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Carver Bancorp Inc. Reports Operating Results (10-Q)

February 17, 2009 | About:

Carver Bancorp Inc. (NASDAQ:CARV) filed Quarterly Report for the period ended 2008-12-31.

CARVER BANCORP INC. is a holding company engaged in general banking business. Carver Bancorp Inc. has a market cap of $12.97 million; its shares were traded at around $5.29 with a P/E ratio of 4.7 and P/S ratio of 0.23. The dividend yield of Carver Bancorp Inc. stocks is 7.62%. Carver Bancorp Inc. had an annual average earning growth of 11.3% over the past 10 years.

Highlight of Business Operations:

On October 3, 2008, the Emergency Economic Stabilization Act of 2008 (the "EESA") was signed into law. The EESA authorizes the U.S. Treasury to, among other things, purchase up to $700 billion of mortgages, mortgage-backed securities, and certain other financial instruments from financial institutions for the purpose of stabilizing and providing liquidity to the U.S. financial markets. The Company did not materially originate or invest in sub-prime assets and, therefore, does not expect to participate in the sale of any of its assets into these programs. EESA also immediately increased the FDIC deposit insurance limit from $100,000 to $250,000 through December 31, 2009.

On October 14, 2008, the U.S. Department of Treasury (the “Treasury”) announced that it will purchase equity stakes in a wide variety of banks and thrifts. Under this program, known as the Troubled Asset Relief Program Capital Purchase Program (the "TARP CPP"), the Treasury made $250 billion of capital available (from the $700 billion authorized by the EESA) to U.S. financial institutions in the form of preferred stock. In conjunction with the purchase of preferred stock, the Treasury will receive warrants to purchase common stock with an aggregate market price equal to 15% of the preferred investment. Participating financial institutions will be required to adopt the Treasury's standards for executive compensation and corporate governance for the period during which the Treasury holds equity issued under the TARP CPP. On January 20, 2009, the Company announced that it completed the sale of $18.98 million in preferred stock to the Treasury in connection with Carver s participation in the TARP CPP. Importantly, Carver is exempt from the requirement to issue a warrant to the Treasury to purchase shares of common stock, as the Bank is a certified Community Development Financial Institution (“CDFI”), conducting most of its depository and lending activities in disadvantaged communities. Therefore the investment will not dilute current common stock stockholders.

In June 2006, Carver Federal was selected by the Treasury to receive an award of $59.0 million in New Markets Tax Credits (“NMTC”). The NMTC award is used to stimulate economic development in low- to moderate-income communities. The NMTC award enables the Bank to invest with community and development partners in economic development projects with attractive terms including, in some cases, below market interest rates, which may have the effect of attracting capital to underserved communities and facilitating the revitalization of the community, pursuant to the goals of the NMTC program. The NMTC award provides a credit to Carver Federal against Federal income taxes when the Bank makes qualified investments. The credits are allocated over seven years from the time of the qualified investment. Recognition of the Bank s NMTC award began in December 2006 when the Bank invested $29.5 million, one-half of its $59.0 million award. In December 2007, the Bank invested an additional $10.5 million and transferred rights to $19.2 million to an investor in a NMTC project. The Bank s NMTC allocation was fully invested as of December 31, 2007. During the seven year period, assuming the Bank meets compliance requirements, the Bank will receive 39% of the $40.0 million invested award amount in tax benefits (5% over each of the first three years, and 6% over each of the next four years). The Company expects to receive the remaining NMTC tax benefit of approximately $10.6 million from its $40.0 million investment over the period ending March 31, 2014. For the three months ended December 31, 2008, the Company recognized a tax benefit of $0.5 million related to the NMTC award

The Bank s subsidiary, CCDC, was formed to facilitate its participation in local economic development and other community-based activities. As part of its operations, CCDC monitors the portfolio of investments related to the $59.0 million NMTC award. For financial reporting purposes, the $19.2 million transfer of rights to an investor in a NMTC project is reflected in the other assets and minority interest sections of the balance sheet as the entity to which the rights were transferred is required to be consolidated under accounting standards based on an evaluation of certain contractual arrangement's between the Company and the investor. Under these arrangements, the Company has a contingent obligation to reimburse the investor for any loss or shortfall incurred as a result of the NTMC project being not in compliance with certain regulations that would void the investor s ability to otherwise utilize tax credits stemming from the award. The maximum possible loss to Carver from such an arrangement is approximately $7.4 million. At December 31, 2008 Carver has not recorded any liability with respect to this obligation in accordance with Statement No. 5.

The unaudited Consolidated Statements of Cash Flows present the change in cash from operating, investing and financing activities. During the nine months ended December 31, 2008, total cash and cash equivalents decreased by $5.5 million reflecting cash used in investing activities of $12.8 million and financing activities of $1.2 million, offset by cash provided by operating activities of $8.5 million.

Net cash used in investing activities was $12.8 million, primarily represents cash disbursed to fund mortgage loan originations of $103.3 million and purchases of available-for-sale securities of $12.4 million, offset partially by principal collections on loans of $99.4 million and proceeds from principal payments, maturities and calls of securities of $5.3 million. Net cash used in financing activities was $1.2 million, primarily resulting from decreased deposits of $33.1 million, offset partially by an increase in borrowings of $32.9 million. Net cash provided by operating activities during this period was $8.5 million, primarily due to a decrease in other assets of $3.2 million.

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Rating: 5.0/5 (1 vote)


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