What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-06-24 compared with 2024-07-16 · 89 added, 89 removed, 371 unchanged (32% of the section changed)

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Executive Summary

Carver concluded fiscal 2024 with a net loss of $3.0 million, compared to a net loss of $4.4 million for the prior year period.

The change in our results of operations was primarily driven by increases in interest income and non-interest income, partially offset by increases in interest expense and non-interest expense compared to the prior fiscal year.

Carver concluded fiscal 2025 with a net loss of $13.7 million, compared to a net loss of $3.0 million for fiscal 2024.

The change in our results of operations was primarily driven by increases in interest expense, non-interest expense and provision for credit losses and a decrease in non-interest income, partially offset by a slight increase in interest income compared to the prior fiscal year.

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.

The Federal Reserve began increasing the federal funds rate at the March 2022 meeting, and is currently maintaining a target interest rate range between 5.25% and 5.5%.

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.

As of March 31, 2024, the City's unemployment rate remains high at 4.9%, exceeding the national average, as employment in the arts and entertainment, food and hospitality sectors continue to remain below their pre-pandemic highs.

The closure of five banks in 2023 led to industry-wide concerns related to liquidity, deposit outflows, unrealized securities losses and eroding confidence in the banking system from the general public.

In response to these 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.

Inflationary pressure appears to have decreased, but rates remain high and affect customer demand.

The target interest rate range had been held steady at its highest point between 5.25% and 5.5% since July 2023, until the Federal Reserve lowered the rates by 50 basis points in September 2024, easing monetary policy for the first time since regular increases began in March 2022.

The Federal Reserve approved two additional cuts in November and December, lowering the overnight borrowing rate to a range between 4.25% to 4.5%, but has left interest rates unchanged since its January 2025 meeting.

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 job growth and levels of unemployment.

The City's local area inflation has exceeded the national rate, primarily due to housing costs, and its unemployment rate remains high at 5.1%, exceeding the national average.

The Company's liquidity position remains adequate.

The impact of market volatility from continued inflation and high 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.

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

At the Market Offering

During fiscal year 2022, we entered into a sales agreement with an agent to sell, from time to time, our common stock having an aggregate offering price of up to $20.0 million, in an “at the market offering.” During fiscal year 2022, the Company sold an aggregate of 397,367 shares of common stock pursuant to the terms of such sales agreement, resulting in aggregate gross proceeds of approximately $3.1 million and net proceeds of $3.0 million, after deducting expenses and commissions paid to the placement agent.

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

Subsequent Events

On April 30, 2024, the Company entered into an agreement with a third party, in which the third party would provide the Company with a $25.0 million revolving unsecured long-term, below-market-rate loan to support the Bank in financing initiatives that reduce greenhouse gas emissions and promote energy efficiency in building projects, fleet upgrades to electric vehicles, and electric vehicle charging station infrastructure.

The loan facility will also support the working capital and asset-specific financing needs of Minority and Women-owned Business Enterprises working on green energy projects, weatherization, electrification, and green technology.

On May 24, 2024, the Bank secured a $1.8 million 12-month fixed-rate advance through the second round of the FHLB-NY 0% Development Advance (ZDA) Program, which provides members with subsidized funding in the form of interest rate credits to assist in originating or purchasing loans that meet an eligibility criteria.

SELECTED FINANCIAL DATA

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 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.

SELECTED FINANCIAL INFORMATION

The following selected consolidated financial and other data is as of and for the years ended March 31 and is derived in part from, and should be read in conjunction with the Company's Consolidated Financial Statements and related notes:

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These assumptions and estimates are susceptible to significant changes based on the current environment.

In a continued effort to combat inflation, the Federal Reserve approved the 11th interest rate hike in July 2023, raising the overnight borrowing rate 25 basis points to a target range of 5.25% to 5.5%, the highest it has been in 22 years.

Interest rates were held steady at the May 2024 meeting and the Federal Reserve is not expected to start cutting rates yet.

Inflationary pressure has decreased, but rates remain high.

The target interest rate range had been held steady at its highest point between 5.25% to 5.5% since July 2023, until the Federal Reserve lowered rates by 50 basis points in September 2024, decreasing the target range to 4.75% to 5% and began easing monetary policy for the first time in four years.

A high interest rate environment can negatively impact the Company if the higher debt service costs on adjustable-rate loans lead to borrowers' inability to pay contractual obligations.

Further, any change in the size of the loan portfolio or any of its components could necessitate an increase in the ACL even

though there may not be a decline in credit quality or an increase in potential problem loans.

As such, there can never be assurance that the ACL accurately reflects the actual loss potential inherent in a loan portfolio.

Further, any change in the size of the loan portfolio or any of its components could necessitate an increase in the ACL even though there may not be a decline in credit quality or an increase in potential problem loans.

As such, there can never be assurance that the ACL accurately reflects

the actual loss potential inherent in a loan portfolio.

There have been no significant changes to the inputs and assumptions during the twelve months ended March 31, 2025.

The ACL is a valuation account that is deducted from the loan portfolio's amortized cost basis to present the net amount expected to be collected on the loans.

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

The Bank generally requires a debt service coverage ratio at origination of at least 1.30x, and that the maximum loan-to-value ("LTV") at origination not exceed 70% based on the appraised value of the mortgaged property.

The Bank generally requires a debt service coverage ratio at origination of at least 1.20x (with personal guarantees), and that the maximum loan-to-value ("LTV") at origination not exceed 75% based on the appraised value of the mortgaged property.

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

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.

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.

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 owner/guarantor, the marketability of the property and the Bank's lending experience with the owner/guarantor.

• Commercial Real Estate ("CRE") - 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.

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 maximum LTV ratio on CRE loans at origination is generally 70% 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 1.30x.

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 owner/guarantor, the marketability of the property and the Bank's lending experience with the owner/guarantor.

The 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 1.20x (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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-200 bps 44,840 (27,150) (37.7) %

-300 bps 22,550 (49,440) (68.7) %

-400 bps (760) (72,750) (101.06) %

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurements.

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$ in thousands Average Balance Interest Average

Cost Average Balance Interest Average

Yield/Cost Average Balance Interest Average

Interest-Earning Assets:

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31,249 1,067 3.41 % 33,093 1,131 3.42 %

Restricted cash deposit 77 — — % — — — %

Money market investments 52,446 2,654 5.06 % 49,032 2,654 5.41 %

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Comparison of Financial Condition at March 31, 2025 and 2024

At March 31, 2024, total assets were $756.8 million, reflecting an increase of $33.6 million, or 4.6%, from total assets of $723.2 million at March 31, 2023.

The increase was primarily attributable to increases of $16.4 million in cash and cash equivalents and $24.3 million in the Bank's net loan portfolio, partially offset by a decrease of $6.2 million in the Bank's investment portfolio.

Total cash and cash equivalents increased $16.4 million, or 38.5%, from $42.6 million at March 31, 2023 to $59.0 million at March 31, 2024.

The increase in cash was primarily due to an increase in total deposits and paydowns received on investment securities, partially offset by net loan activity and a decrease in advances from the FHLB-NY and other borrowed money.

In addition, the Bank received $2.5 million during the second quarter for the CDFI Fund's Equitable Recovery Program (ERP) award.

Total investment securities decreased $6.2 million, or 11.0%, to $50.0 million at March 31, 2024, compared to $56.2 million at March 31, 2023 due to scheduled principal payments received of approximately $5.3 million and a $0.5 million increase in unrealized losses in the available-for-sale portfolio.

Gross portfolio loans increased $25.0 million, or 4.2%, to $622.9 million at March 31, 2024, compared to $597.9 million at March 31, 2023, primarily due to new loan originations of $61.7 million and loan pool purchases of $31.5 million.

These were partially offset by attrition and payoffs of $68.2 million.

The level of payoffs during the current fiscal year, significantly lower than the prior period's, can be attributed to borrowers continuing to sell commercial real estate, although now at a slower pace, in order to lock in values, as well as paydowns on lines of credit for borrowers looking for opportunities to reduce interest expense in the current rate environment.

At March 31, 2025, total assets were $730.0 million, reflecting a decrease of $26.8 million, or 3.5%, from total assets of $756.8 million at March 31, 2024.

The decrease was primarily attributable to decreases of $8.7 million in cash and cash equivalents, and $3.7 million and $9.7 million in the Bank's net investment and loan portfolios, respectively.

Total cash and cash equivalents decreased $8.7 million, or 14.7%, from $59.0 million at March 31, 2024 to $50.3 million at March 31, 2025.

The decrease in cash was primarily due to a $26.3 million decrease in advances from the FHLB-NY and other borrowed money, partially offset by a $14.8 million increase in total deposits.

Total investment securities decreased $3.7 million, or 7.4%, to $46.3 million at March 31, 2025, compared to $50.0 million at March 31, 2024 due to scheduled principal payments received of approximately $4.3 million, partially offset by a $0.7 million decrease in unrealized losses in the available-for-sale portfolio.

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

The decrease was primarily due to attrition and payoffs of $63.3 million, partially offset by new loan originations of $39.1 million and loan pool purchases of $15.4 million.

The level of payoffs and paydowns can be attributed to commercial real estate activity, as some borrowers capitalized on increased property values by selling collateral assets to payoff loans.

Liabilities and Equity

Total liabilities increased $36.5 million, or 5.4%, to $714.5 million at March 31, 2024, compared to $678.0 million at March 31, 2023, primarily due to an increase in total deposits, partially offset by a decrease in advances from the FHLB-NY and other borrowed money.

Total liabilities decreased $14.1 million, or 2.0%, to $700.4 million at March 31, 2025, compared to $714.5 million at March 31, 2024, due to a decrease of $26.3 million in advances from the FHLB-NY and other borrowed money, partially offset by a $14.8 million increase in total deposits.

Deposits increased $14.8 million, or 2.3%, to $661.8 million at March 31, 2025, compared to $647.0 million at March 31, 2024.

The increase was primarily related to increases in money market and certificate of deposit accounts, market-rate products for which the rates increased over the current fiscal year period.

As of March 31, 2024 and 2023, the aggregate amount of uninsured deposits (deposits in amounts greater than or equal to $250,000, which is the maximum amount for federal deposit insurance) was $91.0 million and $116.8 million, respectively.

The increase was primarily related to increases in money market and certificate of deposit accounts, as customers migrated to higher yielding accounts in these market-rate products for which the rates increased over the current fiscal year period.

Non-interest bearing deposits decreased $12.5 million, or 12.3%, during fiscal year 2025, primarily due to one customer relationship who transferred $10.0 million from a non-interest bearing checking to a money market account.

As of March 31,

2025 and 2024, the aggregate amount of uninsured deposits (deposits in amounts greater than or equal to $250,000, which is the maximum amount for federal deposit insurance) was $69.4 million and $91.0 million, respectively.

These uninsured balances disclosed do not consider that FDIC insurance can be further extended by claimant within certain law firm deposit accounts.

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Advances from the FHLB-NY and other borrowed money decreased $26.3 million, or 56.6%, to $20.2 million at March 31, 2025, compared to $46.5 million at March 31, 2024.

The Bank repaid a $10.0 million overnight advance secured from the FHLB-NY on March 31, 2023 and secured a $3.0 million 18-month advance from the new FHLB-NY 0% Development Advance (ZDA) Program during the second quarter.

At March 31, 2024, the Bank had $28.0 million outstanding advances from the FHLB-NY.

In addition, the Company borrowed $2.5 million through a long-term unsecured, below-market rate term loan from a third party to finance eligible loans offered through the Bank's community investment initiatives and loan programs.

During the first quarter of the current fiscal year, the Bank secured a $1.8 million 12-month fixed-rate advance through the second round of the FHLB-NY 0% Development Advance (ZDA) Program, which provides members with subsidized funding in the form of interest rate credits to assist in originating or purchasing loans that meet an eligibility criteria.

In addition, the Bank repaid $28.0 million outstanding advances from the FHLB-NY during fiscal year 2025.

At March 31, 2025, the Bank had a $1.8 million outstanding advance from the FHLB-NY.

Total equity decreased $12.7 million, or 30.0%, to $29.6 million at March 31, 2025, compared to $42.3 million at March 31, 2024.

The decrease was due to a net loss of $3.0 million, coupled with an increase of $0.5 million in unrealized losses on securities available-for-sale for the twelve month period ended March 31, 2024.

In addition, the Bank recorded a $0.7 million decrease to retained earnings to reflect the cumulative effect adjustment related to the adoption of CECL (Topic 326), effective April 1, 2023.

These decreases were partially offset by a $1.0 million increase in capital as a result of the issuance of common shares in a private placement during the second quarter.

The decrease was primarily due to a net loss of $13.7 million, partially offset by a decrease of $0.7 million in unrealized losses on securities available-for-sale and a $0.2 million increase in capital as a result of the issuance of common shares in a private placement during the third quarter of fiscal year 2025.

Comparison of Operating Results for the Years Ended March 31, 2025 and 2024

The Company reported a net loss of $13.7 million for fiscal year 2025, compared to a net loss of $3.0 million for the prior year period.

The change in our results was primarily driven by increases in interest income and non-interest income, partially offset by an increase in non-interest expense compared to the prior fiscal year.

The change in our results was primarily driven by increases in interest expense, non-interest expense and provision for credit losses and a decrease in non-interest income, partially offset by an increase in interest income compared to the prior fiscal year.

Net Interest Income

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Interest income increased $0.3 million, or 0.9%, to $34.3 million, compared to $34.0 million for the prior year period.

Interest income on loans increased $4.6 million, or 18.3%, primarily due to an increase in the average yield on the portfolio of 52 basis points, coupled with a $32.9 million, or 5.7%, increase in average loan balances.

Interest income on money market investments increased $1.6 million to $2.7 million, compared to $1.1 million for the prior year period, due to an increase in average interest rates of 2.75% on the Bank's interest-bearing account at the Federal Reserve Bank.

Interest income on investment securities was also higher, despite a decrease of $7.2 million in average balances, due to an average increase in yields of 54 basis points compared to the prior year period.

Interest income on loans increased $0.3 million, or 1.0%, primarily due to an $8.7 million, or 1.4%, increase in average loan balances.

Interest income on mortgage-backed and investment securities were lower primarily due to decreases of $1.9 million, or 7.0%, and $3.8 million, 11.4%, respectively, in the average balances compared to the prior fiscal year.

Interest income on money market investments remained flat at $2.7 million, despite a $3.4 million increase in the average balance of the Bank's interest-bearing account at the Federal Reserve Bank due to a decrease of 35 basis points in the average rates.

Interest expense increased $3.6 million to $15.1 million, compared to $11.5 million for the prior year period.

The higher interest rate environment is reflected in the average cost of interest-bearing deposits and borrowing costs for the comparative period.

Interest expense on deposits increased $5.4 million, primarily due to an increase in the average rates paid on money market and certificate of deposit accounts.

Interest expense on borrowings increased $1.2 million from the prior fiscal year, due to increases in both the average outstanding balances of $17.5 million and average borrowing rates of 92 basis points.

The higher interest rate environment is reflected in the average cost of interest-bearing deposits for the current period.

Interest expense on deposits increased $3.9 million, primarily due to increases in the average balances of $32.7 million and average rates of 76 basis points, of higher-cost certificate of deposits.

The average rates paid on savings and money market accounts also increased for the twelve months ended March 31, 2025, compared to the prior fiscal year, as the Bank offered promotional rates during the current period in an attempt to attract and retain deposits.

Provision for Credit Losses

The Bank recorded an $83 thousand provision for credit loss for fiscal year 2024, compared to a $100 thousand provision for loan loss for the prior year period.

The Bank recorded a $1.2 million provision for credit loss for fiscal year 2025, compared to an $83 thousand provision for credit loss for the prior year period.

For the year ended March 31, 2025, net charge-offs of $725 thousand were recognized, compared to net charge-offs of $109 thousand in the prior year period.

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The ACL was $6.3 million at March 31, 2025, which represents a ratio of the ACL to nonaccrual loans of 25.8%, compared to 49.9% at March 31, 2024.

The ratio of the ACL to total loans receivable, excluding PPP loans, was 0.94% at March 31, 2024, compared to 0.88% at March 31, 2023.

The ratio of th

e ACL to total loans receivable, excluding PPP loans, was 1.03% at March 31, 2025, compared to 0.94% at March 31, 2024.

Non-interest Income

Non-interest income for the twelve months ended March 31, 2024 increased $3.1 million, or 86.1%, to $6.7 million compared to $3.6 million in the prior year period.

Non-interest income for the current fiscal year included $2.4 million grant income recognized from the Bank's award through the CDFI Fund's Equitable Recovery Program.

The Bank also recognized $0.5 million grant income associated with a loan program no longer in existence, that had been transferred to the Bank through an acquired institution.

In addition, other non-interest income included a $296 thousand death benefit recorded in BOLI income during the third quarter of the current fiscal year.

Non-interest income for the twelve months ended March 31, 2025 decreased $3.6 million, or 53.7%, to $3.1 million compared to $6.7 million in the prior year period.

The previous period included grant income of $2.4 million recognized from the Bank's award through the CDFI Fund's Equitable Recovery Program and $0.5 million associated with a discontinued loan program, that had been transferred to the Bank through an acquired institution.

In addition, the Bank recognized a $0.2 million loss on the sale of a loan during the current fiscal year.

Non-interest Expense

Non-interest expense for the twelve months ended March 31, 2025 increased $2.6 million, or 8.1%, to $34.8 million compared to $32.2 million for the prior year period.

Employee compensation and benefits increased compared to the prior year period due to the Company's transition to a new payroll and benefits administrator during the first quarter of the current fiscal year, and new permanent staff hired to replace temporary consultants.

Data processing expense was higher due to upgraded cybersecurity systems and the implementation of service contracts for new consumer loan and deposit products.

Other non-interest expense increased due to higher legal costs associated with an activist shareholder and audit fees related to the CECL implementation.

In addition, operating charge-offs were higher compared to the prior year period due to a higher number of check fraud incidents.

Employee compensation and net occupancy costs related to building expenses increased compared to the prior year period.

Net equipment expense was higher due to upgraded cybersecurity systems and increases in hardware/software maintenance contracts.

Other non-interest expense was higher due to increases in security services at the branches and legal costs associated with an activist shareholder.

The Company did not have any federal, state and local income tax expense as of March 31, 2025 and 2024.

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Additionally, Carver Federal has other sources of liquidity including the ability to borrow from the Federal Home Loan Bank of New York ("FHLB-NY") utilizing unpledged mortgage-backed securities and certain mortgage loans, the sale of available-for-sale securities and the sale of certain mortgage loans.

Net borrowings decreased $4.6 million during fiscal year 2024 as the Bank repaid a $10.0 million overnight advance secured from the FHLB-NY on March 31, 2023 and secured a $3.0 million 18-month advance from the new FHLB-NY 0% Development Advance (ZDA) Program during the second quarter of the current fiscal year.

At March 31, 2024, based on available collateral held at the FHLB-NY, Carver Federal had the

ability to borrow an additional $7.8 million on a secured basis, utilizing mortgage-related loans and securities as collateral.

At March 31, 2024, the Bank had $28.0 million outstanding advances from the FHLB-NY.

Net borrowings decreased $26.3 million during fiscal year 2025 as the Bank repaid $28.0 million outstanding advances from the FHLB-NY during fiscal year 2025.

The Bank secured a $1.8 million 12-month fixed-rate advance through the second round of the FHLB-NY 0% Development Advance (ZDA) Program during the first quarter, which provides members with subsidized funding in the form of interest rate credits to assist in originating or purchasing loans that meet an eligibility criteria.

At March 31, 2025, based on available collateral held at the FHLB-NY, Carver Federal had the ability to borrow an additional $30.4 million on a secured basis, utilizing mortgage-related loans and securities as collateral.

At March 31, 2025, the Bank had a $1.8 million outstanding advances from the FHLB-NY.

The Bank has the ability to pledge additional loans as collateral in order to borrow up to 30% of its total assets.

The Company also had $13.4 million in long-term subordinated debt securities and $5.0 million in low interest loans outstanding as of March 31, 2025.

During the first quarter of the current fiscal year, the Company entered into an agreement with a third party, under which the third party provided the Company with a $25.0 million revolving unsecured long-term, below-market-rate loan to support the Bank in financing initiatives that reduce greenhouse gas emissions and promote energy efficiency in building projects, fleet upgrades to electric vehicles, and electric vehicle charging station infrastructure.

As of March 31, 2025, the Company had not drawn on the facility.

The Bank's most liquid assets are cash and short-term investments.

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At March 31, 2025 and 2024, assets qualifying for short-term liquidity, including cash and cash equivalents, totaled $50.3 million and $59.0 million, respectively.

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.” During fiscal year 2022, we have sold an aggregate of 397,367 shares of our common stock pursuant to the terms of such sales agreement, for aggregate gross proceeds of approximately $3.1 million.

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.” During fiscal year 2022, we 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.

There have been no subsequent offerings.

The most significant potential liquidity challenge the Bank faces is variability in its cash flows as a result of mortgage refinance activity.

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However, in a rising rate environment, customers generally tend to prefer fixed-rate mortgage loan products over variable rate products.

Carver Federal is also at risk to deposit outflows due to a competitive interest rate environment.

Carver Federal is also at risk of deposit outflows due to a competitive interest rate environment.

The Consolidated Statements of Cash Flows present the change in cash from operating, investing and financing activities.

During fiscal year 2024, total cash and cash equivalents increased $16.4 million to $59.0 million reflecting cash provided by financing activities of $43.1 million, partially offset by cash used in investing activities of $20.1 million and cash used in operating activities of $6.6 million.

Net cash used in operating activities totaled $6.6 million.

Net cash used in investing activities of $20.1 million was attributable to loan purchases, partially offset by loan repayments and payoffs, net of originations and investment paydowns.

Net cash provided by financing activities of $43.1 million resulted from a $46.6 million increase in net deposits, partially offset by a $4.6 million decrease in net borrowings.

The Bank repaid a $10.0 million FHLB-NY overnight advance secured on March 31, 2023 and secured a $3.0 million 18-month advance from the new FHLB-NY 0% Development Advance (ZDA) Program during the second quarter of the current fiscal year.

The Company also borrowed $2.5 million through a long-term unsecured below-market rate term loan from a third party to finance eligible loans offered through the Bank's community investment initiatives and loan programs.

In addition, the Company issued common shares in a private placement transaction during the second quarter for gross proceeds of $1.0 million.

During fiscal year 2025, total cash and cash equivalents decreased $8.7 million to $50.3 million reflecting cash used in operating activities of $12.6 million and cash used in financing activities of $11.2 million, partially offset by cash provided by investing activities of $15.1 million.

Net cash used in financing activities of $11.2 million resulted from the repayment of $28.0 million outstanding advances from the FHLB-NY during fiscal year 2025.

This was partially offset by a $14.8 million increase in net deposits and a $1.8 million 12-month advance secured through the second round of the FHLB-NY 0% Development Advance (ZDA) Program during the first quarter.

Net cash provided by investing activities of $15.1 million was attributable to investment paydowns and loan repayments and payoffs, net of purchases and originations.

Potential Mortgage Representation and Warranty Liabilities

During the period 2004 through 2009, the Bank originated 1-4 family residential mortgage loans and sold the loans to the FNMA.

The loans were sold to FNMA with the standard representations and warranties for loans sold to the GSE's.

The loans were sold to FNMA with the standard representations and warranties for loans sold to the GSEs.

The Bank may be required to repurchase these loans in the event of breaches of these representations and warranties.

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The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and in connection with its overall investment strategy.

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

These instruments involve, to varying

degrees, elements of credit, interest rate and liquidity risk.

In accordance with GAAP, these instruments are not recorded in the consolidated financial statements.

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The Bank must satisfy minimum capital standards established by the OCC.

For a description of the OCC capital regulation, see “Item 1-Regulation and Supervision-Federal Banking Regulation-Capital Requirements.” Regardless of Basel III's minimum requirements, Carver, as a result of the 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.

The Formal Agreement was terminated on January 18, 2023.

For a description of the OCC capital regulation, see “Item 1-Regulation and Supervision-Federal Banking Regulation-Capital Requirements.” Regardless of Basel III's minimum requirements, Carver was issued an Individual Minimum Capital Ratio ("IMCR") letter 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.

The IMCR remains in effect.

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

At March 31, 2025, the Bank'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.

For additional information regarding Carver Federal's Regulatory Capital and Ratios, refer to Note 12 of Notes to Consolidated Financial Statements, “Stockholders' Equity.”

Impact of Inflation and Changing Prices

The financial statements and accompanying notes appearing elsewhere herein have been prepared in accordance with GAAP, which require the measurement of financial position and operating results in terms of historical dollars without considering the changes in the relative purchasing power of money over time due to inflation.

The impact of inflation is reflected in the increased cost of Carver Federal's operations.

Unlike most industrial companies, nearly all the assets and liabilities of the Bank are monetary in nature.

As a result, interest rates have a greater impact on Carver Federal's performance than do the effects of the general level of inflation.

Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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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 7. Management’s Discussion and Analysis