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

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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

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