<PAGE> 1
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, 1997.
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 ninety days. Yes X No
Class Outstanding at August 13, 1997
----- ------------------------------
Common Stock, par value $.01 2,314,275
1
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CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of
June 30, and March 31, 1997 (unaudited) ............... 3
Consolidated Statements of Income for the Three
Months Ended June 30, 1997 and 1996 (unaudited)........ 4
Consolidated Statements of Cash Flows for the Three
Months Ended June 30, 1997 and 1996 (unaudited)........ 5
Notes to Consolidated Financial Statements (unaudited)... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 7
Item 3. Quantitative and Qualitative Disclosures
About Market Risk................................... 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings....................................... 10
Item 2. Changes in Securities.................................... 11
Item 3. Defaults upon Senior Securities......................... 11
Item 4. Submission of Matters to a Vote of Security Holders..... 11
Item 5. Other Information....................................... 11
Item 6. Exhibits and Reports on Form 8-K........................ 11
SIGNATURES
2
<PAGE> 3
CARVER BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
As of As of
June 30, March 31,
ASSETS 1997 1997
------------- -------------
<S> <C> <C>
Cash and amounts due from depository institutions ........... $ 3,602,803 $ 4,230,757
Federal funds sold .......................................... 3,100,000 0
------------- -------------
Total cash and cash equivalents ......................... 6,702,803 4,230,757
Securities available for sale ............................... 38,951,618 83,892,617
Investment securities held to maturity, net
(estimated fair values of $1,672,000 and $1,673,000 at
June 30, 1997 and March 31, 1997) ........................ 1,610,854 1,675,181
Mortgage-backed securities held to maturity, net
(estimated fair values of $104,453,000 and $107,719,000 at
June 30, 1997 and March 31, 1997) ........................ 106,424,957 110,852,668
Loans receivable, net ....................................... 234,753,580 197,917,673
Real estate owned, net ...................................... 82,198 82,198
Property and equipment, net ................................. 11,536,643 11,342,678
Federal Home Loan Bank of New York stock, at cost ........... 4,960,000 5,535,000
Accrued interest receivable, net ............................ 3,004,176 2,978,365
Excess of cost over net assets acquired, net ................ 1,402,731 1,456,000
Other assets ................................................ 4,347,390 3,650,366
------------- -------------
Total assets ............................................ $ 413,776,950 $ 423,613,503
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits .................................................. $ 269,540,947 $ 266,471,487
Securities sold under agreement to repurchase ............. 82,335,000 74,335,000
Advances from Federal Home Loan Bank of New York .......... 24,400,000 45,400,000
Other borrowed money ...................................... 1,320,457 1,365,990
Advance payments by borrowers for taxes and insurance ..... 670,502 670,502
Other liabilities ......................................... 967,881 1,386,802
------------- -------------
Total liabilities ...................................... 379,234,787 389,629,781
------------- -------------
Stockholders' Equity:
Preferred stock, $0.01 par value per share;
1,000,000 shares authorized; none issued ................ -- --
Common stock, $0.01 par value per share; 5,000,000 shares
authorized; 2,314,275 shares issued and outstanding ..... 23,134 23,144
Additional paid-in capital ................................ 21,412,370 21,410,167
Retained earnings-substantially restricted ................ 14,669,185 14,359,060
Common stock acquired by Employee Stock Ownership Plan .... (1,320,457) (1,365,990)
Unrealized (loss) net, on securities available for sale, .. (242,069) (442,659)
------------- -------------
Total stockholders' equity .............................. 34,542,163 33,983,722
------------- -------------
Total liabilities and stockholders' equity ........ $ 413,776,950 $ 423,613,503
============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 4
CARVER BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
June 30,
1997 1996
---------- ----------
Interest income:
Loans receivable ............................... $4,369,777 $1,716,869
Mortgage-backed securities ..................... 2,225,628 2,738,163
Debt and equity securities ..................... 66,877 1,169,619
Other interest-earning assets .................. 134,592 186,758
---------- ----------
Total interest income ....................... 6,796,874 5,811,409
Interest expense:
Deposits ....................................... 2,122,659 2,073,300
Advances and other borrowed money .............. 1,697,577 1,058,926
---------- ----------
Total interest expense ...................... 3,820,236 3,132,226
---------- ----------
Net interest income .............................. 2,976,638 2,679,183
(Recovery of) provision for loan losses .......... 167,356 51,862
---------- ----------
Net interest income after (recovery of)
provision for loan losses ...................... 2,809,282 2,627,321
---------- ----------
Non-interest income:
Loan fees and service charges .................. 37,216 38,419
Other .......................................... 279,145 289,648
---------- ----------
Total non-interest income .................. 316,361 328,067
---------- ----------
Non-interest expenses:
Salaries and employee benefits ................. 1,107,995 967,609
Net occupancy expenses ......................... 252,439 309,388
Equipment ...................................... 239,150 252,797
Loss on foreclosed real estate ................. 4,163 6,050
Advertising .................................... 59,375 45,172
Federal deposit insurance premium .............. 0 144,649
Amortization of intangibles .................... 53,268 53,268
Legal expenses ................................. 55,000 55,000
Bank charges ................................... 126,593 77,130
Security service ............................... 54,576 73,862
Other .......................................... 608,800 478,843
---------- ----------
Total non-interest expenses ................ 2,561,359 2,463,768
---------- ----------
Income before income taxes ....................... 564,284 491,620
Income taxes ..................................... 254,159 228,136
---------- ----------
Net income ....................................... $ 310,125 $ 263,484
========== ==========
Net income per common share ...................... $ 0.14 $ 0.12
========== ==========
Weighted average number of common shares
outstanding .................................... $2,180,812 $2,162,598
========== ==========
See Notes to Consolidated Financial Statements.
4
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CARVER BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income ........................................................ $ 310,125 $ 263,484
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of premises and equipment ......... 117,482 151,351
Amortization of intangibles ..................................... 53,268 53,268
Other amortization and accretion, net ........................... 211,844 130,211
Provision for (recovery of) loan losses ......................... 167,356 51,862
Deferred income taxes ........................................... (315,044) (96,678)
Allocation of ESOP .............................................. 47,438 36,812
Changes in:
(Increase) Decrease in accrued interest receivable, net .......... (25,811) 74,878
Refundable income taxes ......................................... 0 (106,930)
(Increase) Decrease in other assets .............................. (697,024) 122,748
(Increase) Decrease in other liabilities ......................... (418,921) 466,599
------------ ------------
Net cash provided by operating activities ..................... (549,287) 1,151,605
------------ ------------
Cash flows from investing activities:
Purchase of securities available for sale ....................... (5,000,000) (8,500,000)
Principal repayments on securities available for sale ........... 1,234,966 1,736,689
Proceeds from sale of securities available for sale ............. 49,008,308 (3,649,399)
Gain on sale of securities available for sale ................... 0 56,635
Purchase of investment securities held to maturity .............. 0 (50,000)
Proceeds from maturities and calls of investment
securities held to maturity ................................... 64,327 174,100
Principal repayment on mortgage-backed securities
held to maturity .............................................. 4,345,148 5,861,794
Purchase of mortgage loans ...................................... (32,544,057) 0)
Net change in loans receivable .................................... (4,374,683) (1,701,846)
Proceeds from sale of real estate owned ......................... 0 164,500
Loss on sale of real estate owned .............................. 0 31,236
Additions to premises and equipment ............................. (311,603) (633,722)
------------ ------------
Net cash (used in) provided by investing activities .......... 12,422,406 788,785
------------ ------------
Cash flows from financing activities:
Net increase (decrease) in deposits ............................. 3,069,460 4,542,586
Advances from Federal Home Loan Bank of New York ................ 22,000,000 10,000,000
Repayment of advances from Federal Home Loan Bank
of New York .................................................. (43,000,000) (20,000,000)
Increase (Decrease) in short term borrowing ....................... 8,000,000 0
Repayment of other borrowed money ................................. (45,533) (45,533)
(Purchase) Redemption of Federal Home Loan Bank of New York, Stock 575,000 0
Net increase (decrease) in advance payments by borrowers
for taxes and insurance ....................................... -- 0
------------ ------------
Net cash provided by (used in) financing activities ............ (9,401,073) (5,502,947)
------------ ------------
Net increase (decrease) in cash and cash equivalents .............. 2,472,046 (3,562,557)
Cash and cash equivalents -- beginning ............................ 4,230,757 10,025,950
------------ ------------
Cash and cash equivalents -- ending ............................... $ 6,702,803 $ 6,463,393
============ ============
Supplemental disclosure of non-cash activities: Unrealized loss on
securities available for sale:
Unrealized loss ............................................... 456,734 $ 348,808
Deferred income taxes ......................................... (214,665) (158,428)
------------ ------------
$ 242,069 $ 190,380
============ ============
Loans receivable transferred to real estate owned ............... $ -- $ 0
============ ============
Supplemental disclosure of cash flow information: Cash paid for:
Interest ...................................................... $ 3,717,198 $ 3,098,514
============ ============
Federal, state and city income taxes ............................. $ -- $ 0
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) REORGANIZATION IN TO A HOLDING COMPANY
On October 17, 1996, Carver Federal Savings Bank (the "Bank")
completed its reorganization into a holding company structure (the
"Reorganization") and became the wholly owned subsidiary of Carver
Bancorp. Inc., (the "Company" or "Bancorp") a Delaware corporation.
Pursuant to an Agreement and Plan of Reorganization, dated May 21, 1996,
each share of Carver Federal Savings Bank's outstanding common stock was
exchanged for one share of Bancorp common stock. At this time, Bancorp
conducts business as a unitary savings and loan holding Company and the
principal business of Bancorp consists of the operation of the Bank. The
Company's common stock is listed on the American Stock Exchange under the
symbol CNY (Carver New York).
(2) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of
Carver Bancorp, Inc., have been prepared in accordance with generally
accepted accounting principles ("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. 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 only normal recurring adjustments)
necessary for fair presentation have been included. The consolidated
results of operations and other data for the three month period ended June
30, 1997 are not necessarily indicative of results that may be expected
for the entire fiscal year ending March 31, 1998. The unaudited
consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary Carver Federal Savings Bank and the Bank's
wholly owned subsidiaries, C.F.S.B. Realty Corp. and C.F.S.B. Credit Corp.
All significant intercompany accounts and transactions have been
eliminated in consolidation.
(3) EARNINGS PER SHARE CALCULATION
Net income per share for the three months ended June 30, 1996 and
1997 are calculated based on weighted average number of shares outstanding
during the period.
(4) RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board (" FASB")
issued SFAS No. 128, "Earnings per Share," which provides for the
computation, presentation and disclosure requirements for earnings per
share. SFAS No. 128 simplifies the computation of earnings per share for
common stock and potential common stock. The adoption of SFAS Nos.128 is
not expected to have a material effect on Carver Bancorp's future
financial condition, results of operations or reported results of
operations
In June 1997, the FASB released SFAS No. 130 "Reporting
Comprehensive Income." This SFAS requires disclosure of all changes in
equity during a period except those resulting from investment by owners
distributions to owners. SFAS 130 is effective for fiscal years beginning
after December 15, 1997. In June 1997, FASB issued SFAS No. 131,
"Disclosures About Segments of Enterprise and Related Information." This
SFAS requires the disclosures regarding reportable segments of an
enterprise. Information required to be disclosed includes among other
factors used to identify segments, selected financial data; profit and
loss, revenues and other operating and non-operating expenses. Its
effective date is for fiscal years ending after December 15, 1997. The
adoption of SFAS No. 130 and 131 is not expected to have a material effect
on Bancorp's future financial condition, results of operation or reported
results of operations.
6
<PAGE> 7
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
consisting of estimates with respect to the financial condition, results of
operations and business of the Company that are subject to various factors which
could cause the actual results to differ materially from these estimates. These
factors include, without limitation, changes in general, economic and market,
legislative and regulatory conditions and the development of an adverse interest
rate environment that adversely affects the interest rate spread or other income
anticipated from the Company's operations and investments.
Financial Condition
Total assets at June 30, 1997 decreased approximately $9.8 million, or
2.26%, to $413.8 million from $423.6 million at March 31, 1997. The decrease was
primarily attributable to the decrease in the Company's portfolio of
mortgage-backed securities held to maturity and securities available for sale,
offset in part by an increase in federal funds sold and an increase in loans
receivable. These changes are consistent with a strategic balance sheet
restructuring which shifted assets out of investment securities and into
mortgage loans which the Company completed at the beginning of the quarter.
The Company's portfolio of mortgage-backed securities held to maturity
decreased by $4.4 million, or 3.99%, to $106.4 million at June 30, 1997 from
$110.9 million at March 31, 1997, reflecting the receipt of principal repayments
on such securities. Total cash and equivalents increased by $2.4 million or
58.4% to $6.7 million at June 30, 1997 from $4.2 million at March 31, 1997.
Securities available for sale decreased $44.9 million or 53.57% to $39.0 million
at June 30, 1997 from $83.9 million at March 31, 1997, due to the sale of $49.0
million of mutual funds and principal repayments which were partially offset by
the purchase of $5.0 million of a mutual fund classified as available for sale
which is expected to provide certain tax benefits to the Company and a decrease
in unrealized loss of $200,000. The Company used these repayments of mortgage
backed securities, proceeds of sale of mutual funds and increased deposits to
purchase $32.0 million of mortgage loans, originate loans and repay advances
from the Federal Home Loan Bank. The Company's loans receivable increased $36.8
million or 18.61% to $234.8 million at June 30, 1997 as compared to $198.0
million at March 31, 1997. The increase was due to the purchase of $32.0 million
of one-to-four family adjustable rate mortgage loans at the beginning of the
quarter and increases in loan originations of multi-family loans of which partly
offset by principal repayments.
The Company's total liabilities decreased by $10.4 million, or 2.67%,
from $389.6 million at March 31, 1997 to $379.2 million at June 30, 1997, as the
result of decreased advances from the Federal Home Loan Bank which was partially
offset by an increase in borrowings under repurchase agreements of $8.0 million
and an increase in deposits. Deposits increased $3.0 million, or 1.15%, to
$269.5 million at June 30, 1997 from $266.5 million at March 31, 1997.
Stockholders' equity increased by $ 558,000, or 1.64%, to $34.5 million
at June 30, 1997 from $34.0 million at March 31, 1997 due to an increase in
retained earnings, the allocation of shares under the Employee Stock Ownership
Plan, and a decrease in the unrealized loss, net, on securities available for
sale. Retained earnings of the Company at June 30, 1996 increased $310,000, or
2.16%, to $14.7 million at June 30, 1997 from $14.4 million at March 31, 1997,
as a result of earnings during the three months ended June 30, 1997. Under
Statement of Financial Accounting Standards ("SFAS") No. 115, unrealized losses
on securities available for sale are recorded net of deferred income tax as a
reduction to retained earnings. At June 30, 1997, such unrealized losses were
approximately $243,000, a decrease of $200,000, or 45.32%, as compared to
$442,000 at March 31, 1997. The decrease in unrealized loss is attributable
primarily to the reduction of the securities held in the available for sale
portfolio by the sale of mutual funds during the last two quarters, and the
lower interest rate environment, which increased the value of the Company's
portfolio of securities available for sale. In accordance with SFAS No. 115,
such losses will not be reflected as a charge to earnings until the underlying
securities are sold, and then only to the extent of the amount of loss, if any,
actually realized at the time of sale.
In addition the Board of Directors declared a cash dividend on June
17, 1997 on the Company's common stock of five cents ($.05) per common share.
The dividend will be payable on August 4, 1997 to stockholders of record at the
close of business July 14, 1997.
7
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RESULTS OF OPERATIONS
Three Months Ended June 30, 1997 and 1996
General
Net income for the three months ended June 30, 1997 increased by
approximately $47,000 or 17.87%, to $310,000, as compared to approximately
$263,000 for the three months ended June 30, 1996. The increase in net income
was due primarily to increased interest income, which was partially offset by
increased interest expense, provision for loan losses and non-interest expense.
Net Interest Income
Net interest income increased $297,000 or 11.10%, to $3.0 million for
the three months ended June 30, 1997 as compared to $2.7 million for the three
months ended June 30, 1996. The increase in net interest income is attributable
to a $985,000, or 16.96%, increase in interest income which was partially offset
by a $688,000, or 21.97% increase in interest expense.
The Company's interest rate spread decreased by 4 basis points to 2.91%
for the three months ended June 30, 1997 compared to 2.95% for the three months
ended June 30, 1996 and net interest margin decreased by 9 basis point over the
same period. The decrease in interest rate spread is attributable to an
increase in the average cost of interest bearing liabilities due to an increase
in both the average cost and average balance of borrowed money, offset in part
by the increase in the average yield on interest earning assets due to the
substantial increase in the average balance of loans. The decrease in net
interest margin is due to a leveraged increase in average interest earning
assets funded at incrementally narrower margins. The Company's ratio of average
interest-earning assets to average interest-bearing liabilities decreased to
1.03x for the three months ended June 30, 1997 as compared to 1.05x.
Average Balance, Interest and Average Yields and Rates
The following table sets forth certain information relating to Carver's
average interest-earning assets and average interest-bearing liabilities and
reflects the average yield on assets and the average cost of liabilities for the
quarters indicated. 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 average
month-end balances, except for federal funds which are derived from daily
balances. Management does not believe that the use of average monthly balances
instead of average daily balances on all other accounts has caused any material
difference in information presented.
The table also presents information for the quarters indicated with
respect to the difference between the weighted average yield earned on
interest-earning assets and the weighted average rate paid on interest-bearing
liabilities, or "interest rate spread," which savings institutions have
traditionally used as an indicator of profitability. Another indicator of an
institution's net interest income is its "net interest margin," which is its net
interest income divided by the average balance of interest-earning assets. Net
interest income is affected by the interest rate spread and by the relative
amounts of interest-earning assets and interest-bearing liabilities. When
interest-earning assets approximate or exceed interest-bearing liabilities, any
positive interest rate spread will generate net interest income.
8
<PAGE> 9
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30,
------------------------------------------------------------------------------------
1997 1996
-------------------------------------- ----------------------------------------
Annualized Annualized
Average Quarterly Average Average Quarterly Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------- -------- ---------- ------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets
Loan (1).................................. $233,565 $4,369 7.48% $83,087 $1,717 8.26%
Investment Securities (2)................. 13,816 141 4.08% 86,750 1,254 5.78%
Mortgage-backed Securities (3)............ 141,048 2,225 6.31% 167,840 2,738 6.53%
Federal Funds Sold........................ 3,454 60 5.39% 7,874 102 5.18%
-------- ------ ---- -------- ------ ----
Total Interest-earning Assets............. 391,883 6,795 6.93% 343,777 5,811 6.76%
------ ------
Non Interest Earning Assets............... 22,948 20,575
-------- --------
Total Assets.............................. $414,831 $366,126
======== ========
Interest-bearing Liabilities
Deposits
DDA....................................... $8,011 $ -- 0.00% $ 6,336 $ -- 0.00%
NOW....................................... 18,527 87 1.88% 17,517 82 1.87%
Savings and clubs......................... 144,460 900 2.49% 143,050 886 2.48%
Money market accounts..................... 21,500 172 3.19% 20,056 160 3.19%
Certificates of deposits.................. 76,310 964 5.05% 72,994 946 5.18%
-------- ------ ---- -------- ------ ----
Total deposits............................ 268,808 2,123 3.16% 259,953 2,073 3.19%
Borrowed money............................ 109,386 1,698 6.21% 68,936 1,059 6.14%
-------- ------ ---- -------- ------ ----
Total interest-bearing liabilities........ 378,194 3,821 4.02% 328,889 3,132 3.81%
------ ------
Non-interest bearing liabilities.......... 2,251 2,447
-------- --------
Total liabilities......................... 382,445 331,336
Stockholders' equity...................... 34,386 34,790
-------- --------
Total liabilities & stockholders' equity.. $414,831 $366,126
======== ========
Net interest income....................... $2,976 $2,679
====== ======
Interest Rate Spread...................... 2.91% 2.95%
==== ====
Net interest margin....................... 3.03% 3.12%
==== ====
Ratio to average interest-
earning assets to average................
Interest-bearing liabilities.............. 1.03X 1.05X
==== ====
</TABLE>
- ----------
(1) Includes non-accrual loans.
(2) Includes FHLB stock and fair value of investments available for sale of
$2.1 million atJune 30, 1997.
(3) Includes fair value of mortgage-backed securities available for sale of
$32.8 million at June 30, 1997.
9
<PAGE> 10
Interest Income
Interest income increased by $985,000 or 16.96% to $6.8 million for the
three months ended June 30, 1997 from $5.8 million for the three months ended
June 30, 1996. The increase was primarily due to an increase in the average
balance of interest earning assets of $48.1 million and a 17 basis point
increase in the average yield on interest-earning assets, which is the result of
the shift in assets from investment securities to loans.
Interest income from loans receivable increased by $2.7 million, or
154.52%, to $4.4 million for the three months ended June 30, 1997 as compared to
$1.7 million for the same period of 1996. This increase results from an $150.5
million or 181.11% increase in the average balance of loan receivables to $233.6
million at June 30, 1997 from $83.1 million at June 30, 1996, partly offset by a
decrease of 78 basis points in the average yield on the loan portfolio. The
increase in the average loan portfolio balances reflects management's strategy
of increasing the emphasis on loan originations and the impact of loan purchases
made during the fourth quarter of fiscal 1997 and the beginning of the current
fiscal year.
Interest income from mortgage-backed securities decreased $513,000, or
18.72%, to $2.2 million for three months ended June 30, 1997 compared to $2.7
million for the three months ended June 30, 1996. This decrease is primarily
attributable to a decrease of $26.8 million or 15.72% in the average balance of
mortgage-backed securities to $141.0 million and a 22 basis point decrease in
yield on mortgage backed securities during the quarter ended June 30, 1997 as
compared to the same period last year. Income from debt and equity securities
and other interest-earning assets decreased by $1.2 million, or 85.15%, to
$201,000 during the three months ended June 30, 1997 as compared to $1.4 million
for the same period last year. The decrease is primarily attributable to a $77.4
million decrease in the average balance of debt and equity securities and other
interest-earning assets combined with a decrease of 1.07% in the yield on the
average balance of debt and equity securities and other interest-earning assets.
Interest Expense
Interest expense increased by $687,000 or 21.96% to $3.8 million for the
three months ended June 30, 1997 as compared to $3.1 million for the same period
in 1996. Interest expense on deposits increased by $49,000 or 2.38% to $2.1
million during the three months ended June 30, 1997 as compared to three months
ended June 30, 1996, primarily due to an increase in the average deposit
balances of $8.9 million to $268.8 million offset by a decrease of cost of
deposits by 3 basis points. Interest on FHLB advances and other borrowings
("borrowings") increased to $638,000 or 60.31% to $1.7 million for the quarter
ended June 30, 1997 from $1.1 million, for the same period in 1996. The increase
resulted from the an increase in the average balance of borrowings by $40.4
million or 58.68% to $109.4 million and an increase in the average cost of
borrowings by 7 basis points to 6.21% for the quarter ended June 30, 1997 as
compared to 6.14% for the same period last year. The increase in average
borrowings reflects the Company's strategy to fund the growth in the loan
portfolio.
Provision for Loan Losses
During the three months ended June 30, 1997, the provision for loan loss
was increased by $115,000 to $167,000 compared to $52,000 for the three months
ended June 30, 1996. During the quarter $320,000 was added to specific allowance
provision for loan losses and general allowance provisions for loan losses was
reduced $153,000. The provision was increased in part to reflect the growth in
the loan portfolio during the quarter and in part to maintain the allowance for
loan losses at an adequate level consistent with the Company's policies.
Carver's allowance for loan losses at June 30, 1997 was $2.4 million compared to
$2.2 million at March 31, 1997, resulting in a ratio of allowance for loan
losses to non-performing assets of 43.23% at June 30, 1997 as compared to 35.06%
at March 31, 1997 and a ratio of allowance for loan losses to total loans of
1.02% and 1.11% respectively.
Non-Interest Income
Non-interest income decreased by $12,000, or 3.57%, to $316,000 for the
three months ended June 30, 1997 as compared to $328,000 for the three months
ended June 30, 1996. The decrease was primarily attributable to a reduction
10,000 reduction in fees from bank services.
Non-Interest Expenses
Non-interest expenses increased by $100,000 or 3.97%,to $2.6 million for
the three months ended June 30, 1997, from $2.5 million for the same period last
year. The increase principally reflects an increase of $140,000, or 14.51%
increase in salaries and employee benefits and the funding of management
incentive plans. Non-interest expenses also reflect an increase of $49,000, or
64.13%, in bank charges and an increase of $130,000, or 27.15% in other expenses
reflecting increased expenses for: loan originations, service fees, telephone
service, and contributions. These increases were partially offset by the
prepayment in fiscal 1997 of federal deposit insurance premiums ("FDIC
premiums") usually due for the quarter. The Company will resume quarterly
payment of FDIC premiums during the second quarter of fiscal 1998 at a reduced
rate pursuant to the passage of the SAIF legislation.
10
<PAGE> 11
Income Tax Expense
Income tax expense for the three months ended June 30, 1997 was $254,000
compared to $228,000 for the three months ended June 30, 1996. The 17.54%
increase corresponds to a $72,000 increase in pre-tax income. The Company's
effective tax rates were 45.04% and 46.41% for the three months ended June 30,
1997 and 1996, respectively.
Liquidity and Capital Resources
The Company's primary sources of funds are deposits 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.
The primary investment activity of the Company is the origination and
purchase of loans and, to a lesser extent, the purchase of investment and
mortgage-backed securities. During the three month period ending June 30, 1997,
the Company purchased $32.5 million of mortgage loans, $5.0 million of
investment securities, and sold $49 million in investment securities. During
the three month period ending June 30, 1996, the Company purchased $8.5 million
of investment and mortgage-backed securities, sold $3.6 million in investment
securities.
The Company's most liquid assets are federal funds sold, and cash and due
from banks. In addition to the liquidity provided by federal funds sold and cash
and due from banks, the Company derives liquidity from its line of credit with
the FHLB, which equals 30% of total assets. The levels of the Company's cash and
cash equivalents are dependent on the Company's operating, financing, lending
and investing activities during any given period. At June 30, 1997, the
Company's cash and cash equivalents totaled $6.7 million compared to $4.2
million at March 31, 1997. The increase in cash and cash equivalents reflects
proceeds form the sale of mutual fund shares.
The Office of Thrift Supervision, the Bank's primary federal regulator,
requires that the Bank meet minimum tangible, core and risk-based capital
requirements. At June 30, 1997, the Bank exceeded all fully phased-in regulatory
capital requirements. The table below presents certain information relating to
the Bank's capital compliance at June 30, 1997 and March 31, 1997.
At June 30, 1997, the Company exceeded all fully phased-in regulatory
capital requirements. The table below presents certain information relating to
the Company's capital compliance at June 30, 1997 and March 31, 1997.
At June 30, 1997 At March 31, 1997
---------------- --------------------
% of % of
Amount Assets Amount Assets
------ ------ ------ ------
(Dollars in thousands)
Tangible Capital........ $ 29,262 7.09% $ 29,089 6.95%
Core Capital............ 29,312 7.10 29,141 6.96
Risk Based Capital...... 30,545 16.18 30,527 17.94
Quantitative and Qualitative Disclosure About Market Risk
Not Applicable
11
<PAGE> 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, Carver Federal is a party to various legal
proceedings incident to its business. At June 30, 1997, except as set forth
below, there were no legal proceedings to which the Company or its subsidiaries
was a party, or to which any of their property was subject, which were expected
by management to result in a material loss.
On January 2, 1996, the United States District Court for the Southern
District of New York dismissed the class action encaptioned Dougherty v. Carver
Federal Savings Bank for lack of subject matter jurisdiction. The class action
alleged that the offering circular, used by Carver to sell its stock in its
public offering, contained material misstatements and omissions. Further, the
complaint alleged that the Bank's shares were not appraised by an independent
appraiser. By separate order on the same date, the court made its ruling
applicable to Gomberg v. Carver Federal Savings Bank and Uminer v. Carver
Federal Savings Bank, two other class actions filed in the Southern District of
New York which asserted claims essentially identical to those asserted in the
Dougherty suit.
The plaintiffs filed a consolidated notice of appeal on January 29,
1996 with the United States Court of Appeals for the Second Circuit. In April
1997 the Circuit Court concluded that the District Court had subject matter
jurisdiction over the plaintiffs' complaint, the Circuit Court reversed and
remanded the case back to the District Court. Carver believes that the
allegations made in this action are without merit and intend to aggressively
defend its interest with respect to such matter.
Item 2. Changes in Securities
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
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11 - Computation of Earnings Per Share
Not applicable
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
12
<PAGE> 13
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.
Date: August 14, 1997 CARVER BANCORP, INC.
/s/ Thomas L. Clark, Jr.
-------------------------------------
Thomas L. Clark, Jr.
President and Chief Executive Officer
Date: August 14, 1997 /s/ Biswarup Mukherjee
-------------------------------------
Biswarup Mukherjee
Executive Vice President and
Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,602,803
<INT-BEARING-DEPOSITS> 388,701,009
<FED-FUNDS-SOLD> 3,100,000
<TRADING-ASSETS> 0
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<ALLOWANCE> 2,413,102
<TOTAL-ASSETS> 413,776,950
<DEPOSITS> 269,540,947
<SHORT-TERM> 106,335,000
<LIABILITIES-OTHER> 1,638,383
<LONG-TERM> 1,720,457
0
0
<COMMON> 23,144
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<INTEREST-TOTAL> 6,796,874
<INTEREST-DEPOSIT> 2,122,659
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<EXPENSE-OTHER> 2,561,359
<INCOME-PRETAX> 564,284
<INCOME-PRE-EXTRAORDINARY> 564,284
<EXTRAORDINARY> 0
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<NET-INCOME> 310,125
<EPS-PRIMARY> 0.14
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<YIELD-ACTUAL> 7.03
<LOANS-NON> 2,302,349
<LOANS-PAST> 3,279,609
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