorporated herein by
reference.
5
(4) EMPLOYEE BENEFIT PLANS
PENSION PLAN
Carver Federal has a non-contributory defined benefit pension plan
covering all eligible employees. The benefits are based on each employee's term
of service. Carver Federal's policy is to fund the plan with contributions which
equal the maximum amount deductible for federal income tax purposes. The plan
was amended such that future benefit accrual ceased as of December 31, 2000.
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.
The following table sets forth the components of net periodic pension
expense for the pension plan and directors' retirement plan for the three months
ended June 30 of the fiscal years indicated.
EMPLOYEE PENSION PLAN NON-EMPLOYEE DIRECTORS' PLAN
2004 2003 2004 2003
---- ---- ---- ----
(IN THOUSANDS)
Interest Cost $ 42 $ 43 $ 2 $ 3
Expected Return on Assets (59) (56) - -
---- ---- ---- ----
Net Periodic Benefit Expense / (Credit) $(17) $(13) $ 2 $ 3
==== ==== ==== ====
(5) SUBSEQUENT EVENTS
On July 28, 2004, the Board of Directors of Carver Bancorp Inc.
declared, for the quarter ended June 30, 2004, a cash dividend of seven cents
($0.07) per common share outstanding. The dividend is payable on August 24, 2004
to stockholders of record at the close of business on August 10, 2004.
(6) RECENT ACCOUNTING PRONOUNCEMENTS
ACCOUNTING AND DISCLOSURE REQUIREMENT RELATED TO THE MEDICARE PRESCRIPTION DRUG,
IMPROVEMENT AND MODERNIZATION ACT OF 2003
In January 2004, the Financial Accounting Standards Board ("FASB")
issued FASB Staff position ("FSP") No. 106-1 "ACCOUNTING AND DISCLOSURE
REQUIREMENTS RELATED TO MEDICARE PRESCRIPTION DRUG, IMPROVEMENT AND
MODERNIZATION ACT OF 2003" ("Medicare Act") for annual financial statements of
fiscal years ending after December 7, 2003. The Medicare Act introduced both a
Medicare prescription-drug benefit and federal subsidy to sponsors of retiree
health-care plans that provide a benefit at least "actuarially equivalent" to
the Medicare benefit.
In May 2004, the FASB issued FSP 106-2 "ACCOUNTING AND DISCLOSURE
REQUIREMENTS RELATED TO THE MEDICARE PRESCRIPTION DRUG, IMPROVEMENT AND
MODERNIZATION ACT OF 2003" ("Revised Medicare Act")," which supersedes FSP 106-1
of the same name. The Company is not affected by the Revised Medicare Act since
it does not provide retiree health-care benefits.
EMPLOYERS' DISCLOSURES ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFIT
In December 2003, the FASB issued a revised SFAS No. 132, "EMPLOYERS'
DISCLOSURES ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS - AN AMENDMENT OF
FASB STATEMENTS NOS. 87, 88 AND 106" (SFAS No. 132(R)). SFAS No. 132 (R)
requires additional disclosures to those in the original statement about the
assets, obligations, cash flows and net periodic benefit cost of defined benefit
pension plans and other defined postretirement plans. SFAS No. 132 (R) also
amends Accounting Principles Board ("APB") Opinion No. 28, "INTERIM FINANCIAL
REPORTING," to require interim
6
disclosure of the components of net periodic benefit cost and, if significantly
different from previously disclosed amounts, the amounts of contributions and
projected contributions to fund pension plans and other postretirement benefit
plans. SFAS No. 132 (R) is effective for financial statements for fiscal years
ending after December 15, 2003, except for disclosure of estimated future
benefit payments, which is effective for fiscal years ending after June 15,
2004. The Company has adopted the disclosure provisions of SFAS No. 132 (R). The
adoption of SFAS No. 132 (R) had no impact on the Company's financial condition
or results of operations.
CONSOLIDATION OF VARIABLE INTEREST ENTITIES
In December 2003, the FASB issued Interpretation No. 46 (revised),
"CONSOLIDATION OF VARIABLE INTEREST ENTITIES, AN INTERPRETATION OF ARB NO. 51,"
("FIN 46R"). Fin 46R addresses how a business enterprise should evaluate whether
it has a controlling financial interest in an entity through means other than
voting rights and, accordingly, should consolidate the variable interest entity
("VIE"). FIN 46R replaces FIN46 that was issued in January 2003. All public
companies, such as Carver, are required to fully implement FIN 46R no later than
the end of the first reporting period ending after March 15, 2004. The adoption
of FIN 46R resulted in the deconsolidation of Carver Statutory Trust I, which
did not have a material impact on the Company's financial condition or results
of operations.
ACCOUNTING FOR CERTAIN LOANS OR DEBT SECURITIES ACQUIRED IN A TRANSFER
In December 2003, the American Institute of Certified Public
Accountants issued Statement of Position No. 03-3, "ACCOUNTING FOR CERTAIN LOANS
OR DEBT SECURITIES ACQUIRED IN A TRANSFER" (SOP No. 03-3). SOP No. 03-3
addresses accounting for differences between contractual cash flows and cash
flows expected to be collected from an investor's initial investment in loans or
debt securities acquired in a transfer if those differences are attributable, at
least in part, to credit quality. SOP No. 03-3 prohibits "carry over" or
creation of valuation allowances in the initial accounting of all loans acquired
in transfers within the scope of SOP No. 03-3, which includes loans acquired in
a business combination. SOP No. 03-3 is effective for loans acquired in fiscal
years beginning after December 15, 2004. The adoption of SOP No. 03-3 is not
expected to have an impact on the Company's financial condition or results of
operations.
ACCOUNTING FOR CERTAIN FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF BOTH
LIABILITIES AND EQUITY
In May 2003, the FASB issued Statement No. 150, "ACCOUNTING FOR CERTAIN
FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY"
("SFAS No. 150"). The SFAS No. 150 requires issuers to classify as liabilities
(or assets in some circumstances) three classes of freestanding financial
instruments that embody obligations for the issuer. Generally, the statement is
effective for financial instruments entered into or modified after May 31, 2003
and is otherwise effective at the beginning of the first interim period
beginning after June 15, 2003. The adoption of SFAS No. 150 did not have a
material impact on the Company's earnings or financial position.
AMENDMENT OF STATEMENT 133 ON DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In April 2003, the FASB issued SFAS No. 149, "AMENDMENT OF STATEMENT
133 ON DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES," which amends and
clarifies financial accounting and reporting of derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities under SFAS No. 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES." SFAS No. 149 is generally effective for contracts
entered into or modified after June 30, 2003, and for hedging relationships
designated after June 30, 2003, and should generally be applied prospectively.
The provisions of SFAS No. 149 that relate to SFAS No. 133 implementation issues
that have been effective for fiscal quarters that began prior to June 15, 2003,
should continue to be applied in accordance with their respective effective
dates. In addition, the provisions of SFAS No. 149 which relate to forward
purchases or sales of when-issued securities, or other securities that do not
yet exist, should be applied to both existing contracts and new contracts
entered into after June 30, 2003. The adoption of SFAS No. 149 did not have a
material impact on our financial condition or results of operations.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
EXPLANATORY NOTE
Statements contained in this Quarterly Report on Form 10-Q,
which are not historical facts are "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended , (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). In addition, senior management may make forward
looking statements orally to analysts, investors, the media and others. These
forward-looking statements may be identified by the use of such words as
"believe," "expect," "anticipate," "intend," "should," "will," "would," "could,"
"may," "planned," "estimated," "potential," "outlook," "predict," "project" and
similar terms and phrases, including references to assumptions. Forward-looking
statements are based on various assumptions and analyses made by the Company in
light of the management's experience and its perception of historical trends,
current conditions and expected future developments, as well as other factors
believed to be appropriate under the circumstances. These statements are not
guarantees of future performance and are subject to risks, uncertainties and
other factors, many of which are beyond the Company's control, that could cause
actual results to differ materially from future results expressed or implied by
such forward-looking statements. Factors which could result in material
variations include, without limitation, the Company's success in implementing
its initiatives, including expanding its product line, adding new branches and
ATM centers, successfully re-branding its image and achieving greater operating
efficiencies; increases in competitive pressure among financial institutions or
non-financial institutions; legislative or regulatory changes which may
adversely affect the Company's business; technological changes which may be more
difficult or expensive than we anticipate; changes in interest rates which may
reduce net interest margins and net interest income; changes in deposit flows,
loan demand or real estate values which may adversely affect the Company's
business; changes in accounting principles, policies or guidelines which may
cause the Company's condition to be perceived differently; litigation or other
matters before regulatory agencies, whether currently existing or commencing in
the future, which may delay the occurrence or non-occurrence of events longer
than anticipated; the ability of the Company to originate and purchase loans
with attractive terms and acceptable credit quality; the ability of the Company
to realize cost efficiencies; the Company's costs or difficulties in completing
its planned acquisition of Independence Federal Savings Bank; and general
economic conditions, either nationally or locally in some or all areas in which
the Company does business, or conditions in the securities markets or the
banking industry which could affect decreased liquidity in the capital markets,
the volume of loan origination, deposit flows, real estate values, the levels of
non-interest income and the amount of loan losses.
The forward-looking statements contained within herein are made as of
the date of this Form 10-Q, and the Company assumes no obligation to update
these forward-looking statements to reflect actual results, changes in
assumptions or changes in other factors affecting such forward-looking
statements or to update the reasons why actual results could differ from those
projected in the forward-looking statements. You should consider these risks and
uncertainties in evaluating forward-looking statements and you should not place
undue reliance on these statements.
As used in this Form 10-Q, "we," "us" and "our" refer to Carver
Bancorp, Inc. and its consolidated subsidiaries, unless the context otherwise
requires.
OVERVIEW
The Holding Company, a Delaware corporation, is the holding company for
Carver Federal, a federally chartered savings bank, and, on a parent-only basis,
had minimal results of operations. The Holding Company is headquartered in New
York, New York. At this time, the Holding Company conducts business as a unitary
savings and loan holding company, and the principal business of the Holding
Company consists of the operation of its wholly-owned subsidiary, Carver
Federal, which operates seven full-service banking locations in the New York
City boroughs of Brooklyn, Queens and Manhattan.
After the close of our first quarter, the Office of Thrift Supervision
(the "OTS"), the Bank's primary federal regulator, advised Carver Federal that
as of its most recent examination Carver Federal's Community Reinvestment Act
performance has been rated "Outstanding." In addition, the Community Development
Financial Institutions Fund of the Department of the Treasury has selected it to
receive a $1.5 million grant as part of its Bank Enterprise Award Program, which
program seeks to expand financing activities in economically distressed areas
throughout the nation. Carver Federal was one of only four institutions to
receive the maximum grant. A portion of these funds will be shared with Carver
Federal's non-profit lending partners related to this grant, and the remaining
net amount will be recognized in the second quarter of fiscal 2005 and invested
in furtherance of our business strategy.
8
At June 30, 2004, total assets increased by $14.0 million, or 2.6%, to
$552.8 million compared to $538.8 million at March 31, 2004. The asset growth
primarily reflects an increase in net loans receivable as new mortgage loan
originations and purchases exceeded mortgage loan repayments. Additional
increases were achieved in cash and cash equivalents and office properties and
equipment. The increase in office properties and equipment is primarily
attributable to the new Jamaica Center branch in Queens. The increase in total
assets was partially offset by a decline in total securities as loan growth
replaced investments that matured or prepaid.
At June 30, 2004, total liabilities increased by $14.2 million, or
2.9%, to $508.4 million from $494.2 million at March 31, 2004. The increase in
liabilities is a result of strong deposit growth, a portion of which was
deposited by the City of New York under New York State's Banking Development
District program. The increase in deposits was partially offset by repayments of
matured borrowings and a decrease in other liabilities resulting primarily from
the payment of income taxes and bank checks.
At June 30, 2004, total stockholders' equity decreased $222,000, or
0.5%, to $44.4 million compared to $44.6 million at March 31, 2004. The decrease
in total stockholders' equity was primarily attributable to a decrease in
accumulated other comprehensive income related to the mark-to-market of the
Bank's available-for-sale securities, partially offset by an increase in
retained earnings from net income derived in the first quarter of fiscal 2005.
Net income available to common stockholders of $1.0 million remained
substantially unchanged from the same period last year. These results were
achieved primarily from a 6.0% increase in net interest income offset by a 4.2%
increase in non-interest expense and an increase in income tax expense partially
due to an increase in the Bank's effective tax rate.
Asset quality of the Bank's loan portfolio remained strong. The Company
did not provide for additional loan loss reserves as the Company considers the
current overall allowance for loan losses to be adequate.
Each of these elements is discussed in the analysis of our financial
results.
The Holding Company is dependent on dividends from the Bank, its own
earnings, capital raised and borrowings for sources of funds. The information
below reflects principally the financial condition and results of operations of
the Bank. The Bank's results of operations are primarily dependent on its net
interest income. The Bank pursues typical thrift activities through originating
and purchasing mortgage loans and funds that activity with the gathering of
deposits. The Bank supplements these mortgage lending activities with additional
interest-earning assets such as mortgage-backed securities and funding sources
such as advances from the Federal Home Loan Bank of New York ("FHLB-NY"). The
Bank has been impacted by the current low interest rate environment, which
continued to hold steady within historically low ranges throughout fiscal 2004.
The low interest rate environment accelerated the repayments of our mortgage
loans and mortgage-backed securities and also allowed for the lowering of the
Bank's cost of funds, the net effect of which resulted in a decline in our net
interest margin. In the first quarter of fiscal 2005 interest rates began to
increase, which may impact net interest margin as interest rates paid on
liabilities will tend to increase more quickly than the yields earned on assets.
The Bank also generates other income such as fee income on deposit and loan
accounts and, to a lesser extent, ATM fees, debit card interchange credit and,
depending on market conditions, net gains on sales of securities and loans. The
level of its expenses such as salaries and benefits, occupancy and equipment
costs, other general and administrative expenses, net losses on sales of
securities and loans and income tax expense further affects the Bank's net
income. This discussion and analysis of the Company's financial condition should
be read in conjunction with the audited Consolidated Financial Statements, the
notes thereto and other financial information included in the Company's 2004
10-K.
CRITICAL ACCOUNTING POLICIES
Note 1 to our audited Consolidated Financial Statements for the fiscal
year ended March 31, 2004 ("fiscal 2004") included in our 2004 10-K, as
supplemented by this report, contains a summary of our significant accounting
policies and is incorporated herein by reference. We believe our policies with
respect to the methodology for our determination of the allowance for loan
losses and asset impairment judgments, including the recoverability of goodwill
and other than temporary declines in the value of our securities, involve a high
degree of complexity and require management to make difficult and subjective
judgments which often require assumptions or estimates about highly uncertain
matters. Changes in these judgments, assumptions or estimates could cause
reported results to differ materially.
9
PENDING MERGER WITH INDEPENDENCE FEDERAL SAVINGS BANK
On March 15, 2004, the Company entered into a definitive merger
agreement to acquire Independence Federal Savings Bank ("Independence").
Independence is a federally chartered savings bank with approximately $201
million in assets as of March 31, 2004 and five branches located in greater
Washington, D.C. At the time of announcement, the cash transaction was valued at
approximately $33 million. The transaction is currently expected to close before
the end of 2004. It remains subject to both regulatory and Independence
stockholder approvals. All necessary regulatory applications have been filed and
we are currently awaiting a response from the OTS. The transaction will be voted
upon by Independence stockholders later this year. See "Comparison of Financial
Condition at June 30, 2004 and March 31, 2004--Assets" for a discussion of
Carver's ownership of Independence's stock.
NEW BRANCH OPENED
In July 2004 the Bank opened its seventh branch at Atlantic Terminal in
Fort Greene, Brooklyn as part of its strategy toward growth in its core markets.
The branch is located in one of Brooklyn's busiest retail and transportation
hubs.
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2004 AND MARCH 31, 2004
ASSETS
Total assets increased by $14.0 million, or 2.6%, to $552.8 million at
June 30, 2004 compared to $538.8 million at March 31, 2004. The change was
primarily attributable to increases of $18.9 million in total loans receivable,
net, $3.1 million in total cash and cash equivalents and $1.3 million in office
properties and equipment, net. The increase in total assets was partially offset
by a decrease of $8.5 million in total securities.
Cash and cash equivalents for the three-month period increased $3.1
million, or 13.8%, to $25.9 million at June 30, 2004 compared to $22.8 million
at March 31, 2004. The increase was primarily a result of the Bank maintaining
more liquid assets at the end of June 2004 in anticipation of upcoming mortgage
loan funding requirements.
Total securities decreased $8.5 million, or 6.1%, to $131.3 million
from $139.9 million at March 31, 2004 as repayments, maturities and sales
exceeded new security purchases. The decline is attributed to the low interest
rate environment, which in turn accelerated mortgage refinancing and prepayments
of the Company's mortgage-backed securities. Additionally, management intends to
continue to use proceeds from security repayments and sales to fund higher
yielding mortgage loan growth. Principal repayments of investment securities of
$10.3 million, maturities of investment securities of $6.4 million, sales of
$7.6 million and a $1.8 reduction in net unrealized gains on securities were
partially offset by new purchases of $17.9 million. During the quarter the
Company purchased 127,785 shares totaling $2.7 million of the common stock of
Independence Federal Savings Bank and currently owns 150,000 such shares.
Total loans receivable, net, increased $18.9 million, or 5.4%, to
$370.8 from $351.9 million at March 31, 2004. The increase resulted from
mortgage loan originations and purchases exceeding loan repayments during the
first three months of fiscal 2005. During the three-month period ended June 30,
2004, loan originations and purchases were $27.7 million and $18.7 million,
respectively, offset in part by loan repayments of $27.2 million and loan sales
of $166,000. The $46.4 million in total loan originations and purchases for the
period was comprised of $15.9 million in construction loans, $15.6 million in
one- to four-family loans, $11.6 million in non-residential real estate mortgage
loans and $3.3 million in multifamily loans. Management has evaluated yields and
loan quality in the competitive New York metropolitan area market and in certain
instances has decided to purchase mortgage-backed securities. Management will
continue to assess yields and economic risk as it determines the balance of
interest-earning assets allocated to loan originations and purchases compared to
additional purchases of mortgage-backed securities.
Office properties and equipment, net, increased $1.3 million, or 11.4%,
to $13.2 million from $11.8 million at March 31, 2004 primarily due to capital
purchases related to the Bank's new Brooklyn branch and expenses related to the
pending acquisition of Independence Federal Savings Bank.
Other assets decreased $788,000, or 14.6%, to $4.6 million from $5.4
million at March 31, 2004. The decrease is primarily due to a reduction in the
Bank's deferred tax asset.
10
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
At June 30, 2004, total liabilities increased by $14.2 million, or
2.9%, to $508.4 million compared to $494.2 million at March 31, 2004. The
increase in liabilities primarily reflects an increase of $23.8 million in
deposits offset by a decrease of $2.0 million in advances from the FHLB-NY and
other borrowed money and a decrease of $7.5 million in other liabilities.
The $23.8 million increase in deposit balances was largely attributable
to a $15.8 million increase in certificates of deposit accounts primarily due to
new monies of $15.0 million obtained from the City of New York under New York
State's Banking Development District program whereby our new Jamaica Center
branch in Queens and our Malcolm X Boulevard branch located at Lenox Avenue and
116th Street in Manhattan were designated as depositories of New York City funds
and were provided $10 million and $5 million, respectively. In addition,
deposits increased by $5.2 million in NOW accounts, $1.5 million in savings and
club accounts and $1.3 million in money market accounts. Other factors
contributing to deposit growth include an emphasis on developing depository
relationships with borrowers and the offer of special promotions to attract new
depositors. At June 30, 2004, the Bank had six branches and two stand-alone 24/7
ATM centers. During July, the Bank opened its seventh branch in the Fort Greene
section of Brooklyn. We believe that deposits will continue to grow with the
addition of new planned branches and 24/7 ATM centers in Brooklyn and Manhattan
coupled with our business development efforts.
The decrease of $2.0 million in advances from the FHLB-NY and other
borrowed money resulted from a repayment of maturing FHLB-NY borrowings using
cash flow primarily from the repayment of mortgage loans and mortgage-backed
securities. The decrease in other liabilities of $7.5 million was primarily the
result of a decline in the liability for income taxes of $2.2 million as tax
payments were remitted to taxing authorities and payments being made for the
clearing of bank checks in the amount of $4.2 million.
On September 17, 2003, the Holding Company, through a subsidiary
business trust, 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 securities were $13.0 million, and,
together with the proceeds from the sale of the trust's common securities, were
used to purchase approximately $13.4 million aggregate principal amount of the
Holding Company's floating rate junior subordinated debt securities due 2033.
The trust preferred securities are redeemable quarterly at the option of the
Company, beginning on or after July 7, 2007, and have a mandatory redemption
date of September 17, 2033. Cash distributions on the trust preferred securities
are cumulative and payable at a floating rate per annum (reset quarterly) equal
to 3.05% over three-month LIBOR, with a rate of 4.61% as of June 30, 2004. The
Holding Company has guaranteed the obligations of Carver Statutory Trust I to
the trust's capital security holders. The $12.8 million net proceeds of the
issuance of trust preferred securities are included as other borrowed money and
were contributed to the Bank to enhance regulatory capital, which has helped to
facilitate the Company's growth strategy.
STOCKHOLDERS' EQUITY
Total stockholders' equity decreased $222,000, or 0.5%, to $44.4
million at June 30, 2004 compared to $44.6 million at March 31, 2004. The
decrease in total stockholders' equity was primarily attributable to a decrease
in accumulated other comprehensive income of $1.1 million partially offset by an
increase in retained earnings of $869,000. Accumulated other comprehensive
income decreased as a result of net unrealized losses, net of taxes, relating to
certain investment and mortgage-backed securities. As required by SFAS No. 115
"Accounting for Certain Investments in Debt and Equity Securities" investment
and mortgage-backed securities accounted for as held-to-maturity are carried at
cost while such securities designated as available-for-sale are carried at
market with an adjustment directly to stockholders' equity, net of taxes, and
does not impact the Consolidated Statements of Income.
During the quarter ended June 30, 2004, the Holding Company purchased
1,350 additional shares of its common stock under its stock repurchase program
announced on August 6, 2002. As a part of its repurchase program, the Holding
Company has purchased 30,450 shares of its common stock in open market
transactions at an average price of $14.14 per share to date. The Holding
Company intends to use repurchased shares to fund its stock-based benefit and
compensation plans and for any other purpose the Board of Directors of the
Holding Company deems advisable in compliance with applicable law.
11
ASSET/LIABILITY MANAGEMENT
The Company's 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 fluctuation on asset prepayments, the level and composition of
deposits and the credit quality of earning assets. Management's 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 Company's Asset/Liability and Interest Rate Risk Committee
("ALCO"), comprised of members of the Board of Directors, meets periodically
with senior management to evaluate the impact of changes in market interest
rates on assets and liabilities, net interest margin, capital and liquidity.
Risk assessments are governed by policies and limits established by senior
management that are reviewed and approved by ALCO and the entire Board of
Directors.
The economic environment continually presents uncertainties as to
future interest rate trends. ALCO regularly monitors the Company's cumulative
gap position, which is the difference between the sensitivity to rate changes on
our 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, in order to respond effectively to changes in interest rates.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is a measure of the Bank's ability to generate adequate cash
to meet 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 cover its ongoing operating expenses. The
Company's 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.
Other sources of liquidity include the ability to borrow under
repurchase agreements, FHLB-NY advances utilizing unpledged mortgage-backed
securities and certain mortgage loans, the sale of available-for-sale securities
and the sale of loans. At June 30, 2004, the Bank had the ability to borrow from
the FHLB-NY an additional $26.3 million on a secured basis, utilizing
mortgage-related loans and securities as collateral.
The Consolidated Statements of Cash Flows present the change in cash
from operating, investing and financing activities. During the three months
ended June 30, 2004, total cash and cash equivalents increased by $3.1 million,
reflecting cash used in operating and investing activities being more than
offset by cash provided by financing activities. Net cash used in operating
activities during this period was $4.0 million, primarily representing decreases
in other liabilities and an increase in other assets offset by adjustments to
the balances of depreciation and amortization expense and other amortization.
Net cash used in investing activities was $14.4 million, primarily representing
the purchase of securities and mortgage loans and the disbursements for loan
originations offset in part by the payment of principal on and the maturities of
securities, the sale of available-for-sale securities and principal collections
on loans. Net cash provided by financing activities was $21.5 million, primarily
representing a net increase in deposits, partially offset by a decrease in
advances from the FHLB-NY. See "Liabilities and Stockholders
Equity--Liabilities" for a discussion of the changes in deposits and FHLB-NY
deposits.
The Bank is required to maintain sufficient liquidity to ensure its
safe and sound operation. Management believes the Bank's short-term assets have
sufficient liquidity to cover loan demand, potential fluctuations in deposit
accounts and to meet other anticipated cash requirements. In addition, as
previously discussed, the Bank has the ability to borrow funds from the FHLB-NY
to further meet any liquidity needs. The Bank monitors its liquidity utilizing
guidelines that are contained in a policy developed by management of the Bank
and approved by the Bank's Board of Directors. The Bank's several liquidity
measurements are evaluated on a frequent basis. The Bank was in compliance with
this policy as of June 30, 2004.
The levels of the Bank's short-term liquid assets are dependent on the
Bank's operating, financing and investing activities during any given period.
The most significant liquidity challenge the Bank currently faces is the
variability in its cash flows as a result of mortgage refinance activity, which
until recently has resulted in a lag in redeploying lower yielding federal funds
into higher yielding mortgage loans and has had a negative impact on the
Company's net interest margin and net interest income. As mortgage interest
rates decline, customers' refinance activities tend to accelerate,
12
causing the cash flow from both the mortgage loan portfolio and the
mortgage-backed securities portfolio to accelerate. In addition, as mortgage
interest rates decrease, customers generally tend to prefer fixed rate mortgage
loan products over variable rate products. Since the Bank generally sells its
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
the Bank's liquidity.
During the fiscal year ended March 31, 2002 ("fiscal 2002"), the
Federal Open Market Committee reduced the federal funds rate on eight separate
occasions by a total of 325 basis points, resulting in a lower interest rate
environment in fiscal 2002 compared to the fiscal year ended March 31, 2001.
During the fiscal year ended March 31, 2003 ("fiscal 2003"), the federal funds
rate was again lowered on three separate occasions a total of 125 basis points.
During fiscal 2004 the federal funds rate remained unchanged at 40-year lows. In
the first quarter of fiscal 2005, the federal funds rate was raised 25 basis
points for the first time since fiscal 2002. The increase in loan and securities
repayments experienced by the Bank from fiscal 2002 through fiscal 2004 was
primarily the result of the increase in mortgage loan refinancing activity
caused by the lower interest rate environment. When mortgage interest rates
increase, customers' refinance activities tend to decelerate, causing the cash
flow from both the mortgage loan portfolio and the mortgage-backed securities
portfolio to decline. Although short term rates increased slightly, mortgage
loans and mortgage-backed securities are typically tied to longer term rates
which increased more dramatically over the last two quarters. As a result of the
increased long term rates, refinance activity has slowed deterring early
repayments and enabling loan portfolio growth through originations.
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 June 30,
2004, the Bank exceeded all regulatory minimum capital requirements and
qualified, under OTS regulations, as a well-capitalized institution. The table
below presents certain information relating to the Bank's capital compliance at
June 30, 2004.
REGULATORY CAPITAL
AT JUNE 30, 2004
(DOLLARS IN THOUSANDS)
Amount % of Assets
------ -----------
Total capital (to risk-weighted assets):
Capital level $57,710 15.66 %
Less requirement 29,487 8.00
------------ -------------
Excess $28,223 7.66
============ =============
Tier 1 capital (to risk-weighted assets):
Capital level $53,604 14.54 %
Less requirement 14,743 4.00
------------ -------------
Excess $38,861 10.54
============ =============
Tier 1 Leverage capital (to adjusted total assets):
Capital level $53,604 9.66 %
Less requirement 22,197 4.00
------------ -------------
Excess $31,407 5.66 %
============ =============
On July 28, 2004, the Board of Directors declared a quarterly dividend
of $0.07 per common share for the quarter ended June 30, 2004. The dividend will
be payable on August 24, 2004 to stockholders of record at the close of business
on August 10, 2004.
13
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 to meet the financing needs of its
customers. The Bank has outstanding various commitments and contractual
obligations as follows:
JUNE 30,
2004
---------------
(IN THOUSANDS)
Commitments to originate mortgage loans $ 87,564
Commitments to originate consumer loans 2,614
Letters of Credit 1,908
---------------
Total $ 92,086
===============
PAYMENTS DUE BY PERIOD
---------------------------------------------------------------------------------
CONTRACTUAL LESS THAN 1 - 3 3 - 5 MORE THAN
OBLIGATIONS TOTAL 1 YEAR YEARS YEARS 5 YEARS
- ----------------------------------------------- ------------------------------- --------------- --------------- --------------
(IN THOUSANDS)
Long term debt obligations:
FHLB advances $ 89,510 $ 31,000 $ 53,974 $ 4,300 $ 236
Guaranteed preferred beneficial interest in
junior subordinated debentures
12,755 12,755
-------------- -------------- --------------- --------------- --------------
Total long term debt obligations
102,265 31,000 53,974 17,055 236
Operating lease obligations:
Lease obligations for rental properties
2,361 328 818 512 703
-------------- -------------- --------------- --------------- --------------
Total contractual obligations $ 104,626 $ 31,328 $ 54,792 $ 17,567 $ 939
============== ============== =============== =============== ==============
Analysis of Earnings
The Company's profitability is primarily dependent upon net interest
income, which mainly represents the difference between income on
interest-earning assets and expense on interest-bearing liabilities. Net
interest income is dependent on the difference between the average balances and
rates earned on interest-earning assets and the average balances and rates paid
on interest-bearing liabilities. Provisions for loan losses, non-interest
income, non-interest expense and income taxes further affect net income. The
earnings of the Company, which are principally earnings of the Bank, are
significantly affected by general economic and competitive conditions,
particularly changes in market interest rates, and to a lesser extent by
government policies and actions of regulatory authorities.
The following tables set forth, for the periods indicated, certain
information relating to Carver's average interest-earning assets, average
interest-bearing liabilities, net interest income, interest rate spread and
interest rate margin. It reflects the average yield on assets and the average
cost of liabilities. Such yields and costs are derived by dividing annualized
income or expense by the average balances of assets or liabilities,
respectively, for the periods shown. Average balances are derived from daily or
month-end balances as available. Management does not believe that the use of
average monthly balances instead of average daily balances has caused any
material difference in information presented. The average balance of loans
includes loans on which the Company has discontinued accruing interest. The
yield and cost include fees, which are considered adjustments to yields.
14
THREE MONTHS ENDED JUNE 30,
-----------------------------------------------------------------------------------
2004 2003
--------------------------------------------- --------------------------------------
AVERAGE ANNUALIZED AVG. AVERAGE ANNUALIZED AVG.
BALANCE INTEREST YIELD/COST BALANCE INTEREST YIELD/COST
-------------- ------------ ------------------------------------------------------
(DOLLARS IN THOUSANDS)
Assets
Loans receivable (1) $358,208 $5,416 6.05% $296,122 $4,866 6.59%
Investment securities (2) 145,340 1,260 3.46% 167,673 1,596 3.82%
Federal funds 16,049 36 0.89% 18,997 54 1.14%
-------------- ------------ ------------ ----------
Total interest-earning assets 519,597 6,712 5.17% 482,792 6,516 5.41%
Non-interest-earning assets 28,267 28,981
-------------- ------------
Total assets $547,864 $511,773
============== ============
Liabilities and Equity
Deposits:
NOW accounts $21,411 $18 0.34% $21,756 $25 0.47%
Savings and club accounts 133,955 199 0.60% 130,943 320 0.98%
Money market accounts 30,772 66 0.86% 25,490 62 0.97%
Certificates of deposit 178,087 835 1.88% 162,100 865 2.14%
-------------- ------------ ------------ ----------
Total deposits 364,225 1,118 1.23% 340,289 1,272 1.50%
Mortgagor's deposits 2,421 7 1.16% 2,245 4 0.77%
Guaranteed beneficial interest in
junior subordinated debentures 12,746 153 4.81% - - 0.00%
Borrowed money 89,397 890 3.99% 100,511 954 3.81%
-------------- ------------ ------------ ----------
Total interest-bearing liabilities 468,789 2,168 1.86% 443,045 2,230 2.02%
Non-interest-bearing DDA accounts 23,398 20,293
Other non-interest-bearing liabilities 10,778 7,371
-------------- ------------
Total liabilities 502,965 470,709
Stockholders' equity 44,899 41,064
-------------- ------------
Total liabilities and stockholders' equity $547,864 $511,773
============== ------------ ============ ----------
Net interest income $4,544 $4,286
============ ==========
Interest rate spread 3.31% 3.39%
=============== ==============
Net interest margin 3.49% 3.55%
=============== ==============
Ratio of average interest-earning assets to
deposits and interest-bearing liabilities 1.11x 1.09x
============ ==========
(1) Includes non-accrual loans.
(2) Includes FHLB-NY stock.
15
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 2004 AND
2003
OVERVIEW. Net income for the three-month period ended June 30, 2004 was
$1.1 million, substantially unchanged from the corresponding prior year period.
These results were achieved primarily due to an increase in interest income of
$196,000 and a decrease in interest expense of $62,000, offset by an increase in
non-interest expense of $158,000 and an increase in income tax expense of
$104,000. Net income available to common stockholders (after adjustment for
dividends payable on the Company's preferred stock) was $1.0 million, or $0.42
per diluted common share, substantially unchanged from the corresponding prior
year period. Selected operating ratios for the three months ended June 30, 2004
and 2003 are set forth in the table below. The following analysis discusses the
changes in components of operating results giving rise to net income.
THREE MONTHS ENDED
SELECTED OPERATING RATIOS: JUNE 30,
2004 2003
--------------- -------------
Return on average assets(1) 0.79% 0.85%
Return on average equity(1) 9.64 10.59
Interest rate spread(1) 3.31 3.39
Net interest margin(1) 3.49 3.55
Operating expenses to average assets(1) 2.88 2.95
Equity-to-assets 8.04 8.09
Efficiency ratio 69.29 69.66
Average interest-earning assets to
interest-bearing liabilities 1.11x 1.09x
(1) Annualized
INTEREST INCOME. Interest income increased by $196,000, or 3.0%, to
$6.7 million for the three months ended June 30, 2004 compared to $6.5 million
in the prior year period. Interest income increased primarily as a result of
higher average real estate mortgage loan balances partially offset by a decline
in average securities balances compared to the prior year period. The average
balance of interest-earning assets increased by $36.8 million, or 7.6%, to
$519.6 million for the three months ended June 30, 2004 compared to $482.8
million for the prior year period. The change in total interest income was also
impacted by the 24 basis point decrease in the annualized average yield on
interest-earning assets to 5.17% for the three months ended June 30, 2004
compared to 5.41% for the prior year period. Net interest margin declined six
basis points to 3.49% for the three months ended June 30, 2004 compared to 3.55%
for the prior year period, resulting from lower interest rates.
Interest income on loans increased by $550,000, or 11.3%, to $5.4
million for the three months ended June 30, 2004 compared to $4.9 million for
the prior year period. The change was primarily due to an increase in average
mortgage loan balances of $62.1 million to $358.2 million compared to $296.1
million for the prior year period partially offset by lower interest rates,
which resulted in decreased yields in the loan portfolio. The annualized average
yield on loans for the three months ended June 30, 2004 declined 54 basis points
to 6.05% compared to 6.59% for the prior year period.
Interest income on investment securities decreased by $336,000, or
21.1%, to $1.3 million for the three months ended June 30, 2004 compared to $1.6
million for the prior year period. The change was primarily due to a 36 basis
point decrease in the annualized average yield on securities to 3.46% from 3.82%
in the prior year period and a decrease of $22.3 million, or 13.3%, in the
average balance of investment securities to $145.3 million compared to $167.7
million in the prior year period. The decrease in the average balance of
securities, primarily mortgage-backed securities, reflects the execution of our
strategy to invest cash flows from securities into higher yielding mortgage
loans when prudent to do so. Additionally, yields and income were impacted by
prepayment activity, which has shortened the anticipated life of mortgage-backed
securities and accelerated premium amortization.
16
Interest income on federal funds sold decreased by $18,000, or 33.3%,
to $36,000 for the three months ended June 30, 2004 compared to $54,000 for the
prior year period. The decline was primarily attributable to a decrease of 25
basis points in the annualized yield on federal funds sold and a decrease in the
average balance of federal funds of $2.9 million, or 15.5%, to $16.0 million
from $19.0 million in the prior year period.
INTEREST EXPENSE. Total interest expense was $2.2 million for the three
months ended June 30, 2004, substantially unchanged from the prior year period.
Primarily due to the lower interest rate environment, the annualized average
cost of interest-bearing liabilities decreased 16 basis points to 1.86% from
2.02% for the prior year period offset by an increase in the average balance of
interest-bearing liabilities of $25.7 million, or 5.8%, to $468.8 million from
$443.0 million during the prior year period.
Interest expense on deposits decreased $151,000, or 11.8%, to $1.1
million for the three months ended June 30, 2004 compared to $1.3 million for
the prior year period. The decrease in interest expense on deposits was due
primarily to a 27 basis point decline in the rate paid on deposits to 1.23%
compared to 1.50% for the prior year period, partially offset by a $23.9 million
increase in the average balance of interest-bearing deposits to $364.2 million
for the three months ended June 30, 2004 from $340.3 million for the prior year
period. Customer deposits have historically provided Carver with a relatively
low cost funding source from which its net interest income and net interest
margin have benefited. The Bank has achieved success in growing core deposits,
including new deposits from the branch opened in fiscal 2004, thereby benefiting
net interest income and net interest margin. See "Liabilities and Stockholders'
Equity--Liabilities."
Interest expense on advances and other borrowed money increased
$89,000, or 9.3%, to $1.0 million for the three months ended June 30, 2004
compared to $954,000 for the prior year period. This was primarily due to an
increase of $153,000 for debt service related to the issuance of $13 million in
subordinated debentures raised by the Company through an issuance of trust
preferred securities in September 2003 and an increase of 18 basis points in the
cost of borrowed money from FHLB-NY advances to 3.99% from 3.81% for the prior
year period. See "Liabilities and Stockholders' Equity--Liabilities." This was
partially offset by a decrease of $11.1 million in the average balance of
borrowed money from FHLB-NY advances to $89.4 million from $100.5 million for
the corresponding prior year period.
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES. Net interest
income before the provision for loan losses increased $258,000, or 6.0%, to $4.5
million for the three months ended June 30, 2004 compared to $4.3 million for
the prior year period as interest rates declined and deposits and short term
borrowings repriced faster than our longer term interest-earning assets coupled
with an overall increase in the average balance of interest-earning assets. The
Company's annualized average interest rate spread decreased by eight basis
points to 3.31% for the three months ended June 30, 2004 compared to 3.39% for
the corresponding prior year period. Our net interest margin, represented by
annualized net interest income divided by average total interest-earning assets,
decreased six basis points to 3.49% for the three months ended June 30, 2004
from 3.55% for the corresponding prior year period.
PROVISION FOR LOAN LOSSES AND ASSET QUALITY. The Company did not
provide for additional loan loss reserves for the three months ended June 30,
2004 or 2003 as the Company considers the overall allowance for loan losses to
be adequate. During the first quarter of fiscal 2005, the Company recorded net
charge-offs of $20,000 compared to $36,000 for the prior year period. At June
30, 2004, the Bank's allowance for loan losses was $4.1 million, substantially
unchanged from March 31, 2004.
At June 30, 2004, non-performing assets totaled $1.9 million, or 0.50%
of total loans receivable, compared to $2.1 million, or 0.60% of total loans
receivable, at March 31, 2004. Non-performing assets include loans 90 days past
due, non-accrual loans and other real estate owned. Other real estate owned
consists of property acquired through foreclosure or deed in lieu of
foreclosure. The Bank had no foreclosed real estate as of June 30, 2004. As a
result of a property tax redemption, the Bank anticipates taking fee ownership
of a vacant tract of land in Bayshore, NY by the end of fiscal 2005. Future
levels of non-performing assets will be influenced by economic conditions,
including the impact of those conditions on our customers, interest rates and
other internal and external factors existing at the time.
At June 30, 2004, the allowance for loan losses of $4.1 million
decreased $20,000 from March 31, 2004 due to net charge-offs in the first
quarter of fiscal 2005. The ratio of the allowance for loan losses to
non-performing loans was 217.8% at June 30, 2004 compared to 194.3% at March 31,
2004. The ratio of the allowance for loan losses to total loans was 1.10% at
June 30, 2004 compared to 1.16% at March 31, 2004.
Management's judgment in determining the adequacy of the allowance for
loan losses is based on an evaluation of certain individual loans, the risk
characteristics and size of the loan portfolio, an assessment of current
economic and real estate market conditions, estimates of the current value of
underlying collateral, past loan loss experience, review of
17
regulatory authority examination reports and other relevant factors. Based on
the process employed, management believes that the allowance for loan losses is
adequate under prevailing economic conditions to absorb losses on existing loans
that may become uncollectible. While management estimates loan losses using the
best available information, no assurance can be made that future adjustments to
the allowance will not be necessary based on growth and change in composition of
the loan portfolio, changes in economic and real estate market conditions,
further information obtained regarding known problem loans, identification of
additional problem loans, results of regulatory examinations and other factors,
both within and outside of management's control.
NON-INTEREST INCOME. Total non-interest income in the first quarter of
fiscal 2005 was substantially unchanged at $1.1 million compared to the prior
year period. This result was achieved primarily from a gain resulting from the
sale of investment securities of $94,000 and additional deposit fees and charges
of $36,000, largely offset by a reduction in loan fees and service charges of
$123,000. The additional deposit fees and charges resulted from increases in ATM
and debit card fees arising from greater transaction volume. The addition of two
new ATM centers in fiscal 2004 contributed to the increased ATM transaction
volume. The $123,000 reduction in loan fees and service charges was largely
attributable to the expected decrease in mortgage prepayment penalty income
amounting to $264,000, partially offset by the recognition of $116,000 of income
from mortgage servicing rights on prior period sales of fixed rate loans where
servicing rights were retained. Mortgage prepayment penalty income declined from
the slowing of refinancing activity due to the slightly higher interest rate
environment during the first quarter of fiscal 2005. Non-interest income
represented 14.5% of revenue (interest income plus non-interest income) for the
first quarter of fiscal 2005 compared to 14.9% for the corresponding prior year
period.
NON-INTEREST EXPENSE. For the quarter ended June 30, 2004, total
non-interest expense increased $158,000, or 4.2%, to $3.9 million compared to
$3.8 million for the prior year period. The increase in non-interest expense was
primarily due to a rise of $196,000 in employee compensation and benefit
expense, resulting from salary increases effective as of September 1, 2003, new
hires at higher average salaries and increases in the costs to provide employee
benefits. Additionally, net occupancy and supplies expense increased $80,000 and
$20,000, respectively, primarily as a result of additional expenses incurred for
the new Jamaica Center branch. These increases in non-interest expense were
partially offset by $117,000 lower consulting fees and a decrease in legal
expenses of $61,000, due to the favorable disposition of certain lawsuits,
compared to the prior year period.
INCOME TAX EXPENSE. For the three-month period ended June 30, 2004,
income before taxes increased $99,000, or 6.0%, to $1.7 million compared to $1.6
million for the prior year period. Income tax expense increased $104,000, or
18.6%, to $663,000 compared to $559,000 for the prior year period. For the
three-month period ended June 30, 2004, the Company accrued for Federal, New
York State and New York City income tax expense at a combined total tax rate of
38%. For the three-month period ended June 30, 2003, the Company's combined tax
rate was 34%, or 4% lower than the current year, which at the time enabled the
Company to reduce its tax provision to be in line with anticipated income tax
liabilities.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Quantitative and qualitative disclosure about market risk is presented
at March 31, 2004 in Item 7A of the Company's 2004 10-K and is incorporated
herein by reference. The Company believes that there have been no material
changes in the Company's market risk at June 30, 2004 compared to March 31,
2004.
ITEM 4. 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 Securities Exchange Act of 1934 ("Exchange Act") is recorded,
processed, summarized and reported within the time periods specified in the
rules and forms of the SEC. As of June 30, 2004, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Financial Officer, of the
effectiveness of the Company's 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 Company's disclosure controls and
procedures were effective to ensure that information required to be disclosed in
the reports we file and submit under the Exchange Act is recorded, processed,
summarized and reported as and when required and that such information is
accumulated and communicated to our management as appropriate to allow timely
decisions regarding required disclosure.
18
There were no changes in our internal control over financial reporting
that occurred during the period covered by this report that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Disclosure regarding legal proceedings that the Company is a party to
is presented in Note 13 to our audited Consolidated Financial Statements in the
2004 10-K and is incorporated herein by reference. Except as set forth below,
there have been no material changes with regard to such legal proceedings since
the filing of the 2004 10-K.
In January 2004, Michael Lee & Company, former accountants for Hale
House Center, Inc. ("Michael Lee"), filed an action against Carver Federal in
New York County Supreme Court, asserting a single claim for contribution against
Carver Federal. The complaint alleges that Carver Federal should be liable to
Michael Lee in the event that Michael Lee is found liable to non-parties Hale
House Center, Inc. and its affiliated corporations ("Hale House plaintiffs") in
a separate action that the Hale House plaintiffs have filed against Michael Lee
asserting claims of professional malpractice and breach of contract due to
Michael Lee's alleged provision of deficient accounting services to Hale House.
The basis of Michael Lee's contribution claim against Carver Federal is that
Carver Federal allegedly breached a legal duty it owed Hale House by improperly
opening and maintaining a checking account on behalf of one of the Hale House
affiliates. Michael Lee seeks contribution from Carver Federal in the amount of
at least $8.5 million or the amount of any money judgment entered against
Michael Lee in favor of the Hale House plaintiffs. On February 4, 2004 Carver
Federal filed a motion to dismiss the complaint in its entirety and, on February
11, 2004, Michael Lee served a cross-motion for summary judgment against Carver
Federal. In May 2004, the court ruled in favor of Carver Federal and judgment
was entered in Carver Federal's favor on June 14, 2004. Michael Lee has appealed
the judgment. In the opinion of management, after consultation with legal
counsel, the lawsuit is without merit and the ultimate outcome of this matter is
not expected to have a material adverse effect on the Company's results of
operations, business operations or consolidated financial condition.
ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY
SECURITIES
During the quarter ended June 30, 2004, the Holding Company purchased
1,350 additional shares of its common stock under its stock repurchase program
announced on August 6, 2002. As a part of its repurchase program, the Holding
Company was approved to purchase up to 231,635 shares of its common stock. To
date, Carver has purchased 30,450 shares of its common stock in open market
transactions at an average price of $14.14 per share. The Holding Company
intends to use repurchased shares to fund its stock-based benefit and
compensation plans and for any other purpose the Board of Directors of the
Holding Company deems advisable in compliance with applicable law. The following
table sets forth the Holding Company's purchases of its equity securities during
the first quarter of fiscal 2005.
ISSUER PURCHASES OF EQUITY SECURITIES
- ----------------------------------------------------------------------------------------------------------------
Total number of Maximum number of
shares as part of shares that may
Total number of Average price publicly announced yet be purchased
Period shares purchased paid per share plan under the plan
- ----------------------------------------------------------------------------------------------------------------
April 1, 2004 to April 30, 2004 - - - 202,535
May 1, 2004 to May 31, 2004 750 20.10 750 201,785
June 1, 2004 to June 30, 2004 600 21.10 600 201,185
19
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Effective July 30, 2004, Devon Woolcock, Senior Vice President and
Chief of Retail Banking, resigned from the Holding Company and Carver Federal to
pursue other opportunities. Management is searching for a new Chief of Retail
Banking.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are submitted with this report:
Exhibit 11. Computation of Net Income Per Share.
Exhibit 31.1 Certification of Chief Executive Officer.
Exhibit 31.2 Certification of Chief Financial Officer.
Exhibit 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.
Exhibit 32.2(*) Written Statement of Chief Financial Officer
furnished pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C.
Section 1350.
* Pursuant to SEC rules, this exhibit will not be deemed filed for purposes
of Section 18 of the Exchange Act or be otherwise subject to the liability
of that section.
(b) Current Reports on Form 8-K.
We furnished the following Current Reports on Form 8-K during the quarter ended
June 30, 2004:
1. Current report on Form 8-K, dated June 3, 2004, which includes
information being filed pursuant to Item 5, an announcement of the sale
of our Series B Convertible Preferred Stock.
2. Current report on Form 8-K, dated April 30, 2004, which includes
information being filed pursuant to Item 12 but was filed under Item 9,
an announcement of our financial results for the fourth quarter ended
March 31, 2004.
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARVER BANCORP, INC.
Date: August 16, 2004 /s/ Deborah C. Wright
-------------------------------------------
Deborah C. Wright
President and Chief Executive Officer
Date: August 16, 2004 /s/ William C. Gray
-------------------------------------------
William C. Gray
Senior Vice President and Chief Financial Officer
21
EXHIBIT 11
COMPUTATION OF NET INCOME PER SHARE
FOR THREE MONTHS ENDED JUNE 30, 2004 AND 2003
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
THREE MONTHS ENDED
JUNE 30,
---------------------------------
2004 2003
---------------- ----------------
EARNINGS PER COMMON SHARE - BASIC
Net income $1,082 $1,087
Preferred dividends (49) (49)
---------------- ----------------
Net income - basic $1,033 $1,038
---------------- ----------------
Weighted average common shares
outstanding - basic 2,284,504 2,288,915
---------------- ----------------
Earning per common share - basic $0.45 $0.45
================ ================
EARNINGS PER COMMON SHARE - DILUTED
Net income - basic $1,033 $1,038
Preferred dividends 49 49
---------------- ----------------
Net income- diluted $1,082 $1,087
---------------- ----------------
Weighted average common shares
outstanding - basic 2,284,504 2,288,915
Effect of dilutive securities - convertible
preferred stock 208,333 208,333
Effect of dilutive securities - options 108,208 63,094
---------------- ----------------
Weighted average shares
outstanding - diluted 2,601,045 2,560,342
---------------- ----------------
Earning per common share-diluted $0.42 $0.42
================ ================
E-1
EXHIBIT 31.1
- --------------------------------------------------------------------------------
CERTIFICATIONS
I, Deborah C. Wright, President and Chief Executive Officer of Carver Bancorp,
Inc., certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Carver Bancorp, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) (paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986)
c) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal controls over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: August 16, 2004 /s/ Deborah C. Wright
---------------------------
Deborah C. Wright
President and
Chief Executive Officer
E-2
EXHIBIT 31.2
- --------------------------------------------------------------------------------
CERTIFICATIONS
I, William C. Gray, Senior Vice President and Chief Financial Officer of Carver
Bancorp, Inc., certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Carver Bancorp, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) (paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986)
c) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal controls over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: August 16, 2004 /s/ William C. Gray
--------------------------
William C. Gray
Senior Vice President and
Chief Financial Officer
E-3
EXHIBIT 32.1
WRITTEN STATEMENT FURNISHED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350
The undersigned, Deborah C. Wright, is the President and Chief
Executive Officer of Carver Bancorp, Inc. (the "Company").
This statement is being furnished in connection with the filing by the
Company of the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2004 (the "Report").
By execution of this statement, I certify that:
a) the Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 (15 U.S.C. 78m(a) or 78o(d)); and
b) the information contained in the Report fairly
presents, in all material respects, the financial
condition and results of operations of the Company as
of the dates and for the periods covered by the
Report.
August 16, 2004 /s/ Deborah C. Wright
Dated -------------------------
Deborah C. Wright
E-4
EXHIBIT 32.2
WRITTEN STATEMENT FURNISHED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350
The undersigned, William C. Gray, is the Senior Vice President and
Chief Financial Officer of Carver Bancorp, Inc. (the "Company").
This statement is being furnished in connection with the filing by the
Company of the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2004 (the "Report").
By execution of this statement, I certify that:
a) the Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 (15 U.S.C. 78m(a) or 78o(d)); and
b) the information contained in the Report fairly
presents, in all material respects, the financial
condition and results of operations of the Company as
of the dates and for the periods covered by the
Report.
August 16, 2004 /s/ William C. Gray
Dated -------------------------
William C. Gray
E-5