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

NEW YORK, Nov. 10, 2015 (GLOBE NEWSWIRE) -- Carver Bancorp, Inc. (the "Company") CARV, the holding company for Carver Federal Savings Bank ("Carver" or the "Bank"), today announced financial results for its quarter ended September 30, 2015, the second quarter of its fiscal year 2016.

The Company reported a net loss of $165 thousand, or basic and diluted loss per share of $0.04, for the quarter, compared to net income of $210 thousand, or basic and diluted earnings per share of $0.06, for the quarter ended September 30, 2014.  For the six months ended September 30, 2015, the Company reported net income of $12 thousand, compared to net income of $381 thousand, or basic and diluted earnings per share of $0.10, for the comparative prior year period. 

Michael T. Pugh, the Company's President and Chief Executive Officer, said:  "During the quarter, we grew our loan portfolio by $71 million, or 14%, while improving our net interest margin from 3.14% to 3.37%.  To support this growth in lending, we recorded a $643 thousand loan provision in the quarter, which positions us for future growth, but reduced this quarter's net income to a loss.  Our total assets are now $736.7 million, reflecting an increase of $66.0 million, or 10% from our prior quarter-end total of $670.8 million.  With a non-performing assets ratio of 1.74%, and a non-performing loans ratio of 1.15%, our credit quality continued to improve and approach industry norms.  Core deposits increased 4% to $344 million, providing ample funding to continue meeting the strong loan demand in our community.  We remain focused on serving local small businesses, particularly the women and minority entrepreneurs who fuel job creation and development." 

"We are also pleased with the Federal Reserve's recent decision to lift its Cease & Desist Order on the Company.  Our capital ratios remain strong, with a Tier 1 capital ratio of 10.35%."

Mr. Pugh concluded, "Looking ahead to the rest of fiscal year 2016, Carver is preparing to launch a loan product designed to support consumers and small businesses in need of timely access to capital."

Statement of Operations Highlights

Second Quarter and Six Months Results

The Company reported a net loss of $165 thousand for the three months ended September 30, 2015, compared to net income of $210 thousand for the prior year quarter.  For the six months ended September 30, 2015, the Company reported net income of $12 thousand, compared to net income of $381 thousand for the prior year period.  In both periods, the change in our results was driven by provision 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 as a result of the increase in our loan portfolio, not due to a decrease in credit quality.  In addition, lower non-interest income, partially offset by higher net interest income contributed to the results.

Net Interest Income

Net interest income increased $1.0 million, or 22.6%, to $5.6 million for the quarter, compared to $4.6 million for the prior year quarter.  Net interest income increased $1.4 million, or 15.2%, to $10.8 million for the six months ended September 30, 2015, compared to $9.4 million for the prior year period.  Increases in each period were driven primarily by loan portfolio growth.

Interest income increased $1.1 million, or 20.4%, to $6.7 million for the quarter, compared to $5.6 million for the prior year quarter, driven by a $133.6 million, or 34.0%, increase in the Bank's average loan balances.  For the six months ended September 30, 2015, interest income increased $1.6 million, or 14.0%, to $12.9 million compared to $11.3 million for the prior year period, driven by a $111.8 million, or 28.3%, increase in the Bank's average loan balances.

Interest expense increased $101 thousand, or 10.2%, to $1.1 million for the quarter, compared to $992 thousand for the prior year quarter.  The increase is primarily due to a $62 thousand, or 8.6%, increase in interest expense on deposits as the Bank grew deposits.  For the six months ended September 30, 2015, interest expense increased $167 thousand, or 8.4%, to $2.2 million, compared to $2.0 million for the prior year period as the Bank grew deposits.

Provision for Loan Losses

To reflect the robust growth in the Bank's loan portfolio, the Company recorded a $643 thousand provision for loan losses for the second quarter, compared to a $713 thousand recovery of loan losses for the prior year quarter.  Net chargeoffs of $178 thousand were recognized for the second quarter, compared to net recoveries of $244 thousand for the prior year quarter. 

For the six months ended September 30, 2015, the Company recorded a $761 thousand provision for loan losses, compared to a $1.5 million recovery of loan losses for the prior year period, due primarily to the robust loan growth during the period.  Net chargeoffs of $666 thousand were recognized for the six months ended September 30, 2015, compared to net recoveries of $858 thousand in the prior year period.

Non-interest Income

Non-interest income decreased $431 thousand, or 27.6%, to $1.1 million for the three months ended September 30, 2015, compared to $1.6 million for the prior year quarter.  For the six months ended September 30, 2015, non-interest income decreased $441 thousand, or 15.9%, to $2.3 million compared to $2.8 million for the prior year period.  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.  Lower depository fees were partially offset by gains on sale of loans and higher loan fees during the six months ended September 30, 2015.

Non-interest Expense

Non-interest expense decreased $542 thousand, or 8.0%, to $6.2 million for the quarter, compared to $6.8 million for the prior year quarter.  For the six months ended September 30, 2015, non-interest expense decreased $1.1 million or 7.9%, to $12.2 million, compared to $13.3 million for the prior year period.  The decrease in both periods were primarily related to lower expenses associated with delinquent loans and loan workout, as well as a decrease in employee compensation and benefits.

Income Taxes

Income tax expense was $79 thousand for the three months ended September 30, 2015, compared to $57 thousand for the prior year quarter.  For the six months ended September 30, 2015, income tax expense was $93 thousand, compared to $73 thousand in the prior year period. 

Financial Condition Highlights

At September 30, 2015, total assets were $736.7 million, reflecting an increase of $60.4 million, or 8.9%, from total assets of $676.4 million at March 31, 2015.  This change was primarily driven by an increase of $79.5 million in the loan portfolio net of the allowance for loan losses, partially offset by a decrease of $21.3 million in the investment portfolio.

Total investment securities decreased $21.3 million, or 18.8%, to $91.8 million at September 30, 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 $79.6 million, or 16.5%, to $562.8 million at September 30, 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") increased $10 thousand to $2.6 million at September 30, 2015.

Total liabilities increased $60.1 million, or 9.7%, to $681.5 million at September 30, 2015, compared to $621.4 million at March 31, 2015, following growth in deposits.

Deposits increased $58.5 million, or 11.1%, to $586.3 million at September 30, 2015, compared to $527.8 million at March 31, 2015, due primarily to increases in certificates of deposits and money market accounts.

Advances from the Federal Home Loan Bank of New York and other borrowed money remained unchanged at $83.4 million at September 30, 2015.

Total equity increased $241 thousand, or 0.4%, to $55.2 million at September 30, 2015, compared to $55.0 million at March 31, 2015.  The increase was primarily driven by a $227 thousand decrease in unrealized losses on investments and net income for the six month period.    

Asset Quality

At September 30, 2015, non-performing assets totaled $12.8 million, or 1.7% of total assets, compared to $15.3 million, or 2.3% of total assets, at March 31, 2015, and $14.8 million, or 2.3% of total assets, at September 30, 2014.  Non-performing assets at September 30, 2015, consisted of $3.9 million of loans 90 days or more past due and nonaccruing, $1.0 million of loans classified as troubled debt restructurings, $3.7 million of other real estate owned, and $2.6 million of loans classified as HFS.

At September 30, 2015, the allowance for loan losses was $4.6 million, representing a ratio of the allowance for loan losses to non-performing loans of 70.5% compared to a ratio of 53.3% at March 31, 2015.  Reflecting a 22.8% decrease in our non-performing loans during the six month period, the ratio of the allowance for loan losses to total loans was 0.8% at September 30, 2015, compared to 0.9% 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 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.

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.