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, 2003
|_| 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 |X| 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 |X| 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 2,282,633
- ---------------------------- ---------
Class Outstanding at July 31, 2003
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, 2003 (unaudited) and March 31, 2003...........................................1
Consolidated Statements of Income for the Three Months
Ended June 30, 2003 and 2002 (unaudited)...............................................2
Consolidated Statement of Changes in Stockholders' Equity and
Comprehensive Income for the Three Months Ended June 30, 2003 (unaudited)..............3
Consolidated Statements of Cash Flows for the Three Months
Ended June 30, 2003 and 2002 (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.....................................16
Item 4. Controls and Procedures........................................................................17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..............................................................................17
Item 2. Changes in Securities and Use of Proceeds......................................................17
Item 3. Defaults Upon Senior Securities................................................................17
Item 4. Submission of Matters to a Vote of Security Holders............................................17
Item 5. Other Information..............................................................................17
Item 6. Exhibits and Reports on Form 8-K...............................................................18
SIGNATURES.......................................................................................................19
EXHIBITS.........................................................................................................20
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except per share data)
June 30, March 31,
2003 2003
--------- ---------
ASSETS (Unaudited)
Cash and cash equivalents:
Cash and due from banks $ 13,981 $ 17,660
Federal funds sold 13,700 5,500
--------- ---------
Total cash and cash equivalents 27,681 23,160
--------- ---------
Securities:
Available-for-sale, at fair value (including pledged as collateral of
$124,719 at June 30, 2003 and $124,139 at March 31, 2003) 126,347 129,055
Held-to-maturity, at amortized cost (including pledged as collateral of
$33,098 at June 30, 2003 and $35,138 at March 31, 2003; fair value
of $34,827 at June 30, 2003 and $37,543 at March 31, 2003) 34,457 36,530
--------- ---------
Total securities 160,804 165,585
--------- ---------
Loans receivable:
Real estate mortgage loans 304,456 294,710
Consumer and commercial business loans 2,150 2,186
Allowance for loan losses (4,123) (4,158)
--------- ---------
Total loans receivable, net 302,483 292,738
--------- ---------
Office properties and equipment, net 10,220 10,193
Federal Home Loan Bank of New York ("FHLB-NY") stock, at cost 5,102 5,440
Accrued interest receivable 2,762 3,346
Identifiable intangible assets, net 124 178
Other assets 5,990 9,205
--------- ---------
Total assets $ 515,166 $ 509,845
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 362,848 $ 347,164
Advances from the FHLB-NY and other borrowed money 102,195 108,996
Other liabilities 8,459 12,612
--------- ---------
Total liabilities 473,502 468,772
--------- ---------
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; 2,282,633 and 2,296,960 shares
outstanding at June 30, 2003 and March 31, 2003, respectively) 23 23
Additional paid-in capital 23,803 23,781
Retained earnings 17,586 16,712
Unamortized awards of common stock under management recognition plan ("MRP") (40) (4)
Treasury stock, at cost (33,725 shares at June 30, 2003 and
19,398 shares at March 31, 2003) (423) (190)
Accumulated other comprehensive income 714 750
--------- ---------
Total stockholders' equity 41,664 41,073
--------- ---------
Total liabilities and stockholders' equity $ 515,166 $ 509,845
========= =========
See accompanying notes to consolidated financial statements.
1
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three Months Ended
June 30,
2003 2002
------ ------
Interest Income:
Loans $4,866 $5,378
Total securities 1,596 1,280
Federal funds sold 54 110
------ ------
Total interest income 6,516 6,768
------ ------
Interest expense:
Deposits 1,272 1,602
Advances and other borrowed money 958 736
------ ------
Total interest expense 2,230 2,338
------ ------
Net interest income 4,286 4,430
Provision for loan losses -- --
------ ------
Net interest income after provision for loan losses 4,286 4,430
------ ------
Non-interest income: (1)
Depository fees and charges 484 404
Loan fees and service charges 646 547
Other 10 2
------ ------
------ ------
Total non-interest income 1,140 953
------ ------
Non-interest expense: (1)
Compensation and benefits 1,805 1,673
Net occupancy expense 324 336
Equipment 382 418
Other 1,269 1,368
------ ------
Total non-interest expense 3,780 3,795
------ ------
Income before income taxes 1,646 1,588
Income taxes 559 714
------ ------
Net income $1,087 $ 874
====== ======
Dividends applicable to preferred stock $ 49 $ 49
------ ------
Net income available to common stockholders $1,038 $ 825
====== ======
Earnings per common share:
Basic $ 0.45 $ 0.36
====== ======
Diluted $ 0.42 $ 0.35
====== ======
(1) Reclassifications have been made to prior year periods to conform with
current periods.
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, 2003 $ 1 $23 $23,781 $ 16,712 ($190) $ 750 ($4) $ 41,073
Comprehensive income:
Net Income for the period
ended June 30, 2003 -- -- -- 1,087 -- -- -- 1,087
Change in net unrealized gain on
securities, net of taxes -- -- -- -- -- (36) -- (36)
Dividends paid -- -- -- (213) -- -- -- (213)
Treasury stock activity -- -- -- -- (233) -- -- (233)
Allocation of shares for MRP -- -- 22 -- -- -- (36) (14)
---- --- ------- -------- ----- ----- ---- --------
Balance-June 30, 2003 $ 1 $23 $23,803 $ 17,586 ($423) $ 714 ($40) $ 41,664
==== === ======= ======== ===== ===== ==== ========
See accompanying notes to consolidated financial statements.
3
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended June 30,
---------------------------
2003 2002
---- ----
Cash flows from operating activities:
Net income $ 1,087 $ 874
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses -- --
ESOP and MRP expense 14 75
Depreciation and amortization expense 284 286
Amortization of intangibles 54 53
Other amortization (accretion) 752 186
Changes in assets and liabilities:
Decrease in accrued interest receivable 584 349
Decrease in other assets 3,271 126
Decrease in other liabilities (4,203) (2,487)
-------- --------
Net cash provided by (used in) operating activities 1,843 (538)
-------- --------
Cash flows from investing activities:
Purchases of securities:
Available-for-sale (23,307) --
Held-to-maturity -- (22)
Proceeds from principal payments, maturities and calls of securities:
Available-for-sale 25,461 8,470
Held-to-maturity 2,028 1,223
Disbursements for loan originations (12,618) (19,373)
Loans purchased from third parties (27,536) --
Principal collections on loans 30,256 29,712
Sale of FHLB-NY stock 338 550
Proceeds from loans sold -- 984
Additions to premises and equipment (311) (244)
-------- --------
Net cash (used in) provided by investing activities (5,689) 21,300
-------- --------
Cash flows from financing activities:
Net increase in deposits 15,684 5,135
Advances from FHLB-NY and other borrowed money 5,000 --
Repayment of FHLB-NY advances and other borrowed money (11,801) (15,051)
Purchase of treasury stock (303) --
Dividends paid (213) (98)
-------- --------
Net cash provided by (used in) financing activities 8,367 (10,014)
-------- --------
Net increase in cash and cash equivalents 4,521 10,748
Cash and cash equivalents at beginning of the period 23,160 34,851
-------- --------
Cash and cash equivalents at end of the period $ 27,681 $ 45,599
======== ========
Supplemental information:
Noncash Transfers-
Change in unrealized gain on valuation of available-for-sale
investments, net ($36) $ 210
Cash paid for-
Interest paid 2,206 2,338
Income taxes paid 2,825 778
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" or "Bancorp"), 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. In the opinion of management, all adjustments (consisting of normal
recurring adjustments) necessary for fair presentation 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, 2003 ("2003 10-K") previously filed with the SEC. The consolidated
results of operations and other data for the three-month period ended June 30,
2003 are not necessarily indicative of results that may be expected for the
entire fiscal year ending March 31, 2004 ("fiscal 2004"). The 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") and Alhambra Holding Corp., a Delaware corporation which is
inactive, and the Bank's wholly owned subsidiaries, CFSB Realty Corp., CFSB
Credit Corp. and 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. We have no unconsolidated subsidiaries or
unconsolidated special purpose entities. 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.
(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, 2003 and
2002, 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, 2003 and 2002, 208,333 shares of
common stock potentially issuable from the conversion of preferred stock and
63,094 shares of common stock at June 30, 2003 potentially issuable from the
exercise 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, 2003 were
considered in determining the diluted net income per common share.
(3) RECENT ACCOUNTING PRONOUNCEMENTS
ACCOUNTING FOR STOCK BASED COMPENSATION
In December 2002, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 148, "ACCOUNTING FOR STOCK-BASED COMPENSATION - TRANSITION AND
DISCLOSURE" ("SFAS 148"). SFAS 148 amends SFAS No. 123, "ACCOUNTING FOR
STOCK-BASED COMPENSATION" ("SFAS 123") to provide alternative methods of
transition for a voluntary change to the fair value method of accounting for
stock-based compensation. It also amends the disclosure provisions of SFAS 123
to require prominent disclosure in both annual and interim financial statements
about the method of accounting for stock-based compensation and the effect of
the method used on reported results.
The transitional requirements of SFAS 148 were effective for all
financial statements for fiscal years ending after December 15, 2002. We have
elected not to adopt the fair value method, and continue to account for
stock-based compensation plans using the intrinsic value method, as permitted.
Accordingly, compensation expense has not been recognized in the accompanying
statements of income for stock-based compensation plans, other than
5
for restricted stock awards. Restricted stock awards are recorded as deferred
compensation, a component of stockholders' equity, at the fair value of these
awards at the date of grant and are amortized to compensation expense over the
awards' specified vesting periods.
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 regards to stock-based compensation
has been to grant stock options and restricted stock awards at year-end. Since
stock options are typically awarded at year-end and contain a nominal vesting
period, no pro forma compensation expense and its related effect on net income
and earnings per share has 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
2003 10-K.
GUARANTOR'S ACCOUNTING AND DISCLOSURE REQUIREMENTS FOR GUARANTEES, INCLUDING
INDIRECT GUARANTEES OF INDEBTNESS OF OTHERS
In November 2002, the Financial Accounting Standards Board ("FASB")
issued Interpretation No. 45, "GUARANTOR'S ACCOUNTING AND DISCLOSURE
REQUIREMENTS FOR GUARANTEES, INCLUDING INDIRECT GUARANTEES OF INDEBTNESS OF
OTHERS" ("FIN 45"), which addresses the disclosure to be made by a guarantor in
its interim and annual financial statements about its obligations under
guarantees. FIN 45 also requires the recognition of a liability by a guarantor
at the inception of certain guarantees.
FIN 45 requires the guarantor to recognize a liability for the
non-contingent component of the guarantee; this is the obligation to stand ready
to perform in the event that specified triggering events or conditions occur.
The initial measurement of this liability is the fair value of the guarantee at
inception. The recognition of the liability is required even if it is not
probable that payments will be required under the guarantee or if the guarantee
was issued with a premium payment or as part of a transaction with multiple
elements.
The Company has adopted the disclosure requirements of FIN 45 and will
apply the recognition and measurement provisions for all guarantees entered into
or modified after March 31, 2003. As of June 30, 2003, the Company maintained
one letter of credit in the amount of $1.9 million. The adoption of this
interpretation had no significant effect on the Company's earnings or financial
position.
ACQUISITIONS OF CERTAIN FINANCIAL INSTITUTIONS
In October 2002, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 147, "ACQUISITIONS OF CERTAIN FINANCIAL INSTITUTIONS."
SFAS No. 147 amends SFAS No. 72, "Accounting for Certain Acquisitions of Banking
or Thrift Institutions," SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets", and FASB Interpretation No. 9, "Applying APB
Opinions Nos. 16 and 17 When a Savings and Loan Association or a Similar
Institution is Acquired in a Business Combination Accounted for by the Purchase
Method." SFAS No. 147 removes acquisitions of financial institutions, other than
transactions between two or more mutual enterprises, from the scope of SFAS No.
72 and FASB Interpretation No. 9. SFAS No. 147 also amends SFAS No. 144 to
include long-term customer-relationship intangible assets such as depositor- and
borrower-relationship intangible assets and credit card holder intangible
assets. The provisions of SFAS No. 147 became effective October 1, 2002. The
adoption of this statement had no significant effect on the Company's earnings
or financial position.
ACCOUNTING FOR COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES
In June 2002, the FASB issued SFAS No. 146, "ACCOUNTING FOR COSTS
ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES." The Statement requires companies
to recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
Examples of costs covered by this standard include lease termination costs and
certain employee severance costs that are associated with a restructuring,
discontinued operation, plant closing or other exit or disposal activity.
Previous accounting guidance was provided by Emerging Issues Task Force ("EITF")
Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." SFAS No. 146 replaces EITF Issue No. 94-3. SFAS No. 146 is to
be applied prospectively to exit or disposal activities initiated after December
31, 2002.
6
RESCISSION OF FASB STATEMENTS NO. 4, 44, AND 64, AMENDMENT OF FASB STATEMENT NO.
13, AND TECHNICAL CORRECTIONS
In April 2002, the FASB issued SFAS No. 145, "RESCISSION OF FASB
STATEMENTS NO. 4, 44, AND 64, AMENDMENT OF FASB STATEMENT NO. 13, AND TECHNICAL
CORRECTIONS." The Statement updates, clarifies and simplifies existing
accounting pronouncements. SFAS No. 145 rescinds SFAS No. 4, "Reporting Gains
and Losses from Extinguishment of Debt," which required all gains and losses
from extinguishment of debt to be aggregated and, if material, classified as an
extraordinary item, net of related income tax effect. As a result, the criteria
in Accounting Principles Board Opinion ("APB") No. 30, "Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions," will now be used to classify those gains and
losses. SFAS No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirements," amended SFAS No. 4 and is no longer necessary because SFAS No. 4
has been rescinded. SFAS No. 145 amends SFAS No. 13, "Accounting for Leases," to
require that certain lease modifications that have economic effects similar to
sale-leaseback transactions be accounted for in the same manner as
sale-leaseback transactions. This amendment is consistent with the FASB's goal
of requiring similar accounting treatment for transactions that have similar
economic effects. SFAS No. 145 also makes technical corrections to existing
pronouncements. While those corrections are not substantive in nature, in some
instances they may change accounting practice. The provisions of SFAS No. 145
are effective for fiscal years beginning after May 15, 2002. The adoption of
this statement had no significant effect on the Company's earnings or financial
position.
ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS
In August 2001, the FASB issued SFAS No. 144 "ACCOUNTING FOR THE
IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS" ("SFAS 144"). SFAS 144 addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets and resolves accounting and implementation issues related to previous
pronouncements. More specifically, it: (a) eliminates the allocation of goodwill
to long-lived assets to be tested for impairment; and (b) details both a
probability-weighted and primary asset approach to estimate cash flows in
testing for impairment of a long-lived asset. SFAS 144 is effective for
financial statements issued for fiscal years beginning after December 15, 2001.
The adoption of this statement had no significant effect on the Company's
earnings or financial position.
ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS
In June 2001, the FASB issued SFAS No. 143 "ACCOUNTING FOR ASSET
RETIREMENT OBLIGATIONS" ("SFAS 143"). SFAS 143 addresses financial accounting
and reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. SFAS 143 is
effective for financial statements issued for fiscal years beginning after June
15, 2002. The adoption of this statement had no significant effect on the
Company's earnings or financial position.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
EXPLANATORY NOTE
This Quarterly Report on Form 10-Q contains forward-looking statements
as that term is defined in the Private Securities Litigation Reform Act of 1995.
In addition, senior management may make forward looking statements verbally to
analysts, investors, the media and others. Such forward-looking statements may
be identified by the use of such words as "believe," "expect," "anticipate,"
"intend," "should," "could," "plan," "estimate," "potential" and similar terms
and phrases, or future or conditional verbs such as "will," "would," "should,"
"could," or "may." Such forward-looking statements are subject to risks and
uncertainties, many of which are beyond our control, which could cause actual
results to differ materially from those currently anticipated due to a number of
factors. Factors which could result in material variations include, but are not
limited to, the Company's success in implementing its initiatives, including
expanding its product line, successfully opening new ATM centers, successfully
rebranding its image and achieving greater operating efficiencies; changes in
interest rates which could affect net interest margins and net interest income;
competitive factors which could affect net interest income and non-interest
income; general economic conditions which could affect the volume of loan
origination, deposit flows, real estate values, changes in the quality and
composition of the Bank's loan and investment portfolios; changes in
management's business strategy; the levels of non-interest income and the amount
of loan losses as well as other factors discussed in documents filed by the
Company with the SEC from time to time.
Any forward-looking statements made in this report or incorporated be
reference in this report are made as of the date of this report, and, except as
required by applicable law, we assume no obligation to update the
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.
CRITICAL ACCOUNTING POLICIES
Note 1 to our Consolidated Financial Statements for fiscal 2003
included in our 2003 10-K, as supplemented by this report, contains a summary of
our significant accounting policies. 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. These critical policies and their application are
periodically reviewed with our Finance and Audit Committee and our Board of
Directors.
GENERAL
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 five full-service banking locations in the New York City
boroughs of Brooklyn, Queens and Manhattan.
The 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 also generates other income, such as fee income on
deposit and loan accounts and, to a lesser extent, 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 should be read in conjunction with the
Consolidated Financial Statements, the notes thereto and other financial
information included in the Company's 2003 10-K.
8
COMPARISON OF FINANCIAL CONDITION AT
JUNE 30, 2003 AND MARCH 31, 2003
ASSETS
Total assets increased by $5.3 million, or 1.0%, to $515.2 million at
June 30, 2003 compared to $509.8 million at March 31, 2003. The change was
primarily attributable to increases of $9.7 million and $4.5 million in total
loans receivable, net, and total cash and cash equivalents, respectively,
partially offset by decreases of $4.8 million and $3.2 million in total
securities and other assets, respectively.
Total loans receivable, net, increased $9.7 million, or 3.3%, to $302.5
from $292.7 million at March 31, 2003. The increase resulted from mortgage loan
originations and purchases exceeding loan repayments during the first three
months of fiscal 2004. During the three-month period ended June 30, 2003 loan
purchases and originations were $27.5 million and $12.6 million, respectively,
offset in part by loan repayments of $30.3 million. Loan originations and
purchases were concentrated in one- to four-family and non-residential real
estate mortgage loans, which accounted for $24.2 million of the $40.1 million
originated and purchased during the period. The remaining originations of $15.9
million were primarily construction loans and multifamily real estate loans.
Management has evaluated yields and loan quality in the competitive New York
metropolitan area market and has made decisions in certain instances to purchase
mortgage-backed securities. Management will continue to evaluate the balance of
earning assets allocated to loan originations and purchases as well as
additional purchases of mortgage-backed securities while continuing to assess
yields and economic risk.
Cash and cash equivalents for the three-month period increased $4.5
million from March 31, 2003. This was due to excess liquid assets created by
higher than expected mortgage loan and mortgage-backed security repayments. The
Bank seeks to invest its lower yielding excess liquid assets in the origination
and purchase of mortgage loans and the purchase of mortgage-backed securities.
Total securities decreased $4.8 million, or 2.9%, to $160.8 million
from $165.6 million at March 31, 2003 as repayments and maturities exceeded new
security purchases. The decline can be attributed to the low interest rate
environment, which in turn has accelerated mortgage refinancing and prepayments
of the Company's mortgage backed securities. Principal repayments of mortgage
backed securities of $10.5 million and maturities of investment securities of
$17.0 million were partially offset by new purchases of $23.3 million.
Other assets decreased $3.2 million, or 34.9%, to $6.0 million from
$9.2 million at March 31, 2003. The decrease is primarily due to loans in
process at the end of March 2003 being booked in the quarter ended June 30,
2003.
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
At June 30, 2003, total liabilities increased by $4.7 million, or 1.0%,
to $473.5 million compared to $468.8 million at March 31, 2003. The increase in
liabilities primarily reflects deposit growth of $15.7 million offset by a
decrease of $6.8 million in advances from the Federal Home Loan Bank of New York
("FHLB-NY") and other borrowed money and a decrease of $4.3 million in other
liabilities.
The $15.7 million increase in deposit balances is primarily
attributable to new relationships with corporate and not-for-profit entities
which contributed to increases of $9.8 million in NOW accounts, $4.9 million in
money market accounts and $2.0 million in savings and club accounts. The
increases in core deposits were partially offset by a decrease of $1.0 million
in certificates of deposit accounts. Other factors contributing to deposit
growth include an emphasis on developing depository relationships with borrowers
and the use of special promotions to attract deposits. At June 30, 2003, the
Bank had five branches and one stand-alone ATM center. We believe that deposits
will continue to grow with the addition of new branches and ATM centers coupled
with our business development efforts.
STOCKHOLDERS' EQUITY
Total stockholders' equity increased $591,000, or 1.4%, to $41.7
million at June 30, 2003 compared to $41.1 million at March 31, 2003. The
increase in stockholders' equity was primarily attributable to a $874,000
increase in retained earnings for the three months ended June 30, 2003 partially
offset by a decrease related to the purchase of treasury stock of $233,000
pursuant to the Company' stock repurchase plan and a reduction in
9
accumulated other comprehensive income of $36,000 resulting from a reduction in
net unrealized gains, net of taxes, relating to certain investment and
mortgage-backed 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 to stockholders'
equity, net of taxes.
The Holding Company has purchased 29,100 shares of its common stock in
open market transactions at an average price of $13.84 per share as part of its
repurchase program announced on August 6, 2002. During the quarter ended June
30, 2003, the Company purchased 20,000 additional shares of its common stock.
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.
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
rates, 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 full Board of
Directors.
The economic environment continually presents uncertainties as to
future interest rate trends. ALCO regularly monitors the Company's cumulative
gap position, in addition to utilizing a model that projects net interest income
based on increasing or decreasing interest rates, in order to be able to respond
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 downward fluctuations in deposit accounts and increases
in its loan and investment portfolio. 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, 2003, the Bank had the ability to borrow from
the FHLB-NY an additional $9.8 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, 2003, total cash and cash equivalents increased by $4.5 million.
Net cash provided by operating activities during this period was $1.8 million,
primarily representing decreases in other assets and accrued interest receivable
adjusted for the balances of depreciation and amortization expense and other
amortization offset by decreases in other liabilities. Net cash used in
investing activities was $5.7 million, primarily representing the purchase of
available-for-sale securities, loan purchases and originations offset in part by
principal payments and maturities of securities and principal collections on
loans. Net cash provided by financing activities was $8.4 million, primarily
representing a net increase in deposits offset by a decrease in advances from
the FHLB-NY.
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. 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
10
policy as of June 30, 2003. 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 faces is the
variability in cash flows as a result of mortgage refinance activity. As
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. When mortgage interest rates
increase, the opposite effect tends to occur. 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.
The increase in loan and securities repayments experienced by the Bank over the
past two fiscal years was primarily the result of the increase in mortgage loan
refinancing activity caused by this lower interest rate environment.
The Office of Thrift Supervision, the Bank's primary federal regulator,
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, 2003, the Bank exceeded all
regulatory minimum capital requirements and qualified as a well-capitalized
institution. The table below presents certain information relating to the Bank's
capital compliance at June 30, 2003.
REGULATORY CAPITAL
At June 30, 2003
Amount % of Assets
------ -----------
Total capital (to risk-weighted assets):
Capital level $44,310 14.07%
Less requirement 25,188 8.00
------- -----
Excess $19,122 6.07%
======= =====
Tier 1 capital (to risk-weighted assets):
Capital level $40,372 12.82%
Less requirement 12,594 4.00
------- -----
Excess $27,778 8.82%
======= =====
Tier 1 Leverage capital (to adjusted total assets):
Capital level $40,372 7.83%
Less requirement 20,612 4.00
------- -----
Excess $19,760 3.83%
======= =====
On July 23, 2003, the Board of Directors declared a quarterly dividend
of $0.05 per common share. The dividend will be payable on August 28, 2003 to
shareholders of record at the close of business on August 11, 2003.
11
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 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.
12
Three months ended June 30,
----------------------------------------------------------------------------------
2003 2002
--------------------------------------- --------------------------------------
Average Annualized Avg. Average Annualized Avg.
Balance Interest Yield/Cost Balance Interest Yield/Cost
------- -------- --------------- ------- -------- ---------------
(Dollars in thousands)
Loans receivable (1) $296,122 $4,866 6.59% $285,501 $5,378 7.56%
Investment securities (2) 167,673 1,596 3.82% 100,600 1,280 5.10%
Federal funds 18,997 54 1.14% 26,512 110 1.67%
-------- ------ ---- -------- ------ ----
Total interest earning assets 482,792 6,516 5.41% 412,613 6,768 6.58%
Non-interest earning assets 28,981 29,524
-------- --------
Total assets $511,773 $442,137
======== ========
Liabilities and Equity
Deposits:
NOW accounts $ 21,756 $ 25 0.47% $ 19,674 $ 47 0.96%
Savings and club accounts 130,943 320 0.98% 128,444 443 1.38%
Money market accounts 25,490 62 0.97% 14,788 50 1.36%
Certificates of deposit 162,100 865 2.14% 152,043 1,062 2.80%
-------- ------ ---- -------- ------ ----
Total deposits 340,289 1,272 1.50% 314,949 1,602 2.04%
Mortgagor's deposits 2,245 4 0.77% 2,506 1 0.16%
Borrowed money 100,511 954 3.81% 64,382 735 4.58%
-------- ------ ---- -------- ------ ----
Total interest-bearing liabilities 443,045 2,230 2.02% 381,837 2,338 2.46%
Non-interest-bearing DDA accounts 20,293 13,912
Other non-interest-bearing liabilities 7,371 9,248
-------- --------
Total liabilities 470,709 404,997
Stockholders' equity 41,064 37,140
-------- --------
Total liabilities and stockholders' equity $511,773 $442,137
======== ========
Net interest income $4,286 $4,430
====== ======
Interest rate spread 3.39% 4.12%
==== ====
Net interest margin 3.55% 4.30%
==== ====
Ratio of average interest-earning assets to
deposits and interest-bearing liabilities 1.09x 1.08x
====== ======
(1) Includes non-accrual loans.
(2) Includes FHLB-NY stock.
13
COMPARISON OF OPERATING RESULTS FOR THE
THREE MONTHS ENDED JUNE 30, 2003 AND 2002
OVERVIEW
Selected operating ratios for the three months ended June 30, 2003 and
2002, are set forth in the table below. The following discussion and analysis
discuss the changes in components of operating results giving rise to net
income.
THREE MONTHS ENDED
SELECTED OPERATING RATIOS: JUNE 30,
2003 2002
--------------- -------------
(UNAUDITED)
Return on average assets(1) 0.85 % 0.79 %
Return on average equity(1) 10.59 9.41
Interest rate spread(1) 3.39 4.12
Net interest margin(1) 3.55 4.30
Operating expenses to average assets(1) 2.95 3.43
Equity-to-assets 8.09 8.61
Efficiency ratio 69.66 70.50
Average interest-earning assets to
interest-bearing liabilities 1.09 1.08
(1) Annualized
NET INCOME
Net income for the three-month period ended June 30, 2003 was $1.1
million compared to net income of $874,000 for the corresponding prior year
period. 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, compared to $825,000, or $0.35 per diluted common
share, for the corresponding prior year period. Net income available to common
stockholders increased $213,000 primarily due to a rise in non-interest income
of $187,000, a decrease in non-interest expense of $15,000 and a decrease in
the Bank's effective tax rate, offset by a decrease in net interest income of
$144,000.
INTEREST INCOME
Interest income decreased by $252,000, or 3.7%, to $6.5 million for the
three months ended June 30, 2003 compared to $6.8 million in the prior year
period. Interest income decreased primarily as a result of the current lower
interest rate environment compared to the prior year period. The change in total
interest income was attributable to a decrease of 117 basis points in the
annualized average yield on interest-earning assets to 5.41% for the three
months ended June 30, 2003 compared to 6.58% for the prior year period. This was
partially offset by an increase in the average balance of interest-earning
assets of $70.2 million, or 17.0%, to $482.8 million for the three months ended
June 30, 2003 compared to $412.6 million for the prior year period. During the
same period we experienced a 75 basis point decline in net interest margin from
4.30% to 3.55% resulting from lower interest rates.
Interest income on loans decreased by $512,000, or 9.5%, to $4.9
million for the three months ended June 30, 2003 compared to $5.4 million for
the prior year period. The change was primarily due to a decline in interest
rates, which resulted in decreased yields in the loan portfolio. The annualized
average yield on loans for the three months ended June 30, 2003 declined 97
basis points to 6.59% compared to 7.56% for the prior year period. The decline
in interest income on loans was partially offset by an increase in average
mortgage loan balances of $10.6 million to $296.1 million compared to $285.5
million for the prior year period.
Interest income on total securities increased by $316,000, or 24.7%, to
$1.6 million for the three months ended June 30, 2003 compared to $1.3 million
for the prior year period. The change was primarily due to an increase of $67.1
million, or 66.7%, in the average balance of securities, to $167.7 million
compared to $100.6 million in the prior year period, partially offset by a 128
basis point decrease in the annualized average yield on mortgage-backed
securities to 3.82% from 5.10% in the prior year period. The growth in the
average balance of
14
securities, primarily mortgage-backed securities, reflects execution of our
balance sheet management strategy. Portfolio yields and interest income declined
as new purchases and the reinvestment of portfolio cash flows were at yields
significantly below existing portfolio yields. To mitigate interest rate risk,
we have purchased short duration securities that by their nature have lower
yields. Additionally, yields and income were impacted by prepayment activity,
which has shortened the anticipated life of mortgage-backed securities and
accelerated premium amortization.
Interest income on federal funds sold decreased by $56,000, or 50.9%,
to $54,000 for the three months ended June 30, 2003 compared to $110,000 for the
prior year period. The decline was primarily attributable to a decrease in the
average balance of federal funds of $7.5 million, or 28.4%, to $19.0 million
from $26.5 million in the prior year period. Also contributing to the decline
was a decrease of 53 basis points in the annualized yield on federal funds sold,
which was 1.14% for the three months ended June 30, 2003 compared to 1.67% in
the prior year period due to lower short-term interest rates.
INTEREST EXPENSE
Total interest expense decreased by $108,000, or 4.6%, to $2.2 million
for the three months ended June 30, 2003 compared to $2.3 million for the prior
year period. The change in interest expense is primarily due to the lower
interest rate environment cited above. The annualized average cost of
interest-bearing liabilities decreased 44 basis points to 2.02% from 2.46% for
the prior year period. The decrease in interest expense was partially offset by
an increase in the average balance of interest-bearing liabilities of $61.2
million, or 16.0%, to $443.0 million from $381.8 million compared to the prior
year period.
Interest expense on deposits decreased $330,000, or 20.6%, to $1.3
million for the three months ended June 30, 2003 compared to $1.6 million for
the prior year period. The decrease in interest expense on deposits was due
primarily to a 54 basis point decline in the rate paid on deposits to 1.50%
compared to 2.04% for the prior year period, partially offset by a $25.3 million
increase in the average balance of interest-bearing deposits to $340.3 million
for the three months ended June 30, 2003 from $314.9 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 has benefited. The Bank's success in growing core deposits, thereby
benefiting net interest income and net interest margin, has been tempered by the
sustained low interest rate environment.
Interest expense on advances and other borrowed money increased
$222,000, or 30.1%, to $958,000 for the three months ended June 30, 2003
compared to $736,000 for the prior year period. This was primarily due to an
increase of $36.1 million in the average balance of borrowed money to $100.5
million from $64.4 million for the corresponding prior year period partially
offset by a decrease of 77 basis points in the cost of borrowings to 3.81% from
4.58% for the prior year period.
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES
Net interest income before the provision for loan losses decreased
by $144,000, or 3.2%, to $4.3 million for the three months ended June 30, 2003
compared to $4.4 million for the prior year period. The Company's annualized
average interest rate spread decreased by 73 basis points to 3.39% for the three
months ended June 30, 2003 compared to 4.12% for the 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, 2003 or 2002 as the Company considers the overall
allowance for loan losses to be adequate. During the first quarter of fiscal
2004, Carver recorded net loan charge-offs of $36,000 compared to net recoveries
of $4,000 for the prior year period. At June 30, 2003, the Bank's allowance for
loan losses of $4.1 million remained substantially unchanged from March 31,
2003.
At June 30, 2003, non-performing assets totaled $1.8 million, or 0.59%
of total loans, substantially unchanged from March 31, 2003. 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, 2003. Future levels of non-performing assets will
15
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.
The ratio of the allowance for loan losses to non-performing loans was
228.5% at June 30, 2003 compared to 230.7% at March 31, 2003. The ratio of the
allowance for loan losses to total loans was 1.34% at June 30, 2003 compared to
1.40% at March 31, 2003.
Management's judgment in determining the adequacy of the allowance for
loan losses is based on an evaluation of 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 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 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 2004 increased
$187,000, or 19.6%, to $1.1 million compared to $953,000 for the prior year
period. Contributing to this growth was an increase in loan fees and service
charges of $98,000 and additional increases of $80,000 in depository fees and
charges, which can be attributed to increased ATM usage, growth in debit card
income and restructuring of depository fees and charges during the second
quarter of fiscal 2003. Loan fees and service charges increased as a result of
recognition of higher mortgage prepayment penalties due to refinancing activity
and a restructuring of loan fees in the second quarter of fiscal 2003.
Non-interest income represented 15.1% of revenue (interest income plus
non-interest income) for the first quarter of fiscal 2004 compared to 12.3% for
the corresponding prior year period.
NON-INTEREST EXPENSE
For the quarter ended June 30, 2003, total non-interest expense of $3.8
million was substantially unchanged from the prior year period. Advertising
expense compared to the prior year period was lower, primarily related to a
corporate rebranding campaign expense that was less than originally anticipated.
Occupancy, equipment and other expenses decreased $12,000. Consulting fees and
employee compensation and benefits expense increased. Consulting fees were
$217,000 for the quarter ended June 30, 2003, an increase of $171,000 from the
prior year period, which was primarily a result of establishing the Bank's real
estate investment trust. The increase in employee compensation and benefits
expense of $132,000 during this period compared to the prior year period, is a
result of the Bank successfully filling additional key executive positions and
an increase in the accrued expense for expected fiscal 2004 management
incentives.
INCOME TAX EXPENSE
For the three-month period ended June 30, 2002, the Company accrued for
Federal, New York State and New York City income tax expense at a combined total
tax rate of 45%. For the three-month period ended June 30, 2003, the Company
decreased its rate following the establishment of Carver Asset Corporation, the
Bank's real estate investment trust.
For the three-month period ended June 30, 2003, income before taxes
increased $58,000, or 3.6%, to $1.6 million compared to the prior year period.
Income tax expense decreased $155,000, or 21.7%, to $559,000 compared to the
prior year period.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Quantitative and qualitative disclosure about market risk is presented
at March 31, 2003 in Item 7 of the Company's 2003 10-K. The Company believes
that there have been no material changes in the Company's market risk at June
30, 2003 compared to March 31, 2003.
16
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, 2003, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the Company's disclosure controls and
procedures pursuant to Exchange Act Rule 13a-14. Based on that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures are effective and timely in alerting them to
material information relating to the Company (including its consolidated
subsidiaries) required to be included in the Company's periodic SEC filings.
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 Consolidated Financial Statements in Carver's
2003 10-K. There have been no material changes with regard to such legal
proceedings since the filing of the 2003 10-K.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
17
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 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 period from
April 1, 2003 to the date of the filing of this report:
1. Current report on Form 8-K, dated July 23, 2003, which includes
information being filed pursuant to Item 12 but was filed under
Item 9, an announcement of our financial results for the first
quarter ended June 30, 2003.
2. Current report on Form 8-K, dated April 23, 2003, 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 and fiscal year ended March 31, 2003.
18
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 14, 2003 /s/ Deborah C. Wright
-------------------------------------
Deborah C. Wright
President and Chief Executive Officer
Date: August 14, 2003 /s/ William C. Gray
-------------------------------------
William C. Gray
Senior Vice President and Chief Financial Officer
19