What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2021-06-29 compared with 2020-08-06 · 305 added, 239 removed, 1369 unchanged (28% of the section changed)

8 unchanged sentences

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended March 31, 2021 , in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Notes 2 and 6 to the consolidated financial statements, effective on April 1, 2019, the Company changed its method of accounting for leases due to the adoption of Accounting Standards Codification Topic 842, Leases .

Basis for Opinion

12 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for loan losses

As described in Notes 2 and 4 to the Company’s consolidated financial statements, the Company has a gross loan portfolio of $483.5 million and related allowance for loan losses of $5.1 million as of March 31, 2021.

The allowance for loan losses includes a general reserve of $5.0 million and a specific reserve of $0.1 million.

In calculating the general reserve component of the allowance for loan losses, the Company segregates the loan portfolio by loan pools and utilizes nine qualitative factors in addition to quantitative factors (historical loss experience).

We identified the qualitative factors used by management to estimate the general reserve portion of the allowance for loan losses, specifically the economic factor, as a critical audit matter.

Significant management judgment is required in the evaluation of the economic factor, which include consideration of local, national economic trends, and the impact of

Auditing these complex judgments and assumptions involves especially challenging auditor judgment due to the nature and extent of audit evidence and effort required to address these matters.

The primary procedures we performed to address this critical audit matter included:

• Evaluating the reasonableness of assumptions used by management in forming the economic factor, by assessing whether the assumptions reflected relevant considerations and were reasonable and reliable for the purpose used.

• Evaluating the appropriateness of the data used by management in developing the economic factor by comparing it to third-party data and evaluating any contradictory evidence identified.

/s/ BDO USA, LLP

1 unchanged sentence

New York, New York

August 6, 2020

June 29, 2021

CARVER BANCORP, INC.

9 unchanged sentences

Held-to-maturity, at amortized cost (fair value of $ 8,140 and $ 10,564 at March 31, 2021 and March 31, 2020, respectively)

10,151 11,137

Total investment securities 94,314 75,980

27 unchanged sentences

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)

17,601 and 45,118 Series D shares, with a liquidation preference of $ 1,000 per share, issued and outstanding at March 31, 2021 and 2020, respectively)

17,601 45,118

Preferred stock (par value $ 0.01 per share:

3,177 Series E shares, with a liquidation preference of $ 1,000 per share, issued and outstanding at March 31, 2021)

Preferred stock (par value $ 0.01 per share:

5,000 Series F shares, with a liquidation preference of $ 1,000 per share, issued and outstanding at March 31, 2021)

Common stock (par value $ 0.01 per share:

4 unchanged sentences

Accumulated deficit ( 42,656 ) ( 52,285 )

Treasury stock, at cost ( 1,944 shares)

Treasury stock, at cost ( 2,503,803 and 1,944 shares at March 31, 2021 and 2020, respectively)

( 2,908 ) ( 408 )

Accumulated other comprehensive income (loss) 932 ( 939 )

Accumulated other comprehensive (loss) income ( 3,175 ) 932

Total equity 52,301 48,894

17 unchanged sentences

Net interest income 15,887 15,996

Provision for (recovery of) for loan losses 19 ( 270 )

Net interest income after provision for (recovery of) loan losses 15,977 17,359

(Recovery of) provision for loan losses ( 100 ) 19

Net interest income after (recovery of) provision for loan losses 15,987 15,977

Non-interest income:

1 unchanged sentence

Loan fees and service charges 357 342

Loss on sale of securities, net — ( 16 )

Gain on sale of securities, net 1,193 —

Gain on sale of loans, net — 66

Gain on sale of building — 616

Other 2,011 184

22 unchanged sentences

Net loss $ ( 3,896 ) $ ( 5,423 )

Other comprehensive income, net of tax:

Change in unrealized loss of securities available-for-sale, net of income tax expense of $ 0

Reclassification adjustment for realized loss on sales of available-for-sale securities, net of income tax expense of $ 0 (due to full valuation allowance)

Total other comprehensive income, net of tax 1,871 1,066

Other comprehensive (loss) income, net of tax:

Change in unrealized (loss) gain of securities available-for-sale, net of income tax expense of $ 0

( 5,300 ) 1,871

Reclassification adjustment for realized gains on sales of available-for-sale securities, net of income tax expense of $ 0 (due to full valuation allowance)

Total other comprehensive (loss) income, net of tax ( 4,107 ) 1,871

Total comprehensive loss, net of tax $ ( 8,003 ) $ ( 3,552 )

5 unchanged sentences

Balance—March 31, 2019

45,118 61 55,514 ( 52,201 ) ( 417 ) ( 939 ) 47,136

Net loss — — — ( 5,423 ) — — ( 5,423 )

Other comprehensive income, net of tax — — — — — 1,871 1,871

ASU reclassification (adoption of ASU 2016-01) — — — ( 721 ) — 721 —

Cumulative effect adjustment for adoption of ASU 2016-02 — — — 5,339 — — 5,339

Treasury stock activity — — 9 — — — 9

Stock based compensation expense ( 47 ) 9 ( 38 )

Balance—March 31, 2020

45,118 61 55,476 ( 52,285 ) ( 408 ) 932 48,894

Net loss — — — ( 3,896 ) — — ( 3,896 )

Other comprehensive income, net of tax — — — — — ( 4,107 ) ( 4,107 )

Cumulative effect adjustment for adoption of ASU 2016-02 — — — 5,339 — — 5,339

Treasury stock activity — — 9 — — — 9

Conversion of Series D preferred stock to common stock ( 13,994 ) 17 13,977 — — — —

Stock relinquishment ( 13,523 ) ( 2 ) 13,525 — — —

Capital contribution — — 2,500 — — — 2,500

Repurchase of common stock — — — — ( 2,500 ) — ( 2,500 )

Issuance of common stock — 4 3,193 — — — 3,197

Issuance of Series E preferred stock 3,177 — — — — — 3,177

Issuance of Series F preferred stock 5,000 — — — — — 5,000

Stock based compensation expense — ( 22 ) 58 — — — 36

Balance—March 31, 2021

$ 25,778 $ 58 $ 75,204 $ ( 42,656 ) $ ( 2,908 ) $ ( 3,175 ) $ 52,301

See accompanying notes to consolidated financial statements

7 unchanged sentences

Adjustments to reconcile net loss to net cash provided by operating activities:

Provision for (recovery of) loan losses 19 ( 270 )

(Recovery of) provision for loan losses ( 100 ) 19

Stock based compensation expense 36 ( 38 )

1 unchanged sentence

Gain on sale of real estate owned, net of market value adjustment ( 80 ) ( 208 )

Loss on securities sales and redemption of equity investment, net — 43

Gain on sale of securities, net ( 1,193 ) —

Gain on sale of loans, net — ( 66 )

Gain on sale of building — ( 616 )

Amortization and accretion of loan premiums and discounts and deferred charges 641 501

Amortization and accretion of premiums and discounts - securities 590 989

(Increase) decrease in accrued interest receivable ( 33 ) 4

Decrease (increase) in other assets 3,397 ( 1,995 )

Decrease in other liabilities ( 134 ) ( 1,675 )

Net cash used in operating activities ( 31 ) ( 8,765 )

Increase in accrued interest receivable ( 588 ) ( 33 )

Decrease in other assets 593 3,397

Increase (decrease) in other liabilities 5,192 ( 134 )

Net cash provided by (used in) operating activities 2,212 ( 31 )

CASH FLOWS FROM INVESTING ACTIVITIES

7 unchanged sentences

Held-to-maturity 2,303 949

Repayments and maturities, net of originations of loans held-for-investment 34,391 46,079

Proceeds from redemption of equity investment — 9,179

Loans held-for-investment, net of (originations) and repayments/payoffs and maturities ( 28,350 ) 34,391

Loans purchased from third parties ( 26,814 ) ( 35,496 )

3 unchanged sentences

Proceeds from sale of real estate owned 260 511

Net cash provided by investing activities 15,724 29,122

Net cash (used in) provided by investing activities ( 76,984 ) 15,724

CASH FLOWS FROM FINANCING ACTIVITIES

Net increase (decrease) in deposits 8,619 ( 106,687 )

Net decrease in FHLB-NY advances and other borrowings ( 8,000 ) ( 17,000 )

Net cash provided by (used in) financing activities 619 ( 123,687 )

Net increase (decrease) in cash and cash equivalents 16,312 ( 103,330 )

Net increase in deposits 67,744 8,619

Net increase (decrease) in FHLB-NY advances and other borrowings 23,705 ( 8,000 )

Contribution of capital 2,500 —

Repurchase of common stock ( 2,500 ) —

Issuance of common stock 3,197 —

Issuance of preferred stock 8,177 —

Net cash provided by financing activities 102,823 619

Net increase in cash and cash equivalents 28,051 16,312

Cash and cash equivalents at beginning of period 47,540 31,228

2 unchanged sentences

Noncash financing and investing activities

Transfer to real estate owned from loans held-for-investment $ — $ 346

Recognition of right-of-use asset $ — $ 19,951

2 unchanged sentences

Recognition of finance lease liability 13 206

Retirement of preferred stock 13,523 —

Retirement of common stock 2 —

Cash paid for:

26 unchanged sentences

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.

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 was made on June 16, 2021.

The interest rate was 3.23 % and the total amount of deferred interest was $ 3.1 million at March 31, 2021.

7 unchanged sentences

On May 24, 2016, the Bank entered into a Formal Agreement ("the 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.

As a result of the 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.

15 unchanged sentences

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.

Certain comparative amounts for the prior period have been reclassified to conform to current period presentations.

Such reclassifications had no effect on net income or shareholders' equity.

Recent Events

COVID-19 continues to have a significant, negative effect on families and businesses in New York and throughout the United States.

While New York State went through a phased reopening upon expiration of an earlier executive order to shelter in place, maintain social distancing and close all non-essential businesses statewide, there remains a significant amount of uncertainty as certain geographic areas continue to experience surges in COVID-19 cases and governments at all levels continue to react to changes in circumstances.

The prolonged pandemic, or any other epidemic of this sort that ultimately harms the global economy, the U.S.

economy or the markets in which we operate could adversely affect Carver’s operations.

The long-term effects of COVID-19 on the Company’s business cannot be ascertained as there remains significant uncertainty regarding the breadth and duration of business disruptions related to the virus.

At this time, it is unknown if the easing of restrictions on individuals and businesses will continue and if and when businesses and their employees will be able to fully resume normal activities.

In addition, new information may emerge regarding the severity of COVID-19 or the effectiveness of the vaccines developed, causing federal, state and local governments to take additional actions to contain COVID-19 or to treat its impact.

Even after formal restrictions have been lifted, changes in the behavior of customers, businesses and their employees – including social distancing – as a result of the pandemic, are unknown.

The Company is closely monitoring its asset quality, liquidity, and capital positions.

Management is actively working to minimize the current and future impact of this unprecedented situation, and is making adjustments to operations where appropriate or necessary to help slow the spread of the virus.

In addition, as a result of further actions that may be taken to contain or reduce the impact of the COVID-19 pandemic, the Company may experience changes in the value of collateral securing outstanding loans, reductions in the credit quality of borrowers and the inability of borrowers to repay loans in accordance with their terms.

The Company is actively managing the credit risk in its loan portfolio, including reviewing the industries that the Company believes are most likely to be impacted by emerging COVID-19 events.

These and similar factors and events may have substantial negative effects on the business, financial condition, and results of operations of the Company and its customers.

Cash and cash equivalents

3 unchanged sentences

Investment Securities

When purchased, investment securities are designated as either investment securities held-to-maturity, available-for-sale or trading.

When purchased, debt 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.

2 unchanged sentences

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.

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.

19 unchanged sentences

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.

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.

7 unchanged sentences

Allowance for Loan and Lease Losses ("ALLL")

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.

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.

22 unchanged sentences

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 pools, the Bank demonstrates a LEP in excess of 12 months.

pools, such as Commercial Real Estate, Multifamily and Business pools, the Bank demonstrates a LEP in excess of 12 months.

The Bank also recognizes losses in accordance with regulatory charge-off criteria.

15 unchanged sentences

These loans present a moderate level of risk due primarily to general economic conditions.

During fiscal year 2021, the Bank also started purchasing non-qualified mortgages for one-to-four family residential loans.

The Bank has approved guidelines for these loans.

• Multifamily - Carver Federal originates and purchases recourse and non-recourse multifamily loans.

23 unchanged sentences

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.

All substandard and doubtful loans and any other loans 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”).

1 unchanged sentence

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 not be 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.

Loans determined to be impaired are evaluated to determine the amount of impairment based on one of the three measurement methods noted above.

In accordance with guidance, if there is no impairment amount, no reserve is established for the loan.

An unallocated loan loss allowance is appropriate when it reflects an estimate of probably loss, determined in accordance with GAAP, and is properly supported.

Troubled Debt Restructured Loans

17 unchanged sentences

The Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”)

The CARES Act, which became law on March 27, 2020, provided emergency economic relief to combat the coronavirus (“COVID-19”) and stimulate the economy.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was signed to provide emergency economic relief to individuals and businesses impacted by the coronavirus (“COVID-19”) pandemic.

The law had several provisions relevant to financial institutions, including:

• 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.

• 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.

• The ability of a borrower of a federally backed mortgage loan (VA, FHA, USDA, Freddie Mac and Fannie Mae) 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.

Such a forbearance will be granted for up to 180 days, which can be extended for an additional 180-day period upon the request of the borrower.

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.

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.

• The ability of a borrower of a multifamily 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.

A forbearance will be granted for up to 30 days, which can be extended for up to two additional 30-day periods upon the request of the borrower.

1 unchanged sentence

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.

Consistent with regulatory guidance and the provisions of the CARES Act, loans less than 30 days past due at December 31, 2019 that were granted COVID-19 related payment deferrals will continue to be considered current and not be reported as TDRs.

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

On December 27, 2020, the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 ("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) accounting standard 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.

Representation and Warranty Reserve

During the period 2004 through 2009, the Bank originated one-to-four family residential mortgage loans and sold the loans to the Federal National Mortgage Association (“FNMA”).

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.

The Bank mgay 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 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.

7 unchanged sentences

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.

The Bank's principal lending activities are concentrated in loans secured by real estate, a substantial portion of which are 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.

24 unchanged sentences

Gains or losses on sale of properties are recognized as incurred.

As of March 31, 2020, the Bank held $ 120 thousand in foreclosed residential real estate properties as a result of obtaining physical possession.

In addition, as of March 31, 2020 and 2019, we had residential loans with a carrying value of $ 3.0 million and $ 4.2 million, respectively, collateralized by residential real estate property for which formal foreclosure proceedings were in process.

As of March 31, 2021, the Bank held $ 60 thousand in a foreclosed residential real estate property as a result of obtaining physical possession.

In addition, as of March 31, 2021 and 2020, we had residential loans with a carrying value of $ 2.5 million

and $ 3.0 million, respectively, collateralized by residential real estate property for which formal foreclosure proceedings were in process.

The Company records income taxes using the asset and liability method.

10 unchanged sentences

Earnings (Loss) per Common Share

The Company has preferred stock series D shares which are entitled to receive dividends if declared on the Company's common stock and are therefore considered to be participating securities.

The Company has preferred stock which are entitled to receive dividends if declared on the Company's common stock and are therefore considered to be participating securities.

Basic earnings (loss) per share (“EPS”) is computed using the two class method.

21 unchanged sentences

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.

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.

8 unchanged sentences

Accounting Standards Recently Adopted

On April 1, 2018, the Company adopted Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers (Topic 606), which supersedes nearly all existing revenue recognition guidance under U.S.

The core principle of Topic 606 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.

Topic 606 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.

The adoption of Topic 606 did not have a material impact to the Company's consolidated financial statements.

For the Company's revenue recognition policy on non-interest income, refer to Note 19 "Non-Interest Revenue and Expense."

On April 1, 2018, the Company adopted Accounting Standards Update ("ASU") No.

2016-01, "Financial Instruments - Overall (Subtopic 825-10):

Recognition and Measurement of Financial Assets and Financial Liabilities." The amendments (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.

On April 1, 2020, the Company adopted ASU No.

2018-03, "Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic 825-10) to clarify certain aspects of the guidance issued in ASU 2016-01.

Upon adoption, we recognized a cumulative effect adjustment of $ 721 thousand as a reclassification from accumulated other comprehensive loss to accumulated deficit.

The tax impact on this reclassification was not material and there was no net tax effect because of the full deferred tax asset valuation allowance.

Additionally, all future unrealized gains and losses will be recognized in the Statements of Operations.

See Note 3 "Investment Securities" for further information.

2018-13 "Fair Value Measurement (Topic 820):

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement," which improved the effectiveness of disclosures in the notes to financial statements by facilitating clear communication of the information required by GAAP that is most important to users of an entity's financial statements.

The amendments removed the disclosure requirements for (1) transfers between Levels 1 and 2 of the fair value hierarchy, (2) the policy for timing of transfers between levels, and (3) the valuation processes for Level 3 fair value measurements.

Additionally, the amendments modified the disclosure requirements for investments in certain entities that calculate net asset value and measurement uncertainty.

Finally, the amendments added disclosure requirements for (1) the changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements, and (2) the range and weighted average of significant unobservable inputs used to develop Level 3 measurements.

The adoption of the standard did not have a material impact on the Company's consolidated statements of financial condition and results of operations.

On April 1, 2019, the Company adopted ASC Topic 842, Leases (Topic 842).

24 unchanged sentences

On April 1, 2019, the Company adopted 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 adoption of the standard did not have a material impact on the Company's consolidated statements of financial condition and results of operations.

On April 1, 2019, the Company adopted ASU No.

2018-02 "Income Statement - Reporting Comprehensive Income (Topic 220)," which allows a reclassification for stranded tax effects from accumulated other comprehensive income to retained earnings, to eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act.

1 unchanged sentence

As the Company has provided a full valuation allowance against its net deferred tax assets, the change in tax rates resulted in a writedown of the deferred tax assets, which was offset by a reduction in the deferred tax valuation allowance.

On April 1, 2018, the Company adopted ASU No.

The adoption of the standard did not have a material impact on the Company's consolidated statements of financial condition and results of operations.

Accounting Standards Not Yet Adopted

12 unchanged sentences

The Company is currently in the implementation stage of ASU 2016-13 and has engaged two vendors to assist management in evaluating the requirements of the new standard, modeling requirements and assessment of the impact of the adoption of the new standard on its consolidated statements of financial condition and results of operations.

In August 2018, the FASB issued ASU No.

2018-13 "Fair Value Measurement (Topic 820):

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement," to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear communication of the information required by GAAP that is most important to users of an entity's financial statements.

Additionally, the amendments modified the disclosure requirements for investments in certain entities that calculate net asset value and measurement uncertainty.

The amendments in this update are effective for fiscal years beginning after December 15, 2019 (for the Company, the fiscal year ending March 31, 2021), and interim periods within those fiscal years.

The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption.

All other amendments should be applied retrospectively to all periods presented upon their effective date.

Early adoption is permitted and an entity is permitted to early adopt any removed or modified disclosures upon issuance of the ASU and delay adoption of the additional disclosures until their effective date.

The adoption of ASU 2018-13 is not expected to have a material impact on the Company's consolidated statements of financial condition and results of operations.

In December 2019, the FASB issued ASU No.

9 unchanged sentences

ASU 2020-04 is effective March 12, 2020 through December 31, 2022.

An entity may elect to apply ASU 2020-04 for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are

available to be issued.

Once elected for a Topic or an Industry Subtopic, the amendments in this ASU must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic.

Once elected for a Topic or an Industry Subtopic, the amendments in this ASU must be applied

prospectively for all eligible contract modifications for that Topic or Industry Subtopic.

We anticipate this ASU will simplify any modifications we execute between the selected start date (yet to be determined) and December 31, 2022 that are directly related to LIBOR transition by allowing prospective recognition of the continuation of the contract, rather than extinguishment of the old contract resulting in writing off unamortized fees/costs.

4 unchanged sentences

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.

GAAP requires that securities be classified into three categories:

GAAP requires that debt securities be classified into three categories:

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

1 unchanged sentence

The Bank had no securities classified as trading at March 31, 2021 and March 31, 2020.

Equity securities primarily consist of the Bank's investment in a limited partnership Community Capital Fund.

As a result of the adoption of ASU 2016-01 in April 2018, the Company determined that these investments fall under the provisions of ASU 2016-01, and accordingly, were transferred from available-for-sale and reclassified into equity securities on the Statement of Financial Condition.

Other investments as of March 31, 2021 primarily consists of the Bank's investment in a limited partnership Community Capital Fund.

These securities are measured at fair value with unrealized holding gains and losses reflected in net income.

Effective April 1, 2018, the Company recorded a cumulative effect adjustment of $ 721 thousand as a reclassification from accumulated other comprehensive loss to retained earnings.

Additionally, all subsequent changes in fair value have been recognized in the Statements of Operations.

Other investments totaled $ 948 thousand at March 31, 2021 and are included in Other Assets on the Statements of Financial Condition.

11 unchanged sentences

Corporate Bonds 5,274 — 793 4,481

Muni Securities 17,763 — 1,153 16,610

Asset-backed Securities 3,336 28 — 3,364

Total available-for-sale $ 89,682 $ 155 $ 3,330 $ 86,507

3 unchanged sentences

Federal National Mortgage Association 7,124 264 — 7,388

Total held-to-maturity mortgage-backed securities 9,151 418 — 9,569

Corporate Bonds 1,000 — 5 995

Total held-to-maturity $ 7,807 $ 333 $ — $ 8,140

18 unchanged sentences

Total held-to-maturity $ 10,151 $ 418 $ 5 $ 10,564

There were no sales of available-for-sale securities and held-to-maturity securities for the year ended March 31, 2020.

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 year ended March 31, 2021.

$ in thousands 2019

There were no sales of available-for-sale securities and held-to-maturity securities for the year ended March 31, 2020.

$ in thousands March 31, 2021

Proceeds $ 37,802

Gross gains 1,193

Gross losses 28

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”) mortgage-backed securities and Federal Home Loan Mortgage Corporation (“FHLMC”) participation certificates.

12 unchanged sentences

Corporate bonds 793 4,481 — — 793 4,481

Muni securities 1,153 16,609 — — 1,153 16,609

Total available-for-sale securities $ 3,217 $ 60,110 $ 113 $ 18,631 $ 3,330 $ 78,741

Held-to-Maturity:

Corporate bonds $ 5 $ 995 $ — $ — $ 5 $ 995

Total held-to-maturity securities $ 5 $ 995 $ — $ — $ 5 $ 995

At March 31, 2020

9 unchanged sentences

Held-to-Maturity:

Mortgage-backed securities $ — $ — $ 87 $ 8,752 $ 87 $ 8,752

Corporate bonds $ 5 995 — — $ 5 $ 995

Total held-to-maturity securities $ 5 $ 995 $ — $ — $ 5 $ 995

A total of seven securities had an unrealized loss at March 31, 2020, compared to 35 at March 31, 2019.

government agency securities and corporate bonds represented 89.1 % and 8.3 %, respectively, of total available-for-sale securities in an unrealized loss position at March 31, 2020.

A total of 15 securities had an unrealized loss at March 31, 2021, compared to 7 at March 31, 2020.

Mortgage-backed securities, U.S.

government agency securities and muni securities represented 49.6%, 23.7 % and 21.1 %, respectively, of total available-for-sale securities in an unrealized loss position at March 31, 2021.

There were three U.S.

government agency securities and one mortgage-backed security that had an unrealized loss position for more than 12 months at March 31, 2020.

government agency securities that had an unrealized loss position for more than 12 months at March 31, 2021.

The cause of the temporary impairment is directly related to changes in interest rates.

3 unchanged sentences

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.

government's guarantees, the high credit quality and strong financial performance of the municipal securities, 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 the Company has the ability and intent to hold the securities until maturity or the valuation recovers.

The Bank did not have any securities that were classified as having other-than-temporary impairment in its investment portfolio at March 31, 2021.

5 unchanged sentences

Available-for-Sale:

Less than one year $ 3,004 $ 2,998 1.61 %

One through five years 3,336 3,364 3.18 %

4 unchanged sentences

Held-to-maturity:

One through five years $ — $ — — %

Five through ten years 1,000 995 5.75 %

After ten years — — — %

Mortgage-backed securities $ 7,807 $ 8,140 2.37 %

$ 10,151 $ 10,564 2.81 %

LOANS RECEIVABLE, NET

The following is a summary of loans receivable, net of allowance for loan losses at March 31:

March 31, 2020 March 31, 2019

March 31, 2021

March 31, 2020

$ in thousands Amount % Amount %

9 unchanged sentences

Total loans receivable, net $ 478,409 $ 423,786

( 1) Includes business overdrafts of $ 10 thousand and $ 79 thousand as of March 31, 2020 and 2019 , respectively

(2) Includes consumer overdrafts of $ 15 thousand as of March 31, 2020 and 2019

( 1) Includes PPP loans of $36.0 million as of March 31, 2021 and business overdrafts of $ 10 thousand as of March 31, 2021 and 2020

(2) Includes consumer overdrafts of $ 44 thousand and $ 15 thousand as of March 31, 2021 and 2020, respectively

Substantially all of the Bank's real estate loans receivable are principally secured by properties located in New York City.

3 unchanged sentences

At March 31, 2021 the Bank pledged $ 42.8 million in total real estate mortgage loans as collateral for advances from the FHLB-NY.

The Bank is participating as a lender in the Paycheck Protection Program ("PPP"), which opened on April 3, 2020.

As part of the CARES Act, the Small Business Administration ("SBA") is authorized to temporarily guarantee loans under this new 7(a) loan program.

Under the PPP, small businesses and other entities and individuals can apply for loans from existing SBA lenders and other approved regulated lenders that enroll in the program, subject to numerous limitations and eligibility criteria.

Since the PPP loans are fully guaranteed by the SBA, there are no additional ALLL reserves required.

As of March 31, 2021, the Bank has approved and funded approximately 304 applications totaling $ 42.9 million of loans under the PPP.

The Bank has begun to receive debt forgiveness payments on PPP loans closed during the first round of the program.

For the fiscal year ended March 31, 2021, the Bank received 83 applications for payment deferrals on approximately $ 90.4 million of loans.

This total includes 61 commercial loans totaling $ 83.5 million and 22 residential loans totaling $ 6.9 million.

As of March 31, 2021, we have 15 loans remaining that are on deferment with outstanding principal balances totaling $8.3 million.

The Bank has been working with the borrowers to determine if there is a risk of any losses associated with repayment and if any additional reserves would have to be allocated to this portfolio.

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, 2021:

33 unchanged sentences

The following is a summary of nonaccrual loans at March 31, 2021 and 2020.

$ in thousands March 31, 2020 March 31, 2019

$ in thousands March 31, 2021

March 31, 2020

Loans accounted for on a nonaccrual basis:

9 unchanged sentences

TDR loans consist of modified 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.

At March 31, 2020, other non-performing assets totaled $ 120 thousand, which consisted of other real estate owned comprised of two foreclosed residential properties, compared to $ 404 thousand comprised of four residential properties at March 31, 2019.

At March 31, 2021, other non-performing assets totaled $ 60 thousand, which consisted of other real estate owned comprised of one foreclosed residential property, compared to $ 120 thousand comprised of two foreclosed residential properties at March 31, 2020.

Other real estate loans is included in other assets in the consolidated statements of financial condition.

9 unchanged sentences

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.

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.

8 unchanged sentences

Substandard 5,188 1,110 8,648

Doubtful — — —

Total $ 106,400 $ 148,809 $ 147,680

67 unchanged sentences

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 was one loan modification made during the twelve months ended March 31, 2021.

There were no loan modifications made during the twelve months ended March 31, 2020.

There were three loan modifications made during the twelve months ended March 31, 2019.

The following table presents an analysis of the loan modifications that were classified as TDRs during the twelve month period ended March 31, 2021,

Modifications to loans during the years ended March 31, 2021

$ in thousands Number of loans Pre-modification outstanding recorded investment Post-Modification Recorded investment Pre-Modification rate Post-Modification rate

$ in thousands Number of loans Pre-Modification Recorded Investment Post-Modification Recorded investment Pre-Modification rate Post-Modification rate

Business 1 $ 4,949 $ 4,949 6.68 % 5.50 %

In an effort to proactively resolve delinquent loans, Carver has selectively extended to certain borrowers concessions such as extensions, rate reductions or forbearance agreements.

For the fiscal years ended March 31, 2020 and 2019, there were no modified loans that defaulted with the last 12 months of modification.

Total TDR loans at March 31, 2020 were $ 3.9 million, $ 2.2 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.

For the fiscal years ended March 31, 2021 and 2020, there were no modified loans that defaulted within the last 12 months of modification.

Total TDR loans at March 31, 2021 were $ 7.5

million, $ 1.8 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, 2020, total TDR loans were $ 3.9 million, of which $ 2.2 million were non-performing.

12 unchanged sentences

Premises and equipment, net $ 4,611 $ 5,377

Depreciation and amortization charged to operations for fiscal years 2020 and 2019 amounted to $ 965 thousand and $ 793 thousand, 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.

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 to be amortized into income over the term of the lease.

The deferred gain on the sale of the property was included in Other Liabilities on the Consolidated Statements of Financial Condition and totaled $ 468 thousand as of March 31, 2019.

During fiscal year 2018, Carver conducted a sale and leaseback transaction on its Harlem headquarters location with an unaffiliated third party.

The Bank leased a portion of the property to continue to maintain its Main Office branch at the same location, and the administrative offices were relocated to a nearby facility.

The Company recognized a $ 9.6 million gain on the sale and leaseback in the fourth quarter of fiscal year 2018.

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 was to be amortized into income over the term of the lease.

The deferred gain on the sale of the property was included in Other Liabilities on the Consolidated Statements of Financial Condition and totaled $ 4.9 million as of March 31, 2019.

On April 1, 2019, the Company adopted Topic 842.

As part of the adoption, the Company recorded a $ 5.3 million cumulative effect adjustment to retained earnings to recognize the total deferred gain balance related to sale and leaseback transactions at the adoption date.

See Note 6 "Leases" for additional information.

Depreciation and amortization charged to operations for fiscal years 2021 and 2020 amounted to $ 1.0 million and $ 965 thousand, respectively.

On April 1, 2019, the Company adopted Topic 842 and all subsequent ASUs that modified Topic 842.

18 unchanged sentences

$ in thousands March 31, 2021

March 31, 2020

Operating lease expense $ 2,856 $ 2,925

15 unchanged sentences

Lease liability $ 16,003 $ 114

Under the legacy GAAP as of March 31, 2019, the Company's minimum annual rental commitments under all non-cancelable leases with initial or remaining terms of more than one year are as follows:

$ in thousands

Year Ending March 31,

Thereafter 8,572

ACCRUED INTEREST RECEIVABLE

41 unchanged sentences

Deposits from certain directors, executive officers and their affiliates 216 64

BORROWED MONEY

ADVANCES FROM THE FHLB-NY AND OTHER BORROWED MONEY

Federal Home Loan Bank Advances.

FHLB-NY advances weighted average interest rates by remaining period to maturity at March 31 are as follows:

$ in thousands 2019

Maturing Year Ended March 31, Weighted

Average Rate Amount

2020 2.66 % $ 8,000

2.66 % $ 8,000

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 $ 203.0 million at March 31, 2021.

4 unchanged sentences

The Bank has sufficient collateral at the FHLB-NY to be able to borrow $ 42.7 million from the FHLB-NY at March 31, 2021.

Interest expense on FHLB advances was $ 176 thousand for the year ended March 31, 2020.

At March 31, 2019, the accrued interest payable on FHLB advances was $ 2 thousand and the interest expense was $ 89 thousand.

Subordinated Debt Securities.

6 unchanged sentences

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 was made on June 16, 2021.

The accrued interest payable on subordinated debt securities was $ 3.1 million and the interest expense was $ 562 thousand for the year ended March 31, 2021.

The accrued interest payable on subordinated debt securities was $ 2.5 million and the interest expense was $ 815 thousand for the year ended March 31, 2020.

Paycheck Protection Program Liquidity Facility (PPPLF) .

The Federal Reserve established the PPPLF to support the PPP program by extending credit to eligible financial institutions that originate PPP loans, taking the loans as collateral at face value.

The interest rate on PPPLF advances is fixed at 0.35% and the maturity date is equal to the maturity date of the PPP loans pledged to secure the extension of credit.

The accrued interest payable on PPPLF advances was $73 thousand and the interest expense was $85 thousand for the year ended March 31, 2021.

The following table sets forth certain information regarding Carver Federal's borrowings as of and for the years ended March 31:

1 unchanged sentence

Amounts outstanding at the end of year:

FHLB advances $ — $ 8,000

Subordinated debt securities 13,403 13,403

PPPLF 23,705 —

Rate paid at year end:

FHLB advances — % 2.66 %

Subordinated debt securities 3.23 % 3.89 %

PPPLF 0.35 % — %

Maximum amount of borrowing outstanding at any month end:

1 unchanged sentence

Subordinated debt securities 13,403 13,403

PPPLF 28,293 —

Approximate average amounts outstanding for year:

1 unchanged sentence

Subordinated debt securities 13,403 13,403

PPPLF 24,453 —

Approximate weighted average rate paid during year:

1 unchanged sentence

Subordinated debt securities 4.19 % 6.08 %

PPPLF 0.35 % — %

The following is a reconciliation of the expected Federal income tax rate to the consolidated effective tax rate for the years ended March 31:

10 unchanged sentences

Allowance for loan losses $ 1,723 $ 1,689

Compensation and benefits 16 —

Nonaccrual loan interest 54 40

Deferred gain - sale leaseback transactions — 1,803

Net operating loss carryforward 18,890 18,732

New markets tax credit 3,434 3,452

AMT credits — 170

Depreciation ( 916 ) ( 5 )

Unrealized (gain) loss on available-for-sale securities ( 313 ) 1,092

Unrealized loss (gain) on available-for-sale securities 667 ( 313 )

Other 248 124

Total Deferred Tax Assets 24,116 23,719

16 unchanged sentences

As a result, at March 31, 2018, the valuation allowance was reduced by $340 thousand, the amount of the Company's AMT credits.

The amount of the AMT credits recorded as a deferred tax asset was $ 0 as of March 31, 2020, and $ 170 thousand as of March 31, 2019.

The amount of the AMT credits recorded as a deferred tax asset was $ 0 as of March 31, 2020.

The AMT credit was $143 thousand as of March 31, 2020, which the Company requested to be refunded from its recently filed fiscal year 2020 federal tax return.

At March 31, 2021, the Company had net operating carryforwards for federal purposes of approximately $ 51.2 million, for state purposes of approximately $ 70.9 million and for city purposes of approximately $ 58.5 million which are available to offset future federal, state and city income and which expire over varying periods from March 2030 through March 2040.

46 unchanged sentences

As of March 31, 2021, 11,744 shares of its common stock have been repurchased in open market transactions.

No shares were repurchased during fiscal 2020.

Treasury's prior approval is required to make further repurchases.

As a result of the Company's participation in the TARP CDCI, the United States Department of the Treasury's (the "U.S.

Treasury") prior approval was required to make further repurchases.

On August 6, 2020, the Company entered into a Securities Purchase Agreement with the U.S.

Treasury to repurchase 2,321,286 shares of the common stock of the Company, par value $0.01 per share, owned by the U.S.

Treasury for an aggregate purchase price of $ 2.5 million.

The stock repurchase provided for in the Securities Purchase Agreement was completed on August 6, 2020.

Upon completion of the repurchase pursuant to the Securities Purchase Agreement, the U.S.

Treasury was no longer a stockholder in the Company.

In connection with the repurchase, Morgan Stanley provided a grant to the Company of $ 2.5 million to fund the repurchase transaction.

In June 2020, The Goldman Sachs Group, Inc., an institutional investor, notified the Company of their intention to effect a series of transfers of up to all its holdings of Series D Preferred Stock.

The conversion and subsequent sale of shares were completed on July 2, 2020:

13,519 Series D Preferred Stock shares were converted into 1,653,397 shares of Common Stock, which were subsequently sold in the open market.

The conversion and sale had no impact on the Company's total capital.

On July 9, 2020, the Company received notice that Morgan Stanley International Holdings Inc., an institutional investor, relinquished its ownership of 180,573 shares of Company common stock and 13,523 shares of Company Preferred Series D Stock to the Company at no cost to the Company.

On October 15, 2020, the Company entered into an agreement with Banc of America Strategic Investments Corporation, under which it issued and sold 147,227 shares of its common stock, par value $0.01, at a price of $ 6.62 per share.

The shares were issued on October 15, 2020, in a private placement exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and Regulation D of the rules and regulations promulgated thereunder.

On January 22, 2021, Prudential Insurance Company of America, an institutional investor, notified the Company of its intention to cancel 475 of its holdings of Series D Preferred Stock and convert them into 58,093 shares of Common Stock.

The conversion had no impact on the Company's total capital.

On February 1, 2021, the Company entered into an agreement with Wells Fargo Central Pacific Holdings, Inc., under which it sold:

(i) 157,806 shares of its common stock, par value $0.01 per share, at a purchase price of $ 7.75 per share, and (ii) 3,177 shares of a new series of preferred stock, Series E non-cumulative non-voting participating preferred stock, par value $0.01 per share, at a purchase price of $ 1,000 per share, in a private placement for gross proceeds of approximately $ 4.4 million.

Upon the completion of certain eligible transfers of the Series E preferred stock by Wells Fargo Central Pacific Holdings, Inc., the Series E preferred stock would be convertible into common stock at a conversion price of $7.96 per share.

The issuance of the shares is exempt from registration pursuant to the exemption provided under Rule 506 of Regulation D promulgated under the Securities Act of 1933, as amended.

The offering was made only to accredited investors as that term is defined in Rule 501(a) of Regulation D under the Act.

Series E Preferred Stock is perpetual and has no maturity date.

The Company may redeem the shares of Series E Preferred Stock, in whole or in part, on any date on or after February 1, 2026.

The holders of Series E Preferred Stock will be entitled to receive, if declared by the Company's board of directors, noncumulative cash dividends on each date that dividends or other distributions are payable.

The holders of the Series E Preferred Stock will not have voting rights except for any vote required by law or by the Company's Certificate of Incorporation, or for effecting or validating:

(i) any increase or decrease in the authorized number of shares of Series E Preferred Stock or issuance of shares of Series E Preferred Stock after the original issue date;

(ii) any amendment, alteration or repeal of any provision of the Certificate of Incorporation or Bylaws of the Company that would adversely affect the voting powers, preferences, privileges or special rights of the Series E Preferred Stock;

(iii) any amendment or alteration of the Certificate of Incorporation or Bylaws of the Company to authorize or create, or increase the authorized amount of any shares of any class or series or any securities convertible into shares of any class or series of capital stock of the Company ranking senior to Series E Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Company;

or (iv) a merger or consolidation of the Company with

another entity (whether or not a corporation), unless in each case (A) the shares of Series E Preferred Stock remain outstanding and (B) such shares remaining outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers, and limitations and restrictions, and limitations and restrictions thereof as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers, and restrictions and limitations thereof, of the Series E Preferred Stock immediately prior to such consummation.

On February 16, 2021, the Company entered into an agreement with J.P.

Morgan Chase Community Development Corporation, under which it sold:

(i) 112,612 shares of its common stock, par value $0.01 per share, at a purchase price of $ 8.88 per share, and (ii) 5,000 shares of a new series of preferred stock, Series F non-cumulative non-voting non-convertible preferred stock, par value $0.01 per share, at a purchase price of $ 1,000 per share, in a private placement for gross proceeds of approximately $ 6.0 million.

The issuance of the shares is exempt from registration pursuant to the exemption provided under Rule 506 of Regulation D promulgated under the Securities Act of 1933, as amended.

The offering was made only to accredited investors as that term is defined in Rule 501(a) of Regulation D under the Act.

Series F Preferred Stock is perpetual and has no maturity date.

The shares are not convertible.

The Company may redeem the shares of Series F Preferred Stock, in whole or in part, on any date on or after February 16, 2026.

The holders of Series F Preferred Stock will be entitled to receive, if declared by the Company's board of directors, noncumulative cash dividends on each date that dividends or other distributions are payable.

The holders of the Series F Preferred Stock will not have voting rights except for any vote required by law or by the Company's Certificate of Incorporation, or for effecting or validating:

(i) any amendment, alteration or repeal of any provision of the Certificate of Incorporation or Bylaws of the Company that would significantly and adversely affect the voting powers, preferences, privileges or special rights of the Series F Preferred Stock;

(ii) any amendment or alteration of the Certificate of Incorporation or Bylaws of the Company to authorize or create, or increase the authorized amount of any shares of any class or series or any securities convertible into shares of any class or series of capital stock of the Company ranking senior to Series F Preferred Stock in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Company;

or (iii) a merger or consolidation of the Company with another entity (whether or not a corporation), unless in each case (A) the shares of Series F Preferred Stock remain outstanding and (B) such shares remaining outstanding or such preference securities, as the case may be, have such rights, preferences, privileges and voting powers , and limitations and restrictions, and limitations and restrictions thereof as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers, and restrictions and limitations thereof, of the Series F Preferred Stock immediately prior to such consummation.

Regulatory Capital .

5 unchanged sentences

On January 1, 2019, the full capital conservation buffer requirement of 2.5% became effective, making its minimum CET1 plus buffer 7%, its minimum Tier 1 capital plus buffer 8.5% and its minimum total capital plus buffer 10.5%.

In accordance with the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies have adopted, effective January 1, 2020, a final rule whereby financial institutions and financial institution holding companies that have less than $10 billion in total consolidated assets and meet other qualifying criteria, including a leverage ratio of greater than 9%, will be eligible to opt into a “Community Bank Leverage Ratio” framework.

Qualifying community banking organizations that elect to use the community bank leverage ratio framework and that maintain a leverage ratio of greater than 9% will be considered to have satisfied the generally applicable risk-based and leverage capital requirements in the agencies’ capital rules and will be considered to have met the “well capitalized” ratio requirements under the Prompt Corrective Action statutes.

The CARES Act and implementing rules temporarily reduced the Community Bank Leverage Ratio to 8%, to be gradually increased back to 9% by 2022.

The CARES Act also provides that, during the same time period, if a qualifying community banking organization falls no more than 1% below the community bank leverage ratio, it will have a two quarter grace period to satisfy the community bank leverage ratio.

The agencies reserved the authority to disallow the use of the Community Bank Leverage Ratio by a financial institution or holding company based on the risk profile of the organization.

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.

3 unchanged sentences

The table below presents the Bank's regulatory capital ratios at March 31, 2021 and 2020.

March 31, 2020 March 31, 2019

March 31, 2021

March 31, 2020

($ in thousands) Amount Ratio Amount Ratio

20 unchanged sentences

$ in thousands At

March 31, 2019 Other Comprehensive Income At

March 31, 2020

Net unrealized (loss) income on securities available-for-sale $ ( 939 ) $ 1,871 $ 932

$ in thousands At

March 31, 2018 ASU 2016-01 reclassification Other Comprehensive Income At

Other Comprehensive Income At

March 31, 2021

Net unrealized income (loss) on securities available-for-sale $ 932 $ ( 4,107 ) $ ( 3,175 )

$ in thousands At

March 31, 2019

Other Comprehensive Income At

March 31, 2020

Net unrealized (loss) income on securities available-for-sale $ ( 939 ) $ 1,871 $ 932

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.

1 unchanged sentence

$ in thousands 2021

Reclassification adjustment for sales of available for-sale securities, net of tax $ — $ 16 Loss on sale of securities, net

Reclassification adjustment for sales of available for-sale securities, net of tax $ 1,193 $ — Gain on sale of securities, net

Comprehensive Income (Loss).

Comprehensive income (loss) represents net income (loss) 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, 2020 included $ 1.9 million of unrealized gains for the year ended March 31, 2020.

The balance at March 31, 2021 included $ 4.1 million of unrealized losses for the year ended March 31, 2021.

The balance at March 31, 2020 included $ 1.9 million of unrealized gains for the year ended March 31, 2020.

4 unchanged sentences

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.

The 401(k) match was temporarily suspended effective October 1, 2020.

Compensation expense recognized for the savings incentive plan was $ 118 thousand and $ 254 thousand, respectively, for fiscal 2021 and 2020.

6 unchanged sentences

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.

If the person is terminated (voluntary or involuntarily) from the Bank, all unvested shares are

If the person is terminated (voluntary or involuntarily) from the Bank, all unvested shares are forfeited.

Pursuant to the plan, the Bank recognized $ 1 thousand and $ 3 thousand as expense for fiscal years 2021 and 2020, respectively.

4 unchanged sentences

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.

During fiscal 2020, there were 31,000 restricted stock awards issued.

There were no grants issued during fiscal 2019.

During fiscal 2021 51,000 restricted stock awards were issued and 31,000 restricted stock awards were issued.in fiscal 2020.

At March 31, 2021, there were 3,000 options outstanding under the 2014 Incentive Plan and 750 were exercisable.

1 unchanged sentence

If the person is terminated (voluntary or involuntarily) from the Bank, all unvested shares are forfeited.

Pursuant to the plan, the Bank recognized $ 24 thousand as expense for fiscal year 2020.

Pursuant to the plan, the Bank recognized $ 88 thousand as expense for fiscal year 2021 and $24 thousand in fiscal year 2020.

Information regarding nonvested shares of restricted stock awards outstanding for the years ended March 31 is as follows:

28 unchanged sentences

This amount will be recognized over the remaining vesting period of 2.15 years (weighted average).

There were no stock options awarded to employees or directors during the year ended March 31, 2020.

There were 2,000 stock options awarded to employees or directors during the year ended March 31, 2021.

At March 31, 2021, all outstanding options had no intrinsic value.

The Company recorded stock compensation expense of $ 4 thousand in fiscal 2020 and 2019.

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 year ended March 31, 2021:

Fair value of options granted $ 3.44

Risk-free interest rate 0.01 %

Volatility 10 %

Expected life of option grants (years) 9.25

The Company recorded stock compensation expense of $ 3 thousand in fiscal 2021 and $4 thousand in 2020.

COMMITMENTS AND CONTINGENCIES

6 unchanged sentences

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:

The following table reflects the Bank's outstanding commitments as of March 31:

$ in thousands 2021

39 unchanged sentences

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, 2020, 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.

At March 31, 2021, 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.

8 unchanged sentences

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, 2020 and 2019, and that are included in the Company's Consolidated Statements of Financial Condition at these dates:

The following table presents, by valuation hierarchy, assets that are measured at fair value on a recurring basis as of March 31, 2021 and 2020, and that are included in the Company's Consolidated Statements of Financial Condition at these

Fair Value Measurements at March 31, 2021, Using

9 unchanged sentences

Corporate bonds — 4,481 — 4,481

Muni securities — 16,610 — 16,610

Asset-backed securities — 3,364 — 3,364

Total available-for-sale securities — 86,507 — 86,507

14 unchanged sentences

Instruments for which unobservable inputs are significant to their fair value measurement (i.e., Level 3) include mortgage servicing rights ("MSR") and other investments.

Level 3 assets accounted for 0.03 % of the Company's total assets at March 31, 2020 and 2019.

Level 3 assets accounted for 0.02 % and 0.03 % of the Company's total assets measured at fair value at March 31, 2021 and 2020, respectively.

The Company reviews and updates the fair value hierarchy classifications on a quarterly basis.

4 unchanged sentences

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.

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.

10 unchanged sentences

Issuances / (Settlements) Transfers to/(from) Level 3 Ending balance,

March 31, 2020 Change in Unrealized Gains/(Losses) Related to Instruments Held at March 31, 2020

March 31, 2021

Change in Unrealized Gains/(Losses) Related to Instruments Held at March 31, 2021

Mortgage Servicing Rights 145 2 — — 147 2

1 unchanged sentence

Issuances / (Settlements) Transfers to/(from) Level 3 Ending balance,

March 31, 2019 Change in Unrealized Gains/(Losses) Related to Instruments Held at March 31, 2019

March 31, 2020

Change in Unrealized Gains/(Losses) Related to Instruments Held at March 31, 2020

Mortgage Servicing Rights 180 ( 35 ) — — 145 ( 33 )

1 unchanged sentence

For Level 3 assets measured at fair value on a recurring basis as of March 31, 2021 and 2020, the significant unobservable inputs used in the fair value measurements were as follows:

$ in thousands Fair Value at March 31, 2020 Valuation Technique Significant Unobservable Inputs Significant Unobservable Input Value

$ in thousands Fair Value at March 31, 2021

Valuation Technique Significant Unobservable Inputs Significant Unobservable Input Value

Mortgage Servicing Rights 147 Discounted Cash Flow Weighted Average Constant Prepayment Rate (1)

Option Adjusted Spread ("OAS") applied to Treasury curve 1200 basis points

$ in thousands Fair Value at March 31, 2019 Valuation Technique Significant Unobservable Inputs Significant Unobservable Input Value

$ in thousands Fair Value at March 31, 2020

Valuation Technique Significant Unobservable Inputs Significant Unobservable Input Value

Mortgage Servicing Rights 145 Discounted Cash Flow Weighted Average Constant Prepayment Rate (1)

14 unchanged sentences

For Level 3 assets measured at fair value on a non-recurring basis as of March 31, 2021 and 2020, the significant unobservable inputs used in the fair value measurements were as follows:

$ in thousands Fair Value at March 31, 2020 Valuation Technique Significant Unobservable Inputs Significant Unobservable Input Value

$ in thousands Fair Value at March 31, 2021

Valuation Technique Significant Unobservable Inputs Significant Unobservable Input Value

Impaired loans $ 5,341 Appraisal of collateral Appraisal adjustments 7.5% cost to sell

Other real estate owned 60 Appraisal of collateral Appraisal adjustments 7.5% cost to sell

$ in thousands Fair Value at March 31, 2019 Valuation Technique Significant Unobservable Inputs Significant Unobservable Input Value

$ in thousands Fair Value at March 31, 2020

Valuation Technique Significant Unobservable Inputs Significant Unobservable Input Value

Impaired loans $ 1,293 Appraisal of collateral Appraisal adjustments 7.5% cost to sell

25 unchanged sentences

Mortgage servicing rights 147 147 — — 147

Other assets - Interest-bearing deposits 981 981 — 981 —

Financial Liabilities:

16 unchanged sentences

Deposits $ 488,815 $ 489,309 $ 291,951 $ 197,358 $ —

Advances from FHLB of New York 8,000 8,001 — 8,001 —

Other borrowed money 13,403 13,386 — 13,386 —

8 unchanged sentences

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.

In June 2006, CCDC received a NMTC award of $ 59 million.

CCDC received a second NMTC award of $ 65 million in May 2009, and a third award of $ 25 million in August 2011.

During the period from December 2009 to September 2012, CCDC transferred rights to investors in NMTC projects (entities CDEs 13-21).

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.

The NMTC compliance period was completed for all these entities, and CDEs 2-21 have been dissolved.

CCDC established various special purpose entities (CDEs 22-25) through which its investments in NMTC eligible activities will be conducted.

As of March 31, 2021, there have been no activities in these entities.

The variable interest entities (“VIEs”) are consolidated, as required, where Carver has controlling financial interest in these entities and is deemed to be the primary beneficiary.

8 unchanged sentences

$ — $ — $ 13,400 $ 13,400 $ 16,110 $ 400 $ — $ — $ 16,510

CDE 18* 600 13,254 — — — — — 5,169 5,169

CDE 19 500 10,746 11,060 11,060 — 1 — 4,191 4,192

Total $ 1,100 $ 24,000 $ 24,460 $ 24,460 $ 15,549 $ 401 $ — $ 9,360 $ 25,310

* Entity exited the NMTC project during fiscal year 2018 and remains on the above table pending final dissolution.

1 Carver Statutory Trust debt investment includes deferred interest of $ 2.5 million.

In June 2006, CCDC received a NMTC award of $ 59 million.

CCDC received a second NMTC award of $ 65 million in May 2009, and a third award of $ 25 million in August 2011.

During the period from December 2009 to September 2012, CCDC transferred rights to investors in NMTC projects (entities CDEs 13-21).

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.

The NMTC compliance period was completed for all these entities, and CDEs 2-17, 20 and 21 have been dissolved.

CCDC established various special purpose entities (CDEs 22-25) through which its investments in NMTC eligible activities will be conducted.

As of March 31, 2020, there have been no activities in these entities.

1 Carver Statutory Trust debt investment includes deferred interest of $ 3.1 million, which was paid on June 16, 2021.

NON-INTEREST REVENUE AND EXPENSE

10 unchanged sentences

Loan fees and service charges primarily relate to program management fees and fees earned in accordance with the Bank's standard lending fees (such as inspection and late charges).

These standard lending fees are earned on a monthly basis

upon receipt.

These standard lending fees are earned on a monthly basis upon receipt.

Other non-interest income

Other non-interest income primarily relates to an advertising services agreement, covering marketing and use of the Bank's office space with a third party.

Other non-interest income includes correspondent banking fees, and income associated with an advertising services agreement covering marketing and use of the Bank's office space with a third party.

The revenue is recognized on a monthly basis.

2 unchanged sentences

Interchangee fees from cardholder transactions are recognized daily, concurrently with the transaction processing services provided by an outsource technology solution and are presented on a net basis.

The following table presents non-interest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the years ended March 31, 2020 and March 31, 2019:

The following table presents non-interest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the years ended March 31, 2021 and 2020:

Years Ended March 31,

11 unchanged sentences

$ in thousands 2021

Other non-interest income:

Grant income $ 500 $ —

Correspondent banking fees 1,235 —

Other 276 184

Total non-interest income $ 2,011 $ 184

Other non-interest expense:

6 unchanged sentences

Retail expenses 825 733

Operating chargeoffs and other losses — 714

Regulatory assessment 209 314

Director's fees 366 331

9 unchanged sentences

Net interest income 3,546 3,874 4,139 4,328

Provision for loan losses 1 7 8 3

Provision for (recovery of) loan losses ( 102 ) ( 1 ) 4 ( 1 )

Non-interest income 1,683 1,973 899 1,643

8 unchanged sentences

Net interest income 4,172 3,844 4,029 3,951

Provision for (recovery of) loan losses 5 49 ( 332 ) 8

Provision for loan losses 1 7 8 3

Non-interest income 941 1,009 965 824

Non-interest expense 6,251 5,896 6,422 6,570

Income tax expense — — — —

Net loss $ ( 1,139 ) $ ( 1,050 ) $ ( 1,436 ) $ ( 1,798 )

23 unchanged sentences

Other income 21 26

Grant income 500 —

Total (loss) income ( 2,518 ) ( 4,473 )

Interest expense on borrowings 562 815

Salaries and employee benefits 168 —

Shareholder expense 223 32

14 unchanged sentences

Increase in other liabilities 609 785

Net cash used in operating activities ( 3 ) ( 29 )

Net cash provided by (used in) operating activities 467 ( 3 )

Cash Flows From Financing Activities

Capital contribution 2,500 —

Redemption of treasury stock, net ( 2,500 ) —

Issuance of common stock 3,197 —

Issuance of preferred stock 8,177 —

Restricted stock vesting 37 4

4 unchanged sentences

SUBSEQUENT EVENTS

On March 11, 2020, the World Health Organization declared a pandemic related to the global spread of COVID-19, the disease caused by a novel strain of coronavirus.

The COVID-19 pandemic has adversely affected global, national and local economies.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was signed to provide emergency economic relief to individuals and businesses impacted by the COVID-19 pandemic.

As part of the CARES Act, the Small Business Administration ("SBA") is authorized to temporarily guarantee loans under a new 7(a) loan program called the Paycheck Protection Program ("PPP").

The Bank is participating as a lender in the PPP, which opened on April 3, 2020.

As of July 31, 2020, the Bank has approved 200 applications for approximately $34.6 million of loans under the PPP.

The Bank has accommodated borrowers with short-term deferments for up to 3 or 4 months as requests or needed.

As of July 31, 2020, the Bank has received 92 applications for payment deferrals on approximately $ 95.6 million of loans.

There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19 and the extent of the impact of COVID-19 on the Company's operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, and the impact on customers, employees and vendors, all of which are uncertain and cannot be determined at this time.

The Company is closely monitoring its asset quality, liquidity, and capital positions.

The Company is actively managing the credit risk in its loan portfolio, including reviewing the industries that the Company believes are most likely to be impacted by emerging COVID-19 events.

These and similar factors and events may have substantial negative effects on the business, financial condition, and results of operations of the Company and its customers.

The Bank has seen an increase in its delinquencies since March 31, 2020 and has determined that $2.1 million of the increase is directly related to the COVID-19 pandemic.

On July 2, 2020, The Goldman Sachs Group, Inc., an institutional investor, completed the conversion and subsequent sale of its shares:

13,519 Series D Preferred Stock was converted into 1,653,397 shares of Common Stock, which were subsequently sold in the open market.

The conversion and sale had no impact on the Company's total capital.

On July 30, 2020, the Company reached an agreement in principle (the "Agreement in Principle") with the United States Department of the Treasury (the "Treasury Department") to repurchase 2,321,286 shares of common stock of the Company, par value $0.01 per share, owned by the Treasury Department for an aggregate purchase price of $ 2.5 million.

In connection with the Agreement in Principle, Morgan Stanley has provided a grant to the Company to fund the repurchase transaction.

The Company anticipates executing a written agreement with the Treasury Department and completing the repurchase on or about August 6, 2020.

On May 6, 2021, the Company entered into an agreement with Spectrum Communications Indemnity Inc., in which Spectrum would provide the Company with an unsecured and subordinated long-dated, below-market-rate loan in the amount of $ 1.5 million to finance eligible loans offered through the Bank's community investment initiatives loan program.

On May 13, 2021, the Company received a non-objection letter from the Federal Reserve Bank of Philadelphia to make a total payment of approximately $ 3.2 million in settlement of deferred interest on the subordinated debt associated with its trust preferred securities due.

Payment in full was sent to the trustee on June 16, 2021 for distribution to all securities holders the following day.

On June 7, 2021, the Bank became aware of a possible fraud incident involving the unauthorized use of a borrower’s account through a third-party vendor’s online cash management system.

The Bank’s preliminary investigation of this matter indicates that unauthorized wires totaling $ 2.1 million were fraudulently withdrawn from the borrower’s money market account

at the Bank from May 12, 2021 through June 1, 2021.

The preliminary investigation indicates that an unauthorized person or entity was provided access to the borrower’s account through a third party online banking system.

The Bank contacted the appropriate regulatory and law enforcement agencies, as well as its insurance provider.

The total exposure to the Bank as a result of this incident is $ 2.1 million.

However, the Bank is pursuing all available sources of recovery and other means of mitigating the potential loss.

If any resulting loss is not insured or exceeds applicable insurance limits, it could have a material adverse effect on our business, financial condition and results of operations.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

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 8. Financial Statements and Supplementary Data