CARVER BANCORP INC

Previous wording

Carver Federal is among the largest African-American operated banks in the United States. The Bank remains dedicated to expanding wealth-enhancing opportunities in the communities it serves by increasing access to capital and other financial services for consumers, businesses and non-profit organizations, including faith-based institutions. A measure of its progress in achieving this goal includes the Bank's seventh consecutive "Outstanding" rating, issued by the OCC following its most recent Community Reinvestment Act (“CRA”) examination in June 2025. The OCC found that the majority of Carver Federal's loans were made within our assessment area, and the Bank has demonstrated excellent responsiveness to its assessment area's needs through its community development lending, investing and service activities. The Bank had approximately $713.6 million in assets and 105 employees as of June 30, 2025.

Current wording

Carver Federal is among the largest African-American operated banks in the United States. The Bank remains dedicated to expanding wealth-enhancing opportunities in the communities it serves by increasing access to capital and other financial services for consumers, businesses and non-profit organizations, including faith-based institutions. A measure of its progress in achieving this goal includes the Bank's seventh consecutive "Outstanding" rating, issued by the OCC following its most recent Community Reinvestment Act (“CRA”) examination in June 2025. The OCC found that the majority of Carver Federal's loans were made within our assessment area, and the Bank has demonstrated excellent responsiveness to its assessment area's needs through its community development lending, investing and service activities. The Bank had approximately $697.9 million in assets and 96 employees as of September 30, 2025.

Previous wording

The Company's subsidiary, Carver Statutory Trust I (the "Trust"), is not consolidated with Carver Bancorp Inc. for financial reporting purposes in accordance with the FASB's ASC Topic 810 regarding the consolidation of variable interest entities. The Trust 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 the Trust), 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 the Trust 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. At June 30, 2025, the Company's maximum exposure to the Trust is $13.7 million, which is the Company's liability to the Trust and includes the Company's investment in the Trust.

Current wording

Capital Securities due September 17, 2033 (“Capital Securities”) and $0.4 million of common securities (which are the only voting securities of the Trust), 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 the Trust 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. At September 30, 2025, the Company's maximum exposure to the Trust is $14.0 million, which is the Company's liability to the Trust and includes the Company's investment in the Trust.

Previous wording

The ACL reflects management's evaluation of the loans presenting identified loss potential, as well as the risk inherent in various components of the portfolio. There is significant judgment applied in estimating the ACL. These assumptions and estimates are susceptible to significant changes based on the current environment. Inflationary pressure appears to have decreased, but rates remain high and affect customer demand. The target interest rate range had been held steady at its highest point between 5.25% and 5.5% since July 2023, until the Federal Reserve lowered rates by 50 basis points in September 2024, decreasing the target range to 4.75% to 5% and began easing monetary policy for the first time in four years. The Federal Reserve approved two additional cuts in November and December 2024, lowering the overnight borrowing rate to a range between 4.25% to 4.5%, but has left interest rates unchanged since its July 2025 meeting. A high interest rate environment can negatively impact the Company if the higher debt service costs on adjustable-rate loans lead to borrowers' inability to pay contractual obligations. Further, any change in the size of the loan portfolio or any of its components could necessitate an increase in the ACL even though there may not be a decline in credit quality or an increase in potential problem loans. As such, there can never be assurance that the ACL accurately reflects the actual loss potential inherent in a loan portfolio. There have been no significant changes to the inputs and assumptions during the three months ended June 30, 2025.

Current wording

The ACL reflects management's evaluation of the loans presenting identified loss potential, as well as the risk inherent in various components of the portfolio. There is significant judgment applied in estimating the ACL. These assumptions and estimates are susceptible to significant changes based on the current environment. Inflation remains somewhat elevated and rates remain high and affect customer demand. The Federal Reserve approved two interest rate cuts in September and October 2025, lowering the overnight borrowing rate to a range of 3.75% to 4%, the lowest in three years. A high interest rate environment can negatively impact the Company if the higher debt service costs on adjustable-rate loans lead to borrowers' inability to pay contractual obligations. Further, any change in the size of the loan portfolio or any of its components could necessitate an increase in the ACL even though there may not be a decline in credit quality or an increase in potential problem loans. As such, there can never be assurance that the ACL accurately reflects the actual loss potential inherent in a loan portfolio. There have been no significant changes to the inputs and assumptions during the six months ended September 30, 2025.

Previous wording

Management believes Carver Federal’s short-term assets have sufficient liquidity to cover loan demand, potential fluctuations in deposit accounts and to meet other anticipated cash requirements, including interest payments on our subordinated debt securities. Additionally, Carver Federal has other sources of liquidity including the ability to borrow from the Federal Home Loan Bank of New York (“FHLB-NY”) utilizing unpledged mortgage-backed securities and certain mortgage loans, the sale of available-for-sale securities and the sale of certain mortgage loans. Net borrowings increased $1.1 million, or 5.4%, to $21.3 million at June 30, 2025, compared to $20.2 million at March 31, 2025. During the first quarter of the current fiscal year, the Bank repaid a $1.8 million 12-month fixed-rate advance secured through the second round of the FHLB-NY 0% Development Advance (ZDA) Program, which provides members with subsidized funding in the form of interest rate credits to assist in originating or purchasing loans that meet an eligibility criteria. In addition, the Bank secured a new $2.9 million 12-month fixed-rate ZDA advance on June 30, 2025. At June 30, 2025, outstanding advances from the FHLB-NY totaled $2.9 million. At June 30, 2025, based on available collateral held at the FHLB-NY, Carver Federal had the ability to borrow an additional $24.6 million on a secured basis, utilizing mortgage-related loans and securities as collateral. The Bank has the ability to pledge additional loans as collateral in order to borrow up to 30% of its total assets. The Company also had $13.4 million in subordinated debt securities and $5.0 million in low interest loans outstanding as of June 30, 2025.

Current wording

Management believes Carver Federal’s short-term assets have sufficient liquidity to cover loan demand, potential fluctuations in deposit accounts and to meet other anticipated cash requirements. Additionally, Carver Federal has other sources of liquidity including the ability to borrow from the Federal Home Loan Bank of New York (“FHLB-NY”) and the Federal Reserve Bank of New York ("FRBNY") utilizing unpledged mortgage-backed securities and certain mortgage loans, the sale of available-for-sale securities and the sale of certain mortgage loans. Net borrowings increased $7.3 million, or 36.1%, to $27.5 million at September 30, 2025, compared to $20.2 million at March 31, 2025. During the first quarter of the current fiscal year, the Bank repaid a $1.8 million 12-month fixed-rate advance that had been secured through the second round of the FHLB-NY 0% Development Advance (ZDA) Program. The ZDA Program provides FHLB-NY members with subsidized funding in the form of interest rate credits to assist in originating or purchasing loans that meet an eligibility criteria. The Bank secured two new 12-month fixed-rate ZDA advances totaling $4.1 million during the six months ended September 30, 2025. In addition, the Bank secured a $5.0 million overnight advance on September 30, 2025 for liquidity purposes. At September 30, 2025, outstanding advances from the FHLB-NY totaled $9.1 million. At September 30, 2025, based on available collateral held at the FHLB-NY, Carver Federal had the ability to borrow an additional $16.6 million on a secured basis, utilizing mortgage-related loans and securities as collateral. The Bank has the ability to pledge additional loans as collateral in order to borrow up to 30% of its total assets. In addition, the Bank had $23.3 million of collateralized borrowing capacity at the FRB discount window with no amounts outstanding as of September 30, 2025. The Company also had $13.4 million in subordinated debt securities and $5.0 million in low interest loans outstanding as of September 30, 2025.

Previous wording

The Bank's most liquid assets are cash and short-term investments. The level of these assets is dependent on the Bank's operating, investing and financing activities during any given period. At June 30, 2025 and March 31, 2025, assets qualifying for short-term liquidity, including cash and cash equivalents, totaled $43.8 million and $50.3 million, respectively.

Current wording

The Bank's most liquid assets are cash and short-term investments. The level of these assets is dependent on the Bank's operating, investing and financing activities during any given period. At September 30, 2025 and March 31, 2025, assets qualifying for short-term liquidity, including cash and cash equivalents, totaled $40.7 million and $50.3 million, respectively.

Previous wording

The Consolidated Statements of Cash Flows present the change in cash from operating, investing and financing activities. During the three months ended June 30, 2025, total cash and cash equivalents decreased $6.5 million to $43.8 million at June 30, 2025, compared to $50.3 million at March 31, 2025, reflecting cash used in operating activities of $0.2 million and cash used in financing activities of $15.2 million, partially offset by cash provided by investing activities of $9.0 million. Net cash used in financing activities of $15.2 million resulted from a net decrease in deposits of $16.3 million, partially offset by an increase of $1.1 million in long-term borrowings. Certificates of deposit decreased in the current period primarily due to the renewal of brokered deposits at lesser amounts. Net cash provided by investing activities of $9.0 million was attributable to investment paydowns and loan repayments and payoffs, net of purchases and originations.

Current wording

The Consolidated Statements of Cash Flows present the change in cash from operating, investing and financing activities. During the six months ended September 30, 2025, total cash and cash equivalents decreased $9.6 million to $40.7 million at September 30, 2025, compared to $50.3 million at March 31, 2025, reflecting cash used in operating activities of $1.8 million and cash used in financing activities of $28.9 million, partially offset by cash provided by investing activities of $21.2 million. Net cash used in financing activities of $28.9 million resulted from a net decrease in deposits of $36.2 million, partially offset by an increase of $7.3 million in net FHLB-NY advances. Certificates of deposit decreased in the current period primarily due to a $38.0 million decrease in brokered deposits that were renewed at lesser amounts. Net cash provided by investing activities of $21.2 million was attributable to investment paydowns and loan repayments and payoffs, net of originations.

Previous wording

Capital adequacy is one of the most important factors used to determine the safety and soundness of individual banks and the banking system. In common with all U.S. banks, Carver Federal’s capital adequacy is measured in accordance with the Basel III regulatory framework governing capital adequacy, stress testing, and market liquidity risk. 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 Tier 1 leverage ratio and 12% for its total risk-based capital ratio. At June 30, 2025, the Bank's capital level exceeded the regulatory requirements to be considered "well capitalized" but did not meet its IMCR requirements. The Tier 1 leverage ratio was 8.82%, below the 9% IMCR requirement, and the total risk-based capital ratio was 11.58%, below the 12% IMCR requirement. The Bank is working on taking appropriate actions with the goal of achieving the IMCR targets.

Current wording

Basel III regulatory framework governing capital adequacy, stress testing, and market liquidity risk. 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 Tier 1 leverage ratio and 12% for its total risk-based capital ratio. At September 30, 2025, the Bank's capital level exceeded the regulatory requirements to be considered "well capitalized" but did not meet its IMCR requirements. The Tier 1 leverage ratio was 8.70%, below the 9% IMCR requirement, and the total risk-based capital ratio was 11.44%, below the 12% IMCR requirement. The Bank is working on taking appropriate actions with the goal of achieving the IMCR targets.

Previous wording

Management has established a representation and warranty reserve for losses associated with the repurchase of mortgage loans sold by the Bank to FNMA that we consider to be both probable and reasonably estimable. These reserves are reported in the consolidated statement of financial condition as a component of other liabilities. The table below summarizes changes in our representation and warranty reserves during the three months ended June 30, 2025:

Current wording

Management has established a representation and warranty reserve for losses associated with the repurchase of mortgage loans sold by the Bank to FNMA that we consider to be both probable and reasonably estimable. These reserves are reported in the consolidated statement of financial condition as a component of other liabilities. The table below summarizes changes in our representation and warranty reserves during the six months ended September 30, 2025:

Previous wording

At June 30, 2025, total assets were $713.6 million, reflecting a decrease of $16.4 million, or 2.2%, from total assets of $730.0 million at March 31, 2025. The decrease was primarily attributable to decreases of $6.5 million in cash and cash equivalents and $8.4 million in the Bank's net loan portfolio.

Current wording

At September 30, 2025, total assets were $697.9 million, reflecting a decrease of $32.1 million, or 4.4%, from total assets of $730.0 million at March 31, 2025. The decrease was primarily attributable to decreases of $9.6 million in cash and cash equivalents and $20.5 million in the Bank's net loan portfolio.

Previous wording

Total cash and cash equivalents decreased $6.5 million, or 12.9%, from $50.3 million at March 31, 2025 to $43.8 million at June 30, 2025. The decrease in cash was primarily due to a $16.3 million decrease in total deposits, partially offset by net loan activity of $8.3 million.

Current wording

Total cash and cash equivalents decreased $9.6 million, or 19.1%, from $50.3 million at March 31, 2025 to $40.7 million at September 30, 2025. The decrease in cash was primarily due to a $36.2 million decrease in total deposits, partially offset by net loan activity of $20.3 million and a net increase in advances from FHLB-NY of $7.3 million.

Previous wording

Total investment securities decreased $0.8 million, or 1.7%, to $45.5 million at June 30, 2025, compared to $46.3 million at March 31, 2025 due to scheduled principal payments received of approximately $0.8 million.

Current wording

Total investment securities decreased $0.6 million, or 1.3%, to $45.7 million at September 30, 2025, compared to $46.3 million at March 31, 2025 due to scheduled principal payments received of approximately $1.4 million, partially offset by a $0.9 million decrease in unrealized losses in the available-for-sale portfolio.

Previous wording

Gross portfolio loans decreased $8.4 million, or 1.4%, to $605.3 million at June 30, 2025, compared to $613.7 million at March 31, 2025. The decrease was primarily due to attrition and payoffs of $22.7 million, partially offset by new loan originations of $10.9 million and loan pool purchases of $3.5 million. The level of payoffs and paydowns can be attributed to commercial real estate activity, as some borrowers capitalized on increased property values by selling collateral assets to payoff loans.

Current wording

Gross portfolio loans decreased $20.8 million, or 3.4%, to $592.9 million at September 30, 2025, compared to $613.7 million at March 31, 2025. The decrease was primarily due to attrition and payoffs of $40.5 million, partially offset by new loan originations of $19.2 million. The level of payoffs and paydowns can be attributed to commercial real estate activity, as some borrowers capitalized on increased property values by selling collateral assets to payoff loans.

Previous wording

Total liabilities decreased $15.3 million, or 2.2%, to $685.1 million at June 30, 2025, compared to $700.4 million at March 31, 2025, primarily due to a decrease of $16.3 million in total deposits, partially offset by an increase of $1.1 million in advances from the FHLB-NY and other borrowed money.

Current wording

Total liabilities decreased $29.4 million, or 4.2%, to $671.0 million at September 30, 2025, compared to $700.4 million at March 31, 2025, primarily due to a decrease of $36.2 million in total deposits, partially offset by an increase of $7.3 million in advances from the FHLB-NY and other borrowed money.

Previous wording

Deposits decreased $16.3 million, or 2.5%, to $645.5 million at June 30, 2025, compared to $661.8 million at March 31, 2025. The decrease was primarily related to decreases in certificate of deposit and interest-bearing business checking and money market accounts. Certificates of deposit decreased in the current period due to the renewal of brokered deposits at lesser amounts.

Current wording

Deposits decreased $36.2 million, or 5.5%, to $625.6 million at September 30, 2025, compared to $661.8 million at March 31, 2025. The decrease was primarily related to a $39.8 million decrease in certificates of deposit, partially offset by a $4.2 million increase in money market accounts. Brokered CDs decreased $38.0 million in the current period as maturing deposits were renewed at lesser amounts.

Previous wording

Advances from the FHLB-NY and other borrowed money increased $1.1 million, or 5.4%, to $21.3 million at June 30, 2025, compared to $20.2 million at March 31, 2025. During the first quarter of the current fiscal year, the Bank repaid a $1.8 million 12-month fixed-rate advance secured through the second round of the FHLB-NY 0% Development Advance (ZDA) Program, which provides members with subsidized funding in the form of interest rate credits to assist in originating or purchasing loans that meet an eligibility criteria. The Bank secured a new $2.9 million 12-month fixed-rate ZDA advance on June 30, 2025.

Current wording

Advances from the FHLB-NY and other borrowed money increased $7.3 million, or 36.1%, to $27.5 million at September 30, 2025, compared to $20.2 million at March 31, 2025. During the first quarter of the current fiscal year, the Bank repaid a $1.8 million 12-month fixed-rate advance that had been secured through the second round of the FHLB-NY 0% Development Advance (ZDA) Program. The ZDA Program provides FHLB-NY members with subsidized funding in the form of interest rate credits to assist in originating or purchasing loans that meet an eligibility criteria. The Bank secured two new 12-month fixed-rate ZDA advances totaling $4.1 million during the current fiscal year. In addition, the Bank secured a $5.0 million overnight advance from the FHLB-NY on September 30, 2025 for liquidity purposes.

Previous wording

Total equity decreased $1.1 million, or 3.7%, to $28.5 million at June 30, 2025, compared to $29.6 million at March 31, 2025. The decrease was due to a net loss of $1.2 million, partially offset by a decrease of $0.2 million in unrealized losses on securities available-for-sale for the three month period ended June 30, 2025.

Current wording

Total equity decreased $2.7 million, or 9.1%, to $26.9 million at September 30, 2025, compared to $29.6 million at March 31, 2025. The decrease was due to a net loss of $3.6 million, partially offset by a decrease of $0.9 million in unrealized losses on securities available-for-sale for the six month period ended September 30, 2025.

Previous wording

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and in connection with its overall investment strategy. These instruments involve, to varying degrees, elements of credit, interest rate and liquidity risk. In accordance with GAAP, these instruments are not recorded in the consolidated financial statements. Such instruments primarily include lending obligations, including commitments to originate mortgage and consumer loans and to fund unused lines of credit. At June 30, 2025, the Company had $4.2 million in outstanding commitments to extend credit and standby letters of credit. Such financial instruments are recorded in the consolidated statements of condition when they are funded. The Company records an allowance for credit losses on off-balance sheet credit exposures, unless such commitments are unconditionally cancellable, through the provision for credit losses expense. The allowance for credit losses on off-balance sheet credit exposures as of June 30, 2025 was $13 thousand and is included in Other Liabilities in the consolidated statements of financial condition.

Current wording

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and in connection with its overall investment strategy. These instruments involve, to varying degrees, elements of credit, interest rate and liquidity risk. In accordance with GAAP, these instruments are not recorded in the consolidated financial statements. Such instruments primarily include lending obligations, including commitments to originate mortgage and consumer loans and to fund unused lines of credit. At September 30, 2025, the Company had $4.2 million in outstanding commitments to extend credit and standby letters of credit. Such financial instruments are recorded in the consolidated statements of condition when they are funded. The Company records an allowance for credit losses on off-balance sheet credit exposures, unless such commitments are unconditionally cancellable, through the provision for credit losses expense. The allowance for credit losses on off-balance sheet credit exposures as of September 30, 2025 was $14 thousand and is included in Other Liabilities in the consolidated statements of financial condition.

Previous wording

Comparison of Operating Results for the Three Months Ended June 30, 2025 and 2024

Current wording

Comparison of Operating Results for the Three and Six Months Ended September 30, 2025 and 2024

Previous wording

The Company reported a net loss of $1.2 million for the three months ended June 30, 2025, compared to a net loss of $2.2 million for the comparable prior year quarter. The change in our results was primarily driven by an increase in non-interest income, partially offset by decreases in interest expense and provision for credit losses compared to the prior year period.

Current wording

The Company reported a net loss of $2.4 million for the three months ended September 30, 2025, compared to a net loss of $2.1 million for the comparable prior year quarter. For the six months ended September 30, 2025, the Company reported a net loss of $3.6 million, compared to a net loss of $4.3 million for the prior year period. The change in our results was primarily due to a decrease in net interest income and increase in non-interest expense, partially offset by an increase in non-interest income and recoveries of credit losses compared to the prior year periods.

Previous wording

The following table reflects selected operating ratios for the three months ended June 30, 2025 and 2024 (unaudited):

Current wording

The following table reflects selected operating ratios for the three and six months ended September 30, 2025 and 2024 (unaudited):

Previous wording

The Company’s profitability is primarily dependent upon net interest income and is also affected by the provision for credit losses, non-interest income, non-interest expense and income taxes. Net interest income represents the difference between income on interest-earning assets and expense on interest-bearing liabilities. Net interest income depends primarily upon the volume of interest-earning assets and interest-bearing liabilities and the corresponding interest rates earned and paid. The Company’s net interest income is significantly impacted by changes in interest rate and market yield curves. Net interest income increased $0.1 million, or 1.8%, to $5.6 million for the three months ended June 30, 2025, compared to $5.5 million for the same quarter last year. The increase was primarily attributable to a $0.1 million decrease in interest expense.

Current wording

The Company’s profitability is primarily dependent upon net interest income and is also affected by the provision for credit losses, non-interest income, non-interest expense and income taxes. Net interest income represents the difference between income on interest-earning assets and expense on interest-bearing liabilities. Net interest income depends primarily upon the volume of interest-earning assets and interest-bearing liabilities and the corresponding interest rates earned and paid. The Company’s net interest income is significantly impacted by changes in interest rate and market yield curves. Net interest income decreased $0.9 million, or 15.0%, to $5.1 million for the three months ended September 30, 2025, compared to $6.0 million for the same quarter last year. Net interest income decreased $0.7 million, or 6.1%, to $10.8 million for the six months ended September 30, 2025, compared to $11.5 million for the prior year period.

Previous wording

The following table sets forth certain information relating to the Company’s average interest-earning assets and average interest-bearing liabilities, and their related average yields and costs for the three months ended June 30, 2025 and 2024. Average yields are derived by dividing annualized income or expense by the average balances of assets or liabilities, respectively, for the periods shown. Average balances are derived from daily or month-end balances as available and applicable. Management does not believe that the use of average monthly balances instead of average daily balances represents a material difference in information presented. The average balance of loans includes loans on which the Company has discontinued accruing interest. The yield includes fees, which are considered adjustment to yield.

Current wording

The following table sets forth certain information relating to the Company’s average interest-earning assets and average interest-bearing liabilities, and their related average yields and costs for the three and six months ended September 30, 2025 and 2024. Average yields are derived by dividing annualized income or expense by the average balances of assets or liabilities, respectively, for the periods shown. Average balances are derived from daily or month-end balances as available and applicable. Management does not believe that the use of average monthly balances instead of average daily balances represents a material difference in information presented. The average balance of loans includes loans on which the Company has discontinued accruing interest. The yield includes fees, which are considered adjustment to yield.

Previous wording

Interest income remained relatively flat at $9.2 million for the three months ended June 30, 2025 compared to the prior year period. Interest income on loans increased $0.3 million for the three months ended June 30, 2025, due to an increase in the average yield on the portfolio of 35 basis points. Interest income on mortgage-backed and investment securities were lower due to decreases in average balances and yields compared to the prior year quarter. Interest income on money market investments decreased $0.3 million for the three months ended June 30, 2025 due to a 124 basis point decrease in the average rate and $12.3 million decrease in the average balance of the Bank's interest-bearing account at the Federal Reserve Bank.

Current wording

Interest income decreased $1.2 million for the three and six months ended September 30, 2025, compared to the prior year periods. Interest income on loans decreased $0.9 million and $0.6 million for the three and six months ended September 30, 2025, respectively, due to a $26.0 million, or 4.2%, and $19.5 million, or 3.1% decrease in average loan balances, coupled with a decrease in the average yield on the portfolio of 39 and 2 basis points for the two comparative periods, respectively. Interest income on investment securities was lower due to decreases in average balances and yields compared to the prior year periods. Interest income on money market investments decreased $0.2 million and $0.5 million for the three and six months ended September 30, 2025, respectively, due to a decrease in average interest rates combined with a $9.0 million decrease in the average balance on deposit in the Bank's interest-bearing account at the Federal Reserve Bank.

Previous wording

Interest expense decreased $0.1 million, or 2.7% to $3.6 million for the three months ended June 30, 2025, compared to $3.7 million for the prior year quarter. Interest expense on deposits increased $0.2 million for the three months ended June 30, 2025. While the average yields on interest-bearing checking accounts and certificates of deposit decreased, the average rates on savings and money market accounts were higher compared to the prior year period, as the Bank offered promotional rates in an attempt to attract and retain deposits. Interest expense on advances and other borrowed money decreased $0.3 million for the three months ended June 30, 2025 due to a $27.6 million decrease in average balances of outstanding FHLB-NY advances.

Current wording

Interest expense decreased $0.4 million, or 10.5% to $3.4 million for the three months ended September 30, 2025, compared to $3.8 million for the prior year quarter. For the six months ended September 30, 2025, interest expense decreased $0.5 million, or 6.7% to $7.0 million, compared to $7.5 million for the prior year period. Interest expense on deposits increased $0.1 million, or 1.6%, to $6.4 million for the six months ended September 30, 2025, compared to $6.3 million for the prior year period. While the average rates on certificates of deposit decreased, the average rates on savings and money market accounts for the three month period were higher compared to the prior year, as the Bank offered promotional rates in an attempt to attract and retain deposits. Interest expense on advances and other borrowed money decreased $0.3 million and $0.6 million for the three and six months ended September 30, 2025, respectively, primarily due to decreases of $25.4 million and $26.5 million in the average balances of outstanding FHLB-NY advances compared to the prior year periods, respectively.

Previous wording

The following table summarizes the activity in the ACL for the three months ended June 30, 2025 and 2024 and the fiscal year ended March 31, 2025:

Current wording

The following table summarizes the activity in the ACL for the six months ended September 30, 2025 and 2024 and the fiscal year ended March 31, 2025:

Previous wording

The Company recorded a $26 thousand recovery of credit loss for the three months ended June 30, 2025, compared to a $260 thousand provision for credit loss for the prior year quarter. Net recoveries of $10 thousand were recognized during the first quarter, compared to net charge-offs of $176 thousand in the prior year quarter.

Current wording

The Company recorded a $15 thousand recovery of credit losses for the three months ended September 30, 2025, compared to a $461 thousand provision for credit losses for the prior year quarter. Net charge-offs of $177 thousand were recognized during the second quarter, compared to net charge-offs of $174 thousand for the prior year quarter. For the six months ended September 30, 2025, the Company recorded a $41 thousand recovery of credit losses, compared to a $721 thousand provision for credit losses for the prior year period. Net charge-offs of $167 thousand were recognized during the six months ended September 30, 2025, compared to net charge-offs of $350 thousand in the prior year period.

Previous wording

At June 30, 2025, nonaccrual loans totaled $24.5 million, or 3.43% of total assets, compared to $24.6 million, or 3.37% of total assets at March 31, 2025. The ACL was $6.3 million at June 30, 2025, which represents a ratio of the ACL to nonaccrual loans of 25.84% compared to a ratio of 25.77% at March 31, 2025. The ratio of the ACL to total loans was 1.04% at June 30, 2025, compared to 1.03% at March 31, 2025.

Current wording

At September 30, 2025, nonaccrual loans totaled $26.7 million, or 3.82% of total assets, compared to $24.6 million, or 3.37% of total assets at March 31, 2025. The ACL was $6.1 million at September 30, 2025, which represents a ratio of the ACL to nonaccrual loans of 22.97% compared to a ratio of 25.77% at March 31, 2025. The ratio of the ACL to total loans was 1.03% at September 30, 2025 and March 31, 2025.

Previous wording

In certain circumstances, the Bank may agree to modify the contractual terms of a borrower’s loan, including extension of maturity date, reduction in the stated interest rate, rescheduling of future cash flows, reduction in the face amount of the debt or reduction of past accrued interest. In cases where such modifications are to a borrower experiencing financial difficulty, the loan is placed on nonaccrual status until the Bank determines that future collection of principal and interest is reasonably assured, which generally requires that the borrower demonstrate performance according to the restructured terms for a period of at least six months. At June 30, 2025, modified loans to a borrower experiencing financial difficulty totaled $6.1 million, of which $5.7 million were classified as performing.

Current wording

In certain circumstances, the Bank may agree to modify the contractual terms of a borrower’s loan, including extension of maturity date, reduction in the stated interest rate, rescheduling of future cash flows, reduction in the face amount of the debt or reduction of past accrued interest. In cases where such modifications are to a borrower experiencing financial difficulty, the loan is placed on nonaccrual status until the Bank determines that future collection of principal and interest is reasonably assured, which generally requires that the borrower demonstrate performance according to the restructured terms for a period of at least six months. At September 30, 2025, modified loans to a borrower experiencing financial difficulty totaled $1.4 million, of which $0.9 million were classified as performing.

Previous wording

At June 30, 2025, non-performing assets totaled $24.5 million, or 3.43% of total assets compared to $24.6 million, or 3.38% of total assets at March 31, 2025. The following table sets forth information with respect to the Bank’s non-performing assets at the dates indicated:

Current wording

At September 30, 2025, non-performing assets totaled $26.7 million, or 3.83% of total assets compared to $24.6 million, or 3.38% of total assets at March 31, 2025. The following table sets forth information with respect to the Bank’s non-performing assets at the dates indicated:

Previous wording

Non-interest income increased $0.6 million, or 85.7%, to $1.3 million for the three months ended June 30, 2025, compared to $0.7 million for the prior year quarter due to increases in depository and loan fees and revenue from the Bank's participation in JPMorgan Chase's Empowering Change program.

Current wording

Non-interest income increased $0.6 million, or 100.0%, to $1.2 million for the three months ended September 30, 2025, compared to $0.6 million for the prior year quarter. For the six months ended September 30, 2025, non-interest income increased $1.2 million, or 92.3%, to $2.5 million, compared to $1.3 million for the prior year period. The increase for both periods was due to higher depository and loan fees and revenue from the Bank's participation in JPMorgan Chase's Empowering Change program compared to the prior year periods.

Previous wording

Non-interest expense remained relatively flat at $8.1 million for the three months ended June 30, 2025 compared to the prior year quarter. Employee compensation and FDIC premiums were higher compared to the prior year period, partially offset by reduced data processing and other non-interest expense.

Current wording

Non-interest expense increased $0.6 million, or 7.3%, to $8.8 million for the three months ended September 30, 2025, compared to $8.2 million for the prior year quarter. For the six months ended September 30, 2025, non-interest expense increased $0.5 million, or 3.0%, to $16.9 million, compared to $16.4 million for the prior year period. Consulting fees related to services provided for strategic planning and FDIC premiums were higher compared to the prior year period, partially offset by reduced data processing and net occupancy costs related to building expenses.