What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2022-07-14 compared with 2021-06-29 · 167 added, 201 removed, 689 unchanged (35% of the section changed)

7 unchanged sentences

The Bank remains dedicated to expanding wealth-enhancing opportunities in the communities it serves by increasing access to capital and other financial services for consumers, businesses and non-profit organizations, including faith-based institutions.

A measure of its progress in achieving this goal includes the Bank's fifth consecutive "Outstanding" rating, issued by the Office of the Comptroller of the Currency (the "OCC") following its most recent Community Reinvestment Act (“CRA”) examination in January 2019.

The OCC found that a substantial majority of originated and purchased loans were within Carver Federal's assessment area, and the Bank has demonstrated excellent responsiveness to its assessment area's needs through its community development lending, investing and service activities.

A measure of its progress in achieving this goal includes the Bank's sixth consecutive "Outstanding" rating, issued by the Office of the Comptroller of the Currency (the "OCC") following its most recent Community Reinvestment Act (“CRA”) examination in March 2022.

The OCC found that 90% of Carver Federal's loans were made within our assessment area, and the Bank has demonstrated excellent responsiveness to its assessment area's needs through its community development lending, investing and service activities.

The Bank had approximately $735.3 million in assets and 107 employees as of March 31, 2022.

25 unchanged sentences

In this connection, Carver Federal has successfully competed with large regional and global financial institutions in a number of competitions for government grants and other awards.

In June 2006, CCDC was selected by the U.S.

Department of Treasury, in a highly competitive process, to receive an award of $59 million in New Markets Tax Credits ("NMTC").

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

The NMTC award is used to stimulate economic development in low- to moderate-income communities.

The NMTC awards enable the Bank to invest with community and development partners in economic development projects with attractive terms including, in some cases, below market interest rates, which may have the effect of attracting capital to underserved communities and facilitating revitalization of the community, pursuant to the goals of the NMTC program.

NMTC awards provide a credit to Carver Federal against Federal income taxes when the Bank makes qualified investments.

The credits are allocated over seven years from the time of the qualified investment.

Alternatively, the Bank can utilize the award in projects where another investor entity provides funding and receives the tax benefits of the award in exchange for the Bank receiving fee income.

As of March 31, 2021, all three award allocations have been fully utilized in qualifying projects.

See "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" and footnotes to the financial statements for additional details on the NMTC activities.

Carver Bancorp, Inc.

20 unchanged sentences

The Company has fully and unconditionally guaranteed the Capital Securities along with all obligations of the Trust under the trust agreement relating to the Capital Securities.

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

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

In accordance with the Financial Accounting Standards Board's Accounting Standards Codification (“ASC”) 810, "Consolidations," the Trust is not consolidated with the Company for financial reporting purposes.

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

Such payments were made in September 2016.

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

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

The Company relies primarily on dividends from Carver Federal to pay cash dividends to its stockholders, to engage in share repurchase programs and to pay principal and interest on its trust preferred debt obligation.

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

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 Company deferred the September 17, 2021 interest payment, but has since had discussions with the Federal Reserve Bank of Philadelphia regarding future quarterly payments.

A streamlined process has been developed for the Company to request regulatory approval to make debenture interest payments.

On December 16, 2021, the Company paid the interest deferred from September 16, 2021 and the regular quarterly interest payment due on December 17, 2021.

Subsequently, the Company made the regular quarterly interest payment on its outstanding debentures due on March 17, 2022 and June 17, 2022.

The Company relies primarily on dividends from Carver Federal to pay cash dividends to its stockholders and to engage in share repurchase programs.

The OCC regulates all capital distributions, including dividend payments, by Carver Federal to the Company, and the Board of Governors of the Federal Reserve (the "FRB") regulates dividends paid by the Company.

3 unchanged sentences

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

At the Market Offering

In 2021, we entered into a sales agreement with an agent to sell, from time to time, our common stock having an aggregate offering price of up to $20.0 million, in an “at the market offering.” As of March 31, 2022, we have sold an aggregate of 397,367 shares of our common stock pursuant to the terms of such sales agreement, for aggregate gross proceeds of approximately $3.1 million.

Aggregate net proceeds received were approximately $3.0 million, after deducting expenses and commissions paid to the placement agent.

Human Capital Resources

6 unchanged sentences

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

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

This includes implementing a hybrid working model where our employees work in the office 2 to 3 times a week, simultaneously, continuing to implement safety measures for employees while on-site.

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

12 unchanged sentences

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

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

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

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

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

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

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

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

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

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

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

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

During fiscal year 2021, Carver increased its qualitative factors and assessment criteria due to the ongoing pandemic.

In fiscal year 2022, the Bank adjusted its qualitative factors and assessment criteria from high to medium based on improving economic factors, such as unemployment, stable interest rates and overall increased activity due to less pandemic related restrictions.

The increase in the qualitative reserves was related to the overall increase in our loan portfolio, partially offset by decreases in our quantitative reserve analysis as the rolling 20 quarter historical loss look back period improved for most of our loan categories.

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

Carver Federal continually reviews the composition of its mortgage loan portfolio and underwriting standards to manage the risk in the portfolio.

Additionally, Carver Federal continually reviews the composition of its mortgage loan portfolio and underwriting standards to manage the risk in the portfolio.

Per the requirements of the Formal Agreement, the Bank has reduced its commercial real estate loan concentration as a percentage of risk-based capital to a level well below that mandated by its regulators.

1 unchanged sentence

Total loans receivable increased $96.0 million, or 20.0%, to $576.5 million at March 31, 2022, compared to $480.5 million at March 31, 2021.

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

Carver Federal's total loans receivable as a percentage of total assets increased to 78.4% at March 31, 2022, compared to 71.0% at March 31, 2021.

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

9 unchanged sentences

Commercial real estate 174,270 30.2 % 150,114 31.2 141,761 33.3 130,812 30.7 141,835 29.9

Construction — — % — — — — — — 4,983 0.9

Business 170,497 29.6 % 148,020 30.8 85,425 20.1 96,430 22.6 102,004 21.5

7 unchanged sentences

One-to-four Family Residential Lending .

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

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

The Bank purchased $11.3 million and $2.8 million of one-to-four family residential loans during fiscal years 2022 and 2021, respectively.

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

In fiscal 2017, the Bank purchased $13.9 million of one-to-four family loans.

Approximately 21.2% of the one-to-four family residential mortgage loans maturing in greater than one year at March 31, 2022 were adjustable rate and approximately 78.8% were fixed-rate.

11 unchanged sentences

Accordingly, there can be no assurance that yields on the Bank's adjustable-rate loans will fully adjust to compensate for increases in the Bank's cost of funds.

Adjustable-rate loans increase the Bank's exposure to decreases in prevailing market interest rates, although decreases in the Bank's cost of funds would tend to offset this effect to an extent.

Adjustable-rate loans increase the Bank's exposure to decreases in prevailing market interest rates, although decreases in the Bank's cost of funds would tend to offset this effect to an extent as well.

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

At March 31, 2022, the Bank had $3.3 million in subprime loans, or 0.6% of its total loan portfolio, of which $1.0 million are non-performing loans.

No subprime loans were purchased during fiscal 2021.

No subprime loans were purchased during fiscal year 2022.

Multifamily Real Estate Lending.

Traditionally, Carver Federal originates and purchases multifamily loans.

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

The Bank purchased $15.1 million, $6.9 million and $7.0 million of multifamily loans during fiscal years 2022, 2021 and 2020, respectively.

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

1 unchanged sentence

Carver Federal's multifamily real estate loan portfolio increased $57.2 million, or 55.2%, to $160.8 million in fiscal 2022, or 27.9% of Carver Federal's total loan portfolio at March 31, 2022.

In making multifamily real estate loans, the Bank primarily considers the property's ability to generate net operating income sufficient to support the debt service, the financial resources, income level and managerial expertise of the borrower, the marketability of the property and the Bank's lending experience with the borrower.

Carver Federal's multifamily real estate product guidelines generally require that the maximum loan-to-value ("LTV") at origination not exceed 75% based on the appraised value of the mortgaged property on all such loans.

1 unchanged sentence

Carver Federal originates and purchases multifamily real estate loans, which are predominantly adjustable rate loans that generally amortize on the basis of a 15-, 20-, 25-, or 30-year period and require a balloon payment after the first five years, or the borrower may have an option to extend the loan for additional periods.

The Bank occasionally originates fixed rate loans with greater than five year terms.

Personal guarantees may be obtained for additional security from these borrowers.

The Bank occasionally originates fixed rate loans with greater than five year terms on a limited basis.

Personal guarantees may be obtained for additional comfort and support to these borrowers.

To help ensure continued collateral protection and asset quality for the term of multifamily real estate loans, Carver Federal employs a risk rating system for its loans.

2 unchanged sentences

In addition, to assist the Bank in evaluating changes in the credit profile of the borrower and the underlying collateral, an independent consulting firm reviews and prepares a written report for a sample of our commercial loan relationships.

On a triannual basis, an independent loan review company i) reviews 70% to 75% of the average commercial loan portfolio, ii) this includes all new and renewed loans greater than $100,000, and iii) all criticized and classified loans.

Summary reports documenting the loan reviews are then reviewed by management for changes in the credit profile of individual borrowers and the portfolio as a whole.

Accordingly, on a triannual basis, the independent loan review company i) reviews 70% to 75% of the average commercial loan portfolio, ii) this includes all new and renewed loans greater than $100,000, and iii) all criticized and classified loans.

Summary reports documenting the loan reviews are then reviewed by management for changes in the credit profile of individual borrowers and the portfolio as a whole, and regularly presented to Senior Management and the Bank's Asset Liability and Interest Rate Risk Committee for risk assessment and monitoring.

Commercial Real Estate Lending .

1 unchanged sentence

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

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

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

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

purchased $18.2 million, $6.3 million and $12.6 million of commercial real estate loans during fiscal years 2022, 2021 and 2020, respectively.

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

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

In originating CRE loans, the Bank primarily considers the ability of the net operating income generated by the real estate to support the debt service, the financial resources, income level and managerial expertise of the borrower, the marketability of the property and the Bank's lending experience with the borrower.

Carver Federal's maximum LTV ratio on commercial real estate mortgage loans at origination is generally 75% based on the latest appraised value of the mortgaged property.

Carver Federal's maximum LTV ratio on commercial real estate mortgage loans at origination is generally 75% based on the latest appraised fair market value of the mortgaged property.

The Bank generally requires a debt service coverage ratio at origination of at least 1.20 on commercial real estate loans.

The Bank also requires the assignment of rents of all tenants' leases in the mortgaged property and personal guarantees may be obtained for additional security from these borrowers.

The Bank also requires the assignment of rents associated with all tenant leases in the mortgaged property and personal guarantees may be obtained for additional security from these borrowers.

At March 31, 2022, commercial real estate mortgage loans totaled $174.3 million, or 30.2% of the total loan portfolio.

2 unchanged sentences

At times, we can offer greater than 5 years for terms of up to 15 years and amortization schedules up to 25 years;

however, the interest rate always resets every 5 years.

Interest rates currently offered by the Bank are adjusted at the beginning of each adjustment period and generally are based upon a fixed spread above the FHLB-NY corresponding regular advance rate.

however, the interest rate generally resets every 5 years.

Interest rates currently offered by the Bank are adjusted at the beginning of each adjustment period and are mostly based upon a fixed spread above the FHLB-NY corresponding regular advance rate.

Historically, Carver Federal has been a New York City metropolitan area leader in the origination of loans to churches.

3 unchanged sentences

There are currently 21 church loans in the Bank's loan portfolio.

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

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

Because payments on loans secured by such properties are often dependent on voluntary contributions by members of the church's congregation, repayment of such loans may be subject to a greater extent to adverse conditions in the economy.

1 unchanged sentence

The Bank determines the appropriate amount and type of security for such loans based in part upon the governance structure of the particular organization, the length of time the church has been established in the community and a cash flow analysis to determine the church's ability to service the proposed loan.

Carver Federal will obtain a first mortgage on the underlying real property and often requires personal guarantees of key members of the congregation and/or key person life insurance on the pastor.

Carver Federal will obtain a first mortgage on the underlying real property and often requires personal guarantees of key members of the congregation and/or key person life insurance that generally includes the pastor at a minimum, depending on the church make-up.

The Bank may also require the church to obtain key person life insurance on specific members of the church's leadership.

While asset quality in the church loan category historically has been one of the strongest asset classes, recent economic conditions have produced higher delinquencies in this portfolio.

While asset quality in the church loan category historically has been one of the strongest asset classes, recent economic conditions have produced higher delinquencies in this portfolio during the early stages of the pandemic, but have since normalized or leveled off.

While management believes that Carver Federal will remain a leading lender to churches in its market area, Carver Federal will continue to conduct disciplined underwriting and maintain focused portfolio management.

2 unchanged sentences

This includes $17.9 million of PPP loans at March 31, 2022.

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

The Bank purchased $5.6 million and $10.7 million business loans during fiscal years 2022 and 2021, respectively.

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

Carver Federal provides revolving credit, working capital and term loan facilities to small businesses with annual sales of approximately $1 million to $25 million in educational, health care, personal services, and light industrial and wholesale segments.

Business loans are typically personally guaranteed by the owners and may also be secured by additional collateral, including real estate, equipment and inventory.

Business loans are typically personally guaranteed by the owners and may also be secured by additional collateral, including real estate, equipment, accounts receivable and inventory.

Consumer and Other Loans .

At March 31, 2022, the Bank had $1.6 million in consumer and other loans, or 0.3%, of the Bank's gross loan portfolio, primarily comprised of $1.5 million of guaranteed graduate medical student loans purchased in fiscal 2017.

Consumer loans are not typically secured by collateral and therefore involve more risk than first mortgage loans.

Consumer loans are not typically secured by collateral and therefore involve more risk than first mortgage loans and all other transactions.

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

Further, the application of

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

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

In underwriting unsecured consumer loans other than secured credit cards, Carver Federal considers the borrower's credit history, an analysis of the borrower's income, expenses and ability to repay the loan and the value of the collateral.

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

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

The underwriting for secured credit cards only takes into consideration the value of the underlying collateral.

3 unchanged sentences

Loans are originated by the Bank's personnel who receive a base salary, commissions and other incentive compensation.

Real estate, business and unsecured loan applications are forwarded to the Bank's Lending Department for underwriting pursuant to standards established in Carver Federal's loan policy.

Real estate, business and unsecured loan applications are forwarded to the Bank's Lending Department for processing, and to the Credit Group for underwriting pursuant to standards established in Carver Federal's Loan Policy.

The underwriting and loan processing for residential one-to-four family loans are performed by an outsourced third party loan originator using lending standards established by the Bank.

3 unchanged sentences

Business loan applications are completed for all business loans.

Most business loans are secured by real estate, personal guarantees, and/or guarantees by the United States Small Business Administration (“SBA”) or Uniform Commercial Code (“UCC”) filings.

Most business loans are secured by real estate, personal guarantees, and/or guarantees by the United States Small Business Administration (“SBA”), as applicable, along with Uniform Commercial Code (“UCC”) lien filings.

The loan approval process considers the credit history of the applicant, collateral, cash flow and purpose and stability of the business.

Upon receipt of a completed loan application from a prospective borrower, a credit report and other verifications are ordered to confirm specific information relating to the loan applicant's income and credit standing.

It is the Bank's policy to obtain an appraisal of the real estate intended to secure a proposed mortgage loan from an independent appraiser approved by the Bank.

It is the Bank's policy to obtain an appraisal of the real estate intended to secure a proposed mortgage loan from an independent appraiser approved by the Bank, along with applicable appraisal reviews.

It is Carver Federal's policy to record a lien on the real estate securing the loan and to obtain a title insurance policy that insures that the property is free of prior encumbrances.

Borrowers must also obtain hazard insurance policies prior to closing and, when the property is in a flood plain as designated by the Department of Housing and Urban Development, obtain flood insurance.

Most borrowers are also required to advance funds on a monthly basis, together with each payment of principal and interest, to a mortgage escrow account from which the Bank makes disbursements for items such as real estate taxes and hazard insurance.

Written confirmation of the guarantee for SBA loans and evidence of the UCC filing is also required.

Borrowers must also obtain hazard insurance policies prior to closing and, when the property is in a flood zone or plain as designated by the Department of Housing and Urban Development, obtain flood insurance.

Most borrowers are also required to advance funds on a monthly basis, together with each payment of principal and interest, for mortgage payment escrows from which the Bank makes disbursements for items such as real estate taxes and hazard insurance.

Written confirmation of the guarantee for SBA loans and evidence of the UCC filing is also required, as applicable.

Loan Approval .

6 unchanged sentences

Under the loans-to-one-borrower limits of the OCC, with certain limited exceptions, loans and extensions of credit to a single or related group of borrowers outstanding at one time generally may not exceed 15% of the unimpaired capital and surplus of a savings bank.

The Bank includes all outstanding debt and any unfunded commitments under contractually binding commitments for purposes of its legal limit calculation.

See “Regulation and Supervision-Federal Banking Regulation-Loans-to-One-Borrower Limitations.” At March 31, 2022, the maximum loans-to-one-borrower under this test was $12.2 million and the Bank had no relationships that exceeded this limit.

15 unchanged sentences

Total loans originated and purchased 201,683 100.0 % 141,310 100.0 % 68,232 100.0 %

Loans sold (3)

Loans sold/participated (3)

(6,080) — (1,294)

1 unchanged sentence

(1) Comprised of personal loans.

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

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

(2) Comprised of $11.3 million one-to-four family, $15.1 million multifamily, $18.2 million commercial real estate and $5.6 million business loans.

(3) Comprised of primarily multifamily and commercial real estate loans.

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

15 unchanged sentences

$ in thousands <1 Yr.

5-15 Yrs 15+ Yrs.

Gross loans receivable:

6 unchanged sentences

The following table sets forth as of March 31, 2022, amounts in each loan category that are contractually due after March 31, 2023 and whether such loans have fixed or adjustable interest rates.

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

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

contractual terms due to prepayments.

Scheduled contractual principal repayments of

loans do not necessarily reflect the actual lives of such assets.

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

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

14 unchanged sentences

For non-owner occupied non-residential real estate and multifamily real estate loans, the borrower's ability to pay typically is dependent on rental income, which can be impacted primarily by vacancies and general market conditions.

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

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

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

26 unchanged sentences

Real estate owned 60 60 120 404 1,145

Loans held-for-sale — — — — 944

Total other non-performing assets 60 60 120 404 1,145

1 unchanged sentence

$ 11,541 $ 7,251 $ 6,896 $ 10,698 $ 7,807

Nonaccrual loans to total loans 1.98 % 1.49 % 1.58 % 2.40 % 1.39 %

Non-performing loans to total loans 1.98 % 1.49 % 1.58 % 2.40 % 1.39 %

6 unchanged sentences

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

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

TDR loans included in the nonaccrual category above totaled $1.7 million at 2022, $1.8 million at 2021, $2.2 million at 2020, $3.2 million at 2019, and $1.9 million at 2018.

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

1 unchanged sentence

At March 31, 2022, total non-performing assets increased by $4.2 million, or 57.5%, to $11.5 million, compared to $7.3 million at March 31, 2021, as a result of a $4.3 million increase in nonaccrual loans, year over year.

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

Nonaccrual loans at March 31, 2022 consisted of fifteen one-to-four family, one multifamily, two commercial real estate, eight small business and SBA loans, and five consumer loans.

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

9 unchanged sentences

The regulations also provide for a “special mention” designation, described as assets that do not currently expose a savings institution to a sufficient degree of risk to warrant substandard classification but do possess credit deficiencies or potential weaknesses deserving management's close attention.

Assets classified as substandard or doubtful result in a higher level of allowances for loan losses recorded in accordance with ASC Subtopic 450-20 “Loss Contingencies.” If an asset or portion thereof is classified as a loss, a savings institution must charge off any amount exceeding the fair value of collateral pursuant to loan impairment guidance in ASC Section 310-10-35.

Section 310-10-35.

If a savings institution does not agree with an examiner's classification of an asset, it may appeal this determination to the OCC Regional Director.

13 unchanged sentences

The Bank has a centralized loan servicing structure that relies upon outside servicers, each of which generates a monthly report of delinquent loans.

The Asset Liability and Interest Rate Risk Committees of the Board establish policy relating to internal classification of loans and also provides input to the Credit Review Committee in its review of classified assets.

The Asset Liability and Interest Rate Risk Committees of the Board establish policy relating to internal classification of loans and also provide input to the Credit Review Committee in its review of classified assets.

In originating loans, Carver Federal recognizes that credit losses will occur and that the risk of loss will vary with, among other things, the type of loan being made, the creditworthiness of the borrower over the term of the loan, general economic conditions and, in the case of a secured loan, the quality of the security for the loan.

10 unchanged sentences

Fair value is defined as the amount in cash or cash-equivalent value of other consideration that a real estate parcel would yield in a current sale between a willing buyer and a willing seller.

Any amount of cost in excess of fair value is charged off against the allowance for loan losses prior to the transfer of the property into OREO.

Any amount of cost in excess of fair value is charged off against the allowance for loan losses prior

to the transfer of the property into OREO.

Carver Federal records an allowance for estimated selling costs of the property immediately after foreclosure.

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

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

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

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

18 unchanged sentences

Net (charge-off) recovery to average loans outstanding:

One-to-four family 0.02 % 0.10 % 0.26 % 0.03 % (0.07) %

Multifamily — % — % — % (0.01) % 0.03 %

Commercial real estate — % — % — % — % 0.01 %

Business 0.06 % 0.23 % 0.10 % (0.26) % 0.01 %

Consumer and other (11.55) % (1.62) % (2.68) % 0.34 % (0.33) %

Total loans (0.02) % 0.06 % 0.07 % (0.05) % (0.01) %

Allowance to total loans 0.97 % 1.06 % 1.15 % 1.08 % 1.07 %

Allowance to non-performing loans 71.48 % 72.99 % 45.13 % 76.94 % 60.11 %

Allowance to nonaccrual loans 48.99 % 71.48 % 72.99 % 45.13 % 76.94 %

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

7 unchanged sentences

Commercial real estate 1,157 20.6 % 907 17.6 % 812 16.4 % 766 16.5 % 1,052 20.5 %

Construction — 0.0 % — 0.0 % — — % — — % 106 2.1 %

Business 2,497 44.4 % 1,855 36.1 % 1,567 31.7 % 1,330 28.6 % 1,003 19.5 %

9 unchanged sentences

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

Securities that are bought and held principally for the purpose of selling them in the near term are classified

as trading securities and are reported at fair value with unrealized gains and losses included in earnings.

Securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and are reported at fair value with unrealized gains and losses included in earnings.

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

4 unchanged sentences

The following table sets forth the amortized cost, fair value and weighted average yields of the Bank's investment portfolio at March 31, 2022, categorized by remaining period to contractual maturity:

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

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

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

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

Available-for-Sale:

16 unchanged sentences

The Bank has invested in mortgage-backed securities to help achieve its asset/liability management goals and collateral needs.

Although mortgage-backed securities generally yield less than whole loans, they present substantially lower credit risk, are more liquid than individual mortgage loans and may be used to collateralize obligations of the Bank.

obligations of the Bank.

Because Carver Federal receives regular payments of principal and interest from its mortgage-backed securities, these investments provide more consistent cash flows than investments in other debt securities, which generally only pay principal at maturity.

2 unchanged sentences

Mortgage-backed securities constituted 5.3% of total assets at March 31, 2022, compared to 7.6% at March 31, 2021.

Carver Federal maintains a portfolio of mortgage-backed securities in the form of Government National Mortgage Association (“GNMA”) pass-through certificates, FNMA mortgage-backed securities, FHLMC participation certificates and commercial mortgage-backed securities.

GNMA pass-through certificates are guaranteed as to the payment of principal and interest by the full faith and credit of the United States Government, while FNMA and FHLMC securities are each guaranteed by their respective agencies as to principal and interest.

2 unchanged sentences

Carver Federal has also invested in pools of loans guaranteed as to principal and interest by the SBA.

The Bank seeks to manage interest rate risk by investing in adjustable-rate mortgage-backed securities, which at March 31, 2021, constituted $1.4 million, or 2.7%, of the mortgage-backed securities portfolio.

The Bank seeks to manage interest rate risk by investing in adjustable-rate mortgage-backed securities, which at March 31, 2022, constituted $680 thousand, or 1.8%, of the mortgage-backed securities portfolio.

Mortgage-backed securities, however, expose Carver Federal to certain unique risks.

29 unchanged sentences

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

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

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

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

29 unchanged sentences

The trust preferred debt securities are redeemable at par quarterly at the option of the Company and have a mandatory redemption date of September 17, 2033.

Cash distributions on the trust preferred debt securities are cumulative and payable at a floating rate per annum resetting quarterly with a margin of 3.05% over the three-month LIBOR, with a rate of 3.2% at March 31, 2021.

Cash distributions on the trust preferred debt securities are cumulative and payable at a floating rate per annum resetting quarterly with a margin of 3.05% over the three-month LIBOR.

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

Such payments were made in September 2016.

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

Interest on the debentures had 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 on the outstanding debenture interest was made on June 16, 2021.

Carver relies primarily on dividends from Carver Federal to pay cash dividends to its stockholders, to engage in share repurchase programs and to pay principal and interest on its trust preferred debt obligation.

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

The Company deferred the September 17, 2021 interest payment, but has since had discussions with the Federal Reserve Bank of Philadelphia regarding future quarterly payments.

A streamlined process has been developed for the Company to request regulatory approval to make debenture interest payments.

On December 16, 2021, the Company paid the interest deferred from September 17, 2021 and the regular quarterly interest payment due on December 17, 2021.

Subsequently, the Company made the regular quarterly interest payments on its outstanding debentures due on March 17, 2022.

The interest rate was 4.0% at March 31, 2022 and June 17, 2022.

Carver relies primarily on dividends from Carver Federal to pay cash dividends to its stockholders and to engage in share repurchase programs.

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

As the subsidiary of a savings and loan association holding company, Carver Federal must file a notice or an application (depending on the proposed dividend amount) with the OCC (and a notice with the FRB) prior to the declaration of each capital distribution.

4 unchanged sentences

Enforcement Actions

On October 23, 2015 the Board of Directors of Carver Bancorp, Inc., in response to the FRB’s Bank Holding Company Report of Inspection issued on April 14, 2015, adopted a Board Resolution (“the Resolution”) as a commitment by the Company’s Board to address certain supervisory concerns noted in the Reserve Bank‘s Report.

The supervisory concerns are related to the Company’s leverage, cash flow and accumulated deferred interest.

As a result of those concerns, the Company is prohibited from paying any dividends without the prior written approval of the Reserve Bank.

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.

On May 24, 2016, the Bank entered into a formal agreement (the "Formal Agreement") with the OCC to undertake certain compliance-related and other actions as further described in the Company’s Current Report on Form 8-K as filed with the 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.

2 unchanged sentences

§ 1828(k) and 12 C.F.R.

As a result of the Formal Agreement, the OCC established higher minimum capital requirements for the Bank.

For further information with respect to the Individual Minimum Capital Ratios (“IMCR”), effective June 29, 2016, refer to “Capital and Liquidity - Carver Federal’s Capital Position.”

The Company is subject to similar requirements as the Bank.

The Company must provide notice to the FRB prior to affecting any change in its directors or senior executive officers.

The Company is also subject to the restrictions on golden parachute and indemnification payments, as set forth in 12 C.F.R.

Written approval of the Federal Reserve Bank is required prior to:

(1) the declaration or payment of dividends by the Company to its stockholders, (2) the declaration or payment of dividends by the Bank to the Company, (3) any distributions of interest or principal by the Company on subordinated debentures or trust preferred securities, (4) any purchases or redemptions of the Company’s stock and (5) the Company incurring, increasing or guaranteeing certain long-term debt outside the ordinary course of business.

These limitations could affect our operations and financial performance.

The Bank is subject to extensive regulation, examination and supervision by its primary regulator, the OCC.

The Bank's deposit accounts are insured up to applicable limits by the FDIC under the Deposit Insurance Fund (“DIF”), and is a member of the FHLB.

The Bank must file reports with the OCC concerning its activities and financial condition, and it must obtain regulatory approvals prior to entering into certain transactions, such as mergers with, or acquisitions of, other depository institutions.

The Bank's deposit accounts are insured up to applicable limits by the FDIC under the Deposit Insurance Fund.

The Bank is a member of the FHLB-NY.

The Bank must file reports with the OCC concerning its activities and financial condition, and it

must obtain regulatory approvals prior to entering into certain transactions, such as mergers with, or acquisitions of, other depository institutions.

The Company, as a unitary savings and loan holding company, is subject to regulation, examination and supervision by the FRB and is required to file certain reports with, and otherwise comply with, the rules and regulations of the FRB and of the SEC under the federal securities laws.

10 unchanged sentences

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

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

be undercapitalized.

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

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

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

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

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

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

The OCC regulations do not include a specific IRR component of the risk-based capital requirement.

However, the OCC monitors the IRR of individual institutions through a variety of means, including an analysis of the change in net portfolio value ("NPV").

The Federal Deposit Insurance Corporation Improvement Act, or FDICIA, required that the OCC and other federal banking agencies revise their risk-based capital standards to ensure that the standards take into account interest rate risk ("IRR") concentration of risk and the risks of non-traditional activities.

The OCC monitors the IRR of individual institutions through a variety of means, including an analysis of the change in net portfolio value ("NPV").

NPV is defined as the net present value of the expected future cash flows of an entity's assets and liabilities and, therefore, hypothetically represents the value of an institution's net worth.

3 unchanged sentences

Carver Federal's Capital Position .

Carver Federal, as a matter of prudent management, targets as its goal the maintenance of capital ratios which exceed minimum requirements and are consistent with Carver Federal's risk profile.

At March 31, 2021, Carver Federal exceeded the capital regulatory requirements and its Individual Minimum Capital Requirements with a common equity Tier 1 ratio of 14.41%, Tier 1 leverage ratio of 10.01%, total risk-based capital ratio of 15.56% and a Tier 1 risk-based capital ratio of 14.41%.

The OCC and the other federal bank regulatory agencies issued a final rule effective January 1, 2015 that revised their leverage and risk-based capital requirements and the method for calculating risk-weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act.

The final rule generally applies to all depository institutions, and top-tier bank and savings and loan holding companies with total consolidated assets of $3 billion or more.

Among other things, the rule established a minimum Common Equity Tier 1 (CET1) capital requirement (4.5% of risk-weighted assets), increased the minimum Tier 1 capital to risk-based assets requirement (from 4% to 6% of risk-weighted assets) and assigned a higher risk weight (150%) to exposures that are more than 90 days past due or are on nonaccrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property.

The final rule also required unrealized gains and losses on certain “available-for-sale” securities holdings to be included for purposes of calculating regulatory capital unless a one-time opt-out is exercised.

Carver Federal has chosen to opt-out.

Federal regulations require depository institutions to meet several minimum capital standards:

a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets ratio of 8%, and a Tier 1 capital to total assets leverage ratio of 4%.

Federal savings banks must also meet a tangible capital ratio of 1.5%.

For purposes of the regulatory capital requirements, a higher risk weight (150%) is assigned to exposures that are more than 90 days past due or are on nonaccrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property.

Unrealized gains and losses on certain “available-for-sale” securities holdings are required to be included for purposes of calculating regulatory capital unless a one-time opt-out is exercised.

Carver Federal has

chosen to opt-out and, therefore, does not include accumulated other comprehensive income (AOCI) in its regulatory capital determinations.

Additional constraints are also imposed on the inclusion in regulatory capital of certain mortgage-servicing assets, deferred tax assets and minority interests.

The rule limits a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of 2.5% of CET1 capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements.

As noted, the final rule became effective for the Bank on January 1, 2015.

The capital conservation buffer requirement was phased in annually beginning January 1, 2016.

On January 1, 2019, the full capital conservation buffer requirement of 2.5% became effective.

The final rule adjusted the prompt corrective action categories described above to incorporate the increased capital standards and established the "well-capitalized" threshold described above.

Legislation enacted in May 2018 requires the federal banking agencies, including the OCC, to establish for institutions with assets of less than $10 billion a “community bank leverage ratio” of between 8 to 10%.

Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations.

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

In addition to establishing the minimum regulatory capital requirements, the regulations limit a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements.

Legislation enacted in May 2018 required the federal banking agencies, including the OCC, to establish for qualifying institutions with assets of less than $10 billion a “community bank leverage ratio” that ranges between 8 to 10% of consolidated assets.

Institutions with capital complying with the ratio and otherwise meeting the specified requirements (including off-balance sheet exposures of 25% or less of total assets and trading assets and liabilities of 5% or less of total assets) and electing the alternative framework are considered to comply with the applicable regulatory capital requirements, including the risk-based requirements.

1 unchanged sentence

The community bank leverage ratio was established at 9% Tier 1 capital to total average assets, effective January 1, 2020.

Pursuant to federal legislation enacted in 2020, the community bank leverage ratio was temporarily lowered to 8% for 2020.

Another rule was issued to increase the ratio to 8.5% for calendar year 2021 and to 9% thereafter.

A qualifying bank may opt in and out of the community bank leverage ratio framework on its quarterly call report.

A bank that ceases to meet any qualifying criteria is provided with a two-quarter grace period to comply with the community bank leverage ratio requirements or the general capital regulations by the federal regulators.

Section 4012 of the Coronavirus Aid, Relief and Economic Security Act of 2020 required that the community bank leverage ratio be temporarily lowered to 8%.

The federal regulators issued a rule making the reduced ratio effective April 23, 2020.

The rules also established a two-quarter grace period for a qualifying community bank whose leverage ratio falls below the 8% community bank leverage ratio requirement so long as the bank maintains a leverage ratio of 7% or greater.

Another rule was issued to transition back to the 9% community bank leverage ratio by increasing the ratio to 8.5% for calendar year 2021 and to 9% thereafter.

As of March 31, 2022, the Bank has not opted into the alternative framework.

Carver Federal, as a matter of prudent management, targets as its goal the maintenance of capital ratios which exceed minimum requirements and are consistent with Carver Federal’s risk profile.

The IMCR established by the OCC on June 29, 2016, as a result of the previously described Formal Agreement, requires the Bank to maintain minimum regulatory capital levels of 9% for its Tier 1 leverage ratio and 12% for its total risk-based capital ratio.

At March 31, 2022, Carver Federal exceeded the capital regulatory requirements and its IMCR requirements with a common equity Tier 1 ratio of 13.75%, Tier 1 leverage ratio of 10.45%, total risk-based capital ratio of 14.78% and a Tier 1 risk-based capital ratio of 13.75%.

Limitation on Capital Distributions.

6 unchanged sentences

(3) the capital distribution would violate a prohibition contained in any statute, regulation or agreement.

The Bank maintains liquidity levels to meet operational needs.

The Bank maintains a liquidity policy to maintain sufficient liquidity to ensure its safe and sound operations.

In the normal course of business, the levels of liquid assets during any given period are dependent on operating, investing and financing activities.

Cash and due from banks, federal funds sold and repurchase agreements with maturities of three months or less are the Bank's most liquid assets.

The Bank maintains a liquidity policy to maintain sufficient liquidity to ensure its safe and sound operations.

Management believes Carver Federal’s short-term assets have sufficient liquidity to cover loan demand, potential fluctuations in deposit accounts and to meet other anticipated cash requirements, including interest payments on our subordinated debt securities.

13 unchanged sentences

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

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

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

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

financial institutions in the form of preferred stock.

14 unchanged sentences

The Bank's authority to invest in certain types of loans or other investments is limited by federal law.

These investment powers are subject to various limitations, including (1) a prohibition against the acquisition of any corporate debt security that is not rated in one of the four highest rating categories, (2) a limit of 400% of an association's capital on the aggregate amount of loans secured by non-residential real estate property, (3) a limit of 20% of an association's assets on commercial loans, with the amount of commercial loans in excess of 10% of assets being limited to small business loans, (4) a limit of 35% of an association's assets on the aggregate amount of consumer loans and acquisitions of certain debt securities, (5) a limit of 5% of assets on non-conforming loans (certain loans in excess of the specific limitations of HOLA), and (6) a limit of the greater of 5% of assets or an association's capital on certain construction loans made for the purpose of financing what is or is expected to become residential property.

an association's capital on certain construction loans made for the purpose of financing what is or is expected to become residential property.

Loans-to-One Borrower Limitations.

16 unchanged sentences

Community Reinvestment.

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

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

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

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

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

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

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

In particular, the system focuses on three tests:

2 unchanged sentences

(3) a service test, to evaluate the institution's delivery of banking services through its branches, ATM centers and other offices.

CRA also requires all institutions to make public disclosure of their CRA ratings.

The Bank received an “Outstanding” CRA rating in its most recent examination conducted in January 2019.

Regulations require that Carver Federal publicly disclose certain agreements that are in fulfillment of CRA.

The CRA also requires all institutions to make public disclosure of their CRA ratings.

The Bank received an “Outstanding” CRA rating in its most recent examination conducted in March 2022.

Regulations require that Carver Federal publicly disclose certain agreements that are in fulfillment of the CRA.

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

3 unchanged sentences

Transactions with Related Parties.

The Bank's authority to engage in transactions with its “affiliates” is limited by federal regulations and by Sections 23A, 23B of the Federal Reserve Act (“FRA”).

The Bank's authority to engage in transactions with its “affiliates” is limited by federal regulations and by Sections 23A and 23B of the Federal Reserve Act.

In general, these transactions must be on terms which are as favorable to the Bank as comparable transactions with non-affiliates.

1 unchanged sentence

Collateral in specified amounts must usually be provided by affiliates to receive loans from the Bank.

In addition, OCC regulations prohibit a savings bank from lending to any of its affiliates that is engaged in activities that are not permissible for bank holding companies and from purchasing the securities of any affiliate other than a subsidiary.

The Bank's authority to extend credit to its directors, executive officers, and 10% shareholders ("insiders"), as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the FRA and Regulation O of the Federal Reserve Board.

In addition, OCC regulations prohibit a savings bank from lending to any

affiliate that is engaged in activities that are not permissible for bank holding companies and from purchasing the securities of any affiliate other than a subsidiary.

Among other things, these provisions require that all loans or extensions of credit to insiders (a) be made on terms that are substantially the same as and follow credit underwriting procedures that are not less stringent than those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features and (b) not exceed certain limitations, individually and in the aggregate, which limits are based, in part, on the amount of the Bank's capital.

10 unchanged sentences

Assessments for institutions of less than $10 billion of assets are now based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of an institution's failure within three years.

That system, effective July 1, 2016, replaced the previous system under which institutions were placed into risk categories.

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

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

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

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

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

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

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

The credits were exhausted as of September 30, 2020.

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

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

7 unchanged sentences

Title III of the USA PATRIOT Act and the related federal regulations imposed the following requirements with respect to financial institutions:

• Establish a Board approved policy and perform a risk assessment of BSA, Anti-Money Laundering and OFAC;

• Establish a Board approved policy and perform a risk assessment of BSA, Anti-Money Laundering and Office of Foreign Assets Control;

• Designate a qualified BSA officer;

9 unchanged sentences

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

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

The Bank was in compliance with this requirement with an investment in the capital stock of the FHLB-NY at March 31, 2022 of $584 thousand.

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

4 unchanged sentences

The dividend rate paid on FHLB-NY stock at March 31, 2022 was 4.75%.

Federal Reserve System

FRB regulations require federally chartered savings associations to maintain non-interest-earning cash reserves against their transaction accounts (primarily interest-bearing checking and demand deposit accounts).

A reserve of 3% is to be maintained against aggregate transaction accounts between $16.9 million and $127.5 million (subject to adjustment annually by the FRB) plus a reserve of 10% (subject to adjustment by the FRB between 8% and 14%) against that portion of total transaction accounts in excess of $127.5 million.

The first $16.9 million of otherwise reservable balances (subject to adjustment annually by the FRB) is exempt from the reserve requirements.

The Bank was in compliance with the foregoing requirements.

Since required reserves must be maintained in the form of either vault cash, a non-interest-bearing account at a Federal Reserve Bank or a pass-through account as defined by the FRB, the effect of this reserve requirement is to reduce Carver Federal's interest-earning assets.

FHLB System members are also authorized to borrow from the Federal Reserve “discount window,” but FRB regulations require institutions to exhaust all FHLB sources before borrowing from a Federal Reserve Bank.

Effective March 26, 2020, the FRB reduced reserve requirement ratios to 0%, which eliminated reserve requirements for all depository institutions.

Privacy Protection

13 unchanged sentences

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

GLB restricts the powers of new unitary savings and loan holding companies.

The GLB restricts the powers of new unitary savings and loan holding companies.

Unitary savings and loan holding companies that are “grandfathered,” i.e., unitary savings and loan holding companies in existence or with applications filed with the regulator on or before May 4, 1999, such as the Company, retain their authority under the prior law.

All other unitary savings and loan holding companies are limited to financially related activities permissible for financial holding companies and certain other activities specified by FRB regulations.

All other unitary savings and loan holding companies are limited to financially related activities permissible for financial holding companies and

certain other activities specified by FRB regulations.

GLB also prohibits nonfinancial companies from acquiring grandfathered unitary savings and loan holding companies.

1 unchanged sentence

Federal law prohibits a savings and loan holding company, including the Company, directly or indirectly, from acquiring:

(1) control (as defined under the Home Owners' Loan Act ("HOLA") of 1933, as amended), of another savings institution (or a holding company parent) without prior FRB approval;

(1) control (as defined under the HOLA), of another savings institution (or a holding company parent) without prior FRB approval;

(2) through merger, consolidation, or purchase of assets, another savings institution or a holding company thereof, or acquiring all or substantially all of the assets of such institution (or a holding company), without prior FRB approval;

6 unchanged sentences

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

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

The previously discussed final rule regarding regulatory capital requirements implemented the Dodd-Frank Act as to savings and loan holding companies.

However, pursuant to subsequent legislation, the FRB extended the applicability of the “Small Bank Holding Company” exception of its consolidated capital requirements to savings and loan holding companies and increased the threshold for the exception to $1.0 billion, effective May 15, 2015.

Additional subsequent legislation directed the Federal Reserve Board to expand the applicability of the exception to holding companies up to $3.0 billion in consolidated assets;

that change was effective in August 2018.

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

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

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

3 unchanged sentences

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

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

the redemption or repurchase occurred.

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

7 unchanged sentences

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.

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

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

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.

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, extended by federal mortgage backing agencies to July 31, 2021.

• Allowing institutions not to characterize loan modifications relating to the COVID-19 pandemic as a troubled debt restructurings 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 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 could be granted for up to 180 days, with an extension for an additional 180-day period upon the request of the borrower.

Except for vacant or abandoned property, the servicer of a federally backed mortgage was prohibited from taking any foreclosure action, including any eviction or sale action, for not less than the 60-day period beginning March 18, 2020, which period was subsequently extended several times by administrative action..

• 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.

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.

A forbearance could be granted for up to 30 days, with an extension for up to two additional 30-day periods upon the request of the borrower.

During the time of the forbearance, the multifamily borrower cannot evict or initiate the eviction of a tenant or charge any late fees, penalties or other charges to a tenant for late payment of rent.

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

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

Federal mortgage backing agencies have extended this program.

The Paycheck Protection Program

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

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

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

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

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

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

of loan forgiveness is determined and remitted to the lender.

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

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

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

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

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

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

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

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

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

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

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

The Paycheck Protection Program (“PPP”), established as part of the CARES Act, provided 100% federally guaranteed loans to eligible small businesses through the Small Business Administration’s (“SBA”) 7(a) loan guaranty program for amounts up to 2.5 times the average monthly “payroll costs” of the business.

The entire principal amount of the borrower’s PPP loan, including any accrued interest, is eligible for PPP loan forgiveness so long as employee and compensation levels of the business are maintained and 60% of the loan proceeds are used for payroll expenses, with the remaining 40% of the loan proceeds used for other qualifying expenses, including, but not limited to, mortgage interest, rent and utilities.

In May 2021, the SBA announced that PPP funding has been exhausted and the SBA stopped accepting new PPP loan applications.

FEDERAL AND STATE TAXATION

Federal Taxation

The Company and the Bank currently file consolidated federal income tax returns, report their income for tax return purposes on the basis of a taxable year ending March 31, using the accrual method of accounting and are subject to federal income taxation in the same manner as other corporations with some exceptions, including in particular the Bank's tax reserve for bad debts.

The bank has a subsidiary which files a REIT tax return which reports its income for tax purposes on the basis of a taxable year ending December 31st.

The Company and the Bank currently file a consolidated federal income tax return on the basis of a taxable year ending March 31 using the accrual method of accounting, and are subject to federal income taxation in the same manner as other corporations with some exceptions, including in particular the Bank's tax reserve for bad debts.

The Bank has a subsidiary which files a REIT tax return which reports its income for tax purposes on the basis of a taxable year ending

The REIT does not join in the consolidated return and it pays tax on its undistributed taxable income.

12 unchanged sentences

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

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

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

As of March 31, 2022, the Company has a pending AMT credit refund of $143 thousand, related to the AMT credits, from its filed fiscal year 2020 federal tax return.

State and Local Taxation

2 unchanged sentences

“Entire net income” means federal taxable income with adjustments.

If, however, the application of an alternative tax (based on taxable net assets allocated to New York or a fixed minimum fee) results in a greater tax, the alternative tax will be imposed.

If, however, the application of an alternative tax (based on capital allocated to New York or a fixed minimum fee) results in a greater tax, the alternative tax will be imposed.

The Company was subject to tax based upon capital for New York State for fiscal 2022.

1 unchanged sentence

For fiscal 2022, the New York State franchise tax rate computed on capital was 0.1875%.

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

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

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

The new legislation revised that method to a measurement based on net assets.

New York City.

The Bank and the Company (including the REIT) file on a combined basis and are also subject to a similarly calculated New York City banking corporation tax on assets allocated to New York City.

The Bank and the Company (including the REIT) file on a combined basis and are also subject to a similarly calculated New York City banking corporation tax on capital allocated to New York City.

For fiscal 2022, the New York City banking corporation tax rate computed on capital is 0.15%.

On April 13, 2015, New York State legislation was signed changing the New York City tax law to conform to the New York State law that was adopted in 2014, with some minor differences.

As a result of the impact of the 2014 legislation effecting both the New York State and New York City tax law, there was a decrease to the Company's gross deferred tax asset of $1.2 million in fiscal 2015 with no impact to current income due to the full valuation allowance.

Delaware Taxation.

1 unchanged sentence

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

What changed 10-K

Item 1. Business