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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
[ ] 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 thirty days.
Yes [X] No [ ]
COMMON STOCK, PAR VALUE $.01 2,314,275
CLASS OUTSTANDING AT AUGUST 1, 2000
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<PAGE>
CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of
June 30, 2000 and March 31, 2000 (unaudited)...... 2
Consolidated Statements of Operations for the Three
Month Periods Ended June 30, 2000 and 1999
(unaudited)........................................... 3
Consolidated Statements of Cash Flows for the
Three-Month Periods Ended June 30, 2000 and 1999
(unaudited)........................................... 4
Notes to Consolidated Financial Statements
(unaudited)........................................... 5
Recent Developments.................................... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............... 6
Item 3. Quantitative and Qualitative Disclosures About
Market Risk............................................ 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................. 17
Item 2. Changes in Securities and Use of Proceeds......... 18
Item 3. Defaults upon Senior Securities................... 18
Item 4. Submission of Matters to a Vote of Security
Holders................................................ 18
Item 5. Other Information................................. 18
Item 6. Exhibits and Reports on Form 8-K.................. 18
SIGNATURES.................................................. 19
i
<PAGE>
CARVER BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
<TABLE>
<CAPTION>
AS OF AS OF
JUNE 30, MARCH 31,
2000 2000
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks..................................... $ 13,026,977 $ 10,902,497
Federal funds sold.......................................... 21,900,000 11,300,000
------------ ------------
Total cash and cash equivalents................... 34,926,977 22,202,497
------------ ------------
Investment securities held to maturity (estimated fair value
Of $24,555,658 and $24,308,640 at June 30, 2000 and March
31, 2000) 24,996,223 24,995,850
Securities available for sale............................... 9,984,733 24,952,220
Mortgage-backed securities held to maturity, net (estimated
fair values of $50,568,748 and $51,939,162 at June 30,
2000 and March 31, 2000).................................. 52,392,022 54,229,230
Loans receivable............................................ 277,455,258 273,083,331
Less allowance for loan losses............................ (2,988,567) (2,935,314)
------------ ------------
Loans receivable, net..................................... 274,466,691 270,148,017
------------ ------------
Real estate owned, net...................................... 845,308 922,308
Property and equipment...................................... 10,936,572 11,175,334
Federal Home Loan Bank of New York stock, at cost........... 5,754,600 5,754,600
Accrued interest receivable................................. 2,285,537 2,653,266
Excess of cost over net assets acquired, net................ 763,512 816,780
Other assets................................................ 1,954,465 2,268,430
------------ ------------
Total assets...................................... $419,306,640 $420,118,532
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits.................................................. $283,315,254 $281,941,338
Securities sold under agreement to repurchase............. 30,637,000 31,337,000
Advances from Federal Home Loan Bank of New York.......... 66,183,343 66,688,456
Other borrowed money...................................... 507,668 553,201
Other liabilities......................................... 5,913,111 6,957,680
------------ ------------
Total liabilities................................. 386,556,376 387,477,675
------------ ------------
Stockholders' equity:
Preferred stock, $0.01 par value per share; 1,000,000
shares authorized; 100,000 issued and outstanding 1,000 1,000
Common stock, $0.01 par value per share; 5,000,000 shares
authorized; 2,314,275 shares issued and outstanding.... 23,144 23,144
Additional paid-in capital................................ 23,787,884 23,789,111
Retained Earnings................ 9,544,653 9,479,552
Common stock acquired by Employee Stock Ownership Plan.... (606,417) (651,950)
------------ ------------
Total stockholders' equity........................ 32,750,264 32,640,857
------------ ------------
Total liabilities and stockholders' equity........ $419,306,640 $420,118,532
============ ============
</TABLE>
<PAGE>
CARVER BANCORP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
JUNE 30
-------------------------
2000 1999
---------- -----------
Interest Income:
Loans ................ $5,297,881 $ 5,060,527
Mortgage-backed securities........... 823,521 981,214
Investment securities................ 751,483 704,790
Federal funds sold........ 209,350 142,415
---------- -----------
Total interest income........ 7,082,235 6,888,946
---------- -----------
Interest expense:
Deposits............................. 2,027,405 2,177,561
Advances and other borrowed money.... 1,365,550 1,402,961
---------- -----------
Total interest expense....... 3,392,955 3,580,522
---------- -----------
Net interest income.................... 3,689,280 3,308,424
Provision for loan losses.............. 469,719 150,000
---------- -----------
Net interest income after provision for
loan losses.......................... 3,219,561 3,158,424
---------- -----------
Non-interest income:
Loan fees and service charges........ 105,873 97,500
Other ......................... 575,167 353,808
---------- -----------
Total non-interest income.... 681,040 451,308
---------- -----------
Non-interest expenses:
Salaries and employee benefits....... 1,437,719 1,304,140
Net occupancy expenses............... 427,594 346,549
Equipment............................ 299,476 302,161
Other................................ 1,562,611 869,985
---------- -----------
Total non-interest
expenses................... 3,727,400 2,822,835
---------- -----------
Income before income taxes...... 173,201 786,897
Income taxes........................... 23,881 --
---------- -----------
Net income...................... $ 149,320 $ 786,897
========== ===========
Net income available to common
stockholders........................ $ 100,101 $ 786,897
Net income per common share-basic..... $ 0.04 $ 0.35
========== ===========
Weighted average number of common
shares outstanding................... 2,252,216 2,218,324
========== ===========
2
<PAGE>
CARVER BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income ........................................... $ 149,320 $ 786,897
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization..... 280,141 252,023
Amortization of intangibles................................. 53,268 53,269
Other amortization and accretion, net....................... 92,425 131,950
Provision for loan losses................................... 469,719 150,000
Allocation of ESOP stock.................................... 45,533 39,279
Decrease in accrued interest receivable, net................ 367,729 382,550
Decrease (increase) in other assets......................... 389,738 (802,860)
Decrease in other liabilities.................... (1,044,569) (1,162,568)
------------- -------------
Net cash provided by (used in) operating activities......... 803,304 (169,460)
------------- -------------
Cash flows from investing activities:
Purchases of securities available for sale.................. (35,000,000) (150,189,616)
Proceeds from maturity of securities available for sale..... 50,000,000 145,000,000
Purchase of investment securities held to maturity.......... -- (25,000,000)
Principal repayment of mortgage backed securities held to
maturity.................................................. 1,779,971 4,656,286
Net change in loans receivable.............................. (4,856,467) 18,978,952
Additions to premises and equipment......................... (41,379) (102,517)
------------- -------------
Net cash provided by (used in) investing activities......... 11,882,125 (6,656,895)
------------- -------------
Cash flows from financing activities:
Net increase in deposits.................................... 1,373,916 6,384,286
Net decrease in securities sold under agreements to
repurchase................................................ (700,000) --
Repayment of FHLB advances.................................. (15,005,113) (4,937)
Advances from FHLB.............. 14,500,000 --
Repayment of other borrowed money........................... (45,533) (50,851)
Dividends paid.............................................. (84,219) --
------------- -------------
Net cash provided by financing activities......... 39,051 6,328,498
------------- -------------
Net increase (decrease) in cash and equivalents............. 12,724,480 (497,857)
Cash and equivalents -- beginning........................... 22,202,497 21,320,748
------------- -------------
Cash and equivalents -- ending.............................. $ 34,926,977 $ 20,822,891
============= =============
Unrealized gain (loss) on securities available for sale..... -- --
Deferred income taxes....................................... -- --
============= =============
Supplemental disclosure of cash flow information: Cash paid for:
Interest.................................................... $ 3,378,920 $ 3,564,302
============= =============
Federal, state and city income taxes........................ -- --
</TABLE>
3
<PAGE>
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 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 normal recurring adjustments)
necessary for fair presentation have been included. The consolidated results of
operations and other data for the three-month periods ended June 30, 2000 are
not necessarily indicative of results that may be expected for the entire fiscal
year ending March 31, 2001 ("fiscal year 2001"). 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 ("Alhambra Holding") and the
Bank's wholly owned subsidiaries, C.F.S.B. Realty Corp., C.F.S.B. Credit Corp.,
Carver Federal and the Holding Company, are referred to herein collectively as
"Carver" or the "Company." All significant inter-company accounts and
transactions have been eliminated in consolidation.
(2) NET INCOME PER COMMON SHARE
Basic earnings per share is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding.
Diluted earnings per share includes any additional common shares as if all
potentially dilutive common shares were issued (e.g. convertible preferred
stock). For the purpose of these calculations, unreleased ESOP shares are not
considered to be outstanding. For the three month period ended June 30, 2000,
$49,219 of preferred dividends were deducted from net income to arrive at the
amount of net income available to common stockholders. Additionally, 208,333
shares of common stock potentially issuable from the conversion of preferred
stock are antidilutive. Only basic earnings per common share are presented.
RECENT DEVELOPMENTS
On August 1, 2000, the Company signed an agreement to sell its Chelsea
branch to Emigrant Savings Bank. The transaction is expected to close late in
the second quarter of the Company's fiscal year.
On July 19, 2000, the Company appointed David L. Hinds, a veteran
financial services executive with a 30-year career at Deutsche Bank and Bankers
Trust Company, and Dennis M. Walcott, President and Chief Executive Officer of
the New York Urban League, to the Company's Board of Directors.
4
<PAGE>
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
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, the Company's ability to improve both its
loan operations, including the origination and purchase of loans which meet its
underwriting guidelines, and deposit gathering capabilities, 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.
GENERAL
Carver Bancorp, Inc., (the "Holding Company" or "Bancorp"), a Delaware
corporation, is the holding company for Carver Federal Savings Bank (the "Bank"
or "Carver Federal"), a federally chartered savings bank. Collectively, the
Holding Company and the Bank are referred to herein as the "Company" or
"Carver." 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, the Bank,
which operates six full service branches in the New York City boroughs of
Brooklyn, Queens and Manhattan.
On May 12,2000 the Holding Company announced the completion of the sale of
the Bank's branch office located in Roosevelt, New York (the "Branch"), to City
National Bank of New York ("CNBNY"), an interim national bank formed by City
National Bank of New Jersey ("CNBNJ") to acquire substantially all the assets of
the Branch. CNBNY assumed approximately $8.5 million of deposit liabilities and
acquired the related branch assets consisting of cash, fixed assets and loans
secured by deposits. CNBNY paid a premium of approximately $255,000,
representing 3% of deposits.
ADDITION OF SENIOR EXECUTIVE OFFICER
On July 17, 2000, Devon Woolcock was appointed Senior Vice President and
Chief of Retail Banking. Mr. Woolcock was formerly Division Executive Vice
President of Citibank, responsible for managing six of Citibank's branches in
Brooklyn and Queens, New York.
FINANCIAL CONDITION
Assets
Total assets decreased by approximately $800,000 to $419.3 million compared
to $420.1 million at March 31, 2000. The decrease primarily reflects decreases
of $15.0 million in investment securities available for sale and $1.8 million in
mortgage-backed securities, offset in part by increases of $12.7 million in cash
and cash equivalents and $4.3 million in net loans receivable.
Total cash and cash equivalents increased by $12.7 million to $34.9 million
compared to $22.2 million at March 31, 2000. The increase primarily reflects the
overnight investment in federal funds sold of a large deposit received on June
30, 2000.
Investment securities available for sale decreased $15.0 million to $10.0
million at June 30, 2000 compared to $25.0 million at March 31, 2000. The
decrease represents the repayment of principal at maturity of investment
securities available for sale. The proceeds from these repayments were used
primarily to fund the increase in net loans receivable as well as to fund the
sale of approximately $8.4 million in deposits of the Roosevelt branch that were
sold to City National Bank.
Mortgage-backed securities held to maturity decreased by $1.8 million
to $52.4 million at June 30, 2000 compared to $54.2 million at March 31, 2000.
The decrease primarily reflects principal repayments.
5
<PAGE>
Loans receivable net, increased by $4.3 million to $274.5 million compared
to $270.1 million at March 31, 2000. The increase in net loans receivable is
primarily attributable to the bank's purchase of adjustable rate single family
mortgage loans in April 2000.
Liabilities and Stockholders' Equity
At June 30, 2000 total liabilities and stockholders' equity decreased
by approximately $800,000 to $419.3 million compared to $420.1 million at March
31, 2000. The decrease in liabilities and stockholders' equity primarily
reflects decreases of $1.2 million in total borrowings and $1.0 million in other
liabilities, offset in part by an increase of $1.4 million in deposits.
The increase in deposits primarily reflects an increase of $5.2 million
in certificates of deposit, offset in part by decreases of $2.2 million in
regular savings, $1.4 million in NOW accounts and $392,000 in money market
accounts. These deposit variances are primarily attributable to the sale of the
Roosevelt branch deposits which for the most part were replaced with
certificates of deposit.
At June 30, 2000 stockholders' equity was $32.8 million compared to $32.7
million at March 31, 2000. The increase in stockholders' equity is primarily
attributable to year-to-date net income, offset in part by dividends declared
and paid on the Company's preferred stock during the quarter.
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, loans and prepayments on mortgage-backed securities are strongly
influenced by changes in general interest rates, economic conditions and
competition.
The Consolidated Statements of Cash Flow present the change in cash
from operating, investing and financing activities. During the quarter ended
June 30, 2000, cash and cash equivalents increased by $12.7 million. Net cash
provided by operating activities was $803,304, representing primarily the
results of operations adjusted for depreciation and amortization, the provision
for possible loan losses and decreases in accrued interest receivable and in
other assets. Net cash provided by investing activities was $11,882,125,
representing primarily proceeds from the maturity of securities available for
sale and principal repayment of mortgage-backed securities held to maturity,
offset in part by a net increase in loans. Net cash provided by financing
activities was $39,051, representing primarily a net increase in deposits,
offset in part by reductions in borrowed money.
The Office of Thrift Supervision (the "OTS"), the Bank's primary
federal regulator, requires that the Bank meet minimum tangible, leverage (core)
and risk-based capital requirements. As of June 30, 2000, the Bank exceeded all
of its regulatory capital requirements. The Bank's required, actual and excess
capital levels as of June 30, 2000 are as follows:
6
<PAGE>
AMOUNT % OF ASSETS
------- -----------
(DOLLARS IN THOUSANDS)
Tangible capital:
Capital level.......................................... $29,105 6.96%
Less requirement....................................... 6,283 1.50
------- -----
Excess................................................. $22,822 5.46%
======= =====
Core capital:
Capital level.......................................... $29,105 6.96%
Less requirement....................................... 16,738 4.00
------- -----
Excess................................................. $12,367 2.96%
======= =====
Risk-based capital:
Capital level.......................................... $31,460 15.71%
Less requirement....................................... 16,022 8.00
------- -----
Excess................................................. $15,438 7.71%
======= =====
ANALYSIS OF EARNINGS
The Company's profitability is primarily dependent upon net interest
income, which 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. Net income is further affected by provisions for
loan losses, non-interest income, non-interest expense and income taxes. 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 certain information relating to Carver's
average interest-earning assets and average interest-bearing liabilities and
reflect the average yield on assets and the average cost of liabilities for the
periods 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 day-end
balances. Management does not believe that the use of average month-end balances
instead of average day-end balances on all other accounts 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 includes fees which are considered adjustments to yields.
7
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
-------------------------------------------------------------------------------
2000 1999
-------------------------------------- --------------------------------------
AVERAGE QUARTERLY ANNUALIZED AVERAGE QUARTERLY ANNUALIZED
BALANCE INTEREST AVG. YIELD/COST BALANCE INTEREST AVG. YIELD/COST
-------- --------- --------------- -------- --------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
INTEREST EARNING ASSETS
Loans(1)......................... $277,402 $5,298 7.64% $261,082 $5,061 7.75%
Investment securities(2)......... 45,979 751 6.53 51,893 705 5.43
Mortgage-backed securities....... 53,317 824 6.18 64,208 981 6.11
Federal funds sold.... 13,625 209 6.14 11,625 142 4.89
-------- ------ ----- -------- ------ -----
Total interest earning
assets.................. 390,323 $7,082 7.26% 388,808 $6,889 7.09%
Non-interest earning assets...... 28,452 30,845
-------- --------
Total Assets.............. $418,775 $419,653
======== ========
LIABILITIES
INTEREST BEARING LIABILITIES
Deposits
DDA.............................. $ 12,328 $ -- --% $ 11,675 $ -- --%
NOW.............................. 17,883 76 1.70 16,902 78 1.85
Savings and clubs................ 144,616 833 2.30 146,808 925 2.52
Money market accounts............ 19,370 123 2.54 21,600 160 2.96
Certificates of deposit.......... 87,022 995 4.57 85,963 1,015 4.72
-------- ------ ----- -------- ------ -----
Total Deposits............ 281,219 2,027 2.88 282,948 2,178 3.08
Borrowed money..................... 97,840 1,366 5.58 102,023 1,403 5.50
-------- ------ ----- -------- ------ -----
Total interest-bearing
liabilities...................... 379,059 3,393 3.58% 384,971 3,581 3.72%
------ ------
Non-interest-bearing liabilities... 6,946 3,045
-------- --------
Total liabilities.................. 386,005 388,016
Stockholders' equity............... 32,770 31,637
-------- --------
Total liabilities and stockholders'
equity........................... $418,775 $419,653
======== ========
Net interest income................ $3,689 $3,308
====== ======
Interest rate spread............... 3.68% 3.37%
===== =====
Net interest margin................ 3.78% 3.40%
===== =====
Ratio of average interest earning
assets to interest-bearing
liabilities...................... 1.03x 1.01x
===== =====
</TABLE>
8
---------------
<PAGE>
(1) Includes non-accrual loans.
(2) Includes FHLB stock and fair value of investments available for sale of
$10.0 million and $25.0 million at June 30, 2000 and March 31, 2000,
respectively.
Comparison of Operating Results for the Three Months Ended June 30, 2000 and
1999
General
The Company reported net income of $149,000, or $0.04 per basic share, for
the quarter ended June 30, 2000 compared to $787,000, or $0.35 per basic share,
for the quarter ended June 30, 1999. For each period the Company applied a tax
loss carryforward resulting from prior period losses and therefore no federal
income taxes have been applied to earnings for either period. On a fully taxable
basis, net income for the quarter ended June 30, 2000 would have been $95,000,
or $0.02 per basic share, compared to $414,000, or $0.19 per basic share, for
the first quarter of the fiscal year ended March 31, 2000 ("fiscal year 2000").
Net income for the quarter ended June 30, 2000 includes non-recurring income of
approximately $255,000, which represents a 3% premium realized on the sale of
deposits from its Roosevelt branch to City National Bank. Excluding the
non-recurring income, the Company would have recorded a net loss of
approximately $105,000, or $0.07 per share, for the first quarter of fiscal year
2001.
For the quarter ended June 30, 2000, net income of $149,000 was
$638,000 lower than the comparable prior year period. Comparing the quarter
ended June 30, 2000 to the prior year period, increases of $381,000 in net
interest income before the provision for possible loan losses and $230,000 in
total non-interest income were offset by increases of $320,000 in the provision
for possible loan losses and $905,000 in total non-interest expense.
Interest Income
Interest income increased by $193,000, or 2.8%, to $7.1 million for the
three month period ended June 30, 2000 compared to $6.9 million for the
comparable prior year period. The increase is primarily attributable to an
increase in the average balance of loans, and to a lesser extent, an increase in
the average rate earned on investment securities and federal funds sold.
Interest income on loans receivable increased by $237,000, or 4.68%, to
$5.3 million for the three month period ended June 30, 2000 compared to $5.1
million for the same period last year. The increase primarily reflect a $16.3
million, or 6.25%, increase in the average balance of loans receivable to $277.4
million for the three month period ended June 30, 2000 compared to $261.1
million for the prior year period. The increase in the average balance of loans
receivable is primarily attributable to the purchase of one-to-four and multi
family mortgage loans.
Interest income on investment securities increased $46,000, or 6.52%, to
$751,000 for the three month period ended June 30, 2000 compared to $705,000 for
the prior year period. The increase is primarily attributable to an increase of
110 basis points in the average yield earned on investment securities.
Interest income on mortgage-backed securities decreased $157,000, or 16.0%,
to $824,000 for the three month period ended June 30, 2000 compared to $981,000
for the three month period ended June 30, 1999. The decrease primarily reflects
a decrease of $10.9 million in the average balance of mortgage-backed securities
to $53.3 million compared to $64.2 million for the prior year period. The
decrease in the average balance of mortgage-backed securities is due to
principal repayments.
Interest income on federal funds sold increased $67,000, or 47.2%, to
$209,000 for the three month period ended June 30, 2000 compared to $142,000 for
the prior year period. The increase is primarily attributable to a 125 basis
point increase in the average yield earned on other interest earning assets, and
to a lesser extent an increase of $2.0 million in the average balance of federal
funds sold.
9
<PAGE>
Interest Expense
Interest expense decreased $188,000, or 5.2%, to $3.4 million for the three
month period ended June 30, 2000 compared to $3.6 million for the same period
last year. The decrease in interest expense is primarily attributable to a
decrease in the cost of interest-bearing deposits, and to a lesser extent, a
decrease in the average balance of advances and other borrowed money.
Interest expense on deposits decreased $151,000, or 6.93%, to $2.0 million
for the three month period ended June 30, 2000 compared to $2.2 million for the
prior year period. The decrease in interest expense on deposits is primarily
attributable to a decrease of 20 basis points in the average cost of deposits.
The decrease in the average cost of deposits is primarily attributable to
decreases in rates offered on the Bank's deposit products.
Interest expense on borrowed money decreased $37,000, or 2.64%, for the
three month period ended June 30, 2000 compared to the prior year period. The
decrease is primarily attributable to a decrease of $4.2 million in the average
balance of borrowed money for the three month period ended June 30, 2000 as
compared to the prior year period.
Net Interest Income Before Provisions for Loan Losses
Net interest income before the provision for possible loan losses increased
by $381,000, or 11.5%, as the result of the increase in interest income and the
decrease in interest expense. The increase in interest income is primarily
attributable to an increase in the average balance of loans receivable as well
as increases in the average rates earned on investment securities and other
interest earning assets. The decrease in interest expense is primarily
attributable to the lower cost of deposits as well as a decrease in the average
balance of borrowed money.
The Company's interest rate spread increased 31 basis points to 3.68% for
the three month period ended June 30, 2000 compared to 3.37% for the three month
period ended June 30, 1999. The Company's net interest margin increased by 38
basis points to 3.78% for the three month period ended June 30, 2000 compared to
3.40% for the prior year period.
Provision for Loan Losses
The Company provided $470,000 for possible loan losses for the three months
ended June 30, 2000 compared to $150,000 for the same period last year. The
increase in the provision for possible loan losses for the first quarter of
fiscal year 2001 is primarily attributable to loan chargeoffs of $418,000 during
the quarter, including a chargeoff of approximately $202,000 related to a loan
pool purchased by the bank in the 1980's, as well as an increase in the balance
of loans identified by the Company as potential problem loans.
At June 30, 2000 non-performing loans totaled $1.9 million or 0.68% of
total loans, compared to non-performing loans of $2.1 million or 0.79% of total
loans at March 31, 2000. In addition to non-performing loans, at June 30, 2000
the Company had identified an additional $1.2 million of loans as potential
problem loans requiring management's close attention. At June 30, 2000 the
allowance for possible loan losses was $3.0 million, compared to $2.9 million at
March 31, 2000. At June 30, 2000 the amount of the allowance applicable to
non-classified loans was $2.2 million. At June 30, 2000, the ratio of the
allowance for possible loan losses to non-performing loans was 157.35% as
compared to 138.07% at March 31, 2000. At June 30, 2000, the ratio of the
allowance for possible loan losses to total loans was 1.08% compared to 1.07% at
March 31, 2000.
Management believes that the allowance for loan losses is adequate. 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, and other factors, both within and outside of
management's control.
Non-Interest Income
Non-interest income increased by $230,000, or 50.9%, to $681,000 for the
three month period ended June 30, 2000 compared to $451,000 for the same period
last year. The
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increase in non-interest income is primarily attributable to non-recurring
income of approximately $255,000, which represents a 3% premium realized on the
sale of the Roosevelt branch deposits to City National Bank.
Non-Interest Expense
Non-interest expense increased $905,000, or 32.0%, to $3.7 million for
the three month period ended June 30, 2000 compared to $2.8 million for the
prior year period. The inrease in non-interest expenses is primarily
attributable to an increase of $693,000, or 79.6%, in the other non-interest
expense category, and to a lesser extent, increases of $134,000 in salaries and
employee benefits and $81,000 in net occupancy expenses.
The increase in other non-interest expense is primarily attributable to
increases of $75,000 in advertising and marketing expenses, $138,000 in
consulting fees, $40,000 in audit fees, $54,000 in legal expenses and $48,000 in
computer service expenses. In addition, other non-interest expenses for the
three month period ended June 30, 1999 were reduced by approximately $303,000 of
net recoveries of chargeoffs that were recorded in an earlier accounting period.
No such recoveries were recorded during the first quarter of fiscal year 2001.
Income Tax Expense
For each period presented, the Company has applied a tax loss
carryforward resulting from prior period losses and therefore no federal taxes
have been applied to earnings for either period. The taxes of $23,881 for the
three month period ended June 30, 2000 represent New York State and New York
City income taxes.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Quantitative and qualitative disclosure about market risk is presented at
March 31, 2000 in Carver's Annual Report on Form 10-K, as amended and filed with
the Securities and Exchange Commission. There have been no material changes in
our market risk at June 30, 2000 compared to March 31, 2000. The following is an
update of the discussion provided therein:
GENERAL. Our largest component of market risk continues to be interest rate
risk. Virtually all of this risk continues to reside at the Bank level. The Bank
still is not subject to foreign currency exchange or commodity price risk. At
June 30, 2000, we owned no trading assets, nor did we utilize hedging
transactions such as interest rate swaps and caps.
ASSETS, DEPOSIT LIABILITIES AND WHOLESALE FUNDS. There has been no change
in the composition of assets, deposit liabilities or wholesale funds from March
31, 2000 to June 30, 2000 that would result in a material adverse effect on the
Bank's interest rate risk.
GAP ANALYSIS. The one-year and five-year cumulative interest sensitivity
gap as a percentage of total assets have not materially changed from their
levels at March 31, 2000 utilizing the same assumptions as at March 31, 2000.
INTEREST RATE RISK COMPLIANCE. We continue to monitor the impact of
interest rate volatility upon net interest income and net portfolio value in the
same manner as at March 31, 2000. There have been no changes in our board
approved limits of acceptable variance in net interest income and net portfolio
value at June 30, 2000 compared to March 31, 2000, and the projected changes
continue to fall within the board approved limits at all levels of potential
interest rate volatility.
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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, 2000, except as set forth below, there
were no legal proceedings to which Carver Federal 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.
At June 30, 2000, two properties as to which the bank is mortgagee are the
subject of criminal forfeiture action pending in U.S. District Court. The
forfeiture arises from the criminal conviction of principals of the borrowers on
the properties.One property is carried as a loan on the bank's books at an
approximate value of $500,000 while the second property is carried as real
estate owned, also with an approximate value of $500,000. It is the Bank's
position that it is a good faith holder for value and the bank is opposing the
government's attempt to forfeit the properties in disregard of the Bank's
interest as mortgagee. The proceedings are in the preliminary stages and
management cannot predict the eventual outcome, the amount of damages, if any,
or the timing of final disposition of the case.
Disclosure regarding other legal proceedings that the Company has been a
party to is presented in Carver's Annual Report on Form 10-K, as amended and
filed with the Securities and Exchange Commission and incorporated by reference
herein. There have been no material changes with regard to such legal
proceedings since the filing of the Annual Report on Form 10-K, as amended. The
following is an update of the discussion provided therein:
On or about July 20, 2000, the Holding Company filed its answer to the
complaint, filed in the Court of Chancery of the State of Delaware in and for
New Castle County on June 29, 2000, entitled KEVIN COHEE AND TERI WILLIAMS V.
CARVER BANCORP, INC.
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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 11. Net income per share.
Exhibit 27. Financial Data Schedule.
(b) Reports on Form 8-K.
Form 8-K, dated April 25, 2000, reporting an update of the status of
litigation in Delaware Chancery Court between Carver and BBC Capital
Market, Inc.
Form 8-K, dated May 12, 2000, reporting the completion of the sale of
the Bank's Roosevelt branch to City National Bank.
Form 8-K, dated May 22, 2000, reporting a Settlement Agreement between
Carver and BBC Capital Market, Inc.
Form 8-K, dated May 25, 2000, reporting earnings for the three-month
and twelve-month periods ended March 31, 2000.
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<PAGE>
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, 2000 /s/ DEBORAH C. WRIGHT
--------------------------------------
Deborah C. Wright
President and Chief Executive Officer
/s/ JAMES BOYLE
Date: August 14, 2000 --------------------------------------
James Boyle
Chief Financial Officer
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EX-11
COMPUTATION OF NET INCOME PER SHARE
EXHIBIT 11
COMPUTATION OF NET INCOME PER SHARE
FOR THREE MONTHS ENDED JUNE 30, 2000 AND 1999
<TABLE>
<CAPTION>
FOR THE THREE MONTH PERIOD ENDED
--------------------------------------
JUNE 30, 2000 JUNE 30, 1999
----------------- -----------------
<S> <C> <C>
Net income................................................. $ 149,320 $786,897
Preferred income........................................... (49,219) --
------- --------
Net income - Basic $ 100,101 $ 786,897
------- -------
Weighted average shares outstanding - Basic................ 2,252,216 2,218,324
--------- ---------
Basic earnings per share...................... $ 0.04 $ 0.35
---------- ---------
Net income - Basic......................................... $ 100,101 $786,897
Impact of potential conversion of convertible preferred
stock to common stock 49,219 --
-------
Net income - Diluted $ 149,320 $ 786,897
------- -------
Weighted average shares outstanding - Basic................ 2,252,216 2,218,324
Effect of dilutive securities - convertible preferred
stock 208,333 --
------- ---------
Weighted average common shares outstanding - diluted 2,460,549 2,218,324
--------- ---------
Basic earnings per share - diluted...................... Anti-dilutive $ 0.35
------------- ---------
</TABLE>
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