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Carver Bancorp, Inc. Reports First Quarter Fiscal Year 2015 Results

NEW YORK, Aug. 12, 2014 (GLOBE NEWSWIRE) -- Carver Bancorp, Inc. (the "Company") (Nasdaq:CARV), the holding company for Carver Federal Savings Bank ("Carver" or the "Bank"), today announced financial results for its first fiscal quarter of 2015 ended June 30, 2014.

The Company reported net income of $173 thousand or basic and diluted earnings per share of $0.05 for the first quarter of its fiscal year ending March 31, 2015, compared to net income of $410 thousand or a basic and diluted earnings per share of $0.11, for the prior year period.

Deborah C. Wright, the Company's Chairman and CEO said, "We returned to profitability following two quarters in which we made the strategic decision to sell certain non-performing loans, terminate our pension plan and upgrade our technology platform to better serve our customers and attract new business. Our loan portfolio continues to improve, with non-performing assets declining 22% from the prior quarter and 51% year-over-year. The competitive environment for real estate loans in our marketplace constrained net interest margin despite stable funding costs. Our capital ratios remain strong with a Tier 1 leverage ratio of 10.35%, and we are pleased that our deposit base has grown for the third consecutive quarter to $518.8 million. Our recently updated core technology platform, with peer competitive, state-of-the-art mobile banking options and expanded products and services platform, will be important factors to further growth in deposits and fee income."

Ms. Wright concluded, "As we celebrate our 65th year as a New York City community bank, focused on serving urban customers, we pause to thank our loyal customers, and look forward to becoming the community bank of choice for others as our communities continue to experience significant growth."

Statement of Operations Highlights

First Quarter Results

The Company reported net income of $173 thousand for the three months ended June 30, 2014, compared to net income of $410 thousand in the prior year period. The primary driver of the change was attributed to non-recurring gains on sales of loans and investments, an insurance recovery, and release of Federal National Mortgage Association ("FNMA") repurchase reserves in the prior year period, partially offset by recoveries of previously charged-off loans versus a provision in the prior year period, and improved net interest income in the current quarter.

Net Interest Income

Interest income increased $189 thousand, or 3.4%, to $5.8 million compared to $5.6 million for the prior year quarter, primarily attributable to an increase in the average balances of loans and other investments. Average loans increased $32.1 million, or 8.8%, compared to the average balance for the prior year, and the average balance for other investments and federal funds sold increased $42.2 million, or 57.0%. A change in loan mix with higher one-to-four family loans and lower multifamily loans, led to a lower average yield on loans.

Interest expense decreased $18 thousand, or 1.8%, to $992 thousand, compared to $1.0 million for the prior year quarter, following lower rates paid on certificates of deposits, and restructuring of certain long-term borrowings. The average rate on interest-bearing liabilities decreased 5 basis points to 0.79% for the quarter ended June 30, 2014.

Provision for Loan Losses

The Company recorded a $781 thousand recovery of loan losses compared to an $831 thousand provision for the prior year quarter. Net recoveries of $614 thousand were recognized compared to net charge-offs of $1.5 million in the prior year period. Recoveries of previously charged-off loans in the current period were the primary driver of the improvement.

Non-interest Income

Non-interest income decreased $925 thousand, or 43.5%, to $1.2 million compared to $2.1 million for the prior year quarter. The decrease is attributable to higher gains on sales of loans and securities in the prior year period and lower fees on loan refinancings in the current period.

Non-interest Expense

Non-interest expense increased $1.2 million, or 23.9%, to $6.5 million, compared to $5.3 million for the prior year quarter. The increase was due to higher employee compensation and benefit expense and higher other non-interest expense attributed to a higher reserve for FNMA repurchases in the current period and a non-recurring insurance recovery in the prior period.

Income Taxes

The income tax expense was $16 thousand for the first quarter compared to $73 thousand in the prior year period.

Financial Condition Highlights

At June 30, 2014, total assets increased $4.3 million, or 0.7% to $644.1 million, compared to $639.8 million at March 31, 2014. The overall change was primarily due to increases of $6.1 million in the investment portfolio and $1.1 million in the loan portfolio net of the allowance for loan losses, offset by a decrease of $2.4 million in held-for-sale loans ("HFS").

Total investment securities increased $6.0 million, or 6.1%, to $104.5 million at June 30, 2014, compared to $98.5 million at March 31, 2014. This result followed an increase of $6.3 million in available-for-sale securities, primarily $5.5 million in short-term investments.

Net loans receivable increased $930 thousand, or 0.2%, to $390.9 million at June 30, 2014, compared to $390.0 million at March 31, 2014. The majority of the increase resulted from loan originations and advances of $15.0 million, offset by $13.8 million of principal repayments and loan payoffs, across all loan classifications.

HFS loans decreased $2.4 million, or 47.9%, to $2.6 million at June 30, 2014, following transfer of one loan into Real Estate Owned.

Total liabilities increased $2.5 million, or 0.4%, to $591.2 million at June 30, 2014, compared to $588.7 million at March 31, 2014.

Deposits increased $9.4 million, or 1.8%, to $518.8 million at June 30, 2014, compared to $509.4 million at March 31, 2014, following increases in money market and interest-bearing checking accounts, partially offset by lower non-interest-bearing and certificates of deposits.

Advances from the Federal Home Loan Bank of New York ("FHLB-NY") and other borrowed money decreased $8.0 million, or 11.4%, to $62.4 million at June 30, 2014, compared to $70.4 million at March 31, 2014, as growth in deposits replaced maturing short-term borrowings.

Total equity increased $1.7 million, or 3.4%, to $52.9 million at June 30, 2014, compared to $51.2 million at March 31, 2014. The majority of the increase was due to a $1.6 million change in unrealized losses on investments and net income earned for the three month period.

Asset Quality

At June 30, 2014, non-performing assets totaled $14.9 million, or 2.3% of total assets, compared to $18.9 million or 3.0% of total assets at March 31, 2014, and $30.1 million or 4.7% of total assets at June 30, 2013. Non-performing assets at June 30, 2014 were comprised of $5.1 million of loans 90 days or more past due and non-accruing, $3.0 million of loans classified as a troubled debt restructuring, $4.1 million of Real Estate Owned, and $2.6 million of loans classified as HFS.

The allowance for loan losses was $7.1 million at June 30, 2014, which represents a ratio of the allowance for loan losses to non-performing loans of 87.0% compared to 57.6% at March 31, 2014. The ratio of the allowance for loan losses to total loans was 1.8% at June 30, 2014, compared to 1.9% at March 31, 2014.

About Carver Bancorp, Inc.

Carver Bancorp, Inc. is the holding company for Carver Federal Savings Bank, a federally chartered stock savings bank. Carver was founded in 1948 to serve African-American communities whose residents, businesses, and institutions had limited access to mainstream financial services. Carver has been designated by the U.S. Treasury Department as a Community Development Financial Institution (CDFI) because of its community-focused banking services and dedication to the economic viability and revitalization of underserved neighborhoods. Carver is the largest African- and Caribbean-American run bank in the United States, with ten full-service branches in the New York City boroughs of Brooklyn, Manhattan, and Queens. For further information, please visit the Company's website at www.carverbank.com.

Certain statements in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors, risks and uncertainties. More information about these factors, risks and uncertainties is contained in our filings with the Securities and Exchange Commission.

CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
$ in thousands except per share data June 30, 2014 March 31, 2014
ASSETS
Cash and cash equivalents:
Cash and due from banks $ 114,830 $ 115,239
Money market investments 6,569 7,315
Total cash and cash equivalents 121,399 122,554
Restricted cash 6,354 6,354
Investment securities:
Available-for-sale, at fair value 95,715 89,461
Held-to-maturity, at amortized cost (fair value of $8,940 and $8,971 at June 30, 2014 and March 31, 2014, respectively) 8,830 9,029
Total investments 104,545 98,490
Loans held-for-sale 2,611 5,011
Loans receivable:
Real estate mortgage loans 355,062 362,888
Commercial business loans 35,481 26,930
Consumer loans 343 138
Loans, net 390,886 389,956
Allowance for loan losses (7,066) (7,233)
Total loans receivable, net 383,820 382,723
Premises and equipment, net 7,695 7,830
Federal Home Loan Bank of New York ("FHLB-NY") stock, at cost 2,772 3,101
Accrued interest receivable 2,590 2,557
Other assets 12,315 11,218
Total assets $ 644,101 $ 639,838
LIABILITIES AND EQUITY
LIABILITIES
Deposits:
Savings $ 97,443 $ 98,051
Non-interest bearing checking 51,948 53,232
Interest-bearing checking 28,401 24,271
Money market 135,920 127,655
Certificates of deposit 205,044 206,157
Total deposits 518,756 509,366
Advances from the FHLB-New York and other borrowed money 62,403 70,403
Other liabilities 10,024 8,900
Total liabilities 591,183 588,669
EQUITY
Preferred stock (par value $0.01 per share: 45,118 Series D shares, with a liquidation preference of $1,000 per share, issued and outstanding) 45,118 45,118
Common stock (par value $0.01 per share: 10,000,000 shares authorized; 3,697,836 shares issued; 3,695,892 shares outstanding at June 30, 2014 and March 31, 2014) 61 61
Additional paid-in capital 56,115 56,114
Accumulated deficit (44,397) (44,570)
Treasury stock, at cost (1,944 shares at June 30, 2014 and March 31, 2014) (417) (417)
Accumulated other comprehensive (loss) income (3,210) (4,768)
Total equity attributable to Carver Bancorp, Inc. 53,270 51,538
Non-controlling interest (352) (369)
Total equity 52,918 51,169
Total liabilities and equity $ 644,101 $ 639,838
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
June 30
$ in thousands except per share data 2014 2013
Interest Income:
Loans $ 5,162 $ 4,915
Mortgage-backed securities 206 263
Investment securities 324 348
Money market investments 66 43
Total interest income 5,758 5,569
Interest expense:
Deposits 722 697
Advances and other borrowed money 270 313
Total interest expense 992 1,010
Net interest income 4,766 4,559
Provision for (recovery of) loan losses (781) 831
Net interest income after provision for loan losses 5,547 3,728
Non-interest income:
Depository fees and charges 896 912
Loan fees and service charges 95 299
Gain on sale of securities 4 278
Gain on sale of loans, net 490
Gain (loss) on sale of real estate owned 4 (48)
Lower of cost or market adjustment on loans held-for-sale (69)
Other 204 266
Total non-interest income 1,203 2,128
Non-interest expense:
Employee compensation and benefits 2,787 2,368
Net occupancy expense 885 871
Equipment, net 175 175
Data processing 277 356
Consulting fees 88 120
Federal deposit insurance premiums 238 309
Other 2,094 1,081
Total non-interest expense 6,544 5,280
Income before income taxes 206 576
Income tax expense 16 73
Consolidated net income 190 503
Less: Net income attributable to non-controlling interest 17 93
Net income attributable to Carver Bancorp, Inc. $ 173 $ 410
Earnings per common share:
Basic $ 0.05 $ 0.11
Diluted $ 0.05 $ 0.11
CARVER BANCORP, INC. AND SUBSIDIARIES
Non Performing Asset Table
$ in thousands June
2014
March
2014
December
2013
September
2013
June
2013
Loans accounted for on a nonaccrual basis (1):
Gross loans receivable:
One-to-four family $ 2,651 $ 2,301 $ 3,736 $ 4,343 $ 6,666
Multifamily 671 2,240 1,363 758 659
Commercial real estate 3,979 7,024 8,702 10,503 8,091
Construction 75 693
Business 818 993 1,120 2,457 3,350
Consumer 5 1 1 4
Total non-performing loans $ 8,124 $ 12,559 $ 14,922 $ 18,140 $ 19,459
Other non-performing assets (2):
Real estate owned 4,124 1,369 1,423 970 946
Loans held-for-sale 2,611 5,011 7,678 7,854 9,709
Total other non-performing assets 6,735 6,380 9,101 8,824 10,655
Total non-performing assets (3): $ 14,859 $ 18,939 $ 24,023 $ 26,964 $ 30,114
Non-performing loans to total loans 2.08 % 3.22 % 3.80 % 4.55 % 5.47 %
Non-performing assets to total assets 2.31 % 2.96 % 3.76 % 4.25 % 4.75 %
(1) Nonaccrual status denotes any loan where the delinquency exceeds 90 days past due and in the opinion of management the collection of contractual interest and/or principal is doubtful. Payments received on a nonaccrual loan are either applied to the outstanding principal balance or recorded as interest income, depending on assessment of the ability to collect on the loan.
(2) Other non-performing assets generally represent loans that the Bank is in the process of selling and has designated held-for-sale or property acquired by the Bank in settlement of loans less costs to sell (i.e., through foreclosure, repossession or as an in-substance foreclosure). These assets are recorded at the lower of their cost or fair value.
(3) Troubled debt restructured loans performing in accordance with their modified terms for less than six months and those not performing in accordance with their modified terms are considered nonaccrual and are included in the nonaccrual category in the table above. At June 30, 2014, there were $5.6 million TDR loans that have performed in accordance with their modified terms for a period of at least six months. These loans are generally considered performing loans and are not presented in the table above.
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES
For the Three Months Ended June 30,
2014 2013
$ in thousands Average
Balance
Interest Average
Yield/Cost
Average
Balance
Interest Average
Yield/Cost
Interest-Earning Assets:
Loans (1) $ 397,811 $ 5,162 5.19 % $ 365,706 $ 4,915 5.38 %
Mortgage-backed securities 36,857 206 2.24 % 57,968 263 1.81 %
Investment securities 52,953 247 1.87 % 62,832 274 1.74 %
Restricted cash deposit 6,354 0.03 % 9,266 1 0.03 %
Equity securities (2) 1,917 24 5.02 % 1,957 19 3.89 %
Other investments and federal funds sold 116,276 119 0.41 % 74,076 97 0.53 %
Total interest-earning assets 612,168 5,758 3.76 % 571,805 5,569 3.90 %
Non-interest-earning assets 10,600 29,899
Total assets $ 622,768 $ 601,704
Interest-Bearing Liabilities:
Deposits:
Interest-bearing checking $ 23,837 $ 10 0.17 % $ 26,423 $ 10 0.15 %
Savings and clubs 97,992 64 0.26 % 97,997 65 0.27 %
Money market 133,237 157 0.47 % 114,440 132 0.46 %
Certificates of deposit 205,133 482 0.94 % 193,260 480 1.00 %
Mortgagors deposits 2,277 9 1.59 % 2,248 10 1.78 %
Total deposits 462,476 722 0.63 % 434,368 697 0.64 %
Borrowed money 43,612 270 2.48 % 45,001 313 2.79 %
Total interest-bearing liabilities 506,088 992 0.79 % 479,369 1,010 0.85 %
Non-interest-bearing liabilities:
Demand 55,299 56,472
Other liabilities 8,707 8,698
Total liabilities 570,094 544,539
Non-controlling interest (369) (256)
Stockholders' equity 53,043 57,421
Total liabilities and equity $ 622,768 $ 601,704
Net interest income $ 4,766 $ 4,559
Average interest rate spread 2.97 % 3.05 %
Net interest margin 3.11 % 3.19 %
(1) Includes nonaccrual loans
(2) Includes FHLB-NY stock
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED SELECTED KEY RATIOS
Three Months Ended
June 30,
Selected Statistical Data: 2014 2013
Return on average assets (1) 0.11 % 0.27 %
Return on average stockholders' equity (2) 1.23 % 2.83 %
Net interest margin (3) 3.11 % 3.19 %
Interest rate spread (4) 2.97 % 3.05 %
Efficiency ratio (5)(10) 109.63 % 78.96 %
Operating expenses to average assets (6) 4.20 % 3.51 %
Average stockholders' equity to average assets (7) 9.07 % 9.64 %
Average interest-earning assets to average interest-bearing liabilities 1.21 x 1.19 x
Basic earnings per share $ 0.05 $ 0.11
Average shares outstanding 3,696,225 3,695,966
June 30,
2014 2013
Capital Ratios:
Tier 1 leverage ratio (8) 10.35 % 10.43 %
Tier 1 risk-based capital ratio (8) 17.53 % 17.42 %
Total risk-based capital ratio (8) 20.10 % 20.00 %
Asset Quality Ratios:
Non-performing assets to total assets (9) 2.31 % 4.75 %
Non-performing loans to total loans receivable (9) 2.08 % 5.47 %
Allowance for loan losses to total loans receivable 1.81 % 2.90 %
Allowance for loan losses to non-performing loans 86.98 % 53.02 %
(1) Net income/(loss), annualized, divided by average total assets.
(2) Net income/(loss), annualized, divided by average total stockholders' equity.
(3) Net interest income, annualized, divided by average interest-earning assets.
(4) Combined weighted average interest rate earned less combined weighted average interest rate cost.
(5) Operating expenses divided by sum of net interest income plus non-interest income.
(6) Non-interest expenses, annualized, divided by average total assets.
(7) Average stockholders' equity divided by average assets for the period ended.
(8) These ratios reflect the consolidated bank only.
(9) Non-performing assets consist of nonaccrual loans, and real estate owned.
(10) Non-GAAP Financial Measures: In addition to evaluating Carver Bancorp's results of operations in accordance with U.S. generally accepted accounting principles ("GAAP"), management routinely supplements their evaluation with an analysis of certain non-GAAP financial measures, such as the efficiency ratio. Management believes this non-GAAP financial measure provides information useful to investors in understanding the Company's underlying operating performance and trends, and facilitates comparisons with the performance of other banks and thrifts. Further, the efficiency ratio is used by management in its assessment of financial performance, including non-interest expense control.

CONTACT: Michael Herley/Ruth Pachman Kekst and Company (212) 521-4897/4891 michael-herley@kekst.com ruth-packman@kekst.com David L. Toner Carver Bancorp, Inc. First Senior Vice President and Chief Financial Officer (718) 676-8936 david.toner@carverbank.comSource:Carver Bancorp, Inc.