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
(Mark One)

|X|  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934
                    For the fiscal year ended March 31, 2001

                                       OR

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

                         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
 incorporation or organization)                              Identification No.)

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. | |

     As of May 31,  2001,  there were  2,306,286  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 $9.00 per
share of the registrant's  common stock on May 31, 2001) was approximately $17.3
million.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None
<PAGE>

                              CARVER BANCORP, INC.
                         2001 ANNUAL REPORT ON FORM 10-K
                                TABLE OF CONTENTS

Part I                                                                     Page
                                                                           ----

Item 1.  Business.........................................................  1
Item 2.  Properties....................................................... 32
Item 3.  Legal Proceedings................................................ 32
Item 4.  Submission of Matters to a Vote of Security-Holders.............. 34

Part II

Item 5.  Market for the Registrant's Common
           Equity and Related Stockholder Matters......................... 35
Item 6.  Selected Financial Data.......................................... 36
Item 7.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations............................ 37
Item 7A. Quantitative and Qualitative Disclosures about Market Risk....... 49
Item 8.  Financial Statements and Supplementary Data...................... 49
Item 9.  Changes in and Disagreements with Accountants on
           Accounting and Financial Disclosure............................ 47

Part III

Item 10. Directors and Executive Officers of the Registrant............... 50
Item 11. Executive Compensation........................................... 54
Item 12. Security Ownership of Certain Beneficial Owners
           and Management................................................. 59
Item 13. Certain Relationships and Related Transactions................... 62

Part IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on
           Form 8-K....................................................... 63

SIGNATURES................................................................ 64
CONSOLIDATED FINANCIAL STATEMENTS OF CARVER
           BANCORP INC. AND SUBSIDIARIRES................................. F-1
EXHIBIT INDEX


                                       i
<PAGE>

                           FORWARD-LOOKING STATEMENTS

     This Annual Report on Form 10-K contains certain forward-looking statements
within the meaning of the Private Securities  Litigation Reform Act of 1995, and
may be identified by the use of such words as "believe," "expect," "anticipate,"
"should,"   "planned,"   "estimated"  and  "potential."  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 factors which could cause actual results to differ materially from these
estimates.  These factors include, without limitation,  the Company's success in
implementing  its  initiatives,   changes  in  general,   economic  and  market,
legislative and regulatory  conditions,  the development of an adverse  interest
rate environment that adversely affects the interest rate spread or other income
anticipated from the Company's  operations and  investments,  the ability of the
Company to originate and purchase  loans with  attractive  terms and  acceptable
credit quality and the ability of the Company to realize cost efficiencies.  The
Company  assumes no  obligation  to update  the  forward-looking  statements  to
reflect the actual  results,  changes in assumptions or changes in other factors
affecting such forward-looking statements.

ITEM 1. BUSINESS.

GENERAL

Carver Bancorp, Inc.

     Carver Bancorp,  Inc., a Delaware  corporation (the "Holding Company"),  is
the holding  company for Carver  Federal  Savings  Bank,  a federally  chartered
savings bank (the "Bank" or "Carver Federal"). Collectively, the Holding Company
and the Bank 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 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 common stock of the Holding Company.  At this time, 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  subsidiaries,  the Bank and  Alhambra  Holding  Corp.,  a Delaware
corporation  ("Alhambra").  The Company  formed  Alhambra to hold the  Company's
investment in a commercial  office building which was subsequently sold in March
2000. Alhambra is currently inactive.

     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 of New York  ("FHLB").  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, par value $0.01
per share.

     Carver  Federal  was  founded  to  provide  an  African-American   operated
institution  where  residents  of  under-served  communities  could invest their
savings and obtain  credit.  Carver  Federal's  principal  business  consists of
attracting  passbook and other savings  accounts  through its branch offices and
investing  those  funds in mortgage  loans and other  investments  permitted  to
federal  savings  banks.  During the fiscal year ended  March 31, 1997  ("fiscal
1997"),  Carver  adopted a business plan to shift its emphasis to direct lending
and  restructure  its  balance  sheet to shift  from  mortgage-backed  and other
investment  securities to higher  yielding whole loans. In the fourth quarter of
fiscal  1997 and the first  quarter of the  fiscal  year  ended  March 31,  1998
("fiscal 1998"), Carver restructured its balance sheet by purchasing whole loans
and  decreasing  its  investment  in   mortgage-backed   and  other   investment
securities.  Since fiscal 1998, Carver has continued following this strategy and
has expanded its origination of multi-family and commercial real estate mortgage
loans.  As a result of this effort,  Carver's loan  portfolio has  substantially
increased as a percentage  of total  assets,  and Carver's  earnings are derived
more from direct  lending and loan purchase  activities  than from  investing in
<PAGE>

securities.  Based on asset  size as of March 31,  2001,  Carver  Federal is the
largest African-American operated financial institution in the United States.

Changes in Executive Management

     Deborah C. Wright was  appointed  President,  Chief  Executive  Officer and
Director  of the  Holding  Company  and  the  Bank as of  June  1,  1999.  For a
description of Ms. Wright's business experience,  see "Executive Officers of the
Holding  Company--Deborah C. Wright." Ms. Wright succeeded Thomas L. Clark, Jr.,
who was removed from his position as President  and Chief  Executive  Officer of
the Holding Company, and President,  Chief Executive Officer and Director of the
Bank on January 25, 1999. Mr. Clark  subsequently  resigned from his position as
Director  of the  Holding  Company  as of June 1, 1999.  During the period  from
January  25,  1999 to June 1,  1999,  the  duties  of the  President  and  Chief
Executive  Officer  were  performed  by  an  Operating  Committee  comprised  of
directors and officers of Carver.

     Judith  Taylor was  appointed  Acting  Senior Vice  President  and Chief of
Retail Banking in November 1999,  Margaret D. Peterson was appointed Senior Vice
President and Chief  Administrative  Officer in November  1999,  James Boyle was
appointed Senior Vice President and Chief Financial  Officer in January 2000, J.
Kevin Ryan was appointed Senior Vice President and Chief Lending Officer in June
2000,  replacing  Benny A. Joseph who had served in such position since November
1999,  and  William  Schult was  appointed  Vice  President  and  Controller  in
September 2000. In January 2000, Walter Bond was appointed Senior Vice President
and Special  Assistant  to the  President  and Chief  Executive  Officer.  Devon
Woolcock was appointed Senior Vice President and Chief of Retail Banking in July
2000,  replacing  Ms.  Taylor  who  left  the  bank  in  September  2000.  For a
description of the business experience of the executive officers, see "Executive
Officers of the Holding Company."

     In May 2001, Mr. Boyle resigned as Chief Financial Officer.  William Schult
is currently serving as Acting Chief Financial Officer.

     Frank Deaton  joined  Carver as Senior Vice  President and Chief Auditor in
May, 2001.  Mr. Deaton was previously  Vice President & Risk Review Manager with
the KeyCorp Risk Management  Group in Cleveland,  Ohio, where he was responsible
for  developing  the scope and  overseeing  completion of risk reviews to ensure
that  critical  credit,  operational,   and  regulatory  compliance  risks  were
mitigated through effective internal controls.

     Linda J. Dunn was  appointed  Senior Vice  President,  General  Counsel and
Secretary in June 2001. Ms. Dunn had been a corporate  associate at the law firm
Paul,  Weiss,  Rifkin,  Wharton & Garrison since 1994. Her prior work experience
includes financial positions at Chemical Bank and American/National Can Company.

LENDING ACTIVITIES

     General. Carver's principal lending activity is the origination of mortgage
loans  for  the  purpose  of  purchasing  or  refinancing  one-  to  four-family
residential,  multi-family residential,  and commercial properties.  Carver also
originates  or  participates  in loans for the  construction  or  renovation  of
commercial  property  and  residential  housing  developments  and  occasionally
originates permanent financing upon completion.  In addition,  Carver originates
home equity loans and consumer loans secured by deposits.

     Carver originates one- to four-family  mortgage loans to service its retail
customers.  Carver continued to engage in  first-mortgage  loan purchases during
the fiscal year ended March 31, 2001 ("fiscal 2001"),  which accounted for 50.5%
of loan additions. Loan purchases complement retail originations, which increase
the loan portfolio as a percentage of total assets.  At March 31, 2001,  one- to
four-family  mortgage loans totaled $157.6 million,  or 54.6%, of Carver's total
gross loan  portfolio,  multi-family  loans totaled $83.6 million,  or 29.0%, of
total gross loans, commercial real estate loans (including church loans) totaled
$36.1 million,  or 12.5%, of total gross loans, and  construction  loans totaled
$7.1  million,  or 2.5%,  of total gross  loans.  Consumer  (credit  card loans,
personal  loans,  automobile  loans and home equity  loans) and  business  loans
totaled $4.0  million,  or 1.4%,  of total gross loans.  Gross loans  receivable
increased  by $13.9  million,  or 5.1%,  to $288.4  million  at March 31,  2001,
compared to $274.5  million at March 31, 2000.  Carver's net loan portfolio as a
percentage  of total assets  increased  to 66.8% at March 31, 2001,  compared to
64.3% at March 31, 2000.


                                       2
<PAGE>

     Loan Portfolio Composition. One- to four-family mortgage loans increased by
$5.1 million,  or 3.4%, to $157.6 million at March 31, 2001,  compared to $152.5
million at March 31, 2000.  During fiscal 2001,  multi-family  real estate loans
decreased by $2.6 million, or 3.0%, to $83.6 million at March 31, 2001, compared
to $86.2  million at March 31, 2000.  Commercial  real estate  loans  (including
church loans)  increased by $13.4 million,  or 59.0%,  to $36.1 million at March
31,  2001,  compared  to $22.7  million at March 31,  2000.  Construction  loans
increased by $708,000,  or 11.1%, to $7.1 million at March 31, 2001, compared to
$6.4  million at March 31, 2000.  Consumer  loans  (credit card loans,  personal
loans,  automobile  loans and home equity loans) and business loans decreased by
$2.7  million,  or 40.3%,  to $4.0  million at March 31,  2001  compared to $6.7
million  at March 31,  2000.  The  decrease  reflects  the  Company's  continued
de-emphasis of consumer  lending  resulting from its decision  during the fiscal
year ended March 31, 1999 ("fiscal  1999") to  discontinue  the  origination  of
unsecured consumer loans.

     Premium on loans increased by $123,000,  or 21.1%, to $705,000 at March 31,
2001,  compared to $582,000 at March 31,  2000  primarily  reflecting  increased
premium  paid on loans  purchased  somewhat  offset  by the  repayment  of loans
purchased at a premium.  Loans in process  increased by $218,000,  or 18.2%,  to
$1.3  million at March 31,  2001,  compared to $1.1  million at March 31,  2000.
Allowance for loan losses  increased by $616,000,  or 21.0%,  to $3.6 million at
March 31,  2001,  compared  to $2.9  million  at March 31,  2000,  reflecting  a
revision in the allowance schedule. See "Asset Quality--Asset Classification and
Allowance for Losses."

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

<TABLE>
<CAPTION>
                                                                           AT MARCH 31,
                                --------------------------------------------------------------------------------------------------
                                       2001                2000                1999                1998                1997
                                ------------------  ------------------  ------------------  ------------------  ------------------
                                  AMOUNT   PERCENT    AMOUNT   PERCENT    AMOUNT   PERCENT    AMOUNT   PERCENT    AMOUNT   PERCENT
                                ---------  -------  ---------  -------  ---------  -------  ---------  -------  ---------  -------
                                                                       (Dollars in thousands)
<S>                             <C>         <C>     <C>         <C>     <C>         <C>     <C>         <C>     <C>         <C>
Real estate loans:
    One- to four-family ....... $ 157,582    54.64% $ 152,458    55.54% $ 181,320    65.39% $ 188,761    66.85% $ 139,961    67.94%
    Multi-family ..............    83,620    29.00%    86,184    31.40%    52,365    18.89%    49,289    17.46%    19,936     9.68%
    Commercial real estate ....    36,113    12.52%    22,721     8.28%    23,092     8.33%    12,789     4.53%    22,415    10.88%
Construction ..................     7,101     2.46%     6,393     2.33%    11,047     3.98%    15,993     5.66%    14,386     6.98%
Consumer  and
    business loans (1) ........     3,966     1.38%     6,725     2.45%     9,450     3.41%    15,536     5.50%     9,310     4.52%
                                ---------  -------  ---------  -------  ---------  -------  ---------  -------  ---------  -------
Total gross loans ............. $ 288,382   100.00% $ 274,481   100.00% $ 277,274   100.00% $ 282,368   100.00% $ 206,008   100.00%
                                =========  =======  =========  =======  =========  =======  =========  =======  =========  =======
Add:
    Premium on loans .......... $     705           $     582           $   1,014           $   1,555           $   1,805
Less:
    Loans in process (2) ......    (1,280)             (1,062)             (2,636)             (4,752)             (6,854)
    Deferred fees and
        loan discounts ........      (819)               (918)             (1,110)             (1,080)               (795)
    Allowance for loan losses..    (3,551)             (2,935)             (4,020)             (3,137)             (2,246)
                                ---------           ---------           ---------           ---------           ---------
    Net  loan  portfolio ...... $ 283,437           $ 270,148           $ 270,522           $ 274,954           $ 197,918
                                =========           =========           =========           =========           =========
</TABLE>

(1)  Includes automobile loans,  personal loans, credit card loans, home equity,
     home improvement loans and business loans.

(2)  Represents undisbursed portion of outstanding construction loans.

     One- to Four-Family  Residential Lending.  Traditionally,  Carver's lending
activity  has been  the  origination  of loans  secured  by first  mortgages  on
existing one- to four-family  residences in Carver's market area.  During fiscal
2001,  the Company  continued  its practice of  purchasing  portfolios  of first
mortgage   loans  on  existing  one-  to   four-family   residences  to  augment
originations.

     Carver  originates and purchases one- to four-family  residential  mortgage
loans in amounts that range between $35,000 and $750,000.  Approximately  85% of
Carver's  one-to-four-family  residential  mortgage  loans at March 31, 2001 had
adjustable rates and approximately 15% had fixed rates.


                                       3
<PAGE>

     Carver'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 which 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 ratio
("LTV")  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 a special loan program,  the LTV ratio may go to
97%.  This  special loan program  consists of loans  originated  and sold to the
State of New York  Mortgage  Agency  ("SONYMA")  or  General  Motors  Acceptance
Corporation ("GMAC") secured by single-family homes purchased by first time home
buyers.

     Carver'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 SONYMA in the
secondary  market.  The Bank originates  fixed-rate loans that qualify for sale,
and from time to time has sold such loans to Fannie Mae since 1993 and to SONYMA
since 1984. 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  and  GMAC.  Carver  uses  several
sub-servicing firms to service mortgage loans, whether held in portfolio or sold
with the  servicing  retained.  At March 31,  2001,  the  Company,  through  its
sub-servicers, was servicing $2.2 million of loans for Fannie Mae and FHLMC.

     Carver  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's  portfolio and are not sold on the secondary  market.  They
are indexed to the weekly average rate on the 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 the 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 the Company's  portfolio  helps
reduce the Bank'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
the 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.

     Multi-Family  Real Estate Lending.  At March 31, 2001,  multi-family  loans
comprised  29.0% of Carver's  gross loan  portfolio.  The largest of these loans
outstanding  was a  $1.9  million  loan  on a 72  unit,  multi-family  apartment
building  located  in the New York  City  borough  of  Brooklyn.  This  loan was
performing  at March 31, 2001.  The Bank  intends to continue to  emphasize  its
multi-family  mortgage  loan  program  which has  enabled the Bank to expand its
presence in the  multi-family  lending market in the New York City area.  Carver
believes that it offers  competitive  rates with  flexible  terms which make the
product   attractive  to  borrowers.   Multi-family   property  lending  entails
additional  risks compared with 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 multi-family residential units.

     Carver's multi-family product guidelines generally require that the maximum
LTV not exceed  75%,  and "cash out"  refinances  are  limited to 65% LTV of 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.  Currently,  the
Bank limits its maximum amount


                                       4
<PAGE>

for an  individual  loan  to  $2.0  million  pursuant  to OTS  restriction.  The
regulatory  maximum is $4.5 million without this limitation.  Carver  originates
multi-family  mortgage 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 multi-family  real estate loans,  Carver employs (with the assistance of
an independent  consulting  firm) a risk-rating  system.  Under the  risk-rating
system,  all multi-family real estate loans with balances over $250,000 are risk
rated.  Separate  multi-family  real estate loan portfolio reviews are performed
annually resulting in written management summary reports.

     Commercial Real Estate Lending.  At March 31, 2001,  commercial real estate
mortgage loans (including loans to churches) totaled $36.1 million, or 12.5%, of
the gross  loan  portfolio.  Carver  originates  commercial  real  estate  first
mortgage  loans in its service area. At March 31, 2001,  the largest  commercial
loan  outstanding  was a $4.0 million loan secured by a  retail/office  building
located in  Manhattan,  New York.  This loan was  performing  at March 31, 2001.
Carver's commercial real estate lending activity consists predominantly of loans
for the purpose of purchasing or refinancing office, retail and church buildings
in its service area.  Commercial  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's  maximum LTV on
commercial  real estate  mortgage  loans is 75%, and "cash out"  refinances  are
limited to 65% LTV of the appraised value. The Bank generally  requires a DCR of
at least 1.3. Assignment of rents of all tenants leasing in the subject property
is a Bank requirement.

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

     Historically Carver has been a New York City area leader in the origination
of loans to  churches.  At March  31,  2001,  loans to  churches  totaled  $10.7
million, or 3.7%, of the Bank's gross loan portfolio. These loans generally have
5-, 7- 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, 2001, the largest  permanent  church loan was a $2.0
million loan secured by a building located in Manhattan, New York. This loan was
performing  at March 31, 2001.  The Bank  provides  construction  financing  for
churches and generally provides permanent  financing upon completion.  Under the
Bank's  current  loan  policy,  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 17 church loans in the 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 will
obtain a first  mortgage on the  underlying  real property and usually  requires
personal  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's  history.  Management  believes that Carver remains a leading lender to
churches in its market area.

     Construction  Lending.  The Bank originates  construction loans for the new
construction  and renovation of churches,  multi-family  buildings,  residential
developments,  community  service  facilities and


                                       5
<PAGE>

affordable housing programs.  Carver 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 accrued  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 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 which 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,  2001,  the Bank had $7.1 million  (excluding  $1.5 million of
committed but undisbursed funds) in construction  loans outstanding,  comprising
2.5% of the Bank's total gross loan portfolio. The largest construction loan was
on a retail  building for $2.0  million  located in the New York City borough of
Manhattan. At March 31, 2001, this loan was performing.

     Consumer and Business Loans. At March 31, 2001, the Bank had  approximately
$4.0 million in consumer and  business  loans,  or 1.4% of the Bank's gross loan
portfolio.  The secured loans in this  portfolio were either secured by deposits
at the Bank, homes or automobiles.  As of March 31, 2001, $1.3 million or 32.4%,
of all consumer and business loans were secured and $2.7 million, or 67.6%, 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,  and a borrower  may be able to assert  claims and
defenses  against  Carver  which it has  against  the  seller of the  underlying
collateral.  In  underwriting  consumer loans,  Carver  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.  In  addition,  with respect to
defaulted automobile loans,  repossessed  collateral may not provide an adequate
source of repayment of the outstanding loan balance as a result of damage,  loss
or  depreciation,  and the remaining  deficiency  often does not warrant further
substantial    collection    efforts   against   the   borrower.    See   "Asset
Quality--Non-performing Assets."

     At March 31,  2001,  the Bank had  $390,000 in business  loans and business
lines of credit;  $100,000 was secured by deposits  and $290,000 was  unsecured.
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 which are secured in full by passbook and/or
certificate of deposit accounts.

     Loan  Processing.  Carver'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.


                                       6
<PAGE>

     All  applications  are forwarded to the Lending  Department  located in the
main office.  Applications  for all fixed-rate  one- to four-family  real estate
loans are underwritten in accordance with Fannie Mae and SONYMA guidelines.  All
loan  applications  for other types of loans are underwritten in accordance with
the Bank's guidelines.

     Carver  has  established   underwriting   standards  for  multi-family  and
commercial real estate.  A commercial real estate loan  application is completed
for all multi-family and commercial properties which the Bank finances. Prior to
loan approval,  the property is inspected by a commercial 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 financial capacity.

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

     It is Carver'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. 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.  The  Board of  Directors  (the  "Board")  has the  overall
responsibility and authority for general  supervision of Carver's loan policies.
The Board has  established  written  lending  policies for the Bank.  The Bank's
Chief  Lending  Officer  has  authority  to approve all loans up to and equal to
$500,000,  the  Management  Loan  Committee  of the Bank  approves  loans  above
$500,000 to $1,000,000.  The Bank's Asset  Liability and Interest Rate Committee
must approve all loans above  $1,000,000 to $2,000,000.  All one-to  four-family
loans  mortgage  loans that  conform to Fannie Mae  standards  and limits can be
approved by the Vice  President,  Residential  Mortgage  Loan  Underwriter.  The
Management Loan Committee is composed of the President or President's  designee,
the Chief Lending  Officer,  and the Chief Financial  Officer.  Loans above $2.0
million 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 shall not exceed 15% of the unimpaired capital and surplus of
a savings  bank.  At March 31,  2001,  the maximum loan under this test would be
$4.5 million. The Bank currently limits its maximum loan to one borrower to $2.0
million.  There are three loan relationships  which exceed $2.0 million and none
that exceed the $4.5 million limit. All of the loans are performing.

     Loan Sales.  Originations  of one- to  four-family  real  estate  loans are
generally  within the New York City  metropolitan  area,  although  Carver  does
occasionally  fund loans in other areas.  All such loans,  however,  satisfy the
Company'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 ensure  subsequent sale in the secondary  market as required to manage
interest rate risk exposure.

     Loan Purchases. Carver purchased a total of $30.9 million of mortgage loans
consisting of performing one-family adjustable-rate mortgage loans to supplement
its origination of one- to four-family  first mortgage loans during fiscal 2001.
This represented  50.5% of Carver's net addition to its loan production at March
31, 2001. The Company  purchases loans in order to increase  interest income and
to manage  its  interest  rate risk.  The  Company  continues  to shift its loan
production  emphasis to take advantage of the higher yields and better  interest
rate risk  characteristics  available on multi-family and commercial real estate
mortgage  loans  as well as  increase  its  participation  in  multi-family  and
commercial  real  estate  mortgage  loans  with New  York  area  lenders.  Loans
purchased in fiscal 2001  decreased  $32.4 million,  or 48.8%,  from fiscal 2000
loan purchases of $63.3 million.


                                       7
<PAGE>

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

<TABLE>
<CAPTION>
                                                              For the Year Ended March 31,
                                          --------------------------------------------------------------------
                                                  2001                    2000                   1999
                                                  ----                    ----                   ----

Loans originated:                          Amount     Percent       Amount    Percent      Amount     Percent
                                           ------     -------       ------    -------      ------     -------
                                                                 (Dollars in thousands)
<S>                                       <C>           <C>        <C>          <C>       <C>           <C>
        One- to four-family ...........   $  2,274        3.71%    $  2,082       3.07%   $ 11,487       12.06%
        Multi-family ..................     15,747       25.70          319       0.47      12,013       12.61
        Commercial real estate ........     12,182       19.88          988       1.46       6,213        6.52
        Construction ..................         --          --        1,000       1.47       6,016        6.32
        Consumer & business loans (1)..        320        0.52          232       0.34       3,801        3.99
                                          --------    --------     --------   --------    --------    --------
Total loans originated ................     30,523       49.81        4,621       6.81      39,530       41.50
Loans purchased (2) ...................     30,922       50.45       63,282      93.19      55,842       58.62
Loans sold (3) ........................       (160)      (0.26)          --         --        (107)      (0.12)
                                          --------    --------     --------   --------    --------    --------
Net additions to loan  portfolio ......   $ 61,285      100.00%    $ 67,903     100.00%   $ 95,265      100.00%
                                          ========    ========     ========   ========    ========    ========
</TABLE>

----------

(1)  Comprised of auto, credit card, personal and home equity.

(2)  Comprised primarily of one-family mortgage loans and multi-family  mortgage
     loans.

(3)  Comprised primarily of one-family loans and student loans.

     Loan  originations  increased $25.9 million in fiscal 2001 to $30.5 million
compared  to $4.6  million  in fiscal  2000 as a result  of a  renewed  focus in
lending.

     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,  the 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 which secure the purchased loans are located are subject to
economic and real estate market  conditions that may  significantly  differ from
those  experienced  in Carver'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.

     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  although  specific  rates and terms may differ  from those  offered by the
Bank. A Lending  Department  officer  monitors the  inspection  and confirms the
review of each purchased loan.  Carver 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 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.


                                       8
<PAGE>

     Carver charges fees in connection with loan  commitments and  originations,
rate  lock-ins,  loan  modifications,  late  payments  and  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 receives fees for servicing loans
for others, which in turn generally are sub-serviced for Carver 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, 2001  regarding the dollar amount of loans  maturing in Carver'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's  actual  repayment
experience to differ from that shown below.

<TABLE>
<CAPTION>
                              Due During the Year Ending       Due After      Due After        Due After
                                       March 31,               3 Through      5 Through       10 Through      Due After
                              ----------------------------   5 Years After  10 Years After  20 Years After  20 Years After
                                2002      2003      2004    March 31, 2001  March 31, 2001  March 31, 2001  March 31, 2001    Total
                              --------  --------  --------  --------------  --------------  --------------  --------------  --------
<S>                           <C>       <C>       <C>          <C>             <C>             <C>              <C>         <C>
(Dollars in thousands)
Real Estate loans:
   One- to four-family ...... $      5  $     52  $    210     $  1,992        $    978        $  9,140         $145,205    $157,582
   Multi-family .............       --        --     3,417       32,390          35,287           8,203            4,323      83,620
   Commercial real estate ...       --        --        --        9,582          17,612           4,435            4,484      36,113
   Construction .............    7,101        --        --           --              --              --               --       7,101
Consumer and business loans..      310        --        --        3,496             160              --               --       3,966
                              --------  --------  --------     --------        --------        --------         --------    --------
       Total ................ $  7,416  $     52  $  3,627     $ 47,460        $ 54,037        $ 21,778         $154,012    $288,382
                              ========  ========  ========     ========        ========        ========         ========    ========
</TABLE>

     Scheduled  contractual  principal  repayments  of loans do not  necessarily
reflect the actual life 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 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.

ASSET QUALITY

     Non-performing  Assets.  When a  borrower  fails  to  make a  payment  on a
mortgage loan,  immediate steps are taken by Carver'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 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


                                       9
<PAGE>

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'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.

     If an automobile loan borrower fails to make a payment on a loan, immediate
steps are taken by Carver's loan  servicing  department to have the  delinquency
cured and the loan restored to current status. 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,  with a follow-up
letter requesting payment. By the 45th day of the delinquency, if payment is not
received,  repossession  efforts  begin.  Once the vehicle is  repossessed,  the
borrower has a 30 day right of redemption. In order for the borrower to exercise
this right, one of the following must occur:

     (1)  The borrower must make all  delinquent  payments  plus two  additional
          monthly payments,  coupled with  repossession and storage charges.  In
          addition,  the  borrower  must show  proof  that the  vehicle is fully
          insured and that Carver is the loss payee.

     (2)  If Carver  reasonably  believes that something  seriously  affects the
          ability to collect the monies owed under the installment loan note and
          the security agreement or the value of the collateral, the full unpaid
          balance  plus  accrued  interest,  late  charges and other fees become
          immediately  payable in order for the  vehicle to be  released  to the
          borrower.

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


                                       10
<PAGE>

<TABLE>
<CAPTION>
                                                                                At March 31,
                                                               ----------------------------------------------
                                                                2001      2000      1999      1998      1997
                                                               ------    ------    ------    ------    ------
                                                                           (Dollars in thousands)
<S>                                                            <C>       <C>       <C>       <C>       <C>
Loans accounted for on a non-accrual basis (1):
Real estate:
        One- to four-family ................................   $  947    $  966    $  392    $1,134    $1,791
        Multi-family .......................................      978       870     1,051       258        --
        Commercial real estate .............................      565        --        --        --       284
        Construction .......................................       23       122       560     3,089       954
Consumer and business loans ................................        6       168       414     1,087       256
                                                               ------    ------    ------    ------    ------
              Total non-accrual loans ......................   $2,519    $2,126    $2,417    $5,568    $3,285
                                                               ======    ======    ======    ======    ======
Accruing loans contractually past due 90 days or more:
Real Estate:
        One- to four-family ................................   $   --    $   --    $  568    $1,049    $  279
        Multi-family .......................................       --        --       804        --       373
        Nonresidential .....................................       --        --        --        --        --
        Construction .......................................       --        --       530        --     2,069
Consumer and business loans ................................       --        --       183       226       400
                                                               ------    ------    ------    ------    ------
              Total accruing 90-day past due loans .........   $   --    $   --    $2,085    $1,275    $3,121
                                                               ======    ======    ======    ======    ======
Total of non-accrual and accruing 90 day past due loans ....   $2,519    $2,126    $4,502    $6,843    $6,406
                                                               ======    ======    ======    ======    ======
Other non-performing assets (2):
Real estate:
        One- to four-family ................................   $   --    $  127    $  185    $   82    $   82
        Multi-family .......................................       27        27        --        --        --
        Nonresidential .....................................      449       768        --        --        --
Consumer loans .............................................       --        16        99        --        --
                                                               ------    ------    ------    ------    ------
              Total other non-performing assets ............   $  476    $  938    $  284    $   82    $   82
                                                               ======    ======    ======    ======    ======
Total non-performing assets ................................   $2,995    $3,064    $4,786    $6,925    $6,488
                                                               ======    ======    ======    ======    ======
Non-performing loans to total loans ........................     0.88%     0.79%     1.66%     2.47%     3.28%
Non-performing assets to total assets (3) ..................     0.71%     0.73%     1.15%     1.58%     1.53%

Troubled debt restructurings (4):
    Real estate:
        Multi-family and commercial ........................   $   --    $   --    $   --    $  807    $  413
                                                               ======    ======    ======    ======    ======
</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,  2001,  gross  interest  income of
     $202,000  would have been recorded on loans  accounted for on a non-accrual
     basis at the end of the 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 Company 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)  Non-performing  assets consist of non-accrual loans, accruing loans 90 days
     or more past due and property acquired in settlement of loans.


                                       11
<PAGE>

(4)  Troubled  debt  restructurings,  as defined  under  Statement  of Financial
     Accounting Standards ("SFAS") No. 15, are loans where the creditor has, for
     economic  or legal  reasons,  granted  concessions  to the debtor  that the
     creditor would not otherwise  consider.  At March 31, 2001,  2000 and 1999,
     Carver had no restructured loans.

     At March 31, 2001,  non-performing assets decreased by $69,000, or 2.3%, to
$3.0 million compared to $3.1 million at March 31, 2000.

     Loans accounted for on a non-accrual basis increased $393,000, or 18.5%, to
$2.5 million at March 31, 2001,  compared to $2.1 million at March 31, 2000. The
increase primarily reflects an increase in non-performing commercial real estate
loans.

     There  were no loans  contractually  past due 90 days or more at March  31,
2001 and March 31,  2000 that were  still  accruing,  reflecting  the  continued
practice  adopted by the Bank during fiscal 2000 to either write off or place on
non-accrual status all loans contractually past due 90 days or more.

     Other  non-performing  assets decreased $462,000,  or 49.3%, to $476,000 at
March 31, 2001,  compared to $938,000 at March 31, 2000. The decrease  primarily
reflects the sale of two foreclosed properties.

     Asset Classification and Allowances for Losses. Federal regulations require
savings  institutions  to  classify  their  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 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 which 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, 2001,  Carver Federal had $2.4 million of loans  classified as
substandard  which  represented  0.6% of the Bank's total assets and 8.0% of the
Bank's  tangible  regulatory  capital  at March 31,  2001.  There  were no loans
classified as doubtful or loss at March 31, 2001.

     The OTS,  in  conjunction  with the other  federal  banking  agencies,  has
adopted an  interagency  policy  statement on the  allowance  for loan 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 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 to increase its loss allowance,  thereby negatively affecting
Carver's reported financial condition and results of operations.

     Carver'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.  Management  conducts


                                       12
<PAGE>

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'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  reviews its assets on a quarterly  basis to  determine  whether any
assets require  classification or re-classification.  The Bank has a centralized
loan  processing  structure  that relies upon  outside  services,  each of which
generates a monthly report of delinquent  loans. The Bank's Board has designated
the Internal Asset Review Committee to perform  quarterly  reviews of the Bank's
asset  quality,  and their  report is  submitted  to the  Board for  review  and
approval prior to implementation of any  classification.  In originating  loans,
Carver  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
as a result of its  purchased  loans in such states.  See "Lending  Activities -
Loan  Purchases."  Carver  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 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.  At  March  31,  2001,  the  Bank  held  $476,000,  net of loss
allowance, in real estate acquired in settlement of loans. Any amount of cost in
excess of fair value is  charged-off  against  the  allowance  for loan  losses.
Carver  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.  See
Note 1 of Notes to Consolidated Financial Statements.


                                       13
<PAGE>

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

<TABLE>
<CAPTION>
                                                                  Year Ended March 31,
                                                     ----------------------------------------------
                                                      2001      2000      1999      1998      1997
                                                     ------    ------    ------    ------    ------
                                                                 (Dollars in thousands)
<S>                                                  <C>       <C>       <C>       <C>       <C>
Balance at beginning of period ...................   $2,935    $4,020    $3,138    $2,246    $1,206
                                                     ------    ------    ------    ------    ------
Loans charged-off:
Real estate:
    One- to four-family ..........................      252       138        --        --        --
    Multi-family .................................       --        --        --        --        --
    Commercial ...................................      194       171        --        --       624
    Consumer .....................................      931     2,260     3,229       367        75
                                                     ------    ------    ------    ------    ------
        Total charge-offs ........................    1,377     2,569     3,229       367       699
                                                     ------    ------    ------    ------    ------
Recoveries:
    Construction .................................       --        --        45        --        50
    One-to-four-family ...........................       --        31        --        --        --
    Multi-family .................................       --        40        --        --        --
    Commercial ...................................       --        22        --        --        --
    Consumer loans ...............................      200       292        37        --        --
                                                     ------    ------    ------    ------    ------
         Total recoveries ........................      200       385        82        --        50
                                                     ------    ------    ------    ------    ------
Net loans charged-off ............................    1,177     2,184     3,147       367       649
    Provision for loan losses ....................    1,793     1,099     4,029     1,259     1,689
                                                     ------    ------    ------    ------    ------
Balance at end of period .........................   $3,551    $2,935    $4,020    $3,138    $2,246
                                                     ======    ======    ======    ======    ======
Ratio of net charge-offs to average loans
      outstanding ................................     0.42%     0.84%     1.17%     0.15%     0.69%
Ratio of allowance to total loans ................     1.24%     1.07%     1.48%     1.11%     1.09%
Ratio of allowance to non-performing assets (1) ..   118.56%     5.79%    85.60%    45.30%    35.06%
</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.

     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,
                               ------------------------------------------------------------------------------------------------
                                      2001                2000                1999                1998                1997
                               ------------------  ------------------  ------------------  ------------------  ----------------

                                       Percent of          Percent of          Percent of          Percent of          Percent of
                                        Loans in            Loans in            Loans in            Loans in            Loans in
                                          Each                Each                Each                Each                Each
                                        Category            Category            Category            Category            Category
                                        To Total            To Total            To Total            To Total            To Total
                               Amount     Loans    Amount     Loans    Amount     Loans    Amount     Loans    Amount     Loans
                               ------    ------    ------    ------    ------    ------    ------    ------    ------    ------
                                                                    (Dollars in thousands)
<S>                            <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
Loans:
  Real estate:
    One-to four-family ......  $1,198     33.74%   $1,050     35.78%   $  957     23.81%   $1,691     53.91%   $1,065     47.40%
    Multi-family ............     748     21.06       764     26.03       902     22.44       400     12.75       264     11.76
    Commercial real estate ..     353      9.94       202      6.88       251      6.24       111      3.53       414     18.44
    Construction ............     290      8.17       272      9.27       424     10.55       340     10.84       212      9.44
Consumer and business .......     962     27.09       647     22.04     1,486     36.96       596     18.97       291     12.96
                               ------    ------    ------    ------    ------    ------    ------    ------    ------    ------
Total allowance for loan
  losses ....................  $3,551    100.00%   $2,935    100.00%   $4,020    100.00%   $3,138    100.00%   $2,246    100.00%
                               ======    ======    ======    ======    ======    ======    ======    ======    ======    ======
</TABLE>

Mortgage-Backed and Related Securities

     Carver 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 collateralized
mortgage obligations ("CMOs"). GNMA pass-through  certificates are


                                       14
<PAGE>

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  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's CMOs are  primarily  adjustable-rate
CMOs  issued  by the  Resolution  Trust  Corporation  ("RTC").  Carver  also has
invested in pools of loans  guaranteed as to principal and interest by the Small
Business Administration ("SBA").

     Although  mortgage-backed  securities  generally yield from 60 to 100 basis
points less than whole loans, they present  substantially  lower credit risk and
are more liquid than individual  mortgage loans and may be used to collateralize
obligations of the Bank.  Because Carver 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--Regulation  of Federal Savings
Associations--QTL Test" and "Federal and State Taxation."

     The Bank seeks to avoid interest rate risk by investing in  adjustable-rate
mortgage-backed securities which at March 31, 2001 constituted $23.3 million, or
54.3%, of the mortgage-backed securities portfolio.  Mortgage-backed securities,
however, expose Carver to certain unique risks. In a declining rate environment,
accelerated  prepayments of loans underlying  these securities  expose Carver 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 increased  effort by Carver since fiscal 1997 to originate and purchase
loans has shifted the emphasis away from the use of  mortgage-backed  securities
as the  Bank's  primary  interest  earning  asset.  Over  the last  fiscal  year
repayments  received  from   mortgage-backed   securities  have  primarily  been
reinvested in  residential  mortgage  loans.  This has resulted in a decrease in
Carver's  investment  in  mortgage-backed  securities  and a  reduction  in  the
percentage of  mortgage-backed  securities  to total assets.  At March 31, 2001,
mortgage-backed  securities  constituted  10.1% of total assets,  as compared to
12.9% at March 31, 2000.

     The   following   table  sets  forth  the   carrying   value  of   Carver's
mortgage-backed securities at the dates indicated.

                                              At March 31,
                                     -----------------------------
                                       2001       2000       1999
                                     -------    -------    -------
                                             (In thousands)
Held to Maturity:
     GNMA .......................    $ 5,774    $ 6,516    $ 7,631
     Fannie Mae .................     21,633     26,222     29,718
     FHLMC ......................     14,672     18,780     24,636
     SBA ........................        594        760      1,325
     CMO:
         RTC ....................         --      1,708      2,282
         FHLMC ..................         --         --        647
         Other ..................        193        243        345
                                     -------    -------    -------
            Total CMOs ..........        193      1,951      3,274
                                     -------    -------    -------
Total held to maturity ..........    $42,866    $54,229    $66,584
                                     =======    =======    =======


                                       15
<PAGE>

     The following table sets forth the scheduled  maturities,  carrying values,
market  values and average  yields for Carver's  mortgage-backed  securities  at
March 31, 2001. 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.

<TABLE>
<CAPTION>
                   One to Five Years     Five to Ten Years    More than Ten Years   Total Mortgage-Backed Securities
                  -------------------   -------------------   -------------------   -------------------------------
                  Carrying    Average   Carrying    Average   Carrying    Average    Carrying    Market     Average
                    Value      Yield      Value      Yield      Value      Yield       Value      Value      Yield
                  --------    -------   --------    -------   --------    -------    --------    -------    -------
                                                        (Dollars in thousands)
<S>                <C>           <C>     <C>           <C>     <C>           <C>      <C>        <C>           <C>
GMNA ..........    $    --         --%   $    --         --%   $ 5,774       6.58%    $ 5,774    $ 5,855       6.58%
Fannie Mae ....         --         --      3,505       6.59     18,128       6.40      21,633     21,622       6.43
FHLMC .........        287       7.83        842       7.61     13,543       6.31      14,672     14,636       6.42
SBA ...........         --         --         --         --        594       6.87         594        542       6.87
CMO ...........         --         --         --         --        193       5.98         193        187       5.98
                   -------               -------               -------                -------    -------
                   $   287               $ 4,347               $38,232                $42,866    $42,842
                   =======               =======               =======                =======    =======
</TABLE>

Investment Activities

     Carver  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.  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--Regulation of Federal Savings Associations--Liquidity."


                                       16
<PAGE>

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

<TABLE>
<CAPTION>
                                                                      At March 31,
                                                              ---------------------------
                                                                2001      2000      1999
                                                              -------   -------   -------
                                                                    (In thousands)
<S>                                                           <C>       <C>       <C>
U.S. Government and Agency securities held to maturity ....   $24,996   $24,996   $    --
U.S. Government and Agency securities available for sale ..    19,926    24,952    29,918
                                                              -------   -------   -------
       Total investment securities ........................   $44,922   $49,948   $29,918
                                                              =======   =======   =======
</TABLE>

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

                                    At March 31,
                            ---------------------------
                              2001      2000      1999
                            -------   -------   -------
                                   (In thousands)
FHLB stock ..............   $ 5,755   $ 5,755   $ 5,755
Federal funds sold ......    23,700    11,300    10,200

     The following table sets forth the scheduled  maturities,  carrying values,
market values and average yields for Carver's investments at March 31, 2001.

<TABLE>
<CAPTION>
                                             One Year or Less      One to Five Years           Total Investments
                                           -------------------    -------------------    ------------------------------
                                           Carrying    Average    Carrying    Average    Carrying    Market     Average
                                            Value       Yield      Value       Yield      Value       Value      Yield
                                           --------   --------    --------   --------    --------   --------   --------
                                                                        (Dollars in thousands)
<S>                                        <C>            <C>     <C>            <C>     <C>        <C>            <C>
U.S. Government and Agency securities ..   $ 19,926       4.98%   $ 24,996       6.40%   $ 44,922   $ 46,015       5.77%
Federal funds sold .....................     23,700       5.00          --         --      23,700     23,700       5.00
FHLB stock .............................      5,755       7.32          --         --       5,755      5,755       7.32
                                           --------               --------               --------   --------
Total investments ......................   $ 49,381               $ 24,996               $ 74,377   $ 75,470
                                           --------               --------               --------   --------
</TABLE>

Deposit Activity and Other Sources of Funds

     General.  Deposits are the primary source of Carver's funds for lending and
other investment  purposes.  In addition to deposits,  Carver 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.  Borrowing may be used to supplement
the Company's  available  funds,  and from time to time the Company has borrowed
funds from the FHLB and through repurchase agreements.

     Deposits.  Carver 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 also offers Individual  Retirement Accounts.  Carver'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 also
holds  deposits  from  various   governmental   agencies  or   authorities   and
corporations.  Carver does not accept deposits from brokers. 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 Company's  funds  acquisition  and
liquidity  requirements,  the  rates  paid  by the  Company's  competitors,  the
Company's growth goals and applicable regulatory restrictions and requirements.


                                       17
<PAGE>

     During the fiscal year ended March 31, 2001 the Bank sold deposits to other
financial  institutions with balances as of the transfer dates of $22.5 million.
Subsequent  to March 31,  2001,  the Bank sold its  facility and deposits in its
branch  located  in East  New  York.  See  "Market  Area  and  Competition"  for
additional discussion of deposits sold.

     The  following  table  sets  forth  deposit  categories,  weighted  average
interest rate, minimum terms, minimum balance,  aggregate balance and percentage
of total deposits for Carver's deposits at March 31, 2001.

<TABLE>
<CAPTION>
  Weighted                                                                        Aggregate      Percentage
   Average        Minimum                                             Minimum      Balance        of Total
Interest Rate       Term                     Category                 Balance   (In thousands)    Deposits
-------------    ---------      ---------------------------------    --------   --------------   ---------
<S>              <C>            <C>                                  <C>             <C>            <C>
    1.49%        None           NOW accounts                         $  1,000        $  14,757        5.28%
    2.14         None           Savings and club                          300          132,645       44.47
    2.25         None           Money market savings accts.               500           15,718        5.63
      --         None           Other demand accounts                     500           11,409        4.08
                                                                                --------------   ---------
                                Total Savings accounts                               $ 174,529       62.46
                                                                                ==============   =========
                                Certificates of Deposit:
    4.26         91 days        91 to 181 Day                           2,500        $   3,379        1.21
    4.13         182 days       182 to 364 Day                          2,500            9,224        3.30
    4.71         12 Months      12 to 17 Month                          1,000           12,543        4.49
    5.04         18 Months      18 to 29 Month                          1,000            9,421        3.37
    5.12         30 Months      30 to 59 Month                          1,000           10,682        3.82
    5.07         5 Years        5 to 7 Year                               500           22,564        8.08
    3.55         3 Years        BEA FDIC Secured (1)                   10,000              600         .21
    3.86         --             Credit Card Collateral (2)                300              151         .05
    6.26         9 Months       G.W. Carver Heritage - Personal           500            7,661        2.74
    5.96         9 Months       G.W. Carver Heritage -NonPersonal      10,000            8,185        2.93
    5.73         30 Days        Jumbo                                 100,000           20,485        7.34
                                                                                --------------   ---------
                                Total Certificates of Deposit                          104,895       37.54
                                                                                --------------   ---------
                                Total Deposits                                       $ 279,424      100.00%
                                                                                ==============   =========
</TABLE>

     (1)  Bank Enterprise Award,  deposit program sponsored by the U.S. Treasury
          Department.

     (2)  Term matched to secured credit card.

     The  following  table sets forth the change in dollar amount of deposits in
the various types of accounts offered by Carver between the dates indicated.

<TABLE>
<CAPTION>
                               Balance at   Percentage               Balance at   Percentage              Balance at   Percentage
                                March 31,    of Total    Increase     March 31,    of Total    Increase    March 31,    of Total
                                  2001       Deposits   (Decrease)      2000       Deposits   (Decrease)     1999       Deposits
                               ----------   ----------  ----------   ----------   ----------  ----------  ----------   ----------
                                                                    (Dollars in   thousands)
<S>                             <C>           <C>        <C>          <C>           <C>         <C>        <C>           <C>
Savings and club ...........    $132,645       47.47%    $(12,632)    $145,277       51.53%     $ 1,482    $143,795       51.91%
Money market savings .......      15,718        5.63       (3,700)      19,418        6.89       (1,514)     20,932        7.56
NOW and demand accounts ....      26,166        9.36       (5,044)      31,210       11.06        4,499      26,711        9.64
Certificates of deposit ....     104,895       37.54       18,859       86,036       30.52          475      85,561       30.89
                                --------      ------     --------     --------      ------      -------    --------      ------

      Total deposits .......    $279,424      100.00     $ (2,517)    $281,941      100.00%     $ 4,942    $276,999      100.00%
                                ========      ======     ========     ========      ======      =======    ========      ======
</TABLE>


                                       18
<PAGE>

The following table sets forth the average balances and interest rates based on
month end balances for certificates of deposit and non-certificate accounts as
of the dates indicated.

<TABLE>
<CAPTION>
                                                           Year Ended March 31,
                                    ------------------------------------------------------------------
                                           2001                    2000                    1999
                                    ------------------      ------------------      ------------------
                                    Average    Average      Average    Average      Average    Average
                                    Balance      Rate       Balance      Rate       Balance      Rate
                                    -------    -------      -------    -------      -------    -------
                                                          (Dollars in thousands)
<S>                                <C>           <C>       <C>           <C>       <C>           <C>
Non-interest-bearing demand .      $ 11,568        --%     $ 11,388        --%     $  9,670        --%
Savings and club ............       137,305      2.22       143,908      2.54       144,990      2.49
Certificates ................        94,006      5.04        86,316      4.65        80,897      4.81
Money market savings accounts        17,598      2.34        19,578      3.22        21,541      2.85
NOW accounts ................        15,926      1.59        18,032      1.74        18,789      1.67
                                   --------                --------                --------
     Total ..................      $276,403                $279,222                $275,887
                                   ========                ========                ========
</TABLE>

     The following table sets forth time deposits in specified  weighted average
interest rate categories as of the dates indicated.

                                      At March 31,
                          ------------------------------------
                            2001          2000          1999
                          --------      --------      --------
                                     (In thousands)
2%-3.99% ...........      $    752      $  5,129      $ 18,034
4%-5.99% ...........       104,143        80,907        67,527
                          --------      --------      --------
    Total ..........      $104,895      $ 86,036      $ 85,561
                          ========      ========      ========

     The following  table sets forth the amount and  maturities of time deposits
in specified weighted average interest rate categories at March 31, 2001.

                                       Amount Due
                 -----------------------------------------------------
                 Less Than                          After
      Rate        One Year  1-2 Years  2-3 Years   3 Years      Total
---------------  ---------  ---------  ---------   --------   --------
                                    ( In thousands)
2% - 3.99% ....   $     --   $     --   $    752   $     --   $    752
4% - 5.99% ....     48,933     20,034      8,905     26,271    104,143
                  --------   --------   --------   --------   --------
      Total ...   $ 48,933   $ 20,034   $  9,657   $ 26,271   $104,895
                  ========   ========   ========   ========   ========

     Carver's  certificates of deposit of $100,000 or more were $16.3 million as
of March 31, 2001.

     The following  table sets forth  Carver's  deposit  reconciliation  for the
periods indicated.

<TABLE>
<CAPTION>
                                                           Year Ended March 31,
                                                 -----------------------------------------
                                                    2001            2000            1999
                                                 ---------       ---------       ---------
                                                              (In thousands)
<S>                                              <C>             <C>             <C>
Deposits at beginning of year .............      $ 281,941       $ 276,999       $ 274,894
Net decrease before interest credited .....        (10,973)         (3,670)         (6,315)
Interest credited .........................          8,456           8,612           8,420
                                                 ---------       ---------       ---------
Deposits at end of year ...................      $ 279,424       $ 281,941       $ 276,999
                                                 =========       =========       =========
</TABLE>

     Included in the net decrease in deposits  before  interest  credited is the
amount of deposits sold during the year ended March 31, 2001 of $22.5 million at
the date of transfer.

     Borrowing.  Savings deposits  historically  have been the primary source of
funds for Carver's lending, investment and general operating activities.  Carver
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  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


                                       19
<PAGE>

maturities. Advances from the FHLB are secured by Carver's stock in the FHLB and
a blanket  pledge  of  Carver's  mortgage  loan and  mortgage-backed  securities
portfolios.

     One of the  elements of  Carver'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 loans. The Bank
seeks to match as closely as possible the term of borrowing  with the  repricing
cycle of the mortgage loans on the balance sheet. At March 31, 2001,  Carver had
outstanding  $100.3 million in FHLB advances and $4.9 million in securities sold
under agreements to repurchase.

     The  following  table sets forth  certain  information  regarding  Carver's
short-term borrowings at the dates and for the periods indicated:

<TABLE>
<CAPTION>
                                                                          At or for the
                                                                        Year Ended March 31,
                                                               --------------------------------------
                                                                 2001           2000           1999
                                                               --------       --------       --------
                                                                       (Dollars in thousands)
<S>                                                            <C>            <C>            <C>
Amounts outstanding at end of period:
      FHLB advances ........................................   $100,299       $ 66,688       $ 65,708
      Securities sold under agreements to repurchase .......      4,930         31,337         35,337
Weighted average rate paid at period end:
      FHLB advances ........................................       5.84%          5.60%          5.46%
      Securities sold under agreements to repurchase .......       6.70%          5.49%          5.52%
Maximum amount of borrowing outstanding at any month end:
      FHLB advances ........................................   $102,314       $ 66,688       $ 65,723
      Securities sold under agreements to repurchase .......     31,337         35,337         85,720
Approximate average amounts outstanding for period:
      FHLB advances ........................................   $ 80,591       $ 65,031       $ 47,393
      Securities sold under agreements to repurchase .......     17,165         32,670         59,296
Approximate weighted average rate paid during period (1):
      FHLB advances ........................................       5.72%          5.47%          5.66%
      Securities sold under agreements to repurchase .......       5.99%          5.46%          5.74%
</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

     The Holding Company is the parent of two wholly owned subsidiaries,  Carver
Federal and Alhambra.

     As a federally chartered savings  institution,  Carver Federal is permitted
to invest up to 2% of its  assets in  subsidiary  service  corporations  plus an
additional 1% in subsidiaries engaged in specified community purposes.  At March
31, 2001, the net book value of the Bank's service corporations  investments was
$158,000.

     Carver  Federal is also  authorized  to make  investments  of any amount in
operating  subsidiaries  that engage solely in activities  that federal  savings
institutions may conduct directly. On March 8, 1995, the Bank formed CFSB Realty
Corp.  as a wholly owned  subsidiary  which holds real estate  acquired  through
foreclosure pending eventual disposition. At March 31, 2001, this subsidiary had
$158,000 in total capital and net operating expenses of $203,000.

     On  September  19,  1996,  the Bank formed CFSB Credit  Corp.  ("CCC") as a
wholly owned subsidiary to undertake  Carver's credit card issuance.  During the
fourth quarter of fiscal 1998, in response to  delinquencies  in the credit card
portfolio,  the Board resolved to discontinue  the direct  issuance of unsecured
credit cards and limited the issuance of secured  credit cards to existing  Bank
customers.  CCC is currently inactive, and its operations have been consolidated
into the Bank's activities.

     Alhambra  was  formed  in  1996  to  hold  the  Company's  investment  in a
commercial office building,  which was subsequently sold in March 2000. Alhambra
is currently inactive.


                                       20
<PAGE>

Market Area and Competition

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

     Although Carver's branches are located in areas that have been historically
underserved  by  other  financial  institutions,  Carver  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. Many of Carver's  competitors have substantially  greater resources
than Carver and offer a wider array of  financial  services  and  products  than
Carver.  At times,  these  larger  commercial  banks and thrifts may offer below
market  interest  rates on mortgage  loans and above market  interest  rates for
deposits.  These pricing concessions  combined with competitors' larger presence
in the New York  market add to the  challenges  Carver  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.

     Branch  Sales.  During the fiscal year ended March 31, 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.  Subsequent  to the year ended March 31,  2001,  the Bank sold its
branch  located  in East New York (the  "East New York  Branch").  This sale was
completed  on June 15,  2001.  As a  result  of this  sale the Bank  transferred
approximately  $16 million of deposits to the  purchaser,  City National Bank of
New Jersey.

Employees

     As of March 31, 2001, Carver had 110 full-time equivalent  employees,  none
of whom was  represented  by a  collective  bargaining  agreement.  The  Company
considers its employees relations to be good.

REGULATION AND SUPERVISION

General

     The Bank is subject to extensive regulation,  examination,  and supervision
by the OTS, as its chartering agency, and the FDIC, as its deposit insurer.  The
Bank's  deposit  accounts  are  insured up to  applicable  limits by the Savings
Association Insurance Fund ("SAIF") administered by the FDIC, and it is a member
of the FHLB. The Bank must file reports with the OTS and the FDIC 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 OTS and the FDIC conduct
periodic  examinations to assess the Bank's  compliance with various  regulatory
requirements.  This  regulation  and  supervision  establishes  a  comprehensive
framework  of  activities  in which a  savings  association  can  engage  and is
intended primarily for the protection of the insurance fund and depositors.  The
Holding Company,  as a savings  association holding company, 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 have  significant  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
policies,  whether by the OTS, the FDIC, or the Congress,  could have a material
adverse impact on the Holding Company, the Bank, and the operations of both.

     The  following  discussion  is  intended  to be a summary  of the  material
statutes and  regulations  applicable to savings  associations,  and it does not
purport to be a comprehensive description of all such statutes and regulations.


                                       21
<PAGE>

Impact of Enactment of the Gramm-Leach-Bliley Act

     The Gramm-Leach-Bliley Act ("Gramm-Leach"), among other things, establishes
a  comprehensive  framework  to  permit  affiliations  among  commercial  banks,
insurance companies and securities firms. Generally, the new law (1) repeals the
historical  restrictions  and eliminates  many federal and state law barriers to
affiliations  among banks and securities  firms,  insurance  companies and other
financial service providers, (2) provides a uniform framework for the activities
of banks,  savings  institutions and their holding  companies,  (3) broadens the
activities  that may be conducted by  subsidiaries  of national  banks and state
banks,  (4)  provides  an  enhanced  framework  for  protecting  the  privacy of
information  gathered by financial  institutions  regarding  their customers and
consumers,  (5) adopts a number of  provisions  related  to the  capitalization,
membership,  corporate  governance and other measures  designed to modernize the
FHLB System,  (6) requires public disclosure of certain  agreements  relating to
funds expended in connection with an institution's  compliance with the CRA, and
(7)  addresses a variety of other legal and  regulatory  issues  affecting  both
day-to-day  operations  and  long-term  activities  of  financial  institutions,
including the functional regulation of bank securities and insurance activities.

     Gramm-Leach  also  restricts  the powers of new  unitary  savings  and loan
association  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 the Holding  Company,  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 association holding companies.

     Gramm-Leach  also  requires  financial  institutions  to  disclose,  on ATM
machines,  any  non-customer  fees and to disclose to their  customers  upon the
issuance of an ATM card any fees that may be imposed by the  institutions on ATM
users. For older ATMs, financial  institutions will have until December 31, 2004
to provide such notices.

     Bank  holding  companies  are  permitted  to engage in a wider  variety  of
financial  activities  than  permitted  under the prior law,  particularly  with
respect to insurance and securities  activities.  In addition,  in a change from
the prior law, bank holding companies are in a position to be owned,  controlled
or acquired by any company engaged in financially related activities.

     The Bank does not  believe  that the new law will have a  material  adverse
affect upon its operations in the near term.  However, to the extent the new law
permits  banks,  securities  firms and  insurance  companies to  affiliate,  the
financial services industry may experience further  consolidation.  This type of
consolidation could result in a growing number of larger financial  institutions
that offer a wider variety of financial  services than the Bank currently offers
and that can more aggressively compete in the markets we currently serve.

Regulation of Federal Savings Associations

     Business  Activities.  The Bank derives its lending and  investment  powers
from the Home Owner's Loan Act, as amended ("HOLA"),  and the regulations of the
OTS  thereunder.  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.  These investment powers are
subject  to  various  limitations,  including  (a)  a  prohibition  against  the
acquisition  of any corporate debt security that is not rated in one of the four
highest rating  categories;  (b) a limit of 400% of an association's  capital on
the aggregate amount of loans secured by  non-residential  real estate property;
(c) a limit of 20% of an  association's  assets on  commercial  loans,  with the
amount of  commercial  loans in excess of 10% of assets  being  limited to small
business loans; (d) a limit of 35% of an  association's  assets on the aggregate
amount of consumer  loans and  acquisitions  of certain debt  securities;  (e) a
limit of 5% of assets on  nonconforming  loans  (loans in excess of the specific
limitations  of  HOLA);  and (f) a limit of the  greater  of 5% of  assets or an
association's  capital on  certain  construction  loans made for the  purpose of
financing what is or is expected to become residential property.


                                       22
<PAGE>

     Loans to One  Borrower.  Under HOLA,  savings  associations  are  generally
subject to the same  limits on loans to one  borrower as are imposed on national
banks. Generally,  under these limits, a savings association may not make a loan
or extend  credit to a single or related  group of borrowers in excess of 15% of
the  association's  unimpaired  capital and surplus.  Additional  amounts may be
lent, not in excess of 10% of unimpaired  capital and surplus,  if such loans or
extensions of credit are fully secured by readily  marketable  collateral.  Such
collateral is defined to include certain debt and equity securities and bullion,
but generally does not include real estate.  At March 31, 2001, the Bank's limit
on loans to one borrower  based on its  unimpaired  capital and surplus was $4.5
million.  During  fiscal 1999,  the Bank was directed by the OTS to abstain from
originating  new loans  which  individually,  or in the  aggregate  exceed  $2.0
million to one borrower.  Since such notice,  the Bank has not originated  loans
which individually or in the aggregate exceed $2.0 million.

     QTL Test.  HOLA requires a savings  association to meet a qualified  thrift
lender  ("QTL") test.  Under the QTL test, a savings  association 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)  certain
intangibles,  including  goodwill and credit card  rights,  and (c) the value of
property  used  to  conduct  the  association's   business.   "Qualified  thrift
investments"  includes  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. At March 31, 2001,
the Bank maintained  approximately  86.11% 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.

     A savings  association  that fails the QTL test must either  operate  under
certain restrictions on its activities or convert to a bank charter. The initial
restrictions  include  prohibitions against (a) engaging in any new activity not
permissible  for a national bank,  (b) paying  dividends not  permissible  under
national bank  regulations,  (c)  obtaining new advances from any FHLB,  and (d)
establishing  any new branch office in a location not permissible for a national
bank in the association's home state. In addition, within one year of the date a
savings  association  ceases to meet the QTL test, any company  controlling  the
association would have to register under, and become subject to the requirements
of, the Bank Holding Company Act of 1956 ("BHC Act"), as amended. If the savings
association does not re-qualify under the QTL test within the three-year  period
after it failed the QTL test, it would be required to terminate any activity and
to dispose of any investment not  permissible for a national bank and would have
to repay as  promptly as  possible  any  outstanding  advances  from an FHLB.  A
savings  association  that has failed the QTL test may re-qualify  under the QTL
test and be free of such limitations, but it may do so only once.

     Capital  Requirements.   The  OTS  capital  regulations  require  federally
chartered  savings banks to meet three capital ratios:  a 1.5% tangible  capital
ratio, a 4% leverage  (core  capital) ratio and an 8% risk-based  capital ratio.
The OTS regulations  also provide that the minimum  leverage capital ratio under
OTS regulations for a depository  institution that has been assigned the highest
composite rating of 1 under the Uniform Financial  Institutions Rating is 3%. In
assessing an institution's  capital adequacy,  the OTS takes into  consideration
not only these numeric factors but also 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 that are  consistent  with the Bank's risk profile.  At March 31, 2001,  the
Bank  exceeded  each of its capital  requirements  with  tangible  and  leverage
capital ratios of 7.02% and a risk-based capital ratio of 15.76%.

     The Federal  Deposit  Insurance  Corporation  Improvement  Act  ("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 ("IRR"),  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.   The  OTS  has
indefinitely  deferred its  requirements of the IRR component in the calculation
of an institution's risk-based capital calculation. The OTS continues to monitor
the  IRR of  individual  institutions  through  analysis  of the  change  in net
portfolio value ("NPV").  The OTS has also used this NPV analysis as part of its
evaluation of certain applications submitted by thrift institutions.  For a more
complete  discussion of NPV analysis,  see Item 7, "Management's  Discussion and
Analysis of Financial Condition and Results of  Operations--Discussion of


                                       23
<PAGE>

Market Risk - Interest Rate Sensitivity  Analysis." The OTS, through its general
oversight of the safety and soundness of savings associations, retains the right
to impose minimum capital requirements on individual  institutions to the extent
the institution is not in compliance with certain written guidelines established
by the OTS regarding NPV analysis. The OTS has not imposed any such requirements
on the Bank.

     Limitation on Capital Distributions. The OTS regulations impose limitations
upon capital  distributions  by savings  associations,  such as cash  dividends,
payments to repurchase or otherwise acquire its shares, payments to shareholders
of another  institution in a cashout  merger,  and other  distributions  charged
against  capital.  Under the OTS regulations,  certain savings  associations are
permitted to pay capital distributions during a calendar year that do not exceed
the  association's net income for that year plus its retained net income for the
prior two years  without  notice to, or the  approval  of, the OTS.  However,  a
savings  association  subsidiary of a savings and loan holding company,  such as
the Bank, must file a notice unless the specific capital  distribution  requires
an  application.   In  addition,   the  OTS  can  prohibit  a  proposed  capital
distribution,  otherwise  permissible  under  the  regulation,  if the  OTS  has
determined that the association is in need of more than normal supervision or if
it determines that a proposed distribution by an association would constitute an
unsafe or unsound practice.  Furthermore, under the OTS prompt corrective action
regulations,  the Bank would be prohibited from making any capital  distribution
if,  after  the  distribution,  the  Bank  failed  to meet its  minimum  capital
requirements as described above. See "--Prompt Corrective Regulatory Action."

     Liquidity.  During fiscal 2001, Congress eliminated the statutory liquidity
requirement  which required  federal savings  associations 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 OTS recently
conformed its implementing  regulations to reflect this statutory change.  Under
the revised  regulations,  which became  effective  March 15, 2001,  the Bank is
required  to  maintain  sufficient  liquidity  to  ensure  its  safe  and  sound
operation. At March 31, 2001, the Bank's liquidity ratio was 12.21%.

     Assessments.  Savings  associations  are required by OTS  regulation to pay
assessments  to the OTS to fund the operations of the OTS. The assessment for an
individual  savings  association is based on three  components:  the size of the
association,  on which the basic assessment  would be based;  the  association's
supervisory condition, which would result in an additional assessment based on a
percentage of the basic assessment for any savings  institution with a composite
rating of 3, 4 or 5 in its most recent safety and soundness examination; and the
complexity of the association's operations,  which would result in an additional
assessment  based  on a  percentage  of the  basic  assessment  for any  savings
association that managed over $1.0 billion in trust assets,  serviced for others
loans  aggregating  more than $1.0  billion,  or had certain  off-balance  sheet
assets aggregating more than $1.0 billion.  In order to avoid a disproportionate
impact on the smaller savings  institutions,  which are those whose total assets
never exceeded $100.0 million,  the regulations  provide that the portion of the
assessment  based on asset size will be the lesser of the  assessment  under the
amended regulations or the regulations before the amendment.

     Branching.  Subject to certain  limitations,  HOLA and the OTS  regulations
permit federally  chartered  savings  associations to establish  branches in any
state of the  United  States.  The  authority  to  establish  such a  branch  is
available  (a)  in  states  that   expressly   authorize   branches  of  savings
associations  located in another state and (b) to an association  that qualifies
as a "domestic building and loan association" under the Internal Revenue Code of
1986, as amended (the "Code"), which imposes qualification  requirements similar
to those for a  "qualified  thrift  lender"  under HOLA.  See "--QTL  Test." The
authority for a federal  savings  association to establish an interstate  branch
network  would  facilitate a  geographic  diversification  of the  association's
activities. This authority under HOLA and the OTS regulations preempts any state
law purporting to regulate branching by federal savings associations.

     Community Reinvestment. Under the CRA, as implemented by OTS regulations, a
federally  chartered  savings  association  has  a  continuing  and  affirmative
obligation  consistent with its safe and sound operation 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
financial institutions nor does it limit an institution's  discretion to develop
the types of  products  and  services  that it  believes  are best suited to its
particular  community,  consistent  with the CRA.  The CRA  requires the OTS, in
connection  with  its  examination  of a  savings  association,  to  assess  the
association's  record of meeting the credit needs of its  community  and to take
such record  into  account in its  evaluation  of certain  applications  by such
association.  The CRA regulations  establish an assessment  system that bases an
association's  rating on its actual


                                       24
<PAGE>

performance in meeting  community  needs. In particular,  the assessment  system
focuses on three tests: (a) a lending test, to evaluate the institution's record
of making loans in its assessment areas; (b) 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 (c) a service test, to evaluate the  institution's  delivery of
services  through its branches,  ATMs, and other offices.  The CRA also requires
all institutions to make public disclosure of their CRA ratings. In addition, in
May, 2000, the OTS proposed  regulations  implementing  the  requirements  under
Gramm-Leach  that insured  depository  institutions  publicly  disclose  certain
agreements  that are in  fulfillment  of the CRA. We have no such  agreement  in
place at this time.  The Bank received a  "Satisfactory"  CRA rating in its most
recent examination conducted in 2000.

     Transactions  with  Related  Parties.  The  Bank's  authority  to engage in
transactions  with its  "affiliates"  is limited by the OTS  regulations  and by
Sections  23A and  23B of the  Federal  Reserve  Act  ("FRA").  In  general,  an
affiliate of the Bank is any company that controls the Bank or any other company
that is  controlled  by a company that  controls the Bank,  excluding the Bank's
subsidiaries other than those that are insured depository institutions.  The OTS
regulations  prohibit  a  savings  association  (a) from  lending  to any of its
affiliates  that is  engaged in  activities  that are not  permissible  for bank
holding  companies under Section 4(c) of the BHC Act and (b) from purchasing the
securities  of any  affiliate  other than a  subsidiary.  Section 23A limits the
aggregate  amount of  transactions  with any individual  affiliate to 10% of the
capital  and surplus of the savings  association  and also limits the  aggregate
amount of transactions  with all affiliates to 20% of the savings  association's
capital and  surplus.  Extensions  of credit to  affiliates  are  required to be
secured by collateral  in an amount and of a type  described in Section 23A, and
the purchase of low quality  assets from  affiliates  is  generally  prohibited.
Section 23B provides that certain transactions with affiliates,  including loans
and asset purchases, must be on terms and under circumstances,  including credit
standards,  that are  substantially  the same or at  least as  favorable  to the
association  as those  prevailing at the time for comparable  transactions  with
nonaffiliated  companies.  In  the  absence  of  comparable  transactions,  such
transactions  may only occur under  terms and  circumstances,  including  credit
standards,   that  in  good  faith  would  be  offered  to  or  would  apply  to
nonaffiliated companies.

     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  thereunder.  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 association's capital. In addition, extensions of credit in excess
of certain limits must be approved by the association's board of directors.

     Enforcement.  Under the Federal Deposit  Insurance Act ("FDI Act"), the OTS
has primary  enforcement  responsibility  over savings  associations and has the
authority  to bring  enforcement  action  against  all  "institution  affiliated
parties,"  including any controlling  stockholder or any shareholder,  attorney,
appraiser  and  accountant  who  knowingly  or  recklessly  participates  in any
violation of applicable law or regulation or breach of fiduciary duty or certain
other  wrongful  actions that causes or is likely to cause a more than a minimal
loss or other  significant  adverse  effect on an insured  savings  association.
Civil  penalties  cover a wide range of  violations  and  actions and range from
$5,000 for each day during which  violations of law,  regulations,  orders,  and
certain written agreements and conditions  continue,  up to $1.0 million per day
for such  violations if the person  obtained a substantial  pecuniary  gain as a
result of such violation or knowingly or recklessly caused a substantial loss to
the institution.  Criminal  penalties for certain financial  institution  crimes
include  fines of up to $1.0  million and  imprisonment  for up to 30 years.  In
addition,  regulators have  substantial  discretion to take  enforcement  action
against an institution  that fails to comply with its  regulatory  requirements,
particularly  with  respect to its capital  requirements.  Possible  enforcement
actions  range from the  imposition  of a capital plan and capital  directive to
receivership,  conservatorship,  or the termination of deposit insurance.  Under
the FDI Act, the FDIC has the authority to recommend to the Director of OTS that
enforcement action be taken with respect to a particular savings association. If
action is not taken by the Director of the OTS,  the FDIC has  authority to take
such action under certain circumstances.


                                       25
<PAGE>

     Standards for Safety and Soundness.  Pursuant to the FDI Act, as amended by
FDICIA and the Riegle  Community  Development and Regulatory  Improvement Act of
1994,  the OTS and the federal bank  regulatory  agencies  have adopted a set of
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.  The guidelines prohibit excessive  compensation as an unsafe
and unsound  practice and describe  compensation  as excessive  when the amounts
paid are  unreasonable  or  disproportionate  to the  services  performed  by an
executive officer, employee, director or principal shareholder. In addition, the
OTS adopted regulations  pursuant to FDICIA that authorize,  but do not require,
the OTS to order an institution that has been given notice by the OTS that it is
not satisfying any of such 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 FDICIA.  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.

     Insurance  Activities.  Carver is generally  permitted to engage in certain
insurance activities through its subsidiaries.  In August, 2000, the OTS and the
other federal  banking  agencies  proposed  regulations  pursuant to Gramm-Leach
which would prohibit depository  institutions from conditioning the extension of
credit to  individuals  upon  either the  purchase  of an  insurance  product or
annuity or an agreement by the consumer not to purchase an insurance  product or
annuity from an entity that is not affiliated  with the depository  institution.
The proposed regulations would also require prior disclosure of this prohibition
to  potential  insurance  product or annuity  customers.  We do not believe that
these regulations,  if adopted as proposed,  would have a material impact on our
operations.

     Prompt Corrective  Regulatory Action. FDICIA established a system of prompt
corrective  action  to  resolve  the  problems  of  undercapitalized  depository
institutions.  Under this system, the federal banking regulators are required to
take certain  supervisory  actions against  undercapitalized  institutions,  the
severity of which depends on the  institution's  degree of  capitalization.  For
this purpose,  a savings  association  would be placed in one of five categories
based on the association's capital.  Generally, a savings association is treated
as "well  capitalized" if its ratio of total capital to risk-weighted  assets is
at least 10.0%,  its ratio of core capital to risk  weighted  assets is at least
6.0%,  its ratio of core capital to total assets is at least 5.0%, and it is not
subject to any order or directive by the OTS to meet a specific capital level. A
savings association will be treated as "adequately  capitalized" if its ratio of
total  capital  to  risk-weighted  assets  is at least  8.0%,  its ratio of core
capital to risk weighted  assets is at least 4.0%, and its ratio of core capital
to total assets is at least 4.0% (3.0% if the  association  receives the highest
rating  on  the  Uniform  Financial   Institutions  Rating  System).  A  savings
association  that has a total risk based capital of less than 8.0% or a leverage
ratio or a Tier 1 capital ratio that is less than 4.0% (3.0%  leverage  ratio if
the   association   receives  the  highest  rating  on  the  Uniform   Financial
Institutions  Rating System) is considered to be  "undercapitalized."  A savings
association  that has a total risk  based  capital of less than 6.0% or a Tier 1
risk based capital ratio or a leverage  ratio of less than 3.0% is considered to
be "significantly  undercapitalized."  A savings association that has a tangible
capital  to assets  ratio  equal to or less than 2% is deemed to be  "critically
undercapitalized."  The elements of an association's capital for purposes of the
prompt corrective action regulations are defined generally as they are under the
regulations for minimum capital requirements. As of March 31, 2001, the Bank was
considered well-capitalized by the OTS. See "-- Capital Requirements."

     When  appropriate,  the OTS can  require  corrective  action  by a  savings
association  holding company under the "prompt  corrective action" provisions of
FDICIA.

     Insurance  of  Deposit  Accounts.  The Bank is a member  of the SAIF of the
FDIC,  and the Bank pays its deposit  insurance  assessments  to the SAIF of the
FDIC. The FDIC also maintains  another  insurance  fund, the Bank Insurance Fund
("BIF"),  which  primarily  insures the  deposits  of banks and state  chartered
savings banks.

     Pursuant to FDICIA, 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


                                       26
<PAGE>

assigns  an  institution  to  one  of  three  capital  categories  based  on the
institution's  financial  information  as of the  reporting  period ending seven
months before the assessment period. The three capital categories consist of (a)
well capitalized, (b) adequately capitalized, or (c) undercapitalized.  The FDIC
also assigns an institution  to one of three  supervisory  subcategories  within
each capital group. The supervisory subgroup to which an institution is assigned
is based on a supervisory  evaluation  provided to the FDIC by the institution's
primary  federal  regulator  and  information  that  the FDIC  determines  to be
relevant  to the  institution's  financial  condition  and the risk posed to the
deposit insurance funds. 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 Bank's annual  assessment rate for the first half of
2001 was 0.03% of deposits. The FDIC is authorized to raise the assessment rates
as necessary to maintain the required reserve ratio of 1.25%. As a result of the
Deposit Insurance Funds Act of 1996 (the "Funds Act"), both the BIF and the SAIF
currently  satisfy the reserve ratio  requirement.  If the FDIC  determines that
assessment rates should be increased,  institutions in all risk categories could
be affected. The FDIC has exercised this authority several times in the past and
could raise insurance assessment rates in the future. If such action is taken by
the FDIC, it could have an adverse effect on the earnings of the Bank.

     In addition, the Funds Act expanded the assessment base for the payments on
the bonds ("FICO bonds")  issued in the late 1980s by the Financing  Corporation
to recapitalize the now defunct Federal Savings and Loan Insurance  Corporation.
Beginning   January  1,  1997,  the  deposits  of  both  BIF-  and  SAIF-insured
institutions  were assessed for the payments on the FICO bonds. The Bank's total
expense in fiscal  2001 for the  assessment  of deposit  insurance  and the FICO
payments was $424,000.

     Privacy Protection.  On June 1, 2000, the OTS published final privacy rules
implementing  the privacy  protection  provisions of Section 504 of Gramm-Leach.
The proposed  regulations  would  require each  financial  institution  to adopt
procedures to protect customers' and consumers' "nonpublic personal information"
by November 13, 2000;  however,  compliance will be optional until July 1, 2001.
The Bank would be required 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.  In addition,
the Bank  would be  required  to  provide  its  customers  with the  ability  to
"opt-out"  of having  the Bank share its  nonpublic  personal  information  with
unaffiliated third parties.

     In  June  2000,  the  OTS  and  other  federal  banking  agencies  proposed
guidelines  establishing  standards for  safeguarding  customer  information  to
implement certain provisions of Gramm-Leach.  The proposed  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 OTS  subsequently
published final rules for safeguarding customer  information.  We cannot predict
what impact these regulations will have on Carver's operations.

     Gramm-Leach   also  provides  for  the  ability  of  each  state  to  enact
legislation  that  is  more  protective  of  consumers'  personal   information.
Currently,  there  are a  number  of  privacy  bills  pending  in the  New  York
legislature. No action has been taken on any of these bills, and the Bank cannot
predict what impact, if any, these bills would have.

     Federal Home Loan Bank System.  The Bank is a member of the FHLB-NY,  which
is one of the regional  FHLBs  composing  the FHLB System.  Each FHLB provides a
central credit facility  primarily for its member  institutions.  The Bank, as a
member of the FHLB-NY,  is required to acquire and hold shares of capital  stock
in the FHLB-NY in an amount at least equal to the greater of 1% of the aggregate
principal  amount  of  its  unpaid   residential   mortgage  loans  and  similar
obligations at the beginning of each year, 0.390 of total assets,  or 5%, of its
advances  (borrowing)  from the  FHLB,  whichever  is  greater.  The Bank was in
compliance with this  requirement with an investment in the capital stock of the
FHLB at March 31, 2001 of


                                       27
<PAGE>

$5.8  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.

     The 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.  The FHLB paid  dividends to the
Bank of $408,000  for the twelve  months  ended March 31, 2001 and  dividends of
$393,000 for the prior fiscal year. If dividends  were  reduced,  or interest on
future FHLB advances increased, the Bank's net interest income would likely also
be reduced.

     Pursuant to Gramm-Leach, the foregoing minimum share ownership requirements
will be replaced by regulations to be promulgated by the Federal Housing Finance
Board.  Gramm-Leach  specifically  provides  that the  minimum  requirements  in
existence  immediately  prior to adoption of Gramm-Leach  shall remain in effect
until such regulations are adopted.  Formerly,  federal saving associations were
required to be members of the FHLB  System.  The new law  removed the  mandatory
membership  requirement and authorized  voluntary membership for federal savings
associations, as is the case for all other eligible institutions.

     Federal  Reserve  System.  The Bank is subject to provisions of the FRA and
the  Federal  Reserve   Board's   regulations   pursuant  to  which   depositary
institutions  may be required to maintain  noninterest-earning  reserves against
their deposit accounts and certain other liabilities.  Currently,  reserves must
be maintained against  transaction  accounts (primarily NOW and regular checking
accounts). The Federal Reserve Board regulations generally require that reserves
be maintained in the amount of 3% of the aggregate of transaction accounts up to
$42.8 million.  The amount of aggregate  transaction accounts in excess of $42.8
million are currently subject to a reserve ratio of 10%, which ratio the Federal
Reserve  Board  may  adjust  between  8% and  14%.  The  Federal  Reserve  Board
regulations  currently exempt $5.0 million of otherwise reservable balances from
the reserve  requirements,  which  exemption is adjusted by the Federal  Reserve
Board at the end of each  year.  The Bank is in  compliance  with the  foregoing
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 passthrough  account as defined by the Federal Reserve Board, the effect of
this reserve  requirement is to reduce the Bank's  interest-earning  assets. The
balances  maintained  to meet the  reserve  requirements  imposed by the Federal
Reserve Board may be used to satisfy liquidity  requirements imposed by the OTS.
FHLB System  members  are also  authorized  to borrow  from the Federal  Reserve
"discount   window,"  but  Federal  Reserve  Board   regulations   require  such
institutions to exhaust all FHLB sources before borrowing from a Federal Reserve
Bank.

     Holding  Company  Regulation.  The Holding Company is a unitary savings and
loan holding  company  within the meaning of the HOLA. As such, it is registered
with the OTS and is subject to the OTS  regulations,  examinations,  supervision
and reporting requirements.  In addition, the OTS has enforcement authority over
the Holding Company and savings  association  subsidiaries.  Among other things,
this  authority  permits the OTS to restrict  or  prohibit  activities  that are
determined to be a serious risk to the subsidiary savings association.  The Bank
must  notify  the OTS at least 30 days  before  declaring  any  dividend  to the
Holding Company.  No dividends were paid from the Bank to the Holding Company in
fiscal 2001.

     The  HOLA  prohibits  a  savings  and loan  holding  company  (directly  or
indirectly,  or through one or more subsidiaries) from acquiring another savings
association or holding  company  thereof  without prior written  approval of the
OTS;  acquiring  or  retaining,  with  certain  exceptions,  more  than  5% of a
non-subsidiary  savings  association,  a non-subsidiary  holding  company,  or a
non-subsidiary  company engaged in activities  other than those permitted by the
HOLA or acquiring or retaining  control of an institution  that is not federally
insured.  In evaluating  applications  by holding  companies to acquire  savings
associations,  the OTS must consider the financial and managerial  resources and
future  prospects  of the company and  institution  involved,  the effect of the
acquisition on the risk to the insurance funds, the convenience and needs of the
community and competitive factors.

     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").


                                       28
<PAGE>

     Delaware  Corporation  Law. The Holding Company is  incorporated  under the
laws of the State of Delaware.  Thus,  we are subject to regulation by the State
of  Delaware  and the rights of our  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 proposed  regulations  that would impose  restrictions  and  limitations  on
certain  high cost home loans made by any  individual  or  entity,  including  a
federally-chartered savings association, that originates more than one high cost
home loan in New York State in a 12-month period.  The regulations,  among other
things, 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, if enacted, 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.

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  particularly 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.  Pursuant to the Small Business
Job  Protection Act of 1996,  the Bank is now  recapturing  (taking into income)
over a multi-year  period a portion of the balance of its bad debt reserve as of
March 31, 1996.

     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.

     Corporate  Alternative Minimum Tax. The Code imposes an Alternative Minimum
Tax ("AMT") on alternative  minimum  taxable  income  ("AMTI") at a rate of 20%.
AMTI is increased by certain preference items. Only 90% of AMTI can be offset by
net operating  loss  carryovers.  AMTI is also adjusted by  determining  the tax
treatment  of certain  items in a manner  that  negates  the  deferral of income
resulting  from the regular tax  treatment of those items.  Thus,  the Company's
AMTI is increased by an amount equal to 75% of the amount by which the Company's
adjusted current  earnings  exceeds its AMTI (determined  without regard to this
adjustment and prior to reduction for net operating losses).


                                       29
<PAGE>

     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
exceptions, including the Bank's deductions for additions to its reserve for bad
debts.  The New York State tax rates for  fiscal  years 2000 and 2001 are 10.53%
and 10.03%,  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.

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. Each of the persons listed below is an executive officer of the
Holding Company and the Bank.

      NAME         AGE                        POSITION
-----------------  ---  ------------------------------------------------------
Deborah C. Wright   43  President and Chief Executive Officer, Director

Walter T. Bond      42  Senior Vice President and Special Assistant to the CEO

William Schult      53  Vice President and Controller

Margaret Peterson   50  Senior Vice President and Chief Administrative Officer

J. Kevin Ryan       48  Senior Vice President and Chief Lending Officer

Devon W. Woolcock   35  Senior Vice President and Chief of Retail Banking


                                       30
<PAGE>

     Deborah C. Wright is currently  President and Chief Executive Officer and a
Director of Carver and Carver  Federal,  positions  she assumed on June 1, 1999.
Prior to assuming her current  positions,  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 named
by Mayor David N. Dinkins to the New York City Housing  Authority  Board,  which
manages New York City's 189,000  public  housing  units.  She is a member of the
Board of  Overseers  of  Harvard  University  and serves on the boards of Empire
State 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.

     Walter  T. Bond is Senior  Vice  President  and  Special  Assistant  to the
President  and Chief  Executive  Officer.  Mr.  Bond joined the Bank in February
1993, as Assistant Vice President, Mortgage Lender. Mr. Bond was assigned to the
position of  Investment  Officer in November  1995.  Mr. Bond is a member of the
Bank's  Investment  and Loan  Committees  and serves as the Company's  Community
Reinvestment Officer. Mr. Bond is a member of the New York Society of Securities
Analysts and the Financial Managers Society.

     William Schult is Vice President and  Controller.  He was appointed  Acting
Chief Financial  Officer in May 2001. He joined Carver Federal in September 2000
after five years as an independent consultant. He has 26 years experience in the
banking  industry  beginning in 1974 as Senior Vice President and Controller for
the  Nassau  Trust  Company.  In 1983  Mr.  Schult  became  Administrative  Vice
President at Norstar  Bank of Long Island.  He moved to The Dime Savings Bank of
New York in 1985 where he was Vice  President and Director of  Accounting  until
1995. Mr. Schult received a BBA in Accounting  from Hofstra  University and is a
Certified Public Accountant in the State of New York.

     Margaret  D.  Peterson is Senior Vice  President  and Chief  Administrative
Officer, integrating Human Resources, Information Technology, Facilities, Vendor
Management and other support  activities.  Ms. Peterson joined Carver Federal in
November 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,  Ms.  Peterson  was a  Vice  President  and  Senior  HR
Generalist for Citibank Global Asset  Management.  Besides her 11 years in Human
Resources,  Ms. Peterson has 10 years of Systems and Technology  experience from
various  positions held at JP Morgan and Chase.  Ms. Peterson earned a Bachelors
Degree from Pace  University,  a M.B.A.  from Columbia  University as a Citicorp
Fellow,  and has been  designated a Certified  Compensation  Professional by the
American Compensation Association.

     J. Kevin Ryan is Senior Vice President and Chief Lending Officer.  Mr. Ryan
joined  Carver  Federal in June 2000 and has over 20 years'  experience  in real
estate lending.  Prior to joining Carver, Mr. Ryan served as Vice President-Team
Leader for Commercial Real Estate at Greenpoint  Mortgage  Funding Co., where he
was  employed  from 1996 to 2000.  From 1985  through  1996,  Mr. Ryan served as
President of Manhattan  Appraisal Co., a commercial and residential  real estate
appraisal  company  which he founded in New York City.  Mr.  Ryan also served in
various  positions at Dime Savings Bank of NY from 1977 to 1985,  including Vice
President,  and as an Adjunct  Professor of Management & Economics at St. John's
University  from 1981  through  1984.  He also is a Board  member of Habitat for
Humanity,  New York City.  Mr. Ryan  received a BBA in  Management  from Hofstra
University and an MBA in Finance from Fordham University.

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


                                       31
<PAGE>

ITEM 2.  PROPERTIES.

               The following table sets forth certain information regarding
Carver's offices and other material properties at March 31, 2001.

<TABLE>
<CAPTION>
                                                                    Lease        Net Book
                                                       Owned or   Expiration     Value at
                                         Year Opened    Leased       Date     March 31, 2001
                                         -----------   --------   ----------  --------------
                                                          (In thousands)
<S>                                          <C>         <C>       <C>           <C>

MAIN OFFICE:
75 West 125th Street                         1996        Owned           --      $5,538
New York, New York

BRANCH OFFICES:

2815 Atlantic Avenue                         1990        Owned           --         291
Brooklyn, New York
(East New York Office)

1281 Fulton Street                           1989        Owned           --       1,024
Brooklyn, New York
(Bedford-Stuyvesant Office)

1009-1015 Nostrand Avenue                    1975        Owned           --         149
Brooklyn, New York
(Crown Heights Office)

115-02 Merrick Boulevard                     1982        Leased    02/28/11         281
Jamaica, New York
(St. Albans Office)

PROPOSED OFFICE:
Central Harlem Plaza-Space "A"                 --        Leased    04/2006           --
Lenox Avenue and West 116th -West 117th
New York, New York                                                               ======
      Total                                                                      $7,283
                                                                                 ======
</TABLE>

     Carver  anticipates  opening the proposed  branch office on Lenox Avenue in
Harlem in the second quarter of fiscal 2002.

     The net book value of Carver's investment in premises and equipment totaled
approximately $10.4 million at March 31, 2001.

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  the Company,  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  Company  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, 2001,  except as set
forth below, there were no material legal proceedings to which Carver Federal 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"),  a
former Carver  employee,  filed suit against Carver Federal in the Supreme Court
of the State of New York,  County of New York  (the "St.  Rose  Action").  On or
about  January 12, 1999,  Carver and St. Rose  entered  into an  agreement  (the
"Agreement")  providing  that St. Rose would resign from Carver 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: (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


                                       32
<PAGE>

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 moved to dismiss St. Rose's fraudulent
misrepresentation  cause of action  and the  Court  granted  Carver's  motion to
dismiss.  Carver  has not filed an answer in the St.  Rose  Action.  By  written
stipulation  of the  parties,  Carver's  time to file an  answer  to St.  Rose's
complaint has been extended  without date.  Carver has unasserted  counterclaims
against  St.  Rose  for,  among  other  claims,  payment  of  certain  financial
obligations to Carver,  which obligations  remain  outstanding as of the date of
this Form 10-K. The parties have had intermittent  settlement  discussions,  but
have not reached an agreement. If the parties do not reach a settlement,  Carver
intends to continue to defend the St. Rose Action vigorously.

     The action brought by Ralph Williams (the "Williams Action") and the action
brought  by Janice  Pressley  (the  "Pressley  Action"  and,  together  with the
Williams Action,  the "Actions") arise out of events concerning the Northeastern
Conference Federal Credit Union ("Northeastern"). Plaintiff Williams is a former
member of the Board of Directors,  and plaintiff Pressley is a former treasurer,
of Northeastern, a federal credit union that maintained accounts with Carver and
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  against the NCUA,  Carver,  Chase Manhattan Bank  ("Chase"),  Astoria
Federal Savings and Loan  Association and Reliance  Federal Savings Bank (Carver
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
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 the  complaints  relate to the action of the NCUA  Board,
the  plaintiffs  allege  that the Bank  Defendants  "collaborated  with the NCUA
Board" in violating unspecified  constitutional and privacy rights and that they
engaged in discrimination.

     On or about December 15, 2000,  defendant  Chase moved to  consolidate  the
Williams Action and Pressley Action. 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  because  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 refilled their motion to dismiss the Williams
Action and it is sub judice. The Bank Defendants'  original motion to dismiss is
still sub judice insofar as it applies to the Pressley Action. If the motions to
dismiss are not granted, Carver intends to defend both Actions vigorously.

     On or about December 28, 2000,  plaintiff  Thomas L. Clark  ("Clark"),  the
former  President  and CEO of Carver,  filed suit  against  Carver  Federal  and
certain  individual  defendants  in the Supreme  Court of the State of New York,
County of New York (the "Clark Action"). Clark claims that the defendants should
be forced to obtain  approval from the OTS to pay severance  benefits that Clark
believes Carver owes him under an employment  agreement.  Clark seeks injunctive
relief and  asserts  claims  for  breach of  contract,  equitable  estoppel  and
estoppel  by  contract.  On or about March 30,  2001,  the  defendants  moved to
dismiss the complaint in its entirety.  By written  stipulation  of the parties,
Clark's time to respond defendants' motion has been extended.  If the Court does
not grant the motion to  dismiss,  Carver  intends  to  vigorously  defend  this
action.


                                       33
<PAGE>

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

     The Holding  Company  held its Annual  Meeting on February  27,  2001.  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;

     2.   The  ratification  of the  appointment  of  KPMG,  LLP as  independent
          auditors  of the  Holding  Company for the fiscal year ended March 31,
          2001; and

     3.   To approve an Amendment to Carver's 1995 Stock Option Plan.

     The results of voting were as follows:

        Proposal 1: Election of Directors:
                     Holding Company
                     Nominees

                     Frederick O. Terrell               For          2,114,655
                                                        Withheld        37,719

                     Robert Holland, Jr.                For          2,114,629
                                                        Withheld        37,745

                     Dennis M. Walcott                  For          2,113,074
                                                        Withheld        39,300

        Proposal 2:  Ratification of Appointment        For          2,141,705
                     of Independent Auditors            Against          7,727
                                                        Abstain          2,942

        Proposal 3:  Amendment to Stock Option Plan     For          1,175,447
                                                        Against         61,824
                                                        Abstain         57,925

     In addition to the nominees  elected at the Annual  Meeting,  the following
persons'  terms of office as  directors  continued  after  the  Annual  Meeting:
Deborah C. Wright,  Kevin Cohee,  David L. Hinds,  Pazel G.  Jackson,  Jr., Teri
Williams and Strauss Zelnick.


                                       34
<PAGE>

                                     PART II

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

     The Common Stock is listed on the American  Stock Exchange under the symbol
"CNY." Prior to May 21, 1997, the Common Stock traded on the National  Market of
The Nasdaq Stock Market under the symbol "CARV." As of May 31, 2001,  there were
2,306,286 shares of the Common Stock  outstanding,  held by approximately  1,150
holders of record.  The  following  table shows the high and low per share sales
prices of the Common Stock.

<TABLE>
<CAPTION>
                                             Closing Sales Price Quarter Ended
-----------------------------------------------------------------------------------------------------------------------
                                       High       Low                                                 High        Low
                                     --------   -------                                             --------    -------
<S>                                  <C>        <C>           <C>                                   <C>         <C>
Year Ended March 31, 2001                                     Year Ended March 31, 2000
  First Quarter..................... $10.9375   $7.5000         First Quarter...................... $11.3750    $7.5000
  Second Quarter.................... $11.1250   $7.8750         Second Quarter..................... $10.0000    $7.6250
  Third Quarter.....................  $9.7500   $7.0000         Third Quarter...................... $11.1250    $7.0000
  Fourth Quarter.................... $10.6000   $8.6000         Fourth Quarter..................... $13.5000    $8.2500
</TABLE>

     The Board  declared  a cash  dividend  of $0.05  (five  cents) per share on
February 1, 2001 and  February  14, 2000  payable to  stockholders  of record on
February  15,  2001 and  February  25,  2000,  respectively.  The  Board has not
determined  to  establish a regular  dividend at this time,  but will review the
Company's position after each quarter for the possible declaration of additional
dividends.  The  timing  and  amount of  future  dividends  will be  within  the
discretion of Carver's  Board and will depend on the earnings of the Company and
its subsidiaries, their financial condition, liquidity and capital requirements,
applicable  governmental  regulations  and  policies  and other  factors  deemed
relevant by the Board.

     The Bank will not be permitted to pay  dividends to the Holding  Company on
its capital stock if its stockholders'  equity would be reduced below applicable
regulatory capital  requirements or 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  capital  distributions  during a calendar year that do not
exceed the  association'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 3 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.


                                       35
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA.

<TABLE>
<CAPTION>
                                                                                At March 31,
                                                  ---------------------------------------------------------------------
                                                      2001           2000           1999          1998          1997
                                                  -----------    -----------    -----------    ----------   -----------
                                                                           (Dollars in thousands)
<S>                                               <C>            <C>            <C>            <C>          <C>
Financial Condition Data:
Total amount of:
Assets ........................................   $   424,500    $   420,119    $   416,483    $  437,458   $   423,614
Loans, net ....................................       283,437        270,148        270,522       274,954       197,918
Mortgage-backed securities ....................        42,866         54,229         66,584        91,116       110,853
Investment securities .........................        24,996         24,996             --            --         1,675
Securities available for sale (1) .............        19,926         24,952         29,918        28,408        83,863
Excess of cost over assets acquired ...........           603            817          1,030         1,246         1,456
Cash and cash equivalents .....................        31,758         22,202         21,321        15,120         4,231
Deposits ......................................       279,424        281,941        276,999       274,894       266,471
Borrowed funds ................................       105,600         98,578        102,038       124,946       121,101
Stockholders' equity ..........................        32,096         32,641         31,175        35,534        33,984
Number of:
Deposit accounts ..............................        44,751         54,597         58,113        51,550        49,142
Offices .......................................             5              7              7             7             7
</TABLE>

<TABLE>
<CAPTION>
                                                                           Year Ended March 31,
                                                  ---------------------------------------------------------------------
                                                      2001           2000           1999          1998          1997
                                                  -----------    -----------    -----------    ----------   -----------
                                                               (Dollars in thousands - except share data)
<S>                                               <C>            <C>            <C>            <C>          <C>
Operating Data:
Interest income ...............................   $    28,307    $    27,367    $    28,473    $   27,828   $    22,847
Interest expense ..............................        14,278         14,009         14,815        15,019        12,483
                                                  -----------    -----------    -----------    ----------   -----------
Net interest income ...........................        14,029         13,358         13,658        12,809        10,364
Provision for loan losses .....................         1,793          1,099          4,029         1,260         1,690
                                                  -----------    -----------    -----------    ----------   -----------
Net interest income after provision for loan
     losses ...................................        12,236         12,259          9,629        11,549         8,674
                                                  -----------    -----------    -----------    ----------   -----------

Non-interest income:
Gain (loss) on sales of deposits and assets ...         1,013             --              4           188          (927)
Other .........................................         1,921          2,539          2,378         2,163         1,040
                                                  -----------    -----------    -----------    ----------   -----------
Total non-interest income .....................         2,934          2,539          2,382         2,351           113
                                                  -----------    -----------    -----------    ----------   -----------
Non-interest expenses:
Loss on sale of foreclosed real estate ........            --             --             --            --            38
Other .........................................        15,461         15,823         17,963        11,651        11,764
                                                  -----------    -----------    -----------    ----------   -----------
Total non-interest expense ....................        15,461         15,823         17,963        11,651        11,802
                                                  -----------    -----------    -----------    ----------   -----------
(Loss) income before income taxes .............          (291)        (1,025)        (5,952)        2,249        (3,015)
                                                  -----------    -----------    -----------    ----------   -----------
Income tax expense (benefit) ..................            98            110         (1,499)        1,203        (1,275)
                                                  -----------    -----------    -----------    ----------   -----------
Net (loss) income .............................   $      (389)   $    (1,135)   $    (4,453)   $    1,046   $    (1,740)
                                                  ===========    ===========    ===========    ==========   ===========
Net (loss) income per common share ............   $     (0.26)   $     (0.53)   $     (2.02)   $     0.48   $     (0.80)
                                                  ===========    ===========    ===========    ==========   ===========
Weighted average number of common shares
    Outstanding ...............................     2,256,441      2,238,846      2,206,133     2,187,619     2,156,346
                                                  ===========    ===========    ===========    ==========   ===========
</TABLE>


                                       36
<PAGE>

<TABLE>
<CAPTION>
                                                                    At or for the Year Ended March 31,
                                                            -------------------------------------------------
                                                             2001       2000       1999       1998      1997
                                                            ------     ------     ------     ------    ------
<S>                                                        <C>        <C>        <C>         <C>      <C>
Key Operating Ratios:
Return on average assets (1) (2) .......................    (0.07)%    (0.27)%    (1.05)%     0.25%    (0.47)%
Return on average equity (2)(3) ........................    (0.89)     (3.29)    (12.70)      3.00     (5.00)
Interest rate spread (4) ...............................     3.48       3.38       3.29       3.14      2.90
Net interest margin (5) ................................     3.61       3.47       3.43       3.27      3.04
Operating expenses to average assets (2)(6) ............     3.72       3.82       4.22       2.80      3.22
Equity-to-assets (7) ...................................     7.56       7.77       7.49       8.12      8.03
Efficiency Ratio (2)(8) ................................    91.14      99.54     111.98      76.85    112.65
Average interest-earning assets to average
    interest-bearing liabilities .......................    1.03x      1.03x      1.04x      1.04x     1.04x
Asset Quality Ratios:
Non performing assets to total assets (9) ..............     0.71%      0.73%      1.15%      1.58%     1.53%
Non performing assets to total loans (9) ...............     1.04       1.12       1.66       2.47      3.28
Allowance for loan losses to total loans ...............     1.24       1.07       1.48       1.11      1.09
Allowance for loan losses to non-performing loans (9) ..   140.97     138.07      85.60      45.30     35.06
Net loan charge-offs to average loans outstanding ......     0.42       0.84       1.17       0.15      0.69
</TABLE>

----------

     (1)  Net income divided by average total assets.

     (2)  For fiscal  1999,  excluding  non-recurring  items  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.  Excluding an  assessment  to
          recapitalize  the SAIF of $1.6 million,  the return on average assets,
          return on average  equity,  operating  expenses to average  assets and
          Efficiency  Ratio for fiscal 1997 were  (0.022%),  (2.29%),  2.77% and
          97.07%, respectively.

     (3)  Net income divided by average total equity.

     (4)  Combined  weighted average interest rate earned less combined weighted
          average interest rate cost.

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

     (6)  Non-interest expenses less loss on foreclosed real estate,  divided by
          average total assets.

     (7)  Total equity divided by assets at period end.

     (8)  Efficiency ratio represents  operating  expenses divided by the sum of
          net interest income plus operating income.

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

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

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 the Company 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


                                       37
<PAGE>

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  Company  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
Company'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
the  Bank's  interest-bearing  liabilities  and  virtually  all  of  the  Bank's
interest-earning  assets are  located at the Bank,  virtually  all of the Bank's
interest rate risk exposure lies at the Bank level. As a result, all significant
interest rate risk 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 interest rate risk by monitoring and controlling
the variation in repricing  intervals  between its assets and liabilities.  To a
lesser extent, the Bank 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  rate-sensitive  assets exceeds the amount of  rate-sensitive
liabilities  and is  considered  negative  when  the  amount  of  interest  rate
sensitive  liabilities exceeds the amount of 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,  and 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 10.38% of total  rate-sensitive  assets at March 31, 2001,
as a result of which its net  interest  income could be  negatively  affected by
rising interest rates, and positively affected by falling interest rates.

     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, 2001.  Maturity  repricing dates
have been projected by applying  prepayment rates which management  believes are
appropriate  and repricing  dates.  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
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.


                                       38
<PAGE>

<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 MBS ........................................  $55,395   $  66,241    $104,980    $71,200    $ 25,013   $  5,900   $328,729
Federal funds sold ...................................   23,700          --          --         --          --         --     23,700
Investment securities(1) .............................   19,926          --          --     24,996          --         --     44,922
                                                        -------   ---------    --------    -------    --------   --------   --------
       Total interest-earning assets .................  $99,021   $  66,241    $104,980    $96,196    $ 25,013   $  5,900   $397,351
                                                        =======   =========    ========    =======    ========   ========   ========
Rate-Sensitive Liabilities:
NOW accounts .........................................   $2,355   $   3,140    $  6,803    $ 3,402    $  5,233      5,233     26,166
Savings accounts .....................................    5,306       6,699      11,426     21,217      41,699     46,298    132,645
Money market accounts ................................    2,986       9,274       1,570      1,258         315        315     15,718
Certificates of deposit ..............................   21,590      53,741      16,374     13,190          --         --    104,895
Borrowings ...........................................   41,000      60,430          --      3,861          --        309    105,600
                                                        -------   ---------    --------    -------    --------   --------   --------
       Total interest-bearing liabilities ............  $73,237   $ 133,284    $ 36,173    $42,928    $ 47,247   $ 52,155   $385,024
                                                        =======   =========    ========    =======    ========   ========   ========

Interest sensitivity gap .............................  $25,784   $ (67,043)   $ 68,807    $53,268    $(22,234)  $(46,255)  $ 12,327

Cumulative interest sensitivity gap ..................  $25,784   $ (41,259)   $ 27,548    $80,816    $ 58,535   $ 12,327         --
Ratio of cumulative gap to total rate-sensitive assets     6.49%     (10.38)%      6.93%     20.34%      14.74%      3.10%
</TABLE>

----------

     (1)  Includes securities available-for-sale.

     In addition,  it is assumed 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 which 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,  which
restrict the periodic change in interest rate.

     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, which the OTS has adopted as part of its capital regulations.

     Under  this  methodology,  interest  rate  risk  exposure  is  assessed  by
reviewing the  estimated  changes in net interest  income  ("NII") and NPV which
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.

     Presented  below,  as of March  31,  2001,  is an  analysis  of the  bank's
interest  rate  risk  ("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.


                                       39
<PAGE>

                         Net Portfolio Value           NPV as % of PV of Assets
Change in Rate    $ Amount     $ Change    % Change     NPV Ratio      Change
--------------    --------     --------    --------     ---------      ------
                             (Dollars in thousands)

   +300 bp         46,077      (10,443)        (18)%      10.55%      (198)bp
   +200 bp         50,122       (6,398)        (11)%      11.34%      (119)bp
   +100 bp         53,565       (2,955)         (5)%      11.99%       (54)bp
      0 bp         56,520           --          --        12.53%           --
   (100) bp        59,501        2,981          +5%       13.06%      + 53bp
   (200) bp        60,998        4,478          +8%       13.30%      + 77bp
   (300) bp        62,931        6,410         +11%       13.61%      +109bp

                                                              March 31, 2001
                                                              --------------
Risk Measures: 200 BP Rate Shock
Pre-Shock NPV Ratio: NPV as % of PV of Assets..............       12.53%
Post-Shock NPV Ratio.......................................       11.34%
Sensitivity Measure; Decline in NPV Ratio..................       119bp

     Certain  shortcomings  are  inherent in the  methodology  used in the above
interest rate risk  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 the Company'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 the
Company's  interest  rate risk  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 the Company'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 net interest
income 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 NII.


                                       40
<PAGE>

<TABLE>
<CAPTION>
                                                             At March 31,             Year ended March 31,
                                                                 2001                         2001
                                                         --------------------    ------------------------------
                                                                     Average                           Average
                                                                      Yield       Average               Yield
                                                          Balance      Cost       Balance    Interest    Cost
                                                         --------    --------    --------    --------  --------
                                                                        (Dollars in thousands)
<S>                                                      <C>             <C>     <C>         <C>           <C>
Interest Earning Assets:
Loans receivable, net (1) .............................  $283,437        7.55%   $278,264    $ 21,398      7.69%
Investment securities(2) ..............................    50,677        5.67      43,350       2,874      6.63
Mortgage-backed securities ............................    42,866        7.03      48,899       3,012      6.16
Federal funds sold ....................................    23,700        4.32      18,256       1,023      5.60
                                                         --------    --------    --------    --------  --------
Total interest-earning assets .........................   400,680        7.06%    388,769    $ 28,307      7.28%
                                                                                 --------    --------  --------
Non-interest earning assets ...........................    23,820                  27,127
                                                         --------                --------
Total assets ..........................................  $424,500                $415,896
                                                         ========                ========


Interest-Bearing Liabilities:
Deposits
     DDA ..............................................  $ 11,409         --%    $ 11,568    $     --       --%
     NOW ..............................................    14,757        1.71      15,926         253      1.59
     Savings and club .................................   132,645        2.30     137,305       3,051      2.22
     Money market accounts ............................    15,718        2.62      17,598         412      2.34
     Certificate of deposits ..........................   104,895        4.52      94,006       4,740      5.04
                                                         --------    --------    --------    --------  --------
Total deposits ........................................   279,424        3.03     276,403       8,456      3.06
Borrowed money ........................................   105,600        5.51      99,783       5,822      5.84
                                                         --------    --------    --------    --------  --------
Total interest-bearing liabilities ....................   385,024        3.71%    376,186    $ 14,278      3.80%
                                                                                 --------    --------  --------
Non-interest-bearing liabilities ......................     7,433                   7,072
                                                         --------                --------
Total liabilities .....................................   392,457                 383,258
Stockholders' equity ..................................    32,043                  32,638
                                                         --------                --------

Total liabilities and stockholders' equity ............  $424,500                $415,896
                                                         ========                ========

Net interest income ...................................                                      $ 14,029
                                                                                             ========

Interest rate spread ..................................                  3.35%                             3.48%
                                                                     ========                          ========

Net interest margin ...................................                                                    3.61%
                                                                                                       ========

Ratio of average interest-earning assets to average
      interest-bearing liabilities ....................                                              1.03
                                                                                                 ========
</TABLE>


                                       41
<PAGE>

<TABLE>
<CAPTION>
                                                                          Year Ended March 31,
                                                  --------------------------------------------------------------------
                                                                2000                                1999
                                                  --------------------------------    --------------------------------
                                                                          Average                             Average
                                                   Average                 Yield       Average                 Yield
                                                   Balance    Interest      Cost       Balance    Interest      Cost
                                                  --------    --------    --------    --------    --------    --------
                                                                         (Dollars in thousands)
<S>                                               <C>         <C>             <C>     <C>         <C>             <C>
Interest Earning Assets:
Loans(1) .....................................    $259,408    $ 19,443        7.50%   $269,241    $ 20,576        7.64%
Investment securities(2) .....................      57,357       3,593        6.26      32,284       1,801        5.58
Mortgage-backed securities ...................      55,075       3,641        6.61      85,236       5,431        6.37
Federal funds sold ...........................      13,000         690        5.31      12,013         665        5.54
                                                  --------    --------    --------    --------    --------    --------
Total interest-earning assets ................     384,840    $ 27,367        7.12%    398,774    $ 28,473        7.14%
                                                              --------    --------                --------    --------
Non-interest earning assets ..................      29,220                              26,709
                                                  --------                            --------
Total assets .................................    $414,060                            $425,483
                                                  ========                            ========
Interest-Bearing Liabilities:
Deposits:
    DDA ......................................    $ 11,388    $     --         --%    $  9,670    $     --         --%
    NOW ......................................      18,032         314        1.74      18,789         314        1.67
    Savings and clubs ........................     143,908       3,650        2.54     144,990       3,604        2.49
    Money market accounts ....................      19,578         631        3.22      21,541         613        2.85
    Certificate of deposits ..................      86,316       4,017        4.65      80,897       3,890        4.81
                                                  --------    --------    --------    --------    --------    --------
Total deposits ...............................     279,222       8,612        3.08     275,887       8,421        3.05
Borrowed money ...............................      95,769       5,397        5.64     107,766       6,394        5.93
                                                  --------    --------    --------    --------    --------    --------
Total interest-bearing liabilities ...........     374,991    $ 14,009        3.74%    383,653    $ 14,815        3.85%
                                                                                      --------    --------    --------
Non-interest-bearing liabilities .............       4,596          --                   6,771
                                                  --------    --------                --------
Total liabilities ............................     379,587    $ 14,009                 390,424
                                                              --------
Stockholders' equity .........................      34,473                              35,059
                                                  --------                            --------

Total liabilities and stockholders'
    equity ...................................    $414,060                            $425,483
                                                  ========                            ========

Net interest income ..........................                $ 13,358                            $ 13,658
                                                              ========                            ========

Interest rate spread .........................                                3.38%                               3.29%
                                                                          ========                            ========

Net interest margin ..........................                                3.47%                               3.43%
                                                                          ========                            ========

Ratio of average interest-earning assets to
    Average interest-bearing liabilities .....                                1.03                                1.04
                                                                          ========                            ========

</TABLE>

     (1)  Includes non-accrual loans.

     (2)  Includes FHLB stock and fair value of investments available for sale.

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'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.


                                       42
<PAGE>

<TABLE>
<CAPTION>
                                                                              Year Ended March 31,
                                                          -------------------------------------------------------------
                                                                  2001 vs. 2000                    2000 vs. 1999
                                                           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 .................................................   $ 1,420    $   535    $ 1,955    $  (753)   $  (378)   $(1,133)
Investment securities (1) .............................      (859)       140       (719)     1,549        243      1,792
Mortgage-backed securities (1) ........................      (408)      (221)      (629)    (2,003)       213     (1,790)
Federal funds sold ....................................       283         50        333         50        (25)        25
                                                          -------    -------    -------    -------    -------    -------
      Total interest-earning assets ...................       436        504        940     (1,159)        53     (1,106)
                                                          -------    -------    -------    -------    -------    -------
Interest-bearing liabilities:
    NOW ...............................................       (37)       (24)       (61)       (13)        13         --
    Savings and clubs .................................      (167)      (432)      (599)       (27)        73         46
    Money market accounts .............................       (64)      (155)      (219)       (42)        60         18
    Certificate of deposits ...........................       358        365        723        252       (125)       127
                                                          -------    -------    -------    -------    -------    -------
      Total deposits ..................................        90       (246)      (156)       170         21        191
    Borrowed money ....................................       227        198        425       (722)      (275)      (997)
                                                          -------    -------    -------    -------    -------    -------
      Total deposit and interest-bearing liabilities ..       317        (48)       269       (552)      (254)      (806)
                                                          -------    -------    -------    -------    -------    -------
Net change in net interest income .....................   $   119    $   552    $   671    $  (607)   $   307    $  (300)
                                                          =======    =======    =======    =======    =======    =======
</TABLE>

----------

     (1)  Includes securities available for sale.

Comparison of Financial Condition at March 31, 2001 and 2000

     At March 31, 2001,  total assets  increased by $4.4  million,  or 1.0%,  to
$424.5  million  compared to $420.1  million at March 31, 2000.  The increase in
total assets was primarily attributable to increases in loans, and cash and cash
equivalents,  offset in part by decreases,  mortgage-backed  securities  held to
maturity and securities  available for sale. Loans receivable,  net increased by
$13.3 million,  or 4.9%, to $283.4  million  compared to $270.1 million one year
ago.  The  increase in loans  results  primarily  from Carver  originations  and
purchases  during 2001 which  exceeded loan payments.  At March 31, 2001,  total
cash and cash equivalents  increased by $9.6 million, or 43.2%, to $31.8 million
compared to $22.2 million at March 31, 2000.  Mortgage-backed securities held to
maturity  decreased by $11.3 million,  or 20.9%,  to $42.9 million,  compared to
$54.2 million at March 31, 2000. The decrease in mortgage-backed securities held
to maturity primarily reflects principal repayments.

     At March 31,  2001  total  liabilities  increased  $4.9  million or 1.3% to
$392.4 million  compared to $387.5 million at March 31, 2000.  This increase was
primarily  attributable  to an  increase of $33.6  million in advances  from the
Federal Home Loan Bank of New York, offset in part by decreases of $26.4 million
in securities  sold under  agreement to repurchase and $2.5 million in deposits.
The decrease in deposits was primarily attributable to the sale of deposits from
the Roosevelt and Chelsea branches during fiscal year 2001.  Excluding  deposits
of the Roosevelt and Chelsea  branches,  total  deposits would have increased by
approximately $25.3 million during fiscal year 2001.

     At March 31, 2001, total stockholders' equity decreased $545,000,  or 1.7%,
to $32.1 million  compared to $32.6  million at March 31, 2000.  The decrease in
stockholders' equity was primarily  attributable to the net loss for the year as
well as dividends  paid on the Company's  preferred  stock.  The Bank's  capital
levels meet regulatory requirements of a well capitalized financial institution.

Comparison of Operating Results For The Years Ended March 31, 2001 and 2000

Net Loss

     The Company reported a net loss for the twelve-month period ended March 31,
2001 of $389,000  compared to a net loss of $1.1 million for the same period the
prior year. The decrease in the net loss was primarily due to a gain on the sale
of deposits of $1.0 million, a $671,000 improvement in net interest income and a
$362,000 reduction in non-interest expense,  partially offset by a non-recurring
gain of $728,000 on the sale of an investment property recognized in fiscal 2000
and a $694,000 increase in the provision for loan losses.


                                       43
<PAGE>

Interest Income

     Interest  income  increased by $941,000,  or 3.4%, to $28.3 million for the
twelve  month  period  ended  March 31, 2001  compared to $27.4  million for the
twelve month period  ended March 31, 2000.  The increase in interest  income was
primarily   attributable   to  an   improvement   in  the   average   yield   on
interest-earning  assets from 7.12% for the twelve  months ended March 31, 2000,
compared to 7.28% for the twelve months ended March 31, 2001. Interest income on
loans  increased by $2.0  million,  or 10.3%,  to $21.4  million for fiscal 2001
compared to $19.4 million for fiscal 2000. The increase in interest  income from
loans reflects an increase of $18.9 million,  or 7.3%, in the average balance of
loans to $278.3  million for fiscal 2001  compared to $259.4  million for fiscal
2000, coupled with a 19 basis point increase in the average rate earned on loans
to 7.69% for  fiscal  2001 from  7.50% for the prior  year.  Interest  income on
investment securities decreased by approximately $0.7 million, or 19.4%, to $2.9
million for the twelve months ended March 31, 2001, compared to $3.6 million for
the prior year,  reflecting an decrease of $14 million in the average balance of
investment securities to $43.4 million for fiscal 2001 compared to $57.4 million
for fiscal  2000,  coupled  with a 37 basis point  increase in the average  rate
earned  on  investment  securities  to 6.63%  from  6.26%.  Interest  income  on
mortgage-backed  securities decreased by $0.6 million, or 16.7%, to $3.0 million
for the twelve  months  ended  March 31, 2001  compared to $3.6  million for the
prior year  reflecting  a decrease of $12.2  million in the  average  balance of
mortgage-backed  securities  to $42.9  million for fiscal 2001 compared to $55.1
million for fiscal 2000,  and, to a lesser extent,  a 45 basis point decrease in
the average rate earned on mortgage-backed securities to 6.16% from 6.61%.

Interest Expense

     Interest  expense  increased by $269,000,  or 1.92%,  to $14.3  million for
fiscal 2001  compared  to $14.0  million  for the prior  year.  The  increase in
interest  expense is  attributable  to a $1.2  million  increase  in the average
balance of interest-bearing  liabilities  combined with a 6 basis point increase
in the average cost of interest bearing liabilities.

     Interest expense on deposits decreased  $156,000,  or 1.8%, to $8.5 million
for fiscal 2001  compared to $8.6 million for the prior year.  This  decrease is
attributable  to a $2.8  million,  or 1.0%,  decrease in the average  balance of
deposits to $276.4 million for fiscal 2001 compared to $279.2 million for fiscal
2000,  and to a lesser  extent,  to a two basis  point  decrease  in the cost of
average deposits.

     Interest expense on borrowed money increased by $425,000,  or 7.9%, to $5.8
million for fiscal 2001 compared to $5.4 million for the prior year. The average
balance of borrowed money was $4.0 million,  or 4.19%, higher during fiscal 2001
than during fiscal 2000,  and the average cost of borrowed money for fiscal 2001
was 20 basis points  higher than the average  cost of borrowed  money for fiscal
2000.

Net Interest Income

     Net  interest  income  before  the  provision  for  loan  losses  increased
$671,000,  or 5.0%,  to $14.0  million for fiscal 2001 compared to $13.4 million
for the prior  year.  The 17 basis  point  increase  in the  return  on  average
interest-earning assets coupled with the six basis point increase in the cost of
interest-bearing liabilities used to fund interest earning assets contributed to
an 11 basis point  increase in the interest  rate spread to 3.5% for fiscal 2001
compared to 3.38% for the prior year. The net interest margin increased to 4.81%
for fiscal 2001  compared to 3.47% for fiscal 2000.  The improved  interest rate
spread  and  margin  were  the  most  significant   items  responsible  for  the
improvement in net interest income in fiscal 2001 compared to fiscal 2000.

Provision for Loan Losses

     Provision for loan losses  increased by $694,000 or 63.2%, to $1.8 million,
for the twelve month  period ended March 31, 2001,  compared to $1.1 million for
the year ended March 31, 2000.  When  determining the provision for loan losses,
management  assesses  the  risk  inherent  in its  loan  portfolio  based on the
information  available at such time relating to trends in the local and national
economy,   trends  in  the  real  estate  market  and  the  Company's  level  of
non-performing  loans and assets and net charge  offs.  The  provision  for loan
losses for fiscal 2001  represents the amount required to maintain the allowance
for loan losses at the level  required by the  Company's  policy.  During fiscal
2001,  the Bank charged off  approximately  $1.4 million of loans.  At March


                                       44
<PAGE>

31, 2001,  non-performing  loans totaled $2.5  million,  or 0.9%, of total loans
compared to $2.1  million,  or 0.8%,  of total loans at March 31, 2000. At March
31, 2001, the Bank's allowance for loan losses was $3.6 million compared to $2.9
million  at  March  31,  2000,   resulting  in  a  ratio  of  the  allowance  to
non-performing loans of 141.0% at March 31, 2001 compared to 138.1% at March 31,
2000 and a ratio of the  allowance  for  possible  loan losses to total loans of
1.23% and 1.1% at March 31, 2001 and March 31, 2000, 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  $395,000 or 15.6%,  to $2.9 million for fiscal 2001  compared to $2.5
million for fiscal 2000. The increase in non-interest income is primarily due to
non-recurring  income of $1.0 million  relating to the sale of deposits less the
non-recurrence  of  $728,000  of income in 2000  resulting  from the sale of the
Alhambra Building by the Company's subsidiary,  Alhambra Realty.  Excluding from
the 2001 fiscal year the gain from the sale of deposits and  excluding  the 2000
income  from  the  sale of the  Alhambra  Building,  total  non-interest  income
increased by $395,000, or 15.6%, compared to fiscal 2000.

Non-Interest Expense

     Non-interest  expense decreased by $362,000,  or 2.3%, to $15.5 million for
fiscal 2001 compared to $15.8 million for the prior fiscal year. The decrease in
non-interest  expense was  primarily  attributable  to  decreases of $573,000 in
other  non-interest  expenses,  $62,000 in net occupancy expenses and $57,000 in
equipment  expense,  offset in part by an increase  of $330,000 in salaries  and
employee  benefits.  The decrease in other  non-interest  expenses was primarily
attributable to reductions in accounting  records  adjustments and a decrease in
the Bank's insurance assessment rate.

Income Tax Expense

     In connection  with the loss from  operations  incurred for fiscal 2001 and
fiscal 2000, the Company has an operating loss carry forward available to offset
future taxable income  totaling  approximately  $5.7 million that will expire in
2019.  The  Company  recorded  income tax expense of $98,000 for fiscal 2001 and
$110,000 for fiscal 2000,  respectively.  The income tax expense for fiscal 2001
and fiscal 2000 represents taxes payable to New York State and New York City.

Comparison of Operating Results For The Years Ended March 31, 2000 and 1999

Net Loss

     The Company reported a net loss for the twelve month period ended March 31,
2000 of $1.1 million  compared to a net loss of $4.5 million for the same period
the prior year.  The decrease in the net loss was  primarily due to decreases in
non-interest expenses and the provision for possible loan losses.

Interest Income

     Interest  income  decreased by $1.1 million,  or 3.9%, to $27.4 million for
the twelve month period ended March 31, 2000  compared to $28.5  million for the
twelve month period  ended March 31, 1999.  The decrease in interest  income was
primarily  attributable to a $13.9 million, or 3.5%, decrease in average balance
of interest  earning  assets to $384.8 million for the twelve months ended March
31, 2000, compared to $398.8 million for twelve months ended March 31, 1999. The
yield on average interest earning assets declined to 7.12% for the twelve months
ended March 31, 2000, compared to 7.14% for the prior year.

     Interest  income on loans  decreased  by $1.1  million,  or 5.5%,  to $19.4
million for fiscal 2000 compared to $20.6 million for fiscal 1999.  The decrease
in interest  income from loans reflects a decrease of $9.8 million,  or 3.7%, in
the  average  balance of loans to $259.4  million  for fiscal  2000  compared to
$269.2  million for fiscal 1999,  coupled with a 14 basis point  decrease in the
average  rate  earned on loans to 7.50% for fiscal 2000 from 7.64% for the prior
year. Interest income on investment  securities  increased by approximately $1.8
million,  or 99.5%,  to $3.6 million for the twelve months ended March 31, 2000,
compared  to $1.8  million  for the prior  year,  reflecting  an increase of $25
million in the average  balance of  investment  securities  to $57.4


                                       45
<PAGE>

million for fiscal 2000 compared to $32.3 million for fiscal 1999,  coupled with
a 68 basis point increase in the average rate earned on investment securities to
6.26% from 5.58%.  Interest income on  mortgage-backed  securities  decreased by
$1.8  million,  or 33.0%,  to $3.6 million for the twelve months ended March 31,
2000 compared to $5.4 million for the prior year, reflecting a decrease of $30.2
million in the average  balance of  mortgage-backed  securities to $55.1 million
for fiscal 2000 compared to $85.2  million for fiscal 1999,  offset in part by a
24 basis point increase in the average rate earned on mortgage-backed securities
to 6.61% from 6.37%.

     The increase in the average  balance of investment  securities is primarily
attributable to the reallocation that existed  throughout most of fiscal 2000 of
cash flows from loans and mortgage-backed securities into investment securities.
Significant  turnover of personnel in the Lending Department  adversely affected
the  Bank's  ability  to  originate  and  purchase  loans  during  fiscal  2000,
contributing to the decrease in the average balance of loans.

Interest Expense

     Interest  expense  decreased by  $805,000,  or 5.4%,  to $14.0  million for
fiscal 2000  compared  to $14.8  million  for the prior  year.  The  decrease in
interest  expense is  attributable  to an $8.7  million  decrease in the average
balance of interest-bearing liabilities combined with an 11 basis point decrease
in the average cost of interest bearing liabilities.

     Interest expense on deposits increased  $191,000,  or 2.3%, to $8.6 million
for fiscal 2000  compared to $8.4 million for the prior year.  This  increase is
attributable  to a $3.3  million,  or 1.2%,  increase in the average  balance of
deposits to $279.2 million for fiscal 2000 compared to $275.9 million for fiscal
1999,  and to a lesser  extent,  to a three basis point  increase in the cost of
average deposits.

     Interest expense on borrowed money decreased by $996,000, or 15.6%, to $5.4
million for fiscal 2000 compared to $6.4 million for the prior year. The average
balance of borrowed money was $12.0 million,  or 11.1%, lower during fiscal 2000
than during fiscal 1999,  and the average cost of borrowed money for fiscal 2000
was 29 basis  points  lower than the average  cost of borrowed  money for fiscal
1999.

Net Interest Income

     Net interest income before the provision for possible loan losses decreased
$301,000,  or 2.2%,  to $13.4  million for fiscal 2000 compared to $13.7 million
for the prior year. The 11 basis point decrease in the cost of  interest-bearing
liabilities used to fund interest  earning assets  contributed to an eight basis
point  increase in the interest rate spread to 3.38% for fiscal 2000 compared to
3.29%  for  the  prior  year.  The  decrease  in the  cost  of  interest-bearing
liabilities  used to fund interest  earning assets also contributed to a 4 basis
point  increase in the net interest  margin to 3.47% for fiscal 2000 compared to
3.43% for fiscal 1999.  However,  the average balance on interest earning assets
decreased  to a greater  degree  that the  average  balance of  interest-bearing
liabilities,  and the decrease in the average balance of interest earning assets
was the most  significant  factor  resulting  in the  $302,000  decrease  in net
interest income for fiscal 2000 as compared to fiscal 1999.

Provision for Loan Losses

     Provision  for loan losses  decreased by $2.9  million,  or 72.7%,  to $1.1
million,  for the twelve month  period  ended March 31,  2000,  compared to $4.0
million for the year ended March 31, 1999.  When  determining  the provision for
loan losses,  management  assesses the risk inherent in its loan portfolio based
on the  information  available at such time  relating to trends in the local and
national  economy,  trends in the real estate market and the Company's  level on
non-performing  loans and assets and net charge offs. The provision for possible
loan  losses for fiscal 2000  represents  the amount  required  to maintain  the
allowance  for  possible  loan  losses at the level  required  by the  Company's
policy,  and the reduced provision is primarily  attributable to the decrease in
non-performing  loans during fiscal 2000.  During fiscal 2000,  the Bank charged
off approximately $2.6 million of loans. At March 31, 2000, non-performing loans
totaled $2.1 million, or 0.8%, of total loans compared to $4.5 million, or 1.6%,
of total loans at March 31, 1999.  At March 31, 2000,  the Bank's  allowance for
possible  loan losses was $2.9  million  compared  to $4.0  million at March 31,
1999, resulting in a ratio of the allowance to non-performing loans of 138.0% at
March 31, 2000  compared to 89.3%


                                       46
<PAGE>

at March 31, 1999 and a ratio of the allowance for possible loan losses to total
loans of 1.07% and 1.46% at March 31, 2000 and March 31, 1999, respectively.

Non-Interest Income

     Non-interest income is composed of loan fees and service charges,  gains or
(losses)  from the sale of  securities,  and fee  income for  banking  services.
Non-interest income increased $157,000, or 6.6%, to $2.5 million for fiscal 2000
compared to $2.4 million for fiscal 1999. The increase in non-interest income is
primarily due to non-recurring income of $728,000 resulting from the sale of the
Alhambra Building by the Company's  subsidiary,  Alhambra Realty.  Excluding the
income  from  the  sale of the  Alhambra  Building,  total  non-interest  income
decreased by $571,000,  or 24.0%,  compared to fiscal 1999. Excluding the income
from the sale of the Alhambra Building,  the decrease in non-interest  income is
primarily  attributable  to a decrease in bank loan fees and service  charges as
well as the decrease in bank service charges on deposit accounts.

Non-Interest Expense

     Non-interest  expense decreased by $2.1 million, or 11.9%, to $15.8 million
for fiscal  2000  compared  to $18.0  million  for the prior  fiscal  year.  The
decrease in non-interest expense is primarily attributable to a decrease of $2.5
million in other  non-interest  expenses,  offset by  increases  of  $475,000 in
salaries and employee  benefits.  The increase in salaries and employee benefits
is the  result of  increased  expenses  associated  with  certain  of the Bank's
benefit  plans.  The  decrease  in  other  non-interest  expenses  is  primarily
attributable  to reductions in consultant fees and  reconciliation  adjustments,
which offset increases of approximately  $318,000 in FDIC assessments,  $229,000
in audit expenses and $335,000 in legal expenses.

Income Tax Expense

     In connection  with the loss from  operations  incurred for fiscal 2000 and
fiscal 1999, the Company has available an operating loss carry forward  totaling
approximately  $5.7  million that will expire in 2019 to offset  future  taxable
income.  The Company  recorded  income tax expense of $110,000  for fiscal 2000,
compared  to a tax  benefit  of $1.5  million  for fiscal  1999.  The income tax
expense for fiscal 2000 represents  taxes payable to New York State and New York
City based upon the Company's  total  assets.  The Company paid no taxes for the
year ended March 31, 1999.

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  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  associations  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 OTS recently  conformed its implementing
regulations to reflect this  statutory  change.  Under the revised  regulations,
which  became  effective  March  15,  2001,  the Bank is  required  to  maintain
sufficient liquidity to ensure its safe and sound operation.  At March 31, 2001,
the Bank's liquidity ratio was 12.21%.

     The Bank's  most liquid  assets are cash and  short-term  investments.  The
level of these assets are dependent on the Bank's  operating,  financing lending
and investing  activities  during any given period. At March 31, 2001, and 2000,
assets  qualifying  for  short-term  liquidity,  including  cash and  short-term
investments, totaled $50.0 million and $72.7 million, respectively.

     The  Consolidated  Statements of Cash Flows present the change in cash from
operating, investing and financing activities. During fiscal 2001, cash and cash
equivalents increased by $9.6 million. Net cash provided by operating activities
was $2.6 million,  representing primarily the results of operations adjusted for
depreciation and amortization,  the provision for loan losses. Net cash provided
by investing  activities  was $1.8 million,  which was primarily the result of a
decline in securities available for sale and mortgage-backed securities,  offset
in part by an  increase in loans  receivable.  Net cash  provided  by  financing
activities was $5.2


                                       47
<PAGE>

million,  reflecting  primarily a net increase in deposits  and  borrowed  funds
partially offset by the proceeds from the sale of branches.

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--Regulation of Federal Savings Associations--Capital Requirements."

     The  Bank  presently   exceeds  all  capital   requirements   as  currently
promulgated.  At March 31, 2001,  the Bank had tangible,  core,  and  risk-based
capital ratios of 7.02%, 7.02%, and 15.76%, respectively.

     The following table reconciles the Bank's  stockholders equity at March 31,
2001, under  accounting  principles  generally  accepted in the United States of
America to regulatory capital requirements:

<TABLE>
<CAPTION>
                                                        REGULATORY CAPITAL REQUIREMENTS
                                                ----------------------------------------------
                                                  GAAP     TANGIBLE   TIER I/CORE   RISK-BASED
                                                 CAPITAL    CAPITAL     CAPITAL       CAPITAL
                                                --------   --------   -----------   ----------
                                                          (Dollars in thousands)
<S>                                             <C>        <C>         <C>           <C>
Stockholders' Equity at March 31, 2001 (1) ..   $ 30,360   $ 30,360    $ 30,360      $ 30,360
                                                ========
Add:
   General valuation allowance ..............                    --          --         2,576
   Deduct:
   Excess of cost over net assets
   acquired .................................                  (603)       (603)         (603)
                                                           --------    --------      --------
   Regulatory capital .......................                29,757      29,757        32,333
   Minimum capital requirement ..............                 6,358      16,956        16,413
                                                           --------    --------      --------
   Regulatory capital excess ................              $ 23,399    $ 12,801      $ 15,920
                                                           ========    ========      ========
</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'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'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.

Tax Bad Debt Reserves

     Federal  tax law  changes  were  enacted in August  1996 to  eliminate  the
"thrift bad debt" method of calculating  bad debt  deductions.  The  legislation
requires the Bank to recapture into taxable income (over a six-year  period) all
bad debt reserves accumulated after March 31, 1988. Since the Bank's federal bad
debt  reserves   approximated  the  1988  base-year   amounts,   this  recapture
requirement  had no  significant  impact.  The tax law changes also provide that
taxes  associated  with the recapture of pre-1988 bad debt reserves would become
payable under more limited circumstances than under prior law. For example, such
taxes  would no longer  be  payable  in the event  that the  thrift  charter  is
eliminated and the Bank is required to convert to a bank charter.

     Amendments to the New York State and New York City tax laws redesignate the
Bank's  state and New York City bad debt  reserves at  December  31, 1995 as the
base-year  amount and also permit  future


                                       48
<PAGE>

additions  to the  base-year  reserves  using  the  percentage-of-taxable-income
method.  This  change  eliminated  the  excess  New York State and New York City
reserves  for which  the  Company  had  recognized  a  deferred  tax  liability.
Management  does not expect these  changes to have a  significant  impact on the
Bank.  Taxes  associated  with the  recapture of the New York State and New York
City base-year  reserve would still become payable under various  circumstances,
including  conversion  to a bank  charter  or  failure  to meet  various  thrift
definition tests.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998,  the FASB  issued SFAS No. 133,  "Accounting  for  Derivative
Instruments and Hedging Activities." This statement  establishes  accounting and
reporting standards for derivative instruments and for hedging activities.  This
statement  also requires  that an entity  recognize  all  derivatives  as either
assets  or  liabilities  in  the  statement  of  financial  position  and  those
instruments  at fair value.  This  statement,  as amended,  is effective for all
fiscal  quarters of fiscal years  beginning after June 15, 2000. The adoption of
this  statement is not  anticipated  to have a material  impact on the financial
position or results of operations of Carver.

     In September 2000, the Financial  Accounting Standard Board ("FASB") issued
Statement of Financial  Accounting  Standards No. 140, "Accounting for Transfers
and Servicing of Financial  Assets and  Extinguishments  of Liabilities"  ("SFAS
140") - a replacement of SFAS 125. SFAS 140 revises the standards for accounting
for  securitizations  and other transfers of financial assets and collateral and
requires  certain  additional   disclosures.   The  collateral   provisions  and
disclosure  requirements of SFAS 140 are effective for fiscal years ending after
December 15, 2000,  whereas the other  provisions  of SFAS 140 are to be applied
prospectively to transfers and servicing of financial assets and extinguishments
of liabilities  occurring  after March 31, 2001. The adoption of SFAS 140 is not
expected  to have a  material  impact on the  Company's  financial  position  or
results of operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE 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.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     For our Consolidated Financial Statements, see index on page F-1.

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

     None.


                                       49
<PAGE>

                                    PART III

ITEM 10. Directors and Executive Officers of the Registrant.

Information with Respect to Directors

     The  following  table sets forth certain  information  with respect to each
director of the Holding Company.  Pursuant to the terms of a Securities Purchase
Agreement  relating to the issuance of the Holding  Company's Series B Preferred
Stock to Provender,  Mr. Frederick O. Terrell was appointed to the Boards of the
Holding  Company  and the Bank for a term  expiring  at the  annual  meeting  of
stockholders  for the fiscal year ending March 31, 2000. He was re-elected for a
three-year term at that meeting. Pursuant to the terms of a settlement agreement
entered into between BBC Capital Market, Inc. and Carver, et al. in May of 2000,
Mr.  Kevin  Cohee and Ms.  Teri  Williams  were  appointed  to the Boards of the
Holding  Company  and the Bank for  terms  expiring  at the  annual  meeting  of
stockholders  for the fiscal  year  ending  March 31,  2002.  There are no other
arrangements  or  understandings  between the Holding  Company and any  director
pursuant to which such other  person was elected to be a director of the Holding
Company.

                               End of   Position Held with the
         Name         Age (1)   Term     Company and the Bank     Director Since
--------------------  -------  ------   ----------------------    --------------
Deborah C. Wright        43     2001  President, Chief Executive       1999
                                         Officer and Director
Frederick O. Terrell     46     2003           Chairman                2000
Pazel G. Jackson, Jr.    69     2001           Director                1997
David L. Hinds           54     2001           Director                2000
Kevin Cohee              43     2002           Director                2000
Teri Williams            43     2002           Director                2000
Strauss Zelnick          43     2002           Director                2000
Robert Holland, Jr.      61     2003           Director                2000
Dennis M. Walcott        49     2003           Director                2000

     (1)  As of May 31, 2001.

     The principal  occupation  and business  experience of each director is set
forth below.

     Deborah C.  Wright is  currently  President,  Chief  Executive  Officer and
Director of the Holding  Company and the Bank,  positions she assumed on June 1,
1999. Prior to assuming her current positions, 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 named
by Mayor David N.  Dinkins to the New York City  Housing  Authority  Board which
manages New York City's 189,000  public  housing  units.  She is a member of the
Board of  Overseers  of  Harvard  University  and serves on the boards of Empire
State 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.

     Frederick  O.  Terrell is currently  Managing  Partner and Chief  Executive
Officer of Provender  Capital Group, LLC, a private equity investment firm based
in New York and Los Angeles. Prior to forming Provender in 1997, Mr. Terrell was
a Managing Director and Partner with the international  investment  banking firm
of Credit Suisse First Boston,  beginning his association with the firm in 1983.
In addition to Carver,  he is a member of the Boards of Vanguarde  Media,  Inc.,
Empire Health Choice, Inc., The Diversity Channel, Inc.,


                                       50
<PAGE>

PacPizza LLC and the Yale School of Management.  Mr.  Terrell  received his B.A.
degree from La Verne College,  an M.A. from Occidental  College and his MBA from
the Yale School of Management.

     Pazel G. Jackson,  Jr. is a retired  Senior Vice  President of J.P.  Morgan
Chase.  From January 1995 to 2000, Mr. Jackson was  responsible for new business
development in targeted markets  throughout the United States.  Prior to joining
J.P.  Morgan  Chase,  Mr.  Jackson  served as the Senior  Credit  Officer of the
Residential  Mortgage Division of Chemical Bank. Mr. Jackson's previous business
experience  also  includes  employment  as a Senior Vice  President in charge of
Commercial  and  Residential  Lending at The Bowery  Savings Bank.  Mr.  Jackson
joined The Bowery in 1969 and held various  positions at this financial  savings
institution  including,  Senior  Vice  President,   Assistant  to  the  Chairman
(1985-1986);   Senior  Vice  President,   Division  Head,  Real  Estate  Finance
(1981-1985);  Senior Vice President,  Marketing Director  (1977-1981);  and Vice
President,  Asset  Recovery  (1973-1977).  Mr.  Jackson  also  served  Chief  of
Engineering   Design  for  the  1964-1965  New  York  World's  Fair  Corporation
(1962-1966).  Mr. Jackson is a licensed professional engineer and earned his MBA
from Columbia University.

     David L. Hinds is a retired Managing  Director of Deutsche Bank who, during
his tenure there,  developed an expertise in turnaround  management  and process
reengineering.  During his extensive  career at Deutsche Bank and Bankers Trust,
Mr. Hinds led several operating divisions,  a start-up technology division and a
global  marketing  and  sales  organization.  Most  recently,  he  was  Managing
Director/Partner  for Deutsche  Bank's Global Cash  Management and Trade Finance
Division,  where  he  had  profit  and  loss  responsibility  for  all  business
activities' including global sales, operations,  product management,  credit and
technology.  Under his leadership,  the Division's profit contribution more than
doubled over four years.  He is a board member of the SBLI Mutual Life Insurance
Company,  past President of the Executive Leadership Council,  Co-Founder of the
Urban  Bankers  Coalition  and  Chairman of the NAACP New York Act - So Advisory
Committee.

     Kevin Cohee is  currently  Chairman and Chief  Executive  Officer of Boston
Bank of  Commerce.  Mr.  Cohee  is also a board  member  of the  Boston  Bank of
Commerce.  Mr.  Cohee  has  an  extensive  background  as an  executive  and  an
entrepreneur.  He was  employed by Salomon  Brothers,  Inc.  in their  Financial
Institutions  Group.  By 1988,  through a leverage  buyout,  Mr. Cohee  obtained
Military Professional  Services,  Inc., a 29 year old company that marketed Visa
and Master  Card credit  cards to  military  personnel.  Mr.  Cohee  purchased a
majority controlled interest in Boston Bank of Commerce in 1995. Mr. Cohee holds
a B.A. and M.B.A.  from the  University of Wisconsin and a J.D. from Harvard Law
School.

     Teri  Williams is  currently  employed as an  Executive  Vice  President of
Boston Bank of Commerce.  Ms. Williams is also a board member of the Boston Bank
of  Commerce.  Ms.  Williams  began  her  business  career  over 17 years ago at
American  Express  TRS  Company  where  she  became  one  of the  youngest  vice
presidents in the company's history.  Ms. Williams is very involved in community
projects,   including  Vice  Chairperson  of  Dimock  Community  Health  Center,
Treasurer of UNICEF/New England and the Board of Overseers for WGBH (public tv).
Ms. Williams holds a B.A. with  distinctions in economics from Brown  University
and  an  M.B.A.   with  honors  from   Harvard   Graduate   School  of  Business
Administration.

     Strauss  Zelnick is the  founder of Zelnick  Media LLC, an  investment  and
advisory firm  specializing in media and  entertainment.  From 1998 to 2000, Mr.
Zelnick was President and Chief Executive Officer of BMG  Entertainment,  a $4.7
billion  music and  entertainment  unit of  Bertelsmann  A.G. BMG  Entertainment
includes the record  labels  Arista,  RCA,  Windham Hill and Ariola,  among many
others,  as well as one of the largest music publishing  companies in the world,
the world's largest record club and significant online  activities,  including a
joint partnership in GetMusic, which promotes artists and sells their music over
the Internet. Mr. Zelnick has spent his career in the entertainment industry and
has a broad  background  in  managing  and  developing  creative  organizations,
including businesses in film, television,  video and multimedia.  Before joining
BMG, Mr. Zelnick was President and Chief Executive  Officer of Crystal Dynamics,
a leading producer and distributor of interactive  entertainment software. Prior
to that,  he worked for four years as President and Chief  Operating  Officer of
20th Century  Fox. He spent three years at Vestron  Inc. as a senior  executive,
becoming President and Chief Operating Officer.  Mr. Zelnick also served as Vice
President,   International  Television  for  Columbia  Pictures.  Mr.  Zelnick's
educational  board  memberships  include Wesleyan  University and Pencil Inc. He
also  serves  on  the  board  of  several   other   charitable,   corporate  and
entertainment organizations. Mr. Zelnick holds a J.D. and an M.B.A. from Harvard
University and a B.A. from Wesleyan University.


                                       51
<PAGE>

     Robert Holland,  Jr. was Chairman and Chief Executive  Officer of Workplace
Integrators,  a  Southeast  Michigan  company he acquired in June 1997 and built
into one of the largest  Steelcase  Office  Furniture  dealerships in the United
States. He recently divested this business.  Mr. Holland is the former President
and Chief  Executive  Officer  of Ben &  Jerry's  and  previously  served as the
Chairman and Chief Executive Officer of Rokher-J, Inc., a New York-based holding
company  participating in business  development  projects and providing strategy
development  assistance  to senior  management of major  corporations.  Prior to
these  positions,  Mr.  Holland  was a  long-standing  partner  with  McKinsey &
Company.  Mr.  Holland  is a member  of the  Boards of The MONY  Group,  Lexmark
International, Inc., Tricon Restaurants, Inc., and Mazaruni Granite Products and
was a member of the Boards of AC Nielsen  Corporation  and Trumark,  Inc. before
those  companies  were sold.  He spent ten years as the Chairman of the Board of
Trustees of Spelman College,  where he currently serves as Vice Chairman, and is
a member of the Board of the Harlem  Junior  Tennis  Program  and the  Executive
Board of the Harvard Journal of African-American Public Policy.

     Dennis M. Walcott is President and Chief Executive  Officer of the New York
Urban  League.  For the past ten  years,  he has been head of the New York Urban
League,  which is  dedicated  to  advocating  for the  rights  of New York  City
residents,  particularly in the areas of education,  police/community  relations
and  welfare-to-work  initiatives.  Mr.  Walcott  supervises a staff of over 150
employees and 500 volunteers located in 17 sites throughout the five boroughs of
New York City. Mr. Walcott is also  responsible  for the New York Urban League's
award of grants from the New York City Board of  Education  to recruit and train
parents  to serve on  School  Leadership  Teams  and to  create  welfare-to-work
initiatives,   including  training,   counseling  and  job  placement  services.
Previously, Mr. Walcott was Executive Director of Harlem Dowling Westside Center
for five years and was a former citywide appointee to the New York City Board of
Education. Mr. Walcott received a Masters of Social Work from Fordham University
and a Masters of  Education  from the  University  of  Bridgeport.  He serves on
numerous boards, including the Independence Bank Foundation.

Information with Respect to Officers

     The  following  table sets forth certain  information  with respect to each
officer of the Holding  Company.  There are no arrangements  between the Holding
Company  and any  officer  pursuant  to which such  person was  selected to be a
officer of the Holding Company.

                                    Position Held with the
        Name          Age            Company and the Bank     Officer Since (1)
--------------------  ---           ------------------------  -----------------
Deborah C. Wright      43           President, Chief                1999
                                    Executive Officer
                                    and Director
Walter T. Bond         42           Senior Vice President           1993
                                    and Special Assistant
                                    to the President and
                                    Chief Executive Officer
Margaret D. Peterson   50           Senior Vice President           1999
                                    and Chief Administrative
                                    Officer
J. Kevin Ryan          48           Senior Vice President and
                                    Chief Lending Officer           2000
Devon W. Woolcock      35           Senior Vice President and       2000
                                    Chief of Retail Banking
William Schult         53           Vice President and              2000
                                    Controller and Acting
                                    Chief Financial Officer

----------

     (1)  Includes terms as officers of the Bank prior to the  incorporation  of
          the Holding Company in 1996.


                                       52
<PAGE>

     The principal occupation and business experience of each officer who is not
a director is set forth below.

     Walter T. Bond is Senior Vice  President,  Acting  Corporate  Secretary and
Special  Assistant to the President and Chief Executive  Officer.  Mr. Bond is a
member of the Bank's Investment Committee.  Mr. Bond joined the Bank in February
1993, as Assistant Vice President, Mortgage Lender. Mr. Bond was assigned to the
position of  Investment  Officer in November  1995.  Mr. Bond is a member of the
Bank's  Investment  and Loan  Committees  and serves as the Company's  Community
Reinvestment Officer. Mr. Bond is a member of the New York Society of Securities
Analysts and the Financial Managers Society.

     Margaret  D.  Peterson is Senior Vice  President  and Chief  Administrative
Officer, integrating Human Resources, Information Technology, Facilities, Vendor
Management and other support  activities.  Ms. Peterson joined Carver Federal in
November 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,  Ms.  Peterson  was a Vice  President  and Senior Human
Resources Generalist for Citibank Global Asset Management.  Besides her 11 years
in  Human  Resources,  Ms.  Peterson  has 10  years of  systems  and  technology
experience  from various  positions held at JP Morgan and Chase  Manhattan Bank.
Ms. Peterson earned a Bachelors degree from Pace University, a MBA from Columbia
University  as  a  Citicorp   Fellow,   and  has  been  designated  a  Certified
Compensation Professional by the American Compensation Association.

     J. Kevin Ryan is Senior Vice President and Chief Lending Officer.  Mr. Ryan
joined  Carver  Federal in June 2000 and has over 20 years'  experience  in real
estate  and  lending.   Prior  to  joining  Carver,  Mr.  Ryan  served  as  Vice
President-Team  Leader for Commercial Real Estate at Greenpoint Mortgage Funding
Co.,  where he was employed from 1996 to 2000.  From 1985 through 1996, Mr. Ryan
served as President of Manhattan  Appraisal  Co., a commercial  and  residential
real estate  appraisal  company which he founded in New York City. Mr. Ryan also
served in various  positions at Dime Savings Bank of New York from 1977 to 1985,
including  Vice  President,  and  as an  Adjunct  Professor  of  Management  and
Economics at St. John's  University from 1981 through 1984. He is a Board member
of Habitat for  Humanity,  New York City.  Mr. Ryan received a BBA in Management
from Hofstra University and an MBA in Finance from Fordham University.

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

     William Schult is Vice President and  Controller.  He was appointed  Acting
Chief Financial  Officer in May 2001. He joined Carver Federal in September 2000
after five years as an independent consultant. He has 26 years experience in the
banking  industry  beginning in 1974 as Senior Vice President and Controller for
the  Nassau  Trust  Company.  In 1983  Mr.  Schult  became  Administrative  Vive
President at Norstar  Bank of Long Island.  He moved to The Dime Savings Bank of
New York in 1985 where he was Vice  President and Director of  Accounting  until
1995. Mr. Schult received a BBA in Accounting  from Hofstra  University and is a
Certified Public Accountant in the State of New York.

Section 16(a) Beneficial Ownership Reporting Compliance

     Section  16(a) of the  Securities  Exchange  Act of 1934,  as amended  (the
"Exchange Act"),  requires the Holding Company's  directors and certain officers
and persons who own more than ten percent of a  registered  class of the Holding
Company's  equity  securities  to file  reports  of  ownership  and  changes  in
ownership with the SEC and the American Stock Exchange.  Officers, directors and
greater than ten percent  shareholders are required by SEC regulation to furnish
the Holding Company with copies of all Section 16(a) forms they file.

     Based solely on a review of copies of such  reports of ownership  furnished
to Carver,  or written  representations  that no forms  were  necessary,  Carver
believes that, during the last fiscal year, all filing  requirements  applicable
to its  directors,  officers  and greater than ten percent  shareholders  of the
Company were complied with,  except for the late filing with the SEC of one Form
3 "Initial Statement of Beneficial


                                       53
<PAGE>

Ownership  of  Securities"  ("Form 3") by David L.  Hinds upon first  becoming a
director  of Carver,  one Form 3 by Devon W.  Woolcock  upon first  becoming  an
executive officer of Carver Federal, and one Form 3 by William Schult upon first
becoming a key manager of Carver Federal.

ITEM 11. EXECUTIVE COMPENSATION.

Summary Compensation Table

     The following table sets forth cash and noncash compensation for the fiscal
year ended March 31, 2001  awarded to or earned by the Holding  Company's  Chief
Executive  Officer  and by  each  other  executive  officer  whose  compensation
exceeded $100,000 for services rendered in all capacities to the Holding Company
and the Bank  during the fiscal  year ended  March 31,  2001  ("Named  Executive
Officers").

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                                                                Long Term Compensation
                                                                                     ----------------------------------------------
                                                       Annual Compensation                   Awards                  Payouts
                                              ------------------------------------   ---------------------   ----------------------
                                                                         Other       Restricted
                                                                         Annual        Stock                  LTIP       All Other
        Name and Principal           Fiscal                           Compensation     Awards      Options   Payouts   Compensation
             Positions               Year(1)  Salary($)  Bonus($)(2)       ($)         ($)(3)        (#)       ($)          ($)
-----------------------------------  -------  ---------  -----------  ------------   ----------    -------   -------   ------------
<S>                                   <C>      <C>          <C>            <C>         <C>         <C>          <C>     <C>
Deborah C. Wright                     2001     235,000          --         --              --      30,000       --          --
President and
Chief Executive Officer               2000     195,833      44,650         --          60,938      30,000       --          --

James Boyle                           2001     125,000          --         --          12,375       4,000       --          --
Senior Vice President and Chief
Financial Officer

Devon W. Woolcock                     2001      85,000      48,500(5)      --              --       4,000       --          --
Senior Vice President and Chief of
Retail Banking

Walter T. Bond                        2001     100,000          --         --           8,750       4,000       --          --
Senior Vice President
                                      2000      62,000          --         --              --          --       --          --

                                      1999      62,000          --         --              --          --       --          --
</TABLE>

----------

(1)  Ms.  Wright  commenced  employment  on June 1, 1999.  Mr.  Boyle  commenced
     employment on January 31, 2000 and  terminated  employment on May 25, 2001.
     Mr.  Woolcock  commenced  employment on July 17, 2000.  Mr. Bond  commenced
     employment on September 12, 1995.

(2)  Does not include perquisites and other personal benefits the value of which
     did not exceed the lesser of $50,000 or 10% of salary and bonus.

(3)  Pursuant  to  her  employment  agreement,  an  award  of  7,500  shares  of
     restricted  stock was made to Ms. Wright as of June 1, 1999, which vests in
     equal installments over a three-year period such that the first installment
     vested on June 1, 2000, and the Board may  accelerate the vesting  schedule
     based on the attainment of specified  performance  goals. The dollar amount
     for this award is based on the closing  price of $8.125 per share of Common
     Stock on June 1, 1999,  the award date,  as  reported  on the Nasdaq  Stock
     Market.  When shares become vested and are distributed,  the recipient also
     receives an amount equal to accumulated  dividends and earnings thereon, if
     any. Pursuant to their letter employment agreements, Messrs. Boyle and Bond
     each received  1,000 shares of  restricted  stock.  Messrs.  Boyle and Bond
     received their awards on January 31, 2000 and April 1, 2000,  respectively,
     each which vest in three  equal  annual  installments  such that each first
     installment  is vested on the first  anniversary  of the  respective  grant
     date. The restricted  stock award amounts  attributed to Messrs.  Boyle and
     Bond are based on the closing prices the grant dates which were $12.375 and
     $8.750, respectively.

(4)  Includes amounts received under the MRP.

(5)  Includes  one-time  payment  under  the  letter  employment   agreement  to
     compensate for benefits from his previous employer that were forfeited.

Employee Benefit Plans

     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


                                       54
<PAGE>

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  such that the first  installment  vests 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.

     Incentive  Compensation  Plan.  The  Incentive  Compensation  Plan provides
incentive  compensation  to certain  eligible  employees in the form of bonuses,
stock options and restricted  stock.  For each fiscal year,  eligible  employees
will receive a bonus equal to 4% of such employee's compensation,  multiplied by
the lesser of 8 and the sum of certain specified factors. In addition, each such
employee  may receive a restricted  stock award of shares  having a market value
equal to 30% of the  employee's  bonus,  which  will vest in five  equal  annual
installments  such that the first  installment vests on the first anniversary of
the date of the grant. Each such employee also may receive an option to purchase
4 times the number of shares of restricted stock awarded to such employee, which
will vest in five  equal  annual  installments  such that the first  installment
vests on the first anniversary of the date of the grant.

     Option Plan. The Carver  Bancorp,  Inc. 1995 Stock Option Plan (the "Option
Plan") provides for automatic option grants to certain employees as of September
12, 1995.  In addition,  the Option Plan provides for  additional  discretionary
option  grants to those  employees  selected  by the  committee  established  to
administer the Option Plan with an exercise price equal to the fair market value
of a share of Common Stock on the date of the grant.  Options  granted under the
Option Plan generally vest in three to five equal annual  installments such that
the first  installment  vests on the first  anniversary of the effective date of
the grant, provided the recipient is still an employee of the Holding Company or
the Bank on such date. Upon death or disability,  all options previously granted
automatically become exercisable. At the annual shareholders meeting in February
2001, the shareholders  approved an amendment to the Option Plan to increase the
number of shares reserved under the Option Plan by 200,000.

     The  following  table  provides  certain  information  with  respect to the
options  and SARs  granted to Named  Executive  Officers  during the fiscal year
ended March 31, 2001.

                      Option/SAR Grants in Last Fiscal Year

<TABLE>
<CAPTION>
                                      Individual Grants
------------------------------------------------------------------------------------------------
                                                                                                     Potential Realizable
                                                                                                    Value at Assumed Annual
                          Number of            Percent Of                                             Rates Of Stock Price
                          Securities         Total Options/                                         Appreciation For Option
                          Underlying          SARs Granted        Exercise Of                                 Term
                          Option/SARs        To Employees In      Base Price                       --------------------------
       Name             Granted (#) (1)        Fiscal Year          ($/Sh)       Expiration Date      5% ($)      10% ($)
-----------------       ---------------      ---------------      -----------    ---------------      ------      -------
<S>                         <C>                   <C>              <C>              <C>              <C>          <C>
Deborah C. Wright           30,000                53.57%           $8.2100          5/31/2010        154,897      392,539
Devon W. Woolcock            4,000                7.14%            $9.9510          7/16/2010         25,033       63,437
Walter T. Bond               4,000                7.14%            $8.7500          3/31/2010         22,011       55,781
</TABLE>

----------

(1)  The option  awards for Ms.  Wright and  Messrs.  Woolcock  and Bond  become
     exercisable  in three  equal  annual  installments  such  that  each  first
     installment  vests on the first  anniversary of the date of the grant. None
     of the options were granted in tandem with any stock appreciation rights.

     The following table provides certain information with respect to the number
of shares of Common Stock acquired  through the exercise of, or represented  by,
outstanding  stock  options  held by the Named  Executive  Officers on March 31,
2001. Also reported is the value for any "in-the-money" options, which represent
the  positive  spread  between the  exercise  price of any such  existing  stock
options  and the  fiscal  year-end  price of Common  Stock,  which was $8.87 per
share.


                                       55
<PAGE>

                        Fiscal Year End Option/SAR Values

<TABLE>
<CAPTION>
                                                                              Number of Securities        Value of Unexercised
                                                                             Underlying Unexercised           In-the-Money
                                                                             Options/SARs at Fiscal      Options/SARs at Fiscal
                                      Shares           Value Realized on          Year-end (1)                Year-end (1)
                               Acquired on Exercise         Exercise                  (#)                          ($)
      Name                             (#)                    ($)          Exercisable/Unexercisable    Exercisable/Unexercisable
-----------------              --------------------    -----------------   -------------------------    -------------------------
<S>                                    <C>                    <C>                <C>                          <C>
Deborah C. Wright                      --                     --                 20,000/40,000                14,900/27,250
James Boyle                            --                     --                  1,333/2,667                      --
Devon W. Woolcock                      --                     --                    0/4,000                        --
Walter T. Bond                         --                     --                  1,745/2,771                    415/385
</TABLE>

----------

(1)  The value of  in-the-money  options  represents the difference  between the
     fair  market  value of the Common  Stock of $8.87 per share as of March 31,
     2001,  and the exercise  price per share of the options.  All 30,000 of the
     options  granted to Ms. Wright on June 1, 1999,  have an exercise  price of
     $8.125 per share,  and 20,000 were  exercisable  as of March 31, 2001.  All
     30,000 of the options granted to her on June 1, 2000 have an exercise price
     of $8.210 per share and none were  exercisable  as of March 31,  2001.  All
     options granted to Mr. Boyle have an exercise price of $12.375 and were not
     in-the-money as of March 31, 2001. Mr. Boyle terminated his employment with
     the Company on May 25, 2001, and all unexercisable  options indicated above
     were forfeited.  All options granted to Mr. Woolcock have an exercise price
     of $9.951 per share and were not  in-the-money  as of March 31,  2001.  Mr.
     Bond was granted 516 options on August 20, 1996,  with an exercise price of
     $8.250.  412 of the options were  exercisable on March 31, 2001, and all of
     the 516  options  were  in-the-money  as of such  date.  Mr.  Bond also was
     granted  4,000 options on April 1, 2000,  with an exercise  price of $8.75.
     1,333 of the options were  exercisable  as of March 31, 2001, and all 4,000
     were in-the-money as of such date.

     Pension Plan. The Bank maintains the Carver Federal Savings Bank Retirement
Income Plan, a noncontributory, tax-qualified defined benefit plan (the "Pension
Plan").  The Pension Plan was amended such that future benefit accrual ceased as
of December 31, 2000. Since that date no new participants were eligible to enter
into the Pension Plan, and  participants  as of such date have not been credited
with additional years of service or increased compensation.

     The following table sets forth the estimated  annual benefits that would be
payable  under the  Pension  Plan in the form of a single  life  annuity  before
reduction  for  the  social  security  amount  upon  retirement  at  the  normal
retirement date. The amounts are expressed at various levels of compensation and
years of service.

                                    Years of Credited Service
                     --------------------------------------------------------
Final Earnings (1)      15          20          25          30          35
------------------   --------    --------    --------    --------    --------
    $100,000         $ 50,000    $ 50,000    $ 50,000    $ 50,000    $ 50,000

     150,000           75,000      75,000      75,000      75,000      75,000

     200,000(2)       100,000     100,000     100,000     100,000     100,000

     250,000(2)       125,000     125,000     125,000     125,000     125,000

     300,000(2)       150,000     150,000     150,000     150,000     150,000

     350,000(2)       175,000     175,000     175,000     175,000     175,000

     400,000(2)       200,000     200,000     200,000     200,000     200,000

----------

(1)  Final  earnings  equal  the  average  of the  participant's  highest  three
     consecutive  calendar years of taxable compensation during the last 10 full
     calendar years of employment  prior to  termination,  or the average of the
     participant's annual compensation over his or her total service, if less.

(2)  Under  Section  401(a)(17)  of the Code, a  participant's  compensation  in
     excess of $170,000 (as adjusted to reflect  cost-of-  living  increases) is
     disregarded for purposes of determining  final earnings.  The amounts shown
     in the table include the  supplemental  retirement  benefits payable to Ms.
     Wright under her  employment  agreement to compensate for the limitation on
     includible compensation.

     Participants  become  100%  vested  after five years of  service,  death or
termination  of the  Pension  Plan,  regardless  of the  participant's  years of
service. As of December 31, 2000, only Ms. Wright and Mr. Bond


                                       56
<PAGE>

were participants in the Pension Plan. At such date, Ms. Wright's final earnings
(as defined) under the Pension Plan were $244,813,  and her credited service was
1 year and 7 months.  Mr.  Bond's  final  earnings  under the Pension  Plan were
$63,881, and his credited service was 8 years and 5 months.

Employment Agreements and Severance Provisions

     Employment  Agreement with Deborah C. Wright.  As of June 1, 1999, both the
Holding  Company and the Bank entered into  employment  agreements to secure the
services of Deborah C. Wright as President  and Chief  Executive  Officer of the
Holding Company and the Bank. The employment  agreement with the Holding Company
is intended to set forth the aggregate  compensation and benefits payable to Ms.
Wright  for  all  services  rendered  to  the  Holding  Company  and  any of its
subsidiaries,  including  the Bank,  and to the extent that  payments  under the
Holding Company's  employment  agreement and the Bank's employment agreement are
duplicative, payments due under the Holding Company's employment agreement would
be offset by amounts actually paid by the Bank for services rendered to it. Both
employment  agreements provide for an initial term of three years beginning June
1,  1999.  Prior to the  second  anniversary  date of the  agreements,  and each
anniversary  date  thereafter,  the term of the  agreements  may be  extended an
additional  year after a review by the Board of the Bank and the Holding Company
of Ms. Wright's  performance.  Unless the Board or Ms. Wright  determines not to
extend the agreements,  in general the remaining term of the agreements will not
exceed two years.

     The  employment  agreements  provide  for an annual base salary of $235,000
which will be reviewed annually by the Board.  Under the agreements,  as of June
1, 1999,  Ms. Wright is entitled to a restricted  stock award of 7,500 shares of
Common Stock,  which will vest in equal  installments over a three-year  period,
and the grant of an option to purchase  30,000  shares of Common  Stock,  50% of
which is  immediately  exercisable  and 50% of which will become  exercisable in
equal  installments  over a  three-year  period.  In  addition,  the  employment
agreements  provide for an annual incentive  payment based on the achievement of
certain  performance  goals,  future  grant  of  stock  awards,  a  supplemental
retirement  benefit,  additional life insurance  protection and participation in
the various  employee  benefit plans  maintained by the Holding  Company and the
Bank  from  time to  time.  The  agreements  also  provide  customary  corporate
indemnification  and errors and omissions insurance coverage throughout the term
of the agreements and for six years thereafter.

     The Bank or the Holding  Company may terminate Ms.  Wright's  employment at
any time for cause as defined  in the  employment  agreements.  In the event the
Bank or the Holding Company terminates Ms. Wright's employment for reasons other
than for cause,  she would be entitled to a severance  benefit equal in value to
the cash  compensation,  retirement  and other  fringe  benefits  she would have
earned had she remained  employed for the remaining term of the agreements.  The
same severance benefits would be available if Ms. Wright resigns during the term
of the employment agreements following: a loss of title, office or membership on
the Board; a material  reduction in her duties,  functions or  responsibilities;
involuntary  relocation  of her  principal  place of employment by over 30 miles
from its location as of June 1, 1999;  other material  breach of contract by the
Holding Company or the Bank that is not cured within 30 days; or, in the case of
the Holding Company, a change in control,  and, in the case of the Bank, certain
circumstances  not later than one year after the effective date of the change in
control. In the event of a change in control, the remaining term of Ms. Wright's
Agreement  with the  Holding  Company  at any point in time will be three  years
unless written notice of non-renewal is given by the Board or Ms. Wright.

     A  portion  of the  severance  benefits  payable  to Ms.  Wright  under the
employment  agreements  in the event of a change  in  control  might  constitute
"excess  parachute  payments" under current  federal tax laws.  Federal tax laws
impose a 20% excise tax, payable by the executive, on excess parachute payments.
In the event that any amounts paid to Ms.  Wright  following a change of control
would constitute "excess parachute payments",  the employment agreement with the
Holding  Company  provides  that she will be  indemnified  for any excise  taxes
imposed due to such excess  parachute  payments,  and any additional  income and
employment  taxes imposed as a result of such  indemnification  of excise taxes.
Any excess  parachute  payments  and  indemnification  amounts  paid will not be
deductible compensation expenses for the Holding Company or the Bank.

     Letter   Agreements.   The  Company  has  entered  into  letter  employment
agreements with Messrs. Bond, Boyle, Ryan, Schult and Woolcock, and Ms. Peterson
(each, an "Executive").  Generally,  each letter  employment  agreement (each, a
"Letter  Agreement")  provides for "at-will"  employment and compensation in


                                       57
<PAGE>

the form of base  salary,  annual  discretionary  bonus,  options and a one-time
payment.  The annual base salary amount for each of Messrs.  Bond, Boyle,  Ryan,
Schult and  Woolcock is $100,000,  $125,000,  $125,000,  $100,000 and  $125,000,
respectively.  The annual base salary  amount for Ms.  Peterson is $72,500  from
January 1, 2001 through September 30, 2001, and $145,000 thereafter. On the date
of hire, Messrs.  Bond, Boyle, Ryan and Woolcock and Ms. Peterson received stock
options to purchase 4,000 shares of common stock,  such options vesting in three
equal annual  installments  such that the first  installment vests at the end of
the first year of employment  (except in the case of Ms.  Peterson,  whose first
installment  vested on March 31,  2001).  Messrs.  Bond,  Boyle and Ryan and Ms.
Peterson each received a one-time  payment of 1,000 shares,  which vest in three
equal annual  installments  such that the first  installment vests at the end of
the first year of employment  (except in the case of Ms.  Peterson,  whose first
installment  vested on March 31,  2001).  Messrs.  Schult and  Woolcock  and Ms.
Peterson  each  received a one-time  payment of $15,000,  $48,000  and  $75,000,
respectively, after completion of three months of employment. Mr. Woolcock's and
Ms.  Peterson's  bonuses are intended to compensate  the Executives for benefits
from their previous employers that were forfeited. The one-time payment would be
forfeited  if the  Executive  resigned  within  one  year of  entering  into the
agreement.

     In the event of a termination without cause (as defined) due to a change in
control,  each Executive will be entitled to the following  severance  benefits:
(1) continuation of weekly salary for 39 weeks as well as a lump sum payment for
any unused vacation time, (2) continuation of participation in the Bank's health
plan,  including  premium sharing  arrangements,  deductibles  and  co-payments,
during  the 39 weeks,  and (3)  utilization  of the  services  of an  outplacing
counseling  firm at the Bank's  expense,  up to 10% of the  Executive's  salary.
These  benefits are subject to completion  of a list of transition  assignments,
release of legal liabilities, non-compete and non-disclosure provisions.

Directors' Compensation

     Directors'  Fees.  The Bank's  directors,  other  than the Chief  Executive
Officer,  receive $600 per meeting  attended of the Bank's  Board of  Directors,
except that the Chairman  receives a fee of $850 per meeting.  In addition,  the
Chairman of the Board  receives a  quarterly  retainer  fee of $1,000.  Fees for
executive  committee  meetings  are $700  per  meeting  and  $475 for all  other
committee  meetings.  Ms.  Wright does not receive  fees for her  attendance  at
meetings of either the Holding  Company's or Bank's Board of or their respective
committees.  Directors  of the Bank  also  serve  as  directors  of the  Holding
Company,  but do not receive  additional  fees for service as  directors  of the
Holding Company.

     Option Plan. The Holding Company  maintains the Option Plan for the benefit
of its  directors  and  certain key  employees.  Any  individual  who becomes an
outside director following the effective date of the Option Plan will be granted
options to purchase 1,000 shares of Common Stock with an exercise price equal to
the  fair  market  value of a share of  Common  Stock on the date of the  grant.
Options  granted  under the Option  Plan  generally  vest in five  equal  annual
installments  commencing on the first  anniversary  of the effective date of the
grant,  provided the recipient is still a director of the Holding Company or the
Bank on such date. In 1997, the Option Plan was amended to provide the Committee
with  discretion  to grant stock  options that will vest and become  exercisable
pursuant to a vesting  schedule  that  differs from the Option  Plan's  standard
five-year schedule.  The Option Plan continues to provide that upon the death or
disability  of  an  option  holder,  all  options  previously  granted  to  such
individual will automatically become exercisable.

     Management  Recognition Plan. The Holding Company maintains the MRP for the
benefit of its directors and certain key  employees.  Any individual who becomes
an outside  director  following  the  effective  date of the MRP will be granted
1,000 shares of restricted  stock.  Awards  granted under the MRP will generally
vest in five equal annual installments  commencing on the first anniversary date
of the award,  provided the recipient is still a director 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.  The MRP was also amended in 1997, to permit the
Committee,  in its  discretion,  to grant  restricted  stock awards with vesting
schedules that differ from the Plan's standard five-year schedule.

     Incentive   Compensation  Plan.  The  Incentive  Compensation  Plan  allows
directors  to defer  all or a  portion  of their  fees.  Under  the  plan,  each
participating  director will have a  bookkeeping  account which will be credited
with the amount deferred and any investment earnings or losses incurred thereon.
A participating director may select from among the following rate of returns for
his  account:  (1) two  percent of certain


                                       58
<PAGE>

specified  factors,  (2) the  highest  interest  rate  being paid by the Bank on
12-month certificates of deposit and (3) the rate of return on Common Stock.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security Ownership of Certain Beneficial Owners

     The following table sets forth, as of May 31, 2001, certain  information as
to shares of Voting Stock  beneficially  owned by persons owning in excess of 5%
of Carver's  outstanding  Voting  Stock.  Carver  knows of no person,  except as
listed  below,  who  beneficially  owned  more  than  5% of  any  class  of  the
outstanding  shares of our Voting Stock as of May 31, 2001.  Except as otherwise
indicated,  the  information  provided in the following  table was obtained from
filings  with the  Securities  and Exchange  Commission  ("SEC") and with Carver
pursuant to the  Securities  Exchange  Act of 1934,  as amended  (the  "Exchange
Act").  Addresses provided are those listed in the filings as the address of the
person  authorized to receive  notices and  communications.  For purposes of the
table below and the table set forth under "Security Ownership of Management," in
accordance  with Rule 13d-3 under the Exchange Act, a person is deemed to be the
beneficial  owner, for purposes of these tables, of any shares of stock (1) over
which he or she has or shares,  directly  or  indirectly,  voting or  investment
power, or (2) of which he or she has the right to acquire  beneficial  ownership
at any time  within 60 days  after  May 31,  2001.  As used in this  Form  10-K,
"voting  power"  is the  power to vote or  direct  the  voting  of  shares,  and
"investment  power"  includes the power to dispose or direct the  disposition of
shares.

<TABLE>
<CAPTION>
                                                                         Amount and
                                                                         Nature of        Percent of       Percent of
                                   Name and Address                      Beneficial          Class        Common Stock
Title of Class                    of Beneficial Owner                    Ownership      Outstanding (1)    Outstanding
--------------      ----------------------------------------------       ----------     ---------------    -----------
<S>                 <C>                                                   <C>                <C>              <C>
Common Stock        Koch Asset Management, L.L.C.                         226,650(2)         9.83%            9.83%
                    1293 Mason Road
                    Town & Country, MO  63131

Common Stock        EQSF Advisers, Inc.                                   218,500(3)         9.47%            9.47%
                    767 Third Avenue
                    New York, NY  10017

Common Stock        Blaylock & Partners, L.P.                             199,000(4)         8.63%            8.63%
                    609 Fifth Avenue
                    New York, NY  10017

Common Stock        BBC Capital Market, Inc.                              170,700(5)         7.40%            7.40%
                    133 Federal Street
                    Boston, MA  02110

Common Stock        Carver Bancorp, Inc.                                  166,656(6)         7.23%            7.23%
                    Employee Stock Ownership Plan
                    Trust (the "ESOP Trust") 75 West 125th Street
                    New York, NY 10027

Series A            Morgan Stanley & Co.                                   40,000(7)         100%             3.49%
Preferred Stock     Incorporated
                    1585 Broadway
                    New York, New York  10036

Series B            Provender Opportunities Fund L.P.                      60,000(8)         100%             5.14%
Preferred Stock     17 State Street
                    New York, NY  10004
</TABLE>

----------

(1)  On May 31, 2001 there were outstanding 2,306,286,  40,000 and 60,000 shares
     of Common  Stock,  Series A Preferred  Stock and Series B Preferred  Stock,
     respectively.

(2)  Based on a  Schedule  13G,  dated  March 14,  2001 and  filed  with the SEC
     jointly by Koch Asset Management, L.L.C. ("KAM") and Donald Leigh Koch, who
     owns  100%  of  KAM  and is the  sole  Managing  Member  of  KAM.  KAM is a
     registered   investment  adviser  which  furnishes   investment  advice  to
     individual  clients by exercising trading authority over securities held in
     accounts   on  behalf  of  such   clients   (collectively,   the   "Managed
     Portfolios").  In its role as an investment adviser to its clients, KAM has
     sole dispositive power over the Managed  Portfolios and may be deemed to be
     the  beneficial  owner of  shares  of  Common  Stock  held by such  Managed
     Portfolios,  and Mr. Koch may be deemed to have the power to  exercise  any
     dispositive  power that KAM may have with  respect to the Common Stock held
     by the Managed Portfolios.  However, KAM does not have the right to vote or
     to receive  dividends  from,  or proceeds from the sale of the Common Stock
     held in such Managed  Portfolios.  Mr. Koch,  individually,  owns and holds
     voting power with respect to Managed  Portfolios  containing  approximately
     46,000 shares of Common Stock, or an aggregate of approximately 1.9%


                                       59
<PAGE>
     of the total  number of  outstanding  shares of  Common  Stock  (the  "Koch
     Shares").  Other than with respect to the Koch Shares,  all shares reported
     in the  Schedule  13G have been  acquired by KAM,  and Mr.  Koch  disclaims
     beneficial ownership, voting rights, rights to dividends, or rights to sale
     proceeds associated with such shares.

(3)  Based on a  Schedule  13G,  dated  March 14,  2001,  and filed with the SEC
     jointly by EQSF  Advisers,  Inc.  ("EQSF"),  M.J.  Whitman  Advisers,  Inc.
     ("MJWA") and Martin J. Whitman, the Chief Executive Officer and controlling
     person of MJWA and EQSF.  EQSF  beneficially  owns 218,500 shares of Common
     Stock.  Mr. Whitman  disclaims  beneficial  ownership of such stock.  Third
     Avenue  Value  Fund,  Inc.,  an  investment  company  registered  under the
     Investment  Company Act of 1940,  has the right to receive  dividends  with
     respect  to, and  proceeds  from the sale of,  such  shares.  EQSF has sole
     voting and dispositive power over such shares.

(4)  Based on a Schedule  13G,  dated  February  14,  2001 filed with the SEC by
     Blaylock & Partners, L.P., a Delaware limited partnership.

(5)  Based on a Schedule  13D,  dated  January 31, 2000,  and filed with the SEC
     jointly by the Boston Bank of Commerce (the "BBOC") and BBC Capital Markets
     ("BBC").  Kevin Cohee, the Chairman,  President and Chief Executive Officer
     of BBOC,  and Teri Williams,  the Executive Vice  President-Marketing/Human
     Resources  of  BBOC,  collectively  own  as  joint  tenants  66.6%  of  the
     outstanding common stock of BBOC. Mr. Cohee and Ms. Williams,  both of whom
     are directors of Carver,  disclaim beneficial ownership of the Common Stock
     owned  beneficially by BBOC or BBC Capital.  BBOC and BBC Capital have sole
     voting and sole  dispositive  power over all of the shares of Common  Stock
     shown.

(6)  Based on a Schedule 13G, dated February 14, 2000, and filed with the SEC by
     the Carver Bancorp,  Inc. ESOP Committee (the "Administrative  Committee").
     The Administrative Committee established to administer the ESOP consists of
     officers of the Bank.  The ESOP's  assets are held in the ESOP  Trust,  for
     which  HSBC  Bank  USA  serves  as  trustee  (the  "ESOP   Trustee").   The
     Administrative   Committee   instructs  the  ESOP  Trustee   regarding  the
     investment of funds  contributed to the ESOP. Common Stock purchased by the
     ESOP Trust is held in a suspense  account and  allocated  to  participants'
     accounts  annually  based on  contributions  made to the ESOP by the  Bank.
     Shares released from the suspense account are allocated among  participants
     in proportion to their  compensation,  as defined in the ESOP, for the year
     the  contributions are made, up to the limits permitted under the Code. The
     ESOP  Trustee  must vote all  allocated  shares  held in the ESOP  Trust in
     accordance with the instructions of participants.  As of December 31, 2000,
     a total of  98,959  shares  had been  allocated,  but not  distributed,  to
     participants.  Under the ESOP,  unallocated  shares or shares  for which no
     voting instructions have been received will be voted by the ESOP Trustee in
     the same  proportion  as  allocated  shares with  respect to which the ESOP
     Trustee receives instructions.

(7)  Morgan  Stanley holds 40,000 shares of Carver's  Series A Preferred  Stock,
     which Carver  issued on January 11, 1999 through a private  placement.  The
     Series A Preferred  Stock accrues  annual  dividends of $1.96875 per share.
     Each  share of Series A  Preferred  Stock was  purchased  for $25.00 and is
     convertible  at the option of the  holder at any time into 2.083  shares of
     Carver's Common Stock, subject to certain antidilution adjustments.  Carver
     may redeem the Series A 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 Series A Preferred
     Stock  shall be  entitled  to receive  $25 per share of Series A  Preferred
     Stock plus all  dividends  accrued and unpaid  thereon.  Morgan  Stanley is
     deemed to have  beneficial  ownership of 83,320 shares or 3.49% of Carver's
     Common Stock since it may elect to convert the Series A Preferred  Stock at
     any time. Pursuant to a Securities  Purchase  Agreement,  dated January 11,
     2000, among Morgan Stanley, Provender (as defined below) and Carver, Morgan
     Stanley  has agreed not to grant any proxies  with  respect to the Series A
     Preferred  Stock or any Common Stock of Carver other than as recommended by
     Carver's  Board  of  Directors,  without  first  obtaining  Carver's  prior
     consent.

(8)  Provender holds 60,000 shares of Carver's Series B Preferred  Stock,  which
     Carver issued on January 11, 1999 through a private placement. The Series B
     Preferred Stock accrues annual dividends at $1.96875 per share.  Each share
     of Series B Preferred  Stock was purchased for $25.00 and is convertible at
     the option of the holder at any time into 2.083  shares of Carver's  Common
     Stock, subject to certain antidilution  adjustments.  Carver may redeem the
     Series B 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 Series B Preferred Stock shall be
     entitled  to  receive  $25 per share of Series B  Preferred  Stock plus all
     dividends  accrued  and  unpaid  thereon.   Provender  is  deemed  to  have
     beneficial  ownership of 124,980  shares or 5.14% of Carver's  Common Stock
     since it may elect to  convert  the Series B  Preferred  Stock at any time.
     Pursuant to a Securities Purchase Agreement,  dated January 11, 2000, among
     Morgan Stanley, Provender and Carver, Provender has agreed not to grant any
     proxies with respect to the Series B Preferred Stock or any Common Stock of
     Carver other than as recommended by Carver's Board without first  obtaining
     Carver's prior consent.

Security Ownership of Management

     The following table sets forth information,  determined as of May 31, 2001,
as to the total  number of shares  of Common  Stock  beneficially  owned by each
director and each Named Executive Officer, as defined herein,  identified in the
Summary  Compensation  Table,  appearing elsewhere herein, and all directors and
executive  officers  of the  Holding  Company or the Bank as a group.  Ownership
information is based upon information  furnished by the respective  individuals.
Except as otherwise indicated,  each person and the group shown in the table has
sole voting and investment power with respect to the shares indicated.

                                       60
<PAGE>
<TABLE>
<CAPTION>
                                                                                                      Amount and       Percent of
                                                                                                       Nature of         Common
                                                                                                      Beneficial          Stock
                     Name                                                Title                      Ownership(1)(2)   Outstanding(3)
----------------------------------------------  -------------------------------------------------   ---------------   --------------
<S>                                             <C>                                                     <C>              <C>
Frederick O. Terrell(4)                         Chairman                                                125,180            5.42%

Deborah C. Wright (5)                           President and Chief Executive Officer                    45,000            1.95

Walter T. Bond(6)                               Senior Vice President                                     3,082             *

James Boyle                                     Senior Vice President and Chief Financial Officer         1,666             *

Kevin Cohee (7)                                 Director                                                170,900            7.41

David L. Hinds                                  Director                                                  7,075             *

Robert Holland, Jr.                             Director                                                 12,000             *

Pazel G. Jackson, Jr.                           Director                                                  1,800             *

Dennis M. Walcott                               Director                                                  2,200             *

Devon W. Woolcock                               Senior Vice President and Chief of Retail Banking         1,333             *

Strauss Zelnick                                 Director                                                  7,222             *

Teri Williams (7)                               Director                                                170,900            7.41

All directors and executive
officers as a group (15 persons)(8)(9)(10)(11)                                                          384,815           16.36%
</TABLE>

----------

*    Less than 1% of outstanding Common Stock.

(1)  Includes 200,  412,  1,333,  200,  200, 200, 800, 200, 200,  35,000 and 200
     shares which may be acquired by Messrs. Terrell, Bond, Boyle, Cohee, Hinds,
     Holland,  Jr.,  Jackson,  Walcott and Zelnick and Mss. Wright and Williams,
     respectively, pursuant to options granted under the Option Plan.

(2)  Excludes  266,  667, 400 and 2,500 shares of  restricted  stock  granted to
     Messrs. Bond, Boyle and Jackson and Ms. Wright,  respectively,  pursuant to
     the MRP with  respect to which such  individuals  have  neither  voting nor
     dispositive power.

(3)  Percentages  with  respect  to each  person or group of  persons  have been
     calculated  on the basis of  2,306,286  shares of Common  Stock,  the total
     number of shares of the Holding  Company's  Common Stock  outstanding as of
     May 31,  2001,  plus the number of shares of Common Stock which such person
     or group has the right to acquire within 60 days after May 31, 2001, by the
     exercise of stock options.

(4)  Includes  60,000  Shares of Series B Preferred  Stock  owned by  Provender.
     Provender also is deemed to have beneficial  ownership of 125,000 shares of
     Common Stock,  which represents 5.12% of the Holding Company's  outstanding
     Common  Stock  (since the Series B Preferred  Stock may be converted at any
     time.) As a Managing  General  Partner of  Provender,  Mr.  Terrell  may be
     deemed  to  beneficially  own  such  securities.   Mr.  Terrell   disclaims
     beneficial ownership to such securities.

(5)  On June 1, 1999,  Ms.  Wright  received an option award to purchase  30,000
     shares of Common Stock at $8.125 per share. On June 1, 2001, 25,000 options
     will be vested and the  remaining  5,000 options will vest on June 1, 2002.
     On June 1, 1999,  Ms.  Wright  also  received  an award of 7,500  shares of
     restricted  stock  under the MRP.  On June 1, 2001,  5,000  shares  will be
     vested,  and the remaining  2,500 shares will vest on June 1, 2002. On June
     1, 2000,  Ms.  Wright  received  an option  award  under the Option Plan to
     purchase 30,000 shares at $8.210 per share. On June 1, 2001, 10,000 options
     will be vested,  and the  remaining  20,000  options will vest in two equal
     annual  installments  such that the next  installment  will vest on June 1,
     2002.

(6)  Mr.  Bond  received an option  award to  purchase  516 shares at $8.250 per
     share on August 20, 1996.  412 options were vested on August 20, 2000,  and
     the  remaining  104  options  will vest on August 20,  2001.  Mr. Bond also
     received an option  award to purchase  1,000  shares at $8.750 per share on
     April 1, 2000.  1,333 options  vested on March 31, 2001,  and the remaining
     2,667 options will vest in two equal annual installments such that the next
     installment will vest on March 31, 2002.

(7)  Represents  shares  owned by BBC Capital,  a  subsidiary  of Boston Bank of
     Commerce, in which Kevin Cohee and Teri Williams are executive officers and
     controlling shareholders.

(8)  Includes  3,224  shares in the  aggregate  held by the ESOP Trust that have
     been  allocated  as of  December  31,  2000 to the  individual  accounts of
     executive  officers under the ESOP and as to which an executive officer has
     sole voting power for the shares allocated to such person's account, but no
     dispositive power,  except in limited  circumstances.  Also includes 65,795
     unallocated  shares  held by the ESOP  Trust as to which the  Board  shares
     voting and dispositive power. Each member of the Board disclaims beneficial
     ownership of the shares held in the ESOP.

(9)  Includes  108  shares  in the  aggregate  attributable  to  the  individual
     accounts of executive  officers  under the 401(k) Plan and as to which each
     executive  officer has sole  dispositive  power for the shares allocated to
     such  person's  account  and shared  voting  power with the  members of the
     committee established to administer the 401(k) Plan.

(10) Includes 3,140 shares which may be acquired by executive  officers pursuant
     to options  granted  under the Option Plan.  Also includes 309 shares which
     may be acquired by the executive officers pursuant to options granted under
     the  Incentive  Compensation  Plan.  Excludes the 240 shares of  restricted
     stock  awarded  to the  executive  officers  under  the MRP  and  Incentive
     Compensation  Plan with  respect  to which  such  executive  officers  have
     neither voting nor dispositive power.

                                       61
<PAGE>

(11) Includes  125,000  shares of Common  Stock  issuable on  conversion  of the
     Series  B  Preferred  Stock  held  by  Provender  Opportunities  Fund  L.P.
     Excluding the effect of the Series B Preferred Stock, the directors, former
     directors and executive  officers of the Holding Company own 347,467 shares
     of the Common Stock representing 15.04% of such securities.  See footnote 4
     above.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The Financial  Institutions  Reform,  Recovery and  Enforcement Act of 1989
("FIRREA") requires that all loans or extensions of credit to executive officers
and directors must be made on substantially the same terms,  including  interest
rates  and  collateral,   as  those   prevailing  at  the  time  for  comparable
transactions  with the general  public and must not involve more than the normal
risk of repayment or present other unfavorable  features.  Carver Federal offers
loans to its  directors,  officers  and  employees,  which loans are made in the
ordinary  course of business,  and are not made with more favorable terms nor do
they involve more than the normal risk of collectibility or present  unfavorable
features.  Furthermore,  loans  above the greater of $25,000 or 5% of the Bank's
capital and surplus  (up to  $500,000)  to the Bank's  directors  and  executive
officers must be approved in advance by a  disinterested  majority of the Bank's
Board.  Under  prior  law,  however,  Carver had a policy of  offering  loans to
directors,  officers,  employees and their immediate  family members residing at
the same  address  on terms  substantially  equivalent  to those  offered to the
public, except the interest rates on loans were reduced so long as the director,
officer or employee remained at the Bank.

     Directors  and  officers of the Company  were  customers of the Bank in the
ordinary course of business during fiscal 2001 for substantially the same terms,
including  interest  rates,  as those  prevailing  at the  time  for  comparable
transactions with unaffiliated persons, and none of such transactions  presented
unfavorable  features.  At March 31, 2001 there were no loans made to  directors
and executive  officers of the Bank whose terms included  reduced interest rates
or other  preferential terms and whose total aggregate balances exceeded $60,000
at any time since April 1, 2000.


                                       62
<PAGE>

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

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

     (1)  Consolidated  Financial  Statements.  For our  Consolidated  Financial
          Statements, see index on page F-1.

     (2)  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, 2001 - None.

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

          See Index of Exhibits following the Consolidated Financial Statements.


                                       63
<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 26, 2001                          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 26, 2001 by the  following
persons on behalf of the registrant and in the capacities indicated.


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


     /s/ William Schult
     ---------------------------   Vice President and Controller
     William Schult                (Principal Financial and Accounting Officer)


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


     /s/ Kevin Cohee
     ---------------------------   Director
     Kevin Cohee


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


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


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


     /s/ Dennis M. Walcott
     ---------------------------   Director
     Dennis M. Walcott
<PAGE>


     /s/ Teri Williams
     ---------------------------   Director
     Teri Williams


     ---------------------------   Director
     Strauss Zelnick

<PAGE>

                      CONSOLIDATED FINANCIAL STATEMENTS OF
                      CARVER BANCORP INC. AND SUBSIDIARIES

                                      INDEX

                                                                           Page

Consolidated Financial Statements as of March 31, 2001, 2000 and 1999
    KPMG LLP Independent Auditor's Report .................................F-2
    Mitchell & Titus LLP Independent Auditor's Report .....................F-3
    Consolidated Statements of Financial Condition as of March 31,
      2001 and 2000 .......................................................F-4
    Consolidated Statements of Operations for the years ended March 31,
      2001, 2000 and 1999 .................................................F-5
    Consolidated Statements of Changes in Stockholders' Equity for the
      years ended March 31, 2001, 2000 and 1999 ...........................F-6
    Consolidated Statements of Cash Flows for the years ended March 31,
      2001, 2000 and 1999 .................................................F-7
    Notes to Consolidated Financial Statements ............................F-8


                                      F-1
<PAGE>

                             LETTERHEAD OF KPMG LLP

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, 2001 and 2000 and the related consolidated statements of operations, changes
in  stockholders'  equity and cash  flows for each of the years in the  two-year
period ended March 31, 2001.  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.  The
accompanying  consolidated  financial statements of Carver Bancorp, Inc. for the
year ended March 31, 1999 were audited by other  auditors  whose report  thereon
dated June 29, 1999,  expressed  an  unqualified  opinion on those  consolidated
financial statements.

     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, 2001 and 2000,  and the results of its  operations  and its cash
flows for each of the years in the  two-year  period  ended March 31,  2001,  in
conformity with accounting principles generally accepted in the United States of
America.

                                    KPMG LLP

May 24, 2001

New York, New York


                                      F-2
<PAGE>

                       LETTERHEAD OF MITCHELL & TITUS LLP




                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------



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


We have audited the accompanying consolidated statements of operations, changes
in stockholders' equity and cash flows for the year ended March 31, 1999 of
Carver Bancorp Inc. and Subsidiaries. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on the consolidated financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit 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 consolidated financial statements. An audit also includes assessing the
accounting principles used and the significant estimates made by management, as
well as evaluating the overall consolidated financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of its operations and cash flows
for the year ended March 31, 1999, in conformity with accounting principles
generally accepted in the United States of America.




June 29, 1999
New York, New York


                                      F-3
<PAGE>

                      CARVER BANCORP, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                                        AS OF MARCH 31,
                                                                                    -----------------------
                                                                                       2001          2000
                                                                                    ---------     ---------
<S>                                                                                 <C>           <C>
ASSETS
Cash and amounts due from depository institutions ..............................    $   8,058     $  10,902
Federal funds sold .............................................................       23,700        11,300
                                                                                    ---------     ---------
       Total cash and cash equivalents .........................................       31,758        22,202
                                                                                    ---------     ---------
Securities available for sale ..................................................       19,926        24,952
Investments securities held to maturity
(including $14,330 pledged as collateral at March 31, 2001) ....................       24,996        24,996
Mortgage-backed securities held to maturity, net
(including $12,068 pledged as collateral at March 31, 2001) ....................       42,866        54,229
Loans receivable ...............................................................      286,988       273,083
       Less allowance for loan losses ..........................................       (3,551)       (2,935)
                                                                                    ---------     ---------
       Loans receivable, net ...................................................      283,437       270,148
                                                                                    ---------     ---------
Real estate owned, net .........................................................          476           922
Property and equipment, net ....................................................       10,421        11,175
Federal Home Loan Bank of New York stock, at cost ..............................        5,755         5,755
Accrued interest receivable ....................................................        2,541         2,653
Excess of cost over net assets acquired, net ...................................          603           817
Other assets ...................................................................        1,721         2,270
                                                                                    ---------     ---------
Total assets ...................................................................    $ 424,500     $ 420,119
                                                                                    =========     =========

LIABILITIES
Deposits .......................................................................    $ 279,424     $ 281,941
Securities sold under agreements to repurchase .................................        4,930        31,337
Advances from Federal Home Loan Bank of New York ...............................      100,299        66,688
Other borrowed money ...........................................................          371           553
Other liabilities ..............................................................        7,380         6,959
                                                                                    ---------     ---------
Total liabilities ..............................................................      392,404       387,478
                                                                                    ---------     ---------
Commitments and contingencies ..................................................           --            --
STOCKHOLDERS' EQUITY
    Preferred stock, $0.01 par value per share; 1,000,000 shares authorized;
    100,000 shares issued and outstanding ......................................            1             1
Common stock; $0.01 par value per share; 5,000,000 shares authorized;
    2,314,275 shares issued at March 31, 2001 and 2000; and 2,306,286 and
    2,314,275 issued and outstanding at March 31, 2001 and 2000,
    respectively ...............................................................           23            23
Additional paid-in capital .....................................................       23,769        23,789
Retained earning ...............................................................        8,793         9,480
Treasury stock, at cost (7,989 shares at March 31, 2001) .......................          (61)           --
Common stock acquired by ESOP ..................................................         (334)         (652)
Common stock acquired by Management Recognition Plan ...........................          (95)           --
                                                                                    ---------     ---------
       Total stockholders' equity ..............................................       32,096        32,641
                                                                                    ---------     ---------
Total liabilities and stockholders' equity .....................................    $ 424,500     $ 420,119
                                                                                    =========     =========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-4
<PAGE>

                      CARVER BANCORP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                       Year Ended March 31,
                                                           -------------------------------------------
                                                               2001            2000            1999
                                                           -----------     -----------     -----------
<S>                                                        <C>             <C>             <C>
INTEREST INCOME
    Loans receivable ..................................    $    21,398     $    19,443     $    20,576
    Mortgage-backed securities ........................          3,012           3,641           5,431
    Investment securities .............................          2,874           3,593           1,801
    Federal funds sold ................................          1,023             690             665
                                                           -----------     -----------     -----------
       Total interest income ..........................         28,307          27,367          28,473
                                                           -----------     -----------     -----------
INTEREST EXPENSE
    Deposits ..........................................          8,456           8,612           8,421
    Advances and other borrowed money .................          5,822           5,397           6,394
                                                           -----------     -----------     -----------
       Total interest expense .........................         14,278          14,009          14,815
                                                           -----------     -----------     -----------
Net interest income ...................................         14,029          13,358          13,658
Provision for loan losses .............................          1,793           1,099           4,029
                                                           -----------     -----------     -----------
Net interest income after provision for loan losses ...         12,236          12,259           9,629
                                                           -----------     -----------     -----------
NON-INTEREST INCOME
    Loan fees and service charges .....................            330             353             673
    Gain on sale of securities available for sale .....             --              --               4
    Income from sale of deposits ......................          1,013              --              --
    Proceeds from sale of Alhambra Building ...........             --             728              --
    Other .............................................          1,591           1,458           1,705
                                                           -----------     -----------     -----------
       Total non-interest income ......................          2,934           2,539           2,382
                                                           -----------     -----------     -----------
NON-INTEREST EXPENSE
    Salaries and employee benefits ....................          6,052           5,722           5,248
    Net occupancy expense .............................          1,401           1,463           1,491
    Equipment .........................................          1,294           1,351           1,409
    Other .............................................          6,714           7,287           9,815
                                                           -----------     -----------     -----------
       Total non-interest expenses ....................         15,461          15,823          17,963
                                                           -----------     -----------     -----------
Loss before income taxes ..............................           (291)         (1,025)         (5,952)
Income tax expense (benefit) ..........................             98             110          (1,499)
                                                           -----------     -----------     -----------
Net loss ..............................................    $      (389)    $    (1,135)    $    (4,453)
                                                           ===========     ===========     ===========
Net loss available to common stockholders .............    $      (585)    $    (1,180)    $    (4,453)
                                                           ===========     ===========     ===========
Net loss per common share .............................    $     (0.26)    $     (0.53)    $     (2.02)
                                                           ===========     ===========     ===========
Weighted average number of shares outstanding .........      2,256,441       2,238,846       2,206,133
                                                           ===========     ===========     ===========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>

                      CARVER BANCORP, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                                  COMMON       COMMON       TOTAL
                                            ADDITIONAL                                             STOCK        STOCK       STOCK-
                     PREFERRED    COMMON      PAID-IN     RETAINED     TREASURY  COMPREHENSIVE   ACQUIRED     ACQUIRED     HOLDERS'
                       STOCK       STOCK      CAPITAL     EARNINGS       STOCK       INCOME       BY ESOP       BY MRP      EQUITY
                     --------    --------    --------     --------     --------     --------     --------     --------     --------
<S>                  <C>         <C>         <C>          <C>          <C>          <C>          <C>          <C>          <C>
Balance--March
   31, 1998 ........ $     --    $     23    $ 21,419     $ 15,290     $     --     $    (13)    $ (1,184)    $     --     $ 35,535
Net loss for the
   year ended
   March 31, 1999 ..       --          --          --       (4,453)          --           --           --           --       (4,453)
Allocation of
   ESOP Stock ......                   --           5           --           --           --          191           --          196
Dividends paid .....       --          --          --         (116)          --           --           --           --         (116)
Decrease in
   unrealized,
   loss in
   Securities
   available for
   sale, net .......       --          --          --           --           --           13           --           --           13
                     --------    --------    --------     --------     --------     --------     --------     --------     --------
Balance--March
   31, 1999 ........       --          23      21,424       10,721           --           --         (993)          --       31,175
Net loss for the
   year ended
   March 31, 2000 ..       --          --          --       (1,135)          --           --           --           --       (1,135)
Preferred Stock ....        1          --       2,365           --           --           --           --           --        2,366
Allocation of
   ESOP Stock ......       --          --          --                                                 341           --          341
Dividends paid .....       --          --          --         (106)          --           --           --           --         (106)
                     --------    --------    --------     --------     --------     --------     --------     --------     --------
Balance--March
   31, 2000 ........        1          23      23,789        9,480           --           --         (652)          --       32,641
Net loss for the
   year ended
   March 31,
   2001 ............       --          --          --         (389)          --           --           --           --         (389)
Dividends paid .....       --          --          --         (298)          --           --           --           --         (298)
Treasury stock
   activity ........       --          --          --           --          (61)          --           --           --          (61)
Allocation of
   ESOP Stock ......       --          --         (20)          --           --           --          318           --          298
Purchase of
shares for
Management
Recognition
Plan ...............       --          --          --           --           --           --           --          (95)         (95)
                     --------    --------    --------     --------     --------     --------     --------     --------     --------
Balance--March
   31, 2001 ........ $      1    $     23    $ 23,769     $  8,793     $    (61)    $     --     $   (334)    $    (95)    $ 32,096
                     ========    ========    ========     ========     ========     ========     ========     ========     ========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-6
<PAGE>

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

<TABLE>
<CAPTION>
                                                                        YEAR ENDED MARCH 31,
                                                                -------------------------------------
                                                                  2001          2000          1999
                                                                ---------     ---------     ---------
<S>                                                             <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ...................................................    $    (389)    $  (1,135)    $  (4,453)
Adjustments to reconcile net loss to net cash provided by
   operating activities:
Depreciation and amortization ..............................        1,142         1,222         1,043
Amortization of intangibles ................................          214           213           217
Other accretion and amortization ...........................         (719)          355         1,109
Provision for loan losses ..................................        1,793         1,099         4,029
Gain from sale of Alhambra .................................           --          (728)           --
Gain on sale of branches ...................................       (1,013)           --            --
Gain on sale of foreclosed real estate .....................          (24)           --            --
Impairment of foreclosed real estate .......................           90            --            --
Net gain on sale of securities available for sale ..........           --            --            (4)
Allocation of ESOP stock ...................................          298           341           196
Decrease in accrued interest receivable ....................          112           207            98
Increase in refundable income taxes ........................           --            --         1,196
Decrease (increase) in other assets ........................          549         2,776           (38)
Charge-off of branch improvements and related items, net ...          222            --            --
MRP activity ...............................................          (95)           --            --
Increase in other liabilities ..............................          421           687         4,847
                                                                ---------     ---------     ---------
Net cash provided by operating activities ..................        2,601         5,037         8,240
                                                                ---------     ---------     ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Principal repayments on investments held to maturity .......       11,077            --            --
Principal repayments on securities available for sale ......           --            --         3,753
Purchases of securities available for sale .................     (166,227)     (460,000)     (331,889)
Proceeds from maturity of securities available for sale ....      172,254       465,000       319,510
Purchase of investment securities held to maturity .........           --       (25,000)           --
Proceeds from maturities and calls of investment
   securities held to maturity .............................           --            --         1,798
Principal repayment of mortgage-backed securities held
   to maturity .............................................                     12,209        23,592
Net change in loans receivable .............................      (15,078)         (965)        4,433
Proceeds from sale of Alhambra building ....................           --         1,369            --
Proceed from the sale of other real estate owned ...........          380            --            --
Additions to premises and equipment ........................         (610)         (512)       (1,657)
                                                                ---------     ---------     ---------
Net cash provided by (used in) investing activities ........        1,796        (7,899)       19,540
                                                                ---------     ---------     ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits ...................................       19,960         4,942         2,105
Net decrease in short-term borrowings ......................      (26,407)       (4,000)      (51,683)
Repayment of FHLB Advances .................................     (117,379)      (19,020)
Federal Home Loan Bank Advances ............................      150,990        20,000        28,967
Repayment of other borrowed money ..........................         (182)         (439)         (191)
Purchase of Treasury Stock - net ...........................          (61)           --            --
Proceeds from issuance of Preferred Stock ..................           --         2,366            --
Dividends paid .............................................         (298)         (106)         (116)
Cash paid to fund sale of deposits .........................      (21,464)           --            --
Decrease in advance payments by
   borrowers for taxes and insurance .......................           --            --          (660)
                                                                ---------     ---------     ---------
Net cash provided by (used in) financing activities ........        5,159         3,743       (21,578)
                                                                ---------     ---------     ---------
Net increase in cash and cash equivalents ..................        9,556           881         6,202
Cash and cash equivalents--beginning .......................       22,202        21,321        15,119
                                                                ---------     ---------     ---------
Cash and cash equivalents--ending ..........................    $  31,758     $  22,202     $  21,321
                                                                ---------     =========     =========
Supplemental disclosure of non-cash activities:

Loans receivable transferred to real estate owned ..........    $      --     $     738     $      --
                                                                =========     =========     =========
Cash paid for:
Interest ...................................................    $  13,897     $  13,506     $  14,815
                                                                =========     =========     =========
Federal, state and city income taxes .......................    $     238     $      29     $      --
                                                                =========     =========     =========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-7
<PAGE>

                      CARVER BANCORP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidated financial statement presentation

     The consolidated  financial  statements include the accounts of the Holding
Company (the "Holding Company"),  the Carver Federal Savings Bank (the "Bank" or
"Carver  Federal")  its wholly owned  subsidiaries  CFSB Realty  Corp.  and CFSB
Credit Corp., and Alhambra Holding Corp. and its majority-owned  subsidiary. 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.

Investment and mortgage-backed securities

     Carver 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 investments  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 other  comprehensive  income in the  Consolidated  Statements  of  Changes in
Stockholders' Equity.

     Investment and  mortgage-backed  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.


                                      F-8
<PAGE>

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.

     Carver 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
three months 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.

     A loan is considered to be impaired, as defined by FAS No. 114, "Accounting
by Creditors for  Impairment of a Loan," when it is probable that Carver will be
unable to collect  all  principal  and  interest  amounts due  according  to the
contractual  terms of the loan  agreement.  Carver tests loans covered under FAS
No.  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 FAS No.
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.

Allowance for loan losses

     An allowance for loan losses is maintained at a level  considered  adequate
to provide for potential loan losses.  Management,  in determining the allowance
for loan losses,  considers the risks inherent in its loan portfolio and changes
in the nature and volume of its loan activities, along with the general economic
and real estate market conditions.

     Carver  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.

Concentration of risk

     The Bank's principle  lending  activities are concentrated in loans secured
by real estate,  a  substantial  portion of which is located in the State of New
York and the State of California.  Accordingly, the ultimate


                                      F-9
<PAGE>

collectibility  of a  substantial  portion of the  Company's  loan  portfolio is
susceptible to changes in New York's and California'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:

     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

     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 is recognized as incurred.

Excess of cost over net assets acquired

     In connection with the acquisition of two branches,  core deposit  premiums
paid and other capitalized acquisition costs are being amortized to expense over
periods from five to fifteen years using the straight-line  method.  The company
reviews these assets annually for signs of permanent impairment.

Interest-rate risk

     The Bank is principally engaged in the business of attracting deposits from
the general public and using these deposits,  together with borrowings and other
funds,  to originate  and purchase  loans secured by real estate and to purchase
investment and mortgage-backed  securities. The potential for interest-rate risk
exists as a result of the  shorter  duration of  interest-sensitive  liabilities
compared to the generally  longer duration of  interest-sensitive  assets.  In a
rising rate  environment,  liabilities will reprice faster than assets,  thereby
reducing the market value of long-term assets and net interest income.  For this
reason,  management  regularly monitors the maturity structure of the assets and
liabilities  in order to measure  its level of  interest-rate  risk and plan for
future volatility.

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.


                                      F-10
<PAGE>

Comprehensive income

     Statement   of   Financial   Accounting   Standards   No.  130,   Reporting
Comprehensive  Income  ("SFAS 130")  establishes  standards  for  reporting  and
display of comprehensive income and its components (revenues,  expenses,  gains,
and losses) in a full set of general - purpose  financial  statements.  SFAS 130
requires that an enterprise (a) classify items of other comprehensive  income by
their nature in a financial statement and (b) display the accumulated balance of
other comprehensive income separately from retained earnings and additional paid
in capital in the equity  section of a statement of financial  position.  Carver
has included the required disclosures in the Consolidated  Statements of Changes
in Stockholders' Equity.

Net income (loss) per common share

     Basic earnings per share ("EPS") is computed by dividing  income  available
to  common  shareholders  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.

Pension Plans

     In February  1998,  the FASB issued SFAS No. 132,  "Employers'  Disclosures
about Pensions and Other Postretirement  Benefits".  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.

Future Application of Accounting Standards

     In June 1998,  the FASB  issued SFAS No. 133,  "Accounting  for  Derivative
Instruments  and Hedging  Activities"  which was  amended by SFAS No. 138.  This
statement   establishes   accounting  and  reporting  standards  for  derivative
instruments,  and for hedging  activities.  SFAS 133  supercedes  the disclosure
requirements  in  SFAS  80,  105 and 119 and is  effective  for  fiscal  periods
beginning  after June 15, 2000.  The adoption of SFAS No. 133 is not expected to
have a material impact on the financial position or results of operations of the
Company.

     In September 2000, the Financial  Accounting Standard Board ("FASB") issued
Statement of Financial  Accounting  Standards No. 140, "Accounting for Transfers
and Servicing of Financial  Assets and  Extinguishments  of Liabilities"  ("SFAS
140") - a replacement of SFAS 125. SFAS 140 revises the standards for accounting
for  securitzations  and other transfers of financial  assets and collateral and
requires  certain  additional   disclosures.   The  collateral   provisions  and
disclosure  requirements of SFAS 140 are effective for fiscal years ending after
December 15, 2000,  whereas the other  provisions  of SFAS 140 are to be applied
prospectively to transfers and servicing of financial assets and extinguishments
of liabilities  occurring  after March 31, 2001. The adoption of SFAS 140 is not
expected  to have a  material  impact on the  Company's  financial  position  or
results of operations.

Reclassifications

     Certain  amounts in the  consolidated  financial  statements  presented for
prior periods have been reclassified to conform with the 2001 presentation.

NOTE 2. BUSINESS OPERATIONS

Background

     The Holding Company was incorporated in May 1996 and whose principal wholly
owned subsidiaries are the Bank and Alhambra Holding Corp. CFSB Realty Corp. and
CFSB  Credit  Corp.  are wholly  owned


                                      F-11
<PAGE>

subsidiaries of the 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.  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  stock  form and issued  2,314,375  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  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 $.01 per share. See Note 3.

Nature of operations

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

NOTE 3. CONVERSION TO STOCK FORM OF OWNERSHIP AND REORGANIZATION INTO A HOLDING
        COMPANY

     On October  24,  1994,  the Bank issued an initial  offering  of  2,314,375
shares of common stock (par value  $0.01) at a price of $10 per share  resulting
in net proceeds of $21,519,000. 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 $3.0 million (unaudited), and $3.5 million (unaudited)
at March 31, 2001 and 2000, 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  Company's  common stock remain
outstanding.  The Bank's  shareholder  approved the Reorganization at the Bank's
annual  meeting  of  shareholders  held on July 29,  1996.  As a  result  of the
Reorganization,  the Bank will not be 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.

NOTE 4. SECURITIES AVAILABLE FOR SALE

     At March 31, 2001 and 2000,  the Company held no MBS as available for sale.
Securities available for sale at March 31, 200 and 2001 are as follows:


                                      F-12
<PAGE>

<TABLE>
<CAPTION>
                                                        March 31, 2001
                                         ---------------------------------------------
                                                       Gross Unrealized
                                                     --------------------
                                         Carrying                            Estimated
                                           Value       Gains      Losses    Fair-Value
                                         --------    --------    --------   ----------
                                                        (In thousands)
<S>                                      <C>         <C>         <C>         <C>
U.S. Government Agency securities ...    $ 19,926    $     --    $     --    $ 19,926
                                         --------    --------    --------    --------
                                         $ 19,926    $     --    $     --    $ 19,926
                                         ========    ========    ========    ========
</TABLE>

<TABLE>
<CAPTION>
                                                        March 31, 2000
                                         ---------------------------------------------
                                                       Gross Unrealized
                                                     --------------------
                                         Carrying                            Estimated
                                           Value       Gains      Losses    Fair-Value
                                         --------    --------    --------   ----------
                                                        (In thousands)
<S>                                      <C>         <C>         <C>         <C>
U.S. Government Agency securities ...    $ 24,952    $     --    $     --    $ 24,952
                                         --------    --------    --------    --------
                                         $ 24,952    $     --    $     --    $ 24,952
                                         ========    ========    ========    ========
</TABLE>

     At March 31, 2001 and 2000, U.S. Government Agency securities  consisted of
short-term discount notes with maturities of 30 days or less. The estimated fair
value of the U.S.  Government Agency securities  approximates the carrying value
at March 31, 2001 and 2000.


     Proceeds from the sales of investment  securities available for sale during
the year ended March 31, 1999 were $24.4 million  resulting in a gross  realized
gain of $4,000. There were no sales of investment  securities available for sale
during the year ended March 31, 2001 and 2000.

NOTE 5. INVESTMENT SECURITIES HELD TO MATURITY, NET

     The carrying value and estimated fair market value of investment securities
held to maturity at March 31, 2001 and 2000 were as follows:

<TABLE>
<CAPTION>
                                                        March 31, 2001
                                         ---------------------------------------------
                                                       Gross Unrealized
                                                     --------------------
                                         Carrying                            Estimated
                                           Value       Gains      Losses    Fair-Value
                                         --------    --------    --------   ----------
                                                        (In thousands)
<S>                                      <C>         <C>         <C>         <C>
U.S. Government Agency securities ..    $ 24,996     $  1,093    $     --    $ 26,089
                                        --------     --------    --------    --------
                                        $ 24,996     $  1,093    $     --    $ 26,089
                                        ========     ========    ========    ========
</TABLE>

<TABLE>
<CAPTION>
                                                        March 31, 2000
                                         ---------------------------------------------
                                                       Gross Unrealized
                                                     --------------------
                                         Carrying                            Estimated
                                           Value       Gains      Losses    Fair-Value
                                         --------    --------    --------   ----------
                                                        (In thousands)
<S>                                      <C>         <C>         <C>         <C>
U.S. Government Agency securities ..    $ 24,996     $     --    $    687    $ 24,309
                                        --------     --------    --------    --------
                                        $ 24,996     $     --    $    687    $ 24,309
                                        ========     ========    ========    ========
</TABLE>

     There were no sales of securities  held to maturity  during the years ended
March 31, 2001,  2000 and 1999.  All securities in the above table mature within
one to five years.


                                      F-13
<PAGE>

NOTE 6. MORTGAGE-BACKED SECURITIES HELD TO MATURITY, NET

     A summary of gross  unrealized  gains and losses and  estimated  fair value
follows:

<TABLE>
<CAPTION>
                                                              March 31, 2001
                                               ---------------------------------------------
                                                             Gross Unrealized
                                                           --------------------
                                               Carrying                            Estimated
                                                 Value       Gains      Losses    Fair Value
                                               --------    --------    --------   ----------
                                                              (In thousands)
<S>                                            <C>         <C>         <C>         <C>
Government National Mortgage Association ..    $  5,774    $     81    $     --    $  5,855
Federal Home Loan Mortgage Corporation ....      14,672          --          36      14,636
Federal National Mortgage Association .....      21,633          --          11      21,622
Small Business Administration .............         594          --          52         542
Collateralized Mortgage Obligations .......         193                       6         187
                                               --------    --------    --------    --------
                                               $ 42,866    $     81    $    105    $ 42,842
                                               ========    ========    ========    ========
</TABLE>

<TABLE>
<CAPTION>
                                                              March 31, 2000
                                               ---------------------------------------------
                                                             Gross Unrealized
                                                           --------------------
                                               Carrying                            Estimated
                                                 Value       Gains      Losses    Fair Value
                                               --------    --------    --------   ----------
                                                              (In thousands)
<S>                                            <C>         <C>         <C>         <C>
Government National Mortgage Association ..    $  6,516    $     --    $    272    $  6,244
Federal Home Loan Mortgage Corporation ....      18,780          --         788      17,992
Federal National Mortgage Association .....      26,222          --       1,218      25,004
Small Business Administration .............         760           6          --         766
Collateralized Mortgage Obligations:
     Resolution Trust Corporation .........       1,708          --          12       1,696
     Other ................................         243          --           6         237
                                               --------    --------    --------    --------
                                               $ 54,229    $      6    $  2,296    $ 51,939
                                               ========    ========    ========    ========
</TABLE>

The following is a schedule of final maturities as of March 31, 2001:

                                       Carrying    Estimated
                                         Value    Fair Value
                                       --------   ----------
                                           (In thousands)
Due in one year or less ...........          --          --
After one through five years ......    $    287    $    294
After five through ten years ......       4,347       4,633
After ten years ...................      38,232      37,915
                                       --------    --------
                                       $ 42,866    $ 42,842
                                       ========    ========

     There were no sales of  mortgage-backed  securities held to maturity during
the years ended March 31, 2001, 2000 and 1999.


                                      F-14
<PAGE>

NOTE 7.  LOANS RECEIVABLE, NET

                                        Year ended March 31,
                                       -----------------------
                                          2001          2000
                                       ---------     ---------
                                           (In thousands)
                                       -----------------------
Real estate mortgage:
    One- to four-family ...........    $ 157,582     $ 152,458
    Multi-family ..................       83,620        86,184
    Commercial real estate ........       36,113        22,721
    Equity and second mortgages ...          185           252
                                       ---------     ---------
                                         277,500       261,615
                                       ---------     ---------
Real estate construction ..........        7,101         6,393
                                       ---------     ---------
Commercial loans ..................          290           700
                                       ---------     ---------
Consumer:
    Secured personal loans ........          211           294
    Student education .............           --            67
    Other .........................        3,280         5,412
                                       ---------     ---------
                                           3,491         5,773
                                       ---------     ---------
Total loans .......................      288,382       274,481
                                       ---------     ---------
Add: Premium ......................          705           582
Less: Loans in process ............       (1,280)       (1,062)
Allowance for loan losses .........       (3,551)       (2,935)
Deferred loan fees and discounts ..         (819)         (918)
                                       ---------     ---------
                                          (4,945)       (4,333)
                                       ---------     ---------
                                       $ 283,437     $ 270,148
                                       =========     =========

     As March  31,  2001,  the  Company's  real  estate  loans  receivable  were
principally secured by properties located in the state of New York (58.7%).

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

                                                       Year Ended March 31,
                                                 ------------------------------
                                                   2001       2000       1999
                                                 --------   --------   --------
                                                         (In thousands)
                                                 ------------------------------
Balance--beginning ............................  $  2,935   $  4,020   $  3,138
Provision charged to operations ...............     1,793      1,099      4,029
Recoveries of amounts previously charged off ..       200        385         82
Loans charged off .............................    (1,377)    (2,569)    (3,229)
                                                 --------   --------   --------
Balance--ending ...............................  $  3,551   $  2,935   $  4,020
                                                 ========   ========   ========

     Non-accrual  loans  consist of loans for which the accrual of interest  has
been  discounted  as a  result  of such  loans  becoming  three  months  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
service  their loans  under the  original  contractual  terms.  The  balances of
non-accrual  and  restructured  loans and their impact in interest income are as
follows:

                                                  Year Ended March 31,
                                               --------------------------
                                                2001      2000      1999
                                               ------    ------    ------
                                                     (In thousands)
                                               --------------------------
Non-accrual loans .........................    $2,519    $2,126    $2,417
Restructured loans ........................        --        --        --
                                               ------    ------    ------
                                               $2,519    $2,126    $2,417
                                               ======    ======    ======


                                      F-15
<PAGE>

                                                  Year Ended March 31,
                                               --------------------------
                                                2001      2000      1999
                                               ------    ------    ------
                                                     (In thousands)
                                               --------------------------
Interest income which would have been
     recorded had loans performed in
    accordance with original contracts ....    $  202    $  345    $  419
Interest income received ..................        --        --       107
                                               ------    ------    ------
Interest income lost ......................    $  202    $  345    $  312
                                               ======    ======    ======

     At March 31, 2001 and 2000,  the recorded  investment in impaired loans was
$2.5 million and $2.1 million,  respectively.  The related  allowance for credit
losses was  approximately  $291,000  and  $330,000  at March 31,  2001 and 2000,
respectively. The impaired loan portfolio is primarily collateral dependent. The
average  recorded  investment  in impaired  loans  during the fiscal years ended
March 31, 2001, 2000 and 1999 was approximately  $3.2 million,  $2.3 million and
$4.0 million,  respectively.  For the years ended March 31, 2001, 2000 and 1999,
the Company recognized cash basis interest income on these impaired loans of $0,
$0 and $107,000, respectively.

     At March 31, 2001, there were no loans to officers.

     The  following is a summary of loans to the Bank's  directors  and officers
(and to any associates of such  persons),  exclusive of loans to any such person
which in aggregate did not exceed $60,000:

                                 Year Ended March 31,
                                 --------------------
                                   2001       2000
                                  ------     ------
                                    (In thousands)
Balance--beginning ...........    $  112     $  659
Loans originated .............        --         --
Other (1) ....................        --       (530)
Repayments ...................      (112)       (17)
                                  ------     ------
Balance--ending ..............    $   --     $  112
                                  ======     ======

----------

(1)  Represents loans to individuals who are no longer directors and officers of
     Carver at March 31, 2000.


                                      F-16
<PAGE>

NOTE 8. LOANS SERVICING

     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  $2,104,000,   $2,775,000  and
$3,035,000 at March 31, 2001, 2000 and 1999, respectively.

     Custodial escrow balances, maintained in connection with the foregoing loan
servicing,  were approximately  $34,000,  $56,000 and $55,000 at March 31, 2001,
2000 and 1999, respectively.

NOTE 9. PREMISES AND EQUIPMENT, NET

     The detail of premises and equipment is as follows:

                                                            MARCH 31,
                                                      --------------------
                                                        2001        2000
                                                      --------    --------
                                                         (In thousands)
                                                      --------------------
Land .............................................    $    451    $    451
Buildings and improvements .......................       8,556       8,521
Leasehold improvements ...........................         335         719
Furnishings and equipment ........................       6,469       6,018
                                                      --------    --------
                                                        15,811      15,709
Less accumulated depreciation and amortization ...       5,390       4,534
                                                      --------    --------
                                                      $ 10,421    $ 11,175
                                                      ========    ========

     Depreciation  and  amortization  charged to operations  for the years ended
March  31,  2001,  2000 and 1999 were  $1,142,000,  $1,222,000  and  $1,043,000,
respectively.

NOTE 10. ACCRUED INTEREST RECEIVABLE

     The detail of accrued interest receivable is as follows:

                                                            MARCH 31,
                                                      --------------------
                                                        2001        2000
                                                      --------    --------
                                                         (In thousands)
                                                      --------------------
Loans receivable .................................    $  1,632    $  1,768
Mortgage-backed securities .......................         788         849
Investments and other interest bearing assets ....         121          36
                                                      --------    --------
Total accrued interest receivable ................    $  2,541    $  2,653
                                                      ========    ========

NOTE 11. EXCESS OF COST OVER NET ASSETS ACQUIRED, NET

     The excess of cost over net assets  acquired  relates to the acquisition of
the Bedford-Stuyvesant office. The detail is as follows:

                                                            MARCH 31,
                                                      --------------------
                                                        2001        2000
                                                      --------    --------
                                                          (In thousands)
                                                      --------------------
Core deposit premium .............................    $    581    $    788
Acquisition costs ................................          22          29
                                                      --------    --------
                                                      $    603    $    817
                                                      ========    ========


                                      F-17
<PAGE>

NOTE 12. DEPOSITS

<TABLE>
<CAPTION>
                                                                   MARCH 31,
                                    -----------------------------------------------------------------------
                                                   2001                                  2000
                                    ---------------------------------     ---------------------------------
                                    WEIGHTED                              WEIGHTED
                                     AVERAGE                               AVERAGE
                                      RATE        AMOUNT      PERCENT       RATE        AMOUNT      PERCENT
                                    --------     --------    --------     --------     --------    --------
                                                              (Dollars in thousands)
<S>                                    <C>       <C>           <C>           <C>       <C>           <C>
DEMAND:
     Interest-bearing ..........       1.71%     $ 14,757        5.28%       1.66%     $ 18,873        6.68%
     Non-interest-bearing ......         --        11,409        4.08          --        12,337        4.38
                                                 --------                              --------    --------
                                       0.96        26,166        9.36        1.00        31,210       11.06
                                                 --------                              --------    --------
SAVINGS:
     Savings and club ..........       2.32       132,645       47.47        2.51       145,277       51.53
     Money Management ..........       2.62        15,718        5.63        3.25        19,418        6.89
     Certificates of deposit ...       4.55       104,895       37.54        4.70        86,036       30.52
                                                 --------    --------                  --------    --------
       .........................       3.26       253,258       90.64        3.31       250,731       88.94
                                                 --------    --------                  --------    --------
       .........................       3.04%     $279,424      100.00%       3.06%     $281,941      100.00%
                                                 ========    ========                  ========    ========
</TABLE>

     The scheduled maturities of certificates of deposits are as follows:

                                                            MARCH 31,
                                                      --------------------
                                                        2001        2000
                                                      --------    --------
                                                         (In thousands)
One year or less .................................    $ 28,449    $ 22,860
After one year to three years ....................      22,067      29,699
After three years to five years ..................      10,682      10,984
After five years .................................      43,697      22,493
                                                      --------    --------
                                                      $104,895    $ 86,036
                                                      ========    ========

     The aggregate amount of certificates of deposit with minimum  denominations
of $100,000 or more was  approximately  $16,322,000 and $17,514,000 at March 31,
2001 and 2000, respectively.

     Interest expense on deposits consists of the following:

<TABLE>
<CAPTION>
                                                                  FOR YEAR ENDED MARCH 31,
                                                              ----------------------------------
                                                                2001         2000         1999
                                                              --------     --------     --------
                                                                        (In thousands)
                                                              ----------------------------------
<S>                                                           <C>          <C>          <C>
Demand ...................................................    $    253     $    314     $    314
Savings and clubs ........................................       3,081        3,650        3,604
Money Management .........................................         412          631          613
Certificates of deposit ..................................       4,739        4,047        3,902
                                                              --------     --------     --------
                                                                 8,485        8,642        8,433
Penalty for early withdrawals of certificate of deposit ..         (29)         (30)         (12)
                                                              --------     --------     --------
                                                              $  8,456     $  8,612     $  8,421
                                                              ========     ========     ========
</TABLE>


                                      F-18
<PAGE>

NOTE 13. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

     The scheduled  maturities of securities sold under agreements to repurchase
are as follows:

<TABLE>
<CAPTION>
                                                                      MARCH 31,
                                                               ---------------------
       LENDER                    MATURITY      INTEREST RATE     2001         2000
----------------------      -----------------  -------------   ---------    --------
                                      (In thousands)
<S>                         <C>                     <C>        <C>          <C>
Federal Home Loan Bank      May 22, 2000            5.88%      $      --    $  4,400
Federal Home Loan Bank      July 26, 2000           5.41              --       8,000
Federal Home Loan Bank      September 5, 2000       5.40              --       6,750
Federal Home Loan Bank      October 26, 2000        4.81              --       5,187
Federal Home Loan Bank      December 4, 2000        6.44              --       7,000
Federal Home Loan Bank      September 5, 2001       6.70           4,930          --
                                                               ---------    --------
                                                               $   4.930    $ 31,337
                                                               =========    ========
</TABLE>

     Information  concerning  securities sold under  agreements to repurchase is
summarized as follows:

<TABLE>
<CAPTION>
                                                                      FOR THE YEAR ENDED
                                                                           MARCH 31,
                                                                     -------------------
                                                                       2001        2000
                                                                     -------     -------
                                                                    (Dollars in thousands)
<S>                                                                  <C>         <C>
Average balance during the year .................................    $17,165     $32,670
Average interest rate during the year ...........................       5.99%       5.46%
Maximum month-end balance during the year .......................    $31,337     $35,337
Mortgage-backed securities underlying the agreements at year end:
      Carrying value ............................................    $ 5,379     $34,225
      Estimated fair value ......................................    $ 5,441     $32,878
</TABLE>

NOTE 14. ADVANCES FROM FEDERAL HOME LOAN BANK OF NEW YORK

     Information  relating to the  maturities  of advances from the Federal Home
Loan Bank of New York is summarized as follows:

                                        MARCH 31,
              ----------------------------------------------------------
                         2001                             2000
              -------------------------         ------------------------
 MATURING
YEAR ENDED      WEIGHTED                          WEIGHTED
 MARCH 31,    AVERAGE RATE       AMOUNT         AVERAGE-RATE      AMOUNT
 ---------    ------------       ------         ------------      ------
                        (Dollars in thousands)
   2001             --%         $     --            5.76%        $ 51,000
   2002            5.86           96,500            5.17           15,000
   2003              --               --            3.58              358
   2006            5.44            3,490              --               --
   2012            3.50              309            3.50              330
                                --------                         --------
                   5.84%        $100,299            5.60%        $ 66,688
                                ========                         ========

                                      F-19
<PAGE>

     At March 31, 2001 and 2000,  the  advances  were  secured by pledges of the
Bank's  investment  in the capital  stock of the Federal Home Loan Bank totaling
$5,755,000  respectively  and a  blanket  assignment  of  the  Bank's  unpledged
qualifying mortgage, mortgage-backed securities and investment portfolios.

NOTE 15. INCOME TAXES

     The  components  of income tax expense for the years ended March 31,  2001,
2000 and 1999 are as follows:

<TABLE>
<CAPTION>
                                                             YEAR ENDED MARCH 31,
                                                       ------------------------------
                                                         2001       2000       1999
                                                       --------   --------   --------
                                                               (In thousands)
<S>                                                    <C>        <C>        <C>
Federal income tax benefit
    Current ........................................   $     --   $     --   $   (701)
    Deferred .......................................         --         --       (689)
State and local income tax expense (benefit)
    Current ........................................         98        110        152
    Deferred .......................................         --         --       (261)
                                                       --------   --------   --------
Total provision for income tax expense (benefit) ...   $     98   $    110   $ (1,499)
                                                       ========   ========   ========
</TABLE>

     The  reconciliation  of the expected  federal tax rate to the  consolidated
effective  tax rate for the years  ended  March 31,  2001,  2000 and 1999 are as
follows:

<TABLE>
<CAPTION>
                                                                                    YEAR ENDED MARCH 31,
                                                              ----------------------------------------------------------------
                                                                     2001                   2000                   1999
                                                              ------------------     ------------------     ------------------
                                                               Amount    Percent      Amount    Percent      Amount    Percent
                                                              -------    -------     -------    -------     -------    -------
                                                                                   (Dollars in thousands)
<S>                                                           <C>          <C>       <C>          <C>       <C>          <C>
Statutory federal income tax ..............................   $   (99)      34.0%    $  (349)      34.0%    $(2,024)      34.0%
State and local income taxes, net of Federal tax benefit ..        98      (33.7)        110      (10.7)        (72)       1.2
Change in valuation allowance .............................       157      (54.0)        298      (26.0)        597      (10.0)
Other .....................................................       (58)     (20.0)         51       (8.0)          0        0.0
                                                              -------    -------     -------    -------     -------    -------
Total income tax expense ..................................   $    98      (33.7)%   $   110      (10.7)%   $(1,499)      25.2%
                                                              =======    =======     =======    =======     =======    =======
</TABLE>

     The Company has net operating  loss  carryforwards  for federal  income tax
purposes at March 31, 2001 and 2000 of  approximately  $5.7  million.  These net
operating loss carryforwards begin to expire in the year ended March 31, 2019.

     The Bank's  stockholders'  equity includes  approximately $3.55 million and
$2.94  million  at  March  31,  2001  and  2000,  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.


                                      F-20
<PAGE>

     The tax  effects  of  existing  temporary  differences  that  give  rise to
significant  portions of deferred tax assets and deferred tax liabilities are as
follows:

                                                                 MARCH 31,
                                                          --------------------
                                                            2001        2000
                                                          --------    --------
                                                             (In thousands)
DEFERRED TAX ASSETS

Net operating loss carryforward .......................   $  1,940    $  1,940
Allowance for loan losses .............................      1,665       1,376
Deferred loan fees ....................................        353         430
Employees pension plan ................................        132          84
Management recognition plan ...........................         --           5
Directors' retirement plan ............................         --         208
Contributions carryforward ............................         67          28
                                                          --------    --------
Total deferred tax assets before valuation allowance ..      4,157       4,071
Valuation allowance ...................................     (2,439)     (2,281)
                                                          --------    --------
Total deferred tax asset ..............................      1,718       1,790
                                                          ========    ========

DEFERRED TAX LIABILITIES
Excess of cost over net assets acquired ...............        251         328
Depreciation ..........................................        429         424
Excess tax bad debt reserve ...........................         16          16
                                                          --------    --------
Total deferred tax liabilities ........................        696         768
                                                          --------    --------
Net deferred tax assets included in other assets ......   $  1,022    $  1,022
                                                          ========    ========

     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. The Company will have to generate approximately $2.5 million
of future taxable income to realize this asset.


                                      F-21
<PAGE>

NOTE 16. EARNINGS PER SHARE

     The following table reconciles the 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,
                                                                                   --------------------------------
                                                                                     2001        2000        1999
                                                                                   --------    --------    --------
                                                                                            (In thousands)
                                                                                   --------------------------------
<S>                                                                                <C>         <C>         <C>
Net loss .......................................................................   $   (389)   $ (1,135)   $ (4,453)
Preferred stock dividends ......................................................       (196)        (45)         --
                                                                                   --------    --------    --------
Net loss - basic ...............................................................       (585)     (1,180)     (4,453)
Impact of potential conversion of convertible preferred stock to common stock ..        196          45          --
                                                                                   --------    --------    --------
Net  loss - diluted ............................................................   $   (389)   $ (1,135)   $ (4,453)
                                                                                   ========    ========    ========

Weighted average common shares outstanding - basic .............................      2,256       2,239       2,206
Effect of dilutive securities
    Convertible preferred stock ................................................        208          46          --
                                                                                   --------    --------    --------
Weighted average common shares outstanding - diluted ...........................      2,464       2,285       2,206
                                                                                   ========    ========    ========
</TABLE>

NOTE 17. STOCKHOLDERS' EQUITY

     Convertible  Preferred Stock. On January 11, 2000, Carver 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  commencing 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  2.083  shares  of  Carver's   Common  Stock,   subject  to  certain
antidilution  adjustments.  Carver  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.

     At March 31, 2001  unpaid  accrued  dividends  related to  preferred  stock
amounted to $57,421.

     Regulatory  Capital.  The  operations  and  profitability  of the  Bank are
significantly affected by legislation and the policies of the various regulatory
agencies.  As required  by the  Financial  Institutions  Reform,  Recovery,  and
Enforcement Act, the Federal Office of Thrift  Supervision  ("OTS")  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 ("FDICIA")
stipulates  that an  institution  with less than  4.0%  core  capital  is deemed
undercapitalized.  At March 31, 2001 and 2000, the Bank exceeded all the current
capital requirements.


                                      F-22
<PAGE>

     The  following  table  sets  out  the  Bank's  various  regulatory  capital
categories at March 31, 2001 and 2000.

<TABLE>
<CAPTION>
                                                At March 31, 2001                At March 31, 2000
                                           --------------------------       ---------------------------
                                            DOLLARS        PERCENTAGE        DOLLARS         PERCENTAGE
                                           --------        ----------       --------         ----------
                                             (Dollars in thousands)           (Dollars in thousands)
<S>                                        <C>                 <C>          <C>                 <C>
Core/leverage capital .............        $ 29,757            7.02%        $ 28,715            6.85%
Tier 1 risk-based capital .........          29,757           14.50           28,715           14.15
Total risk-based capital ..........          32,333           15.76           31,213           15.38
</TABLE>

     The following table reconciles the Bank's stockholders' equity at March 31,
2001 and 2000, in accordance with accounting  principles  generally  accepted in
the United States of America to regulatory capital requirements:

<TABLE>
<CAPTION>
                                                       REGULATORY CAPITAL REQUIREMENTS
                                                ----------------------------------------------
                                                  GAAP     TANGIBLE   TIER I/CORE   RISK-BASED
                                                 CAPITAL    CAPITAL     CAPITAL       CAPITAL
                                                --------   --------   -----------   ----------
                                                           (Dollars in thousands)
<S>                                             <C>        <C>         <C>           <C>
Stockholders' Equity at March 31, 2001 (1) ..   $ 30,360   $ 30,360    $ 30,360      $ 30,360
Add:
   General valuation allowances .............                    --          --         2,576
Deduct:
   Excess of cost over net assets acquired ..                  (603)       (603)         (603)
Regulatory capital ..........................                29,757      29,757        32,333
Minimum capital requirement .................                 6,358      16,956        16,413
                                                           --------    --------      --------
Regulatory capital excess ...................              $ 23,399    $ 12,801      $ 15,920
                                                           ========    ========      ========
</TABLE>

<TABLE>
<CAPTION>
                                                       REGULATORY CAPITAL REQUIREMENTS
                                                ----------------------------------------------
                                                  GAAP     TANGIBLE   TIER I/CORE   RISK-BASED
                                                 CAPITAL    CAPITAL     CAPITAL       CAPITAL
                                                --------   --------   -----------   ----------
                                                           (Dollars in thousands)
<S>                                             <C>        <C>         <C>           <C>
    March 31, 2000 (1) ......................   $ 29,532   $ 29,532    $ 29,532      $ 29,532
Add:
   General valuation allowances .............                    --          --         2,538
Deduct:
   Excess of cost over net assets acquired ..                  (817)       (817)         (817)
   Asset required to be deducted ............                    --          --           (40)
                                                           --------    --------      --------
Regulatory capital ..........................                28,715      28,715        31,213
Minimum capital requirement .................                 6,283      16,766        16,235
                                                           --------    --------      --------
Regulatory capital excess ...................              $ 22,432    $ 11,949      $ 14,978
                                                           ========    ========      ========
</TABLE>

----------

(1) Reflects Bank only.


                                      F-23
<PAGE>

NOTE 18. BENEFIT 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, 2001. 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:

                                                                March 31,
                                                         --------------------
                                                           2001        2000
                                                         --------    --------
                                                            (In thousands)
                                                         --------------------
Change in benefit obligation during the year
Benefit obligation at the beginning of year ..........   $  2,846    $  3,145
Service cost .........................................        121         162
Interest cost ........................................        207         188
Actuarial gain .......................................        (84)       (488)
Benefits paid ........................................       (243)       (161)
Curtailment ..........................................   $   (320)        $--
                                                         --------    --------
Benefit obligation at end of year ....................   $  2,527    $  2,846
                                                         ========    ========

Change in fair value of plan assets during the year
Fair value of plan assets at beginning of year .......   $  3,791    $  3,625
Actual return on plan assets .........................         46         251
Employer contributions ...............................         --          76
Benefits paid ........................................       (243)       (161)
                                                         --------    --------
Fair value of plan assets at end of year .............   $  3,594    $  3,791
                                                         ========    ========

Funded status ........................................   $  1,067    $    945
Contributions ........................................         --          --
Unrecognized transition obligation ...................         --         259
Unrecognized gain ....................................     (1,074)     (1,336)
Unrecognized past service liability ..................         --          14
                                                         --------    --------
Accrued pension cost .................................   $     (7)   $   (118)
                                                         ========    ========

     Net periodic pension cost included the following components:

                                                       Year Ended March 31,
                                                    --------------------------
                                                     2001      2000      1999
                                                    ------    ------    ------
                                                          (In thousands)
Service cost .....................................  $  121    $  159    $  162
Interest cost ....................................     207       191       188
Expected return on plan assets ...................    (298)     (284)     (260)
Amortization of:
   Unrecognized transition (benefit) obligation ..      36        36        36
   Unrecognized gain (loss) ......................     (96)      (62)      (46)
   Unrecognized past service liability ...........       2         2         2
Curtailment credit ...............................     (84)       --        --
                                                    ------    ------    ------
Net periodic pension (benefit) cost ..............  $ (112)   $   42    $   82
                                                    ======    ======    ======

     Significant actuarial assumptions used in determining plan benefits are:

                                                YEAR ENDED MARCH 31,
                                             ------------------------
                                             2001      2000      1999
                                             ----      ----      ----
Annual salary increase .................     4.75%     5.50%     4.50%
Long-term return on assets .............     8.00%     8.00%     8.00%
Discount rate used in measurement of
benefit obligations ....................     7.25%     8.00%     6.50%


                                      F-24
<PAGE>

Savings Incentive Plan

     The Bank has a savings  incentive  plan,  pursuant to Section 401(k) of the
Code, for all eligible employees of the Bank. Employees may elect to defer up to
the lesser of 15% or the maximum amount allowed under law of their  compensation
and may  receive a 50%  matching  contribution  from the Bank up to the  maximum
allowed by law through  December 31, 2000.  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. 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 31st 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 1 to 5 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, 2001, 2000 and 1999 were $45,000, $56,000 and $68,000 respectively.

Directors' Retirement Plan

     Concurrent  with the  conversion to the stock form of  ownership,  the Bank
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.

                                                              March 31,
                                                          ----------------
                                                           2001      2000
                                                          ------    ------
                                                           (In thousands)
Change in benefit obligation during the year
Benefit obligation at beginning of year ...............   $  670    $  795
Service cost ..........................................       --        --
Interest cost .........................................       35        51
Actuarial loss (gain) .................................       14      (151)
Benefits paid .........................................      (51)      (25)
Curtailment ...........................................   $ (372)   $   --
                                                          ------    ------
    Benefit obligation at end of year .................   $  296    $  670
                                                          ======    ======

Change in fair value of plan assets during the year
Fair value of plan assets at beginning of year ........   $   --        --
Actual return on plan assets ..........................       --        --
Employer contributions ................................       51        25
Benefits paid .........................................      (51)      (25)
                                                          ------    ------
Fair value of plan assets at end of year ..............   $   --    $   --
                                                          ======    ======

Funded Status .........................................   $ (296)   $ (670)
Contributions .........................................       --         6
Unrecognized loss .....................................       21       166
Unrecognized past service liability ...................       --        55
                                                          ------    ------
Accrued pension cost ..................................   $ (275)   $ (443)
                                                          ======    ======

     Net periodic pension cost for the years ended March 31, 2001, 2000 and 1999
included the following:

                                              2001     2000     1999
                                             ------   ------   ------
                                                  (In thousands)
Service cost .............................   $   --   $   --   $   42
Interest cost ............................       35       51       32
Expected return on plan assets ...........       --       --       --
Amortization of:
   Unrecognized gain .....................        4       27        4
   Unrecognized past service liability ...       23       55       55
   Curtailment credit ....................     (179)      --       --
                                             ------   ------   ------
Net periodic pension (benefit) cost ......   $ (117)  $  133   $  133
                                             ======   ======   ======


                                      F-25
<PAGE>

     The actuarial  assumptions used in determining plan benefits include annual
fee increases of 4.75%, 5.50% and 4.50%, and a discount rate of 7.25%, 8.00% and
6.50%, for the years ended March 31, 2001, 2000 and 1999, respectively.

Management Recognition Plan

     The 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  $178,000 and $62,000 as expense for the years
ended March 31, 2000 and 1999, respectively.

NOTE 19. 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. 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 $298,000,  $326,000 and $171,000 for the years ended March 31, 2001,
2000 and 1999 respectively.

     The ESOP shares at March 31, 2001 and 2000 are as follows:

                                                         March 31,
                                           ------------------------------------
                                                 2001               2000
                                           ---------------    -----------------
                                           (In thousands except for share data)
                                           ------------------------------------
Allocated shares .......................           149                117
Shares committed to be released ........            --                 --
Unreleased shares ......................            33                 65
                                                ------             ------
Total ESOP shares ......................           182                182
                                                ======             ======

Fair value of unreleased shares ........        $  293             $  570

NOTE 20. 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


                                      F-26
<PAGE>

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.

     The Bank has outstanding various loan commitments as follows:

                                                    MARCH 31,
                                              --------------------
                                                2001         2000
                                              --------    --------
                                                 (In thousands)
                                              --------------------
Commitments to originate loan mortgages ..    $  6,137    $  2,472
Commitments to purchase loan mortgages ...          --      15,000
Consumer loans ...........................       3,380       4,488
                                              --------    --------
Total ....................................    $  9,517    $ 21,960
                                              ========    ========

     At  March  31,  2001,  of the  $6,137,000  in  outstanding  commitments  to
originate  mortgage  loans,  $3,382,000  represented  commitments  to  originate
multi-family  mortgage  loans at fixed  rates  within a range of 7.38% to 7.88%,
1,475,000  represented the undisbursed balance of all other real estate loans at
a rate of 8.50% and $1,280,000 represented construction loans at 9.69%.

     At March 31,  2001,  undisbursed  funds  from  approved  consumer  lines of
credit,  primarily  credit  cards,  totaled  $3,380,000.  Such lines  consist of
unsecured and secured lines of credit of $3,117,000  and $263,000  respectively.
All such lines carry adjustable rates.

     At March 31, 2001,  undisbursed  funds from approved  unsecured  commercial
lines of credit totaled $51,000.

     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 $191,000, $273,000, and $266,000
for the years ended March 31, 2001, 2000 and 1999, respectively. As of March 31,
2001, minimum rental commitments under all noncancellable leases with initial or
remaining terms of more than one year and expiring through 2012 are as follows:


                                      F-27
<PAGE>

                   YEAR ENDED                      MINIMUM
                    MARCH 31,                       RENTAL
                   ----------                   --------------
                                                (In thousands)
                         2002                      $   185
                         2003                          189
                         2004                          192
                         2005                          195
                         2006                          199
                   Thereafter                        1,132
                                                --------------
                                                   $ 2,092
                                                ==============

     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  the Company,  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  Company  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, 2001,  except as set
forth below, there were no material legal proceedings to which Carver Federal 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"),  a
former Carver employee filed suit against Carver Federal in the Supreme Court of
the State of New York,  County of New York (the "St. Rose Action").  On or about
January  12,  1999,   Carver  and  St.  Rose  entered  into  an  agreement  (the
"Agreement")  providing  that St. Rose would resign from Carver 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: (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 moved to
dismiss St. Rose's  fraudulent  misrepresentation  cause of action and the Court
granted Carver's motion.  Carver has not filed an answer in the St. Rose Action.
By written  stipulation  of the parties,  Carver's time to file an answer to St.
Rose's  complaint  has  been  extended  without  date.   Carver  has  unasserted
counterclaims  against St.  Rose for,  among  other  claims,  payment of certain
financial  obligations to Carver.  The parties have had intermittent  settlement
discussions, but have not reached an agreement.

     The action brought by Ralph Williams (the "Williams Action") and the action
brought by Janice Pressley (the "Presley Action" and, together with the Williams
Action,   the  "Actions")  arise  out  of  events  concerning  the  Northeastern
Conference Federal Credit Union ("Northeastern"). Plaintiff Williams is a former
member of the Board of Directors,  and plaintiff Pressley is a former treasurer,
of Northeastern, a federal credit union that maintained accounts with Carver and
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  against the NCUA,  Carver,  Chase Manhattan Bank  ("Chase"),  Astoria
Federal Savings and Loan  Association and Reliance  Federal Savings Bank (Carver
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
against  the same  defendants  seeking  unspecified  compensatory  and  punitive
damages.


                                      F-28
<PAGE>

     While the bulk of the  complaints  relate to the action of the NCUA  Board,
the  plaintiffs  allege  that the Bank  Defendants  "collaborated  with the NCUA
Board" in violating unspecified  constitutional and privacy rights and that they
engaged in discrimination.

     On or about December 15, 2000,  defendant  Chase moved to  consolidate  the
Williams Action and Pressley Action. In anticipation of that consolidation,  the
Bank  Defendants  filed a joint  motion to  dismiss  both  complaints.  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 the cases. The Bank
Defendants  have refilled their motion to dismiss the Williams  Action and it is
sub judice. The Bank Defendants'  original motion to dismiss is still sub judice
insofar as it applies to the Pressley Action.  If the motions to dismiss are not
granted, Carver intends to defend both Actions vigorously.

NOTE 21. 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.


                                      F-29
<PAGE>

Borrowings

     The fair  values  of  advances  from  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, 2001 approximates the fees
received. The fair value is not considered material.

     The carrying  amounts and estimated fair values of the Company's  financial
instruments at March 31, 2001 and 2000 are as follows:

<TABLE>
<CAPTION>
                                                                          AT MARCH 31,
                                                          ---------------------------------------------
                                                                  2001                    2000
                                                          ---------------------   ---------------------
                                                          CARRYING    ESTIMATED   CARRYING    ESTIMATED
                                                           AMOUNT    FAIR VALUE    AMOUNT    FAIR VALUE
                                                          --------   ----------   --------   ----------
                                                                         (In thousands)
<S>                                                       <C>         <C>         <C>         <C>
Financial Assets:
           Cash and cash equivalents .................    $ 31,758    $ 31,758    $ 22,202    $ 22,202
           Securities available for sale .............    $ 19,926    $ 19,926    $ 24,952    $ 24,952
           Investment securities held to maturity ....    $ 24,996    $ 26,089    $ 24,996    $ 24,309
           Mortgage backed securities ................    $ 42,866    $ 42,842    $ 54,229    $ 51,939
           Loans receivable ..........................    $283,437    $290,140    $270,148    $254,439
           Accrued interest receivable ...............    $  2,541    $  2,541    $  2,653    $  2,653
Financial Liabilities:
           Deposits ..................................    $279,424    $258,920    $281,941    $279,773
           Securities sold under
           agreements  to purchase ...................    $  4,930    $  4,930    $ 31,337    $ 31,337
           Advances from Federal Home
           Loan Bank of New York .....................    $100,299    $105,421    $ 66,688    $ 66,688
           Other borrowed money ......................    $    371    $    371    $    553    $    553
Commitments ..........................................    $     --    $     --    $     --    $     --
</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 subjectively to these estimated fair values.


                                      F-30
<PAGE>

NOTE 22. QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                      YEAR ENDED MARCH 31, 2001,
                                            -----------------------------------------------
                                             FIRST       SECOND        THIRD       FOURTH
                                            QUARTER      QUARTER      QUARTER      QUARTER
                                            --------     --------     --------     --------
                                                             (In thousands)
<S>                                         <C>          <C>          <C>          <C>
Interest income ........................    $  7,082     $  7,082     $  7,197     $  6,946
Interest expense .......................      (3,393)      (3,497)      (3,745)      (3,643)
                                            --------     --------     --------     --------
Net interest income ....................       3,689        3,585        3,452        3,303
Provision for loan losses ..............        (443)        (450)        (450)        (450)
Non-interest income ....................         681        1,264          498          491
Non-interest expense ...................      (3,754)      (3,941)      (3,942)      (3,824)
Income tax (expense) benefit ...........         (24)        (178)          45           59
                                            --------     --------     --------     --------
Net income (loss) ......................    $    149     $    280     $   (397)    $   (421)
                                            ========     ========     ========     ========
Net income (loss) per common share .....    $   0.04     $   0.10     $  (0.20)    $  (0.21)
                                            ========     ========     ========     ========
</TABLE>

<TABLE>
<CAPTION>
                                                      YEAR ENDED MARCH 31, 2000,
                                            -----------------------------------------------
                                             FIRST       SECOND        THIRD       FOURTH
                                            QUARTER      QUARTER      QUARTER      QUARTER
                                            --------     --------     --------     --------
                                                             (In thousands)
<S>                                         <C>          <C>          <C>          <C>
Interest income ........................    $  6,865     $  6,694     $  6,960     $  6,848
Interest expense .......................      (3,580)      (3,563)      (3,500)      (3,366)
                                            --------     --------     --------     --------
Net interest income ....................       3,285        3,131        3,460        3,482
Provision for loan losses ..............        (150)        (230)        (225)        (494)
Non-interest income ....................         475          513          539        1,012
Non-interest expense ...................      (2,824)      (3,155)      (3,202)      (6,642)
Income tax expense .....................          --           --          (23)         (87)
                                            --------     --------     --------     --------
Net income (loss) ......................    $    786     $    259     $    549     $ (2,729)
                                            ========     ========     ========     ========
Net income (loss) per common share .....    $    .35     $    .11     $    .25     $  (1.23)
                                            ========     ========     ========     ========
</TABLE>

NOTE 23. CARVER BANCORP, INC. (PARENT COMPANY ONLY) FINANCIAL STATEMENTS

CONDENSED STATEMENTS OF FINANCIAL CONDITION

                                                                AS OF MARCH 31,
                                                             -------------------
                                                               2001       2000
                                                             --------   --------
                                                               (In thousands)
ASSETS
Cash on deposit with the Bank ............................   $  2,128   $  2,068
Investment in the Bank ...................................     30,360     29,532
Investment in Alhambra Holding Corp. .....................         --      2,137
Accounts receivable from Alhambra Realty Holding .........         --          3
Promissory note receivable from Alhambra Realty Holding ..         --         50
                                                             --------   --------

Total assets .............................................   $ 32,488   $ 33,790
                                                             ========   ========

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable to the Bank .............................   $    118   $     73
Other liabilities ........................................        274      1,076
                                                             --------   --------
Total liabilities ........................................        392      1,149

Stockholders' equity .....................................     32,096     32,641
                                                             --------   --------

Total liabilities and stockholders' equity ...............   $ 32,488   $ 33,790
                                                             ========   ========


                                      F-31
<PAGE>

CONDENSED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                               YEAR ENDED MARCH 31,
                                                         --------------------------------
                                                           2001        2000        1999
                                                         --------    --------    --------
                                                                  (In thousands)
<S>                                                      <C>         <C>         <C>
INCOME
Equity in net income (loss) from the Bank ............   $    624    $   (413)   $ (4,735)
Equity in net income (loss) from Alhambra Holding ....         --         720          --
Interest income from deposit with the Bank ...........         48          77         292
Interest income from promissory note .................         --          12          --
Other income .........................................         --          13          14
                                                         --------    --------    --------
    Total income .....................................        672         409      (4,429)

EXPENSES
Salaries and employee benefits .......................         64         113           6
Legal expense ........................................        233         659          10
Shareholder expense ..................................        510         432
Other ................................................        156         340           8
                                                         --------    --------    --------
    Total expense ....................................        963       1,544          24

Loss before income taxes .............................       (291)      (1135)     (4,453)
Income tax expense ...................................         98          --          --
                                                         --------    --------    --------
Net loss .............................................   $   (389)   $ (1,135)   $ (4,453)
                                                         ========    ========    ========
</TABLE>

CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                YEAR ENDED MARCH 31,
                                                          --------------------------------
                                                            2001        2000        1999
                                                          --------    --------    --------
                                                                    (In thousands)
<S>                                                       <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ..............................................   $   (389)   $ (1,135)   $ (4,453)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Equity in net (income) loss of the Bank ...............       (624)        413       4,735
Equity in net income of Alhambra Holding ..............         --        (720)         --
Decrease (increase) in accounts receivable ............          3          (3)         --
Decrease (increase) in promissory note receivable .....         50         (50)         --
Increase in accounts payable to Bank ..................         45          73          --
(Increase) decrease in other liabilities ..............       (802)        914          41
MRP activity ..........................................        (95)         --          --
Allocation of ESOP Stock ..............................        298         341         196
Other,  net ...........................................       (203)        (25)       (416)
                                                          --------    --------    --------
Net cash provided by operating activities .............     (1,717)       (192)        103
                                                          --------    --------    --------

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

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of preferred stock .............         --       2,366          --
Purchase of treasury stock - net ......................        (61)         --          --
Dividends paid ........................................       (298)       (106)       (116)
Decrease in unrealized loss on investments ............         --          --          13
                                                          --------    --------    --------
Net cash (used in) provided by financing activities ...       (359)      2,260        (103)
                                                          --------    --------    --------
Net increase in cash ..................................         60       2,068          --

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


                                      F-32
<PAGE>

NOTE 24. STOCK OPTION PLAN

     During  1995,  Carver  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 was  138,862.  At March 31,  2001,  there were  112,963
options outstanding and 89,663 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 (10) years. Under the Plan, as amended,  option grants generally vest
on an annual basis  ratably over either three (3) or five (5) years,  commencing
after one (1) 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,
2001, 2000, and 1999 follows:

<TABLE>
<CAPTION>
                                               2001                  2000                  1999
                                      --------------------   --------------------   -------------------
                                                  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 ....     58,463    $   9.57     79,115    $  10.74     79,115   $  10.76
Granted ...........................     56,000        8.94     31,000        8.21         --
Exercised .........................         --                     --          --         --
Forfeited .........................     (1,500)      16.13    (51,652)      10.55         --      10.86
                                      --------               --------               --------
Outstanding, end of year ..........    112,963        9.17     58,463        9.57     79,115      10.74
                                      ========               ========               ========
Exercisable at year end ...........     89,663                 34,470          --     31,450         --
                                      ========               ========               ========
</TABLE>

     The following table summarizes information about stock options at March 31,
2001:

                           Options Outstanding         Options Exercisable
                      ------------------------------   -------------------
                                 Weighted   Weighted              Weighted
                                  Average    Average               Average
     Range of                    Remaining  Exercise              Exercise
  Exercise Prices      Shares      Life       Price)    Shares      Price
-------------------   --------   --------   --------   --------   --------
$   8.00   $   8.99     71,000    8 years   $   8.24     66,000       8.17
    9.00       9.99      9,000    8 years       9.60      1,000       9.11
   10.00      10.99     25,463    6 years      10.36     20,663      10.38
   12.00      12.99      5,000    8 years      12.49        400      12.94
   13.00      13.99      1,000    6 years      13.81        400      13.81
   16.00      16.99      1,500    7 years      16.13      1,200      16.13
                      --------                         --------
Total                  112,963                           89,663
                      ========                         ========

     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 under the  Statement  of
Financial   Accounting   Standards   No.  123,   "Accounting   for   Stock-Based
Compensation,"  (SFAS No. 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 No. 123 for its Plan, net
income and earnings  per common  share would have been to the pro forma  amounts
indicated below:


                                      F-33
<PAGE>

<TABLE>
<CAPTION>
                                                            Year Ended March 31,
                                                   ------------------------------------
                                                      2001         2000         1999
                                                   ----------   ----------   ----------
                                               (Dollars in thousands, except per share data)
<S>                                                <C>          <C>          <C>
Net loss available to common stockholders:
       As reported .............................   $      585   $    1,180   $    4,453
       Pro forma ...............................   $      759        1,268        4,453

Basic loss per share:
       As reported .............................   $     0.26         0.53   $     2.02
       Pro forma ...............................   $     0.34         0.57   $     2.02
Weighted average number of shares outstanding ..    2,256,441    2,238,846    2,206,133
</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  rate of  5.50%,  volatility  of 30%,
expected dividend yield of 0.60%, and an expected life of five (5) years.

NOTE 25. SUBSEQUENT EVENTS (UNAUDITED)

     On June 15,  2001,  the Holding  Company  completed  the sale of the Bank's
branch in East New York (the  "Branch"),  to City  National  Bank of New  Jersey
("CNBNJ").  CNBNJ assumed approximately $16.6 million of deposit liabilities and
acquired the related Branch assets consisting of cash, land and building,  other
fixed assets and loans secured by deposits.

     In June 1998,  the FASB  issued SFAS No. 133,  "Accounting  for  Derivative
Instruments and Hedging Activities." This statement  establishes  accounting and
reporting standards for derivative instruments and for hedging activities.  This
statement  also requires  that an entity  recognize  all  derivatives  as either
assets  or  liabilities  in  the  statement  of  financial  position  and  those
instruments  at fair value.  This  statement,  as amended,  is effective for all
fiscal  quarters of fiscal years  beginning after June 15, 2000. The adoption of
this  statement is not  anticipated  to have a material  impact on the financial
position or results of  operations.  As  permitted  by SFAS No. 133, on April 1,
2001, Carver transferred  investment  securities and mortgage-backed  securities
with a book value of  approximately  $45.7  million from the  classification  of
held-to-maturity to available for sale.


                                      F-34
<PAGE>

EXHIBIT INDEX

Exhibit No.         Description
-----------         -----------

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

   3.2              Bylaws of Carver Bancorp, Inc.(1)

   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(3)

   4.5              Certificate  of  Designations,  Preferences  and  Rights  of
                    Series A Convertible Preferred Stock (5)

   4.6              Certificate  of  Designations,  Preferences  and  Rights  of
                    Series B Convertible Preferred Stock (5)

   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, 1989(1)

   10.3             Carver  Federal  Savings  Bank  401(k)  Savings  Plan in RSI
                    Retirement  Trust,  as amended and restated  effective as of
                    May 1, 1993(1)

   10.4             Carver   Bancorp,   Inc.   Employee  Stock  Ownership  Plan,
                    effective as of January 1, 1993(1)

   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)

   10.9             Employment  Agreement by and between Carver Federal  Savings
                    Bank  and  Thomas  L.  Clark,  entered  into as of  April 1,
                    1997(2)

   10.10            Employment Agreement by and between Carver Bancorp, Inc. and
                    Thomas L. Clark, entered into as of April 1, 1997(2)

   10.11            Employment  Agreement by and between Carver Federal  Savings
                    Bank  and  Deborah  C.  Wright,  entered  into as of June 1,
                    1999(4)

   10.12            Employment Agreement by and between Carver Bancorp, Inc. and
                    Deborah C. Wright, entered into as of June 1, 1999(4)

   10.13            Securities  Purchase  Agreement by and among Carver Bancorp,
                    Inc.,  Morgan  Stanley  &  Co.  Incorporated  and  Provender
                    Opportunities Fund L.P.(6)


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<PAGE>

   10.14            Registration  Rights  Agreement by and among Carver Bancorp,
                    Inc.,  Morgan  Stanley  &  Co.  Incorporated  and  Provender
                    Opportunities Fund L.P.(6)

   10.15            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.(6)

   10.16            Amendment  to the Carver  Bancorp.  Inc.  1995 Stock  Option
                    Plan.(7)

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

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

   10.19            Form  of  Letter  Employment   Agreement  between  Executive
                    Officers and Carver Bancorp, Inc.

   21.1             Subsidiaries of the Registrant(6)

   23.1             Consent of Mitchell & Titus LLP

   23.2             Consent of KPMG LLP

----------

     (1) Incorporated herein by reference to Registration Statement No. 333-0559
     on Form S-4 of Carver Bancorp. Inc., filed with the Securities and Exchange
     Commission during July 1997, as amended.

     (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, 1997.

     (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, 1998.

     (4)  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.

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

     (6)  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.

     (7) Incorporated  herein by reference to the Registrant's  Proxy Statement,
     dated January 25, 2001.


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