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Carver Bancorp, Inc. Reports Third Quarter Fiscal Year 2016 Results

NEW YORK, Feb. 10, 2016 (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 quarter ended December 31, 2015, the third quarter of its fiscal year 2016.

The Company reported net income of $437 thousand, or basic and diluted earnings per share of $0.12, for the quarter, compared to net income of $111 thousand, or basic and diluted earnings per share of $0.03, for the quarter ended December 31, 2014. For the nine months ended December 31, 2015, the Company reported net income of $451 thousand, or basic and diluted earnings per share of $0.12, compared to net income of $491 thousand, or basic and diluted earnings per share of $0.13, for the comparative prior year period.

Michael T. Pugh, the Company's President and Chief Executive Officer, said: “During the quarter our lending results continued to show positive momentum, with our loan portfolio increasing by $39 million, or 7% over the prior quarter. Our banking team's engagement with potential and existing customers is also yielding results in the growth of core deposits, which represent a low-cost source of funding for our loan portfolio. During the quarter, our core deposits increased 5% to $361 million, outpacing our overall 2% increase in deposits. At the close of the quarter, our capital ratios remained strong with a Tier 1 capital ratio of 10.15%.

"As an organization, Carver continues to invest the time and resources in our people to create an ecosystem of success that better equips our bankers and the local small business entrepreneurs that operate in our communities with the tools they need to succeed. This past December, Carver co-facilitated a workshop on capital access for the local small business community. Our lending team also continues to build relationships with the Minority and Women Business Enterprises ("MWBEs") that are quickly becoming a key engine of economic growth in our communities. In the months ahead, we plan to formally rollout a new loan program for borrowers who need access to capital of up to $15,000.

Mr. Pugh concluded, "We are pleased with the direction of our banking franchise and the operational improvements that are underway. As we look ahead, we believe Carver remains well-positioned for continued improvement and positive growth."

Statement of Operations Highlights

Third Quarter and Nine Months Results

The Company reported net income of $437 thousand for the three months ended December 31, 2015, compared to net income of $111 thousand for the prior year quarter. For the nine months ended December 31, 2015, the Company reported net income of $451 thousand, compared to net income of $491 thousand for the prior year period. In both periods, the change in our results was driven by higher net interest income and non-interest income, partially offset by provisions for loan losses in the current periods compared to recoveries of loan losses in the prior year periods. Our provision for loan losses increased in both periods primarily as a result of the increase in our loan portfolio.

Net Interest Income

Net interest income increased $1.6 million, or 37.3%, to $5.8 million for the quarter, compared to $4.3 million for the prior year quarter. Net interest income increased $3.0 million, or 22.1%, to $16.6 million for the nine months ended December 31, 2015, compared to $13.6 million for the prior year period. Increases in each period were driven primarily by loan portfolio growth.

Interest income increased $1.7 million, or 33.1%, to $7.0 million for the quarter, compared to $5.3 million for the prior year quarter, driven by a $169.4 million, or 40.9%, increase in the Bank's average loan balances. For the nine months ended December 31, 2015, interest income increased $3.3 million, or 20.1%, to $19.9 million compared to $16.6 million for the prior year period, driven by a $131.1 million, or 32.6%, increase in the Bank's average loan balances.

Interest expense increased $158 thousand, or 15.6%, to $1.2 million for the quarter, compared to $1.0 million for the prior year quarter. For the nine months ended December 31, 2015, interest expense increased $326 thousand, or 10.9%, to $3.3 million, compared to $3.0 million for the prior year period. The increase in each period was primarily due to the Bank's deposit growth. The cost of deposits remained flat at 0.63% for the quarter and 0.62% year to date.

Provision for Loan Losses

To reflect the robust growth in the Bank's loan portfolio, the Company recorded a $728 thousand provision for loan losses for the third quarter, compared to a $1.2 million recovery of loan losses for the prior year quarter. Net chargeoffs of $100 thousand were recognized for the third quarter, compared to net recoveries of $434 thousand for the prior year quarter.

For the nine months ended December 31, 2015, the Company recorded a $1.5 million provision for loan losses, compared to a $2.6 million recovery of loan losses for the prior year period, due primarily to the robust loan growth during the period. Net chargeoffs of $793 thousand were recognized for the nine months ended December 31, 2015, compared to net recoveries of $1.3 million in the prior year period.

Non-interest Income

Non-interest income increased $1.3 million, or 94.7%, to $2.7 million for the three months ended December 31, 2015, compared to $1.4 million for the prior year quarter. For the nine months ended December 31, 2015, non-interest income increased $893 thousand, or 21.4%, to $5.1 million compared to $4.2 million for the prior year period. The increase was primarily attributed to a gain recognized on the sale and leaseback of one of the Bank's branch locations conducted as part of Carver's ongoing site rationalization efforts. The increase was also attributable to gains on sales of loans and real estate owned during the quarter. Non-interest income in the prior year included a $323 thousand grant from the Community Development Financial Institutions Fund of the U.S. Treasury Department.

Non-interest Expense

Non-interest expense increased $558 thousand, or 8.2%, to $7.3 million for the quarter, compared to $6.8 million for the prior year quarter due to higher other non-interest expense, including the acceleration of expenses due to the closing of a branch during the quarter. For the nine months ended December 31, 2015, non-interest expense decreased $497 thousand or 2.5%, to $19.6 million, compared to $20.1 million for the prior year period. The Bank had lower expenses associated with delinquent loans and loan workout, as well as a decrease in regulatory assessment charges compared to the prior year period.

Income Taxes

Income tax expense was $67 thousand for the three months ended December 31, 2015, compared to $62 thousand for the prior year quarter. For the nine months ended December 31, 2015, income tax expense was $160 thousand, compared to $135 thousand in the prior year period.

Financial Condition Highlights

At December 31, 2015, total assets were $754.1 million, reflecting an increase of $77.7 million, or 11.5%, from total assets of $676.4 million at March 31, 2015. This change was primarily driven by an increase of $117.7 million in the loan portfolio net of the allowance for loan losses, partially offset by a decrease of $29.2 million in the investment portfolio.

Total investment securities decreased $29.2 million, or 25.8%, to $83.9 million at December 31, 2015, compared to $113.1 million at March 31, 2015, as cash generated from calls and sales of securities was redeployed into higher yielding loans.

Loans, net increased $118.4 million, or 24.5%, to $601.6 million at December 31, 2015, compared to $483.2 million at March 31, 2015, following growth in mortgage and business loans from loan purchases and originations.

Loans held-for-sale ("HFS") decreased $172 thousand, or 6.7%, to $2.4 million at December 31, 2015, following the transfer of one loan into Real Estate Owned.

Total liabilities increased $77.7 million, or 12.5%, to $699.1 million at December 31, 2015, compared to $621.4 million at March 31, 2015, following growth in deposits.

Deposits increased $69.9 million, or 13.2%, to $597.6 million at December 31, 2015, compared to $527.8 million at March 31, 2015, due primarily to increases in certificates of deposits, money market and non-interest bearing checking accounts.

Advances from the Federal Home Loan Bank of New York and other borrowed money increased $5.0 million, or 6.0%, to $88.4 million at December 31, 2015, compared to $83.4 million at March 31, 2015. The Bank increased its borrowings to fund loan growth during the quarter.

Total equity increased $86 thousand, or 0.2%, to $55.1 million at December 31, 2015, compared to $55.0 million at March 31, 2015. The increase was primarily driven by net income for the nine month period, offset by a $365 thousand increase in unrealized losses on investments.

Asset Quality

At December 31, 2015, non-performing assets totaled $13.5 million, or 1.8% of total assets, compared to $15.3 million, or 2.3% of total assets, at March 31, 2015, and $15.1 million, or 2.3% of total assets, at December 31, 2014. Non-performing assets at December 31, 2015, consisted of $5.1 million of loans classified as impaired, $3.4 million of loans 90 days or more past due and nonaccruing, $1.6 million of loans classified as troubled debt restructurings, $1.0 million of other real estate owned, and $2.4 million of loans classified as HFS.

At December 31, 2015, the allowance for loan losses was $5.2 million, representing a ratio of the allowance for loan losses to non-performing loans of 51.0% compared to a ratio of 53.3% at March 31, 2015. Non-performing loans have increased 20.9% during the nine month period, primarily due to one commercial real estate loan that is experiencing delays in securing approval to allow tenancy. Nonetheless, the ratio of the allowance for loan losses to total loans was 0.86% at December 31, 2015, compared to 0.93% at March 31, 2015.

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. In light of its mission to promote economic development and revitalize underserved communities, Carver has been designated by the U.S. Department of the Treasury as a community development financial institution. Carver is among the largest African- and Caribbean-American managed banks in the United States, with nine 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 (UNAUDITED)
$ in thousands except per share dataDecember 31, 2015 March 31, 2015
ASSETS
Cash and cash equivalents:
Cash and due from banks$45,572 $44,864
Money market investments504 6,128
Total cash and cash equivalents46,076 50,992
Restricted cash211 6,354
Investment securities:
Available-for-sale, at fair value68,192 101,185
Held-to-maturity, at amortized cost (fair value of $15,721 and $12,231 at December 31, 2015 and March 31, 2015, respectively)15,731 11,922
Total investment securities83,923 113,107
Loans held-for-sale2,404 2,576
Loans receivable:
Real estate mortgage loans524,624 412,204
Commercial business loans76,867 70,555
Consumer loans85 434
Loans, net601,576 483,193
Allowance for loan losses(5,174) (4,477)
Total loans receivable, net596,402 478,716
Premises and equipment, net6,455 7,075
Federal Home Loan Bank of New York (“FHLB-NY”) stock, at cost3,783 3,519
Accrued interest receivable3,677 2,781
Other assets11,202 11,266
Total assets$754,133 $676,386
LIABILITIES AND EQUITY
LIABILITIES
Deposits:
Savings$93,302 $95,009
Non-interest bearing checking66,222 50,731
Interest-bearing checking32,581 30,860
Money market168,257 148,702
Certificates of deposit235,594 200,123
Mortgagors deposits1,656 2,336
Total deposits597,612 527,761
Advances from the FHLB-NY and other borrowed money88,403 83,403
Other liabilities13,053 10,243
Total liabilities699,068 621,407
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; 3,698,031 shares issued; 3,696,087 shares outstanding at December 31, 2015 and March 31, 2015, respectively)61 61
Additional paid-in capital55,470 55,468
Accumulated deficit(43,757) (44,206)
Treasury stock, at cost (1,944 shares at December 31, 2015 and March 31, 2015)(417) (417)
Accumulated other comprehensive loss(1,410) (1,045)
Total equity55,065 54,979
Total liabilities and equity$754,133 $676,386


CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Nine Months Ended
December 31, December 31,
$ in thousands except per share data2015 2014 2015 2014
Interest income:
Loans$6,467 $4,677 $18,283 $14,838
Mortgage-backed securities192 197 579 595
Investment securities317 345 999 998
Money market investments33 46 87 181
Total interest income7,009 5,265 19,948 16,612
Interest expense:
Deposits841 741 2,399 2,182
Advances and other borrowed money330 272 924 815
Total interest expense1,171 1,013 3,323 2,997
Net interest income5,838 4,252 16,625 13,615
Provision for (recovery of) loan losses728 (1,151) 1,489 (2,645)
Net interest income after provision for loan losses5,110 5,403 15,136 16,260
Non-interest income:
Depository fees and charges820 887 2,297 2,707
Loan fees and service charges114 282 457 495
Gain on sale of securities 3 1 8
Gain (loss) on sale of loans, net305 499 (2)
Gain on sale of real estate owned146 41 164 44
Gain on sale of building1,203 1,203
Lower of cost or market adjustment on loans held-for-sale1 1 1 2
Other152 194 444 919
Total non-interest income2,741 1,408 5,066 4,173
Non-interest expense:
Employee compensation and benefits2,921 2,997 8,430 8,784
Net occupancy expense1,199 919 3,320 2,763
Equipment, net150 229 475 656
Data processing455 77 1,036 398
Consulting fees245 369 558 767
Federal deposit insurance premiums135 189 390 542
Other2,242 2,009 5,382 6,178
Total non-interest expense7,347 6,789 19,591 20,088
Income before income taxes504 22 611 345
Income tax expense67 62 160 135
Consolidated net income (loss)437 (40) 451 210
Less: Net loss attributable to non-controlling interest (151) (281)
Net income attributable to Carver Bancorp, Inc.$437 $111 $451 $491
Earnings per common share:
Basic$0.12 $0.03 $0.12 $0.13
Diluted0.12 0.03 0.12 0.13


CARVER BANCORP, INC. AND SUBSIDIARIES
Non Performing Asset Table
$ in thousandsDecember
2015
September
2015
June
2015
March
2015
December
2014
Loans accounted for on a nonaccrual basis (1):
Gross loans receivable:
One-to-four family$2,997 $3,251 $3,654 $3,664 $3,089
Multifamily1,229 1,241 1,247 1,053 1,053
Commercial real estate3,427 1,784 2,817 2,850
Business2,494 1,992 1,883 861 1,550
Consumer 7
Total non-performing loans$10,147 $6,484 $8,568 $8,395 $8,549
Other non-performing assets (2):
Real estate owned960 3,723 3,723 4,341 3,934
Loans held-for-sale2,404 2,586 2,576 2,576 2,606
Total other non-performing assets3,364 6,309 6,299 6,917 6,540
Total non-performing assets (3):$13,511 $12,793 $14,867 $15,312 $15,089
Non-performing loans to total loans1.69% 1.15% 1.74% 1.74% 1.96%
Non-performing assets to total assets1.79% 1.74% 2.22% 2.26% 2.34%
(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 less cost to sell, 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 December 31, 2015, there were $5.7 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 December 31,
2015 2014
Average Average Average Average
$ in thousands Balance Interest Yield/Cost Balance Interest Yield/Cost
Interest-Earning Assets:
Loans (1) $583,963 $6,467 4.43% $414,547 $4,677 4.51%
Mortgage-backed securities 36,266 192 2.12% 35,354 197 2.23%
Investment securities 39,050 221 2.26% 54,471 263 1.93%
Restricted cash deposit 154 0.03% 6,354 0.03%
Equity securities (2) 4,017 41 4.05% 1,727 18 4.14%
Other investments and federal funds sold 55,526 88 0.63% 90,153 110 0.48%
Total interest-earning assets 718,976 7,009 3.90% 602,606 5,265 3.49%
Non-interest-earning assets 34,863 24,909
Total assets $753,839 $627,515
Interest-Bearing Liabilities:
Deposits:
Interest-bearing checking $31,635 $12 0.15% $29,018 $12 0.16%
Savings and clubs 92,673 63 0.27% 94,338 63 0.26%
Money market 166,178 213 0.51% 148,778 185 0.49%
Certificates of deposit 240,631 546 0.90% 195,443 473 0.96%
Mortgagors deposits 2,488 7 1.12% 1,939 8 1.64%
Total deposits 533,605 841 0.63% 469,516 741 0.63%
Borrowed money 93,655 330 1.40% 43,577 272 2.48%
Total interest-bearing liabilities 627,260 1,171 0.74% 513,093 1,013 0.78%
Non-interest-bearing liabilities:
Demand 56,867 53,350
Other liabilities 14,809 7,178
Total liabilities 698,936 573,621
Non-controlling interest (501)
Stockholders' equity 54,903 54,395
Total liabilities and equity $753,839 $627,515
Net interest income $5,838 $4,252
Average interest rate spread 3.16% 2.71%
Net interest margin 3.25% 2.82%
(1) Includes nonaccrual loans
(2) Includes FHLB-NY stock


CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES
For the Nine Months Ended December 31,
2015 2014
Average Average Average Average
$ in thousands Balance Interest Yield/Cost Balance Interest Yield/Cost
Interest-Earning Assets:
Loans (1) $532,914 $18,282 4.57% $401,856 $14,838 4.92%
Mortgage-backed securities 38,138 579 2.02% 36,070 595 2.20%
Investment securities 47,472 726 2.04% 53,468 762 1.90%
Restricted cash deposit 3,652 1 0.03% 6,354 1 0.03%
Equity securities (2) 3,410 102 3.97% 1,822 59 4.30%
Other investments and federal funds sold 55,912 258 0.61% 106,692 357 0.44%
Total interest-earning assets 681,498 19,948 3.90% 606,262 16,612 3.65%
Non-interest-earning assets 30,201 17,721
Total assets $711,699 $623,983
Interest-Bearing Liabilities:
Deposits:
Interest-bearing checking $31,829 $39 0.16% $26,744 $33 0.16%
Savings and clubs 93,834 190 0.27% 96,385 193 0.27%
Money market 158,822 602 0.50% 141,159 517 0.49%
Certificates of deposit 223,963 1,551 0.92% 199,803 1,416 0.94%
Mortgagors deposits 2,337 17 0.97% 1,977 23 1.54%
Total deposits 510,785 2,399 0.62% 466,068 2,182 0.62%
Borrowed money 78,557 924 1.56% 43,599 815 2.48%
Total interest-bearing liabilities 589,342 3,323 0.75% 509,667 2,997 0.78%
Non-interest-bearing liabilities:
Demand 53,273 53,432
Other liabilities 14,043 7,307
Total liabilities 656,658 570,406
Non-controlling interest (408)
Stockholders' equity 55,041 53,985
Total liabilities and equity $711,699 $623,983
Net interest income $16,625 $13,615
Average interest rate spread 3.15% 2.87%
Net interest margin 3.25% 2.99%
(1) Includes nonaccrual loans
(2) Includes FHLB-NY stock


CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED SELECTED KEY RATIOS
Three Months Ended Nine Months Ended
December 31, December 31,
Selected Statistical Data: 2015 2014 2015 2014
Return on average assets (1) 0.23% 0.07% 0.08% 0.10%
Return on average stockholders' equity (2) (10) 3.18% 0.82% 1.09% 1.21%
Return on average stockholders' equity, excluding AOCI (2) (10) 3.10% 0.79% 1.07% 1.15%
Net interest margin (3) 3.25% 2.82% 3.25% 2.99%
Interest rate spread (4) 3.16% 2.71% 3.15% 2.87%
Efficiency ratio (5) (10) 85.64% 119.95% 90.32% 112.93%
Operating expenses to average assets (6) 3.90% 4.33% 3.67% 4.29%
Average stockholders' equity to average assets (7) (10) 7.28% 8.67% 7.73% 8.65%
Average stockholders' equity, excluding AOCI, to average assets (7) (10) 7.49% 8.99% 7.93% 9.10%
Average interest-earning assets to average interest-bearing liabilities 1.15x1.17x1.16x1.19x
Basic earnings per share $0.12 $0.03 $0.12 $0.13
Average shares outstanding 3,696,420 3,696,420 3,696,420 3,696,338
December 31,
2015 2014
Capital Ratios:
Tier 1 leverage ratio (8) 10.15% 10.49%
Common Equity Tier 1 capital ratio (8) 12.72% n/a
Tier 1 risk-based capital ratio (8) 12.72% 16.16%
Total risk-based capital ratio (8) 14.06% 18.37%
Asset Quality Ratios:
Non-performing assets to total assets (9) 1.79% 2.34%
Non-performing loans to total loans receivable (9) 1.69% 1.96%
Allowance for loan losses to total loans receivable 0.86% 1.35%
Allowance for loan losses to non-performing loans 50.99% 68.78%
(1) Net income, annualized, divided by average total assets.
(2) Net income, 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 expense divided by sum of net interest income and non-interest income.
(6) Non-interest expense, 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. December 31, 2015 ratios were calculated under the new capital requirements that became effective January 1, 2015.
(9) Non-performing assets consist of nonaccrual loans and real estate owned.
(10) See Non-GAAP Financial Measures disclosure for comparable GAAP measures.

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, return on average stockholders' equity excluding average accumulated other comprehensive income (loss) ("AOCI"), and average stockholders' equity excluding AOCI to average assets. Management believes these non-GAAP financial measures provide information that is 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.

Return on equity measures how efficiently we generate profits from the resources provided by our net assets. Return on average stockholders' equity is calculated by dividing annualized net income (loss) by average stockholders' equity, excluding AOCI. Management believes that this performance measure explains the results of the Company's ongoing businesses in a manner that allows for a better understanding of the underlying trends in the Company's current businesses. For purposes of the Company's presentation, AOCI includes the changes in the market or fair value of its investment portfolio and former pension plan. These fluctuations have been excluded due to the unpredictable nature of this item and are not necessarily indicative of current operating or future performance.

Three Months Ended
December 31,
Nine Months Ended
December 31,
$ in thousands 2015 2014 2015 2014
Average Stockholders' Equity
Average Stockholders' Equity 54,903 54,395 55,041 53,985
Average AOCI (1,568) (2,023) (1,415) (2,813)
Average Stockholders' Equity, excluding AOCI $56,471 $56,418 $56,456 $56,798
Return on Average Stockholders' Equity 3.18% 0.82% 1.09% 1.21%
Return on Average Stockholders' Equity, excluding AOCI 3.10% 0.79% 1.07% 1.15%
Average Stockholders' Equity to Average Assets 7.28% 8.67% 7.73% 8.65%
Average Stockholders' Equity, excluding AOCI, to Average Assets 7.49% 8.99% 7.93% 9.10%


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

Source:Carver Bancorp, Inc.