UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                _________________
                                    FORM 10-K

                  FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
           SECTIONS 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934


/X/  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                    FOR THE FISCAL YEAR ENDED MARCH 31, 2003

                                       OR

/ /  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
     EXCHANGE ACT OF 1934


              FOR THE TRANSITION PERIOD FROM _________ TO _________

                         Commission File Number: 0-21487

                              CARVER BANCORP, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

             DELAWARE                                    13-3904174
 (State or Other Jurisdiction of            (I.R.S. Employer Identification No.)
  Incorporation or Organization)

75 WEST 125TH STREET, NEW YORK, NEW YORK                              10027
(Address of Principal Executive Offices)                           (Zip Code)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 876-4747
           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

COMMON STOCK, PAR VALUE $.01 PER SHARE               AMERICAN STOCK EXCHANGE
           (Title of Class)                         (Name of each Exchange on
                                                       which registered)

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                                      NONE

 Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. /X/ Yes / / No

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /

    Indicate by check mark whether the registrant is an  accelerated filer (as
defined in Rule 12b-2 of the Act).
/ /  Yes    /X/  No

    As of May 31, 2003, there were 2,286,133 shares of common stock of the
registrant outstanding. The aggregate market value of the Registrant's common
stock held by non-affiliates (based on the closing sales price of $15.30 per
share of the registrant's common stock on May 31, 2003) was approximately $35.0
million.

                      DOCUMENTS INCORPORATED BY REFERENCE:

Portions of registrant's proxy statement for the Annual Meeting of stockholders
for the fiscal year ended March 31, 2003 (the "Proxy Statement") are
incorporated by reference into Part III of this Form 10-K.

<PAGE>

                              CARVER BANCORP, INC.
                         2003 ANNUAL REPORT ON FORM 10-K
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
     Part I                                                                                        Page
     ------                                                                                        ----
<S>                                                                                                <C>
     Item 1.     Business........................................................................    2
     Item 2.     Properties......................................................................   28
     Item 3.     Legal Proceedings...............................................................   28
     Item 4.     Submission of Matters to a Vote of Security Holders.............................   30

     Part II
     -------

     Item 5.     Market for Carver Bancorp, Inc. Common
                   Equity and Related Stockholder Matters........................................   31
     Item 6.     Selected Financial Data.........................................................   32
     Item 7.     Management's Discussion and Analysis of Financial
                   Condition and Results of Operations...........................................   33
     Item 7A.    Quantitative and Qualitative Disclosures about Market Risk......................   44
     Item 8.     Financial Statements and Supplementary Data.....................................   45
     Item 9.     Changes in and Disagreements with Accountants on
                   Accounting and Financial Disclosure...........................................   77

     Part III
     --------

     Item 10.    Directors and Executive Officers of Carver Bancorp, Inc.........................   77
     Item 11.    Executive Compensation..........................................................   77
     Item 12.    Security Ownership of Certain Beneficial Owners
                   and Management and Related Stockholder Matters................................   77
     Item 13.    Certain Relationships and Related Transactions..................................   77
     Item 14.    Controls and Procedures.........................................................   77

     Part IV
     -------

     Item 15.    Exhibits, Financial Statement Schedules and Reports on
                   Form 8-K......................................................................   78

     SIGNATURES  ................................................................................   79

     CERTIFICATIONS..............................................................................   80

     EXHIBIT INDEX...............................................................................  E-1
</TABLE>

<PAGE>

                           FORWARD-LOOKING STATEMENTS

         Statements contained in this Annual Report on Form 10-K which are not
historical facts are forward-looking statements as that term is defined in the
Private Securities Litigation Reform Act of 1995, and may be identified by the
use of such words as "believe," "expect," "anticipate," "intend," "should,"
"could," "planned," "estimated," "potential" and similar terms and phrases.
These forward-looking statements consist of estimates with respect to the
financial condition, results of operations and business of the Company (as
defined below) that are subject to various risks and uncertainties which could
cause actual results to differ materially from these estimates due to a number
of factors. Factors which could result in material variations include, but are
not limited to, the Company's success in implementing its initiatives, including
expanding its product line, successfully rebranding its image and achieving
greater operating efficiencies; changes in interest rates which could affect net
interest margins and net interest income; competitive factors which could affect
net interest income and non-interest income; the ability of the Company to
originate and purchase loans with attractive terms and acceptable credit
quality; the ability of the Company to realize cost efficiencies; and general
economic conditions which could affect the volume of loan origination, deposit
flows, real estate values, the levels of non-interest income and the amount of
loan losses. The Company assumes no obligation to update these forward-looking
statements to reflect actual results, changes in assumptions or changes in other
factors affecting such forward-looking statements.

                                     PART I


ITEM 1.  BUSINESS

GENERAL DESCRIPTION OF BUSINESS

CARVER BANCORP, INC.

         Carver Bancorp, Inc., a Delaware corporation (on a stand-alone basis,
the "Holding Company"), is the holding company for Carver Federal Savings Bank,
a federally chartered savings bank, and its subsidiaries (collectively, the
"Bank" or "Carver Federal"). Collectively, the Holding Company, the Bank and the
Holding Company's other direct and indirect subsidiaries are referred to herein
as the "Company" or "Carver." On October 17, 1996, the Bank completed its
reorganization into a holding company structure (the "Reorganization") and
became a wholly owned subsidiary of the Holding Company. Pursuant to an
Agreement and Plan of Reorganization, dated May 21, 1996, each share of the
Bank's outstanding common stock was exchanged for one share of common stock of
the Holding Company. The Holding Company conducts business as a unitary savings
and loan holding company, and the principal business of the Holding Company
consists of the operation of its wholly owned subsidiary, the Bank.

         The Holding Company's executive offices are located at the home office
of the Bank at 75 West 125th Street, New York, New York 10027. The Holding
Company's telephone number is (212) 876-4747.

CARVER FEDERAL SAVINGS BANK

         The Bank was chartered in 1948 and began operations in 1949 as Carver
Federal Savings and Loan Association, a federally chartered mutual savings and
loan association, at which time the Bank obtained federal deposit insurance and
became a member of the Federal Home Loan Bank (the "FHLB") of New York. The Bank
converted to a federal savings bank in 1986 and changed its name at that time to
Carver Federal Savings Bank. On October 24, 1994, the Bank converted from mutual
to stock form and issued 2,314,275 shares of its common stock at a price of $10
per share.

         Carver Federal was founded as an African-American operated institution
to provide residents of under-served communities with the ability to invest
their savings and obtain credit. Carver Federal's principal business consists of
attracting deposit accounts through its five branch offices and investing those
funds in mortgage loans and other investments permitted to federal savings
banks. Based on asset size as of March 31, 2003, Carver Federal is the largest
African-American operated financial institution in the United States.

COMPANY WEBSITE AND AVAILABILITY OF SECURITIES AND EXCHANGE COMMISSION FILINGS

         The Company makes available on or through its internet website,
WWW.CARVERBANK.COM, its annual report on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K, and all amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934. Such reports are free of charge and are available as soon as reasonably
practicable after the Company electronically files such material with, or
furnishes it to, the Securities and Exchange Commission.


                                       2
<PAGE>


MANAGEMENT STRATEGY

         The Company's general operating strategy focuses on the origination of
commercial, construction, multifamily and, to a lesser extent, secured consumer
and business loans and the efficient use of personnel and technological
resources. During 1999, the Company reduced its previous emphasis on investing
in one- to four-family loans in favor of investing in higher margin business
lines, including commercial, construction and multifamily real estate loans. The
Company's current operating strategy consists primarily of: (1) the origination
of commercial construction and multifamily real estate in the Bank's primary
market area; (2) investing funds not utilized for loan originations or purchases
in the purchase of United States Government Agency securities, mortgage-backed
securities and, to a lesser extent, repurchasing the Company's common stock; (3)
expanding its branch network by opening de novo branches and stand-alone ATM
centers; (4) generating fee income by attracting and retaining high transaction
core deposit accounts; and (5) to continue to lower its expense ratio by
efficiently utilizing personnel, branch facilities and alterative delivery
channels (telephone banking, internet, and ATMs) to service its customers. The
Company plans to generate additional fee income by utilizing third party
providers to sell non-deposit investment products and to offer a Carver credit
card.

LENDING ACTIVITIES

         GENERAL. Carver Federal's principal lending activity is the origination
or purchase of mortgage loans for the purpose of purchasing or refinancing one-
to four-family residential, multifamily, and commercial properties. Carver
Federal also originates or participates in loans for the construction or
renovation of commercial properties and residential housing developments and
occasionally originates permanent financing upon completion of construction. In
addition, Carver Federal originates home equity loans and consumer loans secured
by deposits. Carver continued to engage in first-mortgage loan purchases during
the fiscal year ended March 31, 2003 ("fiscal 2003"), which accounted for 42.5%
of loan additions. Loan purchases are used to complement originations.

         LOAN PORTFOLIO COMPOSITION. Gross loans receivable increased by $5.7
million, or 1.9%, to $303.2 million at March 31, 2003, compared to $297.5
million at March 31, 2002. Carver Federal's net loan portfolio as a percentage
of total assets decreased to 57.8% at March 31, 2003, compared to 64.3% at March
31, 2002. One- to four-family mortgage loans totaled $71.7 million, or 23.7% of
Carver Federal's total gross loan portfolio, multifamily loans totaled $131.7
million, or 43.5% of total gross loans, non-residential real estate loans, which
includes commercial and church loans, totaled $79.2 million, or 26.1% of total
gross loans, and construction loans totaled $18.4 million, or 6.1% of total
gross loans. Consumer (credit card loans, personal loans, automobile loans, home
equity loans and home improvement loans) and business loans totaled $2.1
million, or 0.7% of total gross loans. One- to four-family mortgage loans
decreased by $51.1 million, or 41.6%, to $71.7 million at March 31, 2003,
compared to $122.8 million at March 31, 2002. This decrease in one- to
four-family loans is a result of a shift in focus toward multifamily lending,
the sale of newly originated one- to four-family loans in the secondary market
and portfolio repayments through normal amortization and early prepayments.
During fiscal 2003, multifamily real estate loans increased by $13.1 million, or
11.0%, to $131.7 million at March 31, 2003, compared to $118.6 million at March
31, 2002. Non-residential real estate loans (including church loans) increased
by $39.1 million, or 97.5%, to $79.2 million at March 31, 2003, compared to
$40.1 million at March 31, 2002. Construction loans increased by $4.7 million,
or 34.3%, to $18.4 million at March 31, 2003, compared to $13.7 million at March
31, 2002. Consumer and business loans decreased by $203,000, or 8.7%, to $2.1
million at March 31, 2003, compared to $2.3 million at March 31, 2002. The
decrease in consumer and business loans reflects the Bank's continued
de-emphasis on consumer lending resulting from its decision during the fiscal
year ended March 31, 1999 ("fiscal 1999") to discontinue the origination of
unsecured consumer loans.

         Premiums on loans are paid when the effective yield on the loans being
purchased is greater than the current market rate for comparable loans. These
premiums are amortized as the loan is repaid. It is possible that in a declining
interest rate environment the rate or speed at which loans repay may increase
which may have the effect of accelerating the amortization of the premium and
therefore reduce the effective yield of the loan. Premium on loans decreased by
$39,000, or 4.3%, to $867,000 at March 31, 2003, compared to $906,000 at March
31, 2002. The decrease was attributable to the amortization of existing loan
premiums which exceeded any additional premiums recorded on new loans purchased.

         Loans in process increased by $2.9 million, or 73.7%, to $6.8 million
at March 31, 2003, compared to $3.9 million at March 31, 2002. Allowance for
loan losses increased by $30,000, or 0.7%, to $4.2 million at March 31, 2003,
reflecting net charge-offs during fiscal 2003; there were no provisions for loan
losses made during fiscal 2003. See "Asset Quality--Asset Classification and
Allowance for Losses."


                                       3
<PAGE>


         The following table sets forth selected data relating to the
composition of Carver Federal's loan portfolio by type of loan at the dates
indicated.

<TABLE>
<CAPTION>
                                                                   AT MARCH 31,
                             ------------------------------------------------------------------------------------------
                                    2003                  2002                   2001                   2000
                             --------------------  --------------------   --------------------   --------------------
                              Amount    Percent     Amount    Percent      Amount    Percent      Amount    Percent
                             --------- ----------  ---------  ---------   ---------- ---------   --------- ----------
                                                             (DOLLARS IN THOUSANDS)
<S>                          <C>           <C>     <C>           <C>      <C>           <C>      <C>           <C>
Real estate loans:
  One- to four-family        $ 71,735      23.66 % $122,814      41.28 %  $ 157,767     54.71 %  $152,458      55.54 %
  Multifamily                 131,749      43.45    118,589      39.86       83,620     29.00      86,184      31.40
  Non-residential              79,244      26.13     40,101      13.48       36,113     12.52      22,721       8.28
  Construction                 18,377       6.06     13,678       4.60        7,101      2.46       6,393       2.33
  Consumer and business (1)     2,125       0.70      2,328       0.78        3,781      1.31       6,725       2.45
                             --------- ----------  ---------  ---------   ---------- ---------   --------- ----------
Total gross loans             303,230     100.00 %  297,510     100.00 %    288,382    100.00 %   274,481     100.00 %
                                       ==========             =========              =========             ==========
ADD:
Premium on loans                  867                   906                     705                   582
LESS:
Loans in process (2)           (6,838)               (3,936)                 (1,280)               (1,062)
Deferred fees and loan
discounts                        (363)                 (642)                   (819)                 (918)
Allowance for loan losses      (4,158)               (4,128)                 (3,551)               (2,935)
                             ---------             ---------              ----------             ---------
Net loan portfolio           $ 292,738             $289,710                $283,437              $270,148
                             =========             =========              ==========             =========
</TABLE>

                                 AT MARCH 31,
                            ---------------------
                                    1999
                            ---------------------
                             Amount     Percent
                            ----------  ---------
                            (DOLLARS IN THOUSANDS)
Real estate loans:
  One- to four-family       $ 181,320      65.39
  Multifamily                  52,366      18.89
  Non-residential              23,093       8.33
  Construction                 11,047       3.98
 Consumer and business (1)      9,450       3.41
                            ----------  ---------
Total gross loans             277,276     100.00
                                        =========
ADD:
Premium on loans                1,014
LESS:
Loans in process (2)           (2,636)
Deferred fees and loan
discounts                      (1,110)
Allowance for loan losses      (4,020)
                            ----------
Net loan portfolio           $270,524
                            ==========

(1)  Includes automobile loans, personal loans, credit card loans, home equity,
     home improvement loans and business loans.
(2)  Represents undisbursed portion of of outstanding construction loans.


         ONE- TO FOUR-FAMILY RESIDENTIAL LENDING. Traditionally, Carver
Federal's lending activity has been the origination and purchase of loans
secured by first mortgages on existing one- to four-family residences in Carver
Federal's market area. Carver Federal originates and purchases one- to
four-family residential mortgage loans in amounts that range between $35,000 and
$750,000. Approximately 67% of Carver Federal's one- to four-family residential
mortgage loans at March 31, 2003 had adjustable rates and approximately 33% had
fixed rates.

         Carver Federal's one- to four-family residential mortgage loans are
generally for terms of 30 years, amortized on a monthly basis, with principal
and interest due each month. Residential mortgage loans often remain outstanding
for significantly shorter periods than their contractual terms. These loans
customarily contain "due-on-sale" clauses that permit the Bank to accelerate
repayment of a loan upon transfer of ownership of the mortgaged property. Also,
borrowers may refinance or prepay one- to four-family residential loans at their
option without penalty.

         The Bank's lending policies generally limit the maximum loan-to-value
("LTV") ratio on one- to four-family residential mortgage loans secured by
owner-occupied properties to 95% of the lesser of the appraised value or
purchase price, with private mortgage insurance required on loans with LTV
ratios in excess of 80%. Under certain special loan programs, Carver originates
and sells loans secured by single-family homes purchased by first time home
buyers where the LTV ratio may go to 97%.

         Carver Federal's fixed-rate, one- to four-family residential mortgage
loans are underwritten in accordance with applicable guidelines and requirements
for sale to the Federal National Mortgage Association ("Fannie Mae") or the
State of New York Mortgage Agency ("SONYMA") in the secondary market. From time
to time the Bank has sold such loans to Fannie Mae and to SONYMA. The Bank also
originates, to a limited extent, loans underwritten according to Federal Home
Loan Mortgage Corporation ("FHLMC") standards. Loans are sold with limited
recourse on a servicing retained basis to Fannie Mae and on a servicing released
basis to SONYMA. Carver Federal uses several sub-servicing firms to service
mortgage loans, whether held in portfolio or sold with the servicing retained.
At March 31, 2003, the Bank, through its sub-servicers, was servicing $4.1
million of loans for Fannie Mae and FHLMC.

         Carver Federal offers one-year, three-year, five/one-year and
five/three-year adjustable-rate one- to four-family residential mortgage loans.
These loans are retained in Carver Federal's portfolio and are not sold on the
secondary market. They are indexed to the weekly average rate on one-year,
three-year and five-year U.S. Treasury securities, respectively, adjusted to a
constant maturity (usually one year), plus a margin of 275 basis points. The
rates at which interest accrues on these loans are adjustable every one or three
years, generally with limitations on adjustments of two percentage points per
adjustment period and six percentage points over the life of a one-year
adjustable-rate mortgage and five percentage points over the life of a
three-year adjustable-rate mortgage.

         The retention of adjustable-rate loans in Carver Federal's portfolio
helps reduce Carver Federal's exposure to increases in prevailing market
interest rates. However, there are unquantifiable credit risks resulting from
potential increases in costs to borrowers in the event of upward repricing of
adjustable-rate loans. It is possible that during periods of rising interest
rates, the risk of default on adjustable-rate loans may increase due to
increases in interest costs to borrowers. Although adjustable-rate loans allow
the Bank to increase the sensitivity of its interest-earning assets to changes
in interest rates, the extent of this interest rate sensitivity is limited by


                                       4
<PAGE>
periodic and lifetime interest rate adjustment limitations. Accordingly, there
can be no assurance that yields on the Bank's adjustable-rate loans will fully
adjust to compensate for increases in the Bank's cost of funds. Adjustable-rate
loans increase the Bank's exposure to decreases in prevailing market interest
rates, although decreases in the Bank's cost of funds would tend to offset this
effect.

         MULTIFAMILY REAL ESTATE LENDING. At March 31, 2003, multifamily loans
totaled $131.7 million, or 43.5% of Carver Federal's gross loan portfolio. The
largest of these loans outstanding was a $2.4 million loan secured by a 48 unit,
multifamily apartment building located in New York, New York. This loan was
performing at March 31, 2003. The Bank intends to continue its emphasis on
multifamily mortgage lending, which has enabled the Bank to benefit from these
higher yielding loans compared to lower yielding one- to four- family loans. In
addition, Carver Federal has expanded its presence in the multifamily lending
market in the New York City area. Carver Federal offers competitive rates with
flexible terms that make the product attractive to borrowers. Multifamily
property lending entails additional risks compared to one- to four-family
residential lending. For example, such loans are dependent on the successful
operation of the real estate project and can be significantly impacted by supply
and demand conditions in the market for multifamily residential units.

         Carver Federal's multi-family product guidelines generally require that
the maximum LTV not exceed 75% while "cash out" refinances are limited to 65%
LTV based on the appraised value. The Bank generally requires a debt coverage
ratio ("DCR") of at least 1.3, which requires the properties to generate cash
flow after expenses and allowances in excess of the principal and interest
payment. The regulatory maximum for loans to one borrower is $6.7 million.
Carver Federal originates multifamily mortgage loans, the predominance of which
are adjustable rate loans that generally amortize on the basis of a 15-, 20-,
25- or 30-year period but require a balloon payment after the first five years,
or the borrower may have an option to extend the loan for two additional
five-year periods. The Bank, on a case-by-case basis, originates ten-year fixed
rate loans.

         To help ensure continued collateral protection and asset quality for
the term of multifamily real estate loans, Carver Federal employs (with the
assistance of an independent consulting firm) a risk-rating system. Under the
risk-rating system, all multifamily real estate loans with balances over
$250,000 are risk rated. Separate multifamily real estate loan portfolio reviews
are performed annually resulting in written management summary reports.

         NON-RESIDENTIAL REAL ESTATE LENDING. At March 31, 2003, non-residential
real estate mortgage loans (including loans to churches) totaled $79.2 million,
or 26.1% of the gross loan portfolio. Carver Federal originates non-residential
real estate first mortgage loans in its market area. At March 31, 2003, the
largest non-residential loan outstanding was a $2.8 million loan secured by a
retail/office building located in New York, New York. This loan was performing
at March 31, 2003. Carver Federal's non-residential real estate lending activity
consists predominantly of loans for the purpose of purchasing or refinancing
office, mixed-use (properties used for both commercial and residential purposes
but predominantly commercial), retail and church buildings in its market area.
Non-residential real estate lending entails additional risks compared with one-
to four-family residential lending. For example, such loans typically involve
large loan balances to single borrowers or groups of related borrowers, and the
payment experience on such loans typically is dependent on the successful
operation of the real estate project. Carver Federal's maximum LTV on
non-residential real estate mortgage loans is 75%, and "cash out" refinances are
limited to 65% LTV based on the appraised value. The Bank generally requires a
DCR of at least 1.3. The Bank requires the assignment of rents of all tenants'
leases in the property which serves as security for the mortgage.

         To help ensure continued collateral protection and asset quality for
the term of the non-residential real estate loans, Carver Federal employs (with
the assistance of an independent consulting firm) a risk-rating system. Under
the risk-rating system, all non-residential real estate loans with balances over
$250,000 are risk rated. Independent third party non-residential loan portfolio
reviews are performed at least annually resulting in written management summary
reports.

         Historically, Carver Federal has been a New York City area leader in
the origination of loans to churches. At March 31, 2003, loans to churches
totaled $15.4 million, or 5.1% of the Bank's gross loan portfolio. These loans
generally have five-, seven- or ten-year terms with 15-, 20- or 25-year
amortization periods and a balloon payment due at the end of the term, and
generally have no greater than a 60% LTV ratio. At March 31, 2003, the largest
permanent church loan was a $2.0 million loan secured by a building located in
New York, New York. This loan was performing at March 31, 2003. The Bank
provides construction financing for churches and generally provides permanent
financing upon completion of construction. Under the Bank's current lending
policies, the maximum loan amount for such lending is $1.0 million, but larger
loan amounts are considered on a case-by-case basis. There are currently 25
church loans in the Bank's portfolio.

         Loans secured by real estate owned by religious organizations generally
are larger and involve greater risks than one- to four-family residential
mortgage loans. Because payments on loans secured by such properties are often
dependent on voluntary contributions by members of the church's congregation,
repayment of such loans may be subject to a greater extent to adverse conditions
in the economy. The Bank seeks to minimize these risks in a variety of ways,
including reviewing the church's financial condition, limiting the size of such
loans and establishing the quality of the collateral securing such loans. The
Bank determines the appropriate amount and type of security for such loans based
in part upon the governance structure of the particular organization, the length
of time the church has been established in the community and a cash flow
analysis of the church to determine its ability to service the proposed loan.
Carver Federal will obtain a first mortgage on the underlying real property and
usually requires personal

                                       5
<PAGE>
guarantees of key members of the congregation and/or key person life insurance
on the pastor of the congregation and may also require the church to obtain key
person life insurance on specific members of the church's leadership. Asset
quality in the church loan category has been exceptional throughout Carver
Federal's history. Management believes that Carver Federal remains a leading
lender to churches in its market area.

         CONSTRUCTION LENDING. The Bank originates construction loans for new
construction and renovation of churches, multi-family buildings, residential
developments, community service facilities and affordable housing programs.
Carver Federal also offers construction loans to qualified individuals and
developers for new construction and renovation of one- to four-family residences
in the Bank's market area. The Bank's construction loans generally have
adjustable interest rates and are underwritten in accordance with the same
standards as the Bank's mortgage loans on existing properties. The loans provide
for disbursement in stages as construction is completed. Construction terms are
usually from 12 to 24 months, during which period the borrower is required to
make monthly payments of interest on the outstanding loan balance. Borrowers
must satisfy all credit requirements that apply to the Bank's permanent mortgage
loan financing for the subject property. Carver Federal has established
additional criteria for construction loans to include an engineer's review on
all construction budgets in excess of $500,000 and appropriate interest reserves
for loans in excess of $250,000.

         Construction financing generally is considered to involve a higher
degree of risk of loss than long-term financing on improved, occupied real
estate. Risk of loss on a construction loan is dependent largely upon the
accuracy of the initial estimate of the property's value at completion of
construction or development and the estimated cost (including interest) of
construction. During the construction phase, a number of factors could result in
delays and cost overruns. If the estimate of construction costs proves to be
inaccurate, the Bank may be required to advance funds beyond the amount
originally committed to permit completion of the development. If the estimate of
value proves to be inaccurate, the Bank may be confronted, at or prior to the
maturity of the loan, with a project having a value that is insufficient to
assure full repayment. The ability of a developer to sell developed lots or
completed dwelling units will depend on, among other things, demand, pricing,
availability of comparable properties and economic conditions. The Bank has
sought to minimize this risk by limiting construction lending to qualified
borrowers in the Bank's market areas, limiting the aggregate amount of
outstanding construction loans and imposing a stricter LTV ratio requirement
than that required for one- to four-family mortgage loans.

         At March 31, 2003, the Bank had $18.4 million (including $6.8 million
of committed but undisbursed funds) in construction loans outstanding,
comprising 6.1% of the Bank's total gross loan portfolio. At March 31, 2003, the
largest construction loan was on a retail building for $2.0 million located in
New York, New York. At March 31, 2003, this loan was performing.

         CONSUMER AND BUSINESS LOANS. At March 31, 2003, the Bank had
approximately $2.1 million in consumer and business loans, or 0.7% of the Bank's
gross loan portfolio. The secured loans in this portfolio were either secured by
deposits at the Bank and homes. At March 31, 2003, $521,000, or 24.5% of all
consumer and business loans, were secured and $1.6 million, or 75.5%, were
unsecured.

         Consumer loans generally involve more risk than first mortgage loans.
Loan collections are dependent on the borrower's continuing financial stability,
and thus are more likely to be adversely affected by job loss, divorce, illness
or personal bankruptcy. Further, the application of various federal and state
laws, including federal and state bankruptcy and insolvency laws, may limit the
amount which can be recovered. These loans may also give rise to claims and
defenses by a borrower against Carver Federal, and a borrower may be able to
assert claims and defenses against Carver Federal which it has against the
seller of the underlying collateral. In underwriting secured consumer loans
other than secured credit cards, Carver Federal considers the borrower's credit
history, an analysis of the borrower's income, expenses and ability to repay the
loan and the value of the collateral. The underwriting for secured credit cards
only takes into consideration the value of the underlying collateral. See "Asset
Quality--Non-performing Assets."

         At March 31, 2003, the Bank had $385,000 in unsecured business loans.
During the fourth quarter of fiscal 1999, the Bank discontinued the origination
of unsecured commercial business loans. The Bank continues to make a limited
number of commercial business loans that are secured in full by passbook and/or
certificate of deposit accounts.

         LOAN PROCESSING. Carver Federal's loan originations are derived from a
number of sources, including referrals by realtors, builders, depositors,
borrowers and mortgage brokers, as well as walk-in customers. Loans are
originated by the Bank's personnel who receive a salary. Loan application forms
are available at each of the Bank's offices. All applications are forwarded to
the Bank's Lending Department located in the main office.

         Carver Federal has established underwriting standards for multifamily
and non-residential real estate. A non-residential real estate loan application
is completed for all multifamily and non-residential properties which the Bank
finances. Prior to loan approval, the property is inspected by a loan officer,
who will prepare a property inspection report. As part of the loan approval
process, consideration is given to the appraisal, location, accessibility,
stability of neighborhood, environmental assessment, personal credit history of
the applicant(s) and the financial capacity of the applicant(s).

         Upon receipt of a completed loan application from a prospective
borrower, a credit report and verifications are ordered to verify specific
information relating to the loan applicant's income and credit standing. It is
the Bank's policy to obtain an appraisal of

                                       6
<PAGE>

the real estate intended to secure a proposed mortgage loan from an independent
fee appraiser approved by the Bank.

         It is Carver Federal's policy to record a lien on the real estate
securing the loan and to obtain a title insurance policy which insures that the
property is free of prior encumbrances. Borrowers must also obtain hazard
insurance policies prior to closing and, when the property is in a flood plain
as designated by the Department of Housing and Urban Development, paid flood
insurance policies must be obtained. Most borrowers are also required to advance
funds on a monthly basis, together with each payment of principal and interest,
to a mortgage escrow account from which the Bank makes disbursements for items
such as real estate taxes and hazard insurance.

         LOAN APPROVAL. Except for loans in excess of $1.5 million, mortgage
loan approval authority has been delegated by the Bank's Board of Directors
("Board") to the Bank's Management Loan Committee, which consists of certain
members of executive management, and to the Bank's Asset Liability and Interest
Rate Risk Committee, a committee of the Board. All one- to four-family mortgage
loans that conform to Fannie Mae standards and limits may be approved by the
Residential Mortgage Loan Underwriter. Loans above $1.5 million as well as any
loan that represents an exception to the Bank's lending policies must be
approved by the full Board.

         LOANS TO ONE BORROWER. Under the loans-to-one-borrower limits of the
Office of Thrift Supervision ("OTS"), with certain limited exceptions, loans and
extensions of credit to a single or related group of borrowers outstanding at
one time generally may not exceed 15% of the unimpaired capital and surplus of a
savings bank. See "Regulation and Supervision-Federal Banking Regulation-Loans
to One Borrower Limitations." At March 31, 2003, the maximum loan under this
test would be $6.7 million. At March 31, 2003 there were no loans that exceed
the $6.7 million limit.

         LOAN SALES. Originations of one- to four-family real estate loans are
generally made on properties located within the New York City metropolitan area,
although Carver Federal does occasionally fund loans secured by property in
other areas. All such loans, however, satisfy the Bank's underwriting criteria
regardless of location. The Bank continues to offer one- to four-family
fixed-rate mortgage loans in response to consumer demand but requires that such
loans satisfy guidelines of either Fannie Mae or SONYMA to provide opportunity
for subsequent sale in the secondary market as desired to manage interest rate
risk exposure.

         LOAN PURCHASES. During fiscal 2003 Carver Federal purchased a total of
$42.3 million of mortgage loans, consisting of performing multifamily and
adjustable-rate one- to four-family mortgage loans to supplement its origination
efforts. This represented 42.5% of Carver Federal's net addition to its loan
production during fiscal 2003. The Bank purchases loans in order to increase
interest income and to manage its liquidity position. The Bank continues to
shift its loan production emphasis to take advantage of the higher yields and
better interest rate risk characteristics available on multifamily and
non-residential real estate mortgage loans as well as to increase its
participation in multifamily and non-residential real estate mortgage loans with
New York area lenders. Loans purchased in fiscal 2003 decreased $2.9 million, or
6.5%, from loan purchases of $45.2 million during the fiscal year ended March
31, 2002 ("fiscal 2002").

         The following table sets forth certain information with respect to
Carver Federal's loan originations, purchases and sales during the periods
indicated.

<TABLE>
<CAPTION>
                                                                   YEAR ENDED MARCH 31,
                                      -----------------------------------------------------------------------------
                                                 2003                      2002                      2001
                                      -------------------------   -----------------------   -----------------------
                                         Amount        Percent      Amount       Percent      Amount       Percent
                                      --------------  ---------   ------------  ---------   ------------  ---------
                                                                  (DOLLARS IN THOUSANDS)
<S>                                         <C>           <C>         <C>           <C>         <C>           <C>
Loans originated:
   One- to four-family                      $ 5,985       6.02 %      $ 4,144       3.78 %      $ 2,274       3.70 %
   Multifamily                               19,979      20.10         27,225      24.80         15,747      25.70
   Non-residential                           24,524      24.67         25,583      23.31         12,182      19.88
   Construction                               9,006       9.06          8,910       8.12              -       0.00
   Consumer and business (1)                    101       0.10             53       0.05            320       0.52
                                      --------------  ---------   ------------  ---------   ------------  ---------
Total loans originated                       59,595      59.95         65,915      60.06         30,523      49.80
Loans purchased (2)                          42,260      42.51         45,203      41.18         30,922      50.46
Loans sold (3)                               (2,453)     (2.47)        (1,361)     (1.24)          (160)     (0.26)
                                      --------------  ---------   ------------  ---------   ------------  ---------
Net additions to loan portfolio            $ 99,402     100.00 %     $109,757     100.00 %     $ 61,285     100.00 %
                                      ==============  =========   ============  =========   ============  =========
</TABLE>

(1)  Comprised of auto, credit card, personal and home equity.
(2)  Comprised primarily of one- to four-family and multi-family mortgage loans.
(3)  Comprise primarily of one- to four-family mortgage loans and automobile
     loans.



                                       7
<PAGE>
         Loan originations were $59.6 million in fiscal 2003, compared to $65.9
million in fiscal 2002 and $30.5 million in fiscal 2001. The decline in loan
originations in fiscal 2003 is due primarily to highly competitive market
conditions.

         Loans purchased by the Bank entail certain risks not necessarily
associated with loans the Bank originates. The Bank's purchased loans are
generally acquired without recourse and in accordance with the Bank's
underwriting criteria for originations. In addition, purchased loans have a
variety of terms, including maturities, interest rate caps and indices for
adjustment of interest rates, that may differ from those offered at the time by
the Bank in connection with the loans the Bank originates. Finally, the market
areas in which the properties that secure the purchased loans are located are
subject to economic and real estate market conditions that may significantly
differ from those experienced in Carver Federal's market area. There can be no
assurance that economic conditions in these out-of-state areas will not
deteriorate in the future, resulting in increased loan delinquencies and loan
losses among the loans secured by property in these areas. It is important to
note that the Bank initially seeks to purchase loans in its market area,
however, the Bank will purchase loans outside its market area to meet its
financial objectives.

         In an effort to reduce these risks, with its existing personnel and
through the use of a quality control/loan review firm, the Bank has sought to
ensure that purchased loans satisfy the Bank's underwriting standards and do not
otherwise have a higher risk of collection or loss than loans originated by the
Bank. A Lending Department officer monitors the inspection and confirms the
review of each purchased loan. Carver Federal also requires appropriate
documentation and further seeks to reduce its risk by requiring, in each
buy/sell agreement, a series of warranties and representations as to the
underwriting standards and the enforceability of the related legal documents.
These warranties and representations remain in effect for the life of the loan.
Any misrepresentation must be cured within ninety (90) days of discovery or
trigger certain repurchase provisions in the buy/sell agreement.

         INTEREST RATES AND LOAN FEES. Interest rates charged by Carver Federal
on mortgage loans are primarily determined by competitive loan rates offered in
its market area and minimum yield requirements for loans purchased by Fannie Mae
and SONYMA. Mortgage loan rates reflect factors such as prevailing market
interest rate levels, the supply of money available to the savings industry and
the demand for such loans. These factors are in turn affected by general
economic conditions, the monetary policies of the federal government, including
the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), the general supply of money in the economy, tax policies and
governmental budget matters.

         Carver Federal charges fees in connection with loan commitments and
originations, rate lock-ins, loan modifications, late payments, changes of
property ownership and for miscellaneous services related to its loans. Loan
origination fees are calculated as a percentage of the loan principal. The Bank
typically receives fees of between zero and one point (one point being
equivalent to 1% of the principal amount of the loan) in connection with the
origination of fixed-rate and adjustable-rate residential mortgage loans. The
loan origination fee, net of certain direct loan origination expenses, is
deferred and accreted into income over the contractual life of the loan using
the interest method. If a loan is prepaid, refinanced or sold, all remaining
deferred fees with respect to such loan are taken into income at such time.

         In addition to the foregoing fees, Carver Federal receives fees for
servicing loans for others, which in turn generally are sub-serviced for Carver
Federal by a third party servicer. Servicing activities include the collection
and processing of mortgage payments, accounting for loan repayment funds and
paying real estate taxes, hazard insurance and other loan-related expenses out
of escrowed funds. Income from these activities varies from period to period
with the volume and type of loans originated, sold and purchased, which in turn
is dependent on prevailing market interest rates and their effect on the demand
for loans in the Bank's market area.

         LOAN MATURITY SCHEDULE. The following table sets forth information at
March 31, 2003 regarding the dollar amount of loans maturing in Carver Federal's
portfolio, including scheduled repayments of principal, based on contractual
terms to maturity. Demand loans, loans having no schedule of repayments and no
stated maturity, and overdrafts are reported as due in one year or less. The
table below does not include any estimate of prepayments, which significantly
shorten the average life of all mortgage loans and may cause Carver Federal's
actual repayment experience to differ significantly from that shown below.

<TABLE>
<CAPTION>
                              DUE DURING THE YEAR ENDING MARCH 31,
                              ------------------------------------


                                                               DUE THREE       DUE       DUE       DUE
                                                                TO FIVE      FIVE TO    TEN TO    AFTER
                              2004        2005        2006       YEARS      TEN YEARS  20 YEARS  20 YEARS     TOTAL
                              ----        ----        ----       -----      ---------  --------  --------     -----
                                                                    (IN THOUSANDS)
<S>                           <C>        <C>          <C>        <C>           <C>     <C>        <C>        <C>
Real Estate Loans:
  One- to four-family        $  6,424    $ 4,898      $ 6,422    $ 4,675    $    623   $ 2,937    $45,756    $ 71,735
  Multifamily                   5,753      3,831        8,187     35,269      24,035    16,408     38,266     131,749
  Non-residential               5,287      6,622       11,375     26,300      19,605     6,707      3,348      79,244
  Construction                 11,584      5,793        1,000          -           -         -          -      18,377
Consumer and business loans       438         30           23      1,320         158       118         38       2,125
                            ----------  ---------  ----------- ---------- ----------- ---------  --------- -----------
    Total                    $ 29,486    $21,174     $ 27,007   $ 67,564    $ 44,421   $26,170    $87,408    $303,230
                            ==========  =========  =========== ========== =========== =========  ========= ===========
</TABLE>

                                       8
<PAGE>

         The following table sets forth amounts in each loan category at March
31, 2003 that are contractually due after March 31, 2003 and whether such loans
have fixed rates or adjustable interest rates. Scheduled contractual principal
repayments of loans do not necessarily reflect the actual lives of such assets.
The average life of long-term loans is substantially less than their contractual
terms due to prepayments. In addition, due-on-sale clauses in mortgage loans
generally give Carver Federal the right to declare a conventional loan due and
payable in the event, among other things, that a borrower sells the real
property subject to the mortgage and the loan is not repaid. The average life of
mortgage loans tends to increase when current mortgage loan market rates are
substantially higher than rates on existing mortgage loans and tends to decrease
when current mortgage loan market rates are substantially lower than rates on
existing mortgage loans.

<TABLE>
<CAPTION>
                                                            DUE AFTER MARCH 31, 2004
                                                ---------------------------------------------------
                                                    FIXED           ADJUSTABLE           TOTAL
                                                ---------------   ---------------    --------------
                                                                   ( IN THOUSANDS )
<S>                                                   <C>               <C>               <C>
Real Estate Loans:
  One- to four-family                                $  23,445         $  41,866         $  65,311
  Multifamily                                           49,553            76,443           125,996
  Non-residential                                       39,137            34,820            73,957
  Construction                                               -             6,793             6,793
Consumer and business                                    1,686                 -             1,686
                                                ---------------   ---------------    --------------
    Total                                            $ 113,821         $ 159,922         $ 273,743
                                                ===============   ===============    ==============
</TABLE>

Asset Quality

         GENERAL. One of the Bank's key operating objectives has been and
continues to be to maintain a high level of asset quality. Through a variety of
strategies, including, but not limited to, monitoring loan delinquencies,
borrower workout arrangements and marketing of foreclosed properties, the Bank
has been proactive in addressing problem and non-performing assets which, in
turn, has helped to build the strength of the Bank's financial condition. Such
strategies, as well as the Bank's concentration on one- to four-family and
multifamily mortgage lending, the maintenance of sound credit standards for new
loan originations and a strong real estate market, have resulted in the Bank
maintaining a low level of non-performing assets.

         The underlying credit quality of the Bank's loan portfolio is dependent
primarily on each borrower's ability to continue to make required loan payments
and, in the event a borrower is unable to continue to do so, the value of the
collateral should be adequate to secure the loan. A borrower's ability to pay
typically is dependent primarily on employment and other sources of income
which, in turn, is impacted by general economic conditions, although other
factors, such as unanticipated expenditures or changes in the financial markets,
may also impact the borrower's ability to pay. Collateral values, particularly
real estate values, are also impacted by a variety of factors, including general
economic conditions, demographics, maintenance and collection or foreclosure
delays.

         NON-PERFORMING ASSETS. When a borrower fails to make a payment on a
mortgage loan, immediate steps are taken by Carver Federal's sub-servicers to
have the delinquency cured and the loan restored to current status. With respect
to mortgage loans, once the payment grace period has expired (in most instances
15 days after the due date), a late notice is mailed to the borrower within two
business days and a late charge is imposed if applicable. If payment is not
promptly received, the borrower is contacted by telephone and efforts are made
to formulate an affirmative plan to cure the delinquency. Additional calls are
made by the 20th and 25th day of the delinquency. If a mortgage loan becomes 30
days delinquent, a letter is mailed to the borrower requesting payment by a
specified date. If a mortgage loan becomes 60 days delinquent, Carver Federal
seeks to make personal contact with the borrower and also has the property
inspected. If a mortgage becomes 90 days delinquent, a letter is sent to the
borrower demanding payment by a certain date and indicating that a foreclosure
suit will be filed if the deadline is not met. If payment is still not made,
management may pursue foreclosure or other appropriate action.

         When a borrower fails to make a payment on a consumer loan, steps are
taken by Carver Federal's loan department to have the delinquency cured and the
loan restored to current status. With the exception of automobile loans, once
the payment grace period has expired (10 days after the due date), a late notice
is mailed to the borrower immediately and a late charge is imposed if
applicable. If payment is not promptly received, the borrower is contacted by
telephone, and efforts are made to formulate an affirmative plan to cure the
delinquency. If a consumer loan becomes 30 days delinquent, a letter is mailed
to the borrower requesting payment by a specified date. If the loan becomes 60
days delinquent, the account is given to an independent collection agency to
follow up with the collection of the account. If the loan becomes 90 days
delinquent, a final warning letter is sent to the borrower and any co-borrower.
If the loan remains delinquent, it is reviewed for charge-off. The Bank's
collection efforts generally continue after the loan is charged off.




                                       9
<PAGE>


         The following table sets forth information with respect to Carver
Federal's non-performing assets at the dates indicated. Loans generally are
placed on non-accrual status when they become 90 days delinquent.

<TABLE>
<CAPTION>
                                                                            AT MARCH 31,
                                                       -----------------------------------------------------------
                                                         2003        2002        2001        2000         1999
                                                       ----------- ----------  ----------  ----------  -----------
                                                       (DOLLARS IN THOUSANDS)
<S>                                                      <C>           <C>         <C>         <C>          <C>
Loans accounted for on a non-accrual basis (1):
  Real estate:
    One- to four-family                                  $ 1,113       $ 756       $ 947       $ 966        $ 392
    Multifamily                                                -         253         978         870        1,051
    Non-residential                                          639       1,754         565           -            -
    Construction                                              23          23          23         122          560
    Consumer and business                                     27          37           6         168          414
                                                       ----------  ----------  ----------  ----------  -----------
      Total non-accrual loans                              1,802       2,823       2,519       2,126        2,417
                                                       ----------  ----------  ----------  ----------  -----------

Accruing loans contractually past due 90 days or more:
  Real estate:
    One- to four-family                                        -           -           -           -          568
    Multifamily                                                -           -           -           -          804
    Construction                                               -           -           -           -          530
    Consumer and business                                      -           -           -           -          183
                                                       ----------  ----------  ----------  ----------  -----------
      Total accruing 90-day past due loans                     -           -           -           -        2,085
                                                       ----------  ----------  ----------  ----------  -----------

Total of non-accrual and accruing 90-day past due
loans                                                      1,802       2,823       2,519       2,126        4,502
                                                       ----------  ----------  ----------  ----------  -----------

Other non-performing assets (2):
  Real estate:
    One- to four-family                                        -           -           -         127          185
    Multifamily                                                -           -          27          27            -
    Non-residential                                            -           -         449         768            -
    Consumer and business                                      -           -           -          16           99
                                                       ----------  ----------  ----------  ----------  -----------
Total other non-performing assets                              -           -         476         938          284
                                                       ----------  ----------  ----------  ----------  -----------
Total non-performing assets (3)                          $ 1,802     $ 2,823     $ 2,995     $ 3,064      $ 4,786
                                                       ==========  ==========  ==========  ==========  ===========

Non-performing loans to total loans                        0.61%       0.96%       0.88%       0.79%        1.66%
Non-performing assets to total assets                      0.35%       0.63%       0.71%       0.73%        1.15%
</TABLE>

(1)   Non-accrual status denotes any loan where the delinquency exceeds 90 days
      past due and in the opinion of management the collection of additional
      interest is doubtful. After a careful review of individual loan history
      and related collateral by management, the loan may be designated as an
      accruing loan that is contractually past due 90 days or more or if in the
      opinion of management the collection of additional interest is doubtful
      the loan will remain in non-accrual status. Payments received on a
      non-accrual 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. During the year ended March 31, 2003, gross interest
      income of $173,000 would have been recorded on loans accounted for on a
      non-accrual basis at the end of the fiscal year if the loans had been
      current throughout the year. Instead, there was no interest on such loans
      included in income during the period.


(2)   Other non-performing assets represent property acquired by the Bank in
      settlement of loans (i.e., through foreclosure or repossession or as an
      in-substance foreclosure). These assets are recorded at the lower of their
      fair value or the unpaid principal balance plus unpaid accrued interest of
      the related loans.


(3)   Total non-performing assets consist of non-accrual loans, accruing loans
      90 days or more past due and property acquired in settlement of loans.


         At March 31, 2003, total non-performing assets decreased by $1.0
million, or 36.2%, to $1.8 million, compared to $2.8 million at March 31, 2002.
All non-performing assets at March 31, 2003 and 2002 relate to loans accounted
for on a non-accrual basis. The decrease primarily reflects a decrease in
non-accruing non-residential and multifamily real estate loans partially offset
by an increase in non-accruing one- to four-family real estate loans.

         There were no accruing loans contractually past due 90 days or more at
March 31, 2003 and March 31, 2002, reflecting the continued practice adopted by
the Bank during the fiscal year ended March 31, 2000 to either write off or
place on non-accrual status all loans contractually past due 90 days or more.




                                       10
<PAGE>
         ASSET CLASSIFICATION AND ALLOWANCES FOR LOSSES. Federal regulations and
the Bank's policies require the classification of assets on the basis of quality
on a regular basis. An asset is classified as "substandard" if it is determined
to be inadequately protected by the current net worth and paying capacity of the
obligor or the current value of the collateral pledged, if any. An asset is
classified as "doubtful" if full collection is highly questionable or
improbable. An asset is classified as "loss" if it is considered un-collectible,
even if a partial recovery could be expected in the future. The regulations also
provide for a "special mention" designation, described as assets that do not
currently expose a savings institution to a sufficient degree of risk to warrant
classification but do possess credit deficiencies or potential weaknesses
deserving management's close attention. Assets classified as substandard or
doubtful require a savings institution to establish general allowances for loan
losses. If an asset or portion thereof is classified loss, a savings institution
must either establish specific allowances for loan losses in the amount of the
portion of the asset classified loss or charge off such amount. Federal
examiners may disagree with a savings institution's classifications. If a
savings institution does not agree with an examiner's classification of an
asset, it may appeal this determination to the OTS Regional Director.

         At March 31, 2003, Carver Federal had $2.1 million of loans classified
as substandard which represented 0.4% of the Bank's total assets and 5.3% of the
Bank's tangible regulatory capital at March 31, 2003. There were no loans
classified as doubtful or loss at March 31, 2003.

         The OTS, in conjunction with the other federal banking agencies, has
adopted an interagency policy statement on the allowance for loan losses and
lease losses. The policy statement provides guidance for financial institutions
on both the responsibilities of management for the assessment and establishment
of adequate allowances and guidance for banking agency examiners to use in
determining the adequacy of general valuation guidelines. Generally, the policy
statement recommends that institutions have effective systems and controls to
identify, monitor and address asset quality problems, that management has
analyzed all significant factors that affect the ability to collect the
portfolio in a reasonable manner and that management has established acceptable
allowance evaluation processes that meet the objectives set forth in the policy
statement. Although management believes that adequate specific and general loan
loss allowances have been established, actual losses are dependent upon future
events and, as such, further additions to the level of specific and general loan
loss allowances may become necessary. Federal examiners may disagree with the
savings institution as to the appropriate level of the institution's allowance
for loan losses. While management believes Carver Federal has established its
existing loss allowances in accordance with generally accepted accounting
principles, there can be no assurance that regulators, in reviewing Carver's
assets, will not require Carver Federal to increase its loss allowance, thereby
negatively affecting Carver's reported financial condition and results of
operations.

         Carver Federal's methodology for establishing the allowance for loan
losses takes into consideration probable losses that have been identified in
connection with specific loans as well as losses that have not been identified
but can be expected to occur. Further, management reviews the ratio of
allowances to total loans (including projected growth) and recommends
adjustments to the level of allowances accordingly. The Internal Asset Quality
Review Committee conducts quarterly reviews of the Bank's loans and evaluates
the need to establish general and specific allowances on the basis of this
review. In addition, management actively monitors Carver Federal's asset quality
and charges off loans and properties acquired in settlement of loans against the
allowances for losses on loans and such properties when appropriate and provides
specific loss reserves when necessary. Although management believes it uses the
best information available to make determinations with respect to the allowances
for losses, future adjustments may be necessary if economic conditions differ
substantially from the economic conditions in the assumptions used in making the
initial determinations.

         Carver Federal's Internal Asset Quality Review Committee reviews its
assets on a quarterly basis to determine whether any assets require
classification or re-classification. The Bank has a centralized loan servicing
structure that relies upon outside servicers, each of which generates a monthly
report of delinquent loans. The Board has designated the Internal Asset Quality
Review Committee to perform quarterly reviews of the Bank's asset quality, and
their report is submitted to the Board for review. The Asset Liability and
Interest Rate Risk Committee establishes policy relating to internal
classification of loans and also provides input to the Internal Asset Quality
Review Committee in its review of classified assets. In originating loans,
Carver Federal recognizes that credit losses will occur and that the risk of
loss will vary with, among other things, the type of loan being made, the
creditworthiness of the borrower over the term of the loan, general economic
conditions and, in the case of a secured loan, the quality of the security for
the loan. It is management's policy to maintain a general allowance for loan
losses based on, among other things, regular reviews of delinquencies and loan
portfolio quality, character and size, the Bank's and the industry's historical
and projected loss experience and current and forecasted economic conditions. In
addition, considerable uncertainty exists as to the future improvement or
deterioration of the real estate markets in various states, or of their ultimate
impact on Carver Federal as a result of its purchased loans in such states. See
"Lending Activities-Loan Purchases." Carver Federal increases its allowance for
loan losses by charging provisions for possible losses against the Bank's
income. General allowances are established by the Board on at least a quarterly
basis based on an assessment of risk in the Bank's loans, taking into
consideration the composition and quality of the portfolio, delinquency trends,
current charge-off and loss experience, the state of the real estate market and
economic conditions generally. Specific allowances are provided for individual
loans, or portions of loans, when ultimate collection is considered improbable
by management based on the current payment status of the loan and the fair value
or net realizable value of the security for the loan.

         At the date of foreclosure or other repossession or at the date the
Bank determines a property is an impaired property, the

                                       11
<PAGE>

Bank transfers the property to real estate acquired in settlement of loans at
the lower of cost or fair value, less estimated selling costs. Fair value is
defined as the amount in cash or cash-equivalent value of other consideration
that a real estate parcel would yield in a current sale between a willing buyer
and a willing seller. Any amount of cost in excess of fair value is charged-off
against the allowance for loan losses. Carver Federal records an allowance for
estimated selling costs of the property immediately after foreclosure.
Subsequent to acquisition, the property is periodically evaluated by management
and an allowance is established if the estimated fair value of the property,
less estimated costs to sell, declines. If, upon ultimate disposition of the
property, net sales proceeds exceed the net carrying value of the property, a
gain on sale of real estate is recorded. At March 31, 2003, the Bank had no real
estate acquired in settlement of loans. See Note 1 of Notes to Consolidated
Financial Statements.

         The following table sets forth an analysis of Carver Federal's
allowance for loan losses for the periods indicated.

<TABLE>
<CAPTION>
                                                                             YEAR ENDED MARCH 31,
                                                    -----------------------------------------------------------------------
                                                        2003          2002           2001          2000           1999
                                                    -------------  ------------  ------------- -------------  -------------
                                                                            (DOLLARS IN THOUSANDS)
<S>                                                      <C>           <C>            <C>           <C>            <C>
Balance at beginning of period                           $ 4,128       $ 3,551        $ 2,935       $ 4,020        $ 3,138
                                                    -------------  ------------  ------------- -------------  -------------
Loans charged off:
  Real estate:
    One- to four-family                                        2             -            252           138              -
    Non-residential                                            -             -            194           171              -
  Consumer and business                                      226           500            931         2,260          3,229
                                                    -------------  ------------  ------------- -------------  -------------
      Total charge-offs                                      228           500          1,377         2,569          3,229
                                                    -------------  ------------  ------------- -------------  -------------

Recoveries:
  Construction                                                 -             -              -             -             45
  One- to four-family                                          -             3              -            31              -
  Multifamily                                                  -             -              -            40              -
  Non-residential                                              -             -              -            22              -
  Consumer and business                                      258           174            200           292             37
                                                    -------------  ------------  ------------- -------------  -------------
    Total recoveries                                         258           177            200           385             82
                                                    -------------  ------------  ------------- -------------  -------------
Net loans charged off (recovered)                            (30)          323          1,177         2,184          3,147
  Provision for losses                                         -           900          1,793         1,099          4,029
                                                    -------------  ------------  ------------- -------------  -------------
Balance at end of period                                 $ 4,158       $ 4,128        $ 3,551       $ 2,935        $ 4,020
                                                    =============  ============  ============= =============  =============

Ratio of net charge-offs to average loans
 outstanding                                              -0.01%         0.11%          0.42%         0.84%          1.17%
Ratio of allowance to total loans                          1.40%         1.41%          1.24%         1.07%          1.48%
Ratio of allowance to non-performing assets (1)          230.74%       146.23%        118.56%        95.79%         85.60%
</TABLE>

     (1)  Non-performing assets consist of non-accrual loans, accruing loans 90
          days or more past due and property acquired in settlement of loans.


                                       12
<PAGE>
         The following table allocates the allowance for loan losses by asset
category at the dates indicated. The allocation of the allowance to each
category is not necessarily indicative of future losses and does not restrict
the use of the allowance to absorb losses in any category.

<TABLE>
<CAPTION>
                                                                      AT MARCH 31,
                                  ---------------------------------------------------------------------------------------
                                        2003                  2002                    2001                 2000
                                  -------------------  --------------------    ----------------------  ----------------
                                              % OF                   % OF                    % OF                  % OF
                                            LOANS IN               LOANS IN                LOANS IN              LOANS IN
                                              EACH                   EACH                    EACH                  EACH
                                            CATEGORY               CATEGORY                CATEGORY              CATEGORY
                                            TO TOTAL               TO TOTAL                TO TOTAL              TO TOTAL
                                  AMOUNT     LOANS      AMOUNT      LOANS       AMOUNT      LOANS      AMOUNT     LOANS
                                  ------     -----      ------      -----       ------      -----      ------     -----
                                                                  (DOLLARS IN THOUSANDS)
<S>                              <C>         <C>       <C>          <C>        <C>          <C>       <C>          <C>
Loans:
  Real estate
    One- to four-family          $   298     24.18 %   $   429      41.28 %    $ 1,198      54.71 %   $ 1,050      55.54 %
    Multi-family                     656     44.24       1,468      39.86          748      29.00         764      31.40
    Non-residential                1,967     26.38         729      13.48          353      12.52         202       8.28
    Construction                     170      4.46          76       4.60          290       2.46         272       2.33
  Consumer and business              344      0.74         377       0.78          962       1.31         647       2.45
  Unallocated                        723         -       1,049          -           -          -           -          -
                                 -------    ------     -------     ------      ------      ------     -------     ------
Total allowance for loan losses  $ 4,158    100.00 %   $ 4,128     100.00 %    $ 3,551     100.00 %   $ 2,935     100.00 %
                                 =======    ======     =======     ======      ======      ======     =======     ======
</TABLE>

                                    AT MARCH 31,
                                    ------------
                                        1999
                                        ----
                                             % OF
                                           LOANS IN
                                              EACH
                                            CATEGORY
                                            TO TOTAL
                                  AMOUNT      LOANS
                                  ------      -----
                                (DOLLARS IN THOUSANDS)
Loans:
  Real estate
    One- to four-family          $   957      65.39 %
    Multi-family                     902      18.89
    Non-residential                  251       8.33
    Construction                     424       3.98
  Consumer and business            1,486       3.41
  Unallocated                       -          -
                                 -------      ------
Total allowance for loan losses  $ 4,020      100.00 %
                                 =======      ======


INVESTMENT ACTIVITIES

         GENERAL. The Bank utilizes mortgage-backed and other investment
securities in virtually all aspects of its asset/liability management strategy.
In making investment decisions, the Board considers, among other things, the
Bank's yield and interest rate objectives, its interest rate and credit risk
position and its liquidity and cash flow.

         The Bank must maintain minimum levels of investments that qualify as
liquid assets under OTS regulations. Liquidity may increase or decrease
depending upon the availability of funds and comparative yields on investments
in relation to the return on loans. The Bank's liquidity policy requires that
cash flow projections are regularly reviewed and updated to assure that adequate
liquidity is maintained.

         Generally, the investment policy of the Bank is to invest funds among
categories of investments and maturities based upon the Bank's asset/liability
management policies, investment quality, loan and deposit volume, liquidity
needs and performance objectives. SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, requires that securities be
classified into three categories: trading, held-to-maturity, and
available-for-sale. Securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading securities
and are reported at fair value with unrealized gains and losses included in
earnings. Debt securities for which the Bank has the positive intent and ability
to hold to maturity are classified as held-to-maturity and reported at amortized
cost. All other securities not classified as trading or held-to-maturity are
classified as available-for-sale and reported at fair value with unrealized
gains and losses included, on an after-tax basis, in a separate component of
stockholders' equity. At March 31, 2003, the Bank had no securities classified
as trading. At March 31, 2003, $129.1 million, or 77.9% of the Bank's
mortgage-backed and other investment securities, was classified as
available-for-sale. The remaining $36.5 million, or 22.1%, was classified as
held-to-maturity.

         MORTGAGE-BACKED SECURITIES. The Bank has invested in mortgage-backed
securities in order to achieve its asset/liability management goals. Although
mortgage-backed securities generally yield from 60 to 100 basis points less than
whole loans, they present substantially lower credit risk, are more liquid than
individual mortgage loans and may be used to collateralize obligations of the
Bank. Because Carver Federal receives regular payments of principal and interest
from its mortgage-backed securities, these investments provide more consistent
cash flows than investments in other debt securities which generally only pay
principal at maturity. Mortgage-backed securities also help the Bank meet
certain definitional tests for favorable treatment under federal banking and tax
laws. See "Regulation and Supervision--Federal Banking Regulation--QTL Test" and
"Federal and State Taxation."

                                       13
<PAGE>


         At March 31, 2003, mortgage-backed securities constituted 24.9% of
total assets, as compared to 14.7% of total assets at March 31, 2002. Carver
Federal maintains a significant portfolio of mortgage-backed securities in the
form of Government National Mortgage Association ("GNMA") pass-through
certificates, Fannie Mae and FHLMC participation certificates and at times
collateralized mortgage obligations ("CMOs"). GNMA pass-through certificates are
guaranteed as to the payment of principal and interest by the full faith and
credit of the U.S. Government while Fannie Mae and FHLMC certificates are each
guaranteed by their respective agencies as to principal and interest.
Mortgage-backed securities generally entitle Carver Federal to receive a pro
rata portion of the cash flows from an identified pool of mortgages. CMOs are
securities issued by special purpose entities generally collateralized by pools
of mortgage-backed securities. The cash flows from such pools are segmented and
paid in accordance with a predetermined priority to various classes of
securities issued by the entity. Carver Federal also has invested in pools of
loans guaranteed as to principal and interest by the Small Business
Administration ("SBA").

         The Bank seeks to manage interest rate risk by investing in
adjustable-rate mortgage-backed securities which at March 31, 2003 constituted
$117.6million, or 92.8% of the mortgage-backed securities portfolio.
Mortgage-backed securities, however, expose Carver Federal to certain unique
risks. In a declining rate environment, accelerated prepayments of loans
underlying these securities expose Carver Federal to the risk that it will be
unable to obtain comparable yields upon reinvestment of the proceeds. In the
event the mortgage-backed security has been funded with an interest-bearing
liability with a maturity comparable to the original estimated life of the
mortgage-backed security, the Bank's interest rate spread could be adversely
affected. Conversely, in a rising interest rate environment, the Bank may
experience a lower than estimated rate of repayment on the underlying mortgages,
effectively extending the estimated life of the mortgage-backed security and
exposing the Bank to the risk that it may be required to fund the asset with a
liability bearing a higher rate of interest.

         The following table sets forth the carrying value of Carver Federal's
mortgage-backed securities at the dates indicated. In November 2002 the Bank
transferred $22.8 million of mortgage-backed securities from available-for-sale
to held-to-maturity. At the beginning of fiscal 2002 the Bank transferred $45.7
million of mortgage-backed securities from held-to-maturity to
available-for-sale.

                                                    AT MARCH 31,
                                                    ------------
                                          2003           2002            2001
                                          ----           ----            ----
                                                   (IN THOUSANDS)
Available-for-Sale:
  GNMA                                  $  47,120       $ 10,584       $      -
  Fannie Mae                               23,470         11,451              -
  FHLMC                                    19,693         28,249              -
  CMO                                           -            136              -
                                        ---------       --------       --------
Total available-for-sale                   90,283         50,420              -

Held-to-Maturity:
  GNMA                                      2,473          3,448          5,774
  Fannie Mae                                6,203          5,607         21,633
  FHLMC                                    27,482          6,149         14,672
  SBA                                         372            439            594
  CMO                                           -              -            193
                                        ---------       --------       --------
Total held to maturity                     36,530         15,643         42,866
                                        ---------       --------       --------
Total mortgage-backed securities        $ 126,813       $ 66,063       $ 42,866
                                        =========       ========       ========


                                       14
<PAGE>

         The following table sets forth the scheduled maturities, carrying
values and fair values for Carver Federal's mortgage-backed securities at March
31, 2003. Expected maturities will differ from contractual maturities due to
scheduled repayments and because borrowers may have the right to call or prepay
obligations with or without prepayment penalties. The following table does not
take into consideration the effects of scheduled repayments or the effects of
possible prepayments.

                                         CARRYING          FAIR
                                          VALUE            VALUE
                                       -------------   -------------
                                               (IN THOUSANDS)

        Available-for-sale:
        One through five years                $ 112           $ 115
        Five through ten years                1,813           1,933
        After ten years                      88,041          88,235
                                       -------------   -------------
                                           $ 89,966        $ 90,283
                                       =============   =============

        Held-to-maturity:
        One through five years                  $ -             $ -
        Five through ten years                  326             345
        After ten years                      36,204          37,198
                                       -------------   -------------
                                           $ 36,530        $ 37,543
                                       =============   =============

         OTHER INVESTMENT SECURITIES. In addition to mortgage-backed securities,
the Bank also invests in high-quality assets (primarily government and agency
obligations) with short and intermediate terms (typically seven years or less)
to maturity. Carver Federal is permitted under federal law to make certain
investments, including investments in securities issued by various federal
agencies and state and municipal governments, deposits at the FHLB, certificates
of deposit in federally insured institutions, certain bankers' acceptances and
federal funds. The Bank may also invest, subject to certain limitations, in
commercial paper having one of the two highest investment ratings of a
nationally recognized credit rating agency, and certain other types of corporate
debt securities and mutual funds.

         The following table sets forth the carrying value of Carver Federal's
other securities available-for-sale and held-to-maturity at the date indicated.

<TABLE>
<CAPTION>
                                                                    AT MARCH 31,
                                                                    ------------
                                                          2003           2002            2001
                                                          ----           ----            ----
                                                                    (IN THOUSANDS)
<S>                                                       <C>            <C>             <C>
U.S. Government and Agency securities:
    Available-for-sale                                    $ 38,772       $ 39,401        $ 19,926
    Held-to-maturity                                             -              -          24,996
                                                          --------       --------        --------
       Total other securities                             $ 38,772       $ 39,401        $ 44,922
                                                          ========       ========        ========
</TABLE>

         The following table sets forth the scheduled maturities, carrying
values and fair values for Carver Federal's other investments at March 31, 2003.

<TABLE>
<CAPTION>
                                         CARRYING             FAIR
                                           VALUE              VALUE
                                           -----              -----
                                               (IN THOUSANDS)
<S>                                       <C>               <C>
Available-for-sale:
     One year or less                     $ 22,109          $ 22,117
     One through five years                 16,078            16,655
                                          --------          --------
                                          $ 38,187          $ 38,772
                                          ========          ========
</TABLE>

         OTHER EARNING ASSETS. Federal regulations require the Bank to maintain
an investment in FHLB stock and a sufficient amount of liquid assets which may
be invested in cash and specified securities. For additional information, see
"Regulation and Supervision--Federal Banking Regulation--Liquidity."



                                       15
<PAGE>

         The following table sets forth the carrying value of Carver Federal's
investment in FHLB stock and liquid assets at the dates indicated.

                                                 AT MARCH 31,
                                                 ------------
                                      2003           2002            2001
                                      ----           ----            ----
                                                (IN THOUSANDS)
FHLB stock                          $ 5,440        $ 3,763         $ 5,755
Federal funds sold                    5,500         21,100          23,700


Deposit Activity and Other Sources of Funds

         GENERAL. Deposits are the primary source of Carver Federal's funds for
lending and other investment purposes. In addition to deposits, Carver Federal
derives funds from loan principal repayments, interest payments and maturing
investments. Loan repayments and interest payments are a relatively stable
source of funds, while deposit inflows and outflows are significantly influenced
by prevailing market interest rates and money market conditions. Borrowed money
may be used to supplement the Bank's available funds, and from time to time the
Bank has borrowed funds from the FHLB and through repurchase agreements.

         DEPOSITS. Carver Federal attracts deposits principally from within its
market area by offering a variety of deposit instruments, including passbook and
statement accounts and certificates of deposit, which range in term from 91 days
to seven years. Deposit terms vary, principally on the basis of the minimum
balance required, the length of time the funds must remain on deposit and the
interest rate. Carver Federal also offers Individual Retirement Accounts. Carver
Federal's policies are designed primarily to attract deposits from local
residents through the Bank's branch network rather than from outside the Bank's
market area. Carver Federal also holds deposits from various governmental
agencies or authorities and corporations. Although the Board has authorized
accepting brokered deposits, the Bank does not have any of these types of
deposits.

         The Bank's interest rates, maturities, service fees and withdrawal
penalties on deposits are established by management on a periodic basis.
Management determines deposit interest rates and maturities based on the Bank's
funds acquisition and liquidity requirements, the rates paid by the Bank's
competitors, the Bank's growth goals and applicable regulatory restrictions and
requirements.

         During fiscal 2002, the Bank sold its branch located in East New York.
As a result of this sale, the Bank transferred approximately $16.4 million of
deposits to the purchaser. During fiscal 2001, the Bank sold its branches
located in Roosevelt and Chelsea, New York. The total amount of deposits
transferred as a result of these sales was $8.4 and $14.1 million, respectively.
There were no branch sales in fiscal 2003.

         The following table sets forth the change in dollar amount of deposits
in the various types of accounts offered by Carver Federal between the dates
indicated. Included in the net increase (decrease) in deposits before interest
credited is the amount of deposits sold during the year ended March 31, 2002 and
2001 of $16.4 and $22.5 million, respectively.

<TABLE>
<CAPTION>
                                                                           YEAR ENDED MARCH 31,
                                                            ----------------------------------------------------
                                                                 2003               2002              2001
                                                            ----------------   ---------------   ---------------
                                                                          (DOLLARS IN THOUSANDS)
<S>                                                               <C>               <C>               <C>
Deposits at beginning of period                                   $ 324,954         $ 279,424         $ 281,941
Net increase (decrease) before interest credited                     16,450            37,403           (10,973)
Interest credited                                                     5,760             8,127             8,456
                                                            ----------------   ---------------   ---------------
Deposits at end of period                                         $ 347,164         $ 324,954         $ 279,424
                                                            ================   ===============   ===============

Net increase (decrease) during the year:
     Amount                                                        $ 22,210          $ 45,530          $ (2,517)
                                                            ================   ===============   ===============
     Percent                                                           6.8%             16.3%             (0.9%)
                                                            ================   ===============   ===============
</TABLE>


                                       16
<PAGE>

         The following table sets forth the distribution of the Bank's deposit
 accounts and the related weighted average interest rates at the dates
 indicated.

<TABLE>
<CAPTION>
                                                               AT MARCH 31,
                               -----------------------------------------------------------------------------
                                               2003                                   2002
                               ---------------------------------------- ------------------------------------
                                            PERCENT OF     WEIGHTED                PERCENT OF     WEIGHTED
                                               TOTAL       AVERAGE                    TOTAL       AVERAGE
                                 AMOUNT      DEPOSITS       RATE        AMOUNT      DEPOSITS       RATE
                                 ------      --------       ----        ------      --------       ----
                                                          (DOLLARS IN THOUSANDS)
<S>                             <C>             <C>                    <C>             <C>
Non-interest -bearing demand    $ 16,539        4.8 %          - %     $ 13,463        4.1 %          - %
NOW accounts                      18,190        5.2         0.53         18,095        5.6         1.24
Savings and club                 128,935       37.1         1.06        126,779       39.0         1.71
Money market savings account      20,735        6.0         0.92         15,232        4.7         1.78
Certificates of deposit          162,765       46.9         2.20        151,385       46.6         2.73
                               ---------      -----         ----      ---------      -----         ----
  Total                        $ 347,164      100.0 %       1.51 %    $ 324,954      100.0 %       2.18 %
                               =========      =====         ====      =========      =====         ====
</TABLE>

                                           AT MARCH 31,
                                -------------------------------------
                                               2001
                                -------------------------------------
                                             PERCENT OF     WEIGHTED
                                                TOTAL       AVERAGE
                                  AMOUNT      DEPOSITS       RATE
                                  ------      --------       ----
                                        (DOLLARS IN THOUSANDS)
Non-interest -bearing demand    $ 11,409        4.1 %           - %
NOW accounts                      14,757        5.3          1.59
Savings and club                 132,645       47.5          2.22
Money market savings account      15,718        5.6          2.34
Certificates of deposit          104,895       37.5          5.04
                               ---------      -----          ----
  Total                        $ 279,424      100.0 %        3.04 %
                               =========      =====          ====


         The following table sets forth the amount and maturities of time
deposits in specified weighted average interest rate categories at March 31,
2003.

<TABLE>
<CAPTION>
                                           AT MARCH 31, 2003                                           TOTAL AT
                                          PERIOD TO MATURITY                                           MARCH 31,
             ----------------------------------------------------------------------------     -------------------------
             LESS THAN                                AFTER                    PERCENT
             ONE YEAR      1-2 YEARS   2-3 YEARS     3 YEARS        TOTAL      OF TOTAL          2002         2001
             ------------  ----------  -----------  -----------  ------------  ----------     ------------ ------------
                                                     (DOLLARS IN THOUSANDS)
<S>             <C>          <C>          <C>         <C>           <C>            <C>          <C>         <C>
1%-1.99%        $ 86,387     $ 1,424      $     -     $      -      $ 87,811        53.9 %      $  22,138   $        -
2%-3.99%           1,497      26,883        9,759        2,787        40,926        25.1           95,523          752
4%-5.99%               -           -            -       34,028        34,028        20.9           33,724      104,143
             ------------  ----------  -----------  -----------  ------------  ----------     ------------ ------------
   Total        $ 87,884     $28,307      $ 9,759     $ 36,815      $162,765       100.0 %      $ 151,385    $ 104,895
             ============  ==========  ===========  ===========  ============  ==========     ============ ============
</TABLE>

         Carver Federal's certificates of deposit of $100,000 or more were
$100.1 million as of March 31, 2003.

         BORROWED MONEY. Deposits are the primary source of funds for Carver
Federal's lending, investment and general operating activities. Carver Federal
is authorized, however, to use advances and securities sold under agreement to
repurchase ("Repos") from the FHLB and approved primary dealers to supplement
its supply of funds and to meet deposit withdrawal requirements. The FHLB
functions as a central bank providing credit for savings institutions and
certain other member financial institutions. As a member of the FHLB system,
Carver Federal is required to own stock in the FHLB and is authorized to apply
for advances. Advances are made pursuant to several different programs, each of
which has its own interest rate and range of maturities. Advances from the FHLB
are secured by Carver Federal's stock in the FHLB and a blanket pledge of Carver
Federal's mortgage loan and mortgage-backed securities portfolios.

         One of the elements of Carver Federal's investment strategy is to
leverage the balance sheet by increasing liabilities with FHLB advances and
Repos and investing borrowed funds primarily in adjustable-rate mortgage loan
and mortgage-backed securities products. The Bank seeks to match as closely as
possible the term of borrowed money with the repricing cycle of the mortgage
loans on the balance sheet. At March 31, 2003, Carver Federal had outstanding
$108.8 million in FHLB advances and no Repos.



                                       17
<PAGE>

         The following table sets forth certain information regarding Carver
Federal's borrowed money at the dates and for the periods indicated:

<TABLE>
<CAPTION>
                                                                        AT OR FOR THE YEAR ENDED
                                                                                MARCH 31,
                                                                                ---------
                                                                           2003               2002
                                                                           ----               ----
                                                                          (DOLLARS IN THOUSANDS)
<S>                                                                     <C>                <C>
Amounts outstanding at the end of period:
  FHLB advances                                                         $ 108,789          $ 75,262
Weighted average rate paid at period end:
  FHLB advances                                                             3.59%             4.18%
Maximum amount of borrowing outstanding at any month end:
  FHLB advances                                                         $ 108,789         $ 100,094
  Repos                                                                         -            14,930
Approximate average amounts outstanding for period:
  FHLB advances                                                          $ 80,861          $ 76,141
  Repos                                                                         -             2,888
Approximate weighted average rate paid during period (1):
  FHLB advances                                                             3.99%             5.50%
  Repos                                                                       - %             5.91%
</TABLE>

(1) The approximate weighted average rate paid during the period was computed by
    dividing the average amounts outstanding into the related interest expense
    for the period.

Subsidiary Activities

         At this time, the Holding Company conducts business as a unitary
savings and loan holding company and the principal business of the Holding
Company consist of the operation of its wholly owned subsidiaries, Carver
Federal and Alhambra Holding Corp., a Delaware Corporation ("Alhambra"). The
Company formed Alhambra to hold the Company's investment in a commercial office
building that was subsequently sold in March 2000. Alhambra is currently
inactive.

         On March 8, 1995, Carver Federal formed CFSB Realty Corp. as a wholly
owned subsidiary to hold real estate acquired through foreclosure pending
eventual disposition. At March 31, 2003, this subsidiary had $221,000 in total
capital and net operating loss of less than $1,000. At March 31, 2003 there was
no real estate owned pending disposition. Carver Federal also owns CFSB Credit
Corp., currently an inactive subsidiary originally formed to undertake the
Bank's credit card issuance.

         During the fourth quarter of fiscal 2003, Carver Federal formed Carver
Asset Corporation, a wholly owned subsidiary which qualifies as a real estate
investment trust pursuant to the Internal Revenue Code of 1986, as amended. This
subsidiary may, among other things, be utilized by Carver Federal to raise
capital in the future. Upon formation of Carver Asset Corporation, Carver
Federal transferred approximately $119 million of mortgage loans to this
subsidiary.

Market Area and Competition

         The Bank's primary market area for deposits consists of the areas
served by its five branches. The Bank considers its primary lending market to
include Bronx, Kings, Manhattan, Queens and Richmond counties, together
comprising New York City, and lower Westchester County, New York. See "Item
2-Properties."

         Although Carver Federal's branches are located in areas that have been
historically underserved by other financial institutions, Carver Federal is
facing increasing competition for deposits and residential mortgage lending in
its immediate market areas. Management believes that this competition has become
more intense as a result of an increased examination emphasis by federal banking
regulators on financial institutions' fulfillment of their responsibilities
under the Community Reinvestment Act ("CRA") and the improving economic
conditions in its market area. The Bank's competition for loans comes
principally from mortgage banking companies, commercial banks, savings banks and
savings and loan associations. The Bank's most direct competition for deposits
comes from commercial banks, savings banks, savings and loan associations and
credit unions. Competition for deposits also comes from money market mutual
funds and other corporate and government securities funds as well as from other
financial intermediaries such as brokerage firms and insurance companies. Many
of Carver Federal's competitors have substantially greater resources than Carver
Federal and offer a wider array of financial services and products than Carver
Federal. At times, these larger financial institutions may offer below market
interest rates on mortgage loans and above market interest rates for deposits.


                                       18
<PAGE>

These pricing concessions combined with competitors' larger presence in the New
York market add to the challenges Carver Federal faces in expanding its current
market share. The Bank believes that it can compete with these institutions by
offering a competitive range of services as well as through personalized
attention and community commitment.

Employees

         As of March 31, 2003, Carver had 111 full-time equivalent employees, of
whom 38 are officers and 73 are non-officers, none of whom was represented by a
collective bargaining agreement. The Bank considers its employees relations to
be satisfactory.

SARBANES-OXLEY ACT OF 2002

         On July 30, 2002, the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley Act")
was signed into law. The Sarbanes-Oxley Act imposes new significant
responsibilities on publicly held companies, particularly in the area of
corporate governance. We have carefully reviewed the Sarbanes-Oxley Act, and are
monitoring and responding to the various implementing regulations that have been
issued, and continue to be issued, by the Securities Exchange Commission and the
American Stock Exchange. We have instituted procedures to address some of the
Sarbanes-Oxley Act's specific concerns and will continue to adapt the Company's
governance structure to the mandates of the Sarbanes-Oxley Act as interpreted by
the regulatory authorities in upcoming periods.

REGULATION AND SUPERVISION

General

         The Bank is subject to extensive regulation, examination and
supervision by its primary regulator, the OTS. The Bank's deposit accounts are
insured up to applicable limits by the Federal Deposit Insurance Corporation
("FDIC") under the Savings Association Insurance Fund ("SAIF"), and it is a
member of the FHLB. The Bank must file reports with the OTS concerning its
activities and financial condition, and it must obtain regulatory approvals
prior to entering into certain transactions, such as mergers with, or
acquisitions of, other depository institutions. The Holding Company, as a
unitary savings and loan holding company, is subject to regulation, examination
and supervision by the OTS and is required to file certain reports with, and
otherwise comply with, the rules and regulations of the OTS and of the
Securities and Exchange Commission (the "SEC") under the federal securities
laws. The OTS and the FDIC periodically perform safety and soundness
examinations of the Bank and the Holding Company and test our compliance with
various regulatory requirements. The OTS has primary enforcement responsibility
over federally chartered savings banks and has substantial discretion to impose
enforcement action on an institution that fails to comply with applicable
regulatory requirements, particularly with respect to its capital requirements.
In addition, the FDIC has the authority to recommend to the Director of the OTS
that enforcement action be taken with respect to a particular federally
chartered savings bank and, if action is not taken by the Director, the FDIC has
authority to take such action under certain circumstances.

         This regulation and supervision establish a comprehensive framework to
regulate and control the activities in which an institution can engage and is
intended primarily for the protection of the insurance fund and depositors. This
structure also gives the regulatory authorities extensive discretion in
connection with their supervisory and enforcement activities and examination
policies, including policies with respect to the classification of assets and
the establishment of adequate loan loss reserves for regulatory purposes. Any
change in such laws and regulations whether by the OTS, the FDIC or through
legislation could have a material adverse impact on the Bank and the Holding
Company and their operations and stockholders.

         The description of statutory provisions and regulations applicable to
federally chartered savings banks and their holding companies and of tax matters
set forth in this document does not purport to be a complete description of all
such statutes and regulations and their effects on the Bank and the Holding
Company.

FEDERAL BANKING REGULATION

         ACTIVITY POWERS. The Bank derives its lending and investment powers
from the Home Owner's Loan Act, as amended ("HOLA"), and the regulations of the
OTS. Under these laws and regulations, the Bank may invest in mortgage loans
secured by residential and commercial real estate, commercial and consumer
loans, certain types of debt securities and certain other assets. The Bank may
also establish service corporations that may engage in activities not otherwise
permissible for the Bank, including certain real estate equity investments and
securities and insurance brokerage. The Bank's authority to invest in certain
types of loans or other investments is limited by federal law.

         LOANS TO ONE BORROWER LIMITATIONS. The Bank is generally subject to the
same limits on loans to one borrower as a national bank. With specified
exceptions, the Bank's total loans or extension of credit to a single borrower
or group of related borrowers may not exceed 15% of the Bank's unimpaired
capital and surplus, which does not include accumulated other comprehensive
income. The Bank may lend additional amounts up to 10% of its unimpaired capital
and surplus if the loans or extensions of credit are fully secured by readily
marketable collateral. The Bank currently complies with applicable loans to one
borrower limitations. At March 31, 2003, the Bank's limit on loans to one
borrower based on its unimpaired capital and surplus was $6.7 million.



                                       19
<PAGE>
         QTL TEST. Under HOLA, the Bank must comply with a qualified thrift
lender ("QTL") test. Under this test, the Bank is required to maintain at least
65% of its "portfolio assets" in certain "qualified thrift investments" in at
least nine months of the most recent twelve-month period. "Portfolio assets"
means, in general, an association's total assets less the sum of (a) specified
liquid assets up to 20% of total assets, (b) goodwill and other intangible
assets and (c) the value of property used to conduct the Bank's business.
"Qualified thrift investments" include various types of loans made for
residential and housing purposes, investments related to such purposes,
including certain mortgage-backed and related securities and consumer loans. If
the Bank fails the QTL test, it must either operate under certain restrictions
on its activities or convert to a bank charter. At March 31, 2003, the Bank
maintained approximately 68.1% of its portfolio assets in qualified thrift
investments. The Bank had also met the QTL test in each of the prior 12 months
and was, therefore, a qualified thrift lender.

         CAPITAL REQUIREMENTS. OTS regulations require the Bank to meet three
minimum capital ratios:

         (1)      a tangible capital ratio requirement of 1.5% of total assets,
                  as adjusted under OTS regulations;

         (2)      a leverage ratio requirement of 8% of core capital to such
                  adjusted total assets; and

         (3)      a risk-based capital ratio requirement of 8% of core and
                  supplementary capital to total risk-weighted assets.

         The minimum leverage capital ratio for any other depository institution
that does not have a composite rating of 1 will be 4%, unless a higher leverage
capital ratio is warranted by the particular circumstances or risk profile of
the depository institution. In determining compliance with the risk-based
capital requirement, the Bank must compute its risk-weighted assets by
multiplying its assets and certain off-balance sheet items by risk-weights,
which range from 0% for cash and obligations issued by the U.S. government or
its agencies to 100% for consumer and commercial loans, as assigned by the OTS
capital regulation based on the risks that the OTS believes are inherent in the
type of asset.

         Generally, tangible capital is defined as common stockholders' equity
(including retained earnings), certain non-cumulative perpetual preferred stock
and related earnings and minority interests in equity accounts of fully
consolidated subsidiaries, less intangibles (other than certain mortgage
servicing rights) and investments in and loans to subsidiaries engaged in
activities not permissible for a national bank.

         Core capital is defined similarly to tangible capital, but also
includes certain qualifying supervisory goodwill and certain purchased credit
card relationships. Supplementary capital includes cumulative and other
perpetual preferred stock, mandatory convertible securities, subordinated debt
and intermediate preferred stock and the allowance for loan and lease losses. In
addition, up to 45% of unrealized gains on available-for-sale equity securities
with a readily determinable fair value may be included in supplementary capital.
The allowance for loan and lease losses includable in supplementary capital is
limited to a maximum of 1.25% of risk-weighted assets, and the amount of
supplementary capital that may be included as total capital cannot exceed the
amount of core capital.

         In assessing an institution's capital adequacy, the OTS takes into
consideration not only these numeric factors but qualitative factors as well,
and has the authority to establish higher capital requirements for individual
institutions where necessary. The Bank, as a matter of prudent management,
targets as its goal the maintenance of capital ratios which exceed these minimum
requirements and are consistent with the Bank's risk profile. At March 31, 2003,
the Bank exceeded each of its capital requirements with a tangible capital ratio
of 7.8%, leverage capital ratio of 7.8% and total risk-based capital ratio of
14.0%.

         The Federal Deposit Insurance Corporation Improvement Act, as amended
("FDICIA"), requires that the OTS and other federal banking agencies revise
their risk-based capital standards, with appropriate transition rules, to ensure
that they take into account interest rate risk, concentration of risk and the
risks of non-traditional activities. The OTS adopted regulations, effective
January 1, 1994, that set forth the methodology for calculating an IRR component
to be incorporated into the OTS risk-based capital regulations. On May 10, 2002,
the OTS adopted an amendment to its capital regulations which eliminated the IRR
component of the risk-based capital requirement. Pursuant to the amendment, the
OTS will continue to monitor the IRR of individual institutions through the OTS
requirements for IRR management, the ability of the OTS to impose individual
minimum capital requirements on institutions that exhibit a high degree of IRR,
and the requirements of Thrift Bulletin 13a, which provides guidance on the
management of IRR and the responsibility of boards of directors in that area.

         LIMITATION ON CAPITAL DISTRIBUTIONS. The OTS imposes various
restrictions on the Bank's ability to make capital distributions, including cash
dividends, payments to repurchase or otherwise acquire its shares and other
distributions charged against capital. A savings institution that is the
subsidiary of a savings and loan holding company, such as the Bank, must file an
application or a notice with the OTS at least 30 days before making a capital
distribution. The Bank must file an application for prior approval if the total
amount of its capital distributions (including each proposed distribution), for
the applicable calendar year would exceed the Bank's net income for that year
plus the Bank's retained net income for the previous two years. In other cases,
the Bank will have to file a notice as a savings bank subsidiary of a savings
and loan holding company.

         The OTS may disapprove of a notice or application if:

                                       20
<PAGE>

         (1)      the Bank would be undercapitalized following the distribution;

         (2)      the proposed capital distribution raises safety and soundness
                  concerns; or

         (3)      the capital distribution would violate a prohibition contained
                  in any statute, regulation or agreement.

         LIQUIDITY. The Bank maintains liquidity levels to meet operational
needs. In the normal course of business, the levels of liquid assets during any
given period are dependent on operating, investing and financing activities.
Cash and due from banks, federal funds sold and repurchase agreements with
maturities of three months or less are the Bank's most liquid assets. The Bank
maintains a liquidity policy to maintain sufficient liquidity to ensure its safe
and sound operation. At March 31, 2003, the Bank's liquidity ratio was 4.39% of
liquid assets to total assets which is in excess of minimum requirements.

         BRANCHING. Subject to certain limitations, federal law permits the Bank
to establish branches in any state of the United States. The authority for the
Bank to establish an interstate branch network would facilitate a geographic
diversification of the Bank's activities. This authority under federal law and
OTS regulations preempts any state law purporting to regulate branching by
federal savings associations.

         COMMUNITY REINVESTMENT. Under the Community Reinvestment Act, as
amended ("CRA"), as implemented by OTS regulations, the Bank has a continuing
and affirmative obligation to help meet the credit needs of its entire
community, including low and moderate income neighborhoods. The CRA does not
establish specific lending requirements or programs for the Bank nor does it
limit the Bank's discretion to develop the types of products and services that
it believes are best suited to its particular community. The CRA does however
require the OTS, in connection with its examination of the Bank, to assess the
Bank's record of meeting the credit needs of its community and to take such
record into account in its evaluation of certain applications by the Bank.

         In particular, the system focuses on three tests:

         (1)      a lending test, to evaluate the institution's record of making
                  loans in its assessment areas;

         (2)      an investment test, to evaluate the institution's record of
                  investing in community development projects, affordable
                  housing and programs benefiting low or moderate income
                  individuals and businesses; and

         (3)      a service test, to evaluate the institution's delivery of
                  banking services through its branches, ATMs and other offices.

         The CRA also requires all institutions to make public disclosure of
their CRA ratings. The Bank received a "Satisfactory" CRA rating in its most
recent examination conducted in 2001.

         Regulations require that we publicly disclose certain agreements that
are in fulfillment of CRA. The Holding Company has no such agreements in place
at this time.

         TRANSACTIONS WITH RELATED PARTIES. The Bank's authority to engage in
transactions with its "affiliates" is limited by OTS regulations and by Sections
23A and 23B of the Federal Reserve Act ("FRA"). In general, these transactions
must be on terms which are as favorable to the Bank as comparable transactions
with non-affiliates. Additionally, certain types of these transactions are
restricted to an aggregate percentage of the Bank's capital. Collateral in
specified amounts must usually be provided by affiliates in order to receive
loans from the Bank. In addition, OTS regulations prohibit a savings bank from
lending to any of its affiliates that is engaged in activities that are not
permissible for bank holding companies and from purchasing the securities of any
affiliate other than a subsidiary.

         The Bank's authority to extend credit to its directors, executive
officers, and 10% shareholders, as well as to entities controlled by such
persons, is currently governed by the requirements of Sections 22(g) and 22(h)
of the FRA and Regulation O of the Federal Reserve Board ("FRB"). Among other
things, these provisions require that extensions of credit to insiders (a) be
made on terms that are substantially the same as, and follow credit underwriting
procedures that are not less stringent than, those prevailing for comparable
transactions with unaffiliated persons and that do not involve more than the
normal risk of repayment or present other unfavorable features and (b) not
exceed certain limitations on the amount of credit extended to such persons,
individually and in the aggregate, which limits are based, in part, on the
amount of the Bank's capital. In addition, extensions of credit in excess of
certain limits must be approved by the Bank's board of directors.

         The FRB rescinded its interpretations of Sections 23A and 23B of the
FRA and replaced these interpretations with Regulation W. The OTS has also
conformed its regulations to coincide with Regulation W. Regulation W makes
various changes to existing law regarding Sections 23A and 23B, including
expanding the definition of what constitutes an "affiliate" subject to Sections
23A and 23B and exempting certain subsidiaries of state-chartered banks from the
restrictions of Sections 23A and 23B.

         Under Regulation W, all transactions entered into on or before December
12, 2002 that would become subject to Sections 23A and 23B solely because of
Regulation W and all transactions covered by Sections 23A and 23B, the treatment
of which will change solely because of Regulation W, will not become subject to
Regulation W until July 1, 2003. All other covered affiliate



                                       21
<PAGE>
transactions became subject to Regulation W on April 1, 2003. The FRB expects
each depository institution that is subject to Sections 23A and 23B to implement
policies and procedures to ensure compliance with Regulation W. We do not expect
that the changes made by Regulation W will have a material adverse effect on our
business.

         Section 402 of the Sarbanes-Oxley Act prohibits the extension of
personal loans to directors and executive officers of issuers (as defined in the
Sarbanes-Oxley Act). The prohibition, however, does not apply to mortgages
advanced by an insured depository institution, such as the Bank, that is subject
to the insider lending restrictions of Section 22(h) of the FRA.

         ENFORCEMENT. The OTS has primary enforcement responsibility over the
Bank. This enforcement authority includes, among other things, the ability to
assess civil money penalties, to issue cease and desist orders and to remove
directors and officers. In general, these enforcement actions may be initiated
in response to violations of laws and regulations and unsafe or unsound
practices.

         STANDARDS FOR SAFETY AND SOUNDNESS. The OTS has adopted guidelines
prescribing safety and soundness standards. The guidelines establish general
standards relating to internal controls and information systems, internal audit
systems, loan documentation, credit underwriting, interest rate exposure, asset
growth, asset quality, earnings, and compensation, fees and benefits. In
general, the guidelines require, among other things, appropriate systems and
practices to identify and manage the risks and exposures specified in the
guidelines. In addition, OTS regulations authorize, but do not require, the OTS
to order an institution that has been given notice that it is not satisfying
these safety and soundness standards to submit a compliance plan. If, after
being so notified, an institution fails to submit an acceptable compliance plan
or fails in any material respect to implement an accepted compliance plan, the
OTS must issue an order directing action to correct the deficiency and may issue
an order directing other actions of the types to which an undercapitalized
association is subject under the "prompt corrective action" provisions of
federal law. If an institution fails to comply with such an order, the OTS may
seek to enforce such order in judicial proceedings and to impose civil money
penalties.

         PROMPT CORRECTIVE ACTION REGULATIONS. Under the prompt corrective
action regulations, the OTS is authorized and, in some cases, required to take
supervisory actions against undercapitalized savings bank. For this purpose, a
savings bank would be placed in one of the following four categories based on
the a bank's regulatory capital: well-capitalized; adequately capitalized;
undercapitalized; or critically undercapitalized.

         Generally, a capital restoration plan must be filed with the OTS within
45 days of the date a bank receives notice that it is "undercapitalized,"
"significantly undercapitalized" or "critically undercapitalized." In addition,
various mandatory supervisory actions become immediately applicable to the
institution, including restrictions on growth of assets and other forms of
expansion. Under the OTS regulations, generally, a federally chartered savings
bank is treated as well capitalized if its total risk-based capital ratio is 10%
or greater, its Tier 1 risk-based capital ratio is 6% or greater, and its
leverage ratio is 5% or greater, and it is not subject to any order or directive
by the OTS to meet a specific capital level. When appropriate, the OTS can
require corrective action by a savings holding company under the "prompt
corrective action" provisions of federal law. At March 31, 2003, the Bank was
considered well-capitalized by the OTS.

         INSURANCE OF DEPOSIT ACCOUNTS. The Bank is a member of the SAIF and
pays its deposit insurance assessments to the SAIF. The FDIC also maintains
another insurance fund, BIF, which primarily insures the deposits of banks and
state chartered savings banks. Under federal law, the FDIC established a
risk-based assessment system for determining the deposit insurance assessments
to be paid by insured depository institutions. Under the assessment system, the
FDIC assigns an institution to one of three capital categories based on the
institution's financial information as of the quarter ending three months before
the beginning of the assessment period. An institution's assessment rate depends
on the capital category and supervisory category to which it is assigned. Under
the regulation, there are nine assessment risk classifications (i.e.,
combinations of capital groups and supervisory subgroups) to which different
assessment rates are applied. Assessment rates currently range from 0.0% of
deposits for an institution in the highest category (i.e., well-capitalized and
financially sound, with no more than a few minor weaknesses) to 0.27% of
deposits for an institution in the lowest category (i.e., undercapitalized and
substantial supervisory concern). The FDIC is authorized to raise the assessment
rates as necessary to maintain the required reserve ratio of the deposit
insurance fund to 1.25%.

         In addition, all FDIC insured institutions are required to pay
assessments to the FDIC at an annual rate of approximately .0212% of insured
deposits to fund interest payments on the bonds issued by the Financing
Corporation ("FICO"), an agency of the federal government established to
recapitalize the predecessor to the SAIF. These assessments will continue until
the FICO bonds mature in 2017.

         FEDERAL HOME LOAN BANK SYSTEM. The Bank is a member of the FHLB of New
York ("FHLB-NY"), which is one of the twelve regional FHLBs composing the FHLB
System. Each FHLB provides a central credit facility primarily for its member
institutions. The Bank, as an FHLB member, is required to acquire and hold
shares of capital stock in the FHLB-NY in an amount equal to the greater of 1%
of the aggregate principal amount of its unpaid residential mortgage loans, home
purchase contracts and similar obligations at the beginning of each year, but
not less than $500 or 5% of its outstanding advances from the FHLB. The Bank was
in compliance with this requirement with an investment in the capital stock of
the FHLB at March 31, 2003 of $5.4 million. Any advances from a FHLB must be
secured by specified types of collateral, and all long term advances may be
obtained only for the purpose of providing funds for residential housing
finance.

                                       22
<PAGE>

         FHLBs are required to provide funds for the resolution of insolvent
thrifts and to contribute funds for affordable housing programs. These
requirements could reduce the amount of earnings that the FHLBs can pay as
dividends to their members and could also result in the FHLBs imposing a higher
rate of interest on advances to their members. If dividends were reduced, or
interest on future FHLB advances increased, the Bank's net interest income would
be adversely affected.

         Under the Gramm-Leach-Bliley Act, as amended ("Gramm-Leach"), which
repeals historical restrictions and eliminates many federal and state law
barriers to affiliations among banks and securities firms, insurance companies
and other financial service providers, membership in the FHLB system is now
voluntary for all federally-chartered savings banks such as the Bank.
Gramm-Leach also replaces the existing redeemable stock structure of the FHLB
system with a capital structure that requires each FHLB to meet a leverage limit
and a risk-based permanent capital requirement. Two classes of stock are
authorized: Class A (redeemable on six months notice) and Class B (redeemable on
five years notice). Pursuant to regulations promulgated by the Federal Housing
Finance Board, as required by Gramm-Leach, the FHLB-NY has adopted a capital
plan, which is expected to become effective on October 1, 2003, that will change
the foregoing minimum stock ownership requirements for FHLB-NY stock. Under the
new capital plan, each member of the FHLB-NY will have to maintain a minimum
investment in FHLB-NY capital stock in an amount equal to the sum of (1) the
greater of $1,000 or 0.20% of the member's mortgage-related assets and (2) 4.50%
of the dollar amount of any outstanding advances under such member's Advances,
Collateral Pledge and Security Agreement with the FHLB-NY.

         FEDERAL RESERVE SYSTEM. Under the FRB's regulations, the Bank is
required to maintain non-interest-earning reserves against its transaction
accounts. FRB regulations generally require that (a) reserves of 3% must be
maintained against aggregate transaction accounts between $6.0 million and $42.1
million (subject to adjustment by the FRB), and (b) a reserve of $1.083 million
plus 10% (subject to adjustment by the FRB between 8% and 14%) must be
maintained against that portion of total transaction accounts in excess of $42.1
million. The first $6.0 million of otherwise reservable balances are exempted
from the reserve requirements. The Bank is in compliance with these reserve
requirements. Because required reserves must be maintained in the form of either
vault cash, a noninterest bearing account at a Federal Reserve Bank, or a
pass-through account as defined by the FRB, the effect of this reserve
requirement is to reduce the Bank's interest-earning assets to the extent that
the requirement exceeds vault cash.

         PRIVACY PROTECTION. Carver Federal is subject to OTS regulations
implementing the privacy protection provisions of Gramm-Leach. These regulations
require the Bank to disclose its privacy policy, including identifying with whom
it shares "nonpublic personal information," to customers at the time of
establishing the customer relationship and annually thereafter. The regulations
also require the Bank to provide its customers with initial and annual notices
that accurately reflect its privacy policies and practices. In addition, to the
extent its sharing of such information is not exempted, the Bank is required to
provide its customers with the ability to "opt-out" of having the Bank share
their nonpublic personal information with unaffiliated third parties.

         The Bank is subject to regulatory guidelines establishing standards for
safeguarding customer information. These regulations implement certain
provisions of Gramm-Leach. The guidelines describe the agencies' expectations
for the creation, implementation and maintenance of an information security
program, which would include administrative, technical and physical safeguards
appropriate to the size and complexity of the institution and the nature and
scope of its activities. The standards set forth in the guidelines are intended
to insure the security and confidentiality of customer records and information,
protect against any anticipated threats or hazards to the security or integrity
of such records and protect against unauthorized access to or use of such
records or information that could result in substantial harm or inconvenience to
any customer. The Bank has a policy to comply with the foregoing guidelines.

         HOLDING COMPANY REGULATION. The Holding Company is a savings and loan
holding company regulated by the OTS. As such, the Holding Company is registered
with and is subject to OTS examination and supervision, as well as certain
reporting requirements. In addition, the OTS has enforcement authority over the
Holding Company and its subsidiaries. Among other things, this authority permits
the OTS to restrict or prohibit activities that are determined to be a serious
risk to the financial safety, soundness or stability of a subsidiary savings
institution. Unlike bank holding companies, federal savings and loan holding
companies are not subject to any regulatory capital requirements or to
supervision by the Federal Reserve Board.

         Gramm-Leach restricts the powers of new unitary savings and loan
holding companies. Unitary savings and loan holding companies that are
"grandfathered," i.e., unitary savings and loan holding companies in existence
or with applications filed with the OTS on or before May 4, 1999, such as
Carver, retain their authority under the prior law. All other unitary savings
and loan holding companies are limited to financially related activities
permissible for bank holding companies, as defined under Gramm-Leach.
Gramm-Leach also prohibits non-financial companies from acquiring grandfathered
unitary savings and loan holding companies.

         RESTRICTIONS APPLICABLE TO ALL SAVINGS AND LOAN HOLDING COMPANIES.
Federal law prohibits a savings and loan holding company, including the Holding
Company, directly or indirectly, from acquiring:

                  (1)      control (as defined under HOLA) of another savings
                           institution (or a holding company parent) without
                           prior OTS approval;



                                       23
<PAGE>

                  (2)      through merger, consolidation, or purchase of assets,
                           another savings institution or a holding company
                           thereof, or acquiring all or substantially all of the
                           assets of such institution (or a holding company),
                           without prior OTS approval; or

                  (3)      control of any depository institution not insured by
                           the FDIC (except through a merger with and into the
                           holding company's savings institution subsidiary that
                           is approved by the OTS).

A savings and loan holding company may not acquire as a separate subsidiary an
insured institution that has a principal office outside of the state where the
principal office of its subsidiary institution is located, except:

                  (1)      in the case of certain emergency acquisitions
                           approved by the FDIC;

                  (2)      if such holding company controls a savings
                           institution subsidiary that operated a home or branch
                           office in such additional state as of March 5, 1987;
                           or

                  (3)      if the laws of the state in which the savings
                           institution to be acquired is located specifically
                           authorize a savings institution chartered by that
                           state to be acquired by a savings institution
                           chartered by the state where the acquiring savings
                           institution or savings and loan holding company is
                           located or by a holding company that controls such a
                           state chartered association.

         FEDERAL SECURITIES LAWS. The Holding Company is subject to the periodic
reporting, proxy solicitation, tender offer, insider trading restrictions and
other requirements under the Securities Exchange Act of 1934, as amended
("Exchange Act").

         DELAWARE CORPORATION LAW. The Holding Company is incorporated under the
laws of the State of Delaware. Thus, it is subject to regulation by the State of
Delaware and the rights of its shareholders are governed by the General
Corporation Law of the State of Delaware.

         NEW YORK STATE BANKING REGULATIONS. The New York State Banking
Department has adopted a new Section 6-1 to the banking law and regulations
which impose restrictions and limitations on certain high cost home loans made
by any individual or entity, including a federally-chartered savings bank, that
originates more than one high cost home loan in New York State in a 12-month
period. Among other things, the regulations and statute prohibit certain
mortgage loan provisions and certain acts and practices by originators and
impose certain disclosure and reporting requirements. It is unclear whether
these provisions would be preempted by Section 5(a) of HOLA, as implemented by
the lending and investment regulations of the OTS. The OTS has not yet adopted
regulations regarding high-cost mortgage loans and is currently considering
whether it will do so. Although the Bank does not originate loans that meet the
definition of "high-cost mortgage loan" under the proposed regulations, in the
event the Bank determines to originate such loans in the future, the Bank may be
subject to such regulation, if adopted as proposed.

         OTHER FEDERAL REGULATION. In response to the events of September 11,
2001, President George W. Bush signed into law the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001, or the USA PATRIOT Act, on October 26, 2001. The USA
PATRIOT Act gives the federal government new powers to address terrorist threats
through enhanced domestic security measures, expanded surveillance powers,
increased information sharing, and broadened anti-money laundering requirements.
By way of amendments to the Bank Secrecy Act, Title III of the USA PATRIOT Act
takes measures intended to encourage information sharing among bank regulatory
agencies and law enforcement bodies. Further, certain provisions of Title III
impose affirmative obligations on a broad range of financial institutions,
including banks, thrifts, brokers, dealers, credit unions, money transfer agents
and parties registered under the Commodity Exchange Act.

         Among other requirements, Title III of the USA PATRIOT Act imposes the
following requirements with respect to financial institutions:

                  o        Pursuant to Section 352, all financial institutions
                           must establish anti-money laundering programs that
                           include, at minimum: (i) internal policies,
                           procedures and controls, (ii) specific designation of
                           an anti-money laundering compliance officer, (iii)
                           ongoing employee training programs, and (iv) an
                           independent audit function to test the anti-money
                           laundering programs. Interim final rules implementing
                           Section 352 were issued by the Treasury Department on
                           April 29, 2002. Such rules state that a financial
                           institution is in compliance with Section 352 if it
                           implements and maintains an anti-money laundering
                           program that complies with the anti-money laundering
                           regulations of its federal functional regulator. The
                           Bank is in compliance with the OTS's anti-money
                           laundering regulations.

                  o        Section 326 of the Act authorizes the Secretary of
                           the Department of Treasury, in conjunction with the
                           other bank regulators, to issue regulations that
                           provide for minimum standards with respect to
                           customer identification at the time new accounts are
                           opened. On July 23, 2002, the OTS and the other
                           federal bank regulators jointly issued proposed rules
                           to implement Section 326. The proposed rules require
                           financial institutions to establish a program
                           specifying procedures for obtaining identifying
                           information from customers seeking to open new
                           accounts. This identifying information would be
                           essentially the same information currently obtained
                           by most financial institutions for individual
                           customers. A financial institution's program


                                       24
<PAGE>

                           would also have to contain procedures to verify the
                           identity of customers within a reasonable period of
                           time, generally through the use of the same forms of
                           identity verification currently in use, such as
                           driver's licenses, passports, credit reports and
                           other similar means.

                  o        Section 312 of the Act requires financial
                           institutions that establish, maintain, administer or
                           manage private banking accounts or correspondent
                           accounts in the United States for non-United States
                           persons or their representatives (including foreign
                           individuals visiting the United States) to establish
                           appropriate, specific, and, where necessary, enhanced
                           due diligence policies, procedures and controls
                           designed to detect and report money laundering.
                           Interim rules under Section 312 were issued by the
                           Treasury Department on July 23, 2002. The interim
                           rules state that a due diligence program is
                           reasonable if it comports with existing best
                           practices standards for banks that maintain
                           correspondent accounts for foreign banks and
                           evidences good faith efforts to incorporate due
                           diligence procedures for accounts posing increased
                           risk of money laundering. In addition, an enhanced
                           due diligence program is reasonable if it comports
                           with best practices standards and focuses enhanced
                           due diligence measures on those correspondent
                           accounts posing a particularly high risk of money
                           laundering based on the bank's overall assessment of
                           the risk posed by the foreign correspondent bank.
                           Finally, a private banking due diligence program must
                           be reasonably designed to detect and report money
                           laundering and the existence of proceeds of foreign
                           corruption. Such a program is reasonable if it
                           focuses on those private banking accounts that
                           present a high risk of money laundering.

                  o        Financial institutions are prohibited from
                           establishing, maintaining, administering or managing
                           correspondent accounts for foreign shell banks
                           (foreign banks that do not have a physical presence
                           in any country), and are subject to certain
                           recordkeeping obligations with respect to
                           correspondent accounts of foreign banks.

                  o        Bank regulators are directed to consider a holding
                           company's effectiveness in combating money laundering
                           when ruling on FRA and Bank Merger Act applications.

FEDERAL AND STATE TAXATION

FEDERAL TAXATION

         GENERAL. The Holding Company and the Bank currently file consolidated
federal income tax returns, report their income for tax return purposes on the
basis of a taxable-year ending March 31st, using the accrual method of
accounting and are subject to federal income taxation in the same manner as
other corporations with some exceptions, including in particular the Bank's tax
reserve for bad debts discussed below. The following discussion of tax matters
is intended only as a summary and does not purport to be a comprehensive
description of the tax rules applicable to the Bank or the Holding Company.

         BAD DEBT RESERVES. The Bank, as a "small bank" (one with assets having
an adjusted tax basis of $500 million or less) is permitted to maintain a
reserve for bad debts with respect to "qualifying loans," which, in general, are
loans secured by certain interests in real property, and to make, within
specified formula limits, annual additions to the reserve which are deductible
for purposes of computing the Bank's taxable income.

         DISTRIBUTIONS. To the extent that the Bank makes "nondividend
distributions" to shareholders, such distributions will be considered to result
in distributions from the Bank's "base year reserve," i.e., its reserve as of
March 31, 1988, to the extent thereof and then from its supplemental reserve for
losses on loans, and an amount based on the amount distributed will be included
in the Bank's taxable income. Nondividend distributions include distributions in
excess of the Bank's current and accumulated earnings and profits, distributions
in redemption of stock and distributions in partial or complete liquidation.
However, dividends paid out of the Bank's current or accumulated earnings and
profits, as calculated for federal income tax purposes, will not constitute
nondividend distributions and, therefore, will not be included in the Bank's
income.

         The amount of additional taxable income created from a nondividend
distribution is an amount that, when reduced by the tax attributable to the
income, is equal to the amount of the distribution. Thus, approximately one and
one-half times the nondividend distribution would be includable in gross income
for federal income tax purposes, assuming a 34% federal corporate income tax
rate.

         ELIMINATION OF DIVIDENDS; DIVIDENDS-RECEIVED DEDUCTION. The Holding
Company may exclude from its income 100% of dividends received from the Bank as
a member of the same affiliated group of corporations. The corporate
dividends-received deduction is generally 70% in the case of dividends received
from unaffiliated corporations with which the Holding Company and the Bank will
not file a consolidated tax return, except that if the Holding Company or the
Bank owns more than 20% of the stock of a corporation distributing a dividend,
then 80% of any dividends received may be deducted.

STATE AND LOCAL TAXATION

         STATE OF NEW YORK. The Bank and the Holding Company are subject to New
York State franchise tax on net income or one of several alternative bases,
whichever results in the highest tax. "Net income" means federal taxable income
with adjustments. The Bank and the Holding Company file combined returns and are
subject to taxation in the same manner as other corporations with some


                                       25
<PAGE>

exceptions, including the Bank's deductions for additions to its reserve for bad
debts. The New York State franchise tax rates for fiscal years 2003 and 2002 are
9.53% and 9.36%, respectively, (including the Metropolitan Commuter
Transportation District Surcharge) of net income. In general, the Holding
Company is not required to pay New York State tax on dividends and interest
received from the Bank or on gains realized on the sale of Bank stock.

         New York State has enacted legislation that enabled the Bank to avoid
the recapture of the New York State tax bad debt reserves that otherwise would
have occurred as a result of the changes in federal law and to continue to
utilize either the federal method or a method based on a percentage of its
taxable income for computing additions to its bad debt reserve.

         NEW YORK CITY. The Bank and the Holding Company are also subject to a
similarly calculated New York City banking corporation tax of 9% on income
allocated to New York City. In this connection, legislation was recently enacted
regarding the use and treatment of tax bad debt reserves that is substantially
similar to the New York State legislation described above.

         DELAWARE TAXATION. As a Delaware holding company not earning income in
Delaware, the Holding Company is exempted from Delaware corporate income tax but
is required to file an annual report with and pay an annual franchise tax to the
State of Delaware.

AVAILABILITY OF SEC FILINGS

       The Holding Company's financial reports can be accessed free of charge
through the SEC's website WWW.SEC.GOV or upon written request to the Holding
Company.

EXECUTIVE OFFICERS OF THE HOLDING COMPANY

         The name, position, term of office as officer and period during which
he or she has served as an officer is provided below for each executive officer
of the Holding Company as of May 31, 2003. Each of the persons listed below is
an executive officer of the Holding Company and the Bank, holding the same
office in each.

<TABLE>
<CAPTION>
NAME                                       AGE           POSITION
----                                       ---           --------
<S>                                        <C>           <C>
Deborah C. Wright                          45            President and Chief Executive Officer, Director
Catherine A. Papayiannis                   43            Executive Vice President and Chief Operating Officer
James H. Bason                             48            Senior Vice President and Chief Lending Officer
Frank Deaton                               34            Senior Vice President and Chief Auditor
Linda J. Dunn                              47            Senior Vice President, General Counsel and Corporate Secretary
William Gray                               48            Senior Vice President and Chief Financial Officer
Brian J. Maher                             61            Senior Vice President and Chief Credit Officer
Margaret Peterson                          52            Senior Vice President and Chief Administrative Officer
Devon W. Woolcock                          37            Senior Vice President and Chief of Retail Banking
</TABLE>


         DEBORAH C. WRIGHT is President and Chief Executive Officer and a
Director of the Holding Company and Carver Federal. Prior to joining Carver on
June 1, 1999, Ms. Wright was President & CEO of the Upper Manhattan Empowerment
Zone Development Corporation, a position she held since May 1996. She previously
served as Commissioner of the Department of Housing Preservation and Development
under Mayor Rudolph W. Giuliani from January 1994 through March 1996. Prior to
that appointment, Ms. Wright was a member of the New York City Housing Authority
Board. She is a member of the Board of Overseers of Harvard University and
serves on the boards of Kraft Foods, Inc., The Lower Manhattan Development
Corporation, the Initiative for a Competitive Inner City, The New York City
Partnership, Inc. and the Ministers and Missionaries Benefit Board of the
American Baptist Churches. Ms. Wright earned A.B., J.D. and M.B.A. degrees from
Harvard University.


         CATHERINE A. PAPAYIANNIS is Executive Vice President and Chief
Operating Officer. She joined Carver in June 2002. Ms. Papayiannis was
previously Senior Vice President/Director of Community Banking at Atlantic Bank
of New York, where she oversaw the regional retail distribution network, the
offsite ATM network, wealth and cash management services, residential and


                                       26
<PAGE>

consumer lending and small business banking. Prior to joining Atlantic Bank Ms.
Papayiannis was employed by Olympian Bank of Brooklyn where she held numerous
roles. Ms. Papayiannis earned a B.B.A. and an M.B.A from Baruch College.

         JAMES H. BASON is Senior Vice President and Chief Lending Officer. He
joined Carver in March 2003. Previously Mr. Bason was Vice President and Real
Estate Loan Officer at The Bank of New York where he had been employed since
1991 when The Bank of New York acquired Barclays Bank (where he had been
employed since 1986). At The Bank of New York he was responsible for developing
and maintaining relationships with developers, builders, real estate investors
and brokers to provide construction and permanent real estate financing. At
Barclays, Mr Bason began his career in residential lending and eventually became
the banks CRA officer. Mr. Bason earned a B.S. in Business Administration from
the State University of New York at Oswego.

          FRANK DEATON is Senior Vice President and Chief Auditor. He joined
Carver in May 2001. Mr. Deaton was previously Vice President and Risk Review
Manager with Key Bank in Cleveland, Ohio. He joined Key Bank in 1990 and was
responsible for developing the scope and overseeing completion of credit,
operational and regulatory compliance audits for a variety of business units.
Mr. Deaton is a Certified Bank Auditor and a member of the Institute of Internal
Auditors.

         LINDA J. DUNN is Senior Vice President, General Counsel and Corporate
Secretary. She joined Carver in June 2001. Ms. Dunn had been a corporate
associate at the law firm Paul, Weiss, Rifkind, Wharton & Garrison since 1994.
She was an Assistant Vice President in the Consumer Products Division of
Chemical Bank from 1987 to 1991. From 1983 to 1987, she was employed at
American/National Can Company where she held various positions from Financial
Analyst to Manager of Performance Analysis in the Specialty Food Products
Division. Ms. Dunn earned A.B., M.B.A. and J.D. degrees from Harvard University.

         WILLIAM GRAY is Senior Vice President and Chief Financial Officer. He
joined Carver in February 2002. Mr. Gray had been employed at the Dime Savings
Bank of New York since 1992, most recently serving as Vice President/Director of
Business Unit Planning and Support in the Controller's Department where he was
responsible for identifying and evaluating strategic initiatives for several
businesses. Mr. Gray earned a B.A. in accounting from Adelphi University in
1986.

         BRIAN J. MAHER is Senior Vice President and Chief Credit Officer. Mr.
Maher joined Carver in September 2002 and was appointed to the newly created
Chief Credit Officer position in January 2003. Mr. Maher brings to Carver 30
years of experience in financial services, 20 years in credit and lending, 15
years of which were with Citibank and seven years with Alliance Funding. Mr.
Maher earned a B.A. from St. Bonaventure University.

         MARGARET D. PETERSON is Senior Vice President and Chief Human Resources
Officer. She joined Carver in October 1999. Ms. Peterson came to Carver from
Deutsche Bank where she served as a Compensation Planning Consultant in
Corporate Human Resources. Prior to joining Deutsche Bank, she was a Vice
President and Senior Human Resources Generalist for Citibank Global Asset
Management. In addition to her 13 years in Human Resources, Ms. Peterson has ten
years of Systems and Technology experience from various positions held at each
of JP Morgan and Chase Manhattan Bank. Ms. Peterson is a member of the Board of
Friends of Columbia University's Double Discovery Center. Ms. Peterson earned a
Bachelors Degree from Pace University, an M.B.A. from Columbia University as a
Citicorp Fellow, and has been designated a Certified Compensation Professional
(CCP) by the American Compensation Association and a Senior Professional in
Human Resources (SPHR) by the HR Certification Institute.

         DEVON W. WOOLCOCK is Senior Vice President and Chief of Retail Banking.
He is a 12-year veteran of retail banking. He joined Carver in 2000 from
Citibank where he was a Division Executive Vice President and where, most
recently, he managed six branches in Brooklyn and Queens. He joined Citibank in
1995 where he managed several South Florida branches before moving to New York
City. Mr. Woolcock began his career with Barnett Bank in Florida, holding
positions including Head Teller, Division Operations Manager and Branch Manager.
Mr. Woolcock attended college at the University of Houston and Bethune Cookman
College.


                                       27
<PAGE>



ITEM 2.  PROPERTIES.

         The Bank currently conducts its business through one administrative
office and five branch offices. The following table sets forth certain
information regarding Carver Federal's offices and other material properties at
March 31, 2003.

<TABLE>
<CAPTION>
                                                                         LEASE
                                                  YEAR      OWNED OR   EXPIRATION     NET BOOK
                                                 OPENED       LEASE       DATE          VALUE
                                              -----------------------------------------------------
                                                                                   (IN THOUSANDS)
<S>                                               <C>       <C>        <C>             <C>
MAIN OFFICE AND BRANCH
----------------------
75 West 125th Street                              1996        Owned                    $ 5,435
New York, NY

BRANCH OFFICES:
---------------
1281 Fulton Street
Brooklyn, NY                                      1989        Owned                      1,494
(Bedford-Stuyvesant branch)

1009-1015 Nostrand Avenue
Brooklyn, NY                                      1975        Owned                        320
(Crown Heights branch)

115-02 Merrick Boulevard
Jamaica, NY                                       1982       Leased     2/28/2011          279
(St Alban's branch)

130 Malcolm X Boulevard
New York, NY                                      2001       Leased     5/31/2006          605
(Malcolm X  Blvd. branch)
                                                                                   ----------------
            Total                                                                      $ 8,133
                                                                                   ================
</TABLE>

         The net book value of Carver Federal's investment in premises and
equipment totaled approximately $10.2 million at March 31, 2003.

ITEM 3.  LEGAL PROCEEDINGS.

         From time to time, Carver Federal is a party to various legal
proceedings incident to its business. Certain claims, suits, complaints and
investigations involving Carver Federal, arising in the ordinary course of
business, have been filed or are pending. The Company is of the opinion, after
discussion with legal counsel representing the Bank in these proceedings, that
the aggregate liability or loss, if any, arising from the ultimate disposition
of these matters would not have a material adverse effect on the Company's
consolidated financial position or results of operations. At March 31, 2003,
except as set forth below, there were no material legal proceedings to which the
Company or its subsidiaries was a party or to which any of their property was
subject.

         On or about April 29, 1999, plaintiff Reginald St. Rose ("St. Rose")
filed suit against Carver Federal in the Supreme Court of the State of New York,
County of New York (the "St. Rose Action"). St. Rose is a former Carver Federal
employee. On or about January 12, 1999, Carver Federal and St. Rose entered into
an agreement (the "Agreement") providing that St. Rose would resign from Carver
Federal on the terms and conditions set forth in the Agreement. In the St. Rose
Action, St. Rose alleged the following causes of action, which relate to the
Agreement and St. Rose's separation from Carver Federal: (1) breach of contract;
(2) promissory estoppel; and (3) fraudulent misrepresentation. St. Rose seeks
damages in an amount not less than $50,000 with respect to the breach of
contract cause of action and seeks undisclosed damages with respect to the
promissory estoppel and fraudulent misrepresentation causes of action.

         On or about August 18, 1999, Carver Federal moved to dismiss St. Rose's
fraudulent misrepresentation cause of action. By decision dated November 23,
1999, the Court granted Carver Federal's motion to dismiss and entered an order
embodying that decision on January 26, 2000. Carver Federal has not filed an
answer in the St. Rose Action. By written stipulation of the parties, Carver
Federal's time to file an answer to St. Rose's complaint has been extended
without date. Carver Federal has unasserted counterclaims against St. Rose for,
among other claims, payment of certain financial obligations to Carver Federal
(including, but not limited to, automobile loans, unsecured loans, lines of
credit and credit card debts), which obligations remain outstanding as of the
date of this Form 10-K. Since January 2000, the St. Rose Action has been largely
inactive. The parties have had intermittent settlement discussions but have not
reached an agreement. If the parties do not reach a settlement, Carver Federal
intends to continue to defend the St. Rose Action vigorously.



                                       28
<PAGE>

         Carver Federal is also a defendant in an action brought by Ralph
Williams (the "Williams Action") and an action brought by Janice Pressley (the
"Pressley Action" and, together with the Williams Action, the "Actions") both of
which arise out of events concerning the Northeastern Conference Federal Credit
Union ("Northeastern"). Plaintiff Williams is a former member of the Board of
Directors of Northeastern and plaintiff Pressley is a former treasurer of
Northeastern.

         Northeastern was a federal credit union and it maintained accounts with
Carver Federal and with other banks in the New York metropolitan area.
Plaintiffs' complaints (which are virtually identical) allege that the National
Credit Union Administration (the "NCUA") acted improperly when it placed
Northeastern into conservatorship and subsequent liquidation. On or about
November 22, 2000, Williams filed his pro se complaint in the United States
District Court, District of Columbia, against the NCUA, Carver Federal, JPMorgan
Chase Bank (formerly Chase Manhattan Bank) ("Chase"), Astoria Federal Savings
and Loan Association and Reliance Federal Savings Bank (Carver Federal with the
last three defendants, collectively the "Bank Defendants") seeking damages in
the amount of $1 million plus certain additional unspecified amounts. On or
about November 22, 2000, plaintiff Pressley filed her pro se action in the
United States District Court, District of Columbia, against the same defendants
seeking unspecified compensatory and punitive damages. Williams seeks damages
for the allegedly "unauthorized" or "invalid" actions of the NCUA Board of
Directors in taking control of Northeastern as well as damages for
discrimination and civil rights violations. Pressley seeks damages based on
identical allegations except that she also alleges certain claims of employment
discrimination. While the bulk of both complaints relate to the action of the
NCUA Board of Directors, the plaintiffs advance two allegations against the Bank
Defendants, including Carver Federal. First, plaintiffs allege that the Bank
Defendants "collaborated with the NCUA Board of Directors" in violating
unspecified constitutional and privacy rights. Second, plaintiffs allege that
the Bank Defendants engaged in discrimination.

On or about December 15, 2000, defendant Chase moved to consolidate the Actions.
In anticipation of that consolidation, the Bank Defendants filed a joint motion
to dismiss both complaints arguing that both Actions are barred by principles of
res judicata and both complaints fail to state claims on which relief can be
granted. The Bank Defendants' motion to dismiss was denied without prejudice
insofar as it applied to the Williams Action solely for the reason that it was a
motion addressed to both Actions prior to the issuance of an order consolidating
these cases. The Bank Defendants have refiled their motion to dismiss the
Williams Action and it is sub judice. If the motion to dismiss is not granted,
Carver Federal intends to defend the Williams Action vigorously. On September
20, 2001, the Court granted the Bank Defendants' motion to dismiss the Pressley
Action. Pressley has appealed the dismissal. Carver Federal is vigorously
opposing the appeal.

         On or about December 28, 2000, plaintiff Thomas L. Clark ("Clark")
filed suit against Carver Federal and individual defendants in the Supreme Court
of the State of New York, County of New York. Clark is the former President and
Chief Executive Officer of Carver Federal. Clark claimed that the defendants
should be forced to obtain approval from the OTS to pay severance benefits that
Clark believes Carver Federal owes him under an employment agreement. Carver
Federal sought injunctive relief and asserted claims for breach of contract,
equitable estoppel and estoppel by contract. On or about March 30, 2001, Carver
Federal and the individual defendants moved to dismiss the complaint in its
entirety based on documentary evidence and for failure to state a cause of
action. By Decision and Order entered November 27, 2001, the Court granted that
motion to the extent of dismissing the first cause of action for breach of
contract against all of the individual defendants and dismissing the second
cause of action based on estoppel theories as against all the defendants. Carver
Federal appealed the Decision and Order insofar as it did not dismiss the
complaint in its entirety. On September 26, 2002, the Appellate Division of the
Supreme Court reversed the lower court and granted Carver Federal's motion in
its entirety. Clark did not appeal that decision and his time to do so has
expired.

         In or about November 2001, Monique Barrow filed an action against
Carver Federal in the United States District Court for the Southern District of
New York alleging that Carver Federal's termination of her employment
constituted a violation of the federal Family and Medical Leave Act, 29 U.S.C.
ss. 2601, et seq., the New York State Human Rights Law, N.Y. Executive ss.296 ET
SEQ., and the New York City Human Rights Law, N.Y.C. Administrative Code ss.
8-101 et seq. Ms. Barrow seeks back pay, front pay and benefits with interest in
an amount not less than $5 million, and punitive, liquidated and other
compensatory damages in an amount not less than $10 million. Carver Federal has
answered the complaint denying any liability. Carver Federal obtained an order
providing for expedited discovery on liability issues. Carver Federal has
completed its discovery and has requested permission to make a motion for
summary judgment. Carver Federal intends to make that motion as soon as
permission is received.




                                       29
<PAGE>

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         The Holding Company held its Annual Meeting on February 4, 2003 for the
fiscal year ended March 31, 2002.

         The purpose of the Annual Meeting was to vote on the following
proposals:

         1.       The election of three directors for terms of three years each;
                  and

         2.       The ratification of the appointment of KPMG, LLP as
                  independent auditors of the Holding Company for the fiscal
                  year ended March 31, 2003.

The results of voting were as follows:

<TABLE>
<CAPTION>
Proposal 1:           Election of Directors:
                      Holding Company Nominees
<S>                   <C>                                                         <C>
                      Carol Baldwin Moody                                         For         2,288,900
                                                                                  Withheld    12,215

                      Edward B. Ruggiero                                          For         2,288,761
                                                                                  Withheld    12,354

                      Strauss Zelnick                                             For         2,288,980
                                                                                  Withheld    12,135

Proposal 2:           Ratification of Appointment of Independent Auditors         For         2,284,851
                                                                                  Against     15,675
                                                                                  Abstain     589
</TABLE>

         In addition to the nominees elected at the Annual Meeting, the
following persons' terms of office as directors continued after the Annual
Meeting: Pazel G. Jackson, Jr., David L. Hinds, Frederick O. Terrell, Robert
Holland, Jr. and Deborah C. Wright.


                                       30
<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

      The Holding Company's common stock is listed on the American Stock
Exchange under the symbol "CNY." As of May 31, 2003, there were 2,286,133 shares
of the common stock outstanding, held by approximately 1,073 stockholders of
record. The following table shows the high and low per share sales prices of the
common stock and the dividends declared for the quarters indicated.
<TABLE>
<CAPTION>
                               High       Low        Dividend                             High       Low       Dividend
                               ----       ---        --------                             ----       ---       --------
<S>                           <C>         <C>         <C>        <C>                    <C>         <C>         <C>
      Fiscal Year 2003                                           Fiscal Year 2002

      June 30, 2002           $13.10      $11.31      $   --     June 30, 2001          $ 9.18      $ 8.60      $   --
      September 30, 2002      $12.15      $ 9.83      $   --     September 30, 2001     $10.13      $ 8.15      $   --
      December 31, 2002       $11.27      $ 9.08      $ 0.05     December 31, 2001      $ 9.80      $ 8.64      $   --
      March 31, 2003          $14.54      $11.13      $ 0.05     March 31, 2002         $11.49      $ 9.60      $ 0.05
</TABLE>

      On January 9, 2003, the Holding Company's Board of Directors announced the
establishment of a quarterly cash dividend in an amount to be determined each
quarter. As such, the Board of Directors declared two separate cash dividends of
$0.05 per common share for the third and fourth quarters of fiscal 2003. They
were paid on or about February 7, 2003 and May 19, 2003, respectively, to common
stockholders of record at the close of business on January 20, 2003 and May 5,
2003, respectively. In each of the past five fiscal years other than fiscal 2003
the Company has paid an annual $0.05 per common share cash dividend.

      The Bank will not be permitted to pay dividends to the Holding Company on
its capital stock if its regulatory capital would be reduced below applicable
regulatory capital requirements or if its stockholders' equity would be reduced
below the amount required to be maintained for the liquidation account, which
was established in connection with the Bank's conversion to stock form. The OTS
capital distribution regulations applicable to savings institutions (such as the
Bank) that meet their regulatory capital requirements permit, after not less
than 30 days prior notice to the OTS, capital distributions during a calendar
year that do not exceed the Bank's net income for that year plus its retained
net income for the prior two years. For information concerning the Bank's
liquidation account, see Note 11 of the Notes to the Consolidated Financial
Statements.

      Unlike the Bank, the Holding Company is not subject to OTS regulatory
restrictions on the payment of dividends to its stockholders, although the
source of such dividends will be dependent, in part, upon dividends from the
Bank. The Holding Company is subject to the requirements of Delaware law, which
generally limit dividends to an amount equal to the excess of the net assets of
the Company (the amount by which total assets exceed total liabilities) over its
statutory capital, or if there is no such excess, to its net profits for the
current and/or immediately preceding fiscal year.


                                       31
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                      At or for the Fiscal Year Ended March 31,
                                                     -------------------------------------------------------------------------
                                                       2003           2002           2001             2000              1999
                                                     --------       --------       ---------        ---------        ---------
                                                                     (Dollars in thousands, except per share data)
<S>                                                  <C>            <C>            <C>              <C>              <C>
Selected Financial Condition Data
Assets                                               $509,845       $450,306       $ 424,500        $ 420,119        $ 416,483
Loans, net                                            292,738        289,710         283,437          270,148          270,522
Securities                                            164,750        105,464          87,788          104,177           96,502
Cash and cash equivalents                              23,160         34,851          31,758           22,202           21,321
Deposits                                              347,164        324,954         279,424          281,941          276,999
Borrowed funds                                        108,996         75,651         105,600           98,578          102,038
Stockholders' equity                                   41,073         36,742          32,096           32,641           31,175
Number of Deposit accounts                             41,220         41,200          44,751           54,597           58,113
Number of offices                                           5              5               5                7                7

Operating Data:
Interest income                                        27,378         28,254          28,307           27,367           28,473
Interest expense                                        8,983         12,047          14,278           14,009           14,815
                                                     --------       --------       ---------        ---------        ---------
Net interest income taxes                              18,395         16,207          14,029           13,358           13,658
Provision for loan losses                                  --            900           1,793            1,099            4,029
                                                     --------       --------       ---------        ---------        ---------
Net interest income after provision for loan losses    18,395         15,307          12,236           12,259            9,629
Non-interest income                                     3,161          4,485           2,934            2,539            2,382
Non-interest expense                                   14,692         14,198          15,461           15,823           17,963
                                                     --------       --------       ---------        ---------        ---------
Income (loss) before income taxes                       6,864          5,594            (291)          (1,025)          (5,952)
Income tax (benefit)                                    3,033            881              98              110           (1,499)
                                                     --------       --------       ---------        ---------        ---------
Net income (loss)                                    $  3,831       $  4,713       $    (389)       $  (1,135)       $  (4,453)
                                                     ========       ========       =========        =========        =========
Diluted earnings (loss) per common share             $   1.52       $   1.89       $   (0.26)       $   (0.53)       $   (2.02)
                                                     ========       ========       =========        =========        =========

Selected Statistical Data:
Return on average assets (1)(3)                          0.83%          1.11%          (0.07)%          (0.27)%          (1.05)%
Return on average equity (2)(3)                          9.77          13.78           (0.89)           (3.29)          (12.70)
Net interest margin (4)                                  4.26           4.05            3.61             3.47             3.43
Average interest rate spread (5)                         4.08           3.92            3.48             3.38             3.29
Efficiency ratio (3)(6)                                 68.16          77.89           96.93           104.31           112.02
Operating expense to average assets (3)(7)               3.18           3.33            3.72             3.82             4.22
Equity to total assets at end of period                  8.06           8.16            7.56             7.77             7.49
Average equity to average assets                         8.48           8.03            7.85             8.33             8.24
Dividend payout ratio (8)                                3.19           2.55          (17.24)           (5.17)           (2.60)
Book value                                           $  16.26       $  14.72       $   13.03        $   14.28        $   14.13

Asset Quality Ratios:
Non-performing assets to total assets (9)                0.36%          0.63%           0.71%            0.73%            1.15%
Non-performing assets to total loans receivable (9)      0.61           0.96            1.04             1.12             1.66
Allowance for loan losses to total loans receivable      1.40           1.41            1.24             1.07             1.48
</TABLE>

(1)   Net income divided by average total assets

(2)   Net income divided by average total equity

(3)   For fiscal 1999, excluding non-recurring expenses amounting to $7.8
      million, the return on average assets, return on average equity, operating
      expenses to average assets and efficiency ratio were 0.24%, 2.85%, 2.98%,
      and 78.94%, respectively.

(4)   Net interest income divided by average interest-earning assets.

(5)   The difference between the weighted average yield on interest-earning
      assets and the weighted average cost of interest-bearing liabilities.

(6)   Non-interest expense (other than real estate owned expenses) divided by
      the sum of net interest income and non-interest income (other than net
      security gains and losses and other non-recurring income).

(7)   Non-interest expense less real estate owned expenses, divided by average
      total assets.

(8)   Dividends paid to common stockholders as a percentage of net income (loss)
      available to common stockholders.

(9)   Non performing assets consist of non-accrual loans, loans accruing 90 days
      or more past due, and property acquired in settlement of loans.

(10)  Total stockholders' equity divided by diluted weighted average shares
      outstanding.


                                       32
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

      The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes to Consolidated Financial Statements
presented elsewhere in this report.

General

      Carver's net income is dependent primarily on its net interest income,
which is the difference between interest income earned on its loan, investment
and mortgage-backed securities portfolios and the interest paid on its
interest-bearing liabilities, such as deposits and borrowings. In addition, net
income is affected by the level of provision for loan losses, as well as
non-interest income and operating expenses.

      The operations of Carver are significantly affected by prevailing economic
conditions, competition and the monetary and fiscal policies of governmental
agencies. Lending activities are influenced by the demand for and supply of
housing, competition among lenders, the level of interest rates and the
availability of funds. Deposit flow and costs of funds are influenced by
prevailing market rates of interest, primarily on competing investments, account
maturities, and the levels of personal income and savings.

Asset/Liability Management

      Net interest income, the primary component of Carver's net income, is
determined by the difference or "spread" between the yield earned on
interest-earning assets and the rates paid on its interest-bearing liabilities
and the relative amounts of such assets and liabilities. Because Carver's
interest-bearing liabilities consist primarily of shorter term deposit accounts,
Carver's interest rate spread can be adversely affected by changes in general
interest rates if its interest-earning assets are not sufficiently sensitive to
changes in interest rates. Management has sought to reduce Carver's exposure to
changes in interest rates by more closely matching the effective maturities and
repricing periods of its interest-earning assets and interest-bearing
liabilities through a variety of strategies, including the origination and
purchase of adjustable-rate loans for its portfolio, investment in
adjustable-rate mortgage-backed securities and shorter-term investment
securities and the sale of all long-term fixed-rate loans originated into the
secondary market. The Bank has also reduced interest rate risk through its
origination and purchase of primarily adjustable-rate mortgage loans and
extension of the term of borrowings.

Discussion of Market Risk--Interest Rate Sensitivity Analysis

      As a financial institution, the Bank's primary component of market risk is
interest rate volatility. Fluctuations in interest rates will ultimately impact
both the level of income and expense recorded on a large portion of the Bank's
assets and liabilities, and the market value of all interest-earning assets,
other than those which possess a short term to maturity. Since all of Carver's
interest-bearing liabilities and virtually all of Carver's interest-earning
assets are located at the Bank, most of Carver's interest rate risk ("IRR")
exposure lies at the Bank level. As a result, all significant IRR management
procedures are performed at the Bank level. Based upon the Bank's nature of
operations, the Bank is not subject to foreign currency exchange or commodity
price risk. The Bank does not own any trading assets.

      Carver seeks to manage its IRR by monitoring and controlling the variation
in repricing intervals between its assets and liabilities. To a lesser extent,
Carver also monitors its interest rate sensitivity by analyzing the estimated
changes in market value of its assets and liabilities assuming various interest
rate scenarios. As discussed more fully below, there are a variety of factors
which influence the repricing characteristics of any given asset or liability.

      The matching of assets and liabilities may be analyzed by examining the
extent to which such assets and liabilities are "interest rate sensitive" and by
monitoring an institution's interest rate sensitivity gap. An asset or liability
is said to be interest rate sensitive within a specific period if it will mature
or reprice within that period. The interest rate sensitivity gap is defined as
the difference between the amount of interest-earning assets maturing or
repricing within a specific period of time and the amount of interest-bearing
liabilities repricing within that same time period. A gap is considered positive
when the amount of interest rate sensitive assets exceeds the amount of interest
rate sensitive liabilities and is considered negative when the amount of
interest rate sensitive liabilities exceeds the amount of interest rate
sensitive assets. Generally, during a period of falling interest rates, a
negative gap could result in an increase in net interest income, while a
positive gap could adversely affect net interest income. Conversely, during a
period of rising interest rates a negative gap could adversely affect net
interest income, while a positive gap could result in an increase in net
interest income. As illustrated below, Carver had a negative one-year gap equal
to 6.26% of total rate sensitive assets at March 31, 2003, as a result of which
its net interest income could be negatively affected by rising interest rates
and positively affected by falling interest rates.


                                       33
<PAGE>

      The following table sets forth information regarding the projected
maturities, prepayments and repricing of the major rate-sensitive asset and
liability categories of Carver as of March 31, 2003. Maturity repricing dates
have been projected by applying prepayment rates which management believes are
appropriate. The information presented in the following table is derived in part
from data incorporated in "Schedule CMR: Consolidated Maturity and Rate," which
is part of the Bank's quarterly reports filed with the OTS. The repricing and
other assumptions are not necessarily representative of the Bank's actual
results. Classifications of items in the table below are different from those
presented in other tables and the financial statements and accompanying notes
included herein and do not reflect non-performing loans.

<TABLE>
<CAPTION>
                                                                      Over One
                                             Three or     Four to      Through      Over Three    Over Five      Over
                                               Less       Twelve        Three         Through      Through       Ten
                Months                        Months      Months        Years        Five Years   Ten Years      Years     Total
----------------------------------------     --------    --------     ---------     -----------   ---------    --------   --------
                                                                          (Dollars in thousands)
<S>                                           <C>        <C>           <C>            <C>          <C>         <C>        <C>
Rate Sensitive Assets:
Loans and Mortgage Backed Securities (1)      $28,823    $  82,424     $  77,738      $ 67,665     $ 46,680    $119,504   $422,834
Federal Funds Sold                              5,500           --            --            --           --          --      5,500
Investment Securities                          14,011        8,105        16,655            --           --       5,812     44,583
                                              -------    ---------     ---------      --------     --------    --------   --------
Total interest-earning assets                 $48,334    $  90,529     $  94,393      $ 67,665     $ 46,680    $125,316   $472,917
                                              =======    =========     =========      ========     ========    ========   ========

Rate Sensitive Liabilities:
NOW accounts                                  $ 1,287    $     884     $   1,950      $  1,607     $  7,159    $  5,303   $ 18,190
Savings Accounts                                3,738        7,964        14,711        14,735       30,344      57,443    128,935
Money market accounts                           1,565        7,092         2,501         1,775        3,197       4,605     20,735
Certificate of Deposits                        27,667      100,001        22,879        12,218           --          --    162,765
Borrowings                                     11,750        6,500        59,047        28,134        3,565          --    108,996
                                              -------    ---------     ---------      --------     --------    --------   --------
Total interest-bearing liabilities            $46,007    $ 122,441     $ 101,088      $ 58,469     $ 44,265    $ 67,351   $439,621
                                              =======    =========     =========      ========     ========    ========   ========

Interest Sensitivity Gap                      $ 2,327    ($ 31,912)    ($  6,695)     $  9,196     $  2,415    $ 57,965   $ 33,296

Cumulative Interest Sensitivity Gap           $ 2,327    ($ 29,585)    ($ 36,280)     ($27,084)    ($24,669)   $ 33,296         --
Ratio of Cumulative Gap to Total Rate
Sensitive assets                                 0.49%      -6.26%        -7.67%        -5.73%       -5.22%        7.04%        --
</TABLE>

(1)   Includes securities available-for-sale.

      The table above assumes that fixed maturity deposits are not withdrawn
prior to maturity and that transaction accounts will decay as disclosed in the
table above.

      Certain shortcomings are inherent in the method of analysis presented in
the table above. Although certain assets and liabilities may have similar
maturities or periods of repricing, they may react in different degrees to
changes in the market interest rates. The interest rates on certain types of
assets and liabilities may fluctuate in advance of changes in market interest
rates, while rates on other types of assets and liabilities may lag behind
changes in market interest rates. Certain assets, such as adjustable-rate
mortgages, generally have features that restrict changes in interest rates on a
short-term basis and over the life of the asset. In the event of a change in
interest rates, prepayments and early withdrawal levels would likely deviate
significantly from those assumed in calculating the table. Additionally, an
increased credit risk may result as the ability of many borrowers to service
their debt may decrease in the event of an interest rate increase. Virtually all
of the adjustable-rate loans in Carver's portfolio contain conditions that
restrict the periodic change in interest rate.

      Net Portfolio Value ("NPV") Analysis. As part of its efforts to maximize
net interest income and manage the risks associated with changing interest
rates, management uses the NPV methodology.

      Under this methodology, IRR exposure is assessed by reviewing the
estimated changes in net interest income ("NII") and NPV that would
hypothetically occur if interest rates rapidly rise or fall all along the yield
curve. Projected values of NII and NPV at both higher and lower regulatory
defined rate scenarios are compared to base case values (no change in rates) to
determine the sensitivity to changing interest rates.


                                       34
<PAGE>

      Presented below, as of March 31, 2003, is an analysis of the Bank's IRR as
measured by changes in NPV and NII for instantaneous and sustained parallel
shifts of 100 basis points in market interest rates. Such limits have been
established with consideration of the impact of various rate changes and the
Bank's current capital position. The information set forth below relates solely
to the Bank; however, because virtually all of the Company's IRR exposure lies
at the Bank level, management believes the table below also accurately reflects
an analysis of the Company's IRR.

<TABLE>
<CAPTION>
                                                Net Portfolio Value               NPV as a % of PV of Assets
                                     -------------------------------------        --------------------------
              Change in Rate         $ Amount      $ Change       % Change        NPV Ratio          Change
              --------------         --------      --------       --------        ---------         --------
                                                             (Dollars in thousands)
<S>                                    <C>          <C>              <C>            <C>             <C>
                  +300 bp              66,134       -9,080           -12%           12.69%          -121 bp
                  +200 bp              70,004       -5,209            -7%           13.24%          - 66 bp
                  +100 bp              72,874       -2,339            -3%           13.62%          - 28 bp
                     0 bp              75,213           --            --            13.90%               --
                 (100) bp              77,241        2,028             3%           14.12%          +  22bp

<CAPTION>
                                                              March 31, 2003
                                                              --------------
<S>                                                           <C>
Risk Measures: +200 BP Rate Shock
Pre-Shock NPV Ratio: NPV as % of PV of Assets                      13.90%
Post-Shock NPV Ratio                                               13.24%
Sensitivity Measure; Decline in NPV Ratio                          -66 bp
</TABLE>

      Certain shortcomings are inherent in the methodology used in the above IRR
measurements. Modeling changes in NPV require the making of certain assumptions,
which may or may not reflect the manner in which actual yields and costs respond
to changes in market interest rates. In this regard, the NPV table presented
assumes that the composition of Carver's interest sensitive assets and
liabilities existing at the beginning of a period remains constant over the
period being measured and also assumes that a particular change in interest
rates is reflected uniformly across the yield curve regardless of the duration
to maturity or repricing of specific assets and liabilities. Accordingly,
although the NPV table provides an indication of Carver's IRR exposure at a
particular point in time, such measurements are not intended to and do not
provide a precise forecast of the effect of changes in market interest rates on
Carver's net interest income and will differ from actual results.

Average Balance, Interest and Average Yields and Rates

      The following table sets forth certain information relating to Carver's
average interest-earning assets and average interest-bearing liabilities and
reflects the average yield on assets and the average cost of liabilities for the
years indicated. Such yields and costs are derived by dividing income or expense
by the average balances of assets or liabilities, respectively, for the periods
shown. Average balances are derived from average month-end balances, except for
federal funds which are derived from daily balances. Management does not believe
that the use of average monthly balances instead of average daily balances on
all other accounts has caused any material difference in the information
presented.

      The table also presents information for the years indicated with respect
to the difference between the weighted average yield earned on interest-earning
assets and the weighted average rate paid on interest-bearing liabilities, or
"interest rate spread," which savings institutions have traditionally used as an
indicator of profitability. Another indicator of an institution's profitability
is its "net interest margin," which is its net interest income divided by the
average balance of interest-earning assets. Net interest income is affected by
the interest rate spread and by the relative amounts of interest-earning assets
and interest-bearing liabilities. When interest-earning assets approximate or
exceed interest-bearing liabilities, any positive interest rate spread will
generate net interest income.


                                       35
<PAGE>

<TABLE>
<CAPTION>
                                                          At March 31, 2003            Year Ended March 31, 2003
                                                       --------------------       ---------------------------------
                                                                     Average       Average
                                                        Balance       Yield        Balance      Interest       Yield
                                                       --------      ------       --------      -------      ------
                                                                          (Dollars in thousands)
<S>                                                    <C>           <C>          <C>           <C>          <C>
Interest-earning Assets:
Loans (1)                                              $292,738        7.62%      $282,439      $21,182        7.50%
Investment securities (2)                                44,212        3.61%        36,660        1,614        4.40%
Mortgage-backed securities                              126,813        4.23%        93,002        4,282        4.60%
Federal funds                                             5,500        3.00%        19,744          300        1.52%
                                                       --------      ------       --------      -------      ------
  Total interest-earning assets                         469,263        6.28%       431,845       27,378        6.34%
Non-interest-earning assets                              40,582                     30,414
                                                       --------                   --------
  Total assets                                         $509,845                   $462,259
                                                       ========                   ========

Interest-bearing Liabilities:
Deposits:
    Checking                                           $ 18,190        0.52%      $ 18,138          130        0.72%
    Savings and clubs                                   128,935        1.06%       127,004        1,477        1.16%
    Money market accounts                                20,735        0.91%        16,747          189        1.13%
    Certificates of deposit                             162,765        2.15%       155,187        3,964        2.55%
                                                       --------      ------       --------      -------      ------
  Total deposits                                        330,625        1.56%       317,076        5,760        1.82%
Borrowed money                                          108,996        3.38%        80,861        3,223        3.99%
                                                       --------      ------       --------      -------      ------
  Total deposits and interest-bearing liabilities       439,621        2.01%       397,937        8,983        2.26%
Non-interest-bearing liabilities:
    Checking                                             16,539                     15,234
    Other liabilities                                    12,612                      9,880
                                                       --------                   --------
  Total liabilities                                     468,772                    423,051
Stockholders' equity                                     41,073                     39,208
                                                       --------                   --------
  Total liabilities and stockholders' equity           $509,845                   $462,259
                                                       ========                   ========
Net interest income                                                                             $18,395
                                                                                                =======

Average interest rate spread                                           4.27%                                   4.08%
                                                                     ======                                  ======

Net interest margin                                                    4.36%                                   4.26%
                                                                     ======                                  ======
Ratio of average interest-earning assets to
  interest-bearing liabilities                                       106.74%                                 108.52%
                                                                     ======                                  ======
</TABLE>

(1)   Includes non-accrual loans.

(2)   Includes FHLB stock.


                                       36
<PAGE>

<TABLE>
<CAPTION>
                                                                             Year Ended March 31,
                                                -------------------------------------------------------------------------
                                                               2002                                    2001
                                                ----------------------------------      ---------------------------------
                                                 Average                                Average
                                                 Balance     Interest       Yield       Balance      Interest      Yield
                                                --------      -------      -------      --------     --------     -------
                                                                          (Dollars in thousands)
<S>                                             <C>           <C>            <C>        <C>           <C>            <C>
Interest-earning Assets:
Loans (1)                                       $297,130      $22,586        7.60%      $278,264      $21,398        7.69%
Investment securities (2)                         38,505        2,324        6.04%        43,350        2,874        6.63%
Mortgage-backed securities                        50,450        2,918        5.78%        48,899        3,012        6.16%
Federal funds                                     13,662          426        3.12%        18,256        1,023        5.60%
                                                --------      -------      ------       --------      -------      ------
  Total interest-earning assets                  399,747       28,254        7.07%       388,769       28,307        7.28%
Non-interest-earning assets                       26,177                                  27,127
                                                --------                                --------
  Total assets                                  $425,924                                $415,896
                                                ========                                ========

Interest-bearing Liabilities:
Deposits:
    Checking                                    $ 21,114          237        1.12%      $ 15,926          253        1.59%
    Savings and clubs                            126,065        2,342        1.86%       137,305        3,051        2.22%
    Money market accounts                         16,181          302        1.87%        17,598          412        2.34%
    Certificates of deposit                      133,624        5,246        3.93%        94,006        4,740        5.04%
                                                --------      -------      ------       --------      -------      ------
  Total deposits                                 296,984        8,127        2.74%       264,835        8,456        3.19%
Borrowed money                                    78,153        3,920        5.02%        99,783        5,822        5.84%
                                                --------      -------      ------       --------      -------      ------
  Total interest-bearing liabilities             375,137       12,047        3.21%       364,618       14,278        3.92%
Non-interest-bearing liabilities:
    Checking                                       7,781                                  11,568
    Other liabilities                              8,809                                   7,072
                                                --------                                --------
Total liabilities                                391,727                                 383,258
Stockholders' equity                              34,197                                  32,638
                                                --------                                --------
Total liabilities and stockholders' equity      $425,924                                $415,896
                                                ========                                ========
Net interest income                                           $16,207                                 $14,029
                                                              =======                                 =======

Interest rate spread                                                         3.86%                                   3.36%
                                                                           ======                                  ======

Net interest margin                                                          4.05%                                   3.61%
                                                                           ======                                  ======

Ratio of avg interest-earning assets to
  interest-bearing liabilities                                             106.56%                                 106.62%
                                                                           ======                                  ======
</TABLE>

(1)   Includes non-accrual loans.

(2)   Includes FHLB stock.

Rate/Volume Analysis

      The following table sets forth information regarding the extent to which
changes in interest rates and changes in volume of interest related assets and
liabilities have affected Carver Federal's interest income and expense during
the periods indicated. For each category of interest-earning asset and
interest-bearing liability, information is provided for changes attributable to
(i) changes in volume (changes in volume multiplied by old rate), (ii) changes
in rates (change in rate multiplied by old volume), and (iii) changes in
rate/volume. Changes in rate/volume variance are allocated proportionately
between changes in rate and changes in volume.


                                       37
<PAGE>

<TABLE>
<CAPTION>
                                                                                   Year Ended March 31,
                                                         -------------------------------------------------------------------------
                                                                    2003 vs. 2002                         2002 vs. 2001
                                                              Increase (Decrease) due to              Increase (Decrease) due to
                                                         ---------------------------------       ---------------------------------
                                                          Volume       Rate         Total         Volume        Rate        Total
                                                         -------     -------       -------       -------       -------     -------
                                                                                   (Dollars in thousands)
<S>                                                      <C>         <C>           <C>           <C>           <C>         <C>
Interest-earning assets:
Loans                                                    ($1,102)      ($302)      ($1,404)      $ 1,434         ($246)    $ 1,188
Investment securities                                        (81)       (629)         (710)         (292)         (258)       (550)
Mortgage-backed securities                                 1,959        (595)        1,364            89          (184)        (94)
Federal funds                                                 92        (218)         (126)         (143)         (454)       (597)
                                                         -------     -------       -------       -------       -------     -------
    Total interest earning assets                            868      (1,744)         (876)        1,088        (1,142)        (53)
                                                         -------     -------       -------       -------       -------     -------

Interest-bearing liabilities:
Checking                                                     (21)        (85)         (106)           58           (74)        (16)
Savings and clubs                                             11        (876)         (865)         (209)         (500)       (709)
Money Market accounts                                          6        (119)         (113)          (26)          (84)       (110)
Certificates of deposit                                      551      (1,834)       (1,283)        1,555        (1,049)        506
                                                         -------     -------       -------       -------       -------     -------
    Total deposits                                           547      (2,914)       (2,367)        1,378        (1,707)       (329)
Borrowed money                                               107        (804)         (697)       (1,085)         (817)     (1,902)
                                                         -------     -------       -------       -------       -------     -------
    Total deposits and interest-bearing liabilities          654      (3,718)       (3,064)          293        (2,524)     (2,231)
                                                         -------     -------       -------       -------       -------     -------

Net change in net interest income                        $   214     $ 1,974       $ 2,188       $   795       $ 1,382     $ 2,178
                                                         =======     =======       =======       =======       =======     =======
</TABLE>

Comparison of Financial Condition at March 31, 2003 and 2002

      At March 31, 2003, total assets increased by $59.5 million, or 13.2%, to
$509.8 million, compared to $450.3 million at March 31, 2002. The increase in
total assets was primarily attributable to increases in total securities. Total
securities at March 31, 2003 increased $60.1 million to $165.6 million from
$105.5 million at March 31, 2002, reflecting a $39.2 million increase in
available-for-sale securities and a $20.9 million increase in held-to-maturity
securities. In November 2002, the Bank transferred $22.8 million of
mortgage-backed and other securities from available-for-sale to
held-to-maturity. The increase in available-for-sale securities, excluding
securities transferred to held-to-maturity, primarily reflects purchases of
$91.1 million substantially offset by $28.7 million in principal repayments,
maturities and calls and a $686,000 increase in the market value of the
portfolio. The increase in held-to-maturity securities reflects securities
transferred from available-for-sale of $22.8 million and purchases of $4.1
million offset by principal payments and maturities of $6.6 million.
Available-for-sale securities represented 77.9% of the total securities
portfolio at March 31, 2003, compared to 85.2% at March 31, 2002.

      Loans receivable, net, increased by $3.0 million, or 1.0%, to $292.7
million, compared to $289.7 million one year ago. The loan growth during fiscal
2003 represented loan originations of $59.6 million and loan purchases of $42.3
million, offset by principal repayments of $96.4 million and loans sold to
Fannie Mae of $2.5 million. The increase in mortgage loan principal repayments,
originations and purchases in fiscal 2003 and fiscal 2002 is primarily a result
of the lower interest rate environment during both fiscal years which has
increased the level of mortgage refinance activity.

      At March 31, 2003, total liabilities increased $55.2 million, or 13.3%, to
$468.8 million, compared to $413.6 million at March 31, 2002. Deposits increased
$22.2 million, or 6.8%, to $347.2 million at March 31, 2003 from $325.0 million
at March 31, 2002. The increase in deposits was primarily attributable to
increases of $11.4 million in certificates of deposit, of which $5.0 was an
individual government deposit, $5.5 million in money market accounts, $3.1
million in demand accounts and $2.2 million in regular savings and club
accounts. Advances from the FHLB-NY and other borrowed money increased $33.3
million, or 44.1%, to $109.0 million at March 31, 2003, from $75.7 million one
year ago.

      At March 31, 2003, stockholders' equity increased $4.3 million, or 11.8%,
to $41.1 million, compared to $36.7 million at March 31, 2002. The increase in
stockholders' equity was primarily attributable to net income of $3.8 million,
other comprehensive income, net of taxes, of $634,000 and the amortization of
the allocated portion of shares held by the Carver Federal Employee Stock
Ownership Plan of $152,000. These increases were partially offset by a net
increase in treasury stock holdings of $52,000 and dividends declared of
$313,000. The Bank's capital levels meet regulatory requirements of a well
capitalized financial institution.


                                       38
<PAGE>

Comparison of Operating Results For The Years Ended March 31, 2003 and 2002

Net Income

      The Bank reported net income for fiscal 2003 of $3.8 million, compared to
$4.7 million for the prior fiscal year. Net income available to common
stockholders for fiscal 2003 was $3.6 million, or $1.52 per diluted common
share, compared to $4.5 million, or $1.89 per diluted common share, for fiscal
2002. The decrease in net income was primarily due to a $2.2 million increase in
federal income taxes, a $1.3 million decrease in non-interest income and a
$494,000 increase in non-interest expense partially offset by a $2.2 million
improvement in net interest income and a $900,000 decrease in the provision for
loan losses.

Interest Income

      Interest income for fiscal 2003 was $27.4 million, a decrease of $876,000,
or 3.1%, from the prior year. The average balance of interest-earning assets
increased to $431.8 million for fiscal 2003 from $399.7 million for the prior
year. This increase was more than offset by a decline in the average yield on
interest-earning assets to 6.34% for fiscal 2003, compared to 7.07% for fiscal
2002.

      Interest income on loans decreased by $1.4 million, or 6.2%, to $21.2
million for fiscal 2003 compared to $22.6 million for fiscal 2002. The decrease
in interest income from loans reflects a decrease of $14.7 million, or 4.9%, in
the average balance of loans to $282.4 million for fiscal 2003 compared to
$297.1 million for fiscal 2002, coupled with a 10 basis point decrease in the
average rate earned on loans to 7.50% for fiscal 2003 from 7.60% for the prior
year. The decrease in the average balance of loans reflects amortization of
prepayments in excess of originations and purchases. The decline in the average
rate earned on loans was principally due to the downward pricing on loan
products during the continuing declining interest rate environment during fiscal
2003.

      Interest income on mortgage-backed securities increased by $1.4 million,
or 46.7%, to $4.3 million for fiscal 2003, compared to $2.9 million for the
prior year, reflecting an increase of $42.6 million in the average balance of
mortgage-backed securities to $93.0 million for fiscal 2003 compared to $50.5
million for fiscal 2002. The increase in the average balance of such securities
was due to the utilization of part of the proceeds received from increased
borrowings and deposits, coupled with the redeployment of mortgage loan
principal repayments, to purchase mortgage-backed securities. This increase was
partially offset by a 118 basis point decrease in the average rate earned on
mortgage-backed securities to 4.60% from 5.78%.

      Interest income on investment securities decreased by approximately
$710,000, or 30.6%, to $1.6 million for fiscal 2003, compared to $2.3 million
for the prior year. The increase in interest income on investment securities
reflects a 164 basis point decrease in the average rate earned on investment
securities to 4.40% from 6.04% and a decrease of $1.8 million in the average
balance of investment securities to $36.7 million for fiscal 2003 compared to
$38.5 million for fiscal 2002.

      Interest income on federal funds decreased $126,000, to $300,000 for
fiscal 2003, compared to $426,000 for the prior year. The decrease is
attributable to a 160 basis point decrease in the average rate earned on federal
funds, partially offset by a $6.1 million increase in the average balance of
federal funds.

Interest Expense

      Interest expense decreased by $3.1 million, or 25.4%, to $9.0 million for
fiscal 2003, compared to $12.0 million for the prior year. The decrease in
interest expense reflects a decline of 95 basis points in the average cost of
interest-bearing liabilities. This decline in average rate paid was partially
offset by a $22.8 million increase in the average balance of interest-bearing
liabilities to $397.9 million in fiscal 2003 from $375.1 million in fiscal 2002.
The increase in the average balance of interest-bearing liabilities in fiscal
2003 compared to fiscal 2002 was due to increases in the average balance of
interest-bearing deposits and, to a lesser extent, increases in the average
balance of borrowed money.

      Interest expense on deposits decreased $2.4 million, or 29.1%, to $5.8
million for fiscal 2003, compared to $8.1 million for the prior year. This
decrease is attributable to a 92 basis point decrease in the cost of average
deposits partially offset by a $20.1 million, or 6.8%, increase in the average
balance of interest-bearing deposits to $317.1 million for fiscal 2003, compared
to $297.0 million for fiscal 2002. The increase in the average balance of
interest-bearing deposits was primarily due to an increase in the average
balance of certificates of deposit of $21.6 million, or 16.1%. The increase in
average interest-bearing deposits was achieved through increased retail
production brought about by enhanced marketing efforts. The decrease in the
average rate paid on deposits was principally due to the declining interest rate
environment experienced in fiscal 2003.

      Interest expense on borrowed money decreased by $697,000, or 17.8%, to
$3.2 million for fiscal 2003, compared to $3.9 million for the prior year. The
decrease in interest expense on borrowed money for fiscal 2003 reflects a
decrease of 103 basis points in the average cost of borrowed money partially
offset by a $2.7 million increase in the average balance of borrowed money. The
decrease in average cost of borrowings was due to the continued declining
interest rate environment experienced during fiscal 2003.


                                       39
<PAGE>

Net Interest Income

      Net interest income represents the difference between income on
interest-earning assets and expense on interest-bearing liabilities. Net
interest income depends primarily upon the volume of interest-earning assets and
interest-bearing liabilities and the corresponding interest rates earned and
paid. Our net interest income is significantly impacted by changes in interest
rate and market yield curves. See "Discussion of Market Risk--Interest Rate
Sensitivity Analysis" for further discussion on the potential impact of changes
in interest rates on our results of operations.

      Net interest income before the provision for loan losses increased $2.2
million, or 13.5%, to $18.4 million for fiscal 2003 compared to $16.2 million
for the prior year. Net interest income benefited from a general interest rate
decline, as well as an increase in deposits. This benefit was partially offset
by an increase in borrowed money, a decrease in loan originations and average
loan balances and accelerated prepayments of mortgage-backed securities. The 95
basis point decrease in the cost of interest-bearing liabilities used to fund
interest-earning assets, coupled with a 73 basis point decrease in the return on
average interest-earning assets, contributed to a 22 basis point increase in the
interest rate spread to 4.08% for fiscal 2003, compared to 3.86% for the prior
year. The net interest margin increased to 4.26% for fiscal 2003, compared to
4.05% for fiscal 2002.

Provision for Loan Losses

      For fiscal 2003 there were no provisions recorded for loan losses,
compared to $900,000 for fiscal 2002. The Bank records provisions for loan
losses, which are charged to earnings, in order to maintain the allowance for
loan losses at a level that is considered appropriate to absorb probable losses
inherent in the existing loan portfolio. The provision in each period reflects
management's evaluation of the adequacy of the allowance for loan losses.
Factors considered include the volume and type of lending conducted, the Bank's
previous loan loss experience, the known and inherent risks in the loan
portfolio, adverse situations that may affect the borrowers' ability to repay,
the estimated value of any underlying collateral, trends in the local and
national economy and trends in the real estate market. Management believes that
the decrease in provisions for loan losses was warranted by the decreases in
charge-offs and non-performing assets.

      During fiscal 2003, the Bank had net recoveries of approximately $30,000,
compared to net charge-offs of $323,000 for fiscal 2002. At March 31, 2003,
non-performing loans totaled $1.8 million, or 0.6% of total loans, compared to
$2.8 million, or 1.0% of total loans, at March 31, 2002. At March 31, 2003, the
Bank's allowance for loan losses was $4.2 million compared to $4.1 million at
March 31, 2002, resulting in a ratio of the allowance to non-performing loans of
230.7% at March 31, 2003, compared to 146.2% at March 31, 2002, and a ratio of
allowance for possible loan losses to total loans of 1.40% and 1.41% at March
31, 2003 and March 31, 2002, respectively. Management believes the Company's
reported allowance for loan loss at March 31, 2003 is both appropriate in the
circumstances and adequate to provide for estimated probable losses in the loan
portfolio. For further discussion of non-performing loans and allowance for loan
losses, see "Business--General Description of Business--Asset Quality" and Note
1 to the Consolidated Financial Statements.

Non-Interest Income

      Non-interest income is composed of loan fees and service charges, gains or
losses from the sale of securities and certain other items, fee income for
banking services and miscellaneous non-interest income. Non-interest income
decreased $1.3 million, or 29.5%, to $3.2 million for fiscal 2003, compared to
$4.5 million for fiscal 2002. Despite increases in fees and charges for deposits
and loans, non-interest income decreased due to the inclusion in fiscal 2002 of
$1.4 million relating to the sale of securities, $987,000 relating to the sale
of the Bank's East New York branch and the loss $101,000 from the sale of the
Bank's automobile loan portfolio.

      Excluding the income and loss from sales of securities, loans and
deposits, total non-interest income increased by $961,000, or 43.7%, compared to
fiscal 2002. Loan fees and service charges amounted to $1.3 million for fiscal
2003, a $655,000, or a 95.5%, increase from the prior year. The increase in loan
fees and service charges is primarily attributable to substantially higher
mortgage prepayment penalties, primarily resulting from multifamily borrowers
prepaying due to the lower interest rate environment, and a restructuring of the
Bank's loan fees in the second quarter of fiscal 2003. Depository fees and
charges increased $316,000, or 21.1%, to $1.8 million for fiscal 2003 from $1.5
million for fiscal 2002. The increase in depository fees primarily relates to
increased ATM fees and the restructuring of the Bank's service charges in the
second quarter of fiscal 2003.

Non-Interest Expense

      Non-interest expense increased by $494,000, or 3.5%, to $14.7 million for
fiscal 2003, compared to $14.2 million for the prior fiscal year. The increase
in non-interest expense was primarily attributable to increases of $307,000 in
net occupancy and equipment expenses and $269,000 in salaries and employee
benefits, slightly offset by a decrease of $82,000 in other non-interest
expense. The increase in net occupancy and equipment expenses are related to the
opening of the Malcolm X Blvd. branch in September 2001 and the renovation of an
existing branch facility which resulted in increases in maintenance contracts,
building taxes and water and sewer expense. The increase in salaries and
employee benefits was primarily attributable to increased compensation


                                       40
<PAGE>

resulting from the Bank being able to successfully fill key management positions
including the Chief Operating Officer, Chief Financial Officer, Chief Lending
Officer and Chief Credit Officer positions.

Income Tax Expense

      Income tax expense was approximately $3.0 million for fiscal 2003, a $2.2
million, or 244.3%, increase from $881,000 for fiscal 2002, reflecting the
benefit of the Bank's tax loss carryforward utilized in fiscal 2002 coupled with
higher pre-tax income in fiscal 2003. During the fourth quarter of fiscal year
2002, the Bank fully utilized its tax loss carryforward resulting from prior
period losses and began to accrue for federal taxes. The effective tax rate in
fiscal 2003 was 44.2% compared to 15.7% in fiscal 2002.

Comparison of Operating Results For The Years Ended March 31, 2002 and 2001

Net Income

      The Bank reported net income for fiscal 2002 of $4.7 million, compared to
a net loss of $389,000 for the same period the prior year. Net income available
to common stockholders for fiscal 2002 was $4.5 million, or $1.89 per diluted
common share, compared to a loss of $586,000, or $0.26 per diluted common share,
for fiscal 2001. The increase in the net income was primarily due to a $2.2
million improvement in net interest income, a gain on the sale of securities of
$1.4 million, a $1.2 million reduction in non-interest expense, and a $893,000
decrease in the provision for loan losses, partially offset by a $783,000
increase in income taxes.

Interest Income

      Interest income for fiscal 2002 amounted to $28.3 million, a decrease of
$53,000, or 0.2%, from the prior year. The decrease in interest income was
primarily attributable to a decline in the average yield on interest-earning
assets to 7.07% for fiscal 2002, compared to 7.28% for fiscal 2001.

      Interest income on loans increased by $1.2 million, or 5.6%, to $22.6
million for fiscal 2002 compared to $21.4 million for fiscal 2001. The increase
in interest income from loans reflects an increase of $18.9 million, or 6.8%, in
the average balance of loans to $297.1 million for fiscal 2002 compared to
$278.3 million for fiscal 2001, partially offset by a nine basis point decrease
in the average rate earned on loans to 7.60% for fiscal 2002 from 7.69% for the
prior year.

      Interest income on mortgage-backed securities decreased by $94,000, or
3.1%, to $2.9 million for fiscal 2002, compared to $3.0 million for the prior
year reflecting a 38 basis point decrease in the average rate earned on
mortgage-backed securities to 5.78% from 6.16%, partially offset by an increase
of $1.6 million in the average balance of mortgage-backed securities to $50.5
million for fiscal 2002, compared to $48.9 million for fiscal 2001.

      Interest income on investment securities decreased by approximately
$550,000, or 19.1%, to $2.3 million for fiscal 2002, compared to $2.9 million
for the prior year, reflecting a decrease of $4.9 million in the average balance
of investment securities to $38.5 million for fiscal 2002 compared to $43.4
million for fiscal 2001, coupled with a 59 basis point decrease in the average
rate earned on investment securities to 6.04% from 6.63%.

      Interest income on federal funds decreased $597,000, to $426,000 for
fiscal 2002, compared to $1.0 million for the prior year. The decrease is
attributable to a 248 basis point decrease in the average rate earned on federal
funds, as well as a $4.6 million decrease in the average balance of federal
funds.

Interest Expense

      Interest expense decreased by $2.3 million, or 15.6%, to $12.0 million for
fiscal 2002, compared to $14.3 million for the prior year. The decrease in
interest expense reflects an improvement of 71 basis points in the average cost
of interest-bearing liabilities, slightly offset by a $10.5 million increase in
the average balance of interest-bearing liabilities.

      Interest expense on deposits decreased $329,000, or 3.9%, to $8.1 million
for fiscal 2002, compared to $8.5 million for the prior year. This decrease is
attributable to a 45 basis point decrease in the cost of average deposits
partially offset by a $32.2 million, or 12.2%, increase in the average balance
of interest-bearing deposits to $297.0 million for fiscal 2002, compared to
$264.8 million for fiscal 2001.


                                       41
<PAGE>

      Interest expense on borrowed money decreased by $1.9 million, or 32.7%, to
$3.9 million for fiscal 2002, compared to $5.8 million for the prior year. Funds
from deposit growth were used to pay down borrowed money. The decrease in
interest expense on borrowed money for fiscal 2002 reflects a $21.6 million
decline in the average balance of borrowed money coupled with an 82 basis points
decrease in the average cost of borrowed money.

Net Interest Income

      Net interest income before the provision for loan losses increased $2.2
million, or 15.5%, to $16.2 million for fiscal 2002 compared to $14.0 million
for the prior year. Net interest income benefited from a general interest rate
decline, a reduction in borrowed money, as well as an increase in deposits, loan
originations and average loan balances. This benefit was partially offset by
accelerated prepayments of mortgage-backed securities and the sale of lower cost
deposits in a non-strategic branch that were replaced by comparatively higher
cost certificates of deposit. The 71 basis point decrease in the cost of
interest-bearing liabilities used to fund interest-earning assets coupled with a
21 basis point decrease in the return on average interest-earning assets
contributed to a 50 basis point increase in the interest rate spread to 3.86%
for fiscal 2002, compared to 3.36% for the prior year. The net interest margin
increased to 4.05% for fiscal 2002, compared to 3.61% for fiscal 2001.

Provision for Loan Losses

      Provision for loan losses decreased by $893,000 or 49.8%, to $900,000, for
fiscal 2002, compared to $1.8 million for fiscal 2001. When determining the
provision for loan losses, management assesses the risk inherent in its loan
portfolio based on information available at such time relating to the volume and
type of lending conducted, the Bank's previous loan loss experience, the known
and inherent risks in the loan portfolio, adverse situations that may affect the
borrowers' ability to repay, the estimated value of any underlying collateral,
trends in the local and national economy and trends in the real estate market.
The provision for loan losses for fiscal 2002 represents the amount required to
maintain the allowance for loan losses at the level required by the Company's
policy. During fiscal 2002, the Bank charged-off approximately $323,000 of loans
as compared to $1.2 million for fiscal 2001. At March 31, 2002, non-performing
loans totaled $2.8 million, or 1.0% of total loans, compared to $2.5 million, or
0.9% of total loans, at March 31, 2001. At March 31, 2002, the Bank's allowance
for loan losses was $4.1 million compared to $3.6 million at March 31, 2001,
resulting in a ratio of the allowance to non-performing assets of 146.2% at
March 31, 2002, compared to 118.6% at March 31, 2001, and a ratio of allowance
for possible loan losses to total loans of 1.41% and 1.24% at March 31, 2002 and
March 31, 2001, respectively.

Non-Interest Income

      Non-interest income is composed of loan fees and service charges, gains or
losses from the sale of securities and certain other items, fee income for
banking services and miscellaneous non-interest income. Non-interest income
increased $1.6 million, or 54.2%, to $4.5 million for fiscal 2002, compared to
$2.9 million for fiscal 2001. The increase in non-interest income is primarily
due to non-recurring income of $1.4 million relating to the sale of securities
and to a lesser extent a $316,000 increase in other non-interest income,
partially offset by a $101,000 loss in connection with the sale of the Bank's
automobile loan portfolio during fiscal 2002. Excluding non-recurring income
from sales of securities, loans and deposits, total non-interest income
increased by $305,000, or 16.1%, compared to fiscal 2001.

Non-Interest Expense

      Non-interest expense decreased by $1.2 million, or 8.0%, to $14.2 million
for fiscal 2002, compared to $15.4 million for the prior fiscal year. The
decrease in non-interest expense was primarily attributable to decreases of $1.0
million in other non-interest expenses and $279,000 in net occupancy and
equipment expenses, slightly offset by an increase of $61,000 in salaries and
employee benefits. The decreases in non-interest expense were attributable in
part to cost reductions as a result of branch sales and decreases in
professional fees and FDIC deposit insurance costs.

Income Tax Expense

      Income tax expense was approximately $881,000 for fiscal 2002, an increase
from $98,000 for fiscal 2001, reflecting higher pre-tax income in fiscal 2002 as
compared to a pre-tax loss in fiscal 2001. During the fourth quarter of fiscal
year 2002, the Bank fully utilized its tax loss carryforward resulting from
prior period losses and began to accrue for federal taxes. The effective tax
rate in fiscal 2002 was 15.7% as compared to (33.7%) in fiscal 2001.

Liquidity and Capital Resources

      Carver Federal's primary sources of funds are deposits, FHLB advances, and
proceeds from principal and interest payments on loans and mortgage-backed
securities. While maturities and scheduled amortization of loans and investments
are predictable


                                       42
<PAGE>

sources of funds, deposit flow and mortgage prepayments are greatly influenced
by general interest rates, economic conditions and competition.

      Congress eliminated the statutory liquidity requirement which required
federal savings banks to maintain a minimum amount of liquid assets of between
four and ten percent, as determined by the Director of the OTS, the Bank's
primary federal regulator. The Bank is required to maintain sufficient liquidity
to ensure its safe and sound operation. As a result of the elimination of the
liquidity requirement, the Bank manages its liquidity through a Board-approved
liquidity policy. At March 31, 2003, the Bank's liquidity ratio was 1.4%. The
Bank's most liquid assets are cash and short-term investments. The level of
these assets are dependent on the Bank's operating, investing and financing
activities during any given period. At March 31, 2003 and 2002, assets
qualifying for short-term liquidity, including cash and short-term investments,
totaled $45.3 million and $50.0 million, respectively.

      The Consolidated Statements of Cash Flows present the change in cash from
operating, investing and financing activities. During fiscal 2003, cash and cash
equivalents decreased by $11.7 million. Net cash used in operating activities
was $1.0 million, representing primarily the results of operations adjusted for
depreciation and amortization and the provision for loan losses. Net cash used
in investing activities was $65.8 million, which was primarily the result of
purchases of loans and securities and originations of loans partially offset by
repayments and maturities of loans and securities. Net cash provided by
financing activities was $55.1 million, reflecting primarily net increases in
deposits and borrowed money.

Regulatory Capital Position

      The Bank must satisfy three minimum capital standards established by the
OTS. For a description of the OTS capital regulation, see "Regulation and
Supervision--Federal Banking Regulation--Capital Requirements."

      The Bank presently exceeds all capital requirements as currently
promulgated. At March 31, 2003, the Bank had tangible, core, and total
risk-based capital ratios of 7.8%, 7.8% and 14.0%, respectively.

      The following table reconciles the Bank's stockholders' equity at March
31, 2003 under accounting principles generally accepted in the United States of
America to regulatory capital requirements.

<TABLE>
<CAPTION>
                                                                                       Regulatory Capital Requirements
                                                                           -----------------------------------------------------
                                                                              GAAP       Tangible       Leverage      Risk-Based
                                                                            Capital      Capital        Capital        Capital
                                                                           --------      --------       --------      ----------
                                                                                                  (In thousands)
<S>                                                                        <C>           <C>            <C>            <C>
      Stockholders' Equity at March 31, 2003 (1)                           $ 40,653      $ 40,653       $ 40,653       $ 40,653

      Add:
         General valuation allowances                                                          --             --          3,885
      Deduct:
         Unrealized loss (gain) on securities available-for-sale, net                        (750)          (750)          (750)
         Excess of cost over net assets acquired                                             (178)          (178)          (178)
                                                                                         --------       --------       --------
      Regulatory Capital                                                                   39,725         39,725         43,610
      Minimum Capital requirement                                                           7,628         20,341         24,844
                                                                                         --------       --------       --------
      Regulatory Capital Excess                                                          $ 32,097       $ 19,384       $ 18,766
                                                                                         ========       ========       ========
</TABLE>

      (1)   Reflects Bank only.

Impact of Inflation and Changing Prices

      The financial statements and accompanying notes appearing elsewhere herein
have been prepared in accordance with generally accepted accounting principles,
which require the measurement of financial position and operating results in
terms of historical dollars without considering the changes in the relative
purchasing power of money over time due to inflation. The impact of inflation is
reflected in the increased cost of Carver Federal's operations. Unlike most
industrial companies, nearly all the assets and liabilities of the Bank are
monetary in nature. As a result, interest rates have a greater impact on Carver
Federal's performance than do the effects of the general level of inflation.
Interest rates do not necessarily move in the same direction or to the same
extent as the prices of goods and services.


                                       43
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

      The information required by this item appears under the caption
"Discussion of Market Risk--Interest Rate Sensitivity Analysis" in Item 7,
incorporated herein by reference.


                                       44
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                             LETTERHEAD OF KPMG LLP

                          Independent Auditor's Report

To the Board of Directors and Stockholders
Carver Bancorp, Inc.:

      We have audited the accompanying consolidated statements of financial
condition of Carver Bancorp, Inc. and subsidiaries (the "Company") as of March
31, 2003 and 2002 and the related consolidated statements of operations, changes
in stockholders' equity and comprehensive income, and cash flows for each of the
years in the three-year period ended March 31, 2003. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

      We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and the significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

      In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of March 31, 2003 and 2002, and the results of its operations and its cash
flows for each of the years in the three-year period ended March 31, 2003, in
conformity with accounting principles generally accepted in the United States of
America.


KPMG  LLP
New York, New York
June 24, 2003


                                       45
<PAGE>

                               MANAGEMENT'S REPORT

      Management is responsible for the preparation and integrity of the
consolidated financial statements and other information presented in this annual
report. The consolidated financial statements have been prepared in conformity
with the generally accepted accounting principles and reflect management's
judgments and estimates with respect to certain events and transactions.

      Management is responsible for maintaining a system of internal control.
The purpose of the system is to provide reasonable assurance that transactions
are recorded in accordance with management's authorization; that assets are
safeguarded against loss or unauthorized use; and that the underlying financial
records support the preparation of financial statements. The system includes the
communication of written policies and procedures, selection of qualified
personnel, appropriate segregation of responsibilities and the ongoing internal
audit function.

      The Board of Directors meets periodically with Company management, the
internal auditor, and the independent auditors, KPMG LLP, to review matters
relative to the quality of financial reporting, internal controls, and the
nature, extent and results of audit efforts.

      The independent auditors conduct an annual audit to enable them to express
an opinion on the Company's consolidated financial statements. In connection
with the audit, the independent auditors consider the Company's internal
controls to the extent they consider necessary to determine the nature, timing
and extent of their audit procedures.


/s/ Deborah C. Wright                           /s/ William C. Gray
-------------------------------------           --------------------------------
Deborah C. Wright                               William C. Gray
President and Chief Executive Officer           Senior Vice President and
                                                Chief Financial Officer


                                       46
<PAGE>

                      CARVER BANCORP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                                                                   March 31,
                                                                                                            ----------------------
                                                                                                               2003         2002
                                                                                                            ---------    ---------
<S>                                                                                                         <C>          <C>
ASSETS
    Cash and cash equivalents:
    Cash and due from banks                                                                                 $  17,660    $  13,751
    Federal Funds sold                                                                                          5,500       21,100
                                                                                                            ---------    ---------
         Total cash and cash equivalents                                                                       23,160       34,851
                                                                                                            ---------    ---------
Securities:
     Available-for-sale, at fair value (including pledged as collateral of
       $124,954 at March 31, 2003 and $76,720 at March 31, 2002)                                              129,055       89,821
     Held-to-maturity, at amortized cost (including pledged as collateral of $35,138 at March 31, 2003
        and $15,549 at March 31, 2002; fair value of $37,543 at March 31, 2003 and $15,716
        at March 31, 2002)                                                                                     36,530       15,643
                                                                                                            ---------    ---------
          Total securities                                                                                    165,585      105,464
                                                                                                            ---------    ---------
Loans receivable:
     Real estate mortgage loans                                                                               294,710      291,510
     Consumer and commercial business loans                                                                     2,186        2,328
     Allowance for loan losses                                                                                 (4,158)      (4,128)
                                                                                                            ---------    ---------
          Total loans receivable, net                                                                         292,738      289,710
                                                                                                            ---------    ---------
Office properties and equipment, net                                                                           10,193       10,251
Federal Home Loan Bank of New York stock, at cost                                                               5,440        3,763
Accrued interest receivable                                                                                     3,346        2,804
Identifiable intangible asset, net                                                                                178          391
Other assets                                                                                                    9,205        3,072
                                                                                                            ---------    ---------
          Total assets                                                                                      $ 509,845    $ 450,306
                                                                                                            =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
     Deposits                                                                                               $ 347,164    $ 324,954
     Advances from the Federal Home Loan Bank of New York and other borrowed money                            108,996       75,651
     Other liabilities                                                                                         12,612       12,959
                                                                                                            ---------    ---------
          Total liabilities                                                                                   468,772      413,564
                                                                                                            ---------    ---------
Stockholders' equity:
     Preferred stock (par value $0.01 per share; 1,000,000
        shares authorized; 100,000 issued and outstanding)                                                          1            1
     Common stock (par value $0.01 per share: 5,000,000 shares authorized; 2,316,358 shares issued;
       2,296,960 and 2,300,896 outstanding at March 31, 2003  and March 31, 2002, respectively)                    23           23
     Additional paid-in capital                                                                                23,781       23,756
     Retained earnings                                                                                         16,712       13,194
     Unallocated common stock held by employee stock ownership plan ("ESOP")                                      --         (152)
     Unamortized awards of common stock under  management recognition plan ("MRP")                                 (4)         (58)
     Treasury stock, at cost (19,398 shares at March 31, 2003 and 15,489 at March 31, 2002)                      (190)        (138)
     Accumulated other comprehensive income                                                                       750          116
                                                                                                            ---------    ---------
          Total stockholders' equity                                                                           41,073       36,742
                                                                                                            ---------    ---------
     Total liabilities and stockholders' equity                                                             $ 509,845    $ 450,306
                                                                                                            =========    =========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       47
<PAGE>

                    CARVER BANCORP, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                                  For the Year Ended March 31,
                                                              -------------------------------------
                                                                2003          2002           2001
                                                              --------      --------       --------
<S>                                                           <C>           <C>            <C>
Interest income:
   Loans                                                      $ 21,182      $ 22,586       $ 21,398
   Mortgage-backed securities                                    4,282         2,918          3,012
   Investment securities                                         1,614         2,324          2,874
   Federal funds sold                                              300           426          1,023
                                                              --------      --------       --------
     Total interest income                                      27,378        28,254         28,307
                                                              --------      --------       --------

Interest expense:
   Deposits                                                      5,760         8,127          8,456
   Advances and other borrowed money                             3,223         3,920          5,822
                                                              --------      --------       --------
     Total interest expense                                      8,983        12,047         14,278
                                                              --------      --------       --------

     Net interest income                                        18,395        16,207         14,029

Provision for loan losses                                           --           900          1,793
                                                              --------      --------       --------
     Net interest income after provision for loan losses        18,395        15,307         12,236
                                                              --------      --------       --------

Non-interest income:
   Depository fees and charges                                   1,813         1,497          1,342
   Loan fees and service charges                                 1,341           686            481
   Gain on sale of investment securities                            --         1,399             --
   Income from sale of branches                                     --           987          1,013
   Loss from sale of loans                                          --          (101)            --
   Other                                                             7            17             72
                                                              --------      --------       --------
      Total non-interest income                                  3,161         4,485          2,908
                                                              --------      --------       --------

Non-interest expense:
   Compensation and benefits                                     6,774         6,505          6,230
   Net occupancy expense                                         1,261         1,144          1,401
   Equipment                                                     1,610         1,420          1,294
   Other                                                         5,047         5,129          6,510
                                                              --------      --------       --------
      Total non-interest expense                                14,692        14,198         15,435
                                                              --------      --------       --------

      Income (loss) before income taxes                          6,864         5,594           (291)
Income tax expense                                               3,033           881             98
                                                              --------      --------       --------
      Net income (loss)                                       $  3,831      $  4,713       $   (389)
                                                              ========      ========       ========

Dividends applicable to preferred stock                       $    197      $    197       $    197

      Net income (loss) available to common stockholders      $  3,634      $  4,516       $   (586)
                                                              ========      ========       ========

Earnings (loss) per common share:
       Basic                                                  $   1.59      $   1.98       $  (0.26)
                                                              ========      ========       ========
       Diluted                                                $   1.52      $   1.89       $  (0.26)
                                                              ========      ========       ========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       48
<PAGE>
                      CARVER BANCORP, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                 (In thousands)

<TABLE>
<CAPTION>

                                                           ADDITIONAL
                                  PREFERRED      COMMON     PAID-IN        RETAINED      TREASURY
                                    STOCK        STOCK      CAPITAL        EARNINGS       STOCK
                                  ---------      ------    ----------      --------      --------
<S>                                <C>           <C>        <C>            <C>            <C>
Balance - March 31, 2000           $     1       $  23      $ 23,789       $  9,480       $    --
Comprehensive (loss):
Net loss                                --          --            --           (389)           --
                                   -------       -----      --------       --------       -------
Comprehensive (loss), net of
taxes:
Dividends paid                          --          --            --           (298)           --
Purchase of treasury stock              --          --            --             --           (61)
Allocation of ESOP Stock                --          --           (20)            --            --
Purchase of shares for MRP              --          --            --             --            --
                                   -------       -----      --------       --------       -------
Balance - March 31, 2001                 1          23        23,769          8,793           (61)

Comprehensive income:
Net income                              --          --            --          4,713            --
Change in net unrealized gain
on available-for-sale
securities,
net of taxes                            --          --            --             --            --
                                   -------       -----      --------       --------       -------

Comprehensive income, net of
taxes:
Dividends paid                          --          --            --           (312)           --
Purchase of treasury stock              --          --            (5)            --           (77)
Allocation of ESOP Stock                --          --            (8)            --            --
Purchase of shares for MRP              --          --            --             --            --
                                   -------       -----      --------       --------       -------
Balance - March 31, 2002                 1          23        23,756         13,194          (138)

Comprehensive income:
Net income                              --          --            --          3,831            --
Change in net unrealized
gain on available-for-sale
securities, net of taxes                --          --            --             --            --
                                   -------       -----      --------       --------       -------
Comprehensive income, net of
taxes:
Dividends paid                          --          --            --           (313)           --
Treasury stock activity                 --          --             5             --           (52)
Allocation of ESOP Stock                --          --            20             --            --
Purchase of shares for MRP              --          --            --             --            --
                                   -------       -----      --------       --------       -------
Balance--March 31, 2003            $     1       $  23      $ 23,781       $ 16,712       $  (190)
                                   =======       =====      ========       ========       =======

<CAPTION>
                                    ACCUMULATED         COMMON          COMMON
                                       OTHER            STOCK            STOCK      TOTAL STOCK-
                                   COMPREHENSIVE     ACQUIRED BY      ACQUIRED BY     HOLDERS'
                                       INCOME            ESOP             MRP         EQUITY
                                   -------------     -----------      -----------   ------------
<S>                                   <C>              <C>              <C>          <C>
Balance - March 31, 2000              $    --          $  (652)         $   --       $ 32,641
Comprehensive (loss):
Net loss                                   --               --              --           (389)
                                      -------          -------          ------       --------
Comprehensive (loss), net of
taxes:                                                                                   (389)
Dividends paid                             --               --              --           (298)
Purchase of treasury stock                 --               --              --            (61)
Allocation of ESOP Stock                   --              318              --            298
Purchase of shares for MRP                 --               --             (95)           (95)
                                      -------          -------          ------       --------
Balance - March 31, 2001                   --             (334)            (95)        32,096

Comprehensive income:
Net income                                 --               --              --          4,713
Change in net unrealized gain
on available-for-sale
securities,
net of taxes                              116               --              --            116
                                      -------          -------          ------       --------

Comprehensive income , net of
taxes:                                                                                  4,829
Dividends paid                             --               --              --           (312)
Purchase of treasury stock                 --               --              --            (82)
Allocation of ESOP Stock                   --              182              --            174
Purchase of shares for MRP                 --               --              37             37
                                      -------          -------          ------       --------
Balance - March 31, 2002                  116             (152)            (58)        36,742

Comprehensive income:
Net income                                 --               --              --          3,831
Change in net unrealized
gainon available-for-sale
securities, net of taxes                  634               --              --            634
                                      -------          -------          ------       --------
Comprehensive income, net of
taxes:                                                                                  4,465
Dividends paid                             --               --              --           (313)
Treasury stock activity                    --               --              --            (47)
Allocation of ESOP Stock                   --              152              --            172
Purchase of shares for MRP                 --               --              54             54
                                      -------          -------          ------       --------
Balance--March 31, 2003               $   750          $    --          $   (4)      $ 41,073
                                      =======          =======          ======       ========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       49
<PAGE>

                     CARVER BANCORP, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                          Year Ended March 31,
                                                                                 ----------------------------------------
                                                                                    2003           2002            2001
                                                                                 --------       ---------       ---------
<S>                                                                              <C>            <C>             <C>
Cash flows from operating activities:
  Net income (loss)                                                              $  3,831       $   4,713       $    (389)
  Adjustments to reconcile net income (loss) to net cash (used in) provided
    by operating activities:
    Provision for loan losses                                                          --             900           1,793
    ESOP and MRP expense                                                              206             206             203
    Depreciation and amortization expense                                           1,224           1,155           1,142
    Amortization of intangibles                                                       213             213             214
    Other accretion and amortization                                                  481             625            (719)
    Loss from sale of loans                                                            --             101              --
    Gain on sale of branches                                                           --            (987)         (1,013)
    Gain on sale of foreclosed real estate                                             --             (77)            (24)
    Impairment of foreclosed real estate                                               --              --              90
    Net gain on sales of available-for-sale securities                                 --          (1,399)             --
    Charge-off of branch improvements and related items, net                           --              --             222
    Changes in assets and liabilities:
      (Increase) decrease in accrued interest receivable                             (542)            (77)            112
      (Increase) decrease in other assets                                          (6,112)         (1,451)            549
      (Decrease) increase in other liabilities                                       (481)          6,185             802
      Increase (decrease) in accrued interest payable                                 134            (606)           (381)
                                                                                 --------       ---------       ---------
         Net cash (used in) provided by operating activities                       (1,046)          9,501           2,601
                                                                                 --------       ---------       ---------
Cash flows from investing activities:
  Purchases of securities:
    Available-for-sale                                                            (91,112)       (134,721)       (166,227)
    Held-to-maturity                                                               (4,145)             --              --
Proceeds from principal payments, maturities and calls of securities:
    Available-for-sale                                                             28,705          79,233         172,254
    Held-to-maturity                                                                6,578           6,357          11,077
Proceeds from sales of available-for-sale securities                                   --          32,676              --
Disbursements for loan originations                                               (59,595)        (63,190)        (30,180)
Loans purchased from third parties                                                (42,260)        (45,881)        (31,265)
Principal collections on loans                                                     96,432         100,306          46,207
(Purchase) redemption of FHLB stock                                                (1,677)          1,992              --
Proceeds from loans sold                                                            2,453           1,260             160
Proceeds from sale of other real estate owned                                          --             553             380
Additions to premises and equipment                                                (1,166)         (1,172)           (610)
                                                                                 --------       ---------       ---------
         Net cash (used in) provided by investing activities                      (65,787)        (22,587)          1,796
                                                                                 --------       ---------       ---------
Cash flows from financing activities:
  Net increase in deposits                                                         22,210          61,900          19,960
  Repayment of securities repurchase agreements                                        --          (4,930)        (26,407)
  Net Proceeds from (repayment of) FHLB advances and other borrowed money          33,345         (25,019)         33,429
  Common stock repurchased                                                           (100)            (77)            (61)
  Cash paid to fund sale of deposits                                                   --         (15,383)        (21,464)
  Dividends paid on Common and Preferred Stocks                                      (313)           (312)           (298)
                                                                                 --------       ---------       ---------
         Net cash provided by financing activities                                 55,142          16,179           5,159
                                                                                 --------       ---------       ---------
Net (decrease) increase in cash and cash equivalents                              (11,691)          3,093           9,556
Cash and cash equivalents at beginning of the period                               34,851          31,758          22,202
                                                                                 --------       ---------       ---------
Cash and cash equivalents at end of the period                                   $ 23,160       $  34,851       $  31,758
                                                                                 ========       =========       =========

Supplemental information:
Noncash Transfers-
  Securities transferred from available-for-sale to held-to-maturity             $ 22,811       $      --       $      --
  Securities transferred from held-to-maturity to available-for-sale                   --          45,700              --
  Change in unrealized gain on valuation of
      investments available-for-sale, net of taxes                                    634             116              --

Cash paid for-
  Interest paid                                                                  $  9,616       $  12,685       $  13,897
  Income taxes paid                                                                 3,106             473             238
                                                                                 ========       =========       =========
</TABLE>

See accompanying notes to consolidated financial statements


                                       50
<PAGE>

                      CARVER BANCORP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of operations

      Carver Bancorp, Inc. ("Carver" or the "Holding Company"), was incorporated
in May 1996 and its principal wholly owned subsidiary is Carver Federal Savings
Bank (the "Bank" or "Carver Federal"). Carver Asset Corporation, CFSB Realty
Corp. and CFSB Credit Corp. are wholly owned subsidiaries of the Bank. CFSB
Credit Corp. is currently inactive. The Bank was chartered in 1948 and began
operations in 1949 as Carver Federal Savings and Loan Association, a federally
chartered mutual savings and loan association. The Bank converted to a federal
savings bank in 1986 and changed its name at that time. On October 24, 1994, the
Bank converted from mutual to stock form and issued 2,314,275 shares of its
common stock, par value $0.01 per share. On October 17, 1996, the Bank completed
its reorganization into a holding company structure (the "Reorganization") and
became a wholly owned subsidiary of the Holding Company. In connection with the
Reorganization, each share of the Bank's outstanding common stock was exchanged
for one share of the Holding Company's common stock, par value $0.01 per share.
See Note 11.

      Carver Federal's principal business consists of attracting deposit
accounts through its branch offices and investing those funds in mortgage loans
and other investments permitted by federal savings banks. The Bank has five
branches located throughout the City of New York that primarily serve the
communities in which they operate.

Basis of consolidated financial statement presentation

      The consolidated financial statements include the accounts of the Holding
Company, the Bank, the Bank's wholly owned subsidiaries, Carver Asset
Corporation, CFSB Realty Corp. and CFSB Credit Corp., and Alhambra Holding
Corp., a subsidiary of the Holding Company which is inactive. All significant
intercompany accounts and transactions have been eliminated in consolidation.

      The consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America.
In preparing the consolidated financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the consolidated statement of financial condition
and revenues and expenses for the period then ended. Estimates that are
particularly susceptible to significant changes in the near-term relate to
prepayment assumptions on mortgage-backed securities, the determination of the
allowance for loan losses and the valuation of real estate owned. Actual results
could differ significantly from those estimates.

      Management believes that prepayment assumptions on mortgage-backed
securities are appropriate, the allowance for loan losses is adequate and real
estate owned is properly valued. While management uses available information to
recognize losses on loans and real estate owned, future additions to the
allowance for loan losses or future write downs of real estate owned may be
necessary based on changes in economic conditions in the areas where Carver had
extended mortgages and other credit instruments.

      In addition, various regulatory agencies, as an integral part of their
examination process, periodically review Carver's allowance for loan losses and
real estate owned valuations. Such agencies may require Carver to recognize
additions to the allowance for loan losses or additional write downs of real
estate owned based on their judgments about information available to them at the
time of their examination.

Cash and cash equivalents

      Cash and cash equivalents include cash and amounts due from depository
institutions and federal funds sold. Generally, federal funds sold are sold for
one-day periods.

Securities

      The Bank does not have trading securities, but does differentiate between
held-to-maturity securities and available-for-sale securities. When purchased,
securities are classified in either the securities held-to-maturity portfolio or
the securities available-for-sale portfolio. Securities can be classified as
held-to-maturity and carried at amortized cost only if the Bank has a positive
intent and ability to hold those securities to maturity. If not classified as
held-to-maturity, such securities are classified as securities
available-for-sale. Available-for-sale securities are reported at fair value.
Unrealized holding gains or losses for securities available-for-sale are to be
excluded from earnings and reported net of deferred income taxes as a separate
component of accumulated other comprehensive income, a component of
Stockholders' Equity.


                                       51
<PAGE>

      Securities held-to-maturity are carried at cost, adjusted for the
amortization of premiums and the accretion of discounts using the level-yield
method over the remaining period until maturity.

      Gains or losses on sales of securities of all classifications are
recognized based on the specific identification method.

Loans receivable

      Loans receivable are carried at unpaid principal balances plus unamortized
premiums, less the allowance for loan losses and deferred loan fees and
discounts.

      The Bank defers loan origination fees and certain direct loan origination
costs and accretes such amounts as an adjustment of yield over the contractual
lives of the related loans using methodologies which approximate the interest
method. Premiums and discounts on loans purchased are amortized or accreted as
an adjustment of yield over the contractual lives of the related loans using
methodologies which approximate the interest method.

      Loans are generally placed on non-accrual status when they are past due 90
days or more as to contractual obligations or when other circumstances indicate
that collection is questionable. When a loan is placed on non-accrual status,
any interest accrued but not received is reversed against interest income.
Payments received on a non-accrual loan are either applied to the outstanding
principal balance or recorded as interest income, depending on an assessment of
the ability to collect the loan. A non-accrual loan is restored to accrual
status when principal and interest payments become current and its future
collectibility is reasonably assured.

Allowance for loan losses

      An allowance for loan losses is maintained at a level considered adequate
to provide for potential loan losses. Management is responsible for determining
the adequacy of the allowance for loan losses and the periodic provisioning for
estimated losses included in the consolidated financial statements. The
evaluation process is undertaken on a quarterly basis, but may increase in
frequency should conditions arise that would require management's prompt
attention, such as business combinations and opportunities to dispose of
non-performing and marginally performing loans by bulk sale or any development
which may indicate an adverse trend.

      The methodology employed for assessing the appropriateness of the
allowance consists of the following criteria:

      o     Establishment of reserve amounts for all specifically identified
            criticized loans, that have been designated as requiring attention
            by management's internal loan review program, bank regulatory
            examinations or the external auditors.

      o     An average loss factor is applied to smaller balance homogenous
            types of loans not subject to specific review. These loans include
            residential 1-4 family, multifamily, nonresidential and construction
            properties, which also includes consumer and business loans.

      o     An allocation to the remaining loans giving effect to historical
            loss experience over several years and linked to cyclical trends.

      Recognition is also given to the changed risk profile brought about by
business combinations, customer knowledge, the results of ongoing credit quality
monitoring processes and the cyclical nature of economic and business
conditions. An important consideration in applying these methodologies is the
concentration of real estate related loans located in the New York metropolitan
area.

      The initial allocation or specific-allowance methodology commences with
loan officers and underwriters grading the quality of their loans on an
eight-category risk classification scale. Loans identified from this process as
below investment grade are referred to the Internal Asset Quality Review
Committee for further analysis and identification of those factors that may
ultimately affect the full recovery or collectibility of principal and/or
interest. These loans are subject to continuous review and monitoring while they
remain in the criticized category. Additionally, the Internal Asset Quality
Review Committee is responsible for performing periodic reviews of the loan
portfolio that are independent from the identification process employed by loan
officers and underwriters. Gradings that fall into criticized categories are
further evaluated and reserve amounts are established for each loan.

      The second allocation or loss factor approach to common or homogeneous
loans is made by applying the average loss factor to the outstanding balances in
each loan category.

      The final allocation of the allowance is made by applying several years of
loss experience to categories of loans. It gives recognition to the loss
experience of acquired businesses, business cycle changes and the real estate
components of loans. Since many loans depend upon the sufficiency of collateral,
any adverse trend in the real estate markets could seriously affect underlying
values available to protect against loss.


                                       52
<PAGE>

      Other evidence used to support the amount of the allowance and its
components are as follows:

      o     Regulatory examinations

      o     Amount and trend of criticized loans

      o     Actual losses

      o     Peer comparisons with other financial institutions

      o     Economic data associated with the real estate market in the
            Company's market area

      o     Opportunities to dispose of marginally performing loans for cash
            consideration

      Carver Federal maintains a loan review system, which allows for a periodic
review of its loan portfolio and the early identification of potential problem
loans. Such system takes into consideration, among other things, delinquency
status, size of loans, type of collateral and financial condition of the
borrowers. Loan loss allowances are established for problem loans based on a
review of such information and/or appraisals of the underlying collateral. On
the remainder of its loan portfolio, loan loss allowances are based upon a
combination of factors including, but not limited to, actual loan loss
experience, composition of loan portfolio, current economic conditions and
management's judgment. Although management believes that adequate loan loss
allowances have been established, actual losses are dependent upon future events
and, as such, further additions to the level of the loan loss allowance may be
necessary in the future.

      A loan is considered to be impaired, as defined by Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment
of a Loan" ("SFAS 114"), when it is probable that Carver Federal will be unable
to collect all principal and interest amounts due according to the contractual
terms of the loan agreement. Carver Federal tests loans covered under SFAS 114
for impairment if they are on nonaccrual status or have been restructured.
Consumer credit nonaccrual loans are not tested for impairment because they are
included in large groups of smaller-balance homogeneous loans that, by
definition along with leases, are excluded from the scope of SFAS 114. Impaired
loans are required to be measured based upon the present value of expected
future cash flows, discounted at the loan's initial effective interest rate, or
at the loan's market price or fair value of the collateral if the loan is
collateral dependent. If the loan valuation is less than the recorded value of
the loan, an impairment reserve must be established for the difference. The
impairment reserve is established by either an allocation of the reserve for
credit losses or by a provision for credit losses, depending on various
circumstances. Impairment reserves are not needed when credit losses have been
recorded so that the recorded investment in an impaired loan is less than the
loan valuation.

Concentration of risk

      The Bank's principal lending activities are concentrated in loans secured
by real estate, a substantial portion of which is located in the State of New
York. Accordingly, the ultimate collectibility of a substantial portion of the
Company's loan portfolio is susceptible to changes in New York's market
conditions.

Premises and equipment

      Premises and equipment are comprised of land, at cost, and buildings,
building improvements, furnishings and equipment and leasehold improvements, at
cost, less accumulated depreciation and amortization. Depreciation and
amortization charges are computed using the straight-line method over the
following estimated useful lives:

<TABLE>
<S>                                        <C>
      Buildings and improvements           10 to 40 years
      Furnishings and equipment            3 to 10 years
      Leasehold improvements               The lesser of useful life or remaining term of lease
</TABLE>

      Significant renewals and betterments are charged to the property and
equipment account. Maintenance and repairs are charged to expense in the year
incurred.

Real estate owned

      Real estate acquired by foreclosure or deed in lieu of foreclosure is
recorded at the fair value at the date of acquisition and thereafter carried at
the lower of cost or fair value less estimated selling costs. The fair value of
such assets is determined based primarily upon independent appraisals and other
relevant factors. The amounts ultimately recoverable from real estate owned
could differ from the net carrying value of these properties because of economic
conditions.

      Costs incurred to improve properties or get them ready for sale are
capitalized. Revenues and expenses related to the holding and operating of
properties are recognized in operations as earned or incurred. Gains or losses
on sale of properties are recognized as incurred.


                                       53
<PAGE>

Identifiable Intangible

      Carver adopted Statement of Financial Accounting Standards No.142 ("SFAS
No. 142"), "Goodwill and Other Intangible Assets" on January 1, 2002. SFAS 142
requires that goodwill and intangible assets with indefinite useful lives no
longer be amortized, but instead tested for impairment at least annually.

      Identifiable intangible assets relate primarily to core deposit premiums,
resulting from the valuation of core deposit intangibles acquired in the
purchase of two branch offices. These identifiable intangible assets are
amortized using the straight line method over periods not exceeding the
estimated average remaining life of the existing customer deposits acquired.
Amortization periods range from 5 to 15 years. Amortization periods for
intangible assets are monitored to determine if events and circumstances require
such periods to be reduced.

Income taxes

      Carver accounts for income taxes using the asset and liability method.
Temporary differences between the basis of assets and liabilities for financial
reporting and tax purposes are measured as of the balance sheet date. Deferred
tax liabilities or recognizable deferred tax assets are calculated on such
differences, using current statutory rates, which result in future taxable or
deductible amounts. The effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the enactment date.

Impairment

      The company periodically evaluates long-lived assets, certain
indentifiable intangibles, deferred cost and goodwill for indication of
impairment in value. There has been no impairment for the past three years. When
required, asset impairment will be recorded as an expense in the current period.

Earnings (loss) per common share

      Basic earnings per share ("EPS") is computed by dividing income available
to common stockholders by the weighted-average number of common shares
outstanding. Diluted EPS includes any additional common shares as if all
potentially dilutive common shares were issued (e.g. convertible preferred
stock). For the purpose of these calculations, unreleased shares of the Carver
Federal Savings Bank Employee Stock Ownership Plan ("ESOP") are not considered
to be outstanding.

Treasury Stock

      Treasury stock is recorded at cost and is presented as a reduction of
stockholders' equity.

Pension Plans

      In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits" ("SFAS 132"). SFAS 132 revises
employers' disclosures about pension and other postretirement benefit plans. It
does not change the measurement or recognition of those plans. Carver has made
the required disclosures in the accompanying Notes to the Consolidated Financial
Statements.

Stock-Based Compensation Plans

      Compensation expense is recognized for the Bank's ESOP equal to the fair
value of shares committed to be released for allocation to participant accounts.
Any difference between the fair value at that time and the ESOP's original
acquisition cost is charged or credited to stockholders' equity (additional
paid-in capital). The cost of unallocated ESOP shares (shares not yet committed
to be released) is reflected as a reduction of stockholders' equity.

      The Holding Company accounts for its stock option plan ("Stock Option
Plan") in accordance with Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees. Accordingly, compensation expense is
recognized only if the exercise price of the option is less than the fair value
of the underlying stock at the grant date. SFAS 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), encourages entities to recognize the fair value of
all stock-based awards (measured on the grant date) as compensation expense over
the vesting period. Alternatively, SFAS 123 allows entities to apply the
provisions of APB Opinion No. 25 and provide pro forma disclosures of net income
and earnings per share as if the fair-value-based method defined in SFAS 123 had
been applied. The Holding Company has elected to apply the provisions of APB
Opinion No. 25 and provide these pro forma disclosures.


                                       54
<PAGE>

      Carver applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations in accounting for our
stock-based Plan under which there is no charge to earnings for stock option
awards and the dilutive effect of outstanding options is reflected as additional
share dilution in the computation of earnings per share.

      Alternatively, Carver could have accounted for its Stock Option Plan under
SFAS 123, under which compensation cost for stock option awards would be
calculated and recognized over the service period (generally equal to the
vesting period). Had Carver applied SFAS 123 for its Stock Option Plan, net
income and earnings per common share would have been to the pro forma amounts
indicated below for the years ended March 31:

<TABLE>
<CAPTION>
                                                                        2003             2002             2001
                                                                     ----------       ----------       ----------
                                                                     (Dollars in thousands, except per share data)
<S>                                                                  <C>              <C>              <C>
      Net Gain (loss) available to common shareholders:
          As reported                                                $    3,634       $    4,516            ($586)
                Total stock-based employee compensation expense
                determined under fair value based methods for
                all awards, net of related tax effects                      (88)            (102)            (173)
                                                                     ----------       ----------       ----------
          Pro forma                                                  $    3,546       $    4,414       $     (759)
                                                                     ==========       ==========       ==========

      Basic gain (loss) per share:
          As reported                                                $     1.59       $     1.98           ($0.26)
          Pro forma                                                        1.55             1.94            (0.34)

      Diluted gain (loss) per share:
          As reported                                                $     1.52       $     1.89           ($0.26)
          Pro forma                                                        1.48             1.85            (0.34)
</TABLE>

      The fair value of the option grants was estimated on the date of the grant
using the Black-Scholes option pricing model applying the following weighted
average assumptions: risk-free interest rates of 5.50%, 5.50% 5.50% 5.00% 4.50 %
and 2.50%, for the relevant years 1997, 1999, 2000, 2001, 2002 and 2003,
respectively; volatility of 30% for each of the years; expected dividend yield
was calculated using annual dividends of $0.05 per share for 1997, 1999, 2001
and 2002,respectively, and $0.20 for 2003; and an expected life of five years
for employee option grants and seven years for directors option grants.

      The Holding Company's management recognition and retention plan ("MRP") is
also accounted for in accordance with Accounting Principles Board Opinion No.
25. The fair value of the shares awarded, measured at the grant date, is
recognized as unearned compensation (a deduction from stockholders' equity) and
amortized to compensation expense as the shares become vested. When MRP shares
become vested, the Company records a credit to additional paid-in capital for
tax benefits attributable to any MRP deductions for tax purposes in excess of
the grant-date fair value charged to expense for financial reporting purposes.

Reclassifications

      Certain amounts in the consolidated financial statements presented for
prior periods have been reclassified to conform with the current year
presentation.


                                       55
<PAGE>

NOTE 2.    SECURITIES

      The following is a summary of securities at March 31, 2003:

<TABLE>
<CAPTION>
                                                                   Gross Unrealized
                                                                ----------------------
                                                  Carrying                                  Estimated
                                                    Value         Gains        Losses       Fair Value
                                                  --------      --------      --------      ----------
                                                                (Dollars in thousands)
<S>                                               <C>           <C>           <C>            <C>
Available-for-Sale:
Mortgage-backed securities:
  Pass-through certificates:
    Government National Mortgage Association      $ 47,066      $    184      $   (130)      $ 47,120
    Federal Home Loan Mortgage Corporation          19,614            90           (11)        19,693
    Federal National Mortgage Association           23,286           216           (32)        23,470
                                                  --------      --------      --------       --------
      Total mortgage-backed securities              89,966           490          (173)        90,283
U.S. Government Agency Securities                   38,187           585            --         38,772
                                                  --------      --------      --------       --------
      Total available-for-sale                     128,153         1,075          (173)       129,055
                                                  --------      --------      --------       --------

Held-to-Maturity:
Mortgage-backed securities:
  Pass-through certificates:
    Government National Mortgage Association         2,473           157            --          2,630
    Federal Home Loan Mortgage Corporation          27,482           682            --         28,164
    Federal National Mortgage Association            6,203           177            --          6,380
    Small Business Administration                      372            --            (3)           369
                                                  --------      --------      --------       --------
      Total mortgage-backed securities              36,530         1,016            (3)        37,543
                                                  --------      --------      --------       --------
      Total held-to-maturity                        36,530         1,016            (3)        37,543
                                                  --------      --------      --------       --------
      Total securities                            $164,683      $  2,091      $   (176)      $166,598
                                                  ========      ========      ========       ========
</TABLE>

      The following is a summary of securities at March 31, 2002:

<TABLE>
<CAPTION>
                                                                    Gross Unrealized
                                                                ----------------------
                                                  Carrying                                 Estimated
                                                    Value         Gains        Losses      Fair Value
                                                  --------      --------      --------     ----------
                                                                    (In thousands)
<S>                                               <C>           <C>           <C>            <C>
Available-for-Sale:
Mortgage-backed securities:
  Pass-through certificates:
    Government National Mortgage Association      $ 10,531      $     55      $     (2)      $ 10,584
    Federal Home Loan Mortgage Corporation          27,840           416            (7)        28,249
    Federal National Mortgage Association           11,435            88           (72)        11,451
  Collateralized Mortgage Obligations                  136            --            --            136
                                                  --------      --------      --------       --------
      Total mortgage-backed securities              49,942           559           (81)        50,420
U.S. Government Agency Securities                   39,663             1          (263)        39,401
                                                  --------      --------      --------       --------
      Total available-for-sale                      89,605           560          (344)        89,821
                                                  --------      --------      --------       --------

Held-to-Maturity:
Mortgage-backed securities:
  Pass-through certificates:
    Government National Mortgage Association         3,448            24            --          3,472
    Federal Home Loan Mortgage Corporation           6,149            23           (53)         6,119
    Federal National Mortgage Association            5,607            74            (2)         5,679
    Small Business Administration                      439             7            --            446
                                                  --------      --------      --------       --------
      Total mortgage-backed securities              15,643           128           (55)        15,716
                                                  --------      --------      --------       --------
      Total held-to-maturity                        15,643           128           (55)        15,716
                                                  --------      --------      --------       --------
      Total securities                            $105,248      $    688      $   (399)      $105,537
                                                  ========      ========      ========       ========
</TABLE>


                                       56
<PAGE>

      The net unrealized gain on available-for-sale securities was $902,000
($750,000 after taxes) at March 31, 2003 as compared to $216,000 ($116,000 after
taxes) at March 31, 2002. On November 30, 2002 the Bank transferred $22.8
million of mortgage-backed securities from available-for-sale to
held-to-maturity as a result of management's intention to hold these securities
in portfolio until maturity. A related unrealized gain of $464,000 as of March
31, 2003 continues to be reported as a separate component of stockholders'
equity and is amortized over the remaining lives of the securities as an
adjustment to yield. Changes in unrealized holding gains and losses resulted in
an after-tax increase in stockholders' equity of $634,000. These gains and
losses will continue to fluctuate based on changes in the portfolio and market
conditions.

      Sales of available-for-sale securities resulted in gross realized gains
during the fiscal year ended March 31, 2002 ("fiscal 2002") of $1.4 million.
There were no sales of securities in the fiscal years ended March 31, 2003
("fiscal 2003") and 2001 ("fiscal 2001").

      The following is a summary of the carrying value (amortized cost) and fair
value of securities at March 31, 2003, by remaining period to contractual
maturity (ignoring earlier call dates, if any). Actual maturities may differ
from contractual maturities because certain security issuers have the right to
call or prepay their obligations.

                                             Carrying        Fair
                                               Value         Value
                                             --------      --------
                                              (Dollars in thousands)

             Available-for-sale:
                Due in one year or less      $ 22,109      $ 22,117
                One through five years         16,190        16,770
                Five through ten years          1,813         1,933
                After ten years                88,041        88,235
                                             --------      --------
                                             $128,153      $129,055
                                             ========      ========

             Held-to-maturity:
                Five through ten years       $    326      $    345
                After ten years                36,204        37,198
                                             --------      --------
                                             $ 36,530      $ 37,543
                                             ========      ========

NOTE 3. LOANS RECEIVABLE, NET

      A summary of loans receivable, net follows:

<TABLE>
<CAPTION>
                                                                   March 31,
                                            ----------------------------------------------------
                                                     2003                          2002
                                            ----------------------       -----------------------
                                              Amount       Percent         Amount        Percent
                                            ---------      -------       ---------       -------
                                                            (Dollars in thousands)
<S>                                         <C>             <C>          <C>             <C>
      Real estate loans:
        One- to four-family                 $  71,735        23.66%      $ 122,814        41.28%
        Multi-family                          131,749        43.45         118,589        39.86
        Non-residential                        79,244        26.13          40,101        13.48
        Construction                           18,377         6.06          13,678         4.60
      Consumer and business                     2,125         0.70           2,328         0.78
                                            ---------       ------       ---------       ------
      Total gross loans                       303,230       100.00%        297,510       100.00%
                                                            ======                       ======
      Add:
      Premium on loans                            867                          906
      Less:
      Loans in process                         (6,838)                      (3,936)
      Deferred fees and loan discounts           (363)                        (642)
      Allowance for loan losses                (4,158)                      (4,128)
                                            ---------                    ---------
      Net loan portfolio                    $ 292,738                    $ 289,710
                                            =========                    =========
</TABLE>


                                       57
<PAGE>

      At March 31, 2003, 93.6% of the Company's real estate loans receivable
were principally secured by properties located in the State of New York.

      The mortgage loan portfolios serviced for the FHLMC and Fannie Mae are not
included in the accompanying consolidated financial statements. The unpaid
principal balances of these loans aggregated $4.1 million, $2.9 million and $2.1
million at March 31, 2003, 2002 and 2000, respectively. Custodial escrow
balances, maintained in connection with the foregoing loan servicing, were
approximately $16,000, $28,000 and $34,000 at March 31, 2003, 2002 and 2000,
respectively. During the year ended March 31, 2003 the Bank sold $2.5 million in
loans with minimal gain recognized, as compared to $1.3 million in loans sold
during fiscal 2002 and a loss of $101,000 recognized.

      The following is an analysis of the allowance for loan losses:

<TABLE>
<CAPTION>
                                                               Year ended March 31,
                                                        -----------------------------------
                                                          2003          2002          2001
                                                        -------       -------       -------
                                                                (Dollars in thousands)
<S>                                                     <C>           <C>           <C>
      Balance at beginning of the year                  $ 4,128       $ 3,551       $ 2,935
      Provision charged to operations                        --           900         1,793
      Recoveries of amounts previously charged off          258           177           200
      Loans charged-off                                    (228)         (500)       (1,377)
                                                        -------       -------       -------
      Balance at ending of the year                     $ 4,158       $ 4,128       $ 3,551
                                                        =======       =======       =======
</TABLE>

      Non-accrual loans consist of loans for which the accrual of interest has
been discounted as a result of such loans becoming 90 days or more delinquent as
to principal and/or interest payments. Interest income on non-accrual loans is
recorded when received. Restructured loans consist of loans where borrowers have
been granted concessions in regards to the terms of their loans due to financial
or other difficulties, which rendered them unable to repay their loans under the
original contractual terms.

      At March 31, 2003, 2002 and 2001 the recorded investment in impaired loans
was $1.8 million, $2.8 million and $2.5 million, respectively all of which
represented non-accrual loans. The related allowance for credit losses was
approximately $195,000 and $146,000 at March 31, 2003 and 2002, respectively.
The impaired loan portfolio is primarily collateral dependent. The average
recorded investment in impaired loans during the fiscal years ended March 31,
2003, 2002 and 2001 was approximately $1.8 million, $2.3 million and $3.2
million, respectively. For the fiscal years ended March 31, 2003, 2002 and 2001,
the Company did not recognize any interest income on these impaired loans.
Interest income of $173,000, $288,000 and $202,000, respectively, for the fiscal
years ended March 31, 2003, 2002 and 2001 would have been recorded on impaired
loans had they performed in accordance with the original contract.

      At March 31, 2003 and 2002, there were no loans to officers.

NOTE 4. PREMISES AND EQUIPMENT, NET

      The detail of premises and equipment is as follows:

<TABLE>
<CAPTION>
                                                                       March 31,
                                                                --------------------
                                                                  2003         2002
                                                                -------      -------
                                                                (Dollars in thousands)
<S>                                                             <C>          <C>
            Land                                                $   415      $   415
            Buildings and improvements                            8,477        8,074
            Leasehold improvements                                  975          934
            Furniture and equipment                               5,383        6,992
                                                                -------      -------
                                                                 15,250       16,415
            Less accumulated depreciation and amortization        5,057        6,164
                                                                -------      -------
                                                                $10,193      $10,251
                                                                =======      =======
</TABLE>

      Depreciation and amortization charged to operations for the fiscal years
ended March 31, 2003, 2002 and 2001 amounted to $1.2 million, $1.2 million and
$1.1 million, respectively.


                                       58
<PAGE>



NOTE 5. ACCRUED INTEREST RECEIVABLE

      The detail of accrued interest receivable is as follows:

<TABLE>
<CAPTION>
                                                                     March 31,
                                                               ---------------------
                                                                2003           2002
                                                               ------         ------
                                                               (Dollars in thousands)
<S>                                                            <C>            <C>
            Loans receivable                                   $1,984         $1,735
            Mortgage-backed securities                            716            517
            Investments and other interest bearing assets         646            552
                                                               ------         ------
            Total accrued interest receivable                  $3,346         $2,804
                                                               ======         ======
</TABLE>

NOTE 6. IDENTIFIABLE INTANGIBLES

      The identifiable intangible asset relates to the acquisition of the
Bedford-Stuyvesant branch office. The detail is as follows:

<TABLE>
<CAPTION>
                                                                              March 31,
                                   ----------------------------------------------------------------------------------------------
                                                         2003                                              2002
                                   --------------------------------------------      --------------------------------------------
                                                                      (Dollars in thousands)
                                     Gross                                Net          Gross                                Net
                                   Carrying         Accumulated        Carrying      Carrying        Accumulated         Carrying
                                     Value         Amortization          Value        Value          Amortization          Value
                                   --------        ------------        --------      --------        ------------        --------
<S>                                <C>               <C>               <C>           <C>               <C>               <C>
Core deposit premiums              $    582          $    410          $    172      $    582          $    205          $    377
Other                                    22                16                 6            22                 8                14
                                   --------          --------          --------      --------          --------          --------
                                   $    604          $    426          $    178      $    604          $    213          $    391
                                   ========          ========          ========      ========          ========          ========
</TABLE>

NOTE 7. DEPOSITS

      Deposit balances and weighted average stated interest rates at March 31
are summarized as follows:

<TABLE>
<CAPTION>
                                                                         At March 31,
                                     ---------------------------------------------------------------------------------------
                                                         2003                                           2002
                                     -----------------------------------------     -----------------------------------------
                                                      Percent of      Weighted                       Percent of     Weighted
                                                        Total         Average                           Total        Average
                                        Amount         Deposits         Rate         Amount           Deposits        Rate
                                     ----------       ----------      --------     ----------        ----------     --------
                                                                      (Dollars in thousands)
<S>                                  <C>                  <C>           <C>        <C>                  <C>           <C>
Non-interest-bearing demand          $   16,539           4.8%            --%      $   13,463             4.1%          --%
NOW accounts                             18,190           5.2           0.52           18,095             5.6         1.24
Savings and club                        128,935          37.1           1.06          126,779            39.0         1.71
Money market savings account             20,735           6.0           0.91           15,232             4.7         1.78
Certificates                            162,765          46.9           2.15          151,385            46.6         2.73
                                     ----------         -----           ----       ----------           -----         ----
Total                                $  347,164         100.0%          1.48%      $  324,954           100.0%        2.18%
                                     ==========         =====                      ==========           =====
</TABLE>


                                       59
<PAGE>

      The scheduled maturities of certificates of deposits are as follows:

                                                               March 31,
                                                        ----------------------
                                                          2003          2002
                                                        --------      --------
                                                             (In thousands)
              Certificates of deposit by remaining
                term to contractual maturity:
                  Within one year                       $127,668      $ 80,528
                  After one but within two years          12,492        26,638
                  After two but within three years        10,387        10,495
                  After three years                       12,218        33,724
                                                        --------      --------
                            Total                       $162,765      $151,385
                                                        ========      ========

The aggregate amount of certificates of deposit with minimum denominations of
$100,000 or more was approximately $100.1 million at March 31, 2003.

      Interest expense on deposits for the the years ended March 31 consists of
the following:

                                              2003          2002          2001
                                            -------       -------       -------
                                                       (In thousands)

      Demand                                $   131       $   237       $   253
      Savings and club                        1,477         2,342         3,081
      Money market                              189           302           412
      Certificates of deposit                 3,975         5,263         4,739
                                            -------       -------       -------
                                              5,772         8,144         8,485
      Penalty for early withdrawal of
         certificates of deposit                (12)          (17)          (29)
                                            -------       -------       -------
                Total interest expense      $ 5,760       $ 8,127       $ 8,456
                                            =======       =======       =======

NOTE 8. BORROWED MONEY

      FHLB Advances. FHLB advances and weighted average interest rates at March
31 are summarized as follows, by remaining period to maturity:

                                                 March 31,
                           ----------------------------------------------------
                                       2003                        2002
                           -------------------------   ------------------------
         Maturing
        Year Ended           Weighted                    Weighted
         March 31,         Average Rate       Amount   Average Rate      Amount
        ----------         ------------       ------   ------------      ------
           2003                  --%        $     --       2.41%        $15,500
           2004                1.93           18,250       4.28           3,500
           2005                4.05           26,000       4.05          26,000
           2006                3.46           32,840       5.29          10,490
           2007                4.42           28,134       5.17          19,484
           2008                3.49            3,300         --              --
           2012                3.50              265       3.50             288
                               ----         --------       ----         -------
                               3.59%        $108,789       4.18%        $75,262
                               ====         ========       ====         =======

      As a member of the FHLB, the Bank may have outstanding FHLB borrowings in
a combination of term advances and overnight funds of up to 25% of its total
assets, or approximately $126.7 million at March 31, 2003. Borrowings are
secured by the Bank's investment in FHLB stock and by a blanket security
agreement. This agreement requires the Bank to maintain as collateral certain
qualifying assets (principally securities and residential mortgage loans) not
otherwise pledged. At March 31, 2003 and 2002,


                                       60
<PAGE>

the advances were secured by pledges of the Bank's investment in the capital
stock of the FHLB-NY totaling $5.4 million and $3.8 million, respectively and a
blanket assignment of the Bank's unpledged qualifying mortgage, mortgage-backed
securities and investment portfolios.

      Securities Sold Under Agreements to Repurchase. In securities sold under
agreements to repurchase, the Bank borrows funds through the transfer of debt
securities to the FHLB, as counterparty, and concurrently agrees to repurchase
the identical securities at a fixed price on a specified date. Repurchase
agreements are collateralized by the securities sold and, in certain cases, by
additional margin securities. At March 31, 2003 and 2002 there were no
securities sold under agreements to repurchase outstanding.

      The following table sets forth certain information regarding Carver's
borrowed money at the dates and for the periods indicated:

<TABLE>
<CAPTION>
                                                                      At or for the Year Ended March 31,
                                                                      ----------------------------------
                                                                           2003               2002
                                                                         --------           --------
                                                                           (Dollars in thousands)
<S>                                                                      <C>                <C>
      Amounts outstanding at the end of period:
        FHLB advances                                                    $108,789           $ 75,262
      Weighted average rate paid at period end:
        FHLB advances                                                        3.59%              4.18%
      Maximum amount of borrowing outstanding at any month end:
        FHLB advances                                                    $108,789           $100,094
        Repos                                                                  --             14,930
      Approximate average amounts outstanding for period:
        FHLB advances                                                    $ 80,861           $ 76,141
        Repos                                                                  --              2,888
      Approximate weighted average rate paid during period:
        FHLB advances                                                        3.99%              5.50%
        Repos                                                                  --%              5.91%
</TABLE>

NOTE 9. INCOME TAXES

      The components of income tax expense for the years ended March 31 are as
follows:

<TABLE>
<CAPTION>
                                                                     2003            2002            2001
                                                                 ----------       ----------       ---------
                                                                                 (In thousands)
<S>                                                              <C>              <C>              <C>
              Federal income tax expense (benefit):
                  Current                                        $    4,200       $      569              --
                  Deferred                                           (1,626)           1,792              --
                                                                 ----------       ----------       ---------
                                                                      2,574            2,361              --
                                                                 ----------       ----------       ---------
              State and local income tax expense (benefit):
                  Current                                             1,104              913              98
                  Deferred                                             (645)              46              --
                                                                 ----------       ----------       ---------
                                                                        459              959              98
                                                                 ----------       ----------       ---------

              Valuation allowance                                        --           (2,439)             --

              Total provision for income tax expense             $    3,033       $      881       $      98
                                                                 ==========       ==========       =========
</TABLE>


                                       61
<PAGE>

      The reconciliation of the expected federal tax rate to the consolidated
effective tax rate for the fiscal years ended March 31 is as follows:

<TABLE>
<CAPTION>
                                                                     2003                     2002                    2001
                                                              ------------------      ------------------       ------------------
                                                              Amount     Percent      Amount     Percent       Amount     Percent
                                                              ------     -------      ------     -------       ------     -------
                                                                                       (Dollars in thousands)
<S>                                                           <C>         <C>        <C>           <C>         <C>         <C>
Statutory Federal income tax                                  $2,334      34.0%      $ 1,902       34.0%       $ (99)      34.0%
State and local income taxes, net of Federal tax benefit         303       4.4           632       11.3           98       (33.6)
Change in valuation allowance                                     --        --        (2,439)      (43.6)        157       (54.0)
Other                                                            396       5.8           786       14.0          (58)       19.9
                                                              ------      ----       -------       ----        -----       -----

Total income tax expense                                      $3,033      44.2%      $   881       15.7%       $  98       (33.7)%
                                                              ======      ====       =======       ====        =====       =====
</TABLE>

      At March 31, 2001, Carver had net operating loss carryforwards for federal
income tax purposes of approximately $5.7 million. These net operating loss
carryforwards were fully utilized during fiscal 2002.

      Carver's stockholders' equity includes approximately $2.8 million and $4.2
million at March 31, 2003 and 2002, respectively, which has been segregated for
federal income tax purposes as a bad debt reserve. The use of this amount for
purposes other than to absorb losses on loans may result in taxable income for
federal income taxes at the then current tax rate.

      The tax effects of existing temporary differences that give rise to
significant portions of deferred tax assets and deferred tax liabilities at
March 31 of the years indicated as follows:

<TABLE>
<CAPTION>
                                                                               2003        2002
                                                                              ------      ------
                                                                                (In thousands)
<S>                                                                           <C>         <C>
            Deferred tax assets
                Income from affiliate                                         $2,050      $   --
                Allowance for loan losses                                      1,414       1,235
                Deferred loan fees                                               287         607
                Compensation and benefit plans                                   281         132
                Reserves for losses on other assets                               22          38
                Non-accrual loan interest                                        194          --
                Contributions carryforward                                         1          95
                                                                              ------      ------

                    Total deferred tax assets before valuation allowance       4,249       2,107
                    Valuation allowance                                           --          --
                                                                              ------      ------
                    Total deferred tax assets                                  4,249       2,107
                                                                              ------      ------

            Deferred tax liabilities
                Unrealized gain on available-for-sale securities                 616         100
                Identifiable Intangibles                                          71         168
                Depreciation                                                     283         315
                                                                              ------      ------
                    Total deferred tax liabilities                               970         583
                                                                              ------      ------

            Net deferred tax assets                                           $3,279      $1,524
                                                                              ======      ======
</TABLE>

      Management believes it is more likely than not that the results of future
operations will generate sufficient future taxable income to realize the
deferred tax asset. Therefore, a valuation allowance against the deferred tax
assets at March 31, 2003 and 2002 was not considered necessary.


                                       62
<PAGE>

NOTE 10. EARNINGS PER COMMON SHARE

      The following table reconciles the earnings (loss) available to common
shareholders (numerator) and the weighted average common stock outstanding
(denominator) for both basic and diluted earnings per share for the periods
presented:

<TABLE>
<CAPTION>
                                                                                     Year Ended March 31,
                                                                             -----------------------------------
                                                                               2003          2002          2001
                                                                             -------       -------       -------
                                                                                          (In thousands)
<S>                                                                          <C>           <C>           <C>
Net income (loss)                                                            $ 3,831       $ 4,713       $  (389)
Preferred stock dividends                                                       (197)         (197)         (197)
                                                                             -------       -------       -------
Net income (loss) - basic                                                      3,634         4,516          (586)
Impact of potential conversion of convertible preferred stock to common
stock                                                                            197           197           197
                                                                             -------       -------       -------
Net income (loss) - diluted                                                  $ 3,831       $ 4,713       $  (389)
                                                                             =======       =======       =======

Weighted average common shares outstanding - basic                             2,291         2,277         2,256
Effect of dilutive securities convertible preferred stock and options            235           218           208
                                                                             -------       -------       -------
Weighted average common shares outstanding - diluted                           2,526         2,495         2,464
                                                                             =======       =======       =======
</TABLE>

NOTE 11. STOCKHOLDERS' EQUITY

      Conversion and Stock Offering. On October 24, 1994, the Bank issued in an
initial public offering 2,314,375 shares of common stock (par value $0.01) at a
price of $10 per share resulting in net proceeds of $21.5 million. As part of
the initial public offering, the Bank established a liquidation account at the
time of conversion, in an amount equal to the surplus and reserves of the Bank
at September 30, 1994. In the unlikely event of a complete liquidation of the
Bank (and only in such event), eligible depositors who continue to maintain
accounts shall be entitled to receive a distribution from the liquidation
account. The total amount of the liquidation account may be decreased if the
balances of eligible deposits decreased as measured on the annual determination
dates. The balance of the liquidation account was approximately $2.1 million
(unaudited), and $2.5 million (unaudited) at March 31, 2003 and 2002,
respectively, based on an assumed decrease of 15.25% of eligible deposits per
annum. On October 17, 1996, the Bank completed the Reorganization and became the
wholly owned subsidiary of the Holding Company. Pursuant to an Agreement and
Plan of Reorganization, dated May 21, 1996, each share of the Bank's outstanding
common stock was exchanged for one share of the Holding Company's common stock.
In connection with the Reorganization, a shareholder of the Bank exercised
appraisal rights and 100 shares of the Bank's common stock were purchased from
such shareholder in the fourth fiscal quarter of 1997. Accordingly, 2,314,275
shares of the Holding Company's common stock were outstanding. The Bank is not
permitted to pay dividends to the Holding Company on its capital stock if the
effect thereof would cause its net worth to be reduced below either: (i) the
amount required for the liquidation account or (ii) the amount required for the
Bank to comply with applicable minimum regulatory capital requirements.

      Convertible Preferred Stock. On January 11, 2000, the Holding Company
sold, pursuant to a Securities Purchase Agreement, dated January 11, 2000, in a
private placement 40,000 shares of Series A Convertible Preferred Stock (the
"Series A Preferred Stock") to Morgan Stanley & Co. Incorporated ("MSDW") and
60,000 Shares of Series B Convertible Preferred Stock (the "Series B Preferred
Stock") to Provender Opportunities Fund L.P. ("Provender"). In addition, Carver
entered into a Registration Rights Agreement, dated January 11, 2000, with MSDW
and Provender. The gross proceeds from the private placement were $2.5 million.

      The Series A Preferred Stock and Series B Preferred Stock (collectively
the "Preferred Stock") accrue annual dividends at $1.97 per share. Dividends are
payable semi-annually on June 15 and December 15 of each year. Each share of
Preferred Stock is convertible at the option of the holder, at any time, into
2.08333 shares of Carver's Common Stock, subject to certain antidilution
adjustments. The Holding Company may redeem the Preferred Stock beginning
January 15, 2004. In the event of any liquidation, dissolution or winding up of
Carver, whether voluntary or involuntary, the holders of the shares of Preferred
Stock shall be entitled to receive $25 per share of Preferred Stock plus all
dividends accrued and unpaid thereon. Each share of Preferred Stock is entitled
to one vote for each share of Common Stock into which the Preferred Stock can be
converted.


                                       63
<PAGE>

      At March 31, 2003 unpaid accrued dividends related to the Preferred Stock
amounted to $57,000.

      Regulatory Capital. The operations and profitability of the Bank are
significantly affected by legislation and the policies of the various regulatory
agencies. The Office of Thrift Supervision ("OTS") has promulgated capital
requirements for financial institutions consisting of minimum tangible and core
capital ratios of 1.5% and 3.0%, respectively, of the institution's adjusted
total assets and a minimum risk-based capital ratio of 8.0% of the institution's
risk weighted assets. Although the minimum core capital ratio is 3.0%, the
Federal Deposit Insurance Corporation Improvement Act, as amended ("FDICIA"),
stipulates that an institution with less than 4.0% core capital is deemed
undercapitalized. At March 31, 2003 and 2002, the Bank exceeded all of its
regulatory capital requirements.

      The following is a summary of the Bank's actual capital amounts and ratios
as of March 31, 2003 and 2002, compared to the OTS requirements for minimum
capital adequacy and for classification as a well-capitalized institution:

<TABLE>
<CAPTION>
                                                   Minimum Capital       Classification as
                              Bank Actual             Adequacy           Well Capitalized
                         ------------------      ------------------     ------------------
                          Amount      Ratio       Amount      Ratio      Amount      Ratio
                          ------      -----       ------      -----      ------      -----
                                              (Dollars in thousands)
<S>                      <C>           <C>       <C>           <C>      <C>          <C>
March 31, 2003
Tangible capital         $39,725       7.8%      $ 7,628       1.5%         N/A       N/A
Leverage capital          39,725       7.8        20,341       4.0      $25,426       5.0%
Risk-based capital:
     Tier I               39,725      12.8           N/A       N/A       18,633       6.0
     Total                43,610      14.0        24,844       8.0       31,055      10.0

March 31, 2002
Tangible capital         $36,442       8.1%      $ 6,744       1.5%         N/A       N/A
Leverage capital          36,442       8.1        17,984       4.0      $22,480       5.0%
Risk-based capital:
     Tier I               36,442      17.0           N/A       N/A       12,865       6.0
     Total                39,140      18.3        17,153       8.0       21,442      10.0
</TABLE>

      The following table reconciles the Bank's stockholders' equity at March
31, 2003, in accordance with accounting principles generally accepted in the
U.S. to regulatory capital requirements:

<TABLE>
<CAPTION>
                                                                               Regulatory Capital Requirements
                                                                   ---------------------------------------------------
                                                                     GAAP      Tangible       Leverage      Risk-Based
                                                                   Capital      Capital        Capital        Capital
                                                                   --------    --------       --------      ----------
                                                                                      (In thousands)
<S>                                                                <C>         <C>            <C>            <C>
Stockholders' Equity at March 31, 2003 (1)                         $ 40,653    $ 40,653       $ 40,653       $ 40,653

Add:
   General valuation allowances                                                      --             --          3,885
Deduct:
   Unrealized loss(gain) on securities available for sale, net                     (750)          (750)          (750)
   Excess of cost over net assets acquired                                         (178)          (178)          (178)
                                                                               --------       --------       --------
Regulatory Capital                                                               39,725         39,725         43,610
Minimum Capital requirement                                                       7,628         20,341         24,844
                                                                               --------       --------       --------
Regulatory Capital Excess                                                      $ 32,097       $ 19,384       $ 18,766
                                                                               ========       ========       ========
</TABLE>

(1)   Reflects Bank only.

      Comprehensive Income. Comprehensive income represents net income and
certain amounts reported directly in stockholders' equity, such as the net
unrealized gain or loss on securities available for sale. The Holding Company
has reported its


                                       64
<PAGE>

comprehensive income for fiscal 2003, 2002 and 2001 in the consolidated
statements of changes in stockholders' equity and comprehensive income. Carver's
other comprehensive income or loss (other than net income), which is
attributable to unrealized gains and losses on securities available-for-sale,
for the year ended March 31, 2003 and 2002 was $750,000 and $116,000,
respectively. Included in the March 31, 2003 amount is $464,000 relating to an
unrealized gain on available-for-sale securities that were transferred during
fiscal 2003 to held-to-maturity. This unrealized gain is an unrealized gain
reported as a separate component of stockholders' equity and is amortized over
the remaining lives of the securities as an adjustment to yield. There was no
other comprehensive income or loss for the year ended March 31, 2001.

NOTE 12. EMPLOYEE BENEFIT AND STOCK COMPENSATION PLANS

Pension Plan. Carver has a non-contributory defined benefit pension plan
covering all eligible employees. The benefits are based on each employee's term
of service. Carver's policy is to fund the plan with contributions which equal
the maximum amount deductible for federal income tax purposes. The plan was
curtailed during the fiscal year ended March 31, 2002.

         The following table sets forth the plan's changes in benefit
obligation, changes in plan assets and funded status and amounts recognized in
Carver's consolidated financial statements at March 31:


<TABLE>
<CAPTION>
                                                                       2003          2002
                                                                     -------       -------
                                                                         (In thousands)
<S>                                                                  <C>           <C>
         Change in projected benefit obligation during the year
         Projected benefit obligation at the beginning of year       $ 2,623       $ 2,527
         Interest cost                                                   178           182
         Actuarial loss                                                  182           154
         Benefits paid                                                  (231)         (240)
                                                                     -------       -------
         Projected benefit obligation at end of year                 $ 2,752       $ 2,623
                                                                     =======       =======

         Change in fair value of plan assets during the year
         Fair value of plan assets at beginning of year              $ 3,369       $ 3,594
         Actual return on plan assets                                   (231)           15
         Benefits paid                                                  (231)         (240)
                                                                     -------       -------
         Fair value of plan assets at end of year                    $ 2,907       $ 3,369
                                                                     =======       =======

         Funded status                                               $   155       $   746
         Unrecognized (gain) / loss                                       93          (600)
                                                                     -------       -------
         Accrued pension cost                                        $   248       $   146
                                                                     =======       =======
</TABLE>

      Net periodic pension benefit included the following components for the
years ended March 31 are:

<TABLE>
<CAPTION>
                                                          2003          2002         2001
                                                        -------       -------       -------
                                                                  (In thousands)
<S>                                                     <C>           <C>           <C>
            Service cost                                $    --       $    --       $   121
            Interest cost                                   178           182           207
            Expected return on plan assets                 (260)         (279)         (298)
            Amortization of:
               Unrecognized transition obligation            --            --            36
               Unrecognized gain                            (19)          (56)          (96)
               Unrecognized past service liability           --            --             2
            Curtailment credit                               --            --           (84)
                                                        -------       -------       -------
            Net periodic pension benefit                $  (101)      $  (153)      $  (112)
                                                        =======       =======       =======
</TABLE>


                                       65
<PAGE>

Significant actuarial assumptions used in determining plan benefits for the
years ended March 31 are:

<TABLE>
<CAPTION>
                                                                    2003       2002       2001
                                                                    ----       ----       ----
<S>                                                                 <C>        <C>        <C>
      Annual salary increase (1)                                     N/A        N/A       4.75%
      Long-term return on assets                                    8.00%      8.00%      8.00%
      Discount rate used in measurement of benefit obligations      6.50%      7.00%      7.25%
</TABLE>

      (1)   The annual salary increase rate is not applicable as the plan
            is frozen.

      Savings Incentive Plan. Carver has a savings incentive plan, pursuant to
Section 401(k) of the Code, for all eligible employees of the Bank. Through
December 31, 2000, employees had the option to elect to defer up to the lesser
of 15% or the maximum amount allowed under law of their compensation and receive
a 50% matching contribution from Carver up to the maximum allowed by law.
Effective January 1, 2001, the plan was modified. In connection with this
modification, Carver will make an annual non-elective contribution to the 401(k)
plan on behalf of each eligible employee equal to 2% of the employee's annual
pay, subject to IRS limitations. This 2% Carver contribution will be made
regardless of whether or not the employee makes a contribution to the 401(k)
plan. To be eligible for the 2% Carver contribution, the employee must have
completed at least one year of service and be employed as of the last day of the
plan year or December 31 of each year. In addition, effective January 1, 2001,
Carver matches contributions to the plan equal to 100% of the pre-tax
contributions made by each employee up to a maximum of 4% of their pay. All such
matching contributions to the plan will be fully vested and non-forfeitable at
all times regardless of the years of service. However, the one-year to five-year
vesting schedule that previously applied to matching contributions will apply to
the new 2% Carver contribution. Total incentive plan expenses for the years
ended March 31, 2003, 2002 and 2001 were $127,000, $60,000 and $45,000,
respectively.

      Directors' Retirement Plan. Concurrent with the conversion to the stock
form of ownership, Carver adopted a retirement plan for non-employee directors.
The plan was curtailed during the fiscal year ended March 31, 2001. The benefits
are payable based on the term of service as a director. The following table sets
forth the plan's changes in benefit obligation, changes in plan assets and
funded status and amounts recognized in Carver's consolidated financial
statements at March 31:

<TABLE>
<CAPTION>
                                                                  --------       --------
                                                                    2003           2002
                                                                  --------       --------
                                                                       (In thousands)
<S>                                                               <C>            <C>
      Change in projected benefit obligation during the year
      Projected benefit obligation at beginning of year           $    264       $    296
      Interest cost                                                     17             19
      Actuarial (gain) / loss                                          (38)            --
      Benefits paid                                                    (43)           (51)
                                                                  --------       --------
          Projected benefit obligation at end of year             $    200       $    264
                                                                  ========       ========

      Change in fair value of plan assets during the year
      Employer contributions                                      $     43       $     51
      Benefits paid                                                    (43)           (51)
                                                                  --------       --------
      Fair value of plan assets at end of year                    $     --       $     --
                                                                  ========       ========

      Funded Status                                               $   (200)      $   (264)
      Contributions                                                     --             --
      Unrecognized (gain) / loss                                       (17)            21
                                                                  --------       --------
      Accrued pension cost                                        $   (217)      $   (243)
                                                                  ========       ========
</TABLE>


                                       66
<PAGE>

      Net periodic pension cost for the years ended March 31, 2003, 2002 and
2001 included the following:

<TABLE>
<CAPTION>
                                                   2003        2002           2001
                                                 -------      -------      ---------
                                                            (In thousands)
<S>                                              <C>          <C>          <C>
      Service cost                               $    --      $    --      $      --
      Interest cost                                   17           19             35
      Expected return on plan assets                  --           --             --
      Amortization of:
        Unrecognized gain                             --           --              4
        Unrecognized past service liability           --           --             23
        Curtailment credit                            --           --           (179)
                                                 -------      -------      ---------
      Net periodic pension cost                  $    17      $    19      $    (117)
                                                 =======      =======      =========
</TABLE>

      The actuarial assumptions used in determining plan benefits include a
discount rate of 6.5%, 7.25% and 7.25% for the years ended March 31, 2003, 2002
and 2001, respectively.

      Management Recognition Plan. The MRP provides for automatic grants of
restricted stock to certain employees as of the September 12, 1995 adoption of
the MRP. In addition, the MRP provides for additional discretionary grants of
restricted stock to those employees selected by the committee established to
administer the MRP. Awards generally vest in three to five equal annual
installments commencing on the first anniversary date of the award, provided the
recipient is still an employee of the Holding Company or the Bank on such date.
Awards will become 100% vested upon termination of service due to death or
disability. When shares become vested and are distributed, the recipients will
receive an amount equal to any accrued dividends with respect thereto Pursuant
to the MRP, the Bank recognized $79,000, $119,000 and $0 as expense for the
years ended March 31, 2003, 2002 and 2001, respectively.

      Employee Stock Ownership Plan. Effective upon conversion, an ESOP was
established for all eligible employees. The ESOP used $1,821,320 in proceeds
from a term loan obtained from a third-party institution to purchase 182,132
shares of Bank common stock in the initial public offering. The term loan
principal is payable over forty equal quarterly installments through September
2004. Interest on the term loan is payable quarterly, at a rate of 3.00% over
the average federal funds rate. On May 20, 2002, the term loan was modified to
provide for interest at a fixed rate of 4% per annum. Each year, the Bank
intends to make discretionary contributions to the ESOP, which will be equal to
principal and interest payments required on the term loan less any dividends
received by the ESOP on unallocated shares.

      Shares purchased with the loan proceeds were initially pledged as
collateral for the term loan and are held in a suspense account for future
allocation among the participants on the basis of compensation, as described by
the Plan, in the year of allocation.

      Accordingly, the ESOP shares pledged as collateral are reported as
unearned ESOP shares in the consolidated statements of financial condition. As
shares are committed to be released from collateral, the Bank reports
compensation expense equal to the current market price of the shares, and the
shares become outstanding for net income per common share computations. ESOP
compensation expense was $172,000, $174,000 and $298,000 for the years ended
March 31, 2003, 2002 and 2001, respectively.

      The ESOP shares at March 31 are as follows:

                                                 2003      2002
                                                 ----      ----
                                                  (In thousands)
            Allocated shares                      163       149
            Unreleased shares                      19        33
                                                 ----      ----
            Total ESOP shares                     182       182
                                                 ====      ====
            Fair value of unreleased shares      $261      $374


                                       67
<PAGE>

      Stock Option Plan. During 1995, the Holding Company adopted the 1995 Stock
Option Plan (the "Plan") to advance the interests of the Bank through providing
select key employees and directors of the Bank and its affiliates. The number of
shares reserved for issuance under the plan is 338,862. At March 31, 2003, there
were 192,176 options outstanding and 106,020 were exercisable. Options are
granted at the fair market value of Carver common stock at the time of the grant
for a period not to exceed ten years. Under the Plan, as amended, option grants
generally vest on an annual basis ratably over either three or five years,
commencing after one year of service. In some instances, portions of option
grants vest at the time of the grant. All options are exercisable immediately
upon a participant's disability, death or a change in control, as defined in the
Plan.

      Information regarding stock options as of and for the years ended March 31
follows:

<TABLE>
<CAPTION>
                                              2003                      2002                       2001
                                    ----------------------     ----------------------     ----------------------
                                                  Weighted                   Weighted                   Weighted
                                                  Average                     Average                    Average
                                                  Exercise                   Exercise                   Exercise
                                     Options       Price        Options        Price       Options        Price
                                    --------      --------     --------      --------     --------      --------
<S>                                  <C>           <C>          <C>           <C>          <C>           <C>
Outstanding, beginning of year       134,767       $ 9.10       112,963       $ 9.17        58,463       $ 9.57
Granted                               65,142        12.05        59,767         9.86        56,000         8.94
Exercised                               (333)        9.93        (2,500)        6.75            --           --
Forfeited                             (7,400)       10.14       (35,463)       10.61        (1,500)       16.13
                                    --------       ------      --------       ------      --------       ------
Outstanding, end of year             192,176       $10.07       134,767       $ 9.10       112,963       $ 9.17
                                    ========       ======      ========       ======      ========       ======
Exercisable at year end              106,020           --        65,600           --        89,663           --
                                    ========       ======      ========       ======      ========       ======
</TABLE>

      The following table summarizes information about stock options at March
31, 2003:

<TABLE>
<CAPTION>
                                                   Options Outstanding                     Options Exercisable
                                      -------------------------------------------         ----------------------
                                                       Weighted          Weighted                       Weighted
                                                        Average           Average                        Average
          Range of                                     Remaining         Exercise                       Exercise
      Exercise Prices                 Shares             Life              Price          Shares          Price
      ---------------                 ------          ----------         --------         ------        --------
<S>                                  <C>                <C>               <C>            <C>             <C>
     $ 8.00    $ 8.99                 68,000             7 years          $ 8.24          59,000         $ 8.20
       9.00      9.99                 48,767             8 years            9.83          27,020           9.85
      10.00     10.99                 10,000             8 years           10.49           4,000          10.48
      11.00     11.99                  2,500            10 years           11.28              --             --
      12.00     12.99                 61,909             9 years           12.08          15,000          12.06
      13.00     13.99                  1,000             5 years           13.81           1,000          13.81
                                     -------                                             -------
     Total                           192,176                                             106,020
                                     =======                                             =======
</TABLE>

NOTE 13. COMMITMENTS AND CONTINGENCIES

      The Bank is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its customers.

      These financial instruments primarily include commitments to extend credit
and to sell loans. Those instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the
statements of financial condition. The contract amounts of those instruments
reflect the extent of involvement the Bank has in particular classes of
financial instruments.

      The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit is
represented by the contractual notional amount of those instruments. The Bank
uses the same credit policies making commitments as it does for on-balance-sheet
instruments.


                                       68
<PAGE>

      The Bank has outstanding various loan commitments as follows:

                                                            March 31,
                                                        2003         2002
                                                      -------      -------
                                                         (In thousands)

         Commitments to originate mortgage loans      $10,643      $14,723
         Consumer loans                                 2,464        2,877
                                                      -------      -------
             Total                                    $13,107      $17,600
                                                      =======      =======

      At March 31, 2003, of the $10.6 million in outstanding commitments to
originate mortgage loans, $2.1 million represented commitments to originate
non-residential mortgage loans at fixed rates within a range of 6.75% to 7.25%,
$1.7 million represented the balance of all other real estate loans at fixed
rates between 4.75% to 7.00% and $6.8 million represented construction loans at
an average rate of 5.96%.

      At March 31, 2003, undisbursed funds from approved consumer lines of
credit, primarily credit cards, totaled $2.5 million. Such lines consist of
unsecured and secured lines of credit of $2.2 million and $242,000 respectively.
All such lines carry adjustable rates. At March 31, 2003, undisbursed funds from
approved unsecured commercial lines of credit totaled $45,000. At March 31,
2003, the Bank maintains one letter of credit in the amount of $1.9 million.

      Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since some of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained if
deemed necessary by the Bank upon extension of credit is based on management's
credit evaluation of the counter-party.

      Collateral held consists primarily of residential real estate, but may
include income-producing commercial properties.

      Rentals, including real estate taxes, under long-term operating leases for
certain branch offices aggregated approximately $186,000, $142,000, and $191,000
for the years ended March 31, 2003, 2002 and 2001, respectively. As of March 31,
2003, minimum rental commitments under all noncancellable leases with initial or
remaining terms of more than one year and expiring through 2012 are as follows:

                             Year Ending          Minimum
                              March 31,            Rental
                              ---------            ------
                                               (In Thousands)
                                2004                 218
                                2005                 222
                                2006                 227
                                2007                 144
                                2008                 131
                             Thereafter              499
                                                   -----
                                                   1,441
                                                   =====

      The Bank also has, in the normal course of business, commitments for
services and supplies. Management does not anticipate losses on any of these
transactions.

      Legal Proceedings. From time to time, Carver Federal is a party to various
legal proceedings incident to its business. Certain claims, suits, complaints
and investigations involving Carver Federal, arising in the ordinary course of
business, have been filed or are pending. The Company is of the opinion, after
discussion with legal counsel representing the Bank in these proceedings, that
the aggregate liability or loss, if any, arising from the ultimate disposition
of these matters would not have a material adverse effect on the Company's
consolidated financial position or results of operations. At March 31, 2003,
except as set forth below, there were no material legal proceedings to which the
Company or its subsidiaries was a party or to which any of their property was
subject.


                                       69
<PAGE>
      On or about April 29, 1999, plaintiff Reginald St. Rose ("St. Rose") filed
suit against Carver Federal in the Supreme Court of the State of New York,
County of New York (the "St. Rose Action"). St. Rose is a former Carver Federal
employee. On or about January 12, 1999, Carver Federal and St. Rose entered into
an agreement (the "Agreement") providing that St. Rose would resign from Carver
Federal on the terms and conditions set forth in the Agreement. In the St. Rose
Action, St. Rose alleged the following causes of action, which relate to the
Agreement and St. Rose's separation from Carver Federal: (1) breach of contract;
(2) promissory estoppel; and (3) fraudulent misrepresentation. St. Rose seeks
damages in an amount not less than $50,000 with respect to the breach of
contract cause of action and seeks undisclosed damages with respect to the
promissory estoppel and fraudulent misrepresentation causes of action.

      On or about August 18, 1999, Carver Federal moved to dismiss St. Rose's
fraudulent misrepresentation cause of action. By decision dated November 23,
1999, the Court granted Carver Federal's motion to dismiss and entered an order
embodying that decision on January 26, 2000. Carver Federal has not filed an
answer in the St. Rose Action. By written stipulation of the parties, Carver
Federal's time to file an answer to St. Rose's complaint has been extended
without date. Carver Federal has unasserted counterclaims against St. Rose for,
among other claims, payment of certain financial obligations to Carver Federal
(including, but not limited to, automobile loans, unsecured loans, lines of
credit and credit card debts), which obligations remain outstanding as of the
date of this Form 10-K. Since January 2000, the St. Rose Action has been largely
inactive. The parties have had intermittent settlement discussions but have not
reached an agreement. If the parties do not reach a settlement, Carver Federal
intends to continue to defend this Action vigorously.

      Carver Federal is also a defendant in an action brought by Ralph Williams
(the "Williams Action") and an action brought by Janice Pressley (the "Pressley
Action" and, together with the Williams Action, the "Actions") both of which
arise out of events concerning the Northeastern Conference Federal Credit Union
("Northeastern"). Plaintiff Williams is a former member of the Board of
Directors of Northeastern and plaintiff Pressley is a former treasurer of
Northeastern.

      Northeastern was a federal credit union and it maintained accounts with
Carver Federal and with other banks in the New York metropolitan area.
Plaintiffs' complaints (which are virtually identical) allege that the National
Credit Union Administration (the "NCUA") acted improperly when it placed
Northeastern into conservatorship and subsequent liquidation. On or about
November 22, 2000, Williams filed his pro se complaint in the United States
District Court, District of Columbia against the NCUA, Carver Federal, JPMorgan
Chase (formerly Chase Manhattan Bank) ("Chase"), Astoria Federal Savings and
Loan Association and Reliance Federal Savings Bank (Carver Federal with the last
three defendants, collectively the "Bank Defendants") seeking damages in the
amount of $1 million plus certain additional unspecified amounts. On or about
November 22, 2000, plaintiff Pressley filed her pro se action in the United
States District Court, District of Columbia against the same defendants seeking
unspecified compensatory and punitive damages. Williams seeks damages for the
allegedly "unauthorized" or "invalid" actions of the NCUA Board in taking
control of Northeastern as well as damages for discrimination and civil rights
violations. Pressley seeks damages based on identical allegations except that
she also alleges certain claims of employment discrimination. While the bulk of
both complaints relate to the action of the NCUA Board of Directors, the
plaintiffs advance two allegations against the Bank Defendants, including Carver
Federal. First, plaintiffs allege that the Bank Defendants "collaborated with
the NCUA Board of Directors" in violating unspecified constitutional and privacy
rights. Second, plaintiffs allege that the Bank Defendants engaged in
discrimination.

      On or about December 15, 2000, defendant Chase moved to consolidate the
Actions. In anticipation of that consolidation, the Bank Defendants filed a
joint motion to dismiss both complaints arguing that both Actions are barred by
principles of res judicata and both complaints fail to state claims on which
relief can be granted. The Bank Defendants' motion to dismiss was denied without
prejudice insofar as it applied to the Williams Action solely for the reason
that it was a motion addressed to both Actions prior to the issuance of an order
consolidating these cases. The Bank Defendants have refiled their motion to
dismiss the Williams Action and it is sub judice. If the motion to dismiss is
not granted, Carver Federal intends to defend the Williams Action vigorously. On
September 20, 2001, the Court granted the Bank Defendants' motion to dismiss the
Pressley Action. Pressley has appealed the dismissal. Carver Federal is
vigorously opposing the appeal.

      On or about December 28, 2000, plaintiff Thomas L. Clark ("Clark") filed
suit against Carver Federal and individual defendants in the Supreme Court of
the State of New York, County of New York. Clark is the former President and
Chief Executive Officer of Carver Federal. Clark claimed that the defendants
should be forced to obtain approval from the OTS to pay severance benefits that
Clark believes Carver Federal owes him under an employment agreement. Carver
Federal sought injunctive relief and assert claims for breach of contract,
equitable estoppel and estoppel by contract. On or about March 30, 2001, Carver
Federal and the individual defendants moved to dismiss the complaint in its
entirety based on documentary evidence and for failure to state a cause of
action. By Decision and Order entered November 27, 2001, the Court granted that
motion to the extent of dismissing the first cause of action for breach of
contract against all of the individual defendant and dismissing the second cause
of action based on estoppel theories as against all the defendants. Carver
Federal appealed the Decision and Order insofar as it did not dismiss the
complaint in its entirety. On September 26, 2002, the Appellate Division of the
Supreme Court reversed the lower court and granted Carver Federals motion in its
entirety. Clark did not appeal that decision and his time to do so has expired.

      On or about November 2001, Monique Barrow filed an action against Carver
Federal in the United States District Court for the Southern District of New
York alleging that Carver Federal's termination of her employment constituted a
violation of the

                                       70
<PAGE>

federal Family and Medical Leave Act, 29 U.S.C. ss. 2601, et seq., the New York
State Human Rights Law, N.Y. Executive ss.296 et seq., and the New York City
Human Rights Law, N.Y.C. Administrative Code ss. 8-101 et seq. Ms. Barrow seeks
back pay, front pay and benefits with interest in an amount not less than $5
million, and punitive, liquidated and other compensatory damages in an amount
not less than $10 million. Carver Federal has answered the complaint denying any
liability. Carver Federal obtained an order providing for expedited discovery on
liability issues. Carver Federal has completed its discovery and has requested
permission to make a motion for summary judgment. Carver Federal intends to make
that motion as soon as permission is received.

NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS

      The fair value of a financial instrument is defined as the amount at which
the instrument could be exchanged in a current transaction between willing
parties, other than a forced or liquidation sale. Significant estimations were
used by the Bank for the purpose of this disclosure. Estimated fair values have
been determined by the Bank using the best available data and estimation
methodology suitable for each category of financial instrument. For those loans
and deposits with floating interest rates, it is presumed that estimated fair
values generally approximate their recorded book balances. The estimation
methodologies used and the estimated fair values and carrying values of the
Bank's financial instruments are set forth below:

Cash and cash equivalents and accrued interest receivable

      The carrying amounts for cash and cash equivalents and accrued interest
receivable approximate fair value because they mature in three months or less.

Securities

      The fair values for securities available-for-sale, mortgage-backed
securities held-to-maturity and investment securities held-to-maturity are based
on quoted market or dealer prices, if available. If quoted market or dealer
prices are not available, fair value is estimated using quoted market or dealer
prices for similar securities.

Loans receivable

      The fair value of loans receivable is estimated by discounting future cash
flows, using current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities of such loans.

Deposits

      The fair value of demand, savings and club accounts is equal to the amount
payable on demand at the reporting date. The fair value of certificates of
deposit is estimated using rates currently offered for deposits of similar
remaining maturities. The fair value estimates do not include the benefit that
results from the low-cost funding provided by deposit liabilities compared to
the cost of borrowing funds in the market.

Borrowings

      The fair values of advances from the Federal Home Loan Bank of New York,
securities sold under agreement to repurchase and other borrowed money are
estimated using the rates currently available to the Bank for debt with similar
terms and remaining maturities.

Commitments

      The fair market value of unearned fees associated with financial
instruments with off-balance sheet risk at March 31, 2003 approximates the fees
received. The fair value is not considered material.


                                       71
<PAGE>

      The carrying amounts and estimated fair values of the Bank's financial
instruments at March 31, 2003 and 2002 are as follows:


<TABLE>
<CAPTION>
                                                                                At March 31,
                                                          ------------------------------------------------------------
                                                                     2003                               2002
                                                          --------------------------        --------------------------
                                                          Carrying        Estimated         Carrying        Estimated
                                                           Amount         Fair Value         Amount         Fair Value
                                                          --------        ----------        --------        ----------
                                                                                (In thousands)
<S>                                                       <C>              <C>              <C>              <C>
Financial Assets:
    Cash and cash equivalents                             $ 23,160         $ 23,160         $ 34,851         $ 34,851
    Investment securities available-for-sale              $ 38,187         $ 38,772         $ 39,663         $ 39,401
    Mortgage backed securities held-to-maturity           $ 36,530         $ 37,543         $ 15,643         $ 15,716
    Mortgage backed securities available-for-sale         $ 89,966         $ 90,283         $ 49,942         $ 50,420
    Loans receivable                                      $292,738         $316,073         $289,114         $300,251
    Accrued interest receivable                           $  3,346         $  3,346         $  2,804         $  2,804
Financial Liabilities:
    Deposits                                              $347,164         $349,317         $324,954         $324,982
    Advances from FHLB of  New York                       $108,789         $112,443         $ 75,262         $ 74,375
    Other borrowed money                                  $    207         $    215         $    389         $    384
</TABLE>

Limitations

      The fair value estimates are made at a discrete point in time based on
relevant market information about the financial instruments. These estimates do
not reflect any premium or discount that could result from offering for sale at
one time the entire holdings of a particular financial instrument. Because no
quoted market value exists for a significant portion of the Bank's financial
instruments, fair value estimates are based on judgments regarding future
expected loss experience, current economic conditions, risk characteristics of
various financial instruments, and other factors. These estimates are subjective
in nature and involve uncertainties and matters of significant judgment and,
therefore, cannot be determined with precision. Changes in assumptions could
significantly affect the estimates.

      In addition, the fair value estimates are based on existing off balance
sheet financial instruments without attempting to value anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. Other significant assets and liabilities that are not
considered financial assets and liabilities include premises and equipment and
advances from borrowers for taxes and insurance. In addition, the tax
ramifications related to the realization of unrealized gains and losses can have
a significant effect on fair value estimates and have not been considered in any
of the estimates.

      Finally, reasonable comparability between financial institutions may not
be likely due to the wide range of permitted valuation techniques and numerous
estimates which must be made given the absence of active secondary markets for
many of the financial instruments. This lack of uniform valuation methodologies
introduces a greater degree of subjectivity to these estimated fair values.


                                       72
<PAGE>

NOTE 15. QUARTERLY FINANCIAL DATA (UNAUDITED)

      The following is a summary of unaudited quarterly financial data for the
fiscal years ended March 31, 2003 and 2002:

<TABLE>
<CAPTION>
                                                           Three Months Ended
                                       -----------------------------------------------------------
                                       June 30       September 30      December 31        March 31
                                       -------       ------------      -----------        --------
                                                    (In thousands, except per share data)
<S>                                    <C>              <C>              <C>              <C>
Fiscal 2003
Interest income                        $ 6,730          $ 6,746          $ 6,777          $ 7,125
Interest expense                        (2,338)          (2,210)          (2,219)          (2,216)
    Net interest income                  4,392            4,536            4,558            4,909
Provision for loan losses                   --               --               --               --
Non-interest income                        952              716              751              742
Non-interest expense                    (3,755)          (3,520)          (3,555)          (3,862)
Income tax expense                        (714)            (797)            (807)            (715)
                                       -------          -------          -------          -------
    Net income                         $   875          $   935          $   947          $ 1,074
                                       =======          =======          =======          =======
Earnings per common share
    Basic                                 0.36             0.39             0.39             0.45
    Diluted                               0.35             0.37             0.38             0.42
                                       =======          =======          =======          =======

Fiscal 2002
Interest income                        $ 7,049          $ 7,024          $ 7,162          $ 7,020
Interest expense                        (3,387)          (3,233)          (2,959)          (2,469)
    Net interest income                  3,662            3,791            4,203            4,551
Provision for loan losses                 (225)            (225)            (225)            (225)
Non-interest income                      1,420              476            1,976              613
Non-interest expense                    (3,419)          (3,438)          (3,836)          (3,505)
Income tax expense                        (273)            (115)            (402)             (91)
                                       -------          -------          -------          -------
    Net income                         $ 1,165          $   489          $ 1,716          $ 1,343
                                       =======          =======          =======          =======
Earnings per common share
    Basic                                 0.49             0.19             0.73             0.57
    Diluted                               0.47             0.19             0.69             0.53
                                       =======          =======          =======          =======
</TABLE>


                                       73
<PAGE>

NOTE 16. CARVER BANCORP, INC. (PARENT COMPANY ONLY) FINANCIAL STATEMENTS

CONDENSED STATEMENTS OF FINANCIAL CONDITION

                                                        AS OF MARCH 31,
                                                   -----------------------
                                                     2003            2002
                                                   -------         -------
                                                   (Dollars in thousands)

ASSETS
Cash on deposit with the Bank                      $    87         $   439
Investment in the Bank                              41,055          37,567
                                                   -------         -------
Total assets                                       $41,142         $38,006
                                                   =======         =======

LIABILITIES
Accounts payable to the Bank                       $     1         $    14
Other liabilities                                       68           1,250
                                                   -------         -------
Total liabilities                                       69           1,264
                                                   -------         -------

Stockholders' equity                                41,073          36,742
                                                   -------         -------
Total liabilities and stockholders' equity         $41,142         $38,006
                                                   =======         =======

CONDENSED STATEMENTS OF OPERATIONS

                                                       YEAR ENDED MARCH 31,
                                                -------------------------------
                                                 2003         2002         2001
                                                ------       ------       -----
                                                     (Dollars in thousands)
INCOME
Equity in net income from the Bank              $7,320       $6,247       $ 624
Interest income from deposit with the Bank           6           33          48
                                                ------       ------       -----
Total income                                     7,326        6,280         672

EXPENSES
Salaries and employee benefits                      52           82          64
Legal expense                                      102          236         233
Shareholder expense                                248          296         510
Other                                               60           72         156
                                                ------       ------       -----
Total expense                                      462          686         963

Income (loss) before income taxes                6,864        5,594        (291)
Income tax expense                               3,033          881          98
                                                ------       ------       -----
Net income (loss)                               $3,831       $4,713       $(389)
                                                ======       ======       =====


                                       74
<PAGE>

CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                          YEAR ENDED MARCH 31,
                                                               -----------------------------------------
                                                                 2003            2002              2001
                                                               -------          -------          -------
                                                                         (Dollars in thousands)
<S>                                                            <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)                                              $ 3,831          $ 4,713          $  (389)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Equity in net (income) of the Bank                              (7,320)          (6,247)            (624)
Income taxes from the Bank                                       3,033               --               --
Decrease in accounts receivable                                     --               --                3
Decrease in promissory note receivable                              --               --               50
(Decrease) increase in accounts payable to Bank                    (13)            (104)              45
(Decrease) increase in other liabilities                        (1,182)             976             (802)
Allocation of ESOP Stock and MRP activity                           --              206              203
Other, net                                                       1,664             (844)            (203)
                                                               -------          -------          -------
Net cash provided by (used in) operating activities                 13           (1,300)          (1,717)
                                                               -------          -------          -------

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the disposition of Alhambra Building                  --               --            2,136
                                                               -------          -------          -------

CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of treasury stock, net                                    (52)             (77)             (61)
Dividends paid                                                    (313)            (312)            (298)
                                                               -------          -------          -------
Net cash used in financing activities                             (365)            (389)            (359)
                                                               -------          -------          -------
Net (decrease) increase in cash                                   (352)          (1,689)              60

Cash and cash equivalents - beginning                              439            2,128            2,068
                                                               -------          -------          -------
Cash and cash equivalents - ending                             $    87          $   439          $ 2,128
                                                               =======          =======          =======
</TABLE>


                                       75
<PAGE>

NOTE 17. RECENT ACCOUNTING PRONOUNCEMENTS

GUARANTOR'S ACCOUNTING AND DISCLOSURE REQUIREMENTS FOR GUARANTEES, INCLUDING
INDIRECT GUARANTEES OF INDEBTNESS OF OTHERS

      In November 2002, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtness of Others" ("FIN 45"),
which addresses the disclosure to be made by a guarantor in its interim and
annual financial statements about its obligations under guarantees. FIN 45 also
requires the recognition of a liability by a guarantor at the inception of
certain guarantees.

      FIN 45 requires the guarantor to recognize a liability for the
non-contingent component of the guarantee; this is the obligation to stand ready
to perform in the event that specified triggering events or conditions occur.
The initial measurement of this liability is the fair value of the guarantee at
inception. The recognition of the liability is required even if it is not
probable that payments will be required under the guarantee or if the guarantee
was issued with a premium payment or as part of a transaction with multiple
elements.

      The Company will adopt the disclosure requirements of FIN 45 and will
apply the recognition and measurement provisions for all guarantees entered into
or modified after March 31, 2003. As of March 31, 2003 the Company maintains one
letter of credit in the amount of $1.9 million and therefore management does not
anticipate that the adoption of this interpretation will have a significant
effect on the Company's earnings or financial position.

ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS

      In October 2001, the FASB issued Statement No. 144 (SFAS No. 144),
"Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets. SFAS No. 144 supersedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
and the accounting and reporting provisions of APB Opinion No. 30, "Reporting
the Results of Operations-- Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions", for the disposal of a segment of a business (as previously
defined in that Opinion). This statement also amends Accounting Research
Bulletin No. 51, "Consolidated Financial Statements," to eliminate the exception
to consolidation for a subsidiary for which control is likely to be temporary.

      SFAS No. 144 improves financial reporting by requiring that one accounting
model be used for long-lived assets to be disposed of by sale, whether
previously held and used or newly acquired, and by broadening the presentation
of discontinued operations to include more disposal transactions. Carver Federal
adopted SFAS No. 144 on January 1, 2002. The adoption of SFAS No. 144 was not
material to Carver Federal's financial condition or results of operations.

ACCOUNTING FOR COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES

      In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." The Statement requires companies
to recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
Examples of costs covered by this standard include lease termination costs and
certain employee severance costs that are associated with a restructuring,
discontinued operation, plant closing or other exit or disposal activity.
Previous accounting guidance was provided by Emerging Issues Task Force ("EITF")
Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." SFAS No. 146 replaces EITF Issue No. 94-3. SFAS No. 146 is to
be applied prospectively to exit or disposal activities initiated after December
31, 2002.

ACCOUNTING FOR STOCK-BASED COMPENSATION - TRANSITION AND DISCLOSURE

      In December 2002, the FASB issued Statement No. 148 (SFAS No. 148),
"Accounting for Stock-Based Compensation -- Transition and Disclosure" -- an
amendment of FASB Statement No. 123 (SFAS No. 123), "Accounting for Stock-Based
Compensation". SFAS No. 148 amends SFAS No.123, to provide alternative methods
of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS No. 148
amends the disclosure requirements of SFAS No. 123 to require prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results.

      SFAS No. 148 requires disclosure of comparable information for all
companies regardless of whether, when, or how an entity adopts the fair value
based method of accounting. This statement improves the prominence and clarity
of the pro forma disclosures required by SFAS No. 123 by prescribing a specific
tabular format and by requiring disclosure in the "Summary of


                                       76
<PAGE>

Significant Accounting Policies" or its equivalent. In addition, this statement
improves the timeliness of those disclosures by requiring their inclusion in
financial reports for interim periods.

      The annual disclosure provisions of SFAS No. 148 are effective for fiscal
years ending after December 15, 2002, with earlier application permitted in
certain circumstances. The interim disclosure provisions are effective for
financial reports containing financial statements for interim periods beginning
after December 15, 2002. Carver Federal adopted the annual disclosure provisions
of SFAS No. 148 on December 31, 2002. Prior year disclosures have been amended
in the accompanying financial statement footnotes to conform with the new
disclosure requirements.

ACCOUNTING FOR CERTAIN FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF BOTH
LIABILITIES AND EQUITY

      On May 15, 2003 the FASB issued Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity". The
statement requires issuers to classify as liabilities (or assets in some
circumstances) three classes of freestanding financial instruments that embody
obligations for the issuer.

      Generally, the statement is effective for financial instruments entered
into or modified after May 31, 2003 and is otherwise effective at the beginning
of the first interim period beginning after June 15, 2003. Carver Federal will
adopt the provisions of the statement on July 1, 2003.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

      None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

      Information concerning Executive Officers of the Company which responds to
this Item is incorporated by reference from Item 1 contained in Part I of this
Form 10-K. The information that responds to this Item with respect to Directors
is incorporated by reference from the section entitled "Election of Directors"
in the Holding Company's definitive Proxy Statement. Information with respect to
compliance by the Company's Directors and Executive Officers with Section 16(a)
of the Exchange Act is incorporated by reference from the subsection entitled
"SEC Beneficial Ownership Reporting Compliance" in the Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION.

      The information required in response to this Item is incorporated by
reference from the section entitled "Compensation of Executive Officers" in the
Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

      The information required in response to this Item is incorporated by
reference from the section entitled "Security Ownership of Certain Beneficial
Owners And Management" in the Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

      The information required in response to this Item is incorporated by
reference from the section entitled "Transactions With Certain Related Persons"
in the Proxy Statement.

ITEM 14. CONTROLS AND PROCEDURES.

      Evaluation of disclosure controls and procedures. The Company maintains
controls and procedures designed to ensure that information required to be
disclosed in the reports that the Company files or submits under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the SEC. Within the 90 days prior to the
date of this report, the Company carried out an evaluation, under the
supervision and with the participation of the Company's management, including
the Company's Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and


                                       77
<PAGE>

operation of the Company's disclosure controls and procedures pursuant to
Exchange Act Rule 13a-14. Based on that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective and timely in alerting them to material information
relating to the Company (including its consolidated subsidiaries) required to be
included in the Company's periodic SEC filings.

      Changes in internal controls. The Company made no significant changes in
its internal controls or in other factors that could significantly affect these
controls subsequent to the date of the evaluation of those controls by the Chief
Executive Officer and Chief Financial Officer.

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a)   List of Documents Filed as Part of this Report

            (1)   Financial Statement Schedules. All financial statement
                  schedules have been omitted, as the required information is
                  either inapplicable or included in the Financial Statements or
                  related notes.

(b)   Reports on Form 8-K Filed During the Last Quarter of the Registrant's
      Fiscal Year Ended March 31, 2003 - None.

(c)   Exhibits required by Item 601 of Regulation S-K:

                  See Index of Exhibits on page E-1.


                                       78
<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

                                          CARVER BANCORP, INC.


June 27, 2003                         By  /s/ Deborah C. Wright
                                          -------------------------------------
                                          Deborah C. Wright
                                          President and Chief Executive Officer
                                          (Duly Authorized Representative)

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below on June 27, 2003 by the following persons on
behalf of the registrant and in the capacities indicated.

/s/ Deborah C. Wright        President, Chief Executive Officer and Director
------------------------     (Principal Executive Officer)
Deborah C. Wright

/s/ William Gray             Senior Vice President and Chief Financial Officer
------------------------     (Principal Financial and Accounting Officer)
William Gray

/s/ Frederick O. Terrell     Chairman
------------------------
Frederick O. Terrell

/s/ Carol Baldwin Moody      Director
------------------------
Carol Baldwin Moody

/s/ David L. Hinds           Director
------------------------
David L. Hinds

/s/ Robert Holland, Jr.      Director
------------------------
Robert Holland, Jr.

/s/ Pazel Jackson            Director
------------------------
Pazel G. Jackson, Jr.

/s/  Edward E. Ruggiero      Director
------------------------
Edward B. Ruggiero

/s/  Strauss Zelnick         Director
------------------------
Strauss Zelnick


                                       79
<PAGE>

                                  CERTIFICATION

I, Deborah C. Wright, President and Chief Executive Officer of Carver Bancorp,
Inc., certify that:

1. I have reviewed this annual report on Form 10-K of Carver Bancorp, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) Presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) All significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this annual
report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.


Date : June 27, 2003                            /s/ Deborah C. Wright
                                                -----------------------
                                                Deborah C. Wright
                                                President and
                                                Chief Executive Officer


                                       80
<PAGE>

                                  CERTIFICATION

I, William C. Gray, Senior Vice President and Chief Financial Officer of Carver
Bancorp, Inc., certify that:

1. I have reviewed this annual report on Form 10-K of Carver Bancorp, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) Presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) All significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this annual
report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.


Date: June 27, 2003                                   /s/ William C. Gray
                                                      -------------------------
                                                      William C. Gray
                                                      Senior Vice President and
                                                      Chief Financial Officer


                                       81
<PAGE>

EXHIBIT INDEX

Exhibit Number      Description
--------------      -----------

3.1                 Certificate of Incorporation of Carver Bancorp, Inc. (1)

3.2                 Amended and Restated Bylaws of Carver Bancorp, Inc.

4.1                 Stock Certificate of Carver Bancorp, Inc. (1)

4.2                 Federal Stock Charter of Carver Federal Savings Bank (1)

4.3                 Bylaws of Carver Federal Savings Bank (1)

4.4                 Amendments to Bylaws of Carver Federal Savings Bank (2)

4.5                 Certificate of Designations, Preferences and Rights of
                    Series A Convertible Preferred Stock (4)

4.6                 Certificate of Designations, Preferences and Rights of
                    Series B Convertible Preferred Stock (4)

10.1                Carver Bancorp, Inc. 1995 Stock Option Plan, effective as of
                    September 12, 1995 (1)

10.2                Carver Federal Savings Bank Retirement Income Plan, as
                    amended and restated effective as of January 1, 1997 and as
                    further amended through January 1, 2001

10.3                Carver Federal Savings Bank 401(k) Savings Plan in RSI
                    Retirement Trust, as amended and restated effective as of
                    January 1, 1997 and including provisions effective through
                    January 1, 2002

10.4                Carver Bancorp, Inc. Employee Stock Ownership Plan,
                    effective as of January 1, 1994, incorporating Amendment No.
                    1, incorporating Second Amendment, incorporating Amendment
                    No. 2, incorporating Amendment No. 2A, incorporating
                    Amendment No. 3 and incorporating Amendment No. 4

10.5                Carver Federal Savings Bank Deferred Compensation Plan,
                    effective as of August 10, 1993 (1)

10.6                Carver Federal Savings Bank Retirement Plan for Nonemployee
                    Directors, effective as of October 24, 1994 (1)

10.7                Carver Bancorp, Inc. Management Recognition Plan, effective
                    as of September 12, 1995 (1)

10.8                Carver Bancorp, Inc. Incentive Compensative Plan, effective
                    as of September 12, 1995 (1)


                                      E-1
<PAGE>

Exhibit Number      Description
--------------      -----------

10.9                Employment Agreement by and between Carver Federal Savings
                    Bank and Deborah C. Wright, entered into as of June 1, 1999
                    (3)

10.10               Employment Agreement by and between Carver Bancorp, Inc. and
                    Deborah C. Wright, entered into as of June 1, 1999 (3)

10.11               Securities Purchase Agreement by and among Carver Bancorp,
                    Inc., Morgan Stanley & Co. Incorporated and Provender
                    Opportunities Fund L.P. (5)

10.12               Registration Rights Agreement by and among Carver Bancorp,
                    Inc., Morgan Stanley & Co. Incorporated and Provender
                    Opportunities Fund L.P. (5)

10.13               Settlement Agreement and Mutual Release by and among BBC
                    Capital Market, Inc., The Boston Bank of Commerce, Kevin
                    Cohee and Teri Williams; Carver Bancorp, Inc., Deborah C.
                    Wright, David N. Dinkins, Linda H. Dunham, Robert J. Franz,
                    Pazel G. Jackson, Jr., Herman Johnson and David R. Jones;
                    Morgan Stanley & Co., Incorporated; and Provender
                    Opportunities Fund, L.P. and Frederick O. Terrell (5)

10.14               Amendment to the Carver Bancorp, Inc. 1995 Stock Option Plan
                    (6)

10.15               Amended and Restated Employment Agreement by and between
                    Carver Federal Savings Bank and Deborah C. Wright, entered
                    into as of June 1, 1999 (7)

10.16               Amended and Restated Employment Agreement by and between
                    Carver Bancorp, Inc. and Deborah C. Wright, entered into as
                    of June 1, 1999 (7)

10.17               Form of Letter Employment Agreement between Executive
                    Officers and Carver Bancorp, Inc. (7)

10.18               Employment Agreement by and between Carver Federal Savings
                    Bank and Catherine A. Papayiannis, entered into as of April
                    22, 2002 (7)

10.19               Carver Bancorp Compensation Plan for Non Employee Directors

10.20               Amendment Number One to Carver Federal Savings Bank
                    Retirement Income Plan, as amended and restated effective as
                    of January 1, 1997 and as further amended through January 1,
                    2001

10.21               First Amendment to the Restatement of the Carver Federal
                    Savings Bank 401(k) Savings Plan

10.22               Second Amendment to the Restatement of the Carver Federal
                    Savings Bank 401(k) Savings Plan for EGTRRA

21.1                Subsidiaries of the Registrant

23.2                Consent of KPMG LLP

99.1                Certification of Deborah C. Wright, President and Chief
                    Executive Officer, pursuant to 18 U.S.C. Section 1350, as
                    adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                    2002

99.2                Certification of William C. Gray, Senior Vice President and
                    Chief Financial Officer, pursuant to 18 U.S.C Section 1350,
                    as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
                    of 2002


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<PAGE>

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(1)   Incorporated herein by reference to Registration Statement No. 333-5559 on
      Form S-4 of Carver Bancorp, Inc., filed with the Securities and Exchange
      Commission on June 7, 1996.

(2)   Incorporated herein by reference to the Exhibits to the Registrant's
      Annual Report on Form 10-K for the fiscal year ended March 31, 1998.

(3)   Incorporated herein by reference to the Exhibits to the Registrant's
      Annual Report on Form 10-K for the fiscal year ended March 31, 1999.

(4)   Incorporated herein by reference to the Exhibits to the Registrant's
      Current Report on Form 8-K, dated January 14, 2000.

(5)   Incorporated herein by reference to the Exhibits to the Registrant's
      Annual Report on Form 10-K for the fiscal year ended March 31, 2000.

(6)   Incorporated herein by reference to the Registrant's Proxy Statement dated
      January 25, 2002.

(7)   Incorporated herein by reference to the Exhibits to the Registrant's
      Annual Report on Form 10-K for the fiscal year ended March 31, 2002.


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