NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nature of operations
Carver Bancorp, Inc. (on a stand-alone basis, the “Company” or “Registrant”), was incorporated in May 1996 and its principal wholly-owned subsidiaries are Carver Federal Savings Bank (the “Bank” or “Carver Federal”) and Alhambra Holding Corp., an inactive Delaware corporation. Carver Federal's wholly-owned subsidiaries are CFSB Realty Corp., Carver Community Development Corporation (“CCDC”) and CFSB Credit Corp., which is currently inactive. The Bank has a real estate investment trust, Carver Asset Corporation ("CAC"), that was formed in February 2004.
“Carver,” the “Company,” “we,” “us” or “our” refers to the Company along with its consolidated subsidiaries. The Bank was chartered in 1948 and began operations in 1949 as Carver Federal Savings and Loan Association, a federally-chartered mutual savings and loan association. The Bank converted to a federal savings bank in 1986. On October 24, 1994, the Bank converted from a mutual holding company structure to stock form and issued
2,314,375
shares of its common stock, par value
$0.01
per share. On October 17, 1996, the Bank completed its reorganization into a holding company structure (the “Reorganization”) and became a wholly-owned subsidiary of the Company.
Carver Federal’s principal business consists of attracting deposit accounts through its branches and investing those funds in mortgage loans and other investments permitted by federal savings banks. The Bank has nine branches located throughout the City of New York that primarily serve the communities in which they operate.
In September 2003, the Company formed Carver Statutory Trust I (the “Trust”) for the sole purpose of issuing trust preferred securities and investing the proceeds in an equivalent amount of floating rate junior subordinated debentures of the Company. In accordance with Accounting Standards Codification (“ASC”) 810, “Consolidation,” Carver Statutory Trust I is unconsolidated for financial reporting purposes. On September 17, 2003, Carver Statutory Trust I issued
13,000
shares, liquidation amount
$1,000
per share, of floating rate capital securities. Gross proceeds from the sale of these trust preferred debt securities of
$13 million
, and proceeds from the sale of the trust's common securities of
$0.4 million
, were used to purchase approximately
$13.4 million
aggregate principal amount of the Company's floating rate junior subordinated debt securities due 2033. The trust preferred debt securities are redeemable at par quarterly at the option of the Company beginning on or after September 17, 2008, and have a mandatory redemption date of September 17, 2033. Cash distributions on the trust preferred debt securities are cumulative and payable at a floating rate per annum resetting quarterly with a margin of
3.05%
over the three-month LIBOR. During the second quarter of fiscal year 2017, the Company applied for and was granted regulatory approval to settle all outstanding debenture interest payments through September 2016. Such payments were made in September 2016. Interest on the debentures has been deferred since September 2016, per the terms of the agreement, which permit such deferral for up to twenty consecutive quarters, as the Company is prohibited from making payments without prior regulatory approval.
Carver relies primarily on dividends from Carver Federal to pay cash dividends to its stockholders, to engage in share repurchase programs and to pay principal and interest on its trust preferred debt obligation. The OCC regulates all capital distributions, including dividend payments, by Carver Federal to Carver, and the FRB regulates dividends paid by Carver. As the subsidiary of a savings and loan association holding company, Carver Federal must file a notice or an application (depending on the proposed dividend amount) with the OCC (and a notice with the FRB) prior to the declaration of each capital distribution. The OCC will disallow any proposed dividend, for among other reasons, that would result in Carver Federal’s failure to meet the OCC minimum capital requirements. In accordance with the Agreement, Carver Federal is currently prohibited from paying any dividends without prior OCC approval, and, as such, has suspended Carver’s regular quarterly cash dividend on its common stock. There are no assurances that dividend payments to Carver will resume.
Regulation
On October 23, 2015, the Board of Directors of the Company adopted resolutions requiring, among other things, written approval from the Federal Reserve Bank of Philadelphia prior to the declaration or payment of dividends, any increase in debt by the Company, or the redemption of Company common stock.
On May 24, 2016, the Bank entered into a Formal Agreement with the OCC to undertake certain compliance-related and other actions as further described in the Company’s Current Report on Form 8-K as filed with the Securities and Exchange Commission (“SEC”) on May 27, 2016. As a result of the Formal Agreement, the Bank must obtain the approval of the OCC
prior to effecting any change in its directors or senior executive officers. The Bank may not declare or pay dividends or make any other capital distributions, including to the Company, without first filing an application with the OCC and receiving the prior approval of the OCC. Furthermore, the Bank must seek the OCC's written approval and the FDIC's written concurrence before entering into any "golden parachute payments" as that term is defined under 12 U.S.C. § 1828(k) and 12 C.F.R. Part 359.
Restatement
On July 7, 2017, the Finance and Audit Committee of the Board of Directors of Carver Bancorp, Inc., after consultation with BDO USA, LLP, our independent registered public accounting firm, determined that our consolidated financial statements as of and for the fiscal year ended March 31, 2016, and each of the quarters during the 2016 and 2017 fiscal years should no longer be relied upon.
Within this report, we have included restated audited results as of and for the year ended March 31, 2016, as well as restated unaudited condensed consolidated financial information for the quarterly periods in 2016 and 2017, which we refer to as the Restatement. Our consolidated financial statements as of and for the year ended March 31, 2016 included in this Annual Report on Form 10-K have been restated from the consolidated financial statements included on our Annual Report on Form 10-K for the year ended March 31, 2016.
The Restatement corrects a material error related to approximately
$1.7 million
of reconciling items that were identified as uncollectable and written off, primarily during the fourth quarter of fiscal year 2017, as part of the focused review of reconciliations and internal controls. Management's evaluation of the items written off concluded that approximately
$1.0 million
of these writeoffs should have been accounted for in prior periods:
$666 thousand
of the amount written off should have been accounted for in fiscal year 2016 and the
$361 thousand
remainder should have been accounted for in years prior to fiscal year 2016. The
$666 thousand
of writeoffs attributable to fiscal year 2016 have been reflected in the Consolidated Statement of Operations for the fiscal year 2016. The
$361 thousand
of writeoffs attributable to periods prior to fiscal year 2016 have been presented in the consolidated financial statements as an adjustment to the opening balance of Accumulated Deficit as of March 31, 2015. On the March 31, 2016 Statement of Financial Condition, these adjustments decreased Cash by
$472 thousand
, Loans Receivable by
$391 thousand
, Other Assets by
$525 thousand
and Other Liabilities by
$497 thousand
. The impact of these adjustments on the fiscal 2016 Statement of Operations was an increase to Other Non-Interest Expense of
$666 thousand
. The impact of these adjustment on the fiscal 2016 Statement of Cash Flows was to decrease beginning and ending Cash and Cash Equivalents by
$168 thousand
and
$472 thousand
, respectively, increase the operating cash outflow from net loss by
$666 thousand
and increase the operating cash inflow from other assets and liabilities by
$362 thousand
.
The Company also identified and corrected material errors related to the accounting for loans on the Company's servicing platforms. The accounting adjustments are related to loan system maintenance items and payment applications that were not timely processed by the Bank on to its core provider system. Management's evaluation of these items concluded that approximately
$1.2 million
should have been accounted for in prior periods:
$865 thousand
should have been accounted for in fiscal year 2016 and the
$285 thousand
remainder should have been accounted for in years prior to fiscal year 2016. The
$865 thousand
of adjustments attributable to fiscal year 2016 have been reflected in the Consolidated Statement of Operations for the fiscal year 2016 as a reduction in interest income on loans. The
$285 thousand
of adjustments attributable to periods prior to fiscal year 2016 have been presented in the consolidated financial statements as an adjustment to the opening balance of Accumulated deficit as of March 31, 2015. On the March 31, 2016 Statement of Financial Condition, these adjustments decreased Accrued Interest Receivable by
$1.2 million
and Loans by
$59 thousand
. The impact of these adjustments on the fiscal 2016 Statement of Cash Flows was operating cash outflows of
$865 thousand
from increased net loss,
$52 thousand
from net premium amortization on loans and
$25 thousand
from the net change in other assets and liabilities and an inflow of
$942 thousand
from the net change in Accrued Interest Receivable.
In addition to the errors described above, adjustments have been made related to other individually immaterial errors including certain corrections that had been previously identified but not recorded because they were not material to our consolidated financial statements. These corrections included adjustments to other liabilities, interest expense and certain reclassification entries. On the March 31, 2016 Statement of Financial Condition, these corrections increased both Other Liabilities and Accumulated Deficit by
$158 thousand
(the opening balance of Accumulated Deficit at March 31, 2015 was increased by
$92 thousand
.) The impact of these corrections on the fiscal 2016 Statement of Operations was to increase interest on loans by
$521 thousand
and interest expense on advances and other borrowed money by
$66 thousand
and decrease loan fees and service charges by
$521 thousand
.
The cumulative adjustments to correct the above errors in the consolidated financial statements as of March 31, 2016 increased previously reported Accumulated Deficit by
$2.3 million
and decreased previously reported Accrued Interest Receivable by
$1.2 million
, Other Assets by
$525 thousand
, Other Liabilities by
$339 thousand
, Cash by
$472 thousand
, Loans Receivable
by
$391 thousand
and Loans Held-for-Sale by
$59 thousand
. The impact of the corrections also increased beginning Accumulated Deficit by
$738 thousand
and increased previously reported Net Loss by
$1.6 million
and previously reported loss per share by
$0.43
for fiscal year 2016.
All applicable amounts relating to this Restatement have been reflected in the consolidated financial statements and disclosed in the notes to the consolidated financial statements in this 2017 Form 10-K. See Note 19 – Quarterly Financial Data (Unaudited) for further details of the restatement adjustments for the quarterly periods of fiscal years 2016 and 2017. The following analysis includes the financial statements as originally reported and as adjusted and takes into account the following adjustments.
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
|
|
|
|
March 31, 2016
|
$ in thousands except per share data
|
As Previously Reported
|
|
Adjustment
|
|
As Restated
|
ASSETS
|
|
|
|
|
|
Cash and cash equivalents:
|
|
|
|
|
|
Cash and due from banks
|
$
|
63,156
|
|
|
$
|
(472
|
)
|
|
$
|
62,684
|
|
Money market investments
|
504
|
|
|
—
|
|
|
504
|
|
Total cash and cash equivalents
|
63,660
|
|
|
(472
|
)
|
|
63,188
|
|
Restricted cash
|
225
|
|
|
—
|
|
|
225
|
|
Investment securities:
|
|
|
|
|
|
Available-for-sale, at fair value
|
56,180
|
|
|
—
|
|
|
56,180
|
|
Held-to-maturity, at amortized cost (fair value of $15,653 at March 31, 2016)
|
15,311
|
|
|
—
|
|
|
15,311
|
|
Total investments
|
71,491
|
|
|
—
|
|
|
71,491
|
|
|
|
|
|
|
|
Loans held-for-sale (HFS)
|
2,495
|
|
|
(59
|
)
|
|
2,436
|
|
|
|
|
|
|
|
Loans receivable:
|
|
|
|
|
|
Real estate mortgage loans
|
517,785
|
|
|
(152
|
)
|
|
517,633
|
|
Commercial business loans
|
71,192
|
|
|
(239
|
)
|
|
70,953
|
|
Consumer loans
|
42
|
|
|
—
|
|
|
42
|
|
Loans, net
|
589,019
|
|
|
(391
|
)
|
|
588,628
|
|
Allowance for loan losses
|
(5,232
|
)
|
|
—
|
|
|
(5,232
|
)
|
Total loans receivable, net
|
583,787
|
|
|
(391
|
)
|
|
583,396
|
|
Premises and equipment, net
|
5,983
|
|
|
—
|
|
|
5,983
|
|
Federal Home Loan Bank of New York (“FHLB-NY”) stock, at cost
|
2,883
|
|
|
—
|
|
|
2,883
|
|
Accrued interest receivable
|
3,647
|
|
|
(1,227
|
)
|
|
2,420
|
|
Other assets
|
7,557
|
|
|
(525
|
)
|
|
7,032
|
|
Total assets
|
$
|
741,728
|
|
|
$
|
(2,674
|
)
|
|
$
|
739,054
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
Savings
|
$
|
95,230
|
|
|
$
|
—
|
|
|
$
|
95,230
|
|
Non-interest bearing checking
|
56,634
|
|
|
—
|
|
|
56,634
|
|
Interest-bearing checking
|
33,106
|
|
|
—
|
|
|
33,106
|
|
Money market
|
163,380
|
|
|
—
|
|
|
163,380
|
|
Certificates of deposit
|
255,854
|
|
|
—
|
|
|
255,854
|
|
Mortgagors deposits
|
2,537
|
|
|
—
|
|
|
2,537
|
|
Total deposits
|
606,741
|
|
|
—
|
|
|
606,741
|
|
Advances from the FHLB-NY and other borrowed money
|
68,403
|
|
|
—
|
|
|
68,403
|
|
Other liabilities
|
12,369
|
|
|
(339
|
)
|
|
12,030
|
|
Total liabilities
|
687,513
|
|
|
(339
|
)
|
|
687,174
|
|
EQUITY
|
|
|
|
|
|
Preferred stock (par value $0.01 per share: 45,118 Series D shares, with a liquidation preference of $1,000 per share, issued and outstanding)
|
45,118
|
|
|
—
|
|
|
45,118
|
|
Common stock (par value $0.01 per share: 10,000,000 shares authorized; 3,698,031 issued; 3,696,087 shares outstanding at March 31, 2016)
|
61
|
|
|
—
|
|
|
61
|
|
Additional paid-in capital
|
55,470
|
|
|
—
|
|
|
55,470
|
|
Accumulated deficit
|
(45,710
|
)
|
|
(2,335
|
)
|
|
(48,045
|
)
|
Treasury stock, at cost (1,944 shares at March 31, 2016)
|
(417
|
)
|
|
—
|
|
|
(417
|
)
|
Accumulated other comprehensive loss
|
(307
|
)
|
|
—
|
|
|
(307
|
)
|
Total equity
|
54,215
|
|
|
(2,335
|
)
|
|
51,880
|
|
Total liabilities and equity
|
$
|
741,728
|
|
|
$
|
(2,674
|
)
|
|
$
|
739,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
|
|
|
|
Year Ended March 31, 2016
|
$ in thousands except per share data
|
As Previously Reported
|
|
Adjustment
|
|
As Restated
|
Interest income:
|
|
|
|
|
|
Loans
|
$
|
24,702
|
|
|
$
|
(344
|
)
|
|
$
|
24,358
|
|
Mortgage-backed securities
|
761
|
|
|
—
|
|
|
761
|
|
Investment securities
|
1,295
|
|
|
—
|
|
|
1,295
|
|
Money market investments
|
150
|
|
|
—
|
|
|
150
|
|
Total interest income
|
26,908
|
|
|
(344
|
)
|
|
26,564
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
Deposits
|
3,269
|
|
|
—
|
|
|
3,269
|
|
Advances and other borrowed money
|
1,270
|
|
|
66
|
|
|
1,336
|
|
Total interest expense
|
4,539
|
|
|
66
|
|
|
4,605
|
|
Net interest income
|
22,369
|
|
|
(410
|
)
|
|
21,959
|
|
Provision for loan losses
|
1,495
|
|
|
—
|
|
|
1,495
|
|
Net interest income after provision for (recovery of) loan losses
|
20,874
|
|
|
(410
|
)
|
|
20,464
|
|
|
|
|
|
|
|
Non-interest income:
|
|
|
|
|
|
Depository fees and charges
|
3,112
|
|
|
—
|
|
|
3,112
|
|
Loan fees and service charges
|
940
|
|
|
(521
|
)
|
|
419
|
|
Gain on sale of securities, net
|
1
|
|
|
—
|
|
|
1
|
|
Gain on sale of loans, net
|
499
|
|
|
—
|
|
|
499
|
|
Gain on real estate owned, net
|
35
|
|
|
—
|
|
|
35
|
|
Gain on sale of building, net
|
1,221
|
|
|
—
|
|
|
1,221
|
|
Lower of cost or market adjustment on loans held-for-sale
|
1
|
|
|
—
|
|
|
1
|
|
Other
|
726
|
|
|
—
|
|
|
726
|
|
Total non-interest income
|
6,535
|
|
|
(521
|
)
|
|
6,014
|
|
|
|
|
|
|
|
Non-interest expense:
|
|
|
|
|
|
Employee compensation and benefits
|
11,358
|
|
|
—
|
|
|
11,358
|
|
Net occupancy expense
|
4,695
|
|
|
—
|
|
|
4,695
|
|
Equipment, net
|
635
|
|
|
—
|
|
|
635
|
|
Data processing
|
1,100
|
|
|
—
|
|
|
1,100
|
|
Consulting fees
|
1,058
|
|
|
—
|
|
|
1,058
|
|
Federal deposit insurance premiums
|
527
|
|
|
—
|
|
|
527
|
|
Other
|
8,078
|
|
|
666
|
|
|
8,744
|
|
Total non-interest expense
|
27,451
|
|
|
666
|
|
|
28,117
|
|
|
|
|
|
|
|
Loss before income taxes
|
(42
|
)
|
|
(1,597
|
)
|
|
(1,639
|
)
|
Income tax expense
|
128
|
|
|
—
|
|
|
128
|
|
Net loss
|
$
|
(170
|
)
|
|
$
|
(1,597
|
)
|
|
$
|
(1,767
|
)
|
|
|
|
|
|
|
Net loss
|
$
|
(170
|
)
|
|
$
|
(1,597
|
)
|
|
$
|
(1,767
|
)
|
Total other comprehensive income
|
738
|
|
|
—
|
|
|
738
|
|
Comprehensive income (loss)
|
$
|
568
|
|
|
$
|
(1,597
|
)
|
|
$
|
(1,029
|
)
|
|
|
|
|
|
|
Loss per common share:
|
|
|
|
|
|
Basic
|
$
|
(0.05
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
(0.48
|
)
|
Diluted
|
$
|
(0.05
|
)
|
|
$
|
(0.43
|
)
|
|
$
|
(0.48
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENT OF CASH FLOWS
|
|
|
|
Year Ended March 31, 2016
|
$ in thousands except per share data
|
As Previously Reported
|
|
Adjustment
|
|
As Restated
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
Net loss
|
$
|
(170
|
)
|
|
$
|
(1,597
|
)
|
|
$
|
(1,767
|
)
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
Provision for loan losses
|
1,495
|
|
|
—
|
|
|
1,495
|
|
Stock based compensation expense
|
2
|
|
|
—
|
|
|
2
|
|
Depreciation and amortization expense
|
1,415
|
|
|
—
|
|
|
1,415
|
|
Loss (gain) on sale of real estate owned, net of market value adjustment
|
(35
|
)
|
|
—
|
|
|
(35
|
)
|
Gain on sale of securities, net
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
Gain on sale of loans, net
|
(499
|
)
|
|
—
|
|
|
(499
|
)
|
Gain on sale of building
|
(1,221
|
)
|
|
—
|
|
|
(1,221
|
)
|
Market adjustment on held-for-sale loans
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
Amortization and accretion of loan premiums and discounts and deferred charges
|
188
|
|
|
(52
|
)
|
|
136
|
|
Amortization and accretion of premiums and discounts - securities
|
322
|
|
|
—
|
|
|
322
|
|
Decrease (increase) in accrued interest receivable
|
(866
|
)
|
|
942
|
|
|
76
|
|
Decrease (increase) in other assets
|
(1,915
|
)
|
|
943
|
|
|
(972
|
)
|
Increase in other liabilities
|
2,010
|
|
|
(540
|
)
|
|
1,470
|
|
Net cash provided by operating activities
|
724
|
|
|
(304
|
)
|
|
420
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
Net cash used in investing activities
|
(52,036
|
)
|
|
—
|
|
|
(52,036
|
)
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
Net cash provided by financing activities
|
63,980
|
|
|
—
|
|
|
63,980
|
|
Net (decrease) increase in cash and cash equivalents
|
12,668
|
|
|
(304
|
)
|
|
12,364
|
|
Cash and cash equivalents at beginning of period
|
50,992
|
|
|
(168
|
)
|
|
50,824
|
|
Cash and cash equivalents at end of period
|
$
|
63,660
|
|
|
$
|
(472
|
)
|
|
$
|
63,188
|
|
|
|
NOTE 2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Basis of consolidated financial statement presentation
The consolidated financial statements include the accounts of the Company, the Bank and the Bank's wholly-owned or majority-owned subsidiaries, Carver Asset Corporation, CFSB Realty Corp., CCDC, and CFSB Credit Corp. All significant intercompany accounts and transactions have been eliminated in consolidation.
The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (GAAP). In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated statement of financial condition and revenues and expenses for the period then ended. Amounts subject to significant estimates and assumptions are items such as the allowance for loan losses, realization of deferred tax assets, assessment of other-than-temporary impairment of securities, and the fair value of financial instruments. While management uses available information to recognize losses on loans, future additions to the allowance for loan losses or future writedowns of real estate owned may be necessary based on changes in economic conditions in the areas where Carver Federal has extended mortgages and other credit instruments. Actual results could differ significantly from those assumptions. Current market conditions increase the risk and complexity of the judgments in these estimates.
In addition, the OCC, Carver Federal's regulator, as an integral part of its examination process, periodically reviews Carver Federal's allowance for loan losses and, if applicable, real estate owned valuations. The OCC may require Carver Federal to recognize additions to the allowance for loan losses or additional writedowns of real estate owned based on their judgments about information available to them at the time of their examination.
Cash and cash equivalents
For the purpose of reporting cash flows, cash and cash equivalents include cash, amounts due from depository institutions and other short-term instruments with an original maturity of three months or less. The amounts due from depository institutions include a non-interest bearing account held at the Federal Reserve Bank where any additional cash reserve required on demand deposits would be maintained. Currently, this reserve requirement is zero since the Bank's vault cash satisfies cash reserve requirements for deposits.
Investment Securities
When purchased, investment securities are designated as either investment securities held-to-maturity, available-for-sale or trading.
Securities are classified as held-to-maturity and carried at amortized cost only if the Bank has a positive intent and ability to hold such securities to maturity. Securities held-to-maturity are carried at cost, adjusted for the amortization of premiums and the accretion of discounts using the level-yield method over the remaining period until maturity.
If not classified as held-to-maturity or trading, securities are classified as available-for-sale based upon management's ability to sell in response to actual or anticipated changes in interest rates, resulting prepayment risk or any other factors. Available-for-sale securities are reported at fair value. Estimated fair values of securities are based on either published or security dealers' market value if available. If quoted or dealer prices are not available, fair value is estimated using quoted or dealer prices for similar securities.
Securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and are reported at fair value with unrealized gains and losses included in earnings.
The Company conducts periodic reviews to identify and evaluate each investment that has an unrealized holding loss. Unrealized holding gains or losses for securities available-for-sale are excluded from earnings and reported net of deferred income taxes in accumulated other comprehensive loss, a component of Stockholders' Equity. Following Financial Accounting Standards Board ("FASB") guidance, the amount of an other-than-temporary impairment when there are credit and non-credit losses on a debt security which management does not intend to sell, and for which it is more likely than not that the Bank will not be required to sell the security prior to the recovery of the non-credit impairment, the portion of the total impairment that is attributable to the credit loss would be recognized in earnings. The remaining difference between the debt security's amortized cost basis and its fair value would be included in other comprehensive income (loss).
During fiscal years
2017
and
2016
,
no
other-than-temporary impairment charges were recorded. Gains or losses on sales of securities of all classifications are recognized based on the specific identification method.
Loans Held-for-Sale
Loans are only moved to held-for-sale classification upon the determination by Carver to sell a loan. Held-for-sale loans are carried at the lower of cost or market value. The initial charge-off, if any is required, will be taken upon the move to held-for-sale and absorbed through Carver's loan loss reserve. The need for further charge-offs is periodically evaluated if the loan remains classified as held-for-sale for an extended period of time using the valuation methodologies identified below. Any subsequently required charge-off is processed as a mark-to-market adjustment. The valuation methodology for loans held-for-sale varies based upon the circumstances. Held-for-sale values may be based upon accepted offer amounts, appraised value of underlying mortgaged premises, prior loan loss experience of Carver in connection with recent loan sales for the loan type in question, and/or other acceptable valuation methods.
Loans Receivable
Loans receivable are carried at unpaid principal balances plus unamortized premiums, purchase accounting mark-to-market adjustments, certain deferred direct loan origination costs and deferred loan origination fees and discounts, less the allowance for loan losses and charge-offs.
The Bank defers loan origination fees and certain direct loan origination costs and amortizes or accretes such amounts as an adjustment of yield over the contractual lives of the related loans using methodologies which approximate the interest
method. Premiums and discounts on loans purchased are amortized or accreted as an adjustment of yield over the contractual lives of the related loans, adjusted for prepayments when applicable, using methodologies which approximate the interest method.
Loans are placed on nonaccrual status when they are past due 90 days or more as to contractual obligations or when other circumstances indicate that collection is not probable. When a loan is placed on nonaccrual status, any interest accrued but not received is reversed against interest income. Payments received on a nonaccrual loan are either applied to protective advances, the outstanding principal balance or recorded as interest income, depending on an assessment of the ability to collect the loan. A nonaccrual loan is restored to accrual status when principal and interest payments become less than 90 days past due and its future collectability is reasonably assured.
If the Bank determines that there is an impairment dollar amount, the Bank next determines whether the amount of impairment is permanent. The amount of impairment determined to be permanent is charged off within the given fiscal quarter. All other amounts are recorded as a specific valuation allowance (“SVA”) reserve. Generally the amount of the loan and negative escrow in excess of the appraised value, for the fair value of collateral valuation method, is determined to be permanent and charged off. The amount attributable to the expected cost to sell, is recorded as a specific valuation allowance. In the event the Bank is using the collateral dependent determination for the dollar amount of impairment and the Bank does not have an accepted appraisal (for example, the Bank may utilize a broker’s price opinion), the Bank generally will treat all dollar amounts identified as impaired to be other than a permanent impairment and the full impaired amount will be recorded as a specific valuation allowance. For impairment amounts calculated utilizing the present value of expected future cash flows, the dollar amount of impairment is recorded as a specific valuation allowance.
Allowance for Loan and Lease Losses ("ALLL")
The adequacy of the Bank's ALLL is determined, in accordance with the Interagency Policy Statement on the Allowance for Loan and Lease Losses (the “Interagency Policy Statement”) released by the OCC on December 13, 2006 and in accordance with ASC Subtopics 450-20 "Loss Contingencies" and 310-10 "Accounting by Creditors for Impairment of a Loan." Compliance with the Interagency Policy Statement includes management's review of the Bank's loan portfolio, including the identification and review of individual problem situations that may affect a borrower's ability to repay. In addition, management reviews the overall portfolio quality through an analysis of delinquency and non-performing loan data, estimates of the value of underlying collateral, current charge-offs and other factors that may affect the portfolio, including a review of regulatory examinations, an assessment of current and expected economic conditions and changes in the size and composition of the loan portfolio.
The ALLL reflects management's evaluation of the loans presenting identified loss potential, as well as the risk inherent in various components of the portfolio. There is significant judgment applied in estimating the ALLL. These assumptions and estimates are susceptible to significant changes based on the current environment. Further, any change in the size of the loan portfolio or any of its components could necessitate an increase in the ALLL even though there may not be a decline in credit quality or an increase in potential problem loans. As such, there can never be assurance that the ALLL accurately reflects the actual loss potential inherent in a loan portfolio.
General Reserve Allowance
Carver's maintenance of a general reserve allowance in accordance with ASC Subtopic 450-20 includes the Bank's evaluating the risk to loss potential of homogeneous pools of loans based upon historical loss factors and a review of nine different environmental factors that are then applied to each pool. The pools of loans (“Loan Type”) are:
|
|
•
|
Other (Consumer and Overdraft Accounts)
|
The pools are further segregated into the following risk rating classes:
The Bank next applies to each pool a risk factor that determines the level of general reserves for that specific pool. The Bank estimates its historical charge-offs via a lookback analysis. The actual historical loss experience by major loan category is expressed as a percentage of the outstanding balance of all loans within the category. As the loss experience for a particular loan category increases or decreases, the level of reserves required for that particular loan category also increases or decreases. The Bank’s historical charge-off rate reflects the period over which the charge-offs were confirmed and recognized, not the period over which the earlier losses occurred. That is, the charge-off rate measures the confirmation of losses over a period that occurs after the earlier actual losses. During the period between the loss-causing events and the eventual confirmations of losses, conditions may have changed. There is always a time lag between the period over which average charge-off rates are calculated and the date of the financial statements. During that period, conditions may have changed. Another factor influencing the General Reserve is the Bank’s Loss Emergence Period ("LEP") assumptions which represent the Bank’s estimate of the average amount of time from the point at which a loss is incurred to the point at which the loss is confirmed, either through the identification of the loss or a charge-off. Based upon adequate management information systems and effective methodologies for estimating losses, management has established a LEP floor of one year on all pools. In some pools, such as Commercial Real Estate, Multifamily and Business, the Bank demonstrates an LEP in excess of 12 months.
Because actual loss experience may not adequately predict the level of losses inherent in a portfolio, the Bank reviews nine qualitative factors to determine if reserves should be adjusted based upon any of those factors. As the risk ratings worsen, some of the qualitative factors tend to increase. The nine qualitative factors the Bank considers and may utilize are:
|
|
1.
|
Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses (
Policy & Procedures
).
|
|
|
2.
|
Changes in relevant economic and business conditions and developments that affect the collectability of the portfolio, including the condition of various market segments (
Economy
).
|
|
|
3.
|
Changes in the nature or volume of the loan portfolio and in the terms of loans (
Nature & Volume
).
|
|
|
4.
|
Changes in the experience, ability, and depth of lending management and other relevant staff (
Management
).
|
|
|
5.
|
Changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified loans (
Problem Assets
).
|
|
|
6.
|
Changes in the quality of the loan review system (
Loan Review
).
|
|
|
7.
|
Changes in the value of underlying collateral for collateral dependent loans (
Collateral Values
).
|
|
|
8.
|
The existence and effect of any concentrations of credit and changes in the level of such concentrations (
Concentrations
).
|
|
|
9.
|
The effect of other external forces such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing portfolio (
External Forces
).
|
The following discussion describes the general risks associated with the Bank’s lending activities:
|
|
•
|
1-4 Family - Carver Federal purchases first mortgage loans secured by one-to-four family properties that serve as the primary residence of the owner, The loans are underwritten in accordance with applicable secondary market underwriting guidelines and requirements for sale. These loans present a moderate level of risk due primarily to general economic conditions.
|
|
|
•
|
Multifamily - Carver Federal originates and purchases multifamily loans. These loans can be affected by economic conditions and the value of the underlying properties. The Bank primarily considers the property's ability to generate net operating income sufficient to support the debt service, the financial resources, income level and managerial expertise of the borrower, the marketability of the property and the Bank's lending experience with the borrower.
|
|
|
•
|
Commercial - Commercial real estate lending consists predominantly of originating loans for the purpose of purchasing or refinancing office, mixed-use (properties used for both commercial and residential purposes but predominantly commercial), retail and church buildings in the Bank's market area. Mixed-use loans are secured by properties that are intended for both residential and business use and are classified as commercial real estate ("CRE"). In originating CRE loans, the Bank primarily considers the ability of the net operating income generated by the real estate to support the debt service, the financial resources, income level and managerial expertise of the borrower, the marketability of the property and the Bank's lending experience with the borrower. The Bank also requires the assignment of rents of all tenants' leases in the mortgaged property and personal guarantees may be obtained for additional security from these borrowers. Commercial real estate loans generally present a higher level of risk than other types of loans due primarily to the effect of general economic conditions and the complexities involved in valuing the underlying collateral.
|
|
|
•
|
Construction - The Bank has historically originated or participated in construction loans for new construction and renovation of multifamily buildings, residential developments, community service facilities, churches, and affordable housing programs. The loans provide for disbursement in stages as construction is completed. Borrowers must satisfy all credit requirements that apply to the Bank's permanent mortgage loan financing for the mortgaged property. Carver Federal has additional criteria for construction loans including an engineer's plan and periodic cost reviews on all construction budgets for loans. Construction loans present an increased level of risk from the effect of general economic conditions and uncertainties surrounding total construction costs. The Bank is not actively engaged in the origination of construction loans and does not pursue the purchase of them.
|
|
|
•
|
Business - The Bank originates and purchases business and SBA loans primarily to businesses located in its primary market area and surrounding areas. Business loans are typically personally guaranteed by the owners and may also be secured by additional collateral, including real estate, equipment and inventory. Business loans are also subject to increased risk from the effect of general economic conditions.
|
|
|
•
|
Consumer - The majority of the Consumer portfolio are student loans which are indemnified by a bond surety company which is contractually obligated to ensure all past due principal and interest payments on all loans from six months from the date of which the claim is received.
|
Specific Reserve Allowance
Carver also maintains a specific reserve allowance for criticized and classified loans individually reviewed for impairment in accordance with ASC Subtopic 310-10 guidelines. The amount assigned to the specific reserve allowance is individually determined based upon the loan. The ASC Subtopic 310-10 guidelines require the use of one of three approved methods to estimate the amount to be reserved and/or charged off for such credits. The three methods are as follows:
1.
The present value of expected future cash flows discounted at the loan's effective interest rate,
2.
The loan's observable market price; or
3.
The fair value of the collateral if the loan is collateral dependent.
The Bank may choose the appropriate ASC Subtopic 310-10 measurement on a loan-by-loan basis for an individually impaired loan, except for an impaired collateral dependent loan. Guidance requires impairment of a collateral dependent loan to be measured using the fair value of collateral method. A loan is considered "collateral dependent" when the repayment of the debt will be provided solely by the underlying collateral, and there are no other available and reliable sources of repayment.
Criticized and classified loans with at risk balances of $500,000 or more and loans below $500,000 that the Chief Credit Officer deems appropriate for review, are identified and reviewed for individual evaluation for impairment in accordance with ASC Subtopic 310-10. Carver also performs impairment analysis for all troubled debt restructurings (“TDRs”). All TDRs are classified as impaired. For non-TDRs, if it is determined that it is probable the Bank will be unable to collect all amounts due according with the contractual terms of the loan agreement, the loan is categorized as impaired.
If the loan is determined to be not impaired, it is then placed in the appropriate pool of criticized and classified loans to be evaluated collectively for impairment. Loans determined to be impaired are evaluated to determine the amount of impairment based on one of the three measurement methods noted above. The Bank then determines whether the impairment amount is permanent, in which case the loan is written down by the amount of the impairment, or if it is other than permanent, in which case the Bank establishes a specific valuation reserve that is included in the total ALLL. In accordance with guidance, if there is no impairment amount, no reserve is established for the loan.
Troubled Debt Restructured Loans
TDRs are those loans whose terms have been modified because of deterioration in the financial condition of the borrower and a concession is made. Modifications could include extension of the terms of the loan, reduced interest rates, capitalization of interest and forgiveness of accrued interest and/or principal. Once an obligation has been restructured because of such credit problems, it continues to be considered restructured until paid in full. For cash flow dependent loans, the Bank records a specific valuation allowance reserve equal to the difference between the present value of estimated future cash flows under the restructured terms discounted at the loan's original effective interest rate, and the loan's original carrying value. For a collateral dependent loan, the Bank records an impairment charge when the current estimated fair value of the property that collateralizes the impaired loan, if any, is less than the recorded investment in the loan. TDR loans remain on nonaccrual status until they have performed in accordance with the restructured terms for a period of at least six months.
Representation and Warranty Reserve
During the period 2004 through 2009, the Bank originated 1-4 family residential mortgage loans and sold the loans to the Federal National Mortgage Association (“FNMA”). The loans were sold to FNMA with the standard representations and warranties for loans sold to the Government Sponsored Entities (GSEs). The Bank may be required to repurchase these loans in the event of breaches of these representations and warranties. In the event of a repurchase, the Bank is typically required to pay the unpaid principal balance as well as outstanding interest and fees. The Bank then recovers the loan or, if the loan has been foreclosed, the underlying collateral. The Bank is exposed to any losses on repurchased loans after giving effect to any recoveries on the collateral.
Management has established a representation and warranty reserve for losses associated with the repurchase of mortgage loans sold by the Bank to FNMA that we consider to be both probable and reasonably estimable. These reserves are reported in the consolidated statement of financial condition as a component of other liabilities. The calculation of the reserve is based on estimates, which are uncertain, and require the application of judgment. In establishing the reserves, we consider a variety of factors, including those loans that are under review by FNMA that have not yet received a repurchase request. The Bank tracks the FNMA claims monthly and evaluates the reserve on a quarterly basis.
Segment Reporting
The Company has determined that all of its activities constitute
one
reportable operating segment.
Concentration of Risk
The Bank's principal lending activities are concentrated in loans secured by real estate, a substantial portion of which is located in New York City. Accordingly, the ultimate collectability of a substantial portion of the Company's loan portfolio is susceptible to changes in New York's real estate market conditions. Qualitative factors in the ALLL calculation incorporate the Bank's concentration risk.
Office Properties and Equipment
Office properties and equipment are comprised of land, at cost, and buildings, building improvements, furnishings and equipment and leasehold improvements, at cost less accumulated depreciation and amortization. Depreciation and amortization charges are computed using the straight-line method over the following estimated useful lives:
|
|
|
Buildings and improvements
|
10 to 25 years
|
Furnishings and equipment
|
3 to 5 years
|
Leasehold improvements
|
Lesser of useful life or remaining term of lease
|
Maintenance, repairs and minor improvements are charged to non-interest expense in the period incurred.
Federal Home Loan Bank Stock
The FHLB-NY has assigned to the Bank a mandated membership stock purchase, based on the Bank's asset size. In addition, for all borrowing activity, the Bank is required to purchase shares of FHLB-NY non-marketable capital stock at par. Such shares are redeemed by FHLB-NY at par with reductions in the Bank's borrowing levels. We do not consider these shares to be other-than-temporarily impaired at
March 31, 2017
. The Bank carries this investment at historical cost.
Mortgage Servicing Rights
All separately recognized servicing assets totaled
$192 thousand
and
$201 thousand
, respectively, at
March 31, 2017
and
2016
, and are included in Other Assets in the consolidated statements of financial condition and measured at fair value. Servicing fee income of $61 thousand and $68 thousand, respectively, was recognized during the years ended
March 31, 2017
and
2016
, and is included in Other Non-Interest Income in the consolidated statements of operations.
Other Real Estate Owned
Real estate acquired by foreclosure or deed-in-lieu of foreclosure is recorded at fair value at the date of acquisition less estimated selling costs. Any subsequent adjustments will be to the lower of cost or market. The fair value of such assets is determined based primarily upon independent appraisals and other relevant factors. The amounts ultimately recoverable from real estate owned could differ from the net carrying value of these properties because of economic conditions. Costs incurred to improve properties or prepare them for sale are capitalized. Revenues and expenses related to the holding and operating of properties are recognized in operations as earned or incurred. Gains or losses on sale of properties are recognized as incurred.
Income Taxes
The Company records income taxes in accordance with ASC 740 “Income Taxes,” as amended, using the asset and liability method. Income tax expense (benefit) consists of income taxes currently payable (receivable) and deferred income taxes. Temporary differences between the basis of assets and liabilities for financial reporting and tax purposes are measured as of the balance sheet date. Deferred tax liabilities or recognizable deferred tax assets are calculated on such differences, using current statutory rates, which result in future taxable or deductible amounts. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. Where applicable, deferred tax assets are reduced by a valuation allowance for any portion determined not likely to be realized. This valuation allowance would subsequently be adjusted by a charge or credit to income tax expense as changes in facts and circumstances warrant. A tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Any interest expense or penalties would be recorded as interest expense.
Earnings (Loss) per Common Share
The Company has preferred stock series D shares which if exercised could convert to common stock and are therefore considered to be participating securities. Basic earnings (loss) per share (“EPS”) is computed using the two class method. This calculation divides net income (loss) available to common stockholders after the allocation of undistributed earnings to the participating securities by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock. These potentially dilutive shares are then included in the weighted average number of shares outstanding for the period. Dilution calculations are not applicable to net loss periods.
Preferred and Common Dividends
The Company is prohibited from paying any dividends without prior regulatory approval pursuant to the terms of the Formal Agreement and Resolution to which it is subject, and is generally subject to regulations governing the payment of dividends. See Item 1 - Business - Regulation and Supervision - Enforcement Actions. There are no assurances that the payments of common stock dividends will resume.
Treasury Stock
Treasury stock is recorded at cost and is presented as a reduction of stockholders' equity.
Stock Compensation Plans
The Company currently has multiple stock plans in place for employees and directors of the Company. U.S. GAAP requires that the compensation cost related to share-based payment transactions be recognized in financial statements. The share-based compensation accounting guidance requires that compensation cost for all stock awards be calculated and recognized over a defined vesting period. For awards with graded-vesting, compensation cost is recognized on a straight-line basis over the requisite vesting period for the entire award. A Black-Scholes model is used to estimate the fair value of stock options, while the market price of the Company's common stock at the date of grant is used for restricted stock awards.
Off-Balance Sheet Financial Instruments
In the ordinary course of business, the Bank has entered into off-balance sheet financial instruments consisting of commitments to extend credit and letters of credit. Such financial instruments are recorded in the consolidated statements of condition when they are funded.
NMTC fee income
The fee income the Company receives related to the transfers of its New Market Tax Credits ("NMTC") varies with each transaction, but all are similar in nature. There are two basic types of fees associated with these transactions. The first is a “sub-allocation fee” that is paid to CCDC when the tax credits are allocated to a subsidiary entity at the time a qualified equity investment is made. This fee is recognized by the Company at the time of allocation. The second type of fee is paid to cover the administrative and servicing costs associated with CCDC's compliance with NMTC reporting requirements. This fee is recognized as the services are rendered.
Advertising Costs
The Company follows the policy of charging the costs of advertising to expense as incurred.
Transfers of Financial Assets
Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.
Impact of Recent Accounting Standards Not Yet Adopted
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard, as modified and augmented by subsequently issued pronouncements (ASUs 2016-08, 2016-10, 2016-12, 2016-20, 2017-05 and 2017-13) is effective for annual periods beginning after December 15, 2017 ( April 1, 2018 for the Company), and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). We are currently planning to use the retrospective approach with the cumulative effect adjustment approach to uncompleted contracts at the date of adoption. Management continues to assess the impact that this guidance will have on its consolidated financial statements and related disclosures. Preliminarily, the Company has concluded the (1) a substantial majority of the Company's revenue is comprised of interest income on financial assets, which is explicitly excluded from the scope of ASU 2014-09 and (2) based on our understanding of the standard and subsequent modification and the nature of our non-interest revenue, many elements of non-interest income will be unaffected. However, at this stage, we have not yet performed detailed analysis on contracts that underly the potentially impacted accounts and, accordingly, cannot make a formal assessment of the impact thereon. Adoption of the new standard will require expanded disclosures.
In January 2016, the FASB issued ASU No. 2016-01, "Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities." The amendments will (1) require equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (2) simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (3) eliminate the requirement to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (4) require public business entities to use an exit price notion when measuring the fair value of financial instruments for disclosure purposes, (5) require an entity to separately present in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, (6) require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements, and (7) clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity's other deferred tax assets. ASU No. 2016-01 is effective for fiscal years beginning after December 15, 2017 (for the Company, the fiscal year ended March 31, 2019), including interim periods within those fiscal years. The adoption of this standard by public entities is permitted as of the beginning of the year of adoption for selected amendments, including the amendment related to unrealized gains and losses on equity securities, by a cumulative
effect adjustment to the statement of financial condition. At March 31, 2017, we had unrealized losses on equity securities of
$496 thousand
, or 1.0% of stockholders' equity.
In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." From the lessee's perspective, the new standard establishes a right-of-use ("ROU") model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement for a lessee. From the lessor's perspective, the new standard requires a lessor to classify leases as either sales-type, finance or operating. A lease will be treated as a sale if it transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee. If risks and rewards are conveyed without the transfer of control, the lease is treated as a financing. If the lessor doesn't convey risks and rewards or control, an operating lease results. A modified retrospective transition approach is required for lessors for sales-type, direct financing, and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. ASU No. 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company currently expects that upon adoption of ASU 2016-02, ROU assets and lease liabilities will be recognized in the consolidated balance sheet in amounts that will be material.
In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Loss," which updates the guidance on recognition and measurement of credit losses for financial assets. The new requirements, known as the current expected credit loss model ("CECL") will require entities to adopt an impairment model based on expected losses rather than incurred losses. ASU No. 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the potential impact of the adoption of the new standard on its consolidated statements of financial condition and results of operations.
In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments," a consensus of the FASB's Emerging Issues Task Force. The update is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows, and provides guidance on how the following cash receipts and payments should be presented and classified in the statement of cash flows: debt prepayment or debt extinguishment costs, settlement of zero-coupon bonds, contingent consideration payments made after a business combination, settlements of insurance claims, settlements of corporate-owned and bank-owned life insurance policies, distributions received from equity method investees, and beneficial interests in securitization transactions. The ASU also clarifies when an entity should separate cash receipts and payments and classify them into more than one class of cash flows. ASU No. 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is currently evaluating the potential impact of the adoption of the new standard on its consolidated statement of cash flows.
In November 2016, the FASB issued ASU No. 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash," to require that a statement of cash flows explain the change during the period in restricted cash or restricted cash equivalents, in addition to changes in cash and cash equivalents. The update provides guidance that restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU No. 2016-18 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company has completed its assessment of the impact of adopting of ASU 2016-18 and expects that as a result of adopting the ASU, the Company will reclassify beginning-of-period and end-of-period balances in the statement of cash flows to include restricted cash in addition to cash and cash equivalents at amounts that will not be material to the consolidated financial statements.
In March 2017, the FASB issued ASU No. 2017-08, "Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities," which shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date. The amendments are effective for fiscal years beginning after December 15, 2018 (for the Company, the fiscal year ending March 31, 2020), and interim periods within those fiscal years. Based on the management's review of the securities in the Company's portfolio at March 31, 2017, the adoption of the standard is not expected to have a material impact on the Company's consolidated statements of financial condition and results of operations.
In May 2017, the FASB issued ASU No. 2017-09, "Compensation - Stock Compensation (Topic 718), Scope of Modification Accounting," which clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. The new guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The adoption of the standard is not expected to have a material impact on the Company's consolidated statements of financial condition and results of operations.
|
|
NOTE 3.
|
INVESTMENT SECURITIES
|
The Bank utilizes mortgage-backed and other investment securities in its asset/liability management strategy. In making investment decisions, the Bank considers, among other things, its yield and interest rate objectives, its interest rate and credit risk position, and its liquidity and cash flow.
Generally, the investment policy of the Bank is to invest funds among categories of investments and maturities based upon the Bank’s asset/liability management policies, investment quality, loan and deposit volume and collateral requirements, liquidity needs and performance objectives. ASC Subtopic 320-10-25 requires that securities be classified into three categories: trading, held-to-maturity, and available-for-sale. At
March 31, 2017
,
$59.0 million
, or
81.5%
, of the Bank’s total securities were classified as available-for-sale, and the remaining
$13.4 million
, or
18.5%
, were classified as held-to-maturity. The Bank had
no
securities classified as trading at
March 31, 2017
and
March 31, 2016
.
The following table sets forth the amortized cost and estimated fair value of securities available-for-sale and held-to-maturity at
March 31, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
Gross Unrealized
|
|
|
$ in thousands
|
Cost
|
|
Gains
|
|
Losses
|
|
Fair Value
|
Available-for-Sale:
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
Government National Mortgage Association
|
$
|
2,576
|
|
|
$
|
—
|
|
|
$
|
89
|
|
|
$
|
2,487
|
|
Federal Home Loan Mortgage Corporation
|
8,053
|
|
|
—
|
|
|
195
|
|
|
7,858
|
|
Federal National Mortgage Association
|
27,241
|
|
|
—
|
|
|
928
|
|
|
26,313
|
|
Other
|
45
|
|
|
—
|
|
|
—
|
|
|
45
|
|
Total mortgage-backed securities
|
37,915
|
|
|
—
|
|
|
1,212
|
|
|
36,703
|
|
U.S. Government Agency Securities
|
7,574
|
|
|
—
|
|
|
92
|
|
|
7,482
|
|
Corporate Bonds
|
5,104
|
|
|
—
|
|
|
140
|
|
|
4,964
|
|
Other investments
(1)
|
10,358
|
|
|
—
|
|
|
496
|
|
|
9,862
|
|
Total available-for-sale
|
60,951
|
|
|
—
|
|
|
1,940
|
|
|
59,011
|
|
Held-to-Maturity*:
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
Government National Mortgage Association
|
1,797
|
|
|
86
|
|
|
—
|
|
|
1,883
|
|
Federal National Mortgage Association
|
10,638
|
|
|
12
|
|
|
60
|
|
|
10,590
|
|
Total held-to-maturity mortgage-backed securities
|
12,435
|
|
|
98
|
|
|
60
|
|
|
12,473
|
|
Corporate Bonds
|
1,000
|
|
|
24
|
|
|
—
|
|
|
1,024
|
|
Total held-to-maturity
|
13,435
|
|
|
122
|
|
|
60
|
|
|
13,497
|
|
Total securities
|
$
|
74,386
|
|
|
$
|
122
|
|
|
$
|
2,000
|
|
|
$
|
72,508
|
|
* The carrying amount and amortized cost are the same for all held-to-maturity securities, as no OTTI has been recorded.
(1)
Primarily comprised of an investment in a CRA fund with 95% of its underlying investments consisting of government and agency backed securities.
The following table sets forth the amortized cost and estimated fair value of securities available-for-sale and held-to-maturity at
March 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
Gross Unrealized
|
|
|
$ in thousands
|
Cost
|
|
Gains
|
|
Losses
|
|
Fair Value
|
Available-for-Sale:
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
Government National Mortgage Association
|
$
|
4,578
|
|
|
$
|
45
|
|
|
$
|
—
|
|
|
$
|
4,623
|
|
Federal Home Loan Mortgage Corporation
|
7,778
|
|
|
—
|
|
|
100
|
|
|
7,678
|
|
Federal National Mortgage Association
|
7,860
|
|
|
—
|
|
|
36
|
|
|
7,824
|
|
Other
|
45
|
|
|
—
|
|
|
—
|
|
|
45
|
|
Total mortgage-backed securities
|
20,261
|
|
|
45
|
|
|
136
|
|
|
20,170
|
|
U.S. Government Agency Securities
|
26,077
|
|
|
27
|
|
|
35
|
|
|
26,069
|
|
Other investments
(1)
|
10,148
|
|
|
—
|
|
|
207
|
|
|
9,941
|
|
Total available-for-sale
|
56,486
|
|
|
72
|
|
|
378
|
|
|
56,180
|
|
Held-to-Maturity*:
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
Government National Mortgage Association
|
2,379
|
|
|
150
|
|
|
—
|
|
|
2,529
|
|
Federal National Mortgage Association and Other
|
11,932
|
|
|
192
|
|
|
—
|
|
|
12,124
|
|
Total held-to-maturity mortgage-backed securities
|
14,311
|
|
|
342
|
|
|
—
|
|
|
14,653
|
|
Corporate Bonds
|
1,000
|
|
|
—
|
|
|
—
|
|
|
1,000
|
|
Total held-to-maturity
|
15,311
|
|
|
342
|
|
|
—
|
|
|
15,653
|
|
Total securities
|
$
|
71,797
|
|
|
$
|
414
|
|
|
$
|
378
|
|
|
$
|
71,833
|
|
* The carrying amount and amortized cost are the same for all held-to-maturity securities, as no OTTI has been recorded.
(1)
Primarily comprised of an investment in a CRA fund with 95% of its underlying investments consisting of government and agency backed securities.
The following is a summary regarding proceeds, gross gains and gross losses realized from the sale of securities from the available-for-sale portfolio for the years ended
March 31
:
|
|
|
|
|
|
|
|
|
$ in thousands
|
2017
|
|
2016
|
Proceeds
|
$
|
7,259
|
|
|
$
|
4,951
|
|
Gross gains
|
58
|
|
|
2
|
|
Gross losses
|
—
|
|
|
1
|
|
There were
no
sales of held-to-maturity securities in fiscal years
2017
or
2016
.
The Bank's investment portfolio is comprised primarily of fixed-rate mortgage-backed securities guaranteed by a Government Sponsored Enterprise (“GSE”) as issuer and Agency securities. Carver maintains a portfolio of mortgage-backed securities in the form of Government National Mortgage Association (“GNMA”) pass-through certificates, Federal National Mortgage Association (“FNMA”) and Federal Home Loan Mortgage Corporation (“FHLMC”) participation certificates. GNMA pass-through certificates are guaranteed as to the payment of principal and interest by the full faith and credit of the United States Government, while FNMA and FHLMC certificates are each guaranteed by their respective agencies as to principal and interest. Based on the high quality of the Bank's investment portfolio, current market conditions have not significantly impacted the pricing of the portfolio or the Bank's ability to obtain reliable prices. During fiscal year 2017, the Bank invested
$5.1 million
in corporate bonds of reputable financial institutions to diversify its available-for-sale portfolio.
At
March 31, 2017
, the Bank pledged securities of
$34.3 million
as collateral for advances from the FHLB-NY and security repurchase agreements.
The following table sets forth the unrealized losses and fair value of securities in an unrealized loss position at
March 31, 2017
for less than 12 months and 12 months or longer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
$ in thousands
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
Available-for-Sale:
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
$
|
1,171
|
|
|
$
|
34,716
|
|
|
$
|
41
|
|
|
$
|
1,942
|
|
|
$
|
1,212
|
|
|
$
|
36,658
|
|
U.S. Government Agency Securities
|
92
|
|
|
7,482
|
|
|
—
|
|
|
—
|
|
|
92
|
|
|
7,482
|
|
Corporate bonds
|
140
|
|
|
4,964
|
|
|
—
|
|
|
—
|
|
|
140
|
|
|
4,964
|
|
Other investments
(1)
|
—
|
|
|
—
|
|
|
496
|
|
|
9,504
|
|
|
496
|
|
|
9,504
|
|
Total available-for-sale securities
|
$
|
1,403
|
|
|
$
|
47,162
|
|
|
$
|
537
|
|
|
$
|
11,446
|
|
|
$
|
1,940
|
|
|
$
|
58,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-Maturity:
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
$
|
60
|
|
|
$
|
7,623
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
60
|
|
|
$
|
7,623
|
|
Total held-to-maturity securities
|
60
|
|
|
7,623
|
|
|
—
|
|
|
—
|
|
|
60
|
|
|
7,623
|
|
Total securities
|
$
|
1,463
|
|
|
$
|
54,785
|
|
|
$
|
537
|
|
|
$
|
11,446
|
|
|
$
|
2,000
|
|
|
$
|
66,231
|
|
(1)
Primarily comprised of an investment in a CRA fund with 95% of its underlying investments consisting of government and agency backed securities.
The following table sets forth the unrealized losses and fair value of securities in an unrealized loss position at
March 31, 2016
for less than 12 months and 12 months or longer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
$ in thousands
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
Available-for-Sale:
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
136
|
|
|
$
|
15,502
|
|
|
$
|
136
|
|
|
$
|
15,502
|
|
U.S. Government Agency Securities
|
3
|
|
|
2,996
|
|
|
32
|
|
|
11,242
|
|
|
35
|
|
|
14,238
|
|
Other investments
(1)
|
—
|
|
|
—
|
|
|
207
|
|
|
9,793
|
|
|
207
|
|
|
9,793
|
|
Total available-for-sale securities
|
$
|
3
|
|
|
$
|
2,996
|
|
|
$
|
375
|
|
|
$
|
36,537
|
|
|
$
|
378
|
|
|
$
|
39,533
|
|
(1)
Primarily comprised of an investment in a CRA fund with 95% of its underlying investments consisting of government and agency backed securities.
A total of
33
securities had an unrealized loss at
March 31, 2017
compared to
13
at
March 31, 2016
. Mortgage-backed securities represented
62.5%
of total available-for-sale securities in an unrealized loss position at
March 31, 2017
. There was
one
mortgage-backed security and
one
investment in a CRA fund that had an unrealized loss position for more than 12 months, and
five
corporate bonds that had an unrealized loss position for less than 12 months at
March 31, 2017
. The cause of the temporary impairment is directly related to changes in interest rates. In general, as interest rates decline, the fair value of securities will rise, and conversely as interest rates rise, the fair value of securities will decline. Management considers fluctuations in fair value as a result of interest rate changes to be temporary, which is consistent with the Bank's experience. The impairments are deemed temporary based on the direct relationship of the change in fair value to movements in interest rates, the life of the investments and their high credit quality. Given the high credit quality of the securities which are backed by the U.S. government's guarantees, and the corporate securities which are all reputable institutions in good financial standing, the risk of credit loss is minimal. Management believes that these unrealized losses are a direct result of the current rate environment and has the ability and intent to hold the securities until maturity or the valuation recovers.
The amount of an other-than-temporary impairment when there are credit and non-credit losses on a debt security which management does not intend to sell, and for which it is more likely than not that the Company will not be required to sell the security prior to the recovery of the non-credit impairment is accounted for as follows: (1) the portion of the total impairment that is attributable to the credit loss would be recognized in earnings, and (2) the remaining difference between the debt security's amortized cost basis and its fair value would be included in other comprehensive income (loss). At
March 31, 2017
and
2016
, the Bank does not have any securities that are classified as having other-than-temporary impairment in its investment portfolio.
The following is a summary of the carrying value (amortized cost) and fair value of securities at
March 31, 2017
, by remaining period to contractual maturity (ignoring earlier call dates, if any). Actual maturities may differ from contractual maturities because certain security issuers have the right to call or prepay their
obligations. The table below does not consider the effects of possible prepayments or unscheduled repayments.
|
|
|
|
|
|
|
|
|
|
|
|
$ in thousands
|
Amortized Cost
|
|
Fair Value
|
|
Weighted
Average Yield
|
Available-for-Sale:
|
|
|
|
|
|
One through five years
|
$
|
5,065
|
|
|
$
|
4,979
|
|
|
1.65
|
%
|
Five through ten years
|
14,284
|
|
|
13,874
|
|
|
2.01
|
%
|
After ten years
|
41,602
|
|
|
40,158
|
|
|
1.60
|
%
|
|
60,951
|
|
|
59,011
|
|
|
1.70
|
%
|
Held-to-maturity:
|
|
|
|
|
|
Five through ten years
|
6,529
|
|
|
6,588
|
|
|
2.99
|
%
|
After ten years
|
6,906
|
|
|
6,909
|
|
|
2.43
|
%
|
|
$
|
13,435
|
|
|
$
|
13,497
|
|
|
2.71
|
%
|
|
|
NOTE 4.
|
LOANS RECEIVABLE, NET
|
The following is a summary of loans receivable, net of allowance for loan losses, and loans held-for-sale at
March 31
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
March 31, 2016
Restated
(a)
|
$ in thousands
|
Amount
|
|
%
|
|
Amount
|
|
%
|
Gross loans receivable:
|
|
|
|
|
|
|
|
One-to-four family - Restated
(a)
|
$
|
132,679
|
|
|
24
|
%
|
|
$
|
141,229
|
|
|
24
|
%
|
Multifamily - Restated
(a)
|
87,824
|
|
|
16
|
%
|
|
94,210
|
|
|
16
|
%
|
Commercial real estate - Restated
(a)
|
241,794
|
|
|
45
|
%
|
|
272,427
|
|
|
47
|
%
|
Construction
|
4,983
|
|
|
1
|
%
|
|
5,033
|
|
|
1
|
%
|
Business - Restated
(a) (1)
|
65,151
|
|
|
12
|
%
|
|
71,038
|
|
|
12
|
%
|
Consumer
(2)
|
8,994
|
|
|
2
|
%
|
|
42
|
|
|
—
|
%
|
Total loans receivable
|
541,425
|
|
|
100
|
%
|
|
583,979
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
Unamortized premiums, deferred costs and fees, net
|
4,127
|
|
|
|
|
4,649
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
(5,060
|
)
|
|
|
|
(5,232
|
)
|
|
|
Total loans receivable, net
|
$
|
540,492
|
|
|
|
|
$
|
583,396
|
|
|
|
|
|
|
|
|
|
|
|
Loans held-for-sale - Restated
(a)
|
$
|
944
|
|
|
|
|
$
|
2,436
|
|
|
|
(a)
March 31, 2016 balances have been restated from previously reported results to correct for material and certain other errors from prior periods. Refer to Notes 1 and 19 for further detail.
(1)
Includes business overdrafts of
$76 thousand
and
$103 thousand
as of
March 31, 2017
and
2016
, respectively
(2)
Includes consumer overdrafts of
$22 thousand
and
$39 thousand
as of
March 31, 2017
and
2016
, respectively
Substantially all of the Bank's real estate loans receivable are principally secured by properties located in New York City. Accordingly, as with most financial institutions in the market area, the ultimate collectability of a substantial portion of the Company's loan portfolio is susceptible to changes in market conditions in this area.
Real estate mortgage loan portfolios (one-to-four family) serviced for Federal National Mortgage Association (“FNMA”) and other third parties are not included in the accompanying consolidated financial statements. The unpaid principal balances of these loans aggregated
$25.7 million
and
$28.1 million
at
March 31, 2017
and
2016
, respectively.
At
March 31, 2017
the Bank pledged
$25.6 million
in total real estate mortgage loans as collateral for advances from the FHLB-NY.
The following is an analysis of the allowance for loan losses based upon the method of evaluating loan impairment for the fiscal year ended
March 31, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in thousands
|
|
One-to-four family
|
|
Multifamily
|
|
Commercial Real Estate
|
|
Construction
|
|
Business
|
|
Consumer
|
|
Total
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance
|
|
$
|
1,697
|
|
|
$
|
622
|
|
|
$
|
1,808
|
|
|
$
|
62
|
|
|
$
|
1,022
|
|
|
$
|
21
|
|
|
$
|
5,232
|
|
Charge-offs
|
|
106
|
|
|
338
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
85
|
|
|
529
|
|
Recoveries
|
|
—
|
|
|
—
|
|
|
20
|
|
|
—
|
|
|
304
|
|
|
4
|
|
|
328
|
|
Provision for (Recovery of) Loan Losses
|
|
72
|
|
|
929
|
|
|
(332
|
)
|
|
44
|
|
|
(753
|
)
|
|
69
|
|
|
29
|
|
Ending Balance
|
|
$
|
1,663
|
|
|
$
|
1,213
|
|
|
$
|
1,496
|
|
|
$
|
106
|
|
|
$
|
573
|
|
|
$
|
9
|
|
|
$
|
5,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses Ending Balance: collectively evaluated for impairment
|
|
1,357
|
|
|
1,207
|
|
|
1,490
|
|
|
106
|
|
|
532
|
|
|
7
|
|
|
4,699
|
|
Allowance for Loan Losses Ending Balance: individually evaluated for impairment
|
|
306
|
|
|
6
|
|
|
6
|
|
|
—
|
|
|
41
|
|
|
2
|
|
|
361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan Receivables Ending Balance
|
|
$
|
134,927
|
|
|
$
|
88,750
|
|
|
$
|
242,818
|
|
|
$
|
4,949
|
|
|
$
|
65,114
|
|
|
$
|
8,994
|
|
|
$
|
545,552
|
|
Ending Balance: collectively evaluated for impairment
|
|
129,420
|
|
|
87,148
|
|
|
239,323
|
|
|
4,949
|
|
|
61,027
|
|
|
8,992
|
|
|
530,859
|
|
Ending Balance: individually evaluated for impairment
|
|
5,507
|
|
|
1,602
|
|
|
3,495
|
|
|
—
|
|
|
4,087
|
|
|
2
|
|
|
14,693
|
|
The following is an analysis of the allowance for loan losses based upon the method of evaluating loan impairment for the fiscal year ended
March 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in thousands
|
|
One-to-four family
|
|
Multifamily
|
|
Commercial Real Estate
|
|
Construction
|
|
Business
|
|
Consumer
|
|
Total
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance
|
|
$
|
1,970
|
|
|
$
|
502
|
|
|
$
|
1,029
|
|
|
$
|
99
|
|
|
$
|
813
|
|
|
$
|
15
|
|
|
$
|
4,428
|
|
Charge-offs
|
|
389
|
|
|
340
|
|
|
—
|
|
|
—
|
|
|
176
|
|
|
517
|
|
|
1,422
|
|
Recoveries
|
|
113
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
578
|
|
|
31
|
|
|
731
|
|
Provision for (Recovery of) Loan Losses
|
|
3
|
|
|
460
|
|
|
770
|
|
|
(37
|
)
|
|
(193
|
)
|
|
492
|
|
|
1,495
|
|
Ending Balance
|
|
$
|
1,697
|
|
|
$
|
622
|
|
|
$
|
1,808
|
|
|
$
|
62
|
|
|
$
|
1,022
|
|
|
$
|
21
|
|
|
$
|
5,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses Ending Balance: collectively evaluated for impairment
|
|
1,602
|
|
|
622
|
|
|
1,787
|
|
|
62
|
|
|
548
|
|
|
21
|
|
|
4,642
|
|
Allowance for Loan Losses Ending Balance: individually evaluated for impairment
|
|
95
|
|
|
—
|
|
|
21
|
|
|
—
|
|
|
474
|
|
|
—
|
|
|
590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan Receivables Ending Balance - Restated
(1)
|
|
$
|
143,653
|
|
|
$
|
95,580
|
|
|
$
|
273,400
|
|
|
$
|
5,000
|
|
|
$
|
70,953
|
|
|
$
|
42
|
|
|
$
|
588,628
|
|
Ending Balance: collectively evaluated for impairment - Restated
(1)
|
|
139,017
|
|
|
93,811
|
|
|
267,106
|
|
|
5,000
|
|
|
64,087
|
|
|
42
|
|
|
569,063
|
|
Ending Balance: individually evaluated for impairment
|
|
4,636
|
|
|
1,769
|
|
|
6,294
|
|
|
—
|
|
|
6,866
|
|
|
—
|
|
|
19,565
|
|
(1)
March 31, 2016 balances have been restated from previously reported results to correct for material and certain other errors from prior periods. Refer to Notes 1 and 19 for further detail.
At
March 31, 2017
and
2016
, the recorded investment in impaired loans was
$14.7 million
and
$19.6 million
, respectively. The related allowance for loan losses for these impaired loans was approximately
$361 thousand
and
$590 thousand
at
March 31, 2017
and
2016
, respectively. Interest income of
$404 thousand
and
$476 thousand
for fiscal years
2017
and
2016
respectively, would have been recorded on impaired loans had they performed in accordance with their original terms.
The following is a summary of nonaccrual loans at
March 31, 2017
and
2016
.
|
|
|
|
|
|
|
|
|
$ in thousands
|
March 31, 2017
|
|
March 31, 2016
|
Loans accounted for on a nonaccrual basis:
|
|
|
|
Gross loans receivable:
|
|
|
|
One-to-four family
|
$
|
3,899
|
|
|
$
|
2,947
|
|
Multifamily
|
1,602
|
|
|
1,769
|
|
Commercial real estate
|
993
|
|
|
5,338
|
|
Business
|
1,922
|
|
|
3,896
|
|
Consumer
|
2
|
|
|
—
|
|
Total nonaccrual loans
|
$
|
8,418
|
|
|
$
|
13,950
|
|
Nonaccrual loans generally consist of loans for which the accrual of interest has been discontinued as a result of such loans becoming 90 days or more delinquent as to principal and/or interest payments. Interest income on nonaccrual loans is recorded when received based upon the collectability of the loan. TDR loans consist of loans where borrowers have been granted concessions in regards to the terms of their loans due to financial or other difficulties, which rendered them unable to repay their loans under the original contractual terms. Total TDR loans at
March 31, 2017
were
$6.4 million
,
$2.5 million
of which were non-performing as they were either not consistently performing in accordance with their modified terms or not performing in accordance with their modified terms for at least six months. At
March 31, 2016
, total TDR loans were
$7.8 million
, of which
$2.2 million
were non-performing.
At
March 31, 2017
, other non-performing assets totaled
$1.9 million
which consisted of other real estate owned ("OREO") properties and held-for-sale loans. At
March 31, 2017
, other real estate owned valued at
$990 thousand
comprised of
eight
foreclosed properties, compared to
$1.0 million
comprised of
seven
properties at
March 31, 2016
. Other real estate loans is included in other assets in the consolidated statements of financial condition. At
March 31, 2017
, held-for-sale loans totaled
$944 thousand
, compared to
$2.4 million
at
March 31, 2016
.
The Bank utilizes an internal loan classification system as a means of reporting problem loans within its loan categories. Loans may be classified as "Pass," “Special Mention,” “Substandard,” “Doubtful,” and “Loss.” Loans rated Pass have demonstrated satisfactory asset quality, earning history, liquidity, and other adequate margins of creditor protection. They represent a moderate credit risk and some degree of financial stability. Loans are considered collectible in full, but perhaps require greater than average amount of loan officer attention. Borrowers are capable of absorbing normal setbacks without failure. Loans rated Special Mention have potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank's credit position at some future date. Loans rated Substandard are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Loans rated Doubtful have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, based on currently existing facts, conditions and values, highly questionable and improbable. Loans classified as Loss are those considered uncollectible with insignificant value and are charged off immediately to the allowance for loan losses.
One-to-four family residential loans and consumer and other loans are rated non-performing if they are delinquent in payments ninety or more days, a troubled debt restructuring with less than six months contractual performance or past maturity. All other one-to-four family residential loans and consumer and other loans are performing loans.
As of
March 31, 2017
, and based on the most recent analysis performed in the current quarter, the risk category by class of loans is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in thousands
|
Multifamily
|
|
Commercial Real Estate
|
|
Construction
|
|
Business
|
Credit Risk Profile by Internally Assigned Grade:
|
|
|
|
|
|
|
Pass
|
$
|
87,148
|
|
|
$
|
238,552
|
|
|
$
|
4,949
|
|
|
$
|
58,555
|
|
Special Mention
|
—
|
|
|
771
|
|
|
—
|
|
|
133
|
|
Substandard
|
1,082
|
|
|
3,495
|
|
|
—
|
|
|
6,426
|
|
Doubtful
|
520
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
88,750
|
|
|
$
|
242,818
|
|
|
$
|
4,949
|
|
|
$
|
65,114
|
|
|
|
|
|
|
|
|
|
|
One-to-four family
|
|
Consumer
|
|
|
|
|
Credit Risk Profile Based on Payment Activity:
|
|
|
|
|
|
|
Performing
|
$
|
131,028
|
|
|
$
|
8,992
|
|
|
|
|
|
Non-Performing
|
3,899
|
|
|
2
|
|
|
|
|
|
Total
|
$
|
134,927
|
|
|
$
|
8,994
|
|
|
|
|
|
As of
March 31, 2016
, and based on the most recent analysis performed, the risk category by class of loans is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in thousands
|
Multifamily
Restated
(1)
|
|
Commercial Real Estate
Restated
(1)
|
|
Construction
|
|
Business
Restated
(1)
|
Credit Risk Profile by Internally Assigned Grade:
|
|
|
|
|
|
|
Pass - Restated
(1)
|
$
|
93,811
|
|
|
$
|
262,867
|
|
|
$
|
5,000
|
|
|
$
|
61,092
|
|
Special Mention
|
—
|
|
|
4,239
|
|
|
—
|
|
|
2,039
|
|
Substandard
|
1,769
|
|
|
6,294
|
|
|
—
|
|
|
7,822
|
|
Doubtful
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
95,580
|
|
|
$
|
273,400
|
|
|
$
|
5,000
|
|
|
$
|
70,953
|
|
|
|
|
|
|
|
|
|
|
One-to-four family
Restated
(1)
|
|
Consumer
|
|
|
|
|
Credit Risk Profile Based on Payment Activity:
|
|
|
|
|
|
|
Performing - Restated
(1)
|
$
|
140,706
|
|
|
$
|
42
|
|
|
|
|
|
Non-Performing
|
2,947
|
|
|
—
|
|
|
|
|
|
Total
|
$
|
143,653
|
|
|
$
|
42
|
|
|
|
|
|
(1)
March 31, 2016 balances have been restated from previously reported results to correct for material and certain other errors from prior periods. Refer to Notes 1 and 19 for further detail.
The following table presents an aging analysis of the recorded investment of past due financing receivable as of
March 31, 2017
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in thousands
|
30-59 Days Past Due
|
|
60-89 Days Past Due
|
|
90 or More Days Past Due
|
|
Total Past Due
|
|
Current
|
|
Total Financing Receivables
|
One-to-four family
|
$
|
2,094
|
|
|
$
|
247
|
|
|
$
|
3,022
|
|
|
$
|
5,363
|
|
|
$
|
129,564
|
|
|
$
|
134,927
|
|
Multifamily
|
—
|
|
|
—
|
|
|
803
|
|
|
803
|
|
|
87,947
|
|
|
88,750
|
|
Commercial real estate
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
242,818
|
|
|
242,818
|
|
Construction
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,949
|
|
|
4,949
|
|
Business
|
—
|
|
|
429
|
|
|
1,500
|
|
|
1,929
|
|
|
63,185
|
|
|
65,114
|
|
Consumer
|
1
|
|
|
—
|
|
|
2
|
|
|
3
|
|
|
8,991
|
|
|
8,994
|
|
Total
|
$
|
2,095
|
|
|
$
|
676
|
|
|
$
|
5,327
|
|
|
$
|
8,098
|
|
|
$
|
537,454
|
|
|
$
|
545,552
|
|
The following table presents an aging analysis of the recorded investment of past due financing receivable as of
March 31, 2016
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in thousands
|
30-59 Days Past Due
|
|
60-89 Days Past Due
|
|
90 or More Days Past Due
|
|
Total Past Due
|
|
Current
Restated
(1)
|
|
Total Financing Receivables
Restated
(1)
|
One-to-four family - Restated
(1)
|
$
|
986
|
|
|
$
|
—
|
|
|
$
|
2,628
|
|
|
$
|
3,614
|
|
|
$
|
140,039
|
|
|
$
|
143,653
|
|
Multifamily - Restated
(1)
|
—
|
|
|
—
|
|
|
1,769
|
|
|
1,769
|
|
|
93,811
|
|
|
95,580
|
|
Commercial real estate - Restated
(1)
|
889
|
|
|
3,410
|
|
|
—
|
|
|
4,299
|
|
|
269,101
|
|
|
273,400
|
|
Construction
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,000
|
|
|
5,000
|
|
Business - Restated
(1)
|
2,495
|
|
|
307
|
|
|
1,972
|
|
|
4,774
|
|
|
66,179
|
|
|
70,953
|
|
Consumer
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
40
|
|
|
42
|
|
Total - Restated
(1)
|
$
|
4,372
|
|
|
$
|
3,717
|
|
|
$
|
6,369
|
|
|
$
|
14,458
|
|
|
$
|
574,170
|
|
|
$
|
588,628
|
|
(1)
March 31, 2016 balances have been restated from previously reported results to correct for material and certain other errors from prior periods. Refer to Notes 1 and 19 for further detail.
At
March 31, 2017
and
2016
, there were
no
loans 90 or more days past due and accruing interest.
The following tables present information on impaired loans with the associated allowance amount, if applicable, at
March 31, 2017
and
2016
. Management determined the specific allowance based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, except when the remaining source of repayment for the loan is the operation or liquidation of the collateral. In those cases, the current fair value of the collateral, less selling costs was used to determine the specific allowance recorded. When the ultimate collectability of the total principal of an impaired loan is in doubt and the loan is on nonaccrual status, all payments are applied to principal under the cost recovery method. When the ultimate collectability of the total principal of an impaired loan is not in doubt and the loan is on nonaccrual status, contractual interest is credited to interest income when received under the cash basis method.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Loans by Class
|
|
At March 31,
|
|
2017
|
|
2016
|
$ in thousands
|
Recorded Investment
|
|
Unpaid Principal Balance
|
|
Associated Allowance
|
|
Recorded Investment
|
|
Unpaid Principal Balance
|
|
Associated Allowance
|
With no specific allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family
|
$
|
3,416
|
|
|
$
|
4,210
|
|
|
$
|
—
|
|
|
$
|
2,909
|
|
|
$
|
4,101
|
|
|
$
|
—
|
|
Multifamily
|
1,596
|
|
|
2,081
|
|
|
—
|
|
|
1,769
|
|
|
2,122
|
|
|
—
|
|
Commercial real estate
|
993
|
|
|
993
|
|
|
—
|
|
|
5,405
|
|
|
5,572
|
|
|
—
|
|
Business
|
1,923
|
|
|
1,968
|
|
|
—
|
|
|
4,223
|
|
|
4,403
|
|
|
—
|
|
Consumer
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family
|
2,091
|
|
|
2,215
|
|
|
306
|
|
|
1,727
|
|
|
1,727
|
|
|
95
|
|
Multifamily
|
6
|
|
|
6
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Commercial real estate
|
2,502
|
|
|
2,502
|
|
|
6
|
|
|
889
|
|
|
889
|
|
|
21
|
|
Business
|
2,164
|
|
|
2,164
|
|
|
41
|
|
|
2,643
|
|
|
2,643
|
|
|
474
|
|
Consumer
|
2
|
|
|
2
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
14,693
|
|
|
$
|
16,141
|
|
|
$
|
361
|
|
|
$
|
19,565
|
|
|
$
|
21,457
|
|
|
$
|
590
|
|
The following table presents information on average balances on impaired loans and the interest income recognized for the years ended
March 31, 2017
and
2016
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended March 31,
|
|
2017
|
|
2016
|
$ in thousands
|
Average Balance
|
|
Interest Income recognized
|
|
Average Balance
|
|
Interest Income recognized
|
With no specific allowance recorded:
|
|
|
|
|
|
|
|
One-to-four family
|
$
|
3,078
|
|
|
$
|
14
|
|
|
$
|
2,835
|
|
|
$
|
17
|
|
Multifamily
|
1,747
|
|
|
6
|
|
|
1,463
|
|
|
17
|
|
Commercial real estate
|
1,774
|
|
|
17
|
|
|
2,935
|
|
|
—
|
|
Business
|
3,619
|
|
|
142
|
|
|
3,662
|
|
|
93
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
One-to-four family
|
2,128
|
|
|
5
|
|
|
1,725
|
|
|
25
|
|
Multifamily
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Commercial real estate
|
1,427
|
|
|
—
|
|
|
895
|
|
|
43
|
|
Business
|
2,187
|
|
|
26
|
|
|
2,340
|
|
|
85
|
|
Consumer
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
15,961
|
|
|
$
|
210
|
|
|
$
|
15,855
|
|
|
$
|
280
|
|
In certain circumstances, loan modifications involve a troubled borrower to whom the Bank may grant a modification. In cases where the Bank grants any significant concessions to a troubled borrower, the Bank accounts for the modification as a TDR under ASC Subtopic 310-40 and the related allowance under ASC Section 310-10-35. Situations around these modifications may include extension of maturity date, reduction in the stated interest rate, rescheduling of future cash flows, reduction in the face amount of the debt or reduction of past accrued interest. Loans modified in TDRs are placed on nonaccrual status until the Company determines that future collection of principal and interest is reasonably assured, which generally requires that the borrower demonstrate performance according to the restructured terms for a period of at least six months. There were no TDR modifications during the 12 month period ended
March 31, 2017
.
The following table presents an analysis of those loan modifications that were classified as TDRs during the twelve month period ended
March 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Modifications to loans during the years ended March 31,
|
|
|
|
2016
|
$ in thousands
|
|
|
Number of loans
|
|
Pre-modification outstanding recorded investment
|
|
Post-Modification Recorded investment
|
|
Pre-Modification rate
|
|
Post-Modification rate
|
One-to-four family
|
|
|
2
|
|
|
429
|
|
|
456
|
|
|
4.08
|
%
|
|
4.89
|
%
|
Total
|
|
|
2
|
|
|
$
|
429
|
|
|
$
|
456
|
|
|
|
|
|
In an effort to proactively manage delinquent loans, Carver has selectively extended to certain borrowers concessions such as extensions, rate reductions or forbearance agreements. For the fiscal year ended
March 31, 2016
,
two
1-4 family loans totaling
$429 thousand
were modified.
There were
no
loans at
March 31, 2017
and
March 31, 2016
that had been modified and subsequently defaulted.
For the fiscal year ended
March 31, 2017
, there were
11
loans in the TDR portfolio totaling
$3.9 million
that were on accrual status as the Company has determined that the future collection of the principal and interest is reasonably assured. This generally represents those borrowers who have performed according to the restructured terms for a period of at least six months. At
March 31, 2016
, there were
11
loans in the performing TDR portfolio totaling
$5.6 million
.
Transactions With Certain Related Persons
Federal law requires that all loans or extensions of credit to executive officers and directors must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with the general public and must not involve more than the normal risk of repayment or present other unfavorable features. Loans to our current directors, principal officers, nominees for election as directors, security holders known by us to own more than 5% of the outstanding
shares of common stock, or associates of such persons (together, “related persons”), are made in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to Carver Federal, and do not involve more than the normal risk of collectibility or present other unfavorable features.
The aggregate amount of loans outstanding to related parties was
$4.7 million
at
March 31, 2017
, and
$4.4 million
at
March 31, 2016
. During fiscal year
2017
, advances totaled
$1.7 million
and principal repayments totaled
$1.4 million
. These loans were made in the ordinary course of business, on substantially the same terms, including collateral, as those prevailing at the time for comparable loans with persons not related to Carver Federal, and do not involve more than the normal risk of collectibility or present other unfavorable features.
Furthermore, loans above the greater of $25,000, or 5% of Carver Federal’s capital and surplus (up to $500,000), to Carver Federal’s directors and executive officers must be approved in advance by a majority of the disinterested members of Carver Federal’s Board of Directors.
|
|
NOTE 5.
|
OFFICE PROPERTIES AND EQUIPMENT, NET
|
The details of office properties and equipment as of
March 31
are as follows:
|
|
|
|
|
|
|
|
|
$ in thousands
|
2017
|
|
2016
|
Land
|
$
|
98
|
|
|
$
|
98
|
|
Building and improvements
|
9,806
|
|
|
9,783
|
|
Leasehold improvements
|
6,547
|
|
|
6,530
|
|
Furniture, equipment, and other
|
12,981
|
|
|
12,759
|
|
|
29,432
|
|
|
29,170
|
|
Less accumulated depreciation and amortization
|
(24,005
|
)
|
|
(23,187
|
)
|
Office properties and equipment, net
|
$
|
5,427
|
|
|
$
|
5,983
|
|
Depreciation and amortization charged to operations for fiscal years
2017
and
2016
amounted to
$867 thousand
and
$1.4 million
, respectively.
During fiscal year 2016, Carver conducted a sale and leaseback transaction on its Crown Heights branch location with an unaffiliated third party as part of the Bank's ongoing facilities rationalization efforts. The Company recognized a
$1.2 million
gain on the sale and leaseback in the third quarter of fiscal year 2016. Carver did not finance the purchase and the gain was calculated utilizing the profit on sale in excess of the present value of the minimum lease payments in accordance with ASC 840. The remaining amount of profit on the sale of the property was deferred from gain recognition and will be amortized into income over the term of the lease. The deferred gain on the sale of the property is included in Other Liabilities on the Consolidated Statements of Financial Condition and totaled
$606 thousand
and
$675 thousand
as of
March 31, 2017
and
2016
, respectively.
|
|
NOTE 6.
|
ACCRUED INTEREST RECEIVABLE
|
The details of accrued interest receivable as of
March 31
are as follows:
|
|
|
|
|
|
|
|
|
$ in thousands
|
2017
|
|
2016
Restated
(1)
|
Loans receivable - Restated
(1)
|
$
|
1,323
|
|
|
$
|
2,060
|
|
Mortgage-backed securities
|
116
|
|
|
88
|
|
Investments and other interest-bearing assets
|
144
|
|
|
272
|
|
Total accrued interest receivable - Restated
(1)
|
$
|
1,583
|
|
|
$
|
2,420
|
|
(1)
March 31, 2016 balances have been restated from previously reported results to correct for material and certain other errors from prior periods. Refer to Notes 1 and 19 for further detail.
Deposit balances and weighted average interest rates as of
March 31
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
$ in thousands
|
Amount
|
|
Percent of Total Deposits
|
|
Weighted Average Rate
|
|
Amount
|
|
Percent of Total Deposits
|
|
Weighted Average Rate
|
Non-interest-bearing demand
|
$
|
61,576
|
|
|
10.63
|
%
|
|
—
|
%
|
|
$
|
56,634
|
|
|
9.32
|
%
|
|
—
|
%
|
Interest-bearing checking
|
37,180
|
|
|
6.42
|
|
|
0.14
|
|
|
33,106
|
|
|
5.46
|
|
|
0.16
|
|
Savings
|
100,913
|
|
|
17.42
|
|
|
0.27
|
|
|
95,230
|
|
|
15.70
|
|
|
0.27
|
|
Money market savings account
|
140,807
|
|
|
24.31
|
|
|
0.60
|
|
|
163,380
|
|
|
26.93
|
|
|
0.52
|
|
Certificates of deposit
|
236,342
|
|
|
40.81
|
|
|
1.00
|
|
|
255,854
|
|
|
42.17
|
|
|
0.92
|
|
Mortgagors deposits
|
2,358
|
|
|
0.41
|
|
|
1.79
|
|
|
2,537
|
|
|
0.42
|
|
|
1.22
|
|
Total
|
$
|
579,176
|
|
|
100.00
|
%
|
|
0.61
|
%
|
|
$
|
606,741
|
|
|
100.00
|
%
|
|
0.59
|
%
|
Scheduled maturities of certificates of deposit for the year ended
March 31, 2017
are as follows:
|
|
|
|
|
|
$ in thousands
|
|
Amount
|
Maturing years ending March 31:
|
|
|
2018
|
|
$161,536
|
2019
|
|
$47,227
|
2020
|
|
$18,182
|
2021
|
|
$4,513
|
2022
|
|
$4,436
|
2023 and beyond
|
|
$448
|
Total
|
|
$
|
236,342
|
|
The following table represents the amount of certificates of deposit of $100,000 or more at
March 31, 2017
maturing during the periods indicated:
|
|
|
|
|
$ in thousands
|
|
Maturing:
|
|
April 1, 2017 to June 30, 2017
|
$
|
52,290
|
|
July 1, 2017 to September 30, 2017
|
15,570
|
|
October 1, 2017 to March 31, 2018
|
72,260
|
|
April 1, 2018 and beyond
|
56,915
|
|
Total
|
$
|
197,035
|
|
Interest expense on deposits is as follows for the years ended
March 31
:
|
|
|
|
|
|
|
|
|
$ in thousands
|
2017
|
|
2016
|
Interest-bearing checking
|
$
|
48
|
|
|
$
|
52
|
|
Savings and clubs
|
261
|
|
|
253
|
|
Money market savings
|
875
|
|
|
844
|
|
Certificates of deposit
|
2,451
|
|
|
2,099
|
|
Mortgagors deposits
|
40
|
|
|
28
|
|
|
3,675
|
|
|
3,276
|
|
Penalty for early withdrawal of certificates of deposit
|
(14
|
)
|
|
(7
|
)
|
Total interest expense
|
$
|
3,661
|
|
|
$
|
3,269
|
|
The following table presents additional information about our year-end deposits:
|
|
|
|
|
|
|
|
|
|
$ in thousands
|
|
2017
|
|
2016
|
Deposits from the Certificate of Deposit Account Registry Service (CDARS)
|
|
$
|
34,547
|
|
|
$
|
34,708
|
|
Deposits from brokers
|
|
71,436
|
|
|
93,921
|
|
Certificates of deposit individually greater than $250,000
|
|
59,489
|
|
|
61,898
|
|
Deposits from certain directors, executive officers and their affiliates
|
|
17,822
|
|
|
17,987
|
|
Federal Home Loan Bank Advances, Repurchase agreements and Guaranteed Debt Securities.
FHLB-NY advances weighted average interest rates by remaining period to maturity at
March 31
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in thousands
|
|
2017
|
|
2016
|
Maturing Year Ended March 31,
|
|
Weighted
Average Rate
|
|
Amount
|
|
Weighted
Average Rate
|
|
Amount
|
2017
|
|
—%
|
|
$
|
—
|
|
|
0.49%
|
|
$
|
25,000
|
|
2018
|
|
1.04%
|
|
5,000
|
|
|
—%
|
|
—
|
|
2019
(1)
|
|
1.50%
|
|
25,000
|
|
|
1.50%
|
|
25,000
|
|
|
|
1.42%
|
|
$
|
30,000
|
|
|
1.00%
|
|
$
|
50,000
|
|
(1)
Effective rate is
2.13%
which includes the net impact of the amortization of the termination fee on restructured borrowing.
Federal Home Loan Bank Advances.
As a member of the FHLB-NY, the Bank may have outstanding FHLB-NY borrowings in a combination of term advances and overnight funds of up to
30%
of its total assets, or approximately
$206.4 million
at
March 31, 2017
. Borrowings are secured by the Bank's investment in FHLB-NY stock and by a blanket security agreement. This agreement requires the Bank to maintain as collateral certain qualifying assets (principally mortgage loans and securities) not otherwise pledged. At
March 31, 2017
, advances were all fixed-rate and secured by pledges of the Bank's investment in the capital stock of the FHLB-NY totaling
$2.2 million
and a blanket assignment of the Bank's pledged qualifying mortgage loans of
$25.6 million
and mortgage-backed and investment securities with a market value of
$34.3 million
. The Bank has sufficient collateral at the FHLB-NY to be able to borrow an additional
$14.5 million
from the FHLB-NY at
March 31, 2017
. The accrued interest payable on FHLB advances was
$32 thousand
and the interest expense was
$584 thousand
for the year ended
March 31, 2017
. At
March 31, 2016
, the accrued interest payable on FHLB advances was
$32 thousand
and the interest expense was
$703 thousand
. The Bank completed a debt restructuring during the first quarter of fiscal year 2014 that allowed it to prepay a
$25 million
long-term borrowing and secure a new borrowing at a significantly lower rate. The termination fees and penalties associated with the borrowing were prepaid to the FHLB and amortized over five years.
Repurchase agreements.
Repurchase agreements ("REPO") are short-term contracts for the sale of securities owned or borrowed by the Bank with an agreement to repurchase those securities at an agreed-upon price and date. Securities sold under agreements to repurchase are stated at the amount of cash received in connection with the transaction. The Bank monitors collateral levels on a continuous basis and may be required to provide additional collateral based on the fair value of the underlying securities. Securities pledged as collateral under repurchase agreements are maintained with our safekeeping agents. At
March 31, 2017
, the outstanding balance of the REPO, which matures in December 2017, was
$1.0 million
, and the accrued interest payable thereon was
$3 thousand
. The recognized interest expense was
$3 thousand
for the year ended
March 31, 2017
. The collateral pledged on this REPO was a mortgage-backed security with a fair value of
$1.5 million
at
March 31, 2017
. There were
no
REPOs at
March 31, 2016
or during the year then ended.
Subordinated Debt Securities.
On September 17, 2003, Carver Statutory Trust I issued
13,000
shares, liquidation amount
$1,000
per share, of floating rate capital securities. Gross proceeds from the sale of these trust preferred debt securities of
$13 million
, and proceeds from the sale of the trust's common securities of
$0.4 million
, were used to purchase approximately
$13.4 million
aggregate principal amount of the Company's floating rate junior subordinated debt securities due 2033. The trust preferred debt securities are redeemable at par quarterly at the option of the Company beginning on or after September 17, 2008, and have a mandatory redemption date of September 17, 2033. Cash distributions on the trust preferred debt securities are cumulative and payable at a floating rate per annum resetting quarterly with a margin of
3.05%
over the three-month LIBOR. During the second quarter of fiscal year 2017, the Company applied for and was granted regulatory approval to settle all outstanding debenture interest payments through September 2016. Such payments totaling
$2.5 million
were made in September 2016. Interest on the debentures has been deferred since September 2016, per the terms of the agreement, as the Company is prohibited from making payments without prior regulatory approval.
On September 30, 2009, the Bank raised
$5.0 million
in a private placement of subordinated debt maturing December 30, 2018. The interest rate was set at
7%
per annum for the first seven years as long as there is no default event, including Carver maintaining its certification as a Community Development Entity (“CDE”) and remaining in compliance with NMTC requirements, and
12%
per annum after. During the second quarter of fiscal year 2012, the interest rate was reduced to
2%
. This subordinated debt has been approved by the regulators to qualify as Tier II capital for the Bank's regulatory capital calculations. Qualifying term subordinated debt must have an original weighted average maturity of at least five years. Once the term to maturity is less than five years, the amount qualified as Tier II capital declines 20% per year. The ability to include any portion of the private placement subordinated debt in Tier II capital expired on January 1, 2017. Subsequent to this report date, the subordinated debt was paid in full.
The accrued interest payable on subordinated debt securities was
$315 thousand
and the interest expense was
$670 thousand
for the year ended
March 31, 2017
. The accrued interest payable on subordinated debt securities was
$2.3 million
and the interest expense was
$633 thousand
for the year ended
March 31, 2016
.
The following table sets forth certain information regarding Carver Federal's borrowings as of and for the years ended
March 31
:
|
|
|
|
|
|
|
|
|
$ in thousands
|
2017
|
|
2016
|
Amounts outstanding at the end of year:
|
|
|
|
FHLB advances
|
$
|
30,000
|
|
|
$
|
50,000
|
|
Subordinated debt securities
|
18,403
|
|
|
18,403
|
|
Repo
|
$
|
1,000
|
|
|
$
|
—
|
|
|
|
|
|
Rate paid at year end:
|
|
|
|
FHLB advances
|
1.42
|
%
|
|
1.00
|
%
|
Subordinated debt securities
|
3.60
|
%
|
|
3.23
|
%
|
Repo
|
1.15
|
%
|
|
—
|
%
|
|
|
|
|
Maximum amount of borrowing outstanding at any month end:
|
|
|
|
FHLB advances
|
$
|
40,000
|
|
|
$
|
95,000
|
|
Subordinated debt securities
|
$
|
18,403
|
|
|
$
|
18,403
|
|
Repo
|
$
|
1,000
|
|
|
$
|
—
|
|
|
|
|
|
Approximate average amounts outstanding for year:
|
|
|
|
FHLB advances
|
$
|
32,849
|
|
|
$
|
61,230
|
|
Subordinated debt securities
|
$
|
18,403
|
|
|
$
|
18,403
|
|
Repo
|
$
|
271
|
|
|
$
|
—
|
|
|
|
|
|
Approximate weighted average rate paid during year:
|
|
|
|
FHLB advances
|
1.78
|
%
|
|
1.15
|
%
|
Subordinated debt securities
|
4.50
|
%
|
|
3.08
|
%
|
Repo
|
1.15
|
%
|
|
—
|
%
|
The components of income tax expense for the years ended
March 31
are as follows:
|
|
|
|
|
|
|
|
|
|
$ in thousands
|
|
2017
|
|
2016
|
Income tax expense
|
|
|
|
|
Current - Federal
|
|
$
|
—
|
|
|
$
|
4
|
|
Current - State
|
|
119
|
|
|
124
|
|
Total income tax expense
|
|
$
|
119
|
|
|
$
|
128
|
|
The following is a reconciliation of the expected Federal income tax rate to the consolidated effective tax rate for the years ended
March 31
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
Restated
(1)
|
$ in thousands
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
Statutory Federal income tax expense (benefit) - Restated
(1)
|
$
|
(929
|
)
|
|
34.0
|
%
|
|
$
|
(558
|
)
|
|
34.0
|
%
|
State and local income tax, net of Federal tax benefit - Restated
(1)
|
119
|
|
|
(4.4
|
)
|
|
128
|
|
|
(7.8
|
)
|
General business credit - Restated
(1)
|
11
|
|
|
(0.4
|
)
|
|
11
|
|
|
(0.7
|
)
|
Change in valuation allowance - Restated
(1)
|
961
|
|
|
(35.2
|
)
|
|
774
|
|
|
(47.2
|
)
|
Other - Restated
(1)
|
(43
|
)
|
|
1.6
|
|
|
(227
|
)
|
|
13.9
|
|
Total income tax expense
|
$
|
119
|
|
|
(4.4
|
)%
|
|
$
|
128
|
|
|
(7.8
|
)%
|
(1)
March 31, 2016 balances have been restated from previously reported results to correct for material and certain other errors from prior periods. Refer to Notes 1 and 19 for further detail.
Tax effects of existing temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities are included in other assets at
March 31
as follows:
|
|
|
|
|
|
|
|
|
$ in thousands
|
2017
|
|
2016
Restated
(1)
|
Deferred Tax Assets:
|
|
|
|
Allowance for loan losses
|
$
|
2,147
|
|
|
$
|
2,230
|
|
Nonaccrual loan interest
|
373
|
|
|
67
|
|
Purchase accounting adjustment
|
1
|
|
|
3
|
|
Net operating loss carryforward - Restated
(1)
|
17,551
|
|
|
16,550
|
|
New markets tax credit
|
2,207
|
|
|
2,207
|
|
Depreciation - Restated
(1)
|
2,018
|
|
|
1,656
|
|
Market value adjustment on HFS loans
|
—
|
|
|
13
|
|
Unrealized loss on available-for-sale securities
|
792
|
|
|
139
|
|
Other - Restated
(1)
|
810
|
|
|
709
|
|
Total Deferred Tax Assets - Restated
(1)
|
25,899
|
|
|
23,574
|
|
Deferred Tax Liabilities:
|
|
|
|
Market value adjustment on HFS loans
|
68
|
|
|
—
|
|
Other
|
812
|
|
|
593
|
|
Total Deferred Tax Liabilities
|
880
|
|
|
593
|
|
Deferred Tax Assets, net - Restated
(1)
|
25,019
|
|
|
22,981
|
|
Valuation Allowance - Restated
(1)
|
(25,019
|
)
|
|
(22,981
|
)
|
Deferred Tax Assets, net of valuation allowance
|
$
|
—
|
|
|
$
|
—
|
|
(1)
March 31, 2016 balances have been restated from previously reported results to correct for material and certain other errors from prior periods. Refer to Notes 1 and 19 for further detail.
On June 29, 2011, the Company raised
$55.0 million
of equity. The capital raise triggered a change in control under Section 382 of the Internal Revenue Code. Generally, Section 382 limits the utilization of an entity's net operating loss carryforwards, general business credits, and recognized built-in losses upon a change in ownership. The Company is currently subject to an annual limitation of approximately
$0.9 million
, but has accumulated availability of
$5 million
as of
March 31, 2017
. The total cumulative availability over the carryover period (20 years) is
$18.1 million
. The Company has a net deferred tax asset (“DTA”) of approximately
$25.0 million
. Based on management's calculations, the Section 382 limitation has resulted in previous reductions of the deferred tax asset of
$5.8 million
. A full valuation allowance for the remaining net deferred tax asset of
$25.0 million
has been recorded. The valuation allowance was initially recorded during fiscal year 2011, and has remained as management concluded and continues to conclude that it is “more likely than not” that the Company will not be able to fully realize the benefit of its deferred tax assets.
At
March 31, 2017
, the Company had net operating carryforwards for federal purposes of approximately
$39.4 million
, for state purposes of approximately
$50.9 million
and for city purposes of approximately
$44.6 million
which are available to offset future federal, state and city income and which expire over varying periods from March 2027 through March 2037.
The Company has no uncertain tax positions. The Company and its subsidiaries are subject to federal, New York State and New York City income taxation. The Company is no longer subject to examination by taxing authorities for years before
March 31, 2014. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination; with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.
|
|
NOTE 10.
|
LOSS PER COMMON SHARE
|
The following table reconciles the earnings (loss) available to common shareholders (numerator) and the weighted average common stock outstanding (denominator) for both basic and diluted earnings (loss) per share for the years ended
March 31
:
|
|
|
|
|
|
|
|
|
$ in thousands except per share data
|
2017
|
|
2016
Restated
(1)
|
Net loss available to common shareholders of Carver Bancorp, Inc. - Restated
(1)
|
$
|
(2,853
|
)
|
|
$
|
(1,767
|
)
|
|
|
|
|
Weighted average common shares outstanding – basic
|
3,696,420
|
|
|
3,696,420
|
|
Weighted average common shares outstanding – diluted
|
3,696,420
|
|
|
3,696,420
|
|
|
|
|
|
Basic loss per common share - Restated
(1)
|
$
|
(0.77
|
)
|
|
$
|
(0.48
|
)
|
Diluted loss per common share - Restated
(1)
|
$
|
(0.77
|
)
|
|
$
|
(0.48
|
)
|
(1)
March 31, 2016 balances have been restated from previously reported results to correct for material and certain other errors from prior periods. Refer to Notes 1 and 19 for further detail.
For the years ended
March 31, 2017
and
2016
, all MRP shares and outstanding stock options were anti-dilutive.
NOTE 11. STOCKHOLDERS' EQUITY
Conversion and Stock Offering.
On October 24, 1994, the Bank issued in an initial public offering
2,314,375
shares of common stock, par value
$0.01
(the “Common Stock”), at a price of
$10
per share resulting in net proceeds of
$21.5 million
. As part of the initial public offering, the Bank established a liquidation account at the time of conversion, in an amount equal to the surplus and reserves of the Bank at September 30, 1994. In the unlikely event of a complete liquidation of the Bank (and only in such event), eligible depositors who continue to maintain accounts shall be entitled to receive a distribution from the liquidation account. The total amount of the liquidation account may be decreased if the balances of eligible deposits decreased as measured on the annual determination dates. The Bank is not permitted to pay dividends to the Company on its capital stock if the effect thereof would cause its net worth to be reduced below either: (i) the amount required for the liquidation account, or (ii) the amount required for the Bank to comply with applicable minimum regulatory capital requirements. In 2011 the stockholders approved a
1-for-15
reverse stock split pursuant to which each 15 shares of the Company’s Common Stock would be converted into one share of Common Stock. The
1-for-15
reverse stock split was effective as of October 27, 2011, resulting in a reduction in the number of outstanding shares of the Company’s Common Stock from
2,492,415
to
166,161
, an increase of the conversion price of the Series C Preferred Stock and the Series D Preferred Stock and the exchange ratio of the Series B Preferred Stock from $0.5451 to $8.1765, and a corresponding decrease in the number of shares of Common Stock issued to the Investors and Treasury. During the year ended March 31, 2012, all outstanding shares of Series B Preferred Stock were converted to Common Stock and all outstanding shares of Series C preferred Stock were converted to Series D Preferred Stock. As of March 31, 2017, there were
3,696,087
shares of Company common stock outstanding.
Series D Preferred Stock ranks senior to the Common Stock. The holders of Series D Preferred Stock are entitled to receive dividends, on an as-converted basis, simultaneously to the payment of any dividends on the Company's common stock. Dividends on the Series D Preferred Stock are not cumulative. If the Company's board of directors does not declare a dividend with respect to any dividend period, the holders of the Series D Preferred Stock will have no right to receive any dividend for that period. The Company may not declare, pay or set apart for payment any dividend or make any distribution on common stock, unless at the time of such dividend or distribution the Company simultaneously pays a non-cumulative dividend or makes a distribution on each outstanding share of Series D Preferred Stock on an as-converted basis. The holders of Series D preferred Stock are generally not entitled to vote, except with respect to amendments to the Company's certificate of incorporation that would change the rights and preferences of the Series D Preferred Stock, the creation or increase of any class of securities senior to the Series D Preferred Stock, the consummation of certain mergers, consolidations or other transactions where the holders of the Series D Preferred Stock are not converted into or exchanged for preference securities of the surviving entity, and as otherwise required by applicable law.
.
The Series D Preferred Stock shall automatically convert into shares of Common Stock only upon the following transfers to third parties (“Eligible Transfers”):
|
|
•
|
a transfer in a widespread public distribution;
|
|
|
•
|
a transfer in which no transferee (together with its affiliates and other transferees acting in concert with it) acquires more than 2% of the Company’s common stock or any other class or series of the Company’s voting stock; or
|
|
|
•
|
a transfer to a transferee that (together with its affiliates and other transferees acting in concert with it) owns or controls more than 50% of the Company’s common stock, without regard to the transfer.
|
The conversion price of the Series D Preferred Stock is $8.1765, and is subject to adjustment in the event of stock splits, subdivisions or combinations, dividends and distributions, issuance of certain rights, spin-offs, self-tenders and exchange offers as set forth under The Series D Preferred Stock is not convertible at the option of the holders. As of March 31, 2017, there were
45,118
shares of Series D Preferred Stock.
On August 6, 2002, the Company announced a stock repurchase program to repurchase up to
15,442
shares of its outstanding common stock. As of
March 31, 2017
, 11,744 shares of its common stock have been repurchased in open market transactions.
No
shares were repurchased during fiscal
2017
. The U.S. Treasury's prior approval is required to make further repurchases.
Regulatory Capital
. The operations and profitability of the Bank are significantly affected by legislation and the policies of the various regulatory agencies. In July 2013, the FDIC and the other federal bank regulatory agencies issued a final rule that revised their leverage and risk-based capital requirements and the method for calculating risk-weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act. The final rule, which became effective for the Bank on January 1, 2015, established a minimum Common Equity Tier 1 (CET1) ratio, a minimum leverage ratio and increases in the Tier 1 and Total risk-based capital ratios. The rule also limits a banking organization's capital distributions and certain discretionary bonus payments if the banking organization does not hold a "capital conservation buffer" consisting of 2.5% of CET1 capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements. The capital conservation buffer requirement will be phased in beginning January 1, 2016 and ending January 1, 2019, when the full capital conservation buffer requirement will be effective. As of
March 31, 2017
, the Bank's capital conservation buffer was 1.25% making its minimum CET1 plus buffer 5.75%, its minimum Tier 1 capital plus buffer 7.25% and its minimum total capital plus buffer 9.25%. On January 1, 2018, the capital conservation buffer will increase to 1.875%. In assessing an institution's capital adequacy, the OCC takes into consideration not only these numeric factors but also qualitative factors, and has the authority to establish higher capital requirements for individual institutions where necessary. Carver Federal, as a matter of prudent management, targets as its goal the maintenance of capital ratios which exceed these minimum requirements and that are consistent with Carver Federal's risk profile. The previously described Formal Agreement that Carver Federal entered into with the OCC included a capital directive requiring the Bank to achieve and maintain minimum regulatory capital levels of a Tier 1 leverage ratio of
9%
and a total risk-based capital ratio of
12%
. At
March 31, 2017
, the Bank's capital level exceeded the regulatory requirements with a Tier 1 leverage ratio of
8.98%
, total risk-based capital ratio of
12.85%
and a Tier 1 risk-based capital ratio of
11.88%
. However, the Tier 1 leverage ratio of
8.98%
was below the Individual Minimum Capital Requirement of
9.00%
mandated for the Bank by its primary regulator. Management has informed its regulator of this shortfall and its plans for regaining compliance.
The table below presents the Bank's regulatory capital ratios at
March 31, 2017
and
2016
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
March 31, 2016 Restated
(1)
|
($ in thousands)
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
Tier 1 leverage capital - Restated
(1)
|
|
|
|
|
|
|
|
|
Regulatory capital
|
|
$
|
61,960
|
|
|
8.98
|
%
|
|
$
|
63,931
|
|
|
8.60
|
%
|
Individual minimum capital requirement
|
|
62,092
|
|
|
9.00
|
%
|
|
|
|
N/A
|
|
Minimum capital requirement
|
|
27,597
|
|
|
4.00
|
%
|
|
29,740
|
|
|
4.00
|
%
|
Excess
|
|
34,363
|
|
|
4.98
|
%
|
|
34,191
|
|
|
4.60
|
%
|
|
|
|
|
|
|
|
|
|
Common equity Tier 1 - Restated
(1)
|
|
|
|
|
|
|
|
|
Regulatory capital
|
|
$
|
61,960
|
|
|
11.88
|
%
|
|
$
|
63,931
|
|
|
12.18
|
%
|
Minimum capital requirement
|
|
23,470
|
|
|
4.50
|
%
|
|
23,622
|
|
|
4.50
|
%
|
Excess
|
|
38,490
|
|
|
7.38
|
%
|
|
40,309
|
|
|
7.68
|
%
|
|
|
|
|
|
|
|
|
|
Tier 1 risk-based capital - Restated
(1)
|
|
|
|
|
|
|
|
|
Regulatory capital
|
|
$
|
61,960
|
|
|
11.88
|
%
|
|
$
|
63,931
|
|
|
12.18
|
%
|
Minimum capital requirement
|
|
31,294
|
|
|
6.00
|
%
|
|
31,496
|
|
|
6.00
|
%
|
Excess
|
|
30,666
|
|
|
5.88
|
%
|
|
32,435
|
|
|
6.18
|
%
|
|
|
|
|
|
|
|
|
|
Total risk-based capital - Restated
(1)
|
|
|
|
|
|
|
|
|
Regulatory capital
|
|
$
|
67,020
|
|
|
12.85
|
%
|
|
$
|
71,163
|
|
|
13.56
|
%
|
Individual minimum capital requirement
|
|
62,588
|
|
|
12.00
|
%
|
|
|
|
N/A
|
|
Minimum capital requirement
|
|
41,725
|
|
|
8.00
|
%
|
|
41,995
|
|
|
8.00
|
%
|
Excess
|
|
25,295
|
|
|
4.85
|
%
|
|
29,168
|
|
|
5.56
|
%
|
(1)
March 31, 2016 balances have been restated from previously reported results to correct for material and certain other errors from prior periods. Refer to Notes 1 and 19 for further detail.
NOTE 12. OTHER COMPREHENSIVE INCOME (LOSS)
The following tables set forth changes in each component of accumulated other comprehensive loss, net of tax for the years ended
March 31, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in thousands
|
|
At
March 31, 2016
|
|
Other Comprehensive Loss
|
|
At
March 31, 2017
|
Net unrealized loss on securities available-for-sale
|
|
$
|
(307
|
)
|
|
$
|
(1,633
|
)
|
|
$
|
(1,940
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in thousands
|
|
At
March 31, 2015
|
|
Other Comprehensive Income
|
|
At
March 31, 2016
|
Net unrealized loss on securities available-for-sale
|
|
$
|
(1,045
|
)
|
|
$
|
738
|
|
|
$
|
(307
|
)
|
The following table sets forth information about amounts reclassified from accumulated other comprehensive loss to the consolidated statement of operations and the affected line item in the statement where net income is presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Twelve Months Ended March 31,
|
|
Affected Line Item in the Consolidated Statement of Operations
|
$ in thousands
|
|
2017
|
|
2016
|
|
Reclassification adjustment for sales of available for-sale securities, net of tax
|
|
$
|
58
|
|
|
$
|
1
|
|
|
Gain on sale of securities, net
|
Comprehensive (Loss) Income.
Comprehensive (loss) income represents net (loss) income and certain amounts reported directly in stockholders' equity, such as net unrealized gain or loss on securities available-for-sale. The balance at
March 31, 2017
included
$1.6 million
of unrealized losses for the year ended
March 31, 2017
. The balance at
March 31, 2016
included
$738 thousand
of unrealized gains for the year ended
March 31, 2016
.
|
|
NOTE 13.
|
EMPLOYEE BENEFIT AND STOCK COMPENSATION PLANS
|
Savings Incentive Plan.
Carver has a savings incentive plan, pursuant to Section 401(k) of the Code, for all eligible employees of the Bank. The Bank matches contributions to the 401(k) Plan equal to
100%
of pre-tax contributions made by each employee up to a maximum of
3%
of their pay, subject to IRS limitations. All such matching contributions are fully vested and non-forfeitable at all times regardless of the years of service with the Bank.
Under the profit-sharing feature, if the Bank achieves a minimum of
70%
of its net income goal as mentioned previously, the Compensation Committee may authorize an annual non-elective contribution to the 401(k) Plan on behalf of each eligible employee up to
2%
of the employee's annual pay, subject to IRS limitations. This non-elective contribution may be made regardless of whether the employee makes a contribution to the 401(k) Plan. Non-elective Bank contributions, if awarded, vest
20%
each year for the first five years of employment and are fully vested thereafter.
To be eligible for the matching contribution, the employee must be 21 years of age and have completed at least three months of service. To be eligible for the non-elective Carver contribution, the employee must also be employed as of the last day of the plan year.
Compensation expense recognized for the savings incentive plan was
$268 thousand
and
$150 thousand
, respectively, for fiscal
2017
and
2016
.
Management Recognition Plan
(“MRP”)
.
The MRP provided for grants of restricted stock to certain employees at September 12, 1995 adoption of the MRP. On March 28, 2005 the plan was amended for all future awards. The MRP provides for additional discretionary grants of restricted stock to those employees selected by the committee established to administer the MRP. Awards granted prior to March 28, 2005, generally vest in three to five equal annual installments commencing on the first anniversary date of the award, provided the recipient is still an employee of the Company or the Bank on such date. Under the amended plan, awards granted after March 28, 2005 vest based on a five-year performance-accelerated vesting schedule. Ten percent of the awarded shares vest in each of the first four years and the remainder in the fifth year but the Compensation Committee may accelerate vesting at any time. Awards will become 100% vested upon termination of service due to death or disability. When shares become vested and are distributed, the recipients will receive an amount equal to any accrued dividends with respect thereto. There are no shares available to grant under the MRP. Pursuant to the MRP, the Bank recognized
$9 thousand
as expense for fiscal year
2016
.
No
expense was recognized for fiscal year
2017
.
Stock Option Plans.
In September 2006, Carver stockholders approved the 2006 Stock Incentive Plan (the "2006 Incentive Plan") which provides for the grant of stock options, stock appreciation rights and restricted stock to employees and directors who are selected to receive awards by the Committee. The 2006 Incentive Plan authorizes Carver to grant awards with respect to
20,000
shares, but no more than
10,000
shares of restricted stock may be granted. During fiscal
2016
, there were
4,000
options and
4,000
restricted stock awards issued. Options are granted at a price not less than fair market value of Carver common stock at the time of the grant for a period not to exceed 10 years. Shares generally vest in 20% increments over 5 years, however, the Committee may specify a different vesting schedule. At
March 31, 2017
, there were
4,133
options outstanding under the 2006 Incentive Plan and
933
were exercisable. All options are exercisable immediately upon a participant's disability, death or a change in control, as defined in the 2006 Incentive Plan, if the person is employed on that date. Pursuant to the plan, the Bank recognized
$5 thousand
and
$9 thousand
as expense for fiscal years
2017
and
2016
, respectively.
In September 2014, Carver stockholders approved the Carver Bancorp, Inc. 2014 Equity Incentive Plan (the "2014 Incentive Plan") which provides for the grant of stock options, stock appreciation rights and restricted stock to executive officers and directors who are selected to receive awards by the Committee. The 2014 Incentive Plan authorizes Carver to grant awards with respect to
250,000
shares. As of
March 31, 2017
,
no
awards have been made from this plan. All of the shares may be issued pursuant to stock options (all of which may be incentive stock options) or all of which may be issued pursuant to restricted stock awards or restricted stock units. Unless the Committee determines otherwise, the award agreements will specify that no award will vest more rapidly than 25% per year over a four-year period, with the first installment vesting one year after the date of grant, subject to acceleration upon the occurrence of specific events. All options are exercisable immediately upon a participant's disability, death or change in control, as defined in the 2014 Incentive Plan, if the person is employed on that date.
Information regarding nonvested shares of restricted stock awards outstanding for the years ended
March 31
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
Shares
|
|
Weighted Average
Grant Price
|
|
Shares
|
|
Weighted Average
Grant Price
|
Outstanding, beginning of year
|
4,000
|
|
|
$
|
5.56
|
|
|
—
|
|
|
$
|
—
|
|
Granted
|
—
|
|
|
—
|
|
|
4,000
|
|
|
5.56
|
|
Vested
|
(800
|
)
|
|
5.56
|
|
|
—
|
|
|
—
|
|
Forfeited
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Outstanding, end of year
|
3,200
|
|
|
$
|
5.56
|
|
|
4,000
|
|
|
$
|
5.56
|
|
Information regarding stock options as of and for the years ended
March 31
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
Options
|
|
Weighted
Average
Exercise
Price
|
|
Options
|
|
Weighted
Average
Exercise
Price
|
Outstanding, beginning of year
|
5,924
|
|
|
$
|
81.65
|
|
|
3,029
|
|
|
$
|
246.18
|
|
Granted
|
—
|
|
|
—
|
|
|
4,000
|
|
|
5.56
|
|
Exercised
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Expired/Forfeited
|
1,791
|
|
|
249.00
|
|
|
1,105
|
|
|
258.30
|
|
Outstanding, end of year
|
4,133
|
|
|
$
|
8.53
|
|
|
5,924
|
|
|
$
|
81.65
|
|
Exercisable, at year end
|
933
|
|
|
|
|
1,924
|
|
|
|
Information regarding stock options as of
March 31, 2017
is as follows :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
Range of
Exercise Prices
|
|
Shares
|
|
Weighted
Average
Remaining
Life
|
|
Weighted
Average
Exercise
Price
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
$
|
5.00
|
|
$
|
5.99
|
|
|
4,000
|
|
|
8.23
|
|
$
|
5.56
|
|
|
800
|
|
|
$
|
5.56
|
|
90.00
|
|
$
|
104.85
|
|
|
133
|
|
|
3.36
|
|
97.50
|
|
|
133
|
|
|
97.50
|
|
Total
|
|
|
4,133
|
|
|
|
|
|
|
933
|
|
|
|
There were
no
stock options awarded to employees during the year ended
March 31, 2017
. The four new outside directors who joined in fiscal year 2014 each received a grant of 1,000 options in fiscal 2016. These options vest over five years.
At
March 31, 2017
, all outstanding options had
no
intrinsic value.
The fair value of the option grants was estimated on the date of the grant using the Black-Scholes option pricing model applying the following weighted average assumptions for the years ended
March 31
:
|
|
|
|
|
|
2017
|
|
2016
|
Risk-free interest rate
|
N/A
|
|
1.78%
|
Volatility
|
N/A
|
|
10.00%
|
Annual dividends
|
N/A
|
|
—%
|
Expected life of option grants
|
N/A
|
|
9.24
|
The Company recorded compensation expense of
$4 thousand
in fiscal
2017
and
$2 thousand
in fiscal
2016
.
Performance Compensation Plan.
In 2006, Carver adopted the Performance Compensation Plan of Carver Bancorp, Inc. (the "Performance Compensation Plan"). This Performance Compensation Plan provides for cash payments to officers or employees designated by the Compensation Committee, which also determines the amount awarded to such participants. Vesting is generally
20%
a year over 5 years and awards are fully vested on a change in control (as defined), or termination of employment by death or disability, but the Committee may accelerate vesting at any time. Payments are made as soon as practicable after the end of the fiscal year in which amounts vest.
No
compensation expense was recognized in fiscal year
2017
or
2016
.
|
|
NOTE 14.
|
COMMITMENTS AND CONTINGENCIES
|
Credit Related Commitments.
The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and in connection with its overall investment strategy. These instruments involve, to varying degrees, elements of credit, interest rate and liquidity risk. In accordance with GAAP, these instruments are not recorded in the consolidated financial statements. Such instruments primarily include lending obligations, including commitments to originate mortgage and consumer loans and to fund unused lines of credit.
The Bank's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments as it does for on-balance-sheet instruments.
The following table reflects the Bank's outstanding lending commitments and contractual obligations as of
March 31
:
|
|
|
|
|
|
|
|
|
$ in thousands
|
2017
|
|
2016
|
Commitments to fund mortgage loans
|
$
|
900
|
|
|
$
|
15,568
|
|
Commitments to fund commercial and consumer loans
|
3,530
|
|
|
3,000
|
|
Lines of credit
|
8,527
|
|
|
6,144
|
|
Letters of credit
|
69
|
|
|
234
|
|
Commitment to fund private equity investment
|
640
|
|
|
852
|
|
|
$
|
13,666
|
|
|
$
|
25,798
|
|
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of these commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management's credit evaluation of the counterparty.
Mortgage Representation & Warranty Liabilities
During the period 2004 through 2009, the Bank originated 1-4 family residential mortgage loans and sold the loans to the Federal National Mortgage Association (“FNMA”). The loans were sold to FNMA with the standard representations and warranties for loans sold to the Government Sponsored Entities (GSE's). The Bank may be required to repurchase these loans in the event of breaches of these representations and warranties. In the event of a repurchase, the Bank is typically required to pay the unpaid principal balance as well as outstanding interest and fees. The Bank then recovers the loan or, if the loan has been foreclosed, the underlying collateral. The Bank is exposed to any losses on repurchased loans after giving effect to any recoveries on the collateral. The Bank has not received a request to repurchase any of these loans since the second quarter of fiscal 2015. Further, there have not been any additional requests from FNMA for loans to be reviewed. Accordingly, management has reduced its level of repurchase reserves.
The following table presents information on open requests from FNMA. The amounts presented are based on outstanding loan principal balances.
|
|
|
|
|
|
$ in thousands
|
|
Loans sold to FNMA
|
Open claims as of March 31, 2016
(1)
|
|
$
|
2,009
|
|
Gross new demands received
|
|
—
|
|
Loans repurchased/made whole
|
|
—
|
|
Demands rescinded
|
|
—
|
|
Advances on open claims
|
|
60
|
|
Principal payments received on open claims
|
|
(25
|
)
|
Open claims as of March 31, 2017
(1)
|
|
$
|
2,044
|
|
|
|
(1)
|
The open claims include all open requests received by the Bank where either FNMA has requested loan files for review, where FNMA has not formally rescinded the repurchase request or where the Bank has not agreed to repurchase the loan. The amounts reflected in this table are the unpaid principal balance and do not incorporate any losses the Bank would incur upon the repurchase of these loans.
|
The table below summarizes changes in our representation and warranty reserves during fiscal
2017
.
|
|
|
|
|
|
$ in thousands
|
|
March 31, 2017
|
Representation and warranty repurchase reserve, March 31, 2016
(1)
|
|
$
|
186
|
|
Net recovery of repurchase losses
(2)
|
|
(24
|
)
|
Representation and warranty repurchase reserve, March 31, 2017
(1)
|
|
$
|
162
|
|
(1)
Reported in consolidated statements of financial condition as a component of other liabilities.
(2)
Component of other non-interest expense.
Lease Commitments.
Rentals under long-term operating leases for certain branches aggregated approximately
$1.3 million
and
$1.5 million
for fiscal years
2017
and
2016
, respectively. As of
March 31, 2017
, minimum rental commitments under all non-cancelable leases with initial or remaining terms of more than one year and expiring through 2026 follow:
|
|
|
|
|
|
$ in thousands
|
|
|
Year Ending March 31,
|
|
Minimum Rental
|
2018
|
|
$
|
1,284
|
|
2019
|
|
966
|
|
2020
|
|
582
|
|
2021
|
|
382
|
|
2022
|
|
90
|
|
Thereafter
|
|
353
|
|
|
|
$
|
3,657
|
|
The Bank also has, in the normal course of business, commitments for services and supplies.
Legal Proceedings.
From time to time, the Company and the Bank or one of its wholly-owned subsidiaries are parties to various legal proceedings incident to their business. At
March 31, 2017
, certain claims, suits, complaints and investigations (collectively “proceedings”) involving the Company and the Bank or a subsidiary, arising in the ordinary course of business, have been filed or are pending. The Company is unable at this time to determine the ultimate outcome of each proceeding, but believes, after discussions with legal counsel representing the Company and the Bank or the subsidiary in these proceedings, that it has meritorious defenses to each proceeding and appropriate measures have been taken to defend the interests of the Company, Bank or subsidiary. There were no legal proceedings pending or known to be contemplated against us that in the opinion of management, would be expected to have a material adverse effect on the financial condition or results of operations of the Company or the Bank.
|
|
NOTE 15.
|
FAIR VALUE MEASUREMENTS
|
On April 1, 2008, the Company adopted ASC Topic 820 which, among other things, defines fair value, establishes a consistent framework for measuring fair value, and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. ASC 820 clarifies that fair value is an “exit” price, representing the amount that would be received when selling an asset, or paid when transferring a liability, in an orderly transaction between market participants. Fair value is thus a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
|
|
•
|
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.
|
A financial instrument’s categorization within this valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The following table presents, by valuation hierarchy, assets that are measured at fair value on a recurring basis as of
March 31, 2017
and
2016
, and that are included in the Company's Consolidated Statements of Financial Condition at these dates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at March 31, 2017, Using
|
$ in thousands
|
Quoted Prices in Active Markets for Identical Assets (Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
|
Significant Unobservable Inputs (Level 3)
|
|
Total Fair Value
|
Mortgage servicing rights
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
192
|
|
|
$
|
192
|
|
Investment securities
|
|
|
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
Government National Mortgage Association
|
—
|
|
|
2,487
|
|
|
—
|
|
|
2,487
|
|
Federal Home Loan Mortgage Corporation
|
—
|
|
|
7,858
|
|
|
—
|
|
|
7,858
|
|
Federal National Mortgage Association
|
—
|
|
|
26,313
|
|
|
—
|
|
|
26,313
|
|
Other
|
—
|
|
|
—
|
|
|
45
|
|
|
45
|
|
U.S. Government Agency securities
|
—
|
|
|
7,482
|
|
|
—
|
|
|
7,482
|
|
Corporate bonds
|
—
|
|
|
4,964
|
|
|
—
|
|
|
4,964
|
|
Other investments
|
—
|
|
|
9,504
|
|
|
358
|
|
|
9,862
|
|
Total available-for-sale securities
|
—
|
|
|
58,608
|
|
|
403
|
|
|
59,011
|
|
Total assets
|
$
|
—
|
|
|
$
|
58,608
|
|
|
$
|
595
|
|
|
$
|
59,203
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at March 31, 2016, Using
|
$ in thousands
|
Quoted Prices in Active Markets for Identical Assets (Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
|
Significant Unobservable Inputs (Level 3)
|
|
Total Fair Value
|
Mortgage servicing rights
|
$
|
—
|
|
|
$
|
—
|
|
|
201
|
|
|
$
|
201
|
|
Investment securities
|
|
|
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
Government National Mortgage Association
|
—
|
|
|
4,623
|
|
|
—
|
|
|
4,623
|
|
Federal Home Loan Mortgage Corporation
|
—
|
|
|
7,678
|
|
|
—
|
|
|
7,678
|
|
Federal National Mortgage Association
|
—
|
|
|
7,824
|
|
|
—
|
|
|
7,824
|
|
Other
|
—
|
|
|
—
|
|
|
45
|
|
|
45
|
|
U.S. Government Agency securities
|
—
|
|
|
26,069
|
|
|
—
|
|
|
26,069
|
|
Other investments
|
—
|
|
|
9,793
|
|
|
148
|
|
|
9,941
|
|
Total available-for-sale securities
|
—
|
|
|
55,987
|
|
|
193
|
|
|
56,180
|
|
Total assets
|
$
|
—
|
|
|
$
|
55,987
|
|
|
$
|
394
|
|
|
$
|
56,381
|
|
Instruments for which unobservable inputs are significant to their fair value measurement (i.e., Level 3) include mortgage servicing rights ("MSR") and other available-for-sale securities. Level 3 assets accounted for
0.09%
of the Company's total assets at
March 31, 2017
and
0.05%
at
March 31, 2016
.
The Company reviews and updates the fair value hierarchy classifications on a quarterly basis. Changes from one quarter to the next that are related to the observable inputs to a fair value measurement may result in a reclassification from one hierarchy level to another.
Below is a description of the methods and significant assumptions utilized in estimating the fair value of available-for-sale securities and MSR:
Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy.
If quoted market prices are not available for the specific security, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. These pricing models primarily use market-based or independently sourced market parameters as inputs, including, but not limited to, yield curves, interest rates, equity or debt prices, and credit spreads. In addition to market information, models also incorporate transaction details, such as maturity and cash flow assumptions. Securities valued in this manner would generally be classified within Level 2 of the valuation hierarchy and primarily include such instruments as mortgage-related securities and corporate debt.
During the fiscal year ended
March 31, 2017
, there were
no
transfers of investments into or out of each level of the fair value hierarchy.
In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy. In valuing certain securities, the determination of fair value may require benchmarking to similar instruments or analyzing default and recovery rates. Quoted price information for the MSRs is not available. Therefore, MSRs are valued using market-standard models to model the specific cash flow structure. Key inputs to the model consist of principal balance of loans being serviced, servicing fees and prepayment rates.
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with those of other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
The following table includes a rollforward of assets classified by the Company within Level 3 of the valuation hierarchy for the years ended
March 31, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in thousands
|
Beginning balance, April 1, 2016
|
|
Total Realized/Unrealized Gains/(Losses) Recorded in Income
(1)
|
|
Issuances / (Settlements)
|
|
Transfers to/(from) Level 3
|
|
Ending balance,
March 31, 2017
|
|
Change in Unrealized Gains/(Losses) Related to Instruments Held at March 31, 2017
|
Available-for-Sale:
|
|
|
|
|
|
|
|
|
|
|
|
Securities Available-for-Sale
|
$
|
45
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
45
|
|
|
$
|
—
|
|
Other investments
|
148
|
|
|
(1
|
)
|
|
211
|
|
|
—
|
|
|
358
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Servicing Rights
|
201
|
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
192
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in thousands
|
Beginning balance, April 1, 2015
|
|
Total Realized/Unrealized Gains/(Losses) Recorded in Income
(1)
|
|
Issuances / (Settlements)
|
|
Transfers to/(from) Level 3
|
|
Ending balance, March 31, 2016
|
|
Change in Unrealized Gains/(Losses) Related to Instruments Held at March 31, 2016
|
Available-for-Sale
|
|
|
|
|
|
|
|
|
|
|
|
Securities Available-for-Sale
|
$
|
47
|
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
$
|
—
|
|
|
$
|
45
|
|
|
$
|
—
|
|
Other investments
|
—
|
|
|
|
|
|
148
|
|
|
—
|
|
|
148
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Servicing Rights
|
210
|
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
201
|
|
|
(8
|
)
|
(1)
Includes net servicing cash flows and the passage of time.
For Level 3 assets measured at fair value on a recurring basis as of
March 31, 2017
and
2016
, the significant unobservable inputs used in the fair value measurements were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in thousands
|
|
Fair Value at March 31, 2017
|
|
Valuation Technique
|
|
Significant Unobservable Inputs
|
|
Significant Unobservable Input Value
|
Available-for-Sale:
|
|
|
|
|
|
|
|
|
Securities Available-for-Sale
|
|
$
|
45
|
|
|
Cost
|
|
n/a
|
|
|
Other investments
|
|
358
|
|
|
Cost
|
|
Contribution into Fund
|
|
358
|
|
|
|
|
|
|
|
|
|
|
Mortgage Servicing Rights
|
|
192
|
|
|
Discounted Cash Flow
|
|
Weighted Average Constant Prepayment Rate
(1)
|
|
22.37
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in thousands
|
|
Fair Value at March 31, 2016
|
|
Valuation Technique
|
|
Significant Unobservable Inputs
|
|
Significant Unobservable Input Value
|
Available-for-Sale:
|
|
|
|
|
|
|
|
|
Securities Available-for-Sale
|
|
45
|
|
|
Cost
|
|
n/a
|
|
|
Other investments
|
|
148
|
|
|
Cost
|
|
Contribution into Fund
|
|
148
|
|
|
|
|
|
|
|
|
|
|
Mortgage Servicing Rights
|
|
201
|
|
|
Discounted Cash Flow
|
|
Weighted Average Constant Prepayment Rate
(1)
|
|
20.84
|
%
|
(1)
Represents annualized loan repayment rate assumptions
Certain assets are measured at fair value on a non-recurring basis. Such instruments are subject to fair value adjustments under certain circumstances (e.g. when there is evidence of impairment). The following table presents assets and liabilities that were measured at fair value on a non-recurring basis as of
March 31, 2017
and
2016
, and that are included in the Company's Consolidated Statements of Financial Condition at these dates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at March 31, 2017, Using
|
$ in thousands
|
Quoted Prices in Active Markets for Identical Assets (Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
|
Significant Unobservable Inputs (Level 3)
|
|
Total Fair Value
|
Impaired loans with a specific reserve allocated
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,953
|
|
|
$
|
5,953
|
|
Other real estate owned
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
990
|
|
|
$
|
990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at March 31, 2016, Using
|
$ in thousands
|
Quoted Prices in Active Markets for Identical Assets (Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
|
Significant Unobservable Inputs (Level 3)
|
|
Total Fair Value
|
Impaired loans with a specific reserve allocated
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,669
|
|
|
$
|
4,669
|
|
Other real estate owned
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,008
|
|
|
$
|
1,008
|
|
For Level 3 assets measured at fair value on a non-recurring basis as of
March 31, 2017
and
2016
, the significant unobservable inputs used in the fair value measurements were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
$ in thousands
|
|
Fair Value at March 31, 2017
|
|
Valuation Technique
|
|
Significant Unobservable Inputs
|
|
Significant Unobservable Input Value
|
Impaired loans with a specific reserve allocated
|
|
$
|
5,953
|
|
|
Appraisal of collateral
|
|
Appraisal adjustments
|
|
7.5% cost to sell
|
|
|
|
|
|
|
|
|
|
Other real estate owned
|
|
990
|
|
|
Appraisal of collateral
|
|
Appraisal adjustments
|
|
7.5% cost to sell
|
|
|
|
|
|
|
|
|
|
|
|
|
$ in thousands
|
|
Fair Value at March 31, 2016
|
|
Valuation Technique
|
|
Significant Unobservable Inputs
|
|
Significant Unobservable Input Value
|
Impaired loans with a specific reserve allocated
|
|
$
|
4,669
|
|
|
Appraisal of collateral
|
|
Appraisal adjustments
|
|
7.5% cost to sell
|
|
|
|
|
|
|
|
|
|
Other real estate owned
|
|
1,008
|
|
|
Appraisal of collateral
|
|
Appraisal adjustments
|
|
7.5% cost to sell
|
The fair values of collateral dependent impaired loans are determined using various valuation techniques, including consideration of appraised values and other pertinent real estate market data.
Other real estate owned represents 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. At the time of acquisition of the real estate owned, the real property value is adjusted to its current fair value. Any subsequent adjustments will be to the lower of cost or market.
|
|
NOTE 16.
|
FAIR VALUE OF FINANCIAL INSTRUMENTS
|
Disclosures regarding the fair value of financial instruments are required to include, in addition to the carrying value, the fair value of certain financial instruments, both assets and liabilities recorded on and off-balance sheet, for which it is practicable to estimate fair value. Accounting guidance defines financial instruments as cash, evidence of ownership of an entity, or a contract that conveys or imposes on an entity the contractual right or obligation to either receive or deliver cash or another financial instrument. The fair value of a financial instrument is discussed below. In cases where quoted market prices are not available, estimated fair values have been determined by the Bank using the best available data and estimation methodology suitable for each such category of financial instruments. For those loans and deposits with floating interest rates, it is presumed that estimated fair values generally approximate their recorded carrying value. The Bank's primary component of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact the Bank's fair value of all interest-earning assets and interest-bearing liabilities, other than those which are short-term in maturity.
The carrying amounts and estimated fair values of the Bank's financial instruments and estimation methodologies at
March 31
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
$ in thousands
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Quoted Prices in Active Markets for Identical Assets (Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
|
Significant Unobservable Inputs (Level 3)
|
Financial Assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
58,686
|
|
|
$
|
58,686
|
|
|
$
|
58,686
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Restricted cash
|
|
283
|
|
|
283
|
|
|
—
|
|
|
283
|
|
|
—
|
|
Available-for-sale securities
|
|
59,011
|
|
|
59,011
|
|
|
—
|
|
|
58,608
|
|
|
403
|
|
FHLB Stock
|
|
2,171
|
|
|
2,171
|
|
|
—
|
|
|
2,171
|
|
|
—
|
|
Held-to-maturity securities
|
|
13,435
|
|
|
13,497
|
|
|
—
|
|
|
13,497
|
|
|
—
|
|
Loans receivable
|
|
540,492
|
|
|
543,929
|
|
|
—
|
|
|
—
|
|
|
543,929
|
|
Loans held-for-sale
|
|
944
|
|
|
944
|
|
|
—
|
|
|
—
|
|
|
944
|
|
Accrued interest receivable
|
|
1,583
|
|
|
1,583
|
|
|
—
|
|
|
1,583
|
|
|
—
|
|
Mortgage servicing rights
|
|
192
|
|
|
192
|
|
|
—
|
|
|
—
|
|
|
192
|
|
Other assets - Interest-bearing deposits
|
|
985
|
|
|
985
|
|
|
—
|
|
|
985
|
|
|
—
|
|
Financial Liabilities:
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
579,176
|
|
|
$
|
548,902
|
|
|
$
|
313,430
|
|
|
$
|
235,472
|
|
|
$
|
—
|
|
Advances from FHLB of New York
|
|
30,000
|
|
|
29,994
|
|
|
—
|
|
|
29,994
|
|
|
—
|
|
Other borrowed money
|
|
19,403
|
|
|
18,896
|
|
|
—
|
|
|
18,896
|
|
|
—
|
|
Accrued interest payable
|
|
390
|
|
|
390
|
|
|
—
|
|
|
390
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
$ in thousands
|
|
Carrying
Amount
Restated
(1)
|
|
Estimated
Fair Value
Restated
(1)
|
|
Quoted Prices in Active Markets for Identical Assets (Level 1)
Restated
(1)
|
|
Significant Other Observable Inputs (Level 2)
Restated
(1)
|
|
Significant Unobservable Inputs (Level 3)
Restated
(1)
|
Financial Assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents - Restated
(1)
|
|
$
|
63,188
|
|
|
$
|
63,188
|
|
|
$
|
63,188
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Restricted cash
|
|
225
|
|
|
225
|
|
|
—
|
|
|
225
|
|
|
—
|
|
Available-for-sale securities
|
|
56,180
|
|
|
56,180
|
|
|
—
|
|
|
55,987
|
|
|
193
|
|
FHLB Stock
|
|
2,883
|
|
|
2,883
|
|
|
—
|
|
|
2,883
|
|
|
—
|
|
Securities held-to-maturity
|
|
15,311
|
|
|
15,653
|
|
|
—
|
|
|
15,653
|
|
|
—
|
|
Loans receivable - Restated
(1)
|
|
583,396
|
|
|
586,162
|
|
|
—
|
|
|
—
|
|
|
586,162
|
|
Loans held-for-sale - Restated
(1)
|
|
2,436
|
|
|
2,436
|
|
|
—
|
|
|
—
|
|
|
2,436
|
|
Accrued interest receivable - Restated
(1)
|
|
2,420
|
|
|
2,420
|
|
|
—
|
|
|
2,420
|
|
|
—
|
|
Mortgage servicing rights
|
|
201
|
|
|
201
|
|
|
—
|
|
|
—
|
|
|
201
|
|
Other assets - Interest-bearing deposits
|
|
983
|
|
|
983
|
|
|
—
|
|
|
983
|
|
|
—
|
|
Financial Liabilities:
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
606,741
|
|
|
$
|
585,394
|
|
|
$
|
329,398
|
|
|
$
|
255,996
|
|
|
$
|
—
|
|
Advances from FHLB of New York
|
|
50,000
|
|
|
50,141
|
|
|
—
|
|
|
50,141
|
|
|
—
|
|
Other borrowed money
|
|
18,403
|
|
|
18,734
|
|
|
—
|
|
|
18,734
|
|
|
—
|
|
Accrued interest payable - Restated
(1)
|
|
2,331
|
|
|
2,331
|
|
|
—
|
|
|
2,331
|
|
|
—
|
|
(1)
March 31, 2016 balances have been restated from previously reported results to correct for material and certain other errors from prior periods. Refer to Notes 1 and 19 for further detail.
Cash and Cash Equivalents
The carrying amounts for cash and cash equivalents approximate fair value and are classified as Level 1 because they mature in three months or less.
Restricted Cash
The carrying amounts for restricted cash approximates fair value and are classified as Level 2 because they represent short-term interest-bearing deposits.
Securities
The fair values for securities available-for-sale and securities held-to-maturity are based on quoted market or dealer prices, if available. If quoted market or dealer prices are not available, fair value is estimated using quoted market or dealer prices for similar securities. Available-for-sale securities are classified across Levels 2 and 3. Held-to-maturity securities are classified as Level 2.
FHLB Stock
Ownership in equity securities of the FHLB is restricted and there is no established market for resale. The carrying amount is at cost, and is classified as Level 2.
Loans Receivable
The fair value of loans receivable is estimated by discounting future cash flows, using current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities of such loans. The method used to estimate the fair value of loans is extremely sensitive to the assumptions and estimates used. While management has attempted to use assumptions and estimates that best reflect the Company's loan portfolio and current market conditions, a greater degree of objectivity is inherent in these values than in those determined in active markets. The loan valuations thus determined do not necessarily represent an “exit” price that would be achieved in an active market. Loans receivable are classified as Level 3.
Loans Held-for-Sale
Loans held-for-sale are carried at the lower of cost or market value and are classified as Level 3. The valuation methodology for loans held-for-sale are based upon amounts offered or other acceptable valuation methods and, in some instances, prior loan loss experience of Carver in connection with recent note sales.
Accrued Interest Receivable
The carrying amounts of accrued interest approximate fair value resulting in a Level 2 classification.
Mortgage Servicing Rights
The fair value of mortgage servicing rights is determined by discounting the present value of estimated future servicing cash flows using current market assumptions for prepayments, servicing costs and other factors and are classified as Level 3.
Interest-Bearing Deposits
The carrying amounts for interest-bearing deposits approximates fair value and are classified as Level 2 because they represent interest-bearing deposits with a maturity greater than one year.
Deposits
The fair value of demand, savings and club accounts is equal to the amount payable on demand at the reporting date. These deposits are classified as Level 1. The fair value of certificates of deposit is estimated using rates currently offered for deposits of similar remaining maturities resulting in a Level 2 classification. The fair value estimates do not include the benefit that results from the low-cost funding provided by deposit liabilities compared to the cost of borrowing funds in the market.
FHLB-NY Advances, Repos and Other Borrowed Money
The fair values of advances from the FHLB-NY, Repos and other borrowed money are estimated using the rates currently available to the Bank for debt with similar terms and remaining maturities and are classified as Level 2.
Accrued Interest Payable
The carrying amounts of accrued interest approximate fair value resulting in a Level 2 classification.
Commitments to Extend Credits, Commercial, and Standby Letters of Credit
The fair value of the commitments to extend credit was estimated to be immaterial as of
March 31, 2017
and
March 31, 2016
. The fair value of commitments to extend credit and standby letters of credit was evaluated using fees currently charged to enter into similar agreements, taking into account the risk characteristics of the borrower, and estimated to be insignificant as of the reporting date.
|
|
NOTE 17.
|
VARIABLE INTEREST ENTITIES
|
The Company's subsidiary, Carver Statutory Trust I, is not consolidated with Carver Bancorp, Inc. for financial reporting purposes. Carver Statutory Trust I was formed in 2003 for the purpose of issuing
$13 million
aggregate liquidation amount of floating rate Capital Securities due September 17, 2033 (“Capital Securities”) and
$0.4 million
of common securities (which are the only voting securities of Carver Statutory Trust I), which are
100%
owned by Carver Bancorp, Inc., and using the proceeds to acquire Junior Subordinated Debentures issued by Carver Bancorp, Inc. Carver Bancorp, Inc. has fully and unconditionally guaranteed the Capital Securities along with all obligations of Carver Statutory Trust I under the trust agreement relating to the Capital Securities.
The Bank's subsidiary, Carver Community Development Corporation (“CCDC”), was formed to facilitate its participation in local economic development and other community-based initiatives. Per the NMTC Award's Allocation Agreement between the CDFI Fund and CCDC, CCDC is permitted to form and sub-allocate credits to subsidiary Community Development Entities (“CDEs”) to facilitate investments in separate development projects.
The variable interest entities (“VIEs”) such as the CDEs and Carver Statutory Trust I are consolidated, as required, where Carver has controlling financial interest in these entities and is deemed to be the primary beneficiary. Carver is normally deemed to have a controlling financial interest and be the primary beneficiary if it has both of the following characteristics:
(a) the power to direct activities of a VIE that most significantly impact the entities economic performance; and
(b) the obligation to absorb losses of the entity that could benefit from the activities that could potentially be significant to the VIE.
As none of the Bank's VIEs meet the above criteria, there are no consolidated VIEs at
March 31, 2017
.
The Bank's VIEs, in which the Company holds significant variable interests or has continuing involvement through servicing a majority of assets in a VIE at
March 31, 2017
are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involvement with SPE (000's)
|
Funded Exposure
|
Unfunded Exposure
|
Total
|
|
Recognized Gain (Loss) (000's)
|
Total Rights transferred
|
Significant unconsolidated VIE assets
|
Total Involvement with SPE asset
|
Debt Investments
|
Equity Investments
|
Funding Commitments
|
Maximum exposure to loss
|
|
Carver Statutory Trust 1
|
$
|
—
|
|
$
|
—
|
|
$
|
13,400
|
|
$
|
13,400
|
|
$
|
13,000
|
|
$
|
400
|
|
$
|
—
|
|
$
|
—
|
|
$
|
13,400
|
|
CDE 13
|
500
|
|
10,500
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
4,095
|
|
4,095
|
|
CDE 14
|
400
|
|
10,000
|
|
10,034
|
|
10,034
|
|
—
|
|
1
|
|
—
|
|
3,900
|
|
3,901
|
|
CDE 15, CDE 16, CDE 17
|
900
|
|
20,500
|
|
20,613
|
|
20,613
|
|
—
|
|
2
|
|
—
|
|
7,995
|
|
7,997
|
|
CDE 18
|
600
|
|
13,254
|
|
13,282
|
|
13,282
|
|
—
|
|
1
|
|
—
|
|
5,169
|
|
5,170
|
|
CDE 19
|
500
|
|
10,746
|
|
10,980
|
|
10,980
|
|
—
|
|
1
|
|
—
|
|
4,191
|
|
4,192
|
|
CDE 20
|
625
|
|
12,500
|
|
12,040
|
|
12,040
|
|
—
|
|
1
|
|
—
|
|
4,875
|
|
4,876
|
|
CDE 21
|
625
|
|
12,500
|
|
12,092
|
|
12,092
|
|
—
|
|
1
|
|
—
|
|
4,875
|
|
4,876
|
|
Total
|
$
|
4,150
|
|
$
|
90,000
|
|
$
|
92,441
|
|
$
|
92,441
|
|
$
|
13,000
|
|
$
|
407
|
|
$
|
—
|
|
$
|
35,100
|
|
$
|
48,507
|
|
In June 2006, CCDC received a NMTC award of
$59 million
. In fiscal 2008, CCDC transferred
$19 million
of rights to an investor in a NMTC project (entity CDE 10). The NMTC compliance period was completed and the entity was dissolved in May 2015. With respect to the remaining
$40 million
of the original NMTC award, CCDC established various special purpose entities (CDEs 1-9,11-12) through which its investments in NMTC eligible activities are conducted. As the Bank is exposed to all of the expected losses and residual returns from these investments under ASC Topic 810, the Bank has determined it has a controlling financial interest and is the primary beneficiary of these entities. During December 2010, Carver divested its interest in the remaining
$7.8 million
NMTC tax credits that it would have received through the period ending March 31, 2014, by transferring its equity ownership in the CDEs and the associated rights to an investor in exchange for
$6.7 million
in cash. In March 2015, the investor exercised its option to sell the equity interest in the CDEs back to Carver. The Bank has a contingent obligation to reimburse the investor for any loss or shortfall incurred as a result of the NMTC projects not being in compliance with certain regulations that would void the investor's ability to otherwise utilize tax credits stemming from the award. The NMTC compliance period was completed and CDEs 2-9, 11 and 12 were dissolved in 2016.
In May 2009, CCDC received a second NMTC award of
$65 million
. During the period from December 2009 to December 2010, CCDC transferred rights to investors in NMTC projects (entities CDEs 13-19). In August 2011, CCDC received a third NMTC award of
$25 million
. In January 2012 and September 2012, CCDC transferred rights to investors in NMTC projects (CDEs 20 and 21). CCDC has a contingent obligation to reimburse the investors for any losses or shortfalls incurred as a result of the NMTC projects not being in compliance with certain regulations that would void the investors' ability to otherwise utilize tax credits stemming from the award.
CCDC established various special purpose entities (CDEs 22-25) through which its investments in NMTC eligible activities will be conducted. As of
March 31, 2017
, there have been no activities in these entities.
|
|
NOTE 18.
|
OTHER NON-INTEREST INCOME AND EXPENSE
|
The following table sets forth other non-interest income and expense totals exceeding 1% of the aggregate of total interest income and non-interest income for any of the years presented:
|
|
|
|
|
|
|
|
|
|
Years Ended March 31,
|
$ in thousands
|
2017
|
|
2016
Restated
(1)
|
Other non-interest income:
|
|
|
|
Compliance fee
|
$
|
397
|
|
|
$
|
348
|
|
Other
|
384
|
|
|
378
|
|
Total non-interest income
|
$
|
781
|
|
|
$
|
726
|
|
|
|
|
|
Other non-interest expense:
|
|
|
|
Advertising
|
465
|
|
|
233
|
|
Legal expense
|
860
|
|
|
271
|
|
Insurance and surety
|
675
|
|
|
896
|
|
Audit expense
|
1,333
|
|
|
952
|
|
Outsourced service
|
417
|
|
|
383
|
|
Data Lines / Internet
|
311
|
|
|
350
|
|
Collection expense
|
216
|
|
|
405
|
|
Retail expenses
|
729
|
|
|
624
|
|
Chargeoffs and other losses
|
894
|
|
|
1,465
|
|
Director's fees
|
296
|
|
|
337
|
|
Other
|
2,703
|
|
|
2,828
|
|
Total non-interest expense
|
$
|
8,899
|
|
|
$
|
8,744
|
|
(1)
March 31, 2016 balances have been restated from previously reported results to correct for material and certain other errors from prior periods. Refer to Notes 1 and 19 for further detail.
NOTE 19.
QUARTERLY FINANCIAL DATA (UNAUDITED)
The following tables set forth certain unaudited financial data for our quarterly operations in fiscal
2017
and
2016
. The following information has been prepared on the same basis as the annual information presented elsewhere in this report and, in the opinion of management, includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the information for the quarterly periods presented. The operating results for any quarter are not necessarily indicative of results for any future period.
Restatement
The Company has restated its consolidated financial statements for fiscal year 2016 contained in the Annual Reports on Form 10-K for the years ended March 31, 2017 and 2016, and its unaudited interim consolidated financial statements contained in the Company's Quarterly Reports on Form 10-Q for each of the quarters ended June 30, 2016 and 2015, September 30, 2016 and 2015 and December 31, 2016 and 2015. The Company has not amended its previously filed Annual Reports on Form 10-K or Quarterly Reports on Form 10-Q for the periods affected by the Restatement. The Restatement corrects a material error related to approximately
$1.7 million
of reconciling items that were identified as uncollectable and written off primarily during the fourth quarter of fiscal year 2017 as part of the focused review of reconciliations and internal controls. Management's evaluation of the items written off concluded that approximately
$1.0 million
of these writeoffs should have been accounted for in prior periods;
$666 thousand
of the amount written off should have been accounted for in fiscal year 2016 and the
$361 thousand
remainder should have been accounted for in years prior to fiscal year 2016. The
$666 thousand
of writeoffs attributable to fiscal year 2016 have been reflected in the Consolidated Statement of Operations for fiscal year 2016 as an increase to Other Non-Interest Expense.
The Company also identified and corrected material errors related to the accounting for loans on the Company's servicing platforms. The accounting adjustments are related to system maintenance items and payment applications that were not timely
processed by the Bank on to its core provider system. Management's evaluation of these items concluded that approximately
$1.2 million
should have been accounted for in prior periods:
$865 thousand
should have been accounted for in fiscal year 2016 and the
$285 thousand
remainder should have been accounted for in years prior to fiscal year 2016. The
$865 thousand
of adjustments attributable to fiscal year 2016 have been reflected in the Consolidated Statement of Operations for the fiscal year 2016 as a reduction in interest income on loans.
In addition to the errors described above, adjustments have been made related to other individually immaterial errors including certain corrections that had been previously identified but not recorded because they were not material to our consolidated financial statements. These corrections included adjustments to other liabilities, interest expense and certain reclassification entries between interest income and non-interest income. The impact of these corrections on the fiscal 2016 Statement of Operations was to increase interest on loans by
$521 thousand
and interest expense on advances and other borrowed money by
$66 thousand
and decrease loan fees and service charges by
$521 thousand
.
The quarterly adjustments in fiscal 2017 represent a reclassification of
$78 thousand
from non-interest income to loan interest income and the effects in the fiscal year of the restatement adjustments noted above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
September 30, 2016
|
|
December 31, 2016
|
|
March 31, 2017
|
$ in thousands, except per share data
|
Previously Reported
|
|
Adjustments
|
|
Restated
|
|
Previously Reported
|
|
Adjustments
|
|
Restated
|
|
Previously Reported
|
|
Adjustments
|
|
Restated
|
|
|
Fiscal 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
$
|
6,906
|
|
|
14
|
|
|
$
|
6,920
|
|
|
$
|
6,284
|
|
|
42
|
|
|
$
|
6,326
|
|
|
$
|
6,104
|
|
|
43
|
|
|
$
|
6,147
|
|
|
$
|
6,733
|
|
Interest expense
|
1,241
|
|
|
21
|
|
|
1,262
|
|
|
1,401
|
|
|
(178
|
)
|
|
1,223
|
|
|
1,282
|
|
|
—
|
|
|
1,282
|
|
|
1,151
|
|
Net interest income
|
5,665
|
|
|
(7
|
)
|
|
5,658
|
|
|
4,883
|
|
|
220
|
|
|
5,103
|
|
|
4,822
|
|
|
43
|
|
|
4,865
|
|
|
5,582
|
|
(Recovery of) provision for loan losses
|
(204
|
)
|
|
—
|
|
|
(204
|
)
|
|
(160
|
)
|
|
—
|
|
|
(160
|
)
|
|
(128
|
)
|
|
—
|
|
|
(128
|
)
|
|
521
|
|
Non-interest income
|
1,163
|
|
|
(23
|
)
|
|
1,140
|
|
|
1,278
|
|
|
(21
|
)
|
|
1,257
|
|
|
1,105
|
|
|
(34
|
)
|
|
1,071
|
|
|
1,150
|
|
Non-interest expense
|
6,587
|
|
|
53
|
|
|
6,640
|
|
|
6,573
|
|
|
198
|
|
|
6,771
|
|
|
7,211
|
|
|
(254
|
)
|
|
6,957
|
|
|
8,163
|
|
Income tax expense
|
37
|
|
|
—
|
|
|
37
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
82
|
|
Net income (loss)
|
$
|
408
|
|
|
$
|
(83
|
)
|
|
$
|
325
|
|
|
$
|
(252
|
)
|
|
$
|
1
|
|
|
$
|
(251
|
)
|
|
$
|
(1,156
|
)
|
|
$
|
263
|
|
|
$
|
(893
|
)
|
|
$
|
(2,034
|
)
|
Earnings (loss) per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.04
|
|
|
$
|
—
|
|
|
0.04
|
|
|
$
|
(0.07
|
)
|
|
$
|
—
|
|
|
(0.07
|
)
|
|
$
|
(0.31
|
)
|
|
$
|
0.07
|
|
|
(0.24
|
)
|
|
$
|
(0.55
|
)
|
Diluted
|
$
|
0.04
|
|
|
$
|
—
|
|
|
0.04
|
|
|
$
|
(0.07
|
)
|
|
$
|
—
|
|
|
(0.07
|
)
|
|
$
|
(0.31
|
)
|
|
$
|
0.07
|
|
|
(0.24
|
)
|
|
$
|
(0.55
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2015
|
|
September 30, 2015
|
|
December 31, 2015
|
|
March 31, 2016
|
$ in thousands, except per share data
|
Previously Reported
|
|
Adjustments
|
|
Restated
|
|
Previously Reported
|
|
Adjustments
|
|
Restated
|
|
Previously Reported
|
|
Adjustments
|
|
Restated
|
|
Previously Reported
|
|
Adjustments
|
|
Restated
|
Fiscal 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
$
|
6,208
|
|
|
(181
|
)
|
|
$
|
6,027
|
|
|
$
|
6,730
|
|
|
(145
|
)
|
|
$
|
6,585
|
|
|
$
|
7,009
|
|
|
(186
|
)
|
|
$
|
6,823
|
|
|
$
|
6,961
|
|
|
168
|
|
|
$
|
7,129
|
|
Interest expense
|
1,058
|
|
|
14
|
|
|
1,072
|
|
|
1,093
|
|
|
16
|
|
|
1,109
|
|
|
1,171
|
|
|
17
|
|
|
1,188
|
|
|
1,217
|
|
|
19
|
|
|
1,236
|
|
Net interest income
|
5,150
|
|
|
(195
|
)
|
|
4,955
|
|
|
5,637
|
|
|
(161
|
)
|
|
5,476
|
|
|
5,838
|
|
|
(203
|
)
|
|
5,635
|
|
|
5,744
|
|
|
149
|
|
|
5,893
|
|
Provision for loan losses
|
34
|
|
|
—
|
|
|
34
|
|
|
643
|
|
|
—
|
|
|
643
|
|
|
728
|
|
|
—
|
|
|
728
|
|
|
90
|
|
|
—
|
|
|
90
|
|
Non-interest income
|
1,193
|
|
|
(34
|
)
|
|
1,159
|
|
|
1,131
|
|
|
(83
|
)
|
|
1,048
|
|
|
2,741
|
|
|
(24
|
)
|
|
2,717
|
|
|
1,470
|
|
|
(380
|
)
|
|
1,090
|
|
Non-interest expense
|
5,851
|
|
|
87
|
|
|
5,938
|
|
|
6,202
|
|
|
163
|
|
|
6,365
|
|
|
7,214
|
|
|
187
|
|
|
7,401
|
|
|
8,184
|
|
|
229
|
|
|
8,413
|
|
Income tax expense (benefit)
|
13
|
|
|
—
|
|
|
13
|
|
|
79
|
|
|
—
|
|
|
79
|
|
|
67
|
|
|
—
|
|
|
67
|
|
|
(31
|
)
|
|
—
|
|
|
(31
|
)
|
Net income (loss)
|
$
|
445
|
|
|
$
|
(316
|
)
|
|
$
|
129
|
|
|
$
|
(156
|
)
|
|
$
|
(407
|
)
|
|
$
|
(563
|
)
|
|
$
|
570
|
|
|
$
|
(414
|
)
|
|
$
|
156
|
|
|
$
|
(1,029
|
)
|
|
$
|
(460
|
)
|
|
$
|
(1,489
|
)
|
Earnings (loss) per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.05
|
|
|
$
|
(0.04
|
)
|
|
$
|
0.01
|
|
|
$
|
(0.04
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
(0.15
|
)
|
|
$
|
0.06
|
|
|
$
|
(0.04
|
)
|
|
$
|
0.02
|
|
|
$
|
(0.28
|
)
|
|
$
|
(0.12
|
)
|
|
(0.40
|
)
|
Diluted
|
$
|
0.05
|
|
|
$
|
(0.04
|
)
|
|
$
|
0.01
|
|
|
$
|
(0.04
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
(0.15
|
)
|
|
$
|
0.06
|
|
|
$
|
(0.04
|
)
|
|
$
|
0.02
|
|
|
$
|
(0.28
|
)
|
|
$
|
(0.12
|
)
|
|
(0.40
|
)
|
|
|
NOTE 20.
|
CARVER BANCORP, INC. - PARENT COMPANY ONLY
|
CONDENSED STATEMENTS OF FINANCIAL CONDITION
|
|
|
|
|
|
|
|
|
|
As of March 31,
|
$ in thousands
|
2017
|
|
2016
Restated
(1)
|
Assets
|
|
|
|
Cash on deposit with subsidiaries
|
$
|
492
|
|
|
$
|
2,995
|
|
Investment in subsidiaries
(1)
|
60,921
|
|
|
64,597
|
|
Other assets
|
15
|
|
|
69
|
|
Total assets
(1)
|
$
|
61,428
|
|
|
$
|
67,661
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
Borrowings
|
$
|
13,403
|
|
|
$
|
13,403
|
|
Accounts payable to subsidiaries
|
228
|
|
|
51
|
|
Other liabilities
(1)
|
399
|
|
|
2,327
|
|
Total liabilities
(1)
|
$
|
14,030
|
|
|
$
|
15,781
|
|
|
|
|
|
Stockholders’ equity
(1)
|
$
|
47,398
|
|
|
$
|
51,880
|
|
Total liabilities and stockholders’ equity
(1)
|
$
|
61,428
|
|
|
$
|
67,661
|
|
(1)
March 31, 2016 balances have been restated from previously reported results to correct for material and certain other errors from prior periods. Investment in subsidiaries, total assets and total liabilities and stockholders' equity were each reduced by
$2.2 million
, other liabilities and total liabilities increased by
$157 thousand
and stockholders' equity was reduced by
$2.3 million
. Refer to Notes 1 and 19 for further detail.
CONDENSED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
Years Ended March 31,
|
$ in thousands
|
2017
|
|
2016
Restated
(1)
|
Income
|
|
|
|
Equity in net loss from subsidiaries
(1)
|
$
|
(2,048
|
)
|
|
$
|
(767
|
)
|
Other income
|
26
|
|
|
23
|
|
Total income
(1)
|
(2,022
|
)
|
|
(744
|
)
|
Expenses
|
|
|
|
Interest expense on borrowings
(1)
|
568
|
|
|
531
|
|
Salaries and employee benefits
|
—
|
|
|
237
|
|
Shareholder expense
|
82
|
|
|
82
|
|
Other
|
181
|
|
|
173
|
|
Total expense
(1)
|
831
|
|
|
1,023
|
|
Net loss
(1)
|
$
|
(2,853
|
)
|
|
$
|
(1,767
|
)
|
Comprehensive loss
(1)
|
$
|
(4,486
|
)
|
|
$
|
(1,029
|
)
|
(1)
March 31, 2016 balances have been restated from previously reported results to correct for material and certain other errors from prior periods. Equity in net loss from subsidiaries was increased and total income was reduced by
$1.5 million
, interest expense on borrowings and total expense were increased by
$66 thousand
, and net loss and comprehensive loss were increased
$1.6 million
. Refer to Notes 1 and 19 for further detail.
CONDENSED STATEMENTS OF CASH FLOW
|
|
|
|
|
|
|
|
|
|
Years Ended March 31,
|
$ in thousands
|
2017
|
|
2016
Restated
(1)
|
Cash Flows From Operating Activities
|
|
|
|
Net loss
(1)
|
$
|
(2,853
|
)
|
|
$
|
(1,767
|
)
|
Adjustments to reconcile net loss to net cash from operating activities:
|
|
|
|
Equity in net loss of subsidiaries
(1)
|
2,048
|
|
|
767
|
|
Increase in account receivable from subsidiaries
|
—
|
|
|
(1
|
)
|
Decrease (increase) in other assets
|
54
|
|
|
(14
|
)
|
Increase (decrease) in accounts payable to subsidiaries
|
176
|
|
|
(1,199
|
)
|
(Decrease) increase in other liabilities
(1)
|
(1,928
|
)
|
|
530
|
|
Net cash used in operating activities
|
(2,503
|
)
|
|
(1,684
|
)
|
|
|
|
|
Net decrease in cash
|
(2,503
|
)
|
|
(1,684
|
)
|
Cash and cash equivalents – beginning
|
2,995
|
|
|
4,679
|
|
Cash and cash equivalents – ending
|
$
|
492
|
|
|
$
|
2,995
|
|
(1)
March 31, 2016 balances have been restated from previously reported results to correct for material and certain other errors from prior periods. Net loss was increased by
$1.6 million
, equity in net loss of subsidiaries was increased by
$1.5 million
and increase in other liabilities was increased by
$66 thousand
. Refer to Notes 1 and 19 for further detail.