##### 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 September 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
    
    2,484,285Class
    
    Outstanding at October 26, 2010




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##### 



TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Statements of Financial Condition as of September 30, 2010 (unaudited) and March 31, 2010
    
    
    2Consolidated Statements of Income for the Three and Six Months Ended September 30, 2010 and 2009 (unaudited)
    
    
    3Consolidated Statement of Changes in Stockholders Equity and Comprehensive Income for the Six Months Ended September 30, 2010 (unaudited)
    
    
    4Consolidated Statements of Cash Flows for the Six Months Ended September 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
    
    
    25Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    45Item 4. Controls and Procedures
    
    
    45PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    46Item 1A. Risk Factors
    
    
    46Item 2. Issuer Purchases of Equity Securities
    
    
    47Item 3. Defaults Upon Senior Securities
    
    
    47Item 4. Reserved
    
    
    47Item 5. Other Information
    
    
    47Item 6. Exhibits
    
    
    47SIGNATURES
    
    
    48Exhibit 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
  September 30,
    
    
    March 31,2010
    
    
    2010(unaudited)ASSETSCash and cash equivalents:Cash and due from banks
    
    $
    27,978
    
    
    $
    37,513Money market investments
    
    
    7,836
    
    
    
    833Total cash and cash equivalents
    
    
    35,814
    
    
    
    38,346Investment securities:Available-for-sale, at fair value
    
    
    57,465
    
    
    
    43,050Held-to-maturity, at amortized cost (fair value of $20,243 and
$12,603 at September 30, 2010 and March 31, 2010, respectively)
    
    
    19,623
    
    
    
    12,343Total securities
    
    
    77,088
    
    
    
    55,393Loans held-for-sale
    
    
    550
    
    
    
    Loans receivable:Real estate mortgage loans
    
    
    560,147
    
    
    
    600,913Commercial business loans
    
    
    57,679
    
    
    
    67,695Consumer loans
    
    
    1,387
    
    
    
    1,403Loans, net
    
    
    619,213
    
    
    
    670,011Allowance for loan losses
    
    
    (17,425
    )
    
    
    (12,000
    )Total loans receivable, net
    
    
    601,788
    
    
    
    658,011Premises and equipment, net
    
    
    11,821
    
    
    
    12,076Federal Home Loan Bank of New York stock, at cost
    
    
    3,353
    
    
    
    4,107Bank owned life insurance
    
    
    9,963
    
    
    
    9,803Accrued interest receivable
    
    
    3,217
    
    
    
    3,539Core deposit intangibles, net
    
    
    152
    
    
    
    228Deferred Tax Asset (net of valuation allowance)
    
    
    
    
    
    
    14,321Other assets
    
    
    11,044
    
    
    
    9,650Total assets
    
    $
    754,790
    
    
    $
    805,474LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Deposits:Savings
    
    $
    107,061
    
    
    $
    115,817Non-Interest Bearing Checking
    
    
    66,676
    
    
    
    58,792NOW
    
    
    42,002
    
    
    
    43,593Money Market
    
    
    68,559
    
    
    
    67,122Certificates of Deposit
    
    
    314,635
    
    
    
    317,925Total Deposits
    
    
    598,933
    
    
    
    603,249Advances from the FHLB-New York and other borrowed money
    
    
    112,542
    
    
    
    131,557Other liabilities
    
    
    8,273
    
    
    
    8,982Total liabilities
    
    
    719,748
    
    
    
    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 September 30, 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 September 30, 2010 and March 31, 2010, respectively)
    
    
    25
    
    
    
    25Additional paid-in capital
    
    
    24,300
    
    
    
    24,374Retained earnings
    
    
    (7,535
    )
    
    
    18,806Treasury stock, at cost (40,406 and 49,972 shares at September 30, 2010
and March 31, 2010, respectively)
    
    
    (568
    )
    
    
    (697
    )Accumulated other comprehensive income
    
    
    (160
    )
    
    
    198Total stockholders equity
    
    
    35,042
    
    
    
    61,686Total liabilities and stockholders equity
    
    $
    754,790
    
    
    $
    805,474
  2




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##### Table of Contents



CARVER BANCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
   Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009*
    
    
    2010
    
    
    2009*Interest Income:Loans
    
    $
    8,686
    
    
    $
    9,689
    
    
    $
    17,635
    
    
    $
    18,788Mortgage-backed securities
    
    
    525
    
    
    
    687
    
    
    
    1,112
    
    
    
    1,431Investment securities
    
    
    94
    
    
    
    126
    
    
    
    158
    
    
    
    187Money market investments
    
    
    38
    
    
    
    5
    
    
    
    58
    
    
    
    15Total interest income
    
    
    9,343
    
    
    
    10,507
    
    
    
    18,963
    
    
    
    20,421Interest expense:Deposits
    
    
    1,504
    
    
    
    1,777
    
    
    
    3,021
    
    
    
    3,815Advances and other borrowed money
    
    
    983
    
    
    
    951
    
    
    
    2,024
    
    
    
    1,936Total interest expense
    
    
    2,487
    
    
    
    2,728
    
    
    
    5,045
    
    
    
    5,751Net interest income
    
    
    6,856
    
    
    
    7,779
    
    
    
    13,918
    
    
    
    14,670Provision for loan losses
    
    
    7,829
    
    
    
    1,315
    
    
    
    14,077
    
    
    
    2,003Net interest income after provision for loan losses
    
    
    (973
    )
    
    
    6,464
    
    
    
    (159
    )
    
    
    12,667Non-interest income:Depository fees and charges
    
    
    742
    
    
    
    782
    
    
    
    1,499
    
    
    
    1,499Loan fees and service charges
    
    
    214
    
    
    
    339
    
    
    
    435
    
    
    
    567Gain on sale of securities, net
    
    
    739
    
    
    
    
    
    
    
    763
    
    
    
    Gain on sale of loans, net
    
    
    4
    
    
    
    
    
    
    
    8
    
    
    
    4New Market
Tax Credit (NMTC) fees
    
    
    370
    
    
    
    38
    
    
    
    1,181
    
    
    
    75Lower of Cost or market adjustment on loans held
for sale
    
    
    
    
    
    
    (2,136
    )
    
    
    
    
    
    
    (2,136
    )Other
    
    
    176
    
    
    
    304
    
    
    
    221
    
    
    
    471Total non-interest income
    
    
    2,245
    
    
    
    (673
    )
    
    
    4,107
    
    
    
    480Non-interest expense:Employee compensation and benefits
    
    
    2,901
    
    
    
    3,194
    
    
    
    6,107
    
    
    
    6,313Net occupancy expense
    
    
    975
    
    
    
    1,155
    
    
    
    1,952
    
    
    
    2,142Equipment, net
    
    
    548
    
    
    
    416
    
    
    
    1,085
    
    
    
    1,000Consulting fees
    
    
    326
    
    
    
    162
    
    
    
    545
    
    
    
    369Federal deposit insurance premiums
    
    
    394
    
    
    
    255
    
    
    
    750
    
    
    
    1,048Other
    
    
    2,492
    
    
    
    1,756
    
    
    
    4,662
    
    
    
    3,124Total non-interest expense
    
    
    7,636
    
    
    
    6,938
    
    
    
    15,101
    
    
    
    13,996Loss before income taxes
    
    
    (6,364
    )
    
    
    (1,147
    )
    
    
    (11,153
    )
    
    
    (849
    )Income tax expense/(benefit)
    
    
    16,998
    
    
    
    (838
    )
    
    
    14,702
    
    
    
    (1,235
    )Net (loss) income
    
    $
    (23,362
    )
    
    $
    (309
    )
    
    $
    (25,855
    )
    
    $
    386Loss per common share:
    
    $
    (9.44
    )
    
    $
    (0.22
    )
    
    $
    (10.53
    )
    
    $
    (0.04
    )
 *
    
    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 six months ended September 30, 2010
 (In thousands)
 (Unaudited)
 AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    TotalPreferred
    
    
    Common
    
    
    Paid-In
    
    
    Treasury
    
    
    Retained
    
    
    Comprehensive
    
    
    StockholdersStock
    
    
    Stock
    
    
    Capital
    
    
    Stock
    
    
    Earnings
    
    
    Income (Loss)
    
    
    EquityBalanceMarch 31, 2010
    
    $
    18,980
    
    
    $
    25
    
    
    $
    24,374
    
    
    $
    (697
    )
    
    $
    18,808
    
    
    $
    198
    
    
    $
    61,688Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,855
    )
    
    
    
    
    
    
    (25,855
    )Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (110
    )
    
    
    (110
    )Reclassification of gains included in net loss net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (458
    )
    
    
    (458
    )Change in net unrealized Gain on available-for-sale
securities, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    210
    
    
    
    210Comprehensive income (loss), net of taxes:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,855
    )
    
    
    (358
    )
    
    
    (26,213
    )Common Dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (62
    )
    
    
    
    
    
    
    (62
    )Preferred Dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (506
    )
    
    
    
    
    
    
    (506
    )Accrued Preferred Dividends
    
    
    
    
    
    
    
    
    
    
    (80
    )
    
    
    
    
    
    
    80
    
    
    
    
    
    
    
    Treasury stock activity
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    129
    
    
    
    
    
    
    
    
    
    
    
    132Stock based compensation
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3BalanceSeptember 30, 2010
    
    $
    18,980
    
    
    $
    25
    
    
    $
    24,300
    
    
    $
    (568
    )
    
    $
    (7,535
    )
    
    $
    (160
    )
    
    $
    35,042
  4




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##### Table of Contents



CARVER BANCORP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
   Six Months Ended September 30,2010
    
    
    2009*OPERATING ACTIVITIESNet (loss)/income
    
    $
    (25,855
    )
    
    $
    386Adjustments to reconcile net income to net cash from operating
activities:Provision for loan losses
    
    
    14,077
    
    
    
    2,003Deferred Tax Asset valuation allowance
    
    
    20,684
    
    
    
    Provision for REO losses
    
    
    19
    
    
    
    Stock based compensation expense
    
    
    51
    
    
    
    5Depreciation and amortization expense
    
    
    760
    
    
    
    943Amortization of premiums and discounts
    
    
    
    
    
    
    295Amortization of intangibles
    
    
    76
    
    
    
    76Loss from sale of real estate owned
    
    
    20
    
    
    
    34Gain on sale of securities
    
    
    (763
    )
    
    
    Gain on sale of loans
    
    
    (8
    )
    
    
    (4
    )Market Adjustment on Held For Sale Loans
    
    
    
    
    
    
    2,136Originations of loans held-for-sale
    
    
    (2,128
    )
    
    
    (647
    )Proceeds from sale of loans held-for-sale
    
    
    2,128
    
    
    
    818(Increase) Decrease in accrued interest receivable
    
    
    322
    
    
    
    192(Increase) Decrease in loan premiums and discounts and
deferred charges
    
    
    (412
    )
    
    
    294Increase in premiums and discounts  securities
    
    
    (771
    )
    
    
    (Increase) decrease in other assets
    
    
    (7,954
    )
    
    
    (6,766
    )Increase (decrease) in other liabilities
    
    
    (328
    )
    
    
    (39
    )Net cash used in operating activities
    
    
    (82
    )
    
    
    (274
    )INVESTING ACTIVITIESPurchases of securities:Available-for-sale
    
    
    (65,130
    )
    
    
    Held-to-maturity
    
    
    (7,980
    )
    
    
    Proceeds from principal payments, maturities, calls and sales
of securities:Available-for-sale
    
    
    50,996
    
    
    
    7,607Held-to-maturity
    
    
    834
    
    
    
    1,968Originations of loans held-for-investment
    
    
    (14,501
    )
    
    
    (66,138
    )Loans purchased from third parties
    
    
    
    
    
    
    (6,726
    )Principal collections on loans
    
    
    56,974
    
    
    
    49,496(Purchase) redemption of FHLB-NY stock
    
    
    753
    
    
    
    (496
    )Additions to premises and equipment
    
    
    (505
    )
    
    
    (155
    )Proceeds from sale of real estate owned
    
    
    7
    
    
    
    522Net cash provided by (used in) investing activities
    
    
    21,448
    
    
    
    (13,922
    )FINANCING ACTIVITIESNet (decrease) increase in deposits
    
    
    (4,316
    )
    
    
    1,265Net change in borrowings of FHLB advances and other borrowings
    
    
    (19,015
    )
    
    
    14,986Dividends paid
    
    
    (568
    )
    
    
    (969
    )Net cash (used in) provided by financing activities
    
    
    (23,899
    )
    
    
    15,282Net (decrease) increase in cash and cash equivalents
    
    
    (2,532
    )
    
    
    1,086Cash and cash equivalents at beginning of period
    
    
    38,346
    
    
    
    13,341Cash and cash equivalents at end of period
    
    $
    35,814
    
    
    $
    14,427Supplemental information:Noncash Transfers-Change in unrealized loss on valuation of available-for-sale
investments, net
    
    $
    (163
    )
    
    $
    402Transfers from loans held-for-investment to loans held-for-sale
    
    $
    550
    
    
    $
    Cash paid for-Interest
    
    $
    4,997
    
    
    $
    8,214Income taxes
    
    $
    1,120
    
    
    $
    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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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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##### Table of Contents



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




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##### Table of Contents



NOTE 3. EARNINGS PER SHARE
  Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009*
    
    
    2010
    
    
    2009*Earnings per common share  basicNet (loss) income
    
    $
    (23,362
    )
    
    $
    (309
    )
    
    $
    (25,855
    )
    
    $
    386Less: CPP Preferred Dividends
    
    
    269
    
    
    
    237
    
    
    
    506
    
    
    
    474Dividends paid and undistributed
(losses)/earnings
allocated to participating securities
    
    
    (172
    )
    
    
    (4
    )
    
    
    (187
    )
    
    
    2Net Income Available to Common Shareholders
    
    $
    (23,459
    )
    
    $
    (542
    )
    
    $
    (26,174
    )
    
    $
    (90
    )Weighted average common shares
outstanding
    
    
    2,483,025
    
    
    
    2,474,719
    
    
    
    2,482,883
    
    
    
    2,472,383Earnings per common share
    
    $
    (9.44
    )
    
    $
    (0.22
    )
    
    $
    (10.53
    )
    
    $
    (0.04
    )
 (1)
    
    As of September 30, 2010, there were no potentially dilutive shares except for 54,369
unvested restricted shares which are also participating securities.*
    
    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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Amortized
    
    
    Gross Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair-ValueAvailable-for-Sale:Mortgage-backed securities:Government National Mortgage
Association
    
    $
    32,447
    
    
    $
    28
    
    
    $
    
    
    
    $
    32,475Federal Home Loan Mortgage Corporation
    
    
    2,052
    
    
    
    9
    
    
    
    
    
    
    
    2,061Federal National Mortgage Association
    
    
    5,898
    
    
    
    
    
    
    
    (13
    )
    
    
    5,885Other
    
    
    45
    
    
    
    
    
    
    
    
    
    
    
    45Total mortgage-backed securities
    
    
    40,442
    
    
    
    37
    
    
    
    (13
    )
    
    
    40,466U.S. Government Agency Securities
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    2,000U.S. Government Security
    
    
    14,999
    
    
    
    
    
    
    
    
    
    
    
    14,999Total available-for-sale
    
    
    57,441
    
    
    
    37
    
    
    
    (13
    )
    
    
    57,465Held-to-Maturity:Mortgage-backed securities:Government National Mortgage
Association
    
    
    8,374
    
    
    
    313
    
    
    
    
    
    
    
    8,687Federal Home Loan Mortgage Corporation
    
    
    8,516
    
    
    
    173
    
    
    
    
    
    
    
    8,689Federal National Mortgage Association
    
    
    2,603
    
    
    
    135
    
    
    
    
    
    
    
    2,738Total mortgage-backed securities
    
    
    19,493
    
    
    
    621
    
    
    
    
    
    
    
    20,114Other
    
    
    130
    
    
    
    
    
    
    
    (1
    )
    
    
    129Total held-to-maturity
    
    
    19,623
    
    
    
    621
    
    
    
    (1
    )
    
    
    20,243Total securities
    
    $
    77,064
    
    
    $
    658
    
    
    $
    (14
    )
    
    $
    77,708
  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
    
    
    12,202
    
    
    
    262
    
    
    
    
    
    
    
    12,465Other
    
    
    140
    
    
    
    
    
    
    
    (2
    )
    
    
    138Total held-to-maturity
    
    
    12,342
    
    
    
    262
    
    
    
    (2
    )
    
    
    12,603Total securities
    
    $
    54,945
    
    
    $
    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
    
    $
    (13
    )
    
    $
    4,886
    
    
    $
    
    
    
    $
    
    
    
    $
    (13
    )
    
    $
    4,886U.S. Government Security*
    
    
    
    
    
    
    14,998
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,998Agencies*
    
    
    
    
    
    
    998
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    998Total available-for-sale
    
    $
    (13
    )
    
    $
    20,882
    
    
    $
    
    
    
    $
    
    
    
    $
    (13
    )
    
    $
    20,882Held-to-Maturity:Mortgage-backed
securities
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Other
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    129
    
    
    
    (1
    )
    
    
    129Total held-to-maturity
    
    $
    
    
    
    $
    
    
    
    $
    (1
    )
    
    $
    129
    
    
    $
    (1
    )
    
    $
    129Total securities
    
    $
    (13
    )
    
    $
    20,882
    
    
    $
    (1
    )
    
    $
    129
    
    
    $
    (14
    )
    
    $
    21,011
 *
    
    shows those securities with an unrealized loss of less than $1 thousand.  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:Other
    
    
    0
    
    
    
    0
    
    
    
    (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, NET
  September 30, 2010
    
    
    March 31, 2010Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentGross loans receivable:One- to four-family
    
    $
    85,253
    
    
    
    13.71
    %
    
    $
    90,150
    
    
    
    13.40
    %Multifamily
    
    
    140,234
    
    
    
    22.56
    %
    
    
    141,702
    
    
    
    21.06
    %Non-residential
    
    
    253,732
    
    
    
    40.82
    %
    
    
    259,619
    
    
    
    38.59
    %Construction
    
    
    82,751
    
    
    
    13.31
    %
    
    
    111,348
    
    
    
    16.55
    %Business
    
    
    58,275
    
    
    
    9.37
    %
    
    
    68,523
    
    
    
    10.19
    %Consumer and other (1)
    
    
    1,388
    
    
    
    0.22
    %
    
    
    1,403
    
    
    
    0.21
    %Total loans receivable
    
    
    621,633
    
    
    
    100.00
    %
    
    
    672,745
    
    
    
    100.00
    %Add:Premium on loans
    
    
    120
    
    
    
    
    
    
    
    130Less:Deferred fees and loan discounts
    
    
    (2,540
    )
    
    
    
    
    
    
    (2,864
    )Allowance for loan losses
    
    
    (17,425
    )
    
    
    
    
    
    
    (12,000
    )Total loans receivable, net
    
    $
    601,788
    
    
    
    
    
    
    $
    658,011
 (1)
    
    Includes personal, credit card, and home improvement   12




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##### Table of Contents



Six MonthsEnded
    
    
    Fiscal YearSeptember 30,
    
    
    Ended March 31,2010
    
    
    2010Beginning Balance
    
    $
    12,000
    
    
    $
    7,049Less charge-offs:One-to-four family
    
    
    (136
    )
    
    
    (580
    )Construction
    
    
    (4,003
    )
    
    
    (1,648
    )Non-residential
    
    
    (2,253
    )
    
    
    Business
    
    
    (2,285
    )
    
    
    (646
    )Consumer and other
    
    
    (0
    )
    
    
    (84
    )Total Charge- Offs:
    
    
    (8,677
    )
    
    
    (2,958
    )Add Recoveries:One-to-four family
    
    
    
    
    
    
    12Non-residential
    
    
    
    
    
    
    Business
    
    
    15
    
    
    
    6Consumer and other
    
    
    10
    
    
    
    46Total Recoveries:
    
    
    25
    
    
    
    64Provision for Loan Losses
    
    
    14,077
    
    
    
    7,845Ending Balance
    
    $
    17,425
    
    
    $
    12,000Ratios:Net charge-offs to average loans outstanding
    
    
    2.67
    %
    
    
    0.43
    %Allowance to total loans
    
    
    2.81
    %
    
    
    1.79
    %Allowance to non-performing loans
    
    
    21.85
    %
    
    
    25.23
    %
   13




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##### Table of Contents



NOTE 9. INCOME TAXES
  September 30,2010Federal income tax expense (benefit):Current
    
    $
    Deferred
    
    
    (4,571
    )Valuation Allowance
    
    
    18,37813,807State and local income tax expense (benefit):Current
    
    
    177Deferred
    
    
    (1,588
    )Valuation Allowance
    
    
    2,306895Total income tax expense:
    
    $
    14,702
  September 30,2010Amount
    
    
    PercentStatutory Federal income tax
    
    $
    (3,792
    )
    
    
    34.0
    %State and local income taxes, net of
Federal tax benefit
    
    
    (424
    )
    
    
    3.8
    %New markets tax credit
    
    
    (1,200
    )
    
    
    10.8
    %General business credit
    
    
    (16
    )
    
    
    0.1
    %Valuation adjustment
    
    
    20,684
    
    
    
    (185.5
    )%Other
    
    
    (550
    )
    
    
    4.9
    %Total income tax expense
    
    $
    14,702
    
    
    
    (131.8
    )%
   14




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##### Table of Contents



September 30,
    
    
    March 31,2010
    
    
    2010Deferred Tax Assets:Allowance for loan losses
    
    $
    6,662
    
    
    $
    4,080Deferred loan fees
    
    
    634
    
    
    
    686Compensation and benefits
    
    
    27
    
    
    
    58Non-accrual loan interest
    
    
    2,218
    
    
    
    1,344Capital loss carryforward
    
    
    130
    
    
    
    84Purchase accounting adjustment
    
    
    156
    
    
    
    131Net operating loss carry forward
    
    
    1,697
    
    
    
    112New markets tax credit
    
    
    8,538
    
    
    
    7,322Depreciation
    
    
    448
    
    
    
    316Minimum pension liability
    
    
    
    
    
    
    110Market value adjustment on HFS loans
    
    
    628
    
    
    
    817Other
    
    
    282
    
    
    
    180Total Deferred Tax Assets
    
    
    21,421
    
    
    
    15,240Deferred Tax Liabilities:Income from affiliate
    
    
    738
    
    
    
    738Unrealized gain on available-for-sale
securities
    
    
    
    
    
    
    181Total Deferred Tax Liabilities
    
    
    738
    
    
    
    919Valuation Allowance
    
    
    (20,684
    )
    
    
    Net Deferred Tax Assets
    
    $
    
    
    
    $
    14,321
    15




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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 September 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
    
    $
    
    
    
    $
    
    
    
    $
    606
    
    
    $
    606Investment securites:Available for sale:Government National Mortgage
Association
    
    $
    30,595
    
    
    $
    1,880
    
    
    $
    
    
    
    $
    32,475Federal Home Loan Mortgage
Corporation
    
    
    2,061
    
    
    
    
    
    
    
    
    
    
    
    2,061Federal National Mortgage Association
    
    
    4,115
    
    
    
    1,770
    
    
    
    
    
    
    
    5,885Other
    
    
    2,000
    
    
    
    
    
    
    
    45
    
    
    
    2,045Total Mortgage-Back Securities
    
    $
    38,772
    
    
    $
    3,650
    
    
    $
    45
    
    
    $
    42,467U.S. Government Security
    
    
    14,999
    
    
    
    
    
    
    
    
    
    
    $
    14,999Total available for sale
    
    $
    53,770
    
    
    $
    3,650
    
    
    $
    45
    
    
    $
    57,465Total assets
    
    $
    53,770
    
    
    $
    3,650
    
    
    $
    651
    
    
    $
    58,071
  16




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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
         17




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##### Table of Contents



Mortgage
    
    
    SecuritiesServicing
    
    
    Available for(in thousands)
    
    Rights
    
    
    SaleBeginning balance, July 1, 2010
    
    $
    622
    
    
    $
    45Activities:
    
    
    
    
    
    
    Transfer in
    
    
    
    
    
    
    Sales
    
    
    
    
    
    
    Unrealized gain (loss)
    
    
    (16
    )
    
    
    Ending balance, September 30, 2010
    
    $
    606
    
    
    $
    45
  Fair Value Measurements at September 30, 2010, UsingQuoted Prices in
    
    
    
    
    
    SignificantActive Markets for
    
    
    Significant Other
    
    
    UnobservableIdentical Assets
    
    
    Observable Inputs
    
    
    Inputs
    
    
    Total Fair(in thousands)
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    ValueHeld For Sale Loans
    
    $
    
    
    
    $
    550
    
    
    $
    
    
    
    $
    550Certain impaired
loans
    
    $
    
    
    
    $
    44,576
    
    
    $
    
    
    
    $
    44,576
 Fair Value Measurements at March 31, 2010, UsingQuoted Prices in
    
    
    
    
    
    SignificantActive Markets for
    
    
    Significant Other
    
    
    UnobservableIdentical Assets
    
    
    Observable Inputs
    
    
    Inputs
    
    
    Total Fair(in thousands)
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    ValueCertain impaired
loans
    
    $
    
    
    
    $
    23,487
    
    
    $
    
    
    
    $
    23,487
    18




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##### Table of Contents



NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS
   September 30, 2010
    
    
    March 31, 2010Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    EstimatedAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueFinancial Assets:Cash and cash equivalents
    
    $
    35,814
    
    
    $
    35,814
    
    
    $
    38,346
    
    
    $
    38,346Securities available-for-sale
    
    
    57,465
    
    
    
    57,465
    
    
    
    43,050
    
    
    
    43,050FHLB Stock
    
    
    3,353
    
    
    
    3,353
    
    
    
    4,107
    
    
    
    4,107Securities held-to-maturity
    
    
    19,623
    
    
    
    20,243
    
    
    
    12,343
    
    
    
    12,603Loans Held For Sale
    
    
    550
    
    
    
    550
    
    
    
    
    
    
    
    Loans receivable
    
    
    601,238
    
    
    
    607,175
    
    
    
    658,011
    
    
    
    664,522Accrued interest receivable
    
    
    3,217
    
    
    
    3,217
    
    
    
    3,539
    
    
    
    3,539Mortgage servicing rights
    
    
    606
    
    
    
    606
    
    
    
    721
    
    
    
    721Financial Liabilities:Deposits
    
    $
    598,933
    
    
    $
    584,202
    
    
    $
    603,249
    
    
    $
    579,023Advances from FHLB of New
York
    
    
    50,071
    
    
    
    50,387
    
    
    
    69,086
    
    
    
    69,339Repurchase agreement
    
    
    30,000
    
    
    
    30,123
    
    
    
    30,000
    
    
    
    30,180Other borrowed money
    
    
    32,471
    
    
    
    31,009
    
    
    
    32,471
    
    
    
    33,325
 Cash and cash equivalents and accrued interest receivable
  Securities
  Loans receivable
   19




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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
     20




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NOTE 12. VARIABLE INTEREST ENTITIES
         21




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NOTE 13. IMPACT OF ACCOUNTING STANDARDS AND INTERPRETATIONS
   22




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23




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NOTE 14. SUBSEQUENTS EVENTS
   24




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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.
   25




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Overview
        26




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##### Table of Contents



New Markets Tax Credit Award
    27




---



##### Table of Contents



28




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##### Table of Contents



Critical Accounting Policies
  Allowance for Loan Losses
        29




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##### Table of Contents



30




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Securities Impairment
  Deferred Income Taxes
   Stock Repurchase Program
  Liquidity and Capital Resources
    31




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##### Table of Contents



32




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Tier 1 Risk-Tier 1 Core
    
    
    Based
    
    
    Total Risk-Capital
    
    
    Capital
    
    
    Based CapitalRatio
    
    
    Ratio
    
    
    RatioGAAP Capital at September 30, 2010
    
    $
    48,480
    
    
    $
    48,480
    
    
    $
    48,480Add:General valuation allowances
    
    
    
    
    
    
    
    
    
    
    7,130Qualifying subordinated debt
    
    
    
    
    
    
    
    
    
    
    5,000Other
    
    
    292
    
    
    
    292
    
    
    
    292Deduct:Unrealized gains on securities
available-for-sale, net
    
    
    133
    
    
    
    133
    
    
    
    133Goodwill and qualifying intangible assets, net
    
    
    152
    
    
    
    152
    
    
    
    152Regulatory Capital
    
    $
    48,488
    
    
    $
    48,488
    
    
    $
    60,618Minimum Capital requirement
    
    
    11,316
    
    
    
    30,175
    
    
    
    45,113Regulatory Capital Excess
    
    $
    37,172
    
    
    $
    18,313
    
    
    $
    15,505Capital Ratios
    
    
    6.43
    %
    
    
    8.60
    %
    
    
    10.75
    %
  Bank Regulatory Matters
   33




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##### Table of Contents



Comparison of Financial Condition at September 30, 2010 and March 31, 2010
 Assets
      Liabilities and Stockholders Equity
     Asset/Liability Management
   34




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##### Table of Contents



Off-Balance Sheet Arrangements and Contractual Obligations
    Commitments to fund construction mortgage loans
    
    $
    14,502Commitments to fund commercial and consumer loans
    
    
    3,365Lines of credit
    
    
    5,944Letters of credit
    
    
    4,154$
    27,964
  35




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##### Table of Contents



Comparison of Operating Results for the Three and Six Months Ended September 30, 2010 and 2009
 Overview
   CARVER BANCORP, INC. AND SUBSIDIARIES
SELECTED KEY RATIOS
 Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,Selected Financial Data:
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Return on average assets (1)
    
    
    (11.61
    )%
    
    
    (0.15
    )%
    
    
    (6.39
    )%
    
    
    0.10
    %Return on average equity (2)
    
    
    (157.82
    )
    
    
    (1.89
    )
    
    
    (79.09
    )
    
    
    1.21Net interest margin (3)
    
    
    3.86
    
    
    
    4.12
    
    
    
    3.88
    
    
    
    3.91Interest rate spread (4)
    
    
    3.78
    
    
    
    3.96
    
    
    
    3.78
    
    
    
    3.73Efficiency ratio (5)
    
    
    83.91
    
    
    
    97.62
    
    
    
    83.78
    
    
    
    92.38Operating expenses to average
assets (6)
    
    
    3.79
    
    
    
    3.44
    
    
    
    3.73
    
    
    
    3.49Average equity to average assets
(7)
    
    
    7.35
    
    
    
    8.08
    
    
    
    8.08
    
    
    
    7.96Average interest-earning assets to
average interest-bearing
liabilities
    
    
    1.06
    x
    
    
    1.12
    x
    
    
    1.07
    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
   36




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##### Table of Contents



37




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##### Table of Contents



CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES
 For the Three Months Ended September 30,2010
    
    
    2009Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Yield/Cost
    
    
    Balance
    
    
    Interest
    
    
    Yield/CostInterest Earning Assets:Loans (1)
    
    $
    641,156
    
    
    $
    8,686
    
    
    
    5.42
    %
    
    $
    683,189
    
    
    $
    9,689
    
    
    
    5.67
    %Mortgage-backed securities
    
    
    61,838
    
    
    
    525
    
    
    
    3.40
    %
    
    
    66,689
    
    
    
    687
    
    
    
    4.11
    %Investment securities (2)
    
    
    3,469
    
    
    
    127
    
    
    
    14.61
    %
    
    
    5,008
    
    
    
    129
    
    
    
    10.21
    %Other investments and federal funds sold
    
    
    3,980
    
    
    
    5
    
    
    
    0.51
    %
    
    
    1,017
    
    
    
    2
    
    
    
    0.73
    %Total interest-earning assets
    
    
    710,443
    
    
    
    9,343
    
    
    
    5.26
    %
    
    
    755,903
    
    
    
    10,507
    
    
    
    5.56
    %Non-interest-earning assets
    
    
    94,681
    
    
    
    
    
    
    
    
    
    
    
    50,928Total assets
    
    $
    805,124
    
    
    
    
    
    
    
    
    
    
    $
    806,831Interest Bearing Liabilities:Deposits:Now demand
    
    $
    61,917
    
    
    
    32
    
    
    
    0.20
    %
    
    $
    49,900
    
    
    
    19
    
    
    
    0.15
    %Savings and clubs
    
    
    109,254
    
    
    
    74
    
    
    
    0.27
    %
    
    
    117,820
    
    
    
    65
    
    
    
    0.22
    %Money market
    
    
    69,967
    
    
    
    192
    
    
    
    1.10
    %
    
    
    46,697
    
    
    
    155
    
    
    
    1.32
    %Certificates of deposit
    
    
    312,460
    
    
    
    1,198
    
    
    
    1.53
    %
    
    
    332,723
    
    
    
    1,529
    
    
    
    1.82
    %Mortgagors deposits
    
    
    2,257
    
    
    
    8
    
    
    
    1.49
    %
    
    
    2,286
    
    
    
    9
    
    
    
    1.60
    %Total deposits
    
    
    555,855
    
    
    
    1,504
    
    
    
    1.08
    %
    
    
    549,426
    
    
    
    1,777
    
    
    
    1.28
    %Borrowed money
    
    
    114,110
    
    
    
    983
    
    
    
    3.45
    %
    
    
    125,114
    
    
    
    951
    
    
    
    3.01
    %Total interest-bearing liabilities
    
    
    669,965
    
    
    
    2,487
    
    
    
    1.48
    %
    
    
    674,540
    
    
    
    2,728
    
    
    
    1.60
    %Non-interest-bearing liabilities:Demand
    
    
    68,257
    
    
    
    
    
    
    
    
    
    
    
    58,517Other liabilities
    
    
    7,691
    
    
    
    
    
    
    
    
    
    
    
    8,552Total liabilities
    
    
    745,913
    
    
    
    
    
    
    
    
    
    
    
    741,609Minority Interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stockholders equity
    
    
    59,211
    
    
    
    
    
    
    
    
    
    
    
    65,222Total liabilities & stockholders
equity
    
    $
    805,124
    
    
    
    
    
    
    
    
    
    
    $
    806,831Net interest income
    
    
    
    
    
    $
    6,856
    
    
    
    
    
    
    
    
    
    
    $
    7,779Average interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.78
    %
    
    
    
    
    
    
    
    
    
    
    3.96
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.86
    %
    
    
    
    
    
    
    
    
    
    
    4.12
    %
 (1)
    
    Includes non-accrual loans(2)
    
    Includes FHLB-NY stock  38




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##### Table of Contents



CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES
 For the Six Months Ended September 30,2010
    
    
    2009Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Yield/Cost
    
    
    Balance
    
    
    Interest
    
    
    Yield/CostInterest Earning Assets:Loans (1)
    
    $
    649,255
    
    
    $
    17,635
    
    
    
    5.43
    %
    
    $
    675,253
    
    
    $
    18,788
    
    
    
    5.56
    %Mortgage-backed securities
    
    
    62,379
    
    
    
    1,112
    
    
    
    3.56
    %
    
    
    69,262
    
    
    
    1,431
    
    
    
    4.13
    %Investment securities (2)
    
    
    3,737
    
    
    
    206
    
    
    
    11.01
    %
    
    
    4,901
    
    
    
    194
    
    
    
    7.89
    %Other investments and federal funds sold
    
    
    2,681
    
    
    
    10
    
    
    
    0.78
    %
    
    
    1,023
    
    
    
    8
    
    
    
    1.56
    %Total interest-earning assets
    
    
    718,052
    
    
    
    18,963
    
    
    
    5.28
    %
    
    
    750,439
    
    
    
    20,421
    
    
    
    5.44
    %Non-interest-earning assets
    
    
    91,628
    
    
    
    
    
    
    
    
    
    
    
    50,989Total assets
    
    $
    809,680
    
    
    
    
    
    
    
    
    
    
    $
    801,428Interest Bearing Liabilities:Deposits:Now demand
    
    $
    52,061
    
    
    
    63
    
    
    
    0.24
    %
    
    $
    52,025
    
    
    
    41
    
    
    
    0.16
    %Savings and clubs
    
    
    112,679
    
    
    
    147
    
    
    
    0.26
    %
    
    
    118,526
    
    
    
    131
    
    
    
    0.22
    %Money market
    
    
    70,388
    
    
    
    415
    
    
    
    1.18
    %
    
    
    45,194
    
    
    
    302
    
    
    
    1.33
    %Certificates of deposit
    
    
    314,705
    
    
    
    2,374
    
    
    
    1.51
    %
    
    
    329,187
    
    
    
    3,320
    
    
    
    2.01
    %Mortgagors deposits
    
    
    2,712
    
    
    
    22
    
    
    
    1.65
    %
    
    
    2,587
    
    
    
    21
    
    
    
    1.60
    %Total deposits
    
    
    552,545
    
    
    
    3,021
    
    
    
    1.09
    %
    
    
    547,519
    
    
    
    3,815
    
    
    
    1.39
    %Borrowed money
    
    
    119,298
    
    
    
    2,024
    
    
    
    3.39
    %
    
    
    122,708
    
    
    
    1,936
    
    
    
    3.15
    %Total interest-bearing liabilities
    
    
    671,843
    
    
    
    5,045
    
    
    
    1.50
    %
    
    
    670,227
    
    
    
    5,751
    
    
    
    1.71
    %Non-interest-bearing liabilities:Demand
    
    
    64,311
    
    
    
    
    
    
    
    
    
    
    
    59,237Other liabilities
    
    
    8,142
    
    
    
    
    
    
    
    
    
    
    
    8,184Total liabilities
    
    
    744,296
    
    
    
    
    
    
    
    
    
    
    
    737,648Minority Interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stockholders equity
    
    
    65,384
    
    
    
    
    
    
    
    
    
    
    
    63,780Total liabilities & stockholders
equity
    
    $
    809,680
    
    
    
    
    
    
    
    
    
    
    $
    801,428Net interest income
    
    
    
    
    
    $
    13,918
    
    
    
    
    
    
    
    
    
    
    $
    14,670Average interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.78
    %
    
    
    
    
    
    
    
    
    
    
    3.73
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.88
    %
    
    
    
    
    
    
    
    
    
    
    3.91
    %
 (1)
    
    Includes non-accrual loans(2)
    
    Includes FHLB-NY stock Interest Income
   39




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##### Table of Contents



Interest Expense
    Provision for Loan Losses and Asset Quality
    40




---



##### Table of Contents



Six MonthsEnded
    
    
    Fiscal YearSeptember 30,
    
    
    Ended March2010
    
    
    31, 2010Beginning Balance
    
    $
    12,000
    
    
    $
    7,049Less: Charge-offs:
    
    
    (8,677
    )
    
    
    (2,958
    )Add: Recoveries
    
    
    25
    
    
    
    64Provision for Loan Losses
    
    
    14,077
    
    
    
    7,845Ending Balance
    
    $
    17,425
    
    
    $
    12,000Ratios:Net charge-offs to average loans outstanding
    
    
    2.67
    %
    
    
    0.43
    %Allowance to total loans
    
    
    2.81
    %
    
    
    1.79
    %Allowance to non-performing loans
    
    
    21.85
    %
    
    
    25.23
    %
    41




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##### Table of Contents



Non-performing Assets
     42




---



##### Table of Contents



September
    
    
    June
    
    
    March
    
    
    December
    
    
    September2010
    
    
    2010
    
    
    2010
    
    
    2009
    
    
    2009Loans accounted for on a non-accrual basis (1):Gross loans receivable:One- to four-family
    
    $
    14,583
    
    
    $
    14,320
    
    
    $
    7,682
    
    
    $
    5,009
    
    
    $
    3,297Multifamily
    
    
    14,103
    
    
    
    16,923
    
    
    
    10,334
    
    
    
    6,406
    
    
    
    5,988Non-residential
    
    
    11,189
    
    
    
    13,249
    
    
    
    6,315
    
    
    
    3,831
    
    
    
    4,933Construction
    
    
    36,145
    
    
    
    34,792
    
    
    
    17,413
    
    
    
    12,719
    
    
    
    9,808Business
    
    
    3,699
    
    
    
    7,031
    
    
    
    5,799
    
    
    
    5,138
    
    
    
    2,760Consumer
    
    
    37
    
    
    
    15
    
    
    
    28
    
    
    
    35
    
    
    
    31Total non-accrual loans
    
    
    79,756
    
    
    
    86,330
    
    
    
    47,571
    
    
    
    33,138
    
    
    
    26,817Other non-performing assets (2):Real estate owned
    
    
    19
    
    
    
    1
    
    
    
    66
    
    
    
    28
    
    
    
    67Total other non-performing assets
    
    
    19
    
    
    
    1
    
    
    
    66
    
    
    
    28
    
    
    
    67Total non-performing assets (3)
    
    $
    79,775
    
    
    $
    86,331
    
    
    $
    47,637
    
    
    $
    33,166
    
    
    $
    26,884Accruing loans contractually past due > 90
days (4)
    
    
    1,765
    
    
    
    478
    
    
    
    1,411
    
    
    
    305
    
    
    
    987Non-performing loans to total loans
    
    
    12.88
    %
    
    
    13.34
    %
    
    
    7.10
    %
    
    
    4.86
    %
    
    
    3.92
    %Non-performing assets to total assets
    
    
    10.57
    %
    
    
    10.74
    %
    
    
    5.91
    %
    
    
    4.12
    %
    
    
    3.33
    %
 (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.  43




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##### Table of Contents



Subprime Loans
  Non-Interest Income
   Non-Interest Expense
   Income Tax Benefit
     44




---



##### Table of Contents



ITEM 3. Quantitative and Qualitative Disclosure about Market Risk
  
 ITEM 4. Controls and Procedures
       45




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
  
 ITEM 1A. Risk Factors
        46




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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.
  47




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##### Table of Contents



SIGNATURES
  CARVER BANCORP, INC.Date: November 15, 2010
    
    /s/ Deborah C. Wright

Deborah C. WrightChairman and Chief Executive Officer(Principal Executive Officer)Date: November 15, 2010
    
    /s/ Chris A. McFadden

Chris A. McFaddenExecutive Vice President & Chief Financial Officer(Principal Accounting Officer)
  48