Carver Bancorp Narrows Losses, Faces Regulatory Scrutiny

TL;DR

**CARV is still bleeding cash and under the OCC's thumb, making it a risky bet despite narrowing losses.**

AI Summary

CARVER BANCORP INC reported a net loss of $1.177 million for the three months ended June 30, 2025, a significant improvement from the $2.212 million net loss in the same period last year. Total interest income remained stable at $9.204 million, compared to $9.207 million in Q2 2024, with interest on loans increasing to $8.426 million from $8.067 million. Interest expense decreased by 3.8% to $3.563 million, primarily due to lower advances and other borrowed money interest. The company recorded a recovery of $26 thousand for credit losses, a positive shift from a $260 thousand provision in the prior year. Non-interest income saw a substantial increase of 79.8% to $1.268 million, driven by higher depository fees and charges and other income. Total non-interest expense slightly decreased to $8.112 million from $8.161 million. Total assets declined to $713.624 million from $729.991 million as of March 31, 2025, mainly due to a decrease in total deposits from $661.837 million to $645.531 million. The company deferred a $300 thousand interest payment on trust preferred securities due June 17, 2025, to manage liquidity, and entered into a Formal Agreement with the OCC on May 14, 2025, imposing restrictions on capital distributions and executive changes.

Why It Matters

Carver Bancorp's reduced net loss and increased non-interest income are positive signs, but the deferred interest payment on trust preferred securities and the OCC's Formal Agreement signal ongoing financial and operational challenges. For investors, these regulatory restrictions on dividends and executive changes could limit shareholder returns and introduce uncertainty. Employees might face increased scrutiny and potential limitations on 'golden parachute payments.' Customers could see impacts on service or branch operations if the bank's financial health doesn't stabilize. In a competitive New York City market, these issues could hinder Carver's ability to compete effectively against larger, more stable financial institutions, potentially impacting its market share and long-term viability.

Risk Assessment

Risk Level: high — The company reported a net loss of $1.177 million for the quarter and deferred a $300 thousand interest payment on trust preferred securities to manage liquidity, indicating ongoing financial strain. Furthermore, the Formal Agreement with the OCC on May 14, 2025, imposes significant restrictions, including requiring approval for changes in directors or senior executive officers, dividend payments, and 'golden parachute payments,' which severely limits management's flexibility and signals heightened regulatory concern.

Analyst Insight

Investors should exercise extreme caution and consider avoiding CARV given the persistent net losses, liquidity management challenges evidenced by the deferred interest payment, and the stringent regulatory oversight from the OCC. The restrictions on capital distributions and executive changes could hinder any potential turnaround efforts and limit shareholder value.

Financial Highlights

debt To Equity

23.98

revenue

$10.472M

operating Margin

N/A

total Assets

$713.624M

total Debt

$30.523M

net Income

-$1.177M

eps

N/A

gross Margin

N/A

cash Position

$43.835M

revenue Growth

2.0%

Revenue Breakdown

Key Numbers

• $1.177M — Net Loss (Improved from $2.212M loss in Q2 2024, but still a loss.)
• $9.204M — Total Interest Income (Stable compared to $9.207M in Q2 2024.)
• $3.563M — Total Interest Expense (Decreased by 3.8% from Q2 2024, positively impacting net interest income.)
• $26K — Recovery for Credit Losses (A positive shift from a $260K provision in Q2 2024.)
• $1.268M — Total Non-Interest Income (Increased by 79.8% from Q2 2024, showing growth in fee-based revenue.)
• $713.624M — Total Assets (Decreased from $729.991M as of March 31, 2025, indicating balance sheet contraction.)
• $645.531M — Total Deposits (Decreased from $661.837M as of March 31, 2025, impacting funding stability.)
• $300K — Deferred Interest Payment (Deferred on trust preferred securities due June 17, 2025, to manage liquidity.)
• 9% — Tier1 Leverage Ratio (Required minimum regulatory capital level by OCC IMCR letter.)
• 12% — Total Risk-Based Capital Ratio (Required minimum regulatory capital level by OCC IMCR letter.)

Key Players & Entities

• CARVER BANCORP INC (company) — Registrant and parent company
• Carver Federal Savings Bank (company) — Principal wholly-owned subsidiary of CARVER BANCORP INC
• OCC (regulator) — Office of the Comptroller of the Currency, which issued a Formal Agreement to the Bank
• Federal Reserve Bank (regulator) — Requires approval for distributions of interest or principal on subordinated debentures or trust preferred securities
• $1.177 million (dollar_amount) — Net loss for the three months ended June 30, 2025
• $2.212 million (dollar_amount) — Net loss for the three months ended June 30, 2024
• $300 thousand (dollar_amount) — Deferred interest payment on trust preferred securities due June 17, 2025
• $9.204 million (dollar_amount) — Total interest income for the three months ended June 30, 2025
• $713.624 million (dollar_amount) — Total assets as of June 30, 2025
• May 14, 2025 (date) — Date the Bank entered into a Formal Agreement with the OCC

FAQ

Risk Factors

• Formal Agreement with OCC [high — regulatory]: Entered into a Formal Agreement with the OCC on May 14, 2025, imposing restrictions on capital distributions and executive changes. This agreement signifies heightened regulatory scrutiny and potential limitations on strategic flexibility.
• Liquidity Management and Deferred Interest [medium — financial]: Deferred a $300 thousand interest payment on trust preferred securities due June 17, 2025, to manage liquidity. This action, while addressing immediate cash needs, may signal underlying liquidity pressures and could impact investor confidence.
• Declining Asset and Deposit Base [medium — financial]: Total assets decreased to $713.624 million from $729.991 million, primarily due to a decline in total deposits from $661.837 million to $645.531 million. This contraction in the balance sheet and funding base could limit future lending capacity and revenue generation.
• Continued Net Loss [medium — financial]: Reported a net loss of $1.177 million for the quarter, an improvement from $2.212 million in the prior year, but still indicates ongoing profitability challenges. Persistent losses can erode capital and impact long-term viability.
• Minimum Capital Requirements [medium — regulatory]: The OCC IMCR letter requires a Tier 1 Leverage Ratio of 9% and a Total Risk-Based Capital Ratio of 12%. While not explicitly stated as breached, the restrictions from the Formal Agreement could impact the ability to meet or maintain these ratios.

Industry Context

Carver Bancorp operates in the highly regulated banking sector, specifically serving communities in New York City. The industry is characterized by intense competition from larger financial institutions, evolving customer expectations for digital services, and a constantly shifting regulatory landscape. Recent trends include rising interest rates impacting net interest margins and increased focus on capital adequacy and risk management by regulators.

Regulatory Implications

The Formal Agreement with the OCC is a significant regulatory development, imposing strict limitations on capital distributions and executive changes. This indicates a high level of supervisory concern and necessitates careful management to ensure compliance and avoid further enforcement actions. The deferred interest payment also signals potential liquidity pressures that regulators will closely monitor.

What Investors Should Do

1. Monitor regulatory developments closely.
2. Assess the impact of balance sheet contraction.
3. Analyze the sustainability of non-interest income growth.
4. Evaluate liquidity management strategies.

Key Dates

• 2025-06-17: Deferred interest payment on trust preferred securities — Indicates a focus on managing immediate liquidity, but raises concerns about financial flexibility and potential strain.
• 2025-05-14: Entered into Formal Agreement with OCC — Introduces significant regulatory constraints on capital distributions and executive changes, impacting strategic decision-making and governance.
• 2025-06-30: End of Q2 2025 — Reporting period for the disclosed financial results, showing a reduced net loss but continued balance sheet contraction.

Glossary

Trust Preferred Securities

Hybrid securities that combine features of both debt and equity, often used by financial institutions to bolster capital. (The company deferred an interest payment on these securities to manage liquidity, highlighting their importance in the capital structure and potential impact on cash flow.)

Formal Agreement with OCC

A regulatory enforcement action taken by the Office of the Comptroller of the Currency (OCC) that imposes specific requirements and restrictions on a financial institution. (This agreement imposes significant operational and capital constraints on Carver Bancorp, directly impacting its ability to distribute capital and make executive changes.)

Allowance for Credit Losses

A contra-asset account that reduces the carrying amount of loans receivable to their estimated net realizable value. (A recovery in credit loss provisions ($26K) is a positive sign, suggesting improved credit quality or reduced expected losses compared to the prior year's provision ($260K).)

Tier 1 Leverage Ratio

A measure of a bank's core capital relative to its total assets, excluding certain assets. (A key regulatory capital metric. The OCC requires a minimum of 9%, and the Formal Agreement may impact the company's ability to maintain this.)

Total Risk-Based Capital Ratio

A measure of a bank's capital adequacy relative to its risk-weighted assets. (Another critical regulatory capital metric. The OCC requires a minimum of 12%, and the Formal Agreement could affect compliance.)

Year-Over-Year Comparison

Compared to the prior year's second quarter, Carver Bancorp has shown an improvement in its net loss, reducing it from $2.212 million to $1.177 million. While total interest income remained stable, a decrease in interest expense and a significant recovery in credit loss provisions contributed positively to the net result. However, the company faces headwinds with a contraction in total assets and deposits, alongside new regulatory constraints imposed by a Formal Agreement with the OCC, which restricts capital distributions and executive changes.

Key Financial Figures

• $0.01 — ich registered Common Stock, par value $0.01 per share CARV The NASDAQ Stock Market,
• $0 — -for-sale, net of income tax expense of $0 (due to full valuation allowance) 124 (
• $2.5 million — ase, Morgan Stanley provided a grant of $2.5 million that was considered contributed capital
• $20.0 million — n aggregate gross sales prices of up to $20.0 million (the "ATM Shares") from ti

Filing Documents

• carv-20250630.htm (10-Q) — 2200KB
• june30202510qex311.htm (EX-31.1) — 11KB
• june30202510qex312.htm (EX-31.2) — 11KB
• june30202510qex321.htm (EX-32.1) — 5KB
• june30202510qex322.htm (EX-32.2) — 5KB
• 0001016178-25-000015.txt ( ) — 10596KB
• carv-20250630.xsd (EX-101.SCH) — 31KB
• carv-20250630_cal.xml (EX-101.CAL) — 59KB
• carv-20250630_def.xml (EX-101.DEF) — 273KB
• carv-20250630_lab.xml (EX-101.LAB) — 554KB
• carv-20250630_pre.xml (EX-101.PRE) — 467KB
• carv-20250630_htm.xml (XML) — 2322KB

Financial Statements

Financial Statements Consolidated Statements of Financial Condition 1 Consolidated Statements of Operations 2 Consolidated Statements of Comprehensive Income (Loss) 3 Consolidated Statement of Changes in Equity 4 Consolidated Statements of Cash Flows 5

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 6 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 27 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 41 Item 4.

Controls and Procedures

Controls and Procedures 41 PART II. OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 42 Item 1A.

Risk Factors

Risk Factors 42 Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities 42 Item 3. Defaults Upon Senior Securities 42 Item 4. Mine Safety Disclosures 42 Item 5. Other Information 42 Item 6. Exhibits 42

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION CARVER BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited) $ in thousands except per share data June 30, 2025 March 31, 2025 ASSETS Cash and cash equivalents: Cash and due from banks $ 43,330 $ 49,810 Money market investments 505 505 Total cash and cash equivalents 43,835 50,315 Investment securities: Available-for-sale, at fair value (amortized cost of $ 55,665 and $ 56,475 , respectively) 43,836 44,522 Held-to-maturity, at amortized cost (fair value of $ 1,662 and $ 1,698 , respectively) 1,704 1,750 Total investment securities 45,540 46,272 Loans receivable: Real estate mortgage loans 412,985 423,023 Commercial business loans 165,280 164,964 Consumer loans 26,993 25,697 Loans, net of deferred fees and costs 605,258 613,684 Allowance for credit losses ( 6,321 ) ( 6,337 ) Total loans receivable, net 598,937 607,347 Premises and equipment, net 2,002 2,010 Federal Home Loan Bank of New York ("FHLB-NY") stock, at cost 868 853 Accrued interest receivable 3,251 2,980 Right-of-use assets 7,602 8,247 Other assets 11,589 11,967 Total assets $ 713,624 $ 729,991 LIABILITIES AND EQUITY LIABILITIES Deposits: Non-interest bearing checking $ 90,026 $ 89,538 Interest-bearing deposits: Interest-bearing checking 41,774 44,453 Savings 111,047 111,365 Money market 158,897 161,592 Certificates of deposit 242,705 252,129 Escrow 1,082 2,760 Total interest-bearing deposits 555,505 572,299 Total deposits 645,531 661,837 Advances from the FHLB-NY and other borrowed money 21,330 20,243 Operating lease liability 8,192 8,869 Other liabilities 10,033 9,464 Total liabilities 685,086 700,413 Commitments and contingencies (Note 8) — — EQUITY Preferred stock, (par value $ 0.01 per share: 9,557 Series D shares, with a liquidation preference of $ 1,000 per share, issued and outstanding, respectively) 9,557 9,557 Preferred stock (par value $ 0.01 per share: 3,177 Series E shares

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) NOTE 1. ORGANIZATION Nature of operations Carver Bancorp, Inc. (on a stand-alone basis, the "Registrant"), was incorporated in May 1996 and its principal wholly-owned subsidiary is Carver Federal Savings Bank (the "Bank" or "Carver Federal"). Carver Federal's wholly-owned subsidiaries are CFSB Realty Corp., Carver Community Development Corporation ("CCDC") and CFSB Credit Corp., which is currently inactive. The Bank has a real estate investment trust, Carver Asset Corporation ("CAC"), that was formed in February 2004. "Carver," the "Company," "we," "us" or "our" refers to the Company along with its consolidated subsidiaries. The Bank was chartered in 1948 and began operations in 1949 as Carver Federal Savings and Loan Association, a federally-chartered mutual savings and loan association. The Bank converted to a federal savings bank in 1986. On October 24, 1994, the Bank converted from a mutual holding company structure to stock form and issued 2,314,375 shares of its common stock, par value $ 0.01 per share. On October 17, 1996, the Bank completed its reorganization into a holding company structure (the "Reorganization") and became a wholly-owned subsidiary of the Company. Carver Federal's principal business consists of attracting deposit accounts through its branches and investing those funds in mortgage loans and other investments permitted by federal savings banks. The Bank has seven branches located throughout the City of New York that primarily serve the communities in which they operate. In September 2003, the Company formed Carver Statutory Trust I (the "Trust") for the sole purpose of issuing trust preferred securities and investing the proceeds in an equivalent amount of floating rate junior subordinated debentures of the Company. On September 17, 2003, Carver Statutory Trust I issued 13,000 shares, liquidation amount $ 1,000 per share, of floating rate capital securities. Gross proceeds fr

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