WILLIAM MICHAEL CUNNINGHAM
CEO & SOCIAL INVESTMENT ADVISER
CREATIVE INVESTMENT RESEARCH

COMPANY: Carver Bancorp Inc.
TICKER: CNY (AMEX)
PRICE: $16.77
52-WEEK RANGE: $15.00–$18.12
MARKET CAPITALIZATION: $43.79 million

William Michael Cunningham is CEO and Social Investment Adviser at Creative Investment Research, Inc.,a socially responsible investment research and management firm founded in 1989. Carver Bancorp, Inc. is the holding company for Carver Federal Savings Bank, a federally chartered thrift bank located in Harlem. Mr. Cunningham spoke to Elisa Mala of The New York Sun about why Carver is a solid pick for bankers and investors alike.

What does the company do?

CNY owns Carver Federal Savings Bank, a thrift or savings and loan institution. The institution is one of the few financial institutions in the United States owned by African Americans and serves a predominately minority customer base.

Who are the company’s largest competitors?

Among the company’s competitors are Astoria Financial Corp. and North Fork Bancorp.

Why do you like this particular stock?

The company continues to do well. Carver Bancorp (CNY) has been trading at $17.50 recently. I note that Bob Johnson, the billionaire African American owner of the Charlotte Hornets, just bought MetroBank, a bank in Florida, He may be looking to make additional purchases, and CNY is the premier African-American bank in the U.S.

Even if that doesn’t happen, I like the bank. It has a solid management team, is well capitalized, and has assets based in the strong, if recently less active, Harlem real estate market.

I feel that returns for the bank will eventually move up to the banking industry averages. This, in turn, means that I believe in the financial viability of the growing minority community in New York. Finally, I am confident in the skills of the Carver management team. Overall, I feel minority banks and thrifts are undervalued relative to their non-minority peers — something both I, and, apparently, Bob Johnson believe.

What do you think the stock is worth?

I believe that Carver is an attractive acquisition target and will benefit from the continuing development of the Harlem real estate market. Carver sells for 12x earnings and a price-to-book of less than one (currently 0.90, up from 0.84x in January 2006). My price target is $20.

What are the risks associated with this stock?

Several buyers have attempted to purchase the bank, most recently Kevin Cohee, owner of another African American bank, OneUnited, in Boston. All the buyers have failed. So far.

With interest rates increasing and residential real estate markets slowing, we remain concerned that minority banks may experience difficult asset liability and interest rate risk management conditions in the near future. There have been limited signs of difficulty to date: FDIC insured institutions reported a fifth consecutive year of record earnings in 2005.

Which type of investor is the stock best suited for?

Long term investors. We profiled the stock on September 24, 1998. (Those comments are online at: www.creativeinvest.com/cirminvadv/netnoir.html) At the time, the stock was trading at nine and an eighth. What we said then applies now: this is stock for socially responsible investors with a long–term time horizon, I’d say five years.

I like to think of this stock as a growth stock, as in demographic growth, with value undertones. As I mentioned, minority banks are undervalued. I think their valuations will catch up to the rest of the banking industry over the next five years, as demographic trends come into play.