Carver Bancorp, Inc. Reports First Quarter Fiscal Year 2017 Results

NEW YORK, Aug. 22, 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 first quarter ended June 30, 2016 of fiscal year 2017.

The Company reported net income of $408 thousand, or basic and diluted earnings per share of $0.04, for the quarter ended June 30, 2016, compared to net income of $445 thousand, or basic and diluted earnings per share of $0.05, for the quarter ended June 30, 2015.

“We are pleased with the first quarter of fiscal year 2017,” said Michael T. Pugh, the Company's President and Chief Executive Officer. “Our favorable net income results were driven by our sustained efforts to grow interest income through loans, while continuing to be mindful of asset quality. The optimization of our loan portfolio remains a strategic priority. During the quarter, we took steps to reduce the concentration of commercial real estate loans as a percentage of our overall assets.

“As a community development financial institution, which first opened its doors in Harlem in 1948, we are committed to providing small businesses and entrepreneurs with the loan capital needed to successfully grow their businesses across the low-to-moderate and middle income neighborhoods that Carver serves throughout Greater New York City.

“During the quarter we executed several initiatives that exemplify our commitment to the community:

  • We rolled out Cash Access Loans, a cost-competitive loan program for small businesses and retail consumers, which secures the needed capital for modest upgrades and day-to-day cash flow needs.

  • We partnered with the New York State Small Business Development Center for our second annual Profit Mastery Seminar, a special program designed to enhance the financial knowledge and skills of small business owners in the local community.

  • We continue to host community partner events highlighting financial education and small business ownership in the neighborhoods that we serve.

“As we move forward, we continue to look for opportunities to reduce operating expenses and grow revenue while ensuring sound operations in line with regulatory guidelines. Notably, as the largest African- and Caribbean- American operated bank in the U.S., we have experienced an increase in new account activity since the beginning of July 2016. We believe this renewed interest in banking with Carver is the result of the deep relationships we have nurtured with our customers and community partners alike-all at a time when messages of social justice, community and diversity have taken on renewed importance. Indeed, for the month of July 2016, Carver opened approximately 1,200 new accounts and took in approximately $4.0 million in new deposits. As a mission-focused bank, we are leveraging this growth in new business to provide individuals with the knowledge and tools they need to make sound banking decisions.”

Statement of Operations Highlights

First Quarter Results
The Company reported net income of $408 thousand for the three months ended June 30, 2016, compared to net income of $445 thousand for the prior year quarter. The change in our results was primarily driven by higher non-interest expense during the current quarter, partially offset by higher net interest income and a recovery of loan loss in the current period compared to a provision for loan loss in the prior year period.

Net Interest Income
Net interest income increased $515 thousand, or 10.0%, to $5.7 million for the three months ended June 30, 2016, compared to $5.2 million for the prior year quarter.

Interest income increased $698 thousand, or 11.2%, to $6.9 million for the three months ended June 30, 2016, compared to $6.2 million for the prior year quarter. Despite a 22 basis point decline in average yield, interest income on loans increased $797 thousand, or 14.1%, compared to the prior year quarter due to a $97.1 million, or 19.9%, increase in the Bank's average loan balances. This was partially offset by a $113 thousand, or 33.1%, decrease in interest on investment securities. Although the average yield on investment securities increased 31 basis points to 2.15% compared to the prior year quarter, the average balances decreased $29.0 million, or 52.3%, to $26.5 million as a result of calls and maturities of securities in the Bank's available-for-sale portfolio.

Interest expense increased $183 thousand, or 17.3%, to $1.2 million for the three months ended June 30, 2016, compared to $1.1 million for the prior year quarter, primarily attributable to a $42.3 million, or 19.5%, increase in the average balances of certificates of deposits. The average rate on money market accounts also increased 13 basis points to 0.62% compared to the prior year quarter, contributing to the $57 thousand increase in interest for that product.

Provision for Loan Losses
The Company recorded a $204 thousand recovery of loan loss for the three months ended June 30, 2016, compared to a $34 thousand provision for loan loss for the prior year quarter. Net recoveries of $155 thousand were recognized during the first quarter, compared to net chargeoffs of $487 thousand for the prior year quarter.

Non-interest Income
Non-interest income remained relatively unchanged at $1.2 million, decreasing $30 thousand, or 2.5%, for the three months ended June 30, 2016, compared to the prior year quarter. Higher depository fees in the current period were offset by higher gains on sales of loans in the prior year quarter.

Non-interest Expense
Non-interest expense increased $736 thousand, or 12.6%, to $6.6 million for the three months ended June 30, 2016, compared to $5.9 million for the prior year quarter due to higher other non-interest expense and employee compensation and benefits. These increases were primarily due to additional legal, audit and staffing costs associated with strengthening the Bank’s regulatory and compliance infrastructure.

Income Taxes
Income tax expense was $37 thousand for the three months ended June 30, 2016, compared to $13 thousand for the prior year quarter.

Financial Condition Highlights
At June 30, 2016, total assets were $697.6 million, reflecting a decrease of $44.1 million, or 5.9%, from total assets of $741.7 million at March 31, 2016. This change was the result of decreases of $27.3 million in the loan portfolio net of the allowance for loan losses and $17.7 million in cash and cash equivalents. The Bank is making efforts to reduce the concentration of commercial real estate loans. The decrease in the loan portfolio was largely attributable to loan payoffs and paydowns.

Total cash and cash equivalents decreased $17.7 million, or 27.8%, to $46.0 million at June 30, 2016, compared to $63.7 million at March 31, 2016 as the Bank repaid short-term borrowings during the period and reduced the level of brokered deposits.

Total investment securities decreased $2.5 million, or 3.5%, to $69.0 million at June 30, 2016, compared to $71.5 million at March 31, 2016, as cash generated from calls and sales of securities was redeployed into higher yielding loans.

Loans decreased $27.3 million, or 4.6%, to $561.7 million at June 30, 2016, compared to $589.0 million at March 31, 2016, as the Bank began a targeted reduction of its concentration in commercial real estate mortgage loans by reducing its efforts to slow attrition in and payoffs of Non Owner Occupied CRE loans.

Loans held-for-sale ("HFS") increased $3.3 million, or 133.6%, to $5.8 million at June 30, 2016, following the transfer of one commercial real estate loan into the held-for-sale portfolio. The transferred loan, with a carrying value of $3.4 million, was subsequently sold at par on July 7, 2016.

Total liabilities decreased $44.9 million, or 6.5%, to $642.6 million at June 30, 2016, compared to $687.5 million at March 31, 2016, following decreases in the Bank's deposits and borrowed funds.

Deposits decreased $26.8 million, or 4.4%, to $579.9 million at June 30, 2016, compared to $606.7 million at March 31, 2016, due primarily to decreases in brokered deposits in money market accounts and certificates of deposits. The Company did not actively pursue the retention of these deposits as it has been seeking to reduce its overall level of brokered deposits.

Advances from the Federal Home Loan Bank of New York and other borrowed money decreased $19.0 million, or 27.8%, to $49.4 million at June 30, 2016, compared to $68.4 million at March 31, 2016 due to the repayment of short-term borrowings during the quarter.

Total equity increased $767 thousand, or 1.4%, to $55.0 million at June 30, 2016, compared to $54.2 million at March 31, 2016. The increase was primarily driven by a $359 thousand increase in unrealized gains on investments and net income for the quarter of $408 thousand.

Asset Quality
At June 30, 2016, non-performing assets totaled $16.4 million, or 2.4% of total assets, compared to $17.5 million, or 2.4% of total assets, at March 31, 2016, and $13.5 million, or 1.8% of total assets, at December 31, 2015. Non-performing assets at June 30, 2016, consisted of $5.0 million of loans classified as impaired, $2.4 million of loans 90 days or more past due and nonaccruing, $2.1 million of loans classified as troubled debt restructurings, $1.1 million of other real estate owned, and $5.8 million of loans classified as HFS. In July 2016, the Bank was successful in selling at par $3.4 million of HFS loans.

At June 30, 2016, the allowance for loan losses was $5.2 million, representing a ratio of the allowance for loan losses to non-performing loans of 54.5% compared to a ratio of 37.5% at March 31, 2016. The ratio of the allowance for loan losses to total loans was 0.92% at June 30, 2016 compared to a ratio of 0.89% at March 31, 2016. Non-performing loans have decreased 31.9% to $9.5 million during the three month period, primarily due to the transfer of one commercial real estate loan to the Bank's held-for-sale portfolio.

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 the largest African- and Caribbean-American managed bank 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 dataJune 30, 2016 March 31, 2016
ASSETS
Cash and cash equivalents:
Cash and due from banks$45,771 $63,156
Money market investments255 504
Total cash and cash equivalents46,026 63,660
Restricted cash225 225
Investment securities:
Available-for-sale, at fair value54,012 56,180
Held-to-maturity, at amortized cost (fair value of $15,442 and $15,653 at June 30, 2016 and March 31, 2016, respectively)14,983 15,311
Total investment securities68,995 71,491
Loans held-for-sale5,829 2,495
Loans receivable:
Real estate mortgage loans491,889 517,785
Commercial business loans69,664 71,192
Consumer loans125 42
Loans, net561,678 589,019
Allowance for loan losses(5,183) (5,232)
Total loans receivable, net556,495 583,787
Premises and equipment, net5,774 5,983
Federal Home Loan Bank of New York (“FHLB-NY”) stock, at cost2,216 2,883
Accrued interest receivable4,310 3,647
Other assets7,686 7,557
Total assets$697,556 $741,728
LIABILITIES AND EQUITY
LIABILITIES
Deposits:
Savings$95,630 $95,230
Non-interest bearing checking54,698 56,634
Interest-bearing checking33,887 33,106
Money market143,959 163,380
Certificates of deposit250,012 255,854
Escrow1,757 2,537
Total deposits579,943 606,741
Advances from the FHLB-NY and other borrowed money49,403 68,403
Other liabilities13,228 12,369
Total liabilities642,574 687,513
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 June 30, 2016 and March 31, 2016, respectively)61 61
Additional paid-in capital55,470 55,470
Accumulated deficit(45,302) (45,710)
Treasury stock, at cost (1,944 shares at June 30, 2016 and March 31, 2016)(417) (417)
Accumulated other comprehensive income (loss)52 (307)
Total equity54,982 54,215
Total liabilities and equity$697,556 $741,728


CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended
June 30,
$ in thousands except per share data2016 2015
Restated
Interest income:
Loans$6,439 $5,642
Mortgage-backed securities170 191
Investment securities228 341
Money market investments69 34
Total interest income6,906 6,208
Interest expense:
Deposits935 776
Advances and other borrowed money306 282
Total interest expense1,241 1,058
Net interest income5,665 5,150
Provision for (recovery of) loan losses (1)(204) 34
Net interest income after provision for loan losses5,869 5,116
Non-interest income:
Depository fees and charges802 668
Loan fees and service charges143 172
Gain on sale of loans, net66 194
Gain on sale of real estate owned, net 18
Gain on sale of building, net17
Other135 141
Total non-interest income1,163 1,193
Non-interest expense:
Employee compensation and benefits2,936 2,781
Net occupancy expense744 996
Equipment, net188 162
Data processing (1)328 224
Consulting fees (1)192 145
Federal deposit insurance premiums166 122
Other (1)2,033 1,421
Total non-interest expense (1)6,587 5,851
Income before income taxes445 458
Income tax expense37 13
Net income attributable to Carver Bancorp, Inc.$408 $445
Earnings per common share:
Basic$0.04 $0.05
Diluted$0.04 $0.05

(1) June 30, 2015 amounts have been restated from previously reported results to correct for a material and certain other errors from prior periods.


CARVER BANCORP, INC. AND SUBSIDIARIES
Non Performing Asset Table
$ in thousandsJune
2016
March
2016
December
2015
September
2015
June
2015
Loans accounted for on a nonaccrual basis (1):
Gross loans receivable:
One-to-four family$3,060 $2,947 $2,997 $3,251 $3,654
Multifamily1,755 1,769 1,229 1,241 1,247
Commercial real estate2,221 5,338 3,427 1,784
Business2,469 3,896 2,494 1,992 1,883
Total non-performing loans$9,505 $13,950 $10,147 $6,484 $8,568
Other non-performing assets (2):
Real estate owned1,100 1,008 960 3,723 3,723
Loans held-for-sale5,829 2,495 2,404 2,586 2,576
Total other non-performing assets6,929 3,503 3,364 6,309 6,299
Total non-performing assets (3):$16,434 $17,453 $13,511 $12,793 $14,867
Non-performing loans to total loans1.69% 2.37% 1.69% 1.15% 1.74%
Non-performing assets to total assets2.36% 2.35% 1.79% 1.74% 2.22%
(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 June 30, 2016, 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,
2016 2015
Average Average Average Average
$ in thousands Balance Interest Yield/Cost Balance Interest Yield/Cost
Interest-Earning Assets:
Loans (1) $584,585 $6,439 4.41% $487,534 $5,642 4.63%
Mortgage-backed securities 33,885 170 2.01% 38,308 191 1.99%
Investment securities 26,462 142 2.15% 55,466 255 1.84%
Restricted cash deposit 225 0.03% 6,354 0.03%
Equity securities (2) 2,829 31 4.40% 2,859 27 3.79%
Other investments and federal funds sold 67,428 124 0.74% 65,470 93 0.57%
Total interest-earning assets 715,414 6,906 3.87% 655,991 6,208 3.79%
Non-interest-earning assets 16,132 24,559
Total assets $731,546 $680,550
Interest-Bearing Liabilities:
Deposits:
Interest-bearing checking $33,189 $13 0.16% $31,538 $13 0.17%
Savings and clubs 96,647 66 0.27% 95,429 63 0.26%
Money market 157,313 243 0.62% 150,824 186 0.49%
Certificates of deposit 259,556 604 0.93% 217,267 504 0.93%
Escrow 2,765 9 1.31% 2,597 10 1.54%
Total deposits 549,470 935 0.68% 497,655 776 0.63%
Borrowed money 59,711 306 2.06% 62,853 282 1.80%
Total interest-bearing liabilities 609,181 1,241 0.82% 560,508 1,058 0.76%
Non-interest-bearing liabilities:
Demand 55,749 51,692
Other liabilities 11,874 13,618
Total liabilities 676,804 625,818
Stockholders' equity 54,742 54,732
Total liabilities and equity $731,546 $680,550
Net interest income $5,665 $5,150
Average interest rate spread 3.05% 3.03%
Net interest margin 3.17% 3.14%
(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: 2016 2015
Restated
Return on average assets (1) 0.22% 0.26%
Return on average stockholders' equity (2) (10) 2.98% 3.25%
Return on average stockholders' equity, excluding AOCI (2) (10) 2.97% 3.17%
Net interest margin (3) 3.17% 3.14%
Interest rate spread (4) 3.05% 3.03%
Efficiency ratio (5) (10) 96.47% 92.24%
Operating expenses to average assets (6) 3.60% 3.44%
Average stockholders' equity to average assets (7) (10) 7.48% 8.04%
Average stockholders' equity, excluding AOCI, to average assets (7) (10) 7.51% 8.26%
Average interest-earning assets to average interest-bearing liabilities 1.17x1.17x
Basic earnings per share $0.04 $0.05
Average shares outstanding 3,696,420 3,696,420
June 30,
2016 2015
Capital Ratios:
Tier 1 leverage ratio (8) 9.18% 10.24%
Common Equity Tier 1 capital ratio (8) 13.03% 14.55%
Tier 1 risk-based capital ratio (8) 13.03% 14.55%
Total risk-based capital ratio (8) 14.43% 16.10%
Asset Quality Ratios:
Non-performing assets to total assets (9) 2.36% 2.22%
Non-performing loans to total loans receivable (9) 1.69% 1.74%
Allowance for loan losses to total loans receivable 0.92% 0.81%
Allowance for loan losses to non-performing loans 54.53% 46.39%
(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.
(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 June 30,
$ in thousands 2016 2015
Average Stockholders' Equity
Average Stockholders' Equity 54,742 54,732
Average AOCI (187) (1,468)
Average Stockholders' Equity, excluding AOCI $54,929 $56,200
Return on Average Stockholders' Equity 2.98% 3.25%
Return on Average Stockholders' Equity, excluding AOCI 2.97% 3.17%
Average Stockholders' Equity to Average Assets 7.48% 8.04%
Average Stockholders' Equity, excluding AOCI, to Average Assets 7.51% 8.26%

Michael Herley/Ruth Pachman Kekst (212) 521-4897/4891 michael.herley@kekst.com ruth.pachman@kekst.com Christina L. Maier Carver Bancorp, Inc. First Senior Vice President and Chief Financial Officer (212) 360-8894 christina.maier@carverbank.com

Source:Carver Bancorp, Inc.