[LOGO OF CARVER BANCORP, INC.]
Contact: David Lilly / Kimberly Kriger William Gray
Kekst and Company Carver Bancorp, Inc.
(212) 521-4800 (212) 360-8840
CARVER BANCORP, INC. REPORTS THIRD QUARTER RESULTS
ANNOUNCES THIRD QUARTER EPS OF $0.36, CONTINUES SUCCESSFUL FRANCHISE EXPANSION
NEW YORK, NEW YORK, JANUARY 27, 2005 - Carver Bancorp, Inc. (the "Company" or
"Carver") (AMEX: CNY), the holding company for Carver Federal Savings Bank (the
"Bank"), today announced its results of operations for the three-month period
ended December 31, 2004, the third quarter of the fiscal year ending March 31,
2005 ("fiscal 2005").
The Company reported diluted earnings per share of $0.36 for the quarter ended
December 31, 2004 compared to $0.47 diluted earnings per share for the same
period last year. Net income available to common stockholders decreased
$283,000, or 23.8%, to $904,000 compared to $1.2 million for the same period
last year. Declines in non-interest income and higher operating expenses offset
increases in net interest income.
Deborah C. Wright, President and CEO of Carver, stated: "Carver's third quarter
results reflect the momentum building in our lending and retail departments,
which produced gains in total loans receivable as well as deposits. While we are
pleased with the resulting increase in net interest income year over year, this
progress was not enough to eliminate the impact of margin compression
experienced throughout our industry, as the U.S. Treasury yield curve continued
to flatten. In addition, non-interest income was negatively impacted by the
decline in mortgage refinance activity, significantly reducing income from
mortgage prepayment penalties. As expected, we also saw near-term increases in
non-interest expense related to the successful launch of new branches and 24/7
ATM centers."
Ms. Wright continued: "In continuing to execute on our strategy to expand
Carver's franchise locally, we recently opened our eighth full service branch in
the new Pathmark supermarket at 145th Street and Frederick Douglass Boulevard in
northern Harlem as well as our fourth state-of-the-art 24/7 ATM center at 116th
Street and Fifth Avenue in southern Harlem. These delivery channels follow the
successful openings of our Jamaica Center branch in Queens, Atlantic Terminal
branch in Brooklyn and three 24/7 ATM centers, dramatically expanding our
footprint over the last 18 months. Although the significant financial investment
required to expand has negatively impacted non-interest expense in the near
term, we believe this strategy is critical if Carver is to meet the competitive
challenge and will increase the Company's franchise value as income is enhanced
by a growing customer base."
Based on their confidence in Carver's future prospects, on January 25, 2005 the
Board of Directors once again declared a $0.07 per share dividend for the third
quarter payable on February 24, 2005 to holders of record at the close of
business on February 10, 2005.
As previously announced, on October 20, 2004, the Company reported that the
holders of all 40,000 outstanding shares of its Series A Convertible Preferred
Stock and all 60,000 outstanding shares of its Series B Convertible Preferred
Stock elected to convert their preferred shares into 208,333 shares of the
Company's common stock.
INCOME STATEMENT HIGHLIGHTS
Quarterly Results
- -----------------
Net income available to common stockholders decreased $283,000, or 23.8%, to
$904,000 compared to $1.2 million for the same period last year. These results
were primarily due to an $471,000 increase in net interest income offset by a
$374,000 decrease in non-interest income and an increase in non-interest expense
of $535,000, as further described below.
Net interest income before the provision for loan losses increased $471,000, or
11.0%, to $4.7 million compared to $4.3 million for the same period last year.
This improvement was a result of an increase in interest income of $740,000, or
11.4%, partially offset by an increase in interest expense of $269,000, or
12.1%, compared to the same period last year. Interest income rose primarily as
a result of increased real estate mortgage loan balances and interest expense
rose primarily due to increased deposits and rates.
The Company did not provide for additional loan loss reserves as the Company
considers the current overall allowance for loan losses to be adequate.
Non-interest income decreased $374,000, or 23.7%, to $1.2 million compared to
$1.6 million for the same period last year. The decrease was primarily
attributable to a decline in mortgage prepayment penalty income of $658,000 as a
result of slowing mortgage refinance activity, partially offset by additional
deposit fees and charges of $121,000 and additional income of $82,000 from an
investment in bank owned life insurance.
Non-interest expense increased $535,000, or 13.5%, to $4.5 million compared to
$4.0 million for the same period last year. The increase in non-interest expense
was primarily due to an increase of $376,000 in employee compensation and
benefits expense, resulting from the staffing of our new Jamaica Center and
Atlantic Terminal branches as well as Company-wide salary increases, increased
cost of employee benefit plans and the timing of accruals for employee bonus
expense. Also contributing to the increase in non-interest expense were
additional net occupancy expenses of $141,000, primarily resulting from the new
branches and 24/7 ATM centers.
Income before taxes decreased $438,000, or 23.4%, to $1.4 million compared to
$1.9 million for the same period last year. Income taxes decreased $122,000, or
19.2%, to $514,000 compared to $636,000 for the same period last year, primarily
due to the decline in income before taxes.
Nine-Month Results
- ------------------
Net income available to common stockholders decreased $1.5 million, or 40.5%, to
$2.1 million compared to $3.6 million for the same period last year. The decline
is primarily due to increased non-interest expense of $1.9 million and decreased
non-interest income of $1.1 million, partially offset by an increase in net
interest income of $882,000 and a decrease in income taxes of $618,000, as
detailed below.
Net interest income before the provision for loan losses increased by $882,000,
or 6.8%, to $13.9 million compared to $13.0 million for the same period last
year. Interest income increased $1.3 million, or 6.9%, compared to the same
period last year primarily as a result of increased real estate mortgage loan
balances. Partially offsetting the rise in interest income was additional
interest expense of $464,000, or an increase of 7.1%, compared to the same
period last year, primarily due to increased deposits and rates.
2
Non-interest income decreased $1.1 million, or 26.1%, to $3.2 million compared
to $4.3 million for the same period last year. The decrease was primarily
attributable to an impairment charge deemed other than temporary of $1.5
million, resulting from the decline in market price of 150,000 shares of
Independence stock that the Company currently holds. Also contributing to the
decline in non-interest income was a decrease of $628,000 in loan fees and
service charges, which were predominantly decreased mortgage prepayment
penalties resulting from a decline in mortgage refinancing activity.
Additionally, other non-interest income declined compared to the same period
last year when a recovery of $558,000 from the recognition of previously
unrecognized mortgage loan income was recorded. These declines were partially
offset by the receipt of a net $1.1 million grant from the Department of the
Treasury's Community Development Financial Institution Fund and increases in
depository fees and charges of $201,000, resulting from higher ATM usage, growth
in debit card income and commissions earned from the sale of investments and
life insurance.
Non-interest expense increased $1.9 million, or 16.1%, to $13.5 million compared
to $11.6 million for the same period last year. The increase in non-interest
expense was due to increases in employee compensation and benefits expense of
$843,000, resulting from the staffing of our new Jamaica Center and Atlantic
Terminal branches and the timing of accruals for employee bonus expense. Also
contributing to the increase in non-interest expense was a charge of $847,000,
resulting from expensing previously capitalized costs related to the proposed
merger with Independence and additional net occupancy expenses of $349,000,
primarily resulting from the opening of new branches and 24/7 ATM centers.
Partially offsetting the increase in non-interest expense was a decline in other
expenses of $218,000, primarily the result of lower consulting fees related to
the establishment in fiscal 2004 of the Bank's real estate investment trust.
Income before taxes decreased $2.1 million, or 37.1%, to $3.6 million compared
to $5.7 million for the same period last year. Income taxes decreased $618,000,
or 31.8%, to $1.3 million compared to $1.9 million for the same period last year
due to the decline in income before taxes.
FINANCIAL CONDITION HIGHLIGHTS
At December 31, 2004, total assets increased by $77.2 million, or 14.3%, to
$616.1 million compared to $538.8 million at March 31, 2004. The asset growth
primarily reflects increases in total loans receivable, net, and total
securities of $57.1 million and $11.9 million, respectively. The increase in
total loans receivable, net, is attributable to new mortgage loan originations
and purchases exceeding mortgage loan repayments. The increase in total
securities is attributable to additional mortgage-backed securities to meet
collateral requirements for New York State deposits at the Jamaica Center
branch. Other assets, office properties and equipment, net, and Federal Home
Loan Bank ("FHLB") stock increased by $5.8 million, $1.6 million and $1.0
million, respectively. The increase in other assets is primarily related to the
Bank's $8.0 million investment in a bank owned life insurance program. The $1.6
million increase in office properties and equipment is primarily attributable to
the new Atlantic Terminal branch in Brooklyn and 24/7 ATM center in Harlem. The
Bank purchased additional FHLB stock to satisfy FHLB requirements. The increase
in total assets was partially offset by a decline in total cash and cash
equivalents of $538,000 as liquid funds were used to fund loan and securities
growth.
At December 31, 2004, total liabilities increased by $76.3 million, or 15.4%, to
$570.5 million from $494.2 million at March 31, 2004. The increase in
liabilities is a result of deposit growth of
3
$62.8 million, of which $50.0 million was deposited by the State and City of New
York under the Banking Development District program. The increase in deposits
was partially offset by a decrease of $7.4 million in other liabilities,
resulting primarily from the payment of bank checks and income taxes.
Additionally, advances from the FHLB and other borrowed money increased by $21.0
million, which was utilized to fund loan growth.
At December 31, 2004, total stockholders' equity increased $917,000, or 2.1%, to
$45.6 million compared to $44.6 million at March 31, 2004. The increase in total
stockholders' equity was primarily attributable to increased retained earnings
of $1.6 million from net income derived during fiscal 2005, partially offset by
a decrease of $408,000 in accumulated other comprehensive income related to the
mark-to-market of the Bank's available-for-sale securities and a reduction to
equity of $361,000 related to the Bank repurchasing some of its outstanding
shares through its stock repurchase program.
During the quarter ended December 31, 2004, the Company purchased 26,400
additional shares of its common stock in the open market or through other
privately negotiated transactions as part of its stock repurchase program
announced on August 6, 2002. To date, the Company has purchased 61,550 shares of
its common stock at an average price of $16.55 per share. The Company intends to
use the repurchased shares to fund its stock-based benefit and compensation
plans and for any other purpose the Board of Directors of the Company deems
advisable in compliance with applicable law.
ASSET QUALITY
At December 31, 2004, non-performing assets totaled $1.6 million, or 0.39% of
total loans receivable, compared to $2.1 million, or 0.60% of total loans
receivable, at March 31, 2004. At December 31, 2004, the allowance for loan
losses of $4.1 million remained unchanged from March 31, 2004. At December 31,
2004, the ratio of the allowance for loan losses to non-performing loans was
254.1% compared to 194.3% at March 31, 2004. At December 31, 2004, the ratio of
the allowance for loan losses to total loans receivable was 1.00% compared to
1.16% at March 31, 2004.
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 eight
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.
STATEMENTS CONTAINED IN THIS NEWS RELEASE, WHICH ARE NOT HISTORICAL FACTS ARE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED, (THE "SECURITIES ACT"), AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). THESE
FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIED BY THE USE OF SUCH WORDS AS
"BELIEVE," "EXPECT," "ANTICIPATE," "INTEND," "SHOULD," "WILL," "WOULD," "COULD,"
"MAY," "PLANNED," "ESTIMATED," "POTENTIAL," "OUTLOOK," "PREDICT," "PROJECT" AND
SIMILAR TERMS AND PHRASES, INCLUDING REFERENCES TO ASSUMPTIONS. FORWARD-LOOKING
STATEMENTS ARE BASED ON VARIOUS ASSUMPTIONS AND ANALYSES MADE BY THE COMPANY IN
LIGHT OF MANAGEMENT'S EXPERIENCE AND ITS PERCEPTION OF HISTORICAL TRENDS,
CURRENT CONDITIONS AND EXPECTED FUTURE DEVELOPMENTS, AS WELL AS OTHER FACTORS
BELIEVED TO BE APPROPRIATE UNDER THE CIRCUMSTANCES. THESE STATEMENTS ARE NOT
GUARANTEES OF FUTURE PERFORMANCE AND ARE SUBJECT TO RISKS, UNCERTAINTIES AND
OTHER FACTORS, MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL, THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM FUTURE RESULTS EXPRESSED OR IMPLIED BY
SUCH FORWARD-LOOKING STATEMENTS. FACTORS WHICH COULD RESULT IN MATERIAL
VARIATIONS INCLUDE, WITHOUT LIMITATION, THE COMPANY'S SUCCESS IN IMPLEMENTING
ITS INITIATIVES, INCLUDING EXPANDING ITS PRODUCT LINE, ADDING NEW BRANCHES AND
ATM CENTERS, SUCCESSFULLY RE-BRANDING ITS IMAGE AND ACHIEVING GREATER OPERATING
EFFICIENCIES; INCREASES IN COMPETITIVE PRESSURE AMONG FINANCIAL INSTITUTIONS OR
NON-FINANCIAL INSTITUTIONS; LEGISLATIVE OR REGULATORY CHANGES WHICH MAY
ADVERSELY AFFECT THE COMPANY'S BUSINESS OR INCREASE THE COST OF DOING BUSINESS;
TECHNOLOGICAL CHANGES WHICH MAY BE MORE DIFFICULT OR EXPENSIVE THAN WE
ANTICIPATE; CHANGES IN INTEREST RATES WHICH MAY REDUCE NET INTEREST MARGINS AND
NET INTEREST INCOME; CHANGES IN DEPOSIT FLOWS, LOAN DEMAND OR REAL ESTATE VALUES
WHICH MAY ADVERSELY AFFECT THE COMPANY'S BUSINESS;
4
CHANGES IN ACCOUNTING PRINCIPLES, POLICIES OR GUIDELINES WHICH MAY CAUSE THE
COMPANY'S CONDITION 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 OF THE COMPANY TO ORIGINATE AND PURCHASE LOANS WITH
ATTRACTIVE TERMS AND ACCEPTABLE CREDIT QUALITY; AND GENERAL ECONOMIC CONDITIONS,
EITHER NATIONALLY OR LOCALLY IN SOME OR ALL AREAS IN WHICH THE COMPANY DOES
BUSINESS, OR CONDITIONS IN THE 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. THE FORWARD-LOOKING STATEMENTS CONTAINED WITHIN HEREIN
ARE MADE AS OF THE DATE OF THIS REPORT, AND THE COMPANY ASSUMES NO OBLIGATION TO
UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT ACTUAL RESULTS, CHANGES IN
ASSUMPTIONS OR CHANGES IN OTHER FACTORS AFFECTING SUCH FORWARD-LOOKING
STATEMENTS OR TO UPDATE THE REASONS WHY ACTUAL RESULTS COULD DIFFER FROM THOSE
PROJECTED IN THE FORWARD-LOOKING STATEMENTS. YOU SHOULD CONSIDER THESE RISKS AND
UNCERTAINTIES IN EVALUATING FORWARD-LOOKING STATEMENTS AND YOU SHOULD NOT PLACE
UNDUE RELIANCE ON THESE STATEMENTS.
# # #
5
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, MARCH 31,
2004 2004
--------------- ---------------
(UNAUDITED)
ASSETS
Cash and cash equivalents:
Cash and due from banks $ 13,136 $ 11,574
Federal funds sold 8,500 8,200
Interest Earning Deposits 600 3,000
--------------- ---------------
Total cash and cash equivalents 22,236 22,774
Securities:
Available-for-sale, at fair value (including pledged as collateral of
$114,109 at December 31, 2004, $82,325 at March 31, 2004) 119,982 96,403
Held-to-maturity, at amortized cost (including pledged as collateral of
$31,054 at December 31, 2004, $42,189 at March 31, 2004) 31,830 43,474
--------------- ---------------
Total securities 151,812 139,877
Loans receivable:
Real estate mortgage loans 411,509 350,015
Consumer and commercial business loans 1,643 6,010
Allowance for loan losses (4,119) (4,125)
--------------- ---------------
Total loans receivable, net 409,033 351,900
Office properties and equipment, net 13,323 11,682
Federal Home Loan Bank of New York stock, at cost 5,625 4,576
Accrued interest receivable 2,713 2,489
Other assets 11,326 5,532
--------------- ---------------
Total assets $ 616,068 $ 538,830
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 436,425 $ 373,665
Advances from the Federal Home Loan Bank of New York and other borrowed money 125,290 104,282
Other liabilities 8,791 16,238
--------------- ---------------
Total liabilities 570,506 494,185
=============== ===============
Stockholders' equity:
Preferred stock (par value $0.01 per share; 1,000,000
shares authorized; 100,000 issued and outstanding) - 1
Common stock (par value $0.01 per share: 10,000,000 shares authorized; 2,524,691 and
2,316,358 shares issued at December 31, 2004 and March 31, 2004, respectively; 2,480,393
and 2,285,267 outstanding at December 31, 2004 and March 31, 2004, respectively) 25 23
Additional paid-in capital 23,913 23,882
Retained earnings 22,536 20,892
Unamortized awards of common stock under management recognition plan (11) (21)
Treasury stock, at cost (44,298 shares at December 31, 2004 and 31,091 shares at
March 31, 2004) (751) (390)
Accumulated other comprehensive income (150) 258
--------------- ---------------
Total stockholders' equity 45,562 44,645
--------------- ---------------
Total liabilities and stockholders' equity $ 616,068 $ 538,830
=============== ===============
6
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
----------------------------------- ------------------------------------
(UNAUDITED) (UNAUDITED)
2004 2003 2004 2003
-------------- ----------------- ---------------- ----------------
Interest Income:
Loans $ 5,780 $ 5,025 $ 16,897 $ 14,952
Total securities 1,411 1,396 3,962 4,507
Federal funds sold 32 62 89 143
-------------- ----------------- ---------------- ----------------
Total interest income 7,223 6,483 20,948 19,602
Interest expense:
Deposits 1,449 1,140 3,886 3,560
Advances and other borrowed money 1,036 1,076 3,134 2,996
-------------- ----------------- ---------------- ----------------
Total interest expense 2,485 2,216 7,020 6,556
Net interest income 4,738 4,267 13,928 13,046
Provision for loan losses - - - -
-------------- ----------------- ---------------- ----------------
Net interest income after provision for loan losses 4,738 4,267 13,928 13,046
Non-interest income:
Depository fees and charges 600 479 1,655 1,454
Loan fees and service charges 466 1,037 1,547 2,175
Gain (loss) on sale of securities - - 94 31
Impairment of securities - - (1,472) -
Gain on sale of loans 28 55 74 55
Grant income - - 1,140 -
Other 109 6 135 577
-------------- ----------------- ---------------- ----------------
Total non-interest income 1,203 1,577 3,173 4,292
Non-interest expense:
Employee compensation and benefits 2,365 1,989 6,435 5,592
Net occupancy expense 526 385 1,402 1,053
Equipment 400 331 1,165 1,113
Merger related expenses - - 847 -
Other 1,216 1,267 3,667 3,885
-------------- ----------------- ---------------- ----------------
Total non-interest expense 4,507 3,972 13,516 11,643
Income before income taxes 1,434 1,872 3,585 5,695
Income taxes 514 636 1,328 1,946
-------------- ----------------- ---------------- ----------------
Net income $ 920 $ 1,236 $ 2,257 $ 3,749
============== ================= ================ ================
Dividends applicable to preferred stock $ 16 $ 49 $ 114 $ 148
Net income available to common stockholders $ 904 $ 1,187 $ 2,143 $ 3,601
============== ================= ================ ================
Earnings per common share:
Basic $ 0.37 $ 0.52 $ 0.91 $ 1.58
============== ================= ================ ================
Diluted $ 0.36 $ 0.47 $ 0.87 $ 1.45
============== ================= ================ ================
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CARVER BANCORP, INC. AND SUBSIDIARIES
SELECTED KEY RATIOS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
KEY OPERATING RATIOS: DECEMBER 31, DECEMBER 31,
-------------------- --------------------
2004 2003 2004 2003
------- -------- ------- -------
Return on average assets (1) 0.62 % 0.94 % 0.53 % 0.96 %
Return on average equity (2) 8.03 11.45 6.61 11.86
Interest rate spread (3) 3.28 3.33 3.34 3.41
Net interest margin (4) 3.41 3.53 3.42 3.58
Operating expenses to average assets (5) 3.05 3.15 3.16 3.04
Equity-to-assets (6) 7.40 8.18 7.40 8.18
Efficiency ratio (7) 75.86 68.78 79.04 67.48
Average interest-earning assets to
interest-bearing liabilities 1.08 1.12 1.05 1.10
ASSET QUALITY RATIOS: DECEMBER 31, MARCH 31,
-------------------- --------------------
2004 2003 2004 2003
------- -------- ------- -------
Non performing assets to total assets (8) 0.26 0.24 0.39 0.36
Non performing assets to total loans receivable (8) 0.39 0.37 0.60 0.61
Allowance for loan losses to total loans receivable 1.00 1.21 1.16 1.40
Allowance for loan losses to non-performing loans (8) 254.1 330.6 194.3 230.7
(1) Net income divided by average total assets, annualized
(2) Net income divided by average total equity, annualized
(3) Combined weighted average interest rate earned less combined weighted
average interest rate cost
(4) Net interest income divided by average interest-earning assets annualized
(5) Non-interest expenses less loss on foreclosed real estate divided by average
total assets, annualized. Excluding merger related expenses the ratio would
be 2.96% year-to-date
(6) Total equity divided by assets at period end
(7) Operating expenses divided by sum of net interest income plus non-interest
income. Excluding the Independence stock impairment charge, grant income and
merger related expenses, the ratio would be 72.67% year-to-date
(8) Non performing assets consist of non-accrual loans, loans accruing 90 days
or more past due and property acquired in settlement of loans
8