SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             -----------------------
                                  FORM 10-K/ A
                                 Amendment No. 1

                  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, 1997

                                        OR

 / /    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
        EXCHANGE ACT OF 1934
        For the transition period from                  to              
                                       ---------------     ---------------

                         COMMISSION FILE NUMBER: 0-21487

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

DELAWARE                                                       13-3904174
---------------------------------------------                ----------------
(STATE OR OTHER JURISDICTION OF INCORPORATION                (I.R.S. EMPLOYER
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.
YES   X      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. X
          ----

     As of May 31, 1997, there were 2,314,275 shares of Common Stock of the
registrant issued and outstanding, of which 2,111,321 shares were held by
non-affiliates on such date, with an aggregate market value of approximately
$20.3 million (based on the closing sales price of $9 5/8 per share of the
registrant's Common Stock on May 30, 1997).

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Registrant's 1997 Annual Meeting of
Stockholders are incorporated by reference into Items 10, 11, 12 and 13 hereof.


<PAGE>

PART II.  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. Carver has
undertaken a restructuring of its balance sheet and is now placing primary
emphasis on its whole loan portfolio through the origination of loans, as well
as the purchase of whole loans. As a result of this effort, the loan portfolio
has substantially increased as a percentage of total assets. Therefore, Carver's
future earnings will be derived from direct lending and purchase activities
replacing investing in securities. Carver's net income is also affected by the
generation of non-interest income, such as loan fees and service charges, as
well as gains on sales of securities held for sale. In addition, net income is
affected by the level of provision for loan losses, as well as operating
expenses.

         The operations of the Bank and the entire thrift industry 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 nationwide.

RECAPITALIZATION OF THE SAVINGS ASSOCIATION INSURANCE FUND (SAIF)

         During the second quarter of fiscal 1997, Carver experienced a one time
pre-tax assessment of $1.6 million for recapitalization of the SAIF pursuant to
legislation which was signed into law in September of 1996. The legislation to
recapitalize the SAIF was anticipated by the industry and reduced Carver
Federal's deposit insurance premium from 23 basis points, on insured deposits of
approximately $248.4 million, to 6.5 basis points effective January 1, 1997.

RESTRUCTURING OF BALANCE SHEET

         In December of 1996, the Board of Directors made a strategic decision
to accelerate the reallocation of assets out of investment securities and into
loans. The Board and management reviewed a variety of transactions that would
reallocate assets on the balance sheet and the income stream that each would
produce. The analysis resulted in a decision to divest of approximately $72
million in money market rate investment securities or mutual funds that were
carried on the books as available for sale and reinvest the proceeds into
performing one-to-four family adjustable rate mortgages. Carver experienced a
one time pre-tax charge of $1.0 million during the fourth fiscal quarter of 1997
as a result of the disposition of the mutual funds. Carver projects that net
yields and earnings will be improved by replacing the lower yielding securities
with higher yielding loans.

         In combination with the asset shift, Carver further leveraged the
balance sheet by increasing total assets. To accomplish this Carver entered into
an agreement to purchase $43.0 million of performing one- to four-family
mortgage loans. The Bank increased securities sold under repurchase agreements
and borrowing from the FHLB to settle the purchase. At March 31, 1997, Carver
settled on $11 million of the loans purchased. The balance of additional loans
purchased ($32 million) settled on April 1, 1997. On April 1, 1997, $49.0
million of securities held as available for sale were sold, $17 million was
utilized to repay FHLB borrowings and $32 million was used to fund the balance
of the additional loans purchased. The average yield on the loans purchased is
expected to exceed the yield on the securities sold by approximately 175 basis
points. The average yield on the additional loans purchased is expected to
exceed the cost of the FHLB borrowings by approximately 100 basis points. As a
result of this strategy, Carver's total assets increased from $371.1 million at
March 31, 1996 to $423.6 million at March 31, 1997.

         The net effect of the transactions settling on April 1, 1997, ($49
million of securities sold, $32 million in loans purchased, and retirement of
$17 million in FHLB borrowings), was a reduction in total assets of $17 million,
to $406.6 million at April 1, 1997.


                                        1
<PAGE>

         As a result of the foregoing, during fiscal 1997, the loan portfolio
increased by 140% from $82.6 million at March 31, 1996, to $197.9 million at
March 31, 1997, an increase of $115.3 million. In addition, Carver added
approximately $1.6 million to its provisions for loan losses during the fourth
quarter of fiscal 1997 in order to maintain the allowance for loan losses at an
adequate level consistent with the Bank's policies. At March 31, 1997, the
allowance for loan losses as a percentage of total loans was 1.13% as compared
to 1.42% at March 31, 1996. See "Comparison of Operating Results for the Years
Ended March 31, 1997 and 1996--Provision for Loan Losses."



ASSET/LIABILITY MANAGEMENT

         Net interest income, the primary component of Carver's net income, is
determined by the difference or "spread" between the yield earned on
interest-earning assets and the rates paid on its interest-bearing liabilities
and the relative amounts of such assets and liabilities. Because Carver's
interest-bearing liabilities consist primarily of shorter term deposit accounts,
Carver's interest rate spread can be adversely affected by changes in general
interest rates if its interest-earning assets are not sufficiently sensitive to
changes in interest rates. Management has sought to reduce Carver's exposure to
changes in interest rates by more closely matching the effective maturities and
repricing periods of its interest-earning assets and interest-bearing
liabilities through a variety of strategies, including the origination and
purchase of adjustable-rate loans for its portfolio, investment in
adjustable-rate and shorter-term mortgage-backed securities and the sale of all
long-term fixed-rate loans originated into the secondary market. Carver Federal
has also reduced interest rate risk through its origination and purchase of
primarily adjustable rate mortgage loans. During fiscal year 1997, loan
portfolio increased by $115.3 million, or 140%. The growth in the loan portfolio
was funded primarily by matched funding from FHLB advances and reverse
repurchase agreements. See "--Restructuring of Balance Sheet."

INTEREST RATE SENSITIVITY ANALYSIS

         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 exceed 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 9.95% of total rate-sensitive assets at March 31, 1997, as
a result of which its net interest income could be adversely affected by rising
interest rates, and positively affected by falling interest rates.


                                        2
<PAGE>

         The following table sets forth information regarding the projected
maturities, prepayments and repricing of the major rate-sensitive asset and
liability categories of Carver as of March 31, 1997. Maturity repricing dates
have been projected by applying the assumptions set forth below to contractual
maturity and repricing dates. The information presented in the following table
is derived 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.


<TABLE>
<CAPTION>
                                               THREE OR            FOUR TO             OVER ONE            OVER THREE      
                                                 LESS               TWELVE              THROUGH              THROUGH       
                 MONTHS                         MONTHS              MONTHS            THREE YEARS          FIVE YEARS      
---------------------------------------- --------------------  -----------------  ------------------  -------------------- 
                                                                                                   (DOLLARS IN THOUSANDS)
<S>                                        <C>                   <C>                <C>                 <C>                
RATE-SENSITIVE ASSETS:
Loans...................................   $   57,890            $   43,301         $   33,715          $   26,555         
Federal Funds Sold......................            0                     0                  0                   0         
Investment Securities(1)................       51,157                                    7,210                             
Mortgage-Backed Securities..............        2,625                     4              1,150               7,598         
Total...................................      111,672                43,305             42,075              34,153         

RATE-SENSITIVE LIABILITIES:
Deposits................................       27,420                48,018             55,053              36,320         
Borrowings..............................       54,000                65,335                                                
Total...................................       81,420               113,353             55,053              36,320         

Interest Sensitivity Gap................   $   30,252            $  (70,048)        $  (12,975)         $   (2,167)        

Cumulative Interest Sensitivity Gap.....   $   30,252            $  (39,796)        $  (52,774)         $  (54,941)        

Ratio of Cumulative Gap to Total
 Rate-Sensitive Assets..................        7.57%                 (9.95)%          (13.20)%            (13.74)%         
                                                     


<CAPTION>                                
                                              OVER FIVE             OVER                     
                                               THROUGH               TEN                     
                 MONTHS                       TEN YEARS             YEARS             TOTAL  
---------------------------------------- ------------------- ------------------ -----------  
                                                                                             
<S>                                        <C>                 <C>                <C>        
RATE-SENSITIVE ASSETS:                                                                       
Loans...................................   $   23,894          $   12,563         $  197,918 
Federal Funds Sold......................            0                   0                  0 
Investment Securities(1)................                                              58,367 
Mortgage-Backed Securities..............        2,621             129,522            143,520 
Total...................................       26,515             142,085            399,805 
                                                                                             
RATE-SENSITIVE LIABILITIES:                                                                  
Deposits................................       59,690              39,971            266,471 
Borrowings..............................        1,766                                121,101 
Total...................................       61,456              39,971            387,572 
                                                                                             
Interest Sensitivity Gap................   $  (34,941)         $  102,114         $   12,233 
                                                                                             
Cumulative Interest Sensitivity Gap.....   $  (89,881)         $   52,204                    
                                                                                             
Ratio of Cumulative Gap to Total                                                             
 Rate-Sensitive Assets..................       (22.48)%            13.06%
</TABLE>



--------------------------------------------

(1)  Includes securities available-for-sale.


                                        3
<PAGE>

         The preceding table was prepared utilizing certain assumptions
regarding prepayment and decay rates as determined by the OTS for savings
associations nationwide as of December 31, 1995. While management does not
believe that these assumptions will be materially different from Carver's actual
experience, the actual interest rate sensitivity of the Bank's assets and
liabilities could vary significantly from the information set forth in the table
due to market and other factors. The following assumptions were used: (i)
adjustable-rate first mortgage loans will prepay at the rate of 6% per year; and
(ii) fixed-rate first mortgage loans will prepay annually as follows:


<TABLE>
<CAPTION>
          COUPON RATE                                            ANNUAL PREPAYMENT RATE
          -----------                                            ----------------------
                                          30-YEAR                        15-YEAR                   5-YEAR BALLOON
                                          -------                        -------                   --------------

<C>                                          <C>                            <C>                          <C>   
6.50%.........................               9.00%                          8.00%                        13.00%
7.00..........................               9.00                           9.00                         16.00
7.50..........................              11.00                          11.00                         19.00
8.00..........................              13.00                          14.00                         25.00
8.50..........................              16.00                          --                            --
9.00..........................              20.00                          --                            --
9.50..........................              25.00                          --                            --
10.00.........................              28.00                          --                            --
</TABLE>

         In addition, it is assumed that fixed maturity deposits are not
withdrawn prior to maturity, transaction accounts will decay at a rate of 37% in
the first year and passbook accounts will decay at a rate of 17% in the first
year, and money market accounts will reflect a 79% decay rate in year one.

         Certain shortcomings are inherent in the method of analysis presented
in the table above. Although certain assets and liabilities may have similar
maturity 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.

         The ratio of cumulative gap to total rate sensitivity assets for the
fiscal year changed from positive 28.14% at March 31, 1996 to negative 9.95% at
March 31, 1997. The adjustable rate assets accounts was 84.83% of the Bank's
total interest sensitive assets as at March 31, 1997.

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


                                        4
<PAGE>

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 net interest income.


                                        5
<PAGE>

<TABLE>
<CAPTION>
                                     AT MARCH 31,                                                         
                                         1997                                  1997                       
                             ---------------------------- ----------------------------------------------- 
                                               AVERAGE                                        AVERAGE     
                                                YIELD          AVERAGE                         YIELD      
                                BALANCE          COST          BALANCE       INTEREST          COST       
                             -------------  ------------- ---------------- -------------  --------------- 
                                                                (DOLLARS IN THOUSANDS
<S>                              <C>            <C>      <C>               <C>                 <C>        
ASSETS:
Loans (1)                        $ 197,918      8.01%    $       94,346    $    7,844          8.31%      
Investment Securities (2)           58,440      5.72             85,040         4,742          5.25       
Mortgage-Backed
  Securities (3)                   143,520      6.35            156,454         9,979          6.38       
Federal Funds Sold                      --        --              5,202           282          5.42       
                                 ---------   -------     --------------   -----------    ----------       
Total Interest-earning assets      399,878      7.08            341,042        22,847          6.70       
                                                                          -----------                     
Non Interest Earning                23,736                       25,453                                   
                                 ---------               --------------                                   
Assets
  Total Assets                   $ 423,614               $      366,495                                   
                                 =========               ==============                                   

Interest-bearing Liabilities:
Deposits
    DDA                          $   7,677        --     $        4,774   $        --            --       
Now                                 18,579      1.89             19,909           311          1.56       
Savings and Clubs                  142,953      2.50            142,410         3,542          2.49       
Money Market Accounts               21,078      3.15             20,398           658          3.23       
Certificate of deposits             76,185      5.37             74,583         3,844          5.15       
                                 ---------   -------     --------------   -----------    ----------       
Total deposits                     266,471      3.26            262,074         8,355          3.19       
Borrowed money                     121,101      6.17             66,403         4,128          6.22       
                                 ---------   -------     --------------   -----------    ----------       
Total interest-bearing
  liabilities                      387,572      4.17            328,477        12,483          3.80       
                                                                          -----------                     
Non-interest-bearing
  liabilities                        2,058                        3,239                                   
                                 ---------                -------------                                   
Total liabilities                  389,630                      331,716                                   
  Stockholders' equity              34,254                       34,779                                   
                                 ---------                -------------                                   
Total liabilities and
  stockholders' equity           $ 423,614                $     366,495                                   
                                 =========                =============                                   
Net interest income                                                       $    10,364                     
                                                                          ===========                     
Interest rate spread                            2.91%                                          2.90%      
                                             =======                                     ==========       
                                                                                                          
Net interest margin                                                                            3.04%      
                                                                                         ========== 

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


<CAPTION>
                                          YEAR ENDED MARCH 31,                                                              
                                                  1996                                            1995                      
                              ---------------------------------------------  -------------------------------------------    
                                                                AVERAGE                                         AVERAGE     
                                  AVERAGE                        YIELD           AVERAGE                         YIELD      
                                  BALANCE       INTEREST         COST            BALANCE       INTEREST          COST       
                              -------------- -------------- ---------------  --------------  ------------- --------------   
                                                                (DOLLARS IN THOUSANDS
<S>                          <C>            <C>                 <C>        <C>               <C>                 <C>        
ASSETS:                                                                                                                     
Loans (1)                    $     58,136   $     4,800         8.26%      $     49,609      $    4,092          8.25%      
Investment Securities (2)          91,639         5,807         6.34             81,466           5,230          6.42       
Mortgage-Backed                                                                                                             
  Securities (3)                  188,136        12,217         6.49            179,963          10,159          5.65       
Federal Funds Sold                 11,949           705         5.90              5,738             269          4.69       
                             ------------   -----------   ----------       ------------      ----------    -----------      
Total Interest-earning assets     349,860        23,529         6.73            316,776          19,750          6.23       
                                            -----------                                      ----------                     
Non Interest Earning               13,977                                        15,369                                     
                             ------------                                  ------------                                     
Assets                                                                                                                      
  Total Assets               $    363,837                                  $    332,145                                     
                             ============                                  ============                                     
                                                                                                                            
Interest-bearing Liabilities:                                                                                               
Deposits                                                                                                                    
    DDA                      $      4,761   $        --           --       $      3,814      $       --            --       
Now                                15,539           314         2.02             13,904             226          1.62       
Savings and Clubs                 140,204         3,507         2.50            144,092           3,591          2.49       
Money Market Accounts              18,770           599         3.19             19,135             541          2.83       
Certificate of deposits            74,060         3,970         5.36             66,870           3,115          4.66       
                             ------------   -----------   ----------       ------------      ----------    ----------       
Total deposits                    253,334         8,390         3.31            247,815           7,473          3.02       
Borrowed money                     73,253         5,204         7.10             54,226           3,059          5.64       
                             ------------   -----------   ----------       ------------      ----------    ----------       
Total interest-bearing                                                                                                      
  liabilities                     326,587        13,594         4.16            302,041          10,532          3.49       
                                            -----------                                      ----------                     
Non-interest-bearing                                                                                                        
  liabilities                       2,230                                        6,710                                      
                             ------------                                  -----------                                      
Total liabilities                 328,817                                      308,750                                      
  Stockholders' equity             35,020                                       23,394                                      
                             ------------                                  -----------                                      
Total liabilities and                                                                                                       
  stockholders' equity       $    363,837                                  $   332,145                                      
                             ============                                  ===========                                      
Net interest income                         $     9,935                                      $    9,218                     
                                            ===========                                      ==========                     
Interest rate spread                                            2.57%                                            2.74%      
                                                          ==========                                       ==========       
                                                                2.85%                                            2.91%      
Net interest margin                                       ==========                                       ==========       


                                        6
<PAGE>

Ratio of average interest-                                                                                                  
  earning assets to                                                                                                         
  average interest-bearing                                                                                                  
  liabilities.............                                      1.07x                                            1.05x      
                                                          ==========                                       ==========       
</TABLE>

-------------------------------------

(1)      Includes non-accrual loans
(2)      Includes FHLB stock and fair value of investments available for sale of
         $2.1 million at March 31, 1997.
(3)      Includes fair value of mortgage-backed securities available for sale of
         $32.8 million at March 31, 1997.


                                        7
<PAGE>

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 new rate), (ii) changes
in rates (change in rate multiplied by old volume), and (iii) total change.
Changes in rate/volume (changes in rate multiplied by the changes in volume) are
allocated proportionately between changes in rate and changes in volume.


<TABLE>
<CAPTION>
                                                                          YEAR ENDED MARCH 31,
                                                                          --------------------
                                                     1997 VS. 1996                          1996 VS. 1996
                                                  INCREASE (DECREASE)                    INCREASE (DECREASE)
                                                        DUE TO                                 DUE TO
                                                        ------                                 ------
                                       VOLUME          RATE       TOTAL       VOLUME         RATE         TOTAL
                                       ------          ----       -----       ------         ----         -----
                                                                                 (DOLLARS IN THOUSANDS)

<S>                                  <C>          <C>          <C>          <C>          <C>          <C>      
Interest-earning assets:
  Loans ..........................   $   3,013    $      31    $   3,044    $     704    $       4    $     708

Investment securities(1) .........        (335)        (730)      (1,065)         645          (68)         577
    Mortgage-backed securities(1)
    Securities ...................      (2,024)        (214)      (2,238)         531        1,527        2,058
  Federal funds sold .............        (441)          18         (423)         367           69          436
                                     ---------    ---------    ---------    ---------    ---------    ---------
  Total interest-earning assets ..         213         (895)        (682)       2,247        1,532        3,779
                                     ---------    ---------    ---------    ---------    ---------    ---------

Interest-bearing liabilities:
NOWs .............................           4           (7)          (3)          33           54           87
Savings and Clubs ................          49          (14)          35          (97)          14          (83)
Money Market Accounts ............          66           (7)          59          (11)          71           60
Certificate of Deposits ..........         (92)          36          (56)         385          468          853
                                     ---------    ---------    ---------    ---------    ---------    ---------
Total Deposits ...................          27            8           35          310          607          917
  Borrowed money .................         638          438        1,076        1,352          793        2,145
                                     ---------    ---------    ---------    ---------    ---------    ---------
Total interest-bearing liabilities         665          446        1,111        1,662        1,400        3,062
                                     ---------    ---------    ---------    ---------    ---------    ---------
Net change in net interest income    $     878    $    (449)   $     429    $     585    $     132    $     717
                                     =========    =========    =========    =========    =========    =========
</TABLE>

---------

(1)      Includes securities available for sale.

COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 1997 AND 1996

         Carver's total assets increased by $56.0 million, or 15.23%, from
$367.6 million at March 31, 1996 to $423.6 million at March 31, 1997. The
increase in assets was primarily due to the restructuring of the investment and
loan portfolios and leveraging the Company's balance sheet. Carver's portfolio
of securities available for sale decreased by $30.5 million, or 26.68%, to $83.8
million at March 31, 1997, from $114.3 million at March 31, 1996. The reason for
this significant change in the portfolio was the sale of the Company's portfolio
of mutual funds (which was included in securities available for sale), in
accordance with the Company's restructuring program. Accordingly the balance of
this portfolio at year end consisted of mortgage-backed securities available for
sale. Mortgage-backed securities held to maturity decreased by $20.3 million, or
15.48%, to $110.8 million at March 31, 1997, from $131.1 million at March 31,
1996, primarily due to principal repayments. Investment securities held to
maturity decreased by $7.3 million, or 82.02%, to $1.6 million at March 31,
1997, from $8.9 million at March 31, 1996. This decrease in investment
securities was due primarily to the call back of certain bonds totaling $7.0
million. Carver's loans receivable increased to $197.9 million at March 31,
1997, as compared to $82.6 million at March 31, 1996. In fiscal year 1997,


                                        8
<PAGE>

Carver Federal purchased $83.0 million of one- to four-family mortgage loans.
See "Restructuring of Balance Sheet."

         Carver's total liabilities increased by $56.8 million, or 17.07%, from
$332.8 million at March 31, 1996, to $389.6 million at March 31, 1997, as a
result of an increase in borrowings as well as increased deposits. At March 31,
1997, the Bank's FHLB advances were $45.4 million, an increase of $20.0 million,
or 78.74%, as compared to advances of $25.4 million at March 31, 1996.
Securities sold under agreements to repurchase increased $27.3 million, or
58.09%, to $74.3 million at March 31, 1997, from $47.0 million at March 31,
1996. Carver used the proceeds from the principal payments of securities to
decrease its borrowings and thereby reduce the cost of funds.

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED MARCH 31, 1997 AND 1996

         NET INCOME (LOSS).

         For fiscal 1997, the Company experienced a net loss of $1.7 million, as
compared to net income of $753,000 for the year ended March 31, 1996. Earnings
for fiscal 1997 were adversely affected by three unusual events. During the
second quarter of fiscal 1997, Carver experienced a one time pre-tax assessment
of $1.6 million for the recapitalization of the Savings Association Insurance
Fund ("SAIF") pursuant to legislation which was enacted in September of 1996.
During the fourth quarter of fiscal 1997, Carver experienced a one time pre-tax
charge of $1.0 million as a result of the disposition of approximately $72
million of money market rate investment securities, or mutual funds. During the
fourth quarter of fiscal 1997, the Company added approximately $1.6 million to
its provision for loan losses. Carver's operating results for the year were also
impacted by an increase in net interest income and an increase in non-interest
expense.

         NET INTEREST INCOME.

         Net interest income before provision for loan losses for the year ended
March 31, 1997, increased $429,000, or 4.32%, to $10.3 million as compared to
$9.9 million for the year ended March 31, 1996 ("fiscal 1996"). Carver's
interest rate spread widened from 2.57% in fiscal 1996 to 2.90% in fiscal 1997,
and its interest margin increased from 2.85% in fiscal 1996, to 3.04% in fiscal
1997. These increases in interest rate spread and net interest margin resulted
in part from the decreased cost of deposits and borrowed money. These increases
also reflect the replacement of certain investment and mortgage-backed
securities with higher yielding loans. The ratio of the Company's average
interest-earning assets to interest-bearing liabilities decreased to 1.04x in
fiscal 1997, from 1.07x in fiscal 1996. The changes in this ratio primarily
reflects the increase in average interest earning assets.

         INTEREST INCOME.

         Carver's interest income for the fiscal year ended March 31, 1997,
decreased by $682,000, or 2.90%, to $22.8 million as compared to $23.5 million
for the fiscal year ended March 31, 1996. The decrease in interest income
resulted primarily from a 3 basis point decrease in the average yield on
interest-bearing assets, from 6.73% during fiscal year 1996, to 6.70% during
fiscal year 1997 and a decline of $8.8 million in the average balance of
interest-earning assets. The decline in average yield resulted from a lower
interest rate environment.

         The decrease in interest income resulted in part from a $2.2 million,
or 18.31%, decrease in income from mortgage-backed securities, reflecting a
decrease of 11 basis points in the average yield to 6.38% in fiscal 1997 from
6.49% in fiscal 1996. The decrease in interest income also resulted in part from
a $1.1 million or


                                        9
<PAGE>

an 18.33% decrease in interest income from investment securities, primarily due
to a decrease of 76 basis points in the average yield to 5.58% during fiscal
1997 from 6.34% during fiscal 1996. A decline in the general level of interest
rates lead these assets, which are primarily adjustable rate, to reprice to
lower yields during fiscal 1997. The decline in average yields resulted in a
decline in interest income. The impact of these declines in the average yields
was offset in part by a shift in Carver's interest earning assets. The shift was
reflected in the declines in the average balances of investment securities and
mortgage-backed securities which were offset by a significant increase in the
average balance of higher yielding mortgage loans. In addition, the average
yield on mortgage loans increased slightly from 8.26% for fiscal 1996 to 8.31%
during fiscal 1997.

         INTEREST EXPENSE.

         Total interest expense decreased by $1.1 million, or 8.18%, to $12.4
million for fiscal 1997, as compared to $13.5 million for fiscal 1996. The
decrease was primarily attributable to a decrease of 88 basis points in the
average cost of borrowings during the fiscal 1997 as well as a decrease in
average balance on borrowings, of $6.8 million, or 9.29%, to $66.4 million for
fiscal 1997, as compared to $73.2 million for fiscal 1996. The interest expense
on deposits for the year ended March 31, 1997, decreased nominally by $35,000,
or 0.42%, from $8.39 million for the year ended March 31, 1996 to $8.36 million
for the year ended March 31, 1997 despite an increase in average deposits of
$8.7 million, or 3.43% to $262.0 million for fiscal year 1997, as compared to
$253.3 million for fiscal 1996. The decrease in average balance was offset by a
12 basis point decrease in the average cost of deposits, from 3.31% for the year
ended March 31, 1996 to 3.19% for fiscal year 1997. The increase in deposits
costs is due principally to a decline in the average cost of certificate of
deposit accounts in the lower interest rate environment.

         PROVISION FOR LOAN LOSSES.

         The provision for loan losses increased by $1.6 million from $131,000,
for the year ended March 31, 1996, to $1.7 million for the year ended March 31,
1997. In addition, the decision to increase the provision reflects the increase
in non-performing loans from $3.3 million at March 31, 1996 to $6.4 million at
March 31, 1997, net charge-offs of $649,000 during fiscal 1997, compared to a
net recovery of $19,000 in fiscal 1996, and the increase in the loan portfolio
to $197.8 million at March 31, 1997 from $82.6 million at March 31, 1996. The
net effect of the increased provision and the charge-offs for fiscal 1997 was an
increase in the allowance for loan losses from $1.2 million at March 31, 1996,
to $2.2 million at March 31, 1997, and equaled 1.09% of the gross loan portfolio
compared to 1.42% at March 31, 1996. The decline in the ratio of allowances to
total loans is the result of the significant increase in gross loans at March
31, 1997. In determining its provision for loan losses, management establishes
specific loss allowances on identified problem loans and general loss allowance
on the remainder of the loan portfolio.

         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 for fiscal year 1997, decreased by $495,000, or 81.44%, to
$113,000, from $608,000 for fiscal year 1996. The decrease was due to loss of
$1.0 million on the sale of Carver's mutual fund investments, as part of the
asset restructuring during fiscal 1997 substantially offset by increased loan
and fee services, charges, and other fees loan fee and service charge income
increased by $116,000 or 149.33% due a substantial increase in loan obligations.
Fee income for banking services increased by $315,000 or 59.53%, primarily due
to an increase in the fees charged for selected services and income from
automatic teller machines.


                                       10
<PAGE>

         NON-INTEREST EXPENSE.

         Non-interest expense increased by $2.7 million, or 30.37%, to $11.8
million for fiscal 1997, as compared to $9.1 million for fiscal year 1996. This
increase was primarily attributable to a one-time pre-tax assessment of $1.6
million for the recapitalization of SAIF, pursuant to the Funds Act. Excluding
the SAIF assessment, total non-interest expense would have been $10.2 million
for fiscal 1997. During the fiscal year 1997 Carver invested substantially in
improving its infrastructure. These investments encompassed upgrading
technology, increasing staff and expanding marketing efforts. These investments
increased operating expenses for the fiscal year 1997. Salaries and employee
benefits for fiscal year 1997 increased by $562,000, or 16.13%, to $4.0 million
from $3.4 million for fiscal year 1996. This increase was primarily due to a
general increase in staff, incentive compensation and ESOP expense. Equipment
expense for fiscal 1997 increased by $403,000, or 58.72%, to $1.1 million from
$686,000 in fiscal year 1996, reflecting the increased depreciation and
maintenance cost for new furniture, fixtures and computers for Carver's new
headquarters and certain branches. Net occupancy expense for fiscal year 1997
increased by $136,000, or 13.92%, to $1.1 million from $976,000 in fiscal year
1996. Increase in rent, cleaning expenses and depreciation of leasehold expenses
account for the increase in occupancy expense. These increases in non-interest
expenses were offset in part by decreased deposit insurance premiums from
$618,000 during fiscal 1996 to $482,000 for fiscal 1997. This $137,000 or 22.9%,
decrease was due to decreased assessment rates which became effective as of the
fourth quarter of fiscal 1997. See "Impact of Recent
Legislation--Recapitalization of the Savings Association Insurance Fund SAIF."
Legal expenses during fiscal year 1997, decreased by $194,000, or 55.26%, to
$157,000 from $351,000 during fiscal year 1996. The decrease in legal cost was
due mainly to capitalization of the costs incurred in connection with the
Reorganization of approximately $225,000. This amount is being depreciated on a
straight line basis over sixty months. Other non-interest expense increased
$314,000, or 16.33%, due to increases on a variety of miscellaneous expense
categories, including, among other items, travel and expense, employee training
and charitable contribution expenses.

         INCOME TAX EXPENSE.

         Income tax expense (benefit) for fiscal year 1997, was a benefit of
$1.2 million, compared to $606,000 for fiscal year 1996, due to the net loss for
fiscal 1977. The Company's effective tax rates were 42.3% and 44.59% for the
years then ended March 31, 1997 and 1996, respectively.

COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 1996 AND 1995

         The Bank's total assets decreased by $305,000, or 0.09%, from $367.9
million at March 31, 1995 to $367.6 million at March 31, 1996. The decrease in
assets was not significant. The Bank's portfolio of mortgage-backed securities
available-for-sale increased $22.0 million, or 111.1%, to $41.7 million at March
31, 1996 from $19.7 million at March 31, 1995 and its portfolio of
mortgage-backed securities held to maturity decreased $50.0 million, or 27.6%,
to $131.1 million at March 31, 1996 from $181.1 million at March 31, 1995. The
reason for change in those two portfolios was mainly due to a transfer of $25.2
million of mortgage-backed securities from the held to maturity portfolio to the
available-for-sale portfolio as allowed by FASB 115. Investment securities
held-to-maturity decreased $9.1 million, or 50.45%, to $8.9 million at March 31,
1996 from $18.0 million at March 31, 1995. This decrease in investment
securities was due to call back of bonds of $9 million. The Bank's securities
available-for-sale and held-to-maturity consisted primarily of U.S. Government
and agency securities and mutual funds invested in similar securities. The
Bank's additional mortgage-backed securities consisted entirely of securities
which meet the regulatory definition of non-high risk mortgage securities. The
Bank's loans receivable increased to $82.6 million at March 31, 1996 as compared
to $48.5 million at March 31, 1995. In fiscal year 1996 Carver Federal purchased
$26.3 million of single family loans.


                                       11
<PAGE>

         The Bank's total liabilities decreased by $268,000, or 0.08%, from
$333.2 million at March 31, 1995 to $332.8 million at March 31, 1996 as the
result of decreased borrowings offset by increased deposits. At March 31, 1996,
the Bank's FHLB advances were $25.4 million, a decrease of $37.0 million, or
59.29%, as compared to advances of $62.4 million at March 31, 1995. Securities
sold under agreements to repurchase increased $28.8 million, or 158.41%, to
$47.0 million at March 31, 1996 from $18.2 million at March 31, 1995. The Bank
used the principal payments of securities to decrease the borrowing in order to
reduce the cost of funds.

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED MARCH 31, 1996 AND 1995

         NET INCOME.

         Net income for the year ended March 31, 1996, decreased by $92,000, or
10.88%, to $753,000 from $845,000 for the year ended March 31, 1995. The decline
in net income, however, resulted primarily from an increase in non interest
expense. During fiscal year 1996, Carver Federal invested substantially in
improving the Bank's infrastructure. These investments encompassed upgrading
technology, increasing lending department staff, expanding marketing efforts,
and re-opening the Bank's headquarters which had been destroyed by fire. The
Bank also incurred increased legal cost in defending the class action suit
brought by the shareholders which was dismissed for lack of subject matter
jurisdiction, as well as higher legal costs associated with operating as a
public company.

         NET INTEREST INCOME.

         Net interest income before provision for loan losses for the year ended
March 31, 1996 increased $716,000, or 7.77%, to $9.9 million as compared to $9.2
million for the year ended March 31, 1995. The Bank's interest rate spread
narrowed from 2.74% in fiscal year 1995 to 2.57% in fiscal year 1996 and its
interest margin decreased from 2.91% in fiscal year 1995 to 2.85% in fiscal year
1996. This decrease in interest rate spread and interest margin resulted from
increased cost of deposits and borrowed money which was partially offset by an
increase in average yield on interest earning asset. The ratio of the Bank's
average interest-earning assets to interest-bearing liabilities improved to
1.07x in fiscal year 1996 from 1.05x in fiscal year 1995. The improvement in
this ratio primarily reflects an increase in stockholders' equity and
non-interest-bearing liabilities.

         INTEREST INCOME.

         The Bank's interest income for the fiscal year ended March 31, 1996
increased $3.8 million, or 19.13%, to $23.5 million as compared to $19.8 million
for the fiscal year ended March 31, 1995. The increase in interest income
resulted primarily from a 50 basis point increase in the average yield on
interest-bearing assets, from 6.23% during fiscal year 1995 to 6.73% during
fiscal year 1996. The increase in average yield reflects the higher interest
rate environment experienced during fiscal year 1996 and, to a lesser extent,
the increased percentage of interest-earning assets represented by higher
yielding loans during year.

         The increase in interest income resulted in part from a $2.1 million,
or 20.26%, increase in income from mortgage-backed securities due to increases
in the Bank's portfolio of securities held-to-maturity and securities
available-for-sale during fiscal year 1996. This increase was primarily due to
an increase of $8.2 million, or 4.54%, in the average balance of mortgage-backed
securities during fiscal year 1996 as compared to fiscal year 1995. The increase
in income from these assets was enhanced by an increase of 84 basis points in
yields to 6.49% during fiscal year 1996 from 5.65% during fiscal year 1995. The
higher average balance and higher yield in mortgage-backed securities portfolio
during fiscal year 1996 reflect the investment of funds


                                       12
<PAGE>

from deposit growth. Interest income from loans increased $708,000, or 17.30%,
to $4.8 million during fiscal year 1996 as compared $4.1 million during fiscal
year 1995. The increase in income from loans was primarily due to an increase in
average balance of $8.5 million, or 17.19%, during fiscal year 1996 as compared
to fiscal year reflecting the implementation of Carver Federal's strategy of
increasing loan originations and purchases.

         Interest income from investment securities increased $577,000, or
11.03%, to $5.8 million during fiscal year 1996 as compared to $5.2 million for
the year ended March 31, 1995. This increase in interest income is due to
increase in the average balance of investment securities of $10.2 million during
fiscal year 1996 as compared to fiscal year 1995. The average yield on
investment securities decreased by 8 basis points during fiscal year 1996 to
6.34% as compared to 6.42% during fiscal year 1995. Interest income from federal
funds sold increased $436,000, or 162.08%, to $705,000 during fiscal year 1996
as compared to $269,000 during fiscal year 1995. This increase in interest
income reflects an increase in the average balance of federal funds sold
increased $6.2 million, or 108.24% to $11.9 million during fiscal year 1996 as
compared to $5.7 million during fiscal year 1995. The increase in interest
income from federal fund sold is in part due to 121 basis points in average
yield during fiscal year 1996 as compared to fiscal year 1995.

         INTEREST EXPENSE.

         Total interest expense increased $3.1 million, 29.07%, to $13.6 million
for fiscal year 1996 as compared to $10.5 million for fiscal year 1995. The
increase was attributable to an increase in average interest-bearing liabilities
due to an increase in deposits and borrowings. The interest expense on deposits
for the year ended March 31, 1996 , increased $917,000, or 12.27%, from $7.5
million for the year ended March 31, 1995 to $8.4 million for the year ended
March 31, 1996. The increase resulted from a $5.5 million, or 2.23%, increase in
the average balance of deposits and a 29 basis point increase in the average
cost of deposits, from 3.02% for the year ended March 31, 1995 to 3.31% for
fiscal year 1996. The increase in deposits costs is due principally to an
increase in higher rate certificate accounts. Interest expense on borrowings for
the year ended March 31, 1996 increased $2.1 million, or 70.12%, from $3.1
million for the year ended March 31, 1995 to $5.2 million for the year ended
March 31, 1996. The increase resulted from a $19.0 million, or 35.09%, increase
in the average balance of borrowings, reflecting the Bank's leveraging strategy
and a 146 basis point increase in the average cost of borrowings, from 5.64% for
fiscal year 1995 to 7.10% for fiscal year 1996 due to the impact of the higher
interest rate environment experienced during the fiscal year.

         PROVISION FOR LOAN LOSSES.

         The provision for loan losses decreased by $203,000 from $334,000 for
the year ended March 31, 1995, to $131,000 for the year ended March 31, 1996.
There was no charge-off during fiscal year 1996. Recovery of charge-off amounted
to $19,000 during the same period. The charge-offs net of recoveries during
fiscal year 1995 amounted to $527,000. The net effect of provision for loan
losses and the net recovery during fiscal 1996 was an increase of the Bank's
total allowance for loan losses increased from $1.1 million at March 31, 1995 to
$1.2 million at March 31, 1996. At March 31, 1996 the allowance for loan losses
represented 1.42% of the gross loan portfolio compared to 2.1% at March 31,
1995. In determining its provision for loan losses, management establishes loss
allowances on identified problem loans and the remainder of the loan portfolio.


                                       13
<PAGE>

         NON-INTEREST INCOME.

         Non-interest income for fiscal year 1996 increased $32,000, or 5.62%,
to $608,000, from $576,000 for fiscal year 1995 due primarily to increase in
loan fees income.

         NON-INTEREST EXPENSE.

         Non-interest expense increased $1.1 million, or 14.00%, to $9.1 million
for fiscal year 1996 as compared to $7.9 million for fiscal year 1995. During
fiscal year 1996 the Bank invested substantially in improving its
infrastructure. These investments encompassed upgrading technology, increasing
management and lending department staff, expanding marketing efforts, and
re-opening the Bank's headquarters which had been destroyed by fire. These
investments increased operating expenses for the fiscal year 1996. Salaries and
employee benefits for fiscal year 1996 increased $408,000, or 13.26%, to $3.5
million from $3.1 million for fiscal year 1995. This increase was due to
increase in management and lending department staff, incentive compensation and
ESOP expenses. Net occupancy expense for fiscal year 1996 increased $123,000, or
14.39%, to $978,000 from $853,000 in fiscal year 1995. Increases in rent,
cleaning expense and the opening of the Bank's new headquarters account for the
increase in occupancy expense. Advertising expense for fiscal year 1996
increased $105,000, or 164.56%, to $168,000 from $64,000 in fiscal year 1995.
Carver Federal retained during the fiscal year 1996 the services of a marketing
company to expand marketing effort in order to increase origination of loans and
deposits for the branches. FDIC insurance premium expense decreased $113,000, or
15.45%, to $618,000 during fiscal year 1996 as compared to $731,000 during
fiscal year 1995 due to lower premium rate. Legal expenses during fiscal year
1996 increased $227,000, or 183.35%, to $351,000 from $124,000 during fiscal
year 1995. The increase in legal expenses was due mainly to defending the class
action law suit brought by certain shareholders as well as higher legal costs
associated with operating as a public company. On January 2, 1996, the United
States District Court for Southern District of New York dismissed the class
action suit for lack of subject matter jurisdiction. The plaintiffs have filed
notice in United States Court of Appeals for second circuit of their intent to
appeal. Other non-interest expense (not including legal expenses) increased
$488,000, or 34.01%, due to increases on a variety of miscellaneous expense
categories.

         INCOME TAX EXPENSE.

         Income tax expense for fiscal year 1996 decreased to $606,000 compared
to $674,000 for fiscal year 1995, because of lower earnings. The Bank's
effective tax rate remains the same for fiscal year 1995.

LIQUIDITY AND CAPITAL RESOURCES

         Carver Federal's primary sources of funds are deposits, FHLB advances,
and proceeds from principal and interest payments on loans, 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.

         The Bank is required to maintain an average daily balance of liquid
assets and short term liquid assets as a percentage of net withdrawable deposit
accounts plus short-term borrowings as defined by OTS regulation. The minimum
required liquidity and short-term liquidity ratios are currently 5% and 1%,
respectively. The Bank's liquidity ratios were 21.86% and 33.00% at March 31,
1997 and 1996, respectively.

         The Bank's most liquid assets are cash and short-term investments
including mutual funds. The level of these assets are dependent on the Bank's
operating, financing lending and investing activities during any


                                       14
<PAGE>

given period. At March 31,1997, and 1996, assets qualifying for short-term
liquidity, including cash and short-term investments, totaled $83.2 million and
$85.8 million, respectively.

         The primary investment activity of the Bank is the origination and
purchase of loans and, to a lesser extent, purchase of investment and
mortgage-backed securities. During fiscal year 1997, Carver purchased $84.7
million in whole loan mortgages, $57.5 million in investment securities and
mortgage-backed securities, and sold $83.3 million in investment securities and
mortgage-backed securities. During fiscal year 1996 the Bank purchased $26.3
million of whole loan mortgages and originated $13.4 million mortgage and other
loans. During fiscal year 1996 no securities were purchased. During fiscal years
1997 and 1996, the Bank received $38.3 million and $27.5 million, respectively,
in principal payments. During fiscal year 1997 there was a cash flow of $7
million due to call back of government agency bonds.

         At March 31, 1997, the Bank had outstanding loan commitments of $13.4
million. Certificates of deposit which are scheduled to mature in one year or
less from March 31, 1997 totaled $48.6 million. Management believes that a
significant percentage of such deposits will remain with the Bank.

REGULATORY CAPITAL POSITION

         The Bank must satisfy three capital standards as set by the OTS. These
standards include a ratio of core capital to adjusted total assets of 3.0%, a
tangible capital standard expressed as 1.5% of total adjusted assets, and a
combination of a core and "supplementary" capital equal to 8.0% of risk-weighted
assets. The risk-based capital standard currently addresses only the credit risk
inherent in the assets in a thrift's portfolio: it does not address other risks
that thrifts face, such as operating, liquidity and interest-rate risks. The OTS
recently finalized regulations that add interest rate risk component to capital
requirements under certain circumstances. The Bank does not expect that this
regulation will require it to reduce its capital for purposes of determining
compliance with its risk-based capital requirement. In addition, the OTS has
recently adopted regulations that impose certain restrictions on savings
associations that have a total risk-based capital ratio that is less than 8%, a
ratio of Tier 1 capital (or core capital) to risk-weighted assets of less 4% or
a ratio of Tier 1 capital to adjusted total assets of less than 4% (or 3% if the
institution receives the highest rating under the OTS examination rating
system).

         The Bank presently exceeds all capital requirements as currently
promulgated. At March 31, 1997, the Bank had tangible, core, and Tier 1 to
risk-weighted assets, and risk-based capital ratios of 6.95%, 7.18%, 6.97% and
17.94% respectively.


                                       15
<PAGE>

         The following table reconciles the Bank's stockholders equity at March
31, 1997, under generally accepted accounting principles to regulatory capital
requirements:


<TABLE>
<CAPTION>
                                                                               REGULATORY CAPITAL REQUIREMENTS
                                                                               -------------------------------
                                                                 GAAP            TANGIBLE          TIER/CORE        RISK-BASED
                                                                CAPITAL           CAPITAL           CAPITAL           CAPITAL
                                                                -------           -------           -------           -------
                                                                               (IN THOUSANDS)

<S>                                                          <C>               <C>              <C>                <C>
Stockholders' Equity at March 31, 1997 (1)                   $       30,050    $       30,050   $       30,050     $       30,050
                                                             ==============    ==============   ==============     ==============
Add:
Unrealized loss on securities available for sale, net                                     443              443                443
General valuation allowances                                                                0                0              1,426
Qualifying intangible assets                                                                0               52                 52
Deduct:                                                                                (1,404)          (1,404)            (1,404)
Goodwill                                                                                                                        0
   Excess of net deferred tax assets                                                        0                0
Asset required to be deducted                                                                              (40)               (40)
                                                                               --------------   --------------     --------------
Regulatory capital                                                                     29,089           29,141             30,527
Minimum capital requirement                                                             6,277           12,555             15,260
                                                                               --------------   --------------     --------------
Regulatory capital excess                                                      $       22,812   $      16,586      $       15,267
                                                                                =============   ==============     ==============
</TABLE>

--------------------------------------------
(1)      Reflects Bank only.

         The Bank presently exceeds all capital requirements as currently
promulgated. At March 31, 1997, the Bank had tangible, core, and Tier 1 to
risk-weighted assets, and risk-based capital ratios of 6.95%, 7.18%, 6.97% and
17.94%, respectively.

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 Company 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.

IMPACT OF RECENT LEGISLATION

         SAIF RECAPITALIZATION. For the period from January 1, through September
30, 1996, there existed a disparity of 23 cents per $100 of deposits in the
minimum deposit insurance assessment rates applicable to deposits insured by the
Bank Insurance Fund ("BIF") and the higher assessment rates applicable to
deposits insured by the Savings Association Insurance Fund ("SAIF"). In response
to this disparity, on September 30, 1996 the Deposit Insurance Funds Act of 1996
(the "Funds Act") was enacted into law. The Funds Act authorized the Federal
Deposit Insurance Corporation ("FDIC") to impose a special assessment on all
financial institutions with SAIF-assessable deposits in the amount necessary to
recapitalize the SAIF. Pursuant to such authority, the FDIC imposed a special
assessment of 65.7 basis points per $100 of an institution's SAIFassessable
deposits held on March 31, 1995. The Company's special SAIF assessment of $1.6
million was charged to expense in September 1996 and paid in November 1996. In
view of the recapitalization of the SAIF, the FDIC reduced the assessment rates
for SAIF-assessable deposits. For the calendar year 1997, the SAIF assessment
rates range from 0 to 27 basis points, which is the same range of rates
applicable to the BIF. Prior to the SAIF recapitalization, all SAIF-insured
institutions were subject to a minimum assessment of 23 basis


                                       16
<PAGE>

points. The Funds Act also expanded the assessment base to include BIF-insured,
as well as SAIF-insured, institutions to fund payments on the bonds issued by
the Financing Corporation ("FICO bonds") to recapitalize the now defunct Federal
Savings and Loan Insurance Corporation. In order to fund such interest payments,
a separate assessment of 1.3 basis points for BIF-assessable deposits and 6.48
basis points for SAIF-assessable deposits became effective on January 1, 1997.
The Funds Act requires that, until December 31, 1999 or such earlier date on
which the last savings association ceases to exist, the rates of assessment for
FICO bond payments imposed on BIF-assessable deposits will be one-fifth of the
rate imposed on SAIF-assessable deposits. As a result of the lower overall
assessment rates, the Company's non-interest expense for the year justify months
ended March 31, 1997 was reduced by $137,000 compared to the same period in
1996.

         The Funds Act also provides for the merger of the BIF and SAIF on
January 1, 1999, with such merger being conditioned upon the prior elimination
of the thrift charter. The Funds Act required the Secretary of Treasury to
conduct a study of relevant factors with respect to the development of a common
charter for all insured depository institutions and the abolition of separate
charters for banks and thrifts and to report the Secretary's conclusions and the
findings to Congress. The Secretary of the Treasury has recommended that the
separate charter for thrifts be eliminated only if other legislation is adopted
that permits bank holding companies to engage in certain non-financial
activities. Absent legislation permitting such non-financial activity, the
Secretary of the Treasury recommended retention of the thrift charter. Other
proposed legislation has been introduced in Congress that would require thrift
institutions to convert to bank charters. The Secretary of the Treasury also
recommended that the BIF and the SAIF be merged irrespective of the elimination
of the thrift charter.

         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 for tax years after 1995 and to require thrifts to recapture into
taxable income (over a six-year period) all bad debt reserves accumulated after
1987. Since the Bank's federal bad debt reserves approximated the 1987 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 provide for future additions to each of the base-year
reserve 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 and New York City state 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 1996, the FASB issued SFAS No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities," which
provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities. SFAS No. 125 provides
consistent standards for distinguishing transfers of financial assets that are
sales from transactions that are secured borrowings. SFAS No. 125 is effective
for transfers occurring after December 31, 1996. In December 1996, the FASB
issued SFAS No. 127, "Deferral of the Effective Date of Certain Provisions of
FASB State No. 125, an Amendment of FASB Statement No. 125." In February 1997,
the FASB issued SFAS No. 128, "Earnings per Share," which


                                       17
<PAGE>

provides for the computation, presentation and disclosure requirements for
earnings per share. SFAS No. 128 simplifies the computation of earnings per
share for common stock and potential common stock. The adoption of SFAS Nos.
125, 127 and 128 is not expected to have a material effect on Carver Bancorp's
future financial condition, results of operations or reported results of
operations.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.


                                       18
<PAGE>

                       Letterhead of Mitchell & Titus 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., (the "Company") and subsidiaries as of March 31, 1997
and 1996 and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the years ended March 31, 1997 and 1996.
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 audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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 audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to in the second
preceding paragraph present fairly, in all material respects, the financial
position of Carver Bancorp and Subsidiaries as of March 31, 1997 and 1996, and
the results of their operations and cash flows for the years ended March 31,
1997 and 1996, in conformity with generally accepted accounting principles.


/s/ Mitchell & Titus LLP



May 30, 1997
New York,  New York.


                                       19
<PAGE>

                         Letterhead of Radics & Co., LLC

INDEPENDENT AUDITORS' REPORT




To the Board of Directors
and Stockholders

Carver Federal Savings Bank

We have audited the accompanying consolidated statements of income, changes in
stockholders' equity and cash flows of Carver Federal Savings Bank (the "Bank")
and subsidiary for the year ended March 31, 1995. These consolidated financial
statements are the responsibility of the Bank'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 generally accepted auditing standards.
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 in the second
preceding paragraph, present fairly, in all material respects, the results of
operations and cash flows of Carver Federal Savings Bank and subsidiaries for
the year ended March 31, 1995, in conformity with generally accepted accounting
principles.

                                          /s/ Radics & Co., LLC
                                          (formerly Stephen P. Radics & Co.)



May 12, 1995
Pine Brook, New Jersey


                                       20
<PAGE>

                                       CARVER BANCORP INC. AND SUBSIDIARIES


<TABLE>
                                                CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

<CAPTION>
                                                                                             AS OF                 AS OF
                                                                                        MARCH 31, 1997        MARCH 31, 1996
                                                                                        --------------        --------------

<S>                                                                                    <C>                   <C>            
ASSETS
Cash and amounts due from depository institutions                                      $     4,230,757       $     3,225,950
Federal funds sold                                                                                  --             6,800,000
                                                                                       ---------------       ---------------
Total cash and cash equivalents (Notes 1 and 19)                                             4,230,757            10,025,950
Securities available for sale (Notes 1, 3, 13 and 19)                                       83,892,617           114,328,245
Investment securities held to maturity, net (estimated fair value of $1,673,000 in 1997
   and $8,814,000 in 1996) (Notes 1, 4, 13, 18 and 19)                                       1,675,181             8,937,075
Mortgage-backed securities held to maturity, net (estimated fair value of $107,719,000 in
  1997 and $129,813,000 in 1996) (Notes 1, 5, 12, 13, 18 and 19)                           110,852,668           131,105,405
Loans receivable, net (Notes 1, 6, 13 and 19)                                              197,917,673            82,608,065
Real estate owned, net (Note 1)                                                                 82,198               314,261
Property and equipment, net (Notes 1 and 8)                                                 11,342,678             9,956,981
Federal Home Loan Bank of New York stock, at cost (Note 13)                                  5,535,000             3,120,000
Accrued interest receivable, net (Notes 1, 9 and 19)                                         2,978,365             2,688,199
Excess of cost over net assets acquired, net (Notes 1 and 10)                                1,456,000             1,669,082
Other assets (Notes 14 and 16)                                                               3,650,366             2,904,078
                                                                                       ---------------       ---------------
    Total assets                                                                       $   423,613,503       $   367,657,341
                                                                                       ===============       ===============

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits (Notes 11 and 19)                                                             $   266,471,487       $   256,951,883
Securities sold under agreements to repurchase (Notes 12 and 19)                            74,335,000            47,000,000
Advances from Federal Home Loan Bank of New York (Notes 13 and 19)                          45,400,000            25,400,000
Other borrowed money (Notes 17 and 19)                                                       1,365,990             1,548,122
Advance payments by borrowers for taxes and insurance                                          670,502               483,055
Other liabilities (Notes 14 and 16)                                                          1,386,802             1,509,500
                                                                                       ---------------       ---------------
    Total liabilities                                                                      389,629,781           332,892,560
                                                                                       ---------------       ---------------

Commitments and contingencies (Notes 18 and 19)                                                                           --

STOCKHOLDERS' EQUITY:  (Note 15)
Preferred stock, $0.01 par value per share; 1,000,000 authorized;  none issued                                            --
Common stock; $0.01 par value per share; 5,000,000 authorized; 2,314,275
issued and outstanding (Note 2)                                                                 23,144                23,144
Additional paid-in capital (Note 2)                                                         21,410,167            21,436,235
Retained earnings - substantially restricted (Notes 2 and 14)                               14,359,060            16,098,728
Common stock acquired by Employee Stock Ownership Plan ("ESOP") (Notes 2 and 17)            (1,365,990)           (1,548,122)
Unrealized (loss) on securities available for sale, net                                       (442,659)           (1,245,204)
                                                                                       ---------------       ---------------
    Total stockholders' equity                                                              33,983,722            34,764,781
                                                                                       ---------------       ---------------
    Total liabilities and stockholders' equity                                         $   423,613,503       $   367,657,341
                                                                                       ===============       ===============
</TABLE>




                 See Notes to Consolidated Financial Statements


                                       21
<PAGE>

                                       CARVER BANCORP INC. AND SUBSIDIARIES


<TABLE>
                                                CONSOLIDATED STATEMENTS OF INCOME

<CAPTION>
                                                                                     YEAR ENDED MARCH 31,
                                                                      1997                   1996                   1995
                                                             ----------------------  --------------------  -------------
<S>                                                               <C>                     <C>                   <C>       
INTEREST INCOME:
Loans (Note 1)                                                    $7,843,822              $4,800,482            $4,092,330
Mortgage-backed securities                                         9,978,660              12,217,281            10,158,697
Debt and equity securities                                         4,416,362               5,415,806             4,983,129
Other interest-earning assets                                        607,903               1,095,336               516,045
                                                                  ----------              ----------            ----------
Total interest income                                             22,846,747              23,528,905            19,750,201
                                                                  ----------              ----------            ----------

Interest expense:
Deposits (Note 11)                                                 8,355,168               8,390,201             7,472,812
Advances and other borrowed money                                  4,127,743               5,204,068             3,058,828
                                                                  ----------              ----------            ----------
Total interest expense                                            12,482,911              13,594,269            10,531,640
                                                                  ----------              ----------            ----------

Net interest income                                               10,363,836               9,934,636             9,218,561
Provision for loan losses (Notes 1 and 6)                          1,689,508                 130,892               333,697
                                                                  ----------              ----------            ----------

Net interest income after provision for loan losses                8,674,328               9,803,744             8,884,864
                                                                  ----------              ----------            ----------
Non-interest income:
Loan fees and service charges                                        194,689                  78,084               121,569
Write-down of investment securities                                       --                      --               (37,139)
Gain (Loss) on sale of securities held for sale (Notes 4 and 5)     (927,093)                     --                   --
Other                                                                845,287                 529,873               491,157
                                                                  ----------              ----------            ----------
Total non-interest income                                            112,883                 607,957               575,587
                                                                  ----------              ----------            ----------

Non-interest expenses:
Salaries and employee benefits (Notes 16 and 17)                   4,044,718               3,482,928             3,075,041
Net occupancy expense (Notes 1 and 18)                             1,111,602                 975,795               853,025
Equipment (Note 1)                                                 1,088,258                 685,657               707,057
Loss on foreclosed real estate (Note 1)                               37,995                  76,582                34,008
Advertising                                                          172,795                 168,084                63,534
Federal insurance premium                                            481,646                 618,169               731,141
Amortization of intangibles (Note 1)                                 213,073                 229,898               241,915
Legal expenses                                                       157,023                 350,921                     *
Bank charges                                                         341,272                 308,391               239,207
Security Service                                                     286,036                 234,856               182,907
SAIF assessment                                                    1,632,290                      --                    --
Provision for loss on other assets                                        --                      --               255,580
Other                                                              2,235,249               1,921,462             1,557,687
                                                                  ----------              ----------            ----------
  Total non-interest expenses                                     11,801,957               9,052,743             7,941,102
                                                                  ----------              ----------            ----------

Income (loss) before income taxes                                 (3,014,746)              1,358,958             1,519,349
Income taxes (Notes 1 and 14)                                     (1,275,078)                605,874               674,297
                                                                  ----------              ----------            ----------
Net income (loss)                                                $(1,739,668)             $  753,084            $  845,052
                                                                 ===========              ==========            ==========
Net income (loss) per common share                               $     (0.80)             $     0.35            $     0.40(1)
                                                                 ===========              ==========            ==========
Weighted average number of shares outstanding (Note 1)             2,169,276               2,156,346             2,136,615
</TABLE>

--------------------------------------------

(1)      Carver Federal Savings Bank converted to stock form on October 24,
         1994. Historical net income per common share from October 24, 1994
         (date of the Bank's stock conversion) to March 31, 1995 was $0.17.
 *       In year ended March 31, 1995, legal expenses included in the "Other"
         Category.


                 See Notes to Consolidated Financial Statements


                                       22
<PAGE>

                                       CARVER BANCORP INC. AND SUBSIDIARIES

<TABLE>
                            CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY


<CAPTION>
                                                                               RETAINED             COMMON            (LOSS) ON
                                                            ADDITIONAL         EARNINGS              STOCK           SECURITIES
                                            COMMON            PAID-IN        SUBSTANTIALLY         ACQUIRED           AVAILABLE
                                             STOCK            CAPITAL         RESTRICTED            BY ESOP         FOR SALE NET    
                                             -----            -------         ----------            -------         ------------    

<S>                                    <C>               <C>              <C>                 <C>                <C>                
Balance - March 31, 1994               $         --      $         --     $ 14,500,592        $         --       $   (330,765)      
Net income for the year ended
  March 31, 1995                                 --                --          845,052                  --                 --       
Net proceeds from common stock
  issued in stock conversion                 23,144        21,495,847               --                  --                 --       
Acquisition of common stock by
  ESOP                                           --                --               --          (1,821,320)                --       
Allocation of ESOP stock                         --           (30,775)              --             91,066                  --       
Decrease in unrealized (loss) on
  securities available for sale, net             --                --               --                  --             28,320       
                                       ------------      ------------     ------------        ------------       ------------       
Balance - March 31, 1995                     23,144        21,465,072       15,345,644          (1,730,254)          (302,455)      
Net income for the year ended                    --                --          753,084                  --                 --       
  March 31, 1996
Allocation of ESOP stock                         --           (28,837)              --            182,132                  --       
Increase in unrealized (loss) in
  securities available for sale, net             --                --               --                  --           (942,759)     
                                       ------------      ------------     ------------        ------------       ------------      
Balance - March 31, 1996                     23,144        21,436,235       16,098,728          (1,548,122)        (1,245,204)      
Net loss for the year ended
  March 31, 1997                                 --                --       (1,739,668)                 --                 --       

Allocation of ESOP Stock                         --           (26,068)              --             182,132                 --       
Decrease in unrealized, loss in
  securities available for sale, net             --                --               --                  --            802,545       
                                       ------------      ------------     ------------        ------------       ------------       
                                       $     23,144      $ 21,410,167     $ 14,359,060        $ (1,365,990)      $   (442,659)      
                                       ============      ============     ============        =============      =============      


<CAPTION>                              
                                       
                                       
                                       
                                              TOTAL     
                                              -----     
                                                        
<S>                                     <C>             
Balance - March 31, 1994                $ 14,169,827    
Net income for the year ended                           
  March 31, 1995                             845,052    
Net proceeds from common stock                          
  issued in stock conversion             21,518,991     
Acquisition of common stock by                          
  ESOP                                    (1,821,320)   
Allocation of ESOP stock                      60,291    
Decrease in unrealized (loss) on
  securities available for sale, net          28,320     
                                        ------------     
Balance - March 31, 1995                  34,801,161    
Net income for the year ended                753,084    
  March 31, 1996                                        
Allocation of ESOP stock                     153,295    
Increase in unrealized (loss) in
  securities available for sale, net        (942,759)                       
                                        ------------    
Balance - March 31, 1996                  34,764,781    
Net loss for the year ended                             
  March 31, 1997                          (1,739,668)   
                                                        
Allocation of ESOP Stock                     156,064    
Decrease in unrealized, loss in                         
  securities available for sale, net         802,545    
                                        ------------    
                                        $ 33,983,722    
                                        ============    
</TABLE>









                 See Notes to Consolidated Financial Statements


                                       23
<PAGE>

                                       CARVER BANCORP INC. AND SUBSIDIARIES

<TABLE>
                                                CONSOLIDATED STATEMENTS OF CASH FLOWS


                              YEAR ENDED MARCH 31,
                                                                                   1997            1996             1995
                                                                               ------------    ------------    -------------
<S>                                                                            <C>             <C>             <C>         
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income ..........................................................   $ (1,739,668)   $    753,084    $    845,052
Adjustments to reconcile net (loss) income
 to net cash provided by operating activities:
Depreciation and amortization of premises and equipment ....................        664,750         301,918         222,699
Amortization of intangibles ................................................        213,082         229,888         241,915
Other amortization and accretion, net ......................................      1,143,308         651,014       1,130,807
Provision for loan losses ..................................................      1,689,508         130,892         333,697
Provision for losses on other assets .......................................             --              --         255,580
Gain from sale of real estate owned ........................................        (26,229)             --              --
Proceeds from sale of loans ................................................             --       1,948,143       3,940,215
Net loss on sale of securities available for sale ..........................        927,093              --              --
Write-down of equity security ..............................................             --              --          37,139
Deferred income taxes ......................................................       (387,456)       (380,541)        (75,869)
Allocation of ESOP stock ...................................................        156,064         153,295          60,291
(Increase) decrease in accrued interest receivable .........................       (290,166)         19,310        (549,524)
Decrease (increase) in refundable income taxes .............................       (286,000)        238,157         651,369
(Increase) decrease in other assets ........................................     (1,493,435)        (72,455)     (1,606,419)
Increase (decrease) in other liabilities ...................................       (510,154)        731,784         234,420
                                                                               ------------    ------------    ------------
Net cash provided by operating activities ..................................         60,697       4,704,489       5,721,372
                                                                               ------------    ------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal repayments on investments held to maturity .......................        311,894          96,335              --
Principal repayments on securities available for sale ......................      5,357,790       2,965,441       1,133,751
Purchases of securities available for sale .................................    (57,508,308)             --     (23,022,923)
Proceeds from sales and call of securities held for sale ...................     84,052,091       9,000,000              --
Purchase of investment securities held to maturity .........................        (50,000)             --      (9,011,875)
Proceeds from maturities and calls of investment securities held to maturity      7,000,000                       2,971,005
Principal repayment of mortgage-backed securities held to maturity .........     19,302,028      23,663,432      22,254,234
Purchase of  mortgage-backed securities held to maturity ...................             --              --     (50,436,456)
Purchase of loans ..........................................................    (84,708,587)    (26,911,379)             --
Net change in loans receivable .............................................    (32,265,562)     (9,357,887)     (2,031,338)
Proceeds from sale of real estate owned ....................................        258,292              --         139,614
Additions to premises and equipment ........................................     (2,050,447)     (5,930,518)     (1,594,145)
(Purchase) Federal Home Loan Bank  stock ...................................     (2,415,000)             --      (1,287,100)
                                                                               ------------    ------------    ------------
Net cash (used in) provided by investing activities ........................    (62,715,809)     (6,474,576)    (60,885,233)
                                                                                               ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits ........................................      9,519,604       8,505,919      (4,027,784)
Net increase (decrease) in short-term borrowings ...........................     58,335,000     (19,188,000)     41,658,000
Proceeds of  long-term borrowings ..........................................             --      11,000,000      20,821,320
Repayment of long-term borrowings ..........................................    (11,000,000)             --     (20,091,066)
Repayment of other borrowed money ..........................................       (182,132)             --              --
Net proceeds from issuance of common stock .................................             --              --      21,518,991
Acquisition of common stock by ESOP ........................................             --              --      (1,821,320)
Increase (Decrease) in advance payments by borrowers for taxes and insurance        187,447        (339,687)       (129,938)
                                                                               ------------    ------------    ------------
Net cash provided by (used in) financing activities ........................     56,859,919         (21,768)     57,928,203
                                                                               ------------    ------------    ------------
Net increase (decrease) in cash and cash equivalents .......................     (5,795,193)     (1,791,855)      2,764,342
Cash and cash equivalents - beginning ......................................     10,025,950      11,817,805       9,053,463
                                                                               ------------    ------------    ============
Cash and cash equivalents  -- ending .......................................   $  4,230,757    $ 10,025,950    $ 11,817,805
                                                                               ============    ============    ============
Supplemental disclosure of non-cash activities:
Transfers of  mortgage-backed securities ...................................    $        --      25,891,771     $        --
                                                                                               ============
Unrealized Gain (loss) on securities available for sale:
Unrealized Gain (loss) .....................................................        835,206      (1,778,783)         53,435
Deferred income taxes ......................................................       (397,547)        836,033         (25,115)
                                                                                               ------------    ------------
                                                                               $    442,659    $   (942,760)   $     28,320
                                                                               ============    ============    ============
Loans receivable transferred to real estate owned ..........................   $     32,729          $   --    $    252,292
                                                                               ============    ------------    ============
Supplemental disclosure of cash flow information:
Cash paid for:
Interest ...................................................................   $ 12,361,162    $ 13,344,140    $ 10,342,385
                                                                               ============    ============    ============
Federal, state and city income taxes .......................................   $    286,000    $    449,197    $     98,795
                                                                               ============    ============    ============
</TABLE>


                 See Notes to Consolidated Financial Statements


                                       24
<PAGE>


                      CARVER BANCORP INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

         NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BACKGROUND

         Carver Bancorp, Inc. ("Carver" or the "Holding Company") is a bank
holding company that was incorporated in May 1996 and whose principal wholly
owned subsidiary is Carver Federal Savings Bank (the "Bank"). CFSB Realty Corp.
and CFSB Credit Corp. are wholly owned 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, Carver Federal Savings Bank converted from mutual
stock form and issued 2,314,375 shares of its common stock, par value $0.01 per
share. In connection with an agreement and plan of reorganization whereby the
Bank would become a wholly owned subsidiary of Carver, the Bank incorporated
Carver on May 9, 1996 under the General Corporation Law of the State of
Delaware. Pursuant to the Reorganization, each outstanding share of the
outstanding common stock of the Bank was converted on a one-to-one basis for
Carver's common stock, except for 100 shares with regard to which a stockholder
of the Bank exercised dissenters' rights of appraisal. Accordingly, 2,314,275
shares of Carver's common stock are presently issued and outstanding.

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 federal savings
banks. Carver's banking subsidiary has seven branches located throughout the
City of New York that primarily serves the communities in which they operate.

BASIS OF CONSOLIDATED FINANCIAL STATEMENT PRESENTATION

         The consolidated financial statements include the accounts of Carver,
the Bank and its wholly owned subsidiaries, CFSB Realty Corp. and CFSB Credit
Corp. All significant intercompany accounts and transactions have been
eliminated in consolidation.

         The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles. 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. Actual results could differ significantly from those
estimates. Material 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.

         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 Carver's market area.

         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


                                       25

<PAGE>


                      CARVER BANCORP INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

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

         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 reporting entity has a positive intent and ability to hold those
securities to maturity. If not classified as held to maturity, such securities
must be classified as securities available for sale. 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 retained
earnings.

         On February 17, 1994, the Bank entered into a four-year interest rate
protection agreement for a notional amount of $20,000,000 as a hedge against
possible losses in the securities available for sale portfolio. The interest
rate protection agreement, which is in effect until January 10, 1998, is indexed
to the three-month LIBOR with a strike rate of 5.5%. The $410,000 paid for the
contract is treated as a premium and is included in the investment securities
available for sale portfolio. The premium is amortized over the term of the
contract on the straight-line basis. Contractual payments earned, which totaled
$102,500 for the year ended March 31, 1997, are treated as yield adjustments on
the hedged securities. At March 31, 1997, the three-month LIBOR stood at
5.77344%.

         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 on the specific identification method.

LOANS RECEIVABLE

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

         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 by use of the interest method. Premiums and discounts
on loans purchased are amortized and accreted, respectively, as an adjustment of
yield over the contractual lives of the related loans by use of the interest
method.

         Loans are placed on non-accrual status when they are past due three
months or more as to contractual obligations. When a loan is placed on
non-accrual status, any interest accrued but not received is reversed against
interest income. A non-accrual loan is restored to accrual status when principal
and interest payments become less than three months past due.


                                       26

<PAGE>


                      CARVER BANCORP INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

         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 the adequacy of the reserve for credit losses. Impairment reserves
are not needed when interest payments have been applied to reduce principal, or
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 absorb future 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

         Real estate and lending activities are concentrated in real estate and
loans secured by real estate a substantial portion of which is located in the
State of New York.



                                       27

<PAGE>


                      CARVER BANCORP INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

PREMISES AND EQUIPMENT

         Premises and equipment are comprised of land and construction in
progress, 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 50 years
               Furnishings and equipment     3 to 10 years
               Leasehold improvements        The lesser of useful life or 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 lower of cost or fair value at the date of acquisition and
thereafter carried at the lower of cost or fair value less estimated selling
costs. The amounts ultimately recoverable from real estate owned could differ
from the net carrying value of these properties because of economic conditions
and the current softness in the local real estate market.

         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. Gain or loss 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.

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 loans secured by real estate and 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

         Federal, state and city income taxes have been provided on the basis of
reported income. The amounts reflected on the tax returns differ from these
provisions due principally to temporary differences in the treatment of certain
items of income and expense for financial statement and income tax reporting
purposes.



                                       28

<PAGE>


                      CARVER BANCORP INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

         Deferred income taxes in the consolidated statement of condition are
adjusted each year to reflect the cumulative taxable and deductible temporary
differences and net operating loss and tax credit carryforwards at the then
existing income tax rates.

NET INCOME PER COMMON SHARE

         Net income per common share for the years ended March 31, 1997 and 1996
is based on net income for the entire year dividend by weighted average shares
outstanding during the year. However, the pro forma net income per share for the
fiscal year ended March 31, 1995 is based on net income for the entire year, as
if the Bank had converted to stock form (see Note 2) on the first day of the
fiscal year, and the weighted average number of common shares outstanding during
the year. Historical net income per share is calculated based on prorated
earnings for October 24, 1994 (the date of the Bank's conversion) to March 31,
1995. For the purpose of these calculations, unreleased ESOP shares are not
considered to be outstanding.

NOTE 2.  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 and in
order to grant priority to eligible depositors, 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 $5,763,000, and $6,800,000 at March 31, 1997 and 1996,
respectively. On October 17, 1996, the Bank completed a reorganization into a
holding company structure (the "Reorganization) and became the wholly-owned
subsidiary of Carver Bancorp., Inc., a savings and loan 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 common stock were purchased 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.


                                       29

<PAGE>


                      CARVER BANCORP INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

NOTE 3.  SECURITIES AVAILABLE FOR SALE


<TABLE>
<CAPTION>
                                                                                   March 31, 1997
                                                ----------------------------------------------------------------------------------
                                                    Carrying                      Gross Unrealized                    Estimated
                                                      Value                Gains                  Losses              Fair Value
                                                ---------------       ---------------        ---------------       ---------------
                                                                                             

<S>                                             <C>                   <C>                    <C>                   <C>            
Mortgage-backed securities                      $    33,469,963       $            --        $       845,206       $    32,624,757
Equity securities:
  Mutual funds                                       49,108,306                    --                     --            49,108,306
  Common and preferred stock                          2,049,898                    --                     --             2,049,898
  Interest rate agreement for a notional
      amount of $5,000,000                               29,750                    --                     --                29,750
  Interest rate agreement for a notional
      amount of $20,000,000                              79,906                    --                     --                79,906
                                                ---------------       ---------------        ---------------       ---------------
                                                $    84,737,823       $            --        $       845,206       $    83,892,617
                                                ===============       ===============        ===============       ===============
</TABLE>



<TABLE>
<CAPTION>
                                                                                   March 31, 1996
                                                ----------------------------------------------------------------------------------
                                                    Carrying                      Gross Unrealized                    Estimated
                                                      Value                Gains                  Losses              Fair Value
                                                ---------------       ---------------        ---------------       ---------------

<S>                                             <C>                   <C>                    <C>                   <C>            
Mortgage--backed securities                     $    42,520,115       $            --        $       612,117       $    41,907,998
Equity securities:                                           --                    --                     --                    --
Mutual funds                                         71,935,268                    --              1,427,439            70,507,829
Common and preferred stock                            2,039,898                50,400                     --             2,090,298
Interest rate agreement for a notional
amount of $20,000,000                                   182,406                    --                360,286              (177,880)
                                                ---------------       ---------------        ---------------       --------------- 
                                                $   116,677,687       $        50,400        $     2,399,842       $   114,328,245
                                                ===============       ===============        ===============       ===============
</TABLE>


NOTE 4.  INVESTMENT SECURITIES HELD TO MATURITY, NET


<TABLE>
<CAPTION>
                                                                                    March 31, 1997
                                                ---------------------------------------------------------------------------------
                                                    Carrying                      Gross Unrealized                   Estimated
                                                      Value                Gains                  Losses             Fair Value
                                                --------------        --------------         --------------        --------------


<S>                                             <C>                   <C>                    <C>                   <C>          
U.S. Government (including agencies):
After one year through five years               $  1,675, 181         $          --          $       2,094         $   1,673,087
                                                =============         =============          =============         =============
</TABLE>


<TABLE>
<CAPTION>
                                                                                    March 31, 1996
                                                ---------------------------------------------------------------------------------
                                                    Carrying                      Gross Unrealized                    Estimated
                                                      Value                Gains                  Losses              Fair Value
                                                --------------        --------------         --------------        --------------


<S>                                             <C>                   <C>                    <C>                   <C>          
U.S. Government (including agencies):
After one year through five years               $   8,937,075         $          --          $     123,277         $   8,813,798
                                                =============         =============          =============         =============
</TABLE>



                                       30

<PAGE>


                      CARVER BANCORP INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS


         There were no sales of securities held to maturity during the years
ended March 31,1997, 1996 and 1995. Proceeds from calls of investment securities
held to maturity during the years ended March 31, 1997, 1996 and 1995 were
$7,000,000, $9,000,000 and $2,971,000, respectively. No gains or losses were
realized on these calls.

         Proceeds from sales of investment securities held for sale during the
year ended March 31, 1997 were $83,265,000, resulting in gross gains of $75,000
and gross losses of $1,002,000. There were no sales of investment securities
held for sale during the years ended March 31, 1996 and 1995.

NOTE 5.  MORTGAGE-BACKED SECURITIES HELD TO MATURITY, NET


<TABLE>
<CAPTION>
                                                                                       March 31, 1997
                                               ----------------------------------------------------------------------------------
                                                   Principal            Unamortized             Unearned               Carrying
                                                    Balance              Premiums               Discounts                Value
                                                    -------              --------               ---------                -----

<S>                                            <C>                   <C>                    <C>                   <C>            
Government National Mortgage Association       $    11,797,496       $            40        $       108,430       $    11,689,106
Federal Home Loan Mortgage Corporation              43,789,880             1,132,946                154,798            44,768,028
Federal National Mortgage Association               41,007,256               603,316                144,713            41,465,859
Small Business Administration                        2,263,969                    --                 15,251             2,248,718
Collateralized mortgage obligations:                        --                    --                     --                    --
Resolution Trust Corporation                         8,240,457               113,289                     --             8,353,746
Federal Home Loan Mortgage Corporation               1,690,298                    --                     --             1,690,298
Others                                                 629,118                 7,795                                      636,913
                                               ---------------       ---------------        ---------------       ---------------
                                               $   109,418,474       $     1,857,386               $423,192       $   110,852,668
                                               ===============       ===============        ===============       ===============
</TABLE>




<TABLE>
<CAPTION>
                                                                                   March 31, 1996
                                               ----------------------------------------------------------------------------------
                                                  Principal            Unamortized              Unearned            Carrying
                                                   Balance               Premiums               Discounts             Value
                                                   -------               --------               ---------             -----

<S>                                            <C>                      <C>                    <C>                 <C>          
Government National Mortgage                   $  13,427,764            $         266          $     131,405       $  13,296,625
Association
Federal Home Loan Mortgage                        54,138,973                1,486,330                204,821          55,420,482
Corporation
Federal National Mortgage Association             45,768,352                  667,099                189,472          46,245,979
Small Business Administration                      2,621,569                       --                 18,569           2,603,000
Collateralized mortgage obligations:
Resolution Trust Corporation                      10,948,712                  188,362                     --          11,137,074
Federal Home Loan Mortgage                         1,703,274                       --                     --           1,703,274
Corporation
Others                                               697,539                    1,432                     --             698,971
                                               -------------            -------------          -------------       -------------
                                               $ 129,306,183            $   2,343,489          $     544,267       $ 131,105,405
                                               =============            =============          =============       =============
</TABLE>




                                       31

<PAGE>


                      CARVER BANCORP INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

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

<TABLE>
<CAPTION>
                                                                  March 31, 1997
                                                                  --------------
                                              Carrying           Gross Unrealized         Estimated
                                                Value          Gains         Losses       Fair Value
                                                -----          -----         ------       ----------


<S>                                        <C>            <C>            <C>            <C>         
Government National Mortgage Association   $ 11,689,106   $    149,141   $    475,567   $ 11,362,680
Federal Home Loan Mortgage Corporation       44,768,028           --          937,810     43,830,218
Federal National Mortgage Association        41,465,859           --        1,480,513     39,985,346
Small Business Administration                 2,248,718         38,806           --        2,287,524
Collateralized mortgage obligations:
Resolution Trust Corporation                  8,353,746                       268,352
                                                                                           8,085,394
Federal Home Loan Mortgage Corporation        1,690,298           --           29,581      1,660,717
Others                                          636,913           --            7,795        629,118
                                           ------------   ------------   ------------   ------------
                                           $110,852,668   $    187,947   $  3,199,618   $107,840,997
                                           ============   ============   ============   ============
</TABLE>


<TABLE>
<CAPTION>
                                                                  MARCH 31, 1996
                                                                  --------------
                                              Carrying           Gross Unrealized         Estimated
                                                Value          Gains         Losses       Fair Value
                                                -----          -----         ------       ----------


<S>                                        <C>            <C>            <C>            <C>         

Government National Mortgage Association   $ 13,296,625   $    176,200   $    390,909   $ 13,081,916
Federal Home Loan Mortgage Corporation       55,420,482        699,524        513,067     55,606,939
Federal National Mortgage Association        46,245,979         98,910      1,127,575     45,217,314
Small Business Administration                 2,603,000         66,086           --        2,669,086
Collateralized mortgage obligations:
Resolution Trust Corporation                 11,137,074           --          273,031     10,864,043
Federal Home Loan Mortgage Corporation        1,703,274           --           17,032      1,686,242
Others                                          698,971           --           11,825        687,146
                                           ------------   ------------   ------------   ------------
                                           $131,105,405   $  1,040,720   $  2,333,439   $129,812,686
                                           ============   ============   ============   ============
</TABLE>

The following is a schedule of final maturities as of March 31,1997:


                                                       Carrying       Estimated
                                                         Value        Fair Value
                                                         -----        ----------
                                                             (In Thousands)
After one through five years                           $ 41,425        $ 40,941
After five through ten years                             69,428          66,900
After ten years                                            --              --
                                                       --------        --------
                                                       $110,853        $107,841
                                                       ========        ========


There were no sales of mortgage-backed securities held to maturity during the
years ended March 31,1997, 1996 and 1995.



                                       32

<PAGE>


                      CARVER BANCORP INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS


NOTE 6.  LOANS RECEIVABLE, NET
                                                        Year Ended March 31,
                                                       ----------------------
                                                       1997              1996
                                                       ----              ----
Real estate mortgage:
One-to four family                                 $139,961,350     $ 59,466,442
Multi-family                                         19,935,991        2,490,355
Non-residential                                      22,415,427       11,138,426
Equity and second mortgages                             586,300          364,085
                                                   ------------     ------------
                                                    182,899,068       73,459,308
                                                   ------------     ------------
Agency for International Development                         --            9,441
                                                   ------------     ------------
Real estate construction                             14,386,137        6,965,301
                                                   ------------     ------------
Commercial loans                                      3,192,251        1,090,941
                                                   ------------     ------------
Consumer:
Passbook or certificate                                 954,635        1,011,371
Student education                                       974,892        1,094,351
Other                                                 3,600,859          931,319
                                                   ------------     ------------
                                                      5,530,386        3,037,041
                                                   ------------     ------------
Total loans                                         206,007,842       84,562,032
                                                   ------------     ------------
Add:   Premium on loans                               1,804,938          882,138
Less:  Loans in process                               6,854,591        1,406,150
Allowance for loan losses                             2,245,746        1,205,496
Deferred loan fees and discounts                        794,770          224,459
                                                   ------------     ------------
                                                      9,895,107        2,836,105
                                                   ------------     ------------
                                                   $197,917,673     $ 82,608,065
                                                   ============     ============

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

<TABLE>
<CAPTION>
                                                                  Year Ended March 31,
                                                                  --------------------
                                                       1997               1996                1995
                                                       ----               ----                ----
<S>                                               <C>               <C>                  <C>          
Balance-beginning                                 $    1,204,496    $    1,074,604       $   1,267,676
Provision charged to operations                        1,689,508           130,892             333,697
Recoveries of amounts previously charged off              49,940                --                  --
Loans charged off                                       (699,198)               -             (526,769)
                                                  ---------------   --------------       -------------
Balance-ending                                    $    2,245,746    $    1,205,496       $   1,074,604
                                                  ==============    ==============       =============
</TABLE>



                                       33

<PAGE>


                      CARVER BANCORP INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

         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. Such loans are
performing in accordance with their restructured terms. The balances of
non-accrual and restructured loans and their impact in interest income are as
follows:

<TABLE>
<CAPTION>
                                                                  Year Ended March 31,
                                                                  --------------------
                                                       1997               1996               1995
                                                       ----               ----               ----
                                                                     (In Thousands)
<S>                                               <C>               <C>                  <C>          

Non-accrual loans                                 $        2,872     $       2,034       $        1,532
Restructured loans                                           413                -                 1,468
                                                  --------------     -------------       --------------
                                                  $        3,285     $       2,034       $        3,000
                                                  ==============     =============       ==============
</TABLE>


<TABLE>
<CAPTION>
                                                                                 Year Ended March 31,
                                                                                 --------------------
                                                                      1997               1996               1995
                                                                      ----               ----               ----
                                                                     (In Thousands)
<S>                                                              <C>                <C>                 <C>          
Interest income which would have been recorded had loans
 performed in accordance with original contracts                 $         393      $         138       $         298
Interest income received                                                   147                 26                  77
                                                                 -------------      -------------       -------------
Interest income lost                                             $         246      $         112       $         221
                                                                 =============      =============       =============
</TABLE>


         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,
                                                    --------------------
                                                   1997                1996
                                                   ----                ----
                                                        (In Thousands)
Balance-beginning                             $     428,429       $     451,567
Loans originated                                    235,200                  --
Repayments                                          (14,022)            (23,138)
                                              --------------      -------------
Balance-ending                                $     649,607       $     428,429
                                              =============       =============


NOTE 7.  LOANS SERVICING

         The mortgage loan portfolios serviced for the FHLMC and FNMA are not
included in the accompanying financial statements. The unpaid principal balances
of these loans aggregated $3,881,000, $4,317,000 and $3,911,000 at March
31,1997,1996 and 1995, respectively.

         Custodial escrow balances, maintained in connection with the foregoing
loan servicing, were approximately $80,000, $89,000, and $136,000 at March
31,1997, 1996 and 1995, respectively.



                                       34

<PAGE>


                      CARVER BANCORP INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

NOTE 8.  PREMISES AND EQUIPMENT, NET

                                                               March 31,
                                                               ---------
                                                          1997           1996
                                                          ----           ----

Land                                                  $   450,952   $   450,952
Buildings and improvements                              8,362,760     8,222,217
Leasehold improvements                                    379,331       712,884
Furnishings and equipment                               3,589,757     2,253,985
Construction in process                                   127,848            --
                                                      -----------   -----------

                                                       12,910,648    11,640,038

Less accumulated depreciation and amortization          1,567,970     1,683,057
                                                      -----------   -----------

                                                      $11,342,678   $ 9,956,981
                                                      ===========   ===========

Depreciation and amortization charged to operation for the years ended March 31,
1997, 1996 and 1995 were $664,000, $302,000 and $223,000, respectively.


NOTE 9.  ACCRUED INTEREST RECEIVABLE, NET

                                                               March 31,
                                                               ---------
                                                          1997           1996
                                                          ----           ----

Loans                                                 $ 1,783,330   $ 1,076,014
Mortgage-backed securities                              1,079,768     1,258,479
Investments and other interest-bearing assets             306,260        57,775
                                                      -----------   -----------
                                                        3,169,358     2,892,268
Less allowance for uncollected interest                  (190,993)     (204,069)
                                                      -----------   -----------
                                                      $ 2,978,365)  $ 2,688,199
                                                      ===========   ===========


NOTE 10. EXCESS OF COST OVER ASSETS ACQUIRED, NET

                                                               March 31,
                                                               ---------
                                                          1997          1996
                                                          ----          ----

Core deposit premium                                  $ 1,403,835   $ 1,609,284
Acquisition costs                                          52,165        59,798
                                                      -----------   -----------
                                                      $ 1,456,000   $ 1,669,082
                                                      ===========   ===========




                                       35

<PAGE>


                      CARVER BANCORP INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

NOTE 11. DEPOSITS

<TABLE>
<CAPTION>
                                                                            March 31,
                                      --------------------------------------------------------------------------------------------
                                                         1997                                               1996
                                      -------------------------------------------      -------------------------------------------
                                      Weighted                                        Weighted
                                       Average                                         Average
                                        Rate          Amount              Percent        Rate         Amount                Percent
                                        ----          ------              -------        ----         ------                -------
DEMAND:
<S>                                     <C>       <C>                     <C>            <C>       <C>                     <C>  
  Interest-bearing                      1.89%     $ 18,578,712              6.97%        1.86%     $ 16,970,517              6.61%
  Non-interest-bearing                  0.00%        7,676,924              2.88%        0.00%        6,015,986              2.33%
                                        ----      ------------            ------         ----      ------------            ------ 

                                        1.34%       26,255,636              9.85%        1.37%       22,986,503              8.94%
                                        ----      ------------            ------         ----      ------------            ------ 

Savings and club                        2.50%      142,953,248             53.65%        2.50%      141,847,681             55.20%
Money Management                        3.15%       21,078,077              7.91%        3.17%       19,443,771              7.57%
Certificate of deposit                  5.18%       76,184,526             28.59%        5.27%       72,673,928             28.29%
                                        ----      ------------            ------         ----      ------------            ------ 

                                        3.41%      240,215,851             90.15%        3.42%      233,965,380             91.06%
                                        ----      ------------            ------         ----      ------------            ------ 


                                        3.28%     $266,471,487            100.00%        3.24%     $256,951,883            100.00%
                                        ====      ============            ======         ====      ============            ====== 
</TABLE>


The scheduled maturities of certificates of deposits are as follows:
                                                                March 31,
                                                                ---------
                                                         1997           1996
                                                         ----           ----
                                                             (In Thousands)

One year or less                                      $    36,028   $    30,961
After one year to three years                              25,639        29,680
After three years to five years                            14,447        11,962
After five years                                               71            70
                                                      -----------   -----------

                                                      $    76,185   $    72,673
                                                      ===========   ===========

         The aggregate amount of certificates of deposit with minimum
denominations of $100,000 or more was approximately $9,430,000 and $9,163,000 at
March 31,1997 and 1996, respectively.

         Interest expense on deposit consists of the following:

<TABLE>
<CAPTION>
                                                                             Year Ended March 31,
                                                                             --------------------
                                                                   1997              1996                1995
                                                                   ----              ----                ----

<S>                                                          <C>                <C>                 <C>          
Demand                                                       $      332,393     $     330,562       $     226,102
Savings and clubs                                                 3,542,024         3,507,068           3,591,611
Money Management                                                    657,529           599,280             540,545
Certificates of deposit                                           3,844,009         3,965,252           3,130,616
                                                             --------------     -------------       -------------
                                                                  8,375,955         8,402,162           7,488,874
Penalty for early withdrawals of certificate of deposit             (20,787)          (11,961)            (16,062)
                                                             ---------------    -------------       -------------
                                                             $    8,355,168     $   8,390,201       $   7,472,812
                                                             ==============     =============       =============
</TABLE>



                                       36

<PAGE>


                      CARVER BANCORP INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

NOTE 12. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

<TABLE>
<CAPTION>
                                                                  Interest                       March 31,
          Lender                        Maturity                    Rate                   1997               1996
-----------------------             ----------------               ------              -----------        ------------
<S>                                 <C>                             <C>              <C>                 <C>      
Federal Home Loan Bank              April 11,1996                   5.70%                                   7,000,000
Securities broker-dealer            May 17,1996                     5.75%                                   6,000,000
Federal Home Loan Bank              June 13,1996                    5.65%                                   7,000,000
Federal Home Loan Bank              July 1,1996                     5.28%                                   3,000,000
Federal Home Loan Bank              July 31,1996                    5.15%                                   5,000,000
Securities broker-dealer            August 16,1996                  5.69%                                   6,000,000
Securities broker-dealer            September 9,1996                5.64%                                   7,000,000
Securities broker-dealer            November 27,1996                5.64%                                   6,000,000
Federal Home Loan Bank              April 30,1997                   5.69%                8,000,000                   -
Federal Home Loan Bank              May 30, 1997                    5.73%                7,000,000                   -
Federal Home Loan Bank              June 30, 1997                   5.76%                8,000,000                   -
Federal Home Loan Bank              July 11, 1997                   5.56%                6,000,000                   -
Federal Home Loan Bank              July 29, 1997                   5.81%                4,000,000                   -
Securities broker-dealer            August 15, 1997                 5.82%                4,000,000                   -
Federal Home Loan Bank              September 10, 1997              5.51%                6,000,000                   -
Federal Home Loan Bank              September 16, 1997              5.56%                5,000,000                   -
Federal Home Loan Bank              October 14, 1997                5.79%                5,000,000                   -
Federal Home Loan Bank              November 3, 1997                5.59%                4,000,000                   -
Securities broker-dealer            November 26, 1997               5.58%                5,835,000                   -
Federal Home Loan Bank              December 3, 1997                5.56%                6,500,000                   -
Federal Home Loan Bank              December 22, 1997               5.77%                5,000,000                   -
                                                                                     -------------       -------------

                                                                                     $  74,335,000       $  47,000,000
                                                                                     =============       =============
</TABLE>

     Information concerning borrowings collateralized by securities sold under
     agreements to repurchase are summarized as follows:

<TABLE>
<CAPTION>
                                                                             For The Year Ended March 31,
                                                                             ----------------------------
                                                                               1997                1996
                                                                               ----                ----
                                                                                (Dollars In Thousands)

<S>                                                                      <C>                 <C>          
Average balance during the year                                          $       26,650      $      25,654
Average interest rate during the year                                              5.73%              5.60%
Maximum month-end balance during the year                                        74,335             47,000
Mortgage-backed securities underlying the agreements at year end:
Carrying value                                                           $        4,898      $      53,544
Estimated fair value                                                              4,757             53,384
</TABLE>




                                       37

<PAGE>


                      CARVER BANCORP INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

NOTE 13. ADVANCES FROM FEDERAL HOME LOAN BANK OF NEW YORK

<TABLE>
<CAPTION>
                                                    March 31,
                      --------------------------------------------------------------------
                                    1997                                 1996
   Maturing           --------------------------------     -------------------------------
  Year Ended            Weighted                             Weighted
   March 31,          Average Rate          Amount         Average Rate          Amount
   ---------          ------------          ------         ------------          ------


     <S>                <C>             <C>                   <C>            <C>          
     1997               --              $          --         5.36%          $  11,000,000
     1998                9.69%             45,000,000         8.10%             14,000,000
     2004                3.58%                400,000         3.58%                400,000
                                        -------------                        -------------
                                        $  45,400,000         6.84%          $  25,400,000
                                        =============                        =============
</TABLE>

         At March 31, 1997 and 1996, the advances were secured by pledges of the
Bank's investment in the capital stock of the Federal Home Loan Bank totaling
$5,535,000 respectively and a blanket assignment of the Bank's unpledged
qualifying mortgage, mortgage-backed securities and investment portfolios.

NOTE 14. INCOME TAXES

         The Bank qualifies as a thrift institution under the provisions of the
Code and is therefore permitted to deduct from taxable income an allowance for
bad debts based on the greater of: (1) actual loan losses (the "experience
method"); or (2) eight percent of taxable income before such bad debt deduction
less certain adjustments (the "percentage of taxable income method"). For the
tax years ended December 31,1996 and 1995, the deduction for bad debts was
computed using the experience method. For the year ended March 31, 1997, the
deductions for bad debt was computed using the percentage method.

         Retained earnings at March 31, 1997, includes approximately $4,183,000
of such bad debts, for which federal income taxes have not been provided. If
such amount is used for purpose other than bad debts losses, including
distributions in liquidation, it will be subject to federal income tax at the
current rate.

         The components of income taxes are summarized as follows:

                                            Year Ended March 31,
                                            --------------------
                                 1997               1996               1995
                                 ----               ----               ----
Current                    $   (1,348,259)    $     785,816       $     750,166
Deferred                           73,181          (179,942)            (75,869)
                           --------------     -------------       -------------
                           $   (1,275,078)    $     605,874       $     674,297
                           ===============    =============       =============




                                       38

<PAGE>


                      CARVER BANCORP INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

         The following table presents a reconciliation between the reported
income taxes and the federal income taxes which would be computed by applying
the normal federal income tax rate of 34% to income before income taxes:

<TABLE>
<CAPTION>
                                                                       Year Ended March 31,
                                                                       --------------------
                                              1997                     1996                      1995 
                                             Amount      Percent      Amount       Percent      Amount        Percent
                                             ------      -------      ------       -------      ------        -------
<S>                                      <C>             <C>        <C>             <C>       <C>              <C>  
Income taxes...........................  $(1,025,014)    (34.00)    $ 462,046       34.00     $ 516,579        34.00
Increases (reductions) in income taxes 
  resulting from:
  Statutory bad debts deduction........           --         --       (36,000)      (2.65)           --           --
  Accretion of purchase accounting
    discount...........................           --         --            --          --       (29,277)       (1.93)
  Amortization of intangibles..........      (43,324)     (1.44)      (37,600)      (2.77)
  Dividend exclusion...................     (373,400)    (12.39)     (190,845)      14.04
  State and city income taxes, net of
    federal income tax effect..........     (166,660)     (5.53)      190,845       14.04       156,032        10.27
  Other items, net.....................                                26,583        1.96        30,963         2.04
                                         -----------      -----     ---------       -----     ---------        -----
Effective income taxes.................  $(1,275,078)     72.30     $ 605,874       44.58     $ 674,297        44.38
                                         ===========      =====     =========       =====     =========        =====
</TABLE>


         At March 31, 1997, refundable income taxes payable of $1,678,711 are
included in other assets. At March 31, 1996, income taxes payable of $379,076
are included in other liabilities. The tax effects of existing temporary
differences that give rise to significant portions of deferred tax assets and
deferred tax liabilities are as follows:

<TABLE>
<CAPTION>
                                                                                                   March 31,
                                                                                                   ---------
                                                                                         1997                 1996
                                                                                         ----                 ----
DEFERRED TAX ASSETS
<S>                                                                                 <C>                 <C>          
Reserve for uncollected interest                                                    $      89,767       $      95,912
Loan and real estate owned losses in excess of bad debts deduction                        (46,808)            300,627
Deferred loan fees                                                                        354,388             105,496
Accrued pension                                                                           229,535              55,643
Write down of common stock                                                                 19,829              19,829
Reserve for losses on other assets                                                        149,985             119,269
Unrealized loss on securities available for sale                                          392,547           1,104,237
Other                                                                                      64,579                  - 
                                                                                    -------------       -------------
                                                                                        1,253,822           1,801,013
                                                                                    -------------       -------------
Deferred tax liabilities
Gain on involuntary conversion                                                            282,685             282,685
Savings premium                                                                           521,721             554,820
Depreciation                                                                              294,974              24,204
                                                                                    -------------       -------------

Sub total                                                                               1,099,380             861,709
                                                                                    -------------       -------------
Net deferred tax assets (liabilities) included in other
assets or (liabilities)                                                             $     154,442       $     939,304
                                                                                    =============       =============
</TABLE>




                                       39

<PAGE>


                      CARVER BANCORP INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

NOTE 15. REGULATORY CAPITAL

         The operations and profitability of the Bank are significantly affected
by legislation and the policies of the various regulatory agencies. The FERREA,
among other things, increase the FDICIA imposes increased requirements on the
operations of financial institutions that fall below certain capital standards.
As required by the FERREA, the OTS promulgated capital requirements for
financial institutions consisting of minimum tangible and core capital ratios of
1.50% and 3.00%, respectively, of the institution's adjusted total assets and a
minimum risk-based capital ratio of 8.00% of the institution's risk weighted
assets. Although the minimum core capital ratio is 3.00%, the FDICIA stipulates
that an institution with less than 4.00% core capital is deemed
undercapitalized. At March 31,1997 and 1996, the Bank exceeded all the current
capital requirements.

         The following table sets out the Bank's various regulatory capital
categorized at March 31, 1997.

                                                               1997
                                                               ----
                                                    Dollars          Percentage
                                                    -------          ----------
                                                             (thousands)
Tangible capital                                  $    29,089           6.95%
Tangible equity                                   $    30,050           7.18%
Core/leverage capital                             $    29,141           6.96%
Tier 1 risk-based capital                         $    30,527           6.97%
Total risk-based capital                          $    30,527          17.94%



                                       40

<PAGE>


                      CARVER BANCORP INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

         The following table reconciles the Bank's stockholders' equity at March
31, 1997, under generally accepted accounting principles to regulatory capital
requirements:

<TABLE>
<CAPTION>
                                                                    Regulatory Capital Requirements
                                                                    -------------------------------
                                                        Gaap         Tangible          Tier/core       Risk-based
                                                       Capital        Capital           Capital          Capital
                                                       -------        -------           -------          -------
                                                                                (In thousands)
<S>                                                  <C>             <C>               <C>              <C>
Stockholders' Equity at March 31,1997                $  30,050       $ 30,050          $  30,050        $ 30,050
                                                     =========
Add:
Unrealized loss on securities available for
sale, net                                                                 443                443             443
General valuation allowances                                               --                 --           1,426
Qualifying intangible assets                                               --                 52              52
Deduct:
Goodwill                                                               (1,404)            (1,404)         (1,404)
Excess of net deferred tax assets                                          --                 --              --
Asset required to be deducted                                              --                 --             (40)
                                                                                       ---------        --------
Regulatory capital                                                     29,089             29,141          30,527
Minimum capital requirement                                             6,277             12,555          15,260
                                                                     --------          ---------        --------
Regulatory capital excess                                            $ 22,812          $  16,586        $ 15,267
                                                                     ========          =========        ========
</TABLE>


NOTE 16. 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 following table sets
forth the plan's funded status:

<TABLE>
<CAPTION>
                                                                               March 31,
                                                                               ---------
                                                                        1997                1996
                                                                        ----                ----

<S>                                                                <C>                 <C>          
Actuarial present value of benefit obligation including
vested benefits of $ 2,054,535 and $1,690,000, respectively        $   2,097,345       $   1,776,395
                                                                   =============       =============
Projected benefit obligation                                       $   2,425,891       $   2,101,224
                                                                   -------------       -------------
Plan assets at fair value                                              2,900,146           2,510,985
Plan assets in excess of projected benefit obligation                    474,255             409,761
Unrecognized net obligation being amortized over  19.75  years           366,279             393,075
Unrecognized prior service cost                                           20,812              22,375
Unrecognized net (gain)                                               (1,008,762)           (926,811)

(Accrued) pension cost included in other liabilities               $     147,416       $    (101,600)
                                                                   =============       =============
</TABLE>


                                       41

<PAGE>


                      CARVER BANCORP INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS


Net periodic pension cost included the following components:
<TABLE>
<CAPTION>
                                                         Year Ended March 31,
                                                         --------------------
                                               1997              1996                1995
                                               ----              ----                ----

<S>                                      <C>                <C>                 <C>          
Service cost                             $      115,541     $      95,323       $     122,675
Interest cost                                   158,379           137,100             137,813
Return on plan assets                          (318,555)         (174,058)           (182,798)
Net deferral and amortization                   157,672           (94,665)             (1,803)
                                         --------------     -------------       -------------
Net periodic pension cost                $       55,057     $     (36,300)      $      75,887
                                         ==============     =============       =============
</TABLE>


Significant actuarial assumptions used in determining plan benefits are:

<TABLE>
<CAPTION>
                                                                         Year Ended March 31,
                                                                         --------------------
                                                              1997               1996               1995
                                                              ----               ----               ----

<S>                                                           <C>               <C>                 <C>  
Annual salary increase                                        5.50%             5.00%               6.00%
Long-term return on assets                                    8.00%             8.00%               8.00%
Discount rate used in measurement of benefit obligations      7.50%             7.00%               8.25%
</TABLE>

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 save up
to 15% of their compensation and may receive a percentage matching contribution
from the Bank with respect to 50% of the eligible employee's contributions up to
the maximum allowed by law. Total incentive plan expenses for the years ended
March 31, 1997, 1996 and 1995 were $63,500, $52,700 and $51,900, 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 benefits are payable
based on the term of service as a director.

<TABLE>
<CAPTION>
                                                                                         1997                1996
                                                                                    ------------        -------------

<C>                                                                                 <C>                 <C>          
Actuarial present value of benefit obligation including vested benefits of
$303,910 and $318,829 at March 31, 1997 and 1996 respectively                       $    360,564        $     348,896
                                                                                    ============        =============
Projected benefit obligation                                                        $    401,463        $     378,355
Plan assets at fair value                                                                    --                   --
                                                                                    ------------        -------------
Projected benefit obligation in excess of plan assets                                    401,463              378,355
Unrecognized past service cost                                                          (221,093)            (331,779)
Additional minimum liability                                                             180,194              302,320
                                                                                    ------------        -------------
Accrued liability included in other liabilities                                     $    360,564        $     348,896
                                                                                    ============        =============
</TABLE>




                                       42

<PAGE>


                      CARVER BANCORP INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

     Net periodic pension cost for the years ended March 31,1997, 1996 and 1995
included the following:


<TABLE>
<CAPTION>
                                      1997                     1996                   1995
                                 ------------              ------------           ------------

<S>                              <C>                       <C>                    <C>         
Service cost                     $     24,330                    18,267                  2,424
Interest cost                          31,395                    28,417                  7,077
Net deferral and amortization          55,324                    55,236                 13,809
                                 ------------                                     ------------
Net pension cost                 $    111,049              $    101,920           $     23,310
                                 ============              ============           ============
</TABLE>



                                       43

<PAGE>


                      CARVER BANCORP INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

         The actuarial assumptions used in determining plan benefits include
annual fee at 2.80% for each of the three years ended March 31, 1997, and a
discount rate of 8.00%, 7.50% and 8.00%, for the years ended March 31, 1997,
1996 and 1995, respectively. The additional minimum liability included as an
intangible asset in other assets are $221,093 and $331,779 for the years ended
March 31, 1997 and 1996, respectively.

MANAGEMENT RECOGNITION PLAN

         Pursuant to the management recognition plan approved at the
stockholders meeting held on September 12, 1995, the Bank recognized $56,570 as
expense for the year ended March 31, 1997 and 1996.


NOTE 17. 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.

         The ESOP is accounted for in accordance with Statement of Position
93-6, "Accounting for Employee Stock Ownership Plan", which was issued by the
American Institute of Certified Public Accountants in November 1993.

         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
share become outstanding for net income per common share computations. ESOP
compensation expense was $156,064 and $153,295 for the years ended March 31,1997
and 1996 respectively.

         The ESOP shares at March 31,1997 and 1996 are as follows:

                                                         1997             1996
                                                     ----------       ----------

Allocated shares                                         28,389               --
                                                     ----------       ----------
Shares committed to be released                          21,847           28,389
Unreleased shares                                       131,896          153,743
                                                     ----------       ----------
Total ESOP shares                                       182,132          182,132
                                                     ==========       ==========

Fair value of unreleased shares                      $1,269,499       $1,345,251
                                                     ==========       ==========




                                       44

<PAGE>


                      CARVER BANCORP INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

NOTE 18. 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 need 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 in excess of the amount recognized in the
statement 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,
                                                           ---------
                                                    1997                1996
                                                    ----                ----
Commitments To Originate Loans
  Mortgage                                     $  13,443,419       $   4,905,316
                                               =============       =============

Commitments To Purchase Loans
  Mortgage                                     $  32,544,057       $           -
                                               =============       =============



Commitments To Sell Loans
  Mortgage                                     $           -       $   1,948,000
  Consumer loans                                           -                  -
                                               -------------       ------------
      Total                                    $           -       $   1,948,000
                                               =============       =============


         At March 31,1997, of the $13,443,419 in outstanding commitments to
originate mortgage loans, $2,460,000 are at fixed rates within a range of 7.625%
to 8.50%, $9,114,000 are for balloon loans with 5 years maturity, whose rates
range between 8.00% to 11.75% and $1,870,000 commercial are adjustable rate with
initial rates ranging from 50% to 8.75%.

         At March 31, 1997, all of the $32,544,057 in outstanding commitments to
purchase mortgage loans are at adjustable rates within a range 6.750 - 8.125%,
ranging from 1-7 years.

         At March 31, 1997, $49,000,000 in Securities carried as "Available for
Sale" where sold for settlement on April 1, 1997.

         At March 31, 1997, $17,000,000 in Borrowings on April 1, 1997, where
scheduled for repayment from the Proceeds of Securities sold.

         At March 31,1997, undisbursed from approved commercial lines of credit
totaled $3,258,000. All such lines are secured, including $2,600,000 in
warehouse lines of credit secured by the underlying warehoused mortgages,
expired within one year, and carry interest rates that float at from 1.50% to
2.00% above the prime rate.


                                       45

<PAGE>


                      CARVER BANCORP INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

         At March 31, 1997, undisbursed funds from approved lines of credit
under a homeowners' equity lending program with an interest rate of 1.25% over
the prime rate adjusted on a monthly basis amounted to approximately $112,000.
Unless they are specifically canceled by notice from the Bank, these funds
represent firm commitments available to the respective borrowers on demand.

         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 $ 285,000, $302,000 and
$269,000 for the years ended March 31, 1997, 1996, and 1995, respectively. As of
March 31, 1997, minimum rental commitments under all noncancellable leases with
initial or remaining terms of more than one year and expiring through 2011 are
as follows:


         Year Ended March 31                  Minimum Rental
         -------------------                  --------------
                                              (In Thousands)
                1998                            $     263
                1999                                  266
                2000                                  293
                2001                                  296
                2002                                  296
        Thereafter                                  1,330
                                                ---------
                                                $   2,744
                                                =========
        
         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.

         On January 2, 1996, the United States District Court for the Southern
District of New York dismissed the class action encaptioned DOUGHERTY V. CARVER
FEDERAL SAVINGS BANK for lack of subject matter jurisdiction. The class action
alleged that the offering circular, used by Carver to sell its stock in its
public offering, contained material misstatements and omissions. Further, the
complaint alleged that the Bank's shares were not appraised by an independent
appraiser. By separate order on the same date, the court made its ruling
applicable to GOMBERG V. CARVER FEDERAL SAVINGS BANK and UMINER V. CARVER
FEDERAL SAVINGS BANK, two other class actions filed in the Southern District of
New York which asserted claims essentially identical to those asserted in the
Dougherty suit.



                                       46

<PAGE>

                      CARVER BANCORP INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

         The plaintiffs filed a consolidated notice of appeal on January 29,
1996 with the United States Court of Appeals for the Second Circuit. In April
1997 the Circuit Court concluded that the District had subject matter
jurisdiction over the plaintiffs' complaint, the Circuit Court reversed and
remanded the case back to the District Court.

         On September 19, 1995, Carver filed an action for declaratory judgment,
for damages for breach of contract, and for breach of a contractual trust,
against Nationar and the Superintendent of the New York State Banking
Department, in the Supreme Court of New York State, County of New York. In
October of 1994, Nationar made a loan to Carver's ESOP Trust (which now belongs
to the Company) in the amount of $1,821,320, to purchase 182,132 shares.
Nationar held, as collateral: the ESOP shares, $1,366,000 and $600,000, all in
separate accounts. When the Superintendent sold Carver's ESOP loan to a third
party purchaser, it failed to transfer Carver's $1,966,000 in collateral. Carver
filed lawsuit to secure the return of the entire amount of collateral.

         By order entered April 10, 1996, on the recommendations of the
Superintendent, the Court directed the return of $600,000 of the collateral. The
Bank received these funds, plus interest, in early June 1996. Subsequently, the
lawsuit was discontinued pursuant to a recommendation of counsel and an
expectation that the Bank would recover 90% of the outstanding collateral which
amounted to $1,366,000. In July and December of 1996 the Superintendent of Banks
made payments of $554,643 and $831,965 respectively to the Bank. As a result of
the full recovery of all of its collateral, along with interest, Carver was able
to reverse the 13% reserve originally established.

         In the conduct of the Company's business, it is also involved in normal
litigation matters. In the opinion of management, the ultimate disposition of
such litigation should not have a material adverse effect on the financial
position or results of operations of the Company.

NOTE 19.          FAIR VALUE OF FINANCIAL INSTRUMENTS

         The fair value of a financial instrument is defined as the amount at
which the instrument could be exchange 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
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.


                                       47
<PAGE>

                      CARVER BANCORP INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

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.

         Advances from Federal Home Loan Bank of New York, Securities sold under
agreement to repurchase and Other borrowed money.

         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.


                                       48
<PAGE>

                      CARVER BANCORP INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

COMMITMENTS

         The fair value of commitments to originate loans is equal to amount of
commitment.

         The carrying amounts and estimated fair values of the Bank's financial
instruments at March 31, 1997 and 1996 are as follows:

<TABLE>
<CAPTION>
                                                                                 AT MARCH 31,
                                                      -----------------------------------------------------------------
                                                                 1997                                1996
                                                      -----------------------------       -----------------------------
                                                        Carrying         Estimated         Carrying          Estimated
                                                         Amount         Fair Value          Amount           Fair Value
                                                         ------         ----------          ------           ----------
                                                                               (In Thousands)
<S>                                                  <C>               <C>               <C>               <C>       
Financial Assets:
Cash and cash equivalents                            $     4,231       $     4,231       $   10,026        $   10,026
Securities available for sale                             84,708            83,863          116,678           114,328
Investment securities                                      1,675             1,673            8,937             8,814
Mortgage-backed securities                               110,853           107,841          131,105           129,813
Loans receivable                                         197,918           199,073           82,608            83,983
Accrued interest receivable                                2,978             2,978            2,688             2,688

Financial Liabilities:
Deposits.                                            $   266,471       $   265,566       $  256,952        $  249,386
Securities sold under agreements to repurchase            74,335            74,333           47,000            47,101
Advances from Federal Home Loan
Bank of New York                                          45,400            45,325           25,400            25,452
Other borrowed money                                       1,366             1,366            1,548             1,548

Commitments:
To originate loans                                   $    13,443       $    13,443       $    4,905        $    4,905
To sell loans                                                  -                 -            1,948             1,948
To fund line of credit                                     5,970             5,970            5,200             5,200
</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 on an 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


                                       49
<PAGE>

                      CARVER BANCORP INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

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.


                                       50
<PAGE>

                      CARVER BANCORP INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

NOTE 20.      QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                                           Year Ended March 31, 1997
                                                     -------------------------------------------------------------------
                                                         First            Second             Third           Fourth
                                                          Qtr.             Qtr.               Qtr             Qtr.
                                                     -----------       -----------       -----------       -----------
                                                                                (In Thousands)

<S>                                                  <C>               <C>               <C>               <C>       
Interest income                                      $     5,811       $     5,609       $    5,770        $    5,657
Interest expense                                           3,132             3,133            3,135             3,083
                                                     -----------       -----------       ----------        ----------
Net interest income.                                       2,679             2,476            2,635             2,574
Provision for loan losses                                     52                33               51             1,554
Non-interest income loss                                     328               282              238              (735)
Non-interest expense..                                     2,464             4,158            2,559            (2,622)
Income taxes (benefits)                                      228              (649)             111              (966)
                                                     -----------       -----------       ----------        ----------
Net income (loss)                                    $       263       $      (784)      $      152        $   (1,371)
                                                     ===========       ===========       ==========        ==========
Net income (loss) per common shares                         0.12             (0.36)      $     0.07        $    (0.63)
                                                     ===========      ============       ==========        ==========


<CAPTION>
                                                                           Year Ended March 31, 1996
                                                     -------------------------------------------------------------------
                                                         First            Second             Third           Fourth
                                                          Qtr.             Qtr.               Qtr             Qtr.
                                                     -----------       -----------       -----------       -----------
                                                                                (In Thousands)
<S>                                                  <C>               <C>               <C>               <C>       
Interest income                                      $     5,914       $     5,936       $    5,883        $    5,796
Interest expense                                           3,457             3,554            3,347             3,236
                                                     -----------       -----------       ----------        ----------
Net interest income                                        2,457             2,382            2,536             2,560
Provision for loan losses                                    (19)                5               75                70
Non-interest income (loss)                                   131               153              143               181
Non-interest expense                                       2,144             2,401            2,194             2,313
Income taxes                                                 197                53              270                86
                                                     -----------       -----------       ----------        ----------
Net income                                           $       266       $        76       $      140        $      271
                                                     ===========       ===========       ==========        ==========
Net income per common shares                         $      0.12       $      0.36       $     0.07        $     0.12
                                                     ===========       ===========       ==========        ==========
</TABLE>


                                       51
<PAGE>

                      CARVER BANCORP INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                         CARVER BANCORP, INC.
                                         (Registrant)


Date: July 18, 1997                By:   /s/ Thomas L. Clark, Jr.
                                         ------------------------

                                         Thomas L. Clark, Jr.
                                         President and Chief Executive Officer
                                         (Duly Authorized Representative)


                                       52