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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 001-13007
CARVER BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3904174
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer Identification No.)
75 West 125th StreetNew YorkNew York10027
(Address of Principal Executive Offices)(Zip Code)
Registrant’s telephone number, including area code: (718) 230-2900

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareCARVThe NASDAQ Stock Market, LLC
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. þ Yes   o No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). þ Yes   oNo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Accelerated Filer
Non-accelerated FilerSmaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☑ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class Outstanding at February 13, 2024
Common Stock, par value $0.01 4,985,612




TABLE OF CONTENTS
 Page
 
 
 




PART I. FINANCIAL INFORMATION

CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
$ in thousands except per share data
December 31, 2023
March 31, 2023
ASSETS  
Cash and cash equivalents:  
Cash and due from banks$74,730 $42,298 
Money market investments500 254 
Total cash and cash equivalents75,230 42,552 
Investment securities:
Available-for-sale, at fair value49,106 53,843 
Held-to-maturity, at amortized cost (fair value of $1,984 and $2,221, respectively)
2,078 2,318 
Total investment securities51,184 56,161 
Loans receivable:
Real estate mortgage loans437,574 423,349 
Commercial business loans172,204 166,908 
Consumer loans14,873 7,639 
Loans, gross624,651 597,896 
Allowance for credit losses(5,897)(5,229)
Total loans receivable, net618,754 592,667 
Premises and equipment, net2,660 3,174 
Federal Home Loan Bank of New York (“FHLB-NY”) stock, at cost2,004 2,266 
Accrued interest receivable2,414 1,911 
Right-of-use assets10,468 12,311 
Other assets12,593 12,182 
Total assets$775,307 $723,224 
LIABILITIES AND EQUITY  
LIABILITIES  
Deposits:  
Non-interest bearing checking$106,408 $109,401 
Interest-bearing deposits:
Interest-bearing checking47,290 49,473 
Savings109,614 109,210 
Money market165,953 150,348 
Certificates of Deposit231,676 178,694 
Escrow1,876 3,303 
Total interest-bearing deposits556,409 491,028 
Total deposits662,817 600,429 
Advances from the FHLB-NY and other borrowed money46,551 51,090 
Operating lease liability11,270 13,173 
Other liabilities11,943 13,308 
Total liabilities732,581 678,000 
Commitments and contingencies (Note 8)  
EQUITY
Preferred stock, (par value $0.01 per share: 10,451 and 13,201 Series D shares, with a liquidation preference of $1,000 per share, issued and outstanding, respectively)
10,451 13,201 
Preferred stock (par value $0.01 per share: 3,177 Series E shares, with a liquidation preference of $1,000 per share, issued and outstanding, respectively)
3,177 3,177 
Preferred stock (par value $0.01 per share: 9,000 Series F shares, with a liquidation preference of $1,000 per share, issued and outstanding, respectively)
9,000 9,000 
Common stock (par value 0.01 per share: 10,000,000 shares authorized; 7,535,339 and 6,799,410 shares issued; 5,031,536 and 4,295,607 shares outstanding, respectively)
76 68 
Additional paid-in capital86,767 82,805 
Accumulated deficit(51,560)(47,904)
Treasury stock, at cost (2,503,803 shares, respectively)
(2,908)(2,908)
Accumulated other comprehensive loss(12,277)(12,215)
Total equity42,726 45,224 
Total liabilities and equity$775,307 $723,224 
See accompanying notes to consolidated financial statements
1



CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended December 31,
Nine Months Ended
December 31,
$ in thousands, except per share data
2023
2022
2023
2022
Interest income:  
Loans$7,336 $6,380 $21,203 $18,362 
Mortgage-backed securities145 150 439 465 
Investment securities289 273 835 639 
Money market investments704 395 1,801 830 
Total interest income8,474 7,198 24,278 20,296 
Interest expense:  
Deposits2,387 1,128 6,112 2,366 
Advances and other borrowed money606 327 1,784 870 
Total interest expense2,993 1,455 7,896 3,236 
Net interest income5,481 5,743 16,382 17,060 
(Recovery of) provision for credit losses(97)305 77 89 
Net interest income after (recovery of) provision for credit losses5,578 5,438 16,305 16,971 
Non-interest income:  
Depository fees and charges543 561 1,678 1,669 
Loan fees and service charges101 72 357 329 
Gain on sale of loans, net 107  107 
Grant income1,401 162 2,003 324 
Other490 90 715 371 
Total non-interest income2,535 992 4,753 2,800 
Non-interest expense:  
Employee compensation and benefits3,452 3,239 10,097 9,725 
Net occupancy expense1,147 1,135 3,428 3,394 
Equipment, net470 593 1,534 1,633 
Data processing757 639 2,265 1,903 
Consulting fees133 86 370 400 
Federal deposit insurance premiums132 102 415 292 
Other2,003 1,725 5,937 5,325 
Total non-interest expense8,094 7,519 24,046 22,672 
Income (loss) before income taxes19 (1,089)(2,988)(2,901)
   Income tax expense    
Net income (loss)$19 $(1,089)$(2,988)$(2,901)
Earnings (loss) per common share:
Basic$ $(0.25)$(0.63)$(0.68)
Diluted (0.25)(0.63)(0.68)

See accompanying notes to consolidated financial statements





2


CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
Three Months Ended December 31,
Nine Months Ended December 31,
$ in thousands
2023
2022
2023
2022
Net income (loss)$19 $(1,089)$(2,988)$(2,901)
Other comprehensive income (loss), net of tax:
Change in unrealized gain (loss) of securities available-for-sale, net of income tax expense of $0 (due to full valuation allowance)3,037 (18)(62)(7,076)
Total other comprehensive income (loss), net of tax3,037 (18)(62)(7,076)
Total comprehensive income (loss), net of tax$3,056 $(1,107)$(3,050)$(9,977)

See accompanying notes to consolidated financial statements

3


CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the Three and Nine Months Ended December 31, 2023 and 2022
(Unaudited)
$ in thousandsPreferred StockCommon StockAdditional Paid-In CapitalAccumulated DeficitTreasury StockAccumulated Other Comprehensive Income (Loss)Total Equity
Three Months Ended December 31, 2023
Balance — September 30, 2023$23,178 $75 $86,217 $(51,579)$(2,908)$(15,314)$39,669 
Net income— — — 19 — — 19 
Other comprehensive income, net of taxes— — — — — 3,037 3,037 
Conversion of Series D preferred stock to common stock(550)1 549 — — —  
Stock based compensation expense— — 1 — — — 1 
Balance — December 31, 2023
$22,628 $76 $86,767 $(51,560)$(2,908)$(12,277)$42,726 
Nine Months Ended December 31, 2023
Balance — March 31, 2023
$25,378 $68 $82,805 $(47,904)$(2,908)$(12,215)$45,224 
Cumulative effect adjustment for adoption of ASU 2016-13— — — (668)— — (668)
Net loss— — — (2,988)— — (2,988)
Other comprehensive loss, net of taxes— — — — — (62)(62)
Conversion of Series D preferred stock to common stock(2,750)4 2,746 — — —  
Issuance of common stock4 996 1,000 
Stock based compensation expense— — 220 — — — 220 
Balance — December 31, 2023
$22,628 $76 $86,767 $(51,560)$(2,908)$(12,277)$42,726 
Three Months Ended December 31, 2022
Balance — September 30, 2022$25,378 $68 $82,734 $(45,315)$(2,908)$(13,720)$46,237 
Net loss— — — (1,089)— — (1,089)
Other comprehensive loss, net of taxes— — — — — (18)(18)
Balance — December 31, 2022
$25,378 $68 $82,734 $(46,404)$(2,908)$(13,738)$45,130 
Nine Months Ended December 31, 2022
Balance — March 31, 2022$25,928 $67 $82,165 $(43,503)$(2,908)$(6,662)$55,087 
Net loss— — — (2,901)— — (2,901)
Other comprehensive loss, net of taxes— — — — — (7,076)(7,076)
Conversion of Series D preferred stock to common stock(550)1 549 — — —  
Stock based compensation expense— — 20 — — — 20 
Balance — December 31, 2022
$25,378 $68 $82,734 $(46,404)$(2,908)$(13,738)$45,130 
See accompanying notes to consolidated financial statements
4


CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended December 31,
$ in thousands
2023
2022
CASH FLOWS FROM OPERATING ACTIVITIES  
Net loss$(2,988)$(2,901)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for credit losses77 89 
Stock based compensation expense220 20 
Depreciation and amortization expense744 783 
Gain on sale of loans, net (107)
Amortization and accretion of loan premiums and discounts and deferred charges, net155 (78)
Amortization and accretion of premiums and discounts — securities249 328 
Increase in accrued interest receivable(503)(99)
(Increase) decrease in other assets(237)2,360 
Decrease in other liabilities(1,431)(9,242)
Net cash used in operating activities(3,714)(8,847)
CASH FLOWS FROM INVESTING ACTIVITIES 
Proceeds from principal payments, maturities and calls of investments: Available-for-sale4,430 6,756 
Proceeds from principal payments, maturities and calls of investments: Held-to-maturity236 2,841 
Purchase of bank-owned life insurance (5,000)
Increase in equity investments(603) 
Loans held-for investment, net of repayments/payoffs and (originations)2,855 (1,963)
Loans purchased from third parties(29,467)(11,199)
Proceeds from participation loans sold 5,129 
Redemption (purchase) of FHLB-NY stock, net262 (782)
Purchase of premises and equipment(236)(168)
Net cash used in investing activities(22,523)(4,386)
CASH FLOWS FROM FINANCING ACTIVITIES  
Net increase (decrease) in deposits62,388 (18,870)
Proceeds from short-term borrowings 15,000 
Repayment of short-term borrowings(10,000) 
Proceeds from long-term borrowings5,527  
Repayment of long-term borrowings (3)
Issuance of common stock1,000  
Net cash provided by (used in) financing activities58,915 (3,873)
Net increase (decrease) in cash and cash equivalents32,678 (17,106)
Cash and cash equivalents at beginning of period42,552 61,018 
Cash and cash equivalents at end of period$75,230 $43,912 
Supplemental cash flow information:  
Noncash financing and investing activities  
Recognition of right-of-use asset$ $1,103 
Recognition of operating lease liability 1,103 
Recognition of finance lease asset 58 
Recognition of finance lease liability 58 
Conversion of preferred stock to common stock$2,750 $550 
Cash paid for:
Interest$7,158 $3,175 
Tax on capital417 162 
See accompanying notes to consolidated financial statements
5


CARVER BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
NOTE 1. ORGANIZATION

Nature of operations

    Carver Bancorp, Inc. (on a stand-alone basis, the “Company” or “Registrant”), was incorporated in May 1996 and its principal wholly-owned subsidiary is Carver Federal Savings Bank (the “Bank” or “Carver Federal”). Carver Federal's wholly-owned subsidiaries are CFSB Realty Corp., Carver Community Development Corporation (“CCDC”) and CFSB Credit Corp., which is currently inactive. The Bank has a real estate investment trust, Carver Asset Corporation ("CAC"), that was formed in February 2004.

    “Carver,” the “Company,” “we,” “us” or “our” refers to the Company along with its consolidated subsidiaries. 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. On October 24, 1994, the Bank converted from a mutual holding company structure to 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 (the “Reorganization”) and became a wholly-owned subsidiary of the Company.

    Carver Federal’s principal business consists of attracting deposit accounts through its branches and investing those funds in mortgage loans and other investments permitted by federal savings banks. The Bank has seven branches located throughout the City of New York that primarily serve the communities in which they operate.

    In September 2003, the Company formed Carver Statutory Trust I (the “Trust”) for the sole purpose of issuing trust preferred securities and investing the proceeds in an equivalent amount of floating rate junior subordinated debentures of the Company. In accordance with Accounting Standards Codification (“ASC”) 810, “Consolidations,” Carver Statutory Trust I is unconsolidated for financial reporting purposes. On September 17, 2003, Carver Statutory Trust I issued 13,000 shares, liquidation amount $1,000 per share, of floating rate capital securities.  Gross proceeds from the sale of these trust preferred debt securities of $13 million, and proceeds from the sale of the trust's common securities of $0.4 million, were used to purchase approximately $13.4 million aggregate principal amount of the Company's floating rate junior subordinated debt securities due 2033.  The trust preferred debt securities are redeemable at par quarterly at the option of the Company beginning on or after September 17, 2008, and have a mandatory redemption date of September 17, 2033. Cash distributions on the trust preferred debt securities are cumulative and payable at a floating rate per annum resetting quarterly with a margin of 3.05% over the three-month LIBOR. During the second quarter of fiscal year 2017, the Company applied for and was granted regulatory approval to settle all outstanding debenture interest payments through September 2016. Such payments were made in September 2016. Interest on the debentures had been deferred beginning with the December 2016 payment, per the terms of the agreement, which permit such deferral for up to twenty consecutive quarters, as the Company is prohibited from making payments without prior regulatory approval. During the fourth quarter of fiscal year 2021, the Company applied for and was granted regulatory approval to settle all outstanding debenture interest payments through June 2021. Full payment was made on June 16, 2021. The Company deferred the September 17, 2021 interest payment, but has since had discussions with the Federal Reserve Bank of Philadelphia regarding future quarterly payments. A streamlined process has been developed for the Company to request regulatory approval to make debenture interest payments. On December 16, 2021, the Company paid the deferred interest that was due on September 17, 2021 and the regular quarterly interest payment due on December 17, 2021. All quarterly interest payments subsequent to the June 2021 payment up to and including the December 2023 payment have been made. The interest rate was 8.69% and the accrued interest was $45 thousand at December 31, 2023.

    While Carver has suspended its regular quarterly cash dividend on its common stock, in the future, Carver may rely on dividends from Carver Federal to pay cash dividends to its stockholders and to engage in share repurchase programs. In recent years, Carver has been successful in obtaining cash independently through its capital raising efforts, which may include cash from government grants or below market-rate loans. As the subsidiary of a savings and loan association holding company, Carver Federal must file a notice or an application (depending on the proposed dividend amount) with the OCC (and an application with the FRB) prior to the declaration of each capital distribution. The OCC will disallow any proposed dividend that, among other reasons, would result in Carver Federal’s failure to meet the OCC minimum capital requirements.

6


Regulation

    On May 24, 2016, the Bank entered into a Formal Agreement ("the Agreement") with the OCC to undertake certain compliance-related and other actions. As a result of the Agreement, the Bank was required to obtain the approval of the OCC prior to effecting any change in its directors or senior executive officers, paying dividends and entering into any "golden parachute payments" as that term is defined under 12 U.S.C. § 1828(k) and 12 C.F.R. Part 359. As a result of the Agreement, Carver was issued an Individual Minimum Capital Ratio (“IMCR”) letter by the OCC, which requires the Bank to maintain minimum regulatory capital levels of 9% for its Tier1 leverage ratio and 12% for its total risk-based capital ratio. The Agreement was terminated on January 18, 2023. The IMCR remains in effect.

The Company continues to be subject to similar requirements that the Bank was subject to under the Agreement. The Company must provide notice to the FRB prior to affecting any change in its directors or senior executive officers. The Company is also subject to the restrictions on golden parachute and indemnification payments, as set forth in 12 C.F.R. Part 359. Written approval of the Federal Reserve Bank is required prior to: (1) the declaration or payment of dividends by the Company to its stockholders, (2) the declaration or payment of dividends by the Bank to the Company, (3) any distributions of interest or principal by the Company on subordinated debentures or trust preferred securities, (4) any purchases or redemptions of the Company’s stock and (5) the Company incurring, increasing or guaranteeing certain long-term debt outside the ordinary course of business. These limitations could affect our operations and financial performance.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidated financial statement presentation

    The consolidated financial statements include the accounts of the Company, the Bank and the Bank’s wholly-owned or majority-owned subsidiaries, Carver Asset Corporation, CFSB Realty Corp., CCDC, and CFSB Credit Corp., which is currently inactive. All significant intercompany accounts and transactions have been eliminated in consolidation.

The Company's subsidiary, Carver Statutory Trust I, is not consolidated with Carver Bancorp, Inc. for financial reporting purposes.  Carver Statutory Trust I was formed in 2003 for the purpose of issuing $13 million aggregate liquidation amount of floating rate Capital Securities due September 17, 2033 (“Capital Securities”) and $0.4 million of common securities (which are the only voting securities of Carver Statutory Trust I), which are 100% owned by Carver Bancorp, Inc., and using the proceeds to acquire Junior Subordinated Debentures issued by Carver Bancorp, Inc.  Carver Bancorp, Inc. has fully and unconditionally guaranteed the Capital Securities along with all obligations of Carver Statutory Trust I under the trust agreement relating to the Capital Securities. The Company does not consolidate the accounts and related activity of Carver Statutory Trust I because it is not the primary beneficiary of the entity.

Variable interest entities ("VIEs") are consolidated, as required, when Carver has a controlling financial interest in these entities and is deemed to be the primary beneficiary. Carver is normally deemed to have a controlling financial interest and be the primary beneficiary if it has both (a) the power to direct activities of a VIE that most significantly impact the entity's economic performance; and (b) the obligation to absorb losses of the entity that could benefit from the activities that could potentially be significant to the VIE.

    The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of the results of the interim period presented. Operating results for the three and nine month periods ended December 31, 2023 are not necessarily indicative of the results that may be expected for the year ended March 31, 2024. The consolidated balance sheet at December 31, 2023 has been derived from the unaudited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. 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. These unaudited consolidated financial statements should be read in conjunction with the Annual Report on Form 10-K for the year ended March 31, 2023. Amounts subject to significant estimates and assumptions are items such as the allowance for credit losses, realization of deferred tax assets, and the fair value of financial instruments. While management uses available information to recognize losses on loans, future additions to the allowance for credit loss or future writedowns of real estate owned may be necessary based on changes in economic conditions in the areas where Carver Federal has extended
7


mortgages and other credit instruments. Actual results could differ significantly from those assumptions. Current market conditions increase the risk and complexity of the judgments in these estimates.

Certain comparative amounts for the prior period have been reclassified to conform to current period presentations. Such reclassifications had no effect on net income or shareholders' equity.

Recent Events

The business climate continues to present significant challenges as banks continue to absorb heightened regulatory costs and compete for limited loan demand. Significant increases in food and energy prices resulted from swift increases in the rate of inflation. The Federal Reserve began increasing the federal funds rate at the March 2022 meeting, and while the rate was held steady at the June 2023 meeting, it was increased another quarter point to the highest level in 22 years at the July 2023 meeting. The Federal Reserve held interest rates steady at the January 2024 meeting, and while it may begin to lower borrowing costs this year, it has indicated that it is not likely to cut interest rates yet by the next meeting in March. For Carver, the economic climate of New York City (“the City”), in particular, impacts our business as the City lags behind the rest of New York State and the nation both in restoring pandemic job losses and in rebounding to pre-pandemic levels of unemployment. The City's unemployment rate remains high at 5.1%, exceeding the national average, as employment in the arts and entertainment, food and hospitality sectors continue to remain below their pre-pandemic highs.

The closures of five banks in 2023 led to industry-wide concerns related to liquidity, deposit outflows, and unrealized securities losses and eroding confidence in the banking system from the general public. In response to these recent developments, the Company took a number of preemptive actions, which included proactive outreach to clients and steps to maximize its funding sources. As a result, the Company's liquidity position remains adequate. The impact of market volatility from the adverse developments in the banking industry along with continued high inflation and rising interest rates, will depend on future developments, which are highly uncertain and difficult to predict.

The Company is closely monitoring its asset quality, liquidity, and capital positions, as well as the credit risk in its loan portfolio. Management is actively working to minimize the current and future impact of this unusual situation, and is continuing to make adjustments to operations where appropriate or necessary to mitigate risk. However, these factors and events may have negative effects on the business, financial condition, and results of operations of the Company and its customers.

New Accounting Standard Adopted in First Quarter

On April 1, 2023, the Company adopted Accounting Standards Codification ("ASC") Topic 326, "Financial Instruments - Credit Loss (ASC 326)," which replaces the guidance on recognition and measurement of credit losses for financial assets. The new requirements, known as the current expected credit loss model ("CECL") will require entities to adopt an impairment model based on expected losses rather than incurred losses. The Company applied the new guidance with a cumulative-effect adjustment to retained earnings as of April 1, 2023, using the modified-retrospective approach. Results for reporting periods beginning after April 1, 2023 are presented under CECL. Prior period amounts have not been restated and are reported in accordance with the incurred loss method. The adoption of ASC 326 resulted in an increase of $0.7 million to the allowance for credit losses related to loans.     

Allowance for Credit Losses ("ACL")

    The ACL is a valuation account that is deducted from the loan portfolio's amortized cost basis to present the net amount expected to be collected on the loans. Loan losses are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Management continues its collection efforts on previously charged-off balances and applies recoveries as additions to the ACL. The measurement of expected credit losses is based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount and a reversion to historical after the reasonable and supportable period. Expected credit losses were estimated using a regression model based on historical data from the Company and peer institutions. Adjustments to modeled loss estimates may be made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level or term, as well as for changes in environmental conditions, such as changes in economic conditions, property values or other relevant factors. The discounted cash flow ("DCF") methodology is used for substantially all pools, applied with a 4-quarter reasonable and supportable forecast period and a 4-quarter reversion period where the ACL reflects the difference between the amortized cost and the present value of the expected cash flows. The expected cash flows are discounted at the effective interest rate and the entire change in present value is reported as credit loss expense (or reversal of credit loss expense). On a quarterly basis, management considers probability of default utilizing economic forecasts including civilian unemployment rates and CPI index, and loss given default assumptions using Frye-Jacobs estimations. For periods beyond the forecast period, the loss rate reverts back to the long-term historical loss average with a 4-
8


quarter straight-line reversion period for all pools. There were no changes in the assumptions used from the April 1, 2023 adoption date and for the quarter ended December 31, 2023.

The Company has elected to exclude accrued interest from the amortized cost basis in determining credit losses. Accrued interest receivable on loans is included in a separate line item on the Consolidated Statements of Financial Condition. Accrual of interest on loans is discontinued when the payment of principal or interest is considered to be in doubt, or when a loan becomes contractually past due by 90 days or more with respect to principal or interest, except for loans that are well-secured and in the process of collection. When a loan is placed on nonaccrual status, any accrued but uncollected interest is reversed from current income. Interest income on nonaccrual loans is recorded when received based upon the collectability of the loan.

Expected credit losses are measured on a collective pool basis when similar risk characteristics exist. Loans with similar risk characteristics are grouped into homogeneous segments, or pools, for allowance calculation. The Company's loan portfolio segments as of March 31, 2023 and December 31, 2023 were as follows:

One-to-four Family - Carver Federal purchases first mortgage loans secured by one-to-four family properties that serve as the primary residence of the owner and non-qualified mortgages for one-to-four family residential loans. The loans are underwritten in accordance with applicable secondary market underwriting guidelines and requirements for sale. These loans present a moderate level of risk due primarily to general economic conditions.

Multifamily - Carver Federal originates and purchases recourse and non-recourse multifamily loans. The Bank generally requires a debt service coverage ratio at origination of at least 1.30, and that the maximum loan-to-value ("LTV") at origination not exceed 70% based on the appraised value of the mortgaged property. Multifamily property lending entails additional risks compared to one-to-four family lending. These loans are dependent on the successful operation of such buildings and can be significantly impacted by economic conditions, industry concentration, valuation of the underlying properties, lease terms, occupancy/vacancy rates, and changes in market demand for multifamily units. The Bank primarily considers the property's ability to generate net operating income sufficient to support the debt service, the financial resources, income level and managerial expertise of the borrower, the marketability of the property and the Bank's lending experience with the owner/guarantor.

Commercial Real Estate ("CRE") - CRE lending consists predominantly of originating loans for the purpose of purchasing or refinancing office, mixed-use properties, retail and church buildings in the Bank's market area.  Mixed-use loans are secured by properties that are intended for both commercial and residential use, but predominantly commercial, and are classified as CRE. The Bank primarily considers the ability of the net operating income generated by the real estate to support the debt service, the financial resources, income level and managerial expertise of the borrower, the marketability of the property and the Bank's lending experience with the owner/guarantor. The maximum LTV ratio on CRE loans at origination is generally 70% based on the latest appraised fair market value of the mortgaged property and the Bank generally requires a debt service coverage ratio at origination of at least 1.30. The Bank also requires the assignment of rents of all tenants' leases in the mortgaged property and personal guarantees may be obtained for additional security from these borrowers. CRE loans generally present a higher level of risk than other types of loans due primarily to the effect of general economic conditions and the complexities involved in valuing the underlying collateral.

Construction - Carver Federal historically originated or participated in construction loans for new construction and renovation of multifamily buildings, residential developments, community service facilities, churches, and affordable housing programs. The loans provide for disbursement in stages as construction is completed. Borrowers must satisfy all credit requirements that apply to the Bank’s permanent mortgage loan financing for the mortgaged property. The Bank has additional criteria for construction loans, including an engineer’s plan and periodic cost reviews on all construction budgets for loans. Construction loans present an increased level of risk from the effect of general economic conditions and uncertainties surrounding construction costs.

Business - Carver Federal originates and purchases business and SBA loans primarily to businesses located in its primary market area and surrounding areas. Business loans are typically personally guaranteed by the owners and may also be secured by additional collateral, including real estate, equipment and inventory. Business loans are subject to increased risk from the effect of general economic conditions. SBA loans are guaranteed by the U.S. government based on the percentage of each individual program.

9


Consumer (including Overdraft accounts) - The Consumer portfolio includes student loans to medical students enrolled in several Caribbean schools, as well as unsecured consumer loans purchased from or originated through strategic partnerships with Bankers Healthcare Group, LLC and Upstart Holdings, Inc. Consumer loans are typically unsecured and more susceptible to declining economic conditions.

Because expected loss predictions may not adequately project the level of losses inherent in a portfolio, the Bank reviews a number of qualitative factors on a quarterly basis to determine if reserves should be adjusted based upon any of those factors.  As the risk ratings worsen, some of the qualitative factors tend to increase.  A number of qualitative factors are considered including economic forecast uncertainty, credit quality trends, valuation trends, concentration risk, quality of loan review, changes in personnel, impact of rising rates, external factors and other considerations. Although the quantitative calculation includes a measurement of statistical economic conditions based on national averages, an additional analysis is performed at the qualitative level that applies specifically to the Company's geographic area and the banking industry that includes reasonable and supportable forecasts.

Reserve for Off-Balance Sheet Credit Exposure

    In the ordinary course of business, the Bank has entered into off-balance sheet financial instruments consisting of commitments to extend credit and letters of credit. Such financial instruments are recorded in the consolidated statements of condition when they are funded. The Company estimates a reserve for expected credit losses on loan commitments over the contractual period in which it is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The Bank does not record any reserve for unconditionally cancellable unfunded lending commitment since the exposure may be canceled to prevent future credit loss. Reserves for unfunded lending commitments that are not unconditionally cancellable are included in Other Liabilities in the consolidated statements of financial condition. Management will consider the likelihood that funding will occur and use the discount rate based on the associated pooled loan analysis loss rate to calculate the estimated expected credit losses. The ACL on off-balance sheet credit exposures was $9 thousand as of December 31, 2023.

Allowance for Credit Losses - Securities

The Company conducts periodic reviews to identify and evaluate each investment that has an unrealized holding loss. For available-for-sale ("AFS") securities in an unrealized loss position, management determines whether the Company has the intent to sell the security, or will more likely than not be required to sell the security before the recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the ACL is written off and the amortized cost adjusted for that amount. If any incremental credit loss occurs, the amortized cost is adjusted further by the credit loss and recorded in earnings. For AFS securities that do not meet the above criteria, management evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management may consider various factors including downgrades in the rating of the security by rating agencies, failure of the issuer to make scheduled interest or principal payments or adverse conditions specifically related to the security. If the decline in fair value is due to credit loss, the credit loss is recorded through ACL, limited by the amount that the fair value is less than the amortized cost basis. Management has reviewed the Bank's AFS portfolio and believes that the unrealized losses are a direct result of the current rate environment and the Company has the ability and intent to hold the securities until maturity or the valuations recover.

10


NOTE 3. EARNINGS (LOSS) PER COMMON SHARE

    The following table reconciles the income (loss) available to common shareholders (numerator) and the weighted average common stock outstanding (denominator) for both basic and diluted earnings (loss) per share for the following periods:
Three Months Ended
December 31,
Nine Months Ended
December 31,
$ in thousands except per share data
2023
2022
2023
2022
Net income (loss)$19 $(1,089)$(2,988)$(2,901)
Less: Participated securities share of undistributed earnings4    
Net income (loss) available to common shareholders$15 $(1,089)$(2,988)$(2,901)
Weighted average common shares outstanding - basic5,002,290 4,294,871 4,771,706 4,271,743 
Effect of dilutive shares1,417,536    
Weighted average common shares outstanding – diluted6,419,826 4,294,871 4,771,706 4,271,743 
Basic earnings (loss) per common share$ $(0.25)$(0.63)$(0.68)
Diluted earnings (loss) per common share (0.25)(0.63)(0.68)

The Company has preferred shares which are entitled to receive dividends if declared on the Company's common stock and are therefore considered to be participating securities. Basic earnings (loss) per share (“EPS”) is computed using the two class method. This calculation divides net income (loss) available to common stockholders after the allocation of undistributed earnings to the participating securities by the weighted average number of shares of common stock outstanding during the period.  Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock. These potentially dilutive shares are then included in the weighted average number of shares outstanding for the period. Dilution calculations are not applicable to net loss periods. For the nine months ended December 31, 2023, and the three and nine months ended December 31, 2022, all restricted shares and outstanding stock options were anti-dilutive.

NOTE 4. COMMON STOCK DIVIDENDS AND ISSUANCES

    On October 28, 2011, the United States Department of the Treasury (the "Treasury Department") exchanged the CDCI Series B preferred stock for 2,321,286 shares of Carver common stock and the Series C preferred stock converted into 1,208,039 shares of Carver common stock and 45,118 shares of Series D preferred stock. Series C stock was previously reported as mezzanine equity, and upon conversion to common and Series D preferred stock is now reported as equity attributable to Carver Bancorp, Inc. The holders of the Series D Preferred Stock are entitled to receive dividends, on an as-converted basis, simultaneously to the payment of any dividends on the common stock.

On August 6, 2020, the Company entered into a Securities Purchase Agreement (the "Agreement") with the Treasury Department to repurchase 2,321,286 shares of Company common stock, owned by the Treasury Department for an aggregate purchase price of $2.5 million. The stock repurchase provided for in the Agreement was completed on August 6, 2020. Upon completion of the repurchase pursuant to the Agreement, the Treasury Department was no longer a stockholder in the Company. In connection with the repurchase, Morgan Stanley provided a grant of $2.5 million that was considered contributed capital to the Company to fund the repurchase transaction.

On October 15, 2020, the Company entered into an agreement with Banc of America Strategic Investments Corporation under which it issued and sold 147,227 shares of its common stock, par value $0.01, at a price of $6.62 per share. The shares were issued on October 15, 2020, in a private placement exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and Regulation D of the rules and regulations promulgated thereunder.

On February 1, 2021, the Company entered into an agreement with Wells Fargo Central Pacific Holdings, Inc., under which it sold: (i) 157,806 shares of its common stock, par value $0.01 per share, at a purchase price of $7.75 per share, and (ii) 3,177 shares of a new series of preferred stock, Series E non-cumulative non-voting participating preferred stock, par value $0.01 per share, at a purchase price of $1,000 per share, in a private placement for gross proceeds of approximately $4.4 million. Upon the completion of certain transfers of the Series E preferred stock by Wells Fargo Central Pacific Holdings, Inc., the Series E preferred stock would be convertible into common stock at a conversion price of $7.96 per share. The issuance of the shares is exempt from registration pursuant to the exemption provided under Rule 506 of Regulation D
11


promulgated under the Securities Act of 1933, as amended. The offering was made only to accredited investors as that term is defined in Rule 501(a) of Regulation D under the Act.

On February 16, 2021, the Company entered into an agreement with J.P. Morgan Chase Community Development Corporation ("J.P. Morgan"), under which it sold: (i) 112,612 shares of its common stock, par value $0.01 per share, at a purchase price of $8.88 per share, and (ii) 5,000 shares of a new series of preferred stock, Series F non-cumulative non-voting non-convertible preferred stock, par value $0.01 per share ("Series F Preferred Stock"), at a purchase price of $1,000 per share, in a private placement for gross proceeds of approximately $6.0 million. On September 27, 2021, the Company entered into an agreement with J.P. Morgan under which it sold an additional 4,000 shares of its Series F Preferred Stock, at a purchase price of $1,000 per share, in a private placement for gross proceeds of $4.0 million. The issuances of the shares were exempt from registration pursuant to the exemption provided under Rule 506 of Regulation D promulgated under the Securities Act of 1933, as amended. The offerings were made only to accredited investors as that term is defined in Rule 501(a) of Regulation D under the Act.

On December 14, 2021, the Company entered into a Sales Agreement (the "Sales Agreement") with Piper Sandler & Co. (“Piper Sandler”), as sales agent, pursuant to which the Company may offer and sell shares of its common stock, par value $0.01 per share, having an aggregate gross sales prices of up to $20.0 million (the “ATM Shares”) from time to time. Any sales made under the Sales Agreement will be sales deemed to be "at-the-market (ATM) offerings," as defined in Rule 415 under the Securities Act of 1933, as amended. These sales will be made through ordinary broker transactions on the NASDAQ Capital Market stock exchange at market prices prevailing at the time, at prices related to the prevailing market prices, or at negotiated prices. The Company intends to use the net proceeds of these offerings for general corporate purposes, including support for organic loan growth and repayment of all or a portion of the outstanding principal amount of our outstanding subordinated debt securities. During fiscal year 2022, the Company sold an aggregate of 397,367 shares of common stock under the ATM offering program, resulting in gross proceeds of $3.1 million and net proceeds to the Company of $3.0 million after deducting commissions and expenses. There were no additional offerings in fiscal year 2023 or during the nine months ended December 31, 2023.

During fiscal year 2023, Prudential Insurance Company of America ("Prudential"), an institutional investor, donated a total of 550 shares of its holdings of Series D Preferred Stock to third parties. The third parties notified the Company of their intention to cancel the shares and convert them into 67,265 shares of Common Stock. During the nine months ended December 31, 2023, Prudential donated a total of 2,750 shares of its holdings of Series D Preferred Stock to third parties. The third parties notified the Company of their intention to cancel the shares and convert them into 336,325 shares of Common Stock. The conversions had no impact on the Company's total capital.

On July 19, 2023, the Company entered into an agreement with National Community Investment Fund, under which it sold 378,788 shares of its common stock, par value $0.01 per share, at a purchase price of $2.64 per share in a private placement for gross proceeds of approximately $1.0 million. The Company intends to use the net proceeds of the private placement for general corporate purposes. The issuance of the shares is exempt from registration pursuant to under Section 4(a)(2) of the Securities Act of 1933, as amended, and Regulation D of the rules and regulations promulgated thereunder.

NOTE 5. ACCUMULATED OTHER COMPREHENSIVE LOSS

    The following tables set forth changes in each component of accumulated other comprehensive loss, net of tax for the nine months ended December 31, 2023 and 2022:
$ in thousands
At
March 31, 2023
Other
Comprehensive
Loss, net of tax
At
December 31, 2023
Net unrealized loss on securities available-for-sale$(12,215)$(62)$(12,277)
$ in thousands
At
March 31, 2022
Other
Comprehensive
Loss, net of tax
At
December 31, 2022
Net unrealized loss on securities available-for-sale$(6,662)$(7,076)$(13,738)

    There were no reclassifications out of accumulated other comprehensive loss to the consolidated statement of operations for the nine months ended December 31, 2023 and 2022.

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NOTE 6. INVESTMENT SECURITIES

    The Bank utilizes mortgage-backed and other investment securities in its asset/liability management strategy. In making investment decisions, the Bank considers, among other things, its yield and interest rate objectives, its interest rate and credit risk position, and its liquidity and cash flow.

    Generally, the investment policy of the Bank is to invest funds among categories of investments and maturities based upon the Bank’s asset/liability management policies, investment quality, loan and deposit volume and collateral requirements, liquidity needs and performance objectives. Debt securities are classified into three categories: trading, held-to-maturity, and available-for-sale. At December 31, 2023, securities with fair value of $49.1 million, or 95.9%, of the Bank’s total securities were classified as available-for-sale, and securities with amortized cost of $2.1 million, or 4.1%, were classified as held-to-maturity, compared to $53.8 million and $2.3 million at March 31, 2023, respectively. The Bank had no securities classified as trading at December 31, 2023 and March 31, 2023.

    Other investments as of December 31, 2023 primarily consists of the Company and Bank's investments in limited partnership Community Capital Funds and a $5.3 million bank-owned life insurance policy ("BOLI") that was purchased during the first quarter of fiscal year 2023 as a channel to add to the Company's non-interest income revenue by means of an investment considered safe and sound by the Company's regulators. The investments in the limited partnerships are measured using the equity method. The BOLI is carried at the cash surrender value of the underlying policies. Income generated from the investment and the increase in the cash surrender value of the BOLI is included in other non-interest income on the Statements of Operations. Other investments totaled $6.9 million at December 31, 2023 and are included in Other Assets on the Statements of Financial Condition.

    The following tables set forth the amortized cost and fair value of securities available-for-sale and held-to-maturity at December 31, 2023 and March 31, 2023:
At December 31, 2023
AmortizedGross Unrealized
$ in thousandsCostGainsLossesFair Value
Available-for-Sale:    
Mortgage-backed Securities:    
Government National Mortgage Association$295 $4 $(1)$298 
Federal Home Loan Mortgage Corporation20,561  (4,321)16,240 
Federal National Mortgage Association11,132  (2,149)8,983 
Total mortgage-backed securities31,988 4 (6,471)25,521 
U.S. Government Agency Securities6,427  (25)6,402 
Corporate Bonds5,266  (2,074)3,192 
Muni Securities17,702  (3,711)13,991 
Total available-for-sale$61,383 $4 $(12,281)$49,106 
Held-to-Maturity:    
Mortgage-backed Securities:    
Government National Mortgage Association$311 $ $(6)$305 
Federal National Mortgage Association and Other1,767  (88)1,679 
Total held-to maturity$2,078 $ $(94)$1,984 

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At March 31, 2023
AmortizedGross Unrealized
$ in thousandsCostGainsLossesFair Value
Available-for-Sale:    
Mortgage-backed Securities:    
Government National Mortgage Association$341 $1 $(1)$341 
Federal Home Loan Mortgage Corporation21,651  (4,051)17,600 
Federal National Mortgage Association11,714  (2,212)9,502 
Total mortgage-backed securities33,706 1 (6,264)27,443 
U.S. Government Agency Securities9,364  (38)9,326 
Corporate Bonds5,269  (2,177)3,092 
Muni Securities17,719  (3,737)13,982 
Total available-for-sale$66,058 $1 $(12,216)$53,843 
Held-to-Maturity:    
Mortgage-backed Securities:    
Government National Mortgage Association$366 $ $(3)$363 
Federal National Mortgage Association and Other1,952  (94)1,858 
Total held-to-maturity$2,318 $ $(97)$2,221 

There were no sales of available-for-sale or held-to-maturity securities for the nine months ended December 31, 2023 and December 31, 2022.

    The following tables set forth the unrealized losses and fair value of securities in an unrealized loss position at December 31, 2023 and March 31, 2023 for less than 12 months and 12 months or longer:
At December 31, 2023
Less than 12 months12 months or longerTotal
$ in thousandsUnrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Available-for-Sale:      
Mortgage-backed securities$ $ $(6,471)$25,260 $(6,471)$25,260 
U.S. Government Agency securities  (25)5,076 (25)5,076 
Corporate bonds  (2,074)3,192 (2,074)3,192 
Muni securities  (3,711)13,991 (3,711)13,991 
Total available-for-sale securities$ $ $(12,281)$47,519 $(12,281)$47,519 
Held-to-Maturity:
Mortgage-backed securities$ $ $(94)$1,950 $(94)$1,950 
  Total held-to-maturity securities$ $ $(94)$1,950 $(94)$1,950 

At March 31, 2023
Less than 12 months12 months or longerTotal
$ in thousandsUnrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Available-for-Sale:      
Mortgage-backed securities$ $ $(6,264)$27,146 $(6,264)$27,146 
U.S. Government Agency securities(13)4,075 (25)5,251 (38)9,326 
Corporate bonds  (2,177)3,092 (2,177)3,092 
Muni securities  (3,737)13,982 (3,737)13,982 
Total available-for-sale securities$(13)$4,075 $(12,203)$49,471 $(12,216)$53,546 
Held-to-Maturity:      
Mortgage-backed securities$(3)$363 $(94)$1,822 $(97)$2,185 
Total held-to-maturity securities$(3)$363 $(94)$1,822 $(97)$2,185 

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    Management reviews the investment portfolio on a quarterly basis to identify and evaluate each investment that has an unrealized holding loss. A total of 23 securities had an unrealized loss at December 31, 2023 compared to 24 at March 31, 2023. Mortgage-backed securities, U.S. government agency securities, municipal securities and a corporate bond security represented 53.2%, 10.7%, 29.4% and 6.7%, respectively, of total available-for-sale securities in an unrealized loss position at December 31, 2023. There were eight mortgage-backed securities, two U.S. government agency securities, one corporate bond and six municipal securities that had an unrealized loss position for more than 12 months at December 31, 2023. Management has evaluated available-for-sale securities that are in an unrealized loss position and has determined that the declines in fair value are attributable to market volatility, and not credit quality or other factors. Given the high credit quality of the mortgage-backed securities, which are backed by explicit U.S. government's guarantees, or guarantees by government sponsored enterprises that have credit ratings and perceived credit risk comparable to the U.S. government, the high credit quality and strong financial performance of the U.S. Government Agency and the results of the individual analyses performed for and continuous surveillance on the municipal securities, as well as the corporate security that is a reputable institution in good financial standing, the risk of credit loss is minimal. Management believes that these unrealized losses are a direct result of the current rate environment and the Company has the ability and intent to hold the securities until maturity or the valuations recover. The Bank's held-to-maturity portfolio consists of mortgage-backed securities that are either fully guaranteed or issued by a government sponsored enterprise, which has a credit rating and perceived credit risk comparable to the U.S. government. As such, no allowance for credit losses on securities available-for-sale or held-to-maturity have been established as of December 31, 2023.

    The following is a summary of the amortized cost and fair value of debt securities at December 31, 2023, by remaining period to contractual maturity (ignoring earlier call dates, if any).  Actual maturities may differ from contractual maturities because certain security issuers have the right to call or prepay their obligations.  The table below does not consider the effects of possible prepayments or unscheduled repayments.
$ in thousandsAmortized CostFair ValueWeighted
Average Yield
Available-for-Sale:
One through five years1,984 1,971 6.41 %
Five through ten years2,667 2,326 2.67 %
After ten years24,744 19,288 3.25 %
Mortgage-backed securities31,988 25,521 1.65 %
Total$61,383 $49,106 2.52 %
Held-to-maturity:
Mortgage-backed securities$2,078 $1,984 2.79 %

NOTE 7. LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES

The loans receivable portfolio is segmented into one-to-four family, multifamily, commercial real estate, business (including Small Business Administration loans), and consumer loans.

    The ACL reflects management’s estimate of lifetime credit losses inherent in loans as of the balance sheet date. Management uses a disciplined process and methodology to calculate the ACL each quarter. To determine the total ACL, management estimates the reserves needed for each segment of the loan portfolio, including loans analyzed individually and loans analyzed on a pooled basis.

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    The following is a summary of loans receivable at December 31, 2023 and March 31, 2023:
December 31, 2023
March 31, 2023
$ in thousandsAmountPercentAmountPercent
Loans receivable:    
One-to-four family$84,041 13.4 %$65,808 11.0 %
Multifamily177,772 28.5 %179,117 30.0 %
Commercial real estate174,202 27.9 %178,424 29.8 %
Construction1,559 0.2 %  %
Business (1)
172,204 27.6 %166,908 27.9 %
Consumer (2)
14,873 2.4 %7,639 1.3 %
Total loans receivable$624,651 100.0 %$597,896 100.0 %
Allowance for credit losses(5,897)(5,229)
Total loans receivable, net$618,754 $592,667 
(1) Includes PPP loans and business overdrafts
(2) Includes personal loans and consumer overdrafts

The totals above are shown net of deferred loan fees and costs. Net deferred loan fees totaled $3.0 million and $2.8 million at December 31, 2023 and March 31, 2023, respectively. The Bank purchased $20.0 million one-to-four family loans, $9.2 million consumer loans and $0.3 million business loans during the nine months ended December 31, 2023.

The Bank participated as a lender in the PPP, which opened on April 3, 2020. As part of the CARES Act, the SBA was authorized to temporarily guarantee loans under this new 7(a) loan program. Under the PPP, small businesses and other entities and individuals could apply for loans from existing SBA lenders and other approved regulated lenders that enrolled in the program, subject to numerous limitations and eligibility criteria. Since the PPP loans are fully guaranteed by the SBA, there are no additional ACL reserves required. As of December 31, 2023, the Bank had approved and funded approximately 420 applications totaling $57.1 million of loans under the PPP. Outstanding business loans under the PPP totaled $268 thousand as of December 31, 2023.

The following is an analysis of the allowance for credit losses based upon the method of evaluating loan reserves for the three and nine months ended December 31, 2023 under the expected loss methodology.
Three months ended December 31, 2023
$ in thousandsOne-to-four
family
MultifamilyCommercial Real EstateConstructionBusinessConsumerUnallocatedTotal
Allowance for credit losses:
Beginning Balance$2,264 $721 $1,212 $ $1,393 $417 $ $6,007 
Charge-offs     (17) (17)
Recoveries    2