10-Q: Carver Bancorp Reports Net Loss for Quarter Ended December 31, 2024

Carver Bancorp, Inc. announces a net loss of $5.6 million for the quarter ended December 31, 2024, compared to a net income of $19 thousand for the same period last year.

Summary

• Carver Bancorp, Inc. reported a net loss of $5.6 million for the three months ended December 31, 2024, a significant decrease from the net income of $19 thousand reported for the same period in the previous year.
• For the nine months ended December 31, 2024, the company reported a net loss of $10.0 million, compared to a net loss of $3.0 million for the same period last year.
• The decrease in profitability is attributed to increases in interest expense, non-interest expense, and provision for credit losses, as well as decreases in interest and non-interest income.
• Total assets decreased by $29.3 million, or 3.9%, to $727.5 million at December 31, 2024, from $756.8 million at March 31, 2024.
• Gross portfolio loans decreased by $12.0 million, or 1.9%, to $610.9 million at December 31, 2024.
• Deposits decreased by $10.1 million, or 1.6%, to $636.9 million at December 31, 2024.
• Advances from the FHLB-NY and other borrowed money decreased by $8.2 million, or 17.6%, to $38.3 million at December 31, 2024.
• The Tier 1 leverage capital ratio was 9.03%, and the total risk-based capital ratio was 12.14% at December 31, 2024.
• Nonaccrual loans increased to $22.8 million, representing 3.1% of total loans, compared to $11.8 million, or 1.9%, at March 31, 2024.

Sentiment

Score: 3

Explanation: The document presents a negative financial picture with a significant net loss and declining assets. While the bank's capital ratios are within regulatory requirements, the overall trend is concerning.

Positives

• The Bank's capital level exceeded the regulatory requirements and its IMCR requirements with a Tier 1 leverage capital ratio of 9.03%, Common Equity Tier 1 capital ratio of 11.13%, Tier 1 risk-based capital ratio of 11.13%, and a total risk-based capital ratio of 12.14%.
• During the first quarter of the current fiscal year, the Bank secured a $1.8 million 12-month fixed-rate advance through the second round of the FHLB-NY 0% Development Advance (ZDA) Program.

Negatives

• The company experienced a significant net loss of $5.6 million for the quarter and $10.0 million for the nine-month period.
• There was a decrease in total assets, gross loans, and deposits.
• Nonaccrual loans increased significantly, indicating potential asset quality issues.
• Net interest income decreased $2.5 million, or 45.5%, to $3.0 million for the three months ended December 31, 2024, compared to $5.5 million for the same quarter last year.

Risks

• Changes in interest rates may reduce net interest margin and net interest income.
• National and/or local changes in economic conditions could affect liquidity, loan originations, deposit flows, real estate values, and credit losses.
• Adverse changes in the financial industry and the securities, credit, national and local real estate markets could negatively impact the company.
• Unexpected outflows of uninsured deposits could require the company to sell investment securities at a loss.
• The company faces risks related to a high concentration of loans to borrowers secured by property located in its market area.

Future Outlook

The economic environment is uncertain regarding long-term interest rate trends, and management monitors the company's cumulative gap position and uses various tools to manage interest rate risk.

Management Comments

• Management believes Carver Federals short-term assets have sufficient liquidity to cover loan demand, potential fluctuations in deposit accounts and to meet other anticipated cash requirements, including interest payments on our subordinated debt securities.
• Management believes that the company has meritorious defenses to each legal proceeding and appropriate measures have been taken to defend the interests of the company, bank or subsidiary.

Industry Context

The report mentions increased competition among financial institutions and non-financial institutions, as well as the impact of federal banking regulators' emphasis on CRA fulfillment. The economic climate of New York City, with its lagging job growth and high unemployment, also impacts the business.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards or comparable companies.
• However, it notes that Carver Federal faces significant competition from financial institutions with greater financial resources, name recognition, and market presence.

Management Changes

Legal Proceedings

• The Company and the Bank are parties to various legal proceedings incident to their business.
• The Company believes it has meritorious defenses to each proceeding and appropriate measures have been taken to defend the interests of the Company, Bank or subsidiary.

Related Party Transactions

• On November 25, 2024, the Company issued and sold a total of 116,766 shares of its common stock, par value $0.01 per share, at a price of $1.67 per share to Carver directors.

Stakeholder Impact

• The net loss and declining financial performance may negatively impact shareholder value.
• The company's ability to provide financial services to its communities may be affected by its financial condition.
• The company's employees may be affected by cost-cutting measures or restructuring efforts.

Next Steps

• Management continues its collection efforts on previously charged-off balances and applies recoveries as additions to the ACL.
• The Bank utilizes an internal loan classification system as a means of reporting problem loans within its loan categories.

Key Dates

Keywords

net loss, nonaccrual loans, deposits, loans, assets, capital, Carver Bancorp, financial results