What changed in this filing

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Item 1. Business

2021-06-29 compared with 2020-08-06 · 121 added, 107 removed, 769 unchanged (23% of the section changed)

58 unchanged sentences

as a wholly-owned subsidiary to hold real estate acquired through foreclosure pending eventual disposition.

At March 31, 2020, this subsidiary had $2.5 million in total assets.

At March 31, 2021, this subsidiary had $267 thousand in total assets.

During the fourth quarter of the fiscal year ended March 31, 2003, Carver Federal formed Carver Asset Corporation (“CAC”), a wholly-owned subsidiary which qualifies as a real estate investment trust (“REIT”) pursuant to the Internal Revenue Code of 1986, as amended.

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The Trust is not consolidated with the Company for financial reporting purposes in accordance with the

Financial Accounting Standards Board's Accounting Standards Codification (“ASC”) regarding the consolidation of variable interest entities (formerly FIN 46(R)).

Financial Accounting Standards Board's Accounting Standards Codification (“ASC”) 810 regarding the consolidation of variable interest entities.

During the second quarter of fiscal year 2017, the Company applied for and was granted regulatory approval to settle all outstanding debenture interest payments on the Carver Statutory Trust I capital securities through September 2016.

Such payments were made in September 2016.

Debenture interest payments have been deferred beginning with the December 2016 payment, which is permissible under the terms of the Indenture for up to twenty consecutive quarters, as the Company is prohibited from making payments without prior approval from the Federal Reserve Bank.

The total amount of deferred interest was $2.5 million at March 31, 2020.

Debenture interest payments had been deferred beginning with the December 2016 payment, which was permissible under the terms of the Indenture for up to twenty consecutive quarters, as the Company was prohibited from making payments without prior approval from the Federal Reserve Bank.

The total amount of deferred interest was $3.1 million at March 31, 2021, which was subsequently paid on June 16, 2021.

The Company 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.

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There are no assurances that dividend payments to the Company will resume.

At fiscal year end 2020, the Company had 107 employees.

None of the Company's employees are a member of a collective bargaining agreement.

Human Capital Resources

At March 31, 2021, the Company had 104 employees, nearly all of whom are full-time and of which approximately 62.5% were female and 81.7% were minorities.

The majority of our employees are based in New York.

Our goal is to attract, develop, retain and plan for succession of key talent and executives to achieve strategic objectives.

We are continually investing in our workforce to further emphasize diversity and inclusion and to foster our employees' growth and career development.

We offer a comprehensive benefits program to our employees and design our compensation programs to attract, retain and motivate employees, as well as to align with Company performance.

None of the Company's employees are a member of a collective bargaining agreement and we consider our relations with our employees to be good.

In response to the COVID-19 pandemic, we implemented significant operating environmental changes that we determined were in the best interest of our employees, as well as the communities in which we operate, and which comply with health and safety standards as required by federal, state and local government agencies, taking into consideration guidelines of the Centers for Disease Control and Prevention and other public health authorities.

This includes having the vast majority of our employees work from home, while implementing additional safety measures for employees continuing critical on-site work.

The Company team members actively share their talents in their communities through volunteer activities in education, economic development, human and health services, and Community Reinvestment.

Additionally, the Company's management team works with leaders of community organizations, community development organizations, and consumer financial educations organizations to identify the credit, investment, and service needs of its community.

Available Information

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Lending Activities

Carver Federal's loan portfolio consists primarily of mortgage loans originated by the Bank's lending teams and secured by commercial real estate including multifamily property and construction loans.

Carver Federal's loan portfolio consists primarily of mortgage and business loans originated by the Bank's lending teams and secured by commercial real estate including multifamily, mixed-use and owner-occupied properties.

Substantially all of the Bank's mortgage loans are secured by properties located within the Bank's market area.

From time to time, the Bank may participate or purchase loans that comply with the Bank's underwriting standards from other financial institutions or in contiguous market geographies to achieve loan growth objectives and improve geographic diversity.

In recent years, Carver Federal had focused on the origination of commercial real estate loans, primarily multifamily and mixed-use commercial loans.

In recent years, Carver Federal had focused on the origination of commercial real estate loans extended primarily to multifamily, as well as owner-occupied and mixed-use commercial loans.

These loans generally have higher yields and shorter maturities than one-to-four family residential properties, and include prepayment penalties that the Bank collects if the loans pay in full prior to the contractual maturity.

The Bank's increased emphasis on portfolio management and monitoring of the commercial real estate and multifamily residential mortgage loans was required given the increase of the overall level of credit risk inherent in this market segment.

Due to the overall improvement in the loan portfolio, the Bank was able to recover provisions for loan losses in years 2013 to 2015.

However, the greater risk associated with commercial real estate, particularly multifamily residential loans, as well as the growth in this type of loan, had required the Bank to increase its provisions for loan losses in fiscal years 2016 to 2018.

The Bank's increased emphasis remains on effective portfolio management and monitoring of the commercial real estate and multifamily residential mortgage loans given the increase of the overall level of credit risk inherent in this market segment.

The greater risk associated with commercial real estate, particularly multifamily residential loans, as well as the growth in this type of loan, had required the Bank to increase its provisions for loan losses in fiscal years 2016 to 2018.

In fiscal years 2019 and 2020, the Bank's recoveries on previously charged off loans exceeded its chargeoffs to such an extent that additional provisions were not necessary.

The provision recorded in fiscal year 2020 was primarily related to

overdraft deposit charge-offs.

The provision recorded in fiscal year 2020 was primarily related to overdraft deposit charge-offs.

During fiscal year 2021, we increased our qualitative factors due to the ongoing pandemic.

These increases in reserves were offset by decreases in our quantitative reserve analysis as the rolling 20 quarter historical loss look back period has improved for most of our loan categories.

The Bank could be required to maintain an allowance for loan losses as a percentage of total loans in excess of the allowance currently maintained.

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Loan Portfolio Composition .

Total loans receivable decreased $0.6 million, or 0.1%, to $425.2 million at March 31, 2020, compared to $425.8 million at March 31, 2019.

Total loans receivable increased $55.3 million, or 13.0%, to $480.5 million at March 31, 2021, compared to $425.2 million at March 31, 2020.

Carver Federal's total loans receivable as a percentage of total assets decreased to 71.0% at March 31, 2021, compared to 73.5% at March 31, 2020.

The following is a summary of loans receivable, net of allowance for loan losses, as of:

March 31, 2020 March 31, 2019 March 31, 2018 March 31, 2017 March 31, 2016

March 31, 2021

March 31, 2020

March 31, 2019

March 31, 2018

March 31, 2017

$ in thousands Amount % Amount % Amount % Amount % Amount %

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Carver Federal purchases first mortgage loans secured by one-to-four family properties that serve as the primary residence of the owner.

The Bank purchased a pool of one-to-four family residential loans totaling $15.2 million during fiscal year 2020.

The Bank purchased $2.8 million and $15.2 million of one-to-four family residential loans during fiscal years 2021 and 2020, respectively.

The Bank did not purchase any one-to-four family loans during fiscal years 2019 and 2018.

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The Bank previously originated or purchased a limited amount of subprime loans (which are defined by the Bank as those loans where the borrowers have FICO scores of 660 or less at origination).

At March 31, 2020, the Bank had $4.6 million

in subprime loans, or 1.1% of its total loan portfolio, of which $1.2 million are non-performing loans.

At March 31, 2021, the Bank had $3.7 million in subprime loans, or 0.8% of its total loan portfolio, of which $1.1 million are non-performing loans.

No subprime loans were purchased during fiscal 2021.

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Traditionally, Carver Federal originates and purchases multifamily loans.

The Bank purchased $6.9 million and $7.0 million of multifamily loans during fiscal years 2021 and 2020, respectively.

Multifamily property lending entails additional risks compared to one-to-four family residential lending.

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Mixed-use loans are secured by properties that are intended for both residential and business use and are classified as commercial real estate ("CRE").

Although Carver Federal has experienced favorable loss history associated with commercial real estate loans, these loans may entail additional risks compared with one-to-four family residential and multifamily lending.

The Bank purchased $6.3 million and $12.6 million of commercial real estate loans during fiscal years 2021 and 2020, respectively.

Although Carver Federal has experienced favorable loss history associated with commercial real estate loans, these loans may

entail additional risks compared with one-to-four family residential and multifamily lending.

For example, such loans typically involve larger loan balances to single borrowers or groups of related borrowers and the payment experience on such loans typically is dependent on the successful operation of the commercial property.

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At March 31, 2021, loans to churches totaled $19.5 million, or 4.1% of the Bank's gross loan portfolio.

These loans generally

have five-, seven-, or ten-year terms with 15-, 20- or 25-year amortization periods, a balloon payment due at the end of the term and generally have no greater than a 70% LTV ratio at origination.

These loans generally have five-, seven-, or ten-year terms with 15-, 20- or 25-year amortization periods, a balloon payment due at the end of the term and generally have no greater than a 70% LTV ratio at origination.

The Bank has also provided construction financing for churches and generally provides permanent financing upon completion of construction.

There are currently six church loans in the Bank's loan portfolio.

There are currently 22 church loans in the Bank's loan portfolio.

Loans secured by real estate owned by faith-based organizations generally are larger and involve greater risks than one-to-four family residential mortgage loans.

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Business Loans .

Carver Federal's small business (Commercial and Industrial, or "C&I") lending portfolio decreased $11.0 million to $85.4 million, comprising 20.1% of the Bank's gross loan portfolio in fiscal 2020.

Carver Federal's small business (Commercial and Industrial, or "C&I") lending portfolio increased $63.3 million to $148.7 million, comprising 30.9% of the Bank's gross loan portfolio in fiscal 2021.

This includes $36.0 million of PPP loans at March 31, 2021.

The Bank purchased $10.7 million of business loans during fiscal year 2021.

In a strategic attempt to diversify the Bank's loan portfolio, Carver Federal demonstrated an emphasis on C&I lending, placing particular focus on organic loan growth through the financing of local entrepreneurs beginning in fiscal year 2018.

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Collection of a delinquent loan is dependent on the borrower's continuing financial stability and is more likely to be adversely affected by changes in employment, marital status, health and other personal financial factors.

Further, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered.

Further, the application of

various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered.

These loans may also give rise to claims and defenses by a borrower against Carver Federal, including claims and defenses that the borrower has against the seller of the underlying collateral.

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Loan originations were $114.5 million in fiscal 2021 compared to $33.5 million in fiscal 2020.

There were $34.8 million loan purchases during fiscal 2020 and no purchases in fiscal 2019.

There were $26.8 million loan purchases during fiscal 2021 and $34.8 million purchases in fiscal 2020.

The following table sets forth certain information with respect to Carver Federal's loan originations and advances, purchases and sales for the fiscal years ended March 31:

2020 2019 2018

$ in thousands Amount Percent Amount Percent Amount Percent

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(1) Comprised of personal loans.

(2) Comprised of $15.2 million one-to-four family residential, $12.6 million commercial real estate and $7.0 million multifamily loans.

(3) Comprised of primarily multifamily and one-to-four family loans in 2020 and 2019, and student loans in 2018.

(2) Comprised of $10.7 million business, $6.9 million multifamily, $6.3 million commercial real estate and $2.8 million one-to-four family residential loans.

(3) Comprised of primarily multifamily and one-to-four family loans.

Loans purchased by the Bank entail certain risks not necessarily associated with loans the Bank originates.

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However, the Bank may purchase loans secured by property outside its market area to meet its financial objectives.

The market areas in which the properties that secure the purchased loans are located may differ from Carver Federal's market area and may be subject to economic and real estate market conditions that may significantly differ from those experienced in Carver Federal's

There can be no assurance that economic conditions in these out-of-state markets will not deteriorate in the future, resulting in increased loan delinquencies and loan losses among the loans secured by property in these areas.

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Scheduled contractual principal repayments of loans do not necessarily reflect the actual lives of such assets.

The average life of long-term loans is substantially less than their contractual terms due to prepayments.

The average life of long-term loans is substantially less than their

contractual terms due to prepayments.

In addition, due-on-sale clauses in mortgage loans generally give Carver Federal the right to declare a conventional loan due and payable in the event, among other things, that a borrower sells the real property subject to the mortgage and the loan is not repaid.

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For one-to-four family loans, a borrowers' ability to pay typically is dependent primarily on employment and other sources of income.

For owner occupied non-residential real estate, a borrower's ability to pay typically is dependent

primarily on the success of the borrower's business.

For owner occupied non-residential real estate, a borrower's ability to pay typically is dependent primarily on the success of the borrower's business.

For all of the Bank's loans, a borrower's ability to pay is also impacted by general economic and other factors, such as unanticipated expenditures or changes in the financial markets.

Collateral values, particularly real estate values, are also impacted by a variety of factors, including general economic conditions, demographics, maintenance and collection or foreclosure delays.

The COVID-19 pandemic has placed additional strains on the economy and collateral values of real estate.

The COVID-19 pandemic has placed additional strains on the economy.

The Company has made provisions in its allowance for loans and lease reserves to mitigate any future charge-offs that may be needed.

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(3) Troubled debt restructured loans performing in accordance with their modified terms for less than six months and those not performing in accordance with their modified terms are considered nonaccrual and are included in the nonaccrual category in the table above.

TDR loans included in the nonaccrual category above totaled $2.2 million at 2020, $3.2 million at 2019, $1.9 million at 2018, $2.5 million at 2017, and $2.2 million at 2016.

TDR loans included in the nonaccrual category above totaled $1.8 million at 2021, $2.2 million at 2020, $3.2 million in 2019, $1.9 million at 2018, and $2.5 million at 2017.

TDR loans that have performed in accordance with their modified terms for a period of at least six months are generally considered performing loans and are not presented in the table above.

Performing TDR loans were $5.8 million at 2021, $1.7 million at 2020, $2.2 million at 2019, $3.8 million at 2018, and $3.9 million at 2017.

At March 31, 2020, total non-performing assets decreased by $3.8 million, or 35.5%, to $6.9 million, compared to $10.7 million at March 31, 2019, as a result of a $3.5 million decrease in nonaccrual loans and a $0.3 million decrease in real estate owned, year over year.

Nonaccrual loans at March 31, 2020 consisted of twelve one-to-four family loans, ten small

business and SBA loans, two consumer loans, and one multifamily loan.

The decrease in delinquent loans from the prior year is primarily due to a decrease in impaired one-four family, multifamily and commercial real estate loans.

At March 31, 2021, total non-performing assets increased by $0.4 million, or 5.8%, to $7.3 million, compared to $6.9 million at March 31, 2020, as a result of a $0.4 million increase in nonaccrual loans, year over year.

Nonaccrual loans at March 31, 2021 consisted of twelve one-to-four family loans, one commercial real estate, one multifamily, eight small business and SBA loans, and six consumer loans.

Management believes that there may be losses associated with certain delinquent loans in the future, but also notes that the amount of losses may be reduced by the value of properties securing these delinquent loans and the Bank's loan loss reserves.

Other non-performing assets at year-end 2020 includes real estate owned assets consisting of two properties foreclosed upon.

Other non-performing assets at year-end 2021 includes real estate owned assets consisting of one foreclosed residential property.

At March 31, 2021, Carver had 8 loans secured by one-to-four family residential real estate properties in the process of foreclosure with a total outstanding balance of $2.5 million.

Although we believe that substantially all risk elements at March 31, 2020 have been disclosed, it is possible that for a variety of reasons, including economic conditions and the conditions related to COVID-19, certain borrowers may be unable to comply with the contractual repayment terms on certain real estate and commercial loans.

Although we believe that substantially all risk elements at March 31, 2021 have been disclosed, other factors, including economic conditions and the conditions related to COVID-19, may cause borrowers to be unable to comply with the contractual repayment terms on certain real estate and commercial loans.

For additional information about certain factors that may affect the future performance of the Company's loan portfolio, please see "Item 1A - Risk Factors" and "Forward Looking Statements."

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Subsequent to taking possession of the property, management periodically evaluates the property and an allowance is established if the estimated fair value of the property, less estimated costs to sell, declines.

If, upon ultimate disposition of the property, net sales proceeds exceed the net carrying value of the property, a gain on sale of real estate is recorded, providing the Bank did not provide financing for the sale.

upon ultimate disposition of the property, net sales proceeds exceed the net carrying value of the property, a gain on sale of real estate is recorded, providing the Bank did not provide financing for the sale.

The following table sets forth an analysis of Carver Federal's allowance for loan losses at and for the years ended March 31:

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The following table allocates the allowance for loan losses by asset category at March 31:

2020 2019 2018 2017 2016

$ in thousands Amount % of

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trading, held-to-maturity, and available-for-sale.

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.

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.

Debt securities for which the Bank has the positive intent and ability to hold to maturity are classified as held-to-maturity and reported at amortized cost.

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The following table sets forth the amortized cost, fair value and weighted average yields of the Bank's investment portfolio at March 31, 2021, categorized by remaining period to contractual maturity:

Due < 1 Year Due 1 - 5 Years Due 5 - 10 Years Due after 10 Years

$ in thousands Amortized Cost Fair Value Weighted Average Yield Amortized Cost Fair Value Weighted Average Yield Amortized Cost Fair Value Weighted Average Yield Amortized Cost Fair Value Weighted Average Yield

Due 1 - 5 Years Due 5 - 10 Years Due after 10 Years

$ in thousands Amortized Cost Fair Value Weighted Average Yield Amortized Cost Fair Value Weighted Average Yield Amortized Cost Fair Value Weighted Average Yield

Available-for-Sale:

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Corporate Bonds — — — % — — — % 5,274 4,481 2.61 %

Muni securities — — — — — % 17,763 16,610 5.61 %

Asset-backed securities 3,336 3,364 3.18 % — — — % — — — %

Total available-for-sale $ 3,336 $ 3,364 3.18 % $ 5,655 $ 5,612 1.37 % $ 80,691 $ 77,531 2.38 %

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Federal National Mortgage Association 4,317 4,442 2.36 % 2,743 2,882 2.03 % 64 64 — %

Total held-to-maturity mortgage-backed securities — — — % 4,779 4,967 2.47 % 2,537 2,685 2.40 % 1,835 1,917 2.65 %

Corporate Bonds — — — % — — — % 1,000 995 5.75 % — — — %

Total held-to-maturity $ 4,528 $ 4,665 2.41 % $ 2,743 $ 2,882 2.03 % $ 536 $ 593 3.7 %

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In the event the mortgage-backed security has been funded with an interest-bearing liability with maturity comparable to the original estimated life of the mortgage-backed security, the Bank's interest rate spread could be adversely affected.

Conversely, in a rising interest rate environment, the Bank may experience a lower than estimated rate of

repayment on the underlying mortgages, effectively extending the estimated life of the mortgage-backed security and exposing the Bank to the risk that it may be required to fund the asset with a liability bearing a higher rate of interest.

Conversely, in a rising interest rate environment, the Bank may experience a lower than estimated rate of repayment on the underlying mortgages, effectively extending the estimated life of the mortgage-backed security and exposing the Bank to the risk that it may be required to fund the asset with a liability bearing a higher rate of interest.

For additional information regarding Carver Federal's mortgage-backed securities portfolio and its maturities refer to Note 3 of Notes to Consolidated Financial Statements, “Investment Securities.”

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Carver Federal's policies are designed primarily to attract deposits from local residents and businesses through the Bank's branches.

However, in fiscal year 2021 the Bank launched a program introducing new products and expanded its digital online account openings into nine states across the Northeast and in Washington D.C.

Carver Federal also holds deposits from various governmental agencies or authorities and corporations.

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Carver Federal has also utilized brokers to obtain money market account deposits.

The rate we pay on brokered money market accounts

is the same or below the rate we pay on non-brokered money market accounts.

The rate we pay on brokered money market accounts is the same or below the rate we pay on non-brokered money market accounts.

These accounts are similar to brokered certificates of deposit accounts in that we only maintain one account for the total deposit per broker, with the broker maintaining the detailed records of each depositor.

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Such payments were made in September 2016.

Interest on the debentures has been deferred beginning with the December 2016 payment, 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.

Interest on the debentures had been deferred beginning with the December 2016 payment, per the terms of the agreement, which permitted such deferral for up to twenty consecutive quarters, as the Company was prohibited from making payments without prior regulatory approval.

During the fourth quarter of fiscal year 2021, the Company applied for and was granted regulatory approval to settle all outstanding debenture interest payments through June 2021.

Full payment on the outstanding debenture interest was made on June 16, 2021.

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 the Company, and the FRB regulates dividends paid by the Company.

The OCC regulates all capital distributions, including dividend payments, by Carver Federal to the Company, and the FRB regulates dividends paid by the

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.

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The severity of the action authorized or required to be taken under the prompt corrective action regulations increases as a bank's capital decreases within the three undercapitalized categories.

All banks are prohibited from paying dividends or other capital distributions or paying management fees to any controlling person if, following such distribution, the bank would be undercapitalized.

All banks are prohibited from paying dividends or other capital distributions or paying management fees to any controlling person if, following such distribution, the bank would

be undercapitalized.

Generally, a capital restoration plan must be filed with the OCC within 45 days of the date a bank receives notice that it is “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.” In addition, various mandatory supervisory actions become immediately applicable to the institution, including restrictions on growth of assets and other forms of expansion.

Under OCC regulations, as amended, a federally chartered savings bank is treated as well-capitalized if its total risk-based capital ratio is 10% or greater, its Tier 1 risk-based capital ratio is 8% or greater, its common equity Tier 1 capital ratio is 6.5% or greater, and its leverage ratio is 5% or greater, and it is not subject to any order or directive by the OCC to meet a specific capital level.

In assessing an institution's capital adequacy, the OCC takes into consideration not only these

numeric factors but also qualitative factors as well, and has the authority to establish higher capital requirements for individual institutions as they deem necessary.

In assessing an institution's capital adequacy, the OCC takes into consideration not only these numeric factors but also qualitative factors as well, and has the authority to establish higher capital requirements for individual institutions as they deem necessary.

The Federal Deposit Insurance Corporation Improvement Act, or FDICIA, required that the OCC and other federal banking agencies revise their risk-based capital standards, with appropriate transition rules, to ensure that they take into account IRR concentration of risk and the risks of non-traditional activities.

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There are various restrictions on a bank's ability to make capital distributions, including cash dividends, payments to repurchase or otherwise acquire its shares and other distributions charged against capital.

A savings institution that is the subsidiary of a savings and loan holding company, such as the Bank, must file a notice with the FRB at least 30 days before making a capital distribution.

A savings institution that is the subsidiary of a savings and loan holding company, such as the Bank, must file a notice with the FRB at least 30 days before making a capital distribution and receive the FRB's nonobjection.

The Bank must also file an application or notice for prior approval with the OCC if the total amount of its capital distributions (including each proposed distribution), for the applicable calendar year would exceed the Bank's net income for that year plus the Bank's retained net income for the previous two years, if the Bank is not an "eligible savings association" as defined in OCC regulations or the capital distributions would violate a prohibition contained in any statute, regulation or agreement.

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In general, these enforcement actions may be initiated in response to violations of laws and regulations and unsafe or unsound practices.

The Emergency Economic Stabilization Act of 2008 (“EESA”) was signed into law on October 3, 2008 and authorizes the U.S.

The Emergency Economic Stabilization Act of 2008 (“EESA”) was signed into law on October 3, 2008 and authorized the U.S.

Department of the Treasury (“Treasury”) to establish the Troubled Asset Relief Program (“TARP”) to purchase certain troubled assets from financial institutions, including banks and thrifts.

Under the TARP, the Treasury could purchase residential and commercial mortgages, and securities, obligations or other instruments based on such mortgages, originated or issued on or before March 14, 2008 that the Secretary of the Treasury determines promotes market stability, as well as any other financial instrument that the Treasury, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, or FRB, determined the purchase of which is necessary to promote market stability.

In the case of a publicly-traded financial institution that sold troubled assets into the TARP, the Treasury must have received a warrant giving the Treasury the right to receive nonvoting common stock or preferred stock in such financial institution, or voting stock with respect to which the Treasury agreed not to exercise voting power, subject to certain de minimis exceptions.

In addition, all financial institutions that sold troubled assets to the TARP and met certain conditions were also subject to certain executive compensation restrictions, which differed depending on how the troubled assets were acquired under the TARP.

On October 14, 2008, the Treasury announced that it would purchase equity stakes in a wide variety of banks and thrifts.

Under this program, known as the Troubled Asset Relief Program Capital Purchase Program (the "TARP CPP"), the Treasury made $250 billion of capital available (from the $700 billion authorized by the EESA) to U.S.

Under this program, known as the Troubled Asset Relief Program Capital Purchase Program (the "TARP CPP"), the

Treasury made $250 billion of capital available (from the $700 billion authorized by the EESA) to U.S.

financial institutions in the form of preferred stock.

In conjunction with the purchase of preferred stock, the Treasury received warrants to purchase common stock with an aggregate market price equal to 15% of the preferred investment.

Participating financial institutions were required to adopt the Treasury's standards for executive compensation and corporate governance for the period during which the Treasury held equity issued under the TARP CPP.

On January 20, 2009, the Company announced that it completed the sale of $18.98 million in preferred stock to the Treasury in connection with Carver's participation in the TARP CPP.

Importantly, Carver is exempt from the requirement to issue a warrant to the Treasury to purchase shares of common stock, as the Bank is a certified Community Development Financial Institution (“CDFI”) conducting most of its depository and lending activities in disadvantaged communities.

Therefore, the investment did not dilute common stockholders.

As a participant in TARP CPP, the Company was subject to certain obligations currently in effect, such as compensation restrictions, a luxury expenditure policy, the requirement the Company include a “say on pay” proposal in the proxy statement and certain certifications.

The Company was also subject to additional restrictions or obligations as may be imposed under TARP CPP for as long as the Company participates in TARP CPP.

The Treasury announced in February 2010 the implementation of the Community Development Capital Initiative (“CDCI”).

This new capital program invested lower cost capital in CDFIs that lend to small businesses in the country's most economically depressed communities.

CDFI banks and thrifts are eligible to receive investments of capital with an initial dividend rate of 2%, compared to the 5% rate offered under the CPP.

CDFIs could apply to receive capital up to 5% of risk-weighted assets.

To encourage repayment while recognizing the unique circumstances facing CDFIs, the dividend rate increased to 9% after eight years, compared to five years under TARP preferred stock.

On August 27, 2010, Carver completed with the Treasury the exchange of the $18.98 million of TARP preferred stock for an equivalent amount of CDCI Series B preferred stock.

As stated above, on October 28, 2011, the U.S.

On October 28, 2011, the U.S.

Treasury exchanged the CDCI Series B preferred stock for 2,321,286 shares of Company common stock.

On August 6, 2020, the Company entered into a Share Purchase Agreement with the Treasury to repurchase the 2,321,286 shares of Company common stock held by the Treasury.

As a result, the Company is no longer a participant in the CDCI program and is not bound by any TARP restrictions as the Treasury is no longer a common stockholder of the Company.

For more information concerning the Bank's repurchase of treasury shares, see Note 12 of the Notes to the Consolidated Financial Statements.

Other Supervision and Regulation

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If the Bank fails the QTL test, it must operate under certain restrictions on its activities.

The Dodd-Frank Act made noncompliance potentially subject to agency enforcement action for

violation of law.

The Dodd-Frank Act made noncompliance potentially subject to agency enforcement action for violation of law.

At March 31, 2021, the Bank maintained approximately 96% of its portfolio assets in qualified thrift investments.

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Under CRA, as amended, as implemented by OCC regulations, the Bank has a continuing and affirmative obligation to help meet the credit needs of its entire community, including low and moderate income neighborhoods.

CRA does not establish specific lending requirements or programs for the Bank nor does it limit the Bank's discretion to develop the types of products and services that it believes are best suited to its particular community.

CRA does not establish specific lending requirements or programs for the Bank nor does it limit the Bank's

discretion to develop the types of products and services that it believes are best suited to its particular community.

CRA does, however, require the OCC, in connection with its examination of the Bank, to assess the Bank's record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by the Bank.

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The Company has no such agreements in place at this time.

In June 2020, the OCC issued amendments to its CRA regulations.

The final rule clarifies and expands the activities that qualify for CRA credit, updates where activities count for such credit and, according to the agency, seeks to create a more consistent and objective method for evaluating CRA performance.

The final rule was effective October 1, 2020 but compliance with the certain of the revised requirements is not mandatory for the Association until January 1, 2023.

Transactions with Related Parties.

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The Dodd-Frank Act required the FDIC to revise its procedures to base assessments upon each insured institution's total assets less tangible equity instead of deposits.

The FDIC finalized a rule, effective April 1, 2011, that set the assessment range at 2.5 to 45 basis points of total assets less tangible equity.

In conjunction with the Deposit Insurance Fund's reserve ratio achieving 1.15%, the assessment range (inclusive of possible adjustments) was reduced for insured institutions of less than $10 billion of total assets to 1.5 basis points to 30 basis points, effective July 1, 2016.

The current assessment range (inclusive of possible adjustments) for insured institutions of less than $10 billion of total assets is 1.5 basis points to 30 basis points.

The Dodd-Frank Act increased the minimum target Deposit Insurance Fund ratio from 1.15% of estimated insured deposits to 1.35% of estimated insured deposits.

The Federal Deposit Insurance Corporation was required to achieve the 1.35% ratio by September 30, 2010.

The Dodd-Frank Act required insured institutions with assets of $10 billion or more to fund the increase from 1.15% 5o 1.35% and, effective July 1, 2016, such institutions were subject to a surcharge to achieve that goal.

The Dodd-Frank Act required insured institutions with assets of $10 billion or more to fund the increase from 1.15% to 1.35% and, effective July 1, 2016, such institutions were subject to a surcharge to achieve that goal.

The FDIC has indicated that the 1.35% ratio was exceeded in November 2018.

Insured institutions of less than $10 billion of assets are receiving credits for their portion of assessments that contributed to raising the reserve ratio from 1.15% to 1.35%.

The Dodd-Frank Act eliminated the 1.5% maximum fund ratio, instead leaving it to the discretion of the Federal Deposit Insurance Corporation, and the Federal Deposit Insurance Corporation has exercised that discretion by establishing a long-range fund ratio of 2%.

Insured institutions of less than $10 billion of assets received credits for their portion of assessments that contributed to raising the reserve ratio from 1.15% to 1.35%.

The credits were exhausted as of September 30, 2020.

The Federal Deposit Insurance Corporation has exercised that discretion by establishing a long-range fund ratio of 2%.

The FDIC has authority to further increase insurance assessments and therefore management cannot predict what insurance assessment rates will be in the future.

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The Bank, as a FHLB-NY member, is required to acquire and hold shares of capital stock in the FHLB-NY in specified amounts.

The Bank was in compliance with this requirement with an investment in the capital stock of the FHLB-NY at March 31, 2020 of $568 thousand.

The Bank was in compliance with this requirement with an investment in the capital stock of the FHLB-NY at March 31, 2021 of $552

Any advances from the FHLB-NY must be secured by specified types of collateral, and all long-term advances may be obtained only for the purpose of providing funds for residential housing finance.

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As such, the Company is registered with and subject to FRB examination and supervision, as well as certain reporting requirements.

The FRB has enforcement authority

over the Company and its subsidiaries.

The FRB has enforcement authority over the Company and its subsidiaries.

Among other things, this authority permits the FRB to restrict or prohibit activities that are determined to be a serious risk to the financial safety, soundness or stability of a subsidiary savings institution.

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In evaluating applications by holding companies to acquire savings associations, the FRB must consider issues such as the financial and managerial resources and future prospects of the company and institution involved, the effect of the acquisition on the risk to the insurance fund, the convenience and needs of the community and competitive factors.

Savings and loan holding companies have not historically been subjected to consolidated regulatory capital requirements.

The Dodd-Frank Act, however, required the FRB to promulgate consolidated capital requirements for depository institution holding companies that are no less stringent, both quantitatively and in terms of components of capital, than those applicable to their subsidiary depository institutions.

The FRB has promulgated consolidated capital requirements for depository institution holding companies that are no less stringent, both quantitatively and in terms of components of capital, than those applicable to their subsidiary depository institutions, including a community bank leverage ratio alternative.

Instruments such as cumulative preferred stock and trust-preferred securities, which were previously includable within Tier 1 capital by bank holding companies within certain limits, are no longer includable as Tier 1 capital, subject to certain grandfathering.

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As a result, holding companies with less than $3.0 billion of consolidated assets, such as the Company, are generally not subject to consolidated capital requirements unless otherwise advised by the FRB.

The Dodd-Frank Act extends the “source of strength” doctrine to savings and loan holding companies.

The FRB promulgated regulations implementing the “source of strength” policy that requires holding companies act as a source of strength to their subsidiary depository institutions by providing capital, liquidity and other support in times of financial stress.

The FRB has issued a policy statement regarding the payment of dividends and the repurchase of shares of common stock by bank holding companies that it has made applicable to savings and loan holding companies as well.

In general, the

policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall financial condition.

In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall financial condition.

Regulatory guidance provides for prior regulatory consultation with respect to capital distributions in certain circumstances such as where the company’s net income for the past four quarters, net of dividends’ previously paid over that period, is insufficient to fully fund the dividend or the company’s overall rate of earnings retention is inconsistent with the company’s capital needs and overall financial condition.

The ability of a holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized.

The policy statement also provides for regulatory consultation prior to a holding company redeeming or repurchasing regulatory capital instruments when the holding company is experiencing financial weaknesses or redeeming or repurchasing common stock or perpetual preferred stock that would result in a net reduction as of the end of a quarter in the amount of such equity instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred.

the redemption or repurchase occurred.

These regulatory policies could affect the ability of the Company to pay dividends, repurchase shares of common stock or otherwise engage in capital distributions.

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• Allowing institutions not to characterize loan modifications relating to the COVID-19 pandemic as a troubled debt restructuring and also allowing them to suspend the corresponding impairment determination for accounting purposes.

• Temporarily reducing the Community Bank Leverage Ratio (the “CBLR”) to 8%.

This law also states that if a qualifying community bank falls below the CBLR, it “shall have a reasonable grace period to satisfy” the CBLR.

This provision terminates on the earlier of December 31, 2020 or the date the President declares that the coronavirus emergency is terminated.

• Temporarily reducing the Community Bank Leverage Ratio (the “CBLR”) as discussed above under "Carver Federal's Capital Position."

• The ability of a borrower of a federally backed mortgage loan (VA, FHA, USDA, Freddie and Fannie) experiencing financial hardship due, directly or indirectly, to the COVID-19 pandemic to request forbearance from paying their mortgage by submitting a request to the borrower’s servicer affirming their financial hardship during the COVID-19 emergency.

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During that time, no fees, penalties or interest beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full under the mortgage contract will accrue on the borrower’s account.

Except for vacant or abandoned property, the servicer of a federally backed mortgage is prohibited from taking any foreclosure action, including any eviction or sale action, for not less than the 60-day period beginning March 18, 2020.

• The ability of a borrower of a multi-family federally backed mortgage loan that was current as of February 1, 2020, to submit a request for forbearance to the borrower’s servicer affirming that the borrower is experiencing financial hardship during the COVID-19 emergency.

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Additionally, a multifamily borrower that receives a forbearance may not require a tenant to vacate a dwelling unit before a date that is 30 days after the date on which the borrower provides the tenant notice to vacate and may not issue a notice to vacate until after the expiration of the forbearance.

Federal mortgage backing agencies have extended this program three times and will continue to offer forbearances to qualifying multifamily property owners through September 30, 2021, subject to the continued tenant protections FHFA has imposed during the pandemic.

The Paycheck Protection Program

The CARES Act provides approximately $350 billion to fund loans to eligible small businesses through the Small Business Administration’s (“SBA”) 7(a) loan guaranty program.

These loans will be 100% federally guaranteed (principal and

interest) through December 31, 2020.

An eligible business can apply for a Paycheck Protection Program (“PPP”) loan up to 2.5 times its average monthly “payroll costs" limited to a loan amount of $10.0 million.

The proceeds of the loan can be used for payroll (excluding individual employee compensation over $100,000 per year), mortgage, interest, rent, insurance, utilities and other qualifying expenses.

PPP loans will have:

(a) an interest rate of 1.0%, (b) a two-year loan term to maturity;

and (c) principal and interest payments deferred for six months from the date of disbursement.

The SBA will guarantee 100% of the PPP loans made to eligible borrowers.

The entire principal amount of the borrower’s PPP loan, including any accrued interest, is eligible to be reduced by the loan forgiveness amount under the PPP so long as employee and compensation levels of the business are maintained and 75% of the loan proceeds are used for payroll expenses, with the remaining 25% of the loan proceeds used for other qualifying expenses.

The CARES Act included the Paycheck Protection Program (“PPP”), a nearly $350 billion program designed to aid small- and medium-sized businesses through federally guaranteed loans distributed through banks.

These loans were intended to guarantee eight weeks of payroll and other costs to help those businesses remain viable and allow their workers to pay their bills.

The initial $350 billion program was supplemented in late April 2020 with $310 billion in additional funding.

On June 5, 2020, the Paycheck Protection Program Flexibility Act (the “new Act”) was signed into law, and made significant changes to the PPP to provide additional relief for small businesses.

The new Act increased flexibility for small businesses that have been unable to rehire employees due to lack of employee availability, or have been unable to operate as normal due to COVID-19 related restrictions, extended the period that businesses have to use PPP funds to qualify for loan forgiveness to 24 weeks, up from 8 weeks under the original rules, and relaxed the requirements that loan recipients must adhere to in order to qualify for loan forgiveness.

In addition, the new Act extended the payment deferral period for PPP loans until the date when the amount

of loan forgiveness is determined and remitted to the lender.

For PPP recipients who do not apply for forgiveness, the loan deferral period is 10 months after the applicable forgiveness period ends.

On July 4, 2020, Congress enacted a new law to extend the deadline for applying for a PPP loan to August 8, 2020.

In December 2020, the Consolidated Appropriations Act, 2021 was enacted to provide additional economic stimulus to individuals and businesses in response to the extended economic distress caused by the pandemic.

This included additional stimulus payments to individuals and their dependents, and extension of enhanced unemployment benefits, $284 billion of additional funds for a second round of PPP loans and a new simplified forgiveness procedure for PPP loans of $150,000 or less.

The program was re-opened on January 11, 2021 with updated guidance outlining program changes to enhance its effectiveness and accessibility.

This round of the PPP will serve new borrowers, as well as allow certain existing PPP borrowers to apply for a second draw PPP loan and make a request to modify their first draw PPP loan.

Coronavirus Response and Relief Supplemental Appropriations Act of 2021 (the “CRRSA Act”)

On December 27, 2020, the CRRSA Act was signed into law, which also contains provisions that could directly impact financial institutions including extending the time that insured depository institutions and depository institution holding companies have to comply with the current expected credit losses (CECL) account standing and extending the authority granted to banks under the CARES Act to elect to temporarily suspend the requirements under U.S.

GAAP applicable to troubled debt restructurings for loan modifications related to the COVID-19 pandemic for any loan that was not more than 30 days past due as of December 31, 2019.

The act directs financial regulators to support community development financial institutions and minority depository institutions and directs Congress to re-appropriate $429 billion in unobligated CARES Act funds.

The PPP, which was originally established under the CARES Act, was also extended under the CRRSA Act.

FEDERAL AND STATE TAXATION

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The Company recorded a benefit of $0.3 million for alternative minimum tax credits which, under the new tax law, are refundable.

As of March 31, 2020, the amount of the AMT credits was $143 thousand, all of which will be refunded to the Company upon filing of the fiscal year 2020 federal tax return..

At March 31, 2020, the amount of the AMT credits was $143 thousand.

As of March 31, 2021, the Company requested a $143 thousand refund, related to the AMT credits, from its recently filed fiscal year 2020 federal tax return..

State and Local Taxation

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On March 31, 2014, New York State tax legislation was signed into law in connection with the approval of the New York State 2014-2015 budget.

rules related to sourcing of revenue for New York State tax purposes and (3) the New York State taxation of entities within one corporate structure, among other provisions.

Portions of the new legislation resulted in significant changes in the calculation of income taxes imposed on banks and thrifts operating in New York State, including changes to (1) future period New York State tax rates, (2) rules related to sourcing of revenue for New York State tax purposes and (3) the New York State taxation of entities within one corporate structure, among other provisions.

In recent years, the Company has been subject to taxation based upon assets in New York State.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business