Carver’s problems stem from a cease and desist order the OTS issued in February. Among other demands, it requires Carver to achieve and maintain minimum regulatory capital levels, places restrictions on future credit extensions and orders that various procedures be implemented to improve the bank’s asset quality.
Carver spokesman Herley says the losses the bank suffered in its most recent two fiscal years are consistent with challenges all institutions have had to grapple with: an unprecedented recession and declining value of real estate assets.
Adds Cunningham: “The bank is being hit by a decline in borrowers’ disposable income, hurting their ability to pay on mortgages and small business loans.”
Wright has said in a previous interview that regulators are concerned about risk to the bank’s balance sheet from real estate loans for multi-family buildings and mixed-used properties negatively impacted by reductions in valuations across the bank’s geographic markets.
Wright said a significant portion of the bank’s balance sheet includes affordable housing construction loans adversely impacted by the federal government’s decision to suspend activities of Fannie Mae and Freddie Mac. She asserts: “On lending, we’ve shifted our focus to business lending where we’ve developed a specialty in small loans to contractors working for city, state and federal government agencies. In addition we’re building our loans to small grocers in New York City. Given our concentration in real estate loans, I expect this new focus to remain for some time.”