Published: 2021-08-19 00:00:00 ET

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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 interest rate was 3.17% and the total amount of deferred interest was $17 thousand at June 30, 2021.

    Carver relies primarily on dividends from Carver Federal to pay cash dividends to its stockholders, to engage in share repurchase programs and to pay principal and interest on its trust preferred debt obligation. 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.

Regulation

    On October 23, 2015, the Board of Directors of the Company adopted resolutions requiring, among other things, written approval from the Federal Reserve Bank of Philadelphia prior to the declaration or payment of dividends, any increase in debt by the Company, or the redemption of Company common stock.

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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 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, 2021 are not necessarily indicative of the results that may be expected for the year ended March 31, 2022. The consolidated balance sheet at June 30, 2021 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, 2021. 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.

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    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																		2021						2020
Net loss																		$	(2,756)					$	(812)
Weighted average common shares outstanding - basic																		3,382,793						3,700,082
Weighted average common shares outstanding – diluted																		3,382,793						3,700,082
Basic loss per common share																		$	(0.81)					$	(0.22)
Diluted loss per common share																		(0.81)						(0.22)

    For the three months ended June 30, 2021 and 2020, all restricted shares and outstanding stock options were anti-dilutive.

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    On October 28, 2011, the Treasury 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.

On July 9, 2020, the Company received notice that Morgan Stanley International Holdings Inc., 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 United States Department of the Treasury (the "Treasury Department") to repurchase 2,321,286 shares of the common stock of the Company, 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, an institutional investor, notified the Company of its intention to cancel 475 of its holdings of Series D Preferred Stock and convert into 58,093 shares of Common Stock. The conversion 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, 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, at a purchase price of $1,000 per share, in a private placement for gross proceeds of approximately $6.0 million. 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.

In May and June 2021, Prudential Insurance Company of America, an institutional investor, donated 1,100 shares of its holdings of Series D Preferred Stock to a third party in a series of transfers. The third party notified the Company of its intention to cancel the shares and convert into 134,530 shares of Common Stock. The conversions had no impact on the Company's total capital.

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    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, 2021 and 2020:

$ in thousands						At March 31, 2021						Other Comprehensive Income, net of tax						At June 30, 2021
Net unrealized loss on securities available-for-sale						$	(3,175)					$	2,119					$	(1,056)

$ in thousands						At March 31, 2020												Other Comprehensive Loss, net of tax						At June 30, 2020
Net unrealized income (loss) on securities available-for-sale						$	932											$	(1,074)					$	(142)

    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. GAAP requires that securities be classified into three categories: trading, held-to-maturity, and available-for-sale. At June 30, 2021, securities with fair value of $86.0 million, or 93.7%, of the Bank’s total securities were classified as available-for-sale, and securities with amortized cost of $5.8 million, or 6.3%, were classified as held-to-maturity. The Bank had no securities classified as trading at June 30, 2021 and March 31, 2021.

    Other investments as of June 30, 2021 primarily consists of the Bank's investment in a limited partnership Community Capital Fund. These securities are measured at fair value with unrealized holding gains and losses reflected in net income. Other investments totaled $1.0 million at June 30, 2021 and are included in Other Assets on the Statements of Financial Condition.

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    The following tables set forth the amortized cost and fair value of securities available-for-sale and held-to-maturity at June 30, 2021 and March 31, 2021:

						At June 30, 2021
						Amortized						Gross Unrealized
$ in thousands						Cost						Gains						Losses						Fair Value
Available-for-Sale:
Mortgage-backed Securities:
Government National Mortgage Association						$	820					$	29					$	—					$	849
Federal Home Loan Mortgage Corporation						27,443						67						485						27,025
Federal National Mortgage Association						14,583						—						333						14,250
Total mortgage-backed securities						42,846						96						818						42,124
U.S. Government Agency Securities						17,883						—						83						17,800
Corporate Bonds						5,274						—						251						5,023
Muni Securities						17,757						170						196						17,731
Asset-backed Securities						3,335						26						—						3,361
Total available-for-sale						$	87,095					$	292					$	1,348					$	86,039
Held-to-Maturity:
Mortgage-backed Securities:
Government National Mortgage Association						$	634					$	63					$	—					$	697
Federal National Mortgage Association and Other						5,199						213						—						5,412
Total held-to maturity						$	5,833					$	276					$	—					$	6,109

						At March 31, 2021
						Amortized						Gross Unrealized
$ in thousands						Cost						Gains						Losses						Fair Value
Available-for-Sale:
Mortgage-backed Securities:
Government National Mortgage Association						$	987					$	39					$	—					$	1,026
Federal Home Loan Mortgage Corporation						28,458						88						761						27,785
Federal National Mortgage Association						15,120						—						510						14,610
Total mortgage-backed securities						44,565						127						1,271						43,421
U.S. Government Agency Securities						18,744						—						113						18,631
Corporate Bonds						5,274						—						793						4,481
Muni Securities						17,763						—						1,153						16,610
Asset-backed Securities						3,336						28						—						3,364
Total available-for-sale						$	89,682					$	155					$	3,330					$	86,507
Held-to-Maturity:
Mortgage-backed Securities:
Government National Mortgage Association						$	683					$	69					$	—					$	752
Federal National Mortgage Association and Other						7,124						264						—						7,388
Total held-to-maturity						$	7,807					$	333					$	—					$	8,140

There were no sales of available-for-sale and held-to-maturity securities for the three months ended June 30, 2021. The following is a summary regarding proceeds, gross gains and gross losses realized from the sale of securities from the available-for-sale portfolio for the three months ended June 30, 2020.

$ in thousands												June 30, 2020
Proceeds												$	30,190
Gross gains												862

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    The following tables set forth the unrealized losses and fair value of securities in an unrealized loss position at June 30, 2021 and March 31, 2021 for less than 12 months and 12 months or longer:

						At June 30, 2021
						Less than 12 months												12 months or longer												Total
$ in thousands						Unrealized Losses						Fair Value						Unrealized Losses						Fair Value						Unrealized Losses						Fair Value
Available-for-Sale:
Mortgage-backed securities						$	818					$	38,490					$	—					$	—					$	818					$	38,490
U.S. Government Agency securities						—						—						83						17,799						83						17,799
Corporate bonds						251						5,022						—						—						251						5,022
Muni securities						178						7,424						18						2,905						196						10,329
Total available-for-sale securities						$	1,247					$	50,936					$	101					$	20,704					$	1,348					$	71,640

						At March 31, 2021
						Less than 12 months												12 months or longer												Total
$ in thousands						Unrealized Losses						Fair Value						Unrealized Losses						Fair Value						Unrealized Losses						Fair Value
Available-for-Sale:
Mortgage-backed securities						$	1,271					$	39,020					$	—					$	—					$	1,271					$	39,020
U.S. Government Agency securities						—						—						113						18,631						113						18,631
Corporate bonds						793						4,481						—						—						793						4,481
Muni securities						1,153						16,609																		1,153						16,609
Total available-for-sale securities						$	3,217					$	60,110					$	113					$	18,631					$	3,330					$	78,741

    A total of 12 securities had an unrealized loss at June 30, 2021 compared to 15 at March 31, 2021. Mortgage-backed securities, U.S. government agency securities and municipal securities represented 53.7%, 24.8% and 14.4%, respectively, of total available-for-sale securities in an unrealized loss position at June 30, 2021. There were three U.S. government agency securities and one mortgage-backed security that had an unrealized loss position for more than 12 months at June 30, 2021. Given the high credit quality of the securities which are backed by the U.S. government's guarantees, the high credit quality and strong financial performance of the municipal securities and the corporate security which 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, 2021.

    The following is a summary of the amortized cost and fair value of debt securities at June 30, 2021, 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 thousands			Amortized Cost						Fair Value						Weighted Average Yield
Available-for-Sale:
One through five years			3,335						3,361						3.18		%
Five through ten years			5,441						5,410						1.47		%
After ten years			35,473						35,144						1.98		%
Mortgage-backed securities			42,846						42,124						1.36		%
Total			$	87,095					$	86,039					1.69		%
Held-to-maturity:
Mortgage-backed securities			$	5,833					$	6,109					2.5		%

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    The allowance for loan and lease losses ("ALLL") reflects management’s judgment in the evaluation of probable loan losses inherent in the portfolio at the balance sheet date. Management uses a disciplined process and methodology to calculate the ALLL each quarter. To determine the total ALLL, management estimates the reserves needed for each segment of the loan portfolio, including loans analyzed individually and loans analyzed on a pooled basis.

    The general valuation allowance applied to those pooled loans not deemed to be impaired is determined using a three step process:

•Trends of historical losses where the net charge-offs on each category are reviewed over a 20 quarter look back period.

•Assessment of several qualitative factors which are adjusted to reflect changes in the current environment.

•Loss Emergence Period reserve "LEP" which takes into account that borrowers have the potential to have suffered some form of loss-causing event or circumstance but that the lender may be unaware of the event.

During the fourth quarter of fiscal 2020, we changed the impact rating of the economic factors (related to unemployment and inflation rate) and collateral factors from moderate to high across all loan categories. Additionally, the factors related to problem loans (including delinquency and credit quality) in the Commercial Real Estate category were increased from moderate to high. These changes were made as a response to the ongoing and expected stressed economic environment resulting from the COVID-19 pandemic. During fiscal year 2021, we increased our qualitative factors due to the ongoing pandemic. These increases in reserves were offset by decreases in our quantitative reserve analysis as the rolling 20 quarter historical loss look back period has improved for most of our loan categories.

The ALLL is sensitive to risk ratings assigned to individually evaluated loans and economic assumptions and delinquency trends. Individual loan risk ratings are evaluated based on the specific facts related to that loan. Additions to the ALLL are made by charges to the provision for loan losses. Credit exposures deemed to be uncollectible are charged against the ALLL, while recoveries of previously charged off amounts are credited to the ALLL.

    The following is a summary of loans receivable at June 30, 2021 and March 31, 2021:

						June 30, 2021												March 31, 2021
$ in thousands						Amount						Percent						Amount						Percent
Gross loans receivable:
One-to-four family						$	74,090					15.2		%				$	76,313					15.9		%
Multifamily						102,131						21.0		%				103,584						21.6		%
Commercial real estate						148,591						30.6		%				150,114						31.2		%
Business (1)						159,360						32.8		%				148,020						30.8		%
Consumer (2)						2,174						0.4		%				2,439						0.5		%
Total loans receivable						$	486,346					100.0		%				$	480,470					100.0		%
Unamortized premiums, deferred costs and fees, net						1,984												3,079
Allowance for loan losses						(5,214)												(5,140)
Total loans receivable, net						$	483,116											$	478,409

(1) Includes PPP loans and business overdrafts

(2) Includes personal loans and consumer overdrafts

The Bank is participating as a lender in the PPP, which opened on April 3, 2020. As part of the CARES Act, the SBA is authorized to temporarily guarantee loans under this new 7(a) loan program. Under the PPP, small businesses and other entities and individuals can apply for loans from existing SBA lenders and other approved regulated lenders that enroll in the program, subject to numerous limitations and eligibility criteria. Since the PPP loans are fully guaranteed by the SBA, there are no additional ALLL reserves required. As of June 30, 2021, the Bank had approved and funded approximately 419 applications totaling $56.4 million of loans under the PPP. The Bank has begun to receive debt forgiveness payments on PPP loans closed during the first round of the program.

Consistent with regulatory guidance and the provisions of the CARES Act, loans less than 30 days past due at December 31, 2019 that were granted COVID-19 related payment deferrals will continue to be considered current and not be reported as TDRs. As of June 30, 2021, the Bank had received 77 applications for payment deferrals on approximately $77.7 million of loans. This total included 57 commercial loans totaling $71.3 million and 20 residential loans totaling $6.4 million. As of June 30, 2021, there were 11 residential loans remaining on deferment with outstanding principal balances

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totaling $6.6 million. The Bank has been working with the borrowers to determine if there is a risk of any losses associated with repayment and if any additional reserves would have to be allocated to this portfolio.

    The following is an analysis of the allowance for loan losses based upon the method of evaluating loan impairment for the three month periods ended June 30, 2021 and 2020, and the fiscal year ended March 31, 2021.

Three months ended June 30, 2021
$ in thousands						One-to-four family						Multifamily						Commercial Real Estate												Business						Consumer						Unallocated						Total
Allowance for loan losses:
Beginning Balance						$	1,058					$	880					$	907											$	1,855					$	165					$	275					$	5,140
Charge-offs						—						—						—												—						(55)						—						(55)
Recoveries						—						—						—												49						8						—						57
Provision for (recovery of) Loan Losses						28						(54)						(37)												200						26						(91)						72
Ending Balance						$	1,086					$	826					$	870											$	2,104					$	144					$	184					$	5,214
Allowance for Loan Losses Ending Balance: collectively evaluated for impairment						$	1,055					$	826					$	870											$	1,992					$	144					$	184					$	5,071
Allowance for Loan Losses Ending Balance: individually evaluated for impairment						31						—						—												112						—						—						143
Loan Receivables Ending Balance:						$	75,122					$	102,914					$	149,622											$	158,492					$	2,180					$	—					$	488,330
Ending Balance: collectively evaluated for impairment						71,313						102,029						149,430												150,870						2,180						—						475,822
Ending Balance: individually evaluated for impairment						3,809						885						192												7,622						—						—						12,508

At March 31, 2021
$ in thousands						One-to-four family						Multifamily						Commercial Real Estate												Business						Consumer						Unallocated						Total
Allowance for Loan Losses Ending Balance: collectively evaluated for impairment						$	1,026					$	880					$	907											$	1,729					$	165					$	275					$	4,982
Allowance for Loan Losses Ending Balance: individually evaluated for impairment						32						—						—												126						—						—						158
Loan Receivables Ending Balance:						$	78,213					$	106,400					$	148,809											$	147,680					$	2,447					$	—					$	483,549
Ending Balance: collectively evaluated for impairment						74,387						106,031						147,891												139,925						2,447						—						470,681
Ending Balance: individually evaluated for impairment						3,826						369						918												7,755						—						—						12,868

Three months ended June 30, 2020
$ in thousands						One-to-four family						Multifamily						Commercial Real Estate												Business						Consumer						Unallocated						Total
Allowance for loan losses:
Beginning Balance						$	1,055					$	1,011					$	812											$	1,567					$	212					$	289					$	4,946
Charge-offs						—						—						—												(10)						—						—						(10)
Recoveries						—						—						—												—						2						—						2
Provision for (recovery of) Loan Losses						(83)						(100)						143												(46)						(12)						(4)						(102)
Ending Balance						$	972					$	911					$	955											$	1,511					$	202					$	285					$	4,836

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The following is a summary of nonaccrual loans at June 30, 2021 and March 31, 2021.

$ in thousands			June 30, 2021						March 31, 2021
Gross loans receivable:
One-to-four family			$	3,511					$	3,524
Multifamily			885						369
Commercial real estate			192						918
Business			2,211						2,290
Consumer			—						90
Total nonaccrual loans			$	6,799					$	7,191

    Nonaccrual loans generally consist of loans for which the accrual of interest has been discontinued as a result of such loans becoming 90 days or more delinquent as to principal and/or interest payments.  Interest income on nonaccrual loans is recorded when received based upon the collectability of the loan. Troubled debt restructured ("TDR") loans consist of modified loans where borrowers have been granted concessions in regards to the terms of their loans due to financial or other difficulties, which rendered them unable to repay their loans under the original contractual terms.

    At June 30, 2021 and March 31, 2021, other non-performing assets totaled $60 thousand which consisted of other real estate owned comprised of one foreclosed residential property. Other real estate loans is included in other assets in the consolidated statements of financial condition. There were no held-for-sale loans at June 30, 2021 and March 31, 2021.

    Although we believe that substantially all risk elements at June 30, 2021 have been disclosed, it is possible that for a variety of reasons, including economic conditions, certain borrowers may be unable to comply with the contractual repayment terms on certain real estate and commercial loans.

    The Bank utilizes an internal loan classification system as a means of reporting problem loans within its loan categories. Loans may be classified as “Pass,” “Special Mention,” “Substandard,” “Doubtful,” and “Loss.” Loans rated Pass have demonstrated satisfactory asset quality, earning history, liquidity, and other adequate margins of creditor protection. They represent a moderate credit risk and some degree of financial stability. Loans are considered collectible in full, but perhaps require greater than average amount of loan officer attention. Borrowers are capable of absorbing normal setbacks without failure. Loans rated Special Mention have potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank's credit position at some future date. Loans rated Substandard are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Loans rated Doubtful have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, based on currently existing facts, conditions and values, highly questionable and improbable. Loans classified as Loss are those considered uncollectible with insignificant value and are charged off immediately to the allowance for loan losses.

    One-to-four family residential loans and consumer and other loans are rated non-performing if they are delinquent in payments ninety or more days, a troubled debt restructuring with less than six months contractual performance or past maturity. All other one-to-four family residential loans and consumer and other loans are performing loans.

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    At June 30, 2021, and based on the most recent analysis performed in the current quarter, the risk category by class of loans is as follows:

$ in thousands						Multifamily						Commercial Real Estate												Business
Credit Risk Profile by Internally Assigned Grade:
Pass						$	96,418					$	141,098											$	142,288
Special Mention						—						5,494												6,040
Substandard						6,496						3,030												10,164
Total						$	102,914					$	149,622											$	158,492
												One-to-four family												Consumer
Credit Risk Profile Based on Payment Activity:
Performing												$	71,611											$	2,180
Non-Performing												3,511												—
Total												$	75,122											$	2,180

    At March 31, 2021, the risk category by class of loans was as follows:

$ in thousands						Multifamily						Commercial Real Estate												Business
Credit Risk Profile by Internally Assigned Grade:
Pass						$	101,212					$	142,168											$	137,447
Special Mention						—						5,531												1,585
Substandard						5,188						1,110												8,648
Total						$	106,400					$	148,809											$	147,680
												One-to-four family												Consumer
Credit Risk Profile Based on Payment Activity:
Performing												$	74,689											$	2,356
Non-Performing												3,524												91
Total												$	78,213											$	2,447

    The following table presents an aging analysis of the recorded investment of past due loans receivables at June 30, 2021 and March 31, 2021.

.

June 30, 2021
$ in thousands						30-59 Days Past Due						60-89 Days Past Due						90 or More Days Past Due						Total Past Due						Current						Total Loans Receivables
One-to-four family						$	3,478					$	—					$	2,944					$	6,422					$	68,700					$	75,122
Multifamily						—						462						517						979						101,935						102,914
Commercial real estate						2,698						1,199						—						3,897						145,725						149,622
Business						2,618						400						1,096						4,114						154,378						158,492
Consumer						93						—						—						93						2,087						2,180
Total						$	8,887					$	2,061					$	4,557					$	15,505					$	472,825					$	488,330

March 31, 2021
$ in thousands						30-59 Days Past Due						60-89 Days Past Due						90 or More Days Past Due						Total Past Due						Current						Total Loans Receivables
One-to-four family						$	1,188					$	—					$	2,950					$	4,138					$	74,075					$	78,213
Multifamily						798						—						—						798						105,602						106,400
Commercial real estate						5,263						—						—						5,263						143,546						148,809
Business						671						400						271						1,342						146,338						147,680
Consumer						2						33						91						126						2,321						2,447
Total						$	7,922					$	433					$	3,312					$	11,667					$	471,882					$	483,549

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    The following table presents information on impaired loans with the associated allowance amount, if applicable, at June 30, 2021 and March 31, 2021.

						At June 30, 2021																		At March 31, 2021
$ in thousands						Recorded Investment						Unpaid Principal Balance						Associated Allowance						Recorded Investment						Unpaid Principal Balance						Associated Allowance
With no specific allowance recorded:
One-to-four family						$	3,734					$	4,393					$	—					$	3,750					$	4,409					$	—
Multifamily						885						885						—						369						369						—
Commercial real estate						192						192						—						918						918						—
Business						2,239						2,465						—						2,332						2,527						—
With an allowance recorded:
One-to-four family						75						75						31						76						72						32
Business						5,383						5,383						112						5,423						5,423						126
Total						$	12,508					$	13,393					$	143					$	12,868					$	13,718					$	158

    The following tables presents information on average balances of impaired loans and the interest income recognized on a cash basis for the three month periods ended June 30, 2021 and 2020.

												For the Three Months Ended June 30,
																		2021												2020
$ in thousands																														Average Balance						Interest Income Recognized						Average Balance						Interest Income Recognized
With no specific allowance recorded:
One-to-four family																														$	3,742					$	4					$	3,862					$	27
Multifamily																														627						—						374						4
Commercial real estate																														555						—						2,069						—
Business																														2,286						—						2,744						29
With an allowance recorded:
One-to-four family																														75						—						682						—
Business																														5,403						76						622						—
Total																														$	12,688					$	80					$	10,353					$	60

    In certain circumstances, the Bank will modify a loan as part of a TDR under GAAP. Situations around these modifications may include 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. Loans modified in TDRs are placed on nonaccrual status until the Company 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. There were no loan modifications made during the three month periods ended June 30, 2021 and 2020. Total TDR loans at June 30, 2021 and March 31, 2021 were $7.5 million, $1.8 million of which were non-performing at both dates as they were either not consistently performing in accordance with their modified terms or not performing in accordance with their modified terms for at least six months.

    In an effort to proactively resolve delinquent loans, the Bank has selectively extended to certain borrowers concessions such as extensions, rate reductions or forbearance agreements. For the periods ended June 30, 2021 and 2020, there were no modified loans that defaulted within 12 months of modification.

    At June 30, 2021, there were 5 loans in the TDR portfolio totaling $5.7 million that were on accrual status as the Company has determined that future collection of the principal and interest is reasonably assured. These have generally performed according to restructured terms for a period of at least six months. At March 31, 2021, there were 5 loans in the TDR portfolio totaling $5.8 million that were on accrual status.

Transactions With Certain Related Persons

    Federal law requires that all loans or extensions of credit to executive officers and directors must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with the general public and must not involve more than the normal risk of repayment or present other unfavorable features.

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    The aggregate amount of loans outstanding to related parties was $60 thousand at June 30, 2021 and March 31, 2021. There were no advances and principal repayments during the three months ended June 30, 2021.

    Furthermore, loans above the greater of $25,000, or 5% of Carver Federal’s capital and surplus (up to $500,000), to Carver Federal’s directors and executive officers must be approved in advance by a majority of the disinterested members of Carver Federal’s Board of Directors.

    Fair value is an “exit” price, representing the amount that would be received when selling an asset, or paid when transferring a liability, in an orderly transaction between market participants. Fair value is thus a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. Fair value measurements are categorized in a a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

•Level 1— Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

•Level 2— Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

◦Level 3— Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

    A financial instrument’s categorization within this valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

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    The following table presents, by valuation hierarchy, assets that are measured at fair value on a recurring basis as of June 30, 2021 and March 31, 2021, and that are included in the Company’s Consolidated Statements of Financial Condition at these dates:

						Fair Value Measurements at June 30, 2021, Using
$ in thousands						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)						Total Fair Value
Mortgage servicing rights						$	—					$	—					$	151					$	151
Investment securities
Available-for-sale:
Mortgage-backed securities:
Government National Mortgage Association						—						849						—						849
Federal Home Loan Mortgage Corporation						—						27,025						—						27,025
Federal National Mortgage Association						—						14,250						—						14,250
U.S. Government Agency securities						—						17,800						—						17,800
Corporate bonds						—						5,023						—						5,023
Muni securities						—						17,731						—						17,731
Asset-backed securities						—						3,361						—						3,361
Total available-for-sale securities						—						86,039						—						86,039
Total assets						$	—					$	86,039					$	151					$	86,190

						Fair Value Measurements at March 31, 2021, Using
$ in thousands						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)						Total Fair Value
Mortgage servicing rights						$	—					$	—					$	147					$	147
Investment securities
Available-for-sale:
Mortgage-backed securities:
Government National Mortgage Association						—						1,026						—						1,026
Federal Home Loan Mortgage Corporation						—						27,785						—						27,785
Federal National Mortgage Association						—						14,610						—						14,610
U.S. Government Agency securities						—						18,631						—						18,631
Corporate bonds						—						4,481						—						4,481
Muni securities						—						16,610						—						16,610
Asset-backed securities						—						3,364						—						3,364
Total available-for-sale securities						—						86,507						—						86,507
Total assets						$	—					$	86,507					$	147					$	86,654

    Instruments for which unobservable inputs are significant to their fair value measurement (i.e., Level 3) include mortgage servicing rights (“MSR”). Level 3 assets accounted for 0.02% of the Company’s total assets at June 30, 2021 and March 31, 2021.

    The Company reviews and updates the fair value hierarchy classifications on a quarterly basis. Changes from one quarter to the next that are related to the observable inputs to a fair value measurement may result in a reclassification from one hierarchy level to another.

    Below is a description of the methods and significant assumptions utilized in estimating the fair value of available-for-sale securities and MSR:

    Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy.

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    If quoted market prices are not available for the specific security, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. These pricing models primarily use market-based or independently sourced market parameters as inputs, including, but not limited to, yield curves, interest rates, equity or debt prices, and credit spreads. In addition to market information, models also incorporate transaction details, such as maturity and cash flow assumptions. Securities valued in this manner would generally be classified within Level 2 of the valuation hierarchy and primarily include such instruments as mortgage-related securities and corporate debt.

    In the three month period ended June 30, 2021, there were no transfers of investments into or out of each level of the fair value hierarchy.

    In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy. In valuing certain securities, the determination of fair value may require benchmarking to similar instruments or analyzing default and recovery rates. Quoted price information for the MSRs is not available. Therefore, MSRs are valued using market-standard models to model the specific cash flow structure. Key inputs to the model consist of principal balance of loans being serviced, servicing fees and discount and prepayment rates.

    The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with those of other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

    The following table includes a rollforward of assets classified by the Company within Level 3 of the valuation hierarchy for the three months ended June 30, 2021 and 2020:

$ in thousands			Beginning balance, April 1, 2021						Total Realized/Unrealized Gains/(Losses) Recorded in Income (1)						Issuances / (Settlements)						Transfers to/(from) Level 3						Ending balance, June 30, 2021						Change in Unrealized Gains/(Losses) Related to Instruments Held at June 30, 2021
Mortgage servicing rights			147						4						—						—						151						4

$ in thousands			Beginning balance, April 1, 2020						Total Realized/Unrealized Gains/(Losses) Recorded in Income (1)						Issuances / (Settlements)						Transfers to/(from) Level 3						Ending balance, June 30, 2020						Change in Unrealized Gains/(Losses) Related to Instruments Held at June 30, 2020
Mortgage servicing rights			145						7						—						—						152						7

(1) Includes net servicing cash flows and the passage of time.

    For Level 3 assets measured at fair value on a recurring basis as of June 30, 2021 and March 31, 2021, the significant unobservable inputs used in the fair value measurements were as follows:

$ in thousands

Fair Value June 30, 2021

Valuation Technique

Significant Unobservable Inputs

Significant Unobservable Input Value

Mortgage servicing rights

151

Discounted Cash Flow

Weighted Average Constant Prepayment Rate (1)

10.31

%

Option Adjusted Spread ("OAS") applied to Treasury curve

1000 basis points

$ in thousands

Fair Value March 31, 2021

Valuation Technique

Significant Unobservable Inputs

Significant Unobservable Input Value

Mortgage servicing rights

147

Discounted Cash Flow

Weighted Average Constant Prepayment Rate (1)

13.33

%

Option Adjusted Spread ("OAS" applied to Treasury curve

1200 basis points

(1) Represents annualized loan repayment rate assumptions

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    Certain assets are measured at fair value on a non-recurring basis. Such instruments are subject to fair value adjustments under certain circumstances (e.g. when there is evidence of impairment). The following table presents assets and liabilities that were measured at fair value on a non-recurring basis as of June 30, 2021 and March 31, 2021, and that are included in the Company’s Consolidated Statements of Financial Condition at these dates:

						Fair Value Measurements at June 30, 2021 Using
						Quoted Prices in Active Markets for Identical Assets						Significant Other Observable Inputs						Significant Unobservable Inputs						Total Fair Value
$ in thousands						(Level 1)						(Level 2)						(Level 3)
Impaired loans						$	—					$	—					$	5,315					$	5,315
Other real estate owned						—						—						60						$	60

						Fair Value Measurements at March 31, 2021, Using
						Quoted Prices in Active Markets for Identical Assets						Significant Other Observable Inputs						Significant Unobservable Inputs						Total Fair Value
$ in thousands						(Level 1)						(Level 2)						(Level 3)
Impaired loans						$	—					$	—					$	5,341					$	5,341
Other real estate owned						—						—						60						$	60

    For Level 3 assets measured at fair value on a non-recurring basis as of June 30, 2021 and March 31, 2021, the significant unobservable inputs used in the fair value measurements were as follows:

$ in thousands

Fair Value June 30, 2021

Valuation Technique

Significant Unobservable Inputs

Significant Unobservable Input Value

Impaired loans

$

5,315

Appraisal of collateral

Appraisal adjustments

7.5% cost to sell

Other real estate owned

60

Appraisal of collateral

Appraisal adjustments

7.5% cost to sell

$ in thousands

Fair Value March 31, 2021

Valuation Technique

Significant Unobservable Inputs

Significant Unobservable Input Value

Impaired loans

$

5,341

Appraisal of collateral

Appraisal adjustments

7.5% cost to sell

Other real estate owned

60

Appraisal of collateral

Appraisal adjustments

7.5% cost to sell

    The fair values of collateral dependent impaired loans are determined using various valuation techniques, including consideration of appraised values and other pertinent real estate market data.

    Other real estate owned represents property acquired by the Bank in settlement of loans less costs to sell (i.e., through foreclosure, repossession or as an in-substance foreclosure).  These assets are recorded at the lower of their cost or fair value. At the time of acquisition of the real estate owned, the real property value is adjusted to its current fair value. Any subsequent adjustments will be to the lower of cost or fair value.

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    The carrying amounts and estimated fair values of the Bank’s financial instruments and estimation methodologies at June 30, 2021 and March 31, 2021 are as follows:

						June 30, 2021
$ in thousands						Carrying Amount						Estimated Fair Value						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Financial Assets:
Cash and cash equivalents						$	78,727					$	78,727					$	78,727					$	—					$	—
Securities available-for-sale						86,039						86,039						—						86,039						—
Securities held-to-maturity						5,833						6,109						—						6,109						—
Loans receivable						483,116						493,736						—						—						493,736
Accrued interest receivable						2,579						2,579						—						2,579						—
Mortgage servicing rights						151						151						—						—						151
Financial Liabilities:
Deposits						$	568,276					$	567,984					$	419,865					$	148,119					$	—
Other borrowed money						34,093						32,627						—						32,627						—
Accrued interest payable						124						124						—						124						—

						March 31, 2021
$ in thousands						Carrying Amount						Estimated Fair Value						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Financial Assets:
Cash and cash equivalents						$	75,591					$	75,591					$	75,591					$	—					$	—
Securities available-for-sale						86,507						86,507						—						86,507						—
Securities held-to-maturity						7,807						8,140						—						8,140						—
Loans receivable						478,409						487,806						—						—						487,806
Accrued interest receivable						2,640						2,640						—						2,640						—
Mortgage servicing rights						147						147						—						—						147
Financial Liabilities:
Deposits						$	556,559					$	557,049					$	402,843					$	154,206					$	—
Other borrowed money						37,108						37,150						—						37,150						—
Accrued interest payable						3,212						3,212						—						3,212						—

    Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities. In addition, certain non-interest income streams such as gains on sales of residential mortgage and SBA loans, income associated with servicing assets, and loan fees, including residential mortgage originations to be sold and prepayment and late fees charged across all loan categories are also not in scope of the new guidance. Topic 606 is applicable to non-interest revenue streams, such as depository fees, service charges and commission revenues. However, the recognition of these revenue streams did not change significantly upon adoption of Topic 606. Non-interest revenue streams in-scope of Topic 606 are discussed below.

Depository fees and charges

    Depository fees and charges primarily relate to service fees on deposit accounts and fees earned from debit cards and check cashing transactions. Service fees on deposit accounts consist of ATM fees, NSF fees, account maintenance charges and other deposit related fees. The revenue is recognized monthly when the Bank's performance obligations are complete, or as incurred for transaction-based fees in accordance with the fee schedules for the Bank's deposit products and services.

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Loan fees and service charges

    Loan fees and service charges primarily relate to program management fees and fees earned in accordance with the Bank's standard lending fees (such as inspection and late charges). These standard lending fees are earned on a monthly basis upon receipt.

Other non-interest income

    Other non-interest income includes correspondent banking fees, and income associated with an advertising services agreement covering marketing and use of the Bank's office space with a third party. The revenue is recognized on a monthly basis.

Interchange income

    

    The Company earns interchange fees from debit card holder transactions conducted through various payment networks. Interchangee fees from cardholder transactions are recognized daily, concurrently with the transaction processing services provided by an outsource technology solution and are presented on a net basis.

    The following table presents non-interest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three months ended June 30, 2021 and 2020:

												Three Months Ended June 30,
$ in thousands																		2021						2020
Non-interest income
In-scope of Topic 606
Depository fees and charges																		$	603					$	587
Loan fees and service charges																		98						57
Other non-interest income																		876						92
Non-interest income (in-scope of Topic 606)																		1,577						736
Non-interest income (out-of-scope of Topic 606)																		64						947
Total non-interest income																		$	1,641					$	1,683

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    The following table sets forth other non-interest income and expense totals exceeding 1% of the aggregate of total interest income and non-interest income for any of the periods presented:

												Three Months Ended June 30,
$ in thousands																		2021						2020
Other non-interest income:
Correspondent banking fees																		$	865					$	79
Other																		71						83
Total non-interest income																		$	936					$	162
Other non-interest expense:
Advertising																		$	99					$	25
Contributions																		2						84
Legal expense																		79						70
Insurance and surety																		199						158
Audit expense																		112						138
Data lines / internet																		109						112
Retail expenses																		243						184
Loss contingency																		2,100						—
Director's fees																		71						85
Other																		646						543
Total non-interest expense																		$	3,660					$	1,399

    On April 1, 2019, the Company adopted Topic 842 and all subsequent ASUs that modified Topic 842. The Company has operating leases related to its administrative offices, seven retail branches and four ATM centers. Two of the operating leases are for branch locations where the Company had entered into a sale and leaseback transaction. The gain had been calculated utilizing the profit on sale in excess of the present value of the minimum lease payments, and the profit on the sale was deferred from gain recognition to be amortized into income over the terms of the leases in accordance with ASC 840. ASC 842 does not require previous sale and leaseback transactions accounted for under ASC 840 to be reassessed. Because the transactions had no off-market terms, the Company recorded a $5.3 million cumulative effect adjustment to retained earnings to recognize the total deferred gain balance at the adoption date. The implementation of the new standard resulted in the recognition of $20.0 million right-of-use ("ROU") assets and corresponding operating lease liabilities upon adoption. As of June 30, 2021, operating ROU lease assets and related lease liabilities totaled $15.4 million and $16.1 million, respectively.

    As the implicit rates of the Company's existing leases are not readily determinable, the discount rate used in determining the lease liability obligation for each individual lease was the FHLB-NY fixed-rate advance rates based on the remaining lease terms as of April 1, 2019.

    As of June 30, 2021, the Company had $104 thousand and $96 thousand of ROU asset and lease liability, respectively, for finance leases related to equipment. The ROU asset is included in Premises and Equipment, net, and the lease liability is included in Advances from the FHLB-NY and Other Borrowed Money on the statements of financial condition.

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    The following tables present information about the Company's leases and the related lease costs as of and for the three months ended June 30, 2021:

						June 30, 2021
Weighted-average remaining lease term
Operating leases						6.8 years
Finance lease						2.1 years
Weighted-average discount rate
Operating leases						2.94		%
Finance lease						1.78		%

												Three Months Ended June 30,
$ in thousands																		2021						2020
Operating lease expense																		$	712					$	714
Finance lease cost
Amortization of right-of use asset																		17						21
Interest on lease liability																		1						1
Cash paid for amounts included in the measurement of lease liabilities
Operating leases																		686						682
Finance lease																		24						17

    Maturities of lease liabilities at June 30, 2021 are as follows:

$ in thousands						Operating Leases						Finance Leases
Year ending March 31,
2022						$	2,062					$	54
2023						2,619						30
2024						2,674						11
2025						2,458						3
2026						2,449						—
Thereafter						5,616						—
Total lease payments						17,878						98
Interest						(1,761)						(2)
Lease liability						$	16,117					$	96

Accounting Standards Recently Adopted

On April 1, 2020, the Company adopted ASU No. 2018-13 "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement," which improved the effectiveness of disclosures in the notes to financial statements by facilitating clear communication of the information required by GAAP that is most important to users of an entity's financial statements. The amendments removed the disclosure requirements for (1) transfers between Levels 1 and 2 of the fair value hierarchy, (2) the policy for timing of transfers between levels, and (3) the valuation processes for Level 3 fair value measurements. Additionally, the amendments modified the disclosure requirements for investments in certain entities that calculate net asset value and measurement uncertainty. Finally, the amendments added disclosure requirements for (1) the changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements, and (2) the range and weighted average of significant

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unobservable inputs used to develop Level 3 measurements. The adoption of the standard did not have a material impact on the Company's consolidated statements of financial condition and results of operations.

On April 1, 2021, the Company adopted ASU No. 2019-12 "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes," which was part of the FASB's simplification initiative to reduce complexity, while maintaining or improving the usefulness of information provided to users of financial statements. The amendments in this update simplified the accounting for income taxes and improved consistent application of GAAP by removing certain exceptions and clarifying and amending existing guidance for areas of Topic 740. The adoption of the standard did not have a material impact on the Company's financial statements.

Accounting Standards Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Loss," which updates 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. ASU No. 2016-13 is effective for fiscal years beginning after December 15, 2019 (for the Company, the fiscal year ending March 31, 2021), including interim periods within those fiscal years. In May 2019, the FASB issued ASU No. 2019-05, "Financial Instruments - Credit Losses (Topic 326): Target Transition Relief," to provide transition relief by giving entities an option to irrevocably elect the fair value option for certain financial assets measured at amortized cost upon adoption of ASU 2016-13. In November 2019, the FASB issued ASU No. 2019-10, which extended the CECL implementation date for smaller reporting companies, as defined by the SEC. The new effective date is for fiscal years beginning after December 15, 2022 (for the Company, the fiscal year ending March 31, 2024), including interim periods within those fiscal years. In November 2019, the FASB issued ASU No. 2019-11, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses," to amend or clarify guidance regarding expected recoveries for purchased financial assets with credit deterioration, transition relief for troubled debt restructurings, disclosures related to accrued interest receivables, and financial assets secured by collateral maintenance provisions. The Company is currently in the implementation stage of ASU 2016-13 and has engaged two vendors to assist management in evaluating the requirements of the new standard, modeling requirements and assessment of the impact of the adoption of the new standard on its consolidated statements of financial condition and results of operations.

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