##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the quarterly period ended June 30, 2010
 OR
 o
    
    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: 1-13007
 CARVER BANCORP, INC.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    13-3904174(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer 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: (718) 230-2900
  þ o
  o o
  o Large Accelerated Filer
    
    o Accelerated Filer
    
    o Non-accelerated Filer
    
    þ Smaller Reporting Company
 o þ
  Common Stock, par value $0.01
    
    2,482,740Class
    
    Outstanding at August 16, 2010




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##### 



TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Statements of Financial Condition as of
June 30, 2010 (unaudited) and March 31, 2010
    
    
    2Consolidated Statements of Income for the Three Months
Ended June 30, 2010 and 2009 (unaudited)
    
    
    3Consolidated Statement of Changes in Stockholders Equity and
Comprehensive Income for the Three Months Ended June 30, 2010 (unaudited)
    
    
    4Consolidated Statements of Cash Flows for the Three Months
Ended June 30, 2010 and 2009 (unaudited)
    
    
    5Notes to Consolidated Financial Statements (unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    22Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    38Item 4. Controls and Procedures
    
    
    38PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    39Item 1A. Risk Factors
    
    
    39Item 2. Issuer Purchases of Equity Securities
    
    
    40Item 3. Defaults Upon Senior Securities
    
    
    40Item 4. Submission of Matters to a Vote of Security Holders
    
    
    40Item 5. Other Information
    
    
    40Item 6. Exhibits
    
    
    40SIGNATURES
    
    
    41Exhibit 11Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   1




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CARVER BANCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
  June 30,
    
    
    March 31,2010
    
    
    2010(unaudited)ASSETSCash and cash equivalents:Cash and due from banks
    
    $
    50,287
    
    
    $
    37,513Money market investments
    
    
    832
    
    
    
    833Total cash and cash equivalents
    
    
    51,119
    
    
    
    38,346Investment securities:Available-for-sale, at fair value
    
    
    44,533
    
    
    
    43,050Held-to-maturity, at amortized cost (fair value of $20,761 and
$12,603 at June 30, 2010 and March 31, 2010, respectively)
    
    
    20,171
    
    
    
    12,343Total securities
    
    
    64,704
    
    
    
    55,393Loans receivable:Real estate mortgage loans
    
    
    584,400
    
    
    
    600,913Commercial business loans
    
    
    61,439
    
    
    
    67,695Consumer loans
    
    
    1,355
    
    
    
    1,403Loans, net
    
    
    647,194
    
    
    
    670,011Allowance for loan losses
    
    
    (15,552
    )
    
    
    (12,000
    )Total loans receivable, net
    
    
    631,642
    
    
    
    658,011Premises and equipment, net
    
    
    12,184
    
    
    
    12,076Federal Home Loan Bank of New York stock, at cost
    
    
    3,714
    
    
    
    4,107Bank owned life insurance
    
    
    9,883
    
    
    
    9,803Accrued interest receivable
    
    
    3,708
    
    
    
    3,539Core deposit intangibles, net
    
    
    190
    
    
    
    228Deferred Tax Asset
    
    
    16,722
    
    
    
    14,321Other assets
    
    
    10,053
    
    
    
    9,650Total assets
    
    $
    803,919
    
    
    $
    805,474LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Deposits:Savings
    
    $
    111,051
    
    
    $
    115,817Non-Interest Bearing Checking
    
    
    66,903
    
    
    
    58,792NOW
    
    
    40,852
    
    
    
    43,593Money Market
    
    
    74,612
    
    
    
    67,122Certificates of Deposit
    
    
    321,714
    
    
    
    317,925Total Deposits
    
    
    615,132
    
    
    
    603,249Advances from the FHLB-New York and other borrowed money
    
    
    120,550
    
    
    
    131,557Other liabilities
    
    
    8,815
    
    
    
    8,982Total liabilities
    
    
    744,497
    
    
    
    743,788Stockholders equity:Preferred stock (CPP) (par value $0.01 per share, 2,000,000 shares authorized; 18,980 shares,
with a liquidation preference of $1,000.00 per share, issued and outstanding
as of June 30, 2010 and March 31, 2010)
    
    
    18,980
    
    
    
    18,980Common stock (par value $0.01 per share: 10,000,000 shares authorized; 2,524,691 shares issued;
2,482,740 and 2,474,719 shares outstanding at June 30, 2010 and March 31, 2010, respectively)
    
    
    25
    
    
    
    25Additional paid-in capital
    
    
    24,379
    
    
    
    24,374Retained earnings
    
    
    16,076
    
    
    
    18,806Treasury stock, at cost (41,951 and 49,972 shares at June 30, 2010
and March 31, 2010, respectively)
    
    
    (589
    )
    
    
    (697
    )Accumulated other comprehensive income
    
    
    551
    
    
    
    198Total stockholders equity
    
    
    59,422
    
    
    
    61,686Total liabilities and stockholders equity
    
    $
    803,919
    
    
    $
    805,474
  2




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CARVER BANCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
   Three Months EndedJune 30,2010
    
    
    2009Interest Income:Loans
    
    $
    8,948
    
    
    $
    9,099Mortgage-backed securities
    
    
    586
    
    
    
    743Investment securities
    
    
    64
    
    
    
    61Money market investments
    
    
    21
    
    
    
    10Total interest income
    
    
    9,619
    
    
    
    9,913Interest expense:Deposits
    
    
    1,517
    
    
    
    2,038Advances and other borrowed money
    
    
    1,041
    
    
    
    985Total interest expense
    
    
    2,558
    
    
    
    3,023Net interest income
    
    
    7,061
    
    
    
    6,890Provision for loan losses
    
    
    6,248
    
    
    
    688Net interest income after provision for loan
losses
    
    
    813
    
    
    
    6,202Non-interest income:Depository fees and charges
    
    
    757
    
    
    
    717Loan fees and service charges
    
    
    221
    
    
    
    228Gain on sale of securities, net
    
    
    24
    
    
    
    Gain on sale of loans, net
    
    
    3
    
    
    
    New Market Tax Credit fees
    
    
    812
    
    
    
    38Other
    
    
    46
    
    
    
    171Total non-interest income
    
    
    1,863
    
    
    
    1,153Non-interest expense:Employee compensation and benefits
    
    
    3,206
    
    
    
    3,119Net occupancy expense
    
    
    977
    
    
    
    987Equipment, net
    
    
    538
    
    
    
    584Consulting fees
    
    
    219
    
    
    
    207Federal deposit insurance premiums
    
    
    356
    
    
    
    793Other
    
    
    2,168
    
    
    
    1,367Total non-interest expense
    
    
    7,464
    
    
    
    7,057(Loss) income before income taxes
    
    
    (4,788
    )
    
    
    298Income tax benefit
    
    
    (2,297
    )
    
    
    (396
    )Net (loss) income
    
    $
    (2,491
    )
    
    $
    694Earnings per common share:Basic
    
    $
    (1.09
    )
    
    $
    0.18Diluted
    
    
    N/A
    
    
    $
    0.18
   3




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CARVER BANCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME (LOSS)
 For the three months ended June 30, 2010
 (In thousands)
 (Unaudited)
 AccumulatedOther
    
    
    TotalPreferred Stock
    
    
    Common
    
    
    Additional Paid-
    
    
    Treasury
    
    
    Retained
    
    
    Comprehensive
    
    
    Stockholders(CPP)
    
    
    Stock
    
    
    In Capital
    
    
    Stock
    
    
    Earnings
    
    
    Income (Loss)
    
    
    EquityBalanceMarch 31, 2010
    
    $
    18,980
    
    
    $
    25
    
    
    $
    24,374
    
    
    $
    (697
    )
    
    $
    18,806
    
    
    $
    198
    
    
    $
    61,686Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,491
    )
    
    
    
    
    
    
    (2,491
    )Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (85
    )
    
    
    (85
    )Change in net unrealized Gain on
available-for-sale securities, net of
taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    438
    
    
    
    438Comprehensive income (loss), net of taxes:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,491
    )
    
    
    353
    
    
    
    (2,138
    )Common Dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    CPP Preferred Dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (237
    )
    
    
    
    
    
    
    (237
    )Accrued CPP Preferred Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    (2
    )Treasury stock activity
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    92
    
    
    
    
    
    
    
    
    
    
    
    97Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    16BalanceJune 30, 2010
    
    $
    18,980
    
    
    $
    25
    
    
    $
    24,379
    
    
    $
    (589
    )
    
    $
    16,076
    
    
    $
    551
    
    
    $
    59,422
   4




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CARVER BANCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
   Three Months Ended June 30,2010
    
    
    2009OPERATING ACTIVITIESNet Loss
    
    $
    (2,491
    )
    
    $
    694Adjustments to reconcile net income to net cash from operating activities:Provision for loan losses
    
    
    6,248
    
    
    
    688Provision
for REO losses
    
    
    37
    
    
    
    Stock based compensation expense
    
    
    16
    
    
    
    12Depreciation and amortization expense
    
    
    410
    
    
    
    483Amortization of other intangibles
    
    
    38
    
    
    
    53Loss from sale of real estate owned
    
    
    (8
    )
    
    
    34Gain on sale of securities
    
    
    24
    
    
    
    Gain on sale of loans
    
    
    3
    
    
    
    (43
    )Originations of loans held-for-sale
    
    
    
    
    
    
    (386
    )Proceeds from sale of loans held-for-sale
    
    
    
    
    
    
    386(Increase) Decrease in accrued interest receivable
    
    
    (169
    )
    
    
    106(Increase) Decrease in loan premiums and discounts and deferred charges
    
    
    (129
    )
    
    
    33Increase in premiums and discounts  securities
    
    
    173
    
    
    
    158(Increase) in other assets
    
    
    (3,301
    )
    
    
    (1,582
    )Increase (decrease) in other liabilities
    
    
    (105
    )
    
    
    348Net cash  provided by operating activities
    
    
    746
    
    
    
    984INVESTING ACTIVITIESPurchases of securities:Available-for-sale
    
    
    (11,000
    )
    
    
    Held-to-maturity
    
    
    (7,970
    )
    
    
    Proceeds from principal payments, maturities, calls and sales of securities:Available-for-sale
    
    
    9,890
    
    
    
    4,779Held-to-maturity
    
    
    296
    
    
    
    326Originations of loans held-for-investment
    
    
    (4,559
    )
    
    
    (36,462
    )Loans purchased from third parties
    
    
    
    
    
    
    (3,163
    )Principal collections on loans
    
    
    23,662
    
    
    
    21,562Proceeds from sales of loan originations held-for-investment
    
    
    1,171
    
    
    
    (Purchase) redemption of FHLB-NY stock
    
    
    393
    
    
    
    (771
    )Additions to premises and equipment
    
    
    (517
    )
    
    
    (134
    )Proceeds from sale of real estate owned
    
    
    21
    
    
    
    268Net cash provided by  investing activities
    
    
    11,387
    
    
    
    (13,595
    )FINANCING ACTIVITIESNet increase in deposits
    
    
    11,883
    
    
    
    1,728Net borrowing of FHLB advances and other borrowings
    
    
    (11,007
    )
    
    
    16,078Dividends paid
    
    
    (237
    )
    
    
    (484
    )Net cash provided by  financing activities
    
    
    639
    
    
    
    17,322Net increase in cash and cash equivalents
    
    
    12,772
    
    
    
    4,711Cash and cash equivalents at beginning of period
    
    
    38,347
    
    
    
    13,341Cash and cash equivalents at end of period
    
    $
    51,119
    
    
    $
    18,052Supplemental information:Noncash Transfers-Change in unrealized loss on valuation of available-for-sale investments,
net
    
    $
    438
    
    
    $
    (359
    )Cash paid for-Interest
    
    $
    2,500
    
    
    $
    5,617Income taxes
    
    $
    995
    
    
    $
    
   5




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CARVER BANCORP, INC AND SUBSIDIARIES
 
 Notes to Consolidated Financial Statements (Unaudited)
 NOTE 1. ORGANIZATION
 Nature of operations
     NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of consolidated financial statement presentation
   6




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Reclassifications
   7




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NOTE 3. EARNINGS PER SHARE
  Three Months EndedJune 30,2010
    
    
    2009Earnings per common share  basicNet (loss) income
    
    $
    (2,491
    )
    
    $
    694Less: CPP Preferred Dividends
    
    
    237
    
    
    
    237Dividends paid and undistributed earnings
allocated to participating securities
    
    
    (22
    )
    
    
    3Net Income Available to Common Shareholders
    
    $
    (2,706
    )
    
    $
    454Weighted average common shares
outstanding
    
    
    2,482,740
    
    
    
    2,470,072Earnings per common share
    
    $
    (1.09
    )
    
    $
    0.18Earnings per common share  dilutedNet (loss) income
    
    $
    (2,491
    )
    
    $
    694Less: CPP Preferred Dividends
    
    
    237
    
    
    
    237Dividends paid and undistributed earnings
allocated to participating securities
    
    
    (22
    )
    
    
    3Net Income Available to Common Shareholders
    
    $
    (2,706
    )
    
    $
    454Weighted average common shares
outstanding  basic
    
    
    2,482,740
    
    
    
    2,470,072Effect of dilutive securities  stock options and
unvested restricted stock (1)
    
    
    10,290
    
    
    
    26,340Weighted average shares
outstanding  diluted
    
    
    2,493,030
    
    
    
    2,496,412Earnings per common share
    
    
    NA
    
    
    $
    0.18
 (1)
    
    As of June 30, 2010, there were no potentially dilutive shares except for 10,290 unvested
restricted shares which are also participating securities.  8




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NOTE 4. ACCOUNTING FOR STOCK BASED COMPENSATION
  NOTE 5. BENEFIT PLANS
 Employee Pension Plan
  NOTE 6. COMMON STOCK DIVIDEND
  NOTE 7. INVESTMENT SECURITIES
    9




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Amortized
    
    
    Gross Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair-ValueAvailable-for-Sale:Mortgage-backed securities:Government National Mortgage Association
    
    $
    22,594
    
    
    $
    461
    
    
    $
    
    
    
    $
    23,055Federal Home Loan Mortgage Corporation
    
    
    3,938
    
    
    
    279
    
    
    
    
    
    
    
    4,217Federal National Mortgage Association
    
    
    4,104
    
    
    
    269
    
    
    
    (1
    )
    
    
    4,372Other
    
    
    334
    
    
    
    
    
    
    
    (31
    )
    
    
    303Total mortgage-backed securities
    
    
    30,970
    
    
    
    1,009
    
    
    
    (32
    )
    
    
    31,947U.S. Government Agency Securities
    
    
    12,491
    
    
    
    95
    
    
    
    
    
    
    
    12,586Total available-for-sale
    
    
    43,461
    
    
    
    1,104
    
    
    
    (32
    )
    
    
    44,533Held-to-Maturity:Mortgage-backed securities:Government National Mortgage Association
    
    
    8,470
    
    
    
    253
    
    
    
    
    
    
    
    8,723Federal Home Loan Mortgage Corporation
    
    
    8,662
    
    
    
    182
    
    
    
    
    
    
    
    8,844Federal National Mortgage Association
    
    
    2,905
    
    
    
    158
    
    
    
    
    
    
    
    3,063Total mortgage-backed securities
    
    
    20,037
    
    
    
    593
    
    
    
    
    
    
    
    20,630Other
    
    
    134
    
    
    
    
    
    
    
    (2
    )
    
    
    132Total held-to-maturity
    
    
    20,171
    
    
    
    593
    
    
    
    (2
    )
    
    
    20,762Total securities
    
    $
    63,632
    
    
    $
    1,697
    
    
    $
    (34
    )
    
    $
    65,295
  Amortized
    
    
    Gross Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair-ValueAvailable-for-Sale:Mortgage-backed securities:Government National Mortgage Association
    
    $
    23,993
    
    
    $
    27
    
    
    $
    (114
    )
    
    $
    23,906Federal Home Loan Mortgage Corporation
    
    
    4,293
    
    
    
    232
    
    
    
    
    
    
    
    4,525Federal National Mortgage Association
    
    
    12,469
    
    
    
    283
    
    
    
    (2
    )
    
    
    12,750Other
    
    
    352
    
    
    
    85
    
    
    
    (52
    )
    
    
    385Total mortgage-backed securities
    
    
    41,107
    
    
    
    627
    
    
    
    (168
    )
    
    
    41,566U.S. Government Agency Securities
    
    
    1,496
    
    
    
    
    
    
    
    (12
    )
    
    
    1,484Total available-for-sale
    
    
    42,603
    
    
    
    627
    
    
    
    (180
    )
    
    
    43,050Held-to-Maturity:Mortgage-backed securities:Government National Mortgage Association
    
    
    430
    
    
    
    41
    
    
    
    
    
    
    
    471Federal Home Loan Mortgage Corporation
    
    
    8,797
    
    
    
    74
    
    
    
    
    
    
    
    8,871Federal National Mortgage Association
    
    
    2,976
    
    
    
    147
    
    
    
    
    
    
    
    3,123Total mortgage-backed securities
    
    
    12,203
    
    
    
    262
    
    
    
    
    
    
    
    12,465Other
    
    
    139
    
    
    
    
    
    
    
    (2
    )
    
    
    137Total held-to-maturity
    
    
    12,342
    
    
    
    262
    
    
    
    (2
    )
    
    
    12,602Total securities
    
    $
    54,945
    
    
    $
    889
    
    
    $
    (182
    )
    
    $
    55,652
  10




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Less than 12 months
    
    
    12 months or longer
    
    
    TotalUnrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    FairLosses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    ValueAvailable-for-Sale:Mortgage-backed securities
    
    $
    
    
    
    $
    
    
    
    $
    (32
    )
    
    $
    376
    
    
    $
    (32
    )
    
    $
    376Agencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total available-for-sale
    
    $
    
    
    
    $
    
    
    
    $
    (32
    )
    
    $
    376
    
    
    $
    (32
    )
    
    $
    376Held-to-Maturity:Mortgage-backed securities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Other
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    133
    
    
    
    (2
    )
    
    
    133Total held-to-maturity
    
    $
    
    
    
    $
    
    
    
    $
    (2
    )
    
    $
    133
    
    
    $
    (2
    )
    
    $
    133Total securities
    
    $
    
    
    
    $
    
    
    
    $
    (34
    )
    
    $
    509
    
    
    $
    (34
    )
    
    $
    509
  Less than 12 months
    
    
    12 months or longer
    
    
    TotalUnrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    FairLosses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    ValueAvailable-for-Sale:Mortgage-backed securities
    
    $
    (42
    )
    
    $
    13,172
    
    
    $
    (126
    )
    
    $
    7,682
    
    
    $
    (168
    )
    
    $
    20,855Agencies
    
    
    (12
    )
    
    
    1,484
    
    
    
    0
    
    
    
    0
    
    
    
    (12
    )
    
    
    1,484Total available-for-sale
    
    $
    (54
    )
    
    $
    14,656
    
    
    $
    (126
    )
    
    $
    7,682
    
    
    $
    (180
    )
    
    $
    22,339Held-to-Maturity:Mortgage-backed securities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Other
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    137
    
    
    
    (2
    )
    
    
    137Total held-to-maturity
    
    $
    
    
    
    $
    
    
    
    $
    (2
    )
    
    $
    137
    
    
    $
    (2
    )
    
    $
    137Total securities
    
    $
    (54
    )
    
    $
    14,656
    
    
    $
    (128
    )
    
    $
    7,819
    
    
    $
    (182
    )
    
    $
    22,476
   11




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NOTE 8. LOANS RECEIVABLE, NET
  June 30, 2010
    
    
    March 31, 2010Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentGross loans receivable:One- to four-family
    
    $
    89,033
    
    
    
    13.75
    %
    
    $
    90,150
    
    
    
    13.40
    %Multifamily
    
    
    142,847
    
    
    
    22.06
    %
    
    
    141,702
    
    
    
    21.06
    %Non-residential
    
    
    249,346
    
    
    
    38.51
    %
    
    
    259,619
    
    
    
    38.59
    %Construction
    
    
    103,190
    
    
    
    15.94
    %
    
    
    111,348
    
    
    
    16.55
    %Business
    
    
    61,636
    
    
    
    9.52
    %
    
    
    68,523
    
    
    
    10.19
    %Consumer and other (1)
    
    
    1,354
    
    
    
    0.22
    %
    
    
    1,403
    
    
    
    0.21
    %Total loans receivable
    
    
    647,408
    
    
    
    100.00
    %
    
    
    672,745
    
    
    
    100.00
    %Add:Premium on loans
    
    
    120
    
    
    
    
    
    
    
    130Less:Deferred fees and loan discounts
    
    
    (334
    )
    
    
    
    
    
    
    (2,864
    )Allowance for loan losses
    
    
    (15,552
    )
    
    
    
    
    
    
    (12,000
    )Total loans receivable, net
    
    $
    631,642
    
    
    
    
    
    
    $
    658,011
 (1)
    
    Includes personal, credit card, and home improvement   12




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##### Table of Contents



For the Three Months EndedJune 30,2010
    
    
    2009Beginning Balance
    
    $
    12,000
    
    
    $
    7,049Less charge-offs:One-to-four family
    
    
    (539
    )
    
    
    Construction
    
    
    (1,154
    )
    
    
    Non-residential
    
    
    (134
    )
    
    
    Business
    
    
    (871
    )
    
    
    (356
    )Consumer and other
    
    
    
    
    
    
    (32
    )Total Charge- Offs:
    
    
    (2,698
    )
    
    
    (388
    )Add Recoveries:One-to-four family
    
    
    
    
    
    
    1Non-residential
    
    
    
    
    
    
    14Business
    
    
    4
    
    
    
    Consumer and other
    
    
    5
    
    
    
    5Total Recoveries:
    
    
    9
    
    
    
    20Provision for Loan Losses
    
    
    6,241
    
    
    
    688Ending Balance
    
    $
    15,552
    
    
    $
    7,369Ratios:Net charge-offs to average loans outstanding
    
    
    2.18
    %
    
    
    0.05
    %Allowance to total loans
    
    
    2.40
    %
    
    
    1.08
    %Allowance to non-performing loans
    
    
    18.02
    %
    
    
    29.37
    %
   13




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##### Table of Contents



NOTE 9. FAIR VALUE MEASUREMENTS
 Fair Value
Measurements
 
    
    Level 1 Inputs to the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active markets.
 
    
    Level 2 Inputs to the valuation methodology include quoted prices for similar
assets and liabilities in active markets, and inputs that are observable for the
asset or liability, either directly or indirectly, for substantially the full term
of the financial instrument.
 
    
    Level 3 Inputs to the valuation methodology are unobservable and significant to
the fair value measurement.
   Fair Value Measurements at June 30, 2010, UsingQuoted Pricesin ActiveMarkets for
    
    
    Significant Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable Inputs
    
    
    Total Fair(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    Value(in thousands)Assets:Mortgage servicing rights
    
    $
    
    
    
    $
    
    
    
    $
    622
    
    
    $
    622Investment
securities:Available for sale:U.S. government Agency Securities
    
    $
    5,000
    
    
    $
    7,587
    
    
    $
    
    
    
    $
    12,587Residential Mortgage-Back Securities
    
    
    
    
    
    
    31,643
    
    
    
    
    
    
    
    31,643Other
    
    
    
    
    
    
    258
    
    
    
    45
    
    
    
    303Total available for sale
    
    $
    5,000
    
    
    $
    39,488
    
    
    $
    45
    
    
    $
    44,533Total assets
    
    $
    5,000
    
    
    $
    39,488
    
    
    $
    667
    
    
    $
    45,155
  14




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##### Table of Contents



Fair Value Measurements at March 31, 2010, UsingQuoted Prices in
    
    
    
    
    
    
    SignificantActive Markets for
    
    
    Significant Other
    
    
    UnobservableIdentical Assets
    
    
    Observable Inputs
    
    
    Inputs
    
    
    Total Fair(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    Value(in thousands)Assets:Mortgage servicing rights
    
    $
    
    
    
    $
    
    
    
    $
    721
    
    
    $
    721Investment securites:Available for sale:U.S. government Agency Securities
    
    $
    
    
    
    $
    1,484
    
    
    $
    
    
    
    $
    1,484Residential Mortgage-Back Securities
    
    
    
    
    
    
    41,181
    
    
    
    
    
    
    
    41,181Other
    
    
    
    
    
    
    244
    
    
    
    141
    
    
    
    385Total available for sale
    
    $
    
    
    
    $
    42,909
    
    
    $
    141
    
    
    $
    43,050Total assets
    
    $
    
    
    
    $
    42,909
    
    
    $
    862
    
    
    $
    43,771
         15




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##### Table of Contents



Mortgage
    
    
    SecuritiesServicing
    
    
    Available for(in thousands)
    
    Rights
    
    
    SaleBeginning balance, April 1, 2010
    
    $
    721
    
    
    $
    141Activities:
    
    
    
    
    
    
    Transfer in
    
    
    
    
    
    
    Sale
    
    
    
    
    
    
    (96
    )Unrealized gain (loss)
    
    
    (99
    )
    
    
    Ending balance, June 30, 2010
    
    $
    622
    
    
    $
    45
  Fair Value Measurements at June 30, 2010, UsingQuoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable
    
    
    Total Fair(in thousands)
    
    (Level 1)
    
    
    (Level 2)
    
    
    Inputs (Level 3)
    
    
    ValueCertain impaired loans
    
    $
    
    
    
    $
    37,829
    
    
    $
    
    
    
    $
    37,829
 Fair Value Measurements at March 31, 2010, UsingQuoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable
    
    
    Total Fair(in thousands)
    
    (Level 1)
    
    
    (Level 2)
    
    
    Inputs (Level 3)
    
    
    ValueCertain impaired loans
    
    $
    
    
    
    $
    23,487
    
    
    $
    
    
    
    $
    23,487
   16




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NOTE 10. FAIR VALUE OF FINANCIAL INSTRUMENTS
   June 30, 2010
    
    
    March 31, 2010Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    EstimatedAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueFinancial Assets:Cash and cash equivalents
    
    $
    51,119
    
    
    $
    51,119
    
    
    $
    38,346
    
    
    $
    38,346Mortgage backed securities available-for-sale
    
    
    44,533
    
    
    
    44,533
    
    
    
    43,050
    
    
    
    43,050FHLB Stock
    
    
    3,714
    
    
    
    3,714
    
    
    
    4,107
    
    
    
    4,107Mortgage backed securities held-to-maturity
    
    
    20,171
    
    
    
    20,761
    
    
    
    12,343
    
    
    
    12,603Loans receivable
    
    
    631,642
    
    
    
    638,884
    
    
    
    658,011
    
    
    
    664,522Accrued interest receivable
    
    
    3,708
    
    
    
    3,708
    
    
    
    3,539
    
    
    
    3,539Mortgage servicing rights
    
    
    622
    
    
    
    622
    
    
    
    721
    
    
    
    721Financial Liabilities:Deposits
    
    $
    615,132
    
    
    $
    595,550
    
    
    $
    603,249
    
    
    $
    579,023Advances from FHLB of New York
    
    
    58,079
    
    
    
    58,170
    
    
    
    69,086
    
    
    
    70,263Repos
    
    
    44,068
    
    
    
    43,567
    
    
    
    44,068
    
    
    
    43,408Other borrowed money
    
    
    18,403
    
    
    
    19,128
    
    
    
    18,403
    
    
    
    19,173
 Cash and cash equivalents and accrued interest receivable
  Securities
  Loans receivable
   17




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##### Table of Contents



Mortgage servicing rights
  Deposits
  Borrowings
  Commitments to Extend Credits, Commercial, and Standby Letters of Credit
  Limitations
    NOTE 11. VARIABLE INTEREST ENTITIES
   18




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19




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NOTE 12. IMPACT OF ACCOUNTING STANDARDS AND INTERPRETATIONS
    20




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NOTE 13. SUBSEQUENTS EVENTS
   21




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ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-Looking Statements
  
    
    general economic conditions, either nationally or locally in some or all areas in which business is conducted, or
conditions in the real estate or securities markets or the banking industry which could affect liquidity in the capital
markets, the volume of loan origination, deposit flows, real estate values, the levels of non-interest income and the
amount of loan losses.
 
    
    changes in existing loan portfolio composition and credit quality, and changes in loan loss requirements;
 
    
    legislative or regulatory changes which may adversely affect the Companys business, including but not limited to the
impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
 
    
    the Companys success in implementing its new business initiatives, including expanding its product line, adding new
branches and ATM centers and successfully building its brand image;
 
    
    changes in interest rates which may reduce net interest margin and net interest income;
 
    
    increases in competitive pressure among financial institutions or non-financial institutions;
 
    
    technological changes which may be more difficult to implement or expensive than anticipated;
 
    
    changes in deposit flows, loan demand, real estate values, borrowing facilities, capital markets and investment
opportunities which may adversely affect the business;
 
    
    changes in accounting principles, policies or guidelines which may cause conditions to be perceived differently;
 
    
    litigation or other matters before regulatory agencies, whether currently existing or commencing in the future, which may
delay the occurrence or non-occurrence of events longer than anticipated;
 
    
    the ability to originate and purchase loans with attractive terms and acceptable credit quality;
 
    
    the ability to attract and retain key members of management; and
 
    
    the ability to realize cost efficiencies.
   22




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Overview
        23




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New Markets Tax Credit Award
     24




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##### Table of Contents



Critical Accounting Policies
  Allowance for Loan Losses
    25




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##### Table of Contents



26




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##### Table of Contents



Securities Impairment
  Deferred Income Taxes
    27




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Stock Repurchase Program
  Liquidity and Capital Resources
       28




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##### Table of Contents



GAAP
    
    
    Tangible
    
    
    Leverage
    
    
    Risk-BasedCapital
    
    
    Equity
    
    
    Capital
    
    
    CapitalStockholders Equity at June 30, 2010
    
    $
    72,251
    
    
    $
    72,251
    
    
    $
    72,251
    
    
    $
    72,251Add:General valuation allowances
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,918Qualifying
subordinated debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,000Other
    
    
    
    
    
    
    182
    
    
    
    182
    
    
    
    182Deduct:Disallowed deferred tax assets
    
    
    
    
    
    
    16,381
    
    
    
    16,381
    
    
    
    16,381Unrealized gains on securities available-for-sale, net
    
    
    
    
    
    
    734
    
    
    
    734
    
    
    
    734Goodwill and qualifying intangible assets, net
    
    
    
    
    
    
    190
    
    
    
    190
    
    
    
    190Regulatory Capital
    
    
    
    
    
    
    55,128
    
    
    
    55,128
    
    
    
    68,046Minimum Capital requirement
    
    
    
    
    
    
    11,794
    
    
    
    31,451
    
    
    
    50,676Regulatory Capital Excess
    
    
    
    
    
    $
    43,334
    
    
    $
    23,677
    
    
    $
    17,370Capital Ratios
    
    
    
    
    
    
    6.99
    %
    
    
    7.01
    %
    
    
    10.77
    %
  Bank Regulatory Matters
   29




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Comparison of Financial Condition at June 30, 2010 and March 31, 2010
 Assets
      Liabilities and Stockholders Equity
     Asset/Liability Management
   30




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##### Table of Contents



Off-Balance Sheet Arrangements and Contractual Obligations
    Commitments to fund construction mortgage loans
    
    $
    24,114Commitments to fund commercial and consumer loans
    
    
    5,474Lines of credit
    
    
    6,182Letters of credit
    
    
    4,154$
    39,924
  31




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##### Table of Contents



Comparison of Operating Results for the Three Months Ended June 30, 2010 and 2009
 Overview
   CARVER BANCORP, INC. AND SUBSIDIARIES
SELECTED KEY RATIOS
 Three Months EndedJune 30,Selected Financial Data:
    
    2010
    
    
    2009Return on average assets (1)
    
    
    -1.22
    %
    
    
    0.35
    %Return on average equity (2)
    
    
    -13.91
    
    
    
    4.35Net interest margin (3)
    
    
    3.89
    
    
    
    3.71Interest rate spread (4)
    
    
    3.78
    
    
    
    3.52Efficiency ratio (5)
    
    
    83.64
    
    
    
    87.74Operating expenses to average assets (6)
    
    
    3.67
    
    
    
    3.55Average equity to average assets (7)
    
    
    8.80
    
    
    
    8.01Average interest-earning assets to
average interest-bearing liabilities
    
    
    1.08
    x
    
    
    1.12
    x
 (1)
    
    Net income, annualized, divided by average total assets.(2)
    
    Net income, annualized, divided by average total equity.(3)
    
    Net interest income, annualized, divided by average interest-earning assets.(4)
    
    Combined weighted average interest rate earned less combined weighted average interest rate
cost.(5)
    
    Operating expenses divided by sum of net interest income plus non-interest income.(6)
    
    Non-interest expenses less loss on real estate owned, annualized, divided by average total
assets.(7)
    
    Total average equity divided by total average assets for the period. Analysis of Net Interest Income
    32




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##### Table of Contents



CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES
  For the Three Months Ended June 30,2010
    
    
    2009Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Yield/Cost
    
    
    Balance
    
    
    Interest
    
    
    Yield/CostInterest Earning Assets:Loans (1)
    
    $
    657,443
    
    
    $
    8,948
    
    
    
    5.44
    %
    
    $
    667,230
    
    
    $
    9,100
    
    
    
    5.46
    %Mortgage-backed securities
    
    
    62,811
    
    
    
    587
    
    
    
    3.74
    %
    
    
    70,159
    
    
    
    743
    
    
    
    4.24
    %Investment securities (2)
    
    
    4,123
    
    
    
    79
    
    
    
    7.67
    %
    
    
    4,874
    
    
    
    60
    
    
    
    4.92
    %Other investments and federal funds sold
    
    
    1,368
    
    
    
    5
    
    
    
    1.58
    %
    
    
    965
    
    
    
    10
    
    
    
    4.15
    %Total interest-earning assets
    
    
    725,745
    
    
    
    9,619
    
    
    
    5.30
    %
    
    
    743,228
    
    
    
    9,913
    
    
    
    5.34
    %Non-interest-earning assets
    
    
    88,541
    
    
    
    
    
    
    
    
    
    
    
    52,737Total assets
    
    $
    814,286
    
    
    
    
    
    
    
    
    
    
    $
    795,965Interest Bearing Liabilities:Deposits:Now demand
    
    $
    42,096
    
    
    
    31
    
    
    
    0.30
    %
    
    $
    54,172
    
    
    
    23
    
    
    
    0.17
    %Savings and clubs
    
    
    116,141
    
    
    
    73
    
    
    
    0.25
    %
    
    
    119,239
    
    
    
    66
    
    
    
    0.22
    %Money market
    
    
    70,814
    
    
    
    223
    
    
    
    1.26
    %
    
    
    43,674
    
    
    
    147
    
    
    
    1.35
    %Certificates of deposit
    
    
    316,975
    
    
    
    1,177
    
    
    
    1.49
    %
    
    
    325,613
    
    
    
    1,790
    
    
    
    2.20
    %Mortgagors deposits
    
    
    3,173
    
    
    
    13
    
    
    
    1.64
    %
    
    
    2,891
    
    
    
    11
    
    
    
    1.52
    %Total deposits
    
    
    549,199
    
    
    
    1,517
    
    
    
    1.10
    %
    
    
    545,589
    
    
    
    2,037
    
    
    
    1.49
    %Borrowed money
    
    
    124,542
    
    
    
    1,041
    
    
    
    3.34
    %
    
    
    120,276
    
    
    
    986
    
    
    
    3.28
    %Total interest-bearing liabilities
    
    
    673,741
    
    
    
    2,558
    
    
    
    1.52
    %
    
    
    665,865
    
    
    
    3,023
    
    
    
    1.82
    %Non-interest-bearing liabilities:Demand
    
    
    60,322
    
    
    
    
    
    
    
    
    
    
    
    58,406Other liabilities
    
    
    8,601
    
    
    
    
    
    
    
    
    
    
    
    7,904Total liabilities
    
    
    742,664
    
    
    
    
    
    
    
    
    
    
    
    732,175Stockholders equity
    
    
    71,622
    
    
    
    
    
    
    
    
    
    
    
    63,790Total liabilities & stockholders equity
    
    $
    814,286
    
    
    
    
    
    
    
    
    
    
    $
    795,965Net interest income
    
    
    
    
    
    $
    7,061
    
    
    
    
    
    
    
    
    
    
    $
    6,890Average interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.78
    %
    
    
    
    
    
    
    
    
    
    
    3.52
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.89
    %
    
    
    
    
    
    
    
    
    
    
    3.71
    %
 (1)
    
    Includes non-accrual loans(2)
    
    Includes FHLB-NY stock  33




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Interest Income
  Interest Expense
  Provision for Loan Losses and Asset Quality
    34




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##### Table of Contents



Three Months Ended
    
    
    Fiscal Year-EndJune 30, 2010
    
    
    March 31, 2010Beginning Balance
    
    $
    12,000
    
    
    $
    7,049Less charge-offs:One-to-four family
    
    
    (539
    )
    
    
    (580
    )Construction
    
    
    (1,154
    )
    
    
    Non-residential
    
    
    (134
    )
    
    
    (1,648
    )Business
    
    
    (871
    )
    
    
    (646
    )Consumer and other
    
    
    
    
    
    
    (84
    )Total Charge-Offs:
    
    
    (2,698
    )
    
    
    (2,958
    )Add Recoveries:One-to-four family
    
    
    
    
    
    
    12Non-residential
    
    
    
    
    
    
    Business
    
    
    4
    
    
    
    6Consumer and other
    
    
    5
    
    
    
    46Total Recoveries:
    
    
    9
    
    
    
    64Provision for Loan Losses
    
    
    6,241
    
    
    
    7,845Ending Balance
    
    $
    15,552
    
    
    $
    12,000Ratios:Net charge-offs to average loans outstanding
    
    
    2.18
    %
    
    
    0.44
    %Allowance to total loans
    
    
    2.40
    %
    
    
    1.79
    %Allowance to non-performing loans
    
    
    18.02
    %
    
    
    25.23
    %
   35




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##### Table of Contents



Non-performing Assets.
     36




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##### Table of Contents



June
    
    
    March
    
    
    December
    
    
    September
    
    
    June2010
    
    
    2010
    
    
    2009
    
    
    2009
    
    
    2009Loans accounted for on a non-accrual basis (1):Gross loans receivable:One- to four-family
    
    $
    14,320
    
    
    $
    7,682
    
    
    $
    5,009
    
    
    $
    3,297
    
    
    $
    6,598Multifamily
    
    
    16,923
    
    
    
    10,334
    
    
    
    6,406
    
    
    
    5,988
    
    
    
    3,978Non-residential
    
    
    13,249
    
    
    
    6,315
    
    
    
    3,831
    
    
    
    4,933
    
    
    
    7,963Construction
    
    
    34,792
    
    
    
    17,413
    
    
    
    12,719
    
    
    
    9,808
    
    
    
    3,750Business
    
    
    7,031
    
    
    
    5,799
    
    
    
    5,138
    
    
    
    2,760
    
    
    
    2,801Consumer
    
    
    15
    
    
    
    28
    
    
    
    35
    
    
    
    31
    
    
    
    3Total non-accrual loans
    
    
    86,331
    
    
    
    47,571
    
    
    
    33,138
    
    
    
    26,817
    
    
    
    25,093Other non-performing assets (2):Real estate owned
    
    
    1
    
    
    
    66
    
    
    
    28
    
    
    
    67
    
    
    
    162Total other non-performing assets
    
    
    1
    
    
    
    66
    
    
    
    28
    
    
    
    67
    
    
    
    162Total non-performing assets (3)
    
    $
    86,332
    
    
    $
    47,637
    
    
    $
    33,166
    
    
    $
    26,884
    
    
    $
    25,255Accruing loans contractually past due > 90 days (4)
    
    
    478
    
    
    
    1,411
    
    
    
    305
    
    
    
    987
    
    
    
    1,388Non-performing loans to total loans
    
    
    13.34
    %
    
    
    7.10
    %
    
    
    4.86
    %
    
    
    4.17
    %
    
    
    4.02
    %Non-performing assets to total assets
    
    
    10.74
    %
    
    
    5.91
    %
    
    
    4.12
    %
    
    
    3.45
    %
    
    
    3.29
    %
 (1)
    
    Non-accrual status denotes any loan where the delinquency exceeds 90 days past due and in the
opinion of management the collection of additional interest is doubtful. Payments received on a
non-accrual loan are either applied to the outstanding principal balance or recorded as interest
income, depending on assessment of the ability to collect on the loan.(2)
    
    Other non-performing assets generally represent property acquired by the Bank in settlement of
loans (i.e., through foreclosure, repossession or as an in-substance foreclosure). These assets
are recorded at the lower of their fair value or the cost to acquire.(3)
    
    Troubled debt restructured loans performing in accordance with their modified terms for less
than six months and those not performing to their modified terms are considered non-accrual and are
included in the non-accrual category in the table above. TDR loans that have performed in
accordance with their modified terms for a period of at least six months are generally considered
performing loans and are not presented in the table above.(4)
    
    Loans 90 days or more past due and still accruing, which were not included in the
non-performing category, are presented in the above table. Loans past due 90 days or more and still
accruing represent mostly 1-4 family loans where the loan servicer is contractually abligated to
make payments. Subprime Loans
   37




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##### Table of Contents



Non-Interest Income
  Non-Interest Expense
  Income Tax Benefit
  
 ITEM 3. Quantitative and Qualitative Disclosure about Market Risk
  
 ITEM 4. Controls and Procedures
    38




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
  
 ITEM 1A. Risk Factors
       39




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##### Table of Contents



Any future FDIC special assessments or increases in insurance premiums will adversely impact the
Companys earnings.
 
 ITEM 2. Issuer Purchases of Equity Securities
  
 ITEM 3. Defaults Upon Senior Securities
  
 ITEM 4. Submission of Matters to a Vote of Security Holders
  
 ITEM 5. Other Information
  
 ITEM 6. Exhibits
  Exhibit 11.
    
    Computation of Earnings Per Share.Exhibit 31.1
    
    Certification of Chief Executive Officer.Exhibit 31.2
    
    Certification of Chief Accounting Officer.Exhibit 32.1
    
    Certification of Chief Executive Officer furnished pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.Exhibit 32.2
    
    Certification of Chief Accounting Officer furnished pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
  40




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##### Table of Contents



SIGNATURES
  CARVER BANCORP, INC.Date: August 16, 2010
    /s/ Deborah C.  WrightDeborah C.  WrightChairman and Chief Executive Officer
(Principal Executive Officer)Date: August 16, 2010
    /s/ Chris A. McFaddenChris A. McFaddenExecutive Vice President & Chief Financial Officer
(Principal Accounting Officer)  41