Carver Bancorp, Inc. (NASDAQ: CARV), the holding company for Carver Federal Savings Bank, has faced a challenging operating environment in recent years, but the company is taking steps to navigate these obstacles and chart a course towards profitability.

Financials

In the fiscal year ended March 31, 2024 (FY-2024), Carver reported a net loss of $3.0 million, a 32% improvement from the prior year's net loss of $4.4 million. While net interest income declined slightly to $22.6 million, a 1% decrease from the prior year, the company was able to drive a significant increase in non-interest income, which grew 87% to $6.7 million. This improvement in the bottom line was achieved without a corresponding increase in non-interest expense, indicating that the company is making progress in its efforts to control costs and improve operational efficiency.

One of the key drivers of Carver's improved performance in FY-2024 was the company's success in diversifying its loan portfolio. The bank increased its origination of commercial mortgages, consumer loans, specialty finance, and broadly syndicated loans, reducing its reliance on traditional one-to-four family residential mortgages. This diversification strategy has helped the company navigate the challenges posed by the "higher for longer" interest rate environment, as the net yield pick-up on newly booked loans has begun to offset the rise in funding costs.

Carver's net interest margin (NIM) also showed signs of improvement, increasing by 28 basis points to 3.31% in the fourth quarter of FY-2024, as the increased origination volume and the net yield pick-up on newly booked loans helped to offset the marginal rise in funding costs. The company's assets per employee also grew by 1.9% during the fiscal year, driven by a 4.6% increase in total assets to $757 million.

Deposits at Carver grew by 7.8% in FY-2024, as the company continued to attract retail, institutional, and direct-to-consumer (DTC) funding to support its asset growth and bolster liquidity. This deposit growth, coupled with the company's diversification efforts, has helped to strengthen Carver's balance sheet and position the bank for future success.

Outlook

Looking ahead, Carver is focused on building upon the progress made in FY-2024 and further enhancing its ability to serve the communities in which it operates. The bank has forged new strategic partnerships with mission-aligned organizations, such as Citigroup, J.P. Morgan, and Wells Fargo, which have provided valuable support in the form of fee-sharing, deposit gathering, and the sharing of best practices.

Additionally, Carver recently closed a $25 million credit facility with the New York Green Bank to be deployed in decarbonization projects that will benefit the health and welfare of New York's urban communities. The bank has also launched a bespoke corporate vendor financing program for minority- and women-owned businesses (MWBEs), which is guaranteed by a Fortune 100 corporate partner.

Furthermore, Carver is investing in technology to improve the customer experience, with the planned Fall 2025 roll-out of LoanVantage™, a core system solution designed to streamline the loan application and approval process.

Community Impact

Carver's journey underscores the systemic importance of mission-driven Minority Depository Institutions (MDIs) and Community Development Financial Institutions (CDFIs) to the health and well-being of underserved communities. The bank has a proud history of providing low-to-moderate income (LMI) communities throughout New York City with access to savings, credit, and other banking services.

Carver has received an "Outstanding" Community Reinvestment Act (CRA) rating for over 20 consecutive years, a testament to its legacy of community impact. This includes lending, depository, and other banking services to tens of thousands of New Yorkers, as well as hundreds of houses of worship, non-profits, multifamily dwellings, and small businesses. The bank also sponsors financial education, wealth-building, and small business empowerment programs, and has contributed to local investment utilizing federal and state grants to support non-profit organizations, workforce development, and home ownership programs.

As the underbanked LMI neighborhoods in Carver's service footprint have expanded to include multiple ethnicities, the bank's definition of community has also evolved. Historically predominant African American and Caribbean-American neighborhoods in Harlem, Brooklyn, and Queens are now punctuated by growing centers of Hispanic, Asian, and Hasidic patronage. Carver's mission and ability to serve this increasingly diverse universe of customers has never been more important.

Future Initiatives

Looking ahead, Carver remains optimistic about the bank's future and its ambition to continue the exploration and development of commercially sustainable products and services to grow with its community. These initiatives include greenhouse gas reduction project financing, bespoke asset management and private wealth management services, earned wage advances for low-income workers, expanded MWBE grants and contractor financing, consumer lending (e.g., auto loans, personal loans), SBA program business loans, and a millennial and Gen Z-focused financial education and investment incubator.

Conclusion

Encouraged by its asset and depositor base expansion, enhanced green lending capabilities, and solid progress towards sustainable earnings, Carver is well-positioned to build on the momentum generated in FY-2024 and continue its mission of serving the diverse communities within its footprint.