# Carver Bancorp Inc: Form 10-Q for the period ended Dec 31, 2024

- Company: [Carver Bancorp Inc](/companies/carv.md) (CIK 1016178)
- Form: 10-Q
- Filed: 2025-02-13
- Accepted by EDGAR: Feb 13, 2025, 10:48 ET
- Period: 2024-12-31
- Accession: 0001016178-25-000005
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1016178/000101617825000005/carv-20241231.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1016178/000101617825000005/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-12-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-10-01 to 2024-12-31 | $953.0k | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Revenue | 9 months, 2024-04-01 to 2024-12-31 | $2.2m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Income tax | 3 months, 2024-10-01 to 2024-12-31 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-04-01 to 2024-12-31 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-10-01 to 2024-12-31 | −$5.6m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-04-01 to 2024-12-31 | −$10.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-10-01 to 2024-12-31 | −$1.09 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-04-01 to 2024-12-31 | −$1.93 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-10-01 to 2024-12-31 | −$1.09 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-04-01 to 2024-12-31 | −$1.93 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-10-01 to 2024-12-31 | 5,189,207 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-04-01 to 2024-12-31 | 5,156,984 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-04-01 to 2024-12-31 | −$6.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-04-01 to 2024-12-31 | $313.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-12-31 | $50.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2024-12-31 | $727.5m | us-gaap:Assets |
| Total liabilities | at 2024-12-31 | $695.3m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-12-31 | $32.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 65,248 characters.

### Forward-Looking Statements

This Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 which may be identified by the use of such words as “may,” “believe,” “expect,” “anticipate,” “should,” “plan,” “estimate,” “predict,” “continue,” and “potential” or the negative of these terms or other comparable terminology. Examples of forward-looking statements include, but are not limited to, estimates with respect to the Company's financial condition, results of operations and business that are subject to various factors that could cause actual results to differ materially from these estimates. These factors include but are not limited to the following:

- changes in interest rates, which may reduce net interest margin and net interest income;
- monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System;
- the ability of the Company to obtain approval from the Federal Reserve Bank of Philadelphia (the "Federal Reserve Bank") to distribute interest payments owed to the holders of the Company's subordinated debt securities;
- the Company's ability to manage its profitability and costs;
- turnover in senior management or the Company's ability to attract and retain qualified personnel;
- the limitations imposed on the Company which require, among other things, written approval of the Federal Reserve Bank prior to the declaration or payment of dividends, any increase in debt by the Company, or the redemption of Company common stock, and the effect on operations resulting from such limitations;
- the impact of bank closings and the risks related to disruption in the banking industry and financial markets;
- the market price and trading volume of our shares of common stock has been and may continue to be volatile, and purchasers of our securities could incur substantial losses;
- changes in the level of trends of delinquencies and write-offs and in our allowance and provision for credit losses;
- the results of examinations by our regulators, including the possibility that our regulators may, among other things, require us to increase our reserve for credit losses, write down assets, change our regulatory capital position, limit our ability to borrow funds or maintain or increase deposits;
- national and/or local changes in economic conditions, which could occur from numerous causes, including political changes, domestic and international policy changes, unrest, war and weather, inflation or deflation conditions in the real estate, securities markets or the banking industry, which could affect liquidity in the capital markets, the volume of loan originations, deposit flows, real estate values, the levels of non-interest income and the amount of credit losses;
- adverse changes in the financial industry and the securities, credit, national and local real estate markets (including real estate values);
- changes in our existing loan portfolio composition (including reduction in commercial real estate loan concentration) and credit quality or changes in credit loss requirements;
- legislative or regulatory changes that may adversely affect the Company’s business, including but not limited to new capital regulations, which could result in, among other things, increased deposit insurance premiums and assessments, capital requirements, regulatory fees and compliance costs, and the resources we have available to address such changes;
- changes in the level of government support of housing finance;
- changes to state rent control laws, which may impact the credit quality of multifamily housing loans;
- our ability to control costs and expenses;
- the impairment of our investment securities;
- risks related to a high concentration of loans to borrowers secured by property located in our market area;
- increases in competitive pressure among financial institutions or non-financial institutions;/
- unexpected outflows of uninsured deposits could require us to sell investment securities at a loss;
- changes in consumer spending, borrowing and savings habits;
- technological changes that may be more difficult to implement or more costly than anticipated;
- changes in deposit flows, loan demand, real estate values, borrowing facilities, capital markets and investment opportunities, which may adversely affect our business;
- changes in accounting standards, policies and practices, as may be adopted or established by the regulatory agencies or the Financial Accounting Standards Board could negatively impact the Company's financial results;
- litigation or regulatory actions, whether currently existing or commencing in the future, which may restrict our operations or strategic business plan;
- the impact of actions taken by activist shareholders and the costs and expenses associated with such actions;
- the ability to originate and purchase loans with attractive terms and acceptable credit quality; and
- the ability to attract and retain key members of management, and to address staffing needs in response to product demand or to implement business initiatives.

Because forward-looking statements are subject to numerous assumptions, risks and uncertainties, actual results or future events could differ possibly materially from those that the Company anticipated in its forward-looking statements. The forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date of this Quarterly Report on Form 10-Q, and the Company assumes no obligation to, and expressly disclaims any obligation to, update these forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements, except as legally required.

### Overview

Carver Bancorp, Inc. is the holding company for Carver Federal Savings Bank, a federally chartered savings bank. The Company is headquartered in New York, New York. The Company conducts business as a unitary savings and loan holding company, and the principal business of the Company consists of the operation of Carver Federal. 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 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.

Carver Federal is among the largest African-American operated banks in the United States. The Bank remains dedicated to expanding wealth-enhancing opportunities in the communities it serves by increasing access to capital and other financial services for consumers, businesses and non-profit organizations, including faith-based institutions. A measure of its progress in achieving this goal includes the Bank's sixth consecutive "Outstanding" rating, issued by the OCC following its most recent Community Reinvestment Act (“CRA”) examination in March 2022. The OCC found that 90% of Carver Federal's loans were made within our assessment area, and the Bank has demonstrated excellent responsiveness to its assessment area's needs through its community development lending, investing and service activities. The Bank had approximately $727.5 million in assets and 111 employees as of December 31, 2024.

Carver Federal engages in a wide range of consumer and commercial banking services. The Bank provides deposit products, including demand, savings and time deposits for consumers, businesses, and governmental and quasi-governmental agencies in its local market area within New York City. In addition to deposit products, Carver Federal offers a number of other consumer and commercial banking products and services, including debit cards, online account opening and banking, online bill pay and telephone banking. Carver Federal also offers a suite of products and services for unbanked and underbanked consumers, branded as Carver Community Cash. This includes check cashing, wire transfers, bill payment, reloadable prepaid cards and money orders.

Carver Federal offers loan products covering a variety of asset classes, including commercial and multifamily mortgages, and business loans. The Bank finances mortgage and loan products through deposits or borrowings. Funds not used to originate mortgages and loans are invested primarily in U.S. government agency securities and mortgage-backed securities.

The Bank's primary market area for deposits consists of the areas served by its seven branches in the Brooklyn, Manhattan and Queens boroughs of New York City. The neighborhoods in which the Bank's branches are located have historically been low- to moderate-income areas. The Bank's primary lending market includes Kings, New York, Bronx and Queens Counties in New York City, and lower Westchester County, New York. Although the Bank's branches are primarily located in areas that were historically underserved by other financial institutions, the Bank faces significant competition for deposits and mortgage lending in its market areas. Management believes that this competition has become more intense as a result of increased examination emphasis by federal banking regulators on financial institutions' fulfillment of their responsibilities under the CRA and more recently due to the decline in demand for loans. Carver Federal's market area has a high density of financial institutions, many of which have greater financial resources, name recognition and market presence, and all of which are competitors to varying degrees. The Bank's competition for loans comes principally from commercial banks, savings institutions and mortgage banking companies. The Bank's most direct competition for deposits comes from commercial banks, savings institutions and credit unions. Competition for deposits also comes from money market mutual funds, corporate and government securities funds, and financial intermediaries such as brokerage firms and insurance companies. Many of the Bank's competitors have substantially greater resources and offer a wider array of financial services and products. 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.

The Company's subsidiary, Carver Statutory Trust I, is not consolidated with Carver Bancorp Inc. for financial reporting purposes in accordance with the FASB's ASC Topic 810 regarding the consolidation of variable interest entities. Carver Statutory Trust I was formed in 2003 for the purpose of issuing $13 million aggregate liquidation amount of floating rate Capital Securities due September 17, 2033 (“Capital Securities”) and $0.4 million of common securities (which are the only voting securities of Carver Statutory Trust I), which are 100% owned by Carver Bancorp Inc., and using the proceeds to acquire junior subordinated debentures issued by Carver Bancorp, Inc. Carver Bancorp, Inc. has fully and unconditionally guaranteed the Capital Securities along with all obligations of Carver Statutory Trust I under the trust agreement relating to the Capital Securities. The Company does not consolidate the accounts and related activity of Carver Statutory Trust I because it is not the primary beneficiary of the entity. At December 31, 2024, the Company's maximum exposure to the Trust is $13.4 million, which is the Company's liability to the Trust and includes the Company's investment in the Trust.

### Critical Accounting Estimates

Note 2 to the Company’s audited Consolidated Financial Statements for the year ended March 31, 2024 included in its Form 10-K for the year ended March 31, 2024, as supplemented by this report, contains a summary of significant accounting estimates. The Company believes its policies with respect to the methodologies used to determine the allowance for credit losses is the most critical accounting estimate. This estimate involves a high degree of complexity, requiring management to make difficult and subjective judgments, which often require assumptions or estimates about highly uncertain matters. Changes in these judgments, assumptions or estimates could result in material differences in the Company's results of operations or financial condition. The following description of these policies should be read in conjunction with the corresponding section of the Company’s Form 10-K for the year ended March 31, 2024.

#### Allowance for Credit Losses ("ACL")

The ACL reflects management's evaluation of the loans presenting identified loss potential, as well as the risk inherent in various components of the portfolio. There is significant judgment applied in estimating the ACL. These assumptions and estimates are susceptible to significant changes based on the current environment. Inflationary pressure has started to decrease, but rates remain high. 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 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. 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 left interest rates unchanged at the January 2025 meeting. 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. There have been no significant changes to the inputs and assumptions during the nine months ended December 31, 2024.

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. Additions to the allowance are recognized through the provision for credit losses. Loan losses are charged off against the allowance when management believes a loan balance is deemed as uncollectible. Management continues its collection efforts on previously charged-off balances and applies recoveries as additions to the ACL. The measurement of expected credit losses is based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The discounted cash flow ("DCF") methodology is used for substantially all pools, applied with a 4-quarter reasonable and supportable forecast period and the loss rate reverts back to the long-term historical loss average with a 12-quarter straight-line reversion period where the ACL reflects the difference between the amortized cost and the present value of the expected cash flows.

Expected credit losses are measured on a collective pool basis when similar risk characteristics exist. Loans with similar risk characteristics are grouped into homogeneous segments, or pools, for allowance calculation. The Company's loan portfolio segments as of December 31, 2024 were as follows:

- One-to-four Family - Carver Federal 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 loans are underwritten in accordance with applicable secondary market underwriting guidelines and requirements for sale. These loans present a moderate level of risk due primarily to general economic conditions.
- 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. 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.

- 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 also requires the assignment of rents of all tenants' leases in the mortgaged property and personal guarantees may be obtained for additional security from these borrowers. CRE loans generally present a higher level of risk than other types of loans due primarily to the effect of general economic conditions and the complexities involved in valuing the underlying collateral.
- Construction - Carver Federal 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. The loans provide for disbursement in stages as construction is completed. Borrowers must satisfy all credit requirements that apply to the Bank’s permanent mortgage loan financing for the mortgaged property. The Bank has additional criteria for construction loans, including an engineer’s plan and periodic cost reviews on all construction budgets for loans. Construction loans present an increased level of risk from the effect of general economic conditions and uncertainties surrounding construction costs.
- Business - Carver Federal originates and purchases business and SBA loans primarily to businesses located in its primary market area and surrounding areas. Business loans are typically personally guaranteed by the owners and may also be secured by additional collateral, including real estate, equipment and inventory. Business loans are subject to increased risk from the effect of general economic conditions. SBA loans are guaranteed by the U.S. government based on the percentage of each individual program.
- Consumer (including Overdraft accounts) - The Consumer portfolio includes student loans to medical students enrolled in several medical schools, throughout the United States and the Caribbean, as well as unsecured consumer loans purchased from or originated through strategic partnerships with Bankers Healthcare Group, LLC and Upstart Holdings, Inc. Consumer loans are typically unsecured and more susceptible to declining economic conditions.

Because expected loss predictions may not adequately project the level of losses inherent in a portfolio, the Bank reviews a number of qualitative factors to determine if reserves should be adjusted based upon any of those factors. As the risk ratings deteriorate, some of the qualitative factors tend to increase. A number of qualitative factors are considered including economic forecast uncertainty, credit quality trends, valuation trends, concentration risk, quality of loan review, changes in personnel, impact of rising rates, external factors and other considerations. Although the quantitative calculation includes a measurement of statistical economic conditions based on national averages, an additional analysis is performed at the qualitative level that applies specifically to the Company's geographic area and the banking industry that includes reasonable and supportable forecasts.

### Stock Repurchase Program

On August 6, 2002, the Company announced a stock repurchase program to repurchase up to 15,442 shares of its outstanding common stock. As of December 31, 2024, 11,744 shares of its common stock have been repurchased in open market transactions at an average price of $235.80 per share (as adjusted for 1-for-15 reverse stock split that occurred on October 27, 2011).

### Liquidity and Capital Resources

Liquidity is a measure of the Bank's ability to generate adequate cash to meet its financial obligations. The principal cash requirements of a financial institution are to cover potential deposit outflows, fund increases in its loan and investment portfolios and ongoing operating expenses. The Bank's primary sources of funds are deposits, borrowed funds and principal and interest payments on loans, mortgage-backed securities and investment securities. While maturities and scheduled amortization of loans, mortgage-backed securities and investment securities are predictable sources of funds, deposit flows and loan and mortgage-backed securities prepayments are strongly influenced by changes in general interest rates, economic conditions and competition. Carver Federal monitors its liquidity utilizing guidelines that are contained in a policy developed by its management and approved by its Board of Directors. Carver Federal's several liquidity measurements are evaluated on a frequent basis.

Management believes Carver Federal’s short-term assets have sufficient liquidity to cover loan demand, potential fluctuations in deposit accounts and to meet other anticipated cash requirements, including interest payments on our subordinated debt securities. 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 $8.2 million, or 17.6%, to $38.3 million at December 31, 2024, compared to $46.5 million at March 31, 2024. 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 made a partial paydown of $10.0 million on a $25.0 million 2-year advance from the FHLB-NY during the second quarter. At December 31, 2024, the Bank had $19.8 million outstanding advances from the FHLB-NY. At December 31, 2024, based on available collateral held at the FHLB-NY, Carver Federal had the ability to borrow an additional $12.7 million on a secured basis, utilizing mortgage-related loans and securities as collateral. 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 subordinated debt securities and $5.0 million in low interest loans outstanding as of December 31, 2024.

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. 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. As of December 31, 2024, the Company has not drawn on the facility.

The Bank's most liquid assets are cash and short-term investments. The level of these assets is dependent on the Bank's operating, investing and financing activities during any given period. At December 31, 2024 and March 31, 2024, assets qualifying for short-term liquidity, including cash and cash equivalents, totaled $50.0 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 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 agent. 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. When mortgage interest rates decline, customers’ refinance activities tend to accelerate, causing the cash flow from both the mortgage loan portfolio and the mortgage-backed securities portfolio to accelerate. In contrast, when mortgage interest rates increase, refinance activities tend to slow, causing a reduction of liquidity. 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 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 the nine months ended December 31, 2024, total cash and cash equivalents decreased $9.0 million to $50.0 million at December 31, 2024, compared to $59.0 million at March 31, 2024, reflecting cash used in operating activities of $6.4 million and cash used in financing activities of $18.1 million, partially offset by cash provided by investing activities of $15.4 million. Net cash used in financing activities of $18.1 million resulted from a net decrease in deposits of $10.1 million and a decrease of $8.3 million in long-term borrowings. 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, and made a partial paydown of $10.0 million on a $25.0 million 2-year advance from the FHLB-NY. In addition, the Company issued common shares in private placements during the current quarter for gross proceeds of $0.2 million. Net cash provided by investing activities of $15.4 million was attributable to investment paydowns and loan repayments and payoffs, net of purchases and originations.

Capital adequacy is one of the most important factors used to determine the safety and soundness of individual banks and the banking system. In common with all U.S. banks, Carver Federal’s capital adequacy is measured in accordance with the Basel III regulatory framework governing capital adequacy, stress testing, and market liquidity risk. Carver Federal, 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. The IMCR remains in effect.

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 noted above. 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.” For the current period, the Bank has elected to continue to utilize the generally applicable leverage and risk-based requirements and not apply the community bank leverage ratio.

The table below presents the capital position of the Bank at December 31, 2024:

*($ in thousands)*

| Tier 1 leverage capital | December 31, 2024 Amount | Ratio |
| --- | ---: | ---: |
| Regulatory capital | $67,209 | 9.03% |
| Individual minimum capital requirement | 66,995 | 9.00% |
| Minimum capital requirement | 29,776 | 4.00% |
| Excess over individual minimum capital requirement | 214 | 0.03% |
| **Common equity Tier 1** |  |  |
| Regulatory capital | $67,209 | 11.13% |
| Minimum capital requirement | 42,288 | 7.00% |
| Excess | 24,921 | 4.13% |
| **Tier 1 risk-based capital** |  |  |
| Regulatory capital | $67,209 | 11.13% |
| Minimum capital requirement | 51,350 | 8.50% |
| Excess | 15,859 | 2.63% |
| **Total risk-based capital** |  |  |
| Regulatory capital | $73,356 | 12.14% |
| Individual minimum capital requirement | 72,494 | 12.00% |
| Minimum capital requirement | 63,432 | 10.50% |
| Excess over individual minimum capital requirement | 862 | 0.14% |

### Bank Regulatory Matters

On May 24, 2016, the Bank entered into a Formal Agreement ("the Agreement") with the OCC to undertake certain compliance-related and other actions. As a result of the Agreement, Carver was issued an IMCR letter by the OCC, which requires the Bank to maintain minimum regulatory capital levels of 9% for its Tier1 leverage ratio and 12% for its total risk-based capital ratio. The Bank was released from the Agreement on January 18, 2023. The IMCR remains in effect. At December 31, 2024, the Bank's capital level exceeded the regulatory requirements and its IMCR requirements with a Tier 1 leverage capital ratio of 9.03%, Common Equity Tier 1 capital ratio of 11.13%, Tier 1 risk-based capital ratio of 11.13%, and a total risk-based capital ratio of 12.14%.

The Company continues to be subject to similar requirements that the Bank was subject to under the Agreement. The Company must provide notice to the FRB prior to effecting any change in its directors or senior executive officers. The Company is also subject to the restrictions on golden parachute and indemnification payments, as set forth in 12 C.F.R. Part

359\. Written approval of the Federal Reserve Bank is required prior to: (1) the declaration or payment of dividends by the Company to its stockholders, (2) the declaration or payment of dividends by the Bank to the Company, (3) any distributions of interest or principal by the Company on subordinated debentures or trust preferred securities, (4) any purchases or redemptions of the Company’s stock and (5) the Company incurring, increasing or guaranteeing certain long-term debt outside the ordinary course of business. These limitations could affect our operations and financial performance.

### 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 Federal National Mortgage Association (“FNMA”). The loans were sold to FNMA with the standard representations and warranties for loans sold to the Government Sponsored Entities ("GSEs"). The Bank may be required to repurchase these loans in the event of breaches of these representations and warranties. In the event of a repurchase, the Bank is typically required to pay the unpaid principal balance as well as outstanding interest and fees. The Bank then recovers the loan or, if the loan has been foreclosed, the underlying collateral. The Bank is exposed to any losses on repurchased loans after giving effect to any recoveries on the collateral. The Bank has not received a request to repurchase any of these loans since the second quarter of fiscal 2015, and there have not been any additional requests from FNMA for loans to be reviewed. At December 31, 2024, the Bank continues to service 71 loans with a principal balance of $10.7 million for FNMA that had been sold with standard representations and warranties.

The following table presents information on open requests from FNMA. The amounts presented are based on outstanding loan principal balances.

*$ in thousands*

|  | Loans sold to FNMA |
| --- | ---: |
| Open claims as of March 31, 2024 (1) | $1,367 |
| Gross new demands received | — |
| Loans repurchased/made whole | — |
| Demands rescinded | — |
| Advances on open claims | — |
| Principal payments received on open claims | (12) |
| Open claims as of December 31, 2024 (1) | $1,355 |

(1) The open claims include all open requests received by the Bank where either FNMA has requested loan files for review, where FNMA has not formally rescinded the repurchase request or where the Bank has not agreed to repurchase the loan. The amounts reflected in this table are the unpaid principal balance and do not incorporate any losses the Bank would incur upon the repurchase of these loans.

Management has established a representation and warranty reserve for losses associated with the repurchase of mortgage loans sold by the Bank to FNMA that we consider to be both probable and reasonably estimable. These reserves are reported in the consolidated statement of financial condition as a component of other liabilities. The table below summarizes changes in our representation and warranty reserves during the nine months ended December 31, 2024:

*$ in thousands*

|  | December 31, 2024 |
| --- | ---: |
| Representation and warranty repurchase reserve, March 31, 2024 (1) | $86 |
| Net adjustment to reserve for repurchase losses (2) | (5) |
| Representation and warranty repurchase reserve, December 31, 2024 (1) | $81 |

(1) Reported in our consolidated statements of financial condition as a component of other liabilities.

(2) Component of other non-interest expense.

### Comparison of Financial Condition at December 31, 2024 and March 31, 2024

### Assets

At December 31, 2024, total assets were $727.5 million, reflecting a decrease of $29.3 million, or 3.9%, from total assets of $756.8 million at March 31, 2024. The decrease was primarily attributable to decreases of $9.0 million in cash and cash equivalents, and $4.1 million and $12.2 million in the Bank's net investment and loan portfolios, respectively.

Total cash and cash equivalents decreased $9.0 million, or 15.3%, from $59.0 million at March 31, 2024 to $50.0 million at December 31, 2024. The decrease in cash was primarily due to decreases of $10.1 million in total deposits and $8.2 million in advances from the FHLB-NY and other borrowed money. This was partially offset by paydowns received on investment securities and net loan activity.

Total investment securities decreased $4.1 million, or 8.2%, to $45.9 million at December 31, 2024, compared to $50.0 million at March 31, 2024 due to scheduled principal payments received of approximately $3.7 million and a $0.3 million increase in unrealized losses in the available-for-sale portfolio.

Gross portfolio loans decreased $12.0 million, or 1.9%, to $610.9 million at December 31, 2024, compared to $622.9 million at March 31, 2024, primarily due to attrition and payoffs of $48.9 million. The level of payoffs and paydowns can be attributed to commercial real estate activity, as some borrowers continue to seek opportunities to reduce interest expense in the current rate environment. These were partially offset by new loan originations of $33.8 million and loan pool purchases of $3.8 million.

### Liabilities and Equity

Total liabilities decreased $19.2 million, or 2.7%, to $695.3 million at December 31, 2024, compared to $714.5 million at March 31, 2024, due to decreases of $10.1 million in total deposits and $8.2 million in advances from the FHLB-NY and other borrowed money.

Deposits decreased $10.1 million, or 1.6%, to $636.9 million at December 31, 2024, compared to $647.0 million at March 31, 2024. An increase of $12.5 million in certificate of deposit accounts was offset by decreases in money market, savings, non-interest bearing checking accounts, and interest-bearing business checking accounts of $7.3 million, $6.1 million, $4.7 million and $2.8 million, respectively. The increase in time deposits was comprised of increases of $7.9 million in institutional deposits in CDARS accounts and $4.6 million in retail deposit accounts.

Advances from the FHLB-NY and other borrowed money decreased $8.2 million, or 17.6%, to $38.3 million at December 31, 2024, compared to $46.5 million at March 31, 2024. 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 made a partial paydown of $10.0 million on a $25.0 million 2-year advance from the FHLB-NY during the second quarter. At December 31, 2024, the Bank had $19.8 million outstanding advances from the FHLB-NY.

Total equity decreased $10.0 million, or 23.6%, to $32.3 million at December 31, 2024, compared to $42.3 million at March 31, 2024. The decrease was due to a net loss of $10.0 million coupled with an increase of $0.3 million in unrealized losses on securities available-for-sale for the nine month period ended December 31, 2024. These decreases were partially offset by a $0.2 million increase in capital as a result of the issuance of common shares in private placements during the current quarter.

### Asset/Liability Management

The Company's primary earnings source is net interest income, which is affected by changes in the level of interest rates, the relationship between the rates on interest-earning assets and interest-bearing liabilities, the impact of interest rate fluctuations on asset prepayments, the level and composition of deposits and assets, and the credit quality of earning assets. Management's asset/liability objectives are to maintain a strong, stable net interest margin, to utilize the Company's capital effectively without taking undue risks, to maintain adequate liquidity and to manage its exposure to changes in interest rates.

The economic environment is uncertain regarding long-term interest rate trends. Management monitors the Company's cumulative gap position, which is the difference between the sensitivity to rate changes on the Company's interest-earning assets and interest-bearing liabilities. In addition, the Company uses various tools to monitor and manage interest rate risk, such as a model that projects net interest income based on increasing or decreasing interest rates.

### Off-Balance Sheet Arrangements

The Company 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. In accordance with GAAP, these instruments are not recorded in the consolidated financial statements. Such instruments primarily include lending obligations, including commitments to originate mortgage and consumer loans and to fund unused lines of credit. At December 31, 2024, the Company had $3.9 million in outstanding commitments to extend credit and standby letters of credit. Such financial instruments are recorded in the consolidated statements of condition when they are funded. The Company records an allowance for credit losses on off-balance sheet credit exposures, unless such commitments are unconditionally cancellable, through the provision for credit losses expense. The allowance for credit losses on off-balance sheet credit exposures as of December 31, 2024 was $9 thousand and is included in Other Liabilities in the consolidated statements of financial condition.

### Comparison of Operating Results for the Three and Nine Months Ended December 31, 2024 and 2023

### Overview

The Company reported a net loss of $5.6 million for the three months ended December 31, 2024, compared to net income of $19 thousand for the comparable prior year quarter. The change in our results was due to increases in interest expense, non-interest expense and provision for credit losses, and decreases in interest and non-interest income compared to the prior year quarter. For the nine months ended December 31, 2024, the Company reported a net loss of $10.0 million, compared to a net loss of $3.0 million for the prior year period. The increase in net loss 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 year period.

The following table reflects selected operating ratios for the three and nine months ended December 31, 2024 and 2023 (unaudited):

| Selected Financial Data: | Three Months Ended December 31, 2024 |  | 2023 |  | Nine Months Ended December 31, 2024 |  | 2023 |  |
| --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- |
| Return on average assets (1) | (3.05)% |  | 0.01% |  | (1.78)% |  | (0.55)% |  |
| Return on average stockholders' equity (2) | (58.55)% |  | 0.19% |  | (33.08)% |  | (9.41)% |  |
| Return on average stockholders' equity, excluding AOCI (2) (8) | (44.98)% |  | 0.14% |  | (25.28)% |  | (7.12)% |  |
| Net interest margin (3) | 1.63% |  | 3.03% |  | 2.64% |  | 3.08% |  |
| Interest rate spread (4) | 1.14% |  | 2.60% |  | 2.14% |  | 2.66% |  |
| Efficiency ratio (5) | 240.84% |  | 100.97% |  | 154.73% |  | 113.77% |  |
| Operating expenses to average assets (6) | 5.12% |  | 4.38% |  | 4.62% |  | 4.40% |  |
| Average stockholders' equity to average assets (7) | 5.20% |  | 5.39% |  | 5.38% |  | 5.81% |  |
| Average stockholders' equity, excluding AOCI, to average assets (7) (8) | 6.77% |  | 7.46% |  | 7.04% |  | 7.68% |  |
| Average interest-earning assets to average interest-bearing liabilities | 1.24 | x | 1.27 | x | 1.25 | x | 1.28 | x |
| (1) Net income (loss), annualized, divided by average total assets. |  |  |  |  |  |  |  |  |
| (2) Net income (loss), annualized, divided by average total stockholders' equity. |  |  |  |  |  |  |  |  |
| (3) Net interest income, annualized, divided by average interest-earning assets. |  |  |  |  |  |  |  |  |
| (4) Combined weighted average interest rate earned less combined weighted average interest rate cost. |  |  |  |  |  |  |  |  |
| (5) Operating expense divided by sum of net interest income and non-interest income. |  |  |  |  |  |  |  |  |
| (6) Non-interest expense, annualized, divided by average total assets. |  |  |  |  |  |  |  |  |
| (7) Total average stockholders' equity divided by total average assets for the period. |  |  |  |  |  |  |  |  |
| (8) See Non-GAAP Financial Measures disclosure for comparable GAAP measures. |  |  |  |  |  |  |  |  |

38

### Non-GAAP Financial Measures

In addition to evaluating the Company's results of operations in accordance with U.S. generally accepted accounting principles (“GAAP”), management routinely supplements their evaluation with an analysis of certain non-GAAP financial measures, such as the return on average stockholders' equity excluding average accumulated other comprehensive income (loss) ("AOCI"), and average stockholders' equity excluding AOCI to average assets. Management believes these non-GAAP financial measures provide information that is useful to investors in understanding the Company's underlying operating performance and trends, and facilitates comparisons with the performance of other banks and thrifts.

Return on average stockholders' equity, excluding AOCI measures how efficiently we generate profits from the resources provided by our net assets. Return on average stockholders' equity, excluding AOCI is calculated by dividing annualized net income (loss) attributable to Carver by average stockholders' equity, excluding AOCI. Management believes that this performance measure and average stockholders' equity, excluding AOCI to average assets explains the results of the Company's ongoing businesses in a manner that allows for a better understanding of the underlying trends in the Company's current businesses. For purposes of the Company's presentation, AOCI includes the changes in the market or fair value of its investment portfolio. These fluctuations have been excluded due to the unpredictable nature of this item and is not necessarily indicative of current operating or future performance.

*$ in thousands*

|  | Three Months Ended December 31, 2024 | 2023 | Nine Months Ended December 31, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Average Stockholders' Equity | $38,589 | $39,883 | $40,193 | $42,326 |
| Average AOCI | (11,643) | (15,232) | (12,409) | (13,657) |
| Average Stockholders' Equity, excluding AOCI | $50,232 | $55,115 | $52,602 | $55,983 |
| Return on Average Stockholders' Equity | (58.55)% | 0.19% | (33.08)% | (9.41)% |
| Return on Average Stockholders' Equity, excluding AOCI | (44.98)% | 0.14% | (25.28)% | (7.12)% |
| Average Stockholders' Equity to Average Assets | 5.20% | 5.39% | 5.38% | 5.81% |
| Average Stockholders' Equity, excluding AOCI, to Average Assets | 6.77% | 7.46% | 7.04% | 7.68% |

### Analysis of Net Interest Income

The Company’s profitability is primarily dependent upon net interest income and is also affected by the provision for credit losses, non-interest income, non-interest expense and income taxes. Net interest income represents the difference between income on interest-earning assets and expense on interest-bearing liabilities. Net interest income depends primarily upon the volume of interest-earning assets and interest-bearing liabilities and the corresponding interest rates earned and paid. The Company’s net interest income is significantly impacted by changes in interest rate and market yield curves. Net interest income decreased $2.5 million, or 45.5%, to $3.0 million for the three months ended December 31, 2024, compared to $5.5 million for the same quarter last year. Net interest income decreased $1.9 million, or 11.6%, to $14.5 million for the nine months ended December 31, 2024, compared to $16.4 million for the prior year period. Interest income on loans was lower compared to the prior periods primarily due to the reversal of interest accrued on loans placed on nonaccrual status during the current quarter.

The following table sets forth certain information relating to the Company’s average interest-earning assets and average interest-bearing liabilities, and their related average yields and costs for the three and nine months ended December 31, 2024 and 2023. Average yields are derived by dividing annualized income or expense by the average balances of assets or liabilities, respectively, for the periods shown. Average balances are derived from daily or month-end balances as available and applicable. Management does not believe that the use of average monthly balances instead of average daily balances represents a material difference in information presented. The average balance of loans includes loans on which the Company has discontinued accruing interest. The yield includes fees, which are considered adjustment to yield.

*$ in thousands*

| Interest-Earning Assets: | For the Three Months Ended December 31, 2024 Average Balance | Interest | Average Yield/Cost | 2023 Average Balance | Interest | Average Yield/Cost |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Loans(1) | $615,081 | $5,829 | 3.79% | $612,243 | $7,336 | 4.79% |
| Mortgage-backed securities | 25,384 | 132 | 2.08% | 26,919 | 145 | 2.15% |
| Investment securities(2) | 31,031 | 243 | 3.13% | 32,229 | 289 | 3.59% |
| Money market investments | 52,835 | 641 | 4.81% | 51,107 | 704 | 5.47% |
| Total interest-earning assets | 724,331 | 6,845 | 3.78% | 722,498 | 8,474 | 4.69% |
| Non-interest-earning assets | 17,540 |  |  | 16,801 |  |  |
| Total assets | $741,871 |  |  | $739,299 |  |  |
| **Interest-Bearing Liabilities:** |  |  |  |  |  |  |
| Deposits |  |  |  |  |  |  |
| Interest-bearing checking | $43,569 | $19 | 0.17% | $48,269 | $33 | 0.27% |
| Savings and clubs | 108,261 | 176 | 0.64% | 109,929 | 85 | 0.31% |
| Money market | 153,905 | 780 | 2.01% | 159,709 | 594 | 1.48% |
| Certificates of deposit | 237,504 | 2,433 | 4.06% | 199,609 | 1,673 | 3.33% |
| Mortgagors deposits | 2,123 | 8 | 1.50% | 2,890 | 2 | 0.27% |
| Total deposits | 545,362 | 3,416 | 2.49% | 520,406 | 2,387 | 1.82% |
| Borrowed money | 38,289 | 474 | 4.91% | 46,821 | 606 | 5.13% |
| Total interest-bearing liabilities | 583,651 | 3,890 | 2.64% | 567,227 | 2,993 | 2.09% |
| Non-interest-bearing liabilities |  |  |  |  |  |  |
| Demand deposits | 99,905 |  |  | 107,088 |  |  |
| Other liabilities | 19,726 |  |  | 25,101 |  |  |
| Total liabilities | 703,282 |  |  | 699,416 |  |  |
| Stockholders' equity | 38,589 |  |  | 39,883 |  |  |
| Total liabilities and equity | $741,871 |  |  | $739,299 |  |  |
| Net interest income |  | $2,955 |  |  | $5,481 |  |
| Average interest rate spread |  |  | 1.14% |  |  | 2.60% |
| Net interest margin |  |  | 1.63% |  |  | 3.03% |
| (1) Includes nonaccrual loans |  |  |  |  |  |  |
| (2) Includes FHLB-NY stock |  |  |  |  |  |  |

40

*$ in thousands*

| Interest-Earning Assets: | For the Nine Months Ended December 31, 2024 Average Balance | Interest | Average Yield/Cost | 2023 Average Balance | Interest | Average Yield/Cost |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Loans(1) | $620,297 | $22,607 | 4.86% | $603,633 | $21,203 | 4.68% |
| Mortgage-backed securities | 26,006 | 405 | 2.08% | 27,930 | 439 | 2.10% |
| Investment securities(2) | 31,835 | 823 | 3.45% | 33,334 | 835 | 3.34% |
| Restricted cash deposit | 102 | — | —% | — | — | —% |
| Money market investments | 51,486 | 2,043 | 5.27% | 44,941 | 1,801 | 5.32% |
| Total interest-earning assets | 729,726 | 25,878 | 4.73% | 709,838 | 24,278 | 4.56% |
| Non-interest-earning assets | 17,021 |  |  | 18,789 |  |  |
| Total assets | $746,747 |  |  | $728,627 |  |  |
| **Interest-Bearing Liabilities:** |  |  |  |  |  |  |
| Deposits |  |  |  |  |  |  |
| Interest-bearing checking | $44,475 | $41 | 0.12% | $50,211 | $51 | 0.13% |
| Savings and clubs | 110,411 | 484 | 0.58% | 110,850 | 195 | 0.23% |
| Money market | 155,476 | 2,335 | 1.99% | 154,405 | 1,631 | 1.40% |
| Certificates of deposit | 227,257 | 6,883 | 4.02% | 189,453 | 4,229 | 2.96% |
| Mortgagors deposits | 2,278 | 17 | 0.99% | 2,967 | 6 | 0.27% |
| Total deposits | 539,897 | 9,760 | 2.40% | 507,886 | 6,112 | 1.60% |
| Borrowed money | 44,553 | 1,664 | 4.96% | 44,994 | 1,784 | 5.26% |
| Total interest-bearing liabilities | 584,450 | 11,424 | 2.59% | 552,880 | 7,896 | 1.90% |
| Non-interest-bearing liabilities |  |  |  |  |  |  |
| Demand deposits | 102,389 |  |  | 108,228 |  |  |
| Other liabilities | 19,715 |  |  | 25,193 |  |  |
| Total liabilities | 706,554 |  |  | 686,301 |  |  |
| Stockholders' equity | 40,193 |  |  | 42,326 |  |  |
| Total liabilities and equity | $746,747 |  |  | $728,627 |  |  |
| Net interest income |  | $14,454 |  |  | $16,382 |  |
| Average interest rate spread |  |  | 2.14% |  |  | 2.66% |
| Net interest margin |  |  | 2.64% |  |  | 3.08% |
| (1) Includes nonaccrual loans |  |  |  |  |  |  |
| (2) Includes FHLB-NY stock |  |  |  |  |  |  |

### Interest Income

Interest income decreased $1.7 million, or 20.0%, to $6.8 million for the three months ended December 31, 2024, compared to $8.5 million for the prior year quarter. Interest income on loans decreased $1.5 million for the three months ended December 31, 2024 primarily due to the reversal of interest accrued on loans placed on nonaccrual status during the current quarter. For the nine months ended December 31, 2024, interest income increased $1.6 million, or 6.6%, to $25.9 million, compared to $24.3 million for the prior year period. Interest income on loans increased $1.4 million for the nine months ended December 31, 2024, due to an increase in the average yield on the portfolio of 18 basis points, coupled with a $16.7 million, or 2.8%, increase in average loan balances compared to the prior period. Interest income on money market investments increased $0.2 million for the nine months ended December 31, 2024 due to a $6.5 million increase in the average balance on deposit in the Bank's interest-bearing account at the Federal Reserve Bank. The reversal of interest income on loans placed on nonaccrual status severely impacted the net interest margin, reducing it to 1.63% and 2.64% for the three and nine month periods, respectively.

### Interest Expense

Interest expense increased $0.9 million, or 30.0% to $3.9 million for the three months ended December 31, 2024, compared to $3.0 million for the prior year quarter. For the nine months ended December 31, 2024, interest expense increased

$3.5 million, or 44.3% to $11.4 million, compared to $7.9 million for the prior year period. The higher interest rate environment is reflected in the average cost of interest-bearing deposits for the current period. Interest expense on deposits increased $1.0 million and $3.7 million, respectively, for the three and nine months ended December 31, 2024, primarily due to increases in the average balances of $37.9 million and $37.8 million, respectively, and average rates of 73 and 106 basis points, respectively of higher-cost certificate of deposits. The average rates paid on savings and money market accounts also increased for the three and six months ended December 31, 2024, compared to the prior year periods, as the Bank offered promotional rates during the current period in an attempt to attract and retain deposits.

### Provision for Credit Losses and Asset Quality

The Bank maintains an ACL that management believes is adequate to absorb inherent and expected credit losses in its loan portfolio. The adequacy of the ACL is determined by management’s continuous review of the Bank’s loan portfolio, including the identification and review of individual problem situations that may affect a borrower’s ability to repay. The ACL reflects management’s estimate of lifetime credit losses inherent in the loan portfolio. 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. Loans made under the PPP are fully guaranteed by the SBA; therefore, these loans do not have an associated allowance.

The following table summarizes the activity in the ACL for the nine months ended December 31, 2024 and 2023 and the fiscal year ended March 31, 2024:

*$ in thousands*

|  | Nine Months Ended December 31, 2024 | Fiscal Year Ended March 31, 2024 | Nine Months Ended December 31, 2023 |
| --- | ---: | ---: | ---: |
| Beginning Balance | $5,871 | $5,229 | $5,229 |
| Impact of CECL adoption | — | 668 | 668 |
| Less: Charge-offs |  |  |  |
| Business | (289) | (10) | — |
| Consumer | (353) | (160) | (134) |
| Total charge-offs | (642) | (170) | (134) |
| Add: Recoveries |  |  |  |
| Business | 6 | 55 | 52 |
| Consumer | 5 | 6 | 5 |
| Total recoveries | 11 | 61 | 57 |
| Net charge-offs | (631) | (109) | (77) |
| Provision for (recovery of) credit losses |  |  |  |
| One-to-four family | (104) | 69 | 132 |
| Multifamily | 78 | 3 | 5 |
| Commercial real estate | 116 | (95) | (106) |
| Construction | 2 | 1 | 1 |
| Business | 283 | (274) | (244) |
| Consumer | 491 | 321 | 289 |
| Unallocated | (49) | 58 | — |
| Provision for credit losses | 817 | 83 | 77 |
| Ending Balance | $6,057 | $5,871 | $5,897 |
| **Ratios:** |  |  |  |
| Net (charge-offs) recoveries to average loans outstanding (annualized) |  |  |  |
| Business | (0.22)% | 0.03% | 0.04% |
| Consumer | (2.92)% | (1.25)% | (1.52)% |
| Total loans | (0.14)% | (0.02)% | (0.02)% |
| Allowance to total loans | 0.99% | 0.94% | 0.94% |
| Allowance to nonaccrual loans | 26.55% | 49.86% | 21.91% |

The Company recorded a $96 thousand provision for credit losses for the three months ended December 31, 2024, compared to a $97 thousand recovery of credit loss for the prior year quarter. Net charge-offs of $281 thousand were recognized during the third quarter, compared to net charge-offs of $13 thousand for the prior year quarter. For the nine months ended December 31, 2024, the Company recorded a $817 thousand provision for credit losses, compared to a $77 thousand provision for credit losses for the prior year period. Net charge-offs of $631 thousand were recognized during the nine months ended December 31, 2024, compared to net charge-offs of $77 thousand in the prior year period.

At December 31, 2024, nonaccrual loans totaled $22.8 million, or 3.1% of total assets, compared to $11.8 million, or 1.6% of total assets at March 31, 2024. The ACL was $6.1 million at December 31, 2024, which represents a ratio of the ACL to nonaccrual loans of 26.6% compared to a ratio of 49.9% at March 31, 2024. The ratio of the ACL to total loans was 0.99% at December 31, 2024, compared to 0.94% at March 31, 2024.

### Non-performing Assets

Non-performing assets consist of nonaccrual loans, loans held-for-sale and property acquired in settlement of loans, which is known as 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. This includes a series of actions such as phone calls, letters, customer visits and, if necessary, legal action. In the event the loan has a guarantee, the Bank may seek to recover on the guarantee, including, where applicable, from the SBA. Loans that remain delinquent are reviewed for reserve provisions and charge-off. 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 are 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 December 31, 2024, modified loans to a borrower experiencing financial difficulty totaled $6.0 million, of which $5.7 million were classified as performing.

At December 31, 2024, non-performing assets totaled $22.9 million, or 3.1% of total assets compared to $11.8 million, or 1.6% of total assets at March 31, 2024. The following table sets forth information with respect to the Bank’s non-performing assets at the dates indicated:

*$ in thousands*

| Loans accounted for on a nonaccrual basis (1): Gross loans receivable: | Non Performing Assets December 31, 2024 | September 30, 2024 | June 30, 2024 | March 31, 2024 | December 31, 2023 |
| --- | ---: | ---: | ---: | ---: | ---: |
| One-to-four family | $1,874 | $2,244 | $2,650 | $3,554 | $4,295 |
| Multifamily | 2,249 | 1,708 | 2,206 | 2,238 | 2,627 |
| Commercial real estate | 6,104 | 4,522 | 4,522 | 4,522 | 5,937 |
| Business | 12,486 | 8,512 | 876 | 1,417 | 14,009 |
| Consumer | 98 | 139 | 50 | 44 | 45 |
| Total nonaccrual loans | 22,811 | 17,125 | 10,304 | 11,775 | 26,913 |
| Other non-performing assets (2): |  |  |  |  |  |
| Real estate owned | 52 | 52 | 52 | 52 | 60 |
| Total non-performing assets (3) | $22,863 | $17,177 | $10,356 | $11,827 | $26,973 |
| Nonaccrual loans to total loans | 3.73% | 2.77% | 1.64% | 1.89% | 4.31% |
| Non-performing loans to total loans | 3.73% | 2.77% | 1.64% | 1.89% | 4.31% |
| Non-performing assets to total assets | 3.14% | 2.29% | 1.39% | 1.56% | 3.48% |
| Allowance to total loans | 0.99% | 1.01% | 0.95% | 0.94% | 0.94% |
| Allowance to nonaccrual loans | 26.55% | 36.45% | 57.79% | 49.86% | 21.91% |
| (1) Nonaccrual status denotes any loan where the delinquency exceeds 90 days past due, or in the opinion of management, the collection of contractual interest and/or principal is doubtful. Payments received on a nonaccrual loan are either applied to the outstanding principal balance or recorded as interest income, depending on assessment of the ability to collect on the loan. |  |  |  |  |  |
| (2) Other non-performing assets generally represent loans that the Bank is in the process of selling and has designated held-for-sale or property acquired by the Bank in settlement of loans less costs to sell (i.e., through foreclosure, repossession or as an in-substance foreclosure). These assets are recorded at the lower of their cost or fair value. |  |  |  |  |  |
| (3) Modified loans to borrowers experiencing financial difficulty that are performing in accordance with their modified terms for less than six months and those not performing in accordance with their modified terms are considered nonaccrual and are included in the nonaccrual category in the table above. At December 31, 2024, there were $5.7 million of these modified loans that have performed in accordance with their modified terms for a period of at least six months. These loans are generally considered performing loans and are not presented in the table above. |  |  |  |  |  |

### Subprime Loans

In the past, the Bank 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 December 31, 2024, the Bank had $2.6 million in subprime loans, or 0.4% of its total loan portfolio, of which $0.7 million are non-performing loans.

### Non-Interest Income

Non-interest income decreased $1.5 million, or 60.0%, to $1.0 million for the three months ended December 31, 2024, compared to $2.5 million for the prior year quarter. For the nine months ended December 31, 2024, non-interest income decreased $2.5 million, or 52.1%, to $2.3 million, compared to $4.8 million for the prior year period. The previous periods included grant income of $1.4 million recognized from the Bank's award through the CDFI Fund's Equitable Recovery Program and $0.5 million associated with a loan program no longer in existence, 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 nine months ended December 31, 2024.

### Non-Interest Expense

Non-interest expense increased $1.4 million, or 17.3%, to $9.5 million for the three months ended December 31, 2024, compared to $8.1 million for the prior year quarter. For the nine months ended December 31, 2024, non-interest expense increased $1.9 million, or 7.9%, to $25.9 million, compared to $24.0 million for the prior year period. Employee compensation and net occupancy costs related to building expenses increased compared to the prior year periods. 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.

## Controls and procedures

As filed, 1,803 characters.

#### (a) Evaluation of Disclosure Controls and Procedures

The Company maintains controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. As of December 31, 2024, the Company’s management, including the Company's Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial and Accounting Officer), has evaluated the effectiveness of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as amended. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must necessarily reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on the foregoing evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2024.

#### (b) Changes in Internal Control over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting during the fiscal quarter to which this report relates, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 206 characters.

There have been no material changes in risk factors applicable to the Company from those disclosed in "Risk Factors" in Item 1A of the Company's Annual Report on Form 10-K for the year ended March 31, 2024.

Filed Feb 13, 2025.
Source: SEC EDGAR, the filing index for accession 0001016178-25-000005. Last ingested by Listed: Oct 24, 2026, 15:02 ET. No prices; not investment advice.