CARVER BANCORP INC (CARV)·Q2 2016 Earnings Summary

Executive Summary

• Q2 FY2016 delivered a net loss of $165 thousand (EPS: -$0.04) on higher loan loss provisioning tied to rapid loan growth; net interest margin expanded to 3.37% from 3.14% in Q1 and 3.04% in the prior-year quarter, reflecting improved asset yields and mix .
• Lending growth accelerated: loans receivable, net rose to $558.2M, with management highlighting a $71M (+14%) intra-quarter loan portfolio increase and total assets up 10% QoQ to $736.7M; core deposits increased 4% to $344M, supporting funding for growth .
• Credit quality improved: non-performing assets ratio fell to 1.74% and non-performing loans ratio to 1.15%; allowance coverage of NPLs rose to 70.5% vs 53.3% at March 31, 2015 .
• Regulatory overhang abated: the Federal Reserve lifted its Cease & Desist Order (effective Sep 24, 2015), and the Company is no longer in “troubled condition,” reinforcing capital strength (Tier 1 leverage ratio 10.35%) and operational progress .
• Wall Street consensus (S&P Global) for Q2 FY2016 EPS/revenue was unavailable; no earnings call transcript was found, limiting real-time guidance color and Q&A detail .

What Went Well and What Went Wrong

What Went Well

• Strong loan growth and NIM expansion: “we grew our loan portfolio by $71 million, or 14%, while improving our net interest margin from 3.14% to 3.37%” (CEO Michael T. Pugh) .
• Credit quality trends improved: non-performing assets 1.74% of total assets and non-performing loans 1.15% of loans, with allowance coverage of NPLs at 70.5% .
• Expense discipline: non-interest expense decreased 8.0% YoY to $6.211M, driven by lower delinquent loan/workout costs and reduced compensation/benefits .

What Went Wrong

• Earnings impact from provisioning: provision for loan losses of $643k versus a $713k recovery in prior-year Q2 drove the quarterly net loss; net charge-offs were $178k vs net recoveries of $244k in prior-year Q2 .
• Non-interest income pressure: down 27.6% YoY to $1.131M, reflecting absence of a prior-year $323k CDFI grant and lower depository fees, partially offset by gains on loan sales and higher loan fees .
• Allowance ratio to total loans edged down (0.81% at Sept 30, 2015 vs 0.93% at March 31, 2015), even as NPL coverage improved; highlights the need to monitor reserve adequacy amid rapid portfolio expansion .

Financial Results

Quarterly P&L (oldest → newest)

Q2 YoY Comparison

Key Ratios (oldest → newest)

Balance Sheet and Asset Quality (period-end)

Segment reporting: Not applicable; CARV does not present revenue by segment in these filings .

Guidance Changes

No formal quantitative guidance was issued in Q2 materials; management provided qualitative direction on lending initiatives and operational focus .

Earnings Call Themes & Trends

No Q2 FY2016 earnings call transcript was found; themes are derived from press releases across quarters.

Management Commentary

• “During the quarter, we grew our loan portfolio by $71 million, or 14%, while improving our net interest margin from 3.14% to 3.37%.” (Michael T. Pugh, President & CEO) .
• “Our total assets are now $736.7 million… With a non-performing assets ratio of 1.74%, and a non-performing loans ratio of 1.15%, our credit quality continued to improve… Core deposits increased 4% to $344 million…” .
• “We are also pleased with the Federal Reserve’s recent decision to lift its Cease & Desist Order… Our capital ratios remain strong, with a Tier 1 capital ratio of 10.35%.” .
• “Looking ahead to the rest of fiscal year 2016, Carver is preparing to launch a loan product designed to support consumers and small businesses in need of timely access to capital.” .
• Prior quarter context: “Since June 2014, our loan portfolio has grown $98 million, or 25%… Tier 1 capital ratio of 10.41%.” (Q1 FY2016) .
• Subsequent quarter: “loan portfolio increasing by $39 million, or 7% over the prior quarter… core deposits increased 5% to $361 million… Tier 1 capital ratio of 10.15%.” (Q3 FY2016) .
• Regulatory: “Federal Reserve Bank… has lifted the Order to Cease and Desist… no longer in ‘troubled condition’…” (Oct 1, 2015) .

Q&A Highlights

No Q2 FY2016 earnings call transcript or Q&A was found for CARV, limiting call-based clarifications and tone analysis [Search attempted; none found].

Estimates Context

• S&P Global consensus estimates for Q2 FY2016 EPS and revenue were unavailable due to access limits; therefore, we cannot quantify beats/misses versus Street for this quarter. Values would have been retrieved from S&P Global if accessible.
• Given the absence of consensus, investors should focus on internal trajectory: strong net interest income growth, NIM expansion, and improving credit metrics, offset by provisioning and softer non-interest income .

Key Takeaways for Investors

• Rapid loan growth and expanding NIM are the core positives; watch for sustainability of NIM gains as asset mix evolves and deposit costs normalize .
• Provisioning drove the loss; management indicates provisions reflect portfolio growth rather than deteriorating credit—monitor reserve build relative to NPL trends and coverage ratios .
• Expense control is evident; continued operational efficiencies and lower workout costs are improving the efficiency ratio—assess durability as scale increases .
• Regulatory risk has diminished meaningfully with the Fed’s C&D termination; this can support investor confidence and strategic flexibility going forward .
• Funding base strengthening via core deposits supports loan growth; track deposit mix and pricing to ensure funding cost discipline persists .
• Near-term trading: absent Street estimates/call color, catalysts include evidence of sustained NIM expansion, further credit quality improvements, and execution on planned small-ticket loan product launch .
• Medium-term thesis: community/MWBE lending focus within NYC footprint, improving capital/credit profile, and operating leverage from scale and technology upgrades—balanced by the need to grow fee income and maintain prudent provisioning amid rapid loan growth .