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Item 8. Financial Statements and Supplementary Data

2023-06-29 compared with 2022-07-14 · 210 added, 232 removed, 1409 unchanged (24% of the section changed)

3 unchanged sentences

Carver Bancorp, Inc.

New York, New York

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of financial condition of Carver Bancorp, Inc.

(the “Company”) as of March 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, change in equity, and cash flows for each of the two years in the period ended March 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

(the “Company”) as of March 31, 2023, and 2022, the related consolidated statements of operations, comprehensive loss, changes in equity, and cash flows for each of the two years in the period ended March 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended March 31, 2023 , in conformity with accounting principles generally accepted in the United States of America.

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(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 a 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.

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

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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, and national economic trends.

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.

Significant management judgment is required in the

evaluation of the economic factor, which include consideration of local and national economic trends.

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:

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We have served as the Company's auditor since 2016.

New York, New York

July 14, 2022

June 29, 2023

CARVER BANCORP, INC.

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Preferred stock (par value $ 0.01 per share:

9,000 and 5,000 Series F shares, with a liquidation preference of $ 1,000 per share, issued and outstanding at March 31, 2022 and 2021, respectively)

9,000 Series F shares, with a liquidation preference of $ 1,000 per share, issued and outstanding at March 31, 2023 and 2022, respectively)

Common stock (par value $ 0.01 per share:

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Net interest income 22,789 20,466

Provision for (recovery of) loan losses 603 ( 100 )

Net interest income after provision for (recovery of) for loan losses 19,863 15,987

Provision for loan losses 100 603

Net interest income after provision for loan losses 22,689 19,863

Non-interest income:

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Loan fees and service charges 480 243

Gain on sale of securities, net — 1,193

Gain on sale of loans, net 107 —

Grant income 439 2,089

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Net loss — — — ( 847 ) — — ( 847 )

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

Other comprehensive loss, net of tax — — — — — ( 3,487 ) ( 3,487 )

Conversion of Series D preferred stock to common stock ( 3,850 ) 4 3,846 — — — —

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 common stock, net of issuance costs 4 2,994 — — — 2,998

Issuance of Series F preferred stock 4,000 — — — — — 4,000

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Net loss — — — ( 4,401 ) — — ( 4,401 )

Other comprehensive income, net of tax — — — — — ( 3,487 ) ( 3,487 )

Other comprehensive loss, net of tax — — — — — ( 5,553 ) ( 5,553 )

Conversion of Series D preferred stock to common stock ( 550 ) 1 549 — — — —

Issuance of common stock, net of issuance costs — 4 2,994 2,998

Issuance of Series F preferred stock 4,000 — — — — — 4,000

Stock based compensation expense — — 91 — — — 91

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Net loss $ ( 4,401 ) $ ( 847 )

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

Provision for (recovery of) loan losses 603 ( 100 )

Adjustments to reconcile net loss to net cash used in operating activities:

Provision for loan losses 100 603

Stock based compensation expense 91 122

Depreciation and amortization expense 1,058 1,029

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

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

Gain on sale of loans, net ( 107 ) —

Amortization and accretion of loan premiums and discounts and deferred charges ( 202 ) ( 335 )

Amortization and accretion of premiums and discounts - securities 397 609

Decrease (increase) in accrued interest receivable 226 ( 588 )

(Increase) decrease in other assets ( 1,301 ) 593

Increase in other liabilities 7,046 5,192

Net cash provided by operating activities 7,152 2,212

Decrease in accrued interest receivable 503 226

Decrease (increase) in other assets 480 ( 1,301 )

(Decrease) increase in other liabilities ( 8,432 ) 7,046

Net cash (used in) provided by operating activities ( 10,513 ) 7,152

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of investments:

Available-for-sale — ( 74,475 )

Proceeds from sales of investments:

Available-for-sale — 37,802

Proceeds from principal payments, maturities and calls of investments:

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Held-to-maturity 2,927 2,524

Purchase of bank-owned life insurance ( 5,000 ) —

Loans held-for-investment, net of (originations) and repayments/payoffs and maturities ( 9,934 ) ( 51,977 )

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Proceeds from participation loans sold 4,000 6,080

(Purchase) redemption of FHLB-NY stock ( 32 ) 16

Proceeds from sale of loans 1,129 —

Purchase of FHLB-NY stock ( 1,682 ) ( 32 )

Purchase of premises and equipment ( 225 ) ( 192 )

Proceeds from sale of real estate owned — 260

Net cash used in investing activities ( 15,262 ) ( 79,079 )

CASH FLOWS FROM FINANCING ACTIVITIES

Net increase in deposits 71,558 67,744

Net (decrease) increase in FHLB-NY advances and other borrowings ( 21,202 ) 23,705

Contribution of capital — 2,500

Repurchase of common stock — ( 2,500 )

Net (decrease) increase in deposits ( 27,688 ) 71,558

Increase in short-term borrowings 10,000 —

Increase in long-term borrowings 25,000 2,500

Repayment of long-term borrowings ( 3 ) ( 23,702 )

Issuance of common stock — 2,998

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Net cash provided by financing activities 7,309 57,354

Net (decrease) increase in cash and cash equivalents ( 14,573 ) 28,051

Net decrease in cash and cash equivalents ( 18,466 ) ( 14,573 )

Cash and cash equivalents at beginning of period 61,018 75,591

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Noncash financing and investing activities

Recognition of right-of-use asset $ 1,103 $ —

Recognition of operating lease liability 1,103 —

Recognition of finance lease asset 183 —

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Conversion of preferred stock to common stock 550 3,850

Retirement of preferred stock — 13,523

Retirement of common stock — 2

Cash paid for:

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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 deferred interest that was due on September 17, 2021 and the interest scheduled for 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.

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

All quarterly interest payments subsequent to the June 2021 payment up to and including the June 2023 payment have been made.

The interest rate was 7.96 % and the total amount of deferred interest was $ 44 thousand at March 31, 2023.

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 Carver, and the FRB regulates dividends paid by Carver.

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

In recent years, Carver has been successful in obtaining cash independently through its capital raising efforts, which may include cash from government grants or below market-rate loans.

Under the prior Formal Agreement, the OCC regulated all capital distributions, including dividend payments, by Carver Federal to Carver, and the FRB regulates dividends paid by Carver.

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

The OCC will disallow any proposed dividend, for among other reasons, that would result in Carver Federal’s failure to meet the OCC minimum capital requirements.

In accordance with the Agreement defined directly below, Carver Federal is currently prohibited from paying any dividends without prior OCC approval, and, as such, has suspended Carver’s regular quarterly cash dividend on its common stock.

There are no assurances that dividend payments to Carver will resume.

The OCC will disallow any proposed dividend that, among other reasons, would result in Carver Federal’s failure to meet the OCC minimum capital requirements.

Carver has suspended Carver’s regular quarterly cash dividend on its common stock.

On October 23, 2015, the Board of Directors of the Company adopted resolutions requiring, among other things, written approval from the Federal Reserve Bank of Philadelphia prior to the declaration or payment of dividends, any increase in debt by the Company, or the redemption of Company common stock.

On May 24, 2016, the Bank entered into a Formal Agreement ("the Agreement") with the OCC to undertake certain compliance-related and other actions.

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.

Furthermore, the Bank must seek the OCC's written approval and the FDIC's written concurrence before entering into any "golden parachute payments" as that term is defined under 12 U.S.C.

As a result of the Agreement, the Bank was required to obtain the approval of the OCC prior to effecting any change in its directors or senior executive officers, paying dividends and entering into any "golden parachute payments" as that term is defined under 12 U.S.C.

§ 1828(k) and 12 C.F.R.

As a result of the Formal Agreement, Carver was issued an Individual Minimum Capital Ratio ("IMCR") letter by the OCC, which 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.

The Agreement was terminated on January 18, 2023.

The IMCR remains in effect.

The Company continues to be subject to similar requirements that the Bank was subject to under the Agreement.

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

The Company is also subject to 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.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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All significant intercompany accounts and transactions have been eliminated in consolidation.

The Company's subsidiary, Carver Statutory Trust I, is not consolidated with Carver Bancorp, Inc.

for financial reporting purposes.

Carver Statutory Trust I was formed in 2003 for the purpose of issuing $ 13 million aggregate liquidation amount of floating rate Capital Securities due September 17, 2033 (“Capital Securities”) and $ 0.4 million of common securities (which are the only voting securities of Carver Statutory Trust I), which are 100% owned by Carver Bancorp, Inc., and using the proceeds to acquire Junior Subordinated Debentures issued by Carver Bancorp, Inc.

Carver Bancorp, Inc.

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

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

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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 impact of new restrictive measures and mandates taken or issued by governments, businesses and individuals have caused uncertainty in the financial markets.

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.

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 continuing to make 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.

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 business climate continues to present significant challenges as banks continue to absorb heightened regulatory costs and compete for limited loan demand.

Significant increases in food and energy prices resulted from swift increases in the rate of inflation.

Additionally, the Federal Reserve has increased the federal funds rate at each of its meetings since March 2022, and while the rate was held steady at the most recent meeting in June 2023, it has indicated that it will likely increase again later this year.

For Carver, the economic climate of New York City (“the City”), in particular, impacts our business as the City lags behind the rest of New York State and the nation both in restoring pandemic job losses and in rebounding to pre-pandemic levels of unemployment.

The City's unemployment rate remains high at 5.4%, exceeding the national average, as employment in the arts and entertainment, food and hospitality sectors continue to remain below their pre-pandemic highs.

In March 2023, the FDIC was appointed as receiver for Silicon Valley Bank and Signature Bank after they experienced runs on deposits and other liquidity constraints.

At the time, Silicon Valley Bank and Signature Bank were the 16th and 29th largest banks in the United States, respectively, as measured by total assets as of December 31, 2022.

Following the failures of Silicon Valley Bank and Signature Bank, on May 1, 2023, First Republic Bank was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver.

The closures of those banks led to industry-wide concerns related to liquidity, deposit outflows, unrealized securities losses and eroding confidence in the banking system.

In response to these recent developments, the Company took a number of preemptive actions, which included proactive outreach to clients and steps to maximize its funding sources.

As a result, the Company's liquidity position remains adequate.

The impact of market volatility from the adverse developments in the banking industry along with continued high inflation and rising interest rates, will depend on future developments, which are highly uncertain and difficult to predict.

The Company is closely monitoring its asset quality, liquidity, and capital positions, as well as the credit risk in its loan portfolio.

Management is actively working to minimize the current and future impact of this unusual situation, and is continuing to make adjustments to operations where appropriate or necessary to mitigate risk.

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

Cash and cash equivalents

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The amount of an other-than-temporary impairment when there are credit and non-credit losses on a debt security that management does not intend to sell, and for which it is more likely than not that the Bank will not be required to sell the security prior to the recovery of the non-credit impairment, the portion of the total impairment that is attributable to the credit loss would be recognized in earnings.

The remaining difference between the debt security's amortized cost basis and its fair value would be included in other comprehensive income (loss).

The remaining difference between the debt security's amortized cost basis and its fair value would be included in other

comprehensive income (loss).

There were no other-than-temporary impairment charges recorded during the fiscal year ended March 31, 2023.

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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.

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Loans rated Special Mention have potential weaknesses that deserve management's close attention.

If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank's credit position at some future date.

If left uncorrected,

these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank's credit position at some future date.

Loans rated Substandard are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any.

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General Reserve Allowance

Carver's maintenance of a general reserve allowance includes the Bank evaluating the risk of potential loss on homogeneous pools of loans based upon historical loss factors and a review of nine different environmental factors that are then applied to each pool.

Carver's maintenance of a general reserve allowance includes the Bank's evaluation of the risk to potential loss on homogeneous pools of loans based upon historical loss factors and a review of nine different environmental factors that are then applied to each pool.

The pools of loans (“Loan Type”) are:

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In some 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 GAAP.

Because actual loss experience may not adequately predict the level of losses inherent in a portfolio, the Bank reviews nine qualitative factors to determine if reserves should be adjusted based upon any of those factors.

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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 owner/guarantor.

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 of all tenants' leases in the mortgaged property and personal guarantees may be obtained for additional security from these borrowers.

CRE loans generally present a higher level of risk than other types of loans due primarily to the effect of general economic conditions and the complexities involved in valuing the underlying collateral.

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government based on the percentage of each individual program.

• Consumer - The majority of the Consumer portfolio are student loans to medical students enrolled in several Caribbean schools.

• Consumer - The Consumer portfolio includes student loans to medical students enrolled in several Caribbean schools, as well as unsecured consumer loans purchased from or originated through strategic partnerships with Bankers Healthcare Group, LLC and Upstart Holdings, Inc..

Specific Reserve Allowance

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TDR loans remain on nonaccrual status until they have performed in accordance with the restructured terms for a period of at least six months.

Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus

On March 22, 2020, the federal banking agencies issued an interagency statement to provide additional guidance to financial institutions who are working with borrowers affected by COVID-19.

The statement provided that agencies will not criticize institutions for working with borrowers and will not direct supervised institutions to automatically categorize all COVID-19 related loan modifications as troubled debt restructurings (“TDRs”).

The agencies have confirmed with staff of the

Financial Accounting Standards Board that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not TDRs.

This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant.

Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented.

The statement further provided that working with borrowers that are current on existing loans, either individually or as part of a program for creditworthy borrowers who are experiencing short-term financial or operational problems as a result of COVID-19, generally would not be considered TDRs.

For modification programs designed to provide temporary relief for current borrowers affected by COVID-19, financial institutions may presume that borrowers that are current on payments are not experiencing financial difficulties at the time of the modification for purposes of determining TDR status, and thus no further TDR analysis is required for each loan modification in the program.

The statement indicated that the agencies’ examiners will exercise judgment in reviewing loan modifications, including TDRs, and will not automatically adversely risk rate credits that are affected by COVID-19, including those considered TDRs.

In addition, the statement noted that efforts to work with borrowers of one-to-four family residential mortgages, where the loans are prudently underwritten, and not past due or carried on nonaccrual status, will not result in the loans being considered restructured or modified for the purposes of their risk-based capital rules.

With regard to loans not otherwise reportable as past due, financial institutions are not expected to designate loans with deferrals granted due to COVID-19 as past due because of the deferral.

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

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 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.

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 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.

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.

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

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

This calculation divides net income (loss) available to common stockholders after the allocation of undistributed earnings to the participating securities by the weighted average number of shares of common stock outstanding during the period.

This calculation divides net income (loss) available to common stockholders after the allocation of undistributed

earnings to the participating securities by the weighted average number of shares of common stock outstanding during the period.

Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock.

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On April 1, 2021, the Company adopted ASU No.

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, 2021, the Company adopted ASU No.

2019-12 "Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes," which was part of the FASB's simplification initiative to reduce complexity, while maintaining or improving the usefulness of information provided to users of financial statements.

The amendments in this update simplified the accounting for income taxes and improved consistent application of GAAP by removing certain exceptions and clarifying and amending existing guidance for areas of Topic 740.

The amendments in this update simplified the accounting for income taxes and improved consistent application of GAAP by removing certain exceptions and clarifying

and amending existing guidance for areas of Topic 740.

The adoption of the standard did not have a material impact on the Company's financial statements.

In November 2021, the FASB issued ASU No.

2021-10 "Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance," to improve the financial reporting of government assistance received by business entities by requiring the disclosure of (1) the types of assistance received, (2) an entity’s accounting for the assistance, and (3) the effect of the assistance on an entity’s financial statements.

ASU 2021-10 is effective for all entities for financial statements issued for annual periods beginning after December 15, 2021 (for the Company, the fiscal year ending March 31, 2023).

Early application of the guidance is permitted.

The adoption of the standard did not have a material impact on the Company's financial statements.

Accounting Standards Not Yet Adopted

In June 2016, the FASB issued ASU No.

2016-13, "Financial Instruments - Credit Loss," which updates the guidance on recognition and measurement of credit losses for financial assets.

2016-13, "Financial Instruments - Credit Loss," which replaces the guidance on recognition and measurement of credit losses for financial assets.

The new requirements, known as the current expected credit loss model ("CECL") will require entities to adopt an impairment model based on expected losses rather than incurred losses.

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2019-11, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses," to amend or clarify guidance regarding expected recoveries for purchased financial assets with credit deterioration, transition relief for troubled debt restructurings, disclosures related to accrued interest receivables, and financial assets secured by collateral maintenance provisions.

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.

The Company has conducted testing of the ASU 2016-13 method utilizing historical financial analysis and has engaged a vendor as an additional resource to examine and reaffirm the models as it relates to the implementation of the new methodology utilizing the current expected credit loss model, which will replace our current incurred loss approach.

Based on the Company's current CECL model results that it has performed alongside the current process, the adoption of the new guidance will result in an increase of approximately $0.7 million to the allowance for credit loss, including the reserve for off-balance sheet credit exposure recorded in other liabilities.

There is no material impact for other assets within the scope of the new CECL guidance, such as held-to-maturity debt securities and other receivables.

The Company will adopt ASU 2016-13 effective April 1, 2023.

As the Company finalizes the CECL implementation, final decisions made by management may result in a different impact than that stated above for financial statement disclosure purposes.

In March 2022, the FASB issued ASU No.

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The effective dates for the amendments in ASU 2022-02 are the same as the effective dates in ASU 2016-13.

The Company is evaluating the impacts of this ASU and does not believe it will have a material impact on the consolidated financial statements.

The Company does not expect the adoption of this ASU to have a material impact on the consolidated financial statements.

In March 2020, the FASB issued ASU No.

5 unchanged sentences

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.

In December 2022, the FASB issued ASU No.

2022-06 "Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848," which defers the sunset date of Topic 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply for

relief in Topic 848.

We anticipate this ASU will simplify any modifications we execute between the selected start date (yet to be determined) and December 31, 2024 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.

The Company is evaluating the impacts of this ASU and has not yet determined whether LIBOR transition and this ASU will have a material impact on the Company's consolidated statements of financial condition and results of operations.

In November 2021, the FASB issued ASU No.

2021-10 "Government Assistance (Topic 832):

ASU 2021-10 is effective for all entities for financial

statements issued for annual periods beginning after December 15, 2021 (for the Company, the fiscal year ending March 31, 2023).

Early application of the guidance is permitted.

The Company is evaluating the impacts of this ASU to determine whether it will have a material impact on the Company's consolidated statements of financial condition and results of operations.

INVESTMENT SECURITIES

4 unchanged sentences

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

At March 31, 2022, securities with fair value of $ 67.6 million, or 92.8 %, of the Bank’s total securities were classified as available-for-sale, and the remaining securities with amortized cost of $ 5.3 million, or 7.2 %, were classified as held-to-maturity.

At March 31, 2023, securities with fair value of $ 53.8 million, or 95.9 %, of the Bank’s total securities were classified as available-for-sale, and the remaining securities with amortized cost of $ 2.3 million, or 4.1 %, were classified as held-to-maturity, compared to $ 67.6 million and $ 5.3 million at March 31, 2022, respectively.

The Bank had no securities classified as trading at March 31, 2023 and March 31, 2022.

Other investments as of March 31, 2022 primarily consists of the Bank's investment in a limited partnership Community Capital Fund.

These securities are measured at fair value with changes in fair value reflected in net income.

Other investments as of March 31, 2023 primarily consists of the Bank's investment in a limited partnership Community Capital Fund and a $ 5.1 million bank-owned life insurance policy ("BOLI") that was purchased during the first quarter of fiscal year 2023 as a channel to add to the Company's non-interest income revenue by means of an investment considered safe and sound by the Company's regulators.

The investment in the limited partnership is measured using the equity method.

The BOLI is carried at the cash surrender value of the underlying policies.

Income generated from the investment and the increase in the cash surrender value of the BOLI is included in other non-interest income on the Statements of Operations.

Other investments totaled $ 6.1 million at March 31, 2023 and are included in Other Assets on the Statements of Financial Condition.

12 unchanged sentences

Muni Securities 17,719 — 3,737 13,982

Asset-backed Securities 347 — 4 343

Total available-for-sale $ 66,058 $ 1 $ 12,216 $ 53,843

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Total held-to-maturity $ 5,254 $ 36 $ 14 $ 5,276

There were no sales of available-for-sale securities and held-to-maturity securities for the year ended March 31, 2022.

The following is a summary regarding proceeds and gross gains realized from the sale of securities from the available-for-sale portfolio for the year ended March 31, 2021.

$ in thousands March 31, 2021

Proceeds $ 37,802

Gross gains 1,193

There were no sales of available-for-sale securities and held-to-maturity securities for the year ended March 31, 2023 and March 31, 2022.

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”) mortgage-backed securities.

13 unchanged sentences

Muni securities — — 3,737 13,982 3,737 13,982

Asset-backed securities 4 343 — — 4 343

Total available-for-sale securities $ 13 $ 4,075 $ 12,203 $ 49,471 $ 12,216 $ 53,546

12 unchanged sentences

Muni securities 1,640 13,512 333 2,256 1,973 15,768

Asset-backed securities 4 343 — — 4 343

Total available-for-sale securities $ 2,163 $ 20,912 $ 4,508 $ 46,290 $ 6,671 $ 67,202

Held-to-Maturity:

Mortgage-backed securities $ 14 $ 2,204 $ — $ — $ 14 $ 2,204

Total held-to-maturity securities $ 14 $ 2,204 $ — $ — $ 14 $ 2,204

A total of 24 securities had an unrealized loss at March 31, 2023, compared to 23 at March 31, 2022.

Mortgage-backed securities, municipal securities, U.S.

government agency securities and a corporate bond security represented 49.4 %, 23.5 %, 20.5 % and 6.1 %, respectively, of total available-for-sale securities in an unrealized loss position at March 31, 2022.

There were four mortgage-backed securities, three U.S.

government agency securities, one corporate bond and one municipal security that had an unrealized loss position for more than 12 months at March 31, 2022.

Mortgage-backed securities, U.S.

government agency securities, municipal securities and a corporate bond security represented 50.7 %, 17.4 %, 26.1 % and 5.8 %, respectively, of total available-for-sale securities in an unrealized loss position at March 31, 2023.

There were eight mortgage-backed securities, two U.S.

government agency securities, one corporate bond and six municipal securities that had an unrealized loss position for more than 12 months at March 31, 2023.

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

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government's guarantees, the high credit quality and strong financial performance of the U.S.

Government Agency and municipal securities, and the corporate security that is a reputable institution in good financial standing, the risk of credit loss is minimal.

Government Agency and the results of the individual analyses performed for and continuous surveillance on the municipal securities, as well as the corporate security that is a reputable institution 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.

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Available-for-Sale:

Less than one year $ 347 $ 343 1.06 %

One through five years — — — %

Five through ten years 5,679 5,330 4.34 %

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(2) Includes consumer overdrafts of $ 19 thousand and $ 31 thousand as of March 31, 2023 and 2022, respectively

During fiscal year 2023, the Bank purchased $ 14.3 million loans at par, comprised of $ 4.0 million one-to-four family, $ 5.8 million commercial real estate, $ 613 thousand business and $ 3.9 million consumer loans.

The Bank purchased $ 50.1 million loans at par during fiscal year 2022, 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.

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

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As of March 31, 2023, the Bank had approved and funded approximately 420 applications totaling $ 57.1 million of loans under the PPP.

Business loans included PPP loans outstanding totaling $17.9 million as of March 31, 2022.

Business loans included PPP loans outstanding totaling $568 thousand as of March 31, 2023.

The net loan origination fees on these loans totaled approximately $4 thousand and are being recognized into interest income on loans over the 2-year and 5-year stated maturity terms of the PPP loans using the straight-line deferral method.

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

The Bank continues to receive debt forgiveness payments on PPP loans closed during the first and second rounds of the program.

As the loans are paid off, the remaining net deferred origination fees are accelerated into income.

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 continued to be considered current and not reported as TDRs.

For the fiscal year ended March 31, 2021, the Bank received 83 applications for payment deferrals on approximately

$ 90.4 million of loans.

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

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.

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At March 31, 2023 and March 31, 2022, other non-performing assets totaled $ 60 thousand, which consisted of other real estate owned comprised of one foreclosed residential property.

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

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

There were no held-for-sale loans at March 31, 2023 and March 31, 2022.

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All other one-to-four family residential loans and consumer and other loans are performing loans.

As of March 31, 2022, and based on the most recent analysis performed in the current quarter, the risk category by class of loans is as follows:

At March 31, 2023, and based on the most recent analysis performed in the current quarter, the risk category by class of loans is as follows:

$ in thousands Multifamily Commercial Real Estate Business

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Total $ 65,808 $ 7,639

As of March 31, 2021, the risk category by class of loans was as follows:

At March 31, 2022, the risk category by class of loans was as follows:

$ in thousands Multifamily Commercial Real Estate Business

9 unchanged sentences

Total $ 70,261 $ 1,638

The following tables presents an aging analysis of the recorded investment of past due loans receivable at March 31, 2022 and 2021.

The following tables present an aging analysis of the recorded investment of past due loans receivable at March 31, 2023 and 2022.

March 31, 2023

28 unchanged sentences

Business 1,114 1,146 — 837 909 —

Consumer 1 1 — — — —

With an allowance recorded:

18 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 were no loan modifications made during the twelve months ended March 31, 2022.

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

The following table presents an analysis of the loan modification that was classified as a TDR 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 Recorded Investment Post-Modification Recorded investment Pre-Modification rate Post-Modification rate

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

There were three loan modifications made during the twelve months ended March 31, 2023.

There was no loan modification made during the twelve months ended March 31, 2022.

The following table presents an analysis of the loan modifications that were classified as TDRs during the twelve months ended March 31, 2023,

Loan Modifications for the year ended

March 31, 2023

$ in thousands Number of loans Recorded Investment

at time of modification

One-to-four family 3 $ 1,357

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

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Federal law requires that all loans or extensions of credit to executive officers and directors must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with the general public and must not involve more than the normal risk of repayment or present other unfavorable features.

The aggregate amount of loans outstanding to related parties was $ 30 thousand at March 31, 2022 and $ 60 thousand at March 31, 2021.

During fiscal year 2022, there were no advances and principal repayments totaled $ 30 thousand.

The aggregate amount of loans outstanding to related parties was $ 30 thousand at March 31, 2023 and March 31, 2022.

There were no advances and principal repayments during the twelve months ended March 31, 2023.

Furthermore, loans above the greater of $25,000, or 5% of Carver Federal’s capital and surplus (up to $500,000), to Carver Federal’s directors and executive officers must be approved in advance by a majority of the disinterested members of Carver Federal’s Board of Directors.

7 unchanged sentences

Premises and equipment, net $ 3,174 $ 3,775

Depreciation and amortization charged to operations was $ 1.0 million for both fiscal years 2022 and 2021.

Depreciation and amortization charged to operations was $ 1.1 million and $ 1.0 million for fiscal years 2023 and 2022, respectively.

The Company applies Accounting Standards Codification ("ASC") Topic 842, Leases ( " ASC 842") to its leases.

28 unchanged sentences

2025 2,705 63

2026 2,687 42

Thereafter 1,276 —

47 unchanged sentences

Federal Home Loan Bank Advances.

At March 31, 2023, the Bank had a $ 10.0 million overnight borrowing with a fixed rate of 4.99 % and a $ 25.0 million advance with a fixed rate of 4.5 % maturing in March 2025 outstanding from the FHLB-NY.

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 $ 217.0 million at March 31, 2023.

1 unchanged sentence

This agreement requires the Bank to maintain as collateral certain qualifying assets (principally mortgage loans and securities) not otherwise pledged.

The Bank had no outstanding advances from the FHLB-NY at March 31, 2022.

At March 31, 2022, the Bank's collateral included its investment in FHLB-NY capital stock totaling $ 584 thousand, and a blanket assignment of pledged qualifying mortgage loans of $ 58.3 million and mortgage-backed and investment securities with a market value of $ 5.9 million.

At March 31, 2023, advances were all fixed-rate and secured by pledges of the Bank's investment in FHLB-NY capital stock totaling $ 2.3 million, and a blanket assignment of pledged qualifying mortgage loans of $ 53.5 million and mortgage-backed and investment securities with a market value of $ 2.5 million.

The Bank has sufficient collateral at the FHLB-NY to be able to borrow $ 6.3 million from the FHLB-NY at March 31, 2023.

The accrued interest payable on FHLB advances was $14 thousand and interest expense was $ 359 thousand for the year ended March 31, 2023.

Subordinated Debt Securities.

On September 17, 2003, Carver Statutory Trust I issued 13,000 shares, liquidation amount $ 1,000 per share, of floating rate capital securities.

Gross proceeds from the sale of these trust preferred debt securities

of $ 13 million, and proceeds from the sale of the trust's common securities of $ 0.4 million, were used to purchase approximately $ 13.4 million aggregate principal amount of the Company's floating rate junior subordinated debt securities due 2033.

Gross proceeds from the sale of these trust preferred debt securities of $ 13 million, and proceeds from the sale of the trust's common securities of $ 0.4 million, were used to purchase approximately $ 13.4 million aggregate principal amount of the Company's floating rate junior subordinated debt securities due 2033.

The trust preferred debt securities are redeemable at par quarterly at the option of the Company beginning on or after September 17, 2008, and have a mandatory redemption date of September 17, 2033.

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

All quarterly interest payments subsequent to the June 2021 payment up to and including the June 2022 payment have been made.

All quarterly interest payments subsequent to the June 2021 payment up to and including the March 2023 payment have been made.

The accrued interest payable on subordinated debt securities was $ 44 thousand and the interest expense was $ 814 thousand for the year ended March 31, 2023.

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 $ 22 thousand and the interest expense was $ 462 thousand for the year ended March 31, 2022.

Paycheck Protection Program Liquidity Facility (PPPLF) .

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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 interest expense was $ 27 thousand for the year ended March 31, 2022.

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

During the twelve months ended March 31, 2023, the Bank repaid its remaining $ 3 thousand outstanding advance under its PPPLF.

Interest expense on PPPLF advances was zero and $ 27 thousand for the years ended March 31, 2023 and 2022, respectively.

Other Borrowings.

During fiscal year 2022, the Company entered into $ 2.5 million in unsecured low interest loans provided by third parties at a fixed interest rate of 1.00 % to finance eligible loans offered through the Bank's community investment initiatives loan program.

The accrued interest payable and interest expense on these notes was $ 19 thousand for the year ended March 31, 2022.

During fiscal year 2022, the Company entered into two 5-year long-term unsecured low interest loans totaling $ 2.5 million provided by third parties.

The $1.5 million and $1.0 million notes have a fixed interest rate of 1.0 %, payable annually, and will mature in 2026.

Based on the covenants of these notes, the proceeds will be used to finance eligible loans offered through the Bank's community investment initiatives loan program.

The accrued interest payable and interest expense on these notes was $ 3 thousand and $ 25 thousand, respectively, for the year ended March 31, 2023.

The accrued interest payable and interest expense was $19 thousand for the year ended March 31, 2022.

The following table presents expected maturities of the Company's long-term borrowings at March 31, 2023:

6 unchanged sentences

Amounts outstanding at the end of year:

FHLB advances $ 35,000 $ —

Subordinated debt securities 13,403 13,403

PPPLF 3 23,705

Other 2,500 2,500

Rate paid at year end:

FHLB advances 4.99 % — %

Subordinated debt securities 7.96 % 3.97 %

33 unchanged sentences

Unrealized loss on available-for-sale securities 2,565 1,399

Other 291 248

Lease liability 4,452 4,811

Total Deferred Tax Assets 31,519 29,379

1 unchanged sentence

Depreciation 671 815

ROU asset 4,169 4,561

Total Deferred Tax Liabilities 4,892 5,470

2 unchanged sentences

Deferred Tax Assets, net of valuation allowance $ — $ —

At March 31, 2022, the Company had net operating carryforwards for federal purposes of approximately $ 46.0 million, for state purposes of approximately $ 71.0 million and for city purposes of approximately $ 59.0 million which are available to offset future federal, state and city income and which expire over varying periods from March 2030 through March 2040.

At March 31, 2023, the Company had net operating loss carryforwards for federal purposes of approximately $ 50.4 million, for state purposes of approximately $ 76.0 million and for city purposes of approximately $ 63.5 million which are available to offset future federal, state and city income and which expire over varying periods from March 2030 through March 2040.

Federal net operating loss carryforwards of $ 21.1 million do not expire, as such losses were incurred after the enactment of the Tax Cuts and Jobs Act, which provides for an unlimited loss carryforward period..

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On October 24, 1994, the Bank issued in an initial public offering 2,314,375 shares of common stock, par value $ 0.01 (the “Common Stock”), at a price of $ 10 per share resulting in net proceeds of $ 21.5 million.

As part of the initial public offering, the Bank established a liquidation account at the time of conversion, in an amount

equal to the surplus and reserves of the Bank at September 30, 1994.

As part of the initial public offering, the Bank established a liquidation account at the time of conversion, in an amount equal to the surplus and reserves of the Bank at September 30, 1994.

In the unlikely event of a complete liquidation of the Bank (and only in such event), eligible depositors who continue to maintain accounts shall be entitled to receive a distribution from the liquidation account.

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The third parties notified the Company of their intention to cancel the shares and convert them into 470,855 shares of Common Stock.

During the twelve months ended March 31, 2023, Prudential donated a total of 550 shares of its holdings of Series D Preferred Stock to third parties.

The third parties notified the Company of their intention to cancel the shares and convert them into 67,265 shares of Common Stock.

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

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These sales will be made through ordinary broker transactions on the NASDAQ Capital Market stock exchange at market prices prevailing at the time, at prices related to the prevailing market prices, or at negotiated prices.

The Company may instruct Piper Sandler not to sell ATM Shares if the sales cannot be effected at or above the price designated by the Company from time to time.

The Company is not obligated to make any sales of the ATM Shares under the Sales Agreement.

The offering of ATM Shares pursuant to the Sales Agreement will terminate upon the earlier of (a) the sale of all of the ATM Shares subject to the Sales Agreement or (b) the termination of the Sales Agreement by Piper Sandler or the Company, as permitted therein.

The Company will pay Piper Sandler a commission rate equal to 3.0% of the aggregate gross proceeds from each sale of ATM Shares and have agreed to provide Piper Sandler with customary indemnification and contribution rights.

The Company will also reimburse Piper Sandler for certain specified expenses in connection with entering into the Sales Agreement.

The Company intends to use the net proceeds of these offerings for general corporate purposes, including support for organic loan growth and repayment of all or a portion of the outstanding principal amount of our outstanding subordinated debt securities.

As of March 31, 2022, we have sold an aggregate of 397,367 shares of common stock under the ATM offering program, resulting in gross proceeds of $3.1 million and net proceeds to the Company of $ 3.0 million after deducting commissions and expenses.

During fiscal year 2022, the Company sold an aggregate of 397,367 shares of common stock under the ATM offering program, resulting in gross proceeds of $3.1 million and net proceeds to the Company of $ 3.0 million after deducting commissions and expenses.

There were no additional offerings during the twelve months ended March 31, 2023.

Regulatory Capital .

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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 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 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.

1 unchanged sentence

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

Regardless of Basel III's minimum requirements, Carver, as a result of the previously described Formal Agreement, was issued an Individual Minimum Capital Ratio ("IMCR") letter by the OCC, which 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.

Carver was issued an Individual Minimum Capital Ratio ("IMCR") letter by the OCC, which 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, 2023, the Bank's capital level exceeded the regulatory requirements and its IMCR requirements with a Tier 1 leverage ratio of 10.61 %, Common Equity Tier 1 capital ratio of 12.47 %, Tier 1 risk-based capital ratio of 12.47 %, and a total risk-based capital ratio of 13.37 %.

32 unchanged sentences

March 31, 2022

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

The following table sets forth information about amounts reclassified from accumulated other comprehensive loss to the consolidated statement of operations and the affected line item in the statement where net income is presented.

For the Twelve Months Ended March 31, Affected Line Item in the Consolidated Statement of Operations

$ in thousands 2022

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

Net unrealized loss on securities available-for-sale $ ( 3,175 ) $ ( 3,487 ) $ ( 6,662 )

There were no reclassifications out of accumulated other comprehensive loss to the consolidated statement of operations for the twelve months ended March 31, 2023 and 2022.

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, 2022 included $ 3.5 million of unrealized losses for the year ended March 31, 2022.

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, 2023 included $ 5.6 million change in unrealized losses for the year ended March 31, 2023.

The balance at March 31, 2022 included $ 3.5 million change in unrealized losses for the year ended March 31, 2022.

EMPLOYEE BENEFIT AND STOCK COMPENSATION PLANS

4 unchanged sentences

The Bank reinstated the 401(k) match in January 2022, which had been suspended since October 2020.

Compensation expense recognized for the savings incentive plan was $ 88 thousand and $ 118 thousand, respectively, for fiscal 2022 and 2021.

Compensation expense recognized for the 401(k) matching contributions was $ 376 thousand and $ 88 thousand, respectively, for fiscal 2023 and 2022.

Stock Option Plans.

6 unchanged sentences

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

Pursuant to the plan, the Bank recognized no expense for fiscal 2022 and $ 1 thousand as expense for fiscal 2021.

Pursuant to the plan, the Bank recognized no expense for fiscal years 2023 and 2022.

In September 2014, Carver stockholders approved the Carver Bancorp, Inc.

3 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 2022 no restricted stock awards were issued, in fiscal 2021 31,000 restricted stock awards were issued.

During fiscal year 2023, 44,500 restricted stock awards were issued.

There were no restricted stock awards issued in fiscal 2022.

At March 31, 2023, there were 2,667 options outstanding under the 2014 Incentive Plan and 2,333 were exercisable.

12 unchanged sentences

This amount will be recognized over the remaining vesting period of 1.11 years (weighted average).

The vesting of the grants totaled $ 91 thousand and $ 122 thousand for fiscal years 2023 and 2022, respectively.

Information regarding stock options as of and for the years ended March 31 is as follows:

20 unchanged sentences

At March 31, 2023, all outstanding options had no intrinsic value.

The Company recorded stock compensation expense of $ 3 thousand in both fiscal 2022 and 2021.

The Company recorded stock compensation expense of $ 2 thousand and $ 3 thousand in fiscal 2023 and 2022, respectively.

COMMITMENTS AND CONTINGENCIES

2 unchanged sentences

These instruments involve, to varying degrees, elements of credit, interest rate and liquidity risk.

These instruments are not recorded

in the consolidated financial statements.

These instruments are not recorded in the consolidated financial statements.

Such instruments primarily include lending obligations, including commitments to originate mortgage and consumer loans and to fund unused lines of credit.

4 unchanged sentences

Commitments to fund mortgage loans $ — $ 12,135

Commitments to fund commercial and consumer loans — —

Lines of credit 3,837 2,986

47 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, 2022 and 2021, and that are included in the Company's Consolidated Statements of Financial Condition at these

The following table presents, by valuation hierarchy, assets that are measured at fair value on a recurring basis as of March 31, 2023 and 2022, and that are included in the Company's Consolidated Statements of Financial Condition at these dates:

Fair Value Measurements at March 31, 2023, Using

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If quoted market prices are not available for the specific security, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows.

These pricing models primarily use market-based or independently sourced market parameters as inputs, including, but not limited to, yield curves, interest rates,

equity or debt prices, and credit spreads.

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.

58 unchanged sentences

Any subsequent adjustments will be to the lower of cost or fair value.

As of March 31, 2023 and 2022, we had loans with a carrying value of $5.6 million and $3.1 million, respectively, for which formal foreclosure proceedings were in process.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Disclosures regarding the fair value of financial instruments are required to include, in addition to the carrying value, the fair value of certain financial instruments, both assets and liabilities recorded on and off-balance sheet, for which it is practicable to estimate fair value.

Accounting guidance defines financial instruments as cash, evidence of ownership of an entity, or a contract that conveys or imposes on an entity the contractual right or obligation to either receive or deliver cash or another financial instrument.

Accounting guidance defines financial instruments as cash, evidence of ownership of an

entity, or a contract that conveys or imposes on an entity the contractual right or obligation to either receive or deliver cash or another financial instrument.

The fair value of a financial instrument is discussed below.

17 unchanged sentences

Deposits $ 600,429 $ 594,736 $ 418,432 $ 176,304 $ —

Advances from FHLB of New York 35,000 35,238 — 35,238 —

Other borrowed money 15,903 14,575 — 14,575 —

16 unchanged sentences

VARIABLE INTEREST ENTITIES

The Company's subsidiary, Carver Statutory Trust I, is not consolidated with Carver Bancorp, Inc.

for financial reporting purposes.

Carver Statutory Trust I was formed in 2003 for the purpose of issuing $ 13 million aggregate liquidation amount of floating rate Capital Securities due September 17, 2033 (“Capital Securities”) and $ 0.4 million of common securities (which are the only voting securities of Carver Statutory Trust I), which are 100 % owned by Carver Bancorp, Inc., and using the proceeds to acquire Junior Subordinated Debentures issued by Carver Bancorp, Inc.

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

Carver is normally deemed to have a controlling financial interest and be the primary beneficiary if it has both (a) the power to direct activities of a VIE that most significantly impact the entities economic performance;

and (b) the obligation to absorb losses of the entity that could benefit from the activities that could potentially be significant to the VIE.

The Company's subsidiary, Carver Statutory Trust I (the "Trust"), was formed in 2003 for the purpose of issuing $ 13 million aggregate liquidation amount of floating rate Capital Securities due September 17, 2033 (“Capital Securities”) and $ 0.4 million of common securities (which are the only voting securities of the Trust), which are 100 % owned by Carver Bancorp, Inc., and using the proceeds to acquire Junior Subordinated Debentures issued by Carver Bancorp, Inc.

Carver Bancorp, Inc.

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

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 Company does not consolidate the accounts and related activity of Carver Statutory Trust I because it is not the primary beneficiary of the entity.

At March 31, 2023, the Company's maximum exposure to the Trust is $ 13.4 million, which is the Company's liability to the Trust and includes the Company's investment in the Trust.

The Bank's subsidiary, Carver Community Development Corporation (“CCDC”), was formed to facilitate its participation in local economic development and other community-based initiatives.

Per the NMTC Award's Allocation Agreement between the CDFI Fund and CCDC, CCDC is permitted to form and sub-allocate credits to subsidiary Community Development Entities (“CDEs”) to facilitate investments in separate development projects.

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.

The NMTC compliance period was completed for all these entities, and subsidiary 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, 2023, 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.

Carver is normally deemed to have a controlling financial interest and be the primary beneficiary if it has both of the following characteristics:

(a) the power to direct activities of a VIE that most significantly impact the entities economic performance;

(b) the obligation to absorb losses of the entity that could benefit from the activities that could potentially be significant to the VIE.

As none of the Bank's VIEs meet the above criteria, there are no consolidated VIEs at March 31, 2022.

The Bank's unconsolidated VIEs, in which the Company holds significant variable interests or has continuing involvement through servicing a majority of assets in a VIE at March 31, 2022 are presented below:

Involvement with SPE (000's) Funded Exposure Unfunded Exposure Total

Recognized Gain (Loss) (000's) Total Rights transferred Significant unconsolidated VIE assets Total Involvement with SPE asset Debt Investments Equity Investments Funding Commitments Maximum exposure to loss

Carver Statutory Trust 1 (1)

$ — $ — $ 13,403 $ 13,403 $ 13,022 $ 403 $ — $ — $ 13,425

1 Carver Statutory Trust debt investment includes deferred interest of $ 22 thousand.

The Company had no consolidated VIEs at March 31, 2023.

NON-INTEREST REVENUE AND EXPENSE

64 unchanged sentences

$ in thousands 2023

Equity in net income/loss from subsidiaries $ 706 $ ( 3,039 )

Equity in net loss/income from subsidiaries $ ( 2,640 ) $ 706

Other income 27 17

Grant income 439 60

Total income (loss) 783 ( 2,518 )

Total (loss) income ( 2,174 ) 783

Interest expense on borrowings 839 481

11 unchanged sentences

Adjustments to reconcile net loss to net cash from operating activities:

Equity in net income/loss from subsidiaries ( 706 ) 3,039

Decrease (increase) in accounts receivable from subsidiaries 205 ( 164 )

Decrease (increase) in other assets 92 ( 38 )

(Decrease) increase in accounts payable to subsidiaries ( 1,213 ) 917

(Decrease) increase in other liabilities ( 2,593 ) 609

Net cash (used in) provided by operating activities ( 5,062 ) 467

Equity in net loss/income from subsidiaries 2,640 ( 706 )

Restricted stock vesting 91 122

Decrease in accounts receivable from subsidiaries — 205

(Increase) decrease in other assets ( 57 ) 92

Increase (decrease) in accounts payable to subsidiaries 976 ( 1,212 )

Decrease in other liabilities ( 14 ) ( 2,593 )

Net cash used in operating activities ( 765 ) ( 4,939 )

Cash Flows From Investing Activities

Capital contribution — ( 15,500 )

Net cash used in investing activities — ( 15,500 )

Cash Flows From Financing Activities

Increase in borrowings — 2,500

Capital contribution ( 15,500 ) 2,500

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

Issuance of common stock — 2,998

Issuance of preferred stock — 4,000

Restricted stock vesting 122 37

Net cash (used in) provided by financing activities ( 5,879 ) 11,411

Net (decrease) increase in cash ( 10,941 ) 11,878

Net cash provided by financing activities — 9,498

Net decrease in cash ( 765 ) ( 10,941 )

Cash and cash equivalents – beginning 1,433 12,374

Cash and cash equivalents – ending $ 668 $ 1,433

SUBSEQUENT EVENTS

On April 12, 2023, the Company entered into an agreement with a third party, in which the third party would provide the Company with an unsecured long-term, below-market-rate loan in the amount of $ 2.5 million to finance eligible loans offered through the Bank's community investment initiatives and loan programs focused on Minority and Women-owned Business Enterprises and consumers across the greater New York City region.

In April 2023, the Bank was awarded a $2.5 million grant as part of the U.S.

Department of the Treasury's Community Development Financial Institutions Fund's Equitable Recovery Program ("CDFI ERP").

The funds will be used towards financing programs and activities to help low- and moderate income communities recover from the COVID-19 pandemic in accordance with the terms and requirements of the CDFI ERP.

On April 1, 2023, the Company adopted ASU No.

2016-13, "Financial Instruments - Credit Loss (Topic 326)" and its subsequent amendments, which replaces the guidance on recognition and measurement of credit losses for financial assets.

The new requirements, known as the current expected credit loss model ("CECL") will require entities to adopt an impairment model based on expected losses rather than incurred losses.

Based on the Company's CECL model results that it has performed alongside the incurred loss approach, the adoption of ASU 2016-13 will result in an increase of approximately $0.7 million to the allowance for credit losses for loans, including the reserve for off-balance sheet credit exposure recorded in other liabilities.

There is no material impact for other assets within the scope of the new CECL guidance, such as held-to-maturity debt securities and other receivables.

The Company will apply the new guidance as a cumulative-effect adjustment to retained earnings as of April 1, 2023, using the modified-retrospective approach.

As the Company finalizes the CECL implementation, final decisions made by management may result in a different impact than that stated above for financial statement disclosure purposes.

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