Carver Bancorp (CARV) 8-K Carver Bancorp, Inc. Announces First Quarter 2009 Results

Contact:	David Lilly / Joseph Kuo	Roy Swan
	Kekst and Company	Carver Bancorp, Inc.
	(212) 521-4800	(212) 360-8820

CARVER BANCORP, INC. ANNOUNCES FIRST QUARTER 2009 RESULTS

Reports First Quarter Net Income of $0.7 Million or $0.27 Per Share

Board Declares Dividend of $0.10 Per Share

New York, New York, August 14, 2008 – Carver Bancorp, Inc. (the “Company”) (NASDAQ: CARV), the holding company for Carver Federal Savings Bank (“Carver Federal” or the “Bank”), today announced financial results for the three month period ended June 30, 2008, the first quarter of the fiscal year ending March 31, 2009 (“fiscal 2009”).

The Company reported net income of $0.7 million and diluted earnings per share of $0.27 for the first quarter of fiscal 2009, compared to net income of $1.1 million and diluted earnings per share of $0.44 for the first quarter of fiscal 2008.  

Commenting on the first quarter results, Deborah C. Wright, Chairman and Chief Executive Officer, said:

“Our first quarter fiscal 2009 financial performance declined year over year, largely because of the interest rate climate, a factor impacting our entire industry.  The portion of our loan portfolio that is rate sensitive, particularly construction loans tied to Libor and Prime Rate indices, generated substantially lower interest income as Libor and Prime rates have fallen by 286 and 325 basis points, respectively, since June 30, 2007. At the same time, the rates paid on deposits and other liabilities did not decline commensurately.  As a result, net interest income declined 5.9%. However, results on a sequential quarter basis improved, with increases in both pre-tax and net income, compared to the fourth quarter of fiscal 2008, as the yield curve steepened somewhat. Importantly, we were able to reduce operating expenses by over 10%.

“We increased the provision for loan losses this quarter as our non-performing loans increased, led by our multifamily and commercial loans categories.  While the New York City real estate market continues to be resilient relative to other real estate markets in certain parts of the U.S. with respect to price stability, we recognize that our markets will not be completely immune to a slowing economy.  We closely monitor our loan portfolio for risk of loss and collateral values, and we are comfortable with our reserve levels.  We believe our active portfolio monitoring and conservative underwriting standards have kept us on solid footing even as the economy continues to face challenges.

"We have made significant progress with our plans to improve efficiency.  Beginning this fall we will begin to offer residential loan products through a third party provider, PHH Mortgage Corporation, via our branches, the Internet and our call center. In addition, we will make application to our regulator at the end of this month to consolidate two of Carver’s retail branches into a single location.  If approved, we will complete this step at the end of the calendar year.  We will continue to pursue additional strategic initiatives to improve return on equity. ”

Carver also announced that on August 13, 2008, the Company’s Board of Directors declared a cash dividend on its common stock of ten cents ($0.10) per share for the first quarter.  The dividend will be payable on September 11, 2008, to stockholders of record at the close of business on August 28, 2008.

First- Quarter Results

Net income declined 40.0% ($0.5 million) over the prior year period to $0.7 million, primarily reflecting a decrease in net interest income of $0.4 million and an increase in non-interest expense of $0.8 million, offset by increases in non-interest income of $0.6 million and an income tax benefit of $0.5 million. 

Interest income decreased 7.1% ($0.9 million) to $11.1 million, reflecting a decrease in yield on interest-earning assets of 69 basis points to 6.26%.  The decrease in yield on interest earning assets reflects decreases in yields on loans of 73 basis points, investment securities of 21 basis points and Federal funds sold of 264 basis points.  The decrease in interest income was primarily the result of decreases in interest income on loans of $0.5 million and interest income on investment securities of $0.3 million.

Interest income on loans decreased 73 basis points to 6.39%, primarily due to lower yields on construction and small business loans tied to Libor and Prime Rate indices, which have fallen by 286 bps and 325 bps, respectively, since June 30, 2007.  The decrease in interest income on investment securities was primarily the result of a $26.5 million reduction in the average balances of investment securities to $4.7 million.  The Bank may invest in securities from time to time to help diversify its asset portfolio, manage liquidity and satisfy collateral requirements for certain deposits.

Interest expense decreased 8.5% ($0.5 million) to $4.9 million reflecting a 41 basis point decrease in the average cost of interest-bearing liabilities to 2.99%, partially offset by growth in the average balance of interest-bearing liabilities of $24.9 million to $652.5 million.  The decrease in interest expense was primarily the result of decreases in interest expense on advances and other borrowed money of $0.3 million and interest expense on deposits of $0.2 million.  The decrease in interest expense on advances and other borrowed money reflects a 59 basis point reduction in the average cost of borrowed money to 4.65% and the decline in the average balance of total borrowed money outstanding of $13.0 million to $62.3 million.

The Bank provided a $0.2 million loan loss provision for the first quarter of fiscal 2009.  At June 30, 2008, the Bank’s allowance for loan losses was $5.0 million.  The Bank’s future levels of non-performing loans will be influenced by economic conditions, including the impact of those conditions on the Bank’s customers, interest rates and other external factors existing at the time.

Non-interest income increased 53.7% ($0.6 million) to $1.7 million, primarily due to increases in other income of $0.3 million and gain on sale of loans of $0.2 million.   Other income increased by $0.3 million, primarily the result of $0.2 million consolidation of income from the minority interest created by a New Markets Tax Credit (“NMTC”) transaction.  

Non-interest expense increased 12.8% ($0.8 million) to $7.3 million, primarily due to increases in other expenses of $0.4 million and employee compensation and benefits of $0.2 million.  The $0.4 million increase in other expense primarily consists of the cost of data lines, ATM equipment and leases, and charge-offs.

Income tax benefit increased by $0.4 million to $0.3 million for the first quarter of fiscal 2009 compared to income tax expense of $0.1 million for the prior year period.  The income tax expense of $0.2 million for the first quarter of fiscal 2009 was offset by the tax benefit generated by the NMTC investment totaling $0.5 million.  The Bank’s NMTC award received in June 2006 has been fully invested.  The Company expects to receive additional NMTC tax benefits of approximately $11.6 million from its $40.0 million investment through the period ending March 31, 2014.

Financial Condition Highlights

At June 30, 2008, total assets decreased 1.0% ($7.9 million) to $788.7 million compared to March 31, 2008, primarily the result of decreases in cash and cash equivalents of $11.3 million and other assets of $8.2 million, partially offset by increases in investment securities of $9.6 million and loans receivable of $1.7 million.

Cash and cash equivalents decreased 41.3% ($11.3 million) to $16.1 million compared to March 31, 2008, primarily due to a $10.5 million decrease in Federal funds sold and a $0.8 million decrease in cash and due from banks.  Other assets decreased 19.9% ($8.2 million) to $33.7 million compared to March 31, 2008, primarily due to completion of a settlement receivable of $7.4 million from the sale of certain investments and disposition of real estate owned of $1.0 million.

Total securities increased 25.2% ($9.6 million) to $47.8 million compared to March 31, 2008, reflecting an increase of $10.3 million in available-for-sale securities and a $0.7 million decrease in held-to-maturity securities.  Available-for-sale securities increased 49.4% ($10.3 million) to $31.2 million compared to March 31, 2008, primarily due to an increase in Agency securities of $9.6 million.  Held to maturity securities decreased 3.9% ($0.7 million) to $16.6 million compared to March 31, 2008, primarily due to collection of normal principal repayments and maturities of securities.  There were $12.4 million in purchases of securities during the first quarter of fiscal 2009.

Total loans receivable, including loans held-for-sale, increased 0.3% ($1.7 million) to $658.3 million compared to March 31, 2008.  The increase was primarily the result of an increase in commercial real estate loans of $11.6 million and an increase in commercial business loans of $1.9 million, offset by decreases in one- to four- family loans of $6.4 million, construction loans of $2.5 million and multi-family loans of $2.0 million.  The Bank continues to grow its loan portfolio through focusing on origination of loans in the markets it serves and will continue to augment these originations with loan participations.  At June 30, 2008, construction loans represented 23.7% of the Bank’s loan portfolio. 

At June 30, 2008, total liabilities decreased 1.1% ($8.0 million) to $715.1 million compared to March 31, 2008.  The decrease in total liabilities was primarily the result of a $21.2 million reduction in customer deposits, offset by an increase of $14.0 million in advances and borrowed money.

Deposits decreased 3.2% ($21.2 million) to $633.5 million compared to March 31, 2008.  The decrease in deposit balances was primarily the result of decreases in certificates of deposit of $17.6 million, NOW accounts of $3.6 million and savings accounts of $1.7 million, which were partially offset by an increase of $2.7 million in DDA accounts.  The Bank replaced approximately $14.0 million of higher cost certificates of deposit upon maturity with lower cost borrowings.  

Advances from the FHLB-NY and other borrowed money increased 23.9% ($14.0 million) to $72.6 million compared to March 31, 2008.  The increase in advances and borrowed money was primarily the result of an increase of $14.0 million in FHLB advances.  At June 30, 2008, based on available collateral held at the FHLB-NY, the Bank had the ability to borrow from the FHLB-NY an additional $81.3 million on a secured basis.

Total stockholders’ equity increased $0.1 million, or 0.01%, to $54.5 million at June 30, 2008 compared to $54.4 million at March 31, 2008. The increase in total stockholders’ equity was primarily attributable to net income for the quarter ended June 30, 2008 totaling $0.7 million, partially offset by dividends paid of $0.2 million and a decrease in accumulated other comprehensive income of $0.4 million.  The Bank’s capital levels meet regulatory requirements of a well-capitalized financial institution.

Stock Repurchase Program

During the first quarter of fiscal 2009, the Company purchased an additional 9,900 shares of common stock under its stock repurchase program.  To date, the Company has purchased 169,374 shares out of a total 231,635 shares approved under the program, at an average price per share of $16.00.  The remaining number of shares authorized for repurchase under the program is 62,261 shares.

Asset Quality

At June 30, 2008, non-performing assets totaled $6.4 million, or 0.81% of total assets, compared to $4.0 million, or 0.50% of total assets at March 31, 2008.  The ratio of the allowance for loan losses to non-performing loans was 80.5% at June 30, 2008 compared to 170.9% at March 31, 2008.  The ratio of the allowance for loan losses to total loans was 0.76% at June 30, 2008 compared to 0.74% at March 31, 2008.

About Carver Bancorp, Inc.

Carver Bancorp, Inc. is the holding company for Carver Federal Savings Bank, a federally chartered stock savings bank.  Carver Federal Savings Bank, the largest African- and Caribbean-American run bank in the United States, operates ten full-service branches in the New York City boroughs of Brooklyn, Queens and Manhattan.  For further information, please visit the Company’s website at www.carverbank.com.

Certain statements in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors, risks and uncertainties.  More information about these factors, risks and uncertainties is contained in our filings with the Securities and Exchange Commission.

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CARVER BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(In thousands, except per share data)

	June 30,			March 31,
	2008			2008
	(unaudited)
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	15,105		$	15,920
Federal funds sold		-			10,500
Interest earning deposits		948			948
Total cash and cash equivalents		16,053			27,368
Securities:
Available-for-sale, at fair value (including pledged as collateral of $30,256 and $20,621at  June 30 and March 31, 2008, respectively)		31,164			20,865
Held-to-maturity, at amortized cost (including pledged as collateral of $16,440 and $16,643 at  June 30 and March 31, 2008, respectively; fair value of $16,497 and $17,493 at  June 30 and March 31, 2008, respectively)		16,629			17,307
Total securities		47,793			38,172
Loans held-for-sale		23,011			23,767
Loans receivable:
Real estate mortgage loans		579,497			578,957
Commercial business loans		54,036			52,109
Consumer loans		1,770			1,728
Allowance for loan losses		(5,032	)		(4,878	)
Total loans receivable, net		630,271			627,916
Office properties and equipment, net		15,759			15,780
Federal Home Loan Bank of New York stock, at cost		2,267			1,625
Bank owned life insurance		9,231			9,141
Accrued interest receivable		3,792			4,063
Goodwill		6,370			6,370
Core deposit intangibles, net		494			532
Other assets		33,671			41,859
Total assets	$	788,712		$	796,593
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits	$	633,464		$	654,663
Advances from the FHLB-New York and other borrowed money		72,632			58,625
Other liabilities		9,018			9,772
Total liabilities		715,114			723,060
Minority interest		19,150			19,150
Stockholders' equity:
Common stock (par value $0.01 per share: 10,000,000 shares authorized; 2,524,691 shares issued; 2,479,382 and 2,481,706 shares outstanding at June 30 and March 31, 2008, respectively)		25			25
Additional paid-in capital		24,091			24,113
Retained earnings		30,941			30,490
Treasury stock, at cost (45,309 and 42,985 shares at June 30 and March 31, 2008, respectively)		(661	)		(670	)
Accumulated other comprehensive income		52			425
Total stockholders' equity		54,448			54,383
Total liabilities and stockholders' equity	$	788,712		$	796,593

 

CARVER BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

	Three Months Ended
	June 30,
	2008			2007
Interest income:
Loans	$	10,453		$	10,993
Mortgage-backed securities		561			502
Investment securities		66			462
Federal funds sold		39			11
Total interest income		11,119			11,968
Interest expense:
Deposits		4,139			4,331
Advances and other borrowed money		722			984
Total interest expense		4,861			5,315
Net interest income		6,258			6,653
Provision for loan losses		169			-
Net interest income after provision for loan losses		6,089			6,653
Non-interest income:
Depository fees and charges		668			630
Loan fees and service charges		417			379
Gain on sale of loans		247			47
Other		416			81
Total non-interest income		1,748			1,137
Non-interest expense:
Employee compensation and benefits		3,414			3,173
Net occupancy expense		1,016			836
Equipment, net		615			592
Other		2,290			1,903
Total non-interest expense		7,335			6,504
Income before income taxes and minority interest		502			1,286
Income tax (benefit) expense		(322	)		143
Minority interest		138			-
Net income	$	686		$	1,143
Earnings per common share:
Basic	$	0.28		$	0.46
Diluted	$	0.27		$	0.44

CARVER BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED AVERAGE BALANCES

(In thousands)

(Unaudited)

	For the Three Months Ended June 30,
	2008							2007
	Average				Average			Average				Average
	Balance		Interest		Yield/Cost			Balance		Interest		Yield/Cost
Interest Earning Assets:
Loans (1)	$	654,501	$	10,453		6.39	%	$	617,973	$	10,993		7.12	%
Mortgage-backed securities		43,454		561		5.16	%		39,108		502		5.13	%
Investment securities (2)		4,656		66		5.69	%		31,201		462		5.92	%
Fed funds sold		7,501		39		2.09	%		933		11		4.73	%
Total interest-earning assets		710,112		11,119		6.26	%		689,215		11,968		6.95	%
Non-interest-earning assets		78,692							54,542
Total assets	$	788,804						$	743,757
Interest Bearing Liabilities:
Deposits:
Now demand	$	24,231		20		0.33	%	$	24,970		35		0.56	%
Savings and clubs		125,496		166		0.53	%		137,273		266		0.78	%
Money market		46,229		296		2.57	%		46,863		242		2.07	%
Certificates of deposit		391,008		3,643		3.74	%		340,322		3,777		4.45	%
Mortgagors deposits		3,314		14		1.69	%		2,820		11		1.56	%
Total deposits		590,278		4,139		2.81	%		552,248		4,331		3.15	%
Borrowed money		62,267		722		4.65	%		75,302		984		5.24	%
Total interest-bearing liabilities		652,545		4,861		2.99	%		627,550		5,315		3.40	%
Non-interest-bearing liabilities:
Demand		53,658							54,600
Other liabilities		9,470							11,902
Total liabilities		715,673							694,052
Minority Interest		19,150
Stockholders' equity		53,981							49,705
Total liabilities & stockholders' equity	$	788,804						$	743,757
Net interest income			$	6,258						$	6,653
Average interest rate spread						3.28	%						3.55	%
Net interest margin						3.53	%						3.86	%

(1) Includes non-accrual loans

(2) Includes FHLB-NY stock

CARVER BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED SELECTED KEY RATIOS

(Unaudited)

	Three Months Ended
	June 30,
Selected Statistical Data:	2008			2007
Return on average assets (1)		0.35	%		0.62	%
Return on average equity (2)		5.08			9.22
Net interest margin (3)		3.53			3.86
Interest rate spread (4)		3.28			3.55
Efficiency ratio (5)		91.62			83.49
Operating expenses to average assets (6)		3.72			3.51
Average equity to average assets (7)		6.84			6.69
Average interest-earning assets to average interest-bearing liabilities		1.09	x		1.10	x
Net income per share – basic	$	0.28		$	0.46
Net income per share – diluted	$	0.27		$	0.44
Average shares outstanding – basic		2,479,328			2,505,371
Average shares outstanding – diluted		2,517,058			2,586,865
Cash dividends	$	0.10		$	0.09
Dividend payout ratio (8)		36.07	%		19.69	%
	June 30,
	2008			2007
Capital Ratios:
Tier I leverage capital ratio (9)		8.03	%		7.84	%
Tier I risk-based capital ratio (9)		9.86			9.42
Total risk-based capital ratio (9)		10.65			10.28
Asset Quality Ratios:
Non performing assets to total assets (10)		0.81	%		0.65	%
Non performing loans to total loans receivable		0.95			0.78
Allowance for loan losses to total loans receivable		0.76			0.86
Allowance for loan losses to non-performing loans		80.45			109.15

(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, annualized, divided by average total assets.

(7) Average equity divided by average assets for the period ended.

(8) Dividends paid on common stock during the period divided by net income for the period.

(9) These ratios reflect consolidated bank only.

(10) Non performing assets consist of non-accrual loans, loans accruing 90 days or more past due and real estate owned.