--------------------------------------------------------------------------------
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 SEPTEMBER 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)
Registrants 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
----- -----
COMMON STOCK, PAR VALUE $.01 2,314,275
------------------------------------ ------------------------------------
Class Outstanding at November 10, 2000
--------------------------------------------------------------------------------
<PAGE>
CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition
as of September 30, 2000 and March 31, 2000
(unaudited).............................................3
Consolidated Statements of Income for the Three
and Six Month Periods Ended September 30, 2000
and 1999 (unaudited)....................................4
Consolidated Statements of Cash Flows for the
Three and Six Month Periods Ended September 30,
2000 and 1999 (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................................................16
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...........................17
SIGNATURES...................................................................17
2
<PAGE>
<TABLE>
<CAPTION>
CARVER BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
As of As of
September 30, March 31,
2000 2000
------------------- -----------------
ASSETS
<S> <C> <C>
Cash and due from banks.................................................. $ 12,112,447 $ 10,902,497
Federal funds sold....................................................... 32,900,000 11,300,000
------------- -------------
Total cash and cash equivalents........................................ 45,012,447 22,202,497
------------- -------------
Investment securities held to maturity (estimated fair value of
$24,766,764 and $24,308,640 at September 30, 2000 and March 31, 2000).. 24,996,201 24,995,850
Securities available for sale............................................ 39,898 24,952,220
Mortgage-backed securities held to maturity, net (estimated fair
values of $47,175,075 and $51,939,162 at September 30, 2000 and
March 31, 2000) ....................................................... 48,841,531 54,229,230
Loans receivable......................................................... 282,722,997 273,083,331
Less allowance for loan losses......................................... (3,214,442) (2,935,314)
------------- -------------
Loans receivable, net.................................................. 279,508,555 270,148,017
------------- -------------
Real estate owned, net................................................... 745,164 922,308
Property and equipment, net.............................................. 10,627,961 11,175,334
Federal Home Loan Bank of New York stock, at cost........................ 5,754,600 5,754,600
Accrued interest receivable.............................................. 2,575,620 2,653,266
Excess of cost over net assets acquired, net............................. 710,243 816,780
Other assets............................................................. 3,152,937 2,268,430
------------- -------------
Total assets........................................................... $ 421,965,157 $ 420,118,532
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits............................................................... $ 267,248,732 $ 281,941,338
Securities sold under agreement to repurchase.......................... 20,817,000 31,337,000
Advances from Federal Home Loan Bank of New York....................... 93,319,485 66,688,456
Other borrowed money................................................... 462,135 553,201
Other liabilities...................................................... 7,044,709 6,957,680
------------- -------------
Total liabilities................................................... 388,892,061 387,477,675
------------- -------------
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............................................. 23,784,855 23,789,111
Retained earnings-substantially restricted............................. 9,824,981 9,479,552
Common stock acquired by Employee Stock Ownership Plan................. (560,884) (651,950)
-------------- -------------
Total stockholders' equity.......................................... 33,073,096 32,640,857
------------- -------------
Total liabilities and stockholders' equity........................ $ 421,965,157 $ 420,118,532
============= =============
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CARVER BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Six Months Ended
September 30, September 30,
------------------------------ ----------------------------
2000 1999 2000 1999
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Interest Income:
Loans ................................ $ 5,275,039 $ 4,678,078 $10,572,920 $ 9,738,605
Mortgage-backed securities............ 763,559 921,569 1,587,079 1,902,783
Investment securities................. 773,869 936,218 1,525,352 1,641,008
Federal funds sold.................... 269,097 184,643 478,447 327,058
----------- ----------- ----------- -----------
Total interest income.............. 7,081,564 6,720,508 14,163,798 13,609,454
----------- ----------- ----------- -----------
Interest expense:
Deposits.............................. 2,120,757 2,175,181 4,148,161 4,352,742
Advances and other borrowed money..... 1,376,252 1,387,651 2,741,803 2,790,612
----------- ----------- ----------- -----------
Total interest expense............. 3,497,009 3,562,832 6,889,964 7,143,354
----------- ----------- ----------- -----------
Net interest income..................... 3,584,555 3,157,676 7,273,834 6,466,100
Provision for loan losses............... 450,000 230,000 892,719 380,000
----------- ----------- ----------- -----------
Net interest income after provision
for loan losses....................... 3,134,555 2,927,676 6,381,115 6,086,100
----------- ----------- ----------- -----------
Non interest income:
Loan fees and service charges......... 83,502 91,228 189,375 188,728
Income from sale of branches........ 758,210 0 1,012,871 0
Other ................................ 422,304 395,421 742,811 749,229
----------- ----------- ----------- -----------
Total non-interest income.......... 1,264,016 486,649 1,945,057 937,957
----------- ----------- ----------- -----------
Non-interest expense:
Salaries and employee benefits........ 1,641,122 1,180,296 3,078,841 2,484,436
Net occupancy expenses................ 366,374 318,028 793,969 664,577
Equipment............................. 369,555 280,979 669,031 583,141
Other................................. 1,562,794 1,375,589 3,152,404 2,245,574
----------- ----------- ----------- -----------
Total non-interest expenses........ 3,939,845 3,154,892 7,694,245 5,977,728
----------- ----------- ----------- -----------
Income before income taxes.............. 458,726 259,433 631,927 1,046,329
State and local income taxes............ 178,398 0 202,279 0
----------- ----------- ----------- -----------
Net income.............................. $ 280,328 $ 259,433 $ 429,648 $ 1,046,329
=========== =========== =========== ===========
Dividends applicable to preferred stock. $ 49,219 $ 0 $ 98,438 $ 0
=========== =========== =========== ===========
Net income available to common
stockholders $ 231,109 $ 259,433 $ 331,210 $ 1,046,329
=========== =========== =========== ===========
Net income per common share - basic..... $ 0.10 $ 0.12 $ 0.15 $ 0.47
=========== =========== =========== ===========
Weighted average number of
common shares outstanding............. 2,256,753 2,223,218 2,254,497 2,220,784
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
CARVER BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
September 30,
-------------------------------------
2000 1999
------------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income............................................................. $ 429,648 $ 1,046,329
Adjustments to reconcile net income to net cash provided by
Operating activities
Depreciation and amortization of premises and equipment................ 451,172 502,895
Amortization of intangibles............................................ 106,537 106,536
Other amortization and accretion, net.................................. (487,173) 365,526
Provision for loan losses.............................................. 892,719 380,000
Gain on sale of branches............................................... (1,012,871) 0
Charge-off of branch improvements and related items, net............... 221,624 0
Deferred income taxes.................................................. 0 123,000
Allocation of ESOP stock............................................... 86,810 81,775
Changes in accrued interest receivable, net............................ 77,646 167,049
(Increase) decrease in other assets.................................... (794,327) 569,068
Increase (decrease) in other liabilities............................... 87,029 (2,301,779)
------------ -------------
Net cash provided by operating activities.............................. 58,814 1,040,379
------------ -------------
Cash flows from investing activities:
Purchases of securities available for sale............................. (86,537,592) (299,065,655)
Proceeds from maturities of securities available for sale.............. 111,895,000 300,000,000
Purchase of investment securities held to maturity..................... 0 (25,000,000)
Principal repayment of mortgage backed securities held to maturity..... 5,429,435 8,125,990
Net (increase) decrease in loans receivable............................ (10,253,257) 15,807,465
Additions to premises and equipment.................................... (125,423) (220,832)
Proceeds from sale of real estate owned................................ 86,964 0
------------ -------------
Net cash provided by (used in) investing activities.................... 20,495,127 (353,032)
------------ -------------
Cash flows from financing activities:
Cash paid to fund sale of deposits..................................... (21,463,587) 0
Net increase in deposits............................................... 7,783,852 2,023,621
Net decrease in securities sold under agreements to repurchase......... (10,520,000) (4,000,000)
Repayment of advances from Federal Home Loan Bank of New York.......... (46,368,971) (9,917)
Advances from Federal Home Loan Bank of New York....................... 73,000,000 0
Repayment of other borrowed money...................................... (91,066) (96,385)
Dividends paid......................................................... (84,219) 0
------------ -------------
Net cash provided by (used in) financing activities.................... 2,256,009 (2,082,681)
------------ -------------
Net increase (decrease) in cash and equivalents........................ 22,809,950 (1,395,334)
Cash and equivalents - beginning....................................... 22,202,497 21,320,748
------------ -------------
Cash and equivalents - ending.......................................... $ 45,012,447 $ 19,925,414
============ =============
Supplemental disclosure of cash flow information: Cash paid for:
Interest............................................................... $ 6,860,538 $ 7,143,353
============ =============
Federal, state and city income taxes................................... $ 45,055 $ 0
============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<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 and six-month periods ended
September 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. and 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 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 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 and six-month periods ended
September 30, 2000, preferred dividends of $49,219 and $98,438, respectively,
were deducted from net income to arrive at the amount of net income available to
common stockholders. Additionally, for both the three-month and six-month
periods ended September 30, 2000, 208,333 shares of common stock potentially
issuable from the conversion of preferred stock are antidulitive. Only basic
earnings per share are presented.
6
<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 and the Bank 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 success in
implementing its initiatives, its ability to achieve cost-savings associated
with the bank's branch closings, changes in general, economic and market,
legislative and regulatory conditions and the development of an interest rate
environment that adversely affects the interest rate spread or other income
anticipated from the Company's operations and investments. The Company and the
Bank assume no obligation to update these forward looking statements to reflect
the actual results, changes in assumptions or changes in other factors affecting
such forward-looking statements.
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 five full service branches in the New York City boroughs of
Brooklyn, Queens and Manhattan.
FINANCIAL CONDITION
ASSETS
At September 30, 2000, total assets increased by approximately $1.8 million
to $422.0 million, compared to $420.1 million at March 31, 2000. The increase
primarily reflects increases of $22.8 million in cash and cash equivalents and
$9.4 million in net loans receivable, offset in part by decreases of $24.9
million in securities available for sale and $5.4 million in mortgage-backed
securities.
The increase in cash and cash equivalents is the result of management's
efforts to ensure sufficient short-term liquidity to fund the sale of the
deposits of the bank's Chelsea branch on September 29, 2000. The increase in
short-term liquidity was primarily provided by the proceeds from the maturity of
securities available for sale, which were invested in federal funds sold.
The net increase in loans during the first six months of fiscal year 2001
includes loan originations of $13.9 million and loans purchases of $17.1
million, partially offset by loan repayments during the period. The increase in
net loans receivable was primarily funded with proceeds from loan repayments as
well as the reallocation of funds from securities available for sale and
mortgage-backed securities.
The decreases in securities available for sale and mortgage-backed
securities represent maturities and/or paydowns that occurred during the first
six months of the fiscal year. The funds received from these maturities and/or
paydowns were used to fund the increase in loans as well as to provide
additional short-term liquidity to fund sale of the Chelsea branch deposits at
the end of the second quarter of the fiscal year.
7
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
At September 30, 2000, total liabilities increased by approximately $1.4
million to $388.9 million, compared to $387.5 million at March 31, 2000. The
increase in liabilities primarily reflects an increase of $16.0 million in total
borrowings, offset in part by a decrease of $14.7 million in deposits.
The decrease in deposits is primarily attributable to sale of deposits from
the Roosevelt and Chelsea branches during the first six months of the year.
Changes in deposit balances during the period include decreases of $8.7 million
in regular savings and club accounts, $6.0 million in NOW accounts and $2.2
million in money market accounts, offset in part by an increase of $2.2 million
in certificates of deposit. Excluding the deposits of the Roosevelt and Chelsea
branches, total deposits for the remaining branches increased by approximately
$13.1 million during the first half of fiscal year 2001. The decrease in
deposits was offset by an increase in borrowed funds.
STOCKHOLDERS' EQUITY
Stockholders' equity increased $432,000 to $33.1 million at September 30,
2000, compared to $32.6 million at March 31, 2000. The increase in stockholders'
equity is primarily attributable to year-to-date net income.
LIQUIDITY AND CAPITAL RESOURCES
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.
The Consolidated Statements of Cash Flows present the change in cash from
operating, investing and financing activities. During the six months ended
September 30, 2000, cash and cash equivalents increased by $22.8 million. Net
cash provided by operating activities was $59,000, representing primarily net
income adjusted for depreciation and amortization, the provision for loan
losses, the net gain from the sale of deposits, the charge-off of branch
improvements and related items and the decrease in other assets. Net cash
provided by investing activities was $20.5 million, representing primarily the
net cash provided by the maturity of securities available for sale and principal
repayments of mortgage-backed securities held to maturity, offset in part by a
net increase in loans. Net cash provided by financing activities was $2.3
million, representing primarily a net increase in deposits and advances from the
Federal Home Loan Bank of New York, offset in part by cash paid to fund the sale
of deposits and a decrease in securities sold under agreement to repurchase.
The Bank is required to maintain a minimum average daily balance of liquid
assets as a percentage of net withdrawable deposit accounts plus short-term
borrowings by the Office of Thrift Supervision (referred to as the OTS)
regulations. The minimum required liquidity ratio is currently 4.0%. At
September 30, 2000, the Bank's liquidity ratio was 14.5%. 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.
8
<PAGE>
The Office of Thrift Supervision, the Bank's primary federal regulator,
requires that the Bank meet minimum capital requirements. At September 30, 2000,
the Bank exceeded all regulatory minimum capital requirements. The table below
presents certain information relating to the Bank's capital compliance at
September 30, 2000.
AMOUNT % OF ASSETS
-------------- --------------
(dollars in thousands)
Total capital (to risk-weighted assets):
Capital level................................ $ 32,276 15.90%
Less requirement............................. 16,237 8.00
--------- --------
Excess....................................... $ 16,039 7.90%
========= ========
Tier 1 capital (to risk-weighted assets):
Capital level................................ $ 29,803 14.68%
Less requirement............................. 16,853 4.00
--------- --------
Excess....................................... $ 12,950 10.68%
========= ========
Tier 1 leverage capital (to adjusted assets):
Capital level................................ $ 29,803 7.07%
Less requirement............................. 16,853 4.00
--------- --------
Excess....................................... $ 12,950 3.07%
========= ========
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
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. 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 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.
9
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended September 30,
-----------------------------------------------------------------------------------
2000 1999
----------------------------------------- -----------------------------------------
Average Annualized Average 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)..................................... $ 276,599 $ 5,275 7.63% $ 249,412 $ 4,678 7.50%
Investment securities (2)..................... 40,970 774 7.56 65,644 936 5.70
Mortgage-backed securities.................... 50,208 764 6.09 60,088 922 6.14
Federal funds sold............................ 18,925 269 5.69 9,600 185 7.71
--------- ------- ------- --------- ------- -----
Total interest earning assets.............. 386,702 7,082 7.33% 384,744 6,721 6.99%
------- -------
Non-interest earning assets................... 28,299 33,255
--------- ---------
Total Assets............................... $ 415,001 $ 417,999
========= =========
LIABILITIES
INTEREST BEARING LIABILITIES
Deposits
DDA $ 11,844 $ - -% $ 11,702 $ - -%
NOW 16,269 65 1.60 16,603 76 1.83
Savings and clubs............................. 140,981 796 2.26 145,762 919 2.52
Money market accounts......................... 18,478 102 2.21 20,646 158 3.06
Certificates of deposit....................... 90,779 1,158 5.10 86,396 1,022 4.73
--------- ------- ------- --------- ------- -----
Total Deposits............................. 278,351 2,121 3.05 281,109 2,175 3.09
Borrowed money................................... 97,555 1,376 5.64 99,969 1,388 5.55
--------- ------- ------- --------- ------- -----
Total deposits and interest-bearing liabilities.. 375,906 3,497 3.72% 381,078 3,563 3.74%
------- -------
Non-interest-bearing liabilities................. 6,346 4,605
--------- ---------
Total liabilities................................ 382,252 385,683
Stockholders' equity............................. 32,749 32,316
--------- ---------
Total liabilities and stockholders' equity....... $ 415,001 $ 417,999
========= =========
Net interest income.............................. $ 3,585 $ 3,158
======= =======
Interest rate spread............................. 3.61% 3.25%
======= =====
Net interest margin.............................. 3.71% 3.28%
======= =====
Ratio of average interest earning assets to
deposits and interest-bearing liabilities........ 1.03x 1.01x
======= =====
</TABLE>
-------------------
(1) Includes non-accrual loans.
(2) Includes FHLB stock and fair value of investments available for sale.
10
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------------------------------------
2000 1999
---------------------------------------------------------------------------------
Average Annualized Average Annualized
Balance Interest Yield/Cost Balance Interest Yield/Cost
----------- ----------- ------------ ----------- ---------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
INTEREST EARNING ASSETS
Loans (1)..................................... $ 277,001 $ 10,573 7.63% $ 255,246 $ 9,739 7.63%
Investment securities (2)..................... 43,474 1,525 7.02 58,769 1,641 5.58
Mortgage-backed securities.................... 51,763 1,588 6.14 62,148 1,903 6.12
Federal funds sold............................ 16,275 478 5.87 10,613 327 6.16
--------- -------- ------ --------- ------- ------
Total interest earning assets.............. 388,513 $ 14,164 7.29% 386,776 $13,610 7.04%
-------- -------
Non-interest earning assets................... 28,376 32,050
--------- ---------
Total Assets............................... $ 416,889 $ 418,826
========= =========
LIABILITIES
INTEREST BEARING LIABILITIES:
Deposits
DDA $ 12,086 $ - -% $ 11,688 $ - -%
NOW 17,076 141 1.65 16,753 154 1.84
Savings and clubs............................. 142,799 1,629 2.28 146,285 1,844 2.52
Money market accounts......................... 18,924 225 2.38 21,123 318 3.01
Certificates of deposit....................... 88,901 2,153 4.84 86,180 2,037 4.73
--------- -------- ------ --------- ------- ------
Total Deposits............................. 279,786 4,148 2.97 282,029 4,353 3.09
Borrowed money................................... 97,697 2,742 5.61 100,995 2,791 5.53
--------- -------- ------ --------- ------- ------
Total deposits and interest-bearing liabilities.. 377,483 6,890 3.65% 383,024 7,144 3.73%
-------- -------
Non-interest-bearing liabilities................. 6,646 3,825
--------- ---------
Total liabilities................................ 384,129 386,849
Stockholders' equity............................. 32,760 31,977
--------- ---------
Total liabilities and stockholders' equity....... $ 416,889 $ 418,826
========= =========
Net interest income.............................. $ 7,274 $ 6,466
======== =======
Interest rate spread............................. 3.64% 3.31%
====== ======
Net interest margin.............................. 3.74% 3.34%
====== ======
Ratio of average interest earning assets to
deposits and Interest-bearing liabilities..... 1.03x 1.01x
====== ======
</TABLE>
---------------------------
(1) Includes non-accrual loans.
(2) Includes FHLB stock and fair value of investments available for sale.
11
<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
GENERAL
The Company reported net income for the three-month period ended
September 30, 2000, of $280,000 compared to net income of $259,000 for the same
period last year. Net income available to common stockholders (net income
reduced by dividends relating to the Company's preferred stock) was $231,000, or
$0.10 per common share, compared to $259,000, or $0.12 per common share, for the
second quarter of fiscal year 2000. Net income for the quarter ended September
30, 2000, includes non-recurring income of approximately $758,000 which
represents the net gain realized on the sale of deposits of the bank's Chelsea
branch. Excluding the non-recurring income, the Company would have recorded a
pre-tax loss of approximately $299,000 for the second quarter of fiscal year
2001.
INTEREST INCOME
Interest income increased by $361,000, or 5.4%, to $7.1 million for the
three months ended September 30, 2000, compared to $6.7 million for the
comparable prior year period. The increase was attributable to a higher level of
interest-earning assets and an increase in the rate of return on those assets.
Interest income on loans receivable increased by $597,000, or 12.8%, to
$5.3 million for the three months ended September 30, 2000, compared to $4.7
million for the comparable prior year period. The increase primarily reflected a
$27.2 million, or 10.9%, increase in the average balance of loans receivable to
$276.6 million for the three months ended September 30, 2000, compared to $249.4
million for the prior year period. The increase in the average balance of loans
receivable resulted from the origination and purchase of loans funded with
proceeds from loan repayments and funds provided from the maturity of investment
securities and mortgage-backed securities.
Interest income on investment securities decreased by $162,000, or
17.3%, to $774,000 for the three months ended September 30, 2000, compared to
$936,000 for the prior year period. The decrease was primarily due to the
decline in average balance of investment securities, which was somewhat offset
by an increase in the average rate of return. The decrease in the average
balance of investment securities was primarily attributable to the reallocation
of funds from maturing investment securities to the origination and purchase of
loans.
Interest income on mortgage-backed securities decreased by $158,000, or
17.1%, to $764,000 for the three months ended September 30, 2000, compared to
$922,000 for the prior year period. The decrease was primarily due to the
decline in average balance of mortgage-backed securities. The decrease in the
average balance of mortgage-backed securities was primarily due to the
reallocation of funds from principal and interest payments from mortgage-backed
securities to the origination and purchase of loans.
Interest income on federal funds sold increased by $84,000, or 45.7%,
to $269,000 for the three months ended September 30, 2000, compared to $185,000
the prior year period. The increase primarily reflected a $9.3 million, or
97.1%, increase in the average balance of federal funds sold to $18.9 million
for the three months ended September 30, 2000, compared to $9.6 million for the
prior year period.
INTEREST EXPENSE
Interest expense decreased $66,000, or 1.8%, to $3.5 million for the
three months ended September 30, 2000, compared to $3.6 million for the prior
year period. The decrease in interest expense was due primarily to a decline in
the average balance of interest-bearing liabilities coupled with a 2 basis point
decline in the annualized cost of deposits and other interest-bearing
liabilities compared to the same period last year.
Interest expense on interest-bearing deposits decreased $54,000, or
2.5%, to $2.1 million for the three months ended September 30, 2000, compared to
$2.2 million for the prior year period. The decrease in interest expense was due
primarily to a decline in the average rate paid on interest-bearing deposits.
This decline in the cost of deposits was primarily the result of a reduction in
the rate paid on saving and money market accounts, which was somewhat offset by
an increase in the rate paid on certificates of deposit.
12
<PAGE>
Interest expense on borrowed money decreased $11,000, or 0.8%, for the
three months ended September 30, 2000, compared to the prior year period. This
decrease in interest expense was primarily due to a decline in the average
balance of borrowed money which was somewhat offset by an increase in the rate
paid for these funds.
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES
Net interest income before provision for loan losses
increased by $427,000, or 13.5%, to $3.6 million for the three months ended
September 30, 2000, compared to $3.2 million for the comparable prior year
period. Interest income increased by $361,000 while interest expense decreased
by $66,000 for the three months ended September 30, 2000, compared to the prior
year period.
The Company's annualized interest rate spread increased by 36
basis points to 3.61%, while the annualized net interest margin improved by 43
basis points to 3.71% for the three months ended September 30, 2000, compared to
the prior year period.
PROVISION FOR LOAN LOSSES AND ASSET QUALITY
The Company provided $450,000 for loan losses for the three-month period
ended September 30, 2000, compared to $230,000 for the same period last year.
The primary reasons for the increase in the provisions were to replenish the
allowance for loan losses, which was reduced by net loan charge-offs of $224,000
for the period, consisting entirely of consumer loans, as well as to respond to
the increase in the balance of loans outstanding during the period.
At September 30, 2000, non-performing loans totaled $2.0 million, or
0.72%, of total loans compared to non-performing loans of $2.1 million, or
0.79%, at March 31, 2000. In addition to non-performing loans, at September 30,
2000, the Company had identified an additional $331,000 of loans as potential
problem loans requiring management's close attention. At September 30, 2000, the
Bank's allowance for loan losses was $3.2 million compared to $2.9 million at
March 31, 2000. At September 30, 2000, the amount of the allowance applicable to
non-classified loans was $2.4 million. At September 30, 2000, the ratio of the
allowance for loan losses to non-performing loans was 158.72% compared to
138.07% at March 31, 2000, and the ratio of the allowance for loan losses to
total loans was 1.14% 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 $777,000 to $1.3 million for the
three-month period ended September 30, 2000, compared to $487,000 for the same
period last year. The increase in non-interest income is primarily attributable
to non-recurring income of approximately $758,000 representing the net gain
realized from the sale of the Chelsea branch during the quarter.
NON-INTEREST EXPENSE
Non-interest expense increased $785,000 to $3.9 million for the quarter
ended September 30, 2000, compared to $3.2 million for the same period last
year. The increase in non-interest expense is primarily attributable to
increases of $461,000 in salaries and employee benefits, $187,000 in other
non-interest expense, and to a lesser extent, increases of $48,000 in occupancy
expense and $89,000 in equipment expense. The increase in salaries and employee
benefits is primarily the result of salary increases required to upgrade and
hire more experienced staff. The increase in other non-interest expense is
primarily attributable to increases in advertising, consulting fees and legal
expense.
13
<PAGE>
INCOME TAX EXPENSE
For each period presented, the Company applied a federal tax loss carry
forward resulting from prior period losses and therefore no federal income taxes
have been applied to income for either period. The taxes of $178,000 for the
three-month period ended September 30, 2000, represent New York State and New
York City income taxes only.
COMPARISON OF OPERATING RESULTS FOR THE SIX MONTH PERIODS ENDED SEPTEMBER 30,
2000 AND 1999
GENERAL
The Company reported net income for the six-month period ended September
30, 2000, of $430,000 compared to net income of $1.0 million for the same period
last year. Net income available to common stockholders was $331,000, or $0.15
per common share for the six-month period ended September 30, 2000, compared to
$1.0 million, or $0.47 per common share, for the same period last year. Net
income for the six-month period ended September 30, 2000, includes non-recurring
income of approximately $1.0 million which represents the net gain realized on
the sale of deposits of the Bank's Roosevelt and Chelsea branches. Excluding the
non-recurring income, the Company would have recorded a pre-tax loss of
approximately $381,000 for the six-month period ended September 30, 2000.
INTEREST INCOME
Interest income increased by $554,000, or 4.1%, to $14.2 million for
the six months ended September 30, 2000, compared to $13.6 million for the
comparable prior year period. The increase was attributable to a higher level of
interest-earning assets and an increase in the rate of return on those assets.
Interest income on loans receivable increased by $834,000, or 8.6%, to
$10.6 million for the six months ended September 30, 2000, compared to $9.7
million for the comparable prior year period. The increase reflected a $21.8
million, or 8.5%, increase in the average balance of loans receivable to $277.0
million for the six months ended September 30, 2000, compared to $255.2 million
for the prior year period. The increase in the average balance of loans
receivable resulted primarily from the origination and purchase of loans funded
with proceeds from loan repayments and funds provided from the maturity of
investment securities and mortgage-backed securities.
Interest income on investment securities decreased by $116,000, or
7.0%, to $1.5 million for the six months ended September 30, 2000, compared to
$1.6 million for the prior year period. The decrease was primarily due to the
decline in average balance of investment securities, which was somewhat offset
by an increase in the average rate of return. The decrease in the average
balance of investment securities was primarily attributable to the reallocation
of funds from maturing investment securities to the origination and purchase of
loans.
Interest income on mortgage-backed securities decreased by $316,000, or
16.6%, to $1.6 million for the six months ended September 30, 2000, compared to
$1.9 million for the prior year period. The decrease was primarily due to the
decline in average balance of mortgage-backed securities. The decrease in the
average balance of mortgage-backed securities was primarily due to the
reallocation of funds from principal and interest payments from mortgage-backed
securities to the origination and purchase of loans.
Interest income on federal funds sold increased by $151,000, or 46.3%,
to $478,000 for the six months ended September 30, 2000, compared to $327,000
for the prior year period. The increase primarily reflected a $5.7 million, or
53.3%, increase in the average balance of federal funds sold to $16.3 million
for the six months ended September 30, 2000, compared to $10.6 million for the
prior year period.
INTEREST EXPENSE
Interest expense decreased $253,000, or 3.5%, to $6.9 million for the
six months ended September 30, 2000, compared to $7.1 million for the prior year
period. The decrease in interest expense was due primarily to a decline in the
average balance of interest-bearing liabilities coupled with an 8 basis point
decline in the annualized cost of deposits and interest-bearing liabilities
compared to the same period last year.
14
<PAGE>
Interest expense on interest-bearing deposits decreased $205,000, or
4.7%, to $4.1 million for the six months ended September 30, 2000, compared to
$4.4 million for the prior year period. The decrease in interest expense was due
primarily to a decline in the average rate paid on interest-bearing deposits.
This decline in the cost of deposits was primarily the result of a reduction in
the rate paid on saving and money market accounts, which was somewhat offset by
an increase in the rate paid on certificates of deposit.
Interest expense on borrowed money decreased $49,000, or 1.7%, for the
six months ended September 30, 2000, compared to the prior year period. The
decrease in interest expense was due primarily to a decline in the average
balance of borrowed money which was somewhat offset by an increase in the rate
paid for these funds.
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES
Net interest income before provision for loan losses
increased by $807,000, or 12.5%, to $7.3 million for the six months ended
September 30, 2000, compared to $6.5 million for the comparable prior year
period. Interest income increased by $554,000 while interest expense decreased
by $253,000 for the six months ended September 30, 2000, compared to the prior
year period.
The Company's annualized interest rate spread increased by 33 basis
points to 3.64%, while the annualized net interest margin improved by 40 basis
points to 3.74% for the six months ended September 30, 2000, compared to the
prior year period.
PROVISION FOR LOAN LOSSES
The Company provided $893,000 for loan losses for the six-month period
ended September 30, 2000, compared to $380,000 for the same period last year.
The primary reasons for the increase in the provision were to replenish the
allowance for loan losses, which was reduced by net charge-offs of $614,000 for
the period, as well as to respond to the increase in the balance of loans
outstanding during the period. Net loan charge-offs for the period consist of
1-4 family mortgage loans of $252,000 and consumer loans of $362,000.
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 $1.0 million to $1.9 million for the
six-month period ended September 30, 2000, compared to $938,000 for the same
period last year. The increase in non-interest income is primarily attributable
to non-recurring income of approximately $1.0 million representing the net gain
realized from the sale of the bank's Roosevelt and Chelsea branches.
NON-INTEREST EXPENSES
Non-interest expense increased $1.7 million to $7.7 million for the
six-month period ended September 30, 2000, compared to $6.0 million for the same
period last year. The increase in non-interest expense is primarily attributable
to increases of $594,000 in salaries and employee benefits and $907,000 in other
non-interest expense, and to a lesser extent, increases of $129,000 in occupancy
expense and $86,000 in equipment expense. The increase in salaries and employee
benefits is primarily the result of salary increases required to upgrade and
hire more experienced staff. The increase in other non-interest expenses is
primarily attributable to increases in advertising, consulting fees, audit
expense and legal expense.
INCOME TAX EXPENSE
For each period presented, the Company applied a federal tax loss
carry forward resulting from prior period losses and therefore no federal income
taxes have been applied to income for either period. The taxes of $202,000
15
<PAGE>
for the six-month period ended September 30, 2000, represent New York State and
New York City income taxes only.
NEW ACCOUNTING PRONOUNCEMENTS
In September 2000, the Financial Accounting Standard Board ("FASB")
issued Statement of Financial Accounting Standards No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities"
("SFAS 140") - a replacement of SFAS 125. SFAS 140 revises the standards for
accounting for securitizations and other transfers of financial assets and
collateral and requires certain additional disclosures. The collateral
provisions and disclosure requirements of SFAS 140 are effective for fiscal
years ending after December 15, 2000, whereas the other provisions of SFAS 140
are to be applied prospectively to transfers and servicing of financial assets
and extinguishments of liabilities occurring after March 31, 2001. The adoption
of SFAS 140 is not expected to have a material impact on the Company's financial
condition or results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Quantitative and qualitative disclosure about market risk is presented
at March 31, 2000, in the Company's Annual Report of Form 10-K, as amended and
filed with the Securities and Exchange Commission ("SEC"). The Company believes
that there have been no material changes in the Company's market risk at
September 30, 2000, compared to March 31, 2000.
16
<PAGE>
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 September 30, 2000, 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.
Disclosure regarding other legal proceedings that the Company is a
party to is presented on Carver's Annual Report on Form 10-K, as amended and
filed with the Securities and Exchange Commission. 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
Delaware section 220 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. The Holding Company has produced
responsive documents and believes that the complaint is now moot.
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
Exhibit 99. Appointment of New Officer
(b) Reports on Form 8-K.
None.
17
<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: November 14, 2000 /s/ Deborah C. Wright
---------------------
Deborah C. Wright
President and Chief Executive Officer
Date: November 14, 2000 /s/ James Boyle
---------------
James Boyle
Senior Vice President
<PAGE>
EXHIBIT INDEX
Exhibit Description
------- -----------
11 Net income per share.
27 Financial Data Schedule
99 Appointment of New Officer
19
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
COMPUTATION OF NET INCOME PER SHARE
FOR THREE AND SIX MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
Three Months Ended Six Months Ended
September 30, September 30,
---------------------------- -------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
EARNINGS PER COMMON SHARE - BASIC
Net income............................... $ 280,328 $ 259,433 $ 429,648 $1,046,329
Preferred dividends...................... (49,219) 0 (98,438) 0
Net income - basic....................... $ 231,109 $ 259,433 $ 331,210 $1,046,329
---------- ---------- ---------- ----------
Weighted average common shares
outstanding - basic................ 2,256,753 2,223,218 2,254,497 2,220,784
---------- ---------- ---------- ----------
Earning per common share - basic......... $ 0.10 $ 0.12 $ 0.15 $ 0.47
---------- ---------- ---------- ----------
Earnings per common share - diluted
Net income - basic....................... $ 231,109 $ 259,433 $ 331,210 $1,046,329
Impact of potential conversion of
convertible preferred stock
to common stock....................... 49,219 0 98,438
---------- ---------- ---------- ----------
0
Net income - diluted..................... $ 280,328 $ 259,433 $ 429,648 $1,046,329
---------- ---------- ---------- ----------
Weighted average shares
outstanding - basic..................... 2,256,753 2,223,218 2,254,497 2,220,784
Effect of dilutive securities -
convertible preferred stock ............ 208,333 0 208,333 0
---------- ---------- ---------- ----------
Weighted average shares
outstanding - diluted.................. 2,465,086 2,223,218 2,462,830 2,220,784
---------- ---------- ---------- ----------
Earning per common share - diluted....... Anti-dilutive $ 0.12 Anti-dilutive $ 0.47
---------- ----------
</TABLE>
20
<PAGE>
EXHIBIT 27
FINANCIAL DATA SCHEDULE
AT AND FOR THE SIX MONTH PERIOD ENDED SEPTEMBER 30, 2000
This schedule contains summary financial information extracted from the
balance sheet and the statement of earnings of Carver Bancorp, Inc. at September
30, 2000, and for the six-month period then ended and is qualified in its
entirety by reference to such financial statements.
ITEM NUMBER ITEM DESCRIPTION AMOUNT
----------- ---------------- ------
9-03(1) Cash 12,112,447
9-03(2) Interest-bearing deposits 0
9-03(3) Federal funds sold 32,900,000
9-03(4) Trading account assets 0
9-03(6) Investments-held-for-sale 39,898
9-03(6) Investments - carrying 73,837,732
9-03(6) Investment - market 71,941,839
9-03(7) Loans 282,722,997
9-03(7)(2) Allowance for losses 3,214,442
9-03(11) Total assets 421,965,157
9-03(12) Deposits 267,248,732
9-03(13) Short-term borrowings 114,136,485
9-03(15) Other liabilities 7,044,709
9-03(16) Long-term debt 462,135
9-03(19) Preferred stock - mandatory redemption 0
9-03(20) Preferred stock - no mandatory redemption 1,000
9-03(21) Common Stocks 23,144
9-03(22) Other stockholders' equity 33,048,952
9-03(23) Total liabilities and stockholders' equity 421,965,157
9-04(1) Interest and fees on loans 10,572,920
9-04(2) Interest and dividends on investments 3,112,431
9-04(4) Other interest income 478,447
9-04(5) Total interest income 14,163,798
9-04(6) Interest on deposits 4,148,161
9-04((9) Total interest expense 6,889,964
9-04(10) Net interest income 7,273,834
20
<PAGE>
9-04(11) Provision for loan losses 892,719
9-04(13)(h) Investment securities gains/losses 0
9-04(14) Other expenses 7,694,245
9-04(15) Income/loss before income tax 631,927
9-04(17) Income/loss before extraordinary items 631,927
9-04(18) Extraordinary items, less tax 0
9-04(19) Cumulative change in accounting principles 0
9-04(20) Net income or loss 429,648
9-04(21) Earnings per share - basic 0.15
9-04(21) Earnings per share - fully diluted 0.15
GUIDE NUMBER ITEM DESCRIPTION AMOUNT
------------ ---------------- ------
I.B.5 Net yield - interest earning assets - actual 7.29
III.C.1(a) Loans on non accrual 2,025,219
III.C.1(b) Accruing loans past due 90 days or more 0
III.C.1(c) Troubled debt restructuring 0
III.C.2 Potential problem loans 330,815
IV.A.1 Allowance for loan loss - beginning of period 2,935,314
IV.A.2 Total charge offs 650,849
IV.A.3 Total recoveries 37,258
IV.A.4 Allowance for loan loss - end of period 3,214,442
IV.B.1 Loan loss allowance allocated to domestic loans 3,214,442
IV.B.2 Loan loss allowance allocated to foreign loans 0
IV.B.3 Loan loss allowance - unallocated 2,364,731
21
<PAGE>
EXHIBIT A-1
-----------
CARVER FEDERAL SAVINGS BANK
NEW OFFICER AND KEY MANAGERIAL HIRES
OCTOBER 1999 - SEPTEMBER 2000
(listed by seniority)
ADDITION OF SENIOR EXECUTIVE
On September 19, 2000, William Schult was appointed Vice President and
Controller. Mr. Schult is a 26 veteran of the banking industry, having served in
senior positions at the Nassau Trust Company, Fleet Bank and the Dime Savings
Bank of New York. Mr. Schult received a BBA in Accounting from Hofstra
University and is a Certified Public Accountant in the State of New York.
22
