-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NReyRI8RSaTS6+pL2N5GgXH724mBtM51ZNEQ7HQ/djZgxDo1+q0pDAM9XUHMMY0D 09XvfZm00YjUWcc/LV5vjQ== /in/edgar/work/20000720/0000950123-00-006706/0000950123-00-006706.txt : 20000920 0000950123-00-006706.hdr.sgml : 20000920 ACCESSION NUMBER: 0000950123-00-006706 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000720 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARVER BANCORP INC CENTRAL INDEX KEY: 0001016178 STANDARD INDUSTRIAL CLASSIFICATION: [6035 ] IRS NUMBER: 133904174 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 001-13007 FILM NUMBER: 676184 BUSINESS ADDRESS: STREET 1: 75 W 125TH ST CITY: NEW YORK STATE: NY ZIP: 10027-4512 BUSINESS PHONE: 2128764747 MAIL ADDRESS: STREET 1: 75 W 125TH ST CITY: NEW YORK STATE: NY ZIP: 10027-4512 10-K/A 1 e10-ka.txt CARVER BANCORP 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K/A FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 0-21487 CARVER BANCORP, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 13-3904174 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 75 WEST 125TH STREET, NEW YORK, NEW YORK 10027 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 876-4747 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: COMMON STOCK, PAR VALUE $.01 PER SHARE AMERICAN STOCK EXCHANGE (TITLE OF CLASS) (NAME OF EACH EXCHANGE ON WHICH REGISTERED)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of May 31, 2000, there were 2,314,275 shares of Common Stock of the registrant issued and outstanding. The aggregate market value of the Registrant's common stock held by non-affiliates (based on the closing sales price of $8.75 per share of the registrant's Common Stock on May 31, 2000) was approximately $16.1 million. DOCUMENTS INCORPORATED BY REFERENCE NONE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K contains forward-looking statements consisting of estimates with respect to the financial condition, results of operations and business of the Company (as defined below) that are subject to various factors which could cause actual results to differ materially from these estimates. These factors include changes in general, economic and market, legislative and regulatory conditions, the development of an adverse interest rate environment that adversely affects the interest rate spread or other income anticipated from the Company's operations and investments, the ability of the Company to originate and purchase loans with attractive terms and acceptable credit quality and the ability of the Company to realize cost efficiencies. ITEM 3. LEGAL PROCEEDINGS From time to time, Carver Federal is a party to various legal proceedings incident to its business. At March 31, 2000, except as set forth below, there were no legal proceedings to which Carver Federal or its subsidiaries was a party, or to which any of their property was subject, which were expected by management to result in a material loss. On or about January 18, 2000, a complaint was filed in the Court of Chancery of the State of Delaware in and for New Castle County (the "Court") entitled BBC Capital Market, Inc. v. Carver Bancorp, Inc., et al., C.A. No. 17743, naming the Holding Company, all of the Holding Company's directors (the "individual defendants"), Morgan Stanley & Co., Inc. ("Morgan Stanley") and Provender Opportunities Fund, L.P. ("Provender") as defendants (the "Action"). The complaint alleged, among other things, that plaintiff BBC Capital Market, Inc. ("BBC" or "Plaintiff") is a 7.4% stockholder of the Holding Company and sought to challenge the Holding Company's issuance on January 11, 2000 of 40,000 shares of the Holding Company's Series A Preferred Stock to Morgan Stanley and 60,000 shares of the Holding Company's Series B Preferred Stock to Provender (the "Transactions"). The complaint further alleged, among other things, that: (i) the individual defendants approved the Transactions for the primary purpose of interfering with effective stockholder action at the Holding Company's annual meeting of stockholders on February 24, 2000 (the "Annual Meeting") at which two director-defendants were up for re-election; (ii) Morgan Stanley sought to intimidate Plaintiff's representatives into dropping any challenge to the election of directors at the Holding Company and that the individual defendants conspired with Morgan Stanley in the alleged intimidation; and (iii) the Holding Company issued a false and misleading proxy statement in connection with the Annual Meeting by not disclosing, among other things, certain facts relating to Plaintiff's nomination of directors at the Annual Meeting and the circumstances surrounding the calling of the Annual Meeting. The complaint alleged four counts: (1) breach of fiduciary duty of loyalty against the individual defendants; (2) breach of fiduciary duty of disclosure against the individual defendants; (3) aiding and abetting breaches of fiduciary duty against Morgan Stanley and Provender; and (4) pursuant to 10 Del. C. sec. 6501, a determination that the individual defendants, Morgan Stanley and Provender, could not cast in excess of 10% of their collective vote at the Annual Meeting. The complaint sought, among other things: (1) an order preliminarily and permanently enjoining the Holding Company, the individual defendants and others from: (a) treating the stock issued to Morgan Stanley and Provender as validly issued for purposes of voting at the Annual Meeting; (b) taking any steps to solicit proxies in favor of the Holding Company's nominees at the Annual Meeting until such time that all alleged disclosure violations were cured; and (c) taking any action to obstruct a proxy solicitation by Plaintiff; (2) an order preliminarily and permanently enjoining Morgan Stanley, Provender and others from aiding and abetting the individual defendants' alleged breach of fiduciary duties and taking any action to obstruct a proxy solicitation by Plaintiff; (3) an order rescinding the Transactions; (4) a declaration that the defendants, Morgan Stanley and Provender, could not cast in excess of 10% of their collective vote at the Annual Meeting; and (5) an award to Plaintiff of the cost and disbursements of the action, including reasonable attorneys' fees and experts' fees. On or about January 29, 2000, defendants filed an answer denying the substantive allegations of the complaint and seeking, among other things, an order dismissing the complaint in its entirety, with prejudice. 1 3 On or about January 31, 2000, Plaintiff filed an amended complaint repeating the allegations in the original complaint and adding a count pursuant to 8 Del. C. sec. 220 seeking an order requiring the Holding Company to immediately produce all information requested in Plaintiff's letter demanding that the Holding Company produce certain information relating to the Holding Company's Employee Stock Ownership Plan (the "ESOP") and 401(k) Savings Plan in RSI Retirement Trust. On or about February 22, 2000, defendants filed an answer denying the substantive allegations of the amended complaint and seeking, among other things, an order dismissing the complaint in its entirety, with prejudice. On or about January 18, 2000, Plaintiff also made a motion for a preliminary injunction to obtain the injunctive relief sought in the complaint and a motion for expedited proceedings to obtain discovery in support of its application for preliminary injunctive relief. The parties engaged in expedited discovery and the Court heard Plaintiff's motion for a preliminary injunction on February 16, 2000. On February 16, 2000, the Court denied Plaintiff's motion for a preliminary injunction in its entirety. On or about March 7, 2000, after the Holding Company's Inspector of Election declared that the Holding Company's nominees had defeated Plaintiff's nominees at the Annual Meeting, Plaintiff filed a second amended complaint which repeated the substantive allegations made in the complaint and the amended complaint and added certain additional allegations, including, among others: (i) further allegations that the Holding Company's proxy statement and related materials issued in connection with the Annual Meeting contained false and misleading statements; and (ii) allegations that the Inspector of Election improperly counted the votes of certain unallocated shares in the ESOP in favor of the Holding Company's nominees. The second amended complaint alleged five counts: (1) breach of fiduciary duty against the individual defendants; (2) breach of fiduciary duty of disclosure against the individual defendants; (3) aiding and abetting breaches of fiduciary duty against Morgan Stanley and Provender; (4) pursuant to 10 Del. C. sec. 6501, a determination that the individual defendants, Morgan Stanley and Provender, could not cast in excess of 10% of their collective vote at the Annual Meeting; and (5) pursuant to 8 Del. C. sec. 225, a determination that the Inspector of Election improperly counted the votes of certain unallocated shares in the ESOP in favor of the Holding Company's nominees. The second amended complaint sought, among other things: (1) an order permanently enjoining the Holding Company, the individual defendants and others from treating any stock issued to Morgan Stanley and Provender as validly issued for purposes of voting; (2) an order rescinding the Transactions; (3) an order declaring that Plaintiff's nominees were elected as directors of the Holding Company at the Annual Meeting; (4) an award to Plaintiff of the cost and disbursements of the Action, including reasonable attorneys' fees and experts' fees; and (5) an award to Plaintiff of its costs and disbursements in the proxy contest, including legal fees, proxy solicitor fees, printing fees and the like. On or about March 27, 2000, defendants filed an answer denying the substantive allegations of the second amended complaint and seeking, among other things, an order dismissing the second amended complaint in its entirety, with prejudice. On or about March 2, 2000, Blaylock & Partners, L.P. ("Blaylock") filed an application in the Court pursuant to section 8 Del. C. sec. 231(c) (the "Application"). The Application alleged that Blaylock is a beneficial holder of approximately 100,000 shares of common stock of the Holding Company and that the Inspector of Election improperly declined to accept and count Blaylock's vote at the Annual Meeting. The Application sought, among other things, an order directing the Inspector of Election to accept and count Blaylock's votes at the Annual Meeting. On or about March 8, 2000, defendants filed an answer to the Application and took no position with respect to the relief sought in the Application. SUBSEQUENT EVENTS On or about April 6, 2000, Plaintiff filed a motion for partial summary judgment with respect to Count V in its second amended complaint seeking a determination that the Inspector of Election improperly counted the votes of certain unallocated shares in the ESOP in favor of the Holding Company's nominees and an order declaring that Plaintiff's nominees had won the election at the Annual Meeting (the "Partial Summary Judgment Motion"). On April 24, 2000, the Court granted the Partial Summary Judgment Motion and declared that the Inspector of Election improperly counted the votes attaching to the unallocated ESOP shares at the Annual Meeting. 2 4 By order dated April 20, 2000, the Application was consolidated with the Action and entitled In Re the Carver Bancorp, Inc., Cons. C.A. No. 17743 (the "Consolidated Action"). The issues in the Consolidated Action were scheduled to be tried before the Court beginning on May 15, 2000. The trial was expected to last between 5 and 10 days. On or about April 26, 2000, certain defendants filed motions in the Court seeking: (1) an order directing the entry of a final judgment on the Court's decision and order on the Partial Summary Judgment Motion or, in the alternative, an order certifying an appeal from the Court's interlocutory order on the Partial Summary Judgment Motion; and (2) to stay the proceedings in the Consolidated Action pending appeal of the Partial Summary Judgment Motion. On or about May 4, 2000, the Court denied these motions. On or about May 2, 2000, Plaintiff filed a motion for summary judgment with respect to the Application seeking, among other things, to dismiss the Application. On or about May 19, 2000, with the exception of Blaylock, the parties to the Consolidated Action entered into a Settlement Agreement and Mutual Release (the "Settlement Agreement"). Pursuant to the terms of the Settlement Agreement, among other things, the parties agreed that: (a) BBC's nominees at the Annual Meeting were appointed to the Boards of the Holding Company and Carver Federal effective May 19, 2000 for a term expiring at the annual meeting of stockholders for the fiscal year ending March 31, 2002; (b) the Holding Company will hold its annual meeting of stockholders for the fiscal year ending March 31, 2000 (the "2000 Annual Meeting") on or before March 24, 2001; (c) in connection with the 2000 Annual Meeting, the Holding Company will ensure that a sufficient number of directors are made eligible for election to the Board of the Holding Company so that the sum of (i) the number two and (ii) the number of directorships up for election at the 2000 Annual Meeting will constitute a majority of the number of directors on the Board of the Holding Company as of the date of the 2000 Annual Meeting; (d) certain directors of the Holding Company agreed to pay and will cause their insurance carrier to pay $475,000 to BBC; (e) all claims concerning the subject matter of the Consolidated Action are mutually released and forever discharged; and (f) the parties would promptly execute and file a stipulation and order dismissing the Consolidated Action with respect to the parties to the Settlement Agreement. On or about May 22, 2000, the parties to the Settlement Agreement executed and filed with the Court a Stipulation and Order of Dismissal With Prejudice (the "Stipulation") providing, among other things, that the Consolidated Action is dismissed with prejudice as to the parties to the Settlement Agreement. On May 24, 2000, the Stipulation was entered as an Order of the Court. In light of, among other things, the Settlement Agreement and Stipulation, Blaylock agreed to withdraw the Application with prejudice. Accordingly, by Order dated May 26, 2000, the Court dismissed the Application with prejudice. On or about June 29, 2000, a complaint was filed in the Court of Chancery of the State of Delaware in and for New Castle County (the "Court") entitled Kevin Cohee and Teri Williams v. Carver Bancorp, Inc. The complaint alleges, among other things, that Plaintiffs, who are directors of the Holding Company and Carver Federal Savings Bank, made various requests to inspect various categories of Carver's books and records. The complaint further alleges that on or about June 26, 2000, Plaintiffs sent a formal demand to Carver pursuant to Section 220 of the Delaware General Corporation Law seeking the right to inspect various categories of Carver's books and records for the purpose of assisting Plaintiffs in fulfilling their fiduciary duties as Carver directors and becoming appropriately informed. The complaint further alleges that Carver had not responded to the requests or the demand as of the date of the filing of the complaint and seeks an Order of the Court summarily requiring the Holding Company to permit Plaintiffs and their agents to inspect and copy the documents identified in the demand and such other relief, including reasonable attorney's fees and costs, as the Court shall deem appropriate. On or about June 29, 2000, the Plaintiffs also filed a motion for expedited proceedings seeking an Order of the Court declaring that proceedings in the action be expedited. Both prior to and since the filing of the Complaint, the Holding Company has provided various Carver books and records to Plaintiffs. The case has not yet been scheduled for further proceedings. 3 5 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS The Holding Company held its Annual Meeting on February 24, 2000. The purpose of the Annual Meeting was to vote on the following proposals: 1. The election of two directors for terms of three years each, which election was contested by BBC; 2. The ratification of the appointment of KPMG, LLP as independent auditors of the Holding Company for the fiscal year ending March 31, 2000; and 3. The consideration of a shareholder proposal requesting that the shareholders adopt a nonbinding resolution recommending that the Board immediately engage the services of an investment banker to explore alternatives to enhance shareholder value, opposed by the Board. The results of voting at the Annual Meeting were as follows:* Proposal 1: Election of Directors: Holding Company Nominees David R. Jones For 888,031(1) Withheld 21,634(1) David N. Dinkins For 887,934 Withheld 21,731 BBC's Nominees Kevin Cohee For 856,342 Withheld 8,902 Teri Williams For 857,264 Withheld 7,980 Proposal 2: Ratification of Appointment For 1,657,339 of Independent Auditors Against 111,942 Abstain 5,628 Broker Non-Votes 0 Proposal 3: Shareholder Proposal For 459,843 Against 1,271,540 Abstain 43,524 Broker Non-Votes 0
(1) As described below, the Court declared that the Inspector improperly counted approximately 86,000 votes attaching to the unallocated ESOP shares at the Annual Meeting which had been voted for the Holding Company's nominees. In addition to the nominees elected at the Annual Meeting, the following persons' terms of office as directors continued after the Annual Meeting: Deborah C. Wright, Linda H. Dunham, Robert J. Franz, Pazel G. Jackson, Jr., Herman Johnson and Frederick O. Terrell. * Shortly after the Annual Meeting, the Holding Company's Inspector of Election declared that the Holding Company's nominees had defeated BBC's nominees at the Annual Meeting. On or about March 7, 2000, BBC filed a second amended complaint to the Action described in "Legal Proceedings" which, among other things, alleged that the Inspector of Election improperly counted the votes of certain unallocated shares in the ESOP in favor of the Holding Company's nominees and which, among other things, sought an order declaring that BBC's nominees had been elected as directors of the Holding Company at the Annual Meeting. On or about March 2, 2000, Blaylock filed the Application in the Court which alleged that Blaylock is a beneficial owner of approximately 100,000 shares of common stock of the Holding Company and that the 4 6 Inspector of Election improperly declined to accept and count Blaylock's vote at the Annual Meeting. The Application sought, among other things, an order directing the Inspector of Election to accept and count Blaylock's votes at the Annual Meeting. On or about April 6, 2000, BBC filed the Partial Summary Judgment Motion with respect to Count V in its second amended complaint seeking a determination that the Inspection of Election improperly counted approximately 86,000 votes attaching to the unallocated ESOP shares at the Annual Meeting, which had been voted for of the Holding Company's nominees and an order declaring that BBC's nominees had won the election at the Annual Meeting. On April 24, 2000, the Court granted the Partial Summary Judgment Motion and declared that the Inspector of Election improperly counted the votes attaching to the unallocated ESOP shares at the Annual Meeting. On or about May 19, 2000, with the exception of Blaylock, the parties to the Consolidated Action entered into the Settlement Agreement. Pursuant to the terms of the Settlement Agreement, among other things, the parties agreed that (i) BBC's nominees at the Annual Meeting were appointed to the Boards for a term expiring at the annual meeting of stockholders for the fiscal year ending March 31, 2002, (ii) the Holding Company will hold the 2000 Annual Meeting on or before March 24, 2001; and (iii) in connection with the 2000 Annual Meeting, the Holding Company will ensure that a sufficient number of directors are made eligible for election to the Board of the Holding Company so that the sum of (i) the number two and (ii) the number of directorships up for election at the 2000 Annual Meeting will constitute a majority of directors on the Board of the Holding Company as of the date of the 2000 Annual Meeting. Under the terms of the Settlement Agreement, Messrs. Dinkins and Jones were not required to relinquish their seats on the Boards; however, Mr. Dinkins and Mr. Jones resigned from each of the Boards of the Holding Company and Carver Federal effective May 25, 2000. See "-- Legal Proceedings." 5 7 PART II LETTERHEAD OF KPMG LLP TO THE BOARD OF DIRECTORS AND STOCKHOLDERS CARVER BANCORP, INC. We have audited the accompanying consolidated statement of financial condition of Carver Bancorp, Inc. and subsidiaries (the "Company") as of March 31, 2000 and the related consolidated statements of operations, changes in stockholders' equity and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial statements based on our audit. The accompanying financial statements of Carver Bancorp, Inc. as of March 31, 1999 were audited by other auditors whose report thereon dated June 29, 1999, expressed an unqualified opinion on those financial statements. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2000, and the results of its operations and cash flows for the year then ended in conformity with generally accepted accounting principles. /S/ KPMG LLP MAY 25, 2000 NEW YORK, NEW YORK 6 8 INDEPENDENT AUDITORS' REPORT LETTERHEAD OF MITCHELL & TITUS, LLP To the Board of Directors and Stockholders Carver Bancorp, Inc. We have audited the accompanying consolidated statements of financial condition of Carver Bancorp, Inc. and subsidiaries (the "Company") as of March 31, 1999, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for each of the years ended March 31, 1999 and 1998. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Carver Bancorp, Inc. and subsidiaries as of March 31, 1999, and the results of its operations and cash flows for each of the years ended March 31, 1999 and 1998, in conformity with generally accepted accounting principles. /s/ MITCHELL & TITUS, LLP June 29, 1999 New York, New York 7 9 CARVER BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AS OF MARCH 31, ---------------------------- 2000 1999 ------------ ------------ ASSETS ASSETS: Cash and amounts due from depository institutions........... $ 10,902,497 $ 11,120,748 Federal funds sold.......................................... 11,300,000 10,200,000 ------------ ------------ Total cash and cash equivalents (Note 20)................... 22,202,497 21,320,748 ------------ ------------ Investment Securities held to maturity (estimated fair value of $24,308,640) (Notes 4, 13 and 20)...................... 24,995,850 -- Securities available for sale (Notes 3, 13 and 20).......... 24,952,220 29,918,137 Mortgage-backed securities held to maturity, net (estimated fair values of $51,939,162 and $65,693,568 at March 31, 2000 and March 31, 1999) (Notes 5, 12, 13 and 20)......... 54,229,230 66,584,447 Loans receivable............................................ 273,083,331 274,541,950 Less allowance for loan losses............................ (2,935,314) (4,020,099) Loans receivable, net (Notes 6, 13 and 20)................ 270,148,017 270,521,851 ------------ ------------ Real estate owned, net...................................... 922,308 184,599 Property and equipment, net (Note 8)........................ 11,175,334 11,884,983 Federal Home Loan Bank of New York stock, at cost (Note 13)....................................................... 5,754,600 5,754,600 Accrued interest receivable (Notes 9 and 20)................ 2,653,266 2,860,693 Excess of cost over net assets acquired, net (Note 10)...... 816,780 1,029,853 Other assets (Notes 14 and 16).............................. 2,268,430 6,422,933 ------------ ------------ Total assets...................................... $420,118,532 $416,482,844 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES: Deposits (Notes 11 and 20).................................. $281,941,338 $276,999,074 Securities sold under agreements to repurchase (Notes 12 and 20)....................................................... 31,337,000 35,337,000 Advances from Federal Home Loan Bank of New York (Notes 13 and 20)................................................... 66,688,456 65,708,466 Other borrowed money (Notes 18 and 20)...................... 553,201 992,619 Other liabilities (Notes 14 and 17)......................... 6,957,680 6,270,419 ------------ ------------ Total liabilities................................. 387,477,675 385,307,578 ------------ ------------ Commitments and contingencies (Notes 19 and 20)............. -- -- STOCKHOLDERS' EQUITY: (Note 16) Preferred stock, $0.01 par value per share; 1,000,000 authorized; 100,000 shares issued and outstanding...... 1,000 -- Common stock; $0.01 par value per share; 5,000,000 authorized; 2,314,275 issued and outstanding (Note 2)..... 23,144 23,144 Additional paid-in capital (Note 2)......................... 23,789,111 21,423,574 Retained earnings (Notes 2 and 14).......................... 9,479,552 10,721,168 Common stock acquired by the ESOP (Notes 2 and 18).......... (651,950) (992,620) Comprehensive income, net of income tax..................... -- -- ------------ ------------ Total stockholders' equity........................ 32,640,857 31,175,266 ------------ ------------ Total liabilities and stockholders' equity........ $420,118,532 $416,482,844 ============ ============
See Notes to Consolidated Financial Statements 8 10 CARVER BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED MARCH 31, ----------------------------------------- 2000 1999 1998 ----------- ----------- ----------- Interest income: Loans............................................. $19,442,840 $20,576,506 $18,311,042 Mortgage-backed securities........................ 3,640,555 5,430,638 8,522,922 Investment securities............................. 3,593,178 1,800,738 670,509 Federal funds sold................................ 689,929 665,544 323,243 ----------- ----------- ----------- Total interest income..................... 27,366,502 28,473,426 27,827,716 ----------- ----------- ----------- Interest expense: Deposits (Note 11)................................ 8,612,026 8,421,226 8,596,358 Advances and other borrowed money................. 5,396,833 6,393,457 6,422,666 ----------- ----------- ----------- Total interest expense.................... 14,008,859 14,814,683 15,019,024 ----------- ----------- ----------- Net interest income................................. 13,357,643 13,658,743 12,808,692 Provision for loan losses (Note 6).................. 1,099,300 4,029,996 1,259,531 ----------- ----------- ----------- Net interest income after provision for loan losses............................................ 12,258,343 9,628,747 11,549,161 ----------- ----------- ----------- Non-interest income: Loan fees and service charges..................... 353,215 673,541 559,960 Gain on sale of securities held for sale (Note 3)............................................. -- 3,948 188,483 Proceeds from Sale of Alhambra Building........... 728,000 -- -- Other............................................. 1,458,206 1,704,667 1,603,096 ----------- ----------- ----------- Total non-interest income................. 2,539,421 2,382,156 2,351,539 ----------- ----------- ----------- Non-interest expenses: Salaries and employee benefits (Notes 17 and 18)............................................ 5,722,355 5,247,525 4,739,069 Net occupancy expense (Note 19)................... 1,463,052 1,490,592 1,118,467 Equipment......................................... 1,350,710 1,409,429 1,255,301 Other............................................. 7,287,053 9,815,474 4,538,111 ----------- ----------- ----------- Total non-interest expenses............... 15,823,170 17,963,020 11,650,948 ----------- ----------- ----------- Income (loss) before income taxes................... (1,025,406) (5,952,117) 2,249,752 Income taxes (benefit) (Note 14).................... 110,030 (1,499,367) 1,203,466 ----------- ----------- ----------- Net income (loss)................................... $(1,135,436) $(4,452,750) $ 1,046,286 ----------- ----------- ----------- Net income (loss) available to common stockholders...................................... $(1,179,589) $(4,452,750) $ 1,046,286 ----------- ----------- ----------- Net income (loss) per common share.................. $ (0.53) $ (2.02) $ 0.48 ----------- ----------- ----------- Weighted average number of shares outstanding....... 2,238,846 2,206,133 2,187,619 =========== =========== ===========
See Notes to Consolidated Financial Statements 9 11 CARVER BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
COMMON ADDITIONAL STOCK PREFERRED COMMON PAID-IN RETAINED ACQUIRED COMPREHENSIVE STOCK STOCK CAPITAL EARNINGS BY ESOP INCOME TOTAL --------- ------- ----------- ------------- ----------- ------------- ----------- Balance -- March 31, 1997...... $ -- $23,144 $21,410,167 $14,359,060 $(1,365,990) $(442,659) $33,983,722 ------ ------- ----------- ----------- ----------- --------- ----------- Net income for the year ended March 31, 1998............... -- -- 1,046,286 -- -- 1,046,286 Preferred Stock................ -- -- -- -- Allocation of ESOP stock....... 58,566 -- 182,132 -- 240,698 Dividends paid................. -- -- (115,714) -- -- (115,714) Options exercised.............. -- (49,836) -- -- -- (49,836) Decrease in unrealized, loss in securities available for sale, net.................... -- -- -- -- 429,189 429,189 ------ ------- ----------- ----------- ----------- --------- ----------- Balance -- March 31, 1998...... 23,144 21,418,897 15,289,632 (1,183,858) (13,470) 35,534,345 ------ ------- ----------- ----------- ----------- --------- ----------- Net loss for the year ended March 31, 1999............... -- -- (4,452,750) -- -- (4,452,750) Allocation of ESOP Stock....... -- 4,677 -- 191,240 -- 195,917 Dividends paid................. -- -- (115,714) (115,714) Decrease in unrealized, loss in Securities available for sale, net.................... -- -- -- -- 13,470 13,470 ------ ------- ----------- ----------- ----------- --------- ----------- Balance -- March 31, 1999...... 23,144 21,423,574 10,721,168 (992,618) -- 31,175,268 ------ ------- ----------- ----------- ----------- --------- ----------- Net loss for the year ended March 31, 2000............... -- -- (1,135,436) -- -- (1,135,436) Preferred Stock................ 1,000 -- 2,365,537 -- -- -- 2,366,537 Allocation of ESOP Stock....... -- -- -- 340,668 -- 340,668 Dividends paid................. -- (106,180) (106,180) Decrease in unrealized, loss in Securities available for sale, net.................... -- -- -- -- -- -- ------ ------- ----------- ----------- ----------- --------- ----------- Balance -- March 31, 2000...... $1,000 $23,144 $23,789,111 $ 9,479,552 $ (651,950) $ -- $32,640,857 ====== ======= =========== =========== =========== ========= ===========
See Notes to Consolidated Financial Statements 10 12 CARVER BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED MARCH 31, ---------------------------------------------- 2000 1999 1998 ------------- ------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income.............................. $ (1,135,436) $ (4,452,750) $ 1,046,286 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization.................. 1,221,742 1,042,659 695,192 Amortization of intangibles.................... 213,073 216,264 209,892 Other amortization and accretion, net.......... 355,109 1,108,675 402,662 Provision for loan losses...................... 1,099,300 4,029,996 1,259,531 Gain from sale of Alhambra..................... (728,000) -- -- Proceeds from maturity sale of loans........... -- -- 1,459,491 Net gain on sale of securities available for sale......................................... -- (3,948) (188,483) Deferred income taxes.......................... -- -- 58,555 Allocation of ESOP stock....................... 340,668 195,917 240,698 (Increase) decrease in accrued interest receivable................................... 207,427 97,850 215,522 Increase (decrease) in refundable income taxes........................................ -- 1,195,852 -- (Increase) decrease in other assets............ 2,776,042 (38,224) 2,818,687 Increase (decrease) in other liabilities....... 687,261 4,846,323 37,294 ------------- ------------- ------------ Net cash provided by operating activities...... 5,037,186 8,238,614 8,255,327 ------------- ------------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Principal repayments on investments held to maturity..................................... -- -- 194,476 Principal repayments on securities available for sale..................................... -- 3,753,447 5,061,181 Purchases of securities available for sale..... (460,000,000) (331,888,674) (17,000,000) Proceeds from maturity, sales and call of securities available for sale................ 465,000,000 319,510,288 55,485,112 Purchase of investment securities held to maturity..................................... (25,000,000) -- (1,946,326) Proceeds from maturities and calls of investment securities held to maturity....... -- 1,797,042 8,480,705 Principal repayment of mortgage-backed securities held to maturity.................. 12,209,146 23,592,334 19,313,831 Net change in loans receivable................. (964,438) 4,432,486 (77,036,664) Proceeds from sale of Alhambra................. 1,368,755 -- -- Additions to premises and equipment............ (512,093) (1,656,535) (897,030) (Purchase) Federal Home Loan Bank stock........ -- -- (219,600) ------------- ------------- ------------ Net cash (used in) provided by investing activities................................... (7,898,630) 19,540,388 (8,564,315)
11 13
YEAR ENDED MARCH 31, ---------------------------------------------- 2000 1999 1998 ------------- ------------- ------------ ------------- ------------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in deposits....................... 4,942,264 2,104,842 8,422,745 Net (decrease) in short-term borrowings........ (4,000,000) (51,683,000) (942,404) Proceeds of long term borrowing................ -- -- 12,685,000 Repayment of FHLB Advances..................... (19,020,010) -- (8,658,686) Federal Home Loan Bank Advances................ 20,000,000 28,966,780 -- Repayment of other borrowed money.............. (439,418) (191,238) (182,132) Proceeds from issuance of Preferred Stock...... 2,366,537 -- -- Dividends Paid................................. (106,180) (115,714) (115,714) Increase (decrease) in advance payments by borrowers for taxes and insurance............ -- (659,995) (10,507) ------------- ------------- ------------ Net cash provided by (used in) financing activities................................... 3,743,193 (21,578,325) 11,198,302 ------------- ------------- ------------ Net increase (decrease) in cash and cash equivalents.................................. 881,749 6,200,677 10,889,314 Cash and cash equivalents -- beginning......... 21,320,748 15,120,071 4,230,757 ------------- ------------- ------------ Cash and cash equivalents -- ending............ $ 22,202,497 $ 21,320,748 $ 15,120,071 ============= ============= ============ Supplemental disclosure of non-cash activities: Unrealized Gain (loss) on securities available for sale: Unrealized Gain (loss)......................... -- -- (25,417) Deferred income taxes.......................... -- -- 11,947 ============= ============= ============ $ -- $ -- $ 13,470 ============= ============= ============ Loans receivable transferred to real estate owned........................................ $ 737,709 $ -- $ -- ============= ============= ============ Supplemental disclosure of cash flow information: Cash paid for: Interest....................................... $ 13,505,854 $ 14,814,683 $ 15,019,024 ============= ============= ============ Federal, state and city income taxes........... $ 29,354 $ -- $ 515,457 ============= ============= ============
See Notes to Consolidated Financial Statements 12 14 CARVER BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BACKGROUND Carver Bancorp, Inc. is a holding company that was incorporated in May 1996 and whose principal wholly owned subsidiaries are Carver Federal Savings Bank and Alhambra Holding Corp. CFSB Realty Corp. and CFSB Credit Corp. are wholly owned subsidiaries of the Bank. Alhambra Realty Corp. is a majority-owned subsidiary of Alhambra. 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 and changed its name at that time. On October 24, 1994, the Bank converted from mutual 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 and became a wholly owned subsidiary of the Holding Company. In connection with the Reorganization, each share of the Bank's outstanding common stock was exchanged for one share of the Holding Company's common stock, par value $.01 per share. See Note 2. NATURE OF OPERATIONS Carver's banking subsidiary's principal business consists of attracting passbook and other savings accounts through its branch offices and investing those funds in mortgage loans and other investments permitted by federal savings banks. Carver's banking subsidiary has six branches located throughout the City of New York that primarily serve the communities in which they operate. BASIS OF CONSOLIDATED FINANCIAL STATEMENT PRESENTATION The consolidated financial statements include the accounts of Carver, the Bank, its wholly owned subsidiary, CFSB Realty Corp., CFSB Credit Corp. and Alhambra and its majority-owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements have been prepared in conformity with generally accepted accounting principles. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated statement of financial condition and revenues and expenses for the period then ended. Estimates that are particularly susceptible to significant changes in the near-term relate to prepayment assumptions on mortgage-backed securities, the determination of the allowance for loan losses and the valuation of real estate owned. Actual results could differ significantly from those estimates. Management believes that prepayment assumptions on mortgage-backed securities are appropriate, the allowance for loan losses is adequate and real estate owned is properly valued. While management uses available information to recognize losses on loans and real estate owned, future additions to the allowance for loan losses or future write downs of real estate owned may be necessary based on changes in economic conditions in the areas where Carver had extended mortgages and other credit instruments. In addition, various regulatory agencies, as an integral part of their examination process, periodically review Carver's allowance for loan losses and real estate owned valuations. Such agencies may require Carver to recognize additions to the allowance for loan losses or additional write downs of real estate owned based on their judgments about information available to them at the time of their examination. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash and amounts due from depository institutions and federal funds sold. Generally, federal funds sold are sold for one-day periods. 13 15 CARVER BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) INVESTMENT AND MORTGAGE-BACKED SECURITIES Carver does not have trading securities, but does differentiate between held to maturity securities and available for sale securities. When purchased, securities are classified in either the investments held to maturity portfolio or the securities available for sale portfolio. Securities can be classified as held to maturity and carried at amortized cost only if the Company has a positive intent and ability to hold those securities to maturity. If not classified as held to maturity, such securities are classified as securities available for sale. Available for sale securities are reported at fair value. Unrealized holding gains or losses for securities available for sale are to be excluded from earnings and reported net of deferred income taxes as a separate component of other comprehensive income in the Consolidated Statements of Changes in Stockholders' Equity. Investment and mortgage-backed securities held to maturity are carried at cost, adjusted for the amortization of premiums and the accretion of discounts using the level-yield method over the remaining period until maturity. Gains or losses on sales of securities of all classifications are recognized based on the specific identification method. LOANS RECEIVABLE Loans receivable are carried at unpaid principal balances plus unamortized premiums, less the allowance for loan losses and deferred loan fees and discounts. Carver defers loan origination fees and certain direct loan origination costs and accretes such amounts as an adjustment of yield over the contractual lives of the related loans using the interest method. Premiums and discounts on loans purchased are amortized or accreted as an adjustment of yield over the contractual lives of the related loans using the interest method. Loans are generally placed on non-accrual status when they are past due three months or more as to contractual obligations or when other circumstances indicate that collection is questionable. When a loan is placed on non-accrual status, any interest accrued but not received is reversed against interest income. Payments received on a non-accrual loan are either applied to the outstanding principal balance or recorded as interest income, depending on an assessment of the ability to collect the loan. A non-accrual loan is restored to accrual status when principal and interest payments become current and its future collectibility is assured. A loan is considered to be impaired, as defined by FAS No. 114, "Accounting by Creditors for Impairment of a Loan," when it is probable that Carver will be unable to collect all principal and interest amounts due according to the contractual terms of the loan agreement. Carver tests loans covered under FAS No. 114 for impairment if they are on nonaccrual status or have been restructured. Consumer credit nonaccrual loans are not tested for impairment because they are included in large groups of smaller-balance homogeneous loans that, by definition along with leases, are excluded from the scope of FAS No. 114. Impaired loans are required to be measured based upon the present value of expected future cash flows, discounted at the loan's initial effective interest rate, or at the loan's market price or fair value of the collateral if the loan is collateral dependent. If the loan valuation is less than the recorded value of the loan, an impairment reserve must be established for the difference. The impairment reserve is established by either an allocation of the reserve for credit losses or by a provision for credit losses, depending on the adequacy of the reserve for credit losses. Impairment reserves are not needed when interest payments have been applied to reduce principal, or when credit losses have been recorded so that the recorded investment in an impaired loan is less than the loan valuation. 14 16 CARVER BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ALLOWANCE FOR LOAN LOSSES An allowance for loan losses is maintained at a level considered adequate to provide for potential loan losses. Management, in determining the allowance for loan losses, considers the risks inherent in its loan portfolio and changes in the nature and volume of its loan activities, along with the general economic and real estate market conditions. Carver maintains a loan review system which allows for a periodic review of its loan portfolio and the early identification of potential problem loans. Such system takes into consideration, among other things, delinquency status, size of loans, type of collateral and financial condition of the borrowers. Loan loss allowances are established for problem loans based on a review of such information and/or appraisals of the underlying collateral. On the remainder of its loan portfolio, loan loss allowances are based upon a combination of factors including, but not limited to, actual loan loss experience, composition of loan portfolio, current economic conditions and management's judgment. Although management believes that adequate loan loss allowances have been established, actual losses are dependent upon future events and, as such, further additions to the level of the loan loss allowance may be necessary in the future. CONCENTRATION OF RISK The Bank's principle lending activities are concentrated in loans secured by real estate, a substantial portion of which is located in the State of New York and the State of California. Accordingly, the ultimate collectibility of a substantial portion of the Company's loan portfolio is susceptible to changes in New York's and California's market conditions. PREMISES AND EQUIPMENT Premises and equipment are comprised of land, at cost, and buildings, building improvements, furnishings and equipment and leasehold improvements, at cost, less accumulated depreciation and amortization. Depreciation and amortization charges are computed using the straight-line method over the following estimated useful lives:
Buildings and improvements 10 to 40 years Furnishings and equipment 3 to 10 years Leasehold improvements The lesser of useful life or remaining term of lease
Significant renewals and betterments are charged to the property and equipment account. Maintenance and repairs are charged to expense in the year incurred. REAL ESTATE OWNED Real estate acquired by foreclosure or deed in lieu of foreclosure is recorded at the lower of cost or fair value at the date of acquisition and thereafter carried at the lower of cost or fair value less estimated selling costs. The fair value of such assets is determined based primarily upon independent appraisals and other relevant factors. The amounts ultimately recoverable from real estate owned could differ from the net carrying value of these properties because of economic conditions. Costs incurred to improve properties or get them ready for sale are capitalized. Revenues and expenses related to the holding and operating of properties are recognized in operations as earned or incurred. Gain or loss on sale of properties is recognized as incurred. 15 17 CARVER BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) EXCESS OF COST OVER NET ASSETS ACQUIRED In connection with the acquisition of two branches, core deposit premiums paid and other capitalized acquisition costs are being amortized to expense over periods from five to fifteen years using the straight-line method. The company reviews these assets annually for signs of permanent impairment. INTEREST-RATE RISK The Bank is principally engaged in the business of attracting deposits from the general public and using these deposits, together with borrowings and other funds, to originate and purchase loans secured by real estate and to purchase investment and mortgage-backed securities. The potential for interest-rate risk exists as a result of the shorter duration of interest-sensitive liabilities compared to the generally longer duration of interest-sensitive assets. In a rising rate environment, liabilities will reprice faster than assets, thereby reducing the market value of long-term assets and net interest income. For this reason, management regularly monitors the maturity structure of the assets and liabilities in order to measure its level of interest-rate risk and plan for future volatility. INCOME TAXES Carver accounts for income taxes using the asset and liability method. Temporary differences between the basis of assets and liabilities for financial reporting and tax purposes are measured as of the balance sheet date. Deferred tax liabilities or recognizable deferred tax assets are calculated on such differences, using current statutory rates which result in future taxable or deductible amounts. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. COMPREHENSIVE INCOME Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS 130") establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains, and losses) in a full set of general -- purpose financial statements. SFAS 130 requires that an enterprise (a) classify items of other comprehensive income by their nature in a financial statement and (b) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid in capital in the equity section of a statement of financial position. Carver has included the required disclosures in the Consolidated Statements of Changes in Stockholders' Equity. NET INCOME (LOSS) PER COMMON SHARE Basic EPS is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding. Diluted EPS includes any additional common shares as if all potentially dilutive common shares were issued (e.g. convertible preferred stock). For the purpose of these calculations, unreleased ESOP shares are not considered to be outstanding. PENSION PLANS In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits". SFAS 132 revises employers' disclosures about pension and other postretirement benefit plans. It does not change the measurement or recognition of those plans. Carver has made the required disclosures in the accompanying Notes to the Consolidated Financial Statements. RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments, and for 16 18 CARVER BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) hedging activities. SFAS 133 supercedes the disclosure requirements in SFAS 80, 105 and 119 and is effective for fiscal periods beginning after June 15, 2000. The adoption of SFAS No. 133 is not expected to have a material impact on the financial position or results of operations of the Company. RECLASSIFICATIONS Certain amounts in the consolidated financial statements presented for prior periods have been reclassified to conform with the 2000 presentation. NOTE 2. CONVERSION TO STOCK FORM OF OWNERSHIP AND REORGANIZATION INTO A HOLDING COMPANY On October 24, 1994, the Bank issued an initial offering of 2,314,375 shares of common stock (par value $0.01) at a price of $10 per share resulting in net proceeds of $21,519,000. As part of the initial public offering, the Bank established a liquidation account at the time of conversion, in an amount equal to the surplus and reserves of the Bank at September 30, 1994. In the unlikely event of a complete liquidation of the Bank (and only in such event), eligible depositors who continue to maintain accounts shall be entitled to receive a distribution from the liquidation account. The total amount of the liquidation account may be decreased if the balances of eligible deposits decreased as measured on the annual determination dates. The balance of the liquidation account was approximately $3,507,800 (unaudited), and $4,139,000 (unaudited) at March 31, 2000 and 1999, respectively, based on an assumed decrease of 15.25% of eligible deposits per annum. On October 17, 1996, the Bank completed the Reorganization and became the wholly owned subsidiary of the Holding Company. Pursuant to an Agreement and Plan of Reorganization, dated May 21, 1996, each share of the Bank's outstanding common stock was exchanged for one share of the Holding Company's common stock. In connection with the Reorganization, a shareholder of the Bank exercised appraisal rights and 100 shares of the Bank's common stock were purchased from such shareholder in the fourth fiscal quarter of 1997. Accordingly 2,314,275 shares of the Company's common stock remain outstanding. The Bank's shareholder approved the Reorganization at the Bank's annual meeting of shareholders held on July 29, 1996. As a result of the Reorganization, the Bank will not be permitted to pay dividends to the Holding Company on its capital stock if the effect thereof would cause its net worth to be reduced below either: (i) the amount required for the liquidation account or (ii) the amount required for the Bank to comply with applicable minimum regulatory capital requirements. NOTE 3. SECURITIES AVAILABLE FOR SALE At March 31, 2000 and 1999, the Company held no MBSs as available for sale.
MARCH 31, 2000 ----------------------------------------------- GROSS UNREALIZED CARRYING ----------------- ESTIMATED VALUE GAINS LOSSES FAIR-VALUE ----------- ------ ------- ----------- U.S. Government Agency securities................ $24,952,220 $-- $-- $24,952,220 ----------- -- -- ----------- 24,952,220 $-- $-- $24,952,220 =========== == == ===========
MARCH 31, 1999 ----------------------------------------------- GROSS UNREALIZED CARRYING ----------------- ESTIMATED VALUE GAINS LOSSES FAIR-VALUE ----------- ------ ------- ----------- U. S. Government Agency securities............... $29,918,137 $-- -- $29,918,137 ----------- -- -- ----------- $29,918,137 $-- $ $29,918,137 =========== == == ===========
17 19 CARVER BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) At March 31, 2000 and 1999, U.S. Government Agency securities consisted of short-term discount notes with maturities of 30 days or less. The estimated fair value of the U.S. Government Agency securities approximates the carrying value at March 31, 2000 and 1999. Proceeds from the sales of investment securities available for sale during the years ended March 31, 1999 and 1998, were $24,365,488 and $5,188,483, respectively, resulting in gross gains of $3,948 and $188,483 respectively. There were no sales of investment securities available for sale during the year ended March 31, 2000. NOTE 4. INVESTMENT SECURITIES HELD TO MATURITY, NET
MARCH 31, 2000 ------------------------------------------------ GROSS UNREALIZED CARRYING ------------------ ESTIMATED VALUE GAINS LOSSES FAIR-VALUE ----------- ----- --------- ----------- U.S. Government Agency securities............ $24,995,850 $-- $(687,210) $24,308,640 ----------- -- --------- ----------- $24,995,850 $-- $(687,210) $24,308,640 =========== == ========= ===========
There were no investment securities held to maturity at March 31, 1999. There were no sales of securities held to maturity during the years ended March 31, 2000, 1999 and 1998. NOTE 5. MORTGAGE-BACKED SECURITIES HELD TO MATURITY, NET A summary of gross unrealized gains and losses and estimated fair value follows:
MARCH 31, 2000 --------------------------------------------------- GROSS UNREALIZED CARRYING --------------------- ESTIMATED VALUE GAINS LOSSES FAIR-VALUE ----------- ------- ---------- ----------- Government National Mortgage Association............................. $ 6,516,167 $ -- $ 271,846 $ 6,244,321 Federal Home Loan Mortgage Corporation.... 18,780,043 -- 787,917 17,992,126 Federal National Mortgage Association..... 26,222,474 -- 1,218,331 25,004,143 Small Business Administration............. 759,922 6,260 -- 766,182 Collateralized Mortgage Obligations: Resolution Trust Corporation............ 1,708,032 -- 12,442 1,695,590 Other................................... 242,592 -- 5,792 236,800 ----------- ------- ---------- ----------- $54,229,230 $ 6,260 $2,296,328 $51,939,162 =========== ======= ========== ===========
MARCH 31, 1999 --------------------------------------------------- GROSS UNREALIZED CARRYING --------------------- ESTIMATED VALUE GAINS LOSSES FAIR-VALUE ----------- ------- ---------- ----------- Government National Mortgage Association............................. $ 7,630,635 $55,247 $ -- $ 7,685,882 Federal Home Loan Mortgage Corporation.... 24,635,700 -- 772,154 23,863,546 Federal National Mortgage Association..... 29,718,567 -- 140,411 29,578,156 Small Business Administration............. 1,325,753 4,255 -- 1,330,008 Collateralized Mortgage Obligations: Resolution Trust Corporation............ 2,282,016 -- 36,023 2,245,993 Federal Home Loan Mortgage Corporation.......................... 647,010 -- 1,820 645,190 Other................................... 344,766 27 -- 344,793 ----------- ------- ---------- ----------- $66,584,447 $59,529 $ 950,408 $65,693,568 =========== ======= ========== ===========
18 20 CARVER BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following is a schedule of final maturities as of March 31, 2000:
CARRYING ESTIMATED VALUE FAIR VALUE ----------- ----------- After one through five years.............................. $ 525,207 $ 498,118 After five through ten years.............................. 5,193,818 5,017,419 After ten years........................................... 48,510,205 46,423,625 ----------- ----------- $54,229,230 $51,939,162 =========== ===========
There were no sales of mortgage-backed securities held to maturity during the years ended March 31, 2000, 1999 and 1998. NOTE 6. LOANS RECEIVABLE, NET
YEAR ENDED MARCH 31, ---------------------------- 2000 1999 ------------ ------------ Real estate mortgage: One- to four-family....................................... $152,457,753 $181,320,829 Multi-family.............................................. 86,184,032 52,365,984 Non-residential........................................... 22,721,310 23,092,010 Equity and second mortgages............................... 251,738 424,981 ------------ ------------ 261,614,833 257,203,804 ------------ ------------ Real estate construction.................................... 6,392,759 11,047,185 ------------ ------------ Commercial loans............................................ 699,844 616,325 ------------ ------------ Consumer: Deposit accounts.......................................... 294,495 376,227 Student education......................................... 67,191 147,064 Other..................................................... 5,412,059 7,883,501 ------------ ------------ 5,773,745 8,406,792 ------------ ------------ Total loans................................................. 274,481,181 277,274,106 ------------ ------------ Add: Premium................................................ 582,263 1,013,770 Less: Loans in process...................................... (1,062,242) (2,635,520) Allowance for loan losses................................... (2,935,314) (4,020,099) Deferred loan fees and discounts............................ (917,871) (1,110,406) ------------ ------------ (4,333,164) (6,752,255) ------------ ------------ $270,148,017 $270,521,851 ============ ============
19 21 CARVER BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following is an analysis of the allowance for loan losses:
YEAR ENDED MARCH 31, ---------------------------------------- 2000 1999 1998 ----------- ----------- ---------- Balance -- beginning......................... $ 4,020,099 $ 3,138,000 $2,245,747 Provision charged to operations.............. 1,099,300 4,029,996 1,259,531 Recoveries of amounts previously charged off........................................ 384,625 81,711 -- Loans charged off............................ (2,568,710) (3,229,608) (367,278) ----------- ----------- ---------- Balance -- ending............................ $ 2,935,314 $ 4,020,099 $3,138,000 =========== =========== ==========
Non-accrual loans consist of loans for which the accrual of interest has been discounted as a result of such loans becoming three months or more delinquent as to principal and/or interest payments. Interest income on non-accrual loans is recorded when received. Restructured loans consist of loans where borrowers have been granted concessions in regards to the terms of their loans due to financial or other difficulties which rendered them unable to service their loans under the original contractual terms. The balances of non-accrual and restructured loans and their impact in interest income are as follows:
YEAR ENDED MARCH 31, -------------------------- 2000 1999 1998 ------ ------ ------ (IN THOUSANDS) Non-accrual loans........................................ $2,126 $2,417 $5,568 Restructured loans....................................... -- -- 807 ------ ------ ------ $2,126 $2,417 $6,375 ====== ====== ======
YEAR ENDED MARCH 31, --------------------- 2000 1999 1998 ----- ----- ----- (IN THOUSANDS) Interest income which would have been recorded had loans performed in accordance with original contracts........... $345 $419 $762 Interest income received.................................... -- 107 285 ---- ---- ---- Interest income lost........................................ $345 $312 $477 ==== ==== ====
At March 31, 2000 and 1999, the recorded investment in impaired loans was $2,126,000 and $2,417,000, respectively. The related allowance for credit losses was approximately $330,000 and $553,000 at December 31, 2000 and 1999, respectively. The impaired loan portfolio is primarily collateral dependent. The average recorded investment in impaired loans during the fiscal years ended March 31, 2000 and 1999 was approximately $2,272,000 and $3,993,000, respectively. For the years ended March 31, 2000, 1999 and 1998, the Company recognized cash basis interest income on these impaired loans of $0, 107,000 and $285,000, respectively. At March 31, 2000, loans to officers totaled $111,722. 20 22 CARVER BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following is a summary of loans to the Bank's directors and officers (and to any associates of such persons), exclusive of loans to any such person which in aggregate did not exceed $60,000:
YEAR ENDED MARCH 31, ---------------------- 2000 1999 --------- --------- Balance -- beginning........................................ $ 659,491 $ 850,195 Loans originated............................................ -- -- Other(1).................................................... (530,534) -- Repayments.................................................. (17,235) (190,704) --------- --------- Balance -- ending........................................... $ 111,722 $ 659,491 ========= =========
- --------------- (1) Represents loans to individuals who are no longer directors and officers of Carver at March 31, 2000. NOTE 7. LOANS SERVICING The mortgage loan portfolios serviced for the FHLMC and Fannie Mae are not included in the accompanying financial statements. The unpaid principal balances of these loans aggregated $2,775,000, $3,035,000 and $3,696,000 at March 31, 2000, 1999 and 1998, respectively. Custodial escrow balances, maintained in connection with the foregoing loan servicing, were approximately $56,000, $55,000 and $61,000 at March 31, 2000, 1999 and 1998, respectively. NOTE 8. PREMISES AND EQUIPMENT, NET The detail of premises and equipment is as follows:
MARCH 31, -------------------------- 2000 1999 ----------- ----------- Land...................................................... $ 450,952 $ 450,952 Buildings and improvements................................ 8,521,565 8,501,923 Leasehold improvements.................................... 718,764 697,903 Furnishings and equipment................................. 6,017,827 5,546,237 ----------- ----------- 15,709,108 15,197,015 Less accumulated depreciation and amortization............ 4,533,774 3,312,032 ----------- ----------- $11,175,334 $11,884,983 =========== ===========
Depreciation and amortization charged to operations for the years ended March 31, 2000, 1999 and 1998 were $1,221,742, $1,042,659 and $695,192, respectively. NOTE 9. ACCRUED INTEREST RECEIVABLE The detail of accrued interest receivable is as follows:
MARCH 31, ------------------------ 2000 1999 ---------- ---------- Loans....................................................... $1,768,295 $2,311,991 Mortgage-backed securities.................................. 849,471 522,530 Investments and other interest-bearing assets............... 35,500 26,172 ---------- ---------- $2,653,266 $2,860,693 ========== ==========
21 23 CARVER BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 10. EXCESS OF COST OVER ASSETS ACQUIRED, NET The excess of cost over assets acquired relates to the acquisition of the Bedford-Stuyvesant office. The detail is as follows:
MARCH 31, ---------------------- 2000 1999 -------- ---------- Core deposit premium........................................ $787,517 $ 992,956 Acquisition costs........................................... 29,263 36,897 -------- ---------- $816,780 $1,029,853 ======== ==========
NOTE 11. DEPOSITS
MARCH 31, ------------------------------------------------------------- 2000 1999 ----------------------------- ----------------------------- WEIGHTED WEIGHTED AVERAGE AVERAGE RATE AMOUNT PERCENT RATE AMOUNT PERCENT -------- -------- ------- -------- -------- ------- (DOLLARS IN THOUSANDS) DEMAND: Interest-bearing.................. 1.66% $ 18,873 6.68% 1.94% $ 16,102 5.81% Non-interest-bearing.............. -- 12,337 4.38 -- 10,609 3.83 1.00 31,210 11.06 1.17 26,711 9.64 SAVINGS: Savings and club.................. 2.51 145,277 51.53 2.51 143,795 51.91 Money Management.................. 3.25 19,418 6.89 2.93 20,932 7.56 Certificate of deposit............ 4.70 86,036 30.52 4.55 85,561 30.89 3.31 250,731 88.94 3.24 250,288 90.36 3.06% $281,941 100.00% 3.04% $276,999 100.00%
The scheduled maturities of certificates of deposits are as follows:
MARCH 31, ------------------ 2000 1999 ------- ------- (IN THOUSANDS) One year or less............................................ $22,860 $18,033 After one year to three years............................... 29,699 30,944 After three years to five years............................. 10,984 10,197 After five years............................................ 22,493 26,387 ------- ------- $86,036 $85,561 ======= =======
The aggregate amount of certificates of deposit with minimum denominations of $100,000 or more was approximately $17,514,000 and $15,915,000 at March 31, 2000 and 1999, respectively. 22 24 CARVER BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Interest expense on deposits consists of the following:
FOR YEAR ENDED MARCH 31, -------------------------------------- 2000 1999 1998 ---------- ---------- ---------- Demand......................................... $ 314,204 $ 313,391 $ 364,774 Savings and clubs.............................. 3,649,742 3,604,347 3,601,095 Money Management............................... 631,452 613,267 691,939 Certificates of deposit........................ 4,046,587 3,902,435 3,948,687 ---------- ---------- ---------- 8,641,985 8,433,440 8,606,495 Penalty for early withdrawals of certificate of deposit...................................... (29,959) (12,214) (10,137) ---------- ---------- ---------- $8,612,026 $8,421,226 $8,596,358 ========== ========== ==========
NOTE 12. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE The scheduled maturities of securities sold under agreements to repurchase are as follows:
MARCH 31, INTEREST -------------------------- LENDER MATURITY RATE 2000 1999 - ------ ----------------- ------------- ----------- ----------- Morgan Stanley Repo...... August 13, 1999 5.61% $ $ 4,000,000 Federal Home Loan Bank... March 2, 2000 5.82 7,000,000 Federal Home Loan Bank... May 22, 2000 5.88 4,400,000 4,400,000 Federal Home Loan Bank... July 26, 2000 5.41 8,000,000 8,000,000 Federal Home Loan Bank... September 5, 2000 5.40 6,750,000 6,750,000 Federal Home Loan Bank... October 26, 2000 4.81 5,187,000 5,187,000 Federal Home Loan Bank... December 4, 2000 6.44 7,000,000 ----------- ----------- $31,337,000 $35,337,000 =========== ===========
Information concerning securities sold under agreements to repurchase are summarized as follows:
FOR THE YEAR ENDED MARCH 31, ------------------ 2000 1999 ------- ------- (IN THOUSANDS) Average balance during the year............................. $32,670 $59,296 Average interest rate during the year....................... 5.46% 5.74% Maximum month-end balance during the year................... $35,337 $85,720 Mortgage-backed securities underlying the agreements at year end: Carrying value............................................ $34,225 $39,343 Estimated fair value...................................... $32,878 $39,316
23 25 CARVER BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 13. ADVANCES FROM FEDERAL HOME LOAN BANK OF NEW YORK Information relating to the maturities of advances from the Federal Home Loan Bank of New York follows:
MARCH 31, ---------------------------------------------------------- 2000 1999 MATURING --------------------------- --------------------------- YEAR ENDED WEIGHTED WEIGHTED MARCH 31, AVERAGE RATE AMOUNT AVERAGE-RATE AMOUNT - ---------- ------------ ----------- ------------ ----------- 2000............................ 5.78% $19,000,000 2001............................ 5.76% $51,000,000 5.44 31,000,000 2002............................ 5.17 15,000,000 5.17 15,000,000 2003............................ 3.58 358,700 3.58 358,700 2012............................ 3.50 329,756 3.50 349,766 ---- ----------- ---- ----------- 5.60 $66,688,456 5.46 $65,708,466 ==== =========== ==== ===========
At March 31, 2000 and 1999, the advances were secured by pledges of the Bank's investment in the capital stock of the Federal Home Loan Bank totaling $5,754,600 respectively and a blanket assignment of the Bank's unpledged qualifying mortgage, mortgage-backed securities and investment portfolios. NOTE 14. INCOME TAXES The components of income tax expense for the years ended March 31, 2000, 1999 and 1998 are as follows:
YEAR ENDED MARCH 31, ------------------------------------- 2000 1999 1998 -------- ----------- ---------- Federal income tax expense (benefit) Current...................................... $ 0 $ (701,458) $ 521,917 Deferred..................................... 0 (688,823) 237,466 State and local income tax expense (benefit) Current...................................... 110,030 152,059 444,083 Deferred..................................... 0 (261,145) 0 -------- ----------- ---------- Total provision for income tax expense......... $110,030 $(1,499,367) $1,203,466 ======== =========== ==========
The reconciliation of the expected Federal tax rate to the consolidated effective tax rate for the years ended March 31, 2000, 1999 and 1998 are as follows:
YEAR ENDED MARCH 31, ------------------------------------------------------------------ 2000 1999 1998 ------------------- --------------------- -------------------- AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT --------- ------- ----------- ------- ---------- ------- Statutory Federal income tax........................ $(348,638) 34.0% $(2,023,720) 34.0% $ 764,916 34.0% State and local income taxes, net of Federal tax benefit.................... 110,030 (10.7) (71,997) 1.2 293,094 13.0 Change in valuation allowance.................. 297,492 (26.0) 596,350 (10.0) 145,456 6.5 Other........................ 51,146 (8.0) 0 0.0 0 0.0 --------- ----- ----------- ----- ---------- ---- Total income tax expense..... $ 110,030 (10.7)% $(1,499,367) 25.2% $1,203,466 53.5% ========= ===== =========== ===== ========== ====
24 26 CARVER BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The bank has net operating loss carryforwards for Federal income tax purposes at March 31, 2000 and 1999 of approximately $5,705,000 and $4,043,000 respectively. These net operating loss carryforwards begin to expire in the year ended March 31, 2019. The Bank's stockholders' equity includes approximately $2.94 million and $4.02 million at March 31, 2000 and 1999, respectively, which has been segregated for Federal income tax purposes as a bad debt reserve. The use of this amount for purposes other than to absorb losses on loans may result in taxable income for Federal income taxes at the then current tax rate. The tax effects of existing temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities are as follows:
MARCH 31, ------------------------ 2000 1999 ---------- ---------- DEFERRED TAX ASSETS Net operating loss carryforward............................. $1,939,777 $1,374,601 Allowance for loan losses................................... 1,376,364 1,885,017 Deferred loan fees.......................................... 430,388 520,667 Employees pension plan...................................... 84,305 21,843 Management recognition plan................................. 4,689 21,350 Directors' retirement plan.................................. 207,669 -- Contributions carryforward.................................. 28,278 -- ---------- ---------- Total deferred tax assets before valuation allowance........ 4,071,470 3,823,478 Valuation allowance......................................... (2,281,334) (1,983,842) ---------- ---------- Total deferred tax asset.................................... 1,790,136 1,839,636 ---------- ---------- DEFERRED TAX LIABILITIES Excess of cost over net assets acquired..................... 328,077 399,827 Depreciation................................................ 423,606 401,356 Excess tax bad debt reserve................................. 16,428 16,428 ---------- ---------- Total deferred tax liabilities.............................. 768,111 817,611 ---------- ---------- Net deferred tax assets included in other assets............ $1,022,025 $1,022,025 ========== ==========
Management believes it is more likely than not that the results of future operations will generate sufficient future taxable income to realize the deferred tax asset. The Company will have to generate approximately $2.5 million of future taxable income to realize this asset. 25 27 CARVER BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 15. EARNINGS PER SHARE The following table reconciles the income available to common shareholders (numerator) and the weighted average common stock outstanding (denominator) for both basic and diluted earnings per share for the periods presented:
YEAR ENDED MARCH 31, ---------------------------------------- 2000 1999 1998 ----------- ----------- ---------- Net income (loss)............................ $(1,135,436) $(4,452,750) $1,046,286 Preferred income............................. (44,153) -- -- ----------- ----------- ---------- Net income (loss) -- Basic................... $(1,179,589) $(4,452,750) $1,046,286 Impact of potential conversion of convertible preferred stock to common stock............ 44,153 -- -- ----------- ----------- ---------- Net income (loss) -- Diluted................. $(1,135,436) $(4,452,750) $1,046,286 =========== =========== ========== Weighted average common shares outstanding -- Basic...................................... 2,238,846 2,206,133 2,187,619 Effect of dilutive securities Convertible preferred stock............................ 46,107 -- -- ----------- ----------- ---------- Weighted average common shares outstanding -- Diluted.................................... 2,284,953 2,206,133 2,187,619 =========== =========== ==========
NOTE 16. STOCKHOLDERS' EQUITY Convertible Preferred Stock. On January 11, 2000, Carver sold, pursuant to a Securities Purchase Agreement, dated January 11, 2000, in a private placement 40,000 shares of Series A Convertible Preferred Stock (the "Series A Preferred Stock") to Morgan Stanley & Co. Incorporated ("MSDW") and 60,000 Shares of Series B Convertible Preferred Stock (the "Series B Preferred Stock") to Provender Opportunities Fund L.P. ("Provender"). In addition, Carver entered into a Registration Rights Agreement, dated January 11, 2000 with MSDW and Provender. The gross proceeds from the private placement were $2.5 million. The Series A Preferred Stock and Series B Preferred Stock (collectively the "Preferred Stock") accrue annual dividends at $1.97 per share. Dividends are payable semi-annually commencing on June 15 and December 15 of each year. Each share of Preferred Stock is convertible at the option of the holder, at any time, into 2.083 shares of Carver's Common Stock, subject to certain antidilution adjustments. Carver may redeem the Preferred Stock beginning January 15, 2004. In the event of any liquidation, dissolution or winding up of Carver, whether voluntary or involuntary, the holders of the shares of Preferred Stock shall be entitled to receive $25 per share of Preferred Stock plus all dividends accrued and unpaid thereon. Each share of Preferred Stock is entitled to one vote for each share of Common Stock into which the Preferred Stock can be converted. At March 31, 2000 unpaid accrued dividends amounted to $44,153. Regulatory Capital. The operations and profitability of the Bank are significantly affected by legislation and the policies of the various regulatory agencies. As required by the Financial Institutions Reform, Recovery, and Enforcement Act, the OTS promulgated capital requirements for financial institutions consisting of minimum tangible and core capital ratios of 1.5% and 3.0%, respectively, of the institution's adjusted total assets and a minimum risk-based capital ratio of 8.0% of the institution's risk weighted assets. Although the minimum core capital ratio is 3.0%, the FDICIA stipulates that an institution with less than 26 28 CARVER BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 4.0% core capital is deemed undercapitalized. At March 31, 2000 and 1999, the Bank exceeded all the current capital requirements. The following table sets out the Bank's various regulatory capital categories at March 31, 2000.
AT MARCH 31, 2000 --------------------- DOLLARS PERCENTAGE ------- ---------- (IN THOUSANDS) Tangible equity............................................. $28,715 6.85% Core/leverage capital....................................... 28,715 6.85 Tier 1 risk-based capital................................... 28,715 14.15 Total risk-based capital.................................... 31,213 15.38
The following table reconciles the Bank's stockholders' equity at March 31, 2000, under generally accepted accounting principles to regulatory capital requirements:
REGULATORY CAPITAL REQUIREMENTS ------------------------------------------------ GAAP TANGIBLE TIER I/CORE RISK-BASED CAPITAL CAPITAL CAPITAL CAPITAL ------- -------- ----------- ---------- Stockholders' Equity at March 31, 2000(1)........ $29,532 $29,532 $29,532 $29,532 ======= Add: General valuation allowances................... -- -- 2,538 Deduct: Goodwill....................................... (817) (817) (817) Asset required to be deducted.................. -- -- (40) ------- ------- ------- Regulatory capital............................. 28,715 28,715 31,213 Minimum capital requirement.................... 6,283 16,766 16,235 ------- ------- ------- Regulatory capital excess...................... $22,432 $11,949 $14,978 ======= ======= =======
- --------------- (1) Reflects Bank only. NOTE 17. BENEFIT PLANS PENSION PLAN Carver has a non-contributory defined benefit pension plan covering all eligible employees. The benefits are based on each employee's term of service. Carver's policy is to fund the plan with contributions which equal the maximum amount deductible for federal income tax purposes. The following table sets forth the 27 29 CARVER BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) plan's changes in benefit obligation, changes in plan assets and funded status and amounts recognized in Carver's consolidated financial statements:
MARCH 31, ------------------------- 2000 1999 ----------- ---------- CHANGE IN BENEFIT OBLIGATION Benefit obligation at the beginning of the year............ $ 3,144,934 $2,796,385 Service cost............................................. 159,270 161,729 Interest cost............................................ 190,648 188,592 Actuarial (gain)/loss.................................... (488,146) 154,737 Benefits paid............................................ (160,921) (156,509) ----------- ---------- Benefit obligation at the end of the year.................. $ 2,845,785 $3,144,934 =========== ========== CHANGE IN PLAN ASSETS Fair value of plan assets at beginning of year............. $ 3,625,222 $3,275,671 Actual return on plan assets............................. 250,871 456,614 Employer Contributions................................... 75,637 49,446 Benefits paid............................................ (160,921) (156,509) ----------- ---------- Fair value of plan assets at end of year................... $ 3,790,809 $3,625,222 =========== ========== Funded Status.............................................. $ 945,024 $ 480,288 Contributions............................................ -- 28,847 Unrecognized transition obligation....................... 259,170 294,873 Unrecognized gain........................................ (1,336,832) (943,321) Unrecognized past service liability...................... 14,410 16,544 ----------- ---------- Accrued pension cost....................................... $ (118,228) $ (122,769) =========== ==========
Net periodic pension cost included the following components:
YEAR ENDED MARCH 31, ----------------------------------- 2000 1999 1998 --------- --------- --------- Service cost.................................... $ 159,270 $ 161,729 $ 158,235 Interest cost................................... 190,648 188,592 182,273 Expected return on plan assets.................. (283,757) (260,201) (233,435) Amortization of: Unrecognized transition obligation............ 35,703 35,703 35,703 Unrecognized gain............................. (61,749) (46,076) (58,131) Unrecognized past service liability........... 2,134 2,134 2,134 --------- --------- --------- Net periodic pension cost....................... $ 42,249 $ 81,881 $ 86,779 ========= ========= =========
Significant actuarial assumptions used in determining plan benefits are:
YEAR ENDED MARCH 31, -------------------- 2000 1999 1998 ---- ---- ---- Annual salary increase...................................... 5.50% 4.50% 5.50% Long-term return on assets.................................. 8.00% 8.00% 8.00% Discount rate used in measurement of benefit obligations.... 8.00% 6.50% 7.50%
28 30 CARVER BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SAVINGS INCENTIVE PLAN The Bank has a savings incentive plan, pursuant to Section 401(k) of the Code, for all eligible employees of the Bank. Employees may elect to defer up to the lesser of 15% or the maximum amount allowed under law of their compensation and may receive a 50% matching contribution from the Bank up to the maximum allowed by law. Total incentive plan expenses for the years ended March 31, 2000, 1999 and 1998 were $56,000, $68,000 and $73,000 respectively. DIRECTORS' RETIREMENT PLAN Concurrent with the conversion to the stock form of ownership, the Bank adopted a retirement plan for non-employee directors. The benefits are payable based on the term of service as a director.
MARCH 31, ---------------------- 2000 1999 --------- --------- CHANGE IN BENEFIT OBLIGATION Benefit obligation at the beginning of the year............. $ 795,439 $ 479,672 Service cost.............................................. -- 42,403 Interest cost............................................. 50,918 31,562 Actuarial (gain)/loss..................................... (151,202) 265,977 Benefits paid............................................. (25,025) (24,175) --------- --------- Benefit obligation at the end of the year................... $ 670,130 $ 795,439 ========= ========= CHANGE IN PLAN ASSETS Fair value of plan assets at beginning of year.............. $ -- $ -- Actual return on plan assets.............................. -- -- Employer Contributions.................................... 25,025 24,175 Benefits paid............................................. (25,025) (24,175) --------- --------- Fair value of plan assets at end of year.................... $ -- $ -- ========= ========= Funded Status............................................... $(670,130) $(795,439) Contributions............................................. 6,256 6,256 Unrecognized loss......................................... 165,758 343,826 Unrecognized past service liability....................... 55,228 110,464 --------- --------- Accrued pension cost........................................ $(442,888) $(334,893) ========= =========
Net periodic pension cost for the years ended March 31, 2000, 1999 and 1998 included the following:
2000 1999 1998 -------- -------- -------- Service cost....................................... $ -- $ 42,403 $ 24,330 Interest cost...................................... 50,918 31,562 31,395 Expected return on plan assets..................... -- -- -- Amortization of: Unrecognized gain................................ 26,866 3,522 88 Unrecognized past service liability.............. 55,236 55,236 55,236 -------- -------- -------- Net periodic pension cost.......................... $133,020 $132,723 $111,049 ======== ======== ========
The actuarial assumptions used in determining plan benefits include annual fee increases of 5.50%, 4.50% and 4.50%, and a discount rate of 8.00%, 6.50% and 6.75%, for the years ended March 31, 2000, 1999 and 1998, respectively. Subsequent to March 31, 2000 the directors voted to terminate the Directors' Retirement Plan. 29 31 CARVER BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) MANAGEMENT RECOGNITION PLAN Pursuant to the management recognition plan approved at the stockholders meeting held on September 12, 1995, the Bank recognized $178,000, $62,000 and $93,000 as expense for the years ended March 31, 2000, 1999 and 1998, respectively. NOTE 18. EMPLOYEE STOCK OWNERSHIP PLAN Effective upon conversion, an ESOP was established for all eligible employees. The ESOP used $1,821,320 in proceeds from a term loan obtained from a third-party institution to purchase 182,132 shares of Bank common stock in the initial public offering. The term loan principal is payable over forty equal quarterly installments through September 2004. Interest on the term loan is payable quarterly, at a rate of 3.00% over the average federal funds rate. Each year, the Bank intends to make discretionary contributions to the ESOP which will be equal to principal and interest payments required on the term loan less any dividends received by the ESOP on unallocated shares. Shares purchased with the loan proceeds were initially pledged as collateral for the term loan and are held in a suspense account for future allocation among the participants on the basis of compensation, as described by the Plan, in the year of allocation. Accordingly, the ESOP shares pledged as collateral are reported as unearned ESOP shares in the consolidated statements of financial condition. As shares are committed to be released from collateral, the Bank reports compensation expense equal to the current market price of the shares, and the shares become outstanding for net income per common share computations. ESOP compensation expense was $326,000, $171,000 and $241,000 for the years ended March 31, 2000, 1999 and 1998 respectively. The ESOP shares at March 31, 2000 and 1999 are as follows:
MARCH 31, -------------------- 2000 1999 -------- -------- Allocated shares............................................ 116,937 75,755 Shares committed to be released............................. -- 19,995 Unreleased shares........................................... 65,195 86,382 Total ESOP shares........................................... 182,132 182,132 Fair value of unreleased shares............................. $570,456 $755,843
NOTE 19. COMMITMENTS AND CONTINGENCIES The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments primarily include commitments to extend credit and to sell loans. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the statements of financial condition. The contract amounts of those instruments reflect the extent of involvement the Bank has in particular classes of financial instruments. The Bank's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual notional amount of those instruments. The Bank uses the same credit policies making commitments as it does for on-balance-sheet instruments. 30 32 CARVER BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Bank has outstanding various loan commitments as follows:
MARCH 31, -------------------------- 2000 1999 ----------- ----------- Commitments to originate loans mortgage................... $ 2,472,000 $ 7,440,520 Commitments to purchase loans mortgage.................... 15,000,000 -- Consumer loans............................................ 4,488,000 4,096,000 ----------- ----------- Total........................................... $21,960,000 $11,536,520 =========== ===========
At March 31, 2000, of the $2,472,000 in outstanding commitments to originate mortgage loans, $1,465,000 represents commitments to originate multi-family mortgage loans at fixed rates within a range of 8% to 9 3/4% and $1,007,000 represent the undisbursed balance of construction loans at rates ranging from 8.25% to 8.83%. The commitment to purchase mortgage loans consists of one- to four- family mortgage loans at rates ranging from 7% to 8.375%. At March 31, 2000, undisbursed funds from approved commercial lines of credit totaled $4,579,000. All such lines are secured, including $1,000,000 in warehouse lines of credit secured by the underlying warehoused mortgages, expire within one year, and carry interest rates that float at 1.00% above the prime rate. At March 31, 2000, undisbursed funds from approved consumer lines of credit, primarily credit cards, totaled $4,488,000. $4,256,000 of such lines are unsecured and $232,000 of such lines are secured. All such lines carry adjustable rates. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on management's credit evaluation of the counter-party. Collateral held consists primarily of residential real estate, but may include income-producing commercial properties. Rentals, including real estate taxes, under long-term operating leases for certain branch offices aggregated approximately $273,000, $266,000, and $263,000 for the years ended March 31, 2000, 1999 and 1998, respectively. As of March 31, 2000, minimum rental commitments under all noncancellable leases with initial or remaining terms of more than one year and expiring through 2011 are as follows:
YEAR ENDED MARCH 31, MINIMUM RENTAL - -------------------- -------------- (IN THOUSANDS) 2001 $ 283 2002 288 2003 293 2004 298 2005 144 Thereafter 994 ------ $2,300 ======
31 33 CARVER BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Bank also has, in the normal course of business, commitments for services and supplies. Management does not anticipate losses on any of these transactions. LEGAL PROCEEDINGS From time to time, Carver Federal is a party to various legal proceedings incident to its business. At March 31, 2000, except as set forth below, there were no legal proceedings to which Carver Federal or its subsidiaries was a party, or to which any of their property was subject, which were expected by management to result in a material loss. At March 31, 2000, two properties as to which the Bank is mortgagee are the subject of criminal forfeiture action pending in U.S. District Court. The forfeiture proceeding arises from the criminal conviction of principals of the borrowers on the properties. One property is carried as a loan on the Bank's books at an approximate value of $500,000 while the second property is carried as real estate owned, also with an approximate value of $500,000. It is the Bank's position that it is a good faith holder for value and the Bank is opposing the government's attempt to forfeit the properties in disregard of the Bank's interest as mortgagee. The proceedings are in the preliminary stages. See "Asset Quality -- Asset Classification and Allowances for Losses." On or about January 18, 2000, a complaint was filed in the Court of Chancery of the State of Delaware in and for New Castle County entitled BBC Capital Market, Inc. v. Carver Bancorp, Inc., et al., C.A. No. 17743, naming the Holding Company, the individual defendants, Morgan Stanley and Provender as defendants. The complaint alleged, among other things, that plaintiff BBC is a 7.4% stockholder of the Holding Company and sought to challenge the Holding Company's issuance on January 11, 2000 of 40,000 shares of the Holding Company's Series A Preferred Stock to Morgan Stanley and 60,000 shares of the Holding Company's Series B Preferred Stock to Provender. The complaint further alleged, among other things, that: (i) the individual defendants approved the Transactions for the primary purpose of interfering with effective stockholder action at the Holding Company's annual meeting of stockholders on February 24, 2000 at which two director-defendants were up for re-election; (ii) Morgan Stanley sought to intimidate Plaintiff's representatives into dropping any challenge to the election of directors at the Holding Company and that the individual defendants conspired with Morgan Stanley in the alleged intimidation; and (iii) the Holding Company issued a false and misleading proxy statement in connection with the Annual Meeting by not disclosing, among other things, certain facts relating to Plaintiff's nomination of directors at the Annual Meeting and the circumstances surrounding the calling of the Annual Meeting. The complaint alleged four counts: (1) breach of fiduciary duty of loyalty against the individual defendants; (2) breach of fiduciary duty of disclosure against the individual defendants; (3) aiding and abetting breaches of fiduciary duty against Morgan Stanley and Provender; and (4) pursuant to 10 Del. C. sec. 6501, a determination that the individual defendants, Morgan Stanley and Provender, could not cast in excess of 10% of their collective vote at the Annual Meeting. The complaint sought, among other things: (1) an order preliminarily and permanently enjoining the Holding Company, the individual defendants and others from: (a) treating the stock issued to Morgan Stanley and Provender as validly issued for purposes of voting at the Annual Meeting: (b) taking any steps to solicit proxies in favor of the Holding Company's nominees at the Annual Meeting until such time that all alleged disclosure violations were cured; and (c) taking any action to obstruct a proxy solicitation by Plaintiff; (2) an order preliminarily and permanently enjoining Morgan Stanley, Provender and others from aiding and abetting the individual defendants' alleged breach of fiduciary duties and taking any action to obstruct a proxy solicitation by Plaintiff; (3) an order rescinding the Transactions; (4) a declaration that the defendants, Morgan Stanley and Provender, could not cast in excess of 10% of their collective vote at the Annual Meeting; and (5) an award to Plaintiff of the cost and disbursements of the action, including reasonable attorneys' fees and experts' fees. On or about January 29, 2000, defendants filed an answer denying the substantive allegations 32 34 CARVER BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) of the complaint and seeking, among other things, an order dismissing the complaint in its entirety, with prejudice. On or about January 31, 2000, Plaintiff filed an amended complaint repeating the allegations in the original complaint and adding a count pursuant to 8 Del. C. sec. 220 seeking an order requiring the Holding Company to immediately produce all information requested in Plaintiff's letter demanding that the Holding Company produce certain information relating to the Holding Company's ESOP and 401(k) Savings Plan in RSI Retirement Trust. On or about February 22, 2000, defendants filed an answer denying the substantive allegations of the amended complaint and seeking, among other things, an order dismissing the complaint in its entirety, with prejudice. On or about January 18, 2000, Plaintiff also made a motion for a preliminary injunction to obtain the injunctive relief sought in the complaint and a motion for expedited proceedings to obtain discovery in support of its application for preliminary injunctive relief. The parties engaged in expedited discovery and the Court heard Plaintiff's motion for a preliminary injunction on February 16, 2000. On February 16, 2000, the Court denied Plaintiff's motion for a preliminary injunction in its entirety. On or about March 7, 2000, after the Holding Company's Inspector of Election declared that the Holding Company's nominees had defeated Plaintiff's nominees at the Annual Meeting, Plaintiff filed a second amended complaint which repeated the substantive allegations made in the complaint and the amended complaint and added certain additional allegations, including, among others: (i) further allegations that the Holding Company's proxy statement and related materials issued in connection with the Annual Meeting contained false and misleading statements; and (ii) allegations that the Inspector of Election improperly counted the votes of certain unallocated shares in the ESOP in favor of the Holding Company's nominees. The second amended complaint alleged five counts: (1) breach of fiduciary duty against the individual defendants; (2) breach of fiduciary duty of disclosure against the individual defendants; (3) aiding and abetting breaches of fiduciary duty against Morgan Stanley and Provender, (4) pursuant to 10 Del. C. sec. 6501, a determination that the individual defendants, Morgan Stanley and Provender, could not cast in excess of 10% of their collective vote at the Annual Meeting; and (5) pursuant to 8 Del. C. sec. 225, a determination that the Inspector of Election improperly counted the votes of certain unallocated shares in the ESOP in favor of the Holding Company's nominees. The second amended complaint sought, among other things: (1) an order permanently enjoining the Holding Company, the individual defendants and others from treating any stock issued to Morgan Stanley and Provender as validly issued for purposes of voting; (2) an order rescinding the Transactions; (3) an order declaring that Plaintiff's nominees were elected as directors of the Holding Company at the Annual Meeting; (4) an award to Plaintiff of the cost and disbursements of the Action, including reasonable attorneys' fees and experts' fees; and (5) an award to Plaintiff of its costs and disbursements in the proxy contest, including legal fees, proxy solicitor fees, printing fees and the like. On or about March 27, 2000, defendants filed an answer denying the substantive allegations of the second amended complaint and seeking, among other things, an order dismissing the second amended complaint in its entirety, with prejudice. On or about March 2, 2000, Blaylock filed an application in the Court pursuant to section 8 Del. C. sec. 231(c). The Application alleged that Blaylock is a beneficial holder of approximately 100,000 shares of common stock of the Holding Company and that the Inspector of Election improperly declined to accept and count Blaylock's vote at the Annual Meeting. The Application sought, among other things, an order directing the Inspector of Election to accept and count Blaylock's votes at the Annual Meeting. On or about March 8, 2000, defendants filed an answer to the Application and took no position with respect to the relief sought in the Application. 33 35 CARVER BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SUBSEQUENT EVENTS On or about April 6, 2000, Plaintiff filed a motion for partial summary judgment with respect to Count V in its second amended complaint seeking a determination that the Inspector of Election improperly counted the votes of certain unallocated shares in the ESOP in favor of the Holding Company's nominees and an order declaring that Plaintiff's nominees had won the election at the Annual Meeting. On April 24, 2000, the Court granted the Partial Summary Judgment Motion and declared that the Inspector of Election improperly counted the votes attaching to the unallocated ESOP shares at the Annual Meeting. The effect of the Court's decision was Plaintiff's nominees, not the Holding Company's nominees, had won the election. By order dated April 20, 2000, the Application was consolidated with the Action and entitled In Re the Carver Bancorp, Inc., Cons. C.A. No. 17743. The issues in the Consolidated Action were scheduled to be tried before the Court beginning on May 15, 2000. The trial was expected to last between 5 and 10 days. On or about April 26, 2000, certain defendants filed motions in the Court seeking; (1) an order directing the entry of a final judgment on the Court's decision and order on the Partial Summary Judgment Motion or, in the alternative, an order certifying an appeal from the Court's interlocutory order on the Partial Summary Judgment Motion, and (2) to stay the proceedings in the Consolidated Action pending appeal of the Partial Summary Judgment Motion. On or about May 4, 2000, the Court denied these motions. On or about May 2, 2000, Plaintiff filed a motion for summary judgment with respect to the Application seeking, among other things, to dismiss the Application. On or about May 19, 2000, with the exception of Blaylock, the parties to the Consolidated Action entered into a Settlement Agreement and Mutual Release. Pursuant to the terms of the Settlement Agreement, among other things, the parties agreed that: (a) BBC's nominees at the Annual Meeting were appointed to the boards of directors of the Holding Company and Carver Federal effective May 19, 2000 for a term expiring at the annual meeting of stockholders for the fiscal year ending March 31, 2002; (b) the Holding Company will hold the 2000 Annual Meeting on or before March 24, 2001; (c) in connection with the 2000 Annual Meeting, the Holding Company will ensure that a sufficient number of directors are made eligible for election to the board of directors of the Holding Company so that the sum of (i) the number two and (ii) the number of directorships up for election at the 2000 Annual Meeting will constitute a majority of the number of directors on the board of directors of the Holding Company as of the date of the 2000 Annual Meeting; (d) certain directors of the Holding Company agreed to pay and will cause their insurance carrier to pay $475,000 to BBC; (e) all claims concerning the subject matter of the Consolidated Action are mutually released and forever discharged; and (f) the parties would promptly execute and file a stipulation and order dismissing the Consolidated Action with respect to the parties to the Settlement Agreement. On or about May 22, 2000, the parties to the Settlement Agreement executed and filed with the Court a Stipulation and Order of Dismissal With Prejudice providing, among other things, that the Consolidated Action is dismissed with prejudice as to the parties to the Settlement Agreement. On May 24, 2000, the Stipulation was entered as an Order of the Court. In light of, among other things, the Settlement Agreement and Stipulation, Blaylock agreed to withdraw the Application with prejudice. Accordingly, by Order dated May 26, 2000, the Court dismissed the Application with prejudice. On or about June 29, 2000, a complaint was filed in the Court entitled Kevin Cohee and Teri Williams v. Carver Bancorp, Inc. The complaint alleges, among other things, that Plaintiffs, who are directors of the Holding Company and Carver Federal, made various requests to inspect various categories of Carver's books and records. The complaint further alleges that on or about June 26, 2000, Plaintiffs sent a formal demand to Carver pursuant to Section 220 of the Delaware General Corporation Law seeking the right to inspect various categories of Carver's books and records for the purpose of assisting Plaintiffs in fulfilling their fiduciary duties 34 36 CARVER BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) as Carver directors and becoming appropriately informed. The complaint further alleges that Carver had not responded to the requests or the demand as of the date of the filing of the complaint and seeks an Order of the Court summarily requiring the Holding Company to permit Plaintiffs and their agents to inspect and copy the documents identified in the demand and such other relief, including reasonable attorneys' fees and costs, as the Court shall deem appropriate. On or about June 29, 2000, the Plaintiffs also filed a motion for expedited proceedings seeking an Order of the Court declaring that proceedings in the action be expedited. Both prior to and since the filing of the Complaint, the Holding Company has provided various Carver books and records to Plaintiffs. The case has not yet been scheduled for further proceedings. NOTE 20. FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than a forced or liquidation sale. Significant estimations were used by the Bank for the purpose of this disclosure. Estimated fair values have been determined by the Bank using the best available data and estimation methodology suitable for each category of financial instrument. For those loans and deposits with floating interest rates, it is presumed that estimated fair values generally approximate their recorded book balances. The estimation methodologies used and the estimated fair values and carrying values of the Bank's financial instruments are set forth below: CASH AND CASH EQUIVALENTS AND ACCRUED INTEREST RECEIVABLE The carrying amounts for cash and cash equivalents and accrued interest receivable approximate fair value because they mature in three months or less. SECURITIES The fair values for securities available for sale, mortgage-backed securities held to maturity and investment securities held to maturity are based on quoted market or dealer prices, if available. If quoted market or dealer prices are not available, fair value is estimated using quoted market or dealer prices for similar securities. LOANS RECEIVABLE The fair value of loans receivable is estimated by discounting future cash flows, using current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities of such loans. DEPOSITS The fair value of demand, savings and club accounts is equal to the amount payable on demand at the reporting date. The fair value of certificates of deposit is estimated using rates currently offered for deposits of similar remaining maturities. The fair value estimates do not include the benefit that results from the low-cost funding provided by deposit liabilities compared to the cost of borrowing funds in the market. ADVANCES FROM FEDERAL HOME LOAN BANK OF NEW YORK, SECURITIES SOLD UNDER AGREEMENT TO REPURCHASE AND OTHER BORROWED MONEY The fair values of advances from Federal Home Loan Bank of New York, securities sold under agreement to repurchase and other borrowed money are estimated using the rates currently available to the Bank for debt with similar terms and remaining maturities. 35 37 CARVER BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) COMMITMENTS The fair market value of unearned fees associated with financial instruments with off-balance sheet risk at March 31, 2000 approximates the fees received. The fair value is not considered material. The carrying amounts and estimated fair values of the Company's financial instruments at March 31, 2000 and 1999 are as follows:
AT MARCH 31, ------------------------------------------------ 2000 1999 ---------------------- ---------------------- CARRYING ESTIMATED CARRYING ESTIMATED AMOUNT FAIR VALUE AMOUNT FAIR VALUE -------- ---------- -------- ---------- (IN THOUSANDS) Financial Assets: Cash and cash equivalents..................... $ 22,202 $ 22,202 $ 21,321 $ 21,321 Securities available for sale................. $ 24,952 $ 24,952 $ 29,918 $ 29,918 Investment securities held to maturity........ $ 24,996 $ 24,309 $ -- $ -- Mortgage backed securities.................... $ 54,229 $ 51,939 $ 66,584 $ 65,694 Loans receivable.............................. $270,148 $254,439 $270,522 $272,711 Accrued interest receivable................... $ 2,653 $ 2,653 $ 2,861 $ 2,861 Financial Liabilities: Deposits...................................... $281,941 $279,773 $276,999 $276,999 Securities sold under agreements to purchase................................... $ 31,337 $ 31,337 $ 35,337 $ 35,337 Advances from Federal Home Loan Bank of New York....................................... $ 66,688 $ 66,688 $ 65,708 $ 65,708 Other borrowed money.......................... $ 553 $ 553 $ 993 $ 993
LIMITATIONS The fair value estimates are made at a discrete point in time based on relevant market information about the financial instruments. These estimates do not reflect any premium or discount that could result from offering for sale at one time the entire holdings of a particular financial instrument. Because no quoted market value exists for a significant portion of the Bank's financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. In addition, the fair value estimates are based on existing on an off balance sheet financial instruments without attempting to value anticipated future business and the value of assets and liabilities that are not considered financial instruments. Other significant assets and liabilities that are not considered financial assets and liabilities include premises and equipment and advances from borrowers for taxes and insurance. In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates. Finally, reasonable comparability between financial institutions may not be likely due to the wide range of permitted valuation techniques and numerous estimates which must be made given the absence of active secondary markets for many of the financial instruments. This lack of uniform valuation methodologies introduces a greater degree of subjectively to these estimated fair values. 36 38 CARVER BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 21. QUARTERLY FINANCIAL DATA (UNAUDITED)
YEAR ENDED MARCH 31, 2000(1) ---------------------------------------- FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER ------- ------- ------- ------- (IN THOUSANDS) Interest income........................................ $6,865 $6,694 $6,960 $ 6,848 Interest expense....................................... (3,580) (3,563) (3,500) (3,366) Net interest income.................................... 3,285 3,131 3,460 3,482 Provision for loan losses.............................. (150) (230) (225) (494) Non-interest income.................................... 475 513 539 1,012 Non-interest expense................................... (2,824) (3,155) (3,202) (6,642) Income taxes........................................... (23) (87) ------ ------ ------ ------- Net income (loss)...................................... $ 786 $ 259 $ 549 $(2,729) ====== ====== ====== ======= Net income (loss) per common share..................... $ .35 $ .11 $ .25 $ (1.23) ====== ====== ====== =======
YEAR ENDED MARCH 31, 1999(1) ---------------------------------------- FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER ------- ------- ------- ------- Interest income........................................ $7,585 $7,001 $ 6,931 $6,956 Interest expense....................................... (3,887) (3,633) (3,523) (3,772) Net interest income.................................... 3,698 3,368 3,408 3,184 Provision for loan losses.............................. (450) (300) (3,061) (218) Non-interest income.................................... 575 572 347 888 Non-interest expense................................... (3,269) (3,337) (8,270) (3,089) Income taxes (benefit)................................. 236 110 (1,847) -- ------ ------ ------- ------ Net income (loss)...................................... $ 318 $ 193 $(5,729) $ 765 ====== ====== ======= ====== Net income (loss) per common share..................... $ 0.14 $ 0.09 $ (2.59) $ 0.35 ====== ====== ======= ======
- --------------- (1) Sum of four quarter results may not equal year-end results due to rounding. NOTE 22. RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments and for hedging activities. This statement also requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and those instruments at fair value. This statement, as amended, is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. The adoption of this statement is not anticipated to have a material impact on the financial position or results of operations. NOTE 23. SUBSEQUENT EVENTS (UNAUDITED) On May 12, 2000, the Holding Company announced the completion of the sale of the Bank's branch office located in Roosevelt, New York (the "Branch"), to City National Bank of New York ("CNBNY"), an interim national bank formed by City National Bank of New Jersey ("CNBNJ") to acquire substantially all the assets of the Branch. CNBNY assumed approximately $8.5 million of deposit liabilities and acquired the related branch assets consisting of cash, fixed assets and loans secured by deposits. CNBNY paid a premium of $255,325, representing 3% of deposits. Immediately upon the consummation of the sale, CNBNY merged with and into CNBNJ. 37 39 CARVER BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. In December, 1999, Carver engaged KPMG LLP ("KPMG") as its independent auditors for the fiscal year ending March 31, 2000. Since November, 1995, Mitchell & Titus LLP ("Mitchell & Titus") has been Carver's independent auditor. The decision to change auditors was recommended by Carver's Audit Committee and was approved by Carver's Board of Directors based on a review by Carver of its accounting and tax service needs for future operations. The reports of Mitchell & Titus on Carver's consolidated financial statements for the fiscal years ended March 31, 1999 and 1998 did not contain an adverse opinion or a disclaimer of opinion, and the reports were not qualified or modified as to uncertainty, audit scope or accounting principles. In connection with Carver's audits of consolidated financial statements for each of the two fiscal years ended March 31, 1999 and 1998, there were no disagreements with Mitchell & Titus on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to the satisfaction of Mitchell & Titus would have caused Mitchell & Titus to make reference to the matter in their report. In connection with the audits of Carver's consolidated financial statements for each of the two fiscal years ended March 31, 1999 and 1998; (a) Mitchell & Titus did not advise Carver that the internal controls necessary for Carver to develop reliable financial statements do not exist; (b) Mitchell & Titus did not advise Carver that information had come to the attention of Mitchell & Titus that had led it to no longer be able to rely on Carver's management representations, or that had made Mitchell & Titus unwilling to be associated with the financial statements prepared by Carver's management; (c) Mitchell & Titus did not advise Carver that Mitchell & Titus would need to expand significantly the scope of its audit, or that information had come to the attention of Mitchell & Titus during such time period that if further investigated may (i) materially impact the fairness or reliability of either a previously issued audit report or the underlying financial statements, or the financial statements issued or to be issued covering the fiscal periods subsequent to the date of the most recent financial statements covered by an audit report (including information that may prevent it from rendering an unqualified audit report on those financial statements) or (ii) cause Mitchell & Titus to be unwilling to rely on Carver's management representations or be associated with Carver's consolidated financial statements; and (d) Mitchell & Titus did not advise Carver that information had come to the attention of Mitchell & Titus of the type described in subparagraph (c) above, the issue not being resolved to the satisfaction of Mitchell & Titus prior to its dismissal. The Company provided Mitchell & Titus with a copy of report Form 8-K and received from Mitchell & Titus a letter addressed to the Securities and Exchange Commission stating that it agrees with the statements made therein. Effective as of December 14, 1999, Carver has entered into an agreement with KPMG that provides for, among other things, the engagement of KPMG as the independent accounting firm that will audit the financial statements of Carver for the fiscal year ending March 31, 2000 and 2001; During Carver's fiscal years ended March 31, 1999 and 1998 and the subsequent period prior to engaging KPMG, Carver (or anyone on Carver's behalf) did not consult KPMG regarding: (1) Either the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on Carver's financial statements; and as such no written report was provided to Carver and no oral advice was provided that the new accountant concluded was an important factor considered by Carver in reaching a decision as to any accounting, auditing or financial reporting issue; or (2) Any matter that was either the subject of disagreement or a reportable event. 38 40 PART III ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS The following table sets forth certain information as to those persons believed by management to be beneficial owners of more than 5% of the outstanding shares of Common Stock or Preferred Stock on May 31, 2000, as disclosed in certain reports regarding such ownership filed by such persons, with the Holding Company or the SEC in accordance with Section 13 of the Exchange Act. Other than those persons listed below, the Company is not aware of any person or group, as such term is defined in the Exchange Act, that beneficially owns more than 5% of the outstanding shares of Common Stock as of May 31, 2000. For purposes of the table set forth below and the table set forth under "-- Stock Ownership of Management," an individual is considered to "beneficially own" any securities (a) over which such individual exercises sole or shared voting or investment power, or (b) of which such individual has the right to acquire beneficial ownership, including the right to acquire beneficial ownership by the exercise of stock options within 60 days after May 31, 2000. As used herein, "voting power" includes the power to vote, or direct the voting of, such securities, and "investment power" includes the power to dispose of, or direct the disposition of, such securities.
AMOUNT AND PERCENT OF NATURE OF SHARES OF NAME AND ADDRESS BENEFICIAL CLASS OF STOCK TITLE OF CLASSES OF BENEFICIAL OWNER OWNERSHIP OUTSTANDING(1) - ---------------- --------------------------------- ---------- -------------- Common Stock.................... EQSF Advisers, Inc. 218,500(2) 9.44% 767 Third Avenue New York, NY 10017 Common Stock.................... Carver Bancorp, Inc. 166,656(3) 7.20% Employee Stock Ownership Plan Trust (the "ESOP Trust") 75 West 125th Street New York, NY 10027 Common Stock.................... Koch Asset Management, L.L.C 222,550(4) 9.64% 1293 Mason Road Town & Country, MO 63131 Common Stock.................... BBC Capital Market, Inc. 170,700(5) 7.38% 133 Federal Street Boston, MA 02110 Series A........................ Morgan Stanley & Co. Incorporated 40,000(6) 100.00% Preferred Stock 1585 Broadway New York, New York 10036 Series B........................ Provender Opportunities Fund L.P. 60,000(7) 100.00% Preferred Stock 17 State Street New York, NY 10004
- --------------- (1) The total number of shares of Common Stock outstanding on May 31, 2000 was 2,314,275 shares. (2) Based on a Schedule 13G, dated February 14, 2000, and filed with the SEC jointly by EQSF Advisers, Inc. ("EQSF") and Martin J. Whitman, the Chief Executive Officer and controlling person of EQSF. EQSF beneficially owns 218,500 shares of Common Stock. Mr. Whitman disclaims beneficial ownership of such stock. Third Avenue Value Fund, Inc., an investment Company registered under the Investment Company Act of 1940, has the right to receive dividends with respect to, and proceeds from the sale of, such shares. EQSF has sole voting and dispositive power over such shares. (3) Based on a Schedule 13G, dated February 14, 2000, and filed with the SEC by the Carver Bancorp, Inc. ESOP Committee (the "Administrative Committee"). The Administrative Committee established to administer the ESOP consists of officers of the Bank. The ESOP's assets are held in the ESOP Trust, for which HSBC Bank USA serves as trustee (the "ESOP Trustee"). The Administrative Committee 39 41 instructs the ESOP Trustee regarding the investment of funds contributed to the ESOP. Common Stock purchased by the ESOP Trust is held in a suspense account and allocated to participants' accounts annually based on contributions made to the ESOP by the Bank. Shares released from the suspense account are allocated among participants in proportion to their compensation, as defined in the ESOP, for the year the contributions are made, up to the limits permitted under the Code. The ESOP Trustee must vote all allocated shares held in the ESOP Trust in accordance with the instructions of participants. As of December 31, 1999, a total of 801,274 shares had been allocated, but not distributed, to participants. Under the ESOP, unallocated shares or shares for which no voting instructions have been received will be voted by the ESOP Trustee in the same proportion as allocated shares with respect to which the ESOP Trustee receives instructions. In the absence of any voting instructions with respect to allocated shares, the Board, on behalf of the Holding Company, directs the voting of all shares of unallocated stock, or in the absence of such directions from the Board, the ESOP Trustee has sole discretion with respect to the voting of such shares. Each member of the Board disclaims beneficial ownership of the shares held in the ESOP Trust. (4) Based on a Schedule 13G, dated February 25, 1999, as subsequently amended and filed with the SEC jointly by Koch Asset Management, L.L.C. ("KAM") and Donald Leigh Koch, the sole Managing Member of KAM. KAM is a registered investment adviser which furnishes investment advice to individual clients by exercising trading authority over securities held in accounts on behalf of such clients (collectively, the "Managed Portfolios"). In its role as an investment adviser to its clients, KAM has sole dispositive power over the Managed Portfolios and may be deemed to be the beneficial owner of shares of Common Stock held by such Managed Portfolios. However, KAM does not have the right to vote or to receive dividends from, or proceeds from the sale of, the Common Stock held in such Managed Portfolios and disclaims any ownership associated with such rights. Mr. Koch may be deemed to have the power to exercise any dispositive power that KAM may have with respect to the Common Stock held by the Managed Portfolios. Mr. Koch, individually, owns and holds voting power with respect to Managed Portfolios containing approximately 44,400 shares of Common Stock, or an aggregate of approximately 1.9% of the total number of outstanding shares of Common Stock (the "Koch shares"). Other than with respect to the Koch shares, all shares reported in the Schedule 13G have been acquired by Koch Asset Management, L.L.C., and Mr. Koch does not have beneficial ownership, voting rights, rights to dividends, or rights to sale proceeds associated with such shares. (5) Based on a Schedule 13D, dated April 2, 1999, as subsequently amended and filed with the SEC jointly by BBOC and BBC. Kevin Cohee, the Chairman, President and Chief Executive Officer of BBOC, and Teri Williams, the Senior Vice President-Marketing/Human Resources of BBOC, collectively own as joint tenants 66.6% of the outstanding common stock of BBOC. Mr. Cohee and Ms. Williams disclaim beneficial ownership of the Common Stock owned beneficially by BBOC or BBC Capital. BBOC and BBC Capital have sole voting and sole dispositive power over all of the shares of Common Stock shown. (6) Morgan Stanley holds 40,000 shares of the Holding Company's Series A Preferred Stock, which Carver issued on January 11, 1999 through a private placement. The Series A Preferred Stock accrues annual dividends at $1.96875 per share. Dividends are payable semi-annually commencing on June 15 and December 15 of each year. Each share of Series A Preferred Stock was purchased for $25.00 and is convertible at the option of the holder at any time into 2.083 shares of the Holding Company's Common Stock, subject to certain antidilution adjustments. The Holding Company may redeem the Series A Preferred Stock beginning January 15, 2004. In the event of any liquidation, dissolution or winding up of the Holding Company, whether voluntary or involuntary, the holders of the shares of Series A Preferred Stock shall be entitled to receive $25 per share of Series A Preferred Stock plus all dividends accrued and unpaid thereon. Morgan Stanley is deemed to have beneficial ownership of 83,333 shares of the Holding Company's Common Stock since it may elect to convert the Series A Preferred Stock at any time. Pursuant to a Securities Purchase Agreement, dated January 11, 2000, among Morgan Stanley, Provender (as defined below) and the Holding Company, Morgan Stanley has agreed not to grant any proxies with respect to the Series A Preferred Stock or any Common Stock of the Holding Company other than as recommended by the Holding Company's Board of Directors without first obtaining the Holding Company's prior consent. 40 42 (7) Provender holds 60,000 shares of the Holding Company's Series B Preferred Stock, which the Holding Company issued on January 11, 1999 through a private placement. The Series B Preferred Stock accrues annual dividends at $1.96875 per share. Dividends are payable semi-annually commencing on June 15 and December 15 of each year. Each share of Series B Preferred Stock was purchased for $25.00 and is convertible at the option of the holder at any time into 2.083 shares of the Holding Company's Common Stock, subject to certain antidilution adjustments. The Holding Company may redeem the Series B Preferred Stock beginning January 15, 2004. In the event of any liquidation, dissolution or winding up of the Holding Company, whether voluntary or involuntary, the holders of the shares of Series B Preferred Stock shall be entitled to receive $25 per share of Series B Preferred Stock plus all dividends accrued and unpaid thereon. Provender is deemed to have beneficial ownership of 125,000 shares of the Holding Company's Common Stock since it may elect to convert the Series B Preferred Stock at any time. Pursuant to a Securities Purchase Agreement, dated January 11, 2000, among Morgan Stanley, Provender and the Holding Company, Provender has agreed not to grant any proxies with respect to the Series B Preferred Stock or any Common Stock of the Holding Company other than as recommended by the Holding Company's Board without first obtaining the Holding Company's prior consent. SECURITY OWNERSHIP OF MANAGEMENT The following table sets forth information, determined as of May 31, 2000, as to the total number of shares of Common Stock beneficially owned by each director and each Named Executive Officer, as defined herein, identified in the Summary Compensation Table, appearing elsewhere herein, and all directors and executive officers of the Holding Company or the Bank as a group. Ownership information is based upon information furnished by the respective individuals. Except as otherwise indicated, each person and the group shown in the table has sole voting and investment power with respect to the shares indicated.
AMOUNT AND PERCENT OF NATURE OF COMMON BENEFICIAL STOCK NAME TITLE OWNERSHIP(1)(2) OUTSTANDING(3) - ---- ----------------------------- --------------- -------------- Deborah C. Wright(4)............. President and Chief Executive 23,300 * Officer, Director Robert J. Franz.................. Director 2,700 * Pazel G. Jackson, Jr............. Director 1,500 * Frederick O. Terrell(5).......... Director 125,000 5.40% Kevin Cohee(6)................... Director 170,700 7.38% Teri Williams(7)................. Director 170,700 7.38% All directors, former directors and executive officers as a group (13 persons)(8)(9)(10)(11).............................. 472,067 20.42%
- --------------- * Less than 1% of outstanding Common Stock. (1) Includes 20,000, 400 and 400 shares which may be acquired by Ms. Wright and Messrs. Franz and Jackson, respectively, pursuant to options granted under the Carver Bancorp, Inc. 1995 Stock Option Plan (the "Option Plan"). (2) Excludes 5,000, 600 and 600 shares of restricted stock granted to Ms. Wright and Messrs. Franz and Jackson, respectively, pursuant to the Carver Bancorp, Inc. Management Recognition Plan (the "MRP") and/or the Incentive Compensation Plan with respect to which such individuals have neither voting nor dispositive power. (3) Percentages with respect to each person or group of persons have been calculated on the basis of 2,314,275 shares of Common Stock, the total number of shares of the Holding Company's Common Stock outstanding as of May 31, 2000, plus the number of shares of Common Stock which such person or group has the right to acquire within 60 days after May 31, 2000, by the exercise of stock options. (4) Ms. Wright was awarded 30,000 options to purchase the Holding Company's Common Stock at a price per share of $8.125 under the Option Plan, 15,000 of which vested as of June 1, 1999, 5,000 of which 41 43 vested on June 1, 2000, and the remainder of which vest in two equal installments of 5,000 beginning on June 1, 2001. Ms. Wright was also awarded 7,500 shares of restricted stock under the MRP, 2,500 of which vested on June 1, 2000, and the remainder will vest in two equal installments of 2,500 beginning on June 1, 2001. (5) Includes 60,000 Shares of the Series B Preferred Stock owned by Provender. Provender is also deemed to have beneficial ownership of 125,000 shares of Common Stock, which represents 5.12% of the Holding Company's outstanding Common Stock (since the Series B Preferred Stock may be converted at any time.) As a Managing General Partner of Provender, Mr. Terrell may be deemed to beneficially own such securities. Mr. Terrell disclaims beneficial ownership to such securities. (6) Represents shares owned by BBC Capital, a subsidiary of Boston Bank of Commerce, in which Kevin Cohee is an executive officer and controlling shareholder. (7) Represents shares owned by BBC Capital, a subsidiary of Boston Bank of Commerce, in which Teri Williams is an executive officer and controlling shareholder. (8) Includes 3,224 shares in the aggregate held by the ESOP Trust that have been allocated as of December 31, 1999 to the individual accounts of executive officers under the ESOP and as to which an executive officer has sole voting power for the shares allocated to such person's account, but no dispositive power, except in limited circumstances. Also includes 65,795 unallocated shares held by the ESOP Trust as to which the Board shares voting and dispositive power. Each member of the Board disclaims beneficial ownership of the shares held in the ESOP. (9) Includes 105 shares in the aggregate attributable to the individual accounts of executive officers under the 401(k) Plan and as to which each executive officer has sole dispositive power for the shares allocated to such person's account and shared voting power with the members of the committee established to administer the 401(k) Plan. (10) Includes 3,140 shares which may be acquired by executive officers pursuant to options granted under the Option Plan. Also includes 309 shares which may be acquired by the executive officers pursuant to options granted under the Incentive Compensation Plan. Excludes the 240 shares of restricted stock awarded to the executive officers under the MRP and Incentive Compensation Plan with respect to which such executive officers have neither voting nor dispositive power. (11) Includes 125,000 shares of Common Stock issuable on conversion of the Series B Preferred Stock held by Provender Opportunities Fund L.P. Excluding the effect of the Series B Preferred Stock, the directors, former directors and executive officers of the Holding Company own 347,467 shares of the Common Stock representing 15.04% of such securities. See footnote 6 above. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) List of Documents Filed as Part of this Report (1) Consolidated Financial Statements. The following are incorporated by reference from Item 8 hereof. 42 44 INDEPENDENT AUDITORS' REPORT Consolidated Statements of Financial Condition as of March 31, 2000 and 1999 Consolidated Statements of Operations for Each of the Years in the Three-Year Period Ended March 31, 2000 Consolidated Statements of Changes in Stockholders' Equity for Each of the Years in the Three-Year Period Ended March 31, 2000 Consolidated Statements of Cash Flows for Each of the Years in the Three-Year Period Ended March 31, 2000 (2) Financial Statement Schedules. All financial statement schedules have been omitted as the required information is either inapplicable or included in the Financial Statements or related notes. (b) Reports on Form 8-K Filed During the Last Quarter of the Registrant's Fiscal Year Ended March 31, 2000 The following reports on Form 8-K were filed during the fourth quarter of the Company's fiscal year ended March 31, 2000: (1) Form 8-K dated January 14, 2000 announcing the sale of Series A and Series B Convertible Preferred Stock. (2) Form 8-K dated March 3, 2000 announcing the results of the Annual Meeting of Stockholders. (c) Exhibits required by Item 601 of Regulation S-K: Exhibits. The following is a list of exhibits filed as part of this Annual Report and is also the Exhibit Index.
NO. EXHIBIT --- ------- 3.1 Certificate of Incorporation of Carver Bancorp, Inc.(1) 3.2 Bylaws of Carver Bancorp, Inc.(1) 4.1 Stock certificate of Carver Bancorp, Inc.(1) 4.2 Federal Stock Charter of Carver Federal Savings Bank(1) 4.3 Bylaws of Carver Federal Savings Bank(1) 4.4 Amendments to Bylaws of Carver Federal Savings Bank(3) 4.5 Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock(6) 4.6 Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock(6) 10.1 Carver Bancorp, Inc. 1995 Stock Option Plan, effective as of September 12, 1995(1) 10.2 Carver Federal Savings Bank Retirement Income Plan, as amended and restated effective as of January 1, 1989(1) 10.3 Carver Federal Savings Bank 401(k) Savings Plan in RSI Retirement Trust, as amended and restated effective as of May 1, 1993(1) 10.4 Carver Bancorp, Inc. Employee Stock Ownership Plan, effective as of January 1, 1993(1) 10.5 Carver Federal Savings Bank Deferred Compensation Plan, effective as of August 10, 1993(1) 10.6 Carver Federal Savings Bank Retirement Plan for Nonemployee Directors, effective as of October 24, 1994(1) 10.7 Carver Bancorp, Inc. Management Recognition Plan, effective as of September 12, 1995(1) 10.8 Carver Bancorp, Inc. Incentive Compensative Plan, effective as of September 12, 1995(1) 10.9 Employment Agreement by and between Carver Federal Savings Bank and Thomas L. Clark, entered into as of April 1, 1997(2)
43 45
NO. EXHIBIT --- ------- 10.10 Employment Agreement by and between Carver Bancorp, Inc. and Thomas L. Clark, entered into as of April 1, 1997(2) 10.11 Employment Agreement by and between Carver Federal Savings Bank and Deborah C. Wright, entered into as of June 1, 1999(4) 10.12 Employment Agreement by and between Carver Bancorp, Inc. and Deborah C. Wright, entered into as of June 1, 1999(4) 10.13 Securities Purchase Agreement by and among Carver Bancorp, Inc., Morgan Stanley & Co. Incorporated and Provender Opportunities Fund L.P.(5) 10.14 Registration Rights Agreement by and among Carver Bancorp, Inc., Morgan Stanley & Co. Incorporated and Provender Opportunities Fund L.P.(5) 10.15 Settlement Agreement and Mutual Release by and among BBC Capital Market, Inc., The Boston Bank of Commerce, Kevin Cohee and Teri Williams; Carver Bancorp, Inc., Deborah C. Wright, David N. Dinkins, Linda H. Dunham, Robert J. Franz, Pazel G. Jackson, Jr., Herman Johnson and David R. Jones; Morgan Stanley & Co., Incorporated; and Provender Opportunities Fund, L.P. and Frederick O. Terrell.(5) 10.16 Stipulation and Order of Dismissal with Prejudice(5) 21.1 Subsidiaries of the Registrant(5) 23.1 Consent of Mitchell & Titus LLP 23.2 Consent of KPMG LLP(5) 27.1 Financial Data Schedule (only submitted with filing in electronic format)(5)
- --------------- (1) Incorporated herein by reference to Registration Statement No. 333-0559 on Form S-4 of Carver Bancorp. Inc., filed with the Securities and Exchange Commission during July 1997, as amended. (2) Incorporated herein by reference to the Exhibits to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1997. (3) Incorporated herein by reference to the Exhibits to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1998. (4) Incorporated herein by reference to the Exhibits to the Registrant's Annual Report of Form 10-K for the fiscal year ended March 31, 1999. (5) Incorporated herein by reference to the Exhibits to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 2000. (6) Incorporated herein by reference to the Exhibits to the Registrant's Current Report on Form 8-K, dated January 14, 2000. 44 46 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CARVER BANCORP, INC. July 20, 2000 By /s/ DEBORAH C. WRIGHT ------------------------------------ Deborah C. Wright President and Chief Executive Officer (Duly Authorized Representative) 45 47 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION - ----------- ----------- 3.1 Certificate of Incorporation of Carver Bancorp, Inc.(1) 3.2 Bylaws of Carver Bancorp, Inc.(1) 4.1 Stock certificate of Carver Bancorp, Inc.(1) 4.2 Federal Stock Charter of Carver Federal Savings Bank(1) 4.3 Bylaws of Carver Federal Savings Bank(1) 4.4 Amendments to Bylaws of Carver Federal Savings Bank(3) 4.5 Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock(6) 4.6 Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock(6) 10.1 Carver Bancorp, Inc. 1995 Stock Option Plan, effective as of September 12, 1995(1) 10.2 Carver Federal Savings Bank Retirement Income Plan, as amended and restated effective as of January 1, 1989(1) 10.3 Carver Federal Savings Bank 401(k) Savings Plan in RSI Retirement Trust, as amended and restated effective as of May 1, 1993(1) 10.4 Carver Bancorp, Inc. Employee Stock Ownership Plan, effective as of January 1, 1993(1) 10.5 Carver Federal Savings Bank Deferred Compensation Plan, effective as of August 10, 1993(1) 10.6 Carver Federal Savings Bank Retirement Plan for Nonemployee Directors, effective as of October 24, 1994(1) 10.7 Carver Bancorp, Inc. Management Recognition Plan, effective as of September 12, 1995(1) 10.8 Carver Bancorp, Inc. Incentive Compensative Plan, effective as of September 12, 1995(1) 10.9 Employment Agreement by and between Carver Federal Savings Bank and Thomas L. Clark, entered into as of April 1, 1997(2) 10.10 Employment Agreement by and between Carver Bancorp, Inc. and Thomas L. Clark, entered into as of April 1, 1997(2) 10.11 Employment Agreement by and between Carver Federal Savings Bank and Deborah C. Wright, entered into as of June 1, 1999(4) 10.12 Employment Agreement by and between Carver Bancorp, Inc. and Deborah C. Wright, entered into as of June 1, 1999(4) 10.13 Securities Purchase Agreement by and among Carver Bancorp, Inc., Morgan Stanley & Co. Incorporated and Provender Opportunities Fund L.P.(5) 10.14 Registration Rights Agreement by and among Carver Bancorp, Inc., Morgan Stanley & Co. Incorporated and Provender Opportunities Fund L.P.(5) 10.15 Settlement Agreement and Mutual Release by and among BBC Capital Market, Inc., The Boston Bank of Commerce, Kevin Cohee and Teri Williams; Carver Bancorp, Inc., Deborah C. Wright, David N. Dinkins, Linda H. Dunham, Robert J. Franz, Pazel G. Jackson, Jr., Herman Johnson and David R. Jones; Morgan Stanley & Co., Incorporated; and Provender Opportunities Fund, L.P. and Frederick O. Terrell.(5) 10.16 Stipulation and Order of Dismissal with Prejudice(5)
46 48
EXHIBIT NO. DESCRIPTION - ----------- ----------- 21.1 Subsidiaries of the Registrant(5) 23.1 Consent of Mitchell & Titus LLP 23.2 Consent of KPMG LLP(5) 27.1 Financial Data Schedule (only submitted with filing in electronic format)(5)
- --------------- (1) Incorporated herein by reference to Registration Statement No. 333-0559 on Form S-4 of Carver Bancorp. Inc., filed with the Securities and Exchange Commission during July 1997, as amended. (2) Incorporated herein by reference to the Exhibits to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1997. (3) Incorporated herein by reference to the Exhibits to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1998. (4) Incorporated herein by reference to the Exhibits to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1999. (5) Incorporated herein by reference to the Exhibits to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 2000. (6) Incorporated herein by reference to the Exhibits to the Registrant's Current Report on Form 8-K, dated January 14, 2000. 47 EX-23.1 2 ex23-1.txt CONSENT OF MITCHELL & TITUS LLP 1 EXHIBIT 23.1 LETTERHEAD OF MITCHELL & TITUS LLP CONSENT OF INDEPENDENT AUDITORS To the Board of Directors and Stockholders Carver Bancorp, Inc. We consent to the incorporation by reference in the annual report on Form 10-K of Carver Bancorp, Inc. and subsidiaries of our report dated June 29, 1999, relating to the consolidated statement of financial position of Carver Bancorp, Inc. and subsidiaries as of March 31, 1999, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for the years ended March 31, 1999 and 1998, which report appears in the March 31, 2000 annual report on Form 10-K of Carver Bancorp, Inc. and subsidiaries. /S/ MITCHELL & TITUS LLP New York, New York July 14, 2000 -----END PRIVACY-ENHANCED MESSAGE-----