##### 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 December 31, 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
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    13-3904174
(I.R.S. Employer Identification No.)75 West 125th Street, New York, New York
(Address of Principal Executive Offices)
    
    10027
(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
    
    2,484,285Class
    
    Outstanding at December 31, 2010




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##### 



TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Statements of Financial Condition as of
December 31, 2010 (unaudited) and March 31, 2010
    
    
    2Consolidated Statements of Operations for the Three and Nine Months
Ended December 31, 2010 and 2009 (unaudited)
    
    
    3Consolidated Statement of Changes in Stockholders Equity and
Comprehensive Income for the Nine Months Ended December 31, 2010 (unaudited)
    
    
    4Consolidated Statements of Cash Flows for the Nine Months
Ended December 31, 2010 and 2009 (unaudited)
    
    
    5Notes to Consolidated Financial Statements (unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    28Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    47Item 4. Controls and Procedures
    
    
    48PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    49Item 1A. Risk Factors
    
    
    49Item 2. Issuer Purchases of Equity Securities
    
    
    50Item 3. Defaults Upon Senior Securities
    
    
    50Item 4. Reserved
    
    
    50Item 5. Other Information
    
    
    50Item 6. Exhibits
    
    
    50SIGNATURES
    
    
    51Exhibit 11Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   1




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##### Table of Contents



CARVER BANCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
  December 31,
    
    
    March 31,2010
    
    
    2010(unaudited)ASSETSCash and cash equivalents:Cash and due from banks
    
    $
    45,645
    
    
    $
    37,513Money market investments
    
    
    7,055
    
    
    
    833Total cash and cash equivalents
    
    
    52,700
    
    
    
    38,346Investment securities:Available-for-sale, at fair value
    
    
    51,114
    
    
    
    43,050Held-to-maturity, at amortized cost (fair value of $19,560 and
$12,603 at December 31, 2010 and March 31, 2010, respectively)
    
    
    19,049
    
    
    
    12,343Total securities
    
    
    70,163
    
    
    
    55,393Loans held-for-sale (HFS)
    
    
    1,700
    
    
    
    Loans receivable:Real estate mortgage loans
    
    
    547,190
    
    
    
    600,913Commercial business loans
    
    
    53,776
    
    
    
    67,695Consumer loans
    
    
    1,346
    
    
    
    1,403Loans, net
    
    
    602,312
    
    
    
    670,011Allowance for loan losses
    
    
    (21,322
    )
    
    
    (12,000
    )Total loans receivable, net
    
    
    580,990
    
    
    
    658,011Premises and equipment, net
    
    
    11,428
    
    
    
    12,076Federal Home Loan Bank of New York (FHLB-NY) stock, at cost
    
    
    3,353
    
    
    
    4,107Bank owned life insurance
    
    
    10,042
    
    
    
    9,803Accrued interest receivable
    
    
    2,773
    
    
    
    3,539Core deposit intangibles, net
    
    
    114
    
    
    
    228Deferred Tax Asset (net of valuation allowance)
    
    
    
    
    
    
    14,321Other assets
    
    
    10,240
    
    
    
    9,650Total assets
    
    $
    743,503
    
    
    $
    805,474LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Deposits:Savings
    
    $
    105,671
    
    
    $
    115,817Non-Interest Bearing Checking
    
    
    81,711
    
    
    
    58,792NOW
    
    
    41,885
    
    
    
    43,593Money Market
    
    
    69,235
    
    
    
    67,122Certificates of Deposit
    
    
    290,406
    
    
    
    317,925Total Deposits
    
    
    588,908
    
    
    
    603,249Advances from the FHLB-NY and other borrowed money
    
    
    112,535
    
    
    
    131,557Other liabilities
    
    
    9,204
    
    
    
    8,982Total liabilities
    
    
    710,647
    
    
    
    743,788Stockholders equity:Preferred stock (par value $0.01 per share, 2,000,000 shares authorized; 18,980 Series A shares,
with a liquidation preference of $1,000.00 per share, issued and outstanding at March 31, 2010
exchanged for 18,980 Series B shares with a liquidation preference of $1,000.00 per share, issued
and
outstanding December 31, 2010
    
    
    18,980
    
    
    
    18,980Common stock (par value $0.01 per share: 10,000,000 shares authorized; 2,524,691 shares issued;
2,484,285 and 2,474,719 shares outstanding at December 31, 2010 and March 31, 2010, respectively)
    
    
    25
    
    
    
    25Additional paid-in capital
    
    
    26,330
    
    
    
    24,374Retained earnings
    
    
    (15,879
    )
    
    
    18,806Non-controlling interest
    
    
    4,637
    
    
    
    Treasury stock, at cost (40,406 and 49,972 shares at December 31, 2010
and March 31, 2010, respectively)
    
    
    (568
    )
    
    
    (697
    )Accumulated other comprehensive income
    
    
    (669
    )
    
    
    198Total stockholders equity
    
    
    32,856
    
    
    
    61,686Total liabilities and stockholders equity
    
    $
    743,503
    
    
    $
    805,474
   2




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CARVER BANCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
   Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009 *Interest Income:Loans
    
    $
    8,021
    
    
    $
    9,361
    
    
    $
    25,656
    
    
    $
    28,149Mortgage-backed securities
    
    
    460
    
    
    
    632
    
    
    
    1,572
    
    
    
    2,063Investment securities
    
    
    105
    
    
    
    73
    
    
    
    263
    
    
    
    259Money market investments
    
    
    19
    
    
    
    114
    
    
    
    77
    
    
    
    129Total interest income
    
    
    8,605
    
    
    
    10,180
    
    
    
    27,568
    
    
    
    30,600Interest expense:Deposits
    
    
    1,366
    
    
    
    1,637
    
    
    
    4,386
    
    
    
    5,452Advances and other borrowed money
    
    
    960
    
    
    
    1,063
    
    
    
    2,984
    
    
    
    2,999Total interest expense
    
    
    2,326
    
    
    
    2,700
    
    
    
    7,370
    
    
    
    8,451Net interest income
    
    
    6,279
    
    
    
    7,480
    
    
    
    20,198
    
    
    
    22,149Provision for loan losses
    
    
    6,242
    
    
    
    1,286
    
    
    
    20,318
    
    
    
    3,290Net interest income after provision for loan losses
    
    
    37
    
    
    
    6,194
    
    
    
    (120
    )
    
    
    18,859Non-interest income:Depository fees and charges
    
    
    725
    
    
    
    757
    
    
    
    2,224
    
    
    
    2,256Loan fees and service charges
    
    
    183
    
    
    
    186
    
    
    
    618
    
    
    
    753Gain on sale of securities, net
    
    
    1
    
    
    
    446
    
    
    
    764
    
    
    
    446(Loss)/Gain on sales of loans, net
    
    
    (1
    )
    
    
    (223
    )
    
    
    7
    
    
    
    (220
    )Gain (Loss) on sale of real estate ownedNew Market Tax Credit (NMTC) fees
    
    
    473
    
    
    
    431
    
    
    
    1,654
    
    
    
    506Lower of Cost or market adjustment on loans held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,136
    )Other
    
    
    349
    
    
    
    1,357
    
    
    
    569
    
    
    
    1,824Total non-interest income
    
    
    1,730
    
    
    
    2,954
    
    
    
    5,836
    
    
    
    3,429Non-interest expense:Employee compensation and benefits
    
    
    2,664
    
    
    
    3,053
    
    
    
    8,771
    
    
    
    9,366Net occupancy expense
    
    
    928
    
    
    
    1,624
    
    
    
    2,880
    
    
    
    3,765Equipment, net
    
    
    587
    
    
    
    569
    
    
    
    1,672
    
    
    
    1,569Consulting fees
    
    
    498
    
    
    
    205
    
    
    
    1,043
    
    
    
    574Federal deposit insurance premiums
    
    
    502
    
    
    
    255
    
    
    
    1,253
    
    
    
    1,303Other
    
    
    2,459
    
    
    
    3,228
    
    
    
    7,120
    
    
    
    6,352Total non-interest expense
    
    
    7,638
    
    
    
    8,934
    
    
    
    22,739
    
    
    
    22,929(Loss)/Income before income taxes
    
    
    (5,871
    )
    
    
    214
    
    
    
    (17,023
    )
    
    
    (641
    )Income tax expense/(benefit)
    
    
    2,317
    
    
    
    (574
    )
    
    
    17,018
    
    
    
    (1,810
    )Net (loss) income
    
    $
    (8,188
    )
    
    $
    788
    
    
    $
    (34,041
    )
    
    $
    1,169(Loss)/Earnings per common share:
    
    $
    (3.30
    )
    
    $
    0.22
    
    
    $
    (13.84
    )
    
    $
    0.18
 *
    
    Restated as previously disclosed in a Form 8-K filed with the Securities and
Exchange Commission on July 15, 2010   3




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CARVER BANCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME (LOSS)
 For the nine months ended December 31, 2010
 (In thousands)
 (Unaudited)
 AccumulatedNon-
    
    
    
    
    
    
    Other
    
    
    TotalCommon
    
    
    Additional Paid-
    
    
    Treasury
    
    
    controlling
    
    
    Retained
    
    
    Comprehensive
    
    
    StockholdersPreferred Stock
    
    
    Stock
    
    
    In Capital
    
    
    Stock
    
    
    interest
    
    
    Earnings
    
    
    Income (Loss)
    
    
    EquityBalanceMarch 31, 2010
    
    $
    18,980
    
    
    $
    25
    
    
    $
    24,374
    
    
    $
    (697
    )
    
    
    
    
    
    $
    18,806
    
    
    $
    198
    
    
    $
    61,686Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34,041
    )
    
    
    
    
    
    
    (34,041
    )Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (110
    )
    
    
    (110
    )Reclassification of gains included net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (458
    )
    
    
    (458
    )Change in net unrealized Gain on available-for-sale
securities, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (299
    )
    
    
    (299
    )Comprehensive income (loss), net of taxes:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34,041
    )
    
    
    (867
    )
    
    
    (34,908
    )Non Controlling Interest on sale of NMTC Equity interest
in investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,655
    
    
    
    
    
    
    
    
    
    
    
    6,655Transfer between Controlling and Non Controlling Interest
    
    
    
    
    
    
    
    
    
    
    2,018
    
    
    
    
    
    
    
    (2,018
    )
    
    
    
    
    
    
    
    
    
    
    Common Dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (124
    )
    
    
    
    
    
    
    (124
    )Preferred Dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (588
    )
    
    
    
    
    
    
    (588
    )Accrued Preferred Dividends
    
    
    
    
    
    
    
    
    
    
    (68
    )
    
    
    
    
    
    
    
    
    
    
    68
    
    
    
    
    
    
    
    Treasury stock activity
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    129
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    132Stock based compensation
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3BalanceDecember 31, 2010
    
    $
    18,980
    
    
    $
    25
    
    
    $
    26,330
    
    
    $
    (568
    )
    
    $
    4,637
    
    
    $
    (15,879
    )
    
    $
    (669
    )
    
    $
    32,856
   4




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CARVER BANCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
   Nine Months Ended December 31,2010
    
    
    2009*OPERATING ACTIVITIESNet (loss)/income
    
    $
    (34,041
    )
    
    $
    1,169Adjustments to reconcile net income to net cash from operating activities:Provision for loan losses
    
    
    20,318
    
    
    
    3,290Deferred Tax Asset and related valuation allowance
    
    
    14,461
    
    
    
    Provision for REO losses
    
    
    38
    
    
    
    Stock based compensation expense
    
    
    57
    
    
    
    5Depreciation and amortization expense
    
    
    1,146
    
    
    
    1,371Amortization of intangibles
    
    
    114
    
    
    
    114Loss from sale of real estate owned
    
    
    20
    
    
    
    14Gain on sale of building
    
    
    
    
    
    
    (1,172
    )Gain on sale of securities
    
    
    (764
    )
    
    
    (446
    )Gain on sale of loans
    
    
    (7
    )
    
    
    220Market Adjustment on Held For Sale Loans
    
    
    
    
    
    
    2,136Originations of loans held-for-sale
    
    
    (2,413
    )
    
    
    (1,464
    )Proceeds from sale of loans held-for-sale
    
    
    2,413
    
    
    
    1,635(Increase) decrease in accrued interest receivable
    
    
    766
    
    
    
    281(Increase) decrease in loan premiums and discounts and deferred charges
    
    
    (510
    )
    
    
    428(Increase) decrease in premiums and discounts  securities
    
    
    (695
    )
    
    
    311(Increase) decrease in other assets
    
    
    (1,832
    )
    
    
    8,449Increase (decrease) in other liabilities
    
    
    222
    
    
    
    (515
    )Net cash used in operating activities
    
    
    (707
    )
    
    
    (1,300
    )INVESTING ACTIVITIESPurchases of securities:Available-for-sale
    
    
    (77,106
    )
    
    
    (23,657
    )Held-to-maturity
    
    
    (7,994
    )
    
    
    Proceeds from principal payments, maturities, calls and sales of securities:Available-for-sale
    
    
    68,444
    
    
    
    35,601Held-to-maturity
    
    
    1,407
    
    
    
    2,208Originations of loans held-for-investment
    
    
    (18,680
    )
    
    
    (96,360
    )Loans purchased from third parties
    
    
    
    
    
    
    (10,760
    )Principal collections on loans
    
    
    75,246
    
    
    
    78,634Proceeds on sale of loans
    
    
    900
    
    
    
    (Purchase ) redemption of FHLB-NY stock
    
    
    754
    
    
    
    (923
    )Disposals /(Additions) to premises and equipment
    
    
    (498
    )
    
    
    3,302Proceeds from sale of real estate owned
    
    
    7
    
    
    
    562Net cash provided by (used in) investing activities
    
    
    42,480
    
    
    
    (11,393
    )FINANCING ACTIVITIESNet decrease in deposits
    
    
    (14,340
    )
    
    
    (18,431
    )Net change in borrowings of FHLB-NY advances and other borrowings
    
    
    (19,022
    )
    
    
    38,548Increase in capital
    
    
    6,655
    
    
    
    Dividends paid
    
    
    (712
    )
    
    
    (1,457
    )Net cash (used in) provided by financing activities
    
    
    (27,420
    )
    
    
    18,660Net (decrease) increase in cash and cash equivalents
    
    
    14,353
    
    
    
    5,967Cash and cash equivalents at beginning of period
    
    
    38,347
    
    
    
    13,341Cash and cash equivalents at end of period
    
    $
    52,700
    
    
    $
    19,308Supplemental information:Noncash Transfers-Change in unrealized loss on valuation of available-for-sale investments, net
    
    $
    (672
    )
    
    $
    402Transfers from loans held-for-investment to loans held-for-sale
    
    $
    2,600
    
    
    $
    Cash paid for-Interest
    
    $
    7,458
    
    
    $
    8,214Income taxes
    
    $
    1,224
    
    
    $
    88
 *
    
    Restated as previously disclosed in a Form 8-K filed with the Securities and Exchange Commission on July 15, 2010   5




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##### Table of Contents



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
  Restatement of Third Quarter Fiscal 2010 Results to Reflect the Correct Estimated
Value of Certain Residential Mortgage Loans
   7




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NOTE 3. EARNINGS PER SHARE
  Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009*Earnings per common share  basicNet (loss) income
    
    $
    (8,188
    )
    
    $
    788
    
    
    $
    (34,041
    )
    
    $
    1,169Less: CPP Preferred Dividends
    
    
    82
    
    
    
    237
    
    
    
    588
    
    
    
    712Dividends paid and undistributed (losses)/earnings
allocated to participating securities
    
    
    (59
    )
    
    
    4
    
    
    
    (248
    )
    
    
    8Net Income Available to Common Shareholders
    
    $
    (8,211
    )
    
    $
    547
    
    
    $
    (34,381
    )
    
    $
    449Weighted average common shares
outstanding
    
    
    2,484,285
    
    
    
    2,474,719
    
    
    
    2,483,350
    
    
    
    2,473,164Earnings per common share
    
    $
    (3.30
    )
    
    $
    0.22
    
    
    $
    (13.84
    )
    
    $
    0.18Earnings per common share  dilutedNet income
    
    
    
    
    
    $
    788
    
    
    
    
    
    
    $
    1,174Less: CPP Preferred Dividends
    
    
    
    
    
    
    237
    
    
    
    
    
    
    
    712Dividends paid and undistributed earnings
allocated to participating securities
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    8Net Income Available to Common Shareholders
    
    
    
    
    
    $
    547
    
    
    
    
    
    
    $
    454Weighted average common shares
outstanding  basic
    
    
    
    
    
    
    2,474,719
    
    
    
    
    
    
    
    2,473,164Effect of dilutive securities  stock options and
unvested restricted stock
    
    
    
    
    
    
    18,223
    
    
    
    
    
    
    
    18,223Weighted average shares
outstanding  diluted
    
    
    
    
    
    
    2,492,942
    
    
    
    
    
    
    
    2,491,387Earnings per common share
    
    
    
    
    
    $
    0.22
    
    
    
    
    
    
    $
    0.18
 *
    
    Restated as previously disclosed in a Form 8-K filed with the Securities and Exchange Commission on July 15, 2010  8




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##### Table of Contents



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




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##### Table of Contents



Amortized
    
    
    Gross Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair-ValueAvailable-for-Sale:Mortgage-backed securities:Government National Mortgage Association
    
    $
    31,383
    
    
    $
    8
    
    
    $
    (403
    )
    
    $
    30,988Federal Home Loan Mortgage Corporation
    
    
    1,972
    
    
    
    
    
    
    
    (66
    )
    
    
    1,906Federal National Mortgage Association
    
    
    4,538
    
    
    
    
    
    
    
    (92
    )
    
    
    4,446Other
    
    
    45
    
    
    
    
    
    
    
    
    
    
    
    45Total mortgage-backed securities
    
    
    37,938
    
    
    
    8
    
    
    
    (561
    )
    
    
    37,385U.S. Government Agency Securities
    
    
    13,970
    
    
    
    
    
    
    
    (241
    )
    
    
    13,729Total available-for-sale
    
    
    51,908
    
    
    
    8
    
    
    
    (802
    )
    
    
    51,114Held-to-Maturity:Mortgage-backed securities:Government National Mortgage Association
    
    
    8,019
    
    
    
    226
    
    
    
    
    
    
    
    8,245Federal Home Loan Mortgage Corporation
    
    
    8,373
    
    
    
    170
    
    
    
    
    
    
    
    8,543Federal National Mortgage Association
    
    
    2,532
    
    
    
    117
    
    
    
    (1
    )
    
    
    2,648Total mortgage-backed securities
    
    
    18,924
    
    
    
    513
    
    
    
    (1
    )
    
    
    19,436Other
    
    
    125
    
    
    
    
    
    
    
    (1
    )
    
    
    124Total held-to-maturity
    
    
    19,049
    
    
    
    513
    
    
    
    (2
    )
    
    
    19,560Total securities
    
    $
    70,957
    
    
    $
    521
    
    
    $
    (804
    )
    
    $
    70,674
  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
    
    
    140
    
    
    
    
    
    
    
    (2
    )
    
    
    138Total held-to-maturity
    
    
    12,343
    
    
    
    262
    
    
    
    (2
    )
    
    
    12,603Total securities
    
    $
    54,946
    
    
    $
    889
    
    
    $
    (182
    )
    
    $
    55,653
  10




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##### Table of Contents



Less than 12 months
    
    
    12 months or longer
    
    
    TotalUnrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    FairLosses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    ValueAvailable-for-Sale:Mortgage-backed securities
    
    $
    (561
    )
    
    $
    36,076
    
    
    $
    
    
    
    $
    
    
    
    $
    (561
    )
    
    $
    36,076Agencies
    
    
    (241
    )
    
    
    13,729
    
    
    
    
    
    
    
    
    
    
    $
    (241
    )
    
    $
    13,729Total available-for-sale
    
    $
    (802
    )
    
    $
    49,805
    
    
    $
    
    
    
    $
    
    
    
    $
    (802
    )
    
    $
    49,805Held-to-Maturity:Mortgage-backed securities
    
    $
    (1
    )
    
    $
    354
    
    
    $
    
    
    
    $
    
    
    
    $
    (1
    )
    
    $
    354Other
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    124
    
    
    
    (1
    )
    
    
    124Total held-to-maturity
    
    $
    (1
    )
    
    $
    354
    
    
    $
    (1
    )
    
    $
    124
    
    
    $
    (2
    )
    
    $
    478Total securities
    
    $
    (803
    )
    
    $
    50,159
    
    
    $
    (1
    )
    
    $
    124
    
    
    $
    (804
    )
    
    $
    50,283
  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
    
    
    
    
    
    
    
    
    
    
    
    (12
    )
    
    
    1,484Total available-for-sale
    
    $
    (54
    )
    
    $
    14,656
    
    
    $
    (126
    )
    
    $
    7,682
    
    
    $
    (180
    )
    
    $
    22,339Held-to-Maturity: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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##### Table of Contents



NOTE 8. LOANS RECEIVABLE AND ALLOWANCE FOR LOAN AND LEASE LOSSES
         12




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##### Table of Contents



December 31, 2010
    
    
    March 31, 2010Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentGross loans receivable:One- to four-family
    
    $
    86,585
    
    
    
    14.27
    %
    
    $
    90,150
    
    
    
    13.40
    %Multifamily
    
    
    132,901
    
    
    
    21.90
    %
    
    
    141,702
    
    
    
    21.06
    %Non-residential
    
    
    249,560
    
    
    
    41.11
    %
    
    
    259,619
    
    
    
    38.59
    %Construction
    
    
    82,242
    
    
    
    13.55
    %
    
    
    111,348
    
    
    
    16.55
    %Business
    
    
    54,268
    
    
    
    8.94
    %
    
    
    68,523
    
    
    
    10.19
    %Consumer and other (1)
    
    
    1,346
    
    
    
    0.22
    %
    
    
    1,403
    
    
    
    0.21
    %Total loans receivable
    
    
    606,902
    
    
    
    100.00
    %
    
    
    672,745
    
    
    
    100.00
    %Add:Premium on loans
    
    
    118
    
    
    
    
    
    
    
    130Less:Deferred fees and loan discounts
    
    
    (4,708
    )
    
    
    
    
    
    
    (2,864
    )Allowance for loan losses
    
    
    (21,322
    )
    
    
    
    
    
    
    (12,000
    )Total loans receivable, net
    
    $
    580,990
    
    
    
    
    
    
    $
    658,011
 (1)
    
    Includes personal, credit card, and home improvement   One-to-fourfamily
    
    
    Multi-Family
    
    
    Commercial Real
    
    
    
    
    
    
    
    
    
    
    Consumer andResidential
    
    
    Mortgage
    
    
    Estate
    
    
    Construction
    
    
    Business
    
    
    Other
    
    
    Unallocated
    
    
    TotalAllowance for loan losses:Beginning Balance
    
    $
    1,035
    
    
    $
    1,566
    
    
    $
    2,613
    
    
    $
    3,831
    
    
    $
    2,069
    
    
    $
    60
    
    
    $
    826
    
    
    $
    12,000Charge-offs:
    
    
    136
    
    
    
    2,796
    
    
    
    599
    
    
    
    4,975
    
    
    
    2,515
    
    
    
    8
    
    
    
    
    
    
    
    11,029Recoveries:
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    15
    
    
    
    17
    
    
    
    
    
    
    
    33Provision for Loan Losses
    
    
    2,031
    
    
    
    6,289
    
    
    
    2,496
    
    
    
    7,196
    
    
    
    3,108
    
    
    
    24
    
    
    
    (826
    )
    
    
    20,318Ending Balance
    
    $
    2,930
    
    
    $
    5,059
    
    
    $
    4,511
    
    
    $
    6,052
    
    
    $
    2,677
    
    
    $
    93
    
    
    $
    
    
    
    $
    21,322Ending Balance: collectively
evaluated for
impairment
    
    
    381
    
    
    
    2,249
    
    
    
    1,347
    
    
    
    184
    
    
    
    1,589
    
    
    
    68
    
    
    
    
    
    
    
    5,817Ending Balance: individually
evaluated for
impairment
    
    
    2,549
    
    
    
    2,810
    
    
    
    3,165
    
    
    
    5,868
    
    
    
    1,088
    
    
    
    25
    
    
    
    
    
    
    
    15,505Financing Receivables Ending Balance:
    
    
    84,251
    
    
    
    132,668
    
    
    
    248,068
    
    
    
    82,203
    
    
    
    53,776
    
    
    
    1,346
    
    
    
    
    
    
    
    602,312Ending Balance: collectively
evaluated for
impairment
    
    
    59,671
    
    
    
    113,567
    
    
    
    206,314
    
    
    
    2,799
    
    
    
    42,770
    
    
    
    1,266
    
    
    
    
    
    
    
    426,387Ending Balance: individually
evaluated for
impairment
    
    
    24,580
    
    
    
    19,101
    
    
    
    41,754
    
    
    
    79,404
    
    
    
    11,006
    
    
    
    80
    
    
    
    
    
    
    
    175,925
  13




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##### Table of Contents



December 31,2010Loans accounted for on a non-accrual basis:Gross loans receivable:One- to four-family
    
    $
    16,290Multifamily
    
    
    14,076Non-residential
    
    
    12,231Construction
    
    
    40,060Business
    
    
    7,471Consumer
    
    
    20Total non-accrual loans
    
    
    90,148
    14




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##### Table of Contents



Multi-Family
    
    
    CommercialMortgage
    
    
    Real Estate
    
    
    Construction
    
    
    BusinessCredit Risk Profile by Internally Assigned Grade:Pass
    
    
    113,568
    
    
    
    206,313
    
    
    
    2,799
    
    
    
    42,770Special Mention
    
    
    1,333
    
    
    
    5,586
    
    
    
    32,014
    
    
    
    5,416Substandard
    
    
    17,396
    
    
    
    35,351
    
    
    
    40,229
    
    
    
    5,501Doubtful
    
    
    372
    
    
    
    817
    
    
    
    7,161
    
    
    
    89Total
    
    $
    132,669
    
    
    $
    248,067
    
    
    $
    82,203
    
    
    $
    53,776
 One-to-four family
    
    
    Consumer andResidential
    
    
    OtherCredit Risk Profile Based on Payment Activity:Performing
    
    $
    67,961
    
    
    $
    1,326Non-Performing
    
    
    16,290
    
    
    
    20Total
    
    $
    84,251
    
    
    $
    1,346
  30-59 Days
    
    
    60-89 Days
    
    
    Greater Than
    
    
    Total Past
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total FinancingPast Due
    
    
    Past Due
    
    
    90 Days
    
    
    Due
    
    
    Impaired (1)
    
    
    TDR (2)
    
    
    Current
    
    
    ReceivablesOne-to-four family residential
    
    $
    6,567
    
    
    $
    5,343
    
    
    $
    8,706
    
    
    $
    20,615
    
    
    $
    501
    
    
    $
    7,318
    
    
    $
    55,816
    
    
    $
    84,251Multi-family mortgage
    
    
    227
    
    
    
    1,963
    
    
    
    12,932
    
    
    
    15,122
    
    
    
    1,144
    
    
    
    
    
    
    
    116,403
    
    
    
    132,669Commercial real estate
    
    
    4,000
    
    
    
    2,607
    
    
    
    5,377
    
    
    
    11,985
    
    
    
    
    
    
    
    7,299
    
    
    
    228,784
    
    
    
    248,067Construction
    
    
    
    
    
    
    
    
    
    
    35,000
    
    
    
    35,000
    
    
    
    923
    
    
    
    4,137
    
    
    
    42,143
    
    
    
    82,203Business
    
    
    9,337
    
    
    
    4
    
    
    
    4,629
    
    
    
    13,969
    
    
    
    2,003
    
    
    
    838
    
    
    
    36,965
    
    
    
    53,776Consumer and other
    
    
    1
    
    
    
    31
    
    
    
    20
    
    
    
    52
    
    
    
    
    
    
    
    
    
    
    
    1,294
    
    
    
    1,346Total
    
    $
    20,132
    
    
    $
    9,948
    
    
    $
    66,664
    
    
    $
    96,744
    
    
    $
    4,571
    
    
    $
    19,592
    
    
    $
    481,405
    
    
    $
    602,312
 (1)
    
    Consists of loans which are
less than
90 days past due but impaired due to other risk characteristics.(2)
    
    $0.7 million are TDR loans that have performed in accordance with their modified terms for
at least six months and are considered performing.

$18.9 million have not performed in accordance with their
modified terms for more than six months and are considered non performing.
Currently they are represented in the following TDR categories:

$6.8 million loans are non accrual as they are not performing in accordance with their modified terms

$4.4 million are 30-59 days past due.

$0.06 million loans are 60-89 days past due.

$7.7 million are greater than 90 days past due.  15




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##### Table of Contents



Impaired Loans by Class
As of December 31, 2010
(In thousands)
 UnpaidRecorded
    
    
    Principal
    
    
    AssociatedInvestment
    
    
    Balance
    
    
    AllowanceWith no specific allowance recorded:One-to-four family residential
    
    
    4,388
    
    
    
    4,388Multi-family mortgage
    
    
    
    
    
    
    Commercial real estate
    
    
    980
    
    
    
    980Construction
    
    
    11,103
    
    
    
    11,103Business
    
    
    2,156
    
    
    
    2,156Consumer and other
    
    
    
    
    
    
    With an allowance recorded:One-to-four family residential
    
    
    4,299
    
    
    
    4,299
    
    
    
    348Multi-family mortgage
    
    
    11,562
    
    
    
    11,562
    
    
    
    2,189Commercial real estate
    
    
    7,938
    
    
    
    7,938
    
    
    
    329Construction
    
    
    22,289
    
    
    
    32,150
    
    
    
    1,345Business
    
    
    
    
    
    
    Consumer and other
    
    
    
    
    
    
    TotalOne-to-four family residential
    
    
    8,687
    
    
    
    8,687
    
    
    
    348Multi-family mortgage
    
    
    11,562
    
    
    
    11,562
    
    
    
    2,189Commercial real estate
    
    
    8,918
    
    
    
    8,918
    
    
    
    329Construction
    
    
    33,392
    
    
    
    43,253
    
    
    
    1,345Business
    
    
    2,156
    
    
    
    2,156Consumer and other
    
    
    
    
    
    
    
  16




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##### Table of Contents



NOTE 9. INCOME TAXES
  December 31,2010Federal income tax expense (benefit):Current
    
    $
    (1,850
    )Deferred
    
    
    2,439Valuation Allowance
    
    
    (16,173
    )(15,584
    )State and local income tax expense (benefit):Current
    
    
    (708
    )Deferred
    
    
    1,303Valuation Allowance
    
    
    (2,029
    )(1,434
    )Total income tax expense:
    
    $
    (17,018
    )
  December 31,2010Amount
    
    
    PercentStatutory Federal income tax
    
    $
    (5,788
    )
    
    
    34.0
    %State and local income taxes, net of
Federal tax benefit
    
    
    118
    
    
    
    (0.7
    )%New markets tax credit
    
    
    0
    
    
    
    
    %General business credit
    
    
    (24
    )
    
    
    0.1
    %Tax Gain on Sale of NMTC
    
    
    4,905
    
    
    
    (28.8
    )%Valuation
allowance
    
    
    18,203
    
    
    
    (106.93
    )%Other
    
    
    (396
    )
    
    
    2.3
    %Total income tax expense
    
    $
    17,018
    
    
    
    (100.0
    )%
   17




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##### Table of Contents



December 31,
    
    
    March 31,2010
    
    
    2010Deferred Tax Assets:Allowance for loan losses
    
    $
    8,152
    
    
    $
    4,080Deferred loan fees
    
    
    615
    
    
    
    686Compensation and benefits
    
    
    29
    
    
    
    58Non-accrual loan interest
    
    
    2,639
    
    
    
    1,344Capital loss carryforward
    
    
    
    
    
    
    84Purchase accounting adjustment
    
    
    169
    
    
    
    131Net operating loss carry forward
    
    
    (34
    )
    
    
    112New markets tax credit
    
    
    5,947
    
    
    
    7,322Depreciation
    
    
    110
    
    
    
    316Minimum pension liability
    
    
    
    
    
    
    110Market value adjustment on HFS loans
    
    
    817
    
    
    
    817Other
    
    
    390
    
    
    
    180Unrealized gain on available-for-sale securities
    
    
    1
    
    
    
    Total Deferred Tax Assets
    
    
    18,835
    
    
    
    15,240Deferred Tax Liabilities:Income from affiliate
    
    
    632
    
    
    
    738Unrealized gain on available-for-sale securities
    
    
    
    
    
    
    181Total Deferred Tax Liabilities
    
    
    632
    
    
    
    919Valuation Allowance
    
    
    (18,203
    )
    
    
    Net Deferred Tax Assets
    
    $
    
    
    
    $
    14,321
    18




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##### Table of Contents



NOTE 10. 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 December 31, 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
    
    $
    
    
    
    $
    
    
    
    $
    693
    
    
    $
    693Investment securites:Available for sale:Government National Mortgage
Association
    
    
    
    
    
    $
    30,988
    
    
    $
    
    
    
    $
    30,988Federal Home Loan Mortgage
Corporation
    
    
    
    
    
    
    1,906
    
    
    
    
    
    
    
    1,906Federal National Mortgage Association
    
    
    
    
    
    
    4,446
    
    
    
    
    
    
    
    4,446Other
    
    
    
    
    
    
    13,729
    
    
    
    45
    
    
    
    13,774Total Mortgage-Back Securities
    
    $
    
    
    
    $
    51,069
    
    
    $
    45
    
    
    $
    51,114Total assets
    
    $
    
    
    
    $
    51,069
    
    
    $
    738
    
    
    $
    51,807
  19




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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
         20




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##### Table of Contents



Mortgage
    
    
    SecuritiesServicing
    
    
    Available for(in thousands)
    
    Rights
    
    
    SaleBeginning
balance, March 31, 2010
    
    $
    721
    
    
    $
    45Activities:
    
    
    
    
    
    
    Unrealized gain (loss)
    
    
    (28
    )
    
    
    Ending balance, December 31, 2010
    
    $
    693
    
    
    $
    45
 Mortgage
    
    
    SecuritiesServicing
    
    
    Available for(in thousands)
    
    Rights
    
    
    SaleBeginning
April 1, 2009
    
    $
    451
    
    
    $
    45Additions
    
    
    177
    
    
    
    Unrealized gain
    
    
    52
    
    
    
    Ending balance, December 31, 2009
    
    $
    680
    
    
    $
    45
  Fair Value Measurements at December 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)
    
    
    ValueHeld For Sale Loans
    
    $
    
    
    
    $
    1,700
    
    
    $
    
    
    
    $
    1,700Certain impaired loans
    
    $
    
    
    
    $
    44,447
    
    
    $
    
    
    
    $
    44,447
 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
    21




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NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS
   December 31, 2010
    
    
    March 31, 2010Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    EstimatedAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueFinancial Assets:Cash and cash equivalents
    
    $
    52,700
    
    
    $
    52,700
    
    
    $
    38,346
    
    
    $
    38,346Securities available-for-sale
    
    
    51,114
    
    
    
    51,114
    
    
    
    43,050
    
    
    
    43,050FHLB Stock
    
    
    3,353
    
    
    
    3,353
    
    
    
    4,107
    
    
    
    4,107Securities held-to-maturity
    
    
    19,049
    
    
    
    19,560
    
    
    
    12,343
    
    
    
    12,603Loans Held For Sale
    
    
    1,700
    
    
    
    1,700
    
    
    
    
    
    
    
    Loans receivable
    
    
    580,990
    
    
    
    588,777
    
    
    
    658,011
    
    
    
    664,522Accrued interest receivable
    
    
    2,773
    
    
    
    2,773
    
    
    
    3,539
    
    
    
    3,539Mortgage servicing rights
    
    
    693
    
    
    
    693
    
    
    
    721
    
    
    
    721Financial Liabilities:Deposits
    
    $
    588,908
    
    
    $
    568,257
    
    
    $
    603,249
    
    
    $
    579,023Advances from FHLB of New York
    
    
    50,064
    
    
    
    50,382
    
    
    
    69,086
    
    
    
    69,339Repurchase agreement
    
    
    30,000
    
    
    
    30,182
    
    
    
    30,000
    
    
    
    30,180Other borrowed money
    
    
    32,471
    
    
    
    30,995
    
    
    
    32,471
    
    
    
    33,325
 Cash and cash equivalents and accrued interest receivable
  Securities
  Loans receivable
   22




---



##### Table of Contents



Loans held-for-sale
  Mortgage servicing rights
  Deposits
  Advances from FHLB-NY and other borrowed money
  Repurchase agreements
  Commitments to Extend Credits, Commercial, and Standby Letters of Credit
  Limitations
     23




---



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NOTE 12. VARIABLE INTEREST ENTITIES
        24




---



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NOTE 13. IMPACT OF ACCOUNTING STANDARDS AND INTERPRETATIONS
   25




---



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26




---



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NOTE 14. SUBSEQUENTS EVENTS
     27




---



##### Table of Contents



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.
   28




---



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Overview
        29




---



##### Table of Contents



New Markets Tax Credit Award
     30




---



##### Table of Contents



31




---



##### Table of Contents



Critical Accounting Policies
  Allowance for Loan Losses
        32




---



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Securities Impairment
   33




---



##### Table of Contents



Deferred Income Taxes
   Stock Repurchase Program
  Liquidity and Capital Resources
      34




---



##### Table of Contents



35




---



##### Table of Contents



Tier 1 Risk-
    
    
    Total Risk-Tier 1 Core
    
    
    Based
    
    
    BasedCapital
    
    
    Capital
    
    
    CapitalRatio
    
    
    Ratio
    
    

RatioGAAP Capital at December 31, 2010
    
    $
    46,760
    
    
    $
    46,760
    
    
    $
    46,760Add:General valuation allowances
    
    
    
    
    
    
    
    
    
    
    6,968Qualifying subordinated debt
    
    
    
    
    
    
    
    
    
    
    5,000Other
    
    
    292
    
    
    
    292
    
    
    
    292Deduct:Unrealized gains on securities available-for-sale, net
    
    
    (377
    )
    
    
    (377
    )
    
    
    (377
    )Goodwill and qualifying intangible assets, net
    
    
    114
    
    
    
    114
    
    
    
    114Regulatory Capital
    
    $
    47,315
    
    
    $
    47,315
    
    
    $
    59,283Minimum Capital requirement
    
    
    11,158
    
    
    
    29,755
    
    
    
    43,826Regulatory Capital Excess
    
    $
    36,157
    
    
    $
    17,560
    
    
    $
    15,457Capital Ratios
    
    
    6.36
    %
    
    
    8.64
    %
    
    
    10.82
    %
 Bank Regulatory Matters
     36




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Comparison of Financial Condition at December 31, 2010 and March 31, 2010
 Assets
       Liabilities and Stockholders Equity
     37




---



##### Table of Contents



Asset/Liability Management
   Off-Balance Sheet Arrangements and Contractual Obligations
    Commitments to fund construction mortgage loans
    
    $
    12,611Commitments to fund commercial and consumer loans
    
    
    100Lines of credit
    
    
    4,315Letters of credit
    
    
    4,154$
    21,180
  38




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##### Table of Contents



Comparison of Operating Results for the Three and Nine Months Ended December 31, 2010 and 2009
 Overview
   CARVER BANCORP, INC. AND SUBSIDIARIES
SELECTED KEY RATIOS
 Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,Selected Financial Data:
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Return on average assets (1)
    
    
    (4.37
    )%
    
    
    0.39
    %
    
    
    (5.75
    )%
    
    
    0.19
    %Return on average equity (2)
    
    
    (92.78
    )
    
    
    4.92
    
    
    
    (82.05
    )
    
    
    2.44Net interest margin (3)
    
    
    3.61
    
    
    
    3.97
    
    
    
    3.79
    
    
    
    3.93Interest rate spread (4)
    
    
    3.48
    
    
    
    3.83
    
    
    
    3.68
    
    
    
    3.77Efficiency ratio (5)
    
    
    95.37
    
    
    
    85.62
    
    
    
    87.34
    
    
    
    89.64Operating expenses to average assets (6)
    
    
    4.08
    
    
    
    4.40
    
    
    
    3.84
    
    
    
    3.80Average equity to average assets (7)
    
    
    4.71
    
    
    
    7.90
    
    
    
    7.01
    
    
    
    7.94Average interest-earning assets to
average interest-bearing liabilities
    
    
    1.10
    x
    
    
    1.10
    x
    
    
    1.08
    x
    
    
    1.11
    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
    39




---



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40




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##### Table of Contents



CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES
 For the Three Months Ended December 31,2010
    
    
    2009Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Yield/Cost
    
    
    Balance
    
    
    Interest
    
    
    Yield/CostInterest Earning Assets:Loans (1)
    
    $
    612,171
    
    
    $
    8,021
    
    
    
    5.24
    %
    
    $
    686,490
    
    
    $
    9,361
    
    
    
    5.45
    %Mortgage-backed securities
    
    
    72,755
    
    
    
    460
    
    
    
    2.53
    %
    
    
    61,469
    
    
    
    633
    
    
    
    4.11
    %Investment securities (2)
    
    
    3,388
    
    
    
    118
    
    
    
    13.90
    %
    
    
    4,946
    
    
    
    78
    
    
    
    6.25
    %Other investments and federal funds sold
    
    
    7,208
    
    
    
    6
    
    
    
    0.32
    %
    
    
    1,004
    
    
    
    108
    
    
    
    43.00
    %Total interest-earning assets
    
    
    695,522
    
    
    
    8,605
    
    
    
    4.95
    %
    
    
    753,909
    
    
    
    10,180
    
    
    
    5.40
    %Non-interest-earning assets
    
    
    53,562
    
    
    
    
    
    
    
    
    
    
    
    57,419Total assets
    
    $
    749,084
    
    
    
    
    
    
    
    
    
    
    $
    811,328Interest Bearing Liabilities:Deposits:Now demand
    
    $
    41,456
    
    
    
    22
    
    
    
    0.21
    %
    
    $
    46,516
    
    
    
    20
    
    
    
    0.17
    %Savings and clubs
    
    
    106,629
    
    
    
    71
    
    
    
    0.27
    %
    
    
    114,301
    
    
    
    63
    
    
    
    0.22
    %Money market
    
    
    69,227
    
    
    
    187
    
    
    
    1.08
    %
    
    
    52,999
    
    
    
    183
    
    
    
    1.37
    %Certificates of deposit
    
    
    301,774
    
    
    
    1,077
    
    
    
    1.43
    %
    
    
    327,502
    
    
    
    1,362
    
    
    
    1.64
    %Mortgagors deposits
    
    
    2,696
    
    
    
    9
    
    
    
    1.28
    %
    
    
    2,186
    
    
    
    9
    
    
    
    1.65
    %Total deposits
    
    
    521,782
    
    
    
    1,366
    
    
    
    1.05
    %
    
    
    543,504
    
    
    
    1,637
    
    
    
    1.19
    %Borrowed money
    
    
    112,538
    
    
    
    960
    
    
    
    3.41
    %
    
    
    138,879
    
    
    
    1,063
    
    
    
    3.03
    %Total interest-bearing liabilities
    
    
    634,320
    
    
    
    2,326
    
    
    
    1.47
    %
    
    
    682,383
    
    
    
    2,700
    
    
    
    1.57
    %Non-interest-bearing liabilities:Demand
    
    
    67,995
    
    
    
    
    
    
    
    
    
    
    
    58,420Other liabilities
    
    
    11,470
    
    
    
    
    
    
    
    
    
    
    
    6,429Total liabilities
    
    
    713,785
    
    
    
    
    
    
    
    
    
    
    
    747,232Minority Interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stockholders equity
    
    
    35,299
    
    
    
    
    
    
    
    
    
    
    
    64,096Total liabilities & stockholders equity
    
    $
    749,084
    
    
    
    
    
    
    
    
    
    
    $
    811,328Net interest income
    
    
    
    
    
    $
    6,279
    
    
    
    
    
    
    
    
    
    
    $
    7,480Average interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.48
    %
    
    
    
    
    
    
    
    
    
    
    3.83
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.61
    %
    
    
    
    
    
    
    
    
    
    
    3.97
    %
 (1)
    
    Includes non-accrual loans(2)
    
    Includes FHLB-NY stock
  41




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##### Table of Contents



CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES
 For the Nine Months Ended December 31,2010
    
    
    2009*Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Yield/Cost
    
    
    Balance
    
    
    Interest
    
    
    Yield/CostInterest Earning Assets:Loans (1)
    
    $
    636,849
    
    
    $
    25,656
    
    
    
    5.37
    %
    
    $
    679,012
    
    
    $
    28,150
    
    
    
    5.53
    %Mortgage-backed securities
    
    
    65,850
    
    
    
    1,572
    
    
    
    3.18
    %
    
    
    66,655
    
    
    
    2,063
    
    
    
    4.13
    %Investment securities (2)
    
    
    3,621
    
    
    
    324
    
    
    
    11.92
    %
    
    
    4,916
    
    
    
    272
    
    
    
    7.36
    %Other investments and federal funds sold
    
    
    4,196
    
    
    
    16
    
    
    
    0.52
    %
    
    
    1,017
    
    
    
    115
    
    
    
    15.07
    %Total interest-earning assets
    
    
    710,516
    
    
    
    27,568
    
    
    
    5.17
    %
    
    
    751,600
    
    
    
    30,600
    
    
    
    5.43
    %Non-interest-earning assets
    
    
    78,893
    
    
    
    
    
    
    
    
    
    
    
    53,140Total assets
    
    $
    789,409
    
    
    
    
    
    
    
    
    
    
    $
    804,740Interest Bearing Liabilities:Deposits:Now demand
    
    $
    48,513
    
    
    
    85
    
    
    
    0.23
    %
    
    $
    50,182
    
    
    
    62
    
    
    
    0.16
    %Savings and clubs
    
    
    110,655
    
    
    
    217
    
    
    
    0.26
    %
    
    
    117,113
    
    
    
    194
    
    
    
    0.22
    %Money market
    
    
    70,000
    
    
    
    602
    
    
    
    1.15
    %
    
    
    47,805
    
    
    
    486
    
    
    
    1.35
    %Certificates of deposit
    
    
    310,379
    
    
    
    3,450
    
    
    
    1.48
    %
    
    
    328,623
    
    
    
    4,680
    
    
    
    1.89
    %Mortgagors deposits
    
    
    2,707
    
    
    
    32
    
    
    
    1.58
    %
    
    
    2,453
    
    
    
    30
    
    
    
    1.62
    %Total deposits
    
    
    542,254
    
    
    
    4,386
    
    
    
    1.08
    %
    
    
    546,176
    
    
    
    5,452
    
    
    
    1.32
    %Borrowed money
    
    
    117,036
    
    
    
    2,984
    
    
    
    3.40
    %
    
    
    128,118
    
    
    
    2,999
    
    
    
    3.11
    %Total interest-bearing liabilities
    
    
    659,290
    
    
    
    7,370
    
    
    
    1.49
    %
    
    
    674,294
    
    
    
    8,451
    
    
    
    1.66
    %Non-interest-bearing liabilities:Demand
    
    
    65,543
    
    
    
    
    
    
    
    
    
    
    
    58,964Other liabilities
    
    
    9,256
    
    
    
    
    
    
    
    
    
    
    
    7,596Total liabilities
    
    
    734,089
    
    
    
    
    
    
    
    
    
    
    
    740,854Minority Interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stockholders equity
    
    
    55,320
    
    
    
    
    
    
    
    
    
    
    
    63,886Total liabilities & stockholders equity
    
    $
    789,409
    
    
    
    
    
    
    
    
    
    
    $
    804,740Net interest income
    
    
    
    
    
    $
    20,198
    
    
    
    
    
    
    
    
    
    
    $
    22,149Average interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.68
    %
    
    
    
    
    
    
    
    
    
    
    3.77
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.79
    %
    
    
    
    
    
    
    
    
    
    
    3.93
    %
 (1)
    
    Includes non-accrual loans(2)
    
    Includes FHLB-NY stock*
    
    Restated as previously disclosed in a Form 8-K filed with the Securities and Exchange
Commission on July 15, 2010
  42




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##### Table of Contents



Interest Income
   Interest Expense
   Provision for Loan Losses and Asset Quality
    43




---



##### Table of Contents



Nine Months
    
    
    Fiscal YearEnded
    
    
    EndedDecember 31,
    
    
    March 31,2010
    
    
    2010Beginning Balance
    
    $
    12,000
    
    
    $
    7,049Less: Charge-offs
    
    
    (11,030
    )
    
    
    (2,958
    )Add: Recoveries
    
    
    33
    
    
    
    64Provision for Loan Losses
    
    
    20,319
    
    
    
    7,845Ending Balance
    
    $
    21,322
    
    
    $
    12,000Ratios:Net charge-offs to average loans
outstanding
    
    
    2.30
    %
    
    
    0.43
    %Allowance to total loans
    
    
    3.54
    %
    
    
    1.79
    %Allowance to non-performing loans
    
    
    23.65
    %
    
    
    25.23
    %
    44




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Non-performing Assets
     45




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CARVER BANCORP, INC. AND SUBSIDIARIES
Non Performing Asset Table
(In thousands)
 December
    
    
    September
    
    
    June
    
    
    March
    
    
    December2010
    
    
    2010
    
    
    2010
    
    
    2010
    
    
    2009Loans accounted for on a non-accrual basis (1):Gross loans receivable:One- to four-family
    
    $
    16,290
    
    
    $
    14,583
    
    
    $
    14,320
    
    
    $
    7,682
    
    
    $
    5,009Multifamily
    
    
    14,076
    
    
    
    14,103
    
    
    
    16,923
    
    
    
    10,334
    
    
    
    6,406Non-residential
    
    
    12,231
    
    
    
    11,189
    
    
    
    13,249
    
    
    
    6,315
    
    
    
    3,831Construction
    
    
    40,060
    
    
    
    36,145
    
    
    
    34,792
    
    
    
    17,413
    
    
    
    12,719Business
    
    
    7,471
    
    
    
    3,699
    
    
    
    7,031
    
    
    
    5,799
    
    
    
    5,138Consumer
    
    
    20
    
    
    
    37
    
    
    
    15
    
    
    
    28
    
    
    
    35Total non-accrual loans
    
    
    90,148
    
    
    
    79,756
    
    
    
    86,330
    
    
    
    47,571
    
    
    
    33,138Other non-performing assets (2):Real estate owned
    
    
    
    
    
    
    19
    
    
    
    1
    
    
    
    66
    
    
    
    28Total other non-performing assets
    
    
    
    
    
    
    19
    
    
    
    1
    
    
    
    66
    
    
    
    28Total non-performing assets (3)
    
    $
    90,148
    
    
    $
    79,775
    
    
    $
    86,331
    
    
    $
    47,637
    
    
    $
    33,166Accruing loans contractually past due > 90 days (4)
    
    
    
    
    
    
    1,765
    
    
    
    478
    
    
    
    1,411
    
    
    
    305Non-performing loans to total loans
    
    
    14.97
    %
    
    
    12.88
    %
    
    
    13.34
    %
    
    
    7.10
    %
    
    
    4.86
    %Non-performing assets to total assets
    
    
    12.12
    %
    
    
    10.57
    %
    
    
    10.74
    %
    
    
    5.91
    %
    
    
    4.12
    %
 (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 and/or principal 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 less costs to sell (i.e., through foreclosure, repossession or as an in-substance
foreclosure). These assets are recorded at the lower of their cost or fair value.(3)
    
    Troubled debt restructured loans performing in accordance with their modified terms for less
than six months and those not performing in accordance with their modified terms are considered
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.
  46




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Subprime Loans
  Non-Interest Income
   Non-Interest Expense
   Income Tax Benefit
   
 ITEM 3.
    
    Quantitative and Qualitative Disclosure about Market Risk
   47




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##### Table of Contents



ITEM 4.
    
    Controls and Procedures
       48




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1.
    
    Legal Proceedings
  
 ITEM 1A.
    
    Risk Factors
        49




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##### Table of Contents



ITEM 2.
    
    Issuer Purchases of Equity Securities
  
 ITEM 3.
    
    Defaults Upon Senior Securities
  
 ITEM 4.
    
    Reserved
 
 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.
  50




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SIGNATURES
  CARVER BANCORP, INC.Date: February 14, 2011
    /s/ Deborah C. WrightDeborah C. WrightChairman and Chief Executive Officer
(Principal Executive Officer) Date: February 14, 2011
    /s/ Chris A. McFaddenChris A. McFaddenExecutive Vice President & Chief Financial Officer
(Principal Accounting Officer)  51