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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 June 30, 2022
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 August 12, 2022
Common Stock, par value $0.01 4,224,821




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
June 30, 2022
March 31, 2022
ASSETS  
Cash and cash equivalents:  
Cash and due from banks$43,127 $60,764 
Money market investments254 254 
Total cash and cash equivalents43,381 61,018 
Investment securities:
Available-for-sale, at fair value60,718 67,596 
Held-to-maturity, at amortized cost (fair value of $5,058 and $5,276 at June 30, 2022 and March 31, 2022, respectively)
5,100 5,254 
Total investment securities65,818 72,850 
Loans receivable:
Real estate mortgage loans395,537 407,835 
Commercial business loans158,327 170,031 
Consumer loans1,533 1,638 
Loans, gross555,397 579,504 
Allowance for loan and lease losses(5,604)(5,624)
Total loans receivable, net549,793 573,880 
Premises and equipment, net3,565 3,775 
Federal Home Loan Bank of New York (“FHLB-NY”) stock, at cost1,141 584 
Accrued interest receivable2,320 2,414 
Right-of-use assets13,029 13,637 
Other assets11,879 7,156 
Total assets$690,926 $735,314 
LIABILITIES AND EQUITY  
LIABILITIES  
Deposits:  
Non-interest bearing checking$105,913 $107,472 
Interest-bearing deposits:
Interest-bearing checking57,413 57,985 
Savings111,696 112,305 
Money market171,985 208,122 
Certificates of deposit139,282 139,255 
Escrow2,005 2,978 
Total interest-bearing deposits482,381 520,645 
Total deposits588,294 628,117 
Advances from the FHLB-NY and other borrowed money25,928 15,949 
Operating lease liability13,806 14,393 
Other liabilities12,262 21,768 
Total liabilities640,290 680,227 
EQUITY
Preferred stock, (par value $0.01 per share: 13,201 and 13,751 Series D shares, with a liquidation preference of $1,000 per share, issued and outstanding at June 30, 2022 and March 31, 2022, respectively)
13,201 13,751 
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 at June 30, 2022 and March 31, 2022)
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 at June 30, 2022 and March 31, 2022, respectively)
9,000 9,000 
Common stock (par value 0.01 per share: 10,000,000 shares authorized; 6,791,828 and 6,720,618 shares issued; 4,288,025 and 4,216,815 shares outstanding at June 30, 2022 and March 31, 2022, respectively)
68 67 
Additional paid-in capital82,734 82,165 
Accumulated deficit(44,360)(43,503)
Treasury stock, at cost (2,503,803 shares at June 30, 2022 and March 31, 2022)
(2,908)(2,908)
Accumulated other comprehensive loss(10,276)(6,662)
Total equity50,636 55,087 
Total liabilities and equity$690,926 $735,314 
See accompanying notes to consolidated financial statements
1



CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended June 30,
$ in thousands, except per share data
2022
2021
Interest income:  
Loans$5,977 $4,839 
Mortgage-backed securities159 244 
Investment securities165 225 
Money market investments72 21 
Total interest income6,373 5,329 
Interest expense:  
Deposits411 525 
Advances and other borrowed money148 152 
Total interest expense559 677 
Net interest income5,814 4,652 
(Recovery of) provision for loan losses(27)72 
Net interest income after (recovery of) provision for loan losses5,841 4,580 
Non-interest income:  
Depository fees and charges555 603 
Loan fees and service charges119 102 
Other35 936 
Total non-interest income709 1,641 
Non-interest expense:  
Employee compensation and benefits3,184 2,808 
Net occupancy expense1,084 1,087 
Equipment, net514 474 
Data processing616 837 
Consulting fees150 20 
Federal deposit insurance premiums101 91 
Other1,758 3,660 
Total non-interest expense7,407 8,977 
Loss before income taxes(857)(2,756)
   Income tax expense  
Net loss$(857)$(2,756)
Loss per common share:
Basic$(0.20)$(0.81)
Diluted(0.20)(0.81)

See accompanying notes to consolidated financial statements





2


CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
Three Months Ended June 30,
$ in thousands
2022
2021
Net loss$(857)$(2,756)
Other comprehensive (loss) income, net of tax:
Unrealized (loss) gain of securities available-for-sale, net of income tax expense of $0 (due to full valuation allowance)(3,614)2,119 
Total other comprehensive (loss) income, net of tax(3,614)2,119 
Total comprehensive loss, net of tax$(4,471)$(637)

See accompanying notes to consolidated financial statements

3


CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the Three Months Ended June 30, 2022 and 2021
(Unaudited)
$ in thousandsPreferred StockCommon StockAdditional Paid-In CapitalAccumulated DeficitTreasury StockAccumulated Other Comprehensive Income (Loss)Total Equity
Three Months Ended June 30, 2022
Balance — March 31, 2022$25,928 $67 $82,165 $(43,503)$(2,908)$(6,662)$55,087 
Net loss— — — (857)— — (857)
Other comprehensive loss, net of taxes— — — — — (3,614)(3,614)
Conversion of Series D preferred stock to common stock(550)1 549 — — —  
Stock based compensation expense— — 20 — — — 20 
Balance — June 30, 2022
$25,378 $68 $82,734 $(44,360)$(2,908)$(10,276)$50,636 
Three Months Ended June 30, 2021
Balance — March 31, 2021$25,778 $58 $75,204 $(42,656)$(2,908)$(3,175)$52,301 
Net loss— — — (2,756)— — (2,756)
Other comprehensive income, net of taxes— — — — — 2,119 2,119 
Conversion of Series D preferred stock to common stock(1,100)1 1,099 — — —  
Stock based compensation expense— 1 25 — — — 26 
Balance — June 30, 2021
$24,678 $60 $76,328 $(45,412)$(2,908)$(1,056)$51,690 
See accompanying notes to consolidated financial statements
4



CARVER BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended June 30,
$ in thousands
2022
2021
CASH FLOWS FROM OPERATING ACTIVITIES  
Net loss$(857)$(2,756)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
(Recovery of) provision for loan losses(27)72 
Stock based compensation expense20 26 
Depreciation and amortization expense260 259 
Amortization and accretion of loan premiums and discounts and deferred charges(65)159 
Amortization and accretion of premiums and discounts — securities132 89 
Decrease in accrued interest receivable94 61 
Increase in other assets(4,800)(162)
Decrease in other liabilities(9,524)(2,027)
Net cash used in operating activities(14,767)(4,279)
CASH FLOWS FROM INVESTING ACTIVITIES 
Proceeds from principal payments, maturities and calls of investments: Available-for-sale3,135 2,443 
Proceeds from principal payments, maturities and calls of investments: Held-to-maturity151 1,961 
Loans held-for investment, net of repayments/payoffs and (originations)33,178 1,883 
Loans purchased from third parties(8,901)(8,370)
Proceeds from participation loans sold 926 
Purchase of FHLB-NY stock, net(557)(32)
Purchase of premises and equipment(50)(98)
Net cash provided by (used in) investing activities26,956 (1,287)
CASH FLOWS FROM FINANCING ACTIVITIES  
Net (decrease) increase in deposits(39,823)11,717 
Increase (decrease) in FHLB-NY advances and other borrowings9,997 (4,515)
Increase in long-term debt 1,500 
Net cash (used in) provided by financing activities(29,826)8,702 
Net (decrease) increase in cash and cash equivalents(17,637)3,136 
Cash and cash equivalents at beginning of period61,018 75,591 
Cash and cash equivalents at end of period$43,381 $78,727 
Supplemental cash flow information:  
Noncash financing and investing activities  
Recognition of right-of-use asset$ $680 
Recognition of operating lease liability 680 
Conversion of preferred stock to common stock$550 $1,100 
Cash paid for:
Interest$559 $3,765 
Income taxes17 16 
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 interest scheduled for December 17, 2021. Subsequently, the Company made the regular quarterly interest payment on its outstanding debentures due on March 17, 2022 and June 17, 2022. The interest rate was 5.08% and the total amount of deferred interest was $26 thousand at June 30, 2022.

    Carver relies primarily on dividends from Carver Federal to pay cash dividends to its stockholders and to engage in share repurchase programs. The OCC regulates all capital distributions, including dividend payments, by Carver Federal to Carver, and the FRB regulates dividends paid by Carver. 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 a notice with the FRB) prior to the declaration of each capital distribution. The OCC will disallow any proposed dividend, for among other reasons, that would result in Carver Federal’s failure to meet the OCC minimum capital requirements. In accordance with the Agreement defined directly below, Carver Federal is currently prohibited from paying any dividends without prior OCC approval, and, as such, has suspended Carver’s regular quarterly cash dividend on its common stock. There are no assurances that dividend payments to Carver will resume.
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 must obtain the approval of the OCC prior to effecting any change in its directors or senior executive officers. The Bank may not declare or pay dividends or make any other capital distributions, including to the Company, without first filing an application with the OCC and receiving the prior approval of the OCC. Furthermore, the Bank must seek the OCC's written approval and the FDIC's written concurrence before 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 Formal 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 Company is subject to similar requirements as the Bank. 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.

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 presentation have been included. Operating results for the three month periods ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ended March 31, 2023. The consolidated balance sheet at June 30, 2022 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, 2022. Amounts subject to significant estimates and assumptions are items such as the allowance for loan losses, realization of deferred tax assets, assessment of other-than-temporary impairment of securities, and the fair value of financial instruments. While management uses available information to recognize losses on loans, future additions to the allowance for loan losses or future writedowns of real estate owned may be necessary based on changes in economic conditions in the areas where Carver Federal has extended 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.

7


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. Additionally, the Federal Reserve has increased the federal funds rate at each of its meetings in 2022, and will likely continue to increase the rate in order to bring down inflation that is at a 40-year high.

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. Less than 71 percent of the City’s pandemic-induced job losses have returned, and unemployment remains high at 6.5 percent.

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.

NOTE 3. LOSS PER COMMON SHARE

    The following table reconciles the loss available to common shareholders (numerator) and the weighted average common stock outstanding (denominator) for both basic and diluted loss per share for the following periods:
Three Months Ended
June 30,
$ in thousands except per share data
2022
2021
Net loss$(857)$(2,756)
Weighted average common shares outstanding - basic4,229,209 3,382,793 
Weighted average common shares outstanding – diluted4,229,209 3,382,793 
Basic loss per common share$(0.20)$(0.81)
Diluted loss per common share(0.20)(0.81)

The Company has preferred stock 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 three months ended June 30, 2022 and 2021, 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.

In June 2020, The Goldman Sachs Group, Inc., an institutional investor, notified the Company of their intention to effect a series of transfers of up to all its holdings of Series D Preferred Stock. The conversion and subsequent sale of shares were completed on July 2, 2020: 13,519 Series D Preferred Stock shares were converted into 1,653,397 shares of Common Stock, which were subsequently sold in the open market. The conversion and sale had no impact on the Company's total capital.

8


On July 9, 2020, the Company received notice that Morgan Stanley International Holdings Inc. ("Morgan Stanley"), an institutional investor, relinquished its ownership of 180,573 shares of Company common stock and 13,523 shares of Company Preferred Series D Stock to the Company at no cost to the Company.

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 January 22, 2021, Prudential Insurance Company of America ("Prudential"), an institutional investor, notified the Company of its intention to cancel 475 of its holdings of Series D Preferred Stock and convert such shares into 58,093 shares of common stock. During fiscal year 2022, Prudential donated a total of 3,850 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 470,855 shares of Common Stock. During the three months ended June 30, 2022, Prudential 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. The conversions had no impact on the Company's total capital.

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 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 our 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 may instruct Piper Sandler not to sell ATM Shares if the sales cannot be effected at or above the price designated by the Company from time to time. The Company is not obligated to make any sales of the ATM Shares under the Sales Agreement. The offering of ATM Shares pursuant to the Sales Agreement will terminate upon the earlier of (a) the sale of all of the ATM Shares subject to the Sales Agreement or (b) the termination of the Sales Agreement by Piper Sandler or the Company, as permitted therein. The Company will pay Piper Sandler a commission rate equal to 3.0% of the aggregate gross proceeds from each sale of ATM Shares and have agreed to provide Piper Sandler with customary indemnification and contribution rights. The Company will also reimburse Piper Sandler for certain specified expenses in connection with entering into the Sales Agreement. The Company intends to use the net proceeds of these offerings for general corporate purposes,
9


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 during the three months ended June 30, 2022.

NOTE 5. OTHER COMPREHENSIVE INCOME (LOSS)

    The following tables set forth changes in each component of accumulated other comprehensive income (loss), net of tax for the three months ended June 30, 2022 and 2021:
$ in thousands
At
March 31, 2022
Other
Comprehensive
Income, net of tax
At
June 30, 2022
Net unrealized income (loss) on securities available-for-sale$(6,662)$(3,614)$(10,276)
$ in thousands
At
March 31, 2021
Other
Comprehensive
Loss, net of tax
At
June 30, 2021
Net unrealized income (loss) on securities available-for-sale$(3,175)$2,119 $(1,056)

    There were no reclassifications out of accumulated other comprehensive loss to the consolidated statement of operations for the three months ended June 30, 2022 and 2021.

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 June 30, 2022, securities with fair value of $60.7 million, or 92.3%, of the Bank’s total securities were classified as available-for-sale, and securities with amortized cost of $5.1 million, or 7.7%, were classified as held-to-maturity, compared to $67.6 million and $5.3 million at March 31, 2022, respectively. The Bank had no securities classified as trading at June 30, 2022 and March 31, 2022.

    Other investments as of June 30, 2022 primarily consists of the Bank's investment in a limited partnership Community Capital Fund and a $5 million bank-owned life insurance policy ("BOLI") that was purchased during the first quarter of fiscal year 2023. These securities are measured at fair value with changes in fair value reflected in net income. Other investments totaled $6.1 million at June 30, 2022 and are included in Other Assets on the Statements of Financial Condition.

10


    The following tables set forth the amortized cost and fair value of securities available-for-sale and held-to-maturity at June 30, 2022 and March 31, 2022:
At June 30, 2022
AmortizedGross Unrealized
$ in thousandsCostGainsLossesFair Value
Available-for-Sale:    
Mortgage-backed Securities:    
Government National Mortgage Association$399 $2 $1 $400 
Federal Home Loan Mortgage Corporation22,955  3,267 19,688 
Federal National Mortgage Association12,444  1,861 10,583 
Total mortgage-backed securities35,798 2 5,129 30,671 
U.S. Government Agency Securities11,843 5 29 11,819 
Corporate Bonds5,271  1,802 3,469 
Muni Securities17,736  3,317 14,419 
Asset-backed Securities346  6 340 
Total available-for-sale$70,994 $7 $10,283 $60,718 
Held-to-Maturity:    
Mortgage-backed Securities:    
Government National Mortgage Association$438 $13 $ $451 
Federal National Mortgage Association and Other4,662  55 4,607 
Total held-to maturity$5,100 $13 $55 $5,058 

At March 31, 2022
AmortizedGross Unrealized
$ in thousandsCostGainsLossesFair Value
Available-for-Sale:    
Mortgage-backed Securities:    
Government National Mortgage Association$439 $9 $ $448 
Federal Home Loan Mortgage Corporation23,744  2,197 21,547 
Federal National Mortgage Association12,852  1,268 11,584 
Total mortgage-backed securities37,035 9 3,465 33,579 
U.S. Government Agency Securities13,864  79 13,785 
Corporate Bonds5,271  1,150 4,121 
Muni Securities17,741  1,973 15,768 
Asset-backed Securities347  4 343 
Total available-for-sale$74,258 $9 $6,671 $67,596 
Held-to-Maturity:    
Mortgage-backed Securities:    
Government National Mortgage Association$481 $27 $ $508 
Federal National Mortgage Association and Other4,773 9 14 4,768 
Total held-to-maturity$5,254 $36 $14 $5,276 

There were no sales of available-for-sale and held-to-maturity securities for the three months ended June 30, 2022 and June 30, 2021.

11


    The following tables set forth the unrealized losses and fair value of securities in an unrealized loss position at June 30, 2022 and March 31, 2022 for less than 12 months and 12 months or longer:
At June 30, 2022
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$804 $6,354 $4,325 $23,969 $5,129 $30,323 
U.S. Government Agency securities  29 6,936 29 6,936 
Corporate bonds  1,802 3,469 1,802 3,469 
Muni securities2,722 12,426 595 1,993 3,317 14,419 
Asset-backed securities6 340   6 340 
Total available-for-sale securities$3,532 $19,120 $6,751 $36,367 $10,283 $55,487 
Held-to-Maturity:
Mortgage-backed securities$55 $4,557 $ $ $55 $4,557 
  Total held-to-maturity securities$55 $4,557 $ $ $55 $4,557 

At March 31, 2022
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$519 $7,057 $2,946 $26,128 $3,465 $33,185 
U.S. Government Agency securities  79 13,785 79 13,785 
Corporate bonds  1,150 4,121 1,150 4,121 
Muni securities1,640 13,512 333 2,256 1,973 15,768 
Asset-backed securities4 343   4 343 
Total available-for-sale securities$2,163 $20,912 $4,508 $46,290 $6,671 $67,202 
Held-to-Maturity:      
Mortgage-backed securities$14 $2,204 $ $ $14 $2,204 
Total held-to-maturity securities$14 $2,204 $ $ $14 $2,204 

    A total of 23 securities had an unrealized loss at June 30, 2022 and March 31, 2022. Mortgage-backed securities, U.S. government agency securities, municipal securities and a corporate bond security represented 54.6%, 12.5%, 26.0% and 6.3%, respectively, of total available-for-sale securities in an unrealized loss position at June 30, 2022. There were four mortgage-backed securities, two U.S. government agency securities, one corporate bond and one municipal security that had an unrealized loss position for more than 12 months at June 30, 2022. Given the high credit quality of the mortgage-backed securities, which are backed by the U.S. government's guarantees, the high credit quality and strong financial performance of the U.S. Government Agency and municipal securities, and 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 did not have any securities that were classified as having other-than-temporary impairment in its investment portfolio at June 30, 2022.

12


    The following is a summary of the amortized cost and fair value of debt securities at June 30, 2022, 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:
Less than one year$346 $340 1.06 %
One through five years   %
Five through ten years6,713 6,460 2.38 %
After ten years28,137 23,247 2.20 %
Mortgage-backed securities35,798