Carver Bancorp's Net Loss Widens Amidst Liquidity Management

TL;DR

**CARV is bleeding cash and under tight regulatory scrutiny; steer clear until they show a clear path to profitability and stability.**

AI Summary

CARVER BANCORP INC reported a net loss of $2.431 million for the three months ended September 30, 2025, an increase from the $2.113 million net loss in the prior year period. For the six months ended September 30, 2025, the net loss was $3.608 million, an improvement from the $4.325 million loss in the same period of 2024. Total assets decreased to $697.933 million as of September 30, 2025, from $729.991 million at March 31, 2025. Net interest income declined to $5.132 million for the three months ended September 30, 2025, down from $5.995 million in the prior year, primarily due to a decrease in interest income from loans and money market investments. Non-interest income saw a significant increase, rising to $1.249 million for the quarter from $584 thousand in the prior year, driven by higher depository fees and loan fees. The company deferred a quarterly interest payment of $567 thousand on its trust preferred securities due June 17, 2025, to manage liquidity. The Bank also entered into a Formal Agreement with the OCC on May 14, 2025, imposing restrictions on capital distributions and executive changes, and is subject to an Individual Minimum Capital Ratio (IMCR) requiring a 9% Tier 1 leverage ratio and 12% total risk-based capital ratio.

Why It Matters

Carver Bancorp's widening net loss and declining asset base signal ongoing challenges for investors, particularly given the deferred interest payment on trust preferred securities, which raises concerns about liquidity and financial stability. The Formal Agreement with the OCC and the Individual Minimum Capital Ratio (IMCR) impose significant regulatory oversight, limiting the company's operational flexibility and ability to return capital to shareholders. This competitive context, coupled with New York City's lagging job growth and high unemployment, suggests a tough operating environment for the bank, potentially impacting its ability to attract deposits and originate profitable loans. Employees and customers might face uncertainty regarding the bank's long-term growth prospects and service offerings.

Risk Assessment

Risk Level: high — The company reported a net loss of $2.431 million for the quarter and deferred a $567 thousand interest payment on its trust preferred securities to manage liquidity, indicating significant financial strain. Furthermore, the Formal Agreement with the OCC, effective May 14, 2025, imposes strict regulatory controls on dividends, executive changes, and capital distributions, severely limiting management's discretion and increasing operational risk.

Analyst Insight

Investors should exercise extreme caution and consider divesting CARV shares due to persistent net losses, liquidity concerns evidenced by deferred interest payments, and stringent regulatory oversight. Await clear evidence of sustained profitability, improved capital ratios, and the lifting of OCC restrictions before considering any investment.

Financial Highlights

debt To Equity

24.93

revenue

$6.381M

operating Margin

N/A

total Assets

$697.933M

total Debt

$17.006M

net Income

-$2.431M

eps

N/A

gross Margin

N/A

cash Position

$40.747M

revenue Growth

-1.1%

Revenue Breakdown

Key Numbers

• $2.431M — Net Loss (Increased from $2.113M in Q3 2024)
• $697.933M — Total Assets (Decreased from $729.991M at March 31, 2025)
• $5.132M — Net Interest Income (Decreased from $5.995M in Q3 2024)
• $1.249M — Total Non-Interest Income (Increased from $584K in Q3 2024)
• $567K — Deferred Interest Payment (On trust preferred securities due June 17, 2025, for liquidity management)
• 9% — Tier 1 Leverage Ratio (Required minimum under OCC's IMCR letter)
• 12% — Total Risk-Based Capital Ratio (Required minimum under OCC's IMCR letter)
• 4.9% — New York City Unemployment Rate (Exceeds the national average)

Key Players & Entities

• CARVER BANCORP INC (company) — Registrant
• Carver Federal Savings Bank (company) — Principal wholly-owned subsidiary of CARVER BANCORP INC
• OCC (regulator) — Office of the Comptroller of the Currency, issued Formal Agreement and IMCR letter
• Federal Reserve Bank (regulator) — Requires approval for debenture interest payments and other capital distributions
• President Trump (person) — Signed the One Big Beautiful Bill into law on July 4, 2025
• $2.431 million (dollar_amount) — Net loss for the three months ended September 30, 2025
• $567 thousand (dollar_amount) — Deferred interest payment on trust preferred securities due June 17, 2025
• $697.933 million (dollar_amount) — Total assets as of September 30, 2025
• 9% (dollar_amount) — Required Tier 1 leverage ratio under IMCR
• 12% (dollar_amount) — Required total risk-based capital ratio under IMCR

FAQ

Risk Factors

• OCC Formal Agreement [high — regulatory]: The Bank entered into a Formal Agreement with the OCC on May 14, 2025, imposing restrictions on capital distributions and executive changes. The agreement requires adherence to specific capital ratios, including a 9% Tier 1 leverage ratio and a 12% total risk-based capital ratio.
• Liquidity Management and Deferred Interest [medium — financial]: The company deferred a quarterly interest payment of $567 thousand on its trust preferred securities due June 17, 2025, to manage liquidity. This action highlights potential liquidity pressures and the need for careful cash flow management.
• Economic Downturn and Local Unemployment [medium — market]: The New York City unemployment rate is at 4.9%, exceeding the national average. This indicates a challenging local economic environment that could impact loan demand, credit quality, and overall business performance.
• Declining Net Interest Income [medium — financial]: Net interest income declined to $5.132 million for the three months ended September 30, 2025, down from $5.995 million in the prior year. This 14.4% decrease signals pressure on the core lending business.
• Net Loss Widening [high — financial]: The company reported a net loss of $2.431 million for the three months ended September 30, 2025, an increase from the $2.113 million net loss in the prior year period. This indicates deteriorating profitability.

Industry Context

Carver Bancorp operates in the highly competitive New York City banking market, which is characterized by a mix of large national banks, regional institutions, and community banks. The industry faces ongoing challenges from evolving customer preferences towards digital banking, increasing regulatory scrutiny, and a dynamic interest rate environment. Community banks like Carver often focus on specific local markets and customer segments, aiming to differentiate through personalized service.

Regulatory Implications

The Formal Agreement with the OCC represents a significant regulatory hurdle, imposing strict capital requirements and operational restrictions. Compliance with the 9% Tier 1 leverage ratio and 12% total risk-based capital ratio is paramount. Failure to meet these requirements could lead to further enforcement actions, impacting the company's ability to operate and grow.

What Investors Should Do

1. Monitor compliance with OCC Formal Agreement: Investors should closely track the company's adherence to the imposed capital ratios and restrictions, as any violations could trigger further penalties.
2. Assess liquidity management strategies: The deferred interest payment highlights potential liquidity concerns. Investors should evaluate the company's ongoing cash flow generation and its ability to meet financial obligations.
3. Analyze non-interest income drivers: The significant increase in non-interest income is a positive development. Investors should assess the sustainability of these fee-based revenues and their contribution to overall profitability.
4. Evaluate loan portfolio performance: Given the decline in net interest income and the local economic conditions, investors should scrutinize the quality and performance of the company's loan portfolio, including the allowance for credit losses.

Key Dates

• 2025-05-14: Entered into Formal Agreement with OCC — Imposes restrictions on capital distributions and executive changes, and sets minimum capital ratios, impacting strategic flexibility and operations.
• 2025-06-17: Deferred interest payment on trust preferred securities — Indicates liquidity management actions, potentially signaling cash flow constraints and impacting investor confidence in timely debt service.
• 2025-09-30: End of Q3 2025 — Reporting period for the 10-Q, showing a net loss of $2.431M and a decrease in total assets to $697.933M.

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, highlighting their importance to the company's capital structure and liquidity management.)

Formal Agreement with OCC

A regulatory order issued by the Office of the Comptroller of the Currency that imposes specific requirements or restrictions on a bank. (This agreement imposes significant operational and capital restrictions on Carver Bancorp, impacting its ability to distribute capital and make executive changes.)

Tier 1 Leverage Ratio

A measure of a bank's core capital relative to its total assets, serving as a key indicator of financial strength. (A minimum of 9% is required under the OCC's Individual Minimum Capital Ratio (IMCR) letter, a critical regulatory compliance metric.)

Total Risk-Based Capital Ratio

A measure of a bank's capital adequacy relative to its risk-weighted assets, reflecting its ability to absorb potential losses. (A minimum of 12% is required under the OCC's IMCR letter, another crucial regulatory compliance metric.)

Net Interest Income

The difference between the interest income generated by a bank and the interest it pays out to its depositors and lenders. (A key profitability metric for banks; Carver's net interest income declined by 14.4% year-over-year, indicating pressure on its core lending operations.)

Non-Interest Income

Revenue generated by a bank from sources other than interest income, such as fees for services. (Carver experienced a significant increase in non-interest income, driven by depository and loan fees, which partially offset the decline in net interest income.)

Year-Over-Year Comparison

Compared to the prior year period, Carver Bancorp reported a wider net loss of $2.431 million for the three months ended September 30, 2025, up from $2.113 million. Net interest income saw a notable decline of 14.4% to $5.132 million, primarily due to reduced interest income from loans and investments. However, non-interest income significantly increased by 113.5% to $1.249 million, driven by higher fees. Total assets decreased to $697.933 million from $729.991 million at the end of the previous fiscal year, reflecting a contraction in the balance sheet.

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) 822 2

Filing Documents

• carv-20250930.htm (10-Q) — 2484KB
• september30202510qex311.htm (EX-31.1) — 11KB
• september30202510qex312.htm (EX-31.2) — 11KB
• september30202510qex321.htm (EX-32.1) — 5KB
• september30202510qex322.htm (EX-32.2) — 5KB
• 0001016178-25-000021.txt ( ) — 11206KB
• carv-20250930.xsd (EX-101.SCH) — 31KB
• carv-20250930_cal.xml (EX-101.CAL) — 61KB
• carv-20250930_def.xml (EX-101.DEF) — 267KB
• carv-20250930_lab.xml (EX-101.LAB) — 556KB
• carv-20250930_pre.xml (EX-101.PRE) — 465KB
• carv-20250930_htm.xml (XML) — 2488KB

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 42 Item 4.

Controls and Procedures

Controls and Procedures 42 PART II. OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 43 Item 1A.

Risk Factors

Risk Factors 43 Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities 43 Item 3. Defaults Upon Senior Securities 43 Item 4. Mine Safety Disclosures 43 Item 5. Other Information 43 Item 6. Exhibits 43

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION CARVER BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited) $ in thousands except per share data September 30, 2025 March 31, 2025 ASSETS Cash and cash equivalents: Cash and due from banks $ 40,242 $ 49,810 Money market investments 505 505 Total cash and cash equivalents 40,747 50,315 Investment securities: Available-for-sale, at fair value (amortized cost of $ 55,076 and $ 56,475 , respectively) 44,069 44,522 Held-to-maturity, at amortized cost (fair value of $ 1,619 and $ 1,698 , respectively) 1,650 1,750 Total investment securities 45,719 46,272 Loans receivable: Real estate mortgage loans 406,080 423,023 Commercial business loans 161,515 164,964 Consumer loans 25,337 25,697 Loans, net of deferred fees and costs 592,932 613,684 Allowance for credit losses ( 6,129 ) ( 6,337 ) Total loans receivable, net 586,803 607,347 Premises and equipment, net 1,942 2,010 Federal Home Loan Bank of New York ("FHLB-NY") stock, at cost 1,148 853 Accrued interest receivable 3,092 2,980 Right-of-use assets 6,951 8,247 Other assets 11,531 11,967 Total assets $ 697,933 $ 729,991 LIABILITIES AND EQUITY LIABILITIES Deposits: Non-interest bearing checking $ 91,214 $ 89,538 Interest-bearing deposits: Interest-bearing checking 42,185 44,453 Savings 110,649 111,365 Money market 165,761 161,592 Certificates of deposit 212,326 252,129 Escrow 3,457 2,760 Total interest-bearing deposits 534,378 572,299 Total deposits 625,592 661,837 Advances from the FHLB-NY and other borrowed money 27,546 20,243 Operating lease liability 7,529 8,869 Other liabilities 10,337 9,464 Total liabilities 671,004 700,413 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

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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