Reports First Quarter Net Income of $0.7 Million or $0.27 Per Share
Board Declares Dividend of $0.10 Per Share
NEW YORK, Aug. 14, 2008 (PRIME NEWSWIRE) -- Carver Bancorp, Inc. (the "Company") (Nasdaq:CARV), the holding company for Carver Federal Savings Bank ("Carver Federal" or the "Bank"), today announced financial results for the three month period ended June 30, 2008, the first quarter of the fiscal year ending March 31, 2009 ("fiscal 2009").
The Company reported net income of $0.7 million and diluted earnings per share of $0.27 for the first quarter of fiscal 2009, compared to net income of $1.1 million and diluted earnings per share of $0.44 for the first quarter of fiscal 2008.
Commenting on the first quarter results, Deborah C. Wright, Chairman and Chief Executive Officer, said:
"Our first quarter fiscal 2009 financial performance declined year over year, largely because of the interest rate climate, a factor impacting our entire industry. The portion of our loan portfolio that is rate sensitive, particularly construction loans tied to Libor and Prime Rate indices, generated substantially lower interest income as Libor and Prime rates have fallen by 286 and 325 basis points, respectively, since June 30, 2007. At the same time, the rates paid on deposits and other liabilities did not decline commensurately. As a result, net interest income declined 5.9%. However, results on a sequential quarter basis improved, with increases in both pre-tax and net income, compared to the fourth quarter of fiscal 2008, as the yield curve steepened somewhat. Importantly, we were able to reduce operating expenses by over 10%.
"We increased the provision for loan losses this quarter as our non-performing loans increased, led by our multifamily and commercial loans categories. While the New York City real estate market continues to be resilient relative to other real estate markets in certain parts of the U.S. with respect to price stability, we recognize that our markets will not be completely immune to a slowing economy. We closely monitor our loan portfolio for risk of loss and collateral values, and we are comfortable with our reserve levels. We believe our active portfolio monitoring and conservative underwriting standards have kept us on solid footing even as the economy continues to face challenges.
"We have made significant progress with our plans to improve efficiency. Beginning this fall we will begin to offer residential loan products through a third party provider, PHH Mortgage Corporation, via our branches, the Internet and our call center. In addition, we will make application to our regulator at the end of this month to consolidate two of Carver's retail branches into a single location. If approved, we will complete this step at the end of the calendar year. We will continue to pursue additional strategic initiatives to improve return on equity."
Carver also announced that on August 13, 2008, the Company's Board of Directors declared a cash dividend on its common stock of ten cents ($0.10) per share for the first quarter. The dividend will be payable on September 11, 2008, to stockholders of record at the close of business on August 28, 2008.
First-Quarter Results
Net income declined 40.0% ($0.5 million) over the prior year period to $0.7 million, primarily reflecting a decrease in net interest income of $0.4 million and an increase in non-interest expense of $0.8 million, offset by increases in non-interest income of $0.6 million and an income tax benefit of $0.5 million.
Interest income decreased 7.1% ($0.9 million) to $11.1 million, reflecting a decrease in yield on interest-earning assets of 69 basis points to 6.26%. The decrease in yield on interest earning assets reflects decreases in yields on loans of 73 basis points, investment securities of 21 basis points and Federal funds sold of 264 basis points. The decrease in interest income was primarily the result of decreases in interest income on loans of $0.5 million and interest income on investment securities of $0.3 million.
Interest income on loans decreased 73 basis points to 6.39%, primarily due to lower yields on construction and small business loans tied to Libor and Prime Rate indices, which have fallen by 286 bps and 325 bps, respectively, since June 30, 2007. The decrease in interest income on investment securities was primarily the result of a $26.5 million reduction in the average balances of investment securities to $4.7 million. The Bank may invest in securities from time to time to help diversify its asset portfolio, manage liquidity and satisfy collateral requirements for certain deposits.
Interest expense decreased 8.5% ($0.5 million) to $4.9 million reflecting a 41 basis point decrease in the average cost of interest-bearing liabilities to 2.99%, partially offset by growth in the average balance of interest-bearing liabilities of $24.9 million to $652.5 million. The decrease in interest expense was primarily the result of decreases in interest expense on advances and other borrowed money of $0.3 million and interest expense on deposits of $0.2 million. The decrease in interest expense on advances and other borrowed money reflects a 59 basis point reduction in the average cost of borrowed money to 4.65% and the decline in the average balance of total borrowed money outstanding of $13.0 million to $62.3 million.
The Bank provided a $0.2 million loan loss provision for the first quarter of fiscal 2009. At June 30, 2008, the Bank's allowance for loan losses was $5.0 million. The Bank's future levels of non-performing loans will be influenced by economic conditions, including the impact of those conditions on the Bank's customers, interest rates and other external factors existing at the time.
Non-interest income increased 53.7% ($0.6 million) to $1.7 million, primarily due to increases in other income of $0.3 million and gain on sale of loans of $0.2 million. Other income increased by $0.3 million, primarily the result of $0.2 million consolidation of income from the minority interest created by a New Markets Tax Credit ("NMTC") transaction.
Non-interest expense increased 12.8% ($0.8 million) to $7.3 million, primarily due to increases in other expenses of $0.4 million and employee compensation and benefits of $0.2 million. The $0.4 million increase in other expense primarily consists of the cost of data lines, ATM equipment and leases, and charge-offs.
Income tax benefit increased by $0.4 million to $0.3 million for the first quarter of fiscal 2009 compared to income tax expense of $0.1 million for the prior year period. The income tax expense of $0.2 million for the first quarter of fiscal 2009 was offset by the tax benefit generated by the NMTC investment totaling $0.5 million. The Bank's NMTC award received in June 2006 has been fully invested. The Company expects to receive additional NMTC tax benefits of approximately $11.6 million from its $40.0 million investment through the period ending March 31, 2014.
Financial Condition Highlights
At June 30, 2008, total assets decreased 1.0% ($7.9 million) to $788.7 million compared to March 31, 2008, primarily the result of decreases in cash and cash equivalents of $11.3 million and other assets of $8.2 million, partially offset by increases in investment securities of $9.6 million and loans receivable of $1.7 million.
Cash and cash equivalents decreased 41.3% ($11.3 million) to $16.1 million compared to March 31, 2008, primarily due to a $10.5 million decrease in Federal funds sold and a $0.8 million decrease in cash and due from banks. Other assets decreased 19.9% ($8.2 million) to $33.7 million compared to March 31, 2008, primarily due to completion of a settlement receivable of $7.4 million from the sale of certain investments and disposition of real estate owned of $1.0 million.
Total securities increased 25.2% ($9.6 million) to $47.8 million compared to March 31, 2008, reflecting an increase of $10.3 million in available-for-sale securities and a $0.7 million decrease in held-to-maturity securities. Available-for-sale securities increased 49.4% ($10.3 million) to $31.2 million compared to March 31, 2008, primarily due to an increase in Agency securities of $9.6 million. Held to maturity securities decreased 3.9% ($0.7 million) to $16.6 million compared to March 31, 2008, primarily due to collection of normal principal repayments and maturities of securities. There were $12.4 million in purchases of securities during the first quarter of fiscal 2009.
Total loans receivable, including loans held-for-sale, increased 0.3% ($1.7 million) to $658.3 million compared to March 31, 2008. The increase was primarily the result of an increase in commercial real estate loans of $11.6 million and an increase in commercial business loans of $1.9 million, offset by decreases in one- to four-family loans of $6.4 million, construction loans of $2.5 million and multi-family loans of $2.0 million. The Bank continues to grow its loan portfolio through focusing on origination of loans in the markets it serves and will continue to augment these originations with loan participations. At June 30, 2008, construction loans represented 23.7% of the Bank's loan portfolio.
At June 30, 2008, total liabilities decreased 1.1% ($8.0 million) to $715.1 million compared to March 31, 2008. The decrease in total liabilities was primarily the result of a $21.2 million reduction in customer deposits, offset by an increase of $14.0 million in advances and borrowed money.
Deposits decreased 3.2% ($21.2 million) to $633.5 million compared to March 31, 2008. The decrease in deposit balances was primarily the result of decreases in certificates of deposit of $17.6 million, NOW accounts of $3.6 million and savings accounts of $1.7 million, which were partially offset by an increase of $2.7 million in DDA accounts. The Bank replaced approximately $14.0 million of higher cost certificates of deposit upon maturity with lower cost borrowings.
Advances from the FHLB-NY and other borrowed money increased 23.9% ($14.0 million) to $72.6 million compared to March 31, 2008. The increase in advances and borrowed money was primarily the result of an increase of $14.0 million in FHLB advances. At June 30, 2008, based on available collateral held at the FHLB-NY, the Bank had the ability to borrow from the FHLB-NY an additional $81.3 million on a secured basis.
Total stockholders' equity increased $0.1 million, or 0.01%, to $54.5 million at June 30, 2008 compared to $54.4 million at March 31, 2008. The increase in total stockholders' equity was primarily attributable to net income for the quarter ended June 30, 2008 totaling $0.7 million, partially offset by dividends paid of $0.2 million and a decrease in accumulated other comprehensive income of $0.4 million. The Bank's capital levels meet regulatory requirements of a well-capitalized financial institution.
Stock Repurchase Program
During the first quarter of fiscal 2009, the Company purchased an additional 9,900 shares of common stock under its stock repurchase program. To date, the Company has purchased 169,374 shares out of a total 231,635 shares approved under the program, at an average price per share of $16.00. The remaining number of shares authorized for repurchase under the program is 62,261 shares.
Asset Quality
At June 30, 2008, non-performing assets totaled $6.4 million, or 0.81% of total assets, compared to $4.0 million, or 0.50% of total assets at March 31, 2008. The ratio of the allowance for loan losses to non-performing loans was 80.5% at June 30, 2008 compared to 170.9% at March 31, 2008. The ratio of the allowance for loan losses to total loans was 0.76% at June 30, 2008 compared to 0.74% at March 31, 2008.
About Carver Bancorp, Inc.
Carver Bancorp, Inc. is the holding company for Carver Federal Savings Bank, a federally chartered stock savings bank. Carver Federal Savings Bank, the largest African- and Caribbean-American run bank in the United States, operates ten full-service branches in the New York City boroughs of Brooklyn, Queens and Manhattan. For further information, please visit the Company's website at www.carverbank.com.
Certain statements in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors, risks and uncertainties. More information about these factors, risks and uncertainties is contained in our filings with the Securities and Exchange Commission.
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except per share data)
June 30, March 31,
2008 2008
--------- ---------
(unaudited)
ASSETS
Cash and cash equivalents:
Cash and due from banks $ 15,105 $ 15,920
Federal funds sold -- 10,500
Interest earning deposits 948 948
--------- ---------
Total cash and cash equivalents 16,053 27,368
Securities:
Available-for-sale, at fair value (including
pledged as collateral of $30,256 and $20,621 at
June 30 and March 31, 2008, respectively) 31,164 20,865
Held-to-maturity, at amortized cost (including
pledged as collateral of $16,440 and $16,643 at
June 30 and March 31, 2008, respectively; fair
value of $16,497 and $17,493 at June 30 and
March 31, 2008, respectively) 16,629 17,307
--------- ---------
Total securities 47,793 38,172
Loans held-for-sale 23,011 23,767
Loans receivable:
Real estate mortgage loans 579,497 578,957
Commercial business loans 54,036 52,109
Consumer loans 1,770 1,728
Allowance for loan losses (5,032) (4,878)
--------- ---------
Total loans receivable, net 630,271 627,916
Office properties and equipment, net 15,759 15,780
Federal Home Loan Bank of New York stock, at cost 2,267 1,625
Bank owned life insurance 9,231 9,141
Accrued interest receivable 3,792 4,063
Goodwill 6,370 6,370
Core deposit intangibles, net 494 532
Other assets 33,671 41,859
--------- ---------
Total assets $ 788,712 $ 796,593
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 633,464 $ 654,663
Advances from the FHLB-New York and other
borrowed money 72,632 58,625
Other liabilities 9,018 9,772
--------- ---------
Total liabilities 715,114 723,060
Minority interest 19,150 19,150
Stockholders' equity:
Common stock (par value $0.01 per share:
10,000,000 shares authorized; 2,524,691 shares
issued; 2,479,382 and 2,481,706 shares
outstanding at June 30 and March 31, 2008,
respectively) 25 25
Additional paid-in capital 24,091 24,113
Retained earnings 30,941 30,490
Treasury stock, at cost (45,309 and 42,985
shares at June 30 and March 31, 2008,
respectively) (661) (670)
Accumulated other comprehensive income 52 425
--------- ---------
Total stockholders' equity 54,448 54,383
--------- ---------
Total liabilities and stockholders' equity $ 788,712 $ 796,593
========= =========
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three Months Ended
June 30,
------------------
2008 2007
-------- --------
Interest income:
Loans $ 10,453 $ 10,993
Mortgage-backed securities 561 502
Investment securities 66 462
Federal funds sold 39 11
-------- --------
Total interest income 11,119 11,968
Interest expense:
Deposits 4,139 4,331
Advances and other borrowed money 722 984
-------- --------
Total interest expense 4,861 5,315
-------- --------
-------- --------
Net interest income 6,258 6,653
Provision for loan losses 169 --
-------- --------
Net interest income after provision for loan
losses 6,089 6,653
Non-interest income:
Depository fees and charges 668 630
Loan fees and service charges 417 379
Gain on sale of loans 247 47
Other 416 81
-------- --------
Total non-interest income 1,748 1,137
Non-interest expense:
Employee compensation and benefits 3,414 3,173
Net occupancy expense 1,016 836
Equipment, net 615 592
Other 2,290 1,903
-------- --------
Total non-interest expense 7,335 6,504
Income before income taxes and minority interest 502 1,286
Income tax (benefit) expense (322) 143
Minority interest 138 --
-------- --------
Net income $ 686 $ 1,143
======== ========
Earnings per common share:
Basic $ 0.28 $ 0.46
======== ========
Diluted $ 0.27 $ 0.44
======== ========
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES
(In thousands)
(Unaudited)
For the Three Months Ended June 30,
--------------------------------------------------
2008 2007
-------------------------- -----------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
-------- -------- ------- ------- -------- -------
Interest Earning
Assets:
Loans(1) $654,501 $10,453 6.39% $617,973 $10,993 7.12%
Mortgage-backed
securities 43,454 561 5.16% 39,108 502 5.13%
Investment
securities(2) 4,656 66 5.69% 31,201 462 5.92%
Fed funds sold 7,501 39 2.09% 933 11 4.73%
-------- ------- ----- -------- ------- -----
Total interest-
earning assets 710,112 11,119 6.26% 689,215 11,968 6.95%
Non-interest-
earning assets 78,692 54,542
-------- --------
Total assets $788,804 $743,757
======== ========
Interest Bearing
Liabilities:
Deposits:
Now demand $ 24,231 20 0.33% $ 24,970 35 0.56%
Savings and clubs 125,496 166 0.53% 137,273 266 0.78%
Money market 46,229 296 2.57% 46,863 242 2.07%
Certificates of
deposit 391,008 3,643 3.74% 340,322 3,777 4.45%
Mortgagors
deposits 3,314 14 1.69% 2,820 11 1.56%
-------- ------- ----- -------- ------- -----
Total deposits 590,278 4,139 2.81% 552,248 4,331 3.15%
Borrowed money 62,267 722 4.65% 75,302 984 5.24%
-------- ------- ----- -------- ------- -----
Total interest-
bearing
liabilities 652,545 4,861 2.99% 627,550 5,315 3.40%
Non-interest-
bearing
liabilities:
Demand 53,658 54,600
Other liabilities 9,470 11,902
-------- --------
Total
liabilities 715,673 694,052
Minority Interest 19,150
Stockholders'
equity 53,981 49,705
-------- --------
Total liabilities
& stockholders'
equity $788,804 $743,757
======== ========
Net interest
income $ 6,258 $ 6,653
======= =======
Average interest
rate spread 3.28% 3.55%
===== =====
Net interest margin 3.53% 3.86%
===== =====
(1) Includes non-accrual loans
(2) Includes FHLB-NY stock
CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED SELECTED KEY RATIOS
(Unaudited)
Three Months Ended
June 30,
--------------------
Selected Statistical Data: 2008 2007
--------- ---------
Return on average assets(1) 0.35% 0.62%
Return on average equity(2) 5.08 9.22
Net interest margin(3) 3.53 3.86
Interest rate spread(4) 3.28 3.55
Efficiency ratio(5) 91.62 83.49
Operating expenses to average assets(6) 3.72 3.51
Average equity to average assets(7) 6.84 6.69
Average interest-earning assets to average
interest-bearing liabilities 1.09x 1.10x
Net income per share - basic $0.28 $0.46
Net income per share - diluted $0.27 $0.44
Average shares outstanding - basic 2,479,328 2,505,371
Average shares outstanding - diluted 2,517,058 2,586,865
Cash dividends $0.10 $0.09
Dividend payout ratio(8) 36.07% 19.69%
June 30,
--------------------
2008 2007
--------- ---------
Capital Ratios:
---------------
Tier I leverage capital ratio(9) 8.03% 7.84%
Tier I risk-based capital ratio(9) 9.86 9.42
Total risk-based capital ratio(9) 10.65 10.28
Asset Quality Ratios:
---------------------
Non performing assets to total assets(10) 0.81% 0.65%
Non performing loans to total loans receivable 0.95 0.78
Allowance for loan losses to total loans
receivable 0.76 0.86
Allowance for loan losses to non-performing
loans 80.45 109.15
(1) Net income, annualized, divided by average total assets.
(2) Net income, annualized, divided by average total equity.
(3) Net interest income, annualized, divided by average
interest-earning assets.
(4) Combined weighted average interest rate earned less combined
weighted average interest rate cost.
(5) Operating expenses divided by sum of net interest income plus
non-interest income.
(6) Non-interest expenses, annualized, divided by average total
assets.
(7) Average equity divided by average assets for the period ended.
(8) Dividends paid on common stock during the period divided by net
income for the period.
(9) These ratios reflect consolidated bank only.
(10) Non performing assets consist of non-accrual loans, loans
accruing 90 days or more past due and real estate owned.