What changed in this filing

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Item 1. Business

2025-06-24 compared with 2024-07-16 · 115 added, 124 removed, 746 unchanged (24% of the section changed)

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Carver Federal was founded in 1948 to serve African-American communities whose residents, businesses and institutions had limited access to mainstream financial services.

The Bank remains headquartered in Harlem, and predominantly all of its seven branches and three stand-alone 24/7 ATM centers are located in low- to moderate-income neighborhoods.

The Bank remains headquartered in Harlem, and predominantly all of its seven branches are located in low- to moderate-income neighborhoods.

Many of these historically underserved communities have experienced unprecedented growth and diversification of incomes, ethnicity and economic opportunity, after decades of public and private investment.

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This, combined with competitors' larger presence in the New York market, add to the challenges the Bank faces in expanding its current market share and growing its near-term profitability.

Carver Federal's 75-year history in its market area, its community involvement and relationships, targeted products and services and personal service consistent with community banking, help the Bank compete with competitors that have entered its market.

Carver Federal's more than 75-year history in its market area, its community involvement and relationships, targeted products and services and personal service consistent with community banking, help the Bank compete with competitors that have entered its market.

The Bank formalized its many community focused investments on August 18, 2005, by forming Carver Community Development Corporation ("CCDC").

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On August 18, 2005, Carver Federal formed CCDC, a wholly-owned community development entity, to facilitate and develop innovative approaches to financial literacy, address the needs of the unbanked and participate in local economic development and other community-based activities.

As part of its operations, CCDC monitors the portfolio of investments related to NMTC awards and makes application for additional awards.

As part of its operations, CCDC manages the Bank's applications for government grants and other awards to help fund these community activities.

Carver Statutory Trust I

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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 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.

All quarterly interest payments subsequent to the June 2021 payment up to and including the June 2024 payment have been made.

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

Debenture interest payments are subject to prior approval from the Federal Reserve Bank.

A streamlined process has been developed for the Company to request regulatory approval to make debenture interest payments, although there is no assurance that the Federal Reserve Bank will continue to approve such quarterly payments.

All quarterly interest payments up to and including the March 2025 payment were made.

The Company deferred the interest payment due June 17, 2025 in order to manage liquidity.

Debenture interest payments may be deferred for up to twenty consecutive quarters under the terms of the Indenture.

While Carver has suspended its regular quarterly cash dividend on its common stock, in the future, the Company 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 the Company.

Under the Formal Agreement, the OCC will monitor all capital distributions, including dividend payments, by Carver Federal to the Company.

The Board of Governors of the Federal Reserve (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.

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 an application with the FRB) prior to the declaration of each capital distribution.

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 its regular quarterly cash dividend on its common stock.

At the Market Offering

During fiscal year 2022, the Company 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 had 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.

There were no additional offerings during fiscal years 2023 and 2024.

Formal Agreement

On January 18, 2023, the OCC notified the Bank that the Formal Agreement between the Bank and the OCC dated May 24, 2016 (the "Formal Agreement") was terminated, effective immediately.

The formal agreement required the Bank to reduce its concentration of commercial real estate and required that the Bank undertake several actions to improve compliance matters and overall profitability.

As a result of active participation and cooperation of management and the Board of Directors of the Bank and the Company, the issues that led to the formal agreement were successfully resolved, resulting in the OCC's termination of the agreement.

The Individual Minimum Capital Ratio letter issued 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, remains in effect, as do the Company's 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.

Subsequent Events

On May 14, 2025, the Bank entered into a formal written agreement with the OCC.

The Formal Agreement specifically provides that the Bank will take the following actions within the time frames specified:

• Establish a Compliance Committee of its Board of Directors to specifically monitor and oversee the Bank's compliance with the Formal Agreement.

This Committee has already been established and is actively underway;

• Prepare a three-year strategic plan for the OCC's review, with such strategic plan to establish objectives specifically focusing on the Bank's earnings performance that will include measures for growth, capital, liquidity and balance sheet mix;

• Prepare an earnings program for the OCC's review designed to improve and sustain the earnings of the Bank.

The Formal Agreement specifically addresses the items referenced above through a new three-year strategic plan.

The Bank's board of directors and management will address these provisions within the required time frames.

Further, the Bank's board of directors and management are fully committed to, as expeditiously as possible, achieving sustainable earnings through a more robust and viable strategic plan, which are part of the Bank's new ongoing operations and actions under the leadership of its new Chief Executive Officer.

The foregoing description of the Formal Agreement is qualified in its entirety by reference to the Formal Agreement issued to the Bank, which is included herein as Exhibit 10.5.

The Individual Minimum Capital Ratio letter issued by the OCC on June 29, 2016, 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, remains in effect, as do the Company's 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.

Human Capital Resources

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Carver Federal's loan portfolio consists primarily of mortgage and business loans originated by the Bank's lending teams and secured primarily by commercial real estate including multifamily, mixed-use and owner-occupied properties and general UCC-1 filings on C&I loans against business assets.

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

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

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

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.

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

From time to time, the Bank may participate or purchase loans that comply with the Bank's underwriting standards from other financial institutions or in contiguous market geographies to achieve loan growth and strategic objectives that fall outside of core markets, but offer asset and geographical diversification.

In recent years, Carver Federal has focused on the origination of commercial real estate loans extended primarily to owner-occupied and mixed-use commercial loans, and to a lesser extent, multifamily transactions in a scaled manner.

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.

During fiscal year 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, 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 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.

During fiscal year 2023, the Bank strengthened its qualitative factors and assessment criteria due to the economic climate in general and its impact on the New York City ("NYC") metropolitan area in which the Company operates.

In spite of the strict analysis applied to our qualitative reserves, the Company's overall allowance declined moderately as the rolling 20 quarter loss look back period revealed little in recorded losses.

The Company adopted CECL on April 1, 2023, which resulted in an increase of $0.7 million to the allowance for credit losses related to loans.

During fiscal year 2025, the Bank's allowance for credit losses increased as a result of a series of qualitative factor adjustments and increase in individually analyzed loan reserves.

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

Loan Portfolio Composition .

Total loans receivable increased $25.0 million, or 4.2%, to $622.9 million at March 31, 2024, compared to $597.9 million at March 31, 2023.

Total loans receivable decreased $9.2 million, or 1.5%, to $613.7 million at March 31, 2025, compared to $622.9 million at March 31, 2024.

Carver Federal's total loans receivable as a percentage of total assets increased to 83.2% at March 31, 2025, compared to 81.5% at March 31, 2024.

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

The Bank purchased $20.0 million and $4.0 million of one-to-four family residential loans during fiscal years 2024 and 2023, respectively.

There were no purchases of one-to-four family residential loans during fiscal year 2025 based around market conditions and pricing.

The Bank purchased $20.0 million of one-to-four family residential loans during fiscal year 2024.

Approximately 33.2% of the one-to-four family residential mortgage loans maturing in greater than one year at March 31, 2025 were adjustable rate and approximately 66.8% were fixed-rate.

One-to-four family residential real estate loans increased $17.0 million, or 25.8%, to $82.8 million at March 31, 2024, compared to $65.8 million at March 31, 2023.

Carver Federal's fixed-rate, one-to-four family residential mortgage loans are underwritten in accordance with applicable secondary market underwriting guidelines and requirements for sale.

One-to-four family residential real estate loans decreased $8.4 million, or 10.1%, to $74.4 million at March 31, 2025, compared to $82.8 million at March 31, 2024.

Historically, Carver Federal's fixed-rate, one-to-four family residential mortgage loans were generally underwritten in accordance with applicable secondary market underwriting guidelines and requirements for sale.

From time to time in the past, the Bank has sold such loans to Fannie Mae, the State of New York Mortgage Agency (“SONYMA”) and other third parties.

These loans are generally sold with limited recourse on a servicing retained basis except to SONYMA where the sale is made with servicing released.

These loans were normally sold with limited recourse on a servicing retained basis except to SONYMA where the sales were made with servicing released.

Carver Federal uses a servicing firm to sub-service mortgage loans, whether held in portfolio or sold with servicing retained.

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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.

Additionally, 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).

Additionally, on a limited basis, 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, 2025, the Bank had $2.6 million in subprime loans, or 0.4% of its total loan portfolio, of which $673 thousand are non-performing loans.

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These loans are dependent on the successful operation of

such buildings and can be significantly impacted by economic conditions, industry concentration, valuation of the underlying properties, lease terms, occupancy/vacancy rates, and changes in market demand for multifamily units.

Carver Federal's multifamily real estate loan portfolio decreased $11.4 million, or 6.4%, to $165.8 million in fiscal 2025, or 27.0% of Carver Federal's total loan portfolio at March 31, 2025.

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 owner/guarantor, when applicable.

Carver Federal's multifamily real estate product guidelines generally require that the maximum loan-to-value ("LTV") at origination not exceed 70% based on the appraised value of the mortgaged property, and a debt service coverage ratio at origination of at least 1.30, which requires the properties to generate cash flow after expenses and allowances in excess of the principal and interest payment.

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, and a debt service coverage ratio at origination of at least 1.20 (with personal guarantees), which requires the properties to generate cash flow after expenses and allowances in excess of the principal and interest payment.

The Bank originates and purchases multifamily real estate loans, which are predominantly fixed rate for the first five years, then adjusts for the second five years, if applicable.

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

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.

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 and internally tracks against local market studies and performance.

All commercial loans, including multifamily real estate loans, are risk rated internally at the time of origination.

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Commercial real estate ("CRE") lending consists predominantly of originating loans for the purpose of purchasing or refinancing office, mixed-use properties, retail and church buildings in the Bank's market area.

Mixed-use loans are secured by properties that are intended for both commercial and residential use, but predominantly commercial, and are classified as CRE.

There were no commercial real estate loan purchases during fiscal year 2024.

The Bank purchased $5.8 million of commercial real estate loans during fiscal year 2023.

At March 31, 2024, Carver Federal's CRE loan portfolio decreased $3.0 million, or 1.7%, to $175.4 million, or 28.2% of the Bank's total loan portfolio.

Mixed-use property loans are secured by buildings/structures that are intended for both commercial and residential use, but predominantly commercial, and are classified as CRE.

There were no commercial real estate loan purchases during fiscal years 2025 and 2024.

At March 31, 2025, Carver Federal's CRE loan portfolio increased $2.9 million, or 1.7%, to $178.3 million, or 29.1% of the Bank's total loan portfolio.

The following table provides details of the Bank's commercial real estate loans by major industry type at March 31, 2025:

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Carver Federal's maximum LTV ratio on CRE loans at origination is generally 75% based on the latest appraised fair market value of the mortgaged property and the Bank generally requires a debt service coverage ratio at origination of at least

1.20 (with guarantor recourse).

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.

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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 generally resets every 5 years.

however, the interest rate generally resets on the 5th year anniversary.

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.

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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 during the early stages of the pandemic, but have since normalized or leveled off.

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 dating back to 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.

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Carver Federal has historically originated or participated in construction loans for new construction and renovation of multifamily buildings, residential developments, community service facilities, churches, and affordable housing programs;

however, the Bank no longer directly originates construction loans.

The loans provide for disbursement in stages as construction is completed.

The Bank's construction loan portfolio totaled $2.2 million, or 0.4% of the total loan portfolio at March 31, 2024.

Construction loans increased $2.4 million to $4.6 million, or 0.7% of the total loan portfolio at March 31, 2025, stemming solely from participations.

Construction loans generally present an increased level of risk from the effect of general economic conditions and uncertainties surrounding construction costs.

Borrowers must satisfy all credit requirements that apply to the Bank's permanent mortgage loan financing for the mortgaged property.

Carver Federal has additional criteria for construction loans including an engineer's plan and periodic cost reviews on all construction budgets and monitoring.

Carver Federal has additional criteria for construction loans including an engineer's plan and periodic cost reviews on all construction budgets and monitoring, but has only been applied in a limited manner as of late through participation with experienced partners.

Business Loans .

Carver Federal's small business (Commercial and Industrial, or "C&I") lending portfolio increased $2.7 million to $169.6 million, comprising 27.2% of the Bank's total loan portfolio as of March 31, 2024.

This includes $268 thousand of PPP loans at March 31, 2024.

The Bank purchased $0.3 million and $0.6 million business loans during fiscal years 2024 and 2023, respectively.

Carver Federal's small business (Commercial and Industrial, or "C&I") lending portfolio decreased $4.6 million to $165.0 million, comprising 26.9% of the Bank's total loan portfolio as of March 31, 2025, which includes $206 thousand remaining of PPP loans.

There were no purchases of business loans during fiscal year 2025.

The Bank purchased $0.3 million business loans during fiscal year 2024.

Carver Federal originates and purchases business and SBA loans, placing particular focus on organic loan growth through the financing of local entrepreneurs and organizations located in its primary market area and surrounding areas.

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 various business segments, including educational, health care, personal services, light industrial, wholesale and trade contractors generally through select programs and others including Required Capital Partner Loans in conjunction with Deloitte and leverage loans through Banc Alliance.

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 various business segments, including educational, health care, personal services, light industrial, wholesale and trade contractors generally through select programs and other customized financial parameters around Required Capital Partner Loans in conjunction with Deloitte, MWBE vendor loans guaranteed by a Fortune 100 Company and leverage/syndication loans through Banc Alliance.

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

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At March 31, 2025, the Bank had $25.7 million in consumer and other loans, or 4.2%, of the Bank's loan portfolio.

This includes $0.8 million of student loans to medical students enrolled in several Caribbean schools purchased in fiscal 2017.

During fiscal year 2024, the Bank purchased $11.3 million consumer loans through strategic partnerships with Bankers Healthcare Group, LLC and Upstart Holdings, Inc.

This includes $0.6 million of student loans to medical students enrolled in several Caribbean schools purchased in

During fiscal year 2025, the Bank generated $15.4 million of consumer loans, purchased primarily through its strategic partnerships that included $7.2 million through Upstart Holdings, Inc.

based on the Bank's credit criteria, $6.2 million in select Bankers Healthcare Group, LLC purchases that had a LMI focus, and approximately $2.0 million in a targeted auto loan pool from Valley National Bank for scaled entry into the space and added diversification, along with a correlated CDFI classification component.

Consumer loans are typically unsecured and more susceptible to declining economic conditions.

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

Further, the application of various federal

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

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

These loans may also give rise to claims and defenses by a borrower against Carver Federal, including defenses against any applicable underlying collateral.

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Loan originations were $39.1 million in fiscal 2025 compared to $61.7 million in fiscal 2024.

There were $31.5 million loan purchases during fiscal 2024 and $14.3 million purchases in fiscal 2023.

There were $15.4 million loan purchases during fiscal 2025 and $31.5 million loan purchases in fiscal 2024.

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

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(1) Comprised of personal loans.

(2) Comprised of business, commercial real estate and multifamily loans.

(2) Comprised of one-to-four family, business and commercial real estate loans.

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

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The following table sets forth information at March 31, 2025 regarding the amount of loans maturing in Carver Federal's portfolio, including scheduled repayments of principal, based on contractual terms to maturity.

Demand loans, loans having no schedule of repayments and no stated maturity, and overdrafts are reported as due in one year or less.

Demand loans, loans having no schedule of repayments and no stated maturity, and overdrafts are reported as due in one year or

The table below does not include any estimate of prepayments, which significantly shorten the average life of all mortgage loans and may cause Carver Federal's actual repayment experience to differ significantly from that shown below:

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Non-performing Assets .

Non-performing assets consist of nonaccrual loans, loans held-for-sale, and property acquired in settlement of loans (OREO), including foreclosure.

Non-performing assets consist of nonaccrual loans, loans held-for-sale, and property acquired in settlement of loans or Other Real Estate Owned ("OREO"), including foreclosure.

When a borrower fails to make a payment on a loan, the Bank and/or its loan servicers take prompt steps to have the delinquency cured and the loan restored to current status.

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The Bank's collection efforts continue after the loan is charged off, except when a determination is made that collection efforts have been exhausted or are not productive.

The Bank may from time to time agree to modify the contractual terms of a borrower's loan.

In cases where such modifications represent a concession to a borrower experiencing financial difficulty, the loan is placed on nonaccrual status until the Bank 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.

At March 31, 2024,

modified loans to a borrower experiencing financial difficulty totaled $6.8 million, of which $5.7 million were classified as performing.

In certain circumstances, the Bank may agree to modify the contractual terms of a borrower's loan, including extension of maturity date, reduction in the stated interest rate, rescheduling of future cash flows, reduction in the face amount of the debt or reduction of past accrued interest.

In cases where such modifications are made to a borrower experiencing financial difficulty, the loan is placed on nonaccrual status until the Bank 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.

At March 31, 2025, modified loans to a borrower experiencing financial difficulty totaled $6.0 million, of which $5.7 million were classified as performing.

The following table sets forth information with respect to Carver Federal's non-performing assets, which includes nonaccrual loans, loans held-for-sale, and property acquired in settlement of loans as of March 31:

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

Performing modified loans were $5.7 million at 2024, $6.0 million at 2023, $5.2 million at 2022, $5.8 million at 2021, and $1.7 million at 2020.

At March 31, 2024, total non-performing assets decreased by $494 thousand, or 4.0%, to $11.8 million, compared to $12.3 million at March 31, 2023, as a result of a $486 thousand decrease in nonaccrual loans, year over year.

Nonaccrual loans at March 31, 2024 consisted of ten one-to-four family, two multifamily, two commercial real estate, seven business, and one consumer loan.

Performing modified loans were $5.7 million at 2025 and 2024, respectively, $6.0 million at 2023, $5.2 million at 2022, and $5.8 million at 2021.

At March 31, 2025, total non-performing assets increased by $12.8 million to $24.6 million, compared to $11.8 million at March 31, 2024, as a result of a $12.8 million increase in nonaccrual loans, year over year.

Nonaccrual loans at March 31, 2025 consisted of seven one-to-four family, four multifamily, three commercial real estate, six business, and three 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 reserves.

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At March 31, 2025, Carver had 6 loans secured by one-to-four family residential real estate properties in the process of foreclosure with a total outstanding balance of $1.3 million.

Although we believe that substantially all risk elements at March 31, 2024 have been disclosed, other factors, including economic conditions, may cause borrowers to be unable to comply with the contractual repayment terms on certain real estate and commercial loans.

Although the Company believes that substantially all risk elements at March 31, 2025 have been disclosed, other factors, including economic conditions, may cause borrowers to be unable to comply with the contractual repayment terms on certain real estate and commercial loans.

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

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An asset is classified as “substandard” if it is determined to be inadequately protected by the current sound net worth and paying capacity of the obligor or of the current value of the collateral pledged, if any.

An asset is classified as “doubtful” if it has all the weaknesses inherent in those classified as "substandard," with the added characteristic that full collection, based on current facts, conditions and values, is highly questionable and improbable.

An asset is classified as “doubtful” if it has all the weaknesses inherent in those

classified as "substandard," with the added characteristic that full collection, based on current facts, conditions and values, is highly questionable and improbable.

An asset is classified as “loss” if it is considered uncollectible with insignificant value, even if a partial recovery could be expected in the future.

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For additional information regarding Carver Federal's ACL policy, refer to Note 2 of Notes to Consolidated Financial Statements, “Summary of Significant Accounting Policies.”

The Board has designated the Management Credit Review Committee for management to perform a review on a quarterly basis of the Bank's asset quality, determine and properly identify and monitor credit risk in the loan portfolio and determine that the Bank's ACL is proper and appropriate and submit their report to the Board for review.

The Board has designated the CECL Committee for management to perform a review on a quarterly basis of the Bank's asset quality, determine and properly identify and monitor credit risk in the loan portfolio and determine that the Bank's ACL is proper and appropriate and submit their report to the Board for review.

Carver Federal's methodology for establishing the ACL takes into consideration the measurement of expected credit losses based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.

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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.

Subsequent to taking possession of the property, management periodically evaluates the property and an allowance

is established if the estimated fair value of the property, less estimated costs to sell, declines.

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

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Less Charge-offs:

One-to-four family — — — — (12)

Multifamily — — — — —

Commercial real estate — — (586) — —

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One-to-four family — — 90 13 88

Multifamily — — — — —

Commercial real estate — — 10 — —

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Total Allowance $ 6,337 100.0 % $ 5,871 100.0 % $ 5,229 100.0 % $ 5,624 100.0 % $ 5,140 100.0 %

The changes in the ACL by loan category was primarily due to the increase in one-to-four family and business loans during fiscal year 2024.

The allocation of the allowance to each category is not necessarily indicative of future losses and does not restrict the use of the allowance to absorb losses in any category.

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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, 2024, constituted $437 thousand, or 1.6%, of the mortgage-backed securities portfolio.

The Bank seeks to manage interest rate risk in part by investing in adjustable-rate mortgage-backed securities, which at March 31, 2025, constituted $367 thousand, or 1.5%, of the mortgage-backed securities portfolio.

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

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For available-for-sale ("AFS") securities in an unrealized loss position, management determines whether the Company has the intent to sell the security, or will more likely than not be required to sell the security before the recovery of its amortized cost basis.

If either of the criteria regarding intent or requirement to sell is met, the ACL is written off and the amortized cost adjusted for that amount.

If either of the criteria regarding intent or requirement to sell is met, any previously recognized ACL is written off and the amortized cost is adjusted to fair value.

If any incremental credit loss occurs, the amortized cost is adjusted further by the credit loss and recorded in earnings.

For AFS securities that do not meet the above criteria, management evaluates whether the decline in fair value has resulted from credit losses or other factors.

For AFS securities that do not meet the above criteria, management evaluates whether the decline in fair value has resulted from credit loss or other factors.

In making this assessment, management may consider various factors including downgrades in the rating of the security by rating agencies, failure of the issuer to make scheduled interest or principal payments or adverse conditions specifically related to the security.

If the decline in fair value is due to credit loss, the credit loss is recorded through ACL, limited by the amount that the fair value is less than the amortized cost basis.

If the decline in fair value is due to credit loss, the loss is recorded through ACL, limited by the amount that the fair value is less than the amortized cost basis.

Non-credit related losses are recorded through other comprehensive income.

Management has reviewed the Bank's AFS portfolio at March 31, 2025 and believes that the 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 valuations recover.

The Bank's held-to-maturity portfolio consists of mortgage-backed securities that are either fully guaranteed or issued by a government sponsored enterprise, which has a credit rating and perceived credit risk comparable to the U.S.

As such, no allowance for credit losses on securities available-for-sale or held-to-maturity have been established as of March 31, 2024.

As such, no allowance for credit losses on securities available-for-sale or held-to-maturity have been established as of March 31, 2025 and 2024.

Sources of Funds

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Carver Federal also offers Individual Retirement Accounts.

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

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's policies are designed primarily to attract deposits from local residents and businesses through the Bank's branches, although the Bank has expanded its digital online account presence across the Northeast and in Washington, D.C.

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

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As of March 31, 2025, Carver had a total of $55.0 million in brokered deposits, compared to $60.0 million as of March 31, 2024.

The Bank secured $60.0 million in DTC brokered CDs during fiscal year 2024 to ensure the availability of sufficient liquidity for projected loan closings.

As of March 31, 2024, the Bank has $76.7 million of reciprocal deposits acquired through its participation in the Certificate of Deposit Account Registry Service (“CDARS”).

As of March 31, 2025, the Bank had $90.0 million of reciprocal deposits acquired through its participation in the Certificate of Deposit Account Registry Service (“CDARS”).

The Bank's CDARS deposits totaled $76.7 million as of March 31, 2024.

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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 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.

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.

All quarterly payments subsequent to the June 2021 payment up to and including the June 2024 payment have been made.

Debenture interest payments are subject to prior approval from the Federal Reserve Bank.

All quarterly payments up to and including the March 2025 payment were made.

The Company deferred the interest payment due June 17, 2025 in order to manage liquidity.

Debenture interest payments may be deferred for up to twenty consecutive quarters under the terms of the Indenture.

The interest rate was 7.6% at March 31, 2025.

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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 the Company, and the FRB regulates dividends paid by the

Under the Formal Agreement, the OCC will monitor 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 an application 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.

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Enforcement Actions

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.

On January 18, 2023, the Bank was released from the Formal Agreement by the OCC as further described in the Company's Current Report on Form 8-K as filed with the SEC on January 23, 2023.

On May 14, 2025, the Bank entered into the Formal Agreement with the OCC.

The Formal Agreement specifically provides that the Bank will take the following actions within the time frames specified:

• Establish a Compliance Committee of its Board of Directors to specifically monitor and oversee the Bank's compliance with the Formal Agreement.

This Committee has already been established and is actively underway;

• Prepare an earnings program for the OCC's review designed to improve and sustain the earnings of the Bank.

The Formal Agreement specifically addresses the items referenced above through a new three-year strategic plan.

The Bank's board of directors and management will address these provisions within the required time frames.

The foregoing description of the Formal Agreement is qualified in its entirety by reference to the Formal Agreement issued to the Bank, which is included herein as Exhibit 10.5.

The OCC has established higher minimum capital requirements for the Bank.

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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.

mandatory supervisory actions become immediately applicable to the institution, including restrictions on growth of assets and other forms of expansion.

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, 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.

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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.

the alternative framework are considered to comply with the applicable regulatory capital requirements, including the risk-based requirements.

Such institutions are also considered "well-capitalized" for prompt corrective action purposes.

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.

As of March 31, 2023, the Bank has not opted into the alternative framework.

Effective January 1, 2020, the federal banking agencies adopted a rule to establish for institutions with assets of less than $10 billion that meet other specified criteria a "community bank leverage ratio" (the ratio of a bank's tangible equity capital to average total consolidated assets) of 9% that such institutions may elect to utilize in lieu of the generally applicable leverage and risk-based capital requirements.

A "qualifying community bank" with capital exceeding 9% will be considered compliant with all applicable regulatory capital and leverage requirements, including the requirement to be "well capitalized." As of March 31, 2025, the Bank has elected to continue to utilize the generally applicable leverage and risk-based requirements and not apply the community bank leverage ratio.

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.

While the Formal Agreement was terminated on January 18, 2023, the IMCR remains in effect.

At March 31, 2024, Carver Federal exceeded the capital regulatory requirements and its IMCR requirements with a common equity Tier 1 ratio of 12.00%, Tier 1 leverage ratio of 9.56%, total risk-based capital ratio of 12.98% and a Tier 1 risk-based capital ratio of 12.00%.

The IMCR established by the OCC on June 29, 2016, 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, 2025, Carver Federal's capital level exceeded the regulatory requirements to be considered "well capitalized," but did not meet its IMCR requirements.

The Tier 1 leverage ratio was 8.70%, below the 9% IMCR requirement, and the total risk-based capital ratio was 11.56% below the 12% IMCR requirement.

The Bank is working on taking appropriate actions with the goal of achieving the IMCR targets.

Limitation on Capital Distributions.

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relationships under which the third party provides services to the bank).

The guidance outlines the agencies' views on sound risk management principles related to third party relationships, including as related to the performance of adequate due diligence on the third party, appropriate documentation of the relationship, and performance of adequate oversight and auditing in order to the limit the risks to the bank.

The guidance outlines the agencies'

views on sound risk management principles related to third party relationships, including as related to the performance of adequate due diligence on the third party, appropriate documentation of the relationship, and performance of adequate oversight and auditing in order to the limit the risks to the bank.

The OCC has primary enforcement responsibility over the Bank.

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The CRA does, however, require the primary regulator, 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.

While CRA modernization is underway, scheduled for full implementation by 2026, the current evaluation system focuses on three tests:

The current evaluation system focuses on three tests:

(1) a lending test, to evaluate the institution's record of making loans in its assessment areas;

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On October 24, 2023, the OCC and the other federal banking agencies issued a final rule to strengthen and modernize the CRA regulations.

Under the final rule, banks with assets of at least $600 million as of December 31 in both of the prior two calendar years and less than $2 billion as of December 31 in either of the prior two calendar years will be an “intermediate bank.” The agencies will evaluate intermediate banks under the Retail Lending Test and either the current community development test, referred to in the final rule as the Intermediate Bank Community Development Test, or, at the bank’s option, the Community Development Financing Test.

The applicability date for the majority of the provisions in the CRA regulations is January 1, 2026, and additional requirements will be applicable on January 1, 2027.

However, on March 28, 2025, the OCC, Federal Reserve and FDIC (collectively "the agencies") announced their intent to issue a proposal to rescind the 2023 CRA final rule due to litigation.

The proposal would reinstate the CRA framework that existed prior to the October 2023 final rule.

For the OCC, this framework includes the OCC guidance issued in 2021, which upholds rules adopted by the agencies in 1995.

Transactions with Related Parties.

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The Bank is subject to federal regulations implementing the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA PATRIOT Act”).

The USA PATRIOT

Act gives the federal government new powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing, and broadened anti-money laundering requirements.

The USA PATRIOT Act gives the federal government new powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing, and broadened anti-money laundering requirements.

By way of amendments to the Bank Secrecy Act ("BSA"), Title III of the USA PATRIOT Act took measures intended to encourage information sharing among bank regulatory agencies and law enforcement bodies.

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

The Bank was in compliance with this requirement with an investment in the capital stock of the FHLB-NY at March 31, 2024 of $2.0 million.

The Bank was in compliance with this requirement with an investment in the capital stock of the FHLB-NY at March 31, 2025 of $853 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.

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The impact on the net deferred tax asset before valuation allowances was a reduction of $3.1 million, which was offset by a corresponding decrease in the valuation allowance of the same amount.

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

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

The refund was received during fiscal year 2023.

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

State and Local Taxation

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

What changed 10-K

Item 1. Business