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<SEC-DOCUMENT>0000882377-03-001084.txt : 20030630
<SEC-HEADER>0000882377-03-001084.hdr.sgml : 20030630
<ACCEPTANCE-DATETIME>20030630151009
ACCESSION NUMBER:		0000882377-03-001084
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		13
CONFORMED PERIOD OF REPORT:	20030331
FILED AS OF DATE:		20030630

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CARVER BANCORP INC
		CENTRAL INDEX KEY:			0001016178
		STANDARD INDUSTRIAL CLASSIFICATION:	SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035]
		IRS NUMBER:				133904174
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0331

	FILING VALUES:
		FORM TYPE:		10-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-13007
		FILM NUMBER:		03764059

	BUSINESS ADDRESS:	
		STREET 1:		75 W 125TH ST
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10027-4512
		BUSINESS PHONE:		2128764747

	MAIL ADDRESS:	
		STREET 1:		75 W 125TH ST
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10027-4512
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>d149191.txt
<DESCRIPTION>CARVER BANCORP, INC.
<TEXT>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                _________________
                                    FORM 10-K

                  FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
           SECTIONS 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934


/X/  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                    FOR THE FISCAL YEAR ENDED MARCH 31, 2003

                                       OR

/ /  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
     EXCHANGE ACT OF 1934


              FOR THE TRANSITION PERIOD FROM _________ TO _________

                         Commission File Number: 0-21487

                              CARVER BANCORP, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

             DELAWARE                                    13-3904174
 (State or Other Jurisdiction of            (I.R.S. Employer Identification No.)
  Incorporation or Organization)

75 WEST 125TH STREET, NEW YORK, NEW YORK                              10027
(Address of Principal Executive Offices)                           (Zip Code)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 876-4747
           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

COMMON STOCK, PAR VALUE $.01 PER SHARE               AMERICAN STOCK EXCHANGE
           (Title of Class)                         (Name of each Exchange on
                                                       which registered)

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                                      NONE

 Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. /X/ Yes / / No

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /

    Indicate by check mark whether the registrant is an  accelerated filer (as
defined in Rule 12b-2 of the Act).
/ /  Yes    /X/  No

    As of May 31, 2003, there were 2,286,133 shares of common stock of the
registrant outstanding. The aggregate market value of the Registrant's common
stock held by non-affiliates (based on the closing sales price of $15.30 per
share of the registrant's common stock on May 31, 2003) was approximately $35.0
million.

                      DOCUMENTS INCORPORATED BY REFERENCE:

Portions of registrant's proxy statement for the Annual Meeting of stockholders
for the fiscal year ended March 31, 2003 (the "Proxy Statement") are
incorporated by reference into Part III of this Form 10-K.

<PAGE>

                              CARVER BANCORP, INC.
                         2003 ANNUAL REPORT ON FORM 10-K
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
     Part I                                                                                        Page
     ------                                                                                        ----
<S>                                                                                                <C>
     Item 1.     Business........................................................................    2
     Item 2.     Properties......................................................................   28
     Item 3.     Legal Proceedings...............................................................   28
     Item 4.     Submission of Matters to a Vote of Security Holders.............................   30

     Part II
     -------

     Item 5.     Market for Carver Bancorp, Inc. Common
                   Equity and Related Stockholder Matters........................................   31
     Item 6.     Selected Financial Data.........................................................   32
     Item 7.     Management's Discussion and Analysis of Financial
                   Condition and Results of Operations...........................................   33
     Item 7A.    Quantitative and Qualitative Disclosures about Market Risk......................   44
     Item 8.     Financial Statements and Supplementary Data.....................................   45
     Item 9.     Changes in and Disagreements with Accountants on
                   Accounting and Financial Disclosure...........................................   77

     Part III
     --------

     Item 10.    Directors and Executive Officers of Carver Bancorp, Inc.........................   77
     Item 11.    Executive Compensation..........................................................   77
     Item 12.    Security Ownership of Certain Beneficial Owners
                   and Management and Related Stockholder Matters................................   77
     Item 13.    Certain Relationships and Related Transactions..................................   77
     Item 14.    Controls and Procedures.........................................................   77

     Part IV
     -------

     Item 15.    Exhibits, Financial Statement Schedules and Reports on
                   Form 8-K......................................................................   78

     SIGNATURES  ................................................................................   79

     CERTIFICATIONS..............................................................................   80

     EXHIBIT INDEX...............................................................................  E-1
</TABLE>

<PAGE>

                           FORWARD-LOOKING STATEMENTS

         Statements contained in this Annual Report on Form 10-K which are not
historical facts are forward-looking statements as that term is defined in the
Private Securities Litigation Reform Act of 1995, and may be identified by the
use of such words as "believe," "expect," "anticipate," "intend," "should,"
"could," "planned," "estimated," "potential" and similar terms and phrases.
These forward-looking statements consist of estimates with respect to the
financial condition, results of operations and business of the Company (as
defined below) that are subject to various risks and uncertainties which could
cause actual results to differ materially from these estimates due to a number
of factors. Factors which could result in material variations include, but are
not limited to, the Company's success in implementing its initiatives, including
expanding its product line, successfully rebranding its image and achieving
greater operating efficiencies; changes in interest rates which could affect net
interest margins and net interest income; competitive factors which could affect
net interest income and non-interest income; the ability of the Company to
originate and purchase loans with attractive terms and acceptable credit
quality; the ability of the Company to realize cost efficiencies; and general
economic conditions which could affect the volume of loan origination, deposit
flows, real estate values, the levels of non-interest income and the amount of
loan losses. The Company assumes no obligation to update these forward-looking
statements to reflect actual results, changes in assumptions or changes in other
factors affecting such forward-looking statements.

                                     PART I


ITEM 1.  BUSINESS

GENERAL DESCRIPTION OF BUSINESS

CARVER BANCORP, INC.

         Carver Bancorp, Inc., a Delaware corporation (on a stand-alone basis,
the "Holding Company"), is the holding company for Carver Federal Savings Bank,
a federally chartered savings bank, and its subsidiaries (collectively, the
"Bank" or "Carver Federal"). Collectively, the Holding Company, the Bank and the
Holding Company's other direct and indirect subsidiaries are referred to herein
as the "Company" or "Carver." On October 17, 1996, the Bank completed its
reorganization into a holding company structure (the "Reorganization") and
became a wholly owned subsidiary of the Holding Company. Pursuant to an
Agreement and Plan of Reorganization, dated May 21, 1996, each share of the
Bank's outstanding common stock was exchanged for one share of common stock of
the Holding Company. The Holding Company conducts business as a unitary savings
and loan holding company, and the principal business of the Holding Company
consists of the operation of its wholly owned subsidiary, the Bank.

         The Holding Company's executive offices are located at the home office
of the Bank at 75 West 125th Street, New York, New York 10027. The Holding
Company's telephone number is (212) 876-4747.

CARVER FEDERAL SAVINGS BANK

         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, at which time the Bank obtained federal deposit insurance and
became a member of the Federal Home Loan Bank (the "FHLB") of New York. The Bank
converted to a federal savings bank in 1986 and changed its name at that time to
Carver Federal Savings Bank. On October 24, 1994, the Bank converted from mutual
to stock form and issued 2,314,275 shares of its common stock at a price of $10
per share.

         Carver Federal was founded as an African-American operated institution
to provide residents of under-served communities with the ability to invest
their savings and obtain credit. Carver Federal's principal business consists of
attracting deposit accounts through its five branch offices and investing those
funds in mortgage loans and other investments permitted to federal savings
banks. Based on asset size as of March 31, 2003, Carver Federal is the largest
African-American operated financial institution in the United States.

COMPANY WEBSITE AND AVAILABILITY OF SECURITIES AND EXCHANGE COMMISSION FILINGS

         The Company makes available on or through its internet website,
WWW.CARVERBANK.COM, its annual report on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K, and all amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934. Such reports are free of charge and are available as soon as reasonably
practicable after the Company electronically files such material with, or
furnishes it to, the Securities and Exchange Commission.


                                       2
<PAGE>


MANAGEMENT STRATEGY

         The Company's general operating strategy focuses on the origination of
commercial, construction, multifamily and, to a lesser extent, secured consumer
and business loans and the efficient use of personnel and technological
resources. During 1999, the Company reduced its previous emphasis on investing
in one- to four-family loans in favor of investing in higher margin business
lines, including commercial, construction and multifamily real estate loans. The
Company's current operating strategy consists primarily of: (1) the origination
of commercial construction and multifamily real estate in the Bank's primary
market area; (2) investing funds not utilized for loan originations or purchases
in the purchase of United States Government Agency securities, mortgage-backed
securities and, to a lesser extent, repurchasing the Company's common stock; (3)
expanding its branch network by opening de novo branches and stand-alone ATM
centers; (4) generating fee income by attracting and retaining high transaction
core deposit accounts; and (5) to continue to lower its expense ratio by
efficiently utilizing personnel, branch facilities and alterative delivery
channels (telephone banking, internet, and ATMs) to service its customers. The
Company plans to generate additional fee income by utilizing third party
providers to sell non-deposit investment products and to offer a Carver credit
card.

LENDING ACTIVITIES

         GENERAL. Carver Federal's principal lending activity is the origination
or purchase of mortgage loans for the purpose of purchasing or refinancing one-
to four-family residential, multifamily, and commercial properties. Carver
Federal also originates or participates in loans for the construction or
renovation of commercial properties and residential housing developments and
occasionally originates permanent financing upon completion of construction. In
addition, Carver Federal originates home equity loans and consumer loans secured
by deposits. Carver continued to engage in first-mortgage loan purchases during
the fiscal year ended March 31, 2003 ("fiscal 2003"), which accounted for 42.5%
of loan additions. Loan purchases are used to complement originations.

         LOAN PORTFOLIO COMPOSITION. Gross loans receivable increased by $5.7
million, or 1.9%, to $303.2 million at March 31, 2003, compared to $297.5
million at March 31, 2002. Carver Federal's net loan portfolio as a percentage
of total assets decreased to 57.8% at March 31, 2003, compared to 64.3% at March
31, 2002. One- to four-family mortgage loans totaled $71.7 million, or 23.7% of
Carver Federal's total gross loan portfolio, multifamily loans totaled $131.7
million, or 43.5% of total gross loans, non-residential real estate loans, which
includes commercial and church loans, totaled $79.2 million, or 26.1% of total
gross loans, and construction loans totaled $18.4 million, or 6.1% of total
gross loans. Consumer (credit card loans, personal loans, automobile loans, home
equity loans and home improvement loans) and business loans totaled $2.1
million, or 0.7% of total gross loans. One- to four-family mortgage loans
decreased by $51.1 million, or 41.6%, to $71.7 million at March 31, 2003,
compared to $122.8 million at March 31, 2002. This decrease in one- to
four-family loans is a result of a shift in focus toward multifamily lending,
the sale of newly originated one- to four-family loans in the secondary market
and portfolio repayments through normal amortization and early prepayments.
During fiscal 2003, multifamily real estate loans increased by $13.1 million, or
11.0%, to $131.7 million at March 31, 2003, compared to $118.6 million at March
31, 2002. Non-residential real estate loans (including church loans) increased
by $39.1 million, or 97.5%, to $79.2 million at March 31, 2003, compared to
$40.1 million at March 31, 2002. Construction loans increased by $4.7 million,
or 34.3%, to $18.4 million at March 31, 2003, compared to $13.7 million at March
31, 2002. Consumer and business loans decreased by $203,000, or 8.7%, to $2.1
million at March 31, 2003, compared to $2.3 million at March 31, 2002. The
decrease in consumer and business loans reflects the Bank's continued
de-emphasis on consumer lending resulting from its decision during the fiscal
year ended March 31, 1999 ("fiscal 1999") to discontinue the origination of
unsecured consumer loans.

         Premiums on loans are paid when the effective yield on the loans being
purchased is greater than the current market rate for comparable loans. These
premiums are amortized as the loan is repaid. It is possible that in a declining
interest rate environment the rate or speed at which loans repay may increase
which may have the effect of accelerating the amortization of the premium and
therefore reduce the effective yield of the loan. Premium on loans decreased by
$39,000, or 4.3%, to $867,000 at March 31, 2003, compared to $906,000 at March
31, 2002. The decrease was attributable to the amortization of existing loan
premiums which exceeded any additional premiums recorded on new loans purchased.

         Loans in process increased by $2.9 million, or 73.7%, to $6.8 million
at March 31, 2003, compared to $3.9 million at March 31, 2002. Allowance for
loan losses increased by $30,000, or 0.7%, to $4.2 million at March 31, 2003,
reflecting net charge-offs during fiscal 2003; there were no provisions for loan
losses made during fiscal 2003. See "Asset Quality--Asset Classification and
Allowance for Losses."


                                       3
<PAGE>


         The following table sets forth selected data relating to the
composition of Carver Federal's loan portfolio by type of loan at the dates
indicated.

<TABLE>
<CAPTION>
                                                                   AT MARCH 31,
                             ------------------------------------------------------------------------------------------
                                    2003                  2002                   2001                   2000
                             --------------------  --------------------   --------------------   --------------------
                              Amount    Percent     Amount    Percent      Amount    Percent      Amount    Percent
                             --------- ----------  ---------  ---------   ---------- ---------   --------- ----------
                                                             (DOLLARS IN THOUSANDS)
<S>                          <C>           <C>     <C>           <C>      <C>           <C>      <C>           <C>
Real estate loans:
  One- to four-family        $ 71,735      23.66 % $122,814      41.28 %  $ 157,767     54.71 %  $152,458      55.54 %
  Multifamily                 131,749      43.45    118,589      39.86       83,620     29.00      86,184      31.40
  Non-residential              79,244      26.13     40,101      13.48       36,113     12.52      22,721       8.28
  Construction                 18,377       6.06     13,678       4.60        7,101      2.46       6,393       2.33
  Consumer and business (1)     2,125       0.70      2,328       0.78        3,781      1.31       6,725       2.45
                             --------- ----------  ---------  ---------   ---------- ---------   --------- ----------
Total gross loans             303,230     100.00 %  297,510     100.00 %    288,382    100.00 %   274,481     100.00 %
                                       ==========             =========              =========             ==========
ADD:
Premium on loans                  867                   906                     705                   582
LESS:
Loans in process (2)           (6,838)               (3,936)                 (1,280)               (1,062)
Deferred fees and loan
discounts                        (363)                 (642)                   (819)                 (918)
Allowance for loan losses      (4,158)               (4,128)                 (3,551)               (2,935)
                             ---------             ---------              ----------             ---------
Net loan portfolio           $ 292,738             $289,710                $283,437              $270,148
                             =========             =========              ==========             =========
</TABLE>

                                 AT MARCH 31,
                            ---------------------
                                    1999
                            ---------------------
                             Amount     Percent
                            ----------  ---------
                            (DOLLARS IN THOUSANDS)
Real estate loans:
  One- to four-family       $ 181,320      65.39
  Multifamily                  52,366      18.89
  Non-residential              23,093       8.33
  Construction                 11,047       3.98
 Consumer and business (1)      9,450       3.41
                            ----------  ---------
Total gross loans             277,276     100.00
                                        =========
ADD:
Premium on loans                1,014
LESS:
Loans in process (2)           (2,636)
Deferred fees and loan
discounts                      (1,110)
Allowance for loan losses      (4,020)
                            ----------
Net loan portfolio           $270,524
                            ==========

(1)  Includes automobile loans, personal loans, credit card loans, home equity,
     home improvement loans and business loans.
(2)  Represents undisbursed portion of of outstanding construction loans.


         ONE- TO FOUR-FAMILY RESIDENTIAL LENDING. Traditionally, Carver
Federal's lending activity has been the origination and purchase of loans
secured by first mortgages on existing one- to four-family residences in Carver
Federal's market area. Carver Federal originates and purchases one- to
four-family residential mortgage loans in amounts that range between $35,000 and
$750,000. Approximately 67% of Carver Federal's one- to four-family residential
mortgage loans at March 31, 2003 had adjustable rates and approximately 33% had
fixed rates.

         Carver Federal's one- to four-family residential mortgage loans are
generally for terms of 30 years, amortized on a monthly basis, with principal
and interest due each month. Residential mortgage loans often remain outstanding
for significantly shorter periods than their contractual terms. These loans
customarily contain "due-on-sale" clauses that permit the Bank to accelerate
repayment of a loan upon transfer of ownership of the mortgaged property. Also,
borrowers may refinance or prepay one- to four-family residential loans at their
option without penalty.

         The Bank's lending policies generally limit the maximum loan-to-value
("LTV") ratio on one- to four-family residential mortgage loans secured by
owner-occupied properties to 95% of the lesser of the appraised value or
purchase price, with private mortgage insurance required on loans with LTV
ratios in excess of 80%. Under certain special loan programs, Carver originates
and sells loans secured by single-family homes purchased by first time home
buyers where the LTV ratio may go to 97%.

         Carver Federal's fixed-rate, one- to four-family residential mortgage
loans are underwritten in accordance with applicable guidelines and requirements
for sale to the Federal National Mortgage Association ("Fannie Mae") or the
State of New York Mortgage Agency ("SONYMA") in the secondary market. From time
to time the Bank has sold such loans to Fannie Mae and to SONYMA. The Bank also
originates, to a limited extent, loans underwritten according to Federal Home
Loan Mortgage Corporation ("FHLMC") standards. Loans are sold with limited
recourse on a servicing retained basis to Fannie Mae and on a servicing released
basis to SONYMA. Carver Federal uses several sub-servicing firms to service
mortgage loans, whether held in portfolio or sold with the servicing retained.
At March 31, 2003, the Bank, through its sub-servicers, was servicing $4.1
million of loans for Fannie Mae and FHLMC.

         Carver Federal offers one-year, three-year, five/one-year and
five/three-year adjustable-rate one- to four-family residential mortgage loans.
These loans are retained in Carver Federal's portfolio and are not sold on the
secondary market. They are indexed to the weekly average rate on one-year,
three-year and five-year U.S. Treasury securities, respectively, adjusted to a
constant maturity (usually one year), plus a margin of 275 basis points. The
rates at which interest accrues on these loans are adjustable every one or three
years, generally with limitations on adjustments of two percentage points per
adjustment period and six percentage points over the life of a one-year
adjustable-rate mortgage and five percentage points over the life of a
three-year adjustable-rate mortgage.

         The retention of adjustable-rate loans in Carver Federal's portfolio
helps reduce Carver Federal's exposure to increases in prevailing market
interest rates. However, there are unquantifiable credit risks resulting from
potential increases in costs to borrowers in the event of upward repricing of
adjustable-rate loans. It is possible that during periods of rising interest
rates, the risk of default on adjustable-rate loans may increase due to
increases in interest costs to borrowers. Although adjustable-rate loans allow
the Bank to increase the sensitivity of its interest-earning assets to changes
in interest rates, the extent of this interest rate sensitivity is limited by


                                       4
<PAGE>
periodic and lifetime interest rate adjustment limitations. Accordingly, there
can be no assurance that yields on the Bank's adjustable-rate loans will fully
adjust to compensate for increases in the Bank's cost of funds. Adjustable-rate
loans increase the Bank's exposure to decreases in prevailing market interest
rates, although decreases in the Bank's cost of funds would tend to offset this
effect.

         MULTIFAMILY REAL ESTATE LENDING. At March 31, 2003, multifamily loans
totaled $131.7 million, or 43.5% of Carver Federal's gross loan portfolio. The
largest of these loans outstanding was a $2.4 million loan secured by a 48 unit,
multifamily apartment building located in New York, New York. This loan was
performing at March 31, 2003. The Bank intends to continue its emphasis on
multifamily mortgage lending, which has enabled the Bank to benefit from these
higher yielding loans compared to lower yielding one- to four- family loans. In
addition, Carver Federal has expanded its presence in the multifamily lending
market in the New York City area. Carver Federal offers competitive rates with
flexible terms that make the product attractive to borrowers. Multifamily
property lending entails additional risks compared to one- to four-family
residential lending. For example, such loans are dependent on the successful
operation of the real estate project and can be significantly impacted by supply
and demand conditions in the market for multifamily residential units.

         Carver Federal's multi-family product guidelines generally require that
the maximum LTV not exceed 75% while "cash out" refinances are limited to 65%
LTV based on the appraised value. The Bank generally requires a debt coverage
ratio ("DCR") of at least 1.3, which requires the properties to generate cash
flow after expenses and allowances in excess of the principal and interest
payment. The regulatory maximum for loans to one borrower is $6.7 million.
Carver Federal originates multifamily mortgage loans, the predominance of which
are adjustable rate loans that generally amortize on the basis of a 15-, 20-,
25- or 30-year period but require a balloon payment after the first five years,
or the borrower may have an option to extend the loan for two additional
five-year periods. The Bank, on a case-by-case basis, originates ten-year fixed
rate loans.

         To help ensure continued collateral protection and asset quality for
the term of multifamily real estate loans, Carver Federal employs (with the
assistance of an independent consulting firm) a risk-rating system. Under the
risk-rating system, all multifamily real estate loans with balances over
$250,000 are risk rated. Separate multifamily real estate loan portfolio reviews
are performed annually resulting in written management summary reports.

         NON-RESIDENTIAL REAL ESTATE LENDING. At March 31, 2003, non-residential
real estate mortgage loans (including loans to churches) totaled $79.2 million,
or 26.1% of the gross loan portfolio. Carver Federal originates non-residential
real estate first mortgage loans in its market area. At March 31, 2003, the
largest non-residential loan outstanding was a $2.8 million loan secured by a
retail/office building located in New York, New York. This loan was performing
at March 31, 2003. Carver Federal's non-residential real estate lending activity
consists predominantly of loans for the purpose of purchasing or refinancing
office, mixed-use (properties used for both commercial and residential purposes
but predominantly commercial), retail and church buildings in its market area.
Non-residential real estate lending entails additional risks compared with one-
to four-family residential lending. For example, such loans typically involve
large loan balances to single borrowers or groups of related borrowers, and the
payment experience on such loans typically is dependent on the successful
operation of the real estate project. Carver Federal's maximum LTV on
non-residential real estate mortgage loans is 75%, and "cash out" refinances are
limited to 65% LTV based on the appraised value. The Bank generally requires a
DCR of at least 1.3. The Bank requires the assignment of rents of all tenants'
leases in the property which serves as security for the mortgage.

         To help ensure continued collateral protection and asset quality for
the term of the non-residential real estate loans, Carver Federal employs (with
the assistance of an independent consulting firm) a risk-rating system. Under
the risk-rating system, all non-residential real estate loans with balances over
$250,000 are risk rated. Independent third party non-residential loan portfolio
reviews are performed at least annually resulting in written management summary
reports.

         Historically, Carver Federal has been a New York City area leader in
the origination of loans to churches. At March 31, 2003, loans to churches
totaled $15.4 million, or 5.1% of the Bank's gross loan portfolio. These loans
generally have five-, seven- or ten-year terms with 15-, 20- or 25-year
amortization periods and a balloon payment due at the end of the term, and
generally have no greater than a 60% LTV ratio. At March 31, 2003, the largest
permanent church loan was a $2.0 million loan secured by a building located in
New York, New York. This loan was performing at March 31, 2003. The Bank
provides construction financing for churches and generally provides permanent
financing upon completion of construction. Under the Bank's current lending
policies, the maximum loan amount for such lending is $1.0 million, but larger
loan amounts are considered on a case-by-case basis. There are currently 25
church loans in the Bank's portfolio.

         Loans secured by real estate owned by religious organizations generally
are larger and involve greater risks than one- to four-family residential
mortgage loans. Because payments on loans secured by such properties are often
dependent on voluntary contributions by members of the church's congregation,
repayment of such loans may be subject to a greater extent to adverse conditions
in the economy. The Bank seeks to minimize these risks in a variety of ways,
including reviewing the church's financial condition, limiting the size of such
loans and establishing the quality of the collateral securing such loans. The
Bank determines the appropriate amount and type of security for such loans based
in part upon the governance structure of the particular organization, the length
of time the church has been established in the community and a cash flow
analysis of the church to determine its ability to service the proposed loan.
Carver Federal will obtain a first mortgage on the underlying real property and
usually requires personal

                                       5
<PAGE>
guarantees of key members of the congregation and/or key person life insurance
on the pastor of the congregation and may also require the church to obtain key
person life insurance on specific members of the church's leadership. Asset
quality in the church loan category has been exceptional throughout Carver
Federal's history. Management believes that Carver Federal remains a leading
lender to churches in its market area.

         CONSTRUCTION LENDING. The Bank originates construction loans for new
construction and renovation of churches, multi-family buildings, residential
developments, community service facilities and affordable housing programs.
Carver Federal also offers construction loans to qualified individuals and
developers for new construction and renovation of one- to four-family residences
in the Bank's market area. The Bank's construction loans generally have
adjustable interest rates and are underwritten in accordance with the same
standards as the Bank's mortgage loans on existing properties. The loans provide
for disbursement in stages as construction is completed. Construction terms are
usually from 12 to 24 months, during which period the borrower is required to
make monthly payments of interest on the outstanding loan balance. Borrowers
must satisfy all credit requirements that apply to the Bank's permanent mortgage
loan financing for the subject property. Carver Federal has established
additional criteria for construction loans to include an engineer's review on
all construction budgets in excess of $500,000 and appropriate interest reserves
for loans in excess of $250,000.

         Construction financing generally is considered to involve a higher
degree of risk of loss than long-term financing on improved, occupied real
estate. Risk of loss on a construction loan is dependent largely upon the
accuracy of the initial estimate of the property's value at completion of
construction or development and the estimated cost (including interest) of
construction. During the construction phase, a number of factors could result in
delays and cost overruns. If the estimate of construction costs proves to be
inaccurate, the Bank may be required to advance funds beyond the amount
originally committed to permit completion of the development. If the estimate of
value proves to be inaccurate, the Bank may be confronted, at or prior to the
maturity of the loan, with a project having a value that is insufficient to
assure full repayment. The ability of a developer to sell developed lots or
completed dwelling units will depend on, among other things, demand, pricing,
availability of comparable properties and economic conditions. The Bank has
sought to minimize this risk by limiting construction lending to qualified
borrowers in the Bank's market areas, limiting the aggregate amount of
outstanding construction loans and imposing a stricter LTV ratio requirement
than that required for one- to four-family mortgage loans.

         At March 31, 2003, the Bank had $18.4 million (including $6.8 million
of committed but undisbursed funds) in construction loans outstanding,
comprising 6.1% of the Bank's total gross loan portfolio. At March 31, 2003, the
largest construction loan was on a retail building for $2.0 million located in
New York, New York. At March 31, 2003, this loan was performing.

         CONSUMER AND BUSINESS LOANS. At March 31, 2003, the Bank had
approximately $2.1 million in consumer and business loans, or 0.7% of the Bank's
gross loan portfolio. The secured loans in this portfolio were either secured by
deposits at the Bank and homes. At March 31, 2003, $521,000, or 24.5% of all
consumer and business loans, were secured and $1.6 million, or 75.5%, were
unsecured.

         Consumer loans generally involve more risk than first mortgage loans.
Loan collections are dependent on the borrower's continuing financial stability,
and thus are more likely to be adversely affected by job loss, divorce, illness
or personal bankruptcy. Further, the application of various federal and state
laws, including federal and state bankruptcy and insolvency laws, may limit the
amount which can be recovered. These loans may also give rise to claims and
defenses by a borrower against Carver Federal, and a borrower may be able to
assert claims and defenses against Carver Federal which it has against the
seller of the underlying collateral. In underwriting secured consumer loans
other than secured credit cards, Carver Federal considers the borrower's credit
history, an analysis of the borrower's income, expenses and ability to repay the
loan and the value of the collateral. The underwriting for secured credit cards
only takes into consideration the value of the underlying collateral. See "Asset
Quality--Non-performing Assets."

         At March 31, 2003, the Bank had $385,000 in unsecured business loans.
During the fourth quarter of fiscal 1999, the Bank discontinued the origination
of unsecured commercial business loans. The Bank continues to make a limited
number of commercial business loans that are secured in full by passbook and/or
certificate of deposit accounts.

         LOAN PROCESSING. Carver Federal's loan originations are derived from a
number of sources, including referrals by realtors, builders, depositors,
borrowers and mortgage brokers, as well as walk-in customers. Loans are
originated by the Bank's personnel who receive a salary. Loan application forms
are available at each of the Bank's offices. All applications are forwarded to
the Bank's Lending Department located in the main office.

         Carver Federal has established underwriting standards for multifamily
and non-residential real estate. A non-residential real estate loan application
is completed for all multifamily and non-residential properties which the Bank
finances. Prior to loan approval, the property is inspected by a loan officer,
who will prepare a property inspection report. As part of the loan approval
process, consideration is given to the appraisal, location, accessibility,
stability of neighborhood, environmental assessment, personal credit history of
the applicant(s) and the financial capacity of the applicant(s).

         Upon receipt of a completed loan application from a prospective
borrower, a credit report and verifications are ordered to verify specific
information relating to the loan applicant's income and credit standing. It is
the Bank's policy to obtain an appraisal of

                                       6
<PAGE>

the real estate intended to secure a proposed mortgage loan from an independent
fee appraiser approved by the Bank.

         It is Carver Federal's policy to record a lien on the real estate
securing the loan and to obtain a title insurance policy which insures that the
property is free of prior encumbrances. Borrowers must also obtain hazard
insurance policies prior to closing and, when the property is in a flood plain
as designated by the Department of Housing and Urban Development, paid flood
insurance policies must be obtained. Most borrowers are also required to advance
funds on a monthly basis, together with each payment of principal and interest,
to a mortgage escrow account from which the Bank makes disbursements for items
such as real estate taxes and hazard insurance.

         LOAN APPROVAL. Except for loans in excess of $1.5 million, mortgage
loan approval authority has been delegated by the Bank's Board of Directors
("Board") to the Bank's Management Loan Committee, which consists of certain
members of executive management, and to the Bank's Asset Liability and Interest
Rate Risk Committee, a committee of the Board. All one- to four-family mortgage
loans that conform to Fannie Mae standards and limits may be approved by the
Residential Mortgage Loan Underwriter. Loans above $1.5 million as well as any
loan that represents an exception to the Bank's lending policies must be
approved by the full Board.

         LOANS TO ONE BORROWER. Under the loans-to-one-borrower limits of the
Office of Thrift Supervision ("OTS"), with certain limited exceptions, loans and
extensions of credit to a single or related group of borrowers outstanding at
one time generally may not exceed 15% of the unimpaired capital and surplus of a
savings bank. See "Regulation and Supervision-Federal Banking Regulation-Loans
to One Borrower Limitations." At March 31, 2003, the maximum loan under this
test would be $6.7 million. At March 31, 2003 there were no loans that exceed
the $6.7 million limit.

         LOAN SALES. Originations of one- to four-family real estate loans are
generally made on properties located within the New York City metropolitan area,
although Carver Federal does occasionally fund loans secured by property in
other areas. All such loans, however, satisfy the Bank's underwriting criteria
regardless of location. The Bank continues to offer one- to four-family
fixed-rate mortgage loans in response to consumer demand but requires that such
loans satisfy guidelines of either Fannie Mae or SONYMA to provide opportunity
for subsequent sale in the secondary market as desired to manage interest rate
risk exposure.

         LOAN PURCHASES. During fiscal 2003 Carver Federal purchased a total of
$42.3 million of mortgage loans, consisting of performing multifamily and
adjustable-rate one- to four-family mortgage loans to supplement its origination
efforts. This represented 42.5% of Carver Federal's net addition to its loan
production during fiscal 2003. The Bank purchases loans in order to increase
interest income and to manage its liquidity position. The Bank continues to
shift its loan production emphasis to take advantage of the higher yields and
better interest rate risk characteristics available on multifamily and
non-residential real estate mortgage loans as well as to increase its
participation in multifamily and non-residential real estate mortgage loans with
New York area lenders. Loans purchased in fiscal 2003 decreased $2.9 million, or
6.5%, from loan purchases of $45.2 million during the fiscal year ended March
31, 2002 ("fiscal 2002").

         The following table sets forth certain information with respect to
Carver Federal's loan originations, purchases and sales during the periods
indicated.

<TABLE>
<CAPTION>
                                                                   YEAR ENDED MARCH 31,
                                      -----------------------------------------------------------------------------
                                                 2003                      2002                      2001
                                      -------------------------   -----------------------   -----------------------
                                         Amount        Percent      Amount       Percent      Amount       Percent
                                      --------------  ---------   ------------  ---------   ------------  ---------
                                                                  (DOLLARS IN THOUSANDS)
<S>                                         <C>           <C>         <C>           <C>         <C>           <C>
Loans originated:
   One- to four-family                      $ 5,985       6.02 %      $ 4,144       3.78 %      $ 2,274       3.70 %
   Multifamily                               19,979      20.10         27,225      24.80         15,747      25.70
   Non-residential                           24,524      24.67         25,583      23.31         12,182      19.88
   Construction                               9,006       9.06          8,910       8.12              -       0.00
   Consumer and business (1)                    101       0.10             53       0.05            320       0.52
                                      --------------  ---------   ------------  ---------   ------------  ---------
Total loans originated                       59,595      59.95         65,915      60.06         30,523      49.80
Loans purchased (2)                          42,260      42.51         45,203      41.18         30,922      50.46
Loans sold (3)                               (2,453)     (2.47)        (1,361)     (1.24)          (160)     (0.26)
                                      --------------  ---------   ------------  ---------   ------------  ---------
Net additions to loan portfolio            $ 99,402     100.00 %     $109,757     100.00 %     $ 61,285     100.00 %
                                      ==============  =========   ============  =========   ============  =========
</TABLE>

(1)  Comprised of auto, credit card, personal and home equity.
(2)  Comprised primarily of one- to four-family and multi-family mortgage loans.
(3)  Comprise primarily of one- to four-family mortgage loans and automobile
     loans.



                                       7
<PAGE>
         Loan originations were $59.6 million in fiscal 2003, compared to $65.9
million in fiscal 2002 and $30.5 million in fiscal 2001. The decline in loan
originations in fiscal 2003 is due primarily to highly competitive market
conditions.

         Loans purchased by the Bank entail certain risks not necessarily
associated with loans the Bank originates. The Bank's purchased loans are
generally acquired without recourse and in accordance with the Bank's
underwriting criteria for originations. In addition, purchased loans have a
variety of terms, including maturities, interest rate caps and indices for
adjustment of interest rates, that may differ from those offered at the time by
the Bank in connection with the loans the Bank originates. Finally, the market
areas in which the properties that secure the purchased loans are located are
subject to economic and real estate market conditions that may significantly
differ from those experienced in Carver Federal's market area. There can be no
assurance that economic conditions in these out-of-state areas will not
deteriorate in the future, resulting in increased loan delinquencies and loan
losses among the loans secured by property in these areas. It is important to
note that the Bank initially seeks to purchase loans in its market area,
however, the Bank will purchase loans outside its market area to meet its
financial objectives.

         In an effort to reduce these risks, with its existing personnel and
through the use of a quality control/loan review firm, the Bank has sought to
ensure that purchased loans satisfy the Bank's underwriting standards and do not
otherwise have a higher risk of collection or loss than loans originated by the
Bank. A Lending Department officer monitors the inspection and confirms the
review of each purchased loan. Carver Federal also requires appropriate
documentation and further seeks to reduce its risk by requiring, in each
buy/sell agreement, a series of warranties and representations as to the
underwriting standards and the enforceability of the related legal documents.
These warranties and representations remain in effect for the life of the loan.
Any misrepresentation must be cured within ninety (90) days of discovery or
trigger certain repurchase provisions in the buy/sell agreement.

         INTEREST RATES AND LOAN FEES. Interest rates charged by Carver Federal
on mortgage loans are primarily determined by competitive loan rates offered in
its market area and minimum yield requirements for loans purchased by Fannie Mae
and SONYMA. Mortgage loan rates reflect factors such as prevailing market
interest rate levels, the supply of money available to the savings industry and
the demand for such loans. These factors are in turn affected by general
economic conditions, the monetary policies of the federal government, including
the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), the general supply of money in the economy, tax policies and
governmental budget matters.

         Carver Federal charges fees in connection with loan commitments and
originations, rate lock-ins, loan modifications, late payments, changes of
property ownership and for miscellaneous services related to its loans. Loan
origination fees are calculated as a percentage of the loan principal. The Bank
typically receives fees of between zero and one point (one point being
equivalent to 1% of the principal amount of the loan) in connection with the
origination of fixed-rate and adjustable-rate residential mortgage loans. The
loan origination fee, net of certain direct loan origination expenses, is
deferred and accreted into income over the contractual life of the loan using
the interest method. If a loan is prepaid, refinanced or sold, all remaining
deferred fees with respect to such loan are taken into income at such time.

         In addition to the foregoing fees, Carver Federal receives fees for
servicing loans for others, which in turn generally are sub-serviced for Carver
Federal by a third party servicer. Servicing activities include the collection
and processing of mortgage payments, accounting for loan repayment funds and
paying real estate taxes, hazard insurance and other loan-related expenses out
of escrowed funds. Income from these activities varies from period to period
with the volume and type of loans originated, sold and purchased, which in turn
is dependent on prevailing market interest rates and their effect on the demand
for loans in the Bank's market area.

         LOAN MATURITY SCHEDULE. The following table sets forth information at
March 31, 2003 regarding the dollar amount of loans maturing in Carver Federal's
portfolio, including scheduled repayments of principal, based on contractual
terms to maturity. Demand loans, loans having no schedule of repayments and no
stated maturity, and overdrafts are reported as due in one year or less. The
table below does not include any estimate of prepayments, which significantly
shorten the average life of all mortgage loans and may cause Carver Federal's
actual repayment experience to differ significantly from that shown below.

<TABLE>
<CAPTION>
                              DUE DURING THE YEAR ENDING MARCH 31,
                              ------------------------------------


                                                               DUE THREE       DUE       DUE       DUE
                                                                TO FIVE      FIVE TO    TEN TO    AFTER
                              2004        2005        2006       YEARS      TEN YEARS  20 YEARS  20 YEARS     TOTAL
                              ----        ----        ----       -----      ---------  --------  --------     -----
                                                                    (IN THOUSANDS)
<S>                           <C>        <C>          <C>        <C>           <C>     <C>        <C>        <C>
Real Estate Loans:
  One- to four-family        $  6,424    $ 4,898      $ 6,422    $ 4,675    $    623   $ 2,937    $45,756    $ 71,735
  Multifamily                   5,753      3,831        8,187     35,269      24,035    16,408     38,266     131,749
  Non-residential               5,287      6,622       11,375     26,300      19,605     6,707      3,348      79,244
  Construction                 11,584      5,793        1,000          -           -         -          -      18,377
Consumer and business loans       438         30           23      1,320         158       118         38       2,125
                            ----------  ---------  ----------- ---------- ----------- ---------  --------- -----------
    Total                    $ 29,486    $21,174     $ 27,007   $ 67,564    $ 44,421   $26,170    $87,408    $303,230
                            ==========  =========  =========== ========== =========== =========  ========= ===========
</TABLE>

                                       8
<PAGE>

         The following table sets forth amounts in each loan category at March
31, 2003 that are contractually due after March 31, 2003 and whether such loans
have fixed rates or adjustable interest rates. Scheduled contractual principal
repayments of loans do not necessarily reflect the actual lives of such assets.
The average life of long-term loans is substantially less than their contractual
terms due to prepayments. In addition, due-on-sale clauses in mortgage loans
generally give Carver Federal the right to declare a conventional loan due and
payable in the event, among other things, that a borrower sells the real
property subject to the mortgage and the loan is not repaid. The average life of
mortgage loans tends to increase when current mortgage loan market rates are
substantially higher than rates on existing mortgage loans and tends to decrease
when current mortgage loan market rates are substantially lower than rates on
existing mortgage loans.

<TABLE>
<CAPTION>
                                                            DUE AFTER MARCH 31, 2004
                                                ---------------------------------------------------
                                                    FIXED           ADJUSTABLE           TOTAL
                                                ---------------   ---------------    --------------
                                                                   ( IN THOUSANDS )
<S>                                                   <C>               <C>               <C>
Real Estate Loans:
  One- to four-family                                $  23,445         $  41,866         $  65,311
  Multifamily                                           49,553            76,443           125,996
  Non-residential                                       39,137            34,820            73,957
  Construction                                               -             6,793             6,793
Consumer and business                                    1,686                 -             1,686
                                                ---------------   ---------------    --------------
    Total                                            $ 113,821         $ 159,922         $ 273,743
                                                ===============   ===============    ==============
</TABLE>

Asset Quality

         GENERAL. One of the Bank's key operating objectives has been and
continues to be to maintain a high level of asset quality. Through a variety of
strategies, including, but not limited to, monitoring loan delinquencies,
borrower workout arrangements and marketing of foreclosed properties, the Bank
has been proactive in addressing problem and non-performing assets which, in
turn, has helped to build the strength of the Bank's financial condition. Such
strategies, as well as the Bank's concentration on one- to four-family and
multifamily mortgage lending, the maintenance of sound credit standards for new
loan originations and a strong real estate market, have resulted in the Bank
maintaining a low level of non-performing assets.

         The underlying credit quality of the Bank's loan portfolio is dependent
primarily on each borrower's ability to continue to make required loan payments
and, in the event a borrower is unable to continue to do so, the value of the
collateral should be adequate to secure the loan. A borrower's ability to pay
typically is dependent primarily on employment and other sources of income
which, in turn, is impacted by general economic conditions, although other
factors, such as unanticipated expenditures or changes in the financial markets,
may also impact the borrower's ability to pay. Collateral values, particularly
real estate values, are also impacted by a variety of factors, including general
economic conditions, demographics, maintenance and collection or foreclosure
delays.

         NON-PERFORMING ASSETS. When a borrower fails to make a payment on a
mortgage loan, immediate steps are taken by Carver Federal's sub-servicers to
have the delinquency cured and the loan restored to current status. With respect
to mortgage loans, once the payment grace period has expired (in most instances
15 days after the due date), a late notice is mailed to the borrower within two
business days and a late charge is imposed if applicable. If payment is not
promptly received, the borrower is contacted by telephone and efforts are made
to formulate an affirmative plan to cure the delinquency. Additional calls are
made by the 20th and 25th day of the delinquency. If a mortgage loan becomes 30
days delinquent, a letter is mailed to the borrower requesting payment by a
specified date. If a mortgage loan becomes 60 days delinquent, Carver Federal
seeks to make personal contact with the borrower and also has the property
inspected. If a mortgage becomes 90 days delinquent, a letter is sent to the
borrower demanding payment by a certain date and indicating that a foreclosure
suit will be filed if the deadline is not met. If payment is still not made,
management may pursue foreclosure or other appropriate action.

         When a borrower fails to make a payment on a consumer loan, steps are
taken by Carver Federal's loan department to have the delinquency cured and the
loan restored to current status. With the exception of automobile loans, once
the payment grace period has expired (10 days after the due date), a late notice
is mailed to the borrower immediately and a late charge is imposed if
applicable. If payment is not promptly received, the borrower is contacted by
telephone, and efforts are made to formulate an affirmative plan to cure the
delinquency. If a consumer loan becomes 30 days delinquent, a letter is mailed
to the borrower requesting payment by a specified date. If the loan becomes 60
days delinquent, the account is given to an independent collection agency to
follow up with the collection of the account. If the loan becomes 90 days
delinquent, a final warning letter is sent to the borrower and any co-borrower.
If the loan remains delinquent, it is reviewed for charge-off. The Bank's
collection efforts generally continue after the loan is charged off.




                                       9
<PAGE>


         The following table sets forth information with respect to Carver
Federal's non-performing assets at the dates indicated. Loans generally are
placed on non-accrual status when they become 90 days delinquent.

<TABLE>
<CAPTION>
                                                                            AT MARCH 31,
                                                       -----------------------------------------------------------
                                                         2003        2002        2001        2000         1999
                                                       ----------- ----------  ----------  ----------  -----------
                                                       (DOLLARS IN THOUSANDS)
<S>                                                      <C>           <C>         <C>         <C>          <C>
Loans accounted for on a non-accrual basis (1):
  Real estate:
    One- to four-family                                  $ 1,113       $ 756       $ 947       $ 966        $ 392
    Multifamily                                                -         253         978         870        1,051
    Non-residential                                          639       1,754         565           -            -
    Construction                                              23          23          23         122          560
    Consumer and business                                     27          37           6         168          414
                                                       ----------  ----------  ----------  ----------  -----------
      Total non-accrual loans                              1,802       2,823       2,519       2,126        2,417
                                                       ----------  ----------  ----------  ----------  -----------

Accruing loans contractually past due 90 days or more:
  Real estate:
    One- to four-family                                        -           -           -           -          568
    Multifamily                                                -           -           -           -          804
    Construction                                               -           -           -           -          530
    Consumer and business                                      -           -           -           -          183
                                                       ----------  ----------  ----------  ----------  -----------
      Total accruing 90-day past due loans                     -           -           -           -        2,085
                                                       ----------  ----------  ----------  ----------  -----------

Total of non-accrual and accruing 90-day past due
loans                                                      1,802       2,823       2,519       2,126        4,502
                                                       ----------  ----------  ----------  ----------  -----------

Other non-performing assets (2):
  Real estate:
    One- to four-family                                        -           -           -         127          185
    Multifamily                                                -           -          27          27            -
    Non-residential                                            -           -         449         768            -
    Consumer and business                                      -           -           -          16           99
                                                       ----------  ----------  ----------  ----------  -----------
Total other non-performing assets                              -           -         476         938          284
                                                       ----------  ----------  ----------  ----------  -----------
Total non-performing assets (3)                          $ 1,802     $ 2,823     $ 2,995     $ 3,064      $ 4,786
                                                       ==========  ==========  ==========  ==========  ===========

Non-performing loans to total loans                        0.61%       0.96%       0.88%       0.79%        1.66%
Non-performing assets to total assets                      0.35%       0.63%       0.71%       0.73%        1.15%
</TABLE>

(1)   Non-accrual status denotes any loan where the delinquency exceeds 90 days
      past due and in the opinion of management the collection of additional
      interest is doubtful. After a careful review of individual loan history
      and related collateral by management, the loan may be designated as an
      accruing loan that is contractually past due 90 days or more or if in the
      opinion of management the collection of additional interest is doubtful
      the loan will remain in non-accrual status. Payments received on a
      non-accrual loan are either applied to the outstanding principal balance
      or recorded as interest income, depending on assessment of the ability to
      collect on the loan. During the year ended March 31, 2003, gross interest
      income of $173,000 would have been recorded on loans accounted for on a
      non-accrual basis at the end of the fiscal year if the loans had been
      current throughout the year. Instead, there was no interest on such loans
      included in income during the period.


(2)   Other non-performing assets represent property acquired by the Bank in
      settlement of loans (i.e., through foreclosure or repossession or as an
      in-substance foreclosure). These assets are recorded at the lower of their
      fair value or the unpaid principal balance plus unpaid accrued interest of
      the related loans.


(3)   Total non-performing assets consist of non-accrual loans, accruing loans
      90 days or more past due and property acquired in settlement of loans.


         At March 31, 2003, total non-performing assets decreased by $1.0
million, or 36.2%, to $1.8 million, compared to $2.8 million at March 31, 2002.
All non-performing assets at March 31, 2003 and 2002 relate to loans accounted
for on a non-accrual basis. The decrease primarily reflects a decrease in
non-accruing non-residential and multifamily real estate loans partially offset
by an increase in non-accruing one- to four-family real estate loans.

         There were no accruing loans contractually past due 90 days or more at
March 31, 2003 and March 31, 2002, reflecting the continued practice adopted by
the Bank during the fiscal year ended March 31, 2000 to either write off or
place on non-accrual status all loans contractually past due 90 days or more.




                                       10
<PAGE>
         ASSET CLASSIFICATION AND ALLOWANCES FOR LOSSES. Federal regulations and
the Bank's policies require the classification of assets on the basis of quality
on a regular basis. An asset is classified as "substandard" if it is determined
to be inadequately protected by the current net worth and paying capacity of the
obligor or the current value of the collateral pledged, if any. An asset is
classified as "doubtful" if full collection is highly questionable or
improbable. An asset is classified as "loss" if it is considered un-collectible,
even if a partial recovery could be expected in the future. The regulations also
provide for a "special mention" designation, described as assets that do not
currently expose a savings institution to a sufficient degree of risk to warrant
classification but do possess credit deficiencies or potential weaknesses
deserving management's close attention. Assets classified as substandard or
doubtful require a savings institution to establish general allowances for loan
losses. If an asset or portion thereof is classified loss, a savings institution
must either establish specific allowances for loan losses in the amount of the
portion of the asset classified loss or charge off such amount. Federal
examiners may disagree with a savings institution's classifications. If a
savings institution does not agree with an examiner's classification of an
asset, it may appeal this determination to the OTS Regional Director.

         At March 31, 2003, Carver Federal had $2.1 million of loans classified
as substandard which represented 0.4% of the Bank's total assets and 5.3% of the
Bank's tangible regulatory capital at March 31, 2003. There were no loans
classified as doubtful or loss at March 31, 2003.

         The OTS, in conjunction with the other federal banking agencies, has
adopted an interagency policy statement on the allowance for loan losses and
lease losses. The policy statement provides guidance for financial institutions
on both the responsibilities of management for the assessment and establishment
of adequate allowances and guidance for banking agency examiners to use in
determining the adequacy of general valuation guidelines. Generally, the policy
statement recommends that institutions have effective systems and controls to
identify, monitor and address asset quality problems, that management has
analyzed all significant factors that affect the ability to collect the
portfolio in a reasonable manner and that management has established acceptable
allowance evaluation processes that meet the objectives set forth in the policy
statement. Although management believes that adequate specific and general loan
loss allowances have been established, actual losses are dependent upon future
events and, as such, further additions to the level of specific and general loan
loss allowances may become necessary. Federal examiners may disagree with the
savings institution as to the appropriate level of the institution's allowance
for loan losses. While management believes Carver Federal has established its
existing loss allowances in accordance with generally accepted accounting
principles, there can be no assurance that regulators, in reviewing Carver's
assets, will not require Carver Federal to increase its loss allowance, thereby
negatively affecting Carver's reported financial condition and results of
operations.

         Carver Federal's methodology for establishing the allowance for loan
losses takes into consideration probable losses that have been identified in
connection with specific loans as well as losses that have not been identified
but can be expected to occur. Further, management reviews the ratio of
allowances to total loans (including projected growth) and recommends
adjustments to the level of allowances accordingly. The Internal Asset Quality
Review Committee conducts quarterly reviews of the Bank's loans and evaluates
the need to establish general and specific allowances on the basis of this
review. In addition, management actively monitors Carver Federal's asset quality
and charges off loans and properties acquired in settlement of loans against the
allowances for losses on loans and such properties when appropriate and provides
specific loss reserves when necessary. Although management believes it uses the
best information available to make determinations with respect to the allowances
for losses, future adjustments may be necessary if economic conditions differ
substantially from the economic conditions in the assumptions used in making the
initial determinations.

         Carver Federal's Internal Asset Quality Review Committee reviews its
assets on a quarterly basis to determine whether any assets require
classification or re-classification. The Bank has a centralized loan servicing
structure that relies upon outside servicers, each of which generates a monthly
report of delinquent loans. The Board has designated the Internal Asset Quality
Review Committee to perform quarterly reviews of the Bank's asset quality, and
their report is submitted to the Board for review. The Asset Liability and
Interest Rate Risk Committee establishes policy relating to internal
classification of loans and also provides input to the Internal Asset Quality
Review Committee in its review of classified assets. In originating loans,
Carver Federal recognizes that credit losses will occur and that the risk of
loss will vary with, among other things, the type of loan being made, the
creditworthiness of the borrower over the term of the loan, general economic
conditions and, in the case of a secured loan, the quality of the security for
the loan. It is management's policy to maintain a general allowance for loan
losses based on, among other things, regular reviews of delinquencies and loan
portfolio quality, character and size, the Bank's and the industry's historical
and projected loss experience and current and forecasted economic conditions. In
addition, considerable uncertainty exists as to the future improvement or
deterioration of the real estate markets in various states, or of their ultimate
impact on Carver Federal as a result of its purchased loans in such states. See
"Lending Activities-Loan Purchases." Carver Federal increases its allowance for
loan losses by charging provisions for possible losses against the Bank's
income. General allowances are established by the Board on at least a quarterly
basis based on an assessment of risk in the Bank's loans, taking into
consideration the composition and quality of the portfolio, delinquency trends,
current charge-off and loss experience, the state of the real estate market and
economic conditions generally. Specific allowances are provided for individual
loans, or portions of loans, when ultimate collection is considered improbable
by management based on the current payment status of the loan and the fair value
or net realizable value of the security for the loan.

         At the date of foreclosure or other repossession or at the date the
Bank determines a property is an impaired property, the

                                       11
<PAGE>

Bank transfers the property to real estate acquired in settlement of loans at
the lower of cost or fair value, less estimated selling costs. Fair value is
defined as the amount in cash or cash-equivalent value of other consideration
that a real estate parcel would yield in a current sale between a willing buyer
and a willing seller. Any amount of cost in excess of fair value is charged-off
against the allowance for loan losses. Carver Federal records an allowance for
estimated selling costs of the property immediately after foreclosure.
Subsequent to acquisition, the property is periodically evaluated by management
and an allowance is established if the estimated fair value of the property,
less estimated costs to sell, declines. If, upon ultimate disposition of the
property, net sales proceeds exceed the net carrying value of the property, a
gain on sale of real estate is recorded. At March 31, 2003, the Bank had no real
estate acquired in settlement of loans. See Note 1 of Notes to Consolidated
Financial Statements.

         The following table sets forth an analysis of Carver Federal's
allowance for loan losses for the periods indicated.

<TABLE>
<CAPTION>
                                                                             YEAR ENDED MARCH 31,
                                                    -----------------------------------------------------------------------
                                                        2003          2002           2001          2000           1999
                                                    -------------  ------------  ------------- -------------  -------------
                                                                            (DOLLARS IN THOUSANDS)
<S>                                                      <C>           <C>            <C>           <C>            <C>
Balance at beginning of period                           $ 4,128       $ 3,551        $ 2,935       $ 4,020        $ 3,138
                                                    -------------  ------------  ------------- -------------  -------------
Loans charged off:
  Real estate:
    One- to four-family                                        2             -            252           138              -
    Non-residential                                            -             -            194           171              -
  Consumer and business                                      226           500            931         2,260          3,229
                                                    -------------  ------------  ------------- -------------  -------------
      Total charge-offs                                      228           500          1,377         2,569          3,229
                                                    -------------  ------------  ------------- -------------  -------------

Recoveries:
  Construction                                                 -             -              -             -             45
  One- to four-family                                          -             3              -            31              -
  Multifamily                                                  -             -              -            40              -
  Non-residential                                              -             -              -            22              -
  Consumer and business                                      258           174            200           292             37
                                                    -------------  ------------  ------------- -------------  -------------
    Total recoveries                                         258           177            200           385             82
                                                    -------------  ------------  ------------- -------------  -------------
Net loans charged off (recovered)                            (30)          323          1,177         2,184          3,147
  Provision for losses                                         -           900          1,793         1,099          4,029
                                                    -------------  ------------  ------------- -------------  -------------
Balance at end of period                                 $ 4,158       $ 4,128        $ 3,551       $ 2,935        $ 4,020
                                                    =============  ============  ============= =============  =============

Ratio of net charge-offs to average loans
 outstanding                                              -0.01%         0.11%          0.42%         0.84%          1.17%
Ratio of allowance to total loans                          1.40%         1.41%          1.24%         1.07%          1.48%
Ratio of allowance to non-performing assets (1)          230.74%       146.23%        118.56%        95.79%         85.60%
</TABLE>

     (1)  Non-performing assets consist of non-accrual loans, accruing loans 90
          days or more past due and property acquired in settlement of loans.


                                       12
<PAGE>
         The following table allocates the allowance for loan losses by asset
category at the dates indicated. The allocation of the allowance to each
category is not necessarily indicative of future losses and does not restrict
the use of the allowance to absorb losses in any category.

<TABLE>
<CAPTION>
                                                                      AT MARCH 31,
                                  ---------------------------------------------------------------------------------------
                                        2003                  2002                    2001                 2000
                                  -------------------  --------------------    ----------------------  ----------------
                                              % OF                   % OF                    % OF                  % OF
                                            LOANS IN               LOANS IN                LOANS IN              LOANS IN
                                              EACH                   EACH                    EACH                  EACH
                                            CATEGORY               CATEGORY                CATEGORY              CATEGORY
                                            TO TOTAL               TO TOTAL                TO TOTAL              TO TOTAL
                                  AMOUNT     LOANS      AMOUNT      LOANS       AMOUNT      LOANS      AMOUNT     LOANS
                                  ------     -----      ------      -----       ------      -----      ------     -----
                                                                  (DOLLARS IN THOUSANDS)
<S>                              <C>         <C>       <C>          <C>        <C>          <C>       <C>          <C>
Loans:
  Real estate
    One- to four-family          $   298     24.18 %   $   429      41.28 %    $ 1,198      54.71 %   $ 1,050      55.54 %
    Multi-family                     656     44.24       1,468      39.86          748      29.00         764      31.40
    Non-residential                1,967     26.38         729      13.48          353      12.52         202       8.28
    Construction                     170      4.46          76       4.60          290       2.46         272       2.33
  Consumer and business              344      0.74         377       0.78          962       1.31         647       2.45
  Unallocated                        723         -       1,049          -           -          -           -          -
                                 -------    ------     -------     ------      ------      ------     -------     ------
Total allowance for loan losses  $ 4,158    100.00 %   $ 4,128     100.00 %    $ 3,551     100.00 %   $ 2,935     100.00 %
                                 =======    ======     =======     ======      ======      ======     =======     ======
</TABLE>

                                    AT MARCH 31,
                                    ------------
                                        1999
                                        ----
                                             % OF
                                           LOANS IN
                                              EACH
                                            CATEGORY
                                            TO TOTAL
                                  AMOUNT      LOANS
                                  ------      -----
                                (DOLLARS IN THOUSANDS)
Loans:
  Real estate
    One- to four-family          $   957      65.39 %
    Multi-family                     902      18.89
    Non-residential                  251       8.33
    Construction                     424       3.98
  Consumer and business            1,486       3.41
  Unallocated                       -          -
                                 -------      ------
Total allowance for loan losses  $ 4,020      100.00 %
                                 =======      ======


INVESTMENT ACTIVITIES

         GENERAL. The Bank utilizes mortgage-backed and other investment
securities in virtually all aspects of its asset/liability management strategy.
In making investment decisions, the Board considers, among other things, the
Bank's yield and interest rate objectives, its interest rate and credit risk
position and its liquidity and cash flow.

         The Bank must maintain minimum levels of investments that qualify as
liquid assets under OTS regulations. Liquidity may increase or decrease
depending upon the availability of funds and comparative yields on investments
in relation to the return on loans. The Bank's liquidity policy requires that
cash flow projections are regularly reviewed and updated to assure that adequate
liquidity is maintained.

         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, liquidity
needs and performance objectives. SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, requires that securities be
classified into three categories: trading, held-to-maturity, and
available-for-sale. Securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading securities
and are reported at fair value with unrealized gains and losses included in
earnings. Debt securities for which the Bank has the positive intent and ability
to hold to maturity are classified as held-to-maturity and reported at amortized
cost. All other securities not classified as trading or held-to-maturity are
classified as available-for-sale and reported at fair value with unrealized
gains and losses included, on an after-tax basis, in a separate component of
stockholders' equity. At March 31, 2003, the Bank had no securities classified
as trading. At March 31, 2003, $129.1 million, or 77.9% of the Bank's
mortgage-backed and other investment securities, was classified as
available-for-sale. The remaining $36.5 million, or 22.1%, was classified as
held-to-maturity.

         MORTGAGE-BACKED SECURITIES. The Bank has invested in mortgage-backed
securities in order to achieve its asset/liability management goals. Although
mortgage-backed securities generally yield from 60 to 100 basis points less than
whole loans, they present substantially lower credit risk, are more liquid than
individual mortgage loans and may be used to collateralize obligations of the
Bank. Because Carver Federal receives regular payments of principal and interest
from its mortgage-backed securities, these investments provide more consistent
cash flows than investments in other debt securities which generally only pay
principal at maturity. Mortgage-backed securities also help the Bank meet
certain definitional tests for favorable treatment under federal banking and tax
laws. See "Regulation and Supervision--Federal Banking Regulation--QTL Test" and
"Federal and State Taxation."

                                       13
<PAGE>


         At March 31, 2003, mortgage-backed securities constituted 24.9% of
total assets, as compared to 14.7% of total assets at March 31, 2002. Carver
Federal maintains a significant portfolio of mortgage-backed securities in the
form of Government National Mortgage Association ("GNMA") pass-through
certificates, Fannie Mae and FHLMC participation certificates and at times
collateralized mortgage obligations ("CMOs"). GNMA pass-through certificates are
guaranteed as to the payment of principal and interest by the full faith and
credit of the U.S. Government while Fannie Mae and FHLMC certificates are each
guaranteed by their respective agencies as to principal and interest.
Mortgage-backed securities generally entitle Carver Federal to receive a pro
rata portion of the cash flows from an identified pool of mortgages. CMOs are
securities issued by special purpose entities generally collateralized by pools
of mortgage-backed securities. The cash flows from such pools are segmented and
paid in accordance with a predetermined priority to various classes of
securities issued by the entity. Carver Federal also has invested in pools of
loans guaranteed as to principal and interest by the Small Business
Administration ("SBA").

         The Bank seeks to manage interest rate risk by investing in
adjustable-rate mortgage-backed securities which at March 31, 2003 constituted
$117.6million, or 92.8% of the mortgage-backed securities portfolio.
Mortgage-backed securities, however, expose Carver Federal to certain unique
risks. In a declining rate environment, accelerated prepayments of loans
underlying these securities expose Carver Federal to the risk that it will be
unable to obtain comparable yields upon reinvestment of the proceeds. In the
event the mortgage-backed security has been funded with an interest-bearing
liability with a maturity comparable to the original estimated life of the
mortgage-backed security, the Bank's interest rate spread could be adversely
affected. Conversely, in a rising interest rate environment, the Bank may
experience a lower than estimated rate of repayment on the underlying mortgages,
effectively extending the estimated life of the mortgage-backed security and
exposing the Bank to the risk that it may be required to fund the asset with a
liability bearing a higher rate of interest.

         The following table sets forth the carrying value of Carver Federal's
mortgage-backed securities at the dates indicated. In November 2002 the Bank
transferred $22.8 million of mortgage-backed securities from available-for-sale
to held-to-maturity. At the beginning of fiscal 2002 the Bank transferred $45.7
million of mortgage-backed securities from held-to-maturity to
available-for-sale.

                                                    AT MARCH 31,
                                                    ------------
                                          2003           2002            2001
                                          ----           ----            ----
                                                   (IN THOUSANDS)
Available-for-Sale:
  GNMA                                  $  47,120       $ 10,584       $      -
  Fannie Mae                               23,470         11,451              -
  FHLMC                                    19,693         28,249              -
  CMO                                           -            136              -
                                        ---------       --------       --------
Total available-for-sale                   90,283         50,420              -

Held-to-Maturity:
  GNMA                                      2,473          3,448          5,774
  Fannie Mae                                6,203          5,607         21,633
  FHLMC                                    27,482          6,149         14,672
  SBA                                         372            439            594
  CMO                                           -              -            193
                                        ---------       --------       --------
Total held to maturity                     36,530         15,643         42,866
                                        ---------       --------       --------
Total mortgage-backed securities        $ 126,813       $ 66,063       $ 42,866
                                        =========       ========       ========


                                       14
<PAGE>

         The following table sets forth the scheduled maturities, carrying
values and fair values for Carver Federal's mortgage-backed securities at March
31, 2003. Expected maturities will differ from contractual maturities due to
scheduled repayments and because borrowers may have the right to call or prepay
obligations with or without prepayment penalties. The following table does not
take into consideration the effects of scheduled repayments or the effects of
possible prepayments.

                                         CARRYING          FAIR
                                          VALUE            VALUE
                                       -------------   -------------
                                               (IN THOUSANDS)

        Available-for-sale:
        One through five years                $ 112           $ 115
        Five through ten years                1,813           1,933
        After ten years                      88,041          88,235
                                       -------------   -------------
                                           $ 89,966        $ 90,283
                                       =============   =============

        Held-to-maturity:
        One through five years                  $ -             $ -
        Five through ten years                  326             345
        After ten years                      36,204          37,198
                                       -------------   -------------
                                           $ 36,530        $ 37,543
                                       =============   =============

         OTHER INVESTMENT SECURITIES. In addition to mortgage-backed securities,
the Bank also invests in high-quality assets (primarily government and agency
obligations) with short and intermediate terms (typically seven years or less)
to maturity. Carver Federal is permitted under federal law to make certain
investments, including investments in securities issued by various federal
agencies and state and municipal governments, deposits at the FHLB, certificates
of deposit in federally insured institutions, certain bankers' acceptances and
federal funds. The Bank may also invest, subject to certain limitations, in
commercial paper having one of the two highest investment ratings of a
nationally recognized credit rating agency, and certain other types of corporate
debt securities and mutual funds.

         The following table sets forth the carrying value of Carver Federal's
other securities available-for-sale and held-to-maturity at the date indicated.

<TABLE>
<CAPTION>
                                                                    AT MARCH 31,
                                                                    ------------
                                                          2003           2002            2001
                                                          ----           ----            ----
                                                                    (IN THOUSANDS)
<S>                                                       <C>            <C>             <C>
U.S. Government and Agency securities:
    Available-for-sale                                    $ 38,772       $ 39,401        $ 19,926
    Held-to-maturity                                             -              -          24,996
                                                          --------       --------        --------
       Total other securities                             $ 38,772       $ 39,401        $ 44,922
                                                          ========       ========        ========
</TABLE>

         The following table sets forth the scheduled maturities, carrying
values and fair values for Carver Federal's other investments at March 31, 2003.

<TABLE>
<CAPTION>
                                         CARRYING             FAIR
                                           VALUE              VALUE
                                           -----              -----
                                               (IN THOUSANDS)
<S>                                       <C>               <C>
Available-for-sale:
     One year or less                     $ 22,109          $ 22,117
     One through five years                 16,078            16,655
                                          --------          --------
                                          $ 38,187          $ 38,772
                                          ========          ========
</TABLE>

         OTHER EARNING ASSETS. Federal regulations require the Bank to maintain
an investment in FHLB stock and a sufficient amount of liquid assets which may
be invested in cash and specified securities. For additional information, see
"Regulation and Supervision--Federal Banking Regulation--Liquidity."



                                       15
<PAGE>

         The following table sets forth the carrying value of Carver Federal's
investment in FHLB stock and liquid assets at the dates indicated.

                                                 AT MARCH 31,
                                                 ------------
                                      2003           2002            2001
                                      ----           ----            ----
                                                (IN THOUSANDS)
FHLB stock                          $ 5,440        $ 3,763         $ 5,755
Federal funds sold                    5,500         21,100          23,700


Deposit Activity and Other Sources of Funds

         GENERAL. Deposits are the primary source of Carver Federal's funds for
lending and other investment purposes. In addition to deposits, Carver Federal
derives funds from loan principal repayments, interest payments and maturing
investments. Loan repayments and interest payments are a relatively stable
source of funds, while deposit inflows and outflows are significantly influenced
by prevailing market interest rates and money market conditions. Borrowed money
may be used to supplement the Bank's available funds, and from time to time the
Bank has borrowed funds from the FHLB and through repurchase agreements.

         DEPOSITS. Carver Federal attracts deposits principally from within its
market area by offering a variety of deposit instruments, including passbook and
statement accounts and certificates of deposit, which range in term from 91 days
to seven years. Deposit terms vary, principally on the basis of the minimum
balance required, the length of time the funds must remain on deposit and the
interest rate. Carver Federal also offers Individual Retirement Accounts. Carver
Federal's policies are designed primarily to attract deposits from local
residents through the Bank's branch network rather than from outside the Bank's
market area. Carver Federal also holds deposits from various governmental
agencies or authorities and corporations. Although the Board has authorized
accepting brokered deposits, the Bank does not have any of these types of
deposits.

         The Bank's interest rates, maturities, service fees and withdrawal
penalties on deposits are established by management on a periodic basis.
Management determines deposit interest rates and maturities based on the Bank's
funds acquisition and liquidity requirements, the rates paid by the Bank's
competitors, the Bank's growth goals and applicable regulatory restrictions and
requirements.

         During fiscal 2002, the Bank sold its branch located in East New York.
As a result of this sale, the Bank transferred approximately $16.4 million of
deposits to the purchaser. During fiscal 2001, the Bank sold its branches
located in Roosevelt and Chelsea, New York. The total amount of deposits
transferred as a result of these sales was $8.4 and $14.1 million, respectively.
There were no branch sales in fiscal 2003.

         The following table sets forth the change in dollar amount of deposits
in the various types of accounts offered by Carver Federal between the dates
indicated. Included in the net increase (decrease) in deposits before interest
credited is the amount of deposits sold during the year ended March 31, 2002 and
2001 of $16.4 and $22.5 million, respectively.

<TABLE>
<CAPTION>
                                                                           YEAR ENDED MARCH 31,
                                                            ----------------------------------------------------
                                                                 2003               2002              2001
                                                            ----------------   ---------------   ---------------
                                                                          (DOLLARS IN THOUSANDS)
<S>                                                               <C>               <C>               <C>
Deposits at beginning of period                                   $ 324,954         $ 279,424         $ 281,941
Net increase (decrease) before interest credited                     16,450            37,403           (10,973)
Interest credited                                                     5,760             8,127             8,456
                                                            ----------------   ---------------   ---------------
Deposits at end of period                                         $ 347,164         $ 324,954         $ 279,424
                                                            ================   ===============   ===============

Net increase (decrease) during the year:
     Amount                                                        $ 22,210          $ 45,530          $ (2,517)
                                                            ================   ===============   ===============
     Percent                                                           6.8%             16.3%             (0.9%)
                                                            ================   ===============   ===============
</TABLE>


                                       16
<PAGE>

         The following table sets forth the distribution of the Bank's deposit
 accounts and the related weighted average interest rates at the dates
 indicated.

<TABLE>
<CAPTION>
                                                               AT MARCH 31,
                               -----------------------------------------------------------------------------
                                               2003                                   2002
                               ---------------------------------------- ------------------------------------
                                            PERCENT OF     WEIGHTED                PERCENT OF     WEIGHTED
                                               TOTAL       AVERAGE                    TOTAL       AVERAGE
                                 AMOUNT      DEPOSITS       RATE        AMOUNT      DEPOSITS       RATE
                                 ------      --------       ----        ------      --------       ----
                                                          (DOLLARS IN THOUSANDS)
<S>                             <C>             <C>                    <C>             <C>
Non-interest -bearing demand    $ 16,539        4.8 %          - %     $ 13,463        4.1 %          - %
NOW accounts                      18,190        5.2         0.53         18,095        5.6         1.24
Savings and club                 128,935       37.1         1.06        126,779       39.0         1.71
Money market savings account      20,735        6.0         0.92         15,232        4.7         1.78
Certificates of deposit          162,765       46.9         2.20        151,385       46.6         2.73
                               ---------      -----         ----      ---------      -----         ----
  Total                        $ 347,164      100.0 %       1.51 %    $ 324,954      100.0 %       2.18 %
                               =========      =====         ====      =========      =====         ====
</TABLE>

                                           AT MARCH 31,
                                -------------------------------------
                                               2001
                                -------------------------------------
                                             PERCENT OF     WEIGHTED
                                                TOTAL       AVERAGE
                                  AMOUNT      DEPOSITS       RATE
                                  ------      --------       ----
                                        (DOLLARS IN THOUSANDS)
Non-interest -bearing demand    $ 11,409        4.1 %           - %
NOW accounts                      14,757        5.3          1.59
Savings and club                 132,645       47.5          2.22
Money market savings account      15,718        5.6          2.34
Certificates of deposit          104,895       37.5          5.04
                               ---------      -----          ----
  Total                        $ 279,424      100.0 %        3.04 %
                               =========      =====          ====


         The following table sets forth the amount and maturities of time
deposits in specified weighted average interest rate categories at March 31,
2003.

<TABLE>
<CAPTION>
                                           AT MARCH 31, 2003                                           TOTAL AT
                                          PERIOD TO MATURITY                                           MARCH 31,
             ----------------------------------------------------------------------------     -------------------------
             LESS THAN                                AFTER                    PERCENT
             ONE YEAR      1-2 YEARS   2-3 YEARS     3 YEARS        TOTAL      OF TOTAL          2002         2001
             ------------  ----------  -----------  -----------  ------------  ----------     ------------ ------------
                                                     (DOLLARS IN THOUSANDS)
<S>             <C>          <C>          <C>         <C>           <C>            <C>          <C>         <C>
1%-1.99%        $ 86,387     $ 1,424      $     -     $      -      $ 87,811        53.9 %      $  22,138   $        -
2%-3.99%           1,497      26,883        9,759        2,787        40,926        25.1           95,523          752
4%-5.99%               -           -            -       34,028        34,028        20.9           33,724      104,143
             ------------  ----------  -----------  -----------  ------------  ----------     ------------ ------------
   Total        $ 87,884     $28,307      $ 9,759     $ 36,815      $162,765       100.0 %      $ 151,385    $ 104,895
             ============  ==========  ===========  ===========  ============  ==========     ============ ============
</TABLE>

         Carver Federal's certificates of deposit of $100,000 or more were
$100.1 million as of March 31, 2003.

         BORROWED MONEY. Deposits are the primary source of funds for Carver
Federal's lending, investment and general operating activities. Carver Federal
is authorized, however, to use advances and securities sold under agreement to
repurchase ("Repos") from the FHLB and approved primary dealers to supplement
its supply of funds and to meet deposit withdrawal requirements. The FHLB
functions as a central bank providing credit for savings institutions and
certain other member financial institutions. As a member of the FHLB system,
Carver Federal is required to own stock in the FHLB and is authorized to apply
for advances. Advances are made pursuant to several different programs, each of
which has its own interest rate and range of maturities. Advances from the FHLB
are secured by Carver Federal's stock in the FHLB and a blanket pledge of Carver
Federal's mortgage loan and mortgage-backed securities portfolios.

         One of the elements of Carver Federal's investment strategy is to
leverage the balance sheet by increasing liabilities with FHLB advances and
Repos and investing borrowed funds primarily in adjustable-rate mortgage loan
and mortgage-backed securities products. The Bank seeks to match as closely as
possible the term of borrowed money with the repricing cycle of the mortgage
loans on the balance sheet. At March 31, 2003, Carver Federal had outstanding
$108.8 million in FHLB advances and no Repos.



                                       17
<PAGE>

         The following table sets forth certain information regarding Carver
Federal's borrowed money at the dates and for the periods indicated:

<TABLE>
<CAPTION>
                                                                        AT OR FOR THE YEAR ENDED
                                                                                MARCH 31,
                                                                                ---------
                                                                           2003               2002
                                                                           ----               ----
                                                                          (DOLLARS IN THOUSANDS)
<S>                                                                     <C>                <C>
Amounts outstanding at the end of period:
  FHLB advances                                                         $ 108,789          $ 75,262
Weighted average rate paid at period end:
  FHLB advances                                                             3.59%             4.18%
Maximum amount of borrowing outstanding at any month end:
  FHLB advances                                                         $ 108,789         $ 100,094
  Repos                                                                         -            14,930
Approximate average amounts outstanding for period:
  FHLB advances                                                          $ 80,861          $ 76,141
  Repos                                                                         -             2,888
Approximate weighted average rate paid during period (1):
  FHLB advances                                                             3.99%             5.50%
  Repos                                                                       - %             5.91%
</TABLE>

(1) The approximate weighted average rate paid during the period was computed by
    dividing the average amounts outstanding into the related interest expense
    for the period.

Subsidiary Activities

         At this time, the Holding Company conducts business as a unitary
savings and loan holding company and the principal business of the Holding
Company consist of the operation of its wholly owned subsidiaries, Carver
Federal and Alhambra Holding Corp., a Delaware Corporation ("Alhambra"). The
Company formed Alhambra to hold the Company's investment in a commercial office
building that was subsequently sold in March 2000. Alhambra is currently
inactive.

         On March 8, 1995, Carver Federal formed CFSB Realty Corp. as a wholly
owned subsidiary to hold real estate acquired through foreclosure pending
eventual disposition. At March 31, 2003, this subsidiary had $221,000 in total
capital and net operating loss of less than $1,000. At March 31, 2003 there was
no real estate owned pending disposition. Carver Federal also owns CFSB Credit
Corp., currently an inactive subsidiary originally formed to undertake the
Bank's credit card issuance.

         During the fourth quarter of fiscal 2003, Carver Federal formed Carver
Asset Corporation, a wholly owned subsidiary which qualifies as a real estate
investment trust pursuant to the Internal Revenue Code of 1986, as amended. This
subsidiary may, among other things, be utilized by Carver Federal to raise
capital in the future. Upon formation of Carver Asset Corporation, Carver
Federal transferred approximately $119 million of mortgage loans to this
subsidiary.

Market Area and Competition

         The Bank's primary market area for deposits consists of the areas
served by its five branches. The Bank considers its primary lending market to
include Bronx, Kings, Manhattan, Queens and Richmond counties, together
comprising New York City, and lower Westchester County, New York. See "Item
2-Properties."

         Although Carver Federal's branches are located in areas that have been
historically underserved by other financial institutions, Carver Federal is
facing increasing competition for deposits and residential mortgage lending in
its immediate market areas. Management believes that this competition has become
more intense as a result of an increased examination emphasis by federal banking
regulators on financial institutions' fulfillment of their responsibilities
under the Community Reinvestment Act ("CRA") and the improving economic
conditions in its market area. The Bank's competition for loans comes
principally from mortgage banking companies, commercial banks, savings banks and
savings and loan associations. The Bank's most direct competition for deposits
comes from commercial banks, savings banks, savings and loan associations and
credit unions. Competition for deposits also comes from money market mutual
funds and other corporate and government securities funds as well as from other
financial intermediaries such as brokerage firms and insurance companies. Many
of Carver Federal's competitors have substantially greater resources than Carver
Federal and offer a wider array of financial services and products than Carver
Federal. At times, these larger financial institutions may offer below market
interest rates on mortgage loans and above market interest rates for deposits.


                                       18
<PAGE>

These pricing concessions combined with competitors' larger presence in the New
York market add to the challenges Carver Federal faces in expanding its current
market share. The Bank believes that it can compete with these institutions by
offering a competitive range of services as well as through personalized
attention and community commitment.

Employees

         As of March 31, 2003, Carver had 111 full-time equivalent employees, of
whom 38 are officers and 73 are non-officers, none of whom was represented by a
collective bargaining agreement. The Bank considers its employees relations to
be satisfactory.

SARBANES-OXLEY ACT OF 2002

         On July 30, 2002, the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley Act")
was signed into law. The Sarbanes-Oxley Act imposes new significant
responsibilities on publicly held companies, particularly in the area of
corporate governance. We have carefully reviewed the Sarbanes-Oxley Act, and are
monitoring and responding to the various implementing regulations that have been
issued, and continue to be issued, by the Securities Exchange Commission and the
American Stock Exchange. We have instituted procedures to address some of the
Sarbanes-Oxley Act's specific concerns and will continue to adapt the Company's
governance structure to the mandates of the Sarbanes-Oxley Act as interpreted by
the regulatory authorities in upcoming periods.

REGULATION AND SUPERVISION

General

         The Bank is subject to extensive regulation, examination and
supervision by its primary regulator, the OTS. The Bank's deposit accounts are
insured up to applicable limits by the Federal Deposit Insurance Corporation
("FDIC") under the Savings Association Insurance Fund ("SAIF"), and it is a
member of the FHLB. The Bank must file reports with the OTS concerning its
activities and financial condition, and it must obtain regulatory approvals
prior to entering into certain transactions, such as mergers with, or
acquisitions of, other depository institutions. The Holding Company, as a
unitary savings and loan holding company, is subject to regulation, examination
and supervision by the OTS and is required to file certain reports with, and
otherwise comply with, the rules and regulations of the OTS and of the
Securities and Exchange Commission (the "SEC") under the federal securities
laws. The OTS and the FDIC periodically perform safety and soundness
examinations of the Bank and the Holding Company and test our compliance with
various regulatory requirements. The OTS has primary enforcement responsibility
over federally chartered savings banks and has substantial discretion to impose
enforcement action on an institution that fails to comply with applicable
regulatory requirements, particularly with respect to its capital requirements.
In addition, the FDIC has the authority to recommend to the Director of the OTS
that enforcement action be taken with respect to a particular federally
chartered savings bank and, if action is not taken by the Director, the FDIC has
authority to take such action under certain circumstances.

         This regulation and supervision establish a comprehensive framework to
regulate and control the activities in which an institution can engage and is
intended primarily for the protection of the insurance fund and depositors. This
structure also gives the regulatory authorities extensive discretion in
connection with their supervisory and enforcement activities and examination
policies, including policies with respect to the classification of assets and
the establishment of adequate loan loss reserves for regulatory purposes. Any
change in such laws and regulations whether by the OTS, the FDIC or through
legislation could have a material adverse impact on the Bank and the Holding
Company and their operations and stockholders.

         The description of statutory provisions and regulations applicable to
federally chartered savings banks and their holding companies and of tax matters
set forth in this document does not purport to be a complete description of all
such statutes and regulations and their effects on the Bank and the Holding
Company.

FEDERAL BANKING REGULATION

         ACTIVITY POWERS. The Bank derives its lending and investment powers
from the Home Owner's Loan Act, as amended ("HOLA"), and the regulations of the
OTS. Under these laws and regulations, the Bank may invest in mortgage loans
secured by residential and commercial real estate, commercial and consumer
loans, certain types of debt securities and certain other assets. The Bank may
also establish service corporations that may engage in activities not otherwise
permissible for the Bank, including certain real estate equity investments and
securities and insurance brokerage. The Bank's authority to invest in certain
types of loans or other investments is limited by federal law.

         LOANS TO ONE BORROWER LIMITATIONS. The Bank is generally subject to the
same limits on loans to one borrower as a national bank. With specified
exceptions, the Bank's total loans or extension of credit to a single borrower
or group of related borrowers may not exceed 15% of the Bank's unimpaired
capital and surplus, which does not include accumulated other comprehensive
income. The Bank may lend additional amounts up to 10% of its unimpaired capital
and surplus if the loans or extensions of credit are fully secured by readily
marketable collateral. The Bank currently complies with applicable loans to one
borrower limitations. At March 31, 2003, the Bank's limit on loans to one
borrower based on its unimpaired capital and surplus was $6.7 million.



                                       19
<PAGE>
         QTL TEST. Under HOLA, the Bank must comply with a qualified thrift
lender ("QTL") test. Under this test, the Bank is required to maintain at least
65% of its "portfolio assets" in certain "qualified thrift investments" in at
least nine months of the most recent twelve-month period. "Portfolio assets"
means, in general, an association's total assets less the sum of (a) specified
liquid assets up to 20% of total assets, (b) goodwill and other intangible
assets and (c) the value of property used to conduct the Bank's business.
"Qualified thrift investments" include various types of loans made for
residential and housing purposes, investments related to such purposes,
including certain mortgage-backed and related securities and consumer loans. If
the Bank fails the QTL test, it must either operate under certain restrictions
on its activities or convert to a bank charter. At March 31, 2003, the Bank
maintained approximately 68.1% of its portfolio assets in qualified thrift
investments. The Bank had also met the QTL test in each of the prior 12 months
and was, therefore, a qualified thrift lender.

         CAPITAL REQUIREMENTS. OTS regulations require the Bank to meet three
minimum capital ratios:

         (1)      a tangible capital ratio requirement of 1.5% of total assets,
                  as adjusted under OTS regulations;

         (2)      a leverage ratio requirement of 8% of core capital to such
                  adjusted total assets; and

         (3)      a risk-based capital ratio requirement of 8% of core and
                  supplementary capital to total risk-weighted assets.

         The minimum leverage capital ratio for any other depository institution
that does not have a composite rating of 1 will be 4%, unless a higher leverage
capital ratio is warranted by the particular circumstances or risk profile of
the depository institution. In determining compliance with the risk-based
capital requirement, the Bank must compute its risk-weighted assets by
multiplying its assets and certain off-balance sheet items by risk-weights,
which range from 0% for cash and obligations issued by the U.S. government or
its agencies to 100% for consumer and commercial loans, as assigned by the OTS
capital regulation based on the risks that the OTS believes are inherent in the
type of asset.

         Generally, tangible capital is defined as common stockholders' equity
(including retained earnings), certain non-cumulative perpetual preferred stock
and related earnings and minority interests in equity accounts of fully
consolidated subsidiaries, less intangibles (other than certain mortgage
servicing rights) and investments in and loans to subsidiaries engaged in
activities not permissible for a national bank.

         Core capital is defined similarly to tangible capital, but also
includes certain qualifying supervisory goodwill and certain purchased credit
card relationships. Supplementary capital includes cumulative and other
perpetual preferred stock, mandatory convertible securities, subordinated debt
and intermediate preferred stock and the allowance for loan and lease losses. In
addition, up to 45% of unrealized gains on available-for-sale equity securities
with a readily determinable fair value may be included in supplementary capital.
The allowance for loan and lease losses includable in supplementary capital is
limited to a maximum of 1.25% of risk-weighted assets, and the amount of
supplementary capital that may be included as total capital cannot exceed the
amount of core capital.

         In assessing an institution's capital adequacy, the OTS takes into
consideration not only these numeric factors but qualitative factors as well,
and has the authority to establish higher capital requirements for individual
institutions where necessary. The Bank, as a matter of prudent management,
targets as its goal the maintenance of capital ratios which exceed these minimum
requirements and are consistent with the Bank's risk profile. At March 31, 2003,
the Bank exceeded each of its capital requirements with a tangible capital ratio
of 7.8%, leverage capital ratio of 7.8% and total risk-based capital ratio of
14.0%.

         The Federal Deposit Insurance Corporation Improvement Act, as amended
("FDICIA"), requires that the OTS and other federal banking agencies revise
their risk-based capital standards, with appropriate transition rules, to ensure
that they take into account interest rate risk, concentration of risk and the
risks of non-traditional activities. The OTS adopted regulations, effective
January 1, 1994, that set forth the methodology for calculating an IRR component
to be incorporated into the OTS risk-based capital regulations. On May 10, 2002,
the OTS adopted an amendment to its capital regulations which eliminated the IRR
component of the risk-based capital requirement. Pursuant to the amendment, the
OTS will continue to monitor the IRR of individual institutions through the OTS
requirements for IRR management, the ability of the OTS to impose individual
minimum capital requirements on institutions that exhibit a high degree of IRR,
and the requirements of Thrift Bulletin 13a, which provides guidance on the
management of IRR and the responsibility of boards of directors in that area.

         LIMITATION ON CAPITAL DISTRIBUTIONS. The OTS imposes various
restrictions on the Bank's ability to make capital distributions, including cash
dividends, payments to repurchase or otherwise acquire its shares and other
distributions charged against capital. A savings institution that is the
subsidiary of a savings and loan holding company, such as the Bank, must file an
application or a notice with the OTS at least 30 days before making a capital
distribution. The Bank must file an application for prior approval if the total
amount of its capital distributions (including each proposed distribution), for
the applicable calendar year would exceed the Bank's net income for that year
plus the Bank's retained net income for the previous two years. In other cases,
the Bank will have to file a notice as a savings bank subsidiary of a savings
and loan holding company.

         The OTS may disapprove of a notice or application if:

                                       20
<PAGE>

         (1)      the Bank would be undercapitalized following the distribution;

         (2)      the proposed capital distribution raises safety and soundness
                  concerns; or

         (3)      the capital distribution would violate a prohibition contained
                  in any statute, regulation or agreement.

         LIQUIDITY. The Bank maintains liquidity levels to meet operational
needs. In the normal course of business, the levels of liquid assets during any
given period are dependent on operating, investing and financing activities.
Cash and due from banks, federal funds sold and repurchase agreements with
maturities of three months or less are the Bank's most liquid assets. The Bank
maintains a liquidity policy to maintain sufficient liquidity to ensure its safe
and sound operation. At March 31, 2003, the Bank's liquidity ratio was 4.39% of
liquid assets to total assets which is in excess of minimum requirements.

         BRANCHING. Subject to certain limitations, federal law permits the Bank
to establish branches in any state of the United States. The authority for the
Bank to establish an interstate branch network would facilitate a geographic
diversification of the Bank's activities. This authority under federal law and
OTS regulations preempts any state law purporting to regulate branching by
federal savings associations.

         COMMUNITY REINVESTMENT. Under the Community Reinvestment Act, as
amended ("CRA"), as implemented by OTS regulations, the Bank has a continuing
and affirmative obligation to help meet the credit needs of its entire
community, including low and moderate income neighborhoods. The CRA does not
establish specific lending requirements or programs for the Bank nor does it
limit the Bank's discretion to develop the types of products and services that
it believes are best suited to its particular community. The CRA does however
require the OTS, in connection with its examination of the Bank, to assess the
Bank's record of meeting the credit needs of its community and to take such
record into account in its evaluation of certain applications by the Bank.

         In particular, the system focuses on three tests:

         (1)      a lending test, to evaluate the institution's record of making
                  loans in its assessment areas;

         (2)      an investment test, to evaluate the institution's record of
                  investing in community development projects, affordable
                  housing and programs benefiting low or moderate income
                  individuals and businesses; and

         (3)      a service test, to evaluate the institution's delivery of
                  banking services through its branches, ATMs and other offices.

         The CRA also requires all institutions to make public disclosure of
their CRA ratings. The Bank received a "Satisfactory" CRA rating in its most
recent examination conducted in 2001.

         Regulations require that we publicly disclose certain agreements that
are in fulfillment of CRA. The Holding Company has no such agreements in place
at this time.

         TRANSACTIONS WITH RELATED PARTIES. The Bank's authority to engage in
transactions with its "affiliates" is limited by OTS regulations and by Sections
23A and 23B of the Federal Reserve Act ("FRA"). In general, these transactions
must be on terms which are as favorable to the Bank as comparable transactions
with non-affiliates. Additionally, certain types of these transactions are
restricted to an aggregate percentage of the Bank's capital. Collateral in
specified amounts must usually be provided by affiliates in order to receive
loans from the Bank. In addition, OTS regulations prohibit a savings bank from
lending to any of its affiliates that is engaged in activities that are not
permissible for bank holding companies and from purchasing the securities of any
affiliate other than a subsidiary.

         The Bank's authority to extend credit to its directors, executive
officers, and 10% shareholders, as well as to entities controlled by such
persons, is currently governed by the requirements of Sections 22(g) and 22(h)
of the FRA and Regulation O of the Federal Reserve Board ("FRB"). Among other
things, these provisions require that extensions of credit to insiders (a) be
made on terms that are substantially the same as, and follow credit underwriting
procedures that are not less stringent than, those prevailing for comparable
transactions with unaffiliated persons and that do not involve more than the
normal risk of repayment or present other unfavorable features and (b) not
exceed certain limitations on the amount of credit extended to such persons,
individually and in the aggregate, which limits are based, in part, on the
amount of the Bank's capital. In addition, extensions of credit in excess of
certain limits must be approved by the Bank's board of directors.

         The FRB rescinded its interpretations of Sections 23A and 23B of the
FRA and replaced these interpretations with Regulation W. The OTS has also
conformed its regulations to coincide with Regulation W. Regulation W makes
various changes to existing law regarding Sections 23A and 23B, including
expanding the definition of what constitutes an "affiliate" subject to Sections
23A and 23B and exempting certain subsidiaries of state-chartered banks from the
restrictions of Sections 23A and 23B.

         Under Regulation W, all transactions entered into on or before December
12, 2002 that would become subject to Sections 23A and 23B solely because of
Regulation W and all transactions covered by Sections 23A and 23B, the treatment
of which will change solely because of Regulation W, will not become subject to
Regulation W until July 1, 2003. All other covered affiliate



                                       21
<PAGE>
transactions became subject to Regulation W on April 1, 2003. The FRB expects
each depository institution that is subject to Sections 23A and 23B to implement
policies and procedures to ensure compliance with Regulation W. We do not expect
that the changes made by Regulation W will have a material adverse effect on our
business.

         Section 402 of the Sarbanes-Oxley Act prohibits the extension of
personal loans to directors and executive officers of issuers (as defined in the
Sarbanes-Oxley Act). The prohibition, however, does not apply to mortgages
advanced by an insured depository institution, such as the Bank, that is subject
to the insider lending restrictions of Section 22(h) of the FRA.

         ENFORCEMENT. The OTS has primary enforcement responsibility over the
Bank. This enforcement authority includes, among other things, the ability to
assess civil money penalties, to issue cease and desist orders and to remove
directors and officers. In general, these enforcement actions may be initiated
in response to violations of laws and regulations and unsafe or unsound
practices.

         STANDARDS FOR SAFETY AND SOUNDNESS. The OTS has adopted guidelines
prescribing safety and soundness standards. The guidelines establish general
standards relating to internal controls and information systems, internal audit
systems, loan documentation, credit underwriting, interest rate exposure, asset
growth, asset quality, earnings, and compensation, fees and benefits. In
general, the guidelines require, among other things, appropriate systems and
practices to identify and manage the risks and exposures specified in the
guidelines. In addition, OTS regulations authorize, but do not require, the OTS
to order an institution that has been given notice that it is not satisfying
these safety and soundness standards to submit a compliance plan. If, after
being so notified, an institution fails to submit an acceptable compliance plan
or fails in any material respect to implement an accepted compliance plan, the
OTS must issue an order directing action to correct the deficiency and may issue
an order directing other actions of the types to which an undercapitalized
association is subject under the "prompt corrective action" provisions of
federal law. If an institution fails to comply with such an order, the OTS may
seek to enforce such order in judicial proceedings and to impose civil money
penalties.

         PROMPT CORRECTIVE ACTION REGULATIONS. Under the prompt corrective
action regulations, the OTS is authorized and, in some cases, required to take
supervisory actions against undercapitalized savings bank. For this purpose, a
savings bank would be placed in one of the following four categories based on
the a bank's regulatory capital: well-capitalized; adequately capitalized;
undercapitalized; or critically undercapitalized.

         Generally, a capital restoration plan must be filed with the OTS within
45 days of the date a bank receives notice that it is "undercapitalized,"
"significantly undercapitalized" or "critically undercapitalized." In addition,
various mandatory supervisory actions become immediately applicable to the
institution, including restrictions on growth of assets and other forms of
expansion. Under the OTS regulations, generally, a federally chartered savings
bank is treated as well capitalized if its total risk-based capital ratio is 10%
or greater, its Tier 1 risk-based capital ratio is 6% or greater, and its
leverage ratio is 5% or greater, and it is not subject to any order or directive
by the OTS to meet a specific capital level. When appropriate, the OTS can
require corrective action by a savings holding company under the "prompt
corrective action" provisions of federal law. At March 31, 2003, the Bank was
considered well-capitalized by the OTS.

         INSURANCE OF DEPOSIT ACCOUNTS. The Bank is a member of the SAIF and
pays its deposit insurance assessments to the SAIF. The FDIC also maintains
another insurance fund, BIF, which primarily insures the deposits of banks and
state chartered savings banks. Under federal law, the FDIC established a
risk-based assessment system for determining the deposit insurance assessments
to be paid by insured depository institutions. Under the assessment system, the
FDIC assigns an institution to one of three capital categories based on the
institution's financial information as of the quarter ending three months before
the beginning of the assessment period. An institution's assessment rate depends
on the capital category and supervisory category to which it is assigned. Under
the regulation, there are nine assessment risk classifications (i.e.,
combinations of capital groups and supervisory subgroups) to which different
assessment rates are applied. Assessment rates currently range from 0.0% of
deposits for an institution in the highest category (i.e., well-capitalized and
financially sound, with no more than a few minor weaknesses) to 0.27% of
deposits for an institution in the lowest category (i.e., undercapitalized and
substantial supervisory concern). The FDIC is authorized to raise the assessment
rates as necessary to maintain the required reserve ratio of the deposit
insurance fund to 1.25%.

         In addition, all FDIC insured institutions are required to pay
assessments to the FDIC at an annual rate of approximately .0212% of insured
deposits to fund interest payments on the bonds issued by the Financing
Corporation ("FICO"), an agency of the federal government established to
recapitalize the predecessor to the SAIF. These assessments will continue until
the FICO bonds mature in 2017.

         FEDERAL HOME LOAN BANK SYSTEM. The Bank is a member of the FHLB of New
York ("FHLB-NY"), which is one of the twelve regional FHLBs composing the FHLB
System. Each FHLB provides a central credit facility primarily for its member
institutions. The Bank, as an FHLB member, is required to acquire and hold
shares of capital stock in the FHLB-NY in an amount equal to the greater of 1%
of the aggregate principal amount of its unpaid residential mortgage loans, home
purchase contracts and similar obligations at the beginning of each year, but
not less than $500 or 5% of its outstanding advances from the FHLB. The Bank was
in compliance with this requirement with an investment in the capital stock of
the FHLB at March 31, 2003 of $5.4 million. Any advances from a FHLB must be
secured by specified types of collateral, and all long term advances may be
obtained only for the purpose of providing funds for residential housing
finance.

                                       22
<PAGE>

         FHLBs are required to provide funds for the resolution of insolvent
thrifts and to contribute funds for affordable housing programs. These
requirements could reduce the amount of earnings that the FHLBs can pay as
dividends to their members and could also result in the FHLBs imposing a higher
rate of interest on advances to their members. If dividends were reduced, or
interest on future FHLB advances increased, the Bank's net interest income would
be adversely affected.

         Under the Gramm-Leach-Bliley Act, as amended ("Gramm-Leach"), which
repeals historical restrictions and eliminates many federal and state law
barriers to affiliations among banks and securities firms, insurance companies
and other financial service providers, membership in the FHLB system is now
voluntary for all federally-chartered savings banks such as the Bank.
Gramm-Leach also replaces the existing redeemable stock structure of the FHLB
system with a capital structure that requires each FHLB to meet a leverage limit
and a risk-based permanent capital requirement. Two classes of stock are
authorized: Class A (redeemable on six months notice) and Class B (redeemable on
five years notice). Pursuant to regulations promulgated by the Federal Housing
Finance Board, as required by Gramm-Leach, the FHLB-NY has adopted a capital
plan, which is expected to become effective on October 1, 2003, that will change
the foregoing minimum stock ownership requirements for FHLB-NY stock. Under the
new capital plan, each member of the FHLB-NY will have to maintain a minimum
investment in FHLB-NY capital stock in an amount equal to the sum of (1) the
greater of $1,000 or 0.20% of the member's mortgage-related assets and (2) 4.50%
of the dollar amount of any outstanding advances under such member's Advances,
Collateral Pledge and Security Agreement with the FHLB-NY.

         FEDERAL RESERVE SYSTEM. Under the FRB's regulations, the Bank is
required to maintain non-interest-earning reserves against its transaction
accounts. FRB regulations generally require that (a) reserves of 3% must be
maintained against aggregate transaction accounts between $6.0 million and $42.1
million (subject to adjustment by the FRB), and (b) a reserve of $1.083 million
plus 10% (subject to adjustment by the FRB between 8% and 14%) must be
maintained against that portion of total transaction accounts in excess of $42.1
million. The first $6.0 million of otherwise reservable balances are exempted
from the reserve requirements. The Bank is in compliance with these reserve
requirements. Because required reserves must be maintained in the form of either
vault cash, a noninterest bearing account at a Federal Reserve Bank, or a
pass-through account as defined by the FRB, the effect of this reserve
requirement is to reduce the Bank's interest-earning assets to the extent that
the requirement exceeds vault cash.

         PRIVACY PROTECTION. Carver Federal is subject to OTS regulations
implementing the privacy protection provisions of Gramm-Leach. These regulations
require the Bank to disclose its privacy policy, including identifying with whom
it shares "nonpublic personal information," to customers at the time of
establishing the customer relationship and annually thereafter. The regulations
also require the Bank to provide its customers with initial and annual notices
that accurately reflect its privacy policies and practices. In addition, to the
extent its sharing of such information is not exempted, the Bank is required to
provide its customers with the ability to "opt-out" of having the Bank share
their nonpublic personal information with unaffiliated third parties.

         The Bank is subject to regulatory guidelines establishing standards for
safeguarding customer information. These regulations implement certain
provisions of Gramm-Leach. The guidelines describe the agencies' expectations
for the creation, implementation and maintenance of an information security
program, which would include administrative, technical and physical safeguards
appropriate to the size and complexity of the institution and the nature and
scope of its activities. The standards set forth in the guidelines are intended
to insure the security and confidentiality of customer records and information,
protect against any anticipated threats or hazards to the security or integrity
of such records and protect against unauthorized access to or use of such
records or information that could result in substantial harm or inconvenience to
any customer. The Bank has a policy to comply with the foregoing guidelines.

         HOLDING COMPANY REGULATION. The Holding Company is a savings and loan
holding company regulated by the OTS. As such, the Holding Company is registered
with and is subject to OTS examination and supervision, as well as certain
reporting requirements. In addition, the OTS has enforcement authority over the
Holding Company and its subsidiaries. Among other things, this authority permits
the OTS to restrict or prohibit activities that are determined to be a serious
risk to the financial safety, soundness or stability of a subsidiary savings
institution. Unlike bank holding companies, federal savings and loan holding
companies are not subject to any regulatory capital requirements or to
supervision by the Federal Reserve Board.

         Gramm-Leach restricts the powers of new unitary savings and loan
holding companies. Unitary savings and loan holding companies that are
"grandfathered," i.e., unitary savings and loan holding companies in existence
or with applications filed with the OTS on or before May 4, 1999, such as
Carver, retain their authority under the prior law. All other unitary savings
and loan holding companies are limited to financially related activities
permissible for bank holding companies, as defined under Gramm-Leach.
Gramm-Leach also prohibits non-financial companies from acquiring grandfathered
unitary savings and loan holding companies.

         RESTRICTIONS APPLICABLE TO ALL SAVINGS AND LOAN HOLDING COMPANIES.
Federal law prohibits a savings and loan holding company, including the Holding
Company, directly or indirectly, from acquiring:

                  (1)      control (as defined under HOLA) of another savings
                           institution (or a holding company parent) without
                           prior OTS approval;



                                       23
<PAGE>

                  (2)      through merger, consolidation, or purchase of assets,
                           another savings institution or a holding company
                           thereof, or acquiring all or substantially all of the
                           assets of such institution (or a holding company),
                           without prior OTS approval; or

                  (3)      control of any depository institution not insured by
                           the FDIC (except through a merger with and into the
                           holding company's savings institution subsidiary that
                           is approved by the OTS).

A savings and loan holding company may not acquire as a separate subsidiary an
insured institution that has a principal office outside of the state where the
principal office of its subsidiary institution is located, except:

                  (1)      in the case of certain emergency acquisitions
                           approved by the FDIC;

                  (2)      if such holding company controls a savings
                           institution subsidiary that operated a home or branch
                           office in such additional state as of March 5, 1987;
                           or

                  (3)      if the laws of the state in which the savings
                           institution to be acquired is located specifically
                           authorize a savings institution chartered by that
                           state to be acquired by a savings institution
                           chartered by the state where the acquiring savings
                           institution or savings and loan holding company is
                           located or by a holding company that controls such a
                           state chartered association.

         FEDERAL SECURITIES LAWS. The Holding Company is subject to the periodic
reporting, proxy solicitation, tender offer, insider trading restrictions and
other requirements under the Securities Exchange Act of 1934, as amended
("Exchange Act").

         DELAWARE CORPORATION LAW. The Holding Company is incorporated under the
laws of the State of Delaware. Thus, it is subject to regulation by the State of
Delaware and the rights of its shareholders are governed by the General
Corporation Law of the State of Delaware.

         NEW YORK STATE BANKING REGULATIONS. The New York State Banking
Department has adopted a new Section 6-1 to the banking law and regulations
which impose restrictions and limitations on certain high cost home loans made
by any individual or entity, including a federally-chartered savings bank, that
originates more than one high cost home loan in New York State in a 12-month
period. Among other things, the regulations and statute prohibit certain
mortgage loan provisions and certain acts and practices by originators and
impose certain disclosure and reporting requirements. It is unclear whether
these provisions would be preempted by Section 5(a) of HOLA, as implemented by
the lending and investment regulations of the OTS. The OTS has not yet adopted
regulations regarding high-cost mortgage loans and is currently considering
whether it will do so. Although the Bank does not originate loans that meet the
definition of "high-cost mortgage loan" under the proposed regulations, in the
event the Bank determines to originate such loans in the future, the Bank may be
subject to such regulation, if adopted as proposed.

         OTHER FEDERAL REGULATION. In response to the events of September 11,
2001, President George W. Bush signed into law the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001, or the USA PATRIOT Act, on October 26, 2001. The USA
PATRIOT Act gives the federal government new powers to address terrorist threats
through enhanced domestic security measures, expanded surveillance powers,
increased information sharing, and broadened anti-money laundering requirements.
By way of amendments to the Bank Secrecy Act, Title III of the USA PATRIOT Act
takes measures intended to encourage information sharing among bank regulatory
agencies and law enforcement bodies. Further, certain provisions of Title III
impose affirmative obligations on a broad range of financial institutions,
including banks, thrifts, brokers, dealers, credit unions, money transfer agents
and parties registered under the Commodity Exchange Act.

         Among other requirements, Title III of the USA PATRIOT Act imposes the
following requirements with respect to financial institutions:

                  o        Pursuant to Section 352, all financial institutions
                           must establish anti-money laundering programs that
                           include, at minimum: (i) internal policies,
                           procedures and controls, (ii) specific designation of
                           an anti-money laundering compliance officer, (iii)
                           ongoing employee training programs, and (iv) an
                           independent audit function to test the anti-money
                           laundering programs. Interim final rules implementing
                           Section 352 were issued by the Treasury Department on
                           April 29, 2002. Such rules state that a financial
                           institution is in compliance with Section 352 if it
                           implements and maintains an anti-money laundering
                           program that complies with the anti-money laundering
                           regulations of its federal functional regulator. The
                           Bank is in compliance with the OTS's anti-money
                           laundering regulations.

                  o        Section 326 of the Act authorizes the Secretary of
                           the Department of Treasury, in conjunction with the
                           other bank regulators, to issue regulations that
                           provide for minimum standards with respect to
                           customer identification at the time new accounts are
                           opened. On July 23, 2002, the OTS and the other
                           federal bank regulators jointly issued proposed rules
                           to implement Section 326. The proposed rules require
                           financial institutions to establish a program
                           specifying procedures for obtaining identifying
                           information from customers seeking to open new
                           accounts. This identifying information would be
                           essentially the same information currently obtained
                           by most financial institutions for individual
                           customers. A financial institution's program


                                       24
<PAGE>

                           would also have to contain procedures to verify the
                           identity of customers within a reasonable period of
                           time, generally through the use of the same forms of
                           identity verification currently in use, such as
                           driver's licenses, passports, credit reports and
                           other similar means.

                  o        Section 312 of the Act requires financial
                           institutions that establish, maintain, administer or
                           manage private banking accounts or correspondent
                           accounts in the United States for non-United States
                           persons or their representatives (including foreign
                           individuals visiting the United States) to establish
                           appropriate, specific, and, where necessary, enhanced
                           due diligence policies, procedures and controls
                           designed to detect and report money laundering.
                           Interim rules under Section 312 were issued by the
                           Treasury Department on July 23, 2002. The interim
                           rules state that a due diligence program is
                           reasonable if it comports with existing best
                           practices standards for banks that maintain
                           correspondent accounts for foreign banks and
                           evidences good faith efforts to incorporate due
                           diligence procedures for accounts posing increased
                           risk of money laundering. In addition, an enhanced
                           due diligence program is reasonable if it comports
                           with best practices standards and focuses enhanced
                           due diligence measures on those correspondent
                           accounts posing a particularly high risk of money
                           laundering based on the bank's overall assessment of
                           the risk posed by the foreign correspondent bank.
                           Finally, a private banking due diligence program must
                           be reasonably designed to detect and report money
                           laundering and the existence of proceeds of foreign
                           corruption. Such a program is reasonable if it
                           focuses on those private banking accounts that
                           present a high risk of money laundering.

                  o        Financial institutions are prohibited from
                           establishing, maintaining, administering or managing
                           correspondent accounts for foreign shell banks
                           (foreign banks that do not have a physical presence
                           in any country), and are subject to certain
                           recordkeeping obligations with respect to
                           correspondent accounts of foreign banks.

                  o        Bank regulators are directed to consider a holding
                           company's effectiveness in combating money laundering
                           when ruling on FRA and Bank Merger Act applications.

FEDERAL AND STATE TAXATION

FEDERAL TAXATION

         GENERAL. The Holding Company and the Bank currently file consolidated
federal income tax returns, report their income for tax return purposes on the
basis of a taxable-year ending March 31st, using the accrual method of
accounting and are subject to federal income taxation in the same manner as
other corporations with some exceptions, including in particular the Bank's tax
reserve for bad debts discussed below. The following discussion of tax matters
is intended only as a summary and does not purport to be a comprehensive
description of the tax rules applicable to the Bank or the Holding Company.

         BAD DEBT RESERVES. The Bank, as a "small bank" (one with assets having
an adjusted tax basis of $500 million or less) is permitted to maintain a
reserve for bad debts with respect to "qualifying loans," which, in general, are
loans secured by certain interests in real property, and to make, within
specified formula limits, annual additions to the reserve which are deductible
for purposes of computing the Bank's taxable income.

         DISTRIBUTIONS. To the extent that the Bank makes "nondividend
distributions" to shareholders, such distributions will be considered to result
in distributions from the Bank's "base year reserve," i.e., its reserve as of
March 31, 1988, to the extent thereof and then from its supplemental reserve for
losses on loans, and an amount based on the amount distributed will be included
in the Bank's taxable income. Nondividend distributions include distributions in
excess of the Bank's current and accumulated earnings and profits, distributions
in redemption of stock and distributions in partial or complete liquidation.
However, dividends paid out of the Bank's current or accumulated earnings and
profits, as calculated for federal income tax purposes, will not constitute
nondividend distributions and, therefore, will not be included in the Bank's
income.

         The amount of additional taxable income created from a nondividend
distribution is an amount that, when reduced by the tax attributable to the
income, is equal to the amount of the distribution. Thus, approximately one and
one-half times the nondividend distribution would be includable in gross income
for federal income tax purposes, assuming a 34% federal corporate income tax
rate.

         ELIMINATION OF DIVIDENDS; DIVIDENDS-RECEIVED DEDUCTION. The Holding
Company may exclude from its income 100% of dividends received from the Bank as
a member of the same affiliated group of corporations. The corporate
dividends-received deduction is generally 70% in the case of dividends received
from unaffiliated corporations with which the Holding Company and the Bank will
not file a consolidated tax return, except that if the Holding Company or the
Bank owns more than 20% of the stock of a corporation distributing a dividend,
then 80% of any dividends received may be deducted.

STATE AND LOCAL TAXATION

         STATE OF NEW YORK. The Bank and the Holding Company are subject to New
York State franchise tax on net income or one of several alternative bases,
whichever results in the highest tax. "Net income" means federal taxable income
with adjustments. The Bank and the Holding Company file combined returns and are
subject to taxation in the same manner as other corporations with some


                                       25
<PAGE>

exceptions, including the Bank's deductions for additions to its reserve for bad
debts. The New York State franchise tax rates for fiscal years 2003 and 2002 are
9.53% and 9.36%, respectively, (including the Metropolitan Commuter
Transportation District Surcharge) of net income. In general, the Holding
Company is not required to pay New York State tax on dividends and interest
received from the Bank or on gains realized on the sale of Bank stock.

         New York State has enacted legislation that enabled the Bank to avoid
the recapture of the New York State tax bad debt reserves that otherwise would
have occurred as a result of the changes in federal law and to continue to
utilize either the federal method or a method based on a percentage of its
taxable income for computing additions to its bad debt reserve.

         NEW YORK CITY. The Bank and the Holding Company are also subject to a
similarly calculated New York City banking corporation tax of 9% on income
allocated to New York City. In this connection, legislation was recently enacted
regarding the use and treatment of tax bad debt reserves that is substantially
similar to the New York State legislation described above.

         DELAWARE TAXATION. As a Delaware holding company not earning income in
Delaware, the Holding Company is exempted from Delaware corporate income tax but
is required to file an annual report with and pay an annual franchise tax to the
State of Delaware.

AVAILABILITY OF SEC FILINGS

       The Holding Company's financial reports can be accessed free of charge
through the SEC's website WWW.SEC.GOV or upon written request to the Holding
Company.

EXECUTIVE OFFICERS OF THE HOLDING COMPANY

         The name, position, term of office as officer and period during which
he or she has served as an officer is provided below for each executive officer
of the Holding Company as of May 31, 2003. Each of the persons listed below is
an executive officer of the Holding Company and the Bank, holding the same
office in each.

<TABLE>
<CAPTION>
NAME                                       AGE           POSITION
- ----                                       ---           --------
<S>                                        <C>           <C>
Deborah C. Wright                          45            President and Chief Executive Officer, Director
Catherine A. Papayiannis                   43            Executive Vice President and Chief Operating Officer
James H. Bason                             48            Senior Vice President and Chief Lending Officer
Frank Deaton                               34            Senior Vice President and Chief Auditor
Linda J. Dunn                              47            Senior Vice President, General Counsel and Corporate Secretary
William Gray                               48            Senior Vice President and Chief Financial Officer
Brian J. Maher                             61            Senior Vice President and Chief Credit Officer
Margaret Peterson                          52            Senior Vice President and Chief Administrative Officer
Devon W. Woolcock                          37            Senior Vice President and Chief of Retail Banking
</TABLE>


         DEBORAH C. WRIGHT is President and Chief Executive Officer and a
Director of the Holding Company and Carver Federal. Prior to joining Carver on
June 1, 1999, Ms. Wright was President & CEO of the Upper Manhattan Empowerment
Zone Development Corporation, a position she held since May 1996. She previously
served as Commissioner of the Department of Housing Preservation and Development
under Mayor Rudolph W. Giuliani from January 1994 through March 1996. Prior to
that appointment, Ms. Wright was a member of the New York City Housing Authority
Board. She is a member of the Board of Overseers of Harvard University and
serves on the boards of Kraft Foods, Inc., The Lower Manhattan Development
Corporation, the Initiative for a Competitive Inner City, The New York City
Partnership, Inc. and the Ministers and Missionaries Benefit Board of the
American Baptist Churches. Ms. Wright earned A.B., J.D. and M.B.A. degrees from
Harvard University.


         CATHERINE A. PAPAYIANNIS is Executive Vice President and Chief
Operating Officer. She joined Carver in June 2002. Ms. Papayiannis was
previously Senior Vice President/Director of Community Banking at Atlantic Bank
of New York, where she oversaw the regional retail distribution network, the
offsite ATM network, wealth and cash management services, residential and


                                       26
<PAGE>

consumer lending and small business banking. Prior to joining Atlantic Bank Ms.
Papayiannis was employed by Olympian Bank of Brooklyn where she held numerous
roles. Ms. Papayiannis earned a B.B.A. and an M.B.A from Baruch College.

         JAMES H. BASON is Senior Vice President and Chief Lending Officer. He
joined Carver in March 2003. Previously Mr. Bason was Vice President and Real
Estate Loan Officer at The Bank of New York where he had been employed since
1991 when The Bank of New York acquired Barclays Bank (where he had been
employed since 1986). At The Bank of New York he was responsible for developing
and maintaining relationships with developers, builders, real estate investors
and brokers to provide construction and permanent real estate financing. At
Barclays, Mr Bason began his career in residential lending and eventually became
the banks CRA officer. Mr. Bason earned a B.S. in Business Administration from
the State University of New York at Oswego.

          FRANK DEATON is Senior Vice President and Chief Auditor. He joined
Carver in May 2001. Mr. Deaton was previously Vice President and Risk Review
Manager with Key Bank in Cleveland, Ohio. He joined Key Bank in 1990 and was
responsible for developing the scope and overseeing completion of credit,
operational and regulatory compliance audits for a variety of business units.
Mr. Deaton is a Certified Bank Auditor and a member of the Institute of Internal
Auditors.

         LINDA J. DUNN is Senior Vice President, General Counsel and Corporate
Secretary. She joined Carver in June 2001. Ms. Dunn had been a corporate
associate at the law firm Paul, Weiss, Rifkind, Wharton & Garrison since 1994.
She was an Assistant Vice President in the Consumer Products Division of
Chemical Bank from 1987 to 1991. From 1983 to 1987, she was employed at
American/National Can Company where she held various positions from Financial
Analyst to Manager of Performance Analysis in the Specialty Food Products
Division. Ms. Dunn earned A.B., M.B.A. and J.D. degrees from Harvard University.

         WILLIAM GRAY is Senior Vice President and Chief Financial Officer. He
joined Carver in February 2002. Mr. Gray had been employed at the Dime Savings
Bank of New York since 1992, most recently serving as Vice President/Director of
Business Unit Planning and Support in the Controller's Department where he was
responsible for identifying and evaluating strategic initiatives for several
businesses. Mr. Gray earned a B.A. in accounting from Adelphi University in
1986.

         BRIAN J. MAHER is Senior Vice President and Chief Credit Officer. Mr.
Maher joined Carver in September 2002 and was appointed to the newly created
Chief Credit Officer position in January 2003. Mr. Maher brings to Carver 30
years of experience in financial services, 20 years in credit and lending, 15
years of which were with Citibank and seven years with Alliance Funding. Mr.
Maher earned a B.A. from St. Bonaventure University.

         MARGARET D. PETERSON is Senior Vice President and Chief Human Resources
Officer. She joined Carver in October 1999. Ms. Peterson came to Carver from
Deutsche Bank where she served as a Compensation Planning Consultant in
Corporate Human Resources. Prior to joining Deutsche Bank, she was a Vice
President and Senior Human Resources Generalist for Citibank Global Asset
Management. In addition to her 13 years in Human Resources, Ms. Peterson has ten
years of Systems and Technology experience from various positions held at each
of JP Morgan and Chase Manhattan Bank. Ms. Peterson is a member of the Board of
Friends of Columbia University's Double Discovery Center. Ms. Peterson earned a
Bachelors Degree from Pace University, an M.B.A. from Columbia University as a
Citicorp Fellow, and has been designated a Certified Compensation Professional
(CCP) by the American Compensation Association and a Senior Professional in
Human Resources (SPHR) by the HR Certification Institute.

         DEVON W. WOOLCOCK is Senior Vice President and Chief of Retail Banking.
He is a 12-year veteran of retail banking. He joined Carver in 2000 from
Citibank where he was a Division Executive Vice President and where, most
recently, he managed six branches in Brooklyn and Queens. He joined Citibank in
1995 where he managed several South Florida branches before moving to New York
City. Mr. Woolcock began his career with Barnett Bank in Florida, holding
positions including Head Teller, Division Operations Manager and Branch Manager.
Mr. Woolcock attended college at the University of Houston and Bethune Cookman
College.


                                       27
<PAGE>



ITEM 2.  PROPERTIES.

         The Bank currently conducts its business through one administrative
office and five branch offices. The following table sets forth certain
information regarding Carver Federal's offices and other material properties at
March 31, 2003.

<TABLE>
<CAPTION>
                                                                         LEASE
                                                  YEAR      OWNED OR   EXPIRATION     NET BOOK
                                                 OPENED       LEASE       DATE          VALUE
                                              -----------------------------------------------------
                                                                                   (IN THOUSANDS)
<S>                                               <C>       <C>        <C>             <C>
MAIN OFFICE AND BRANCH
- ----------------------
75 West 125th Street                              1996        Owned                    $ 5,435
New York, NY

BRANCH OFFICES:
- ---------------
1281 Fulton Street
Brooklyn, NY                                      1989        Owned                      1,494
(Bedford-Stuyvesant branch)

1009-1015 Nostrand Avenue
Brooklyn, NY                                      1975        Owned                        320
(Crown Heights branch)

115-02 Merrick Boulevard
Jamaica, NY                                       1982       Leased     2/28/2011          279
(St Alban's branch)

130 Malcolm X Boulevard
New York, NY                                      2001       Leased     5/31/2006          605
(Malcolm X  Blvd. branch)
                                                                                   ----------------
            Total                                                                      $ 8,133
                                                                                   ================
</TABLE>

         The net book value of Carver Federal's investment in premises and
equipment totaled approximately $10.2 million at March 31, 2003.

ITEM 3.  LEGAL PROCEEDINGS.

         From time to time, Carver Federal is a party to various legal
proceedings incident to its business. Certain claims, suits, complaints and
investigations involving Carver Federal, arising in the ordinary course of
business, have been filed or are pending. The Company is of the opinion, after
discussion with legal counsel representing the Bank in these proceedings, that
the aggregate liability or loss, if any, arising from the ultimate disposition
of these matters would not have a material adverse effect on the Company's
consolidated financial position or results of operations. At March 31, 2003,
except as set forth below, there were no material legal proceedings to which the
Company or its subsidiaries was a party or to which any of their property was
subject.

         On or about April 29, 1999, plaintiff Reginald St. Rose ("St. Rose")
filed suit against Carver Federal in the Supreme Court of the State of New York,
County of New York (the "St. Rose Action"). St. Rose is a former Carver Federal
employee. On or about January 12, 1999, Carver Federal and St. Rose entered into
an agreement (the "Agreement") providing that St. Rose would resign from Carver
Federal on the terms and conditions set forth in the Agreement. In the St. Rose
Action, St. Rose alleged the following causes of action, which relate to the
Agreement and St. Rose's separation from Carver Federal: (1) breach of contract;
(2) promissory estoppel; and (3) fraudulent misrepresentation. St. Rose seeks
damages in an amount not less than $50,000 with respect to the breach of
contract cause of action and seeks undisclosed damages with respect to the
promissory estoppel and fraudulent misrepresentation causes of action.

         On or about August 18, 1999, Carver Federal moved to dismiss St. Rose's
fraudulent misrepresentation cause of action. By decision dated November 23,
1999, the Court granted Carver Federal's motion to dismiss and entered an order
embodying that decision on January 26, 2000. Carver Federal has not filed an
answer in the St. Rose Action. By written stipulation of the parties, Carver
Federal's time to file an answer to St. Rose's complaint has been extended
without date. Carver Federal has unasserted counterclaims against St. Rose for,
among other claims, payment of certain financial obligations to Carver Federal
(including, but not limited to, automobile loans, unsecured loans, lines of
credit and credit card debts), which obligations remain outstanding as of the
date of this Form 10-K. Since January 2000, the St. Rose Action has been largely
inactive. The parties have had intermittent settlement discussions but have not
reached an agreement. If the parties do not reach a settlement, Carver Federal
intends to continue to defend the St. Rose Action vigorously.



                                       28
<PAGE>

         Carver Federal is also a defendant in an action brought by Ralph
Williams (the "Williams Action") and an action brought by Janice Pressley (the
"Pressley Action" and, together with the Williams Action, the "Actions") both of
which arise out of events concerning the Northeastern Conference Federal Credit
Union ("Northeastern"). Plaintiff Williams is a former member of the Board of
Directors of Northeastern and plaintiff Pressley is a former treasurer of
Northeastern.

         Northeastern was a federal credit union and it maintained accounts with
Carver Federal and with other banks in the New York metropolitan area.
Plaintiffs' complaints (which are virtually identical) allege that the National
Credit Union Administration (the "NCUA") acted improperly when it placed
Northeastern into conservatorship and subsequent liquidation. On or about
November 22, 2000, Williams filed his pro se complaint in the United States
District Court, District of Columbia, against the NCUA, Carver Federal, JPMorgan
Chase Bank (formerly Chase Manhattan Bank) ("Chase"), Astoria Federal Savings
and Loan Association and Reliance Federal Savings Bank (Carver Federal with the
last three defendants, collectively the "Bank Defendants") seeking damages in
the amount of $1 million plus certain additional unspecified amounts. On or
about November 22, 2000, plaintiff Pressley filed her pro se action in the
United States District Court, District of Columbia, against the same defendants
seeking unspecified compensatory and punitive damages. Williams seeks damages
for the allegedly "unauthorized" or "invalid" actions of the NCUA Board of
Directors in taking control of Northeastern as well as damages for
discrimination and civil rights violations. Pressley seeks damages based on
identical allegations except that she also alleges certain claims of employment
discrimination. While the bulk of both complaints relate to the action of the
NCUA Board of Directors, the plaintiffs advance two allegations against the Bank
Defendants, including Carver Federal. First, plaintiffs allege that the Bank
Defendants "collaborated with the NCUA Board of Directors" in violating
unspecified constitutional and privacy rights. Second, plaintiffs allege that
the Bank Defendants engaged in discrimination.

On or about December 15, 2000, defendant Chase moved to consolidate the Actions.
In anticipation of that consolidation, the Bank Defendants filed a joint motion
to dismiss both complaints arguing that both Actions are barred by principles of
res judicata and both complaints fail to state claims on which relief can be
granted. The Bank Defendants' motion to dismiss was denied without prejudice
insofar as it applied to the Williams Action solely for the reason that it was a
motion addressed to both Actions prior to the issuance of an order consolidating
these cases. The Bank Defendants have refiled their motion to dismiss the
Williams Action and it is sub judice. If the motion to dismiss is not granted,
Carver Federal intends to defend the Williams Action vigorously. On September
20, 2001, the Court granted the Bank Defendants' motion to dismiss the Pressley
Action. Pressley has appealed the dismissal. Carver Federal is vigorously
opposing the appeal.

         On or about December 28, 2000, plaintiff Thomas L. Clark ("Clark")
filed suit against Carver Federal and individual defendants in the Supreme Court
of the State of New York, County of New York. Clark is the former President and
Chief Executive Officer of Carver Federal. Clark claimed that the defendants
should be forced to obtain approval from the OTS to pay severance benefits that
Clark believes Carver Federal owes him under an employment agreement. Carver
Federal sought injunctive relief and asserted claims for breach of contract,
equitable estoppel and estoppel by contract. On or about March 30, 2001, Carver
Federal and the individual defendants moved to dismiss the complaint in its
entirety based on documentary evidence and for failure to state a cause of
action. By Decision and Order entered November 27, 2001, the Court granted that
motion to the extent of dismissing the first cause of action for breach of
contract against all of the individual defendants and dismissing the second
cause of action based on estoppel theories as against all the defendants. Carver
Federal appealed the Decision and Order insofar as it did not dismiss the
complaint in its entirety. On September 26, 2002, the Appellate Division of the
Supreme Court reversed the lower court and granted Carver Federal's motion in
its entirety. Clark did not appeal that decision and his time to do so has
expired.

         In or about November 2001, Monique Barrow filed an action against
Carver Federal in the United States District Court for the Southern District of
New York alleging that Carver Federal's termination of her employment
constituted a violation of the federal Family and Medical Leave Act, 29 U.S.C.
ss. 2601, et seq., the New York State Human Rights Law, N.Y. Executive ss.296 ET
SEQ., and the New York City Human Rights Law, N.Y.C. Administrative Code ss.
8-101 et seq. Ms. Barrow seeks back pay, front pay and benefits with interest in
an amount not less than $5 million, and punitive, liquidated and other
compensatory damages in an amount not less than $10 million. Carver Federal has
answered the complaint denying any liability. Carver Federal obtained an order
providing for expedited discovery on liability issues. Carver Federal has
completed its discovery and has requested permission to make a motion for
summary judgment. Carver Federal intends to make that motion as soon as
permission is received.




                                       29
<PAGE>

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         The Holding Company held its Annual Meeting on February 4, 2003 for the
fiscal year ended March 31, 2002.

         The purpose of the Annual Meeting was to vote on the following
proposals:

         1.       The election of three directors for terms of three years each;
                  and

         2.       The ratification of the appointment of KPMG, LLP as
                  independent auditors of the Holding Company for the fiscal
                  year ended March 31, 2003.

The results of voting were as follows:

<TABLE>
<CAPTION>
Proposal 1:           Election of Directors:
                      Holding Company Nominees
<S>                   <C>                                                         <C>
                      Carol Baldwin Moody                                         For         2,288,900
                                                                                  Withheld    12,215

                      Edward B. Ruggiero                                          For         2,288,761
                                                                                  Withheld    12,354

                      Strauss Zelnick                                             For         2,288,980
                                                                                  Withheld    12,135

Proposal 2:           Ratification of Appointment of Independent Auditors         For         2,284,851
                                                                                  Against     15,675
                                                                                  Abstain     589
</TABLE>

         In addition to the nominees elected at the Annual Meeting, the
following persons' terms of office as directors continued after the Annual
Meeting: Pazel G. Jackson, Jr., David L. Hinds, Frederick O. Terrell, Robert
Holland, Jr. and Deborah C. Wright.


                                       30
<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

      The Holding Company's common stock is listed on the American Stock
Exchange under the symbol "CNY." As of May 31, 2003, there were 2,286,133 shares
of the common stock outstanding, held by approximately 1,073 stockholders of
record. The following table shows the high and low per share sales prices of the
common stock and the dividends declared for the quarters indicated.
<TABLE>
<CAPTION>
                               High       Low        Dividend                             High       Low       Dividend
                               ----       ---        --------                             ----       ---       --------
<S>                           <C>         <C>         <C>        <C>                    <C>         <C>         <C>
      Fiscal Year 2003                                           Fiscal Year 2002

      June 30, 2002           $13.10      $11.31      $   --     June 30, 2001          $ 9.18      $ 8.60      $   --
      September 30, 2002      $12.15      $ 9.83      $   --     September 30, 2001     $10.13      $ 8.15      $   --
      December 31, 2002       $11.27      $ 9.08      $ 0.05     December 31, 2001      $ 9.80      $ 8.64      $   --
      March 31, 2003          $14.54      $11.13      $ 0.05     March 31, 2002         $11.49      $ 9.60      $ 0.05
</TABLE>

      On January 9, 2003, the Holding Company's Board of Directors announced the
establishment of a quarterly cash dividend in an amount to be determined each
quarter. As such, the Board of Directors declared two separate cash dividends of
$0.05 per common share for the third and fourth quarters of fiscal 2003. They
were paid on or about February 7, 2003 and May 19, 2003, respectively, to common
stockholders of record at the close of business on January 20, 2003 and May 5,
2003, respectively. In each of the past five fiscal years other than fiscal 2003
the Company has paid an annual $0.05 per common share cash dividend.

      The Bank will not be permitted to pay dividends to the Holding Company on
its capital stock if its regulatory capital would be reduced below applicable
regulatory capital requirements or if its stockholders' equity would be reduced
below the amount required to be maintained for the liquidation account, which
was established in connection with the Bank's conversion to stock form. The OTS
capital distribution regulations applicable to savings institutions (such as the
Bank) that meet their regulatory capital requirements permit, after not less
than 30 days prior notice to the OTS, capital distributions during a calendar
year that do not exceed the Bank's net income for that year plus its retained
net income for the prior two years. For information concerning the Bank's
liquidation account, see Note 11 of the Notes to the Consolidated Financial
Statements.

      Unlike the Bank, the Holding Company is not subject to OTS regulatory
restrictions on the payment of dividends to its stockholders, although the
source of such dividends will be dependent, in part, upon dividends from the
Bank. The Holding Company is subject to the requirements of Delaware law, which
generally limit dividends to an amount equal to the excess of the net assets of
the Company (the amount by which total assets exceed total liabilities) over its
statutory capital, or if there is no such excess, to its net profits for the
current and/or immediately preceding fiscal year.


                                       31
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                      At or for the Fiscal Year Ended March 31,
                                                     -------------------------------------------------------------------------
                                                       2003           2002           2001             2000              1999
                                                     --------       --------       ---------        ---------        ---------
                                                                     (Dollars in thousands, except per share data)
<S>                                                  <C>            <C>            <C>              <C>              <C>
Selected Financial Condition Data
Assets                                               $509,845       $450,306       $ 424,500        $ 420,119        $ 416,483
Loans, net                                            292,738        289,710         283,437          270,148          270,522
Securities                                            164,750        105,464          87,788          104,177           96,502
Cash and cash equivalents                              23,160         34,851          31,758           22,202           21,321
Deposits                                              347,164        324,954         279,424          281,941          276,999
Borrowed funds                                        108,996         75,651         105,600           98,578          102,038
Stockholders' equity                                   41,073         36,742          32,096           32,641           31,175
Number of Deposit accounts                             41,220         41,200          44,751           54,597           58,113
Number of offices                                           5              5               5                7                7

Operating Data:
Interest income                                        27,378         28,254          28,307           27,367           28,473
Interest expense                                        8,983         12,047          14,278           14,009           14,815
                                                     --------       --------       ---------        ---------        ---------
Net interest income taxes                              18,395         16,207          14,029           13,358           13,658
Provision for loan losses                                  --            900           1,793            1,099            4,029
                                                     --------       --------       ---------        ---------        ---------
Net interest income after provision for loan losses    18,395         15,307          12,236           12,259            9,629
Non-interest income                                     3,161          4,485           2,934            2,539            2,382
Non-interest expense                                   14,692         14,198          15,461           15,823           17,963
                                                     --------       --------       ---------        ---------        ---------
Income (loss) before income taxes                       6,864          5,594            (291)          (1,025)          (5,952)
Income tax (benefit)                                    3,033            881              98              110           (1,499)
                                                     --------       --------       ---------        ---------        ---------
Net income (loss)                                    $  3,831       $  4,713       $    (389)       $  (1,135)       $  (4,453)
                                                     ========       ========       =========        =========        =========
Diluted earnings (loss) per common share             $   1.52       $   1.89       $   (0.26)       $   (0.53)       $   (2.02)
                                                     ========       ========       =========        =========        =========

Selected Statistical Data:
Return on average assets (1)(3)                          0.83%          1.11%          (0.07)%          (0.27)%          (1.05)%
Return on average equity (2)(3)                          9.77          13.78           (0.89)           (3.29)          (12.70)
Net interest margin (4)                                  4.26           4.05            3.61             3.47             3.43
Average interest rate spread (5)                         4.08           3.92            3.48             3.38             3.29
Efficiency ratio (3)(6)                                 68.16          77.89           96.93           104.31           112.02
Operating expense to average assets (3)(7)               3.18           3.33            3.72             3.82             4.22
Equity to total assets at end of period                  8.06           8.16            7.56             7.77             7.49
Average equity to average assets                         8.48           8.03            7.85             8.33             8.24
Dividend payout ratio (8)                                3.19           2.55          (17.24)           (5.17)           (2.60)
Book value                                           $  16.26       $  14.72       $   13.03        $   14.28        $   14.13

Asset Quality Ratios:
Non-performing assets to total assets (9)                0.36%          0.63%           0.71%            0.73%            1.15%
Non-performing assets to total loans receivable (9)      0.61           0.96            1.04             1.12             1.66
Allowance for loan losses to total loans receivable      1.40           1.41            1.24             1.07             1.48
</TABLE>

(1)   Net income divided by average total assets

(2)   Net income divided by average total equity

(3)   For fiscal 1999, excluding non-recurring expenses amounting to $7.8
      million, the return on average assets, return on average equity, operating
      expenses to average assets and efficiency ratio were 0.24%, 2.85%, 2.98%,
      and 78.94%, respectively.

(4)   Net interest income divided by average interest-earning assets.

(5)   The difference between the weighted average yield on interest-earning
      assets and the weighted average cost of interest-bearing liabilities.

(6)   Non-interest expense (other than real estate owned expenses) divided by
      the sum of net interest income and non-interest income (other than net
      security gains and losses and other non-recurring income).

(7)   Non-interest expense less real estate owned expenses, divided by average
      total assets.

(8)   Dividends paid to common stockholders as a percentage of net income (loss)
      available to common stockholders.

(9)   Non performing assets consist of non-accrual loans, loans accruing 90 days
      or more past due, and property acquired in settlement of loans.

(10)  Total stockholders' equity divided by diluted weighted average shares
      outstanding.


                                       32
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

      The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes to Consolidated Financial Statements
presented elsewhere in this report.

General

      Carver's net income is dependent primarily on its net interest income,
which is the difference between interest income earned on its loan, investment
and mortgage-backed securities portfolios and the interest paid on its
interest-bearing liabilities, such as deposits and borrowings. In addition, net
income is affected by the level of provision for loan losses, as well as
non-interest income and operating expenses.

      The operations of Carver are significantly affected by prevailing economic
conditions, competition and the monetary and fiscal policies of governmental
agencies. Lending activities are influenced by the demand for and supply of
housing, competition among lenders, the level of interest rates and the
availability of funds. Deposit flow and costs of funds are influenced by
prevailing market rates of interest, primarily on competing investments, account
maturities, and the levels of personal income and savings.

Asset/Liability Management

      Net interest income, the primary component of Carver's net income, is
determined by the difference or "spread" between the yield earned on
interest-earning assets and the rates paid on its interest-bearing liabilities
and the relative amounts of such assets and liabilities. Because Carver's
interest-bearing liabilities consist primarily of shorter term deposit accounts,
Carver's interest rate spread can be adversely affected by changes in general
interest rates if its interest-earning assets are not sufficiently sensitive to
changes in interest rates. Management has sought to reduce Carver's exposure to
changes in interest rates by more closely matching the effective maturities and
repricing periods of its interest-earning assets and interest-bearing
liabilities through a variety of strategies, including the origination and
purchase of adjustable-rate loans for its portfolio, investment in
adjustable-rate mortgage-backed securities and shorter-term investment
securities and the sale of all long-term fixed-rate loans originated into the
secondary market. The Bank has also reduced interest rate risk through its
origination and purchase of primarily adjustable-rate mortgage loans and
extension of the term of borrowings.

Discussion of Market Risk--Interest Rate Sensitivity Analysis

      As a financial institution, the Bank's primary component of market risk is
interest rate volatility. Fluctuations in interest rates will ultimately impact
both the level of income and expense recorded on a large portion of the Bank's
assets and liabilities, and the market value of all interest-earning assets,
other than those which possess a short term to maturity. Since all of Carver's
interest-bearing liabilities and virtually all of Carver's interest-earning
assets are located at the Bank, most of Carver's interest rate risk ("IRR")
exposure lies at the Bank level. As a result, all significant IRR management
procedures are performed at the Bank level. Based upon the Bank's nature of
operations, the Bank is not subject to foreign currency exchange or commodity
price risk. The Bank does not own any trading assets.

      Carver seeks to manage its IRR by monitoring and controlling the variation
in repricing intervals between its assets and liabilities. To a lesser extent,
Carver also monitors its interest rate sensitivity by analyzing the estimated
changes in market value of its assets and liabilities assuming various interest
rate scenarios. As discussed more fully below, there are a variety of factors
which influence the repricing characteristics of any given asset or liability.

      The matching of assets and liabilities may be analyzed by examining the
extent to which such assets and liabilities are "interest rate sensitive" and by
monitoring an institution's interest rate sensitivity gap. An asset or liability
is said to be interest rate sensitive within a specific period if it will mature
or reprice within that period. The interest rate sensitivity gap is defined as
the difference between the amount of interest-earning assets maturing or
repricing within a specific period of time and the amount of interest-bearing
liabilities repricing within that same time period. A gap is considered positive
when the amount of interest rate sensitive assets exceeds the amount of interest
rate sensitive liabilities and is considered negative when the amount of
interest rate sensitive liabilities exceeds the amount of interest rate
sensitive assets. Generally, during a period of falling interest rates, a
negative gap could result in an increase in net interest income, while a
positive gap could adversely affect net interest income. Conversely, during a
period of rising interest rates a negative gap could adversely affect net
interest income, while a positive gap could result in an increase in net
interest income. As illustrated below, Carver had a negative one-year gap equal
to 6.26% of total rate sensitive assets at March 31, 2003, as a result of which
its net interest income could be negatively affected by rising interest rates
and positively affected by falling interest rates.


                                       33
<PAGE>

      The following table sets forth information regarding the projected
maturities, prepayments and repricing of the major rate-sensitive asset and
liability categories of Carver as of March 31, 2003. Maturity repricing dates
have been projected by applying prepayment rates which management believes are
appropriate. The information presented in the following table is derived in part
from data incorporated in "Schedule CMR: Consolidated Maturity and Rate," which
is part of the Bank's quarterly reports filed with the OTS. The repricing and
other assumptions are not necessarily representative of the Bank's actual
results. Classifications of items in the table below are different from those
presented in other tables and the financial statements and accompanying notes
included herein and do not reflect non-performing loans.

<TABLE>
<CAPTION>
                                                                      Over One
                                             Three or     Four to      Through      Over Three    Over Five      Over
                                               Less       Twelve        Three         Through      Through       Ten
                Months                        Months      Months        Years        Five Years   Ten Years      Years     Total
- ----------------------------------------     --------    --------     ---------     -----------   ---------    --------   --------
                                                                          (Dollars in thousands)
<S>                                           <C>        <C>           <C>            <C>          <C>         <C>        <C>
Rate Sensitive Assets:
Loans and Mortgage Backed Securities (1)      $28,823    $  82,424     $  77,738      $ 67,665     $ 46,680    $119,504   $422,834
Federal Funds Sold                              5,500           --            --            --           --          --      5,500
Investment Securities                          14,011        8,105        16,655            --           --       5,812     44,583
                                              -------    ---------     ---------      --------     --------    --------   --------
Total interest-earning assets                 $48,334    $  90,529     $  94,393      $ 67,665     $ 46,680    $125,316   $472,917
                                              =======    =========     =========      ========     ========    ========   ========

Rate Sensitive Liabilities:
NOW accounts                                  $ 1,287    $     884     $   1,950      $  1,607     $  7,159    $  5,303   $ 18,190
Savings Accounts                                3,738        7,964        14,711        14,735       30,344      57,443    128,935
Money market accounts                           1,565        7,092         2,501         1,775        3,197       4,605     20,735
Certificate of Deposits                        27,667      100,001        22,879        12,218           --          --    162,765
Borrowings                                     11,750        6,500        59,047        28,134        3,565          --    108,996
                                              -------    ---------     ---------      --------     --------    --------   --------
Total interest-bearing liabilities            $46,007    $ 122,441     $ 101,088      $ 58,469     $ 44,265    $ 67,351   $439,621
                                              =======    =========     =========      ========     ========    ========   ========

Interest Sensitivity Gap                      $ 2,327    ($ 31,912)    ($  6,695)     $  9,196     $  2,415    $ 57,965   $ 33,296

Cumulative Interest Sensitivity Gap           $ 2,327    ($ 29,585)    ($ 36,280)     ($27,084)    ($24,669)   $ 33,296         --
Ratio of Cumulative Gap to Total Rate
Sensitive assets                                 0.49%      -6.26%        -7.67%        -5.73%       -5.22%        7.04%        --
</TABLE>

(1)   Includes securities available-for-sale.

      The table above assumes that fixed maturity deposits are not withdrawn
prior to maturity and that transaction accounts will decay as disclosed in the
table above.

      Certain shortcomings are inherent in the method of analysis presented in
the table above. Although certain assets and liabilities may have similar
maturities or periods of repricing, they may react in different degrees to
changes in the market interest rates. The interest rates on certain types of
assets and liabilities may fluctuate in advance of changes in market interest
rates, while rates on other types of assets and liabilities may lag behind
changes in market interest rates. Certain assets, such as adjustable-rate
mortgages, generally have features that restrict changes in interest rates on a
short-term basis and over the life of the asset. In the event of a change in
interest rates, prepayments and early withdrawal levels would likely deviate
significantly from those assumed in calculating the table. Additionally, an
increased credit risk may result as the ability of many borrowers to service
their debt may decrease in the event of an interest rate increase. Virtually all
of the adjustable-rate loans in Carver's portfolio contain conditions that
restrict the periodic change in interest rate.

      Net Portfolio Value ("NPV") Analysis. As part of its efforts to maximize
net interest income and manage the risks associated with changing interest
rates, management uses the NPV methodology.

      Under this methodology, IRR exposure is assessed by reviewing the
estimated changes in net interest income ("NII") and NPV that would
hypothetically occur if interest rates rapidly rise or fall all along the yield
curve. Projected values of NII and NPV at both higher and lower regulatory
defined rate scenarios are compared to base case values (no change in rates) to
determine the sensitivity to changing interest rates.


                                       34
<PAGE>

      Presented below, as of March 31, 2003, is an analysis of the Bank's IRR as
measured by changes in NPV and NII for instantaneous and sustained parallel
shifts of 100 basis points in market interest rates. Such limits have been
established with consideration of the impact of various rate changes and the
Bank's current capital position. The information set forth below relates solely
to the Bank; however, because virtually all of the Company's IRR exposure lies
at the Bank level, management believes the table below also accurately reflects
an analysis of the Company's IRR.

<TABLE>
<CAPTION>
                                                Net Portfolio Value               NPV as a % of PV of Assets
                                     -------------------------------------        --------------------------
              Change in Rate         $ Amount      $ Change       % Change        NPV Ratio          Change
              --------------         --------      --------       --------        ---------         --------
                                                             (Dollars in thousands)
<S>                                    <C>          <C>              <C>            <C>             <C>
                  +300 bp              66,134       -9,080           -12%           12.69%          -121 bp
                  +200 bp              70,004       -5,209            -7%           13.24%          - 66 bp
                  +100 bp              72,874       -2,339            -3%           13.62%          - 28 bp
                     0 bp              75,213           --            --            13.90%               --
                 (100) bp              77,241        2,028             3%           14.12%          +  22bp

<CAPTION>
                                                              March 31, 2003
                                                              --------------
<S>                                                           <C>
Risk Measures: +200 BP Rate Shock
Pre-Shock NPV Ratio: NPV as % of PV of Assets                      13.90%
Post-Shock NPV Ratio                                               13.24%
Sensitivity Measure; Decline in NPV Ratio                          -66 bp
</TABLE>

      Certain shortcomings are inherent in the methodology used in the above IRR
measurements. Modeling changes in NPV require the making of certain assumptions,
which may or may not reflect the manner in which actual yields and costs respond
to changes in market interest rates. In this regard, the NPV table presented
assumes that the composition of Carver's interest sensitive assets and
liabilities existing at the beginning of a period remains constant over the
period being measured and also assumes that a particular change in interest
rates is reflected uniformly across the yield curve regardless of the duration
to maturity or repricing of specific assets and liabilities. Accordingly,
although the NPV table provides an indication of Carver's IRR exposure at a
particular point in time, such measurements are not intended to and do not
provide a precise forecast of the effect of changes in market interest rates on
Carver's net interest income and will differ from actual results.

Average Balance, Interest and Average Yields and Rates

      The following table sets forth certain information relating to Carver's
average interest-earning assets and average interest-bearing liabilities and
reflects the average yield on assets and the average cost of liabilities for the
years indicated. Such yields and costs are derived by dividing income or expense
by the average balances of assets or liabilities, respectively, for the periods
shown. Average balances are derived from average month-end balances, except for
federal funds which are derived from daily balances. Management does not believe
that the use of average monthly balances instead of average daily balances on
all other accounts has caused any material difference in the information
presented.

      The table also presents information for the years indicated with respect
to the difference between the weighted average yield earned on interest-earning
assets and the weighted average rate paid on interest-bearing liabilities, or
"interest rate spread," which savings institutions have traditionally used as an
indicator of profitability. Another indicator of an institution's profitability
is its "net interest margin," which is its net interest income divided by the
average balance of interest-earning assets. Net interest income is affected by
the interest rate spread and by the relative amounts of interest-earning assets
and interest-bearing liabilities. When interest-earning assets approximate or
exceed interest-bearing liabilities, any positive interest rate spread will
generate net interest income.


                                       35
<PAGE>

<TABLE>
<CAPTION>
                                                          At March 31, 2003            Year Ended March 31, 2003
                                                       --------------------       ---------------------------------
                                                                     Average       Average
                                                        Balance       Yield        Balance      Interest       Yield
                                                       --------      ------       --------      -------      ------
                                                                          (Dollars in thousands)
<S>                                                    <C>           <C>          <C>           <C>          <C>
Interest-earning Assets:
Loans (1)                                              $292,738        7.62%      $282,439      $21,182        7.50%
Investment securities (2)                                44,212        3.61%        36,660        1,614        4.40%
Mortgage-backed securities                              126,813        4.23%        93,002        4,282        4.60%
Federal funds                                             5,500        3.00%        19,744          300        1.52%
                                                       --------      ------       --------      -------      ------
  Total interest-earning assets                         469,263        6.28%       431,845       27,378        6.34%
Non-interest-earning assets                              40,582                     30,414
                                                       --------                   --------
  Total assets                                         $509,845                   $462,259
                                                       ========                   ========

Interest-bearing Liabilities:
Deposits:
    Checking                                           $ 18,190        0.52%      $ 18,138          130        0.72%
    Savings and clubs                                   128,935        1.06%       127,004        1,477        1.16%
    Money market accounts                                20,735        0.91%        16,747          189        1.13%
    Certificates of deposit                             162,765        2.15%       155,187        3,964        2.55%
                                                       --------      ------       --------      -------      ------
  Total deposits                                        330,625        1.56%       317,076        5,760        1.82%
Borrowed money                                          108,996        3.38%        80,861        3,223        3.99%
                                                       --------      ------       --------      -------      ------
  Total deposits and interest-bearing liabilities       439,621        2.01%       397,937        8,983        2.26%
Non-interest-bearing liabilities:
    Checking                                             16,539                     15,234
    Other liabilities                                    12,612                      9,880
                                                       --------                   --------
  Total liabilities                                     468,772                    423,051
Stockholders' equity                                     41,073                     39,208
                                                       --------                   --------
  Total liabilities and stockholders' equity           $509,845                   $462,259
                                                       ========                   ========
Net interest income                                                                             $18,395
                                                                                                =======

Average interest rate spread                                           4.27%                                   4.08%
                                                                     ======                                  ======

Net interest margin                                                    4.36%                                   4.26%
                                                                     ======                                  ======
Ratio of average interest-earning assets to
  interest-bearing liabilities                                       106.74%                                 108.52%
                                                                     ======                                  ======
</TABLE>

(1)   Includes non-accrual loans.

(2)   Includes FHLB stock.


                                       36
<PAGE>

<TABLE>
<CAPTION>
                                                                             Year Ended March 31,
                                                -------------------------------------------------------------------------
                                                               2002                                    2001
                                                ----------------------------------      ---------------------------------
                                                 Average                                Average
                                                 Balance     Interest       Yield       Balance      Interest      Yield
                                                --------      -------      -------      --------     --------     -------
                                                                          (Dollars in thousands)
<S>                                             <C>           <C>            <C>        <C>           <C>            <C>
Interest-earning Assets:
Loans (1)                                       $297,130      $22,586        7.60%      $278,264      $21,398        7.69%
Investment securities (2)                         38,505        2,324        6.04%        43,350        2,874        6.63%
Mortgage-backed securities                        50,450        2,918        5.78%        48,899        3,012        6.16%
Federal funds                                     13,662          426        3.12%        18,256        1,023        5.60%
                                                --------      -------      ------       --------      -------      ------
  Total interest-earning assets                  399,747       28,254        7.07%       388,769       28,307        7.28%
Non-interest-earning assets                       26,177                                  27,127
                                                --------                                --------
  Total assets                                  $425,924                                $415,896
                                                ========                                ========

Interest-bearing Liabilities:
Deposits:
    Checking                                    $ 21,114          237        1.12%      $ 15,926          253        1.59%
    Savings and clubs                            126,065        2,342        1.86%       137,305        3,051        2.22%
    Money market accounts                         16,181          302        1.87%        17,598          412        2.34%
    Certificates of deposit                      133,624        5,246        3.93%        94,006        4,740        5.04%
                                                --------      -------      ------       --------      -------      ------
  Total deposits                                 296,984        8,127        2.74%       264,835        8,456        3.19%
Borrowed money                                    78,153        3,920        5.02%        99,783        5,822        5.84%
                                                --------      -------      ------       --------      -------      ------
  Total interest-bearing liabilities             375,137       12,047        3.21%       364,618       14,278        3.92%
Non-interest-bearing liabilities:
    Checking                                       7,781                                  11,568
    Other liabilities                              8,809                                   7,072
                                                --------                                --------
Total liabilities                                391,727                                 383,258
Stockholders' equity                              34,197                                  32,638
                                                --------                                --------
Total liabilities and stockholders' equity      $425,924                                $415,896
                                                ========                                ========
Net interest income                                           $16,207                                 $14,029
                                                              =======                                 =======

Interest rate spread                                                         3.86%                                   3.36%
                                                                           ======                                  ======

Net interest margin                                                          4.05%                                   3.61%
                                                                           ======                                  ======

Ratio of avg interest-earning assets to
  interest-bearing liabilities                                             106.56%                                 106.62%
                                                                           ======                                  ======
</TABLE>

(1)   Includes non-accrual loans.

(2)   Includes FHLB stock.

Rate/Volume Analysis

      The following table sets forth information regarding the extent to which
changes in interest rates and changes in volume of interest related assets and
liabilities have affected Carver Federal's interest income and expense during
the periods indicated. For each category of interest-earning asset and
interest-bearing liability, information is provided for changes attributable to
(i) changes in volume (changes in volume multiplied by old rate), (ii) changes
in rates (change in rate multiplied by old volume), and (iii) changes in
rate/volume. Changes in rate/volume variance are allocated proportionately
between changes in rate and changes in volume.


                                       37
<PAGE>

<TABLE>
<CAPTION>
                                                                                   Year Ended March 31,
                                                         -------------------------------------------------------------------------
                                                                    2003 vs. 2002                         2002 vs. 2001
                                                              Increase (Decrease) due to              Increase (Decrease) due to
                                                         ---------------------------------       ---------------------------------
                                                          Volume       Rate         Total         Volume        Rate        Total
                                                         -------     -------       -------       -------       -------     -------
                                                                                   (Dollars in thousands)
<S>                                                      <C>         <C>           <C>           <C>           <C>         <C>
Interest-earning assets:
Loans                                                    ($1,102)      ($302)      ($1,404)      $ 1,434         ($246)    $ 1,188
Investment securities                                        (81)       (629)         (710)         (292)         (258)       (550)
Mortgage-backed securities                                 1,959        (595)        1,364            89          (184)        (94)
Federal funds                                                 92        (218)         (126)         (143)         (454)       (597)
                                                         -------     -------       -------       -------       -------     -------
    Total interest earning assets                            868      (1,744)         (876)        1,088        (1,142)        (53)
                                                         -------     -------       -------       -------       -------     -------

Interest-bearing liabilities:
Checking                                                     (21)        (85)         (106)           58           (74)        (16)
Savings and clubs                                             11        (876)         (865)         (209)         (500)       (709)
Money Market accounts                                          6        (119)         (113)          (26)          (84)       (110)
Certificates of deposit                                      551      (1,834)       (1,283)        1,555        (1,049)        506
                                                         -------     -------       -------       -------       -------     -------
    Total deposits                                           547      (2,914)       (2,367)        1,378        (1,707)       (329)
Borrowed money                                               107        (804)         (697)       (1,085)         (817)     (1,902)
                                                         -------     -------       -------       -------       -------     -------
    Total deposits and interest-bearing liabilities          654      (3,718)       (3,064)          293        (2,524)     (2,231)
                                                         -------     -------       -------       -------       -------     -------

Net change in net interest income                        $   214     $ 1,974       $ 2,188       $   795       $ 1,382     $ 2,178
                                                         =======     =======       =======       =======       =======     =======
</TABLE>

Comparison of Financial Condition at March 31, 2003 and 2002

      At March 31, 2003, total assets increased by $59.5 million, or 13.2%, to
$509.8 million, compared to $450.3 million at March 31, 2002. The increase in
total assets was primarily attributable to increases in total securities. Total
securities at March 31, 2003 increased $60.1 million to $165.6 million from
$105.5 million at March 31, 2002, reflecting a $39.2 million increase in
available-for-sale securities and a $20.9 million increase in held-to-maturity
securities. In November 2002, the Bank transferred $22.8 million of
mortgage-backed and other securities from available-for-sale to
held-to-maturity. The increase in available-for-sale securities, excluding
securities transferred to held-to-maturity, primarily reflects purchases of
$91.1 million substantially offset by $28.7 million in principal repayments,
maturities and calls and a $686,000 increase in the market value of the
portfolio. The increase in held-to-maturity securities reflects securities
transferred from available-for-sale of $22.8 million and purchases of $4.1
million offset by principal payments and maturities of $6.6 million.
Available-for-sale securities represented 77.9% of the total securities
portfolio at March 31, 2003, compared to 85.2% at March 31, 2002.

      Loans receivable, net, increased by $3.0 million, or 1.0%, to $292.7
million, compared to $289.7 million one year ago. The loan growth during fiscal
2003 represented loan originations of $59.6 million and loan purchases of $42.3
million, offset by principal repayments of $96.4 million and loans sold to
Fannie Mae of $2.5 million. The increase in mortgage loan principal repayments,
originations and purchases in fiscal 2003 and fiscal 2002 is primarily a result
of the lower interest rate environment during both fiscal years which has
increased the level of mortgage refinance activity.

      At March 31, 2003, total liabilities increased $55.2 million, or 13.3%, to
$468.8 million, compared to $413.6 million at March 31, 2002. Deposits increased
$22.2 million, or 6.8%, to $347.2 million at March 31, 2003 from $325.0 million
at March 31, 2002. The increase in deposits was primarily attributable to
increases of $11.4 million in certificates of deposit, of which $5.0 was an
individual government deposit, $5.5 million in money market accounts, $3.1
million in demand accounts and $2.2 million in regular savings and club
accounts. Advances from the FHLB-NY and other borrowed money increased $33.3
million, or 44.1%, to $109.0 million at March 31, 2003, from $75.7 million one
year ago.

      At March 31, 2003, stockholders' equity increased $4.3 million, or 11.8%,
to $41.1 million, compared to $36.7 million at March 31, 2002. The increase in
stockholders' equity was primarily attributable to net income of $3.8 million,
other comprehensive income, net of taxes, of $634,000 and the amortization of
the allocated portion of shares held by the Carver Federal Employee Stock
Ownership Plan of $152,000. These increases were partially offset by a net
increase in treasury stock holdings of $52,000 and dividends declared of
$313,000. The Bank's capital levels meet regulatory requirements of a well
capitalized financial institution.


                                       38
<PAGE>

Comparison of Operating Results For The Years Ended March 31, 2003 and 2002

Net Income

      The Bank reported net income for fiscal 2003 of $3.8 million, compared to
$4.7 million for the prior fiscal year. Net income available to common
stockholders for fiscal 2003 was $3.6 million, or $1.52 per diluted common
share, compared to $4.5 million, or $1.89 per diluted common share, for fiscal
2002. The decrease in net income was primarily due to a $2.2 million increase in
federal income taxes, a $1.3 million decrease in non-interest income and a
$494,000 increase in non-interest expense partially offset by a $2.2 million
improvement in net interest income and a $900,000 decrease in the provision for
loan losses.

Interest Income

      Interest income for fiscal 2003 was $27.4 million, a decrease of $876,000,
or 3.1%, from the prior year. The average balance of interest-earning assets
increased to $431.8 million for fiscal 2003 from $399.7 million for the prior
year. This increase was more than offset by a decline in the average yield on
interest-earning assets to 6.34% for fiscal 2003, compared to 7.07% for fiscal
2002.

      Interest income on loans decreased by $1.4 million, or 6.2%, to $21.2
million for fiscal 2003 compared to $22.6 million for fiscal 2002. The decrease
in interest income from loans reflects a decrease of $14.7 million, or 4.9%, in
the average balance of loans to $282.4 million for fiscal 2003 compared to
$297.1 million for fiscal 2002, coupled with a 10 basis point decrease in the
average rate earned on loans to 7.50% for fiscal 2003 from 7.60% for the prior
year. The decrease in the average balance of loans reflects amortization of
prepayments in excess of originations and purchases. The decline in the average
rate earned on loans was principally due to the downward pricing on loan
products during the continuing declining interest rate environment during fiscal
2003.

      Interest income on mortgage-backed securities increased by $1.4 million,
or 46.7%, to $4.3 million for fiscal 2003, compared to $2.9 million for the
prior year, reflecting an increase of $42.6 million in the average balance of
mortgage-backed securities to $93.0 million for fiscal 2003 compared to $50.5
million for fiscal 2002. The increase in the average balance of such securities
was due to the utilization of part of the proceeds received from increased
borrowings and deposits, coupled with the redeployment of mortgage loan
principal repayments, to purchase mortgage-backed securities. This increase was
partially offset by a 118 basis point decrease in the average rate earned on
mortgage-backed securities to 4.60% from 5.78%.

      Interest income on investment securities decreased by approximately
$710,000, or 30.6%, to $1.6 million for fiscal 2003, compared to $2.3 million
for the prior year. The increase in interest income on investment securities
reflects a 164 basis point decrease in the average rate earned on investment
securities to 4.40% from 6.04% and a decrease of $1.8 million in the average
balance of investment securities to $36.7 million for fiscal 2003 compared to
$38.5 million for fiscal 2002.

      Interest income on federal funds decreased $126,000, to $300,000 for
fiscal 2003, compared to $426,000 for the prior year. The decrease is
attributable to a 160 basis point decrease in the average rate earned on federal
funds, partially offset by a $6.1 million increase in the average balance of
federal funds.

Interest Expense

      Interest expense decreased by $3.1 million, or 25.4%, to $9.0 million for
fiscal 2003, compared to $12.0 million for the prior year. The decrease in
interest expense reflects a decline of 95 basis points in the average cost of
interest-bearing liabilities. This decline in average rate paid was partially
offset by a $22.8 million increase in the average balance of interest-bearing
liabilities to $397.9 million in fiscal 2003 from $375.1 million in fiscal 2002.
The increase in the average balance of interest-bearing liabilities in fiscal
2003 compared to fiscal 2002 was due to increases in the average balance of
interest-bearing deposits and, to a lesser extent, increases in the average
balance of borrowed money.

      Interest expense on deposits decreased $2.4 million, or 29.1%, to $5.8
million for fiscal 2003, compared to $8.1 million for the prior year. This
decrease is attributable to a 92 basis point decrease in the cost of average
deposits partially offset by a $20.1 million, or 6.8%, increase in the average
balance of interest-bearing deposits to $317.1 million for fiscal 2003, compared
to $297.0 million for fiscal 2002. The increase in the average balance of
interest-bearing deposits was primarily due to an increase in the average
balance of certificates of deposit of $21.6 million, or 16.1%. The increase in
average interest-bearing deposits was achieved through increased retail
production brought about by enhanced marketing efforts. The decrease in the
average rate paid on deposits was principally due to the declining interest rate
environment experienced in fiscal 2003.

      Interest expense on borrowed money decreased by $697,000, or 17.8%, to
$3.2 million for fiscal 2003, compared to $3.9 million for the prior year. The
decrease in interest expense on borrowed money for fiscal 2003 reflects a
decrease of 103 basis points in the average cost of borrowed money partially
offset by a $2.7 million increase in the average balance of borrowed money. The
decrease in average cost of borrowings was due to the continued declining
interest rate environment experienced during fiscal 2003.


                                       39
<PAGE>

Net Interest Income

      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. Our net interest income is significantly impacted by changes in interest
rate and market yield curves. See "Discussion of Market Risk--Interest Rate
Sensitivity Analysis" for further discussion on the potential impact of changes
in interest rates on our results of operations.

      Net interest income before the provision for loan losses increased $2.2
million, or 13.5%, to $18.4 million for fiscal 2003 compared to $16.2 million
for the prior year. Net interest income benefited from a general interest rate
decline, as well as an increase in deposits. This benefit was partially offset
by an increase in borrowed money, a decrease in loan originations and average
loan balances and accelerated prepayments of mortgage-backed securities. The 95
basis point decrease in the cost of interest-bearing liabilities used to fund
interest-earning assets, coupled with a 73 basis point decrease in the return on
average interest-earning assets, contributed to a 22 basis point increase in the
interest rate spread to 4.08% for fiscal 2003, compared to 3.86% for the prior
year. The net interest margin increased to 4.26% for fiscal 2003, compared to
4.05% for fiscal 2002.

Provision for Loan Losses

      For fiscal 2003 there were no provisions recorded for loan losses,
compared to $900,000 for fiscal 2002. The Bank records provisions for loan
losses, which are charged to earnings, in order to maintain the allowance for
loan losses at a level that is considered appropriate to absorb probable losses
inherent in the existing loan portfolio. The provision in each period reflects
management's evaluation of the adequacy of the allowance for loan losses.
Factors considered include the volume and type of lending conducted, the Bank's
previous loan loss experience, the known and inherent risks in the loan
portfolio, adverse situations that may affect the borrowers' ability to repay,
the estimated value of any underlying collateral, trends in the local and
national economy and trends in the real estate market. Management believes that
the decrease in provisions for loan losses was warranted by the decreases in
charge-offs and non-performing assets.

      During fiscal 2003, the Bank had net recoveries of approximately $30,000,
compared to net charge-offs of $323,000 for fiscal 2002. At March 31, 2003,
non-performing loans totaled $1.8 million, or 0.6% of total loans, compared to
$2.8 million, or 1.0% of total loans, at March 31, 2002. At March 31, 2003, the
Bank's allowance for loan losses was $4.2 million compared to $4.1 million at
March 31, 2002, resulting in a ratio of the allowance to non-performing loans of
230.7% at March 31, 2003, compared to 146.2% at March 31, 2002, and a ratio of
allowance for possible loan losses to total loans of 1.40% and 1.41% at March
31, 2003 and March 31, 2002, respectively. Management believes the Company's
reported allowance for loan loss at March 31, 2003 is both appropriate in the
circumstances and adequate to provide for estimated probable losses in the loan
portfolio. For further discussion of non-performing loans and allowance for loan
losses, see "Business--General Description of Business--Asset Quality" and Note
1 to the Consolidated Financial Statements.

Non-Interest Income

      Non-interest income is composed of loan fees and service charges, gains or
losses from the sale of securities and certain other items, fee income for
banking services and miscellaneous non-interest income. Non-interest income
decreased $1.3 million, or 29.5%, to $3.2 million for fiscal 2003, compared to
$4.5 million for fiscal 2002. Despite increases in fees and charges for deposits
and loans, non-interest income decreased due to the inclusion in fiscal 2002 of
$1.4 million relating to the sale of securities, $987,000 relating to the sale
of the Bank's East New York branch and the loss $101,000 from the sale of the
Bank's automobile loan portfolio.

      Excluding the income and loss from sales of securities, loans and
deposits, total non-interest income increased by $961,000, or 43.7%, compared to
fiscal 2002. Loan fees and service charges amounted to $1.3 million for fiscal
2003, a $655,000, or a 95.5%, increase from the prior year. The increase in loan
fees and service charges is primarily attributable to substantially higher
mortgage prepayment penalties, primarily resulting from multifamily borrowers
prepaying due to the lower interest rate environment, and a restructuring of the
Bank's loan fees in the second quarter of fiscal 2003. Depository fees and
charges increased $316,000, or 21.1%, to $1.8 million for fiscal 2003 from $1.5
million for fiscal 2002. The increase in depository fees primarily relates to
increased ATM fees and the restructuring of the Bank's service charges in the
second quarter of fiscal 2003.

Non-Interest Expense

      Non-interest expense increased by $494,000, or 3.5%, to $14.7 million for
fiscal 2003, compared to $14.2 million for the prior fiscal year. The increase
in non-interest expense was primarily attributable to increases of $307,000 in
net occupancy and equipment expenses and $269,000 in salaries and employee
benefits, slightly offset by a decrease of $82,000 in other non-interest
expense. The increase in net occupancy and equipment expenses are related to the
opening of the Malcolm X Blvd. branch in September 2001 and the renovation of an
existing branch facility which resulted in increases in maintenance contracts,
building taxes and water and sewer expense. The increase in salaries and
employee benefits was primarily attributable to increased compensation


                                       40
<PAGE>

resulting from the Bank being able to successfully fill key management positions
including the Chief Operating Officer, Chief Financial Officer, Chief Lending
Officer and Chief Credit Officer positions.

Income Tax Expense

      Income tax expense was approximately $3.0 million for fiscal 2003, a $2.2
million, or 244.3%, increase from $881,000 for fiscal 2002, reflecting the
benefit of the Bank's tax loss carryforward utilized in fiscal 2002 coupled with
higher pre-tax income in fiscal 2003. During the fourth quarter of fiscal year
2002, the Bank fully utilized its tax loss carryforward resulting from prior
period losses and began to accrue for federal taxes. The effective tax rate in
fiscal 2003 was 44.2% compared to 15.7% in fiscal 2002.

Comparison of Operating Results For The Years Ended March 31, 2002 and 2001

Net Income

      The Bank reported net income for fiscal 2002 of $4.7 million, compared to
a net loss of $389,000 for the same period the prior year. Net income available
to common stockholders for fiscal 2002 was $4.5 million, or $1.89 per diluted
common share, compared to a loss of $586,000, or $0.26 per diluted common share,
for fiscal 2001. The increase in the net income was primarily due to a $2.2
million improvement in net interest income, a gain on the sale of securities of
$1.4 million, a $1.2 million reduction in non-interest expense, and a $893,000
decrease in the provision for loan losses, partially offset by a $783,000
increase in income taxes.

Interest Income

      Interest income for fiscal 2002 amounted to $28.3 million, a decrease of
$53,000, or 0.2%, from the prior year. The decrease in interest income was
primarily attributable to a decline in the average yield on interest-earning
assets to 7.07% for fiscal 2002, compared to 7.28% for fiscal 2001.

      Interest income on loans increased by $1.2 million, or 5.6%, to $22.6
million for fiscal 2002 compared to $21.4 million for fiscal 2001. The increase
in interest income from loans reflects an increase of $18.9 million, or 6.8%, in
the average balance of loans to $297.1 million for fiscal 2002 compared to
$278.3 million for fiscal 2001, partially offset by a nine basis point decrease
in the average rate earned on loans to 7.60% for fiscal 2002 from 7.69% for the
prior year.

      Interest income on mortgage-backed securities decreased by $94,000, or
3.1%, to $2.9 million for fiscal 2002, compared to $3.0 million for the prior
year reflecting a 38 basis point decrease in the average rate earned on
mortgage-backed securities to 5.78% from 6.16%, partially offset by an increase
of $1.6 million in the average balance of mortgage-backed securities to $50.5
million for fiscal 2002, compared to $48.9 million for fiscal 2001.

      Interest income on investment securities decreased by approximately
$550,000, or 19.1%, to $2.3 million for fiscal 2002, compared to $2.9 million
for the prior year, reflecting a decrease of $4.9 million in the average balance
of investment securities to $38.5 million for fiscal 2002 compared to $43.4
million for fiscal 2001, coupled with a 59 basis point decrease in the average
rate earned on investment securities to 6.04% from 6.63%.

      Interest income on federal funds decreased $597,000, to $426,000 for
fiscal 2002, compared to $1.0 million for the prior year. The decrease is
attributable to a 248 basis point decrease in the average rate earned on federal
funds, as well as a $4.6 million decrease in the average balance of federal
funds.

Interest Expense

      Interest expense decreased by $2.3 million, or 15.6%, to $12.0 million for
fiscal 2002, compared to $14.3 million for the prior year. The decrease in
interest expense reflects an improvement of 71 basis points in the average cost
of interest-bearing liabilities, slightly offset by a $10.5 million increase in
the average balance of interest-bearing liabilities.

      Interest expense on deposits decreased $329,000, or 3.9%, to $8.1 million
for fiscal 2002, compared to $8.5 million for the prior year. This decrease is
attributable to a 45 basis point decrease in the cost of average deposits
partially offset by a $32.2 million, or 12.2%, increase in the average balance
of interest-bearing deposits to $297.0 million for fiscal 2002, compared to
$264.8 million for fiscal 2001.


                                       41
<PAGE>

      Interest expense on borrowed money decreased by $1.9 million, or 32.7%, to
$3.9 million for fiscal 2002, compared to $5.8 million for the prior year. Funds
from deposit growth were used to pay down borrowed money. The decrease in
interest expense on borrowed money for fiscal 2002 reflects a $21.6 million
decline in the average balance of borrowed money coupled with an 82 basis points
decrease in the average cost of borrowed money.

Net Interest Income

      Net interest income before the provision for loan losses increased $2.2
million, or 15.5%, to $16.2 million for fiscal 2002 compared to $14.0 million
for the prior year. Net interest income benefited from a general interest rate
decline, a reduction in borrowed money, as well as an increase in deposits, loan
originations and average loan balances. This benefit was partially offset by
accelerated prepayments of mortgage-backed securities and the sale of lower cost
deposits in a non-strategic branch that were replaced by comparatively higher
cost certificates of deposit. The 71 basis point decrease in the cost of
interest-bearing liabilities used to fund interest-earning assets coupled with a
21 basis point decrease in the return on average interest-earning assets
contributed to a 50 basis point increase in the interest rate spread to 3.86%
for fiscal 2002, compared to 3.36% for the prior year. The net interest margin
increased to 4.05% for fiscal 2002, compared to 3.61% for fiscal 2001.

Provision for Loan Losses

      Provision for loan losses decreased by $893,000 or 49.8%, to $900,000, for
fiscal 2002, compared to $1.8 million for fiscal 2001. When determining the
provision for loan losses, management assesses the risk inherent in its loan
portfolio based on information available at such time relating to the volume and
type of lending conducted, the Bank's previous loan loss experience, the known
and inherent risks in the loan portfolio, adverse situations that may affect the
borrowers' ability to repay, the estimated value of any underlying collateral,
trends in the local and national economy and trends in the real estate market.
The provision for loan losses for fiscal 2002 represents the amount required to
maintain the allowance for loan losses at the level required by the Company's
policy. During fiscal 2002, the Bank charged-off approximately $323,000 of loans
as compared to $1.2 million for fiscal 2001. At March 31, 2002, non-performing
loans totaled $2.8 million, or 1.0% of total loans, compared to $2.5 million, or
0.9% of total loans, at March 31, 2001. At March 31, 2002, the Bank's allowance
for loan losses was $4.1 million compared to $3.6 million at March 31, 2001,
resulting in a ratio of the allowance to non-performing assets of 146.2% at
March 31, 2002, compared to 118.6% at March 31, 2001, and a ratio of allowance
for possible loan losses to total loans of 1.41% and 1.24% at March 31, 2002 and
March 31, 2001, respectively.

Non-Interest Income

      Non-interest income is composed of loan fees and service charges, gains or
losses from the sale of securities and certain other items, fee income for
banking services and miscellaneous non-interest income. Non-interest income
increased $1.6 million, or 54.2%, to $4.5 million for fiscal 2002, compared to
$2.9 million for fiscal 2001. The increase in non-interest income is primarily
due to non-recurring income of $1.4 million relating to the sale of securities
and to a lesser extent a $316,000 increase in other non-interest income,
partially offset by a $101,000 loss in connection with the sale of the Bank's
automobile loan portfolio during fiscal 2002. Excluding non-recurring income
from sales of securities, loans and deposits, total non-interest income
increased by $305,000, or 16.1%, compared to fiscal 2001.

Non-Interest Expense

      Non-interest expense decreased by $1.2 million, or 8.0%, to $14.2 million
for fiscal 2002, compared to $15.4 million for the prior fiscal year. The
decrease in non-interest expense was primarily attributable to decreases of $1.0
million in other non-interest expenses and $279,000 in net occupancy and
equipment expenses, slightly offset by an increase of $61,000 in salaries and
employee benefits. The decreases in non-interest expense were attributable in
part to cost reductions as a result of branch sales and decreases in
professional fees and FDIC deposit insurance costs.

Income Tax Expense

      Income tax expense was approximately $881,000 for fiscal 2002, an increase
from $98,000 for fiscal 2001, reflecting higher pre-tax income in fiscal 2002 as
compared to a pre-tax loss in fiscal 2001. During the fourth quarter of fiscal
year 2002, the Bank fully utilized its tax loss carryforward resulting from
prior period losses and began to accrue for federal taxes. The effective tax
rate in fiscal 2002 was 15.7% as compared to (33.7%) in fiscal 2001.

Liquidity and Capital Resources

      Carver Federal's primary sources of funds are deposits, FHLB advances, and
proceeds from principal and interest payments on loans and mortgage-backed
securities. While maturities and scheduled amortization of loans and investments
are predictable


                                       42
<PAGE>

sources of funds, deposit flow and mortgage prepayments are greatly influenced
by general interest rates, economic conditions and competition.

      Congress eliminated the statutory liquidity requirement which required
federal savings banks to maintain a minimum amount of liquid assets of between
four and ten percent, as determined by the Director of the OTS, the Bank's
primary federal regulator. The Bank is required to maintain sufficient liquidity
to ensure its safe and sound operation. As a result of the elimination of the
liquidity requirement, the Bank manages its liquidity through a Board-approved
liquidity policy. At March 31, 2003, the Bank's liquidity ratio was 1.4%. The
Bank's most liquid assets are cash and short-term investments. The level of
these assets are dependent on the Bank's operating, investing and financing
activities during any given period. At March 31, 2003 and 2002, assets
qualifying for short-term liquidity, including cash and short-term investments,
totaled $45.3 million and $50.0 million, respectively.

      The Consolidated Statements of Cash Flows present the change in cash from
operating, investing and financing activities. During fiscal 2003, cash and cash
equivalents decreased by $11.7 million. Net cash used in operating activities
was $1.0 million, representing primarily the results of operations adjusted for
depreciation and amortization and the provision for loan losses. Net cash used
in investing activities was $65.8 million, which was primarily the result of
purchases of loans and securities and originations of loans partially offset by
repayments and maturities of loans and securities. Net cash provided by
financing activities was $55.1 million, reflecting primarily net increases in
deposits and borrowed money.

Regulatory Capital Position

      The Bank must satisfy three minimum capital standards established by the
OTS. For a description of the OTS capital regulation, see "Regulation and
Supervision--Federal Banking Regulation--Capital Requirements."

      The Bank presently exceeds all capital requirements as currently
promulgated. At March 31, 2003, the Bank had tangible, core, and total
risk-based capital ratios of 7.8%, 7.8% and 14.0%, respectively.

      The following table reconciles the Bank's stockholders' equity at March
31, 2003 under accounting principles generally accepted in the United States of
America to regulatory capital requirements.

<TABLE>
<CAPTION>
                                                                                       Regulatory Capital Requirements
                                                                           -----------------------------------------------------
                                                                              GAAP       Tangible       Leverage      Risk-Based
                                                                            Capital      Capital        Capital        Capital
                                                                           --------      --------       --------      ----------
                                                                                                  (In thousands)
<S>                                                                        <C>           <C>            <C>            <C>
      Stockholders' Equity at March 31, 2003 (1)                           $ 40,653      $ 40,653       $ 40,653       $ 40,653

      Add:
         General valuation allowances                                                          --             --          3,885
      Deduct:
         Unrealized loss (gain) on securities available-for-sale, net                        (750)          (750)          (750)
         Excess of cost over net assets acquired                                             (178)          (178)          (178)
                                                                                         --------       --------       --------
      Regulatory Capital                                                                   39,725         39,725         43,610
      Minimum Capital requirement                                                           7,628         20,341         24,844
                                                                                         --------       --------       --------
      Regulatory Capital Excess                                                          $ 32,097       $ 19,384       $ 18,766
                                                                                         ========       ========       ========
</TABLE>

      (1)   Reflects Bank only.

Impact of Inflation and Changing Prices

      The financial statements and accompanying notes appearing elsewhere herein
have been prepared in accordance with generally accepted accounting principles,
which require the measurement of financial position and operating results in
terms of historical dollars without considering the changes in the relative
purchasing power of money over time due to inflation. The impact of inflation is
reflected in the increased cost of Carver Federal's operations. Unlike most
industrial companies, nearly all the assets and liabilities of the Bank are
monetary in nature. As a result, interest rates have a greater impact on Carver
Federal's performance than do the effects of the general level of inflation.
Interest rates do not necessarily move in the same direction or to the same
extent as the prices of goods and services.


                                       43
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

      The information required by this item appears under the caption
"Discussion of Market Risk--Interest Rate Sensitivity Analysis" in Item 7,
incorporated herein by reference.


                                       44
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                             LETTERHEAD OF KPMG LLP

                          Independent Auditor's Report

To the Board of Directors and Stockholders
Carver Bancorp, Inc.:

      We have audited the accompanying consolidated statements of financial
condition of Carver Bancorp, Inc. and subsidiaries (the "Company") as of March
31, 2003 and 2002 and the related consolidated statements of operations, changes
in stockholders' equity and comprehensive income, and cash flows for each of the
years in the three-year period ended March 31, 2003. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

      We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and the significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

      In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of March 31, 2003 and 2002, and the results of its operations and its cash
flows for each of the years in the three-year period ended March 31, 2003, in
conformity with accounting principles generally accepted in the United States of
America.


KPMG  LLP
New York, New York
June 24, 2003


                                       45
<PAGE>

                               MANAGEMENT'S REPORT

      Management is responsible for the preparation and integrity of the
consolidated financial statements and other information presented in this annual
report. The consolidated financial statements have been prepared in conformity
with the generally accepted accounting principles and reflect management's
judgments and estimates with respect to certain events and transactions.

      Management is responsible for maintaining a system of internal control.
The purpose of the system is to provide reasonable assurance that transactions
are recorded in accordance with management's authorization; that assets are
safeguarded against loss or unauthorized use; and that the underlying financial
records support the preparation of financial statements. The system includes the
communication of written policies and procedures, selection of qualified
personnel, appropriate segregation of responsibilities and the ongoing internal
audit function.

      The Board of Directors meets periodically with Company management, the
internal auditor, and the independent auditors, KPMG LLP, to review matters
relative to the quality of financial reporting, internal controls, and the
nature, extent and results of audit efforts.

      The independent auditors conduct an annual audit to enable them to express
an opinion on the Company's consolidated financial statements. In connection
with the audit, the independent auditors consider the Company's internal
controls to the extent they consider necessary to determine the nature, timing
and extent of their audit procedures.


/s/ Deborah C. Wright                           /s/ William C. Gray
- -------------------------------------           --------------------------------
Deborah C. Wright                               William C. Gray
President and Chief Executive Officer           Senior Vice President and
                                                Chief Financial Officer


                                       46
<PAGE>

                      CARVER BANCORP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                                                                   March 31,
                                                                                                            ----------------------
                                                                                                               2003         2002
                                                                                                            ---------    ---------
<S>                                                                                                         <C>          <C>
ASSETS
    Cash and cash equivalents:
    Cash and due from banks                                                                                 $  17,660    $  13,751
    Federal Funds sold                                                                                          5,500       21,100
                                                                                                            ---------    ---------
         Total cash and cash equivalents                                                                       23,160       34,851
                                                                                                            ---------    ---------
Securities:
     Available-for-sale, at fair value (including pledged as collateral of
       $124,954 at March 31, 2003 and $76,720 at March 31, 2002)                                              129,055       89,821
     Held-to-maturity, at amortized cost (including pledged as collateral of $35,138 at March 31, 2003
        and $15,549 at March 31, 2002; fair value of $37,543 at March 31, 2003 and $15,716
        at March 31, 2002)                                                                                     36,530       15,643
                                                                                                            ---------    ---------
          Total securities                                                                                    165,585      105,464
                                                                                                            ---------    ---------
Loans receivable:
     Real estate mortgage loans                                                                               294,710      291,510
     Consumer and commercial business loans                                                                     2,186        2,328
     Allowance for loan losses                                                                                 (4,158)      (4,128)
                                                                                                            ---------    ---------
          Total loans receivable, net                                                                         292,738      289,710
                                                                                                            ---------    ---------
Office properties and equipment, net                                                                           10,193       10,251
Federal Home Loan Bank of New York stock, at cost                                                               5,440        3,763
Accrued interest receivable                                                                                     3,346        2,804
Identifiable intangible asset, net                                                                                178          391
Other assets                                                                                                    9,205        3,072
                                                                                                            ---------    ---------
          Total assets                                                                                      $ 509,845    $ 450,306
                                                                                                            =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
     Deposits                                                                                               $ 347,164    $ 324,954
     Advances from the Federal Home Loan Bank of New York and other borrowed money                            108,996       75,651
     Other liabilities                                                                                         12,612       12,959
                                                                                                            ---------    ---------
          Total liabilities                                                                                   468,772      413,564
                                                                                                            ---------    ---------
Stockholders' equity:
     Preferred stock (par value $0.01 per share; 1,000,000
        shares authorized; 100,000 issued and outstanding)                                                          1            1
     Common stock (par value $0.01 per share: 5,000,000 shares authorized; 2,316,358 shares issued;
       2,296,960 and 2,300,896 outstanding at March 31, 2003  and March 31, 2002, respectively)                    23           23
     Additional paid-in capital                                                                                23,781       23,756
     Retained earnings                                                                                         16,712       13,194
     Unallocated common stock held by employee stock ownership plan ("ESOP")                                      --         (152)
     Unamortized awards of common stock under  management recognition plan ("MRP")                                 (4)         (58)
     Treasury stock, at cost (19,398 shares at March 31, 2003 and 15,489 at March 31, 2002)                      (190)        (138)
     Accumulated other comprehensive income                                                                       750          116
                                                                                                            ---------    ---------
          Total stockholders' equity                                                                           41,073       36,742
                                                                                                            ---------    ---------
     Total liabilities and stockholders' equity                                                             $ 509,845    $ 450,306
                                                                                                            =========    =========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       47
<PAGE>

                    CARVER BANCORP, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                                  For the Year Ended March 31,
                                                              -------------------------------------
                                                                2003          2002           2001
                                                              --------      --------       --------
<S>                                                           <C>           <C>            <C>
Interest income:
   Loans                                                      $ 21,182      $ 22,586       $ 21,398
   Mortgage-backed securities                                    4,282         2,918          3,012
   Investment securities                                         1,614         2,324          2,874
   Federal funds sold                                              300           426          1,023
                                                              --------      --------       --------
     Total interest income                                      27,378        28,254         28,307
                                                              --------      --------       --------

Interest expense:
   Deposits                                                      5,760         8,127          8,456
   Advances and other borrowed money                             3,223         3,920          5,822
                                                              --------      --------       --------
     Total interest expense                                      8,983        12,047         14,278
                                                              --------      --------       --------

     Net interest income                                        18,395        16,207         14,029

Provision for loan losses                                           --           900          1,793
                                                              --------      --------       --------
     Net interest income after provision for loan losses        18,395        15,307         12,236
                                                              --------      --------       --------

Non-interest income:
   Depository fees and charges                                   1,813         1,497          1,342
   Loan fees and service charges                                 1,341           686            481
   Gain on sale of investment securities                            --         1,399             --
   Income from sale of branches                                     --           987          1,013
   Loss from sale of loans                                          --          (101)            --
   Other                                                             7            17             72
                                                              --------      --------       --------
      Total non-interest income                                  3,161         4,485          2,908
                                                              --------      --------       --------

Non-interest expense:
   Compensation and benefits                                     6,774         6,505          6,230
   Net occupancy expense                                         1,261         1,144          1,401
   Equipment                                                     1,610         1,420          1,294
   Other                                                         5,047         5,129          6,510
                                                              --------      --------       --------
      Total non-interest expense                                14,692        14,198         15,435
                                                              --------      --------       --------

      Income (loss) before income taxes                          6,864         5,594           (291)
Income tax expense                                               3,033           881             98
                                                              --------      --------       --------
      Net income (loss)                                       $  3,831      $  4,713       $   (389)
                                                              ========      ========       ========

Dividends applicable to preferred stock                       $    197      $    197       $    197

      Net income (loss) available to common stockholders      $  3,634      $  4,516       $   (586)
                                                              ========      ========       ========

Earnings (loss) per common share:
       Basic                                                  $   1.59      $   1.98       $  (0.26)
                                                              ========      ========       ========
       Diluted                                                $   1.52      $   1.89       $  (0.26)
                                                              ========      ========       ========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       48
<PAGE>
                      CARVER BANCORP, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                 (In thousands)

<TABLE>
<CAPTION>

                                                           ADDITIONAL
                                  PREFERRED      COMMON     PAID-IN        RETAINED      TREASURY
                                    STOCK        STOCK      CAPITAL        EARNINGS       STOCK
                                  ---------      ------    ----------      --------      --------
<S>                                <C>           <C>        <C>            <C>            <C>
Balance - March 31, 2000           $     1       $  23      $ 23,789       $  9,480       $    --
Comprehensive (loss):
Net loss                                --          --            --           (389)           --
                                   -------       -----      --------       --------       -------
Comprehensive (loss), net of
taxes:
Dividends paid                          --          --            --           (298)           --
Purchase of treasury stock              --          --            --             --           (61)
Allocation of ESOP Stock                --          --           (20)            --            --
Purchase of shares for MRP              --          --            --             --            --
                                   -------       -----      --------       --------       -------
Balance - March 31, 2001                 1          23        23,769          8,793           (61)

Comprehensive income:
Net income                              --          --            --          4,713            --
Change in net unrealized gain
on available-for-sale
securities,
net of taxes                            --          --            --             --            --
                                   -------       -----      --------       --------       -------

Comprehensive income, net of
taxes:
Dividends paid                          --          --            --           (312)           --
Purchase of treasury stock              --          --            (5)            --           (77)
Allocation of ESOP Stock                --          --            (8)            --            --
Purchase of shares for MRP              --          --            --             --            --
                                   -------       -----      --------       --------       -------
Balance - March 31, 2002                 1          23        23,756         13,194          (138)

Comprehensive income:
Net income                              --          --            --          3,831            --
Change in net unrealized
gain on available-for-sale
securities, net of taxes                --          --            --             --            --
                                   -------       -----      --------       --------       -------
Comprehensive income, net of
taxes:
Dividends paid                          --          --            --           (313)           --
Treasury stock activity                 --          --             5             --           (52)
Allocation of ESOP Stock                --          --            20             --            --
Purchase of shares for MRP              --          --            --             --            --
                                   -------       -----      --------       --------       -------
Balance--March 31, 2003            $     1       $  23      $ 23,781       $ 16,712       $  (190)
                                   =======       =====      ========       ========       =======

<CAPTION>
                                    ACCUMULATED         COMMON          COMMON
                                       OTHER            STOCK            STOCK      TOTAL STOCK-
                                   COMPREHENSIVE     ACQUIRED BY      ACQUIRED BY     HOLDERS'
                                       INCOME            ESOP             MRP         EQUITY
                                   -------------     -----------      -----------   ------------
<S>                                   <C>              <C>              <C>          <C>
Balance - March 31, 2000              $    --          $  (652)         $   --       $ 32,641
Comprehensive (loss):
Net loss                                   --               --              --           (389)
                                      -------          -------          ------       --------
Comprehensive (loss), net of
taxes:                                                                                   (389)
Dividends paid                             --               --              --           (298)
Purchase of treasury stock                 --               --              --            (61)
Allocation of ESOP Stock                   --              318              --            298
Purchase of shares for MRP                 --               --             (95)           (95)
                                      -------          -------          ------       --------
Balance - March 31, 2001                   --             (334)            (95)        32,096

Comprehensive income:
Net income                                 --               --              --          4,713
Change in net unrealized gain
on available-for-sale
securities,
net of taxes                              116               --              --            116
                                      -------          -------          ------       --------

Comprehensive income , net of
taxes:                                                                                  4,829
Dividends paid                             --               --              --           (312)
Purchase of treasury stock                 --               --              --            (82)
Allocation of ESOP Stock                   --              182              --            174
Purchase of shares for MRP                 --               --              37             37
                                      -------          -------          ------       --------
Balance - March 31, 2002                  116             (152)            (58)        36,742

Comprehensive income:
Net income                                 --               --              --          3,831
Change in net unrealized
gainon available-for-sale
securities, net of taxes                  634               --              --            634
                                      -------          -------          ------       --------
Comprehensive income, net of
taxes:                                                                                  4,465
Dividends paid                             --               --              --           (313)
Treasury stock activity                    --               --              --            (47)
Allocation of ESOP Stock                   --              152              --            172
Purchase of shares for MRP                 --               --              54             54
                                      -------          -------          ------       --------
Balance--March 31, 2003               $   750          $    --          $   (4)      $ 41,073
                                      =======          =======          ======       ========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       49
<PAGE>

                     CARVER BANCORP, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                          Year Ended March 31,
                                                                                 ----------------------------------------
                                                                                    2003           2002            2001
                                                                                 --------       ---------       ---------
<S>                                                                              <C>            <C>             <C>
Cash flows from operating activities:
  Net income (loss)                                                              $  3,831       $   4,713       $    (389)
  Adjustments to reconcile net income (loss) to net cash (used in) provided
    by operating activities:
    Provision for loan losses                                                          --             900           1,793
    ESOP and MRP expense                                                              206             206             203
    Depreciation and amortization expense                                           1,224           1,155           1,142
    Amortization of intangibles                                                       213             213             214
    Other accretion and amortization                                                  481             625            (719)
    Loss from sale of loans                                                            --             101              --
    Gain on sale of branches                                                           --            (987)         (1,013)
    Gain on sale of foreclosed real estate                                             --             (77)            (24)
    Impairment of foreclosed real estate                                               --              --              90
    Net gain on sales of available-for-sale securities                                 --          (1,399)             --
    Charge-off of branch improvements and related items, net                           --              --             222
    Changes in assets and liabilities:
      (Increase) decrease in accrued interest receivable                             (542)            (77)            112
      (Increase) decrease in other assets                                          (6,112)         (1,451)            549
      (Decrease) increase in other liabilities                                       (481)          6,185             802
      Increase (decrease) in accrued interest payable                                 134            (606)           (381)
                                                                                 --------       ---------       ---------
         Net cash (used in) provided by operating activities                       (1,046)          9,501           2,601
                                                                                 --------       ---------       ---------
Cash flows from investing activities:
  Purchases of securities:
    Available-for-sale                                                            (91,112)       (134,721)       (166,227)
    Held-to-maturity                                                               (4,145)             --              --
Proceeds from principal payments, maturities and calls of securities:
    Available-for-sale                                                             28,705          79,233         172,254
    Held-to-maturity                                                                6,578           6,357          11,077
Proceeds from sales of available-for-sale securities                                   --          32,676              --
Disbursements for loan originations                                               (59,595)        (63,190)        (30,180)
Loans purchased from third parties                                                (42,260)        (45,881)        (31,265)
Principal collections on loans                                                     96,432         100,306          46,207
(Purchase) redemption of FHLB stock                                                (1,677)          1,992              --
Proceeds from loans sold                                                            2,453           1,260             160
Proceeds from sale of other real estate owned                                          --             553             380
Additions to premises and equipment                                                (1,166)         (1,172)           (610)
                                                                                 --------       ---------       ---------
         Net cash (used in) provided by investing activities                      (65,787)        (22,587)          1,796
                                                                                 --------       ---------       ---------
Cash flows from financing activities:
  Net increase in deposits                                                         22,210          61,900          19,960
  Repayment of securities repurchase agreements                                        --          (4,930)        (26,407)
  Net Proceeds from (repayment of) FHLB advances and other borrowed money          33,345         (25,019)         33,429
  Common stock repurchased                                                           (100)            (77)            (61)
  Cash paid to fund sale of deposits                                                   --         (15,383)        (21,464)
  Dividends paid on Common and Preferred Stocks                                      (313)           (312)           (298)
                                                                                 --------       ---------       ---------
         Net cash provided by financing activities                                 55,142          16,179           5,159
                                                                                 --------       ---------       ---------
Net (decrease) increase in cash and cash equivalents                              (11,691)          3,093           9,556
Cash and cash equivalents at beginning of the period                               34,851          31,758          22,202
                                                                                 --------       ---------       ---------
Cash and cash equivalents at end of the period                                   $ 23,160       $  34,851       $  31,758
                                                                                 ========       =========       =========

Supplemental information:
Noncash Transfers-
  Securities transferred from available-for-sale to held-to-maturity             $ 22,811       $      --       $      --
  Securities transferred from held-to-maturity to available-for-sale                   --          45,700              --
  Change in unrealized gain on valuation of
      investments available-for-sale, net of taxes                                    634             116              --

Cash paid for-
  Interest paid                                                                  $  9,616       $  12,685       $  13,897
  Income taxes paid                                                                 3,106             473             238
                                                                                 ========       =========       =========
</TABLE>

See accompanying notes to consolidated financial statements


                                       50
<PAGE>

                      CARVER BANCORP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of operations

      Carver Bancorp, Inc. ("Carver" or the "Holding Company"), was incorporated
in May 1996 and its principal wholly owned subsidiary is Carver Federal Savings
Bank (the "Bank" or "Carver Federal"). Carver Asset Corporation, CFSB Realty
Corp. and CFSB Credit Corp. are wholly owned subsidiaries of the Bank. CFSB
Credit Corp. is currently inactive. 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 and changed its name at that time. On October 24, 1994, the
Bank converted from mutual to stock form and issued 2,314,275 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 Holding Company. In connection with the
Reorganization, each share of the Bank's outstanding common stock was exchanged
for one share of the Holding Company's common stock, par value $0.01 per share.
See Note 11.

      Carver Federal's principal business consists of attracting deposit
accounts through its branch offices and investing those funds in mortgage loans
and other investments permitted by federal savings banks. The Bank has five
branches located throughout the City of New York that primarily serve the
communities in which they operate.

Basis of consolidated financial statement presentation

      The consolidated financial statements include the accounts of the Holding
Company, the Bank, the Bank's wholly owned subsidiaries, Carver Asset
Corporation, CFSB Realty Corp. and CFSB Credit Corp., and Alhambra Holding
Corp., a subsidiary of the Holding Company which is inactive. All significant
intercompany accounts and transactions have been eliminated in consolidation.

      The consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America.
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. Estimates that are
particularly susceptible to significant changes in the near-term relate to
prepayment assumptions on mortgage-backed securities, the determination of the
allowance for loan losses and the valuation of real estate owned. Actual results
could differ significantly from those estimates.

      Management believes that prepayment assumptions on mortgage-backed
securities are appropriate, the allowance for loan losses is adequate and real
estate owned is properly valued. While management uses available information to
recognize losses on loans and real estate owned, future additions to the
allowance for loan losses or future write downs of real estate owned may be
necessary based on changes in economic conditions in the areas where Carver had
extended mortgages and other credit instruments.

      In addition, various regulatory agencies, as an integral part of their
examination process, periodically review Carver's allowance for loan losses and
real estate owned valuations. Such agencies may require Carver to recognize
additions to the allowance for loan losses or additional write downs of real
estate owned based on their judgments about information available to them at the
time of their examination.

Cash and cash equivalents

      Cash and cash equivalents include cash and amounts due from depository
institutions and federal funds sold. Generally, federal funds sold are sold for
one-day periods.

Securities

      The Bank does not have trading securities, but does differentiate between
held-to-maturity securities and available-for-sale securities. When purchased,
securities are classified in either the securities held-to-maturity portfolio or
the securities available-for-sale portfolio. Securities can be classified as
held-to-maturity and carried at amortized cost only if the Bank has a positive
intent and ability to hold those securities to maturity. If not classified as
held-to-maturity, such securities are classified as securities
available-for-sale. Available-for-sale securities are reported at fair value.
Unrealized holding gains or losses for securities available-for-sale are to be
excluded from earnings and reported net of deferred income taxes as a separate
component of accumulated other comprehensive income, a component of
Stockholders' Equity.


                                       51
<PAGE>

      Securities held-to-maturity are carried at cost, adjusted for the
amortization of premiums and the accretion of discounts using the level-yield
method over the remaining period until maturity.

      Gains or losses on sales of securities of all classifications are
recognized based on the specific identification method.

Loans receivable

      Loans receivable are carried at unpaid principal balances plus unamortized
premiums, less the allowance for loan losses and deferred loan fees and
discounts.

      The Bank defers loan origination fees and certain direct loan origination
costs and accretes such amounts as an adjustment of yield over the contractual
lives of the related loans using methodologies which approximate the interest
method. Premiums and discounts on loans purchased are amortized or accreted as
an adjustment of yield over the contractual lives of the related loans using
methodologies which approximate the interest method.

      Loans are generally placed on non-accrual status when they are past due 90
days or more as to contractual obligations or when other circumstances indicate
that collection is questionable. When a loan is placed on non-accrual status,
any interest accrued but not received is reversed against interest income.
Payments received on a non-accrual loan are either applied to the outstanding
principal balance or recorded as interest income, depending on an assessment of
the ability to collect the loan. A non-accrual loan is restored to accrual
status when principal and interest payments become current and its future
collectibility is reasonably assured.

Allowance for loan losses

      An allowance for loan losses is maintained at a level considered adequate
to provide for potential loan losses. Management is responsible for determining
the adequacy of the allowance for loan losses and the periodic provisioning for
estimated losses included in the consolidated financial statements. The
evaluation process is undertaken on a quarterly basis, but may increase in
frequency should conditions arise that would require management's prompt
attention, such as business combinations and opportunities to dispose of
non-performing and marginally performing loans by bulk sale or any development
which may indicate an adverse trend.

      The methodology employed for assessing the appropriateness of the
allowance consists of the following criteria:

      o     Establishment of reserve amounts for all specifically identified
            criticized loans, that have been designated as requiring attention
            by management's internal loan review program, bank regulatory
            examinations or the external auditors.

      o     An average loss factor is applied to smaller balance homogenous
            types of loans not subject to specific review. These loans include
            residential 1-4 family, multifamily, nonresidential and construction
            properties, which also includes consumer and business loans.

      o     An allocation to the remaining loans giving effect to historical
            loss experience over several years and linked to cyclical trends.

      Recognition is also given to the changed risk profile brought about by
business combinations, customer knowledge, the results of ongoing credit quality
monitoring processes and the cyclical nature of economic and business
conditions. An important consideration in applying these methodologies is the
concentration of real estate related loans located in the New York metropolitan
area.

      The initial allocation or specific-allowance methodology commences with
loan officers and underwriters grading the quality of their loans on an
eight-category risk classification scale. Loans identified from this process as
below investment grade are referred to the Internal Asset Quality Review
Committee for further analysis and identification of those factors that may
ultimately affect the full recovery or collectibility of principal and/or
interest. These loans are subject to continuous review and monitoring while they
remain in the criticized category. Additionally, the Internal Asset Quality
Review Committee is responsible for performing periodic reviews of the loan
portfolio that are independent from the identification process employed by loan
officers and underwriters. Gradings that fall into criticized categories are
further evaluated and reserve amounts are established for each loan.

      The second allocation or loss factor approach to common or homogeneous
loans is made by applying the average loss factor to the outstanding balances in
each loan category.

      The final allocation of the allowance is made by applying several years of
loss experience to categories of loans. It gives recognition to the loss
experience of acquired businesses, business cycle changes and the real estate
components of loans. Since many loans depend upon the sufficiency of collateral,
any adverse trend in the real estate markets could seriously affect underlying
values available to protect against loss.


                                       52
<PAGE>

      Other evidence used to support the amount of the allowance and its
components are as follows:

      o     Regulatory examinations

      o     Amount and trend of criticized loans

      o     Actual losses

      o     Peer comparisons with other financial institutions

      o     Economic data associated with the real estate market in the
            Company's market area

      o     Opportunities to dispose of marginally performing loans for cash
            consideration

      Carver Federal maintains a loan review system, which allows for a periodic
review of its loan portfolio and the early identification of potential problem
loans. Such system takes into consideration, among other things, delinquency
status, size of loans, type of collateral and financial condition of the
borrowers. Loan loss allowances are established for problem loans based on a
review of such information and/or appraisals of the underlying collateral. On
the remainder of its loan portfolio, loan loss allowances are based upon a
combination of factors including, but not limited to, actual loan loss
experience, composition of loan portfolio, current economic conditions and
management's judgment. Although management believes that adequate loan loss
allowances have been established, actual losses are dependent upon future events
and, as such, further additions to the level of the loan loss allowance may be
necessary in the future.

      A loan is considered to be impaired, as defined by Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment
of a Loan" ("SFAS 114"), when it is probable that Carver Federal will be unable
to collect all principal and interest amounts due according to the contractual
terms of the loan agreement. Carver Federal tests loans covered under SFAS 114
for impairment if they are on nonaccrual status or have been restructured.
Consumer credit nonaccrual loans are not tested for impairment because they are
included in large groups of smaller-balance homogeneous loans that, by
definition along with leases, are excluded from the scope of SFAS 114. Impaired
loans are required to be measured based upon the present value of expected
future cash flows, discounted at the loan's initial effective interest rate, or
at the loan's market price or fair value of the collateral if the loan is
collateral dependent. If the loan valuation is less than the recorded value of
the loan, an impairment reserve must be established for the difference. The
impairment reserve is established by either an allocation of the reserve for
credit losses or by a provision for credit losses, depending on various
circumstances. Impairment reserves are not needed when credit losses have been
recorded so that the recorded investment in an impaired loan is less than the
loan valuation.

Concentration of risk

      The Bank's principal lending activities are concentrated in loans secured
by real estate, a substantial portion of which is located in the State of New
York. Accordingly, the ultimate collectibility of a substantial portion of the
Company's loan portfolio is susceptible to changes in New York's market
conditions.

Premises and equipment

      Premises and equipment are comprised of land, at cost, and buildings,
building improvements, furnishings and equipment and leasehold improvements, at
cost, less accumulated depreciation and amortization. Depreciation and
amortization charges are computed using the straight-line method over the
following estimated useful lives:

<TABLE>
<S>                                        <C>
      Buildings and improvements           10 to 40 years
      Furnishings and equipment            3 to 10 years
      Leasehold improvements               The lesser of useful life or remaining term of lease
</TABLE>

      Significant renewals and betterments are charged to the property and
equipment account. Maintenance and repairs are charged to expense in the year
incurred.

Real estate owned

      Real estate acquired by foreclosure or deed in lieu of foreclosure is
recorded at the fair value at the date of acquisition and thereafter carried at
the lower of cost or fair value less estimated selling costs. The fair value of
such assets is determined based primarily upon independent appraisals and other
relevant factors. The amounts ultimately recoverable from real estate owned
could differ from the net carrying value of these properties because of economic
conditions.

      Costs incurred to improve properties or get them ready for sale are
capitalized. Revenues and expenses related to the holding and operating of
properties are recognized in operations as earned or incurred. Gains or losses
on sale of properties are recognized as incurred.


                                       53
<PAGE>

Identifiable Intangible

      Carver adopted Statement of Financial Accounting Standards No.142 ("SFAS
No. 142"), "Goodwill and Other Intangible Assets" on January 1, 2002. SFAS 142
requires that goodwill and intangible assets with indefinite useful lives no
longer be amortized, but instead tested for impairment at least annually.

      Identifiable intangible assets relate primarily to core deposit premiums,
resulting from the valuation of core deposit intangibles acquired in the
purchase of two branch offices. These identifiable intangible assets are
amortized using the straight line method over periods not exceeding the
estimated average remaining life of the existing customer deposits acquired.
Amortization periods range from 5 to 15 years. Amortization periods for
intangible assets are monitored to determine if events and circumstances require
such periods to be reduced.

Income taxes

      Carver accounts for income taxes using the asset and liability method.
Temporary differences between the basis of assets and liabilities for financial
reporting and tax purposes are measured as of the balance sheet date. Deferred
tax liabilities or recognizable deferred tax assets are calculated on such
differences, using current statutory rates, which result in future taxable or
deductible amounts. The effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the enactment date.

Impairment

      The company periodically evaluates long-lived assets, certain
indentifiable intangibles, deferred cost and goodwill for indication of
impairment in value. There has been no impairment for the past three years. When
required, asset impairment will be recorded as an expense in the current period.

Earnings (loss) per common share

      Basic earnings per share ("EPS") is computed by dividing income available
to common stockholders by the weighted-average number of common shares
outstanding. Diluted EPS includes any additional common shares as if all
potentially dilutive common shares were issued (e.g. convertible preferred
stock). For the purpose of these calculations, unreleased shares of the Carver
Federal Savings Bank Employee Stock Ownership Plan ("ESOP") are not considered
to be outstanding.

Treasury Stock

      Treasury stock is recorded at cost and is presented as a reduction of
stockholders' equity.

Pension Plans

      In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits" ("SFAS 132"). SFAS 132 revises
employers' disclosures about pension and other postretirement benefit plans. It
does not change the measurement or recognition of those plans. Carver has made
the required disclosures in the accompanying Notes to the Consolidated Financial
Statements.

Stock-Based Compensation Plans

      Compensation expense is recognized for the Bank's ESOP equal to the fair
value of shares committed to be released for allocation to participant accounts.
Any difference between the fair value at that time and the ESOP's original
acquisition cost is charged or credited to stockholders' equity (additional
paid-in capital). The cost of unallocated ESOP shares (shares not yet committed
to be released) is reflected as a reduction of stockholders' equity.

      The Holding Company accounts for its stock option plan ("Stock Option
Plan") in accordance with Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees. Accordingly, compensation expense is
recognized only if the exercise price of the option is less than the fair value
of the underlying stock at the grant date. SFAS 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), encourages entities to recognize the fair value of
all stock-based awards (measured on the grant date) as compensation expense over
the vesting period. Alternatively, SFAS 123 allows entities to apply the
provisions of APB Opinion No. 25 and provide pro forma disclosures of net income
and earnings per share as if the fair-value-based method defined in SFAS 123 had
been applied. The Holding Company has elected to apply the provisions of APB
Opinion No. 25 and provide these pro forma disclosures.


                                       54
<PAGE>

      Carver applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations in accounting for our
stock-based Plan under which there is no charge to earnings for stock option
awards and the dilutive effect of outstanding options is reflected as additional
share dilution in the computation of earnings per share.

      Alternatively, Carver could have accounted for its Stock Option Plan under
SFAS 123, under which compensation cost for stock option awards would be
calculated and recognized over the service period (generally equal to the
vesting period). Had Carver applied SFAS 123 for its Stock Option Plan, net
income and earnings per common share would have been to the pro forma amounts
indicated below for the years ended March 31:

<TABLE>
<CAPTION>
                                                                        2003             2002             2001
                                                                     ----------       ----------       ----------
                                                                     (Dollars in thousands, except per share data)
<S>                                                                  <C>              <C>              <C>
      Net Gain (loss) available to common shareholders:
          As reported                                                $    3,634       $    4,516            ($586)
                Total stock-based employee compensation expense
                determined under fair value based methods for
                all awards, net of related tax effects                      (88)            (102)            (173)
                                                                     ----------       ----------       ----------
          Pro forma                                                  $    3,546       $    4,414       $     (759)
                                                                     ==========       ==========       ==========

      Basic gain (loss) per share:
          As reported                                                $     1.59       $     1.98           ($0.26)
          Pro forma                                                        1.55             1.94            (0.34)

      Diluted gain (loss) per share:
          As reported                                                $     1.52       $     1.89           ($0.26)
          Pro forma                                                        1.48             1.85            (0.34)
</TABLE>

      The fair value of the option grants was estimated on the date of the grant
using the Black-Scholes option pricing model applying the following weighted
average assumptions: risk-free interest rates of 5.50%, 5.50% 5.50% 5.00% 4.50 %
and 2.50%, for the relevant years 1997, 1999, 2000, 2001, 2002 and 2003,
respectively; volatility of 30% for each of the years; expected dividend yield
was calculated using annual dividends of $0.05 per share for 1997, 1999, 2001
and 2002,respectively, and $0.20 for 2003; and an expected life of five years
for employee option grants and seven years for directors option grants.

      The Holding Company's management recognition and retention plan ("MRP") is
also accounted for in accordance with Accounting Principles Board Opinion No.
25. The fair value of the shares awarded, measured at the grant date, is
recognized as unearned compensation (a deduction from stockholders' equity) and
amortized to compensation expense as the shares become vested. When MRP shares
become vested, the Company records a credit to additional paid-in capital for
tax benefits attributable to any MRP deductions for tax purposes in excess of
the grant-date fair value charged to expense for financial reporting purposes.

Reclassifications

      Certain amounts in the consolidated financial statements presented for
prior periods have been reclassified to conform with the current year
presentation.


                                       55
<PAGE>

NOTE 2.    SECURITIES

      The following is a summary of securities at March 31, 2003:

<TABLE>
<CAPTION>
                                                                   Gross Unrealized
                                                                ----------------------
                                                  Carrying                                  Estimated
                                                    Value         Gains        Losses       Fair Value
                                                  --------      --------      --------      ----------
                                                                (Dollars in thousands)
<S>                                               <C>           <C>           <C>            <C>
Available-for-Sale:
Mortgage-backed securities:
  Pass-through certificates:
    Government National Mortgage Association      $ 47,066      $    184      $   (130)      $ 47,120
    Federal Home Loan Mortgage Corporation          19,614            90           (11)        19,693
    Federal National Mortgage Association           23,286           216           (32)        23,470
                                                  --------      --------      --------       --------
      Total mortgage-backed securities              89,966           490          (173)        90,283
U.S. Government Agency Securities                   38,187           585            --         38,772
                                                  --------      --------      --------       --------
      Total available-for-sale                     128,153         1,075          (173)       129,055
                                                  --------      --------      --------       --------

Held-to-Maturity:
Mortgage-backed securities:
  Pass-through certificates:
    Government National Mortgage Association         2,473           157            --          2,630
    Federal Home Loan Mortgage Corporation          27,482           682            --         28,164
    Federal National Mortgage Association            6,203           177            --          6,380
    Small Business Administration                      372            --            (3)           369
                                                  --------      --------      --------       --------
      Total mortgage-backed securities              36,530         1,016            (3)        37,543
                                                  --------      --------      --------       --------
      Total held-to-maturity                        36,530         1,016            (3)        37,543
                                                  --------      --------      --------       --------
      Total securities                            $164,683      $  2,091      $   (176)      $166,598
                                                  ========      ========      ========       ========
</TABLE>

      The following is a summary of securities at March 31, 2002:

<TABLE>
<CAPTION>
                                                                    Gross Unrealized
                                                                ----------------------
                                                  Carrying                                 Estimated
                                                    Value         Gains        Losses      Fair Value
                                                  --------      --------      --------     ----------
                                                                    (In thousands)
<S>                                               <C>           <C>           <C>            <C>
Available-for-Sale:
Mortgage-backed securities:
  Pass-through certificates:
    Government National Mortgage Association      $ 10,531      $     55      $     (2)      $ 10,584
    Federal Home Loan Mortgage Corporation          27,840           416            (7)        28,249
    Federal National Mortgage Association           11,435            88           (72)        11,451
  Collateralized Mortgage Obligations                  136            --            --            136
                                                  --------      --------      --------       --------
      Total mortgage-backed securities              49,942           559           (81)        50,420
U.S. Government Agency Securities                   39,663             1          (263)        39,401
                                                  --------      --------      --------       --------
      Total available-for-sale                      89,605           560          (344)        89,821
                                                  --------      --------      --------       --------

Held-to-Maturity:
Mortgage-backed securities:
  Pass-through certificates:
    Government National Mortgage Association         3,448            24            --          3,472
    Federal Home Loan Mortgage Corporation           6,149            23           (53)         6,119
    Federal National Mortgage Association            5,607            74            (2)         5,679
    Small Business Administration                      439             7            --            446
                                                  --------      --------      --------       --------
      Total mortgage-backed securities              15,643           128           (55)        15,716
                                                  --------      --------      --------       --------
      Total held-to-maturity                        15,643           128           (55)        15,716
                                                  --------      --------      --------       --------
      Total securities                            $105,248      $    688      $   (399)      $105,537
                                                  ========      ========      ========       ========
</TABLE>


                                       56
<PAGE>

      The net unrealized gain on available-for-sale securities was $902,000
($750,000 after taxes) at March 31, 2003 as compared to $216,000 ($116,000 after
taxes) at March 31, 2002. On November 30, 2002 the Bank transferred $22.8
million of mortgage-backed securities from available-for-sale to
held-to-maturity as a result of management's intention to hold these securities
in portfolio until maturity. A related unrealized gain of $464,000 as of March
31, 2003 continues to be reported as a separate component of stockholders'
equity and is amortized over the remaining lives of the securities as an
adjustment to yield. Changes in unrealized holding gains and losses resulted in
an after-tax increase in stockholders' equity of $634,000. These gains and
losses will continue to fluctuate based on changes in the portfolio and market
conditions.

      Sales of available-for-sale securities resulted in gross realized gains
during the fiscal year ended March 31, 2002 ("fiscal 2002") of $1.4 million.
There were no sales of securities in the fiscal years ended March 31, 2003
("fiscal 2003") and 2001 ("fiscal 2001").

      The following is a summary of the carrying value (amortized cost) and fair
value of securities at March 31, 2003, 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.

                                             Carrying        Fair
                                               Value         Value
                                             --------      --------
                                              (Dollars in thousands)

             Available-for-sale:
                Due in one year or less      $ 22,109      $ 22,117
                One through five years         16,190        16,770
                Five through ten years          1,813         1,933
                After ten years                88,041        88,235
                                             --------      --------
                                             $128,153      $129,055
                                             ========      ========

             Held-to-maturity:
                Five through ten years       $    326      $    345
                After ten years                36,204        37,198
                                             --------      --------
                                             $ 36,530      $ 37,543
                                             ========      ========

NOTE 3. LOANS RECEIVABLE, NET

      A summary of loans receivable, net follows:

<TABLE>
<CAPTION>
                                                                   March 31,
                                            ----------------------------------------------------
                                                     2003                          2002
                                            ----------------------       -----------------------
                                              Amount       Percent         Amount        Percent
                                            ---------      -------       ---------       -------
                                                            (Dollars in thousands)
<S>                                         <C>             <C>          <C>             <C>
      Real estate loans:
        One- to four-family                 $  71,735        23.66%      $ 122,814        41.28%
        Multi-family                          131,749        43.45         118,589        39.86
        Non-residential                        79,244        26.13          40,101        13.48
        Construction                           18,377         6.06          13,678         4.60
      Consumer and business                     2,125         0.70           2,328         0.78
                                            ---------       ------       ---------       ------
      Total gross loans                       303,230       100.00%        297,510       100.00%
                                                            ======                       ======
      Add:
      Premium on loans                            867                          906
      Less:
      Loans in process                         (6,838)                      (3,936)
      Deferred fees and loan discounts           (363)                        (642)
      Allowance for loan losses                (4,158)                      (4,128)
                                            ---------                    ---------
      Net loan portfolio                    $ 292,738                    $ 289,710
                                            =========                    =========
</TABLE>


                                       57
<PAGE>

      At March 31, 2003, 93.6% of the Company's real estate loans receivable
were principally secured by properties located in the State of New York.

      The mortgage loan portfolios serviced for the FHLMC and Fannie Mae are not
included in the accompanying consolidated financial statements. The unpaid
principal balances of these loans aggregated $4.1 million, $2.9 million and $2.1
million at March 31, 2003, 2002 and 2000, respectively. Custodial escrow
balances, maintained in connection with the foregoing loan servicing, were
approximately $16,000, $28,000 and $34,000 at March 31, 2003, 2002 and 2000,
respectively. During the year ended March 31, 2003 the Bank sold $2.5 million in
loans with minimal gain recognized, as compared to $1.3 million in loans sold
during fiscal 2002 and a loss of $101,000 recognized.

      The following is an analysis of the allowance for loan losses:

<TABLE>
<CAPTION>
                                                               Year ended March 31,
                                                        -----------------------------------
                                                          2003          2002          2001
                                                        -------       -------       -------
                                                                (Dollars in thousands)
<S>                                                     <C>           <C>           <C>
      Balance at beginning of the year                  $ 4,128       $ 3,551       $ 2,935
      Provision charged to operations                        --           900         1,793
      Recoveries of amounts previously charged off          258           177           200
      Loans charged-off                                    (228)         (500)       (1,377)
                                                        -------       -------       -------
      Balance at ending of the year                     $ 4,158       $ 4,128       $ 3,551
                                                        =======       =======       =======
</TABLE>

      Non-accrual loans consist of loans for which the accrual of interest has
been discounted as a result of such loans becoming 90 days or more delinquent as
to principal and/or interest payments. Interest income on non-accrual loans is
recorded when received. Restructured loans consist of 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 March 31, 2003, 2002 and 2001 the recorded investment in impaired loans
was $1.8 million, $2.8 million and $2.5 million, respectively all of which
represented non-accrual loans. The related allowance for credit losses was
approximately $195,000 and $146,000 at March 31, 2003 and 2002, respectively.
The impaired loan portfolio is primarily collateral dependent. The average
recorded investment in impaired loans during the fiscal years ended March 31,
2003, 2002 and 2001 was approximately $1.8 million, $2.3 million and $3.2
million, respectively. For the fiscal years ended March 31, 2003, 2002 and 2001,
the Company did not recognize any interest income on these impaired loans.
Interest income of $173,000, $288,000 and $202,000, respectively, for the fiscal
years ended March 31, 2003, 2002 and 2001 would have been recorded on impaired
loans had they performed in accordance with the original contract.

      At March 31, 2003 and 2002, there were no loans to officers.

NOTE 4. PREMISES AND EQUIPMENT, NET

      The detail of premises and equipment is as follows:

<TABLE>
<CAPTION>
                                                                       March 31,
                                                                --------------------
                                                                  2003         2002
                                                                -------      -------
                                                                (Dollars in thousands)
<S>                                                             <C>          <C>
            Land                                                $   415      $   415
            Buildings and improvements                            8,477        8,074
            Leasehold improvements                                  975          934
            Furniture and equipment                               5,383        6,992
                                                                -------      -------
                                                                 15,250       16,415
            Less accumulated depreciation and amortization        5,057        6,164
                                                                -------      -------
                                                                $10,193      $10,251
                                                                =======      =======
</TABLE>

      Depreciation and amortization charged to operations for the fiscal years
ended March 31, 2003, 2002 and 2001 amounted to $1.2 million, $1.2 million and
$1.1 million, respectively.


                                       58
<PAGE>



NOTE 5. ACCRUED INTEREST RECEIVABLE

      The detail of accrued interest receivable is as follows:

<TABLE>
<CAPTION>
                                                                     March 31,
                                                               ---------------------
                                                                2003           2002
                                                               ------         ------
                                                               (Dollars in thousands)
<S>                                                            <C>            <C>
            Loans receivable                                   $1,984         $1,735
            Mortgage-backed securities                            716            517
            Investments and other interest bearing assets         646            552
                                                               ------         ------
            Total accrued interest receivable                  $3,346         $2,804
                                                               ======         ======
</TABLE>

NOTE 6. IDENTIFIABLE INTANGIBLES

      The identifiable intangible asset relates to the acquisition of the
Bedford-Stuyvesant branch office. The detail is as follows:

<TABLE>
<CAPTION>
                                                                              March 31,
                                   ----------------------------------------------------------------------------------------------
                                                         2003                                              2002
                                   --------------------------------------------      --------------------------------------------
                                                                      (Dollars in thousands)
                                     Gross                                Net          Gross                                Net
                                   Carrying         Accumulated        Carrying      Carrying        Accumulated         Carrying
                                     Value         Amortization          Value        Value          Amortization          Value
                                   --------        ------------        --------      --------        ------------        --------
<S>                                <C>               <C>               <C>           <C>               <C>               <C>
Core deposit premiums              $    582          $    410          $    172      $    582          $    205          $    377
Other                                    22                16                 6            22                 8                14
                                   --------          --------          --------      --------          --------          --------
                                   $    604          $    426          $    178      $    604          $    213          $    391
                                   ========          ========          ========      ========          ========          ========
</TABLE>

NOTE 7. DEPOSITS

      Deposit balances and weighted average stated interest rates at March 31
are summarized as follows:

<TABLE>
<CAPTION>
                                                                         At March 31,
                                     ---------------------------------------------------------------------------------------
                                                         2003                                           2002
                                     -----------------------------------------     -----------------------------------------
                                                      Percent of      Weighted                       Percent of     Weighted
                                                        Total         Average                           Total        Average
                                        Amount         Deposits         Rate         Amount           Deposits        Rate
                                     ----------       ----------      --------     ----------        ----------     --------
                                                                      (Dollars in thousands)
<S>                                  <C>                  <C>           <C>        <C>                  <C>           <C>
Non-interest-bearing demand          $   16,539           4.8%            --%      $   13,463             4.1%          --%
NOW accounts                             18,190           5.2           0.52           18,095             5.6         1.24
Savings and club                        128,935          37.1           1.06          126,779            39.0         1.71
Money market savings account             20,735           6.0           0.91           15,232             4.7         1.78
Certificates                            162,765          46.9           2.15          151,385            46.6         2.73
                                     ----------         -----           ----       ----------           -----         ----
Total                                $  347,164         100.0%          1.48%      $  324,954           100.0%        2.18%
                                     ==========         =====                      ==========           =====
</TABLE>


                                       59
<PAGE>

      The scheduled maturities of certificates of deposits are as follows:

                                                               March 31,
                                                        ----------------------
                                                          2003          2002
                                                        --------      --------
                                                             (In thousands)
              Certificates of deposit by remaining
                term to contractual maturity:
                  Within one year                       $127,668      $ 80,528
                  After one but within two years          12,492        26,638
                  After two but within three years        10,387        10,495
                  After three years                       12,218        33,724
                                                        --------      --------
                            Total                       $162,765      $151,385
                                                        ========      ========

The aggregate amount of certificates of deposit with minimum denominations of
$100,000 or more was approximately $100.1 million at March 31, 2003.

      Interest expense on deposits for the the years ended March 31 consists of
the following:

                                              2003          2002          2001
                                            -------       -------       -------
                                                       (In thousands)

      Demand                                $   131       $   237       $   253
      Savings and club                        1,477         2,342         3,081
      Money market                              189           302           412
      Certificates of deposit                 3,975         5,263         4,739
                                            -------       -------       -------
                                              5,772         8,144         8,485
      Penalty for early withdrawal of
         certificates of deposit                (12)          (17)          (29)
                                            -------       -------       -------
                Total interest expense      $ 5,760       $ 8,127       $ 8,456
                                            =======       =======       =======

NOTE 8. BORROWED MONEY

      FHLB Advances. FHLB advances and weighted average interest rates at March
31 are summarized as follows, by remaining period to maturity:

                                                 March 31,
                           ----------------------------------------------------
                                       2003                        2002
                           -------------------------   ------------------------
         Maturing
        Year Ended           Weighted                    Weighted
         March 31,         Average Rate       Amount   Average Rate      Amount
        ----------         ------------       ------   ------------      ------
           2003                  --%        $     --       2.41%        $15,500
           2004                1.93           18,250       4.28           3,500
           2005                4.05           26,000       4.05          26,000
           2006                3.46           32,840       5.29          10,490
           2007                4.42           28,134       5.17          19,484
           2008                3.49            3,300         --              --
           2012                3.50              265       3.50             288
                               ----         --------       ----         -------
                               3.59%        $108,789       4.18%        $75,262
                               ====         ========       ====         =======

      As a member of the FHLB, the Bank may have outstanding FHLB borrowings in
a combination of term advances and overnight funds of up to 25% of its total
assets, or approximately $126.7 million at March 31, 2003. Borrowings are
secured by the Bank's investment in FHLB stock and by a blanket security
agreement. This agreement requires the Bank to maintain as collateral certain
qualifying assets (principally securities and residential mortgage loans) not
otherwise pledged. At March 31, 2003 and 2002,


                                       60
<PAGE>

the advances were secured by pledges of the Bank's investment in the capital
stock of the FHLB-NY totaling $5.4 million and $3.8 million, respectively and a
blanket assignment of the Bank's unpledged qualifying mortgage, mortgage-backed
securities and investment portfolios.

      Securities Sold Under Agreements to Repurchase. In securities sold under
agreements to repurchase, the Bank borrows funds through the transfer of debt
securities to the FHLB, as counterparty, and concurrently agrees to repurchase
the identical securities at a fixed price on a specified date. Repurchase
agreements are collateralized by the securities sold and, in certain cases, by
additional margin securities. At March 31, 2003 and 2002 there were no
securities sold under agreements to repurchase outstanding.

      The following table sets forth certain information regarding Carver's
borrowed money at the dates and for the periods indicated:

<TABLE>
<CAPTION>
                                                                      At or for the Year Ended March 31,
                                                                      ----------------------------------
                                                                           2003               2002
                                                                         --------           --------
                                                                           (Dollars in thousands)
<S>                                                                      <C>                <C>
      Amounts outstanding at the end of period:
        FHLB advances                                                    $108,789           $ 75,262
      Weighted average rate paid at period end:
        FHLB advances                                                        3.59%              4.18%
      Maximum amount of borrowing outstanding at any month end:
        FHLB advances                                                    $108,789           $100,094
        Repos                                                                  --             14,930
      Approximate average amounts outstanding for period:
        FHLB advances                                                    $ 80,861           $ 76,141
        Repos                                                                  --              2,888
      Approximate weighted average rate paid during period:
        FHLB advances                                                        3.99%              5.50%
        Repos                                                                  --%              5.91%
</TABLE>

NOTE 9. INCOME TAXES

      The components of income tax expense for the years ended March 31 are as
follows:

<TABLE>
<CAPTION>
                                                                     2003            2002            2001
                                                                 ----------       ----------       ---------
                                                                                 (In thousands)
<S>                                                              <C>              <C>              <C>
              Federal income tax expense (benefit):
                  Current                                        $    4,200       $      569              --
                  Deferred                                           (1,626)           1,792              --
                                                                 ----------       ----------       ---------
                                                                      2,574            2,361              --
                                                                 ----------       ----------       ---------
              State and local income tax expense (benefit):
                  Current                                             1,104              913              98
                  Deferred                                             (645)              46              --
                                                                 ----------       ----------       ---------
                                                                        459              959              98
                                                                 ----------       ----------       ---------

              Valuation allowance                                        --           (2,439)             --

              Total provision for income tax expense             $    3,033       $      881       $      98
                                                                 ==========       ==========       =========
</TABLE>


                                       61
<PAGE>

      The reconciliation of the expected federal tax rate to the consolidated
effective tax rate for the fiscal years ended March 31 is as follows:

<TABLE>
<CAPTION>
                                                                     2003                     2002                    2001
                                                              ------------------      ------------------       ------------------
                                                              Amount     Percent      Amount     Percent       Amount     Percent
                                                              ------     -------      ------     -------       ------     -------
                                                                                       (Dollars in thousands)
<S>                                                           <C>         <C>        <C>           <C>         <C>         <C>
Statutory Federal income tax                                  $2,334      34.0%      $ 1,902       34.0%       $ (99)      34.0%
State and local income taxes, net of Federal tax benefit         303       4.4           632       11.3           98       (33.6)
Change in valuation allowance                                     --        --        (2,439)      (43.6)        157       (54.0)
Other                                                            396       5.8           786       14.0          (58)       19.9
                                                              ------      ----       -------       ----        -----       -----

Total income tax expense                                      $3,033      44.2%      $   881       15.7%       $  98       (33.7)%
                                                              ======      ====       =======       ====        =====       =====
</TABLE>

      At March 31, 2001, Carver had net operating loss carryforwards for federal
income tax purposes of approximately $5.7 million. These net operating loss
carryforwards were fully utilized during fiscal 2002.

      Carver's stockholders' equity includes approximately $2.8 million and $4.2
million at March 31, 2003 and 2002, respectively, which has been segregated for
federal income tax purposes as a bad debt reserve. The use of this amount for
purposes other than to absorb losses on loans may result in taxable income for
federal income taxes at the then current tax rate.

      The tax effects of existing temporary differences that give rise to
significant portions of deferred tax assets and deferred tax liabilities at
March 31 of the years indicated as follows:

<TABLE>
<CAPTION>
                                                                               2003        2002
                                                                              ------      ------
                                                                                (In thousands)
<S>                                                                           <C>         <C>
            Deferred tax assets
                Income from affiliate                                         $2,050      $   --
                Allowance for loan losses                                      1,414       1,235
                Deferred loan fees                                               287         607
                Compensation and benefit plans                                   281         132
                Reserves for losses on other assets                               22          38
                Non-accrual loan interest                                        194          --
                Contributions carryforward                                         1          95
                                                                              ------      ------

                    Total deferred tax assets before valuation allowance       4,249       2,107
                    Valuation allowance                                           --          --
                                                                              ------      ------
                    Total deferred tax assets                                  4,249       2,107
                                                                              ------      ------

            Deferred tax liabilities
                Unrealized gain on available-for-sale securities                 616         100
                Identifiable Intangibles                                          71         168
                Depreciation                                                     283         315
                                                                              ------      ------
                    Total deferred tax liabilities                               970         583
                                                                              ------      ------

            Net deferred tax assets                                           $3,279      $1,524
                                                                              ======      ======
</TABLE>

      Management believes it is more likely than not that the results of future
operations will generate sufficient future taxable income to realize the
deferred tax asset. Therefore, a valuation allowance against the deferred tax
assets at March 31, 2003 and 2002 was not considered necessary.


                                       62
<PAGE>

NOTE 10. EARNINGS PER COMMON SHARE

      The following table reconciles the earnings (loss) available to common
shareholders (numerator) and the weighted average common stock outstanding
(denominator) for both basic and diluted earnings per share for the periods
presented:

<TABLE>
<CAPTION>
                                                                                     Year Ended March 31,
                                                                             -----------------------------------
                                                                               2003          2002          2001
                                                                             -------       -------       -------
                                                                                          (In thousands)
<S>                                                                          <C>           <C>           <C>
Net income (loss)                                                            $ 3,831       $ 4,713       $  (389)
Preferred stock dividends                                                       (197)         (197)         (197)
                                                                             -------       -------       -------
Net income (loss) - basic                                                      3,634         4,516          (586)
Impact of potential conversion of convertible preferred stock to common
stock                                                                            197           197           197
                                                                             -------       -------       -------
Net income (loss) - diluted                                                  $ 3,831       $ 4,713       $  (389)
                                                                             =======       =======       =======

Weighted average common shares outstanding - basic                             2,291         2,277         2,256
Effect of dilutive securities convertible preferred stock and options            235           218           208
                                                                             -------       -------       -------
Weighted average common shares outstanding - diluted                           2,526         2,495         2,464
                                                                             =======       =======       =======
</TABLE>

NOTE 11. STOCKHOLDERS' EQUITY

      Conversion and Stock Offering. On October 24, 1994, the Bank issued in an
initial public offering 2,314,375 shares of common stock (par value $0.01) at a
price of $10 per share resulting in net proceeds of $21.5 million. As part of
the initial public offering, the Bank established a liquidation account at the
time of conversion, in an amount equal to the surplus and reserves of the Bank
at September 30, 1994. In the unlikely event of a complete liquidation of the
Bank (and only in such event), eligible depositors who continue to maintain
accounts shall be entitled to receive a distribution from the liquidation
account. The total amount of the liquidation account may be decreased if the
balances of eligible deposits decreased as measured on the annual determination
dates. The balance of the liquidation account was approximately $2.1 million
(unaudited), and $2.5 million (unaudited) at March 31, 2003 and 2002,
respectively, based on an assumed decrease of 15.25% of eligible deposits per
annum. On October 17, 1996, the Bank completed the Reorganization and became the
wholly owned subsidiary of the Holding Company. Pursuant to an Agreement and
Plan of Reorganization, dated May 21, 1996, each share of the Bank's outstanding
common stock was exchanged for one share of the Holding Company's common stock.
In connection with the Reorganization, a shareholder of the Bank exercised
appraisal rights and 100 shares of the Bank's common stock were purchased from
such shareholder in the fourth fiscal quarter of 1997. Accordingly, 2,314,275
shares of the Holding Company's common stock were outstanding. The Bank is not
permitted to pay dividends to the Holding Company on its capital stock if the
effect thereof would cause its net worth to be reduced below either: (i) the
amount required for the liquidation account or (ii) the amount required for the
Bank to comply with applicable minimum regulatory capital requirements.

      Convertible Preferred Stock. On January 11, 2000, the Holding Company
sold, pursuant to a Securities Purchase Agreement, dated January 11, 2000, in a
private placement 40,000 shares of Series A Convertible Preferred Stock (the
"Series A Preferred Stock") to Morgan Stanley & Co. Incorporated ("MSDW") and
60,000 Shares of Series B Convertible Preferred Stock (the "Series B Preferred
Stock") to Provender Opportunities Fund L.P. ("Provender"). In addition, Carver
entered into a Registration Rights Agreement, dated January 11, 2000, with MSDW
and Provender. The gross proceeds from the private placement were $2.5 million.

      The Series A Preferred Stock and Series B Preferred Stock (collectively
the "Preferred Stock") accrue annual dividends at $1.97 per share. Dividends are
payable semi-annually on June 15 and December 15 of each year. Each share of
Preferred Stock is convertible at the option of the holder, at any time, into
2.08333 shares of Carver's Common Stock, subject to certain antidilution
adjustments. The Holding Company may redeem the Preferred Stock beginning
January 15, 2004. In the event of any liquidation, dissolution or winding up of
Carver, whether voluntary or involuntary, the holders of the shares of Preferred
Stock shall be entitled to receive $25 per share of Preferred Stock plus all
dividends accrued and unpaid thereon. Each share of Preferred Stock is entitled
to one vote for each share of Common Stock into which the Preferred Stock can be
converted.


                                       63
<PAGE>

      At March 31, 2003 unpaid accrued dividends related to the Preferred Stock
amounted to $57,000.

      Regulatory Capital. The operations and profitability of the Bank are
significantly affected by legislation and the policies of the various regulatory
agencies. The Office of Thrift Supervision ("OTS") has promulgated capital
requirements for financial institutions consisting of minimum tangible and core
capital ratios of 1.5% and 3.0%, respectively, of the institution's adjusted
total assets and a minimum risk-based capital ratio of 8.0% of the institution's
risk weighted assets. Although the minimum core capital ratio is 3.0%, the
Federal Deposit Insurance Corporation Improvement Act, as amended ("FDICIA"),
stipulates that an institution with less than 4.0% core capital is deemed
undercapitalized. At March 31, 2003 and 2002, the Bank exceeded all of its
regulatory capital requirements.

      The following is a summary of the Bank's actual capital amounts and ratios
as of March 31, 2003 and 2002, compared to the OTS requirements for minimum
capital adequacy and for classification as a well-capitalized institution:

<TABLE>
<CAPTION>
                                                   Minimum Capital       Classification as
                              Bank Actual             Adequacy           Well Capitalized
                         ------------------      ------------------     ------------------
                          Amount      Ratio       Amount      Ratio      Amount      Ratio
                          ------      -----       ------      -----      ------      -----
                                              (Dollars in thousands)
<S>                      <C>           <C>       <C>           <C>      <C>          <C>
March 31, 2003
Tangible capital         $39,725       7.8%      $ 7,628       1.5%         N/A       N/A
Leverage capital          39,725       7.8        20,341       4.0      $25,426       5.0%
Risk-based capital:
     Tier I               39,725      12.8           N/A       N/A       18,633       6.0
     Total                43,610      14.0        24,844       8.0       31,055      10.0

March 31, 2002
Tangible capital         $36,442       8.1%      $ 6,744       1.5%         N/A       N/A
Leverage capital          36,442       8.1        17,984       4.0      $22,480       5.0%
Risk-based capital:
     Tier I               36,442      17.0           N/A       N/A       12,865       6.0
     Total                39,140      18.3        17,153       8.0       21,442      10.0
</TABLE>

      The following table reconciles the Bank's stockholders' equity at March
31, 2003, in accordance with accounting principles generally accepted in the
U.S. to regulatory capital requirements:

<TABLE>
<CAPTION>
                                                                               Regulatory Capital Requirements
                                                                   ---------------------------------------------------
                                                                     GAAP      Tangible       Leverage      Risk-Based
                                                                   Capital      Capital        Capital        Capital
                                                                   --------    --------       --------      ----------
                                                                                      (In thousands)
<S>                                                                <C>         <C>            <C>            <C>
Stockholders' Equity at March 31, 2003 (1)                         $ 40,653    $ 40,653       $ 40,653       $ 40,653

Add:
   General valuation allowances                                                      --             --          3,885
Deduct:
   Unrealized loss(gain) on securities available for sale, net                     (750)          (750)          (750)
   Excess of cost over net assets acquired                                         (178)          (178)          (178)
                                                                               --------       --------       --------
Regulatory Capital                                                               39,725         39,725         43,610
Minimum Capital requirement                                                       7,628         20,341         24,844
                                                                               --------       --------       --------
Regulatory Capital Excess                                                      $ 32,097       $ 19,384       $ 18,766
                                                                               ========       ========       ========
</TABLE>

(1)   Reflects Bank only.

      Comprehensive Income. Comprehensive income represents net income and
certain amounts reported directly in stockholders' equity, such as the net
unrealized gain or loss on securities available for sale. The Holding Company
has reported its


                                       64
<PAGE>

comprehensive income for fiscal 2003, 2002 and 2001 in the consolidated
statements of changes in stockholders' equity and comprehensive income. Carver's
other comprehensive income or loss (other than net income), which is
attributable to unrealized gains and losses on securities available-for-sale,
for the year ended March 31, 2003 and 2002 was $750,000 and $116,000,
respectively. Included in the March 31, 2003 amount is $464,000 relating to an
unrealized gain on available-for-sale securities that were transferred during
fiscal 2003 to held-to-maturity. This unrealized gain is an unrealized gain
reported as a separate component of stockholders' equity and is amortized over
the remaining lives of the securities as an adjustment to yield. There was no
other comprehensive income or loss for the year ended March 31, 2001.

NOTE 12. EMPLOYEE BENEFIT AND STOCK COMPENSATION PLANS

Pension Plan. Carver has a non-contributory defined benefit pension plan
covering all eligible employees. The benefits are based on each employee's term
of service. Carver's policy is to fund the plan with contributions which equal
the maximum amount deductible for federal income tax purposes. The plan was
curtailed during the fiscal year ended March 31, 2002.

         The following table sets forth the plan's changes in benefit
obligation, changes in plan assets and funded status and amounts recognized in
Carver's consolidated financial statements at March 31:


<TABLE>
<CAPTION>
                                                                       2003          2002
                                                                     -------       -------
                                                                         (In thousands)
<S>                                                                  <C>           <C>
         Change in projected benefit obligation during the year
         Projected benefit obligation at the beginning of year       $ 2,623       $ 2,527
         Interest cost                                                   178           182
         Actuarial loss                                                  182           154
         Benefits paid                                                  (231)         (240)
                                                                     -------       -------
         Projected benefit obligation at end of year                 $ 2,752       $ 2,623
                                                                     =======       =======

         Change in fair value of plan assets during the year
         Fair value of plan assets at beginning of year              $ 3,369       $ 3,594
         Actual return on plan assets                                   (231)           15
         Benefits paid                                                  (231)         (240)
                                                                     -------       -------
         Fair value of plan assets at end of year                    $ 2,907       $ 3,369
                                                                     =======       =======

         Funded status                                               $   155       $   746
         Unrecognized (gain) / loss                                       93          (600)
                                                                     -------       -------
         Accrued pension cost                                        $   248       $   146
                                                                     =======       =======
</TABLE>

      Net periodic pension benefit included the following components for the
years ended March 31 are:

<TABLE>
<CAPTION>
                                                          2003          2002         2001
                                                        -------       -------       -------
                                                                  (In thousands)
<S>                                                     <C>           <C>           <C>
            Service cost                                $    --       $    --       $   121
            Interest cost                                   178           182           207
            Expected return on plan assets                 (260)         (279)         (298)
            Amortization of:
               Unrecognized transition obligation            --            --            36
               Unrecognized gain                            (19)          (56)          (96)
               Unrecognized past service liability           --            --             2
            Curtailment credit                               --            --           (84)
                                                        -------       -------       -------
            Net periodic pension benefit                $  (101)      $  (153)      $  (112)
                                                        =======       =======       =======
</TABLE>


                                       65
<PAGE>

Significant actuarial assumptions used in determining plan benefits for the
years ended March 31 are:

<TABLE>
<CAPTION>
                                                                    2003       2002       2001
                                                                    ----       ----       ----
<S>                                                                 <C>        <C>        <C>
      Annual salary increase (1)                                     N/A        N/A       4.75%
      Long-term return on assets                                    8.00%      8.00%      8.00%
      Discount rate used in measurement of benefit obligations      6.50%      7.00%      7.25%
</TABLE>

      (1)   The annual salary increase rate is not applicable as the plan
            is frozen.

      Savings Incentive Plan. Carver has a savings incentive plan, pursuant to
Section 401(k) of the Code, for all eligible employees of the Bank. Through
December 31, 2000, employees had the option to elect to defer up to the lesser
of 15% or the maximum amount allowed under law of their compensation and receive
a 50% matching contribution from Carver up to the maximum allowed by law.
Effective January 1, 2001, the plan was modified. In connection with this
modification, Carver will make an annual non-elective contribution to the 401(k)
plan on behalf of each eligible employee equal to 2% of the employee's annual
pay, subject to IRS limitations. This 2% Carver contribution will be made
regardless of whether or not the employee makes a contribution to the 401(k)
plan. To be eligible for the 2% Carver contribution, the employee must have
completed at least one year of service and be employed as of the last day of the
plan year or December 31 of each year. In addition, effective January 1, 2001,
Carver matches contributions to the plan equal to 100% of the pre-tax
contributions made by each employee up to a maximum of 4% of their pay. All such
matching contributions to the plan will be fully vested and non-forfeitable at
all times regardless of the years of service. However, the one-year to five-year
vesting schedule that previously applied to matching contributions will apply to
the new 2% Carver contribution. Total incentive plan expenses for the years
ended March 31, 2003, 2002 and 2001 were $127,000, $60,000 and $45,000,
respectively.

      Directors' Retirement Plan. Concurrent with the conversion to the stock
form of ownership, Carver adopted a retirement plan for non-employee directors.
The plan was curtailed during the fiscal year ended March 31, 2001. The benefits
are payable based on the term of service as a director. The following table sets
forth the plan's changes in benefit obligation, changes in plan assets and
funded status and amounts recognized in Carver's consolidated financial
statements at March 31:

<TABLE>
<CAPTION>
                                                                  --------       --------
                                                                    2003           2002
                                                                  --------       --------
                                                                       (In thousands)
<S>                                                               <C>            <C>
      Change in projected benefit obligation during the year
      Projected benefit obligation at beginning of year           $    264       $    296
      Interest cost                                                     17             19
      Actuarial (gain) / loss                                          (38)            --
      Benefits paid                                                    (43)           (51)
                                                                  --------       --------
          Projected benefit obligation at end of year             $    200       $    264
                                                                  ========       ========

      Change in fair value of plan assets during the year
      Employer contributions                                      $     43       $     51
      Benefits paid                                                    (43)           (51)
                                                                  --------       --------
      Fair value of plan assets at end of year                    $     --       $     --
                                                                  ========       ========

      Funded Status                                               $   (200)      $   (264)
      Contributions                                                     --             --
      Unrecognized (gain) / loss                                       (17)            21
                                                                  --------       --------
      Accrued pension cost                                        $   (217)      $   (243)
                                                                  ========       ========
</TABLE>


                                       66
<PAGE>

      Net periodic pension cost for the years ended March 31, 2003, 2002 and
2001 included the following:

<TABLE>
<CAPTION>
                                                   2003        2002           2001
                                                 -------      -------      ---------
                                                            (In thousands)
<S>                                              <C>          <C>          <C>
      Service cost                               $    --      $    --      $      --
      Interest cost                                   17           19             35
      Expected return on plan assets                  --           --             --
      Amortization of:
        Unrecognized gain                             --           --              4
        Unrecognized past service liability           --           --             23
        Curtailment credit                            --           --           (179)
                                                 -------      -------      ---------
      Net periodic pension cost                  $    17      $    19      $    (117)
                                                 =======      =======      =========
</TABLE>

      The actuarial assumptions used in determining plan benefits include a
discount rate of 6.5%, 7.25% and 7.25% for the years ended March 31, 2003, 2002
and 2001, respectively.

      Management Recognition Plan. The MRP provides for automatic grants of
restricted stock to certain employees as of the September 12, 1995 adoption of
the MRP. In addition, the MRP provides for additional discretionary grants of
restricted stock to those employees selected by the committee established to
administer the MRP. Awards generally vest in three to five equal annual
installments commencing on the first anniversary date of the award, provided the
recipient is still an employee of the Holding Company or the Bank on such date.
Awards will become 100% vested upon termination of service due to death or
disability. When shares become vested and are distributed, the recipients will
receive an amount equal to any accrued dividends with respect thereto Pursuant
to the MRP, the Bank recognized $79,000, $119,000 and $0 as expense for the
years ended March 31, 2003, 2002 and 2001, respectively.

      Employee Stock Ownership Plan. Effective upon conversion, an ESOP was
established for all eligible employees. The ESOP used $1,821,320 in proceeds
from a term loan obtained from a third-party institution to purchase 182,132
shares of Bank common stock in the initial public offering. The term loan
principal is payable over forty equal quarterly installments through September
2004. Interest on the term loan is payable quarterly, at a rate of 3.00% over
the average federal funds rate. On May 20, 2002, the term loan was modified to
provide for interest at a fixed rate of 4% per annum. Each year, the Bank
intends to make discretionary contributions to the ESOP, which will be equal to
principal and interest payments required on the term loan less any dividends
received by the ESOP on unallocated shares.

      Shares purchased with the loan proceeds were initially pledged as
collateral for the term loan and are held in a suspense account for future
allocation among the participants on the basis of compensation, as described by
the Plan, in the year of allocation.

      Accordingly, the ESOP shares pledged as collateral are reported as
unearned ESOP shares in the consolidated statements of financial condition. As
shares are committed to be released from collateral, the Bank reports
compensation expense equal to the current market price of the shares, and the
shares become outstanding for net income per common share computations. ESOP
compensation expense was $172,000, $174,000 and $298,000 for the years ended
March 31, 2003, 2002 and 2001, respectively.

      The ESOP shares at March 31 are as follows:

                                                 2003      2002
                                                 ----      ----
                                                  (In thousands)
            Allocated shares                      163       149
            Unreleased shares                      19        33
                                                 ----      ----
            Total ESOP shares                     182       182
                                                 ====      ====
            Fair value of unreleased shares      $261      $374


                                       67
<PAGE>

      Stock Option Plan. During 1995, the Holding Company adopted the 1995 Stock
Option Plan (the "Plan") to advance the interests of the Bank through providing
select key employees and directors of the Bank and its affiliates. The number of
shares reserved for issuance under the plan is 338,862. At March 31, 2003, there
were 192,176 options outstanding and 106,020 were exercisable. Options are
granted at the fair market value of Carver common stock at the time of the grant
for a period not to exceed ten years. Under the Plan, as amended, option grants
generally vest on an annual basis ratably over either three or five years,
commencing after one year of service. In some instances, portions of option
grants vest at the time of the grant. All options are exercisable immediately
upon a participant's disability, death or a change in control, as defined in the
Plan.

      Information regarding stock options as of and for the years ended March 31
follows:

<TABLE>
<CAPTION>
                                              2003                      2002                       2001
                                    ----------------------     ----------------------     ----------------------
                                                  Weighted                   Weighted                   Weighted
                                                  Average                     Average                    Average
                                                  Exercise                   Exercise                   Exercise
                                     Options       Price        Options        Price       Options        Price
                                    --------      --------     --------      --------     --------      --------
<S>                                  <C>           <C>          <C>           <C>          <C>           <C>
Outstanding, beginning of year       134,767       $ 9.10       112,963       $ 9.17        58,463       $ 9.57
Granted                               65,142        12.05        59,767         9.86        56,000         8.94
Exercised                               (333)        9.93        (2,500)        6.75            --           --
Forfeited                             (7,400)       10.14       (35,463)       10.61        (1,500)       16.13
                                    --------       ------      --------       ------      --------       ------
Outstanding, end of year             192,176       $10.07       134,767       $ 9.10       112,963       $ 9.17
                                    ========       ======      ========       ======      ========       ======
Exercisable at year end              106,020           --        65,600           --        89,663           --
                                    ========       ======      ========       ======      ========       ======
</TABLE>

      The following table summarizes information about stock options at March
31, 2003:

<TABLE>
<CAPTION>
                                                   Options Outstanding                     Options Exercisable
                                      -------------------------------------------         ----------------------
                                                       Weighted          Weighted                       Weighted
                                                        Average           Average                        Average
          Range of                                     Remaining         Exercise                       Exercise
      Exercise Prices                 Shares             Life              Price          Shares          Price
      ---------------                 ------          ----------         --------         ------        --------
<S>                                  <C>                <C>               <C>            <C>             <C>
     $ 8.00    $ 8.99                 68,000             7 years          $ 8.24          59,000         $ 8.20
       9.00      9.99                 48,767             8 years            9.83          27,020           9.85
      10.00     10.99                 10,000             8 years           10.49           4,000          10.48
      11.00     11.99                  2,500            10 years           11.28              --             --
      12.00     12.99                 61,909             9 years           12.08          15,000          12.06
      13.00     13.99                  1,000             5 years           13.81           1,000          13.81
                                     -------                                             -------
     Total                           192,176                                             106,020
                                     =======                                             =======
</TABLE>

NOTE 13. COMMITMENTS AND CONTINGENCIES

      The Bank 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.

      These financial instruments primarily include commitments to extend credit
and to sell loans. Those instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the
statements of financial condition. The contract amounts of those instruments
reflect the extent of involvement the Bank has in particular classes of
financial instruments.

      The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit is
represented by the contractual notional amount of those instruments. The Bank
uses the same credit policies making commitments as it does for on-balance-sheet
instruments.


                                       68
<PAGE>

      The Bank has outstanding various loan commitments as follows:

                                                            March 31,
                                                        2003         2002
                                                      -------      -------
                                                         (In thousands)

         Commitments to originate mortgage loans      $10,643      $14,723
         Consumer loans                                 2,464        2,877
                                                      -------      -------
             Total                                    $13,107      $17,600
                                                      =======      =======

      At March 31, 2003, of the $10.6 million in outstanding commitments to
originate mortgage loans, $2.1 million represented commitments to originate
non-residential mortgage loans at fixed rates within a range of 6.75% to 7.25%,
$1.7 million represented the balance of all other real estate loans at fixed
rates between 4.75% to 7.00% and $6.8 million represented construction loans at
an average rate of 5.96%.

      At March 31, 2003, undisbursed funds from approved consumer lines of
credit, primarily credit cards, totaled $2.5 million. Such lines consist of
unsecured and secured lines of credit of $2.2 million and $242,000 respectively.
All such lines carry adjustable rates. At March 31, 2003, undisbursed funds from
approved unsecured commercial lines of credit totaled $45,000. At March 31,
2003, the Bank maintains one letter of credit in the amount of $1.9 million.

      Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since some of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained if
deemed necessary by the Bank upon extension of credit is based on management's
credit evaluation of the counter-party.

      Collateral held consists primarily of residential real estate, but may
include income-producing commercial properties.

      Rentals, including real estate taxes, under long-term operating leases for
certain branch offices aggregated approximately $186,000, $142,000, and $191,000
for the years ended March 31, 2003, 2002 and 2001, respectively. As of March 31,
2003, minimum rental commitments under all noncancellable leases with initial or
remaining terms of more than one year and expiring through 2012 are as follows:

                             Year Ending          Minimum
                              March 31,            Rental
                              ---------            ------
                                               (In Thousands)
                                2004                 218
                                2005                 222
                                2006                 227
                                2007                 144
                                2008                 131
                             Thereafter              499
                                                   -----
                                                   1,441
                                                   =====

      The Bank also has, in the normal course of business, commitments for
services and supplies. Management does not anticipate losses on any of these
transactions.

      Legal Proceedings. From time to time, Carver Federal is a party to various
legal proceedings incident to its business. Certain claims, suits, complaints
and investigations involving Carver Federal, arising in the ordinary course of
business, have been filed or are pending. The Company is of the opinion, after
discussion with legal counsel representing the Bank in these proceedings, that
the aggregate liability or loss, if any, arising from the ultimate disposition
of these matters would not have a material adverse effect on the Company's
consolidated financial position or results of operations. At March 31, 2003,
except as set forth below, there were no material legal proceedings to which the
Company or its subsidiaries was a party or to which any of their property was
subject.


                                       69
<PAGE>
      On or about April 29, 1999, plaintiff Reginald St. Rose ("St. Rose") filed
suit against Carver Federal in the Supreme Court of the State of New York,
County of New York (the "St. Rose Action"). St. Rose is a former Carver Federal
employee. On or about January 12, 1999, Carver Federal and St. Rose entered into
an agreement (the "Agreement") providing that St. Rose would resign from Carver
Federal on the terms and conditions set forth in the Agreement. In the St. Rose
Action, St. Rose alleged the following causes of action, which relate to the
Agreement and St. Rose's separation from Carver Federal: (1) breach of contract;
(2) promissory estoppel; and (3) fraudulent misrepresentation. St. Rose seeks
damages in an amount not less than $50,000 with respect to the breach of
contract cause of action and seeks undisclosed damages with respect to the
promissory estoppel and fraudulent misrepresentation causes of action.

      On or about August 18, 1999, Carver Federal moved to dismiss St. Rose's
fraudulent misrepresentation cause of action. By decision dated November 23,
1999, the Court granted Carver Federal's motion to dismiss and entered an order
embodying that decision on January 26, 2000. Carver Federal has not filed an
answer in the St. Rose Action. By written stipulation of the parties, Carver
Federal's time to file an answer to St. Rose's complaint has been extended
without date. Carver Federal has unasserted counterclaims against St. Rose for,
among other claims, payment of certain financial obligations to Carver Federal
(including, but not limited to, automobile loans, unsecured loans, lines of
credit and credit card debts), which obligations remain outstanding as of the
date of this Form 10-K. Since January 2000, the St. Rose Action has been largely
inactive. The parties have had intermittent settlement discussions but have not
reached an agreement. If the parties do not reach a settlement, Carver Federal
intends to continue to defend this Action vigorously.

      Carver Federal is also a defendant in an action brought by Ralph Williams
(the "Williams Action") and an action brought by Janice Pressley (the "Pressley
Action" and, together with the Williams Action, the "Actions") both of which
arise out of events concerning the Northeastern Conference Federal Credit Union
("Northeastern"). Plaintiff Williams is a former member of the Board of
Directors of Northeastern and plaintiff Pressley is a former treasurer of
Northeastern.

      Northeastern was a federal credit union and it maintained accounts with
Carver Federal and with other banks in the New York metropolitan area.
Plaintiffs' complaints (which are virtually identical) allege that the National
Credit Union Administration (the "NCUA") acted improperly when it placed
Northeastern into conservatorship and subsequent liquidation. On or about
November 22, 2000, Williams filed his pro se complaint in the United States
District Court, District of Columbia against the NCUA, Carver Federal, JPMorgan
Chase (formerly Chase Manhattan Bank) ("Chase"), Astoria Federal Savings and
Loan Association and Reliance Federal Savings Bank (Carver Federal with the last
three defendants, collectively the "Bank Defendants") seeking damages in the
amount of $1 million plus certain additional unspecified amounts. On or about
November 22, 2000, plaintiff Pressley filed her pro se action in the United
States District Court, District of Columbia against the same defendants seeking
unspecified compensatory and punitive damages. Williams seeks damages for the
allegedly "unauthorized" or "invalid" actions of the NCUA Board in taking
control of Northeastern as well as damages for discrimination and civil rights
violations. Pressley seeks damages based on identical allegations except that
she also alleges certain claims of employment discrimination. While the bulk of
both complaints relate to the action of the NCUA Board of Directors, the
plaintiffs advance two allegations against the Bank Defendants, including Carver
Federal. First, plaintiffs allege that the Bank Defendants "collaborated with
the NCUA Board of Directors" in violating unspecified constitutional and privacy
rights. Second, plaintiffs allege that the Bank Defendants engaged in
discrimination.

      On or about December 15, 2000, defendant Chase moved to consolidate the
Actions. In anticipation of that consolidation, the Bank Defendants filed a
joint motion to dismiss both complaints arguing that both Actions are barred by
principles of res judicata and both complaints fail to state claims on which
relief can be granted. The Bank Defendants' motion to dismiss was denied without
prejudice insofar as it applied to the Williams Action solely for the reason
that it was a motion addressed to both Actions prior to the issuance of an order
consolidating these cases. The Bank Defendants have refiled their motion to
dismiss the Williams Action and it is sub judice. If the motion to dismiss is
not granted, Carver Federal intends to defend the Williams Action vigorously. On
September 20, 2001, the Court granted the Bank Defendants' motion to dismiss the
Pressley Action. Pressley has appealed the dismissal. Carver Federal is
vigorously opposing the appeal.

      On or about December 28, 2000, plaintiff Thomas L. Clark ("Clark") filed
suit against Carver Federal and individual defendants in the Supreme Court of
the State of New York, County of New York. Clark is the former President and
Chief Executive Officer of Carver Federal. Clark claimed that the defendants
should be forced to obtain approval from the OTS to pay severance benefits that
Clark believes Carver Federal owes him under an employment agreement. Carver
Federal sought injunctive relief and assert claims for breach of contract,
equitable estoppel and estoppel by contract. On or about March 30, 2001, Carver
Federal and the individual defendants moved to dismiss the complaint in its
entirety based on documentary evidence and for failure to state a cause of
action. By Decision and Order entered November 27, 2001, the Court granted that
motion to the extent of dismissing the first cause of action for breach of
contract against all of the individual defendant and dismissing the second cause
of action based on estoppel theories as against all the defendants. Carver
Federal appealed the Decision and Order insofar as it did not dismiss the
complaint in its entirety. On September 26, 2002, the Appellate Division of the
Supreme Court reversed the lower court and granted Carver Federals motion in its
entirety. Clark did not appeal that decision and his time to do so has expired.

      On or about November 2001, Monique Barrow filed an action against Carver
Federal in the United States District Court for the Southern District of New
York alleging that Carver Federal's termination of her employment constituted a
violation of the

                                       70
<PAGE>

federal Family and Medical Leave Act, 29 U.S.C. ss. 2601, et seq., the New York
State Human Rights Law, N.Y. Executive ss.296 et seq., and the New York City
Human Rights Law, N.Y.C. Administrative Code ss. 8-101 et seq. Ms. Barrow seeks
back pay, front pay and benefits with interest in an amount not less than $5
million, and punitive, liquidated and other compensatory damages in an amount
not less than $10 million. Carver Federal has answered the complaint denying any
liability. Carver Federal obtained an order providing for expedited discovery on
liability issues. Carver Federal has completed its discovery and has requested
permission to make a motion for summary judgment. Carver Federal intends to make
that motion as soon as permission is received.

NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS

      The fair value of a financial instrument is defined as the amount at which
the instrument could be exchanged in a current transaction between willing
parties, other than a forced or liquidation sale. Significant estimations were
used by the Bank for the purpose of this disclosure. Estimated fair values have
been determined by the Bank using the best available data and estimation
methodology suitable for each category of financial instrument. For those loans
and deposits with floating interest rates, it is presumed that estimated fair
values generally approximate their recorded book balances. The estimation
methodologies used and the estimated fair values and carrying values of the
Bank's financial instruments are set forth below:

Cash and cash equivalents and accrued interest receivable

      The carrying amounts for cash and cash equivalents and accrued interest
receivable approximate fair value because they mature in three months or less.

Securities

      The fair values for securities available-for-sale, mortgage-backed
securities held-to-maturity and investment securities held-to-maturity are based
on quoted market or dealer prices, if available. If quoted market or dealer
prices are not available, fair value is estimated using quoted market or dealer
prices for similar securities.

Loans receivable

      The fair value of loans receivable is estimated by discounting future cash
flows, using current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities of such loans.

Deposits

      The fair value of demand, savings and club accounts is equal to the amount
payable on demand at the reporting date. The fair value of certificates of
deposit is estimated using rates currently offered for deposits of similar
remaining maturities. The fair value estimates do not include the benefit that
results from the low-cost funding provided by deposit liabilities compared to
the cost of borrowing funds in the market.

Borrowings

      The fair values of advances from the Federal Home Loan Bank of New York,
securities sold under agreement to repurchase and other borrowed money are
estimated using the rates currently available to the Bank for debt with similar
terms and remaining maturities.

Commitments

      The fair market value of unearned fees associated with financial
instruments with off-balance sheet risk at March 31, 2003 approximates the fees
received. The fair value is not considered material.


                                       71
<PAGE>

      The carrying amounts and estimated fair values of the Bank's financial
instruments at March 31, 2003 and 2002 are as follows:


<TABLE>
<CAPTION>
                                                                                At March 31,
                                                          ------------------------------------------------------------
                                                                     2003                               2002
                                                          --------------------------        --------------------------
                                                          Carrying        Estimated         Carrying        Estimated
                                                           Amount         Fair Value         Amount         Fair Value
                                                          --------        ----------        --------        ----------
                                                                                (In thousands)
<S>                                                       <C>              <C>              <C>              <C>
Financial Assets:
    Cash and cash equivalents                             $ 23,160         $ 23,160         $ 34,851         $ 34,851
    Investment securities available-for-sale              $ 38,187         $ 38,772         $ 39,663         $ 39,401
    Mortgage backed securities held-to-maturity           $ 36,530         $ 37,543         $ 15,643         $ 15,716
    Mortgage backed securities available-for-sale         $ 89,966         $ 90,283         $ 49,942         $ 50,420
    Loans receivable                                      $292,738         $316,073         $289,114         $300,251
    Accrued interest receivable                           $  3,346         $  3,346         $  2,804         $  2,804
Financial Liabilities:
    Deposits                                              $347,164         $349,317         $324,954         $324,982
    Advances from FHLB of  New York                       $108,789         $112,443         $ 75,262         $ 74,375
    Other borrowed money                                  $    207         $    215         $    389         $    384
</TABLE>

Limitations

      The fair value estimates are made at a discrete point in time based on
relevant market information about the financial instruments. These estimates do
not reflect any premium or discount that could result from offering for sale at
one time the entire holdings of a particular financial instrument. Because no
quoted market value exists for a significant portion of the Bank's financial
instruments, fair value estimates are based on judgments regarding future
expected loss experience, current economic conditions, risk characteristics of
various financial instruments, and other factors. These estimates are subjective
in nature and involve uncertainties and matters of significant judgment and,
therefore, cannot be determined with precision. Changes in assumptions could
significantly affect the estimates.

      In addition, the fair value estimates are based on existing off balance
sheet financial instruments without attempting to value anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. Other significant assets and liabilities that are not
considered financial assets and liabilities include premises and equipment and
advances from borrowers for taxes and insurance. In addition, the tax
ramifications related to the realization of unrealized gains and losses can have
a significant effect on fair value estimates and have not been considered in any
of the estimates.

      Finally, reasonable comparability between financial institutions may not
be likely due to the wide range of permitted valuation techniques and numerous
estimates which must be made given the absence of active secondary markets for
many of the financial instruments. This lack of uniform valuation methodologies
introduces a greater degree of subjectivity to these estimated fair values.


                                       72
<PAGE>

NOTE 15. QUARTERLY FINANCIAL DATA (UNAUDITED)

      The following is a summary of unaudited quarterly financial data for the
fiscal years ended March 31, 2003 and 2002:

<TABLE>
<CAPTION>
                                                           Three Months Ended
                                       -----------------------------------------------------------
                                       June 30       September 30      December 31        March 31
                                       -------       ------------      -----------        --------
                                                    (In thousands, except per share data)
<S>                                    <C>              <C>              <C>              <C>
Fiscal 2003
Interest income                        $ 6,730          $ 6,746          $ 6,777          $ 7,125
Interest expense                        (2,338)          (2,210)          (2,219)          (2,216)
    Net interest income                  4,392            4,536            4,558            4,909
Provision for loan losses                   --               --               --               --
Non-interest income                        952              716              751              742
Non-interest expense                    (3,755)          (3,520)          (3,555)          (3,862)
Income tax expense                        (714)            (797)            (807)            (715)
                                       -------          -------          -------          -------
    Net income                         $   875          $   935          $   947          $ 1,074
                                       =======          =======          =======          =======
Earnings per common share
    Basic                                 0.36             0.39             0.39             0.45
    Diluted                               0.35             0.37             0.38             0.42
                                       =======          =======          =======          =======

Fiscal 2002
Interest income                        $ 7,049          $ 7,024          $ 7,162          $ 7,020
Interest expense                        (3,387)          (3,233)          (2,959)          (2,469)
    Net interest income                  3,662            3,791            4,203            4,551
Provision for loan losses                 (225)            (225)            (225)            (225)
Non-interest income                      1,420              476            1,976              613
Non-interest expense                    (3,419)          (3,438)          (3,836)          (3,505)
Income tax expense                        (273)            (115)            (402)             (91)
                                       -------          -------          -------          -------
    Net income                         $ 1,165          $   489          $ 1,716          $ 1,343
                                       =======          =======          =======          =======
Earnings per common share
    Basic                                 0.49             0.19             0.73             0.57
    Diluted                               0.47             0.19             0.69             0.53
                                       =======          =======          =======          =======
</TABLE>


                                       73
<PAGE>

NOTE 16. CARVER BANCORP, INC. (PARENT COMPANY ONLY) FINANCIAL STATEMENTS

CONDENSED STATEMENTS OF FINANCIAL CONDITION

                                                        AS OF MARCH 31,
                                                   -----------------------
                                                     2003            2002
                                                   -------         -------
                                                   (Dollars in thousands)

ASSETS
Cash on deposit with the Bank                      $    87         $   439
Investment in the Bank                              41,055          37,567
                                                   -------         -------
Total assets                                       $41,142         $38,006
                                                   =======         =======

LIABILITIES
Accounts payable to the Bank                       $     1         $    14
Other liabilities                                       68           1,250
                                                   -------         -------
Total liabilities                                       69           1,264
                                                   -------         -------

Stockholders' equity                                41,073          36,742
                                                   -------         -------
Total liabilities and stockholders' equity         $41,142         $38,006
                                                   =======         =======

CONDENSED STATEMENTS OF OPERATIONS

                                                       YEAR ENDED MARCH 31,
                                                -------------------------------
                                                 2003         2002         2001
                                                ------       ------       -----
                                                     (Dollars in thousands)
INCOME
Equity in net income from the Bank              $7,320       $6,247       $ 624
Interest income from deposit with the Bank           6           33          48
                                                ------       ------       -----
Total income                                     7,326        6,280         672

EXPENSES
Salaries and employee benefits                      52           82          64
Legal expense                                      102          236         233
Shareholder expense                                248          296         510
Other                                               60           72         156
                                                ------       ------       -----
Total expense                                      462          686         963

Income (loss) before income taxes                6,864        5,594        (291)
Income tax expense                               3,033          881          98
                                                ------       ------       -----
Net income (loss)                               $3,831       $4,713       $(389)
                                                ======       ======       =====


                                       74
<PAGE>

CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                          YEAR ENDED MARCH 31,
                                                               -----------------------------------------
                                                                 2003            2002              2001
                                                               -------          -------          -------
                                                                         (Dollars in thousands)
<S>                                                            <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)                                              $ 3,831          $ 4,713          $  (389)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Equity in net (income) of the Bank                              (7,320)          (6,247)            (624)
Income taxes from the Bank                                       3,033               --               --
Decrease in accounts receivable                                     --               --                3
Decrease in promissory note receivable                              --               --               50
(Decrease) increase in accounts payable to Bank                    (13)            (104)              45
(Decrease) increase in other liabilities                        (1,182)             976             (802)
Allocation of ESOP Stock and MRP activity                           --              206              203
Other, net                                                       1,664             (844)            (203)
                                                               -------          -------          -------
Net cash provided by (used in) operating activities                 13           (1,300)          (1,717)
                                                               -------          -------          -------

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the disposition of Alhambra Building                  --               --            2,136
                                                               -------          -------          -------

CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of treasury stock, net                                    (52)             (77)             (61)
Dividends paid                                                    (313)            (312)            (298)
                                                               -------          -------          -------
Net cash used in financing activities                             (365)            (389)            (359)
                                                               -------          -------          -------
Net (decrease) increase in cash                                   (352)          (1,689)              60

Cash and cash equivalents - beginning                              439            2,128            2,068
                                                               -------          -------          -------
Cash and cash equivalents - ending                             $    87          $   439          $ 2,128
                                                               =======          =======          =======
</TABLE>


                                       75
<PAGE>

NOTE 17. RECENT ACCOUNTING PRONOUNCEMENTS

GUARANTOR'S ACCOUNTING AND DISCLOSURE REQUIREMENTS FOR GUARANTEES, INCLUDING
INDIRECT GUARANTEES OF INDEBTNESS OF OTHERS

      In November 2002, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtness of Others" ("FIN 45"),
which addresses the disclosure to be made by a guarantor in its interim and
annual financial statements about its obligations under guarantees. FIN 45 also
requires the recognition of a liability by a guarantor at the inception of
certain guarantees.

      FIN 45 requires the guarantor to recognize a liability for the
non-contingent component of the guarantee; this is the obligation to stand ready
to perform in the event that specified triggering events or conditions occur.
The initial measurement of this liability is the fair value of the guarantee at
inception. The recognition of the liability is required even if it is not
probable that payments will be required under the guarantee or if the guarantee
was issued with a premium payment or as part of a transaction with multiple
elements.

      The Company will adopt the disclosure requirements of FIN 45 and will
apply the recognition and measurement provisions for all guarantees entered into
or modified after March 31, 2003. As of March 31, 2003 the Company maintains one
letter of credit in the amount of $1.9 million and therefore management does not
anticipate that the adoption of this interpretation will have a significant
effect on the Company's earnings or financial position.

ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS

      In October 2001, the FASB issued Statement No. 144 (SFAS No. 144),
"Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets. SFAS No. 144 supersedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
and the accounting and reporting provisions of APB Opinion No. 30, "Reporting
the Results of Operations-- Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions", for the disposal of a segment of a business (as previously
defined in that Opinion). This statement also amends Accounting Research
Bulletin No. 51, "Consolidated Financial Statements," to eliminate the exception
to consolidation for a subsidiary for which control is likely to be temporary.

      SFAS No. 144 improves financial reporting by requiring that one accounting
model be used for long-lived assets to be disposed of by sale, whether
previously held and used or newly acquired, and by broadening the presentation
of discontinued operations to include more disposal transactions. Carver Federal
adopted SFAS No. 144 on January 1, 2002. The adoption of SFAS No. 144 was not
material to Carver Federal's financial condition or results of operations.

ACCOUNTING FOR COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES

      In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." The Statement requires companies
to recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
Examples of costs covered by this standard include lease termination costs and
certain employee severance costs that are associated with a restructuring,
discontinued operation, plant closing or other exit or disposal activity.
Previous accounting guidance was provided by Emerging Issues Task Force ("EITF")
Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." SFAS No. 146 replaces EITF Issue No. 94-3. SFAS No. 146 is to
be applied prospectively to exit or disposal activities initiated after December
31, 2002.

ACCOUNTING FOR STOCK-BASED COMPENSATION - TRANSITION AND DISCLOSURE

      In December 2002, the FASB issued Statement No. 148 (SFAS No. 148),
"Accounting for Stock-Based Compensation -- Transition and Disclosure" -- an
amendment of FASB Statement No. 123 (SFAS No. 123), "Accounting for Stock-Based
Compensation". SFAS No. 148 amends SFAS No.123, to provide alternative methods
of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS No. 148
amends the disclosure requirements of SFAS No. 123 to require prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results.

      SFAS No. 148 requires disclosure of comparable information for all
companies regardless of whether, when, or how an entity adopts the fair value
based method of accounting. This statement improves the prominence and clarity
of the pro forma disclosures required by SFAS No. 123 by prescribing a specific
tabular format and by requiring disclosure in the "Summary of


                                       76
<PAGE>

Significant Accounting Policies" or its equivalent. In addition, this statement
improves the timeliness of those disclosures by requiring their inclusion in
financial reports for interim periods.

      The annual disclosure provisions of SFAS No. 148 are effective for fiscal
years ending after December 15, 2002, with earlier application permitted in
certain circumstances. The interim disclosure provisions are effective for
financial reports containing financial statements for interim periods beginning
after December 15, 2002. Carver Federal adopted the annual disclosure provisions
of SFAS No. 148 on December 31, 2002. Prior year disclosures have been amended
in the accompanying financial statement footnotes to conform with the new
disclosure requirements.

ACCOUNTING FOR CERTAIN FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF BOTH
LIABILITIES AND EQUITY

      On May 15, 2003 the FASB issued Statement No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity". The
statement requires issuers to classify as liabilities (or assets in some
circumstances) three classes of freestanding financial instruments that embody
obligations for the issuer.

      Generally, the statement is effective for financial instruments entered
into or modified after May 31, 2003 and is otherwise effective at the beginning
of the first interim period beginning after June 15, 2003. Carver Federal will
adopt the provisions of the statement on July 1, 2003.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

      None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

      Information concerning Executive Officers of the Company which responds to
this Item is incorporated by reference from Item 1 contained in Part I of this
Form 10-K. The information that responds to this Item with respect to Directors
is incorporated by reference from the section entitled "Election of Directors"
in the Holding Company's definitive Proxy Statement. Information with respect to
compliance by the Company's Directors and Executive Officers with Section 16(a)
of the Exchange Act is incorporated by reference from the subsection entitled
"SEC Beneficial Ownership Reporting Compliance" in the Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION.

      The information required in response to this Item is incorporated by
reference from the section entitled "Compensation of Executive Officers" in the
Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

      The information required in response to this Item is incorporated by
reference from the section entitled "Security Ownership of Certain Beneficial
Owners And Management" in the Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

      The information required in response to this Item is incorporated by
reference from the section entitled "Transactions With Certain Related Persons"
in the Proxy Statement.

ITEM 14. CONTROLS AND PROCEDURES.

      Evaluation of disclosure controls and procedures. The Company maintains
controls and procedures designed to ensure that information required to be
disclosed in the reports that the Company files or submits under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the SEC. Within the 90 days prior to the
date of this report, the Company carried out an evaluation, under the
supervision and with the participation of the Company's management, including
the Company's Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and


                                       77
<PAGE>

operation of the Company's disclosure controls and procedures pursuant to
Exchange Act Rule 13a-14. Based on that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective and timely in alerting them to material information
relating to the Company (including its consolidated subsidiaries) required to be
included in the Company's periodic SEC filings.

      Changes in internal controls. The Company made no significant changes in
its internal controls or in other factors that could significantly affect these
controls subsequent to the date of the evaluation of those controls by the Chief
Executive Officer and Chief Financial Officer.

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a)   List of Documents Filed as Part of this Report

            (1)   Financial Statement Schedules. All financial statement
                  schedules have been omitted, as the required information is
                  either inapplicable or included in the Financial Statements or
                  related notes.

(b)   Reports on Form 8-K Filed During the Last Quarter of the Registrant's
      Fiscal Year Ended March 31, 2003 - None.

(c)   Exhibits required by Item 601 of Regulation S-K:

                  See Index of Exhibits on page E-1.


                                       78
<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

                                          CARVER BANCORP, INC.


June 27, 2003                         By  /s/ Deborah C. Wright
                                          -------------------------------------
                                          Deborah C. Wright
                                          President and Chief Executive Officer
                                          (Duly Authorized Representative)

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below on June 27, 2003 by the following persons on
behalf of the registrant and in the capacities indicated.

/s/ Deborah C. Wright        President, Chief Executive Officer and Director
- ------------------------     (Principal Executive Officer)
Deborah C. Wright

/s/ William Gray             Senior Vice President and Chief Financial Officer
- ------------------------     (Principal Financial and Accounting Officer)
William Gray

/s/ Frederick O. Terrell     Chairman
- ------------------------
Frederick O. Terrell

/s/ Carol Baldwin Moody      Director
- ------------------------
Carol Baldwin Moody

/s/ David L. Hinds           Director
- ------------------------
David L. Hinds

/s/ Robert Holland, Jr.      Director
- ------------------------
Robert Holland, Jr.

/s/ Pazel Jackson            Director
- ------------------------
Pazel G. Jackson, Jr.

/s/  Edward E. Ruggiero      Director
- ------------------------
Edward B. Ruggiero

/s/  Strauss Zelnick         Director
- ------------------------
Strauss Zelnick


                                       79
<PAGE>

                                  CERTIFICATION

I, Deborah C. Wright, President and Chief Executive Officer of Carver Bancorp,
Inc., certify that:

1. I have reviewed this annual report on Form 10-K of Carver Bancorp, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) Presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) All significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this annual
report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.


Date : June 27, 2003                            /s/ Deborah C. Wright
                                                -----------------------
                                                Deborah C. Wright
                                                President and
                                                Chief Executive Officer


                                       80
<PAGE>

                                  CERTIFICATION

I, William C. Gray, Senior Vice President and Chief Financial Officer of Carver
Bancorp, Inc., certify that:

1. I have reviewed this annual report on Form 10-K of Carver Bancorp, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) Presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) All significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this annual
report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.


Date: June 27, 2003                                   /s/ William C. Gray
                                                      -------------------------
                                                      William C. Gray
                                                      Senior Vice President and
                                                      Chief Financial Officer


                                       81
<PAGE>

EXHIBIT INDEX

Exhibit Number      Description
- --------------      -----------

3.1                 Certificate of Incorporation of Carver Bancorp, Inc. (1)

3.2                 Amended and Restated Bylaws of Carver Bancorp, Inc.

4.1                 Stock Certificate of Carver Bancorp, Inc. (1)

4.2                 Federal Stock Charter of Carver Federal Savings Bank (1)

4.3                 Bylaws of Carver Federal Savings Bank (1)

4.4                 Amendments to Bylaws of Carver Federal Savings Bank (2)

4.5                 Certificate of Designations, Preferences and Rights of
                    Series A Convertible Preferred Stock (4)

4.6                 Certificate of Designations, Preferences and Rights of
                    Series B Convertible Preferred Stock (4)

10.1                Carver Bancorp, Inc. 1995 Stock Option Plan, effective as of
                    September 12, 1995 (1)

10.2                Carver Federal Savings Bank Retirement Income Plan, as
                    amended and restated effective as of January 1, 1997 and as
                    further amended through January 1, 2001

10.3                Carver Federal Savings Bank 401(k) Savings Plan in RSI
                    Retirement Trust, as amended and restated effective as of
                    January 1, 1997 and including provisions effective through
                    January 1, 2002

10.4                Carver Bancorp, Inc. Employee Stock Ownership Plan,
                    effective as of January 1, 1994, incorporating Amendment No.
                    1, incorporating Second Amendment, incorporating Amendment
                    No. 2, incorporating Amendment No. 2A, incorporating
                    Amendment No. 3 and incorporating Amendment No. 4

10.5                Carver Federal Savings Bank Deferred Compensation Plan,
                    effective as of August 10, 1993 (1)

10.6                Carver Federal Savings Bank Retirement Plan for Nonemployee
                    Directors, effective as of October 24, 1994 (1)

10.7                Carver Bancorp, Inc. Management Recognition Plan, effective
                    as of September 12, 1995 (1)

10.8                Carver Bancorp, Inc. Incentive Compensative Plan, effective
                    as of September 12, 1995 (1)


                                      E-1
<PAGE>

Exhibit Number      Description
- --------------      -----------

10.9                Employment Agreement by and between Carver Federal Savings
                    Bank and Deborah C. Wright, entered into as of June 1, 1999
                    (3)

10.10               Employment Agreement by and between Carver Bancorp, Inc. and
                    Deborah C. Wright, entered into as of June 1, 1999 (3)

10.11               Securities Purchase Agreement by and among Carver Bancorp,
                    Inc., Morgan Stanley & Co. Incorporated and Provender
                    Opportunities Fund L.P. (5)

10.12               Registration Rights Agreement by and among Carver Bancorp,
                    Inc., Morgan Stanley & Co. Incorporated and Provender
                    Opportunities Fund L.P. (5)

10.13               Settlement Agreement and Mutual Release by and among BBC
                    Capital Market, Inc., The Boston Bank of Commerce, Kevin
                    Cohee and Teri Williams; Carver Bancorp, Inc., Deborah C.
                    Wright, David N. Dinkins, Linda H. Dunham, Robert J. Franz,
                    Pazel G. Jackson, Jr., Herman Johnson and David R. Jones;
                    Morgan Stanley & Co., Incorporated; and Provender
                    Opportunities Fund, L.P. and Frederick O. Terrell (5)

10.14               Amendment to the Carver Bancorp, Inc. 1995 Stock Option Plan
                    (6)

10.15               Amended and Restated Employment Agreement by and between
                    Carver Federal Savings Bank and Deborah C. Wright, entered
                    into as of June 1, 1999 (7)

10.16               Amended and Restated Employment Agreement by and between
                    Carver Bancorp, Inc. and Deborah C. Wright, entered into as
                    of June 1, 1999 (7)

10.17               Form of Letter Employment Agreement between Executive
                    Officers and Carver Bancorp, Inc. (7)

10.18               Employment Agreement by and between Carver Federal Savings
                    Bank and Catherine A. Papayiannis, entered into as of April
                    22, 2002 (7)

10.19               Carver Bancorp Compensation Plan for Non Employee Directors

10.20               Amendment Number One to Carver Federal Savings Bank
                    Retirement Income Plan, as amended and restated effective as
                    of January 1, 1997 and as further amended through January 1,
                    2001

10.21               First Amendment to the Restatement of the Carver Federal
                    Savings Bank 401(k) Savings Plan

10.22               Second Amendment to the Restatement of the Carver Federal
                    Savings Bank 401(k) Savings Plan for EGTRRA

21.1                Subsidiaries of the Registrant

23.2                Consent of KPMG LLP

99.1                Certification of Deborah C. Wright, President and Chief
                    Executive Officer, pursuant to 18 U.S.C. Section 1350, as
                    adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                    2002

99.2                Certification of William C. Gray, Senior Vice President and
                    Chief Financial Officer, pursuant to 18 U.S.C Section 1350,
                    as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
                    of 2002


                                      E-2
<PAGE>

- ----------
(1)   Incorporated herein by reference to Registration Statement No. 333-5559 on
      Form S-4 of Carver Bancorp, Inc., filed with the Securities and Exchange
      Commission on June 7, 1996.

(2)   Incorporated herein by reference to the Exhibits to the Registrant's
      Annual Report on Form 10-K for the fiscal year ended March 31, 1998.

(3)   Incorporated herein by reference to the Exhibits to the Registrant's
      Annual Report on Form 10-K for the fiscal year ended March 31, 1999.

(4)   Incorporated herein by reference to the Exhibits to the Registrant's
      Current Report on Form 8-K, dated January 14, 2000.

(5)   Incorporated herein by reference to the Exhibits to the Registrant's
      Annual Report on Form 10-K for the fiscal year ended March 31, 2000.

(6)   Incorporated herein by reference to the Registrant's Proxy Statement dated
      January 25, 2002.

(7)   Incorporated herein by reference to the Exhibits to the Registrant's
      Annual Report on Form 10-K for the fiscal year ended March 31, 2002.


                                      E-3

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.2
<SEQUENCE>3
<FILENAME>d155771.txt
<DESCRIPTION>BY-LAWS, ARTICLES OF INCORPORATION
<TEXT>
                                                                     EXHIBIT 3.2

                           AMENDED AND RESTATED BYLAWS

                                       OF

                              CARVER BANCORP, INC.

                                    ARTICLE I

                                     OFFICES

      Section 1. Registered Office. The registered office of Carver Bancorp,
Inc. (the "Corporation") in the State of Delaware shall be in the City of
Wilmington, County of New Castle.

      Section 2. Additional Offices. The Corporation may also have offices and
places of business at such other places, within or without the State of
Delaware, as the Board of Directors (the "Board") may from time to time
designate or the business of the Corporation may require.

                                   ARTICLE II

                                  STOCKHOLDERS

      Section 1. Place of Meetings. Meetings of stockholders of the Corporation
shall be held at such place, within or without the State of Delaware, as may be
fixed by the Board and designated in the notice of meeting. If no place is so
fixed, they shall be held at the principal administrative office of the
Corporation.

      Section 2. Annual Meetings. The annual meeting of stockholders of the
Corporation for the election of directors and the transaction of any other
business which may properly come before such meeting shall be held each year on
a date and at a time to be designated by the Board.

      Section 3. Special Meetings. Special meetings of stockholders, for any
purpose, may be called at any time only by the Chairman of the Board, the
President and Chief Executive Officer or by resolution of at least three-fourths
of the directors then in office. Special meetings shall be held on the date and
at the time and place as may be designated by the Board. At a special meeting,
no business shall be transacted and no corporate action shall be taken other
than that stated in the notice of meeting.

      Section 4. Notice of Meetings. Except as otherwise required by law,
written notice stating the place, date and hour of any meeting of stockholders
and, in the case of a

<PAGE>
                                     - 2 -


special meeting, the purpose or purposes for which the meeting is called, shall
be delivered to each stockholder of record entitled to vote at such meeting,
either personally or by mail not less than ten (10) nor more than sixty (60)
days before the date of such meeting. If mailed, such notice shall be deemed to
be delivered when deposited in the U.S. mail, with postage thereon prepaid,
addressed to the stockholder at his or her address as it appears on the stock
transfer books or records of the Corporation as of the record date prescribed in
Section 6 of this Article II, or at such other address as the stockholder shall
have furnished in writing to the Secretary. Notice of any special meeting shall
indicate that the notice is being issued by or at the direction of the person or
persons calling such meeting. When any meeting of stockholders, either annual or
special, is adjourned to another time or place, no notice of the adjourned
meeting need be given, other than an announcement at the meeting at which such
adjournment is taken giving the time and place to which the meeting is
adjourned; provided, however, that if the adjournment is for more than thirty
(30) days, or if after adjournment, the Board fixes a new record dated for the
adjourned meeting, notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.

      Section 5. Waiver of Notice. Notice of any annual or special meeting need
not be given to any stockholder who submits a signed waiver of notice of any
meeting, in person or by proxy or by his or her duly authorized
attorney-in-fact, whether before or after the meeting. The attendance of any
stockholder at a meeting, in person or by proxy, shall constitute a waiver of
notice by such stockholder, except where a stockholder attends a meeting for the
express purpose of objecting at the beginning of the meeting to the transaction
of any business because the meeting is not lawfully called or convened.

      Section 6. Fixing of Record Date. For the purpose of determining
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or stockholders entitled to receive payment of any
dividend or other distribution or the allotment of any rights, or in order to
make a determination of stockholders for any other proper purpose, the Board
shall fix a date as the record date for any such determination of stockholders,
which date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board. Such date in any case shall be not more
than sixty (60) days and, in the case of a meeting of stockholders, not less
than ten (10) days prior to the date on which the particular action requiring
such determination of stockholders is to be taken. When a determination of
stockholders entitled to vote at any meeting of stockholders has been made as
provided in this Section 6, such determination shall, unless otherwise provided
by the Board, also apply to any adjournment thereof. If no record date is fixed,
(a) the record date for determining stockholders entitled to notice of or vote
at a meeting of stockholders shall be at the close of business on the day next
preceding the day on which the notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held, and (b) the record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto.

<PAGE>
                                     - 3 -


      Section 7. Quorum. The holders of record of a majority of the total number
of votes eligible to be cast in the election of directors generally by the
holders of the outstanding shares of the capital stock of the Corporation
entitled to vote thereat, represented in person or by proxy, shall constitute a
quorum for the transaction of business at a meeting of stockholders, except as
otherwise provided by law, these Bylaws or the Certificate of Incorporation. If
less than a majority of such total number of votes are represented at a meeting,
a majority of the number of votes so represented may adjourn the meeting from
time to time without further notice, provided, that if such adjournment is for
more than thirty days, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting. At such adjourned meeting
at which a quorum is present, any business may be transacted that might have
been transacted at the meeting as originally called. When a quorum is once
present to organize a meeting of stockholders, such quorum is not broken by the
subsequent withdrawal of any stockholders.

      Section 8. Conduct of Meetings. The Chairman of the Board shall serve as
chairman at all meetings of the stockholders. If the Chairman of the Board is
absent or otherwise unable to so serve, the President and Chief Executive
Officer shall serve as chairman at any meeting of stockholders held in such
absence. If both the Chairman of the Board and the President and Chief Executive
Officer are absent or otherwise unable to serve, such other person as shall be
appointed by the Board of Directors shall serve as chairman at any meeting of
stockholders held in such absence. The Secretary or, in his or her absence, such
other person as the chairman of the meeting shall appoint, shall serve as
secretary of the meeting. The chairman of the meeting shall conduct all meetings
of the stockholders in accordance with the best interests of the Corporation and
shall have the authority and discretion to establish reasonable procedural rules
for the conduct of such meetings, including such regulation of the manner of
voting and the conduct of discussion as he or she shall deem appropriate.

      Section 9. Voting; Proxies. Each stockholder entitled to vote at any
meeting may vote either in person or by proxy. Unless otherwise specified in the
Certificate of Incorporation or in a resolution, or resolutions, of the Board
providing for the issuance of preferred stock, each stockholder entitled to vote
shall be entitled to one vote for each share of capital stock registered in his
or her name on the transfer books or records of the Corporation. Each
stockholder entitled to vote may authorize another person or persons to act for
him or her by proxy. All proxies shall be in writing, signed by the stockholder
or by his or her duly authorized attorney-in-fact, and shall be filed with the
Secretary before being voted. No proxy shall be valid after three (3) years from
the date of its execution unless otherwise provided in the proxy. The attendance
at any meeting by a stockholder who shall have previously given a proxy
applicable thereto shall not, as such, have the effect of revoking the proxy.
The Corporation may treat any duly executed proxy as not revoked and in full
force and effect until it receives a duly executed instrument revoking it, or a
duly executed proxy bearing a later date. If ownership of a share of voting
stock of the Corporation stands in the name of two or more persons, in the
absence of written directions to the Corporation to the contrary, any one or
more of such stockholders may cast all votes to which such ownership is
entitled. If an attempt is

<PAGE>
                                     - 4 -


made to cast conflicting votes by the several persons in whose names shares of
stock stand, the vote or votes to which those persons are entitled shall be cast
as directed by a majority of those holding such stock and present at such
meeting. If such conflicting votes are evenly split on any particular matter,
each faction may vote the securities in question proportionally, or any person
voting the shares, or a beneficiary, if any, may apply to the Court of Chancery
or such other court as may have jurisdiction to appoint an additional person to
act with the persons so voting the shares, which shall then be voted as
determined by a majority of such persons and the person appointed by the Court.
Except for the election of directors or as otherwise provided by law, the
Certificate of Incorporation or these Bylaws, at all meetings of stockholders,
all matters shall be determined by a vote of the holders of a majority of the
number of votes eligible to be cast by the holders of the outstanding shares of
capital stock of the Corporation present and entitled to vote thereat. Directors
shall, except as otherwise required by law, these Bylaws or the Certificate of
Incorporation, be elected by a plurality of the votes cast by each class of
shares entitled to vote at a meeting of stockholders, present and entitled to
vote in the election.

      Section 10. Inspectors of Election. In advance of any meeting of
stockholders, the Board shall appoint one or more persons, other than officers,
directors or nominees for office, as inspectors of election to act at such
meeting or any adjournment thereof. Such appointment shall not be altered at the
meeting. If inspectors of election are not so appointed, the chairman of the
meeting shall make such appointment at the meeting. If any person appointed as
inspector fails to appear or fails or refuses to act at the meeting, the vacancy
so created may be filled by the appointment by the Board in advance of the
meeting or at the meeting by the chairman of the meeting. The duties of the
inspectors of the elections shall include determining the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, the validity and effect of proxies, receiving votes,
ballots or consents, hearing and deciding all challenges and questions arising
in connection with the right to vote, counting and tabulating all votes, ballots
or consents, determining the results, and doing such acts as are proper to the
conduct of the election or the vote with fairness to all stockholders. Any
report or certificate made by them shall be prima facie evidence of the facts
stated and of the vote as certified by them. Each inspector shall be entitled to
a reasonable compensation for his or her services, to be paid by the
Corporation.

      Section 11. Procedure for Nominations. Subject to the provisions hereof,
the Nominating/Corporate Governance Committee of the Board shall select nominees
for election as directors. Except in the case of a nominee substituted as a
result of the death, incapacity, withdrawal or other inability to serve of a
nominee, the Nominating/Corporate Governance Committee shall deliver written
nominations to the Secretary at least sixty (60) days prior to the date of the
annual meeting. Provided the Nominating/Corporate Governance Committee makes
such nominations, no nominations for directors except those made by the
Nominating/Corporate Governance Committee shall be voted upon at the annual
meeting of stockholders unless other nominations by stockholders are made in
accordance with the provisions of this Section 11. Nominations of individuals
for

<PAGE>
                                     - 5 -


election to the Board at a meeting of stockholders may be made by any
stockholder of record of the Corporation entitled to vote for the election of
directors at such meeting who provides timely notice in writing to the Secretary
as set forth in this Section 11. To be timely, a stockholder's notice must be
delivered to or received by the Secretary not later than the following dates:
(i) with respect to an election of directors to be held at an annual meeting of
stockholders, sixty (60) days in advance of such meeting if such meeting is to
be held on a day which is within thirty (30) days preceding the anniversary of
the previous year's annual meeting, or ninety (90) days in advance of such
meeting if such meeting is to held on or after the anniversary of the previous
year's annual meeting; and (ii) with respect to an election to be held at an
annual meeting of stockholders held at a time other than within the time periods
set forth in the immediately held clause (i), or at a special meeting of
stockholders for the election of directors, the close of business on the tenth
(10th) day following the date on which notice of such meeting is first given to
stockholders. For purposes of this Section 11, notice shall be deemed to first
be given to stockholders when disclosure of such date of the meeting of
stockholders is first made in a press release reported to Dow Jones News
Services, Associated Press or comparable national news service, or in a document
publicly filed by the Corporation with the Securities and Exchange Commission
pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as
amended. Such stockholder's notice shall set forth (a) as to each person whom
the stockholder proposes to nominate for election or re-election as a director,
(i) the name, age, business address and residence address of such person, (ii)
the principal occupation or employment of such person, (iii) such person's
written consent to serve as a director, if elected, and (iv) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission (whether or not the Corporation is
then subject to such rules); and (b) as to the stockholder giving the notice (i)
the name and address of such stockholder, (ii) the class and number of shares of
the Corporation which are owned of record by such stockholder and the dates upon
which he or she acquired such shares, (iii) a description of all arrangement or
understandings between the stockholder and nominee and any other person or
persons (naming such person or person) pursuant to which the nominations are to
be made by the stockholder, and (iv) the identification of any person employed,
retained, or to be compensated by the stockholder submitting the nomination or
by the person nominated, or any person acting on his or her behalf to make
solicitations or recommendations to stockholders for the purpose of assisting in
the election of such director, and a brief description of the terms of such
employment, retainer or arrangement for compensation. At the request of the
Board, any person nominated by the Board for election as a director shall
furnish to the Secretary that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee together with
the required written consent. No person shall be elected as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 11.

      The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not properly brought before the
meeting in accordance with the provisions hereof and, if he should so determine,
he shall declare to the meeting

<PAGE>
                                     - 6 -


that such nomination was not properly brought before the meeting and shall not
be considered.

      Section 12. Substitution of Nominees. In the event that a person is
validly designated as a nominee in accordance with Section 11 of this Article II
and shall thereafter becoming unwilling or unable to stand for election to the
Board, the Nominating/Corporate Governance Committee may designate a substitute
nominee upon delivery, not fewer than five (5) days prior to the date of the
meeting for the election of such nominee, of a written notice to the Secretary
setting forth such information regarding such substitute nominee as would have
been required to be delivered to the Secretary pursuant to Section 11 of this
Article II had such substitute nominee been initially proposed as a nominee.
Such notice shall include a signed consent to serve as a director of the
Corporation, if elected, of each substituted nominee.

      Section 13. New Business. Any new business to be taken up at the annual
meeting at the request of the Chairman of the Board, the President and Chief
Executive Officer or by resolution of at least three-fourths of the directors
then in office shall be stated in writing and filed with the Secretary at least
fifteen (15) days before the date of the annual meeting, and all business so
stated, proposed and filed shall be considered at the annual meeting, but,
except as provided in this Section 13, no other proposal shall be acted upon at
the annual meeting. Any proposal offered by any stockholder may be made at the
annual meeting and the same may be discussed and considered, but unless properly
brought before the meeting such proposal shall not be acted upon at the meeting.
For a proposal to be properly brought before an annual meeting by a stockholder,
the stockholder must be a stockholder of record and have given timely notice
thereof in writing to the Secretary. To be timely, a stockholder's notice must
be delivered to or received by the Secretary not later than the following dates:
(i) with respect to an annual meeting of stockholders, sixty (60) days in
advance of such meeting if such meeting is to be held on a day which is within
thirty (30) days preceding the anniversary of the previous year's annual
meeting, or ninety (90) days in advance of such meeting if such meeting is to be
held on or after the anniversary of the previous year's annual meeting; and (ii)
with respect to an annual meeting of stockholders held at a time other than
within the time periods set forth in the immediately preceding clause (i), the
close of business on the tenth (10th) day following the date on which notice of
such meeting is first given to stockholders. For purposes of this Section 13,
notice shall be deemed to first be given to stockholders when disclosure of such
date of the meeting of stockholders is first made in a press release reported to
Dow Jones News Services, Associated Press or comparable national news service,
or in a document publicly filed by the Corporation with the Securities and
Exchange Commission pursuant to Section 13, 14, or 15(d) of the Securities
Exchange Act of 1934, as amended. A stockholder's notice to the Secretary shall
set forth as to the matter the stockholder proposes to bring before the annual
meeting (a) a brief description of the proposal desired to be brought before the
annual meeting; (b) the name and address of the stockholder proposing such
business; (c) the class and number of shares of the Corporation which are owned
of record by the stockholder and the dates upon which he or she acquired such
shares; (d) the identification of any person employed, retained, or to be
compensated by the stockholder

<PAGE>
                                     - 7 -


submitting the proposal, or any person acting on his or her behalf, to make
solicitations or recommendations to stockholders for the purpose of assisting in
the passage of such proposal, and a brief description of the terms of such
employment, retainer or arrangement for compensation; and (e) such other
information regarding such proposal as would be required to be included in a
proxy statement filed pursuant to the proxy rules of the Securities and Exchange
Commission or required to be delivered to the Corporation pursuant to the proxy
rules of the Securities and Exchange Commission (whether or not the Corporation
is then subject to such rules). This provision shall not prevent the
consideration and approval or disapproval at an annual meeting of reports of
officers, directors and committees of the Board or the management of the
Corporation, but in connection with such reports, no new business shall be acted
upon at such annual meeting unless stated and filed as herein provided. This
provision shall not constitute a waiver of any right of the Corporation under
the proxy rules of the Securities and Exchange Commission or any other rule or
regulation to omit a stockholder's proposal from the Corporation's proxy
materials.

      The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that any new business was not properly brought before the
meeting in accordance with the provisions hereof and, if he should so determine,
he shall declare to the meeting that such new business was not properly brought
before the meeting and shall not be considered.

                                   ARTICLE III

                                  CAPITAL STOCK

      Section 1. Certificates of Stock. Certificates representing shares of
stock shall be in such form as shall be determined by the Board. Each
certificate shall state that the Corporation will furnish to any stockholder
upon request and without charge a statement of the powers, designations,
preferences and relative, participating, optional or other special rights of the
shares of each class or series of stock and the qualifications or restrictions
of such preferences and/or rights, or shall set forth such statement on the
certificate itself. The certificates shall be numbered in the order of their
issue and entered in the books of the Corporation or its transfer agent or
agents as they are issued. Each certificate shall state the registered holder's
name and the number and class of shares, and shall be signed by the Chairman of
the Board or the President and Chief Executive Officer, and the Secretary or any
Assistant Secretary, and may, but need not, bear the seal of the Corporation or
a facsimile thereof. Any or all of the signatures on the certificates may be
facsimiles. In case any officer who shall have signed any such certificate shall
cease to be such officer of the Corporation, whether because of death,
resignation or otherwise, before such certificate shall have been delivered by
the Corporation, such certificate may nevertheless be adopted by the Corporation
and be issued and delivered as

<PAGE>
                                     - 8 -


though the person or persons who signed such certificate or certificates had not
ceased to be such officer or officers of the Corporation.

      Section 2. Transfer Agent and Registrar. The Board shall have the power to
appoint one or more Transfer Agents and Registrars for the transfer and
registration of certificates of stock of any class, and may require that stock
certificates be countersigned and registered by one or more of such Transfer
Agents and Registrars.

      Section 3. Registrations and Transfer of Shares. Subject to the provisions
of the Certificate of Incorporation of the Corporation, the name of each person
owning a share of the capital stock of the Corporation shall be entered on the
books of the Corporation together with the number of shares held by him or her,
the numbers of the certificates covering such shares and the dates of issue of
such certificates. Subject to the provisions of the Certificate of Incorporation
of the Corporation, the shares of stock of the Corporation shall be transferable
on the books of the Corporation by the holders thereof in person, or by their
duly authorized attorney or legal representatives, on surrender and cancellation
of certificates for a like number of shares, accompanied by an assignment or
power of transfer endorsed thereon or attached thereto, duly executed, with such
guarantee or proof of the authenticity of the signature as the Corporation or
its agents may reasonably required and with proper evidence of payment of any
applicable transfer taxes. Subject to the provisions of the Certificate of
Incorporation of the Corporation, a record shall be made of each transfer.

      Section 4. Lost, Destroyed and Mutilated Certificates. The holder of any
shares of stock of the Corporation shall immediately notify the Corporation of
any loss, theft, destruction or mutilation of the certificates therefor. The
Corporation may issue, or cause to be issued, a new certificate of stock in the
place of any certificate theretofore issued by it alleged to have been lost,
stolen or destroyed upon evidence satisfactory to the Corporation of the loss,
theft or destruction of the certificate, and in the case of mutilation, the
surrender of the mutilated certificate. The Corporation may, in its discretion,
require the owner of the lost, stolen or destroyed certificate, or his or her
legal representatives, to give the Corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft, destruction or mutilation of any such certificate and the issuance of
such new certificate, or may refer such owner to such remedy or remedies as he
or she may have under the laws of the State of Delaware.

      Section 5. Holder of Record. Subject to the provisions of the Certificate
of Incorporation of the Corporation, the Corporation shall be entitled to treat
the holder of record of any share or shares of stock as the holder thereof in
fact and shall not be bound to recognize any equitable or other claim to or
interest in such shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise expressly provided by
law.

<PAGE>
                                     - 9 -


                                   ARTICLE IV

                               BOARD OF DIRECTORS

      Section 1. Responsibilities; Number of Directors. The business and affairs
of the Corporation shall be under the direction of the Board. The Board shall
consist of not less than five (5) nor more than fifteen (15) directors. Within
the foregoing limits, the number of directors shall be determined only by
resolution of the Board. A minimum of three (3) directors shall be persons other
than officers or employees of the Corporation or its subsidiaries and shall not
have a relationship which, in the opinion of the Board (exclusive of such
persons), could interfere with the exercise of independent judgment in carrying
out the responsibilities of a director. No more than two directors shall be
officers or employees of the Corporation or its subsidiaries.

      Section 2. Qualifications. Each director shall be at least eighteen (18)
years of age.

      Section 3. Regular and Annual Meetings. An annual meeting of the Board for
the election of officers shall be held, without notice other than these Bylaws,
immediately after, and at the same place as, the annual meeting of the
stockholders, or, with notice, at such other time or place as the Board may fix
by resolution. The Board may provide, by resolution, the time and place, within
or without the State of Delaware, for the holding of regular meetings of the
Board without notice other than such resolution.

      Section 4. Special Meetings. Special meetings of the Board may be called
for any purpose at any time by or at the request of the Chairman of the Board or
the President and Chief Executive Officer. Special meetings of the Board shall
also be called by the Secretary upon the written request, stating the purpose or
the purposes of the meeting, of at least sixty percent (60%) of the directors
then in office, but in any event not less than (5) directors. The persons
authorized to call special meetings of the Board shall give notice of such
meetings in the manner prescribed by these Bylaws and may fix any place, within
or without the Corporation's regular business area, as the place for holding any
special meeting of the Board called by such persons. No business shall be
conducted at a special meeting other than that specified in the notice of
meeting.

      Section 5. Notice of Meetings; Waiver of Notice. Except as otherwise
provide in Section 4 of this Article IV, at least twenty-four (24) hours notice
of meetings shall be given to each director if given in person, by same-day
courier or by telephone, telegraph, telex, facsimile or other electronic
transmission and at least five (5) days notice of meetings shall be given if
given in writing and delivered by courier (other than same-day) or by postage
prepaid mail. The purpose of any special meeting shall be stated in

<PAGE>
                                     - 10 -


the notice. Such notice shall be deemed given when sent or given to any mail or
courier service (other than same-day) or company providing electronic
transmission service. Any director may waive notice of any meeting by submitting
a signed waiver of notice with the Secretary, whether before or after the
meeting. The attendance of a director at a meeting shall constitute a waiver of
notice of such meeting, except where a director attends a meeting for the
express purpose of objecting at the beginning of the meeting to the transaction
of any business because the meeting is not lawfully called or convened.

      Section 6. Conduct of Meetings. Meetings of the Board shall be presided
over by the Chairman of the Board or such other director or officer as the
Chairman of the Board shall designate, and in the absence or incapacity of the
Chairman of the Board, the presiding officer shall be the President and Chief
Executive Officer. In the absence or disability of both the Chairman of the
Board and the President and Chief Executive Officer, a majority of the entire
Board shall designate a director or officer who shall preside over meetings of
the Board. The Secretary or, in his or her absence, a person appointed by the
Chairman of the Board (or other presiding person), shall act as secretary of the
meeting. The Chairman of the Board (or other person presiding) shall conduct all
meetings of the Board in accordance with the best interests of the Corporation
and shall have the authority and discretion to establish reasonable procedural
rules for the conduct of Board meetings. At the discretion of the Chairman of
the Board, any one or more directors may participate in a meeting of the Board
or a committee of the Board by means of a conference telephone or similar
communications equipment allowing all person participating in the meeting to
hear each other at the same time. Participation by such means shall constitute
presence in person at any such meeting.

      Section 7. Quorum and Voting Requirements. A quorum at any meeting of the
Board shall consist of not less than a majority of the directors then in office
or such greater number as shall be required by law, these Bylaws or Certificate
of Incorporation, but not less than one-third (1/3) of the total number. If less
than a required quorum is present, the majority of those directors present shall
adjourn the meeting to another time and place without further notice. At such
adjourned meeting at which a quorum shall be represented, any business may be
transacted that might have been transacted at the meeting as originally noticed.
Except as otherwise provided by law, the Certificate of Incorporation or these
Bylaws, a majority vote of the directors present at a meeting, if a quorum is
present, shall constitute an act of the Board.

      Section 8. Informal Action by Directors. Unless otherwise restricted by
the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all member of the Board of
Directors or such committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
of Directors or such committee.

      Section 9. Resignation. Any director may resign at any time by sending a
written notice of such resignation to the principal office of the Corporation
addressed to

<PAGE>
                                     - 11 -


the Chairman of the Board or the President and Chief Executive Officer. Unless
otherwise specified therein, such resignation shall take effect upon receipt
thereof.

      Section 10. Vacancies. To the extent not inconsistent with the Certificate
of Incorporation and subject to the limitations prescribed by law and the rights
of holders of Preferred Stock, vacancies in the office of director, including
vacancies created by newly created directorships resulting from an increase in
the number of directors, shall be filled only by a vote of a majority of the
directors then holding office, whether or not a quorum, at any regular or
special meeting of the Board called for that purpose. Subject to the rights of
holders of Preferred Stock, no person shall be so elected a director unless
nominated by the Nominating/Corporate Governance Committee. Subject to the
rights of holders of Preferred Stock, any director so elected shall serve for
the remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until his or her successor
shall be elected and qualified.

      Section 11. Compensation. From time to time, as the Board deems necessary,
the Board shall fix the compensation of directors, and officers of the
Corporation in such one or more forms as the Board may determine.

      Section 12. Amendments Concerning the Board. The number of directors and
other restrictions and qualifications for directors of the Corporation as set
forth in these Bylaws may be altered only by a vote, in addition to any vote
required by law, of two-thirds of the entire Board or by the affirmative vote of
the holders of record of not less than eighty percent (80%) of the total votes
eligible to be cast by holders of all outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors at a meeting
of the stockholders for that purpose.

                                    ARTICLE V

                                   COMMITTEES

      Section 1. Standing Committees. At each annual meting of the Board, upon
recommendation by the Chairman of the Board, the directors shall designate from
their own number, by resolution, the following committees:

      (a)   Executive Committee

      (b)   Finance and Audit Committee

      (c)   Compensation Committee

      (d)   Nominating/Corporate Governance Committee

      (e)   Asset Liability and Interest Rate Risk Committee

<PAGE>
                                     - 12 -


which shall be standing committees of the Board. The Chairman of the Board shall
appoint a director to fill any vacancy on any committee of the Board. The
members of the committees shall serve at the pleasure of the Board.

      Section 2. Executive Committee. There shall be an Executive Committee of
the Board, consisting of at least four (4) members, as shall be appointed by
Board resolution or these Bylaws. The President and Chief Executive Officer and
the Secretary shall be ex-officio members of the Executive Committee, with power
to vote on all matters so long as they are also directors of the Corporation.
Three (3) members of the Executive Committee, at least two (2) of whom must be
non-officer directors, or such other number of members as the Board of Directors
may establish by resolution, shall constitute a quorum for the transaction of
business. The vote of a majority of members present at any meeting including the
presiding member, who shall be eligible to vote, shall constitute the action of
the Executive Committee.

      The President and Chief Executive Officer shall serve as chairman of the
Executive Committee, so long as he or she is a director. In the absence of the
chairman of the Executive Committee, the committee shall designate, from among
its membership present, a person to preside at any meeting held in such absence.
The Executive Committee shall designate, from its membership or otherwise, a
secretary who shall report to the Board at its next regular meeting all
proceedings and actions taken by the Executive Committee. The Executive
Committee shall meet as necessary at the call of the Chairman of the Board, the
President and Chief Executive Officer or at the call of a majority of the
members of the Executive Committee.

      The Executive Committee shall, to the extent not inconsistent with law,
these Bylaws, the Certificate of Incorporation, and resolutions adopted by the
Board, exercise all the powers and authority of the Board in the management of
the business and affairs of the Corporation in the intervals between the
meetings of the Board.

      Section 3. Finance and Audit Committee. The Finance and Audit Committee
shall consist of at least three (3) members whose background and experience are
financial and/or business management related, none of whom shall be an officer
or salaried employee of the Corporation or its subsidiaries, an attorney who
receives a fee or other compensation for legal services rendered to the
Corporation or any other individual having a relationship which, in the opinion
of the Board, would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director. At any regular meeting of the
Board, any director who is otherwise eligible to serve on the Finance and Audit
Committee may be elected to fill a vacancy that has occurred on the Finance and
Audit Committee. The Chairman of the Board shall designate one member of the
committee to serve as chairman of the committee.

      The Finance and Audit Committee shall meet annually, at the call of the
chairman of the committee and may hold such additional meetings as the chairman
of the committee may deem necessary, to examine, or cause to be examined, the
records and

<PAGE>
                                     - 13 -


affairs of the Corporation to determine its true financial condition, and shall
present a report of examination to the Board at the Board's next regular meeting
following the meeting of the Finance and Audit Committee. The committee shall
have such other duties and responsibilities as are set forth in a written
charter adopted by the Board. The committee shall appoint, from its membership
or otherwise, a secretary who shall cause to be kept written minutes of all
meetings of the committee. A quorum shall consist of at least one-third of the
members of the committee, and in no event less than three (3) members of the
committee. The vote of a majority of members present at any meeting including
the presiding member, who shall be eligible to vote, shall constitute the action
of the Finance and Audit Committee.

      The Finance and Audit Committee shall make, or cause to be made, such
other examinations as it may deem advisable or whenever so directed by the Board
and shall report thereon in writing at a regular meeting of the Board. The
Finance and Audit Committee shall employ accountants and independent auditors
and arrange for such other assistance as it may deem necessary or desirable. The
Finance and Audit committee shall review and evaluate the procedures and
performance of the Corporation's internal auditing staff.

      Section 4. Compensation Committee. The Compensation Committee shall
consist of at least two (2) members, none of whom shall be an officer or
salaried employee of the Corporation or its subsidiaries as shall be appointed
by Board resolution or these Bylaws. The Chairman of the Board shall designate
one member of the committee to serve as chairman of the Compensation Committee,
who shall have the authority to adopt and establish procedural rules for the
conduct of all meetings of the committee.

      The committee shall meet annually at the call of the chairman of the
committee, and may hold such additional meetings as the Chairman of the Board
may deem necessary. A quorum shall consist of at least one-third of the voting
members of the Committee, and in no event less than two (2) voting members of
the committee. The vote of a majority of the voting members present at any
meeting, including the chairman of the committee who shall be eligible to vote,
shall constitute the action of the Compensation Committee. The committee shall
appoint, from its membership or otherwise, a secretary who shall cause to be
kept written minutes of the committee.

      The Compensation Committee shall be responsible for overseeing the
development, implementation and conduct of the Corporation's employment and
personnel policies, notices and procedures, including the administration of the
Corporation's compensation and benefit programs, and shall have such other
duties and responsibilities as are set forth in a written charter adopted by the
Board.

      Section 5. Nominating/Corporate Governance Committee. The
Nominating/Corporate Governance Committee shall consist of at least two (2)
members, as shall be appointed by Board resolutions or these Bylaws.
Notwithstanding the

<PAGE>
                                     - 14 -


foregoing, no director shall serve on the Nominating/Corporate Governance
Committee in any capacity in any year during which such director's term as a
director is scheduled to expire. A quorum shall consist of at least one-third of
the members of the Committee, and in no event less than two (2) members of the
committee. The vote of a majority of members present at any meeting including
the presiding member, who shall be eligible to vote, shall constitute the action
of the Nominating/Corporate Governance Committee.

      The Nominating/Corporate Governance Committee shall review qualifications
of and interview candidates for the Board and shall make nominations for
election of board members in accordance with the provisions of these Bylaws, in
relation to those nominations, to the Board, and shall have such other duties
and responsibilities as are set forth in a written charter adopted by the Board.
The Chairman of the Board shall designate one member of the Committee to serve
as chairman of the Nominating/Corporate Governance Committee.

      Section 6. Asset Liability and Interest Rate Risk Committee. The Asset
Liability and Interest Rate Risk Committee shall consist of at least three (3)
members, as shall be appointed by Board resolutions or these Bylaws. At any
regular meeting of the Board, any director who is otherwise eligible to serve on
the Asset Liability and Interest Rate Risk Committee may be elected to fill a
vacancy that has occurred on the Asset Liability and Interest Rate Risk
Committee. The Chairman of the Board shall designate one member of the committee
to serve as chairman of the committee.

      The Asset Liability and Interest Rate Risk Committee shall meet annually,
at the call of the chairman of the committee and may hold such additional
meetings as the chairman of the committee may deem necessary, to examine, or
cause to be examined, the records and affairs of the Corporation to review and
monitor its activities relating to asset/liability management and interest rate
risk, and shall present a report of examination to the Board at the Board's next
regular meeting following the meeting of the Asset Liability and Interest Rate
Risk Committee. The committee shall appoint, from its membership or otherwise, a
secretary who shall cause to be kept written minutes of all meetings of the
committee. A quorum shall consist of at least one-third of the members of the
committee, and in no event less than three (3) members of the committee. The
vote of a majority of members present at any meeting including the presiding
member, who shall be eligible to vote, shall constitute the action of the Asset
Liability and Interest Rate Risk Committee.

      Section 7. Other Committees. The Board may by resolution authorize such
other committees as from time to time it may deem necessary or appropriate for
the conduct of the business of the Corporation. The members of each committee so
authorized shall be appointed by the Board from members of the Board and/or
employees of the Corporation. In addition, the President and Chief Executive
Officer and the Secretary (so long as the Secretary is also a director of the
Corporation) shall be ex-officio members of each such committee. Each such
committee shall exercise such powers as may be assigned by the Board to the
extent not inconsistent with law, these Bylaws, the Certificate of
Incorporation, or resolutions of the Board.

<PAGE>
                                     - 15 -


                                   ARTICLE VI

                                    OFFICERS

      Section 1. Number. The Board shall, at each annual meeting, elect a
Chairman of the Board, a President and Chief Executive Officer, a Secretary and
may elect a Vice Chairman and such other officers of the Board from time to time
may deem necessary or the business of the Corporation may require. Any number of
offices may be held by the same person except that no person may simultaneously
hold the offices of President and Chief Executive Officer and Secretary.

      The election of all officers shall be by a majority of the directors then
in office. If such election is not held at the meeting held annually for the
election of officers, such officers may be so elected at any subsequent regular
meeting or at a special meeting called for that purpose, in the same manner
above provided. Each person elected shall have such authority, bear such title
and perform such duties as provided in these Bylaws and as the Board may
prescribe from time to time. All officers elected or appointed by the Board
shall assume their duties immediately upon their election and shall hold office
at the pleasure of the Board. Whenever a vacancy occurs among the officers, it
may be filled at any regular or special meeting called for that purpose, in the
same manner as above provided.

      Section 2. Term of Office and Removal. Each officer shall serve until his
or her successor is elected and duly qualified, the office is abolished, or he
or she is removed. Except for the Chairman of the Board, the President and the
Chief Executive Officer, any officer may be removed at any regular meeting of
the Board with or without cause by an affirmative vote of a majority of the
directors then in office. The Board may remove the Chairman of the Board or the
President and Chief Executive Officer at any time, with or without cause, only
by a vote of two-thirds of the non-officer directors then holding office at any
regular or special meeting of the Board called for that purpose.

      Section 3. Chairman of the Board. The Chairman of the Board shall preside
at all meetings of the stockholders; preside at all meetings of the Board; make
recommendations to the Board regarding appointments to all committees, including
chairmanships; and sign instruments in the name of the Corporation.

      In the absence or disability of the Chairman of the Board, the President
and Chief Executive Officer shall exercise the powers and perform the duties
which otherwise would fall upon the Chairman of the Board. In the absence or
disability of both the Chairman of the Board and the President and Chief
Executive Officer, a majority of the Board shall designate a person who shall
exercise the powers and perform the duties which otherwise would fall upon the
Chairman of the Board.

<PAGE>
                                     - 16 -


      Section 4. President and Chief Executive Officer. The President shall be
the Chief Executive Officer of the Corporation and shall, subject to the
direction of the Board, oversee all the major activities of the Corporation and
its subsidiaries and be responsible for assuring that the policy decisions of
the Board are implemented as formulated. The President and Chief Executive
Officer shall be responsible, in consultation with such Officers and members of
the Board, as he deems appropriate, for planning the growth of the Corporation.
The President and Chief Executive Officer shall be responsible for stockholder
relations and relations with investment bankers or other similar financial
institutions, and shall be empowered to designate officers of the Corporation
and its subsidiaries to assist in such activities. The President and Chief
Executive Officer shall be principally responsible for exploring and reporting
to the Board all opportunities for mergers, acquisitions and new business. The
President and Chief Executive Officer, under authority given to him, shall have
the authority to sign instruments in the name of the Corporation. The President
and Chief Executive Officer shall have general supervision and direction of all
of the Corporation's officers and personnel, subject to and consistent with
policies enunciated by the Board. The President and Chief Executive Officer
shall have such other powers as may be assigned to him by the Board or its
committees.

      Section 5. Vice Presidents. Executive Vice Presidents, Senior Vice
Presidents and Vice Presidents may be appointed by the Board of Directors to
perform such duties as may be prescribed by these Bylaws, the Board or the
President and Chief Executive Officer as permitted by the Board.

      Section 6. Secretary. The Secretary shall attend all meetings of the Board
and of the stockholders, and shall record, or cause to be recorded, all votes
and minutes of all proceedings of the Board and of the stockholders in a book or
books to be kept for that purpose. The Secretary shall perform such executive
and administrative duties as may be assigned by the Board, the Chairman of the
Board or the President and Chief Executive Officer. The Secretary shall have
charge of the seal of the Corporation, shall submit such reports and statements
as may be required by law or by the Board, shall conduct all correspondence
relating to the Board and its proceedings and shall have such other powers and
duties as are generally incident to the office of Secretary and as may be
assigned to him or her by the Board, the Chairman of the Board or the President
and Chief Executive Officer.

      Section 7. Comptroller. The Comptroller shall be the chief accounting
officer of the Corporation and shall be responsible for the maintenance of
adequate systems and records. The Comptroller shall also be treasurer of the
Corporation and shall keep a record of all assets, liabilities, receipts,
disbursements, and other financial transactions, and shall see that all
expenditures are made in accordance with procedures duly established from time
to time by the Board. The Comptroller shall make such reports as may be required
by the Board or as are required by law.

      Section 8. Other Officers and Employees. Other officers and employees
appointed by the Board shall have such authority and shall perform such duties
as may be

<PAGE>
                                     - 17 -


assigned to them, from time to time, by the Board or the President and Chief
Executive Officer.

      Section 9. Compensation of Officers and Others. The compensation of all
officers and employees shall be fixed from time to time by the Board, or by any
committee or officer authorized by the Board to do so, upon the recommendation
and report by the Compensation Committee. The compensation of agents shall be
fixed by the Board, or by any committee or officer authorized by the Board to do
so, upon the recommendation and report of the Compensation Committee.

                                   ARTICLE VII

                                    DIVIDENDS

      The Board shall have the power, subject to the provisions of law and the
requirements of the Certificate of Incorporation, to declare and pay dividends
out of surplus (or, if no surplus exists, out of net profits of the Corporation,
for the fiscal year in which the dividend is declared and/or the preceding
fiscal year, except where there is an impairment of capital stock), to pay such
dividends to the stockholders in cash, in property, or in shares of the capital
stock of the Corporation, and to fix the date or dates for the payment of such
dividends.

                                  ARTICLE VIII

                                   AMENDMENTS

      These Bylaws, except at provided by applicable law or the Certificate of
Incorporation, or as otherwise set forth in these Bylaws, may be amended or
repealed at any regular meeting of the entire Board by the vote of two-thirds of
the Board; provided, however, that (a) a notice specifying the change or
amendment shall have been given at a previous regular meeting and entered in the
minutes of the Board; (b) a written statement describing the change or amendment
shall be made in the notice mailed to the directors of the meeting at which the
change or amendment shall be acted upon; and (c) any Bylaw made by the Board may
be altered, amended, rescinded, or repealed by the holders of the shares of
capital stock entitled to vote thereon at any annual meeting or at any special
meeting called for that purpose in accordance with the percentage requirements
set forth in the Certificate of Incorporation and/or these Bylaws.
Notwithstanding the foregoing, any provision of these Bylaws that contains a
supermajority voting requirement shall only be altered, amended, rescinded, or
repealed by a vote of the Board or holders of capital stock entitled to vote
thereon that is not less than the supermajority specified in such provision.

<PAGE>

================================================================================

                           AMENDED AND RESTATED BYLAWS

                                       OF

                              CARVER BANCORP, INC.

================================================================================

<PAGE>

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
                                    ARTICLE I

OFFICES........................................................................1
     Section 1.  Registered Office.............................................1
     Section 2.  Additional Offices............................................1

                                   ARTICLE II

STOCKHOLDERS...................................................................1
     Section 1.  Place of Meetings.............................................1
     Section 2.  Annual Meetings...............................................1
     Section 3.  Special meetings..............................................1
     Section 4.  Notice of Meetings............................................1
     Section 5.  Waiver of Notice..............................................2
     Section 6.  Fixing of Record Date.........................................2
     Section 7.  Quorum........................................................2
     Section 8.  Conduct of Meetings...........................................3
     Section 9.  Voting; Proxies...............................................3
     Section 10. Inspectors of Election........................................4
     Section 11. Procedure for Nominations.....................................4
     Section 12. Substitution of Nominees......................................6
     Section 13. New Business..................................................6

                                   ARTICLE III

CAPITAL STOCK..................................................................7
     Section 1.  Certificates of Stock.........................................7
     Section 2.  Transfer Agent and Registrar..................................8
     Section 3.  Registration and Transfer of Shares...........................8
     Section 4.  Lost, Destroyed and Mutilated Certificates....................8
     Section 5.  Holder of Record..............................................8

                                   ARTICLE IV

BOARD OF DIRECTORS.............................................................9
     Section 1.  Responsibilities; Number of Directors.........................9
     Section 2.  Qualifications................................................9
     Section 3.  Regular and Annual Meetings...................................9
     Section 4.  Special Meetings..............................................9
     Section 5.  Notice of Meetings; Waiver of Notice..........................9
     Section 6.  Conduct of Meetings..........................................10
     Section 7.  Quorum and Voting Requirements...............................10
     Section 8.  Informal Action by Directors.................................10


                                       i
<PAGE>

     Section 9.  Resignation..................................................10
     Section 10. Vacancies....................................................11
     Section 11. Compensation.................................................11
     Section 12. Amendments Concerning the Board..............................11

                                    ARTICLE V

COMMITTEES....................................................................11
     Section 1.  Standing Committees..........................................11
     Section 2.  Executive Committee..........................................12
     Section 3.  Finance and Audit Committee..................................12
     Section 4.  Compensation Committee.......................................13
     Section 5.  Nominating/Corporate Governance Committee....................13
     Section 6.  Asset Liability and Interest Rate Risk Committee.............14
     Section 7.  Other Committees.............................................14

                                   ARTICLE VI

OFFICERS......................................................................15
     Section 1.  Number.......................................................15
     Section 2.  Term of Office and Removal...................................15
     Section 3.  Chairman of the Board........................................15
     Section 4.  President and Chief Executive Officer........................16
     Section 5.  Vice Presidents..............................................16
     Section 6.  Secretary....................................................16
     Section 7.  Comptroller..................................................16
     Section 8.  Other Officers and Employees.................................16
     Section 9.  Compensation of Officers and Employees.......................17

                                   ARTICLE VII

DIVIDENDS.....................................................................17

                                  ARTICLE VIII

AMENDMENTS....................................................................17


                                       ii

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>4
<FILENAME>d156273.txt
<DESCRIPTION>MATERIAL CONTRACTS
<TEXT>
- --------------------------------------------------------------------------------

                                                                    EXHIBIT 10.2

================================================================================

                           Carver Federal Savings Bank
                             Retirement Income Plan

             As Amended And Restated Effective As Of January 1, 1997

                 And As Further Amended Through January 1, 2001

================================================================================

<PAGE>

                                                               Table of Contents
- --------------------------------------------------------------------------------

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

TABLE OF CONTENTS..............................................................i

CARVER FEDERAL SAVINGS BANK RETIREMENT INCOME PLAN FOREWORD....................1

SECTION I  Definitions.........................................................2
     1.1      Definitions......................................................2

SECTION II PARTICIPATION......................................................13
     2.1      Date of Participation...........................................13
     2.2      Ineligible Employees............................................13
     2.3      Reemployment After a Termination of Employment
              Accompanied by a Break-in-Service...............................13
     2.3      Repayment of Prior Distribution Upon Reemployment...............14

SECTION III NORMAL RETIREMENT INCOME..........................................15
     3.1      Accrued Benefit.................................................15
     3.2      Eligibility and Commencement - Normal Retirement Income.........16
     3.3      Amount of Normal Retirement Income..............................16

SECTION IV - LATE AND EARLY RETIREMENT INCOME.................................17
     4.1      Eligibility and Commencement - Late Retirement Date.............17
     4.2      Amount of Late Retirement Income................................17
     4.3      Eligibility and Commencement - Early Retirement Date............19
     4.4      Amount of Early Retirement Income...............................19

SECTION V TERMINATION OF EMPLOYMENT AND VESTED RETIREMENT INCOME..............20
     5.1      Eligibility and Commencement - Vested Retirement Date...........20
     5.2      Amount of Vested Retirement Income..............................20

SECTION VI MAXIMUM RETIREMENT INCOME..........................................21
     6.1      Maximum Retirement Income.......................................21
     6.2      Top-Heavy Provisions............................................28

SECTION VII NORMAL FORM OF PAYMENT............................................35
     7.1      Normal Form of Payment - Joint and Survivor.....................35
     7.2      Normal Form of Payment - Life-No Death Benefit..................35
     7.3      Optional Forms of Payment.......................................35
     7.4      Notice to Participants..........................................35
     7.5      Election of Option..............................................36
     7.6      Qualified Election..............................................36
     7.7      Payment of Retirement Income to Participant.....................37


================================================================================
187                                i                 CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                               Table of Contents
- --------------------------------------------------------------------------------

     7.8      Limits of Payment Options.......................................38
     7.9      Minimum Amounts to be Paid......................................39

SECTION VIII OPTIONAL FORMS OF PAYMENT........................................40
     8.1      Contingent Pensioner Option.....................................40
     8.2      Years Certain and Life Option...................................40
     8.3      Social Security Option..........................................41
     8.4      Direct Rollover of Eligible Rollover Distributions..............42

SECTION IX PRERETIREMENT SPOUSE BENEFIT.......................................43
     9.1      Eligibility for Preretirement Spouse Benefit....................43
     9.2      Amount of Preretirement Spouse Benefit..........................43
     9.3      Payments of Preretirement Spouse Benefit........................45

SECTION X DEATH BENEFITS......................................................47
     10.1     Death Before Retirement Date....................................47
     10.2     Death on or After Retirement Date...............................47

SECTION XI FUNDING OF BENEFITS................................................48
     11.1     Contributions to the Fund.......................................48
     11.2     Fund for Exclusive Benefit of Participants......................48
     11.3     Disposition of Credits and Forfeitures..........................48

SECTION XII FIDUCIARY RESPONSIBILITY PROVISIONS...............................49
     12.1     Fiduciary Responsibility Provisions.............................49

SECTION XIII PLAN ADMINISTRATOR...............................................50
     13.1     Appointment and Acceptance......................................50
     13.2     Duties and Authority............................................50
     13.3     Expenses of the Plan and Assistance to Plan Administrator.......50
     13.4     Participants and Other Payees - Data............................51
     13.5     Resignation and Removal of Plan Administrator...................51
     13.6     Appointment of Successor Plan Administrator.....................51
     13.7     Plan Administration - Miscellaneous.............................51

SECTION XIV AMENDMENT AND TERMINATION OF PLAN.................................55
     14.1     Amendment - General.............................................55
     14.2     Amendment - Merger or Consolidation of Plan.....................55
     14.3     Partial Termination of Plan.....................................55
     14.4     Termination of Plan.............................................56

SECTION XV RESTRICTION OF BENEFITS UPON EARLY TERMINATION OF THE PLAN.........58
     15.1     Restriction of Benefits Upon Early Termination of the Plan......58


================================================================================
187                                ii                CARVER FEDERAL SAVINGS BANK

<PAGE>

                                                                        Foreword
- --------------------------------------------------------------------------------

                           CARVER FEDERAL SAVINGS BANK
                             RETIREMENT INCOME PLAN
                                    FOREWORD

Effective November 1, 1953, the Employer (or its predecessor) established the
Prior Plan ("Prior Plan") for the benefit of its eligible employees. Effective
January 1, 1976, the Prior Plan was amended and restated in its entirety and
became known as Carver Federal Savings Bank Retirement Income Plan.

The Prior Plan was amended from time to time to comply with legislative
requirements and to reflect changing Plan provisions.

Effective January 1, 1989, the Prior Plan was further amended and restated in
its entirety to incorporate the changes required by the Tax Reform Act of 1986
and subsequent legislation and regulations, and also incorporated certain
amendments to the Prior Plan as in effect on December 31, 1988.

Effective as of January 1, 1997, the Employer amended and restated the Prior
Plan. The Plan, as restated (hereinafter referred to as the "Plan"), complies
with all applicable legislation and regulations thereunder issued to date
addressing tax-qualified plans, including pension provisions under the Uniformed
Services Employment and Reemployment Rights Act of 1994, the Retirement
Protection Act of 1994, the Small Business Job Protection Act of 1996, the
Taxpayer Relief Act of 1997, the Restructuring and Reform Act of 1998 and the
Community Renewal Tax Relief Act of 2000. Subject to any amendments that may
subsequently be adopted by the Employer pursuant to Section 14.1, the provisions
set forth in this Plan shall apply to any Employee who is in the employment of
the Employer on or after January 1, 1997. Except to the extent specifically
required to the contrary under the terms of this Plan, for terminations of
employment prior to January 1, 1997, the rights and benefits of a former
participant shall be determined in accordance with the provisions of the Prior
Plan as in effect on the date of the former participant's termination of
employment. The Prior Plan is amended and restated in its entirety. The Plan
shall contain the terms and conditions set forth herein.

Pursuant to resolutions adopted by the Employer, the Plan shall be frozen
effective December 31, 2000 (the "Plan Freeze Date"). Effective as of the Plan
Freeze Date, (A) no Employee may commence or recommence participation in the
Plan, (B) Final Earnings shall not include any Earnings received by a
Participant on or after the Plan Freeze Date (December 31, 2000), and (C)
Credited Service and the accrual of all Participants' benefits shall cease.

The Employer has herein restated the Plan with the intention that (A) the Plan
shall at all times be qualified under Section 401(a) of the Code, (B) the
corresponding trust agreement shall be tax-exempt under Section 50l(a) of the
Code, and (C) Employer contributions under the Plan shall be tax deductible
under Section 404 of the Code. The terms of the Plan shall be construed in
accordance with such intention.


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187                                  1               CARVER FEDERAL SAVINGS BANK
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                                                                       Section I
                                                                     Definitions
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                                    SECTION I
                                   Definitions

1.1   Definitions

      (A)   Accrued Benefit - A Participant's benefit attributable to Employer
            contributions determined as of a date specified by the Employer by
            applying the benefit formula set forth in Section 3.1 and expressed
            in the form of an annual benefit commencing at Normal Retirement
            Date.

      (B)   Adjustment Factor - The appropriate adjustment factor(s), as shown
            in Table A attached to this Plan, which may be applicable to a
            Participant's retirement income in accordance with the further terms
            of the Plan. In no event will a Participant's Accrued Benefit as of
            the date of change of factors contained in said table be reduced by
            such change.

      (C)   Affiliated Employer - A member of an affiliated service group (as
            defined under Section 4l4(m) of the Code), a controlled group of
            corporations (as defined under Section 4l4(b) of the Code), a group
            of trades or businesses under common control (as defined under
            Section 4l4(c) of the Code) of which the Employer is a member, any
            leasing organization (as defined under Section 414(n) of the Code)
            providing the services of Leased Employees to the Employer, or any
            other group provided for under any and all Income Tax Regulations
            promulgated by the Secretary of the Treasury under Section 414(o) of
            the Code.

      (D)   Affiliated Service - Employment with an employer during the period
            that such employer is an Affiliated Employer.

      (E)   Beneficiary - Any person who is receiving or eligible to receive a
            benefit under the Plan upon the death of a Participant. In the case
            of a married Participant, the Spouse (as defined under Section
            1.1(KK) or 9.1(A)) shall be the designated Beneficiary unless the
            Participant elects otherwise pursuant to Section 7.5.

      (F)   Code - The Internal Revenue Code of 1986, as it may be amended from
            time to time, and any regulations, rulings or notices issued
            pursuant thereto.

      (G)   Contingent Pensioner - A Beneficiary other than the Participant's
            Spouse, who is receiving or eligible to receive a benefit under the
            Plan in accordance with the terms of Section 8.1.

      (H)   Credited Service - That portion of a Participant's Service which is
            included for purposes of determining the amount of his Accrued
            Benefit. With respect to any employment period, a Participant's
            Credited Service shall (1) include all years and full



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187                                  2               CARVER FEDERAL SAVINGS BANK
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                                                                       Section I
                                                                     Definitions
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            months of employment with the Employer corresponding with Service
            allowed but without regard to the number of Hours of Service and (2)
            exclude (a) a fractional month of Service, (b) periods of employment
            with an Affiliated Employer, and (c) periods of employment prior to
            January 1, 1988 for an Employee who (i) was in the employment of the
            Employer on January 1, 1988, (ii) was not enrolled as a Participant
            under the provisions of the Plan as in effect on December 31, 1987
            solely because he had attained age sixty (60) at the time of his
            employment with the Employer, and (iii) became a Participant in the
            Plan on January 1, 1988.

            Notwithstanding any provision of the plan to the contrary, effective
            December 12, 1994, calculation of service with respect to qualified
            military service will be provided in accordance with Section 414(u)
            of the Code.

            A Participant's Credited Service shall not include Credited Service
            which is not restored under Section 2.3.

            In addition, notwithstanding any provision to the contrary contained
            in this Plan, a Participant shall not accrue Credited Service for
            any year or fraction thereof completed after the Plan Freeze Date.

      (I)   Early Retirement Date - The date described in Section 4.3.

      (J)   Earnings - The remuneration received from the Employer by or on
            behalf of the Participant, including all compensation shown on any
            and all federal source reporting forms completed by the Employer for
            the Plan Year for federal income tax purposes (including W-2 Forms)
            and including any contributions through a salary reduction
            arrangement to a cash or deferred plan under Section 401(k) of the
            Code and contributions which are not includable in the gross income
            of an Employee under a "cafeteria plan" described in Section 125 of
            the Code, or, effective January 1, 1998, elective amounts that are
            not includable in the gross income of an Employee by reason of
            Section 132(f)(4) of the Code, but excluding any other deferred
            compensation arrangements. Earnings shall include statutory
            disability payments to a Participant and supplemental disability
            income provided by the Employer if the inclusion of such income
            shall result in a greater benefit to the Participant. A
            determination whether to include such income as Earnings shall be
            applied on a uniform, nondiscriminatory basis.

            The amount of Earnings taken into account for a Plan Year consisting
            of twelve (12) months for Plan Years commencing on and after January
            1, 1997, shall not exceed one hundred sixty thousand dollars
            ($160,000) for the 1997, 1998 and 1999 Plan Years and one hundred
            and seventy thousand dollars ($170,000) for the 2000 and 2001 Plan
            Years, adjusted in multiples of ten thousand dollars ($10,000) for
            increases in the cost-of-living as prescribed by the Secretary of
            the Treasury under Section 401(a)(17)(B) of the Code. Any
            cost-of-living increases described in this paragraph shall be
            applicable solely with respect to the amount of Earnings taken into
            account under the Plan during


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187                                  3               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                       Section I
                                                                     Definitions
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            the twelve (12) month period or periods to which such increase
            applies. For purposes of this Section 1.1(J), if the Plan Year in
            which an Employee's Earnings are paid is less than twelve (12)
            calendar months, the amount of Earnings taken into account for such
            Plan Year shall be the applicable limit hereunder for such Plan Year
            multiplied by a fraction, the numerator of which is the number of
            months taken into account for such Plan Year and the denominator of
            which is twelve (12).

            In determining the dollar limitation hereunder, earnings received
            from any Affiliated Employer shall be recognized as Earnings.

            In no event shall an Employee who was a Participant under the Plan
            as in effect on December 31, 1993 and whose Accrued Benefit on or
            after January 1, 1994 is based on Earnings in excess of one hundred
            fifty thousand dollars ($150,000) during a Plan Year prior to
            January 1, 1994, receive an Accrued Benefit under the Plan which is
            less than the greater of: (i) the Participant's Accrued Benefit as
            determined pursuant to the provisions of the Plan for Plan Years on
            or after January 1, 1994, based on all of the Participant's Credited
            Service, or (ii) the sum of: (A) the Accrued Benefit that would have
            been payable assuming the Plan provisions immediately preceding
            January 1, 1994 had remained in effect until the Participant's
            Termination of Employment with the Participant having terminated
            service on December 31, 1993, and (B) the Participant's Accrued
            Benefit as determined pursuant to the provisions of the Plan for
            Plan Years on or after January 1, 1994, based on the Participant's
            Credited Service commencing on January 1, 1994.

      (K)   Effective Date - November 1, 1953.

      (L)   Employee - Any individual who is compensated for an Hour of Service
            with the Employer.

      (M)   Employer - Carver Federal Savings Bank.

      (N)   Entry Date - January 1 and July 1 of each Plan Year.

      (O)   ERISA - The Employee Retirement Income Security Act of 1974, as it
            may be amended from time to time, and any regulations, rulings or
            notices issued pursuant thereto.

      (P)   Final Earnings - The average of a Participant's Earnings received in
            any three (3) consecutive calendar years during the last ten (10)
            consecutive full calendar years before the earliest to occur of the
            Participant's Termination of Employment, retirement or death, which
            produces the highest such average. If a Participant has less than
            three (3) years of Service, Earnings are averaged over the
            Participant's total period of Service.


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187                                  4               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                       Section I
                                                                     Definitions
- --------------------------------------------------------------------------------

            Final Earnings shall not include any Compensation received by a
            Participant after the Plan Freeze Date.

      (Q)   Fund - The fund or funds established by separate written agreement
            between the Employer and an insurance company and/or trustee or
            trustees for the purpose of accumulating contributions made in
            accordance with Section XI, Funding of Benefits, and paying the
            benefits described in certain other sections of this Plan.

      (R)   Highly Compensated Employee - An individual described in Section
            414(q) of the Code.

      (S)   Hours of Service -

            (1)   Each hour for which the Employee is either directly or
                  indirectly paid by the Employer, or entitled to payment,

                  (a)   for duties performed for the Employer during the Plan
                        Year (the "computation period"); and

                  (b)   for reasons other than the performance of duties
                        (irrespective of whether the employment relationship has
                        terminated) including paid sick leave, paid vacation
                        time, disability, layoff, jury duty, military duty or
                        leave of absence, etc. No more than 501 Hours of Service
                        will be credited under this paragraph to an Employee for
                        any single continuous period (whether or not such period
                        occurs in a single computation period). Hours under this
                        paragraph will be calculated and credited pursuant to
                        Department of Labor Regulations Section 2530.200b-2
                        which is incorporated herein by reference; and

            (2)   Any additional hours as normally would have been credited to
                  the Employee had he worked on a non overtime basis during the
                  following periods:

                  (a)   temporary layoff,

                  (b)   leave of absence of up to two (2) years, as authorized
                        by the Employer pursuant to the Employer's established
                        leave policy, and

                  (c)   military leave while the Employee's reemployment rights
                        are protected by law, provided that any such periods
                        qualify as Service in accordance with the terms of the
                        Service definition; and

                  Notwithstanding any provision of the plan to the contrary,
                  effective December 12, 1994, contributions, benefits and
                  calculation of service with respect to


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187                                  5               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                       Section I
                                                                     Definitions
- --------------------------------------------------------------------------------

                  qualified military service will be provided in accordance with
                  Section 414(u) of the Code.

            (3)   Each other hour for which back pay is either awarded or agreed
                  to by the Employer, irrespective of mitigation of damages. The
                  same Hours of Service will not be credited both under
                  paragraph (1) or paragraph (2), as the case may be, and under
                  this paragraph (3). These Hours of Service will be credited to
                  the Employee for the computation period or periods to which
                  the award or agreement pertains rather than the computation
                  period in which the award, agreement or payment is made.

                  In no event will Hours of Service be allowed and computed in a
                  manner less liberal than the manner described in the
                  Department of Labor Regulations Section 2530.200b-2.

      (T)   Joint and Survivor - The form of payment described in Section 7.1.

      (U)   Late Retirement Date - The date described in Section 4.1.

      (V)   Leased Employee - Any individual (other than an Employee of the
            Employer or an Employee of an Affiliated Employer) who, pursuant to
            an agreement between the Employer or any Affiliated Employer and any
            other person ("leasing organization"), has performed services for
            the Employer or any Affiliated Employer on a substantially full-time
            basis for a period of at least one (1) year, and such services are
            performed under the primary direction of or control by the Employer
            or any Affiliated Employers. A determination as to whether a Leased
            Employee shall be treated as an Employee of the Employer or an
            Affiliated Employer shall be made as follows: a Leased Employee
            shall not be considered an Employee of the Employer if: (a) such
            employee is a participant in a money purchase pension plan providing
            (i) a nonintegrated Employer contribution rate of at least ten
            percent (10%) of compensation, as defined in Section 415(c)(3) of
            the Code, however, including amounts contributed pursuant to a
            compensation reduction agreement which are excludable from the
            employee's gross income under Section 125, Section 402(e)(3),
            Section 402(h)(1)(B) or Section 403(b) of the Code, and effective
            January 1, 1998, including elective amounts that are excludable from
            the gross income of an Employee by reason of Section 132(f)(4) of
            the Code; (ii) immediate plan participation; and (iii) full and
            immediate vesting; and (b) Leased Employees do not constitute more
            than twenty percent (20%) of the Employer's Non-Highly Compensated
            Employees.

      (W)   Normal Retirement Date -

            (1)   For purposes of determining a Participant's eligibility for
                  retirement income and vesting status, the day on which the
                  Participant attains age sixty-five (65); provided, however,
                  that with respect to an Employee whose Participation in the


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187                                  6               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                       Section I
                                                                     Definitions
- --------------------------------------------------------------------------------

                  Plan commences on or after January 1, 1992, Normal Retirement
                  Date is the later of the day on which the Participant attains
                  age sixty-five (65) and the fifth (5th) anniversary of his
                  initial participation in the Plan.

            (2)   For all other purposes, a Participant's Normal Retirement Date
                  is the first day of the month coincident with or next
                  following the applicable day set forth in paragraph (1).

      (X)   Participant - Any Employee or former Employee covered under this
            Plan who has neither received nor has commenced receiving his
            retirement income under this Plan.

      (Y)   PBGC - Pension Benefit Guaranty Corporation.

      (Z)   Plan - Carver Federal Savings Bank Retirement Income Plan, as
            amended from time to time.

      (AA)  Plan Administrator - The individual or individuals selected by the
            Employer in accordance with Section 13.1.

      (BB)  Plan Year - The period of twelve (12) consecutive months commencing
            on January 1, 1976 and on each January 1 thereafter.

      (CC)  Prior Plan - The program established by the Employer for providing
            retirement income and other benefits for certain of its employees
            and their beneficiaries as in effect prior to the Restatement Date.

      (DD)  Prior Plan Accrued Benefit - With respect to each Prior Plan
            Participant, the annual amount of retirement income accrued by the
            Prior Plan Participant as of December 31, 1970 as determined in
            accordance with the terms of the Prior Plan as constituted on such
            date.

      (EE)  Prior Plan Participant - A Participant covered under the Plan on
            January 1, 1981 who, as of December 31, 1970 was a Participant under
            the Prior Plan.

      (FF)  Restatement Date - January 1, 1997.

      (GG)  Retirement Date - The date on which the payment of a Participant's
            retirement income is to commence, as determined in accordance with
            the further terms of the Plan.

      (HH)  Service - Employment with the Employer commencing on the Employee's
            earliest employment date and ending on the earliest of his
            Termination of Employment date accompanied by a break-in-service (as
            defined below), Retirement Date or date of death. Service is subject
            to the following rules for the purposes of determining an Employee's
            participation and vesting status:


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187                                  7               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                       Section I
                                                                     Definitions
- --------------------------------------------------------------------------------

            (1)   With respect to any employment period prior to January 1,
                  1976, an Employee's Service will be determined in accordance
                  with the terms of the Prior Plan as of December 31, 1975,
                  provided that any such accrual involving a fractional year of
                  Service will be rounded up to the next full year.

            (2)   With respect to any employment periods on and after January 1,
                  1976, an Employee will be credited with one (1) year of
                  Service for each Plan Year during which he has at least 1,000
                  Hours of Service.

                  Solely for the purpose of determining an Employee's vesting
                  status, with respect to an Employee whose employment date
                  commences after January 1, 1976 and who does not have at least
                  1,000 Hours of Service during the Plan Year which includes his
                  employment date, such Employee will be credited with one (1)
                  year of Service if such Employee has at least 1,000 Hours of
                  Service during the twelve (12) month period commencing with
                  his employment date.

                  Solely for the purpose of determining an Employee's
                  participation status, with respect to an Employee whose
                  employment date commences after January 1, 1976, such Employee
                  will be credited with one (1) year of Service if such Employee
                  has at least 1,000 Hours of Service during the twelve (12)
                  month period commencing with his employment date.

                  If in any Plan Year an Employee has less than 1,000 Hours of
                  Service but more than 500 Hours of Service, no Service will be
                  credited for such Plan Year, but a "break-in-service" will not
                  be deemed to have occurred.

                  If in any Plan Year an Employee does not complete more than
                  500 Hours of Service, no Service will be credited for such
                  Plan Year and a "break-in-service" will be deemed to have
                  occurred, as of the beginning of such Plan Year.

                  Solely for the purpose of determining whether a one year
                  break-in-service has occurred in a Plan Year, an Employee who
                  is absent from work for maternity or paternity reasons shall
                  receive credit for up to 501 Hours of Service which would
                  otherwise have been credited to such Employee but for such
                  absence, or in any case in which such hours cannot be
                  determined eight (8) Hours of Service per day of such absence.
                  For purposes of this paragraph, an absence from work for
                  maternity or paternity reasons means an absence (a) by reason
                  of the pregnancy of the Employee, (b) by reason of the birth
                  of a child of the Employee, (c) by reason of the placement of
                  a child with the Employee in connection with the adoption of
                  such child by such Employee, or (d) for purposes of caring for
                  such child for a period beginning immediately following such
                  birth or placement. The Hours of Service credited under this
                  paragraph shall be credited (i) in the Plan Year in which the
                  absence begins if the crediting


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<PAGE>

                                                                       Section I
                                                                     Definitions
- --------------------------------------------------------------------------------

                  is necessary to prevent a break-in-service in that period, or
                  (ii) in all other cases, in the following Plan Year.

            (3)   Service prior to a break-in-service which occurs before
                  January 1, 1985 will be determined in accordance with the
                  terms of the Plan as of the date the break-in-service
                  occurred.

            (4)   If an Employee who has a break-in-service which occurs after
                  January 1, 1985 is later reemployed by the Employer, the
                  following special rule shall apply:

                  Service prior to his most recent break-in-service shall be
                  counted along with any Service earned on or after the
                  Employee's reemployment date if:

                  (a)   he was entitled to any vested retirement income
                        attributable Termination of Employment and Vested
                        Retirement

                  (b)   he was not entitled to any vested retirement income
                        break-in-service did not equal or exceed the greater of:

                        (i)   the Employee's aggregate number of years of pre
                              break service; or

                        (ii)  five (5) years.

                  If a reemployed Employee fails to meet any of the tests
                  described in (a) or (b) above, any Service earned prior to his
                  most recent break-in-service will be disregarded.

            (5)   Absence from employment shall be counted as Service if the
                  following circumstances apply:

                  (a)   temporary layoff,

                  (b)   leave of absence of up to two (2) years, as authorized
                        by the Employer pursuant to the Employer's established
                        leave policy,

                  (c)   military leave while the Employee's reemployment rights
                        are protected by law, provided that the Employee returns
                        to active employment with the Employer when recalled (if
                        temporary layoff), within two (2) years (if leave of
                        absence), or within ninety (90) days after he becomes
                        eligible for release from active duty (if military
                        leave). If the Employee does not return to active
                        employment with the Employer, his Service will be deemed
                        to have ceased on the date his absence commenced.


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187                                   9              CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                       Section I
                                                                     Definitions
- --------------------------------------------------------------------------------

                        Notwithstanding any provision of the plan to the
                        contrary, effective December 12, 1994, contributions,
                        benefits and calculation of service with respect to
                        qualified military service will be provided in
                        accordance with Section 414(u) of the Code.

                  The Employer's leave policy shall be applied in a uniform and
                  nondiscriminatory manner to all Employees under similar
                  circumstances.

            (6)   Employment with a predecessor company shall be counted as
                  Service to the extent required by ERISA.

            (7)   With respect to an Employee who, as of July 30, 1982, was in
                  the employ of Allied Federal Savings and Loan Association,
                  such Employee will be credited with Service for any employment
                  period prior to July 31, 1982 with Allied Federal Savings and
                  Loan Association. Such Service will be deemed as Service with
                  the Employer and the provisions of this Section 1.1(HH) will
                  apply to such Service as though such Employee's employment
                  with Allied Federal Savings and Loan Association had been
                  employment with the Employer.

            (8)   Service shall be credited to an Employee for periods of
                  employment with an Affiliated Employer. Employment with an
                  Affiliated Employer shall be credited pursuant to this
                  paragraph (8) while such employer is an Affiliated Employer.

            No Service performed on or after the Plan Freeze Date shall be
            counted for purposes of eligibility for Plan participation or for
            determining a Participant's Credited Service under the Plan.

      (II)  Social Security Amount - The estimated initial annual amount of the
            primary benefit that may become payable to a Participant, commencing
            at age sixty-five (65), under the provisions of Title II of the
            Federal Social Security Act as in effect on the date of any
            determination of a Participant's Accrued Benefit hereunder. Such
            amount shall be estimated by assuming the Earnings for any
            Participant who terminates employment prior to age sixty-five (65)
            will continue until age sixty-five (65) at the same rate as in
            effect on the date he terminated employment. Wages prior to a
            Participant's date of employment will be estimated by projecting the
            actual change in the average wage from year to year as determined by
            the Social Security Administration backwards to his date of
            employment. In lieu of this estimated salary history, the actual
            salary history, or the actual Social Security award, if available,
            will be utilized, provided the Participant provides such history or
            award within six (6) months of his Termination of Employment or
            retirement. Once determined, the Primary Social Security Benefit
            will not be changed after the earliest of the Participant's Normal
            Retirement Date, or his date of death, retirement, or Termination of
            Employment. Effective December 31, 2000, in the case of any
            Participant employed by the Employer on December 31, 2000, this
            Section


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<PAGE>

                                                                       Section I
                                                                     Definitions
- --------------------------------------------------------------------------------

            shall be applied as if the Plan Freeze Date (December 31, 2000) is
            such Participant's Termination of Employment date.

      (JJ)  Social Security Retirement Age - The age used as the retirement age
            for the Participant under Section 216(1) of the Social Security Act,
            except that such section shall be applied (1) without regard to the
            age increase factor and (2) as if the early retirement age under
            Section 216(1)(2) of such Act were sixty-two (62).

      (KK)  Spouse - The lawful wife of a male Participant or the lawful husband
            of a female Participant, on the earlier of the Participant's
            Retirement Date or his date of death; provided that a former spouse
            will be treated as the Spouse or surviving Spouse, and a current
            spouse will not be treated as the Spouse or surviving Spouse to the
            extent provided under a qualified domestic relations order as
            described in Section 414(p) of the Code.

      (LL)  Termination of Employment - A Participant's cessation of employment
            for reasons other than retirement or death.

      (MM)  Trustee - The trustee as set forth in a trust agreement agreed on by
            both the Employer and such trustee.

      (NN)  Vesting Percentage - The percentage applied to a Participant's
            Accrued Benefit in accordance with the further terms of the Plan, as
            determined below:

                      Service for Vesting Purposes         Percentage
                      ----------------------------         ----------

                      If he has 5 years:                          100%

                      If he has less than 5 years:                  0%

            Notwithstanding the foregoing, if a Participant's Service ceases on
            or after his Normal Retirement Date, his Vesting Percentage will be
            100%, and further provided that the Vesting Percentage of a Prior
            Plan Participant whose Service ceases on or after he attains age
            sixty (60) will be 100%.

      (OO)  Year of Eligibility Service - The earliest to occur of the following
            twelve (12) consecutive month periods during which an Employee has
            at least 1,000 Hours of Service:

            (a)   the twelve (12) consecutive month period beginning on the
                  Employee's employment date,

            (b)   the Plan Year which includes the last day of the twelve (12)
                  consecutive month period commencing with the Employee's
                  employment date,


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<PAGE>

                                                                       Section I
                                                                     Definitions
- --------------------------------------------------------------------------------

            (c)   any Plan Year beginning after the last day of the twelve (12)
                  consecutive month period commencing with the Employee's
                  employment date.

                  For purposes of determining Years of Eligibility Service,
                  employment with an Affiliated Employer shall be deemed to be
                  employment with the Employer.

      (PP)  Plan Freeze Date - December 31, 2000.



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<PAGE>

                                                                      Section II
                                                                   Participation
- --------------------------------------------------------------------------------

                                   SECTION II
                                  PARTICIPATION

2.1   Date of Participation

      Each Employee who was covered under the Plan on December 31, 1996 and who
      is in the employment of the Employer on the Restatement Date, will
      continue to be a Participant under this Plan on the Restatement Date.

      Each other Employee who has attained age eighteen (18) will become a
      Participant under this Plan on the Entry Date coincident with or next
      following the date on which the Employee has completed at least one (1)
      Year of Eligibility Service.

      Notwithstanding the above, no Employee shall be eligible to become a
      Participant in the Plan or, in the case of a reemployed Employee, to
      recommence participation in the Plan on or after the Plan Freeze Date.

2.2   Ineligible Employees

      The following classes of Employees is ineligible to participate in the
      Plan:

            All Leased Employees.

            Any Employee who is not a Plan Participant as of December 31, 2000.

2.3   Reemployment After a Termination of Employment Accompanied by a
      Break-in-Service

      Prior to the Plan Freeze Date, an Employee who satisfied the requirements
      of Section 2.1 and subsequently (A) incurs a Termination of Employment,
      (B) incurs a break-in-service (as defined in Section 1.1(HH)) and (C) is
      reemployed after such break-in-service, will become a Participant under
      this Plan on the first day on which he has an Hour of Service. Prior to
      the Plan Freeze Date, any reemployed Employee who was not a Participant in
      the Plan but who had completed one (1) Year of Eligibility Service prior
      to his break-in-service will become a Participant in the Plan on the later
      of the first day of the month coincident with or next following (A) the
      date on which he attains age eighteen (18) and (B) the date on which he
      completes an Hour of Service after his reemployment. Prior to the Plan
      Freeze Date, any other reemployed Employee will become a Participant on
      the first day of the month coincident with or next following the date on
      which he meets all the requirements of Section 2.1.

      Prior to the Plan Freeze Date, for the purposes of determining a covered
      Employee's postbreak Service, Service shall be counted from such first day
      of reemployment.


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187                                 13               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                      Section II
                                                                   Participation
- --------------------------------------------------------------------------------

2.3   Repayment of Prior Distribution Upon Reemployment

      If a former Participant received his vested accrued retirement income at
      the time of his latest break-in-service in the form of a lump sum payment
      in accordance with the terms of Section 13.7(G) and is subsequently
      reemployed by the Employer, his previous Credited Service shall be
      disregarded when determining his retirement income upon his subsequent
      retirement or break-in-service.

      However, he may restore the Credited Service he lost when he received the
      lump sum payment by repaying the amount he received plus interest. The
      interest on such amount will be computed for the number of full calendar
      months from the date of payment to the date of repayment at the rate of
      120% of the Federal mid-term rate (as in effect under Section 1274 of the
      Code for the first month of the Plan Year). Such repayment must be made no
      later than the earlier of (A) the fifth anniversary of his reemployment
      date with the Employer, or (B) the last day of a period of five (5)
      consecutive one year breaks-in-service determined from the date the lump
      sum payment was paid such participant. Upon a Participant's subsequent
      retirement or break-in-service, that portion of his vested accrued
      retirement income attributable to Credited Service before his latest
      retirement or break-in-service shall not be less than his previous vested
      accrued retirement income modified, if applicable, to reflect any change
      in the form of payment of his retirement income.


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187                                 14               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                     Section III
                                                        Normal Retirement Income
- --------------------------------------------------------------------------------

                                   SECTION III
                            NORMAL RETIREMENT INCOME

3.1   Accrued Benefit

      A Participant's Accrued Benefit shall be the greatest of (A), (B), (C), or
      D below:

      (A)   (1)   50% of Final Earnings reduced by 50% of the Social Security
                  Amount (provided, however, that the maximum offset hereunder
                  will, in no event, exceed the maximum allowable offset under
                  Internal Revenue Regulations Section 1.401(l)-(3)(b)(3));

            (2)   the amount described in (A)(1) shall be multiplied by (a) or
                  (b), below, whichever applies:

                  (a)   if the Participant's employment did not cease prior to
                        his Normal Retirement Date:, the ratio that the number
                        of his years of Credited Service up to a maximum of
                        fifteen (15), on his Retirement Date bears to fifteen
                        (15), or

                  (b)   if the Participant's employment ceased prior to his
                        Normal Retirement Date:

                        the ratio that the number of his years of Credited
                        Service bears to the greater of (i) fifteen (15), and
                        (ii) the number of years of Credited Service he would
                        have had on his Normal Retirement Date had his Service
                        not ceased; or

      (B)   $25 multiplied by each month for which the Participant is granted
            Credited Service; or

      (C)   the Participant's Prior Plan Accrued Benefit; or

      (D)   the Participant's Accrued Benefit determined as of December 31,
            1997.

      In no event will a reduction in Final Earnings cause the retirement income
      determined for a Participant on his Normal Retirement Date to be less than
      the highest amount of retirement income the Participant would have
      received in the same form of payment had his Service ceased at any time
      prior to his Normal Retirement Date when he was eligible to receive an
      immediate retirement income.

      Moreover, in no event will the total annual amount of retirement income to
      be provided for a reemployed Participant on account of all periods of
      employment be greater than the annual


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187                                 15               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                     Section III
                                                        Normal Retirement Income
- --------------------------------------------------------------------------------

      amount of retirement income which would have been provided for him if his
      prior cessation of Service had not occurred.

3.2   Eligibility and Commencement - Normal Retirement Income

      Each Participant who retires from the employ of the Employer on his Normal
      Retirement Date will receive a normal retirement income commencing on such
      date.

3.3   Amount of Normal Retirement Income

      The annual amount of normal retirement income payable to such Participant
      will be equal to the amount described in paragraphs (A), (B), or (C)
      below, whichever applies:

      (A)   If the Participant has a Spouse as of his Retirement Date and does
            not elect pursuant to Section 7.5 to receive his normal retirement
            income on the basis of any other form of payment provided under this
            Plan:

            The Participant's annual normal retirement income shall be paid on
            the basis of the Joint and Survivor form and shall be determined by
            multiplying (1) and (2) below, where:

            (1)   equals the amount determined in Section 3.1, and

            (2)   equals the Adjustment Factor appropriate for the Joint and
                  Survivor form.

      (B)   If the Participant does not have a Spouse as of his Retirement Date
            or if the Participant has a Spouse and elects pursuant to Section
            7.5 to receive his normal retirement income under the Life-No Death
            Benefit form of payment as described in Section VII, Normal Form of
            Payments:

            The Participant's annual normal retirement income shall be the
            amount determined in Section 3.1.

      (C)   If, in lieu of the alternatives specified in paragraph (A) or (B)
            above, the Participant elects pursuant to Section 7.5 to receive his
            normal retirement income on the basis of one of the optional forms
            of payment described in Section VIII, Optional Forms of Payment:

            The Participant's annual normal retirement income shall be
            determined by adjusting the amount determined in Section 3.1 in the
            manner described in Section VIII, Optional Forms of Payment, for the
            optional form of payment elected by the Participant.


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187                                 16               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                      Section IV
                                                Late and Early Retirement Income
- --------------------------------------------------------------------------------

                                  SECTION IV -
                        LATE AND EARLY RETIREMENT INCOME

4.1   Eligibility and Commencement - Late Retirement Date

      Subject to the provisions of Section 7.7, each Participant whose
      employment with the Employer continues after his Normal Retirement Date
      will receive a late retirement income commencing on the first day of the
      month coincident with or next following the date he retires.

4.2   Amount of Late Retirement Income

      Subject to the provisions of Section 7.9, the annual amount of late
      retirement income payable to such Participant will be determined based
      upon the number of years and months that his actual Late Retirement Date
      exceeds his Normal Retirement Date as set forth below:

      (A)   If the Participant's Late Retirement Date occurs in the same Plan
            Year as his or her Normal Retirement Date, the annual amount of late
            retirement income payable to such Participant will be equal to the
            greater of the amounts described in paragraphs (1) or (2) below:

            (1)   the annual amount described in the applicable paragraph of
                  Section 3.3, based on the terms of the Plan as constituted on
                  the date the Participant retired and Final Earnings and
                  Credited Service to the Participant's Normal Retirement Date,
                  but not later than December 31, 2000, adjusted by multiplying
                  such amount by the late retirement Adjustment Factor ("LRF"),
                  or

            (2)   the annual amount described in the applicable paragraph of
                  Section 3.3, based on the terms of the Plan as constituted on
                  the date the Participant retired and Final Earnings and
                  Credited Service to the date the Participant retired, but not
                  later than December 31, 2000.

      (B)   If the Participant's Late Retirement Date occurs in the Plan Year
            following his or her Normal Retirement Date, the annual amount of
            late retirement income payable to such Participant will be equal to
            the greatest of the amounts described in paragraphs (1), (2) or (3)
            below:

            (1)   the annual amount described in the applicable paragraph of
                  Section 3.3, based on the terms of the Plan as constituted on
                  the date the Participant retired and Final Earnings and
                  Credited Service to the Participant's Normal Retirement Date,
                  but not later than December 31, 2000, adjusted by multiplying
                  such amount by the LRF, or


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187                                 17               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                      Section IV
                                                Late and Early Retirement Income
- --------------------------------------------------------------------------------

            (2)   the annual amount described in the applicable paragraph of
                  Section 3.3, based on the terms of the Plan as constituted on
                  the date the Participant retired and Final Earnings and
                  Credited Service to the date the Participant retired, but not
                  later than December 31, 2000, or

            (3)   the annual amount described under (1) or (2) above, whichever
                  produces the greater amount, determined as of the last day of
                  the Plan Year coincident with or preceding the Late Retirement
                  Date (but not later than December 31, 2000) multiplied by the
                  ratio that the LRF bears to the late retirement Adjustment
                  Factor as of the last day of the Plan Year coincident with or
                  preceding the Late Retirement Date ("Prior LRF").

      (C)   If the Participant's Late Retirement Date occurs in the second Plan
            Year subsequent to his or her Normal Retirement Date, or at any time
            thereafter, the annual amount of late retirement income payable to
            such Participant will be equal to the greatest of the amounts
            described in paragraphs (1), (2) or (3) below:

            (1)   the annual amount described in the applicable paragraph of
                  Section 3.3, based on the terms of the Plan as constituted on
                  the date the Participant retired and Final Earnings and
                  Credited Service to the Participant's Normal Retirement Date,
                  but not later than December 31, 2000, adjusted by multiplying
                  such amount by the LRF, or

            (2)   the annual amount described in the applicable paragraph of
                  Section 3.3, based on the terms of the Plan as constituted on
                  the date the Participant retired and Final Earnings and
                  Credited Service to the date the Participant retired, but not
                  later than December 31, 2000, or

            (3)   the annual amount, determined as of the last day of the Plan
                  Year coincident with or preceding the Late Retirement Date
                  (but not later than December 31, 2000) multiplied by the ratio
                  that the LRF bears to the Prior LRF where the annual amount
                  for the purpose of this paragraph equals the greatest of:

                  (a)   (1) above, or

                  (b)   (2) above, or

                  (c)   the result of the prior year's last day of the Plan Year
                        (but not later than December 31, 2000) calculations
                        determining the greatest of all annual amounts.

      (D)   Notwithstanding the foregoing, the annual amount of late retirement
            income for a Participant whose Late Retirement Date occurs after the
            date he attains the age of seventy and one-half (70-1/2) shall not
            be less than the actuarial equivalent of the annual


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187                                 18               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                      Section IV
                                                Late and Early Retirement Income
- --------------------------------------------------------------------------------


            late Retirement Benefit that would have been payable if benefit
            payments had begun on the date the Participant attained the age of
            seventy and one half (70-1/2).

4.3   Eligibility and Commencement - Early Retirement Date

      Each Participant who retires from the employ of the Employer after
      attaining age fifty-five (55) will be eligible to receive an early
      retirement income provided his Vesting Percentage is other than zero
      percent (0%). The early retirement income will be a deferred benefit
      commencing upon the Participant's Normal Retirement Date.

      However, a Participant who is eligible to receive an early retirement
      income may elect to have such benefit commence prior to his Normal
      Retirement Date. Payment of this retirement income will commence on the
      first day of any month between the date the election is made and the
      Participant's Normal Retirement Date, as specified by the Participant in
      his election.

4.4   Amount of Early Retirement Income

      (A)   The annual amount of early retirement income payable to such a
            Participant at his Normal Retirement Date will be equal to the
            amount described in the applicable paragraph of Section 3.3, based
            on (1) the terms of the Plan as constituted on the date the
            Participant retired and (2) Credited Service to the date the
            Participant retired, but not later than December 31, 2000.

      (B)   If payments commence prior to a Participant's Normal Retirement
            Date, the annual amount of early retirement income payable to such
            Participant will be equal to the amount described in paragraph (A)
            above, multiplied by the appropriate Adjustment Factor.


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187                                 19               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                       Section V
                          Termination of Employment and Vested Retirement Income
- --------------------------------------------------------------------------------

                                    SECTION V
             TERMINATION OF EMPLOYMENT AND VESTED RETIREMENT INCOME

5.1   Eligibility and Commencement - Vested Retirement Date

      Each Participant who incurs a Termination of Employment, and who will not
      receive early, normal or late retirement income in accordance with the
      preceding Sections, will be eligible to receive a vested retirement income
      commencing upon his Normal Retirement Date, provided his Vesting
      Percentage is other than zero percent (0%).

      Subject to the provisions of Section 4.3, a Participant may instead elect
      in writing to receive retirement income commencing on the first day of any
      month following the date the election is made and after he has attained
      age fifty-five (55), as specified by the Participant in his election.

5.2   Amount of Vested Retirement Income

      (A)   The annual amount of vested retirement income payable to such
            Participant at his Normal Retirement Date will be equal to the
            amount described in the applicable paragraph of Section 3.3, based
            on (1) the terms of the Plan as constituted on the date the
            Participant terminated employment and (2) Credited Service to the
            date the Participant terminated employment (but not later than
            December 31, 2000) multiplied by the Participant's Vesting
            Percentage.

      (B)   If payments commence prior to a Participant's Normal Retirement
            Date, the annual amount of vested retirement income payable to such
            Participant will be equal to the amount described in paragraph (A)
            above multiplied by the appropriate Early Commencement Adjustment
            Factor.

      (C)   Notwithstanding any other provisions of this Plan to the contrary,
            if the Participant's Termination of Employment occurred prior to
            January 1, 1976, he will receive his retirement income in the Normal
            Form of Payment described in Section 7.2 unless he has elected to
            receive his retirement income in (1) an optional form of payment
            described in Section VIII, Optional Forms of Payment, or (2) the
            Joint and Survivor form of payment.


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187                                 20               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                      Section VI
                                                       Maximum Retirement Income
- --------------------------------------------------------------------------------

                                   SECTION VI
                            MAXIMUM RETIREMENT INCOME

6.1   Maximum Retirement Income

      (A)   For purposes of this Section 6.1, the words and phrases below will
            have the following meanings:

            (1)   Annual Additions - The sum of the following amounts credited
                  to a Participant's account or accounts for the Limitation
                  Year:

                  (a)   Employer contributions,

                  (b)   Employee contributions,

                  (c)   forfeitures, and

                  (d)   (1) amounts allocated after March 31, 1984 to an
                        individual medical account, as defined in Section
                        415(l)(2) of the Code, that is part of a pension or
                        annuity plan maintained by the Employer and (2) amounts
                        derived from contributions, paid or accrued after
                        December 31, 1985, that are attributable to
                        post-retirement medical benefits allocated to the
                        separate account of a key employee, as defined in
                        Section 419A(d)(3) of the Code, under a welfare benefit
                        fund are treated as Annual Additions to a defined
                        contribution plan.

                  The Annual Additions for a Limitation Year commencing prior to
                  the Restatement Date shall be determined in accordance with
                  the provisions of the Prior Plan.

            (2)   Current Accrued Benefit - A Participant's annual Accrued
                  Benefit under the Plan, determined in accordance with Section
                  415(b)(2) of the Code, as if the Participant had separated
                  from service as of the close of the last Limitation Year
                  beginning before January 1, 1987. In determining the amount of
                  a Participant's Current Accrued Benefit, the following shall
                  be disregarded:

                  (a)   any change in the terms and conditions of the Plan after
                        May 5, 1986; and

                  (b)   any cost-of-living adjustment occurring after May 5,
                        1986.

            (3)   Defined benefit plan and defined contribution plan - The
                  meanings set forth in Section 4l5(k) of the Code.


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187                                 21               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                      Section VI
                                                       Maximum Retirement Income
- --------------------------------------------------------------------------------

            (4)   Defined Benefit Plan Fraction - For a Limitation Year, a
                  fraction, (a) the numerator of which is the aggregate
                  Projected Annual Benefit (determined as of the last day of the
                  Limitation Year) of the Participant under all defined benefit
                  plans (whether or not terminated) maintained by the Employer,
                  and (b) the denominator of which is the lesser of (i) the
                  product of l.25 (or such adjustment as required under Section
                  6.2(D)) and the dollar limitation in effect under Section
                  4l5(b)(l)(A) of the Code for such Limitation Year adjusted as
                  prescribed by the Secretary of the Treasury under Section
                  415(d) of the Code, or (ii) the product of l.4 and the amount
                  which may be taken into account with respect to such
                  Participant under Section 4l5(b)(l)(B) of the Code for such
                  Limitation Year. Notwithstanding the above, if the Participant
                  was a participant in one or more defined benefit plans of the
                  Employer in existence on May 6, l986, the dollar limitation
                  used to determine the denominator of this fraction will not be
                  less than one hundred twenty-five percent (125%) of the
                  Participant's Current Accrued Benefit.

            (5)   Defined Contribution Plan Fraction - For a Limitation Year, a
                  fraction, (a) the numerator of which is the sum of the
                  Participant's Annual Additions under all defined contribution
                  plans (whether or not terminated) maintained by the Employer
                  for the current year and all prior Limitation Years (including
                  annual additions attributable to the Participant's
                  nondeductible employee contributions to all defined benefit
                  plans (whether or not terminated) maintained by the Employer
                  and the Annual Additions attributable to the Participant's
                  welfare benefit funds as defined under Section 419(e) of the
                  Code or individual medical accounts as defined under Section
                  415(l)(2) of the Code, maintained by the Employer), and (b)
                  the denominator of which is the sum of the maximum aggregate
                  amounts for the current year and all prior Limitation Years
                  with the Employer (regardless of whether a defined
                  contribution plan was maintained by the Employer). "Maximum
                  aggregate amounts" shall mean the lesser of (i) the product of
                  1.25 (or such adjustment as required under Section 6.2(D)) and
                  the dollar limitation in effect under Section 415(c)(1)(A) of
                  the Code, adjusted as prescribed by the Secretary of the
                  Treasury under Section 415(d) of the Code or (ii) the product
                  of 1.4 and the amount that may be taken into account under
                  Section 415(c)(l)(B) of the Code; provided, however, the Plan
                  Administrator may elect, on a uniform and nondiscriminatory
                  basis, to apply the special transition rule of Section
                  415(e)(7) of the Code applicable to Limitation Years ending
                  before January l, l983 in determining the denominator of the
                  Defined Contribution Plan Fraction.

                  If the Employee was a Participant as of the first day of the
                  first Limitation Year beginning after December 31, 1986, in
                  one or more defined contribution plans maintained by the
                  Employer which were in existence on May 6, 1986, the numerator
                  of this fraction will be adjusted if the sum of this fraction
                  and the


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187                                 22               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                      Section VI
                                                       Maximum Retirement Income
- --------------------------------------------------------------------------------

                  defined benefit fraction would otherwise exceed 1.0 under the
                  terms of this Plan. Under the adjustment, an amount equal to
                  the product of (1) the excess of the sum of the fractions over
                  1.0 times (2) the denominator of this fraction, will be
                  permanently subtracted from the numerator of this fraction.
                  The adjustment is calculated using the fractions as they would
                  be computed as of the end of the last Limitation Year
                  beginning before January 1, 1987, and disregarding any changes
                  in the terms and conditions of the plans made after May 5,
                  1986, but using the Section 415 limitation applicable to the
                  first Limitation Year beginning on or after January 1, 1987.

            (6)   Highest Average Compensation - The average Section 415
                  Compensation of a Participant for the three (3) consecutive
                  calendar years during which he was a Participant in the Plan
                  that produces the highest such average. If an Employee was a
                  Participant for less than three (3) consecutive years, the
                  number of his consecutively completed calendar years during
                  which he was a Participant shall be used to compute such
                  average.

            (7)   Limitation Year - The Plan Year.

            (8)   Maximum Permissible Dollar Amount - $90,000. Such amount shall
                  be adjusted in accordance with the provisions of Section
                  6.1(C).

            (9)   Projected Annual Benefit - Under a defined benefit plan, the
                  annual retirement income to which a Participant would be
                  entitled under such plan if (a) he were to continue in
                  employment until his normal retirement age under such plan (or
                  until his current age, if later), (b) his Section 4l5
                  Compensation for the Limitation Year under consideration
                  remains the same until the date he attains such age, and (c)
                  all other relevant factors used to determine benefits under
                  the plan were to remain the same as in the current Limitation
                  Year for all future Limitation Years.

            (10)  Section 415 Compensation - A Participant's remuneration as
                  defined under Income Tax Regulations Sections 1.415-2(d)(2),
                  (3) and (6). For the purpose of determining Section 415
                  Compensation for any Limitation Year, amounts shall be
                  includable in the Limitation Year in which they are actually
                  paid or made available to the Participant. For purposes of
                  this Section, effective for Limitation Years commencing after
                  December 31, 1997, Section 415 Compensation shall include (A)
                  any elective deferral (as defined in Section 402(g)(3) of the
                  Code), and (B) any amount which is contributed or deferred by
                  the Employer at the election of the Employee and which is not
                  includable in the gross income of the Employee by reason of
                  Section 125 or 457 of the Code.

                  For purposes of this Section 6.1(A)(10), effective for
                  Limitation Years commencing on or after January 1, 1998, for
                  purposes of applying the


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187                                 23               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                      Section VI
                                                       Maximum Retirement Income
- --------------------------------------------------------------------------------

                  limitations described in this Section 6.1, amounts paid or
                  made available during such Limitation Years shall include
                  elective amounts that are not includable in the gross income
                  of an Employee by reason of Section 132(f)(4) of the Code.

            (B)   For purposes of applying the Section 415 limitations, the
                  Employer and all members of a controlled group of
                  corporations, as defined under Section 414(b) of the Code as
                  modified by Section 415(h) of the Code, all commonly
                  controlled trades or businesses, as defined under Section
                  414(c) of the Code, as modified by Section 415(h) of the Code,
                  all affiliated service groups, as defined under Section 414(m)
                  of the Code, of which the Employer is a member or was a member
                  for any period, provided a Participant was employed by such
                  member during the period of affiliation, as well as any
                  leasing organization, as defined under Section 414(n) of the
                  Code that employs any person who is considered an Employee
                  under Section 414(n) of the Code, and any other entity
                  required to be aggregated with the Employer in accordance with
                  regulations prescribed by the Secretary of the Treasury under
                  Section 4l4(o) of the Code, shall be treated as the Employer.

            (C)   The maximum amount of annual retirement income payable under
                  this Plan during any Limitation Year shall be subject to all
                  of the following limitations:

                  (1)   The annual retirement income payable as a Life-No Death
                        Benefit, or as a Joint and Survivor form of payment
                        shall be the lesser of (a) the Maximum Permissible
                        Dollar Amount or (b) one hundred percent (100%) of the
                        Participant's Highest Average Compensation.

                  (2)   A Participant's retirement income which does not exceed
                        a maximum of $10,000 for any Plan Year shall be deemed
                        not to exceed the foregoing limitations if the
                        Participant did not at any time participate in a defined
                        contribution plan, a welfare benefit plan as defined
                        under Section 419A(d)(2) of the Code or an individual
                        medical account as defined under Section 415(l)(2) of
                        the Code maintained by the Employer. The aforementioned
                        $10,000 maximum shall be subject to the provisions of
                        Section 6.1(C)(4).

                  (3)   A Participant's retirement income payable in any form of
                        payment other than a Life-No Death Benefit form of
                        payment or a Joint and Survivor form of payment will be
                        adjusted to the actuarial equivalent of the Life-No
                        Death Benefit form of payment before applying the
                        limitations of this Section 6.1(C). The actuarial
                        equivalent of a Life-No Death Benefit form of payment is
                        equal to the greater of the annuity benefit computed
                        using the interest rate and mortality table (or other
                        tabular factor) specified in the Plan for adjusting
                        benefits in the same form, and the annuity benefit
                        computed using a five percent (5%) interest rate
                        assumption, and effective for Limitation Years beginning
                        after December 31, 1994, the GATT Applicable Mortality
                        Table as set forth in Table A. In


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187                                 24               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                      Section VI
                                                       Maximum Retirement Income
- --------------------------------------------------------------------------------

                        determining the actuarial equivalent of a Life-No Death
                        Benefit form of payment for any lump sum distribution or
                        retirement income form other than a nondecreasing
                        annuity payable for a period of not less than the life
                        of the Participant (or in the case of the Preretirement
                        Spouse Benefit, the life of the surviving Spouse) or
                        decreases during the life of the Participant merely
                        because of: (A) the death of the survivor annuitant (but
                        only if the reduction is not below fifty percent (50%)
                        of the annual retirement income payable before the death
                        of the survivor annuitant), or (B) the cessation or
                        reduction of Social Security supplements of qualified
                        disability payments as defined in Section 401(a)(11) of
                        the Code, the "GATT Applicable Interest Rate," as
                        defined in the Table A of the Plan, will be substituted
                        for a "five percent (5%) interest rate assumption" in
                        the preceding sentence.

            (4)   (a)   If a Participant has completed less than ten (10) years
                        of participation in the defined benefit plan of the
                        Employer, the Maximum Permissible Dollar Amount set
                        forth in Section 6.l(C)(1)(a) above will be reduced by
                        multiplying such limitation by a fraction, the numerator
                        of which is the number of years and fraction thereof of
                        such Participant's participation and the denominator of
                        which is ten (10).

                  (b)   If a Participant has completed less than ten (10) years
                        of employment with the Employer, the limitation set
                        forth in Section 6.1(C)(1)(b) and the $10,000 maximum
                        set forth in Section 6.1(C)(2) above will be reduced by
                        multiplying such amount by a fraction, the numerator of
                        which is the number of years and fraction thereof of
                        such Participant's employment and the denominator of
                        which is ten (10).

                  (c)   In no event will the reduction set forth in Section
                        6.1(C)(4)(a) or (b) reduce the limitations set forth in
                        Section 6.1(C)(1) or the maximum set forth in Section
                        6.1(C)(2) to an amount less than one-tenth (1/10th) of
                        such limitation or maximum, whichever is applicable,
                        determined without regard to this Section 6.1(C)(4).

                  (d)   To the extent provided in regulations prescribed by the
                        Secretary of the Treasury or his delegate, this Section
                        6.1(C)(4) will be applied separately with respect to
                        each change in the benefit structure of the Plan.

            (5)   (a)   The Maximum Permissible Dollar Amount, and in the case
                        of a Participant who has incurred a Termination of
                        Employment, the Participant's Highest Average
                        Compensation, will be adjusted for increases in the
                        cost-of-living in accordance with regulations prescribed
                        by the Secretary of the Treasury or his delegate in
                        accordance with


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                                                                      Section VI
                                                       Maximum Retirement Income
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                        Section 415(d) of the Code. Each annual adjustment shall
                        be limited to the scheduled annual increase, as
                        determined by the Secretary of the Treasury, and shall
                        be effective for the Limitation Year within which such
                        increase has become effective.

                  (b)   In the event that the annual retirement income otherwise
                        payable to a Participant who has retired or terminated
                        employment has been limited by the Maximum Permissible
                        Dollar Amount, such limited annual retirement income
                        shall be increased in accordance with any automatic
                        cost-of-living adjustments in such dollar amount made
                        pursuant to Section 6.1(C)(5)(a).

            (6)   A Participant's retirement income which commences after his
                  Social Security Retirement Age may exceed the Maximum
                  Permissible Dollar Amount provided the actuarial equivalent of
                  such annual retirement income commencing at his Social
                  Security Retirement Age satisfies such Maximum Permissible
                  Dollar Amount actuarially adjusted to the date of retirement.
                  The actuarial equivalent of the Maximum Permissible Dollar
                  Amount commencing after his Social Security Retirement Age,
                  shall be determined as the lesser of the equivalent annual
                  retirement income computed using the interest rate and
                  mortality table (or other tabular factor) specified in the
                  Plan for purposes of determining the actuarial equivalent for
                  a Late Retirement Income benefit and the equivalent annual
                  retirement income computed using a five percent (5%) interest
                  rate assumption, and effective for Limitation Years beginning
                  after December 31, 1994, the GATT Applicable Mortality Table
                  as set forth in Table A of the Plan.

            (7)   If a Participant's retirement income commences prior to his
                  Social Security Retirement Age, the Maximum Permissible Dollar
                  Amount will be determined as follows:

                  (a)   If a Participant's Social Security Retirement Age is
                        sixty-five (65), the Maximum Permissible Dollar Amount
                        of retirement income commencing on or after age
                        sixty-two (62) is determined by reducing the Maximum
                        Permissible Dollar Amount by five-ninths of one percent
                        (5/9ths of 1%) for each month by which such benefit
                        commences before the month in which the Participant
                        attains age sixty-five (65).

                  (b)   If a Participant's Social Security Retirement Age is
                        greater than sixty-five (65), the Maximum Permissible
                        Dollar Amount of retirement income commencing on or
                        after age sixty-two (62) is determined by reducing the
                        Maximum Permissible Dollar Amount by five-ninths of one
                        percent (5/9ths of 1%) for each of the first thirty-six
                        (36) months and five-twelfths of one percent (5/12ths of
                        1%) for each of the additional


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                                                                      Section VI
                                                       Maximum Retirement Income
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                        months (up to twenty-four (24) months) by which such
                        retirement income commences before the month in which
                        the Participant attains his Social Security Retirement
                        Age.

                  (c)   If a Participant's retirement income commences prior to
                        age sixty-two (62), the Maximum Permissible Dollar
                        Amount shall be equal to retirement income commencing at
                        age sixty-two (62) reduced in accordance with paragraph
                        (a) or (b) above, whichever is applicable, and further
                        reduced to the actuarial equivalent of such retirement
                        income determined as of the benefit commencement date.
                        In determining the actuarial equivalent of retirement
                        income commencing prior to age sixty-two (62), such
                        retirement income shall be determined as the lesser of
                        the equivalent annual retirement income computed using
                        the Plan rates for an Early Retirement Benefit as set
                        forth in Section 4.4 and Table A, and the equivalent
                        annual retirement income computed using a five percent
                        (5%) interest rate, and effective for Limitation Years
                        beginning after December 31, 1994, the GATT Applicable
                        Mortality Table as set forth in the Table A of the Plan.

            (8)   If any retirement benefits shall be payable to or on account
                  of any Participant in this Plan under any other defined
                  benefit plan(s) (whether or not terminated) maintained by the
                  Employer, the limitation applicable to such Participant for
                  the purposes of this Section 6.l shall be determined by
                  combining the retirement income payable under this Plan and
                  the retirement benefits of all other such defined benefit
                  plan(s). To the extent necessary, the retirement income under
                  this Plan shall be reduced to insure that such combined
                  benefits shall not exceed the limitation applicable to such
                  Participant. Notwithstanding the foregoing, in the case of a
                  Participant who was a participant in one or more defined
                  benefit plans of the Employer in existence on May 6, 1986, the
                  limitations of this Section 6.l shall not be less than the
                  participant's Current Accrued Benefits under all such defined
                  benefit plans as of the end of the last Limitation Year
                  beginning before January 1, 1987. The preceding sentence
                  applies only if the defined benefit plans individually and in
                  the aggregate satisfied the requirements of Section 415 of the
                  Code, as in effect at the end of the 1986 Limitation Year.

                  In the case of a Participant who was a participant in one or
                  more defined benefit plans of the Employer as of the first day
                  of the first Limitation Year beginning after December 31,
                  1994, the limit applicable to such Participant for purposes of
                  this Section 6.1 shall not cause the Maximum Permissible
                  Dollar Amount for such Participant under all such defined
                  benefit plans to be less than the Participant's Old Law
                  Benefit. The preceding sentence applies only if such defined
                  benefit plans met the requirements Code Section 415 on
                  December 7, 1994.


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                                                                      Section VI
                                                       Maximum Retirement Income
- --------------------------------------------------------------------------------

            (9)   Notwithstanding the limitations of Section 6.1(C), if a
                  Participant is also a participant in any defined contribution
                  plan of the Employer, the retirement income payable under this
                  Plan shall be reduced to the extent necessary as determined by
                  the Plan Administrator, so as not to exceed the overall
                  limitations on benefits and contributions of Section 415(e) of
                  the Code. For this purpose, the Plan Administrator will
                  compute the Participant's Defined Benefit Plan Fraction and
                  Defined Contribution Plan Fraction and will make any necessary
                  adjustments so that the sum of the fractions, for any
                  Limitation Year, will not exceed 1.0. If the Plan satisfied
                  the applicable requirements of Section 415 of the Code as in
                  effect for all Limitation Years beginning before January 1,
                  1987, an amount shall be subtracted from the numerator of the
                  Defined Contribution Plan Fraction (not exceeding such
                  numerator) as prescribed by the Secretary of the Treasury or
                  his delegate so that the sum of the Defined Benefit Plan
                  Fraction and Defined Contribution Plan Fraction computed under
                  Section 415(e)(1) of the Code does not exceed 1.0 for such
                  Limitation Year. This subsection (9) shall not apply with
                  respect to Plan Years beginning on or after January 1, 2000.

6.2   Top-Heavy Provisions

      The following provisions will become effective in any Plan Year in which
      the Plan is determined to be a Top-Heavy Plan and shall supersede any
      other conflicting provisions of the Plan.

      (A)   For purposes of this Section 6.2, the words and phrases below will
            have the following meanings:

            (1)   Determination Date - With respect to a Plan Year, the last day
                  of the preceding Plan Year. With respect to the first Plan
                  Year, the last day of the first Plan Year.

            (2)   Employer - For purposes of this Section 6.2, the Employer who
                  adopts this Plan and any Affiliated Employer. An entity other
                  than the Employer will be treated as an Employer only while it
                  is an Affiliated Employer.

            (3)   Five-Percent Owner - If the Employer is a corporation, any
                  Employee who owns (or is considered as owning within the
                  meaning of Section 3l8 of the Code) more than five percent
                  (5%) of the value of the outstanding stock, or stock
                  possessing more than five percent (5%) of the total combined
                  voting power of all the stock, of the Employer. If the
                  Employer is not a corporation, a Five-Percent Owner means any
                  Employee who owns more than five percent (5%) of the capital
                  or profits interest in the Employer.

            (4)   Key Employee - Any Employee or former Employee (or, where
                  applicable, such person's Beneficiary) in the Plan who, at any
                  time during the Plan Year


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                                                                      Section VI
                                                       Maximum Retirement Income
- --------------------------------------------------------------------------------

                  containing the Determination Date or any of the preceding four
                  (4) Plan Years, is: (a) an Officer having Top-Heavy Earnings
                  from the Employer of greater than fifty percent (50%) of the
                  dollar limitation in effect under Section 415(b)(1)(A) of the
                  Code; (b) one of the ten (10) Employees having Top-Heavy
                  Earnings from the Employer of more than the dollar limitation
                  in effect under Section 415(c)(1)(A) of the Code and owning
                  (or considered as owning within the meaning of Section 318 of
                  the Code modified by Section 416(i)(1)(B)(iii) of the Code)
                  both more than a one-half of one percent (1/2 of 1%) interest
                  in value and the largest interests in the value of the
                  Employer; (c) a Five-Percent Owner of the Employer; or (d) a
                  One-Percent Owner of the Employer having Top-Heavy Earnings
                  from the Employer greater than $150,000. For purposes of
                  computing the Top-Heavy Earnings in Sections 6.2(A)(4)(a), (b)
                  and (d) above, the aggregation rules of Sections 414(b), (c),
                  (m), (n) and (o) of the Code shall apply.

            (5)   Non-Key Employee - Any Employee or former Employee (or, where
                  applicable, such person's Beneficiary) who is not a Key
                  Employee.

            (6)   Officer - An Employee who is an administrative executive in
                  the regular and continued service of his Employer; any
                  Employee who has the title but not the authority of an officer
                  shall not be considered an Officer for purposes of this
                  paragraph. Similarly, an Employee who does not have the title
                  of an officer but has the authority of an officer shall be
                  considered an Officer. For purposes of this paragraph, the
                  maximum number of Officers that must be taken into
                  consideration shall be determined as follows: (a) three (3),
                  if the number of Employees is less than thirty (30); (b) ten
                  percent (10%) of the number of Employees, if the number of
                  Employees is between thirty (30) and five hundred (500); or
                  (c) fifty (50), if the number of Employees is greater than
                  five hundred (500). In determining such limit, the term
                  "Employer" shall be determined in accordance with Sections
                  414(b), (c), (m), (n) and (o) of the Code and "Employee" shall
                  include Leased Employees and exclude employees described in
                  Section 414(q)(5) of the Code.

            (7)   One-Percent Owner - If the Employer is a corporation, any
                  Employee who owns (or is considered as owning within the
                  meaning of Section 318 of the Code modified by Section
                  416(i)(1)(B)(iii) of the Code) more than one percent (1%) of
                  the value of the outstanding stock, or stock possessing more
                  than one percent (1%) of the total combined voting power of
                  all the stock, of the Employer. If the Employer is not a
                  corporation, a One-Percent Owner means any Employee who owns
                  more than one percent (1%) of the capital or profits interest
                  in the Employer.


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<PAGE>

                                                                      Section VI
                                                       Maximum Retirement Income
- --------------------------------------------------------------------------------

            (8)   Permissive Aggregation Group - All the plans of the Employer
                  which are included in the Required Aggregation Group plus any
                  plans of the Employer which are not part of a Required
                  Aggregation Group, but which satisfy the requirements of
                  Sections 401(a)(4) and 410 of the Code when considered
                  together with the Required Aggregation Group. If two (2) or
                  more defined benefit plans are included in the aggregation
                  group, the same actuarial assumptions must be used with
                  respect to all such plans in determining the Present Value of
                  Accrued Benefits.

            (9)   Present Value of Accrued Benefits - The Present Value of
                  Accrued Benefits will be determined as of the Valuation Date
                  and will be based upon (a) the 1983 Group Annuity Mortality
                  Table (separate for males and females), and (b) a five percent
                  (5%) interest rate and the assumed benefit commencement date
                  shall be determined taking into account any nonproportional
                  subsidy. Solely for the purpose of determining if this Plan,
                  or any other plan included in a Required Aggregation Group of
                  which this Plan is a part, is a Top-Heavy Plan, the Present
                  Value of Accrued Benefits of a Non-Key Employee will be
                  determined under (a) the method, if any, that uniformly
                  applies for accrual purposes under all plans maintained by the
                  Affiliated Employers, or (b) if there is no single uniform
                  method used by all plans, as if such benefit accrued not more
                  rapidly than the slowest accrual rate permitted under the
                  fractional rule of Section 411(b)(1)(C) of the Code.

            (10)  Required Aggregation Group - All the plans of the employer
                  (whether or not terminated) in which a Key Employee
                  participates or participated at any time during the Plan Year
                  containing the Determination Date or any of the four (4)
                  preceding Plan Years and each other plan of the Employer
                  (whether or not terminated) which enables any plan in which a
                  Key Employee participates or participated to meet the
                  requirements of Section 401(a)(4) or 410 of the Code. If two
                  (2) or more defined benefit plans are included in the
                  aggregation group, the same actuarial assumptions must be used
                  with respect to all such plans in determining the Present
                  Value of Accrued Benefits.

            (11)  Super Top-Heavy Plan - This Plan will be a Super Top-Heavy
                  Plan for a given Plan Year in which:

                  (a)   the Top-Heavy Ratio for the Plan exceeds ninety percent
                        (90%) and the Plan is not part of any Required
                        Aggregation Group or Permissive Aggregation Group; or

                  (b)   the Plan is part of a Required Aggregation Group (but is
                        not part of a Permissive Aggregation Group) and the
                        Top-Heavy Ratio for the group of plans exceeds ninety
                        percent (90%); or


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<PAGE>

                                                                      Section VI
                                                       Maximum Retirement Income
- --------------------------------------------------------------------------------

                  (c)   the Plan is part of a Required Aggregation Group and
                        part of a Permissive Aggregation Group and the Top-Heavy
                        Ratio for the Permissive Aggregation Group exceeds
                        ninety percent (90%).

            (12)  Top-Heavy Earnings - For any year, an individual' s annual
                  compensation as defined under Section 414(q)(7) of the Code,
                  and commencing January 1, 1998, Section 414(q)(4) of the Code,
                  up to a maximum of one hundred sixty thousand dollars
                  ($160,000) for the 1997, 1998 and 1999 and one hundred seventy
                  thousand dollars ($170,000) for the 2000 and 2001 Plan Years,
                  adjusted in multiples of ten thousand dollars ($10,000) for
                  increases in the cost-of-living, as prescribed by the
                  Secretary of the Treasury under Section 401(a)(17)(B) of the
                  Code.

            (13)  Top-Heavy Plan - This Plan will be a Top-Heavy Plan for a
                  given Plan Year if:

                  (a)   the Top-Heavy Ratio for the Plan exceeds sixty percent
                        (60%) and the Plan is not part of any Required
                        Aggregation Group or Permissive Aggregation Group; or

                  (b)   the Plan is part of a Required Aggregation Group (but is
                        not part of a Permissive Aggregation Group) and the
                        Top-Heavy Ratio for the group of plans exceeds sixty
                        percent (60%); or

                  (c)   the Plan is part of a Required Aggregation Group and
                        part of a Permissive Aggregation Group and the Top-Heavy
                        Ratio for the Permissive Aggregation Group exceeds sixty
                        percent (60%).

            (14)  Top-Heavy Ratio -

                  (a)   If the Employer maintains one (1) or more qualified
                        defined benefit plans and the Employer has not
                        maintained any qualified defined contribution plans
                        which during the five (5) year period ending on the
                        Determination Date have or have had account balances,
                        the Top-Heavy Ratio for the Plan alone or for the
                        Required Aggregation Group or Permissive Aggregation
                        Group, as appropriate, is a fraction, the numerator of
                        which is the sum of the Present Value of Accrued
                        Benefits under the aggregated qualified defined benefit
                        plan or plans for all Key Employees as of the
                        Determination Date (including any part of any accrued
                        benefit distributed in the five (5) year period ending
                        on the Determination Date) and the denominator of which
                        is the sum of the Present Value of Accrued Benefits
                        under the aggregated qualified defined benefit plan or
                        plans for all participants as of the Determination Date
                        (including any part of any accrued benefit distributed
                        in the five (5) year period ending on the Determination
                        Date), determined in


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187                                 31               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                      Section VI
                                                       Maximum Retirement Income
- --------------------------------------------------------------------------------

                        accordance with Section 416 of the Code and the
                        regulations thereunder.

                  (b)   If the Employer maintains one (1) or more qualified
                        defined benefit plans and the Employer maintains or has
                        maintained one (1) or more qualified defined
                        contribution plans which during the five (5) year period
                        ending on the Determination Date have or have had any
                        account balances, the Top-Heavy Ratio for any Required
                        Aggregation Group or Permissive Aggregation Group, as
                        appropriate, is a fraction, the numerator of which is
                        the sum of the Present Value of Accrued Benefits under
                        the aggregated qualified defined benefit plan or plans
                        for all Key Employees, determined in accordance with
                        paragraph (a) above, and the sum of the account balances
                        under the aggregated qualified defined contribution plan
                        or plans for all Key Employees as of the Determination
                        Date, and the denominator of which is the sum of the
                        Present Value of Accrued Benefits under the aggregated
                        qualified defined benefit plan or plans for all
                        participants, determined in accordance with paragraph
                        (a) above, for all Participants and the sum of the
                        account balances under the aggregated qualified defined
                        contribution plan or plans for all Participants as of
                        the Determination Date, all determined in accordance
                        with Section 416 of the Code and the regulations
                        thereunder. The account balances under a qualified
                        defined contribution plan in both the numerator and
                        denominator of the Top-Heavy Ratio are adjusted for any
                        distribution of an account balance made in the five (5)
                        year period ending on the Determination Date.

                  (c)   For purposes of paragraphs (a) and (b) above, the value
                        of account balances and the Present Value of Accrued
                        Benefits will be determined as of the most recent
                        Valuation Date that falls within the twelve (12) month
                        period ending on the Determination Date, except as
                        provided in Section 416 of the Code and the regulations
                        thereunder for the first and second Plan Years of a
                        qualified defined benefit plan. The account balances and
                        Present Value of Accrued Benefits of a Participant (i)
                        who is a Non-Key Employee but who was a Key Employee in
                        a prior year, or (ii) who has not been credited with at
                        least an Hour of Service with any employer maintaining
                        the Plan at any time during the five (5) year period
                        ending on the Determination Date, will be disregarded.
                        The calculation of the Top-Heavy Ratio and the extent to
                        which distributions are taken into account will be made
                        in accordance with Section 416 of the Code and the
                        regulations thereunder. When aggregating plans, the
                        value of account balances and the Present Value of
                        Accrued Benefits


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<PAGE>

                                                                      Section VI
                                                       Maximum Retirement Income
- --------------------------------------------------------------------------------

                        will be calculated with reference to the Determination
                        Date that falls within the same calendar year.

            (15)  Valuation Date - For the purpose of computing the Top-Heavy
                  Ratio and Super Top-Heavy Ratio, the last date of the Plan
                  Year.

            For purposes of Sections 6.2(A)(8) and (10), the rules of Sections
            414(b), (c), (m), (n) and (o) of the Code shall be applied in
            determining the meaning of the term "Employer".

      (B)   Minimum Retirement Income - If the Plan becomes a Top-Heavy Plan,
            then, notwithstanding other Sections of the Plan, each Non-Key
            Employee Participant will be entitled to a Minimum Retirement
            Income, expressed in the form of a Life-No Death Benefit form of
            payment commencing at his Normal Retirement Date, which will accrue
            at the rate of (1) two percent (2%) of such Participant's Section
            415 Compensation (modified by Section 401(a)(17) of the Code) during
            the five (5) consecutive Plan Years in which he received the highest
            such Section 415 Compensation, multiplied by (2) that portion of his
            Service used to determine his Vesting Percentage (up to a maximum of
            ten (10) years) that is completed during Plan Years in which the
            Plan is a Top-Heavy Plan. For purposes of (1) above, Plan Years
            beginning after the close of the last Plan Year in which the Plan is
            a Top-Heavy Plan will be excluded.

            A Non-Key Employee may not fail to accrue a Minimum Retirement
            Income merely because such Employee was not employed on a specified
            date; neither may such Employee be excluded from participation (or a
            failure to accrue a benefit) because (a) his Earnings are less than
            a stated amount, nor because (b) he fails to make mandatory Employee
            contributions, if any nor because (c) he completed less than 1,000
            Hours of Service during the applicable accrual computation period.
            If a Non-Key Employee is concurrently a Participant under this Plan
            and a defined contribution plan maintained by the Employer, the
            annual amount of retirement income for such Participant as
            determined in the preceding paragraphs shall be reduced by the
            annual amount of retirement income, commencing on his Normal
            Retirement Date, that can be provided under such defined
            contribution plan on a Life-No Death Benefit basis by contributions
            made to such defined contribution plan on the Participant's behalf
            during the year in which this Plan is Top-Heavy.

            If a Non-Key Employee is a Participant under this Plan and a defined
            contribution plan maintained by the Employer, the annual amount of
            retirement income for such Participant as determined in the
            preceding paragraphs shall not be provided hereunder if the
            retirement income provided under such defined contribution plan
            together with the retirement income provided under Section III,
            Normal Retirement Income, or Section IV, Late and Early Retirement
            Income, are at least equal in value to such annual retirement
            income. If the Minimum Retirement Income is payable in a form other
            than a Life-No Death Benefit or on a date other than Normal
            Retirement Date, it will be


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<PAGE>

                                                                      Section VI
                                                       Maximum Retirement Income
- --------------------------------------------------------------------------------

            adjusted to be the actuarial equivalent of the Life-No Death Benefit
            form payable at Normal Retirement Date based on the appropriate
            Adjustment Factor.

      (C)   Minimum Vesting Percentage - Notwithstanding any other Vesting
            Percentage provision of this Plan to the contrary, the Vesting
            Percentage that is applied to the accrued retirement income of a
            Participant who has at least one (1) Hour of Service with the
            Employer on and after the date this Plan becomes a Top-Heavy Plan,
            in accordance with the further terms of this Plan, and to the extent
            that with respect to a Participant this is a faster vesting
            schedule, shall be as determined as follows:

                     Service For Vesting Purposes           Percentage
                     ----------------------------           ----------

                     If he has less than 2 years:                0%
                     If he has 2 years:                         20%
                     If he has 3 years:                         40%
                     If he has 4 years:                         60%
                     If he has 5 years:                         80%
                     If he has 6 years:                        100%

            For those Plan Years in which the Plan ceases to be a Top-Heavy
            Plan, the vesting schedule shall be determined in accordance with
            the provisions of Section 1.1 (NN), subject to the following
            conditions:

            (1)   The Vesting Percentage of a Participant's retirement income
                  before the Plan ceased to be a Top-Heavy Plan shall not be
                  reduced; and

            (2)   After the Plan ceases to be a Top-Heavy Plan, each Participant
                  with at least three (3) years of Service with the Employer
                  shall have his Vesting Percentage computed under the greater
                  of the provisions of this Section 6.2(C) or the provisions of
                  Section 1.1 (NN).

      (D)   Modification to Section 6.1 when a Plan is a Top-Heavy Plan - For
            any Limitation Year prior to January 1, 2000 in which the Plan is
            determined to be a Super Top-Heavy Plan, the definitions of the
            "Defined Benefit Fraction", and "Defined Contribution Fraction" will
            be changed by substituting in the denominator of each Fraction "1.0"
            for "1.25" wherever it appears therein.

            For any Plan Year in which the Plan is a Top-Heavy Plan but not a
            Super Top-Heavy Plan, the Plan will be treated as a Super Top-Heavy
            Plan hereunder unless paragraph (B)(1) is applied by substituting
            "three percent (3%)" for "two percent (2%)".


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<PAGE>

                                                                     Section VII
                                                          Normal Form of Payment
- --------------------------------------------------------------------------------

                                   SECTION VII
                             NORMAL FORM OF PAYMENT

7.1   Normal Form of Payment - Joint and Survivor

      If the Participant has a Spouse on his Retirement Date, the normal form of
      payment is the Joint and Survivor form. This form provides that, upon the
      Participant's death on or after his Retirement Date, fifty percent (50%)
      of the retirement income payable to the Participant will be paid to such
      Spouse, if surviving the Participant, for the balance of the Spouse's
      life.

      As an alternative to the fifty percent (50%) continuation described above,
      a Participant may elect that sixty-six and two-thirds percent (66-2/3%) or
      one hundred percent (100%) of the benefit payable to him be continued to
      his Spouse upon his death. Such election will not require spousal consent.

7.2   Normal Form of Payment - Life-No Death Benefit

      If the Participant does not have a Spouse on his Retirement Date, the
      normal form of payment is the Life-No Death Benefit form. This form
      provides that payments will be made to the Participant in a level amount
      during his lifetime and that, after his death, no further payment will be
      made.

7.3   Optional Forms of Payment

      Subject to the provisions of Section 7.5, in lieu of receiving his
      retirement income in the normal form applicable to him, a Participant may
      elect to receive a benefit of equal value in one of the optional forms of
      payment described in Section VIII, Optional Forms of Payment. Moreover, if
      the Participant's normal form of payment is that described in Section 7.1,
      such Participant may also elect to receive, in lieu thereof, retirement
      income in the form of a Life-No Death Benefit as described in the second
      sentence of Section 7.2.

7.4   Notice to Participants

      The Employer shall make every reasonable effort to furnish each
      Participant, by personal delivery or first class mail, the following
      information not less than thirty (30) days nor more than ninety (90) days
      prior to his commencement of benefits:

      (A)   the terms and conditions of the Joint and Survivor form of payment,

      (B)   the Participant's right to make, and the effect of, an election to
            waive the Joint and Survivor form of payment,

      (C)   the rights of the Participant's Spouse under the Plan,


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<PAGE>

                                                                     Section VII
                                                          Normal Form of Payment
- --------------------------------------------------------------------------------

      (D)   the right to make, and the effect of, a revocation of a previous
            election to waive the Joint and Survivor form of payment, and

      (E)   the relative values of the various optional forms of payment under
            the Plan.

      The Employer may also permanently post in the Employer's office or offices
      the information described in (A) through (E) above in a manner that is
      reasonably calculated to reach the attention of each Participant.

7.5   Election of Option

      The Participant may elect or revoke an option during the ninety (90) day
      period before his Retirement Date by filing a written election with the
      Employer. However, a Participant may not elect more than one (1) option to
      be effective at the same time. No such election or revocation can be made
      after the Participant's Retirement Date.

      To elect an option, a married Participant must make a Qualified Election
      in accordance with Section 7.6. If a Participant elects an optional form
      of payment, the amount of retirement income payable to him must be more
      than fifty percent (50%) of the present value of the retirement income
      payable to the Participant had the option not been elected, unless the
      alternate recipient is the Participant's Spouse; otherwise, such election
      will be deemed null and void.

7.6   Qualified Election

      Notwithstanding any other provisions in the Plan to the contrary, for
      purposes of this Section 7.6, a Qualified Election to waive the Joint and
      Survivor form of payment shall not be effective unless: (A) the
      Participant's Spouse irrevocably consents in writing to the election; (B)
      such election designates a Beneficiary or form of payment which may not be
      changed without spousal consent (or the consent of the Spouse expressly
      permits a change in such designations by the Participant without any
      requirement of further consent by the Spouse), (C) the Spouse's consent
      acknowledges understanding of the effect of such election, and (D) the
      consent is witnessed by a Plan representative or a notary public.
      Notwithstanding this spousal consent requirement, if the Participant
      establishes to the satisfaction of a Plan representative that such written
      consent cannot be obtained because:

      (1)   there is no Spouse;

      (2)   the Spouse cannot be located;

      (3)   there are other circumstances as the Secretary of the Treasury may
            prescribe by regulations, then the Participant's election to waive
            coverage will be considered valid.


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187                                 36               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                     Section VII
                                                          Normal Form of Payment
- --------------------------------------------------------------------------------

      Any consent necessary under this provision will be valid only with respect
      to the Spouse who signs the consent. A Participant is allowed to revoke
      his Qualified Election without the consent of his Spouse. The number of
      his Qualified Elections and revocations is not limited.

7.7   Payment of Retirement Income to Participant

      All payment of retirement income under the Plan shall be made in
      accordance with Section 401(a)(9) of the Code. Subject to the Joint and
      Survivor form of payment requirement of Section 7.1 and the Preretirement
      Spouse Benefit requirement of Section IX, the distribution requirements of
      Section 401(a)(9) of the Code as set forth in this Section 7.7 and in
      Sections 7.8 and 7.9, shall take precedence over any inconsistent
      provisions of this Plan.

      Retirement income will be payable to the Participant monthly with each
      payment equal to one twelfth (1/12) of the annual amount. The first of
      such monthly payments will be made to the Participant as of his Retirement
      Date, with subsequent monthly payments being made as of the first day of
      each month thereafter until the Participant's death occurs.

      Unless the Participant elects otherwise, the payment of retirement income
      will commence no later than the sixtieth (60th) day after the end of the
      Plan Year in which the latest of the following occurs.

      (A)   the Participant attains the earlier of (1) age sixty-five (65), or
            (2) his Normal Retirement Date as defined in Section 1.1(W)(1), or

      (B)   the tenth (10th) anniversary of the year in which the Participant
            commenced participation in the Plan, or

      (C)   the Participant's Termination of Employment with the Employer.

      (1)   Distributions to Five Percent Owners shall be subject to the
            following rules: The vested interest in the Accrued Benefit of a
            5-percent owner (as described in Section 416(i) of the Code and
            determined with respect to the Plan Year ending in the calendar year
            in which such individual attains age 70-1/2 must be distributed or
            commence to be distributed no later than the first day of April
            following the calendar year in which such individual attains age
            70-1/2. The vested interest in the Accrued Benefit of a person who
            is not a 5-percent owner (as described in Section 416(i) of the
            Code) for the Plan Year ending in the calendar year in which such
            person attains age 70-1/2 but who becomes a 5-percent owner (as
            described in Section 416(i) of the Code) for a later Plan Year must
            be distributed or commence to be distributed no later than the first
            day of April following the last day of the calendar year that
            includes the last day of the first Plan Year for which such
            individual is a 5-percent owner (as described in Section 416(i) of
            the Code).


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187                                 37               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                     Section VII
                                                          Normal Form of Payment
- --------------------------------------------------------------------------------

      (2)   Distributions to other than 5-percent owners shall be subject to the
            following rules: The vested interest in the Accrued Benefit of an
            Employee who is not a five-percent owner and who attained age 70-1/2
            prior to January 1, 1988, must be distributed or commence to be
            distributed no later than the first day of April following the
            calendar year in which occurs the later of: (i) his termination of
            employment or (ii) his attainment of age 70-1/2.

            Except as otherwise provided in the following paragraph, the vested
            interest in the Accrued Benefit of any Employee who attains age
            70-1/2 after December 31, 1987, must be distributed or commence to
            be distributed no later than the first day of April following the
            later of: (A) the 1989 calendar year or (B) the calendar year in
            which such individual attains age 70-1/2.

            Effective January 1, 1997, an Employee otherwise required to receive
            a distribution under the preceding paragraph, may elect to defer
            distribution of the Accrued Benefit to the date of his termination
            of employment without spousal consent. In addition, no spousal
            consent is required when payments recommence to the Employee, if
            payments recommence to the Employee with the same Beneficiary and in
            a form of benefit that is the same, but for the cessation of
            distributions hereunder.

            Notwithstanding the foregoing, the vested interest in the Accrued
            Benefit of (I) any Employee who becomes a Participant on or after
            January 1, 1997 or (II) any Employee who attains age 70-1/2 in a
            calendar year beginning on or after January 1, 2002, must be
            distributed or commence to be distributed no later than the first
            day of April following the calendar year in which occurs the later
            of: (1) his termination of employment or (2) his attainment of age
            70-1/2.

            Notwithstanding any provisions of the Plan to the contrary, any and
            all distributions from the Plan shall be made in accordance with
            Section 401(a)(9) of the Code and the requirements of Income Tax
            Regulations issued under Code Section 401(a)(9).

7.8   Limits of Payment Options

      Payments, if not made in a lump sum, may only be made over one of the
      following periods (or a combination thereof):

      (A)   the life of the Participant,

      (B)   the life of the Participant and a designated Beneficiary,

      (C)   a period certain not extending beyond the life expectancy of the
            Participant, or

      (D)   a period certain not extending beyond the joint and last survivor
            expectancy of the Participant and his designated Beneficiary.


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187                                 38               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                     Section VII
                                                          Normal Form of Payment
- --------------------------------------------------------------------------------

7.9   Minimum Amounts to be Paid

      The amount to be paid each year must be at least an amount equal to the
      quotient obtained by dividing the Participant's entire retirement income
      by the life expectancy of the Participant or joint and last survivor
      expectancy of the Participant and designated Beneficiary. Life expectancy
      and joint and last survivor expectancy are computed by the use of the
      return multiples contained in Income Tax Regulations Section 1.72-9. For
      purposes of this computation, a Participant's life expectancy may be
      recalculated no more frequently than annually, however, the life
      expectancy of a non spouse Beneficiary may not be recalculated. If the
      Participant's Spouse is not the designated Beneficiary, the method of
      payment selected must assure that at least fifty percent (50%) of the
      present value of the amount available for payment would be payable within
      the life expectancy of the Participant.

      If the Participant dies after payment of his retirement income has
      commenced, the remaining portion of such retirement income will be paid at
      least as rapidly as under the method of payment being used prior to the
      Participant's death.

      If the Participant dies before payment of his retirement income commences,
      the Participant's entire retirement income must be paid no later than
      December 31 of the calendar year containing the fifth anniversary of the
      Participant's death except to the extent that an election is made to
      receive payment in accordance with (A) or (B) below:

      (A)   If any portion of the Participant's retirement income is payable to
            a designated Beneficiary other than the Participant's Spouse, such
            payments will be made in substantially equal installments over the
            life or life expectancy of the designated Beneficiary commencing on
            or before December 31 of the calendar year immediately following the
            calendar year in which the Participant died;

      (B)   If, however, the designated Beneficiary is the Participant's
            surviving Spouse, the date on which payments are required to begin
            in accordance with (A) above is not required to be earlier than the
            later of (1) December 31 of the calendar year immediately following
            the calendar year in which the Participant died, and (2) December 31
            of the calendar year in which the Participant would have attained
            age seventy and one-half (70-1/2).

      With respect to distributions under the Plan made in calendar years
      beginning on or after January 1, 2001, the Plan will apply the minimum
      distribution requirements of Section 401(a)(9) of the Code in accordance
      with the regulations under Section 401(a)(9) that were proposed in January
      2001, notwithstanding any provision of the Plan to the contrary. This
      amendment shall continue in effect until the end of the last calendar year
      beginning before the effective date of final regulations under Section
      401(a)(9) or such other date specified in guidance published by the
      Internal Revenue Service.


================================================================================
187                                 39               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                    Section VIII
                                                       Optional Forms of Payment
- --------------------------------------------------------------------------------

                                  SECTION VIII
                            OPTIONAL FORMS OF PAYMENT

8.1   Contingent Pensioner Option

      A Participant who elects this option will receive a reduced amount of
      retirement income during his lifetime, so that after his death retirement
      income in the same amount, or sixty-six and two-thirds percent (66-2/3%)
      or fifty percent (50%) thereof (as specified in the election) will be paid
      for the life of the Contingent Pensioner designated by the Participant, if
      surviving the Participant. If the option is in effect on the Participant's
      Retirement Date, the amount of retirement income payable to the
      Participant will be determined by multiplying the amount which would
      otherwise be payable to him, assuming the normal form described in Section
      7.2 is effective, by the appropriate Adjustment Factor.

      If a Participant who has elected this option dies on or after his Normal
      Retirement Date but before his Retirement Date, his Contingent Pensioner
      will receive retirement income payments beginning on the first day of the
      month next following the Participant's death and continuing for the
      balance of his life.

      These retirement income payments will be equal to the amount which would
      have been payable to the Participant had he retired hereunder on such
      first day of the month with the option in effect, as adjusted by the
      continuation percentage (100%, 66-2/3% or 50%) elected by the Participant.

      This option will be deemed null and void if (A) the Contingent Pensioner
      dies before the Participant's Retirement Date or (B) the Participant dies
      before the earlier of his Retirement Date and his Normal Retirement Date.

8.2   Years Certain and Life Option

      Subject to the provisions of Section 7.8, a Participant who elects this
      option will receive a reduced amount of retirement income during his
      lifetime, so that if his death occurs within the year certain period
      commencing upon his Retirement Date as specified in the election (5, 10,
      15 or 20 years), retirement income in the same amount will be paid to the
      Beneficiary designated by the Participant for the balance of the years
      certain period specified by the Participant.

      If the option is in effect on the Participant's Retirement Date, the
      amount of retirement income payable to the Participant will be determined
      by multiplying the amount which would otherwise be payable to him,
      assuming the normal form described in Section 7.2 is effective, by the
      appropriate Adjustment Factor.

      If a Participant who has elected this option dies on or after his Normal
      Retirement Date, but before his Retirement Date, his designated
      Beneficiary will receive retirement income payments beginning on the first
      day of the month next following the Participant's death and continuing
      until


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187                                 40               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                    Section VIII
                                                       Optional Forms of Payment
- --------------------------------------------------------------------------------

      the end of the years certain period specified by the Participant. These
      retirement income payments will be in the same amount as would have been
      payable had the Participant retired hereunder on such first day of the
      month with the option in effect.

      If this option is in effect on the Participant's Retirement Date and
      neither the Participant nor his designated Beneficiary survives to the end
      of the years certain period, a final lump sum payment equal to the
      commuted value of any unpaid payments shall be made as follows: to the
      Participant's Spouse, if living; otherwise, in equal shares to surviving
      children of the Participant; and in the event none of the above-named
      individuals survives the Participant, to the executor or administrator of
      the estate of the last to die of (A) the Participant or (B) the last to
      survive of his designated Beneficiaries.

      This option will be deemed null and void if the Participant dies before
      the earlier of his Retirement Date and Normal Retirement Date.

8.3   Social Security Option

      (A)   For the purposes of this Section 8.3, the words and phrases below
            will have the following meanings:

            (1)   Social Security Amount means the annual Primary Insurance
                  Amount, or portion thereof, which the Participant is expected
                  to receive under the Social Security Act.

            (2)   Social Security Commencement Date means the first day of the
                  month coincident with or next following the date the
                  Participant's Social Security Amount is expected to commence.

      (B)   A Participant may elect this option if his Retirement Date precedes
            his Social Security Commencement Date. Upon such election, the
            Employer will determine the Participant's Social Security Amount and
            Social Security Commencement Date on the basis of the Social
            Security Act then constituted.

      (C)   The Participant who elects this option will receive increased
            retirement income before his Social Security.

            Commencement Date and reduced retirement income thereafter, so that
            the Participant's total benefit under this Plan and the Social
            Security Act will be paid in a generally level amount throughout his
            retirement.

      (D)   The amount of increased retirement income will be equal to the
            amount of retirement income which would have been payable to the
            Participant if this option had not been elected, assuming the normal
            form described in Section 7.2 is effective, plus his Social Security
            Amount multiplied by the appropriate Adjustment Factor. The amount
            of reduced retirement income will be equal to the increased amount
            of retirement income


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187                                 41               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                    Section VIII
                                                       Optional Forms of Payment
- --------------------------------------------------------------------------------

            payable to the Participant before his Social Security Commencement
            Date minus his Social Security Amount.

8.4   Direct Rollover of Eligible Rollover Distributions

      For purposes of this Section 8.4, the following definitions shall apply:

      (A)   "Direct Rollover" means a payment by the Plan to the Eligible
            Retirement Plan specified by the Distributee.

      (B)   "Distributee" means an Employee or former Employee. In addition, the
            Employee's or former Employee's surviving Spouse and the Employee's
            or former Employee's Spouse or former spouse who is the alternate
            payee under a qualified domestic relations order, as defined in
            Section 414(p) of the Code, are Distributees with regard to the
            interest of the Spouse or former spouse.

      (C)   "Eligible Retirement Plan" means an individual retirement account
            described in Section 408(a) of the Code, an individual retirement
            annuity described in Section 408(b) of the Code, an annuity plan
            described in Section 403(a) of the Code, or a qualified trust
            described in Section 401(a) of the Code, that accepts the
            Distributee's Eligible Rollover Distribution. However, in the case
            of an Eligible Rollover Distribution to the surviving Spouse, an
            Eligible Retirement Plan is an individual retirement account or
            individual retirement annuity.

      (D)   "Eligible Rollover Distribution" means any distribution of all or
            any portion of the balance to the credit of the Distributee, except
            that an Eligible Rollover Distribution does not include: any
            distribution that is one of a series of substantially equal periodic
            payments (not less frequently than annually) made for the life (or
            life expectancy) of the Distributee or the joint lives (or joint
            life expectancies) of the Distributee and the Distributee's
            designated Beneficiary, or for a specified period of ten (10) years
            or more; any distribution to the extent such distribution is
            required under Section 401(a)(9) of the Code; the portion of any
            distribution that is not includable in gross income (determined
            without regard to the exclusion for net unrealized appreciation with
            respect to employer securities); and effective January 1, 2000, any
            hardship distribution described in Section 401(k)(2)(B)(i)(IV) of
            the Code.

      Notwithstanding any provision of the Plan to the contrary that would
      otherwise limit a Distributee's election under this Section, a Distributee
      may elect, at the time and in the manner prescribed by the Plan
      Administrator, to have any portion of an Eligible Rollover Distribution
      paid directly to an Eligible Retirement Plan specified by the Distributee
      in a Direct Rollover.


================================================================================
187                                 42               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                      Section IX
                                                    Preretirement Spouse Benefit
- --------------------------------------------------------------------------------

                                   SECTION IX
                          PRERETIREMENT SPOUSE BENEFIT

9.1   Eligibility for Preretirement Spouse Benefit

      Upon the death of a Participant before his Retirement Date, his Spouse
      will receive a Preretirement Spouse Benefit as described in this Section
      IX if all the following requirements were met when the Participant died:

      (A)   the Participant had a Spouse as defined in Section 1.1(KK) to whom
            the Participant had been married at least one (1) full year prior to
            his death;

      (B)   the Participant was credited with at least one (1) Hour of Service
            on or after August 23, 1984;

      (C)   the Participant had a vested right to Employer funded benefits.

9.2   Amount of Preretirement Spouse Benefit

      (A)   For purposes of this Section 9.2, earliest retirement age means the
            earliest date on which a Participant could elect to receive his
            retirement income under the Plan.

      (B)   The Preretirement Spouse Benefit will be payable in the form of
            retirement income. The annual amount of such benefit will be as
            follows:

            (1)   With respect to a Participant who, on his date of death, has
                  attained age fifty (50) and completed ten (10) years of
                  Service, and who dies while actively employed with the
                  Employer, the Preretirement Spouse Benefit will be payable as
                  retirement income, deferred to the Participant's Normal
                  Retirement Date. The annual amount of such benefit will be
                  equal to fifty percent (50%) of the retirement income which
                  the Participant would have received in accordance with Section
                  3.1 assuming that his Credited Service remained uninterrupted
                  and that his Earnings remained unchanged until his Normal
                  Retirement Date. However, if the surviving Spouse of such a
                  Participant is more than ten (10) years younger than the
                  Participant, the annual retirement income will be reduced in
                  accordance with the following schedule:


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187                                 43               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                      Section IX
                                                    Preretirement Spouse Benefit
- --------------------------------------------------------------------------------

                 Number of Full Years By Which the
                 Participant's Spouse is Younger than
                 the Participant                                Percentage
                 ------------------------------------           ----------

                         11                                         98%
                         12                                         96%
                         13                                         94%
                 etc., decreasing in steps                   etc., decreasing
                 of one year                                 in steps of 2%

            If the Participant's Spouse elects to receive the first initial
            monthly payment prior to the date the Participant would have reached
            his Normal Retirement Date, the annual amount of such retirement
            income will be the same amount which the surviving Spouse would
            receive in accordance with the previous paragraph of this Section
            9.2, as adjusted in accordance with the appropriate terms of Section
            IV, Late and Early Retirement Income.

      (2)   With respect to a Participant who is not described in paragraph (1)
            above, the Preretirement Spouse Benefit will be payable in the form
            of retirement income. The annual amount of such retirement income
            will be as follows:

            (a)   (i)   If a Participant dies after his earliest retirement age
                        and on or after his Normal Retirement Date, fifty
                        percent (50%) of the retirement income which the
                        Participant would have received had he retired on the
                        day before his death, with his retirement income payable
                        as an immediate 50% Joint and Survivor form of payment,
                        adjusted in accordance with the appropriate terms of
                        Section IV, Late and Early Retirement Income.

                  (ii)  If the Participant dies on or after his earliest
                        retirement age but prior to his Normal Retirement Date,
                        fifty percent (50%) of the retirement income which the
                        Participant would have received had he retired on the
                        day before his death, with his retirement income payable
                        as a 50% Joint and Survivor form of payment deferred to
                        the Participant 's Normal Retirement Date. If the
                        Participant's Spouse elects to receive the first initial
                        monthly payment prior to the date the Participant would
                        have reached his Normal Retirement Date, the annual
                        amount of such retirement income will be fifty percent
                        (50%) of the reduced retirement income which the
                        Participant would have received had he retired on the
                        day before his death, with his retirement income payable
                        as a 50% Joint and Survivor form of payment and as
                        adjusted in accordance with the appropriate terms of
                        Section IV, Late and Early Retirement Income.


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187                                 44               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                      Section IX
                                                    Preretirement Spouse Benefit
- --------------------------------------------------------------------------------

            (b)   If a Participant dies before his earliest retirement age, his
                  Spouse will receive the same reduced retirement income,
                  deferred to the Participant's Normal Retirement Date, that
                  would have been payable if the Participant had:

                  (i)   terminated employment on the earlier of his actual
                        Termination of Employment and his date of death;

                  (ii)  survived to his Normal Retirement Date;

                  (iii) elected to receive an immediate 50% Joint and Survivor
                        form of payment at his Normal Retirement Date; and

                  (iv)  died on the day immediately after his Normal Retirement
                        Date.

            Notwithstanding the preceding sentence, the Spouse of a Participant
            may elect that the retirement income commence on the Participant's
            earliest retirement age following the Participant's death. Such
            benefit shall be equal to the same benefit that would have been
            payable to the Spouse if the Participant (I) terminated employment
            on the earlier of his actual Termination of Employment and his date
            of death, (II) survived to his earliest retirement age, (III)
            retired at his earliest retirement age with an immediate 50% Joint
            and Survivor form of payment, and (IV) died on the day after his
            earliest retirement age.

9.3   Payments of Preretirement Spouse Benefit

      The retirement income will be payable monthly with each payment equivalent
      to one twelfth (1/12) of the annual amount. The initial monthly payment
      will be made as of the first day of the month coincident with or next
      following the later of the date the Participant would have attained his
      Normal Retirement Date if he had lived and his date of death.
      Notwithstanding the foregoing sentence,

      (A)   a Participant's Spouse may, pursuant to Section 9.2, elect that the
            initial monthly payment will be made as of the first day of the
            month coincident with or next following the later of the
            Participant's death or earliest retirement age (as defined in
            Section 9.2), or

      (B)   a Participant's Spouse may elect to defer the commencement of
            payments to the first day of any month up to and including the month
            in which the Participant would have attained age seventy and
            one-half (70-1/2) if he had lived. The amount of such deferred
            payment will be adjusted in accordance with the appropriate terms of
            Section IV, Late and Early Retirement Income, to reflect such later
            commencement.


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187                                 45               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                      Section IX
                                                    Preretirement Spouse Benefit
- --------------------------------------------------------------------------------

      Subsequent monthly payments will be made as of the first day of each month
      thereafter until the Spouse's death occurs.


================================================================================
187                                 46               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                       Section X
                                                                  Death Benefits
- --------------------------------------------------------------------------------

                                    SECTION X
                                 DEATH BENEFITS

10.1  Death Before Retirement Date

      If a Participant dies before the earlier of his Normal Retirement Date or
      his Retirement Date, his Spouse will be eligible to receive retirement
      income in accordance with Section IX, Preretirement Spouse Benefit if the
      Preretirement Spouse Benefit is effective. Otherwise, no benefit will
      become payable. If the Participant dies on or after his Normal Retirement
      Date and before his Late Retirement Date and had a Spouse on the date of
      his death, retirement income as described in Section 9.2. will be paid to
      the Participant's Spouse, provided an optional form of payment was not
      then in effect. If an optional form of payment was in effect on such
      Participant's death, any retirement income payable will be paid in
      accordance with such form. If on such Participant's death the Participant
      did not have a Spouse and no optional form was in effect, no retirement
      income will become payable.

10.2  Death on or After Retirement Date

      If a Participant dies after his Retirement Date and had a Spouse on the
      date of his death, retirement income as described in Section 7.1 will be
      paid to the Participant's Spouse provided another form of payment is not
      in effect.

      If a Participant dies after his Retirement Date and has no Spouse, no
      retirement income will be payable unless an optional form of payment
      providing for such payment is then in effect.


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187                                 47               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                      Section XI
                                                             Funding of Benefits
- --------------------------------------------------------------------------------

                                    SECTION XI
                               FUNDING OF BENEFITS

11.1  Contributions to the Fund

      From time to time and in such frequency as required by law, the Employer
      will make such contributions to the Fund as required to maintain the Plan
      on a sound actuarial basis. In determining the amounts and incidence of
      such contributions, the Employer will take into account such actuarial
      recommendations as may be provided by an enrolled actuary as defined by
      ERISA. Additional amounts may be contributed only to the extent permitted
      by law.

11.2  Fund for Exclusive Benefit of Participants

      The Fund is for the exclusive benefit of Participants and other persons
      who may become entitled to benefits hereunder, and may also be used to pay
      any reasonable expenses arising from the operation of the Plan. Prior to
      the satisfaction of all liabilities for benefits provided hereunder, no
      contribution made to the Fund will be refunded to the Employer unless a
      contribution was made:

      (A)   by reason of a mistake of fact,

      (B)   conditionally upon an initial favorable Internal Revenue Service
            determination and such a determination is not received, or

      (C)   conditionally upon being allowed as a tax deduction and such
            deduction is disallowed.

      For purposes of this Section 11.2, all contributions to the Plan made by
      the Employer shall be deemed to be conditioned on the deductibility by the
      Employer of such contributions under Section 404 of the Code unless such
      contributions are made for the purpose of satisfying the minimum funding
      standards of Section 412 of the Code.

      Such refund must be made within one year, under (A) from the date the
      contribution was made and, under (B) and (C) from the date of disallowance
      of tax qualification or tax deduction. All such refunds will be limited in
      amount, circumstances and timing to the provisions of Section 403(c) of
      ERISA and no such refund shall be made if, solely on account of such
      refund, the Plan would cease to be qualified pursuant to Section 401(a) of
      the Code.

11.3  Disposition of Credits and Forfeitures

      No credit or forfeitures arising from the operation of the Plan may be
      used to increase the benefit of any Participant or group of Participants,
      but will instead be taken into account to reduce contributions to be made
      by the Employer.


================================================================================
187                                 48               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                     Section XII
                                             Fiduciary Responsibility Provisions
- --------------------------------------------------------------------------------

                                   SECTION XII
                       FIDUCIARY RESPONSIBILITY PROVISIONS

12.1  Fiduciary Responsibility Provisions

      As required by ERISA, the Employer, by action of its governing board,
      shall appoint certain named fiduciaries of the Plan.

      The named fiduciary or fiduciaries, as the case may be, shall have the
      authority to control and manage the operation of the Plan, and shall be
      responsible for establishing and carrying out a funding policy and method
      consistent with the objectives of the Plan and the requirements of ERISA.
      If more than one fiduciary has been named, this authority and
      responsibility shall be jointly and severally shared.

      Any person or group of persons may serve in more than one fiduciary
      capacity with respect to the Plan. A named fiduciary (or a fiduciary
      designated by a named fiduciary) may employ one or more persons to render
      advice with regard to any responsibilities such fiduciary has under the
      Plan. A person who is a named fiduciary with respect to control and
      management of the assets of the Plan may appoint an investment manager or
      managers to manage any assets of the Plan. Unless it shall agree to accept
      additional fiduciary responsibility, the investment manager's liability as
      a fiduciary is limited to that arising from its management of any assets
      of the Plan held by the investment manager in one or more of its separate
      accounts.

      The Employer may allocate fiduciary responsibilities (other than trustee
      responsibilities) among named fiduciaries if there are more than one.
      Provision may be made for named fiduciaries to designate persons other
      than named fiduciaries to carry out fiduciary responsibilities under the
      Plan. If any fiduciary responsibility of a named fiduciary is allocated to
      any persons or a person is designated to carry out such responsibility,
      then such named fiduciary shall not be liable for any act or omission of
      such person in carrying out such responsibility except as provided by
      ERISA.

      No fiduciary guarantees the Fund in any manner against investment loss or
      depreciation of asset value.


================================================================================
187                                 49               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                    Section XIII
                                                              Plan Administrator
- --------------------------------------------------------------------------------

                                  SECTION XIII
                               PLAN ADMINISTRATOR

13.1  Appointment and Acceptance

      As required by ERISA, the Employer will appoint a Plan Administrator of
      the Plan by designating either the Employer or an individual or group of
      individuals to act in this capacity. The person designated as Plan
      Administrator shall signify acceptance of this position in writing.

      The Plan Administrator is a fiduciary within the meaning of ERISA.

13.2  Duties and Authority

      The Plan Administrator will administer the Plan on behalf of the Employer
      in a nondiscriminatory manner for the exclusive benefit of Participants
      and their Beneficiaries.

      The Plan Administrator will perform all such duties as are necessary to
      operate, administer and manage the Plan in accordance with the terms
      thereof, including but not limited to the following:

      (A)   to determine all questions relating to a Participant's coverage
            under the Plan,

      (B)   to maintain all necessary records for the administration of the
            Plan,

      (C)   to compute and authorize the payment of retirement income and other
            benefit payments to eligible Participants and Beneficiaries,

      (D)   to interpret and construe the provisions of the Plan and to make
            regulations which are not inconsistent with the terms thereof,

      (E)   to advise or assist Participants regarding any rights, benefits or
            elections available under the Plan.

      The Plan Administrator will take such actions as are necessary to
      establish and maintain the Plan as a retirement program which is at all
      times in full and timely compliance with any law or regulation having
      pertinence to this Plan.

      The Plan Administrator is granted by the Employer all reasonable powers
      necessary or appropriate to accomplish his duties as Plan Administrator.

13.3  Expenses of the Plan and Assistance to Plan Administrator

      All reasonable expenses necessary to operate and administer the Plan shall
      be borne by the Employer except to the extent the Employer has elected to
      pay such expenses from the Fund.


================================================================================
187                                 50               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                    Section XIII
                                                              Plan Administrator
- --------------------------------------------------------------------------------

      The Employer shall furnish the Plan Administrator with such clerical and
      other assistance as is required in the performance of his duties.

13.4  Participants and Other Payees - Data

      Participants and other persons affected by the Plan will furnish the Plan
      Administrator upon request such documents, evidence or information which
      the Plan Administrator considers necessary or desirable for the purpose of
      administering the Plan. The Plan Administrator may cause to be withheld
      any payment otherwise due the Participant or other person, until the
      required document, evidence or other information is so furnished.

13.5  Resignation and Removal of Plan Administrator

      The Plan Administrator may resign at any time by delivering to the
      Employer a written notice of resignation, to take effect at a date
      specified therein. Such date should not be less than thirty (30) days
      after the delivery of the resignation, unless waived by the Employer.

      The Plan Administrator may be removed with or without cause by the
      Employer through delivery to him of written notice of removal, to take
      effect at a date specified therein.

13.6  Appointment of Successor Plan Administrator

      In the event the office of Plan Administrator is vacant, the Employer will
      promptly designate a successor Plan Administrator who must signify
      acceptance of this position in writing. In the event no successor is
      appointed, the board or other governing body of the Employer shall
      function as the Plan Administrator until a new Plan Administrator has been
      appointed and has accepted such appointment.

13.7  Plan Administration - Miscellaneous

      (A)   Filing a Claim for Benefits - A Participant or Beneficiary shall
            notify the Plan Administrator of a claim for benefits under the
            Plan. Such request may be in any form adequate to give reasonable
            notice to the Plan Administrator and shall set forth the basis of
            such claim and shall authorize the Plan Administrator to conduct
            such examinations as may be necessary to determine the validity of
            the claim and to take such steps as may be necessary to facilitate
            the payment of any benefits to which the Participant or Beneficiary
            may be entitled under the Plan.

      (B)   Denial of Claim - Whenever a claim for benefits by any Participant
            or Beneficiary has been denied, written notice prepared in a manner
            calculated to be understood by the Participant or Beneficiary will
            be provided, setting forth the specific reasons for the denial and
            explaining the procedure for an appeal and review of the decision by
            the Plan Administrator.


================================================================================
187                                 51               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                    Section XIII
                                                              Plan Administrator
- --------------------------------------------------------------------------------

      (C)   Governing Law - The Plan shall be governed and construed and
            enforced in accordance with the laws of the State of New York,
            without regard to the choice of law or conflict of law rules
            recognized by such state, except to the extent that such laws are
            preempted by the federal laws of the United States of America.

      (D)   Masculine and Feminine, Singular and Plural - In construing the text
            of the Plan, the masculine shall include the feminine and the
            singular shall include the plural, and the plural the singular
            wherever the context shall plainly so require.

      (E)   Reference to Laws and Sections - Any reference herein to any section
            of the Code, ERISA or any other statute or law shall be deemed to
            include any successor statute or law of similar import. Any
            reference to a section number shall refer to a Section of this Plan,
            unless otherwise indicated.

      (F)   Nonassignment - Except, effective August 5, 1997, to the extent of
            any offset of a Participant's benefits as a result of any judgment,
            order, decree or settlement agreement provided in Section
            401(a)(13)(C) of the Code, all retirement income payments and other
            payments are provided for the Participant, Beneficiary or other
            person to whom a payment is due ("Payee") for the support and
            benefit of such Payee, and such retirement income shall not be
            assigned or anticipated and shall be free from the claims of all
            creditors, to the fullest extent permitted by law.

      (G)   Small Benefits - Notwithstanding any other provision in the Plan to
            the contrary, if the Value of a Participant's nonforfeitable
            retirement income at his Termination of Employment, retirement or
            death prior to the commencement of payments is $3,500 (and,
            effective January 1, 1998, $5,000) or less, the Plan Administrator
            shall authorize a lump sum payment of such Value in lieu of all
            future payments. If the Value of a Participant's nonforfeitable
            retirement income at his Termination of Employment, retirement or
            death prior to commencement of payments is $0, the Participant or,
            if applicable, his Beneficiary, shall be deemed to have received a
            lump sum payment of the vested nonforfeitable retirement income.

            For purposes of this paragraph (G), Value means the actuarially
            equivalent value of the normal form of retirement income payable in
            the form of a lump sum. Prior to January 1, 2000, the value shall be
            based upon the PBGC immediate annuity interest rate in effect three
            (3) months prior to the Participant's Termination of Employment,
            retirement or death (or, if lesser, the interest rate which would be
            used as of the date of the distribution by the PBGC for purposes of
            determining the present value of a lump sum distribution on plan
            termination) and the UP-1984 Mortality Table. Effective January 1,
            2000, except as otherwise provided in Table A, the value shall be
            calculated as of the date of distribution (I) using the GATT
            Applicable Mortality Table and the GATT Applicable Interest Rate,
            both as set forth in Table A.


================================================================================
187                                 52               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                    Section XIII
                                                              Plan Administrator
- --------------------------------------------------------------------------------

            In the case of benefits payable in the form of (i) a Preretirement
            Spouse Benefit under Section IX or a Joint and Survivor form under
            Section 7.1 or a Contingent Pensioner Option as described Section
            8.1, with the Participant's Spouse as beneficiary, if the present
            value of the nonforfeitable Accrued Benefit at the time of any
            distribution exceeds three thousand five hundred dollars ($3,500)
            (and effective January 1, 1998, five thousand dollars ($5,000), the
            present value of the Accrued Benefit at any subsequent time will be
            deemed to exceed three thousand five hundred dollars ($3,500) (and
            effective January 1, 1998, five thousand dollars ($5,000)). In
            addition, if the Participant has begun to receive distributions
            pursuant to a form of benefits under which at least one scheduled
            periodic distribution is still payable, and the present value of the
            Participant's nonforfeitable Accrued Benefit exceeded the three
            thousand five hundred dollar ($3,500) (and effective January 1,
            1998, five thousand dollar ($5,000)) cash out limit at the time of
            the first distribution under that optional form, the present value
            of the Accrued Benefit at any subsequent time will be deemed to
            exceed three thousand five hundred dollars ($3,500) (and effective
            January 1, 1998, five thousand dollars ($5,000)). In all other
            cases, if the present value of a Participant's nonforfeitable
            Accrued Benefit determined at the time of any distribution, is equal
            to or less than three thousand five hundred dollars ($3,500) (and
            effective January 1, 1998, five thousand dollars ($5,000)), such
            Participant, or if applicable, a deceased Participant's beneficiary,
            shall automatically receive a distribution of the full present value
            of the nonforfeitable Accrued Benefit. Such determination shall be
            made without regard to the present value of the Participant's
            benefit at the time of any earlier distribution.

      (H)   Limitation - Participation in the Plan shall not grant any
            Participant the right to be retained in the employ of the Employer
            or any other rights than those to which he is entitled under law or
            regulations.

      (I)   Divestment of Benefits for Cause Precluded - In no event may a
            Participant be divested for cause of retirement income or other
            benefits which he is eligible to receive under the Plan.

      (J)   Clerical Error - If any fact pertaining to eligibility for or
            amounts of benefits payable under the Plan to a Participant,
            Beneficiary or other person to whom a payment is due has been
            misstated, or in the event of clerical error, the benefits will be
            adjusted on the basis of the correct facts in a manner precluding
            individual selection.

      (K)   Qualified Domestic Relations Orders - Notwithstanding any other
            provisions of the Plan to the contrary, all or part of the
            Participant's Accrued Benefit may be distributed to an alternate
            payee pursuant to a Qualified Domestic Relations Order within the
            meaning of Section 414(p) of the Code. The Plan Administrator shall
            establish procedures for determining if a Domestic Relations Order
            is qualified within the meaning of Section 414(p) of the Code.


================================================================================
187                                 53               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                    Section XIII
                                                              Plan Administrator
- --------------------------------------------------------------------------------

      (L)   Missing Payee - Notwithstanding any other provision in the Plan to
            the contrary, if payment is not able to be made to any Employee,
            Participant, Beneficiary or other person to whom a payment is due
            ("Payee") under the Plan because the identity or whereabouts of such
            Payee cannot be ascertained after reasonable efforts have been made
            to identify or locate such person (including mailing a certified
            notice of the payment due to the last known address of such Payee as
            shown on the records of the Employer), such payment and all
            subsequent payments otherwise due to such Payee shall be forfeited
            twenty-four (24) months after the date such payment first became
            due. However, such payment and any subsequent payments shall be
            reinstated retroactively, without interest, no later than sixty (60)
            days after the date on which the Payee is identified and located.
            Notwithstanding the foregoing, as of the termination date of the
            Plan, the Plan Administrator shall (i) transfer benefits of missing
            Participants to the Pension Benefit Guaranty Corporation, or (ii)
            purchase an irrevocable commitment in the amount necessary to
            provide the benefits of any missing Participants from an insurer, to
            the extent provided for under Code Section 401(a)(34) and Section
            4050 of the Employee Retirement Income Security Act of 1974, as
            amended, and the regulations thereunder.

      (M)   Headings - The headings of sections are included solely for
            convenience of reference, and if there be any conflict between such
            headings and the text of the Plan, the text shall control.


================================================================================
187                                 54               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                     Section XIV
                                               Amendment and Termination of Plan
- --------------------------------------------------------------------------------

                                   SECTION XIV
                        AMENDMENT AND TERMINATION OF PLAN

14.1  Amendment - General

      The Employer reserves the right to amend or modify the Plan in whole or in
      part from time to time. No such action shall adversely affect the Accrued
      Benefits of Participants; provided, however, that the Employer may make
      any amendment or modification (of retroactive effect, if necessary) to
      establish and maintain the Plan's qualification under Section 401(a) of
      the Code and to bring the Plan into full compliance with ERISA.

      If any amendment changes the Vesting Percentage of this Plan, any
      Participant with three (3) or more years of Service may, by filing a
      written request with the Employer, elect to have his Vested Percentage
      computed under the vesting schedule in effect prior to the amendment.

      The period during which the Participant may elect to have his Vested
      Percentage computed under the prior vesting schedule shall commence with
      the date the amendment is adopted and shall end on the latest of:

      (A)   sixty (60) days after the amendment is adopted;

      (B)   sixty (60) days after the amendment becomes effective; or

      (C)   sixty (60) days after the Participant is issued written notice of
            the amendment from the Employer.

14.2  Amendment - Merger or Consolidation of Plan

      This Plan may be amended by the Employer to provide for the merger or
      consolidation of the Plan with another retirement plan or for the transfer
      of assets and liabilities hereunder to another retirement plan. Such an
      event, however, may not occur unless such Participant would receive a
      retirement benefit under such other retirement plan after the merger,
      consolidation or transfer (assuming the surviving plan had then
      terminated) which is at least as great as the benefit he would have
      received under this Plan immediately prior to the merger, consolidation or
      transfer (assuming the plan had then terminated).

14.3  Partial Termination of Plan

      In the event a partial termination of the Plan occurs with respect to a
      specified group of Participants, the Employer shall cause to be allocated
      and segregated for the benefit of such Participants a proportionate
      interest in the Fund. Such proportionate interest shall be determined by
      an enrolled actuary as defined by ERISA and applied by the Employer to
      provide retirement income to such Participants in accordance with the
      following terms of this


================================================================================
187                                 55               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                     Section XIV
                                               Amendment and Termination of Plan
- --------------------------------------------------------------------------------

      Section XIV. Any retirement income so provided shall be nonforfeitable.
      However, no Participant or other individual shall have recourse towards
      the satisfaction of any benefit accrued under the Plan other than from the
      Fund or the PBGC.

14.4  Termination of Plan

      The Employer intends to continue the Plan indefinitely but reserves the
      right to terminate it at any time. The date when the Plan is terminated,
      completely or partially, shall be referred to in this Section 14.4 as the
      Plan Termination Date.

      As of the Plan Termination Date, retirement income accrued on account of a
      Participant shall be nonforfeitable. However, no Participant or other
      individual shall have recourse towards the satisfaction of any benefit
      accrued under the Plan other than from the Fund or the PBGC.

      After any final expenses have been withdrawn from the Fund, the Employer
      shall cause the amount remaining in the Fund to be allocated according to
      the following categories, in the order given:

      (A)   first, there shall be allocated an amount necessary to provide
            retirement income for Participants and other individuals who, three
            (3) years prior to the Plan Termination Date, were either receiving
            retirement income or would have been eligible to receive retirement
            income had they then retired.

            (For this purpose "retirement income" means retirement income
            determined for the Participant or other individual in accordance
            with provisions of the Plan in effect five (5) years prior to the
            Plan Termination Date.)

      (B)   second, there shall be allocated an amount necessary to provide all
            other retirement income guaranteed under Title IV of ERISA, as
            determined in accordance with Section 4044 thereof.

      (C)   third, there shall be allocated an amount necessary to provide all
            other retirement income not guaranteed by ERISA which vests in each
            Participant in accordance with Section V, Termination of Employment
            and Vested Retirement Income, assuming that the Plan Termination
            Date is his Termination of Employment date.

      (D)   fourth, there shall be allocated an amount necessary to provide all
            other retirement income accrued by Participants as of the Plan
            Termination Date but not then vested in accordance with Section V,
            Termination of Employment and Vested Retirement Income.

      The amount necessary to provide the retirement income specified in each of
      the above categories shall be determined in accordance with annuity
      purchase rate assumptions selected by the Employer in accordance with such
      governmental regulations as may apply.


================================================================================
187                                 56               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                     Section XIV
                                               Amendment and Termination of Plan
- --------------------------------------------------------------------------------

      Amounts allocated on a Participant's behalf under any category above shall
      be appropriately adjusted if:

            (1)   an amount has been allocated on such Participant's behalf
                  under a prior category, and/or

            (2)   all or a portion of a Participant's retirement income has been
                  guaranteed under an insurance company contract prior to the
                  Plan Termination Date.

      If the amount available for allocation under any category is not
      sufficient to fully provide retirement income specified for such category,
      a pro rata allocation of the amount available will be made, and reduced
      retirement income will be provided to the extent possible.

      As provided by ERISA, the Internal Revenue Service may require that the
      Fund be allocated in a manner different than that specified above in order
      to meet nondiscrimination requirements.

      After the assets of the Fund have been withdrawn and allocated in
      accordance with the preceding terms of this Section 14.4, any amount
      remaining in the Fund will be returned to the Employer.

      Notwithstanding the foregoing provisions, the amount of any retirement
      income otherwise to be provided in accordance with this Section 14.4 will
      be restricted in accordance with Section XV, Restriction of Benefits Upon
      Early Termination, to any extent required.


================================================================================
187                                 57               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                      Section XV
                      Restriction of Benefits Upon Early Termination of the Plan
- --------------------------------------------------------------------------------

                                   SECTION XV
           RESTRICTION OF BENEFITS UPON EARLY TERMINATION OF THE PLAN

15.1  Restriction of Benefits Upon Early Termination of the Plan

      This Section XV is included in the Plan to conform to the requirements of
      Income Tax Regulations Section 1.401(a)(4).

      (A)   The following provisions relating to restrictions on benefits
            payable to certain highly compensated employees are applicable

            (1)   For purposes of this Section 15.1, "Restricted Employee" shall
                  mean any one of the twenty-five (25) highest paid Employees
                  from the group comprised of Highly Compensated Employees (as
                  defined under Section 414(q) of the Code) and Highly
                  Compensated Former Employees (as defined under Section
                  414(q)(6) of the Code).

            (2)   If the Plan is terminated, the benefit which becomes payable
                  to a Restricted Employee must satisfy the nondiscrimination
                  requirements of Section 401(a)(4) of the Code and the
                  regulations promulgated thereunder.

            (3)   If a benefit becomes payable to a Restricted Employee before
                  the Plan terminates, the maximum annual benefit payable to
                  such Restricted Employee shall be an amount equal to the
                  annual payments which would be payable to him assuming
                  payments in the form of a Life-No Death Benefit that is the
                  actuarial equivalent of his Accrued Benefit and other benefits
                  to which the Restricted Employee is entitled under the Plan
                  (other than any social security supplement within the meaning
                  of Income Tax Regulations Section 1.411(a)-7(c)(4)(ii)).

            (4)   Notwithstanding the foregoing, the restrictions set forth in
                  paragraph (3) above shall not apply if:

                  (a)   after payment to a Restricted Employee of his benefit,
                        the value of Plan assets equals or exceeds one hundred
                        ten percent (110%) of the value of current liabilities
                        as defined under Section 412(l)(7) of the Code; or

                  (b)   prior to any payment to the Restricted Employee, the
                        value of the benefit payable to the Restricted Employee
                        is less than one percent (1%) of the value of current
                        liabilities as defined under Section 412(l)(7) of the
                        Code; or


================================================================================
187                                 58               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                      Section XV
                      Restriction of Benefits Upon Early Termination of the Plan
- --------------------------------------------------------------------------------

                  (c)   the value of the benefit payable to the Restricted
                        Employee is less than or equal to three thousand five
                        hundred dollars ($3,500) (and effective January 1, 1998,
                        five thousand dollars ($5,000).

                  For purposes of this paragraph (4), the value of Plan assets
                  and the value of current liabilities must be determined as of
                  the same date.

      (B)   The terms of this Section 15.1 shall prevail over any other terms of
            the Plan that may be inconsistent herewith.

      (C)   Any limitations or procedures in this Section 15.1 shall
            automatically become inoperative and of no effect upon a ruling,
            regulation or other pronouncement by the Internal Revenue Service
            that such limitations or procedures are not required, have been
            superseded or no longer apply.


================================================================================
187                                 59               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                         Table A
- --------------------------------------------------------------------------------

                                     TABLE A

Late Retirement Adjustment Factor

         Years After Normal                   Years After Normal
           Retirement Date        Factor       Retirement Date          Factor
           ---------------        ------       ---------------          ------
            (not beyond                          (not beyond
          December 31, 2000)                   December 31, 2000)
                  1                 1.08                6                1.63
                  2                 1.17                7                1.77
                  3                 1.27                8                1.92
                  4                 1.38                9                2.08
                  5                 1.50               10                2.25

Early Commencement Adjustment Factor

        Years Prior to Normal                  Years Prior to Normal
           Retirement Date        Factor          Retirement Date       Factor
           ---------------        ------          ---------------       ------
                  1                 .93                   6              .62
                  2                 .86                   7              .59
                  3                 .79                   8              .56
                  4                 .72                   9              .53
                  5                 .65                  10              .50

Social Security Option Adjustment Factor

        Years Prior to Normal                  Years Prior to Normal
           Retirement Date        Factor           Retirement Date      Factor
           ---------------        ------           ---------------      ------
                  1                 .93                   6              .62
                  2                 .86                   7              .59
                  3                 .79                   8              .56
                  4                 .72                   9              .53
                  5                 .65                  10              .50


================================================================================
187                                 60               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                         Table A
- --------------------------------------------------------------------------------

                               TABLE A (Continued)

Years Certain and Life Option Adjustment Factor

                Age of Benefit
                 Commencement                  Number of Years Certain
                 ------------                  -----------------------
                                            5        10       15       20
                                           ---       --       --       --
                 Less Than 55              .99      .98      .95      .92
                   55 - 59                 .98      .97      .93      .89
                   60 - 64                 .97      .95      .90      .85
                 65 and Over               .96      .93      .87      .79

Joint and Survivor Adjustment Factor and Contingent Pensioner Option Adjustment
Factor

                                            Joint and Survivor and
                                             Contingent Annuitant
              Age of Participant           Continuation Percentage *
              ------------------           -------------------------
                                           50%       66-2/3%    100%
                                           ---       -------    ----
                 Less Than 55              .92         .89     .85
                   55 - 59                 .91         .88     .84
                   60 - 64                 .90         .87     .82
                 65 and Over               .89         .86     .81

*     Rates shall be reduced (increased) by .01 for each full year by which the
      joint annuitant is younger (older) than the participant by more than three
      years. Maximum factor is .98.

Factors for other than integral years shall be interpolated from the above table
and rounded to nearest .01.

Application of GATT Mortality Table and Interest Rate Assumptions

      Notwithstanding the above provisions of this Table A of the Plan and
      except as provided below with respect to Sections 6.1(C)(3), 6.1(C)(6) and
      6.1(C)(7)(c) and except as otherwise provided in this Table A, effective
      as of January 1, 2000 for purposes of Small Benefits under


================================================================================
187                                 61               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                         Table A
- --------------------------------------------------------------------------------

      Section 13.7(G) of the Plan, the "actuarially equivalent value" shall be
      determined by using (A) the 1983 Group Annuity Mortality Table based on a
      fixed blend of 50% of the male mortality rates and 50% of the female
      mortality rates as described in Section 807(d)(5)(A) of the Code (without
      regard to any other subparagraph of Code Section 807(d)(5) or such other
      mortality table as may be prescribed by the Secretary of the Treasury
      ("GATT Applicable Mortality Table"), and (B) the GATT Applicable Interest
      Rate, as hereafter defined.

      "GATT Applicable Interest Rate" shall mean the interest rate on 30-year
      Treasury securities for the third full calendar month preceding the
      Participant's Termination of Employment, retirement or death, whichever
      applies.

      For purposes of Sections 6.1(C)(3), 6.1(C)(6) and 6.1(C)(7)(c), the GATT
      Applicable Mortality Table and the GATT Applicable Interest Rate shall be
      effective only with respect to benefits accrued after the "Final
      Implementation Date," as defined below. For benefits accrued prior to the
      Final Implementation Date and up to the "Freeze Date," as defined below,
      benefits will be based on the "Old Law Benefit," as defined below:

      "Final Implementation Date" shall mean January 1, 2000.

      "Freeze Date" shall mean December 31, 1999.

      "Old Law Benefit" shall mean the Participant's Accrued Benefit under the
      terms of the Plan as of the Freeze Date. The Old Law Benefit is determined
      for each possible annuity starting date and optional form of benefit based
      on the Participant's Accrued Benefit under the terms of the Plan as of the
      Freeze Date, and applying Section 6.1(C)(3), 6.1(C)(6) and 6.1(C)(7)(c) as
      in effect on December 7, 1994, including the participation requirements
      under Code Section 415(b)(5). In determining the Old Law Benefit, the
      following shall be disregarded:

      (i)   any Plan amendment increasing benefits adopted after the Freeze
            Date; and

      (ii)  any cost of living adjustments that become effective after the
            Freeze Date.

      A Participant's Old Law Benefit will not be increased after the Freeze
      Date, however if the limitations of Code Section 415, as set forth in
      Section 6.1 of the Plan, as in effect on December 7, 1994, are less than
      the limitations that were applied to determine the Participant's Old Law
      Benefit on the Freeze Date, then the Participant's Old Law Benefit will be
      reduced in accordance with such reduced limitation. If at any date after
      the Freeze Date, the Participant's total Plan benefit before the
      application of Code Section 415 is less than the Participant's Old Law
      Benefit, the Old Law Benefit will be reduced to the Participant's total
      Plan benefit.

With reference to Plan benefits determined in accordance with Section 13.7(G)
and the applicable assumptions specified above, after December 31, 1999 and
before the date of adoption of this amended and restated Plan, a Participant
shall be entitled to the greater of: (a) his Accrued Benefit determined under
the Plan in accordance with the applicable Adjustment Factors set forth in
Section


================================================================================
187                                 62               CARVER FEDERAL SAVINGS BANK
<PAGE>

                                                                         Table A
- --------------------------------------------------------------------------------

13.7(G) of the Prior Plan as in effect immediately prior to January 1, 2000, or
(b) his Accrued Benefit determined under the Plan as set forth above in this
Table A.


================================================================================
187                                 63               CARVER FEDERAL SAVINGS BANK

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>5
<FILENAME>d156270.txt
<DESCRIPTION>MATERIAL CONTRACTS
<TEXT>
                                                                    EXHIBIT 10.3

================================================================================

                           Carver Federal Savings Bank
                               401(k) Savings Plan
                                       In
                              RSI Retirement Trust
               (As Amended And Restated Effective January 1, 1997
           and including provisions effective through January 1, 2002)
================================================================================
Incorporating Proposed Amendment Number One

<PAGE>

                                                               Table Of Contents
- --------------------------------------------------------------------------------

                                TABLE OF CONTENTS

Table Of Contents..............................................................i

Introduction...................................................................1

Article I -  Definitions.......................................................3

Article II -  Eligibility and Participation...................................13
     2.1      Eligibility.....................................................13
     2.2      Ineligible Employees............................................13
     2.3      Participation...................................................14
     2.4      Termination of Participation....................................14
     2.5      Eligibility upon Reemployment...................................14
     2.6      Eligibility Upon Reemployment of Employees Subject to
               Section 16(b) of   the Securities Exchange Act of 1934.........15

Article III -  Contributions and Limitations on Contributions.................16
     3.1      Before-Tax Contributions........................................16
     3.2      Limitation on Before-Tax Contributions..........................16
     3.3      Changes in Before-Tax Contributions.............................19
     3.4      Matching Contributions..........................................20
     3.5      Special Contributions...........................................20
     3.6      Discretionary Employer Contributions............................21
     3.7      Limitation on Matching Contributions............................21
     3.8      Aggregate Limit; Multiple Use of Alternative Limitation.........23
     3.9      Interest on Excess Contributions................................24
     3.10     Payment of Contributions to the Trust and Separate Agency.......25
     3.11     Rollover Contributions..........................................25
     3.12     Section 415 Limits on Contributions.............................26
     3.13     Nonelective Employer Contributions..............................30

Article IV -  Vesting and Forfeitures.........................................32
     4.1      Vesting.........................................................32
     4.2      Forfeitures.....................................................33
     4.3      Vesting upon Reemployment.......................................34

Article V -  Trust Fund, Investment Accounts and voting rights................36
     5.1      Trust Fund......................................................36
     5.2      Interim Investments.............................................36
     5.3      Account Values..................................................37
     5.4      Voting Rights...................................................37
     5.5      Tender Offers and Other Offers..................................38
     5.6      Separate Assets.................................................39
     5.7      Power to Invest in Employer Securities..........................39


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<PAGE>

                                                               Table Of Contents
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Article VI -  Investment Directions, Changes of Investment Directions and
Transfers Between Investment Accounts.........................................40
     6.1      Investment Directions...........................................40
     6.2      Change of Investment Directions.................................40
     6.3      Transfers Between Investment Accounts...........................40
     6.4      Employees Other than Participants...............................41
     6.5      Restrictions on Investments in the Employer Stock Fund for
               Certain  Participants..........................................41

Article VII -  Payment of Benefits............................................43
     7.1      General.........................................................43
     7.2      Spousal Consent Requirements - Optional Forms of Benefit
               Payments, Loans, Withdrawals, Beneficiaries....................44
     7.3      Non-Hardship Withdrawals........................................46
     7.4      Hardship Distributions..........................................46
     7.5      Distribution of Benefits Following Retirement, Disability or
               Termination of Service.........................................50
     7.6      Optional Forms of Benefit Payment upon Retirement, Disability
               or Termination of Service......................................52
     7.7      Designation of Beneficiary......................................55
     7.8      Preretirement Death Benefits....................................56
     7.9      Direct Rollover of Eligible Rollover Distributions..............58
     7.10     Latest Commencement of Benefits.................................64
     7.11     Manner of Payment of Distributions from the Employer
               Stock Fund.....................................................65

Article VIII -  Loans to Participants.........................................66
     8.1      Definitions and Conditions......................................66
     8.2      Loan Amount.....................................................66
     8.3      Term of Loan....................................................66
     8.4      Operational Provisions..........................................67
     8.5      Repayments......................................................68
     8.6      Default.........................................................69
     8.7      Coordination of Outstanding Account and Payment of Benefits.....70

Article IX -  Administration..................................................71
     9.1      General Administration of the Plan..............................71
     9.2      Designation of Named Fiduciaries................................71
     9.3      Responsibilities of Fiduciaries.................................71
     9.4      Plan Administrator..............................................72
     9.5      Committee.......................................................72
     9.6      Powers and Duties of the Committee..............................73
     9.7      Certification of Information....................................74
     9.8      Authorization of Benefit Payments...............................75
     9.9      Payment of Benefits to Legal Custodian..........................75
     9.10     Service in More Than One Fiduciary Capacity.....................75


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     9.11     Payment of Expenses.............................................75
     9.12     Administration of Separate Assets...............................76

Article X -  Benefit Claims Procedure.........................................77
     10.1     Definition......................................................77
     10.2     Claims..........................................................77
     10.3     Disposition of Claim............................................77
     10.4     Denial of Claim.................................................77
     10.5     Inaction by Plan Administrator..................................78
     10.6     Right to Full and Fair Review...................................78
     10.7     Time of Review..................................................78
     10.8     Final Decision..................................................78

Article XI -  Amendment, Termination, and Withdrawal..........................79
     11.1     Amendment and Termination.......................................79
     11.2     Withdrawal from the Trust Fund..................................79

Article XII -  Top-Heavy Plan Provisions......................................80
     12.1     Introduction....................................................80
     12.2     Definitions.....................................................80
     12.3     Minimum Contributions...........................................84
     12.4     Impact on Section 415 Maximum Benefits..........................85
     12.5     Vesting.........................................................86

Article XIII -  Miscellaneous Provisions......................................87
     13.1     No Right to Continued Employment................................87
     13.2     Merger, Consolidation, or Transfer..............................87
     13.3     Nonalienation of Benefits.......................................87
     13.4     Missing Payee...................................................87
     13.5     Affiliated Employers............................................88
     13.6     Successor Employer..............................................88
     13.7     Return of Employer Contributions................................88
     13.8     Adoption of Plan by Affiliated Employer.........................88
     13.9     Construction of Language........................................89
     13.10    Headings........................................................89
     13.11    Governing Law...................................................89


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787                                  iii             Carver Federal Savings Bank
<PAGE>

                                                                    Introduction
- --------------------------------------------------------------------------------

                                  INTRODUCTION

Effective as of October 1, 1989, ("Effective Date"), Carver Federal Savings Bank
("Employer") adopted the Carver Federal Savings Bank 401(k) Savings Plan and
Trust ("1989 Plan").

Effective as of May 1, 1993, the Employer adopted resolutions wherein RSI
Retirement Trust was named successor trustee and the RSI Retirement Trust
Agreement and Declaration of Trust ("Agreement") was adopted.

Effective as of May 1, 1993, the 1989 Plan was amended and restated in its
entirety. The amended and restated plan became known as Carver Federal Savings
Bank 401(k) Savings Plan in RSI Retirement Trust ("Prior Plan"). Effective as of
October 24, 1994, the Employer (a) added an investment fund to the Prior Plan
consisting of common stock of the Employer, (b) established the Plan as a Plan
of Partial Participation as defined under the Agreement and (c) adopted a
Separate Agreement establishing a separate trust to hold the common stock of the
Employer and designated a Separate Agency to serve as trustee.

Effective as of January 1, 1997, the Prior Plan is amended and restated in its
entirety. The amended and restated plan shall be known as Carver Federal Savings
Bank 401(k) Savings Plan in RSI Retirement Trust ("Plan"), shall contain the
terms and conditions set forth herein, and shall in all respects be subject to
the provisions of the Agreement which are incorporated herein and made a part
hereof.

The Plan as amended and restated hereunder incorporates a cash or deferred
arrangement under Section 401(k) of the Internal Revenue Code of 1986, as
amended ("Code").

The Plan shall constitute a profit-sharing plan within the meaning of Section
401(a) of the Code, without regard to current or accumulated profits of the
Employer, as provided in Section 401(a)(27) of the Code.

The Plan complies with all Internal Revenue Service legislation and regulations
issued to date addressing tax-qualified plans, including the Uniformed Services
Employment and Reemployment Rights Act of 1994, the Uruguay Round Agreements
Act, the Small Business Job Protection Act of 1996, the Taxpayer Relief Act of
1997, the Restructuring and Reform Act of 1998 and the Community Renewal Tax
Relief Act of 2000 (commonly referred to as GUST II), and "good faith"
compliance with the requirements of the Economic Growth and Tax Relief
Reconciliation Act of 2001 (EGTRRA), as provided for under Internal Revenue
Service Notice 2001-57. In addition, the Plan complies with final regulations
under Code Section 401(a)(9).

Subject to any amendments that may subsequently be adopted by the Employer prior
to his Termination of Service, the provisions set forth in this Plan shall apply
to an Employee who is in the employment of the Employer on or after January 1,
1997. Except to the extent specifically required to the contrary under the terms
of this Plan, for terminations of employment prior to January 1, 1997, the
rights and benefits of a former participant shall be determined in accordance
with the provisions of the Prior Plan as in effect on the date of the former
participant's termination of employment.


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787                                   1              Carver Federal Savings Bank
<PAGE>

                                                                    Introduction
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The Employer has herein restated the Plan with the intention that (i) the Plan
shall at all times be qualified under Section 401(a) of the Code, (ii) the
Agreement and any trust created under any Separate Agreement shall be tax-exempt
under Section 501(a) of the Code, and (iii) Employer contributions under the
Plan shall be tax deductible under Section 404 of the Code. The provisions of
the Plan and the Agreement, as well as any Separate Agreement shall be construed
to effectuate such intentions.

Effective January 1, 2002, the Plan is amended to meet the requirements for a
designed-based "safe harbor" arrangement under Sections 401(k)(12) and
401(m)(11) of the Code.


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787                                   2              Carver Federal Savings Bank
<PAGE>

                                                                     Article I -
                                                                     Definitions
- --------------------------------------------------------------------------------

                                   ARTICLE I -
                                   DEFINITIONS

The following words and phrases shall have the meanings hereinafter ascribed to
them. Those words and phrases which have limited application are defined in the
respective Articles in which such terms appear.

1.1   Accounts means the Before-Tax Contribution Account (including Special
      Contributions, if any), Matching Contribution Account, Rollover
      Contribution Account, Discretionary Employer Contribution Account and
      commencing January 1, 2001, Nonelective Employer Contribution Account,
      established under the Plan on behalf of an Employee.

1.2   Actual Contribution Percentage means, prior to January 1, 2002, the ratio
      (expressed as a percentage) of the Matching Contributions under the Plan
      which are made on behalf of an Eligible Employee for the Plan Year to such
      Eligible Employee's compensation (as defined under Section 414(s) of the
      Code) for the Plan Year. An Eligible Employee's compensation hereunder
      shall include compensation receivable from the Employer for that portion
      of the Plan Year during which the Employee is an Eligible Employee, up to
      a maximum of one hundred sixty thousand dollars ($160,000) for the 1997,
      1998 and 1999 Plan Years and one hundred seventy thousand dollars
      ($170,000) for the 2000 and 2001 Plan Years, adjusted in multiples of ten
      thousand dollars ($10,000) for increases in the cost-of-living as
      prescribed by the Secretary of the Treasury under Section 401(a)(17)(B) of
      the Code.

1.3   Actual Deferral Percentage means, prior to January 1, 2002, the ratio
      (expressed as a percentage) of the sum of Before-Tax Contributions, and
      those Qualified Nonelective Contributions taken into account under the
      Plan for the purpose of determining the Actual Deferral Percentage, which
      are made on behalf of an Eligible Employee for the Plan Year to such
      Eligible Employee's compensation (as defined under Section 414(s) of the
      Code) for the Plan Year. An Eligible Employee's compensation hereunder
      shall include compensation receivable from the Employer for that portion
      of the Plan Year during which the Employee is an Eligible Employee, up to
      a maximum of one hundred sixty thousand dollars ($160,000) for the 1997,
      1998 and 1999 Plan Years and one hundred seventy thousand dollars
      ($170,000) for the 2000 and 2001 Plan Years, adjusted in multiples of ten
      thousand dollars ($10,000) for increases in the cost-of-living as
      prescribed by the Secretary of the Treasury under Section 401(a)(17)(B) of
      the Code.

1.4   Affiliated Employer means a member of an affiliated service group (as
      defined under Section 414(m) of the Code), a controlled group of
      corporations (as defined under Section 414(b) of the Code), a group of
      trades or businesses under common control (as defined under Section 414(c)
      of the Code) of which the Employer is a member, any leasing organization
      (as defined under Section 414(n) of the Code) providing the services of
      Leased Employees to the Employer, or any other group provided for under
      any and all Income Tax Regulations promulgated by the Secretary of the
      Treasury under Section 414(o) of the Code.


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787                                   3              Carver Federal Savings Bank
<PAGE>

                                                                     Article I -
                                                                     Definitions
- --------------------------------------------------------------------------------

1.5   Affiliated Service means employment with an employer during the period
      that such employer is an Affiliated Employer.

1.6   Agreement means the RSI Retirement Trust Agreement and Declaration of
      Trust as amended and restated August 1, 1990, as amended from time to
      time. The Agreement shall be incorporated herein and constitute a part of
      the Plan.

1.7   Average Actual Contribution Percentage means the average of the Actual
      Contribution Percentages of (a) the group comprised of Eligible Employees
      who are Highly Compensated Employees or (b) the group comprised of
      Eligible Employees who are Non-Highly Compensated Employees, whichever is
      applicable.

1.8   Average Actual Deferral Percentage means the average of the Actual
      Deferral Percentages of (a) the group comprised of Eligible Employees who
      are Highly Compensated Employees or (b) the group comprised of Eligible
      Employees who are Non-Highly Compensated Employees, whichever is
      applicable.

1.9   Before-Tax Contribution Account means the separate, individual account
      established on behalf of a Participant to which Before-Tax Contributions
      and Special Contributions if any, made on his behalf are credited,
      together with all earnings and appreciation thereon, and against which are
      charged any withdrawals, loans and other distributions made from such
      account and any losses, depreciation or expenses allocable to amounts
      credited to such account.

1.10  Before-Tax Contributions means the contributions of the Employer made in
      accordance with the Compensation Reduction Agreements of Participants
      pursuant to Section 3.1.

1.11  Beneficiary means any person who is receiving or is eligible to receive a
      benefit under Section 7.8 of the Plan upon the death of an Employee or
      former Employee.

1.12  Board means the board of trustees, directors or other governing body of
      the Sponsoring Employer.

1.13  Code means the Internal Revenue Code of 1986, as amended from time to
      time.

1.14  Committee means the person or persons appointed by the Employer in
      accordance with Section 9.2(b).

1.15  Compensation means with respect to Plan Years commencing on and after
      January 1, 1997, an Employee's wages, salary, fees and other amounts
      defined as compensation in Section 415(c)(3) of the Code and Income Tax
      Regulations Sections 1.415-2(d)(2), (3) and (6), received for personal
      services actually rendered in the course of employment with the Employer
      for the calendar year, prior to any reduction pursuant to a Compensation
      Reduction Agreement. Compensation shall include commissions, overtime,
      bonuses, wage continuation payments to an Employee absent due to illness
      or disability of a short-term nature, the amount of any Employer
      contributions under a flexible benefits program maintained by the Employer
      under Section 125 of the Code pursuant to a salary reduction agreement
      entered into by the Participant under Section 125


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787                                   4              Carver Federal Savings Bank
<PAGE>

                                                                     Article I -
                                                                     Definitions
- --------------------------------------------------------------------------------

      of the Code, amounts paid or reimbursed by the Employer for Employee
      moving expenses (to the extent not deductible by the Employee), and the
      value of any nonqualified stock option granted to an Employee by the
      Employer (to the extent includable in gross income for the year granted).
      Commencing January 1, 1998, Compensation shall also include elective
      amounts that are not includable in the gross income of the Employee by
      reason of Section 132(f)(4) of the Code.

      Compensation does not include contributions made by the Employer to any
      other pension, deferred compensation, welfare or other employee benefit
      plan, amounts realized from the exercise of a nonqualified stock option or
      the sale of a qualified stock option, and other amounts which receive
      special tax benefits.

      Compensation shall not exceed one hundred sixty thousand dollars
      ($160,000) for the 1997, 1998 and 1999 Plan Years and one hundred seventy
      thousand dollars ($170,000) for the 2000 and 2001 Plan Years, adjusted in
      multiples of ten thousand dollars ($10,000) for increases in the
      cost-of-living as prescribed by the Secretary of the Treasury under
      Section 401(a)(17)(B) of the Code. For purposes of this Section 1.15, if
      the Plan Year in which a Participant's Compensation is being made is less
      than twelve (12) calendar months, the amount of Compensation taken into
      account for such Plan Year shall be the adjusted amount, as prescribed by
      the Secretary of the Treasury under Section 401(a)(17) of the Code, for
      such Plan Year, multiplied by a fraction, the numerator of which is the
      number of months taken into account for such Plan Year and the denominator
      of which is twelve (12). In determining the dollar limitation hereunder,
      compensation received from any Affiliated Employer shall be recognized as
      Compensation.

1.16  Compensation Reduction Agreement means an agreement between the Employer
      and an Eligible Employee whereby the Eligible Employee agrees to reduce
      his Compensation during the applicable payroll period by an amount equal
      to any whole percentage thereof, to the extent provided in Section 3.1,
      and the Employer agrees to contribute to the Trust, on behalf of such
      Eligible Employee, an amount equal to the specified reduction in
      Compensation.

1.17  Conversion Date means October 24, 1994, the date of conversion of the
      Employer from mutual to stock ownership.

1.18  Disability means a physical or mental condition, determined after review
      of those medical reports deemed satisfactory for this purpose, which
      renders the Participant totally and permanently incapable of engaging in
      any substantial gainful employment based on his education, training and
      experience.

1.19  Discretionary Employer Contribution Account means the separate, individual
      account established on behalf of a Participant to which Discretionary
      Employer Contributions, if any, are credited, together with all earnings
      and appreciation thereon, and against which are charged any


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787                                   5              Carver Federal Savings Bank
<PAGE>

                                                                     Article I -
                                                                     Definitions
- --------------------------------------------------------------------------------

      withdrawals, loans and other distributions made from such account, as well
      as any losses, depreciation, or expenses allocable to amounts credited to
      such account.

1.20  Discretionary Employer Contributions means the amounts, if any,
      contributed by the Employer on behalf of an Eligible Employee, pursuant to
      Section 3.6.

1.21  Early Retirement Date means the first day of any month coincident with or
      following the Participant's attainment of age sixty (60) and the
      completion of a five (5) year Period of Service.

      Notwithstanding any provisions of the plan to the contrary, if a
      Participant incurs a Termination of Service after having completed a five
      (5) year Period of Service but before attaining age sixty (60), the
      Participant's Early Retirement Date shall be the date as of which the
      Participant attains age sixty (60).

1.22  Effective Date means October 1, 1989.

1.23  Eligible Employee means an Employee who is eligible to participate in the
      Plan pursuant to the provisions of Article II.

1.24  Employee means any person employed by the Employer.

1.25  Employer means Carver Federal Savings Bank and any Participating Affiliate
      or any successor organization which shall continue to maintain the Plan
      set forth herein.

1.26  Employer Resolutions means resolutions adopted by the Board.

1.27  Employer Stock Fund means commencing upon the Conversion Date, the
      Separate Assets consisting of common stock of the Employer which shall be
      maintained in an Investment Account established for such purpose.

1.28  Employment Commencement Date means the date on which an Employee first
      performs an Hour of Service for the Employer upon initial employment or,
      if applicable, upon reemployment.

1.29  ERISA means the Employee Retirement Income Security Act of 1974, as
      amended from time to time.

1.30  Forfeitures means any amounts forfeited pursuant to Section 4.2.

1.31  Hardship means the condition described in Section 7.4.

1.32  Highly Compensated Employee means, with respect to a Plan Year commencing
      January 1, 1997, an Employee or an employee of an Affiliated Employer who
      is such an Employee or employee during the Plan Year for which a
      determination is being made and who:

      (a)   during the Plan Year immediately preceding the Plan Year for which a
            determination is being made, received compensation as defined under
            Section 414(q)(4) of the Code


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787                                   6              Carver Federal Savings Bank
<PAGE>

                                                                     Article I -
                                                                     Definitions
- --------------------------------------------------------------------------------

            ("Section 414(q) Compensation") from the Employer, in excess of
            eighty thousand dollars ($80,000) and effective for the 2000 Plan
            Year, eighty-five thousand dollars ($85,000), adjusted as prescribed
            by the Secretary of the Treasury under Section 415(d) of the Code,
            or

      (b)   at any time during the Plan Year for which a determination is being
            made or at any time during the Plan Year immediately preceding the
            Plan Year for which a determination is being made, was a
            five-percent owner as described under Section 414(q)(2) of the Code.

      For purposes of subsection (a) above, effective for Plan Years commencing
      after December 31, 1997, Section 414(q) Compensation shall include (A) any
      elective deferral (as defined in Section 402(g)(3) of the Code, and (B)
      any amount which is contributed or deferred by the Employer at the
      election of the Employee and which is not includable in the gross income
      of the Employee by reason of Section 125, 132(f)(4) or 457 of the Code.

      Highly Compensated Employee also means a former Employee who (A) incurred
      a Termination of Service prior to the Plan Year of the determination, (B)
      is not credited with an Hour of Service during the Plan Year of the
      determination and (C) satisfied the requirements of subsection (a) or (b)
      during either the Plan Year of his Termination of Service or any Plan Year
      ending coincident with or subsequent to the Employee's attainment of age
      fifty-five (55).

1.33  Hour of Service means each hour for which an Employee is paid or entitled
      to be paid by the Employer for the performance of duties.

1.34  Investment Accounts means any and all of the investment accounts
      established by Board resolution and presented to the Trustees, for the
      purpose of investing contributions made to the Plan Funds in accordance
      with the provisions of the Agreement or Separate Agreement, as applicable.
      The securities and other property in which contributions to the Investment
      Accounts of the Plan Funds may be invested shall be specified in the
      Agreement or the Separate Agreement, and the rights of the Trustees or
      Separate Agency shall be established in accordance with the provisions of
      such Agreement and Separate Agreement.

1.35  Leased Employee means with respect to Plan Years commencing on and after
      January 1, 1997, any individual (other than an Employee of the Employer or
      an employee of an Affiliated Employer) who, pursuant to an agreement
      between the Employer or any Affiliated Employer and any other person
      ("leasing organization"), has performed services for the Employer or any
      Affiliated Employer on a substantially full-time basis for a period of at
      least one (1) year, and such services are performed under the primary
      direction of and control by the Employer or any Affiliated Employer. A
      determination as to whether a Leased Employee shall be treated as an
      Employee of the Employer or an Affiliated Employer shall be made as
      follows: a Leased Employee shall not be considered an Employee of the
      Employer if: (a) such employee is a participant in a money purchase
      pension plan providing (i) a nonintegrated Employer contribution rate of
      at least ten percent (10%) of compensation, as defined in Section
      415(c)(3)


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787                                   7              Carver Federal Savings Bank
<PAGE>

                                                                     Article I -
                                                                     Definitions
- --------------------------------------------------------------------------------

      of the Code, however, including amounts contributed pursuant to a
      compensation reduction agreement which are excludable from the employee's
      gross income under Section 125, Section 402(e)(3), Section 402(h)(1)(B) or
      Section 403(b) of the Code, and effective January 1, 1998, including
      elective amounts that are excludable from the gross income of an Employee
      by reason of Section 132(f)(4) of the Code; (ii) immediate plan
      participation; and (iii) full and immediate vesting; and (b) Leased
      Employees do not constitute more than twenty percent (20%) of the
      Employer's Non-Highly Compensated Employees.

1.36  Matching Contribution Account means the separate, individual account
      established on behalf of a Participant to which the Matching Contributions
      made on such Participant's behalf are credited, together with all earnings
      and appreciation thereon, and against which are charged any withdrawals,
      loans and other distributions made from such account and any losses,
      depreciation or expenses allocable to amounts credited to such account.

1.37  Matching Contributions means the contributions made by the Employer
      pursuant to Section 3.4.

1.38  Named Fiduciaries means the Trustees, the Committee, the Separate Agency
      and such other parties who are designated by the Sponsoring Employer to
      control and manage the operation and administration of the Plan.

1.39  Net Value means the value of an Employee's Accounts as determined as of
      the Valuation Date coincident with or next following the event requiring
      such determination.

1.40  Nonelective Employer Contribution Account means the separate, individual
      account established on behalf of a Participant to which Nonelective
      Employer Contributions, if any, made on such Participant's behalf are
      credited, together with all earnings and appreciation thereon, and against
      which are charged any withdrawals, loans and other distributions made from
      such account and any losses, depreciation or expenses allocable to amounts
      credited to such account.

1.41  Nonelective Employer Contributions means the contributions made by the
      Employer pursuant to Section 3.13.

1.42  Non-Highly Compensated Employee means, with respect to a Plan Year, an
      Employee who is not a Highly Compensated Employee.

1.43  Normal Retirement Age means the date an Employee attains age sixty-five
      (65).

1.44  Normal Retirement Date means the first day of the month coincident with or
      next following the Participant's Normal Retirement Age.

1.45  One Year Period of Severance means, a twelve (12) consecutive month period
      following an Employee's Termination of Service with the Employer during
      which the Employee did not perform an Hour of Service.



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787                                   8              Carver Federal Savings Bank
<PAGE>

                                                                     Article I -
                                                                     Definitions
- --------------------------------------------------------------------------------

      Notwithstanding the foregoing, if an Employee is absent from employment
      for maternity or paternity reasons, such absence during the twenty-four
      (24) month period commencing on the first date of such absence shall not
      constitute a One Year Period of Severance. An absence from employment for
      maternity or paternity reasons means an absence (a) by reason of pregnancy
      of the Employee, or (b) by reason of a birth of a child of the Employee,
      or (c) by reason of the placement of a child with the Employee in
      connection with the adoption of such child by such Employee, or (d) for
      purposes of caring for such child for a period beginning immediately
      following such birth or placement.

1.46  Participant means an Eligible Employee who participates in accordance with
      the provisions of Section 2.3, and whose participation in the Plan has not
      been terminated in accordance with the provisions of Section 2.4.

1.47  Participating Affiliate means any corporation that is a member of a
      controlled group of corporations (within the meaning of Section 414(b) of
      the Code) of which the Sponsoring Employer is a member and any
      unincorporated trade or business that is a member of a group of trades or
      businesses under common control (within the meaning of Section 414(c) of
      the Code) of which the Sponsoring Employer is a member, which, with the
      prior approval of the Sponsoring Employer and subject to such terms and
      conditions as may be imposed by such Sponsoring Employer and the Trustees,
      shall adopt this Plan in accordance with the provisions of Section 13.8
      and the Agreement. Such entity shall continue to be a Participating
      Affiliate until such entity terminates its participation in the Plan in
      accordance with Section 13.8.

1.48  Period of Service means a period commencing with an Employee's Employment
      Commencement Date and ending on the date such Employee first incurs a
      Termination of Service.

      Notwithstanding the foregoing, the period between the first and second
      anniversary of the first date of a maternity or paternity absence
      described under Section 1.45 shall not be included in determining a Period
      of Service.

      A period during which an individual was not employed by the Employer shall
      nevertheless be deemed to be a Period of Service if such individual
      incurred a Termination of Service and:

      (a)   such Termination of Service was the result of resignation, discharge
            or retirement and such individual is reemployed by the Employer
            within one (1) year after such Termination of Service; or

      (b)   such Termination of Service occurred when the individual was
            otherwise absent for less than one (1) year and he was reemployed by
            the Employer within one (1) year after the date such absence began.

      All Periods of Service not disregarded under Sections 2.5 and 4.3 shall be
      aggregated.


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787                                   9              Carver Federal Savings Bank
<PAGE>

                                                                     Article I -
                                                                     Definitions
- --------------------------------------------------------------------------------

      Wherever used in the Plan, a Period of Service means the quotient obtained
      by dividing the days in all Periods of Service not disregarded hereunder
      by three hundred sixty-five (365) and disregarding any fractional
      remainder.

1.49  Plan means the Carver Federal Savings Bank 401(k) Savings Plan in RSI
      Retirement Trust, as herein restated and as it may be amended from time to
      time. The Plan shall be a Plan of Partial Participation as defined under
      the Agreement.

1.50  Plan Administrator means the person or persons who have been designated as
      such by the Employer in accordance with the provisions of Section 9.4.

1.51  Plan Funds means the assets of the Plan held in the Trust Fund and
      Separate Assets held under any Separate Agreement.

1.52  Plan Year means the calendar year.

1.53  Postponed Retirement Date means the first day of the month coincident with
      or next following a Participant's date of actual retirement which occurs
      after his Normal Retirement Date.

1.54  Prior Plan means the Carver Federal Savings Bank 401(k) Savings Plan in
      RSI Retirement Trust as in effect on the date immediately preceding the
      Restatement Date.

1.55  Qualified Nonelective Contributions means contributions, other than
      Matching Contributions and Discretionary Employer Contributions, made by
      the Employer, which (a) Participants may not elect to receive in cash in
      lieu of their being contributed to the Plan; (b) are one hundred percent
      (100%) nonforfeitable when made; and (c) are not distributable under the
      terms of the Plan to Participants or their Beneficiaries until the
      earliest of:

      (i)   the Participant's death, Disability or separation from service for
            other reasons;

      (ii)  the Participant's attainment of age fifty-nine and one-half
            (59-1/2); or

      (iii) termination of the Plan.

      Special Contributions defined under Section 1.63 are Qualified Nonelective
      Contributions.

1.56  Restatement Date means January 1, 1997.

1.57  Retirement Date means the Participant's Normal Retirement Date, Early
      Retirement Date or Postponed Retirement Date, whichever is applicable.

1.58  Rollover Contribution means (a) a contribution to the Plan of money
      received by an Employee from a qualified plan or (b) a contribution to the
      Plan of money transferred directly from another qualified plan on behalf
      of the Employee, which the Code permits to be rolled over into the Plan.


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787                                  10              Carver Federal Savings Bank
<PAGE>

                                                                     Article I -
                                                                     Definitions
- --------------------------------------------------------------------------------

1.59  Rollover Contribution Account means the separate, individual account
      established on behalf of an Employee to which his Rollover Contributions
      are credited together with all earnings and appreciation thereon, and
      against which are charged any withdrawals, loans and other distributions
      made from such account and any losses, depreciation or expenses allocable
      to amounts credited to such account.

1.60  Separate Agency means any trustee holding Plan Funds under a Separate
      Agreement.

1.61  Separate Agreement means the trust agreement governing the investment and
      administration of any Separate Assets. Such Separate Agreement shall be
      incorporated herein and constitute a part of the Plan.

1.62  Separate Assets means assets of the Plan as described in Article V which
      are held in a trust other than the Trust.

1.63  Special Contributions means the contributions made by the Employer
      pursuant to Section 3.5. Special Contributions are Qualified Nonelective
      Contributions as defined under Section 1.55.

1.64  Sponsoring Employer means Carver Federal Savings Bank or any successor
      organization which shall continue to maintain the Plan set forth herein.

1.65  Spouse means a person to whom the Employee was legally married and which
      marriage had not been dissolved by formal divorce proceedings that had
      been completed prior to the date on which payments to the Employee are
      scheduled to commence.

1.66  Termination of Service means the earlier of (a) the date on which an
      Employee's service is terminated by reason of his resignation, retirement,
      discharge, death or Disability or (b) the first anniversary of the date on
      which such Employee's active service ceases for any other reason.

      Service in the Armed Forces of the United States of America shall not
      constitute a Termination of Service but shall be considered to be a period
      of employment by the Employer provided that (i) such military service is
      caused by war or other emergency or the Employee is required to serve
      under the laws of conscription in time of peace, (ii) the Employee returns
      to employment with the Employer within six (6) months following discharge
      from such military service and (iii) such Employee is reemployed by the
      Employer at a time when the Employee had a right to reemployment at his
      former position or substantially similar position upon separation from
      such military duty in accordance with seniority rights as protected under
      the laws of the United States of America. Notwithstanding any provision of
      the Plan to the contrary,[ effective December 12, 1994, contributions,
      benefits and calculation of Periods of Service with respect to qualified
      military service will be provided in accordance with Section 414(u) of the
      Code

      A leave of absence granted to an Employee by the Employer shall not
      constitute a Termination of Service provided that the Participant returns
      to the active service of the Employer at the expiration of any such period
      for which leave has been granted.


- --------------------------------------------------------------------------------
787                                  11              Carver Federal Savings Bank
<PAGE>

                                                                     Article I -
                                                                     Definitions
- --------------------------------------------------------------------------------

      Notwithstanding the foregoing, an Employee who is absent from service with
      the Employer beyond the first anniversary of the first date of his absence
      for maternity or paternity reasons set forth in Section 1.45 shall incur a
      Termination of Service for purposes of the Plan on the second anniversary
      of the date of such absence.

1.67  Trust means the trust established or maintained under the Agreement with
      respect to the Plan.

1.68  Trust Fund means the assets held in accordance with the Agreement.

1.69  Trustees means the Trustees of the RSI Retirement Trust.

1.70  Units means the units of measure of an Employee's proportionate undivided
      beneficial interest in one or more of the Investment Accounts, valued as
      of the close of business.

1.71  Valuation Date means each business day.


- --------------------------------------------------------------------------------
787                                  12              Carver Federal Savings Bank
<PAGE>

                                                                    Article II -
                                                   Eligibility and Participation
- --------------------------------------------------------------------------------

                                   ARTICLE II -
                          ELIGIBILITY AND PARTICIPATION

2.1   Eligibility

      (a)   Every Employee who was a Participant in the Prior Plan immediately
            prior to the Restatement Date shall continue to be a Participant on
            the Restatement Date.

      (b)   Every other Employee who is not excluded under the provisions of
            Section 2.2 shall become an Eligible Employee upon satisfying all of
            the following conditions:

            (i)   completion of a Period of Service of one (1) year;

            (ii)  attainment of age twenty-one (21); and

            (iii) classification as a salaried Employee.

      (c)   For purposes of determining (i) if an Employee completed a Period of
            Service of one (1) year and (ii) Periods of Service pursuant to
            Section 2.5, employment with (A) an Affiliated Employer and (B)
            effective October 1, 1989 and November 19, 1990 respectively, prior
            employment with either Crossland Savings, FSB or Nassau Federal
            Savings and Loan Association, shall be deemed employment with the
            Employer.

      (d)   An Employee who otherwise satisfies the requirements of this Section
            2.1 and who is no longer excluded under the provisions of Section
            2.2 shall immediately become an Eligible Employee.

2.2   Ineligible Employees

      The following classes of Employees are ineligible to participate in the
      Plan:

      (a)   Employees compensated on an hourly basis;

      (b)   Leased Employees;

      (c)   Employees in a unit of Employees covered by a collective bargaining
            agreement with the Employer pursuant to which employee benefits were
            the subject of good faith bargaining and which agreement does not
            expressly provide that Employees of such unit be covered under the
            Plan; and

      (d)   Owner-Employees. For purposes of this Section 2.2(d), Owner-Employee
            means an individual who is a sole proprietor or who is a partner
            owning more than ten percent (10%) of either the capital or profits
            interest of a partnership which adopted the Plan.


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787                                  13              Carver Federal Savings Bank
<PAGE>

                                                                    Article II -
                                                   Eligibility and Participation
- --------------------------------------------------------------------------------

2.3   Participation

      Participation in the Plan is voluntary with respect to an election for
      Before-Tax Contributions. An Eligible Employee may elect to make
      Before-Tax Contributions in accordance with Section 3.1, as of the first
      full payroll period of any calendar month with or next following
      satisfaction of the eligibility requirements set forth in Section 2.1. In
      addition, an Eligible Employee will participate in the Plan upon
      satisfaction of the eligibility requirements set forth in Section 2.1,
      with respect to eligibility for (a) Special Contributions in accordance
      with Section 3.5 or (b) Discretionary Employer Contributions in accordance
      with Section 3.9 or (c) Nonelective Employer Contributions in accordance
      with Section 3.13.

      An election for Before-Tax Contributions shall be evidenced by completing
      and filing the form prescribed by the Committee not less than ten (10)
      days prior to the date participation is to commence. Such form shall
      include, but not be limited to, a Compensation Reduction Agreement, a
      designation of Beneficiary, and an investment direction as described in
      Section 6.1. By completing and filing such form, the Eligible Employee
      authorizes the Employer to make the applicable payroll deductions from
      Compensation, commencing on the first applicable payday coincident with or
      next following the effective date of the Eligible Employee's election to
      participate. In the case of Special Contributions or Discretionary
      Employer Contributions and effective January 1, 2001, Nonelective Employer
      Contributions, a Participant shall complete a form prescribed by the
      Committee, designating a Beneficiary and an investment direction as
      described in Section 6.1.

      Effective January 1, 2001, for any Plan Year in which a Nonelective
      Employer Contribution is made in accordance with Section 3.13, all
      Employees who meet the requirements of an Eligible Employee during such
      Plan Year and who are employed by the Employer on the last day of the Plan
      Year shall participate in the Plan.

2.4   Termination of Participation

      Participation in the Plan shall terminate on the earlier of the date a
      Participant dies or the entire vested interest in the Net Value of such
      Participant's Accounts has been distributed.

2.5   Eligibility upon Reemployment

      If an Employee incurs a One Year Period of Severance prior to satisfying
      the eligibility requirements of Section 2.1, service prior to such One
      Year Period of Severance shall be disregarded and such Employee must
      satisfy the eligibility requirements of Section 2.1 as a new Employee.

      If an Employee incurs a One Year Period of Severance after satisfying the
      eligibility requirements of Section 2.1 and:

      (a)   if such Employee is not vested in any Matching Contributions and/or
            Discretionary Employer Contributions and/or Nonelective Employer
            Contributions, incurs a One Year


- --------------------------------------------------------------------------------
787                                  14              Carver Federal Savings Bank
<PAGE>

                                                                    Article II -
                                                   Eligibility and Participation
- --------------------------------------------------------------------------------

            Period of Severance and again performs an Hour of Service, the
            Employee shall receive credit for Periods of Service prior to a One
            Year Period of Severance only if the number of consecutive One Year
            Periods of Severance is less than the greater of: (i) five (5) years
            or (ii) the aggregate number of such Employee's Periods of Service
            credited before his One Year Period of Severance. If such former
            Employee's Periods of Service prior to his One Year Period of
            Severance are recredited under this Section 2.5, such former
            Employee shall be eligible to participate immediately upon
            reemployment, provided such Employee is not excluded from
            participating under the provisions of Section 2.2. If such former
            Employee's Periods of Service prior to his One Year Period of
            Severance are not recredited under this Section 2.5, such Employee
            must satisfy the eligibility requirements of Section 2.1 as a new
            Employee;

      (b)   if such Employee is vested in any Matching Contributions and/or
            Discretionary Employer Contributions and/or Nonelective Employer
            Contributions, incurs a One Year Period of Severance and again
            performs an Hour of Service, the Employee shall receive credit for
            Periods of Service prior to his One Year Period of Severance and
            shall be eligible to participate in the Plan immediately upon
            reemployment, provided such Employee is not excluded from
            participating under the provisions of Section 2.2.

2.6   Eligibility Upon Reemployment of Employees Subject to Section 16(b) of the
      Securities Exchange Act of 1934

      Notwithstanding anything contained in the Plan to the contrary, if an
      Employee subject to the provisions of Section 16(b) of the Securities
      Exchange Act of 1934 incurs a Termination of Service and again performs an
      Hour of Service, such Employee shall not be eligible to participate in the
      Plan until the later of: (a) the date which is six (6) months from the
      date such Employee incurred a Termination of Service or (b) the date such
      Employee again performs an Hour of Service with the Employer; provided
      such Employee is not excluded from participating under the provisions of
      Section 2.2.


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787                                  15              Carver Federal Savings Bank
<PAGE>

                                                                   Article III -
                                  Contributions and Limitations on Contributions
- --------------------------------------------------------------------------------

                                  ARTICLE III -
                 CONTRIBUTIONS AND LIMITATIONS ON CONTRIBUTIONS

3.1   Before-Tax Contributions

      The Employer shall make Before-Tax Contributions for each payroll period
      in an amount equal to the amount by which a Participant's Compensation has
      been reduced with respect to such period under his Compensation Reduction
      Agreement. Subject to the limitations set forth in Sections 3.2 and 3.12,
      the amount of reduction authorized by the Eligible Employee shall be
      limited to whole percentages of Compensation and shall not be less than
      one percent (1%) nor greater than fifteen percent (15%). The Before-Tax
      Contributions made on behalf of a Participant shall be credited to such
      Participant's Before-Tax Contribution Account and shall be invested in
      accordance with Article VI of the Plan.

3.2   Limitation on Before-Tax Contributions

      Sections 3.2(a), (b), (c) and (d), below, shall apply with respect to Plan
      Years beginning prior to January 1, 2002. Commencing January 1, 2002, the
      alternative method of meeting the non-discrimination requirements set
      forth in Section 401(k)(12) of the Code shall apply.

      For any year in which the alternative method, referred to above, applies,
      the Employer shall provide each Eligible Employee a comprehensive notice
      of the Employee's rights and obligations under the Plan, written in a
      manner calculated to be understood by the average Eligible Employee. This
      notice will be provided at least thirty (30) days but not more than ninety
      (90) days before the beginning of the Plan Year. In the event the Employee
      becomes an Eligible Employee after the ninetieth (90th) day before the
      beginning of the Plan Year and does not receive the notice for that
      reason, the notice must be provided no more than ninety (90) days before
      the Employee becomes an Eligible Employee, but not later than the date the
      Employee actually becomes an Eligible Employee.

      In addition to any other election periods provided under the Plan, each
      Eligible Employee may make or modify a deferral election during the thirty
      (30)-day period immediately following receipt of the notice described in
      the above paragraph.

      (a)   Commencing January 1, 1997, the percentage of Before-Tax
            Contributions made on behalf of a Participant who is a Highly
            Compensated Employee shall be limited so that the Average Actual
            Deferral Percentage for the group of such Highly Compensated
            Employees for the Plan Year does not exceed the greater of:

            (i)   the Average Actual Deferral Percentage for the group of
                  Eligible Employees who were Non-Highly Compensated Employees
                  for the preceding Plan Year multiplied by 1.25; or


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787                                  16              Carver Federal Savings Bank
<PAGE>

                                                                   Article III -
                                  Contributions and Limitations on Contributions
- --------------------------------------------------------------------------------

            (ii)  the Average Actual Deferral Percentage for the group of
                  Eligible Employees who were Non-Highly Compensated Employees
                  for the preceding Plan Year multiplied by two (2); provided,
                  that the difference in the Average Actual Deferral Percentage
                  for eligible Highly Compensated Employees and eligible
                  Non-Highly Compensated Employees does not exceed two percent
                  (2%). Use of this alternative limitation shall be subject to
                  the provisions of Income Tax Regulations issued under Code
                  Section 401(m)(9) regarding the multiple use of the
                  alternative limitation set forth in Sections 401(k) and 401(m)
                  of the Code.

            The preceding Plan Year testing method can only be modified if the
            Plan meets the requirements for changing to current Plan Year
            testing as set forth in Internal Revenue Service Notice 98-1, or any
            successor future guidance issued by the Internal Revenue Service.

            The above subsections (i) and (ii) shall be subject to the
            distribution provisions of the last paragraph of Section 3.12(f).

            If the Average Actual Deferral Percentage for the group of eligible
            Highly Compensated Employees exceeds the limitations set forth in
            the preceding paragraph, the amount of excess Before-Tax
            Contributions for a Highly Compensated Employee shall be determined
            by "leveling" (as hereafter defined), the highest Before-Tax
            Contributions made by Highly Compensated Employees until the Average
            Actual Deferral Percentage test for the group of eligible Highly
            Compensated Employees complies with such limitations. For purposes
            of this paragraph, "leveling" means reducing the Before-Tax
            Contribution of the Highly Compensated Employee with the highest
            Before-Tax Contribution amount to the extent required to:

            (A)   enable the Average Actual Deferral Percentage limitations to
                  be met, or

            (B)   cause such Highly Compensated Employee's Before-Tax
                  Contribution amount to equal the dollar amount of the
                  Before-Tax Contribution of the Highly Compensated Employee
                  with the next highest Before-Tax Contribution amount by
                  distribution of such excess Before-Tax Contributions, as
                  described below, to the Highly Compensated Employee, whose
                  Before-Tax Contributions equal the highest dollar amount,

            and repeating such process until the Average Actual Deferral
            Percentage for the group of eligible Highly Compensated Employees
            complies with the Average Actual Deferral Percentage limitations.

            If Before-Tax Contributions made on behalf of a Participant during
            any Plan Year exceed the maximum amount applicable to a Participant
            as set forth above, any such contributions, including any earnings
            thereon as determined under Section 3.9, shall be characterized as
            Compensation payable to the Participant and shall be paid to the


- --------------------------------------------------------------------------------
787                                  17              Carver Federal Savings Bank
<PAGE>

                                                                   Article III -
                                  Contributions and Limitations on Contributions
- --------------------------------------------------------------------------------

            Participant from his Before-Tax Contribution Account no later than
            two and one-half (2-1/2) months after the close of such Plan Year.

            If Before-Tax Contributions during any Plan Year exceed the maximum
            amount applicable to a Participant as set forth above, any Matching
            Contributions, including any earnings thereon as determined under
            Section 3.9, that are attributable to Before-Tax Contributions which
            are returned to the Participant as provided hereunder, shall be
            treated as Forfeitures under Section 4.2.

            In the event that the Plan satisfies the requirements of Section
            401(k), 401(a)(4) or 410(b) of the Code only if aggregated with one
            or more other plans, or if one or more other plans satisfy the
            requirements of Section 401(k), 401(a)(4) or 410(b) of the Code only
            if aggregated with the Plan, then this Section 3.2 shall be applied
            by determining the Actual Deferral Percentages of Eligible Employees
            as if all such plans were a single plan.

            If any Highly Compensated Employee is a Participant in two (2) or
            more cash or deferred arrangements of the Employer, for purposes of
            determining the Actual Deferral Percentage with respect to such
            Highly Compensated Employee, all cash or deferred arrangements shall
            be treated as one (1) cash or deferred arrangement.

      (b)   Before-Tax Contributions under this Plan, and elective deferrals (as
            defined under Section 402(g) of the Code) under all other plans,
            contracts or arrangements of the Employer made on behalf of any
            Participant during the 1997 Plan Year shall not exceed nine thousand
            five hundred dollars ($9,500). During the 1998 and 1999 Plan Years,
            such amount shall be increased to ten thousand dollars ($10,000).
            During the 2000 and 2001 Plan Years, such amount shall be increased
            to ten thousand five hundred dollars ($10,500). For Plan Years
            commencing after December 31, 2001, Before-Tax Contributions and
            elective deferrals (as defined under Section 402(g) of the Code)
            under all other plans, contracts or arrangements of the Employer
            shall be further adjusted as prescribed by the Secretary of the
            Treasury under Section 415(d) of the Code. This Section 3.2(b) shall
            be subject to the distribution provisions of the last paragraph of
            Section 3.12(f).

      (c)   If Before-Tax Contributions made on behalf of a Participant during
            any Plan Year exceed the dollar limitation set forth in subsection
            (b), such contributions, including any earnings thereon as
            determined under Section 3.9, shall be characterized as Compensation
            payable to the Participant and shall be paid to the Participant from
            his Before-Tax Contribution Account no later than April 15th of the
            calendar year following the close of such Plan Year.

            If Before-Tax Contributions during any Plan Year exceed the maximum
            dollar amount applicable to a Participant as set forth in subsection
            (b), any Matching Contributions, including any earnings thereon as
            determined under Section 3.9, that are attributable to


- --------------------------------------------------------------------------------
787                                  18              Carver Federal Savings Bank
<PAGE>

                                                                   Article III -
                                  Contributions and Limitations on Contributions
- --------------------------------------------------------------------------------

            Before-Tax Contributions which are returned to the Participant as
            provided hereunder, shall be treated as Forfeitures under Section
            4.2.

      (d)   Subject to the requirements of Sections 401(a) and 401(k) of the
            Code, the maximum amounts under subsections (a) and (b) may differ
            in amount or percentage as between individual Participants or
            classes of Participants, and any Compensation Reduction Agreement
            may be terminated, amended, or suspended without the consent of any
            such Participant or Participants in order to comply with the
            provisions of such subsections (a) and (b).

3.3   Changes in Before-Tax Contributions

      Unless (a) an election is made to the contrary, or (b) a Participant
      receives a Hardship distribution pursuant to Section 7.4(c)(iii), the
      percentage of Before-Tax Contributions made under Section 3.1 shall
      continue in effect so long as the Participant has a Compensation Reduction
      Agreement in force. A Participant may, by completing the applicable form,
      prospectively increase or decrease the rate of Before-Tax Contributions
      made on his behalf to any of the percentages authorized under Section 3.1
      or suspend Before-Tax Contributions without withdrawing from participation
      in the Plan. Such form must be filed at least ten (10) days prior to the
      first day of the payroll period with respect to which such change is to
      become effective. A Participant who has Before-Tax Contributions made on
      his behalf suspended may resume such contributions by completing and
      filing the applicable form. Not more often than once in any calendar
      quarter may an election be made which would prospectively increase,
      decrease, suspend or resume Before-Tax Contributions made on behalf of a
      Participant. A Participant may terminate his Before-Tax Contributions at
      any time.

      Notwithstanding the foregoing, a Participant who receives a Hardship
      distribution pursuant to Section 7.4(c)(iii) shall have his Compensation
      Reduction Agreement deemed null and void and all Before-Tax Contributions
      made on behalf of such Participant shall be suspended until the later to
      occur of: (i) twelve (12) months after receipt of the Hardship
      distribution and (ii) the first payroll period which occurs ten (10) days
      following the completion and filing of a Compensation Reduction Agreement
      authorizing the resumption of Before-Tax Contributions to be made on his
      behalf. Before-Tax Contributions following a Hardship distribution made
      pursuant to Section 7.4(c)(iii) shall be subject to the following
      limitations:

      (A)   Before-Tax Contributions for the Participant's taxable year
            immediately following the taxable year of the Hardship distribution
            shall not exceed the applicable limit under Section 402(g) of the
            Code for such next taxable year less the amount of such
            Participant's Before-Tax Contributions for the taxable year of the
            Hardship distribution, and

      (B)   the percentage of Before-Tax Contributions for the twelve (12) month
            period following the mandatory twelve (12) month suspension period
            shall not exceed the percentage of


- --------------------------------------------------------------------------------
787                                  19              Carver Federal Savings Bank
<PAGE>

                                                                   Article III -
                                  Contributions and Limitations on Contributions
- --------------------------------------------------------------------------------

            Before-Tax Contributions made on behalf of the Participant as set
            forth in the last Compensation Reduction Agreement in effect prior
            to the Hardship distribution.

      Before-Tax Contributions based on Compensation for the period during which
      such contributions had been suspended or decreased may not be made up at a
      later date.

3.4   Matching Contributions

      (a)   The Employer shall make contributions on behalf of each Participant
            in an amount equal to fifty percent (50%) of such Participant's
            Before-Tax Contribution. Commencing January 1, 2002, the Employer
            shall make contributions on behalf of each Participant, in an amount
            equal to one hundred percent (100%) of such Participant's Before-Tax
            Contributions, up to the first four percent (4%) of the
            Participant's Compensation.

      (b)   Matching Contributions shall be credited to the Participant's
            Matching Contribution Account and shall be invested in accordance
            with Article VI of the Plan.

      (c)   If a Participant terminates his Before-Tax Contributions, Matching
            Contributions attributable to such contributions will also cease. If
            Before-Tax Contributions are suspended, the Matching Contributions
            attributable to such contributions will be suspended for the same
            period. Subject to the limitations set forth in subsection (a), if
            Before-Tax Contributions are increased or decreased, Matching
            Contributions attributable to such contributions will be increased
            or decreased during the same period. Matching Contributions for the
            period during which Before-Tax Contributions had been suspended or
            decreased may not be made up at a later date.

      (d)   Matching Contributions may be reviewed and modified by the
            Employer's Board from time to time. Commencing January 1, 2002, this
            Section 3.4(d) shall no longer apply.

3.5   Special Contributions

      In addition to any other contributions, the Employer may, in its
      discretion, make Special Contributions for a Plan Year to the Before-Tax
      Contribution Account of any Eligible Employees. Such Special Contributions
      may be limited to the amount necessary to insure that the Plan complies
      with the requirements of Section 401(k) of the Code. The Special
      Contributions made on behalf of a Participant shall be invested in
      accordance with Article VI of the Plan.

      The Employer may provide that Special Contributions be made only on behalf
      of each Eligible Employee who is a Non-Highly Compensated Employee on the
      last day of the Plan Year. Such Special Contributions shall be allocated
      in proportion to each such Eligible Employee's Compensation for the Plan
      Year.

      Any other provision of the Plan to the contrary notwithstanding, no
      Matching Contributions shall be made with respect to any Special
      Contributions.


- --------------------------------------------------------------------------------
787                                  20              Carver Federal Savings Bank
<PAGE>

                                                                   Article III -
                                  Contributions and Limitations on Contributions
- --------------------------------------------------------------------------------

3.6   Discretionary Employer Contributions

      Subject to the limitations of Section 3.12, the Employer may, in its sole
      and absolute discretion, make Discretionary Employer Contributions to the
      Plan for a Plan Year. Discretionary Employer Contributions shall be
      allocated on an annual basis in an amount up to fifteen percent (15%)
      determined by the Board, as a percentage of the Compensation of each
      Eligible Employee who is in the employ of the Employer on the last day of
      the Plan Year.

      Notwithstanding the foregoing, an Eligible Employee who incurs a
      Termination of Service prior to the last day of the Plan Year for reasons
      of death, Disability or retirement on a Retirement Date shall receive a
      Discretionary Employer Contribution pursuant to the foregoing paragraph,
      for the Plan Year up to the date of his Termination of Service.

      The Discretionary Employer Contributions allocated to each Eligible
      Employee shall be credited to such Participant's Discretionary Employer
      Contribution Account and shall be invested in accordance with Article VI
      of the Plan. Any and all withdrawals, distributions or payments from a
      Participant's Discretionary Employer Contribution Account shall be made in
      accordance with Article VII, or Article VIII of the Plan, whichever is
      applicable.

3.7   Limitation on Matching Contributions

      This Section 3.7 shall apply with respect to Plan Years beginning prior to
      January 1, 2002. Commencing January 1, 2002, the alternative method of
      meeting the non-discrimination requirements set forth in Section
      401(m)(11) of the Code shall apply.

      Commencing January 1, 1997, the Actual Contribution Percentage made on
      behalf of a Participant who is a Highly Compensated Employee shall be
      limited so that the Average Actual Contribution Percentage for the group
      of such Highly Compensated Employees for the Plan Year shall not exceed
      the greater of:

      (a)   the Average Actual Contribution Percentage for the group of Eligible
            Employees who were Non-Highly Compensated Employees for the
            preceding Plan Year multiplied by 1.25; or

      (b)   the Average Actual Contribution Percentage for the group of Eligible
            Employees who were Non-Highly Compensated Employees for the
            preceding Plan Year, multiplied by two (2); provided, that the
            difference in the Average Actual Contribution Percentage for Highly
            Compensated Employees and Non-Highly Compensated Employees does not
            exceed two percent (2%). Use of this alternative limitation shall be
            subject to the provisions of Income Tax Regulations issued under
            Code Section 401(m)(9) regarding the multiple use of the alternative
            limitation set forth in Sections 401(k) and 401(m) of the Code.


- --------------------------------------------------------------------------------
787                                  21              Carver Federal Savings Bank
<PAGE>

                                                                   Article III -
                                  Contributions and Limitations on Contributions
- --------------------------------------------------------------------------------

      The preceding Plan Year testing method can only be modified if the Plan
      meets the requirements for changing to current Plan Year testing as set
      forth in Internal Revenue Service Notice 98-1, or any successor future
      guidance issued by the Internal Revenue Service.

      The above subsections (a) and (b) shall be subject to the distribution
      provisions of the last paragraph of Section 3.12(f).

      If the Average Actual Contribution Percentage for the group of eligible
      Highly Compensated Employees exceeds the limitations set forth in the
      preceding paragraph, the amount of excess Matching Contributions for a
      Highly Compensated Employee shall be determined by "leveling" (as
      hereafter defined) the highest Matching Contributions until the Average
      Actual Contribution Percentage test for the group of eligible Highly
      Compensated Employees complies with such limitations. For purposes of this
      paragraph, "leveling" means reducing the Matching Contributions made on
      behalf of the Highly Compensated Employee with the highest Matching
      Contribution amount to the extent required to:

      (i)   enable the Average Actual Contribution Percentage limitations to be
            met, or

      (ii)  cause such Highly Compensated Employee's Matching Contribution
            amount to equal the dollar amount of the Matching Contribution made
            on behalf of the Highly Compensated Employee with the next highest
            Matching Contribution amount

      and repeating such process until the Average Actual Contribution
      Percentage for the group of eligible Highly Compensated Employees complies
      with the Average Actual Contribution Percentage limitations.

      If Matching Contributions during any Plan Year exceed the maximum amount
      applicable to a Participant as set forth above, any such contributions,
      including any earnings thereon as determined under Section 3.9, shall,
      whether or not vested, be treated as Forfeitures under Section 4.2.

      In the event that the Plan satisfies the requirements of Section 401(m),
      401(a)(4) or 410(b) of the Code only if aggregated with one or more other
      plans, or if one or more other plans satisfy the requirements of Section
      401(m), 401(a)(4) or 410(b) of the Code only if aggregated with the Plan,
      then this Section 3.7 shall be applied by determining the Actual
      Contribution Percentages of Eligible Employees as if all such plans were a
      single plan.

      If any Highly Compensated Employee is a Participant in two (2) or more
      plans of the Employer, for purposes of determining the Actual Contribution
      Percentage with respect to such Highly Compensated Employee, all such
      plans shall be treated as one (1) plan.


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787                                  22              Carver Federal Savings Bank
<PAGE>

                                                                   Article III -
                                  Contributions and Limitations on Contributions
- --------------------------------------------------------------------------------

3.8   Aggregate Limit; Multiple Use of Alternative Limitation

      This Section 3.8 shall apply with respect to Plan Years beginning prior to
      January 1, 2002. Commencing January 1, 2002, the alternative method of
      meeting the non-discrimination requirements set forth in Sections
      401(k)(12) and 401(m)(11) of the Code shall apply.

      Commencing January 1, 1997, multiple use of the alternative limitation in
      determining the Average Actual Deferral Percentage and Average Actual
      Contribution Percentage shall not be permitted.

      Multiple use of the alternative limitation occurs if, for the group of
      Eligible Employees who are Highly Compensated Employees, the sum of the
      Average Actual Deferral Percentage and the Average Actual Contribution
      Percentage exceeds the Aggregate Limit.

      For purposes of this Section 3.8, Aggregate Limit shall mean the greater
      of (a) or (b), where (a) and (b) are as follows:

      (a)   the sum of:

            (i)   one hundred twenty-five percent (125%) of the greater of:

                  (A)   the Average Actual Deferral Percentage for the group of
                        Eligible Employees who were Non-Highly Compensated
                        Employees for the preceding Plan Year; or

                  (B)   the Average Actual Contribution Percentage for the group
                        of Eligible Employees who were Non-Highly Compensated
                        Employees for the preceding Plan Year; and

            (ii)  two (2) plus the lesser of subsection (a)(i)(A) or (a)(i)(B).
                  In no event shall this amount exceed two hundred percent
                  (200%) of the lesser of subsection (a)(i)(A) or (a)(i)(B).

      (b)   the sum of:

            (i)   one hundred twenty-five percent (125%) of the lesser of:

                  (A)   the Average Actual Deferral Percentage for the group of
                        Eligible Employees who were Non-Highly Compensated
                        Employees for the preceding Plan Year; or

                  (B)   the Average Actual Contribution Percent age for the
                        group of Eligible Employees who were Non-Highly
                        Compensated Employees for the preceding Plan Year; and


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787                                  23              Carver Federal Savings Bank
<PAGE>

                                                                   Article III -
                                  Contributions and Limitations on Contributions
- --------------------------------------------------------------------------------

            (ii)  two (2) plus the greater of subsection (b)(i)(A) or (b)(i)(B).
                  In no event shall this amount exceed two hundred percent
                  (200%) of the greater of subsection (b)(i)(A) or (b)(i)(B).

      If multiple use of the alternative limitation occurs, the excess
      Before-Tax Contributions for Highly Compensated Employees under the Plan
      shall be reduced in accordance with Section 3.2(a).

3.9   Interest on Excess Contributions

      In the event Before-Tax Contributions and/or Matching Contributions made
      on behalf of a Participant during a Plan Year exceed the maximum allowable
      amount as described in Section 3.2(a), 3.2(b) or 3.7 ("Excess
      Contributions") and such Excess Contributions and earnings thereon are
      payable to the Participant under the applicable provisions of the Plan,
      earnings on such Excess Contributions for the period commencing with the
      first day of the Plan Year in which the Excess Contributions were made and
      ending with the date of payment to the Participant ("Allocation Period")
      shall be determined in accordance with the provisions of this Section 3.9.

      The earnings allocable to excess Before-Tax Contributions for an
      Allocation Period shall be equal to the sum of (a) plus (b) where (a) and
      (b) are determined as follows:

      (a)   The amount of earnings attributable to the Participant's Before-Tax
            Contribution Account for the Plan Year multiplied by a fraction, the
            numerator of which is the excess Before-Tax Contributions and
            Special Contributions for the Plan Year, and the denominator of
            which is the sum of (i) the Net Value of the Participant's
            Before-Tax Contribution Account as of the last day of the
            immediately preceding Plan Year and (ii) the contributions
            (including the Excess Contributions) made to the Before-Tax
            Contribution Account on the Participant's behalf during such Plan
            Year.

      (b)   The amount of earnings attributable to the Participants Before-Tax
            Contribution Account for the period commencing with the first day of
            the Plan Year in which payment is made to the Participant and ending
            with the date of payment to the Participant multiplied by a
            fraction, the numerator of which is the excess Before-Tax
            Contributions and Special Contributions made to the Before-Tax
            Contribution Account on the Participant's behalf during the Plan
            Year immediately preceding the Plan Year in which the payment is
            made to the Participant, and the denominator of which is the Net
            Value of the Participant's Before-Tax Contribution Account on the
            first day of the Plan Year in which the payment is made to the
            Participant.

      The earnings allocable to excess Matching Contributions for an Allocation
      Period shall be equal to the sum of (A) and (B) where (A) and (B) are
      determined as follows:


- --------------------------------------------------------------------------------
787                                  24              Carver Federal Savings Bank
<PAGE>

                                                                   Article III -
                                  Contributions and Limitations on Contributions
- --------------------------------------------------------------------------------

      (A)   The amount of earnings attributable to the Participants Matching
            Contribution Account for the Plan Year multiplied by a fraction, the
            numerator of which is the excess Matching Contributions for the Plan
            Year, and the denominator of which is the sum of (I) the Net Value
            of the Participant's Matching Contribution Account as of the last
            day of the immediately preceding Plan Year and (II) the
            contributions (including the Excess Contributions) made to the
            Matching Contribution Account on the Participant's behalf during
            such Plan Year.

      (B)   The amount of earnings attributable to the Participants Matching
            Contribution Account for the period commencing with the first day of
            the Plan Year in which payment is made to the Participant and ending
            with the date of payment to the Participant multiplied by a
            fraction, the numerator of which is the excess Matching
            Contributions made to the Matching Contribution Account on the
            Participant's behalf during the Plan Year immediately preceding the
            Plan Year in which the payment is made to the Participant, and the
            denominator of which is the Net Value of the Participant's Matching
            Contribution Account on the first day of the Plan Year in which the
            payment is made to the Participant.

3.10  Payment of Contributions to the Trust and Separate Agency

      As soon as possible after each payroll period, but not less often than
      once a month, the Employer shall deliver (a) to the Trustees: (i) the
      Before-Tax Contributions required to be made to the Trust during such
      payroll period under the applicable Compensation Reduction Agreements and
      (ii) the amount of all Matching Contributions required to be made to the
      Trust for such payroll period and (b) to the Separate Agency: (i) the
      Before-Tax Contributions required to be made to the Separate Agency during
      such payroll period under the applicable Compensation Reduction Agreement,
      and (ii) the amount of all Matching Contributions required to be made to
      the Separate Agency during such payroll period.

      Special Contributions, Discretionary Employer Contributions and effective
      January 1, 2001, Nonelective Employer Contributions to the Trust and to
      the Separate Agency shall be forwarded by the Employer to the Trustees and
      to the Separate Agency no later than the time for filing the Employer's
      federal income tax return, plus any extensions thereon, for the Plan Year
      to which they are attributable.

3.11  Rollover Contributions

      Subject to such terms and conditions as may from time to time be
      established by the Committee, the Trustees and the Separate Agency, an
      Employee, whether or not a Participant, may contribute a Rollover
      Contribution to the Plan Fund; provided, however, that such Employee shall
      submit a written certification, in form and substance satisfactory to the
      Committee, that the contribution qualifies as a Rollover Contribution. The
      Committee shall be entitled to rely on such certification and shall accept
      the contribution on behalf of the Trustees.


- --------------------------------------------------------------------------------
787                                  25              Carver Federal Savings Bank
<PAGE>

                                                                   Article III -
                                  Contributions and Limitations on Contributions
- --------------------------------------------------------------------------------

      Rollover Contributions shall be credited to an Employee's Rollover
      Contribution Account and shall be invested in accordance with Article VI
      of the Plan.

3.12  Section 415 Limits on Contributions

      (a)   For purposes of this Section 3.12, the following terms and phrases
            shall have the meanings hereafter ascribed to them:

            (i)   "Annual Additions" shall mean the sum of the following amounts
                  credited to a Participant's Accounts for the Limitation Year:
                  (A) Employer contributions, including Before-Tax
                  Contributions, Matching Contributions, Special Contributions,
                  Discretionary Employer Contributions and Nonelective Employer
                  Contributions; (B) any Employee contributions; (C)
                  forfeitures; and (D) (1) amounts allocated to an individual
                  medical account, as defined in Section 415(l)(2) of the Code,
                  which is part of a pension or annuity plan maintained by the
                  Employer and (2) amounts derived from contributions, paid or
                  accrued, which are attributable to post-retirement medical
                  benefits allocated to the separate account of a key employee,
                  as defined in Section 419A(d)(3) of the Code, under a welfare
                  benefit fund as defined in Section 419(e) of the Code,
                  maintained by the Employer are treated as Annual Additions.
                  Annual Additions include the following contributions credited
                  to a Participant's Accounts for the Limitation Year,
                  regardless of whether such contributions have been distributed
                  to the Participant:

                  (I)   Before-Tax Contributions which exceed the limitations
                        set forth in Section 3.2(a);

                  (II)  Before-Tax Contributions made on behalf of a Highly
                        Compensated Employee which exceed the limitations set
                        forth in Section 3.2(b); and

                  (III) Matching Contributions made on behalf of a Highly
                        Compensated Employee which exceed the limitations set
                        forth in Section 3.7.

            (ii)  "Current Accrued Benefit" shall mean a Participant's annual
                  accrued benefit under a defined benefit plan, determined in
                  accordance with the meaning of Section 415(b)(2) of the Code,
                  as if the Participant had separated from service as of the
                  close of the last Limitation Year beginning before January 1,
                  1987. In determining the amount of a Participant's Current
                  Accrued Benefit, the following shall be disregarded:

                  (A)   any change in the terms and conditions of the defined
                        benefit plan after May 5, 1986; and

                  (B)   any cost of living adjustment occurring after May 5,
                        1986.


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787                                  26              Carver Federal Savings Bank
<PAGE>

                                                                   Article III -
                                  Contributions and Limitations on Contributions
- --------------------------------------------------------------------------------

            (iii) "Defined Benefit Plan" and "Defined Contribution Plan" shall
                  have the meanings set forth in Section 415(k) of the Code.

            (iv)  "Defined Benefit Plan Fraction" for a Limitation Year shall
                  mean a fraction, (A) the numerator of which is the aggregate
                  projected annual benefit (determined as of the last day of the
                  Limitation Year) of the Participant under all defined benefit
                  plans (whether or not terminated) maintained by the Employer,
                  and (B) the denominator of which is the lesser of: (I) the
                  product of 1.25 (or such adjustment as required under Section
                  12.4) and the dollar limitation in effect under Section
                  415(b)(1)(A) of the Code, adjusted as prescribed by the
                  Secretary of the Treasury under Section 415(d) of the Code, or
                  (II) the product of 1.4 and the amount which may be taken into
                  account with respect to such Participant under Section
                  415(b)(1)(B) of the Code for such Limitation Year.
                  Notwithstanding the above, if the Participant was a
                  participant in one or more defined benefit plans of the
                  Employer in existence on May 6, 1986, the dollar limitation of
                  the denominator of this fraction will not be less than the
                  Participant's Current Accrued Benefit.

            (v)   "Defined Contribution Plan Fraction" for a Limitation Year
                  shall mean a fraction, (A) the numerator of which is the sum
                  of the Participant's Annual Additions under all defined
                  contribution plans (whether or not terminated) maintained by
                  the Employer for the current year and all prior Limitation
                  Years (including annual additions attributable to the
                  Participant's nondeductible employee contributions to all
                  defined benefit plans (whether or not terminated) maintained
                  by the Employer), and (B) the denominator of which is the sum
                  of the maximum aggregate amounts for the current year and all
                  prior Limitation Years with the Employer (regardless of
                  whether a defined contribution plan was maintained by the
                  Employer). "Maximum aggregate amounts" shall mean the lesser
                  of (I) the product of 1.25 (or such adjustment as required
                  under Section 12.4) and the dollar limitation in effect under
                  Section 415(c)(1)(A) of the Code, adjusted as prescribed by
                  the Secretary of the Treasury under Section 415(d) of the
                  Code, or (II) the product of 1.4 and the amount that may be
                  taken into account under Section 415(c)(1)(B) of the Code;
                  provided, however, that the Committee may elect, on a uniform
                  and nondiscriminatory basis, to apply the special transition
                  rule of Section 415(e)(7) of the Code applicable to Limitation
                  Years ending before January 1, 1983 in determining the
                  denominator of the Defined Contribution Plan Fraction.

                  If the Employee was a Participant as of the end of the first
                  day of the first Limitation Year beginning after December 31,
                  1986, in one or more defined contribution plans maintained by
                  the Employer which were in existence on May 6, 1986, the
                  numerator of this fraction will be adjusted if the sum of this
                  fraction and the defined benefit fraction would otherwise
                  exceed 1.0 under the terms of


- --------------------------------------------------------------------------------
787                                  27              Carver Federal Savings Bank
<PAGE>

                                                                   Article III -
                                  Contributions and Limitations on Contributions
- --------------------------------------------------------------------------------

                  this Plan. Under the adjustment, an amount equal to the
                  product of (1) the excess of the sum of the fractions over 1.0
                  times (2) the denominator of this fraction, will be
                  permanently subtracted from the numerator of this fraction.
                  The adjustment is calculated using the fractions as they would
                  be computed as of the end of the last Limitation Year
                  beginning before January 1, 1987, and disregarding any changes
                  in the terms and conditions of the Plan made after May 5,
                  1986, but using the Section 415 limitation applicable to the
                  first Limitation Year beginning on or after January 1, 1987.
                  The annual addition for any Limitation Year beginning before
                  January 1, 1987, shall not be recomputed to treat all Employee
                  contributions as Annual Additions.

            (vi)  "Limitation Year" shall mean the calendar year.

            (vii) "Section 415 Compensation" shall be with respect to a Plan
                  Year commencing January 1, 1997, a Participant's remuneration
                  as defined in Income Tax Regulations Sections 1.415-2(d)(2),
                  (3) and (6). For purposes of this Section, effective for Plan
                  Years commencing after December 31, 1997, Section 415
                  Compensation shall include (A) any elective deferral (as
                  defined in Section 402(g)(3) of the Code, and (B) any amount
                  which is contributed or deferred by the Employer at the
                  election of the Employee and which is not includable in the
                  gross income of the Employee by reason of Section 125 or 457
                  of the Code.

                  For purposes of this Section 3.12(a)(vii), effective for
                  Limitation Years commencing on or after January 1, 1998, for
                  purposes of applying the Limitations described in this Section
                  3.12, compensation paid or made available during such
                  Limitation Years shall include elective amounts that are not
                  includable in the gross income of an Employee by reason of
                  Section 132(f)(4) of the Code.

      (b)   For purposes of applying the Section 415 limitations, the Employer
            and all members of a controlled group of corporations (as defined
            under Section 414(b) of the Code as modified by Section 415(h) of
            the Code), all commonly controlled trades or businesses (as defined
            under Section 414(c) of the Code as modified by Section 415(h) of
            the Code), all affiliated service groups (as defined under Section
            414(m) of the Code) of which the Employer is a member, any leasing
            organization (as defined under Section 414(n) of the Code) that
            employs any person who is considered an Employee under Section
            414(n) of the Code and any other group provided for under any and
            all Income Tax Regulations promulgated by the Secretary of the
            Treasury under Section 414(o) of the Code, shall be treated as a
            single employer.

      (c)   If the Employer maintains more than one qualified Defined
            Contribution Plan on behalf of its Employees, such plans shall be
            treated as one Defined Contribution Plan for purposes of applying
            the Section 415 limitations of the Code.


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787                                  28              Carver Federal Savings Bank
<PAGE>

                                                                   Article III -
                                  Contributions and Limitations on Contributions
- --------------------------------------------------------------------------------

      (d)   Notwithstanding anything contained in the Plan to the contrary, in
            no event shall the Annual Additions to a Participant's Accounts for
            a Limitation Year exceed the lesser of:

            (i)   thirty thousand dollars ($30,000), and with respect to a
                  Limitation Year commencing on and after January 1, 1995, as
                  adjusted in multiples of five thousand dollars ($5,000) for
                  increases in the cost-of-living as prescribed by the Secretary
                  of the Treasury under Section 415(d) of the Code; or

            (ii)  twenty-five percent (25%) of the Participants Section 415
                  Compensation for such Limitation Year. For purposes of this
                  subsection (d)(ii), Section 415 Compensation shall not include
                  (A) any contribution for medical benefits within the meaning
                  of Section 419A(f)(2) of the Code after separation from
                  service, which is otherwise treated as an Annual Addition, and
                  (B) any amount otherwise treated as an Annual Addition under
                  Section 415(l)(1) of the Code.

      (e)   If, as a result of the allocation of forfeitures, a reasonable error
            in estimating a Participant's annual Compensation, a reasonable
            error in determining the amount of elective deferrals that may be
            made with respect to any Participant, or as otherwise permitted by
            the Internal Revenue Service, the Annual Additions to a
            Participant's Accounts for a Limitation Year exceed the limitation
            set forth in subsection (d) above during the Limitation Year, any or
            all of the following contributions on behalf of such Participant
            shall be immediately adjusted to that amount which will result in
            such Annual Additions not exceeding the limitation set forth in
            subsection (d):

            (i)   Discretionary Employer Contributions;

            (ii)  Nonelective Employer Contributions;

            (iii) Before-Tax Contributions;

            (iv)  Special Contributions; and

            (v)   Matching Contributions.

      (f)   If the Annual Additions to a Participant's Accounts for a Limitation
            Year exceed the limitations set forth in subsection (d) above at the
            end of a Limitation Year, such excess amounts shall not be treated
            in accordance with the following:

            (i)   such excess amounts shall be used to reduce the Before-Tax
                  Contributions, Discretionary Employer Contributions, Matching
                  Contributions and/or Special Contributions to be made on
                  behalf of such Participant in the succeeding Limitation Year,
                  provided that such Participant is an Eligible Employee during
                  such succeeding Limitation Year. If such Participant is not an
                  Eligible Employee or ceases to be an Eligible Employee during
                  such succeeding Limitation Year, any remaining excess amounts
                  from the preceding Limitation Year shall be


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787                                  29              Carver Federal Savings Bank
<PAGE>

                                                                   Article III -
                                  Contributions and Limitations on Contributions
- --------------------------------------------------------------------------------

                  allocated during such succeeding Limitation Year to each
                  Participant then actively participating in the Plan. Such
                  allocation shall be in proportion to the Before-Tax
                  Contributions made to date on his behalf for such Limitation
                  Year, or the prior Limitation Year with respect to an
                  allocation as of the beginning of a Limitation Year, before
                  any other contributions are made in such succeeding Limitation
                  Year; or

            (ii)  such excess amounts may be reduced by the distribution of such
                  Participant's Before-Tax Contributions to such Participant.

            The Employer will, at the end of the Limitation Year in which such
            excess amounts were made, choose the manner in which to treat such
            excess amounts on a uniform and nondiscriminatory basis on behalf of
            all affected Participants. If such excess amounts are reduced by the
            distribution described in subsection (ii), the amounts of such
            distribution shall not be taken into account for purposes of
            Sections 3.2(a)(i) and (ii), 3.7(a) and (b), or in determining the
            limitation in Section 3.2(b). In addition, any Matching
            Contributions attributable to such amounts shall constitute
            Forfeitures as described in Section 4.2.

      (g)   If a Participant participates in both (i) the Plan and/or any other
            defined contribution plan maintained by the Employer and (ii) any
            defined benefit plan or plans maintained by the Employer, the sum of
            the Defined Contribution Plan Fraction and the Defined Benefit Plan
            Fraction shall not exceed the sum of l.0. This subsection (g) shall
            not apply with respect to Plan Years beginning on or after January
            1, 2000.

      (h)   If, for any Plan Year commencing prior to January 1, 2000, the sum
            determined under subsection (g) for any Participant exceeds 1.0, the
            Defined Benefit Plan Fraction of such Participant as provided in the
            defined benefit plan or plans maintained by the Employer shall be
            reduced in order that such sum shall not exceed 1.0.

3.13  Nonelective Employer Contributions

      Effective with respect to the period beginning January 1, 2001, in
      addition to other contributions, if any, the Employer will make a
      Nonelective Employer Contribution in accordance with Section 401(k)(12) of
      the Code, for a Plan Year, in order to meet the nondiscrimination
      requirements of Code Section 401(k). For any Plan Year in which the
      Employer makes a Nonelective Employer Contribution, such contribution
      shall be in the amount of two percent (2%) of each Eligible Employee's
      Compensation who is employed by the Employer on the last day of the Plan
      Year.

      Nonelective Employer Contributions made to the Plan on behalf of each
      Eligible Employee, shall be credited to such Eligible Employee's
      Nonelective Employer Contribution Account and shall be invested in
      accordance with Article VI of the Plan. Any and all withdrawals,
      distributions or


- --------------------------------------------------------------------------------
787                                  30              Carver Federal Savings Bank
<PAGE>

                                                                   Article III -
                                  Contributions and Limitations on Contributions
- --------------------------------------------------------------------------------

      payments from a Participant's Nonelective Employer Contribution Account
      shall be made in accordance with Article VII, or Article VIII of the Plan,
      whichever is applicable.


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787                                  31              Carver Federal Savings Bank
<PAGE>

                                                                    Article IV -
                                                         Vesting and Forfeitures
- --------------------------------------------------------------------------------

                                   ARTICLE IV -
                             VESTING AND FORFEITURES

4.1   Vesting

      (a)   An Employee shall always be fully vested in the Net Value of his
            Before-Tax Contribution Account and the Net Value of his Rollover
            Contribution Account. Commencing January 1, 2002, an Employee shall
            always be fully vested in the Net Value of the portion of his
            Matching Contribution Account which consists of Matching
            Contributions made on and after January 1, 2002, and the earnings
            thereon.

      (b)   A Participant shall become fully vested in the Net Value of that
            portion of his Matching Contribution Account as in effect prior to
            January 1, 2002, the Net Value of his Discretionary Employer
            Contribution Account and the Net Value of his Nonelective Employer
            Contribution Account upon the earlier of such Participant's (i)
            Normal Retirement Age or (ii) termination of employment by reason of
            death, Disability or reaching his Retirement Date.

      (c)   Prior to September 15, 1998, a Participant who is not fully vested
            under subsection (b) shall be vested in the Net Value of his
            Matching Contribution Account and the Net Value of his Matching
            Contribution Account in accordance with the following schedule:

                    Period of Service                          Vested Percentage
                    -----------------                          -----------------

                    Less than 3 years                                  0%
                    3 years but less than 4 years                     20%
                    4 years but less than 5 years                     40%
                    5 years but less than 6 years                     60%
                    6 years but less than 7 years                     80%
                    7 or more years                                  100%

            Effective September 15, 1998, the vesting schedule was amended as
            follows:

                     Period of Service                         Vested Percentage
                     -----------------                         -----------------

                     Less than 1 year                                   0%
                     1 year but less than 2 years                      20%
                     2  years but less than 3 years                    40%
                     3 years but less than 4 years                     60%
                     4 years but less than 5 years                     80%
                     5 or more years                                  100%

            For purposes of determining a Participant's Period of Service under
            this subsection (c) and under Section 4.3, employment with an
            Affiliated Employer shall be deemed employment with the Employer.


- --------------------------------------------------------------------------------
787                                  32              Carver Federal Savings Bank
<PAGE>

                                                                    Article IV -
                                                         Vesting and Forfeitures
- --------------------------------------------------------------------------------

            For purposes of determining a Participant's vested percentage of the
            Net Value of his Matching Contribution Account and the Net Value of
            his Discretionary Employer Contribution Account, all Periods of
            Service shall be recognized, including, effective October 1, 1989
            and November 19, 1990 respectively, employment with CrossLand
            Savings, FSB and Nassau Federal Savings and Loan Association which
            preceded employment with the Employer.

      (d)   The vested Net Value of a Participant's Matching Contribution
            Account, Discretionary Employer Contribution Account and Nonelective
            Employer Contribution Account shall be determined as follows:

            (i)   the Participant's Matching Contribution Account, Discretionary
                  Employer Contribution Account and Nonelective Employer
                  Contribution Account shall first be increased to include (A)
                  that portion of such Account which had been previously
                  withdrawn in accordance with Sections 7.3 and 7.4 and (B) that
                  portion of such Account which had been borrowed in accordance
                  with Article VIII and is outstanding on the date of this
                  determination;

            (ii)  the applicable vested percentage determined in accordance with
                  subsection (c) shall then be applied to such Account as
                  determined in accordance with clause (i);

            (iii) the amount determined in accordance with clause (ii) shall
                  then be reduced by (A) that portion of such Account which had
                  been previously withdrawn in accordance with Sections 7.2 and
                  7.3 and (B) that portion of such Account which had been
                  borrowed in accordance with Article VIII and is outstanding on
                  the date of this determination.

4.2   Forfeitures

      If a Participant who is not fully vested in the Net Value of his Accounts
      terminates employment, the Units representing the nonvested portion of his
      Accounts shall constitute Forfeitures. Forfeitures shall be treated as
      Matching Contributions, Discretionary Employer Contributions and
      Nonelective Employer Contributions and shall be applied to reduce the
      amount of subsequent Matching Contributions, Discretionary Employer
      Contributions and Nonelective Employer Contributions otherwise required to
      be made.

      With respect to a Participant's Matching Contribution Account, anything in
      Section 4.1 to the contrary notwithstanding, any Matching Contribution
      forfeited in accordance with the sixth paragraph of Section 3.2(a), the
      second paragraph of Section 3.2(c), the sixth paragraph of Section 3.7 or
      the second paragraph of Section 3.12(f), shall be applied to reduce the
      amount of subsequent Matching Contributions otherwise required to be made.


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787                                  33              Carver Federal Savings Bank
<PAGE>

                                                                    Article IV -
                                                         Vesting and Forfeitures
- --------------------------------------------------------------------------------

      If a former Participant who is not fully vested in the Net Value of his
      Accounts receives a distribution of his vested interest in the Net Value
      of his Accounts and is subsequently reemployed by the Employer prior to
      incurring five (5) consecutive One Year Periods of Severance, he shall
      have the Net Value of his Accounts as of the date he previously terminated
      employment reinstated provided he repays the full amount of his
      distribution in cash or cash equivalents before the end of the five (5)
      consecutive One Year Periods of Severance commencing with the date of
      distribution. The reinstated amount shall be unadjusted by any gains or
      losses occurring subsequent to the Participant's termination of employment
      and prior to repayment of such distribution. Any forfeited amounts
      required to be reinstated hereunder shall be made by an additional
      Employer contribution for such Plan Year. If such former Participant does
      not repay the full amount of his distribution in cash or cash equivalents
      before the end of the five (5) consecutive One Year Periods of Severance
      commencing with the date of distribution, the Net Value of his Accounts as
      of the date he previously terminated employment shall not be reinstated.

      If a former Participant who is not fully vested in the Net Value of his
      Accounts elects to defer distribution of his vested account interest or
      elects to receive installment payments pursuant to Section 7.6(e), the
      nonvested portion of such former Participant's Account shall be forfeited
      as of the date of his Termination of Service; provided, however, that if
      such former Participant is reemployed before incurring five (5)
      consecutive One Year Periods of Severance, the nonvested portion of his
      Accounts shall be reinstated in its entirety, unadjusted by any gains or
      losses occurring subsequent to the distribution.

4.3   Vesting upon Reemployment

      (a)   For purposes of this Section 4.3, "Period of Service" means an
            Employee's Period of Service determined in accordance with Section
            4.1(c).

      (b)   For the purpose of determining a Participant's vested interest in
            the Net Value of his Matching Contribution Account, Discretionary
            Employer Contribution Account and Nonelective Employer Contribution
            Account:

            (i)   if an Employee is not vested in any Matching Contributions
                  and/or Discretionary Employer Contributions and/or Nonelective
                  Employer Contributions, incurs a One Year Period of Severance
                  and again performs an Hour of Service, such Employee shall
                  receive credit for his Periods of Service prior to his One
                  Year Period of Severance only if the number of consecutive One
                  Year Periods of Severance is less than the greater of: (A)
                  five (5) years or (B) the aggregate number of his Periods of
                  Service credited before his One Year Period of Severance.

            (ii)  if a Participant is partially vested in any Matching
                  Contributions and/or Discretionary Employer Contributions
                  and/or Nonelective Employer Contributions, incurs a One Year
                  Period of Severance and again performs an


- --------------------------------------------------------------------------------
787                                  34              Carver Federal Savings Bank
<PAGE>

                                                                    Article IV -
                                                         Vesting and Forfeitures
- --------------------------------------------------------------------------------

                  Hour of Service, such Participant shall receive credit for his
                  Periods of Service prior to his One Year Period of Severance;
                  provided, however, that after five (5) consecutive One Year
                  Periods of Severance, a former Participant's vested interest
                  in the Net Value of the Matching Contribution Account and/or
                  Discretionary Employer Contribution Account and/or Nonelective
                  Employer Contribution Account attributable to Periods of
                  Service prior to his One Year Period of Severance shall not be
                  increased as a result of his Periods of Service following his
                  reemployment date.

            (iii) if a Participant is fully vested in any Matching Contributions
                  and/or Discretionary Employer Contributions and/or Nonelective
                  Employer Contributions, incurs a One Year Period of Severance
                  and again performs an Hour of Service, such Participant shall
                  receive credit for all his Periods of Service prior to his One
                  Year Period of Severance.


- --------------------------------------------------------------------------------
787                                  35              Carver Federal Savings Bank
<PAGE>

                                                                     Article V -
                               Trust Fund, Investment Accounts and voting rights
- --------------------------------------------------------------------------------

                                    ARTICLE V -
                TRUST FUND, INVESTMENT ACCOUNTS AND VOTING RIGHTS

5.1   Trust Fund

      The Employer has adopted the Agreement as the funding vehicle with respect
      to the Investment Accounts. Commencing on the Conversion Date, the
      Employer has adopted the Separate Agreement as the funding vehicle with
      respect to the Employer Stock Fund.

      All contributions forwarded by the Employer to the Trustees pursuant to
      the Agreement shall be held by them in trust and shall be used to purchase
      Units on behalf of the Plan in accordance with the terms and provisions of
      the Agreement. Contributions designated for investment in any Investment
      Account of the Trust Fund shall be allocated proportionately to and among
      the classes of Units so selected for such Investment Account.

      All contributions forwarded by the Employer to the Separate Agency
      pursuant to the Separate Agreement shall be held by them in trust in
      accordance with the terms and provisions of the Separate Agreement.

      All assets of the Plan shall be held for the exclusive benefit of
      Participants, Beneficiaries or other persons entitled to benefits. No part
      of the corpus or income of the Plan Funds shall be used for, or diverted
      to, purposes other than for the exclusive benefit of Participants,
      Beneficiaries or other persons entitled to benefits and for defraying
      reasonable administrative expenses of the Plan, Trust and Separate Agency.
      No person shall have any interest in or right to any part of the earnings
      of the Plan Funds, or any rights in, to or under the Plan Funds or any
      part of its assets, except to the extent expressly provided in the Plan.

      The Trustees and the Separate Agency shall invest and reinvest the Plan
      Fund, and the income therefrom, without distinction between principal and
      income, in accordance with the terms and provisions of the Agreement and
      Separate Agreement, respectively. The Trustees and the Separate Agency may
      maintain such part of the Trust Fund and the Separate Assets, respectively
      in cash uninvested as they shall deem necessary or desirable. The Trustees
      shall be the owner of and have title to all the assets of the Plan Funds
      other than the Separate Assets and shall have full power to manage the
      same, except as otherwise specifically provided in the Agreement. The
      Separate Agency shall be the owner of and shall have title to the Separate
      Assets, and shall have full power to manage the same, except as otherwise
      specifically provided in the Separate Agreement.

5.2   Interim Investments

      The Trustees may temporarily invest any amounts designated for investment
      in any of the Investment Accounts of the Trust Fund identified herein in
      the Investment Account which provides for short-term investments and
      retain the value of such contributions therein pending


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787                                  36              Carver Federal Savings Bank
<PAGE>

                                                                     Article V -
                               Trust Fund, Investment Accounts and voting rights
- --------------------------------------------------------------------------------

      the allocation of such values to the Investment Accounts designated for
      investment. The Separate Agency may temporarily invest any amounts in
      short-term investment pending investment in the Employer Stock Fund.

5.3   Account Values

      The Net Value of the Accounts of an Employee means the sum of the total
      Net Value of each Account maintained on behalf of the Employee in the
      Trust and Separate Agency as determined as of the Valuation Date
      coincident with or next following the event requiring the determination of
      such Net Value. The assets of any Account shall consist of the Units
      credited to such Account. The applicable Units shall be valued from time
      to time by the Trustees and Separate Agency, respectively, in accordance
      with the Agreement and Separate Agreement, but not less often than
      monthly. On the basis of such valuations, each Employee's Accounts shall
      be adjusted to reflect the effect of income collected and accrued,
      realized and unrealized profits and losses, expenses and all other
      transactions during the period ending on the applicable Valuation Date.

      Upon receipt by the Trustees of Before-Tax Contributions, Matching
      Contributions, and, if applicable, Discretionary Employer Contributions,
      Rollover Contributions, Special Contributions and Nonelective Employer
      Contributions, and upon receipt by a Separate Agency of any Before-Tax
      Contributions, Matching Contributions, and, if applicable, Discretionary
      Employer Contributions, Rollover Contributions, Special Contributions and
      Nonelective Employer Contributions, such contributions shall be applied to
      purchase for such Employee's Account (a) Units other than Units of the
      Employer Stock Fund, using the value of such Units as of the close of
      business on the date received and (b) Units of the Employer Stock Fund
      using the value of such Units as of the preceding Valuation Date. Whenever
      a distribution is made to a Participant, Beneficiary or other person
      entitled to benefits, the appropriate number of Units credited to such
      Employee shall be reduced accordingly and each such distribution shall be
      charged against the Units of the Investment Accounts of such Employee pro
      rata according to their respective values.

      For the purposes of this Section 5.3, fractions of Units as well as whole
      Units may be purchased or redeemed for the Account of an Employee.

5.4   Voting Rights

      Each Participant with Units in the Employer Stock Fund shall have the
      right to participate confidentially in the exercise of voting rights
      appurtenant to shares held in such Investment Account, provided that such
      person had Units in such Account as of the most recent Valuation Date
      coincident with or preceding the applicable record date for which records
      are available. Such participation shall be achieved by completing and
      filing with the inspector of elections, or such other person who shall be
      independent of the issuer of shares as the Committee shall designate, at
      least ten (10) days prior to the date of the meeting of holders of shares
      at which such voting rights will be exercised, a written direction in the
      form and manner prescribed by the


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787                                  37              Carver Federal Savings Bank
<PAGE>

                                                                     Article V -
                               Trust Fund, Investment Accounts and voting rights
- --------------------------------------------------------------------------------

      Committee. The inspector of elections, or other such person designated by
      the Committee shall tabulate the directions given on a strictly
      confidential basis, and shall provide the Committee with only the final
      results of the tabulation. The final results of the tabulation shall be
      followed by the Committee in the direction as to the manner in which such
      voting rights shall be exercised. As to each matter in which the holders
      of shares are entitled to vote:

      (a)   a number of affirmative votes shall be cast equal to the product of:

            (i)   the total number of shares held in the Employer Stock Fund as
                  of the applicable record date; and

            (ii)  a fraction, the numerator of which is the aggregate value (as
                  of the Valuation Date coincident with or immediately preceding
                  the applicable record date) of the Units in the Employer Stock
                  Fund of all persons directing that an affirmative vote be
                  cast, and the denominator of which is the aggregate value (as
                  of the Valuation Date coincident with or immediately preceding
                  the applicable record date) of the Units in the Employer Stock
                  Fund of all persons directing that an affirmative or negative
                  vote be cast; and

      (b)   a number of negative votes shall be cast equal to the product of:

            (i)   the total number of shares held in the Employer Stock Fund as
                  of the applicable record date; and

            (ii)  a fraction, the numerator of which is the aggregate value (as
                  of the Valuation Date coincident with or immediately preceding
                  the applicable record date) of the Units in the Employer Stock
                  Fund of all persons directing that a negative vote be cast,
                  and the denominator of which is the aggregate value (as of the
                  Valuation Date coincident with or immediately preceding the
                  applicable record date) of the Units in the Employer Stock
                  Fund of all persons directing that an affirmative or negative
                  vote be cast.

      The Committee shall furnish, or cause to be furnished, to each person with
      Units in the Employer Stock Fund, all annual reports, proxy materials and
      other information known to have been furnished by the issuer of the shares
      or by any proxy solicitor, to the holders of shares.

5.5   Tender Offers and Other Offers

      Each Participant with Units in the Employer Stock Fund shall have the
      right to participate confidentially in the response to a tender offer, or
      any other offer, made to the holders of shares generally, to purchase,
      exchange, redeem or otherwise transfer shares; provided that such person
      has Units in the Employer Stock Fund as of the Valuation Date coincident
      with or immediately preceding the first day for delivering shares or
      otherwise responding to such tender or other offer. Such participation
      shall be achieved by completing and filing with the inspector of
      elections, or such other person who shall be independent of the issuer of
      shares as the


- --------------------------------------------------------------------------------
787                                  38              Carver Federal Savings Bank
<PAGE>

                                                                     Article V -
                               Trust Fund, Investment Accounts and voting rights
- --------------------------------------------------------------------------------

      Committee shall designate, at least ten (10) days prior to the last day
      for delivering shares or otherwise responding to such tender or other
      offer, a written direction in the form and manner prescribed by the
      Committee. The inspector of elections, or other such person designated by
      the Committee shall tabulate the directions given on a strictly
      confidential basis, and shall provide the Committee with only the final
      results of the tabulation. The final results of the tabulation shall be
      followed by the Committee in the direction as to the number of shares to
      be delivered. On the last day for delivering shares or otherwise
      responding to such tender or other offer, a number of shares equal to the
      product of:

      (a)   the total number of shares held in the Employer Stock Fund; and

      (b)   a fraction, the numerator of which is the aggregate value (as of the
            Valuation Date coincident with or immediately preceding the first
            day for delivering shares or otherwise responding to such tender or
            other offer) of the Units in the Employer Stock Fund of all persons
            directing that shares be delivered in response to such tender or
            other offer, and the denominator of which is the aggregate value (as
            of the Valuation Date coincident with or immediately preceding the
            first day for delivering shares or otherwise responding to such
            tender or other offer) of the Units in the Employer Stock Fund of
            all persons directing that shares be delivered or that the delivery
            of shares be withheld;

      shall be delivered in response to such tender or other offer. Delivery of
      the remaining shares then held in the Employer Stock Fund shall be
      withheld. The Committee shall furnish, or cause to be furnished, to each
      person whose Account is invested in whole or in part in the Employer Stock
      Fund, all information concerning such tender offer furnished by the issuer
      of shares, or information furnished by or on behalf of the person making
      the tender or such other offer.

5.6   Separate Assets

      Subject to the terms and conditions of the Agreement and upon approval by
      the Trustees, a designated portion of the assets of the Plan may be held
      as Separate Assets under the Separate Agreement pursuant to investment
      elections made by Plan Participants from time to time. The Trustees shall
      have no responsibility or liability with respect to the management and
      control of any Separate Assets and shall have only those administrative
      duties with respect to such Separate Assets as are set forth in the Plan
      and the Agreement.

5.7   Power to Invest in Employer Securities

      The Committee may direct the Separate Agency to acquire or hold any
      security issued by the Employer or any Affiliated Employer which is a
      "qualifying employer security" as such term is defined under ERISA and to
      invest that portion of the assets of the Plan Funds in such securities.


- --------------------------------------------------------------------------------
787                                  39              Carver Federal Savings Bank
<PAGE>

                                                                    Article VI -
                         Investment Directions, Changes of Investment Directions
                                       and Transfers Between Investment Accounts
- --------------------------------------------------------------------------------

                                  ARTICLE VI -
             INVESTMENT DIRECTIONS, CHANGES OF INVESTMENT DIRECTIONS
                    AND TRANSFERS BETWEEN INVESTMENT ACCOUNTS

6.1   Investment Directions

      Upon electing to participate, each Participant shall direct that the
      contributions made to his Accounts shall be applied to purchase Units in
      any one or more of the Investment Accounts of the Trust Fund, and
      commencing on the Conversion Date, purchase Units in the Employer Stock
      Fund. Such direction shall indicate the percentage, in multiples of ten
      percent (10%), in which Before-Tax Contributions, Matching Contributions,
      Special Contributions, Discretionary Employer Contributions and Rollover
      Contributions shall be made to the designated Investment Accounts.
      Commencing January 1, 2001, such direction shall indicate the percentage,
      in multiples of one percent (1%), in which Before-Tax Contributions,
      Matching Contributions, Special Contributions, Discretionary Employer
      Contributions, Rollover Contributions and Nonelective Employer
      Contributions shall be made to the designated Investment Accounts.

      To the extent a Participant shall fail to make an investment direction,
      contributions made on his behalf shall be applied to purchase Units in the
      Investment Account which provides for short-term investments.

6.2   Change of Investment Directions

      A Participant may change any investment direction not more often than once
      in any calendar quarter by completing and filing a notice in the form and
      manner prescribed by the Committee at least ten (10) days prior to the
      effective date of such direction. Commencing January 1, 2001, a
      Participant may change any investment direction, at any time, in the form
      and manner prescribed by the Committee either: (a) by completing and
      filing a notice at least ten (10) days prior to the effective date of such
      direction, or (b) by telephone or other electronic medium. Any such change
      shall be subject to the same conditions as if it were an initial direction
      and shall be applied only to any contributions to be invested on or after
      the effective date of such direction.

6.3   Transfers Between Investment Accounts

      By filing a notice in the form and manner prescribed by the Committee at
      least ten (10) days prior to the effective date of such change, a
      Participant or Beneficiary may, not more often than once in any calendar
      quarter, direct that multiples of ten percent (10%) of the Net Value of
      any one or more Investment Accounts be transferred to any one or more of
      the other Investment Accounts. Commencing January 1, 2001, a Participant
      or Beneficiary may, at any time, redirect the investment of his Investment
      Accounts such that a percentage of any one or more Investment Accounts may
      be transferred to any one or more other


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787                                  40              Carver Federal Savings Bank
<PAGE>

                                                                    Article VI -
                         Investment Directions, Changes of Investment Directions
                                       and Transfers Between Investment Accounts
- --------------------------------------------------------------------------------

      Investment Accounts in the form and manner prescribed by the Committee,
      either: (a) by filing a notice at least ten (10) days prior to the
      effective date of such change, or (b) by telephone or other electronic
      medium. The requisite transfers shall be valued as of the Valuation Date
      on which the direction is received by the Trustees and shall be affected
      within seven (7) days of the Trustees' receipt of such direction.

6.4   Employees Other than Participants

      (a)   Investment Direction

            An Employee who is not a Participant but who has made a Rollover
            Contribution in accordance with the provisions of Section 3.11,
            shall direct, in the form and manner prescribed by the Committee,
            that such contribution be applied to the purchase of Units in any
            one or more of the Investment Accounts, and commencing on the
            Conversion Date, to purchase Units in the Employer Stock Fund. Such
            direction shall indicate the percentage, in multiples of ten percent
            (10%), in which contributions shall be made to the designated
            Investment Accounts. Commencing January 1, 2001, such direction
            shall indicate the percentage, in multiples of one percent (1%), in
            which contributions shall be made to the designated Accounts. To the
            extent any Employee shall fail to make an investment direction, the
            Rollover Contributions shall be applied to the purchase of Units in
            the Investment Account which provides for short-term investments.

      (b)   Transfers Between Investment Accounts

            An Employee who is not a Participant may, subject to the provisions
            of Section 6.3, not more often than once in any calendar quarter,
            direct that multiples of ten percent (10%) of the Net Value of any
            one or more Investment Accounts be transferred to any one or more of
            the other Investment Accounts. Commencing January 1, 2001, an
            Employee who is not a Participant may, subject to the provisions of
            Section 6.3, at any time, redirect the investment of his Investment
            Accounts such that a percentage of any one or more Investment
            Accounts may be transferred to any one or more other Investment
            Accounts. The requisite transfers shall be valued as of the
            Valuation Date on which the direction is received by the Trustees
            and shall be affected within seven (7) days of the Trustees' receipt
            of such direction.

6.5   Restrictions on Investments in the Employer Stock Fund for Certain
      Participants

      Notwithstanding anything in the Plan to the contrary, any Participant
      subject to the provisions of Section 16(b) of the Securities Exchange Act
      of 1934, as amended: (a) may direct that his Accounts be transferred into
      or out of the Employer Stock Fund, subject to the provisions of Section
      6.3, only once during each quarter, during the period beginning on the
      third (3rd)


- --------------------------------------------------------------------------------
787                                  41              Carver Federal Savings Bank
<PAGE>

                                                                    Article VI -
                         Investment Directions, Changes of Investment Directions
                                       and Transfers Between Investment Accounts
- --------------------------------------------------------------------------------

      business day following the date of release of the quarterly and annual
      statements of sales and earnings by the issuer of the shares, and ending
      on the twelfth (12th) business day following such date; and (b) may not
      make a transfer in accordance with the provisions of Section 6.3 within
      six (6) months of the next preceding transfer into or out of the Employer
      Stock Fund. In addition, any Participant subject to the provisions of
      Section 16(b) of the Securities Exchange Act of 1934 who elects to receive
      a distribution of shares from the Plan in accordance with Section 7.11
      hereof, including withdrawals under Sections 7.3 and 7.4 and loans under
      Article VIII, or who substantially decreases his rate of Before-Tax
      Contributions pursuant to Section 3.3 with respect to the amounts to be
      invested in the Employer Stock Fund, or his investment direction with
      respect to the Employer Stock Fund pursuant to Section 6.2, must either
      (i) in the case of a distribution, hold such shares for a period of six
      (6) months commencing with the date of distribution, or (ii) refrain from
      directing the purchase of additional Units in the Employer Stock Fund for
      a period of six (6) months beginning with the date of a decrease in rate
      or a change in investment direction. However, unless otherwise required by
      rules and regulations of the Securities and Exchange Commission, the
      restrictions under this Section 6.5 shall not apply to distributions of
      shares made in connection with a Participant's death, Disability,
      termination of employment or reaching his Retirement Date; pursuant to a
      qualified domestic relations order described under Section 414(p) of the
      Code; as a result of the minimum distribution requirements described under
      Section 401(a)(9) of the Code; or as a result of the limitations described
      under Section 401(k), 401(m), 402(g) and 415 of the Code.


- --------------------------------------------------------------------------------
787                                  42              Carver Federal Savings Bank
<PAGE>

                                                                   Article VII -
                                                             Payment of Benefits
- --------------------------------------------------------------------------------

                                  ARTICLE VII -
                               PAYMENT OF BENEFITS

7.1   General

      (a)   For purposes of this Article VII, the following terms and phrases
            shall have the meanings hereinafter ascribed to them:

            (i)   "Beneficiary" shall mean (A) in the case of a married
                  Participant, the Spouse. Notwithstanding the foregoing, such
                  Participant may, subject to the spousal consent requirements
                  of Section 7.2(a), effectively elect to designate a person or
                  persons other than the Spouse as Beneficiary; (B) in the case
                  of a single Participant, a person or persons who have been
                  designated under the Plan by such Participant or who are
                  otherwise entitled to a benefit under the Plan.

            (ii)  "Straight Life Annuity" shall mean a benefit payable in equal
                  monthly installments to the Participant for his life with no
                  benefits payable after his death.

            (iii) "100% Joint and Survivor Annuity" shall mean a benefit payable
                  in equal monthly installments to the Participant for his life
                  with the same benefit continuing after his death to and for
                  the life of a surviving Beneficiary.

            (iv)  "75% Joint and Survivor Annuity" shall mean a benefit payable
                  in equal monthly installments to the Participant for his life
                  with a benefit equal to three-quarters (3/4) of the benefit
                  paid to the Participant continuing after his death to and for
                  the life of a surviving Beneficiary.

            (v)   "50% Joint and Survivor Annuity" shall mean a benefit payable
                  in equal monthly installments to the Participant for his life
                  with a benefit equal to one-half (1/2) of the benefit paid to
                  the Participant continuing after his death to and for the life
                  of a surviving Beneficiary.

            (vi)  "Period Certain and Life Annuity" shall mean a benefit payable
                  in equal monthly installments to the Participant for his
                  lifetime. If the Participant's death occurs on or after the
                  expiration of the period certain, no further benefits will be
                  payable. If, however, the Participant's death occurs before
                  the expiration of the period certain, equal monthly
                  installments in the same amount as paid to the Participant
                  prior to his death will be paid to his designated Beneficiary.
                  In the event neither the Participant nor the designated
                  Beneficiary survive to the end of said period certain, a final
                  lump sum distribution equal to the commuted value of any
                  installments shall be made to the estate of the last to die of
                  (A) the Participant and (B) his Beneficiary.


- --------------------------------------------------------------------------------
787                                  43              Carver Federal Savings Bank
<PAGE>

                                                                   Article VII -
                                                             Payment of Benefits
- --------------------------------------------------------------------------------

      (b)   The vested interest in the Net Value of any one or more of the
            Accounts of a Participant, Beneficiary or any other person entitled
            to benefits under the Plan shall be paid only at the times, to the
            extent, in the manner, and to the persons provided in this Article
            VII.

      (c)   Notwithstanding the foregoing, if payments are to be made on a
            monthly basis and if payments are fifty dollars ($50.00) or less,
            the Committee, in its sole discretion, may determine to make such
            payments in a lump sum or in quarterly, semi-annual, or annual
            installments.

      (d)   Any distribution of the vested interest in the Net Value of a
            Participant's Accounts which is made by the purchase of any annuity
            shall be made by the purchase of a nontransferable annuity contract
            from a legal reserve life insurance company licensed to do business
            in the state of New York. Such annuity contract shall comply with
            the provisions of this Plan.

      (e)   The Net Value of any one or more of the Accounts of a Participant
            shall be subject to the provisions of Section 8.7.

      (f)   Notwithstanding any provisions of the Plan to the contrary, any and
            all withdrawals, distributions or payments made under the provisions
            of this Article VII shall be made in accordance with Section
            401(a)(9) of the Code and any and all Income Tax Regulations
            promulgated thereunder.

            With respect to distributions under the Plan made in calendar years
            beginning on or after January 1, 2001, the Plan will apply the
            minimum distribution requirements of Section 401(a)(9) of the Code
            in accordance with the regulations under Section 401(a)(9) that were
            proposed in January 2001, notwithstanding any provision of the Plan
            to the contrary. This amendment shall continue in effect until the
            end of the 2002 calendar year. For calendar years beginning with the
            2003 calendar year, the Plan will apply the minimum distribution
            requirements of Section 401(a)(9) of the Code, in accordance with
            final regulations, as set forth in Section 7.10.

      (g)   Notwithstanding any provisions of the Plan to the contrary, the
            provisions of this Article VII shall also apply to a person who is
            not a Participant but who has made a contribution to and maintains a
            Rollover Contribution Account under the Plan.

      (h)   Distributions from the Employer Stock Fund under this Article VII,
            shall be made in accordance with Section 7.11 hereunder.

7.2   Spousal Consent Requirements - Optional Forms of Benefit Payments, Loans,
      Withdrawals, Beneficiaries

      (a)   An election by the Participant (i) to receive benefit payments in a
            form other than the normal form of benefit payment set forth in
            Section 7.5(a), (ii) to receive a loan in


- --------------------------------------------------------------------------------
787                                  44              Carver Federal Savings Bank
<PAGE>

                                                                   Article VII -
                                                             Payment of Benefits
- --------------------------------------------------------------------------------

            accordance with the provisions of Article VIII or to revise,
            renegotiate, renew or extend an existing loan, (iii) to receive a
            withdrawal in accordance with the provisions of Section 7.3 or
            Section 7.4, (iv) to designate a Beneficiary who is other than his
            Spouse, or (v) under any other provision of the Plan which is
            subject to spousal consent, shall not be effective unless: (A) the
            Participant's Spouse irrevocably consents to such election in
            writing, (B) such election designates a Beneficiary or form of
            benefit payment, which may not be changed without spousal consent
            unless the consent of the Spouse expressly permits designation by
            the Participant without any requirement of further consent by the
            Spouse, (C) the Spouse's consent acknowledges understanding of the
            effect of such election, and (D) the consent is witnessed by a Plan
            representative or a notary public. Notwithstanding this consent
            requirement, if the Participant establishes to the satisfaction of
            the Plan representative that such written consent cannot be obtained
            because there is no Spouse or the Spouse cannot be located, such
            election shall be deemed a qualified election.

            Any consent necessary under this provision shall be valid only with
            respect to the Spouse who signs the consent. Notwithstanding the
            foregoing sentence, a consent to receive a loan or withdrawal which
            had been executed by a Spouse shall be binding with respect to such
            loan or withdrawal on any subsequent Spouse.

      (b)   (i)   A married Participant who has submitted to the Committee an
                  election form in accordance with the provisions of subsection
                  (a)(i) may, without the consent of his Spouse, revoke such
                  prior election by submitting written notification of such
                  revocation to the Committee before the date benefit payments
                  are scheduled to commence. Upon revocation, the 50% Joint and
                  Survivor Annuity, with the Participant's Spouse as
                  Beneficiary, shall be reinstated unless the Participant files
                  another election form in accordance with the provisions of
                  subsection (a). The number of election forms and revocations
                  shall not be limited.

            (ii)  A married Participant who has submitted to the Committee an
                  election form in accordance with the provisions of subsection
                  (a)(iv), may, without the consent of his Spouse, revoke such
                  prior election by submitting written notification of such
                  revocation to the Committee before the date benefit payments
                  are scheduled to commence. Such revocation shall result in the
                  reinstatement of the Spouse as the designated Beneficiary
                  unless the Participant effectively designates another person
                  as Beneficiary in accordance with the provisions of subsection
                  (a) and Section 7.7. The number of election forms and
                  revocations shall not be limited.

      (c)   The terms and conditions of any election form shall, unless
            otherwise indicated, become effective on the date benefit payments
            are scheduled to commence, or, if applicable, the date of
            distribution.


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7.3   Non-Hardship Withdrawals

      (a)   Subject to the spousal consent requirements of Section 7.2(a) and
            the terms and conditions contained in this Section 7.3, upon ten
            (10) days prior written notice to the Committee each Participant who
            has attained age fifty-nine and one-half (59-1/2) shall be entitled
            to withdraw not more often than once during any Plan Year all or any
            portion of his vested interest in the Net Value of his Accounts in
            the following order of priority:

            (i)   the Before-Tax Contribution Account;

            (ii)  the Net Value of the Participant's Rollover Contribution
                  Account provided that such Participant shall have satisfied
                  such additional terms and conditions, if any, as the Committee
                  may deem necessary;

            (iii) the vested interest in the Net Value of his Matching
                  Contribution Account;

            (iv)  the vested interest in the Net Value of his Discretionary
                  Employer Contribution Account; and

            (v)   the Net Value of his Nonelective Employer Contribution
                  Account.

      (b)   Withdrawals under this Section 7.3 shall be made in the following
            order of priority:

            (i)   by the redemption of Units from each of the Participant's
                  Accounts in the Trust Fund in the order set forth in Section
                  7.3(a), on a pro rata basis from the Investment Accounts
                  thereunder, as were selected by the Participant pursuant to
                  Article VI; and

            (ii)  by the redemption of Units invested in the Employer Stock Fund
                  from each of the Participant's Accounts invested under the
                  Separate Agreement, in the order set forth in Section 7.3(a),
                  if selected by the Participant pursuant to Article VI.

      (c)   Any withdrawals under this Section 7.3 shall be subject to the
            restrictions of Section 6.5.

7.4   Hardship Distributions

      (a)   For purposes of this Section 7.4, a "Hardship" distribution shall
            mean a distribution that is (i) made on account of a condition which
            has given rise to immediate and heavy financial need of a
            Participant and (ii) necessary to satisfy such financial need. A
            determination of the existence of an immediate and heavy financial
            need and the amount necessary to meet the need shall be made by the
            Committee in accordance with uniform nondiscriminatory standards
            with respect to similarly situated persons.

      (b)   Immediate and Heavy Financial Need:


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            A Hardship distribution shall be deemed to be made on account of an
            immediate and heavy financial need if the distribution is on account
            of:

            (i)   expenses for medical care described under Section 213(d) of
                  the Code which were previously incurred by the Participant,
                  the Participant's Spouse or any of the Participant's
                  dependents as defined under Section 152 of the Code or
                  expenses which are necessary to obtain medical care described
                  under Section 213(d) of the Code for the Participant, the
                  Participant's Spouse or any of the Participant's dependents as
                  defined under Section 152 of the Code; or

            (ii)  purchase (excluding mortgage payments) of a principal
                  residence of the Participant; or

            (iii) payment of tuition and related educational fees for the next
                  twelve (12) months of post-secondary education for the
                  Participant, the Participant's Spouse, children or any of the
                  Participant's dependents as defined under Section 152 of the
                  Code; or

            (iv)  the need to prevent the eviction of the Participant from his
                  principal residence or foreclosure on the mortgage of the
                  Participant's principal residence; or

            (v)   any other condition which the Commissioner of Internal
                  Revenue, through the publication of revenue rulings, notices
                  and other documents of general applicability, deems to be an
                  immediate and heavy financial need.

      (c)   Necessary to Satisfy Such Financial Need:

            (i)   A distribution will be treated as necessary to satisfy an
                  immediate and heavy financial need of a Participant if: (A)
                  the amount of the distribution is not in excess of (1) the
                  amount required to relieve the financial need of the
                  Participant and (2) if elected by the Participant, an amount
                  necessary to pay any federal, state or local income taxes, or
                  penalties reasonably anticipated to result from such
                  distribution, and (B) such need may not be satisfied from
                  other resources that are reasonably available to the
                  Participant.

            (ii)  A distribution will be treated as necessary to satisfy a
                  financial need if the Committee reasonably relies upon the
                  Participant's representation that the need cannot be relieved:

                  (A)   through reimbursement or compensation by insurance or
                        otherwise,

                  (B)   by reasonable liquidation of the Participant's assets,
                        to the extent such liquidation would not itself cause an
                        immediate and heavy financial need,


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                  (C)   by cessation of Before-Tax Contributions or Employee
                        contributions, if any, under the Plan, or

                  (D)   by other distributions or nontaxable loans from plans
                        maintained by the Employer or by any other employer, or
                        by borrowing from commercial sources on reasonable
                        commercial terms.

                  For purposes of this subsection (c)(ii), the Participant's
                  resources shall be deemed to include those assets of his
                  Spouse and minor children that are reasonably available to the
                  Participant.

            (iii) Alternatively, a Hardship distribution will be deemed to be
                  necessary to satisfy an immediate and heavy financial need of
                  a Participant if (A) or (B) are met:

                  (A)   all of the following requirements are satisfied:

                        (I)   the distribution is not in excess of (1) the
                              amount of the immediate and heavy financial need
                              of the Participant and (2) if elected by the
                              Participant, an amount necessary to pay any
                              federal, state or local income taxes or penalties
                              reasonably anticipated to result from such
                              distribution;

                        (II)  the Participant has obtained all distributions,
                              other than Hardship distributions, and all
                              nontaxable loans currently available under all
                              plans maintained by the Employer;

                        (III) the Plan, and all other plans maintained by the
                              Employer, provide that the Participant's elective
                              contributions and Employee contributions, if any,
                              will be suspended for twelve (12) months after
                              receipt of the Hardship distribution; and

                        (IV)  the Plan, and all other plans maintained by the
                              Employer, provide that the Participant may not
                              make elective contributions for the Participant's
                              taxable year immediately following the taxable
                              year of the Hardship distribution in excess of the
                              applicable limit under Section 402(g) of the Code
                              for such next taxable year, less the amount of
                              such Participant's elective contributions for the
                              taxable year of the Hardship distribution; or

                  (B)   the requirements set forth in additional methods, if
                        any, prescribed by the Commissioner of Internal Revenue
                        (through the publication of revenue rulings, notices and
                        other documents of general applicability) are satisfied.


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      (d)   A Participant who has withdrawn the maximum amounts available to
            such Participant under Section 7.3 or a Participant who is not
            eligible for a withdrawal thereunder, may, in case of Hardship (as
            defined under this Section 7.4), apply not more often than once in
            any Plan Year to the Committee for a Hardship distribution. Any
            application for a Hardship distribution shall be subject to the
            spousal consent requirements of Section 7.2(a) and be made in
            writing to the Committee at least ten (10) days prior to the
            requested date of payment. Hardship distributions may be made by a
            distribution of all or a portion of a Participant's (i) Before-Tax
            Contributions, (ii) Net Value of his Rollover Contribution Account,
            (iii) vested interest in the Net Value of his Matching Contribution
            Account and (iv) the vested interest in the Net Value of his
            Discretionary Employer Contribution Account.

      (e)   Distributions under this Section 7.4 shall be made in the following
            order of priority:

            (i)   Participant's Before-Tax Contributions;

            (ii)  the Net Value of the Participant's Rollover Contribution
                  Account;

            (iii) the vested interest in the Net Value of the Participant's
                  Matching Contribution Account; and

            (iv)  the vested interest in the Net Value of the Participant's
                  Discretionary Employer Contribution Account; and

            (v)   the vested interest in the Net Value of the Participant's
                  Nonelective Employer Contribution Account.

      (f)   Withdrawals under this Section 7.4 shall be made in the following
            order of priority:

            (i)   by the redemption of Units from each of the Participant's
                  Accounts in the Trust Fund in the order set forth in Section
                  7.4(e), on a pro rata basis from the Investment Accounts
                  thereunder, as were selected by the Participant pursuant to
                  Article VI; and

            (ii)  by the redemption of Units invested in the Employer Stock Fund
                  from each of the Participant's Accounts invested under the
                  Separate Agreement, in the order set forth in Section 7.4(e),
                  if selected by the Participant pursuant to Article VI.

      (g)   A Participant who receives a Hardship distribution under this
            Section 7.4 may have his Before-Tax Contributions suspended in
            accordance with Section 3.3.

      (h)   Any withdrawals under this Section 7.4 shall be subject to the
            restrictions of Section 6.5.


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7.5   Distribution of Benefits Following Retirement, Disability or Termination
      of Service

      (a)   If a Participant incurs a Termination of Service for any reason
            other than death, a distribution of the vested interest in the Net
            Value of his Accounts shall be made by the purchase of (i) a 50%
            Joint and Survivor Annuity with his Spouse as the designated
            Beneficiary or (ii) a Straight Life Annuity if the Participant does
            not have a Spouse. Payment of benefits to the Participant shall
            commence as of the later of the Participant's Normal Retirement Date
            or his Postponed Retirement Date.

      (b)   The Committee shall make every reasonable effort to furnish each
            Participant, by personal delivery or first class mail, the following
            information not less than thirty (30) days nor more than ninety (90)
            days prior to the date benefit payments are scheduled to commence:

            (i)   the terms and conditions of the 50% Joint and Survivor
                  Annuity,

            (ii)  the Participant's right to make, and the effect of, an
                  election to waive the 50% Joint and Survivor Annuity,

            (iii) the rights of the Participant's Spouse under the Plan,

            (iv)  the right to make, and the effect of, a revocation of a
                  previous election to waive the 50% Joint and Survivor Annuity,
                  and

            (v)   the relative values of the various optional forms of benefit
                  payments under the Plan.

            The Employer may also permanently post in the Employers office or
            offices the information described in (i) through (v) above in a
            manner that is reasonably calculated to reach the attention of each
            Participant.

      (c)   In lieu of the normal form of benefit payment set forth in Section
            7.5(a), the Participant may file an election form to receive his
            vested interest in the Net Value of his Accounts in any one of the
            optional forms of benefit payment set forth in Section 7.6. Such
            form must be filed with the Committee during the ninety (90) day
            election period ending on the date benefit payments are scheduled to
            commence.

      (d)   If a Participant who incurs a Termination of Service for any reason
            other than death, files an election with the Committee to receive an
            optional form of benefit payment in accordance with the provisions
            of Section 7.6, and dies before the entire vested interest in the
            Net Value of his Accounts has been distributed:


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            (i)   if the Net Value of a Participant's Accounts was distributed
                  by the purchase of an annuity contract, the remainder, if any,
                  of such vested interest shall be paid in accordance with the
                  provisions of such annuity contract;

            (ii)  if the Participant had elected to receive and had begun
                  receiving a distribution in the form of installments, the
                  Beneficiary shall receive distributions over the remaining
                  installment period, at the times set forth in such election.
                  If the Beneficiary designated to receive payments under the
                  installment form of benefit payments dies after the
                  commencement of payments to the Participant but prior to the
                  earlier of the end of the installment period or the date of
                  the Participant's death, the Participant shall, subject to the
                  spousal consent requirements of Section 7.2(a), have the right
                  to designate another Beneficiary, provided such designation is
                  executed and filed with the Committee prior to the
                  Participant's death. If there is no Beneficiary, the remaining
                  vested interest in the Net Value of his Accounts shall be
                  payable in a lump sum to the executor or administrator of his
                  estate, or, if no such executor or administrator is appointed
                  and qualifies within a time which the Committee shall, in its
                  sole and absolute discretion, deem to be reasonable, then to
                  such one or more of the descendants and blood relatives of
                  such deceased Participant as the Committee, in its sole and
                  absolute discretion, may select;

            (iii) if the Participant had elected to receive a deferred lump sum
                  distribution, the Participant's Beneficiary shall receive a
                  lump sum distribution as of the earlier of: (A) the Valuation
                  Date set forth in the Participant's election or (B) the last
                  Valuation Date which occurs within one (1) year of the
                  Participant's death;

            (iv)  if the Participant had elected to receive an immediate lump
                  sum distribution, the Participant's Beneficiary shall receive
                  a lump sum distribution as of the Valuation Date set forth in
                  the Participant's election;

            (v)   if the Participant had elected to receive an annuity and the
                  annuity contract had not yet been purchased, the Participant's
                  Beneficiary shall, by completing and filing the election form
                  prescribed by the Committee, elect to receive the distribution
                  as a Straight Life Annuity or one of the optional forms of
                  benefit payment set forth in Section 7.8(f));

            (vi)  if the Participant had elected that a lump sum distribution be
                  paid in a Direct Rollover pursuant to Section 7.9 and such
                  distribution had not yet been made, the Participant's
                  Beneficiary shall, by completing and filing the election form
                  prescribed by the Committee, elect to receive the distribution
                  as a Straight Life Annuity or in one of the optional forms of
                  benefit payment set forth in Section 7.8(f));


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            (vii) Notwithstanding the foregoing, if the Beneficiary is the
                  Participant's Spouse and if benefits are payable to such
                  Beneficiary as an immediate or deferred lump sum distribution,
                  such Spouse may defer the distribution up to the date on which
                  the Participant would have attained age seventy and one-half
                  (70-1/2).

      (e)   If an Participant who incurs a Termination of Service is reemployed
            by the Employer, upon such Participant's subsequent Termination of
            Service his prior election to receive a distribution in a form other
            than the normal form of benefit payment set forth in subsection (a)
            shall be null and void and the vested interest in the Net Value of
            his Accounts shall be distributed to him in accordance with the
            provisions of subsection (a).

      (f)   An Employee who incurs a Termination of Service, has elected to
            receive a distribution in the form of installments and is reemployed
            by the Employer prior to the distribution of the entire vested
            interest in the Net Value of his Accounts in accordance with the
            provisions of Section 7.6(e), shall not be eligible to receive or to
            continue to receive such distribution during his period of
            reemployment with the Employer. Upon such Employee's subsequent
            Termination of Service, his prior election to receive a distribution
            in the form of installments shall be null and void and the vested
            interest in the Net Value of his Accounts shall be distributed to
            him in accordance with the provisions of subsection (a).

      (g)   If a Participant incurs a Termination of Service for any reason and
            the vested interest in the Net Value of the Participant's Accounts
            is equal to or less than three thousand five hundred dollars
            ($3,500), (and effective January 1, 1998, five thousand dollars
            ($5,000)), a lump sum distribution of the vested interest in the Net
            Value of his Accounts shall be made to the Participant within seven
            (7) days of the Valuation Date coincident with the date of receipt
            by the Trustees of the proper documentation that such Participant
            incurred a Termination of Service.

      (d)   A Participant's vested interest in the Net Value of his Accounts in
            the Employer Stock Fund shall be distributed to the Participant by
            the Separate Agency as soon as administratively possible following
            the date the Employer is informed by the Trustees of the
            Participant's vested interest in such Investment Accounts. The
            distribution shall be made in accordance with Section 7.11 and the
            terms and provisions of the Separate Agreement.

7.6   Optional Forms of Benefit Payment upon Retirement, Disability or
      Termination of Service

      (a)   In lieu of the normal form of benefit payment set forth in Section
            7.5(a), a Participant who incurs a Termination of Service as of his
            Retirement Date or incurs a Termination of Service due to Disability
            or incurs a Termination of Service for any other reason may file an
            election form to receive a distribution of the vested interest in
            the Net Value of his Accounts by the purchase of a 100% Joint and
            Survivor Annuity, a 75% Joint and


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            Survivor Annuity or a 50% Joint and Survivor Annuity or a Period
            Certain and Life Annuity. Such form may, subject to the spousal
            consent requirements of Section 7.2(a), include an election to
            designate a Beneficiary who is other than his Spouse. Payment of
            benefits to the Participant shall commence as of the later of the
            Participant's Normal Retirement Date or his Postponed Retirement
            Date. Notwithstanding the foregoing sentence, such form may include
            an election to receive a distribution commencing on any date
            coincident with or next following his Early Retirement Date or, if
            applicable, the date of his Disability.

      (b)   In lieu of the normal form of benefit payment set forth in Section
            7.5(a), a Participant who incurs a Termination of Service as of his
            Retirement Date or incurs a Termination of Service due to Disability
            or incurs a Termination of Service for any other reason may, subject
            to the spousal consent requirements of Section 7.2(a), file an
            election form to receive a distribution of the vested interest in
            the Net Value of his Accounts by the purchase of a Straight Life
            Annuity. Payment of benefits to the Participant shall commence as of
            the later of the Participant's Normal Retirement Date or his
            Postponed Retirement Date. Notwithstanding the foregoing sentence,
            such form may include an election to receive a distribution
            commencing on any date coincident with or next following his Early
            Retirement Date or, if applicable, the date of his Disability.

      (c)   In lieu of the normal form of benefit payment set forth in Section
            7.5(a), a Participant who incurs a Termination of Service as of his
            Retirement Date or incurs a Termination of Service due to Disability
            or incurs a Termination of Service for any other reason may, subject
            to the spousal consent requirements of Section 7.2(a) and the
            required minimum distribution provisions of Sections 7.10(b) and
            7.10(c), file an election form to receive the vested interest in the
            Net Value of his Accounts as a lump sum distribution as of any
            Valuation Date following his Termination of Service and prior to his
            Normal Retirement Date; provided, however, that the Valuation Date
            may not be later than thirteen (13) months following his Termination
            of Service. The vested interest in the Net Value of his Accounts
            shall be distributed to such Participant as a lump sum distribution
            within seven (7) days of the Valuation Date coincident with the date
            of receipt by the Trustees of the proper documentation indicating
            the Participant's distribution date.

      (d)   In lieu of the normal form of benefit payment set forth in Section
            7.5(a), a Participant who incurs a Termination of Service as of his
            Retirement Date or incurs a Termination of Service due to Disability
            or incurs a Termination of Service for any other reason may, subject
            to the spousal consent requirements of Section 7.2(a), elect to
            defer receipt of the vested interest in the Net Value of his
            Accounts beyond his Normal Retirement Date or Postponed Retirement
            Date. If such an election is made, the vested interest in the Net
            Value of his Accounts shall continue to be held in the Trust Fund.
            Subject to the required minimum distribution provisions of Sections
            7.10(b) and 7.10(c), the vested interest in the Net Value of his
            Accounts shall be distributed to such Participant as a lump sum
            distribution within seven (7) days of the Valuation Date coincident
            with the


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            date of receipt by the Trustees of the proper documentation
            indicating the Employee's deferred distribution date.

      (e)   In lieu of the normal form of benefit payment set forth in Section
            7.5(a), a Participant who incurs a Termination of Service as of his
            Retirement Date or incurs a Termination of Service due to Disability
            or incurs a Termination of Service for any other reason may, subject
            to the spousal consent requirements of Section 7.2(a) and the
            required minimum distribution provisions of Sections 7.10(b) and
            7.10(c), file an election form to receive the vested interest in the
            Net Value of his Accounts in the form of equal monthly, quarterly or
            annual installments over a period not to exceed ten (10) years. If a
            Participant elects to receive his benefit pursuant to this
            subsection (e), the installment period may not extend beyond the
            life expectancy of such Participant or the life expectancy of such
            Participant and his Beneficiary. The vested interest in the Net
            Value of his Accounts shall be determined as of such Valuation Date
            or Valuation Dates in each such Plan Year as may be elected by such
            Participant and shall be based on the respective values of the
            Participant's Units in each Investment Account as of such Valuation
            Date or Valuation Dates. The amount of the installment payment shall
            be distributed by the redemption of Units from the Participant's
            Accounts on a pro rata basis among such Participant's Investment
            Accounts. Any portion of the vested interest in the Net Value of the
            Accounts of such Participant which shall not have been so paid shall
            continue to be held for his benefit or for the benefit of his
            Beneficiary in the Participant's Investment Accounts.

      (f)   In lieu of the normal form of benefit payment set forth in Section
            7.5(a), a Participant who incurs a Termination of Service as of his
            Retirement Date or incurs a Termination of Service due to Disability
            or incurs a Termination of Service for any other reason may, subject
            to the spousal consent requirements of Section 7.2(a), file an
            election form that a lump sum distribution equal to the vested
            interest in the Net Value of his Accounts be paid in a Direct
            Rollover pursuant to Section 7.9. The amount of such lump sum
            distribution shall be determined as of the Valuation Date coincident
            with the date of receipt by the Trustees of the proper
            documentation.

      (g)   In lieu of the normal form of benefit payment set forth in Section
            7.5(a), a Participant who incurs a Termination of Service as of his
            Retirement Date or incurs a Termination of Service due to Disability
            or incurs a Termination of Service for any other reason may, subject
            to the spousal consent requirements of Section 7.2(a), file an
            election form to receive the vested interest in the Net Value of his
            Accounts in the form of a partial lump sum distribution as of some
            Valuation Date following his Termination of Service. Subject to the
            required minimum distribution provisions of Sections 7.10(b) and
            7.10(c), the partial lump sum distribution shall be distributed to
            such Employee within seven (7) days of the Valuation Date coincident
            with the date of receipt by the Trustees of the proper documentation
            indicating the Employee's distribution date; and the balance


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            of the vested interest in the Net Value of his Accounts shall be
            payable in the form of one (1) of the following:

            (i)   monthly, quarterly or annual installments over a period not to
                  exceed ten (10) years, as set forth in subsection (e); or

            (ii)  the purchase of an annuity, as set forth in Section
                  7.1(a)(ii), (iii), (iv), (v) or (vi).

7.7   Designation of Beneficiary

      (a)   Subject to the spousal consent requirements of Section 7.2(a), a
            Participant may, from time to time, designate any person or persons
            as Beneficiary or contingent Beneficiary to receive a benefit under
            Section 7.5 or Section 7.8 upon the death of the Participant. For
            purposes of this Section 7.7, "person" includes an individual, a
            trust, an estate, or any other entity designated as a Beneficiary.

      (b)   The designation of a Beneficiary or contingent Beneficiary shall be
            made in writing by the Participant in the form and manner prescribed
            by the Committee and shall not be effective unless such form is (i)
            filed prior to the death of such person and (ii) complies with the
            spousal consent requirements of Section 7.2(a). If more than one (1)
            person is designated as a Beneficiary, each designated Beneficiary
            in such Beneficiary classification shall have an equal share, unless
            the Participant directs otherwise.

      (c)   The designation of a Beneficiary or contingent Beneficiary which is
            filed with the Committee will revoke all prior Beneficiary
            designations filed with the Committee. The number of Beneficiary
            designations and revocations shall not be limited.

      (d)   If the Beneficiary or contingent Beneficiary designated to receive
            payments under an optional form of benefit set forth in Section 7.6
            dies prior to the commencement of benefit payments to the
            Participant, the terms and conditions of such election shall be
            deemed null and void and the normal form of benefit set forth in
            Section 7.5(a) shall be reinstated. Subject to the spousal consent
            requirements of Section 7.2(a), the Participant shall have the right
            to elect another optional form of benefit payment and another
            Beneficiary, provided such election is completed and filed with the
            Committee prior to the earlier of: (i) the Participant's death, or
            (ii) the date the Participant's benefit payments are scheduled to
            commence. Such election shall become effective on the date the
            Participant's benefit payments are scheduled to commence.

      (e)   If the Spouse or other Beneficiary designated to receive payments
            under Section 7.8(b) or Section 7.8(e), dies prior to the death of
            the Participant, the terms and conditions of such election shall be
            null and void. If the Participant is married, the normal form of
            benefit set forth in Section 7.8(b)(ii) shall be reinstated. Subject
            to the spousal consent requirements of Section 7.2(a), the
            Participant shall have the right to elect another Beneficiary,
            provided such election is completed and filed with the Committee
            prior to


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            the earlier of: (i) the Participant's death, or (ii) the date the
            Participant's benefit payments are scheduled to commence. Such
            election shall become effective on the date the Participant's
            benefit payments are scheduled to commence.

      (f)   If a Participant fails to designate a Beneficiary other than a
            Spouse to receive the Preretirement Death Benefit set forth in
            Section 7.8, or if the Beneficiary and contingent Beneficiary
            designated by a Participant die prior to such Participant's death
            and before the entire vested interest in the Net Value of the
            Participant's Accounts has been distributed, such Participant's
            benefits shall be paid as a lump sum to the executor or
            administrator of his estate.

7.8   Preretirement Death Benefits

      (a)   If a Participant dies prior to the date benefits are to commence and
            the vested interest in the Net Value of the Participant's Accounts
            is equal to or less than three thousand five hundred dollars
            ($3,500) (and effective January 1, 1998, five thousand dollars
            ($5,000)), a lump sum distribution of the vested interest in the Net
            Value of his Accounts shall be made to the Participant's Beneficiary
            within seven (7) days of the Valuation Date coincident with the date
            of receipt by the Trustees of the proper documentation indicating
            the date of the Participant's death.

      (b)   If a Participant dies prior to the date benefits are to commence and
            the vested interest in the Net Value of the Participant's Accounts
            exceeds three thousand five hundred dollars ($3,500) (and effective
            January 1, 1998, five thousand dollars ($5,000)), the Preretirement
            Death Benefit for a Participant shall be as follows:

            (i)   if a Participant had a vested interest in the Net Value of his
                  Accounts and died (A) prior to the date benefit payments are
                  scheduled to commence and (B) with no surviving Spouse, the
                  vested interest in the Net Value of his Accounts shall be made
                  to the Participant's designated Beneficiary by the purchase of
                  a Straight Life Annuity. Payment of benefits shall commence
                  within one (1) year of the Participant's death;

            (ii)  if a Participant had a vested interest in the Net Value of his
                  Accounts and died (A) prior to the date benefits payments are
                  scheduled to commence and (B) with a surviving Spouse, the
                  vested interest in the Net Value of his Accounts shall be made
                  to the surviving Spouse by the purchase of a Straight Life
                  Annuity. Payment of benefits to the Participant's Spouse shall
                  commence as of the later of the date the Participant would
                  have attained his Normal Retirement Date or the date of the
                  Participant's death.

      (c)   Notwithstanding the provisions of subsection (b)(ii), the surviving
            Spouse of a Participant may elect that the Straight Life Annuity be
            purchased with benefits to commence on a date selected by the Spouse
            which occurs on any date commencing


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            with the Participant's date of death and ending on the date the
            Participant would have attained age seventy and one-half (70-1/2).

      (d)   In lieu of the normal form of benefit payment set forth in
            subsection (b)(ii), a Participant may, subject to the spousal
            consent requirements of Section 7.2(a), elect to waive the
            Preretirement Death Benefit. Such waiver shall designate a
            Beneficiary who is other than the Participant's Spouse.

      (e)   Consent by a Spouse to waive the Preretirement Death Benefit is not
            binding on a subsequent Spouse. If a Participant has elected, with
            spousal consent, to waive the Preretirement Death Benefit and is
            subsequently widowed or divorced and thereafter remarried, the
            Preretirement Death Benefit is automatically reinstated upon
            remarriage, subject to any subsequent election by the Participant,
            with the consent of his new Spouse, to waive such coverage.

      (f)   In lieu of the normal form of Preretirement Death Benefit set forth
            in subsection (b), upon the Participant's death the Beneficiary of a
            Participant may, by completing and filing the election form
            prescribed by the Committee, elect to receive the vested interest in
            the Net Value of a Participant's Accounts in one of the following
            optional forms of benefit payment:

            (i)   as a lump sum distribution as of any Valuation Date following
                  the Participant's death; provided, however, that the Valuation
                  Date may not be later than one (1) year following the
                  Participant's death. The vested interest in the Net value of
                  the Participant's Accounts shall be distributed to such person
                  as a lump sum distribution within seven (7) days of the
                  Valuation Date coincident with the date of receipt by the
                  Trustees of the proper documentation indicating the
                  distribution date.

            (ii)  in the form of equal monthly, quarterly or annual installments
                  over a period not to exceed ten (10) years. The vested
                  interest in the Net value of the Participant's Accounts shall
                  be determined as of such Valuation Date or Valuation Dates in
                  each such Plan Year as may be elected by such person and shall
                  be based on the respective values of the deceased
                  Participant's Units in each Investment Account as of such
                  Valuation Date or Valuation Dates. The amount of the
                  installment payment shall be distributed by the redemption of
                  Units from the deceased Participant's Accounts on a pro rata
                  basis among such deceased Participant's Investment Accounts.
                  Any portion of the vested interest in the Net Value of the
                  Accounts of such deceased Participant which shall not have
                  been so paid shall continue to be held for the benefit of the
                  surviving Spouse or other Beneficiary or for the benefit of
                  the beneficiary designated by such person. If the surviving
                  Spouse or other Beneficiary elects to receive his benefit
                  pursuant to this subsection (f)(ii), installment payments
                  shall begin to such


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                  person within one (1) year of the Participant's death and the
                  installment period may not extend beyond the life expectancy
                  of such person.

            (iii) as a lump sum distribution equal to the vested interest in the
                  Net Value of the Participant's Accounts made payable in a
                  Direct Rollover pursuant to Section 7.9. Such lump sum
                  distribution shall be made within seven (7) days of the
                  Valuation Date coincident with the date of receipt by the
                  Trustees of the proper documentation.

            (iv)  in the form of a partial distribution as of some Valuation
                  Date following his Termination of Service. Subject to the
                  required minimum distribution provisions of Sections 7.10(b)
                  and 7.10(c), the partial distribution shall be distributed to
                  such Employee within seven (7) days of the Valuation Date
                  coincident with the date of receipt by the Trustees of the
                  proper documentation indicating the Employee's distribution
                  date; and the balance of the vested interest in the Net Value
                  of his Accounts shall be payable in the form of one of the
                  following:

                  (I)   installments over a period not to exceed ten (10) years,
                        as set forth in subsection (f)(ii);

                  (II)  the purchase of a Straight Life Annuity, as set forth in
                        subsections (b) and (c), if applicable; or

                  (III) a lump sum distribution made payable in a Direct
                        Rollover pursuant to Section 7.9 and as set forth in
                        subsection (iii).

            Notwithstanding the foregoing provisions to the contrary, if the
            surviving Spouse of a deceased Participant elects one of these
            optional forms of benefit payment set forth above, such Spouse may
            elect to have benefits commence on a date selected by such Spouse
            which occurs on any date commencing with the Participant's date of
            death and ending on the date the Participant would have attained age
            seventy and one-half (70-1/2).

7.9   Direct Rollover of Eligible Rollover Distributions

      For purposes of this Section 7.9, the following definitions shall apply:

      (a)   "Direct Rollover" means a payment by the Plan to the Eligible
            Retirement Plan specified by the Distributee.

      (b)   "Distributee" means an Employee or former Employee. In addition, the
            Employee's or former Employee's surviving spouse and the Employee's
            or former Employee's Spouse or former spouse who is the alternate
            payee under a qualified domestic relations order, as defined in
            Section 414(p) of the Code, are Distributees with regard to the
            interest of the Spouse or former spouse.


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      (c)   "Eligible Retirement Plan" means an individual retirement account
            described in Section 408(a) of the Code, an individual retirement
            annuity described in Section 408(b) of the Code, an annuity plan
            described in Section 403(a) of the Code, or a qualified trust
            described in Section 401(a) of the Code, that accepts the
            Distributee's Eligible Rollover Distribution. However, in the case
            of an Eligible Rollover Distribution to the surviving Spouse, an
            Eligible Retirement Plan is an individual retirement account or
            individual retirement annuity.

      (d)   "Eligible Rollover Distribution" means any distribution of all or
            any portion of the balance to the credit of the Distributee, except
            that an Eligible Rollover Distribution does not include: any
            distribution that is one of a series of substantially equal periodic
            payments (not less frequently than annually) made for the life (or
            life expectancy) of the Distributee or the joint lives (or joint
            life expectancies) or the Distributee and the Distributee's
            designated Beneficiary, or for a specified period of ten (10) years
            or more; any distribution to the extent such distribution is
            required under Section 401(a)(9) of the Code; and the portion of any
            distribution that is not includable in gross income (determined
            without regard to the exclusion for net unrealized appreciation with
            respect to employer securities); and effective January 1, 2000, any
            Hardship distribution described in Section 401(k)(2)(B)(i)(IV) of
            the Code.

      Notwithstanding any provision of the Plan to the contrary that would
      otherwise limit a Distributee's election under this Section, a Distributee
      may elect, at the time and in the manner prescribed by the Plan
      Administrator, to have any portion of an Eligible Rollover Distribution
      paid directly to an Eligible Retirement Plan specified by the Distributee
      in a Direct Rollover.

7.10  Minimum Distribution Requirements

      (a)   General Rules

            (i)   Effective Date. The provisions of this Section 7.10 will apply
                  for purposes of determining required minimum distributions for
                  calendar years beginning with the 2003 calendar year.

            (ii)  Precedence. The requirements of this Section 7.10 will take
                  precedence over any inconsistent provisions of the Plan.

            (iii) Requirements of Treasury Regulations Incorporated. All
                  distributions required under this Section 7.10 will be
                  determined and made in accordance with the Treasury
                  regulations under Section 401(a)(9) of the Code.

            (iv)  TEFRA Section 242(b)(2) Elections. Notwithstanding the other
                  provisions of this Section 7.10, distributions may be made
                  under a designation made before January 1, 1984, in accordance
                  with Section 242(b)(2) of the Tax Equity and Fiscal
                  Responsibility Act (TEFRA), and the provisions of the Plan, if
                  applicable, that relate to Section 242(b)(2) of TEFRA.


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      (b)   Time and Manner of Distribution

            (i)   Required Beginning Date. The Participant's entire interest
                  will be distributed, or begin to be distributed, to the
                  Participant no later than the Participant's Required Beginning
                  Date.

            (ii)  Death of Participant Before Distributions Begin. If the
                  Participant dies before distributions begin, the Participant's
                  entire interest will be distributed, or begin to be
                  distributed, no later than as follows:

                  (A)   If the Participant's surviving Spouse is the
                        Participant's sole Designated Beneficiary, distributions
                        to the surviving Spouse will begin by December 31 of the
                        calendar year immediately following the calendar year in
                        which the Participant died, or by December 31 of the
                        calendar year in which the Participant would have
                        attained age 70 1/2, if later.

                  (B)   If the Participant's surviving Spouse is not the
                        Participant's sole Designated Beneficiary, distributions
                        to the Designated Beneficiary will begin by December 31
                        of the calendar year immediately following the calendar
                        year in which the Participant died.

                  (C)   If there is no Designated Beneficiary as of September 30
                        of the year following the year of the Participant's
                        death, the Participant's entire interest will be
                        distributed by December 31 of the calendar year
                        containing the fifth (5th) anniversary of the
                        Participant's death.

                  (D)   If the Participant's surviving Spouse is the
                        Participant's sole Designated Beneficiary and the
                        surviving Spouse dies after the Participant but before
                        distributions to the surviving Spouse begin, this
                        Section 7.10(b)(ii), other than Section 7.10(b)(ii)(A),
                        will apply as if the surviving Spouse were the
                        Participant.

                  For purposes of this Section 7.10(b)(ii) and Section 7.10(d),
                  unless Section 7.10(b)(ii)(D) applies, distributions are
                  considered to begin on the Participant's Required Beginning
                  Date. If Section 7.10.(b)(ii)(D) applies, distributions are
                  considered to begin on the date distributions are required to
                  begin to the surviving Spouse under Section 7.10(b)(ii)(A). If
                  distributions under an annuity purchased from an insurance
                  company, if applicable, irrevocably commence to the
                  Participant before the Participant's Required Beginning Date
                  (or to the Participant's surviving Spouse before the date
                  distributions are required to begin to the surviving Spouse
                  under Section 7.10(b)(ii)(A), the date distributions are
                  considered to begin is the date distributions actually
                  commence.

            (iii) Election to Apply 5-Year Rule to Distributions to Designated
                  Beneficiaries. If the Participant dies before distributions
                  begin and there is a Designated Beneficiary, distribution to
                  the Designated Beneficiary is not required to begin by the
                  date specified in Section 7.10(b)(ii), but the Participant's
                  entire interest will be distributed to the Designated
                  Beneficiary by December 31 of the calendar year containing the
                  fifth anniversary of the Participant's death. If the
                  Participant's surviving Spouse is the Participant's sole


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                  Designated Beneficiary and the surviving Spouse dies after the
                  Participant but before distributions to either the Participant
                  or the surviving Spouse begin, this election will apply as if
                  the surviving Spouse were the Participant.

            (iv)  Election to Allow Participants or Beneficiaries to Elect
                  5-Year Rule. Participants or Beneficiaries may elect on an
                  individual basis whether the 5-year rule or the Life
                  Expectancy rule in Sections 7.10(b)(ii) and 7.10(d)(ii)
                  applies to distributions after the death of a Participant who
                  has a Designated Beneficiary. The election must be made no
                  later than the earlier of September 30 of the calendar year in
                  which distribution would be required to begin under Section
                  7.10(b)(ii), or by September 30 of the calendar year which
                  contains the fifth anniversary of the Participant's (or, if
                  applicable, surviving Spouse's) death. If neither the
                  Participant nor Beneficiary makes an election under this
                  subsection, distributions will be made in accordance with
                  Sections 7.10(b)(ii) and 7.10(d)(ii) and, if applicable, the
                  elections in Section 7.10(b)(iii) above.

            (v)   Election to Allow Designated Beneficiary Receiving
                  Distributions Under 5-Year Rule to Elect Life Expectancy
                  Distributions. A Designated Beneficiary who is receiving
                  payments under the 5-year rule may make a new election to
                  receive payments under the Life Expectancy rule until December
                  31, 2003, provided that all amounts that would have been
                  required to be distributed under the Life Expectancy rule for
                  all Distribution Calendar Years before 2004 are distributed by
                  the earlier of December 31, 2003 or the end of the 5-year
                  period.

            (vi)  Forms of Distribution. Unless the Participant's interest is
                  distributed in the form of an annuity purchased from an
                  insurance company or in a single sum on or before the Required
                  Beginning Date, as of the first Distribution Calendar Year
                  distributions will be made in accordance with Sections 7.10(c)
                  and (d). If the Participant's interest is distributed in the
                  form of an annuity purchased from an insurance company,
                  distributions thereunder will be made in accordance with the
                  requirements of Section 401(a)(9) of the Code and the Treasury
                  regulations.

      (c)   Required Minimum Distributions During Participant's Lifetime

            (i)   Amount of Required Minimum Distribution For Each Distribution
                  Calendar Year. During the Participant's lifetime, the minimum
                  amount that will be distributed for each Distribution Calendar
                  Year is the lesser of:

                  (A)   the quotient obtained by dividing the Participant's
                        Accounts by the distribution period in the Uniform
                        Lifetime Table set forth in Section 1.401(a)(9)-9 of the
                        Treasury regulations, using the Participant's age as of
                        the Participant's birthday in the Distribution Calendar
                        Year; or

                  (B)   if the Participant's sole Designated Beneficiary for the
                        Distribution Calendar Year is the Participant's Spouse,
                        the quotient obtained by dividing the Participant's
                        Accounts by the number in the Joint and Last Survivor
                        Table set forth in Section


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                        1.401(a)(9)-9 of the Treasury regulations, using the
                        Participant's and Spouse's attained ages as of the
                        Participant's and Spouse's birthdays in the Distribution
                        Calendar Year.

            (ii)  Lifetime Required Minimum Distributions Continue Through Year
                  of Participant's Death. Required minimum distributions will be
                  determined under this Section 7.10(c) beginning with the first
                  Distribution Calendar Year and up to and including the
                  Distribution Calendar Year that includes the Participant's
                  date of death.

      (d)   Required Minimum Distributions After Participant's Death

            (i)   Death On or After Date Distributions Begin

                  (A)   Participant Survived by Designated Beneficiary. If the
                        Participant dies on or after the date distributions
                        begin and there is a Designated Beneficiary, the minimum
                        amount that will be distributed for each Distribution
                        Calendar Year after the year of the Participant's death
                        is the quotient obtained by dividing the Participant's
                        Accounts by the longer of the remaining Life Expectancy
                        of the Participant or the remaining Life Expectancy of
                        the Participant's Designated Beneficiary, determined as
                        follows:

                        (I)   The Participant's remaining Life Expectancy is
                              calculated using the age of the Participant in the
                              year of death, reduced by one for each subsequent
                              year.

                        (II)  If the Participant's surviving Spouse is the
                              Participant's sole Designated Beneficiary, the
                              remaining Life Expectancy of the surviving Spouse
                              is calculated for each Distribution Calendar Year
                              after the year of the Participant's death using
                              the surviving Spouse's age as of the Spouse's
                              birthday in that year. For Distribution Calendar
                              Years after the year of the surviving Spouse's
                              death, the remaining Life Expectancy of the
                              surviving Spouse is calculated using the age of
                              the surviving Spouse as of the Spouse's birthday
                              in the calendar year of the Spouse's death,
                              reduced by one for each subsequent calendar year.

                        (III) If the Participant's surviving Spouse is not the
                              Participant's sole Designated Beneficiary, the
                              Designated Beneficiary's remaining Life Expectancy
                              is calculated using the age of the Beneficiary in
                              the year following the year of the Participant's
                              death, reduced by one for each subsequent year.

                  (B)   No Designated Beneficiary. If the Participant dies on or
                        after the date distributions begin and there is no
                        Designated Beneficiary as of September 30 of the year
                        after the year of the Participant's death, the minimum
                        amount that will be distributed for each Distribution
                        Calendar Year after the year of the Participant's death
                        is the quotient obtained by dividing the Participant's
                        Accounts by the Participant's remaining Life Expectancy
                        calculated using the age of the Participant in the year
                        of death, reduced by one for each subsequent year.


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            (ii)  Death Before Date Distributions Begin

                  (A)   Participant Survived by Designated Beneficiary. If the
                        Participant dies before the date distributions begin and
                        there is a Designated Beneficiary, the minimum amount
                        that will be distributed for each Distribution Calendar
                        Year after the year of the Participant's death is the
                        quotient obtained by dividing the Participant's Accounts
                        by the remaining Life Expectancy of the Participant's
                        Designated Beneficiary, determined as provided in
                        Section 7.10(d)(i).

                  (B)   No Designated Beneficiary. If the Participant dies
                        before the date distributions begin and there is no
                        Designated Beneficiary as of September 30 of the year
                        following the year of the Participant's death,
                        distribution of the Participant's entire interest will
                        be completed by December 31 of the calendar year
                        containing the fifth anniversary of the Participant's
                        death.

                  (C)   Death of Surviving Spouse Before Distributions to
                        Surviving Spouse Are Required to Begin. If the
                        Participant dies before the date distributions begin,
                        the Participant's surviving Spouse is the Participant's
                        sole Designated Beneficiary, and the surviving Spouse
                        dies before distributions are required to begin to the
                        surviving Spouse under Section 7.10(b)(ii)(A), this
                        Section 7.10(d)(ii) will apply as if the surviving
                        Spouse were the Participant.

      (e)   Definitions

            For purposes of this Section 7.10, the following words and phrases
            shall have the meanings hereafter ascribed to them:

            (i)   Designated Beneficiary. The individual who is designated as
                  the Beneficiary under Section 1.11 of the Plan and is the
                  Designated Beneficiary under Section 401(a)(9) of the Code and
                  Section 1.401(a)(9)-1, Q&A-4, of the Treasury regulations.

            (ii)  Distribution Calendar Year. A calendar year for which a
                  minimum distribution is required. For distributions beginning
                  before the Participant's death, the first Distribution
                  Calendar Year is the calendar year immediately preceding the
                  calendar year which contains the Participant's Required
                  Beginning Date. For distributions beginning after the
                  Participant's death, the first Distribution Calendar Year is
                  the calendar year in which distributions are required to begin
                  under Section 7.10(b)(ii). The required minimum distribution
                  for the Participant's first Distribution Calendar Year will be
                  made on or before the Participant's Required Beginning Date.
                  The required minimum distribution for other Distribution
                  Calendar Years, including the required minimum distribution
                  for the Distribution Calendar Year in which the Participant's
                  Required Beginning Date occurs, will be made on or before
                  December 31 of that Distribution Calendar Year.

            (iii) Life Expectancy. Life Expectancy as calculated by use of the
                  Single Life Table in Section 1.401(a)(9)-9 of the Treasury
                  regulations.


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      (iv)  Participant's Accounts. The Accounts of the last Valuation Date in
            the calendar year immediately preceding the Distribution Calendar
            Year (valuation calendar year) increased by the amount of any
            contributions made and allocated or Forfeitures allocated to the
            Accounts as of dates in the valuation calendar year after the
            Valuation Date and decreased by distributions made in the valuation
            calendar year after the Valuation Date. The Accounts for the
            valuation calendar year includes any amounts rolled over or
            transferred to the Plan either in the valuation calendar year or in
            the Distribution Calendar Year if distributed or transferred in the
            valuation calendar year.

      (v)   Required Beginning Date. The date specified in Section 7.11(b) or
            (c), whichever is applicable.

7.11  Latest Commencement of Benefits

      (a)   Unless the Participant elects otherwise in accordance with the Plan,
            in no event shall the payment of benefits commence later than the
            sixtieth (60th) day after the close of the Plan Year in which the
            latest of the following events occur: (i) the attainment by the
            Participant of age sixty-five (65), (ii) the tenth (10th)
            anniversary of the year in which the Participant commenced
            participation in the Plan or Prior Plan, or (iii) the termination of
            the Participant's employment with the Employer; provided, however,
            that if the amount of the payment required to commence on the date
            determined under this sentence cannot be ascertained by such date, a
            payment retroactive to such date may be made no later than sixty
            (60) days after the earliest date on which the amount of such
            payment can be ascertained under the Plan.

      (b)   Distributions to five-percent owners:

            The vested interest in the Net Value of the Accounts of a
            five-percent owner (as described in Section 416(i) of the Code and
            determined with respect to the Plan Year ending in the calendar year
            in which such individual attains age seventy and one-half (70-1/2))
            must be distributed or commence to be distributed no later than the
            first day of April following the calendar year in which such
            individual attains age seventy and one-half (70-1/2). The vested
            interest in the Net Value of the Accounts of a Participant who is
            not a five-percent owner (as described in Section 416(i) of the
            Code) for the Plan Year ending in the calendar year in which such
            person attains age seventy and one-half (70-1/2) but who becomes a
            five-percent owner (as described in Section 416(i) of the Code) for
            a later Plan Year must be distributed or commence to be distributed
            no later than the first day of April following the last day of the
            calendar year that includes the last day of the first Plan Year for
            which such individual is a five-percent owner (as described in
            Section 416(i) of the Code).

      (c)   Subject to Section 7.1(f), distributions to other than five-percent
            owners:

            The vested interest in the Net Value of the Accounts of a
            Participant who is not a five-percent owner and who attained age
            seventy and one-half (70-1/2) prior to January 1,


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            1988, must be distributed or commence to be distributed no later
            than the first day of April following the calendar year in which
            occurs the later of: (i) his termination of employment or (ii) his
            attainment of age seventy and one-half (70-1/2).

            Except as otherwise provided in the following paragraph, the vested
            interest in the Net Value of the Accounts of any Participant who
            attains age seventy and one-half (70-1/2) after December 31, 1987,
            must be distributed or commence to be distributed no later than the
            first day of April following the calendar year in which such
            individual attains age seventy and one-half (70-1/2).

            Effective January 1, 1997, an Employee otherwise required to receive
            a distribution under the preceding paragraph, may elect to defer
            distribution of the Net Value of his Accounts to the date of his
            termination of employment.

            Notwithstanding the foregoing, the vested interest in the Net Value
            of the Accounts of (I) any Employee who becomes a Participant on or
            after January 1, 1997 or (II) any Employee who attains age seventy
            and one-half (70-1/2) in a calendar year beginning on or after
            January 1, 2003, must be distributed or commence to be distributed
            no later than the first day of April following the calendar year in
            which occurs the later of: (1) his termination of employment or (2)
            his attainment of age seventy and one-half (70-1/2).

7.12  Manner of Payment of Distributions from the Employer Stock Fund

      Distributions from the Employer Stock Fund shall be made to Participants
      and Beneficiaries in cash, unless the Participant or Beneficiary elects
      that such distributions may be made wholly or partially in shares. If the
      Participant or Beneficiary elects that such distributions may be made
      wholly or partially in shares, subject to such terms and conditions as may
      be established from time to time by the Committee, the maximum number of
      shares to be distributed shall be equal to the number of whole shares that
      could be purchased on the date of distribution based on the fair market
      value of shares determined as of the date of payment and on the fair
      market value of the Participant's Units in the Employer Stock Fund on the
      valuation date preceding the distribution. An amount of money equal to any
      remaining amount of the payment that is less than the fair market value of
      a whole share shall be distributed in cash. For purposes of this Section
      7.12, the fair market value of a share shall be determined on a uniform
      and nondiscriminatory basis in such manner as the Separate Agency may, in
      its discretion, prescribe.


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                                                                  Article VIII -
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                                 ARTICLE VIII -
                              LOANS TO PARTICIPANTS

8.1   Definitions and Conditions

      (a)   For purposes of this Article VIII, the following terms and phrases
            shall have the meanings hereafter ascribed to them:

            (i)   "Borrower" means a Participant or a "Party in Interest" (as
                  defined under Section 3(14) of ERISA) who maintains an
                  Account, provided such Participant or Party in Interest is not
                  receiving a benefit payment in the form of installment or
                  annuity payments in accordance with the provisions of Article
                  VII, or a preretirement death benefit in accordance with the
                  provisions of Section 7.8.

            (ii)  "Loan Account" means the separate, individual account
                  established on behalf of a Borrower in accordance with the
                  provisions of Section 8.4(d).

      (b)   To the extent permitted under the provisions of this Article VIII
            and subject to the terms and conditions set forth herein and in
            Section 7.2, a Borrower may request a loan from his Accounts. Any
            loans made in accordance with this Article VIII shall not be subject
            to the provisions of Article VI.

8.2   Loan Amount

      Upon a finding by the Committee that all requirements hereunder have been
      met, a Borrower may request a loan from his Accounts, in an amount up to
      the lesser of: (a) fifty percent (50%) of the Net Value as of the close of
      business on the date the loan is processed of the Before-Tax Contribution
      Account, vested Matching Contribution Account, vested Discretionary
      Employer Contribution Account, Rollover Contribution Account and
      Nonelective Employer Contribution Account, or (b) fifty thousand dollars
      ($50,000), reduced by the highest outstanding loan balance during the
      preceding twelve (12) months. The minimum loan permitted shall be one
      thousand dollars ($1,000).

8.3   Term of Loan

      All loans shall be for a fixed term of not more than five (5) years,
      except that a loan which shall be used to acquire any dwelling which
      within a reasonable time is to be used as the principal residence of the
      Borrower, may, in the discretion of the Committee, be made for a term of
      not more than fifteen (15) years. Interest on a loan shall be based on a
      reasonable rate of interest. Such rate shall be the "prime rate" as set
      forth in the first publication of The Wall Street Journal issued during
      the month in which the Borrower requests the loan, increased by one (1)
      percentage point and rounded to the nearest quarter of one percent (1/4 of
      1%). Such rate shall remain in effect until the Loan Account is closed.


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787                                  66              Carver Federal Savings Bank
<PAGE>

                                                                  Article VIII -
                                                           Loans to Participants
- --------------------------------------------------------------------------------

8.4   Operational Provisions

      (a)   An application for a loan shall be filed in the form and manner
            prescribed by the Committee and shall be subject to the fees, if
            any, set forth in Section 9.11. If the Committee shall approve such
            application, the Committee shall establish the amount of such loan
            and such loan shall be effected as of the Valuation Date next
            following receipt by the Trustees.

      (b)   The amount of the loan shall be distributed from the Investment
            Accounts in which the Borrower's Accounts are invested, in the
            following order of priority:

            (i)   Before-Tax Contribution Account;

            (ii)  Rollover Contribution Account;

            (iii) vested Matching Contribution Account;

            (iv)  vested Discretionary Employer Contribution Account;

            (v)   vested Nonelective Employer Contribution Account.

            Distributions from each of the foregoing Accounts shall be made in
            the following order of priority:

                  (A)   by the redemption of Units from each of the Borrower's
                        Accounts in the Trust Fund in the order set forth above,
                        on a pro rata basis from the Investment Accounts
                        thereunder, as were selected by the Participant pursuant
                        to Article VI; and

                  (B)   by the redemption of Units invested in the Employer
                        Stock Fund from each of the Borrower's Accounts invested
                        under the Separate Agreement, in the order set forth
                        above, if selected by the Borrower pursuant to Article
                        VI.

      (c)   The proceeds of a loan shall be distributed to the Borrower as soon
            as practicable after the Valuation Date as of which the loan is
            processed; provided, however, that the Borrower shall have satisfied
            such reasonable conditions as the Committee shall deem necessary,
            including, without limitation: (i) the delivery of an executed
            promissory note for the amount of the loan, including interest,
            payable to the order of the Trustees; (ii) an assignment to the Plan
            of such Borrower's interest in his Accounts to the extent of such
            loan; and (iii) if the Borrower is actively employed by the
            Employer, an authorization to the Employer to make payroll
            deductions in order to repay his loan to the Plan. The
            aforementioned promissory note shall be duly acknowledged and
            executed by the Borrower and shall be held by the Trustees, or the
            Committee as agent for the Trustees, as an asset of the Borrower's
            Loan Account pursuant to subsection (d).


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787                                  67              Carver Federal Savings Bank
<PAGE>

                                                                  Article VIII -
                                                           Loans to Participants
- --------------------------------------------------------------------------------

      (d)   A Loan Account shall be established for each Borrower with an
            outstanding loan pursuant to this Article VIII. Each Loan Account
            shall be comprised of a Borrower's (i) executed promissory note and
            (ii) installment payments of principal and interest made pursuant to
            Section 8.5(a). Upon full payment and satisfaction of the
            outstanding Loan Account balance, a Borrower's promissory note shall
            be marked paid in full, returned to the Borrower, and his Loan
            Account thereupon closed.

      (e)   As of each Valuation Date coincident with or next succeeding each
            payment of principal and interest on a loan, the then current
            balance of each Borrower's Loan Account shall be debited by the
            amount of such payment and such amount shall be transferred for
            investment in accordance with Section 8.5(c) to the appropriate
            Borrower's Account. If the Committee established a lien against the
            Borrower's Accounts pursuant to Section 8.6(c), and foreclosure of
            such lien is deferred until the Borrower's Termination of Service
            pursuant to Section 8.6(c)(i), for each month that foreclosure of
            the lien is deferred, the then current balance of the Borrower's
            Loan Account shall be charged with interest on the unpaid principal
            and interest thereon.

      (f)   Only one (1) loan shall be outstanding to any Borrower under this
            Article VIII at any time.

      (g)   Any loans under this Article VIII shall be subject to the
            restrictions of Section 6.5.

8.5   Repayments

      (a)   If the Borrower is on the payroll of the Employer and unless
            otherwise agreed to by the Committee, repayments of loan principal,
            or the unpaid balance thereof, and interest thereon shall be made
            through payroll deductions. The first repayment shall be deducted as
            of the first payroll date occurring no later than three (3) weeks
            after the Committee submits the loan form for processing.

            If the Borrower is not on the payroll of the Employer and unless
            otherwise agreed to by the Committee, repayments of loan principal,
            or the unpaid balance thereof, and interest thereon, shall be made
            in cash or cash equivalencies to the Employer in equal monthly
            installments for payment to his Loan Account.

      (b)   Any amount repaid to the Plan by a Borrower with respect to a loan,
            including interest thereon, shall be invested as if such amount were
            a contribution to be invested in accordance with Section 6.1.

      (c)   With respect to each Borrower's Loan Account, any repayment of
            principal and interest made by a Borrower shall be credited, as of
            the Valuation Date coincident with or next succeeding such payment,
            to the Borrower's Accounts in the order of priority established
            under Section 8.4(b). No Account having a lesser degree of priority
            shall be credited until the Account having the immediately preceding
            degree of priority has


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787                                  68              Carver Federal Savings Bank
<PAGE>

                                                                  Article VIII -
                                                           Loans to Participants
- --------------------------------------------------------------------------------


            been restored by an amount equal to that which had been borrowed
            from such Account.

      (d)   A Borrower may prepay his entire loan, plus all interest accrued and
            unpaid thereon, as of any Valuation Date. A Borrower will not be
            permitted to make partial prepayments to his or her Loan Account.

      (e)   In the event the Plan is terminated, the entire unpaid principal
            amount of the loan hereunder, together with any accrued and unpaid
            interest thereon, shall become immediately due and payable.

8.6   Default

      (a)   If a Borrower fails to make any payment on any loan when due under
            this Article VIII, the entire unpaid principal amount of such loan,
            together with any accrued and unpaid interest thereon, shall be
            deemed in default and become due and payable ninety (90) days after
            the initial date of payment delinquency.

      (b)   If a Borrower fails to make any payment on a loan and is deemed to
            be in default pursuant to subsection (a), the Committee shall
            establish a lien against the Borrower's Accounts in an amount equal
            to any unpaid principal and interest. The lien shall be foreclosed
            by applying the value of the Borrower's Loan Account (determined as
            of the next Valuation Date immediately following foreclosure) in
            satisfaction of said unpaid principal and interest as follows:

            (i)   if the Borrower is in the employment of the Employer, upon the
                  Borrower's Termination of Service; or

            (ii)  if the Borrower is not in the employment of the Employer,
                  immediately upon default.

            Thereupon, the vested interest in the balance of the Borrower's
            Accounts shall be distributed in accordance with the applicable
            provisions of the Plan.

      (c)   The Committee may, in accordance with uniform rules established by
            it, restrict the right of any Borrower who has defaulted on a loan
            from the Plan to: (i) make withdrawals and/or loans from his
            Matching Contribution Account, Before-Tax Contribution Account,
            Discretionary Employer Contribution Account, Nonelective Employer
            Contribution Account and/or Rollover Contribution Account for a
            period not exceeding twelve (12) months or (ii) if the Borrower is
            an Eligible Employee, authorize Before-Tax Contributions to be made
            on his behalf or make any other contributions to the Plan for a
            period not exceeding twelve (12) months.


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787                                  69              Carver Federal Savings Bank
<PAGE>

                                                                  Article VIII -
                                                           Loans to Participants
- --------------------------------------------------------------------------------

8.7   Coordination of Outstanding Account and Payment of Benefits

      (a)   If the Borrower has an outstanding Loan Account and is either (i)
            scheduled to receive or elects to receive a lump sum distribution in
            accordance with the provisions of Article VII, or (ii) scheduled to
            receive the last installment payment under a previous election made
            in accordance with the provisions of Article VII to receive payments
            in a form other than the normal form of benefit payments, then, at
            the time of the distribution or payment under clause (i) or (ii)
            above, the entire unpaid principal amount of the loan together with
            any accrued and unpaid interest thereon, shall become immediately
            due and payable. No Plan distribution, except as permitted under
            Section 7.3 or Section 7.4, shall be made to any Borrower unless and
            until such Borrower's Loan Account, including accrued interest
            thereunder, has been liquidated and closed. If a Borrower fails to
            pay the outstanding balance of his Loan Account hereunder, such loan
            shall be satisfied as if a default had occurred pursuant to Section
            8.6.

      (b)   Any reference in the Plan to the Net Value of Units in a Borrower's
            Accounts available for distribution to any Borrower, shall mean the
            value after the satisfaction of the entire unpaid principal loan
            amount and any accrued, unpaid interest thereon, as provided in this
            Article VIII.


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787                                  70              Carver Federal Savings Bank
<PAGE>

                                                                    Article IX -
                                                                  Administration
- --------------------------------------------------------------------------------

                                  ARTICLE IX -
                                 ADMINISTRATION

9.1   General Administration of the Plan

      The operation and administration of the Plan shall be subject to the
      management and control of the Named Fiduciaries and Plan Administrator
      designated by the Sponsoring Employer. The designation of such Named
      Fiduciaries and Plan Administrator, the terms of their appointment, and
      their duties and responsibilities allocated among them shall be as set
      forth in this Article IX. Any actions taken hereunder shall be conclusive
      and binding on Participants, Retired Participants, Employees,
      Beneficiaries and other persons, and shall not be overturned unless found
      to be arbitrary and capricious by a court of competent jurisdiction.

9.2   Designation of Named Fiduciaries

      The management and control of the operation and administration of the Plan
      shall be allocated in the following manner:

      (a)   The Sponsoring Employer shall designate the Trustees as a Named
            Fiduciary to perform those functions set forth in the Plan or the
            Agreement which are applicable to a Plan of Partial Participation.

      (b)   The Sponsoring Employer shall designate the Separate Agency to
            perform those functions relating to the Separate Agency in the Plan
            or the Separate Agreement.

      (c)   The Sponsoring Employer shall designate one or more individuals to
            serve as member(s) of an employee benefits Committee to perform
            those functions set forth in the Agreement, Separate Agreement or
            the Plan that are assigned to such Committee.

      (d)   A Trust Participant (as defined under the Agreement) may delegate to
            a person or persons the duties and responsibilities for voting Units
            set forth under the Agreement and Separate Agreement.

      (e)   The Sponsoring Employer shall designate the Separate Agency as a
            Named Fiduciary to perform those functions set forth in the Separate
            Agreement or the Plan that are assigned to the Separate Agency,
            including the voting and tender of shares of the Employer Stock.

9.3   Responsibilities of Fiduciaries

      The Named Fiduciaries and Plan Administrator shall have only those powers,
      duties, responsibilities and obligations that are specifically allocated
      to them under the Plan, the Agreement or the Separate Agreement.


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787                                  71              Carver Federal Savings Bank
<PAGE>

                                                                    Article IX -
                                                                  Administration
- --------------------------------------------------------------------------------

      To the extent permitted by ERISA, each Named Fiduciary and Plan
      Administrator may rely upon any direction, information or action of
      another Named Fiduciary, Plan Administrator or the Sponsoring Employer as
      being proper under the Plan, the Agreement or the Separate Agreement and
      is not required to inquire into the propriety of any such direction,
      information or action and no Named Fiduciary or Plan Administrator shall
      be responsible for any act or failure to act of another Named Fiduciary,
      Plan Administrator or the Sponsoring Employer.

      No Named Fiduciary, Plan Administrator or the Employer guarantees the
      Trust Fund or Separate Assets in any manner against investment loss or
      depreciation in asset value.

      The allocation of responsibility between the Trustees and the Sponsoring
      Employer or between the Separate Agency and the Sponsoring Employer may be
      changed by written agreement. Such reallocation shall be evidenced by
      Employer Resolutions and shall not be deemed an amendment to the Plan.

      To the extent permitted by ERISA, the Trustees shall have no liability or
      responsibility with respect to the administration of any Separate Assets
      held outside the Trust except as specifically set forth in the Agreement.
      The authority and responsibility of the Trustees extend only to those Plan
      assets held in accordance with the Agreement.

9.4   Plan Administrator

      The Sponsoring Employer shall designate the Trustees as the Trustee
      Administrator to perform those functions applicable to Plans of Partial
      Participation as set forth in the Agreement. The Sponsoring Employer shall
      also designate one or more persons to act as Plan Administrator and to
      perform those functions set forth in the Agreement, the Plan or the
      Separate Agreement that are assigned to the Plan Administrator.

      The duties and responsibilities of a plan administrator under ERISA shall
      be allocated between the Plan Administrator and the Trustee Administrator
      as set forth herein or in the Agreement. Such allocation may be changed
      only by written agreement between the parties and shall not be deemed an
      amendment to the Plan.

      The Plan Administrator shall be solely responsible for monitoring and
      notifying the Trustees of an Employee's age for all purposes under the
      Plan.

      The Plan Administrator is designated as the Plan's agent for the service
      of legal process.

9.5   Committee

      The members of the Committee designated by the Sponsoring Employer under
      Section 9.2(b) shall serve for such term(s) as the Sponsoring Employer
      shall determine and until their successors are designated and qualified.
      The term of any member of the Committee may be renewed from time to time
      without limitation as to the number of renewals. Any member of the
      Committee may (a) resign upon at least sixty (60) days written notice to
      the Sponsoring Employer or (b) be removed from office but only for his
      failure or inability, in the opinion of the Sponsoring


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787                                  72              Carver Federal Savings Bank
<PAGE>

                                                                    Article IX -
                                                                  Administration
- --------------------------------------------------------------------------------

      Employer, to carry out his responsibilities in an effective manner.
      Termination of employment with the Employer shall be deemed to give rise
      to such failure or inability.

      The powers and duties allocated to the Committee shall be vested jointly
      and severally in its members. Notwithstanding specific instructions to the
      contrary, any instrument or document signed on behalf of the Committee by
      any member of the Committee may be accepted and relied upon by the
      Trustees and Separate Agency as the act of the Committee. The Trustees and
      Separate Agency shall not be required to inquire into the propriety of any
      such action taken by the Committee nor shall they be held liable for any
      actions taken by them in reliance thereon.

      The Sponsoring Employer may, pursuant to Employer Resolutions and upon
      notice to the Trustees, change the number of individuals comprising the
      Committee, their terms of office or other conditions of their incumbency
      provided that there shall be at all times at least one individual member
      of the Committee. Any such change shall not be deemed an amendment to the
      Plan.

9.6   Powers and Duties of the Committee

      The Committee shall have authority to perform all acts it may deem
      necessary or appropriate in order to exercise the duties and powers
      imposed or granted by ERISA, the Plan, the Agreement, the Separate
      Agreement or any Employer Resolutions. Such duties and powers shall
      include, but not be limited to, the following:

      (a)   Power to Construe - Except as otherwise provided in the Agreement,
            or the Separate Agreement, the Committee shall have the power to
            construe the provisions of the Plan and to determine any questions
            of fact which may arise thereunder.

      (b)   Power to Make Rules and Regulations - The Committee shall have the
            power to make such reasonable rules and regulations as it may deem
            necessary or appropriate to perform its duties and exercise its
            powers. Such rules and regulations shall include, but not be limited
            to, those governing (i) the manner in which the Committee shall act
            and manage its own affairs, (ii) the procedures to be followed in
            order for Employees or Beneficiaries to claim benefits, and (iii)
            the procedures to be followed by Participants, Beneficiaries or
            other persons entitled to benefits with respect to notifications,
            elections, designations or other actions required by the Plan or
            ERISA. All such rules and regulations shall be applied in a uniform
            and nondiscriminatory manner.

      (c)   Powers and Duties with Respect to Information - The Committee shall
            have the power and responsibility:

            (i)   to obtain such information as shall be necessary for the
                  proper discharge of its duties;


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787                                  73              Carver Federal Savings Bank
<PAGE>

                                                                    Article IX -
                                                                  Administration
- --------------------------------------------------------------------------------

            (ii)  to furnish to the Employer, upon request, such reports as are
                  reasonable and appropriate;

            (iii) to receive, review and retain periodic reports of the
                  financial condition of the Plan Funds; and

            (iv)  to receive, collect and transmit to the Trustees all
                  information required by the Trustees in the administration of
                  the Accounts of the Employee as contemplated in Section 9.7.

      (d)   Power of Delegation - The Committee shall have the power to delegate
            fiduciary responsibilities (other than trustee responsibilities
            defined under Section 405(c)(3) of ERISA) to one or more persons who
            are not members of the Committee. Unless otherwise expressly
            indicated by the Sponsoring Employer, the Committee must reserve the
            right to terminate such delegation upon reasonable notice.

      (e)   Power of Allocation - Subject to the written approval of the
            Sponsoring Employer, the Committee shall have the power to allocate
            among its members specified fiduciary responsibilities (other than
            trustee responsibilities defined under Section 405(c)(3) of ERISA).
            Any such allocation shall be in writing and shall specify the
            persons to whom such allocation is made and the terms and conditions
            thereof.

      (f)   Duty to Report - Any member of the Committee to whom specified
            fiduciary responsibilities have been allocated under subsection (e)
            shall report to the Committee at least annually. The Committee shall
            report to the Sponsoring Employer at least annually regarding the
            performance of its responsibilities as well as the performance of
            any persons to whom any powers and responsibilities have been
            further delegated.

      (g)   Power to Employ Advisors and Retain Services - The Committee may
            employ such legal counsel, enrolled actuaries, accountants, pension
            specialists, clerical help and other persons as it may deem
            necessary or desirable in order to fulfill its responsibilities
            under the Plan.

9.7   Certification of Information

      The Committee shall certify to the Trustees on such periodic or other
      basis as may be agreed upon, but in no event later than ten (10) days
      before any Valuation Date as of which the Trustees must effect any action
      with respect to any Accounts held under the provisions of the Plan,
      relevant facts regarding the establishment of the Accounts of an Employee,
      periodic contributions with respect to such Accounts, investment elections
      and modifications thereof and withdrawals and distributions therefrom. The
      Trustees shall be fully protected in maintaining individual Account
      records and in administering the Accounts of the Employee on the basis of
      such certifications and shall have no duty of inquiry or otherwise with
      respect to any transactions


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787                                  74              Carver Federal Savings Bank
<PAGE>

                                                                    Article IX -
                                                                  Administration
- --------------------------------------------------------------------------------

      or communications between the Committee and Employees relating to the
      information contained in such certifications.

9.8   Authorization of Benefit Payments

      The Committee shall forward to the Trustees and, if applicable, any
      Separate Agency, any application for payment of benefits within a
      reasonable time after it has approved such application. The Trustees and
      Separate Agency may rely on any such information set forth in the approved
      application for the payment of benefits to the Participant, Beneficiary or
      any other person entitled to benefits.

9.9   Payment of Benefits to Legal Custodian

      Whenever, in the Committee's opinion, a person entitled to receive any
      benefit payment is a minor or deemed to be physically, mentally or legally
      incompetent to receive such benefit, the Committee may direct the Trustees
      and Separate Agency to make payment for his benefit to such individual or
      institution having legal custody of such person or to his legal
      representative. Any benefit payment made in accordance with the provisions
      of this Section 9.9 shall operate as a valid and complete discharge of any
      liability for payment of such benefit under the provisions of the Plan.

9.10  Service in More Than One Fiduciary Capacity

      Any person or group of persons may serve in more than one fiduciary
      capacity with respect to the Plan, regardless of whether any such person
      is an officer, employee, agent or other representative of a party in
      interest.

9.11  Payment of Expenses

      The Employer will pay the ordinary administrative expenses of the Plan and
      compensation of the Trustees to the extent required, except that any
      expenses directly related to the Trust Fund, such as transfer taxes,
      brokers' commissions, registration charges, or administrative expenses of
      the Trustees (including expenses of counsel retained by it in accordance
      with the Agreement), shall be paid from the Trust Fund or from such
      Investment Account to which such expenses directly relate.

      The Employer may, if determined by the Committee, charge Employees all or
      part of the reasonable expenses associated with withdrawals and other
      distributions or Account transfers. The Employer will charge Employees
      loan origination fees and all annual maintenance fees associated with
      loans.

      Brokerage commissions incurred in connection with the Employer Stock Fund
      shall be paid by the Employer.


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787                                  75              Carver Federal Savings Bank
<PAGE>

                                                                    Article IX -
                                                                  Administration
- --------------------------------------------------------------------------------

9.12  Administration of Separate Assets

      The Committee and the Separate Agency shall be solely responsible for the
      administration of the Separate Assets, including the administration,
      collection and enforcement of any loans held therein. All contributions to
      and withdrawals or disbursements from the Separate Assets shall be made
      directly to or by the Separate Agency.

      The Trustees may, as agreed upon with the Committee, provide such combined
      or coordinated Plan records and reports, which include the Separate
      Assets. The Trustees shall be fully protected in relying upon any
      information provided to them by the Committee or Separate Agency with
      respect to such Separate Assets. The inclusion of any information
      pertaining to Separate Assets in such combined or coordinated Plan records
      and reports shall not increase the responsibility or liability of the
      Trustees with respect to the Separate Assets. If Plan Funds may be
      transferred between the Separate Assets and the other Investment Accounts,
      the manner in which such transfers may be made must be agreed to in a
      written instrument entered into among the Committee, the Trustees and the
      Separate Agency.


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787                                  76              Carver Federal Savings Bank
<PAGE>

                                                                     Article X -
                                                        Benefit Claims Procedure
- --------------------------------------------------------------------------------

                                   ARTICLE X -
                            BENEFIT CLAIMS PROCEDURE

10.1  Definition

      For purposes of this Article X, "Claimant" shall mean any Participant,
      Beneficiary or any other person entitled to benefits under the Plan or his
      duly authorized representative.

10.2  Claims

      A Claimant may file a written claim for a Plan benefit with the Plan
      Administrator on the appropriate form to be supplied by the Plan
      Administrator. The Plan Administrator shall, in its sole and absolute
      discretion, review the Claimant's application for benefits and determine
      the disposition of such claim.

10.3  Disposition of Claim

      The Plan Administrator shall notify the Claimant as to the disposition of
      the claim for benefits under this Plan within ninety (90) days after the
      appropriate form has been filed unless special circumstances require an
      extension of time for processing. If such an extension of time is
      required, the Plan Administrator shall furnish written notice of the
      extension to the Claimant prior to the termination of the initial ninety
      (90) day period. The extension notice shall indicate the special
      circumstances requiring the extension of time and the date the Plan
      Administrator expects to render a decision. In no event shall such
      extension exceed a period of one hundred-eighty (180) days from the
      receipt of the claim.

10.4  Denial of Claim

      If a claim for benefits under this Plan is denied in whole or in part by
      the Plan Administrator, a notice written in a manner calculated to be
      understood by the Claimant shall be provided by the Plan Administrator to
      the Claimant and such notice shall include the following:

      (a)   a statement that the claim for the benefits under this Plan has been
            denied;

      (b)   the specific reasons for the denial of the claim for benefits,
            citing the specific provisions of the Plan which set forth the
            reason or reasons for the denial;

      (c)   a description of any additional material or information necessary
            for the Claimant to perfect the claim for benefits under this Plan
            and an explanation of why such material or information is necessary;
            and

      (d)   appropriate information as to the steps to be taken if the Claimant
            wishes to appeal such decision.


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787                                  77              Carver Federal Savings Bank
<PAGE>

                                                                     Article X -
                                                        Benefit Claims Procedure
- --------------------------------------------------------------------------------

10.5  Inaction by Plan Administrator

      A claim for benefits shall be deemed to be denied if the Plan
      Administrator shall not take any action on such claim within ninety (90)
      days after receipt of the application for benefits by the Claimant or, if
      later, within the extended processing period established by the Plan
      Administrator by written notice to the Claimant, in accordance with
      Section 10.3.

10.6  Right to Full and Fair Review

      A Claimant who is denied, in whole or in part, a claim for benefits under
      the Plan may file an appeal of such denial. Such appeal must be made in
      writing by the Claimant or his duly authorized representative and must be
      filed with the Committee within sixty (60) days after receipt of the
      notification under Section 10.4 or the date his claim is deemed to be
      denied under Section 10.5. The Claimant or his representative may review
      pertinent documents and submit issues and comments in writing.

10.7  Time of Review

      The Committee, independent of the Plan Administrator, shall conduct a full
      and fair review of the denial of claim for benefits under this Plan to a
      Claimant within sixty (60) days after receipt of the written request for
      review described in Section 10.6; provided, however, that an extension,
      not to exceed sixty (60) days, may apply in special circumstances. Written
      notice shall be furnished to the Claimant prior to the commencement of the
      extension period.

10.8  Final Decision

      The Claimant shall be notified in writing of the final decision of such
      full and fair review by such Committee. Such decision shall be written in
      a manner calculated to be understood by the Claimant, shall state the
      specific reasons for the decision and shall include specific references to
      the pertinent Plan provisions upon which the decision is based. In no
      event shall the decision be furnished to the Claimant later than sixty
      (60) days after the receipt of a request for review, unless special
      circumstances require an extension of time for processing, in which case a
      decision shall be rendered within one hundred-twenty (120) days after
      receipt of such request for review.


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787                                  78              Carver Federal Savings Bank
<PAGE>

                                                                    Article XI -
                                          Amendment, Termination, and Withdrawal
- --------------------------------------------------------------------------------

                                  ARTICLE XI -
                     AMENDMENT, TERMINATION, AND WITHDRAWAL

11.1  Amendment and Termination

      The Employer expects to continue the Plan indefinitely, but specifically
      reserves the right, in its sole and absolute discretion, at any time, by
      appropriate action of the Board, to terminate its Plan or to amend
      (subject to the approval of the Trustees), in whole or in part, any or all
      of the provisions of the Plan. Subject to the provisions of Section 13.7,
      no such amendment or termination shall permit any part of the Plan Funds
      to be used for or diverted to purposes other than for exclusive benefit of
      Participants, Beneficiaries or other persons entitled to benefits, and no
      such amendment or termination shall reduce the interest of any
      Participant, Beneficiary or other person who may be entitled to benefits,
      without his consent. In the event of a partial termination of the Plan, or
      upon complete discontinuance of contributions under the Plan, the Accounts
      of each affected Participant shall become fully vested and shall be
      distributable in accordance with the provisions of Article VII. In the
      event of a complete termination of the Plan, the Accounts of each affected
      Participant shall become fully vested and shall be distributable as a lump
      sum distribution within seven (7) days of the Valuation Date coincident
      with the date of receipt by the Trustees of the proper documentation
      indicating the Participant's distribution date.

      If any amendment changes the vesting schedule, any Participant who has a
      Period of Service of three (3) or more years may, by filing a written
      request with the Employer, elect to have his vested percentage computed
      under the vesting schedule in effect prior to the amendment.

      The period during which the Participant may elect to have his vested
      percentage computed under the prior vesting schedule shall commence with
      the date the amendment is adopted and shall end on the latest of:

      (a)   sixty (60) days after the amendment is adopted;

      (b)   sixty (60) days after the amendment becomes effective; or

      (c)   sixty (60) days after the Participant is issued written notice of
            the amendment from the Employer.

11.2  Withdrawal from the Trust Fund

      An Employer may withdraw its Plan from the Trust Fund in accordance with
      and subject to the provisions of the Agreement.


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787                                  79              Carver Federal Savings Bank
<PAGE>

                                                                   Article XII -
                                                       Top-Heavy Plan Provisions
- --------------------------------------------------------------------------------

                                  ARTICLE XII -
                            TOP-HEAVY PLAN PROVISIONS

12.1  Introduction

      Any other provisions of the Plan to the contrary notwithstanding, the
      provisions contained in this Article XII shall be effective with respect
      to any Plan Year in which this Plan is a Top-Heavy Plan, as hereinafter
      defined.

12.2  Definitions

      For purposes of this Article XII, the following words and phrases shall
      have the meanings stated herein unless a different meaning is plainly
      required by the context.

      (a)   "Account," for the purpose of determining the Top-Heavy Ratio, means
            the sum of (i) a Participant's Accounts as of the most recent
            Valuation Date and (ii) an adjustment for contributions due as of
            the Determination Date.

      (b)   "Determination Date" means, with respect to any Plan Year, the last
            day of the preceding Plan Year. With respect to the first Plan Year,
            "Determination Date" means the last day of such Plan Year.

      (c)   "Five-Percent Owner" means, if the Employer is a corporation, any
            Employee who owns (or is considered as owning within the meaning of
            Section 318 of the Code modified by Section 416(i)(1)(B)(iii) of the
            Code) more than five percent (5%) of the value of the outstanding
            stock of, or more than five percent (5%) of the total combined
            voting power of all the stock of, the Employer. If the Employer is
            not a corporation, a Five-Percent Owner means any Employee who owns
            more than five percent (5%) of the capital or profits interest in
            the Employer.

      (d)   "Key Employee" means any Employee or former Employee (or, where
            applicable, such person's Beneficiary) in the Plan who, at any time
            during the Plan Year containing the Determination Date or any of the
            preceding four (4) Plan Years, is: (i) an Officer having Top-Heavy
            Earnings from the Employer of greater than fifty percent (50%) of
            the dollar limitation in effect under Section 415(b)(1)(A) of the
            Code; (ii) one of the ten (10) Employees having Top-Heavy Earnings
            from the Employer of more than the dollar limitation in effect under
            Section 415(c)(1)(A) of the Code and owning (or considered as owning
            within the meaning of Section 318 of the Code modified by Section
            416(i)(1)(B)(iii) of the Code) both more than a one-half of one
            percent (1/2%) interest in value and the largest interests in the
            value of the Employer; (iii) a Five-Percent Owner of the Employer;
            or (iv) a One-Percent Owner of the Employer having Top-Heavy
            Earnings from the Employer greater than one hundred fifty thousand
            dollars ($150,000). For purposes of computing the Top-Heavy Earnings
            in subsections (d)(i), (d)(ii) and


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787                                  80              Carver Federal Savings Bank
<PAGE>

                                                                   Article XII -
                                                       Top-Heavy Plan Provisions
- --------------------------------------------------------------------------------

            (d)(iv), the aggregation rules of Sections 414(b), (c), (m) and (o)
            of the Code shall apply.

      (e)   "Non-Key Employee" means an Employee or former Employee (or, where
            applicable, such person's Beneficiary) who is not a Key Employee.

      (f)   "Officer" means an Employee who is an administrative executive in
            the regular and continued service of his Employer; any Employee who
            has the title but not the authority of an officer shall not be
            considered an Officer for purposes of this Article XII. Similarly,
            an Employee who does not have the title of an officer but has the
            authority of an officer shall be considered an Officer. For purposes
            of this Article XII, the maximum number of Officers that must be
            taken into consideration shall be determined as follows: (i) three
            (3), if the number of Employees is less than thirty (30); (ii) ten
            percent (10%) of the number of Employees, if the number of Employees
            is between thirty (30) and five hundred (500); or (iii) fifty (50),
            if the number of Employees is greater than five hundred (500). In
            determining such limit, the term "Employer" shall be determined in
            accordance with Sections 414(b), (c), (m) and (o) of the Code and
            "Employee" shall include Leased Employees and exclude employees
            described in Section 414(q)(5) of the Code.

      (g)   "One-Percent Owner" means, if the Employer is a corporation, any
            Employee who owns (or is considered as owning within the meaning of
            Section 318 of the Code modified by Section 416(i)(1)(B)(iii) of the
            Code) more than one percent (1%) of the value of the outstanding
            stock of, or more than one percent (1%) of the total combined voting
            power of all the stock of, the Employer. If the Employer is not a
            corporation, a One-Percent Owner means any Employee who owns more
            than one percent (1%) of the capital or profits interest in the
            Employer.

      (h)   A "Permissive Aggregation Group" consists of one or more plans of
            the Employer that are part of a Required Aggregation Group, plus one
            or more plans that are not part of a Required Aggregation Group but
            that satisfy the requirements of Sections 401(a)(4) and 410 of the
            Code when considered together with the Required Aggregation Group.
            If two (2) or more defined benefit plans are included in the
            aggregation group, the same actuarial assumptions must be used with
            respect to all such plans in determining the Present Value of
            Accrued Benefits.

      (i)   "Present Value of Accrued Benefits" shall be determined in
            accordance with the actuarial assumptions set forth in the defined
            benefit plan and the assumed benefit commencement date shall be
            determined taking into account any nonproportional subsidy. The
            accrued benefit of any Employee shall be determined under the method
            used for accrual purposes for all plans of the Employer, or if no
            such method is described, as if such benefit accrued not more
            rapidly than the slowest accrual rate permitted under Section
            411(b)(1)(C) of the Code.


- --------------------------------------------------------------------------------
787                                  81              Carver Federal Savings Bank
<PAGE>

                                                                   Article XII -
                                                       Top-Heavy Plan Provisions
- --------------------------------------------------------------------------------

      (j)   "Related Rollover Contributions" means rollover contributions
            received by the Plan that are not initiated by the Employee nor made
            from another plan maintained by the Employer.

      (k)   A "Required Aggregation Group" consists of each plan of the Employer
            (whether or not terminated) in which a Key Employee participates or
            participated at any time during the Plan Year containing the
            Determination Date or any of the four (4) preceding Plan Years and
            each other plan of the Employer (whether or not terminated) which
            enables any plan in which a Key Employee participates or
            participated to meet the requirements of Section 401(a)(4) or 410 of
            the Code. If two (2) or more defined benefit plans are included in
            the aggregation group, the same actuarial assumptions must be used
            with respect to all such plans in determining the Present Value of
            Accrued Benefits.

      (l)   A "Super Top-Heavy Plan" means a Plan in which, for any Plan Year:

            (i)   the Top-Heavy Ratio (as defined under subsection (o)) for the
                  Plan exceeds ninety percent (90%) and the Plan is not part of
                  any Required Aggregation Group (as defined under subsection
                  (k)) or Permissive Aggregation Group (as defined under
                  subsection (h)); or

            (ii)  the Plan is a part of a Required Aggregation Group (but is not
                  part of a Permissive Aggregation Group) and the Top-Heavy
                  Ratio for the group of plans exceeds ninety percent (90%); or

            (iii) the Plan is a part of a Required Aggregation Group and part of
                  a Permissive Aggregation Group and the Top-Heavy Ratio for the
                  Permissive Aggregation Group exceeds ninety percent (90%).

      (m)   "Top-Heavy Earnings" means, for any year, compensation as defined
            under Section 414(q)(4) of the Code, up to a maximum of one hundred
            sixty thousand dollars ($160,000) for the 1997, 1998 and 1999 Plan
            Years and one hundred seventy thousand dollars ($170,000) for the
            2000 and 2001 Plan Years, adjusted in multiples of ten thousand
            dollars ($10,000) for increases in the cost-of-living, as prescribed
            by the Secretary of the Treasury under Section 401(a)(17)(B) of the
            Code.

      (n)   A "Top-Heavy Plan" means a Plan in which, for any Plan Year:

            (i)   the Top-Heavy Ratio (as defined under subsection (o)) for the
                  Plan exceeds sixty percent (60%) and the Plan is not part of
                  any Required Aggregation Group (as defined under subsection
                  (k)) or Permissive Aggregation Group (as defined under
                  subsection (h)); or

            (ii)  the Plan is a part of a Required Aggregation Group but is not
                  part of a Permissive Aggregation Group and the Top-Heavy Ratio
                  for the group of plans exceeds sixty percent (60%); or


- --------------------------------------------------------------------------------
787                                  82              Carver Federal Savings Bank
<PAGE>

                                                                   Article XII -
                                                       Top-Heavy Plan Provisions
- --------------------------------------------------------------------------------

            (iii) the Plan is a part of a Required Aggregation Group and part of
                  a Permissive Aggregation Group and the Top-Heavy Ratio for the
                  Permissive Aggregation Group exceeds sixty percent (60%).

      (o)   "Top-Heavy Ratio" means:

            (i)   if the Employer maintains one or more qualified defined
                  contribution plans and the Employer has not maintained any
                  qualified defined benefit plans which during the five (5) year
                  period ending on the Determination Date have or have had
                  accrued benefits, the Top-Heavy Ratio for the Plan alone or
                  for the Required Aggregation Group or Permissive Aggregation
                  Group, as appropriate, is a fraction, the numerator of which
                  is the sum of the Account balances under the aggregated
                  defined contribution plan or plans for all Key Employees as of
                  the Determination Date, including any part of any Account
                  balance distributed in the five (5) year period ending on the
                  Determination Date but excluding distributions attributable to
                  Related Rollover Contributions, if any, and the denominator of
                  which is the sum of all Account balances under the aggregated
                  qualified defined contribution plan or plans for all
                  Participants as of the Determination Date, including any part
                  of any Account balance distributed in the five (5) year period
                  ending on the Determination Date but excluding distributions
                  attributable to Related Rollover Contributions, if any,
                  determined in accordance with Section 416 of the Code and the
                  regulations thereunder.

            (ii)  if the Employer maintains one or more qualified defined
                  contribution plans and the Employer maintains or has
                  maintained one or more qualified defined benefit plans which
                  during the five (5) year period ending on the Determination
                  Date have or have had any accrued benefits, the Top-Heavy
                  Ratio for any Required Aggregation Group or Permissive
                  Aggregation Group, as appropriate, is a fraction, the
                  numerator of which is the sum of the Account balances under
                  the aggregated qualified defined contribution plan or plans
                  for all Key Employees, determined in accordance with (i)
                  above, and the sum of the Present Value of Accrued Benefits
                  under the aggregated qualified defined benefit plan or plans
                  for all Key Employees as of the Determination Date, and the
                  denominator of which is the sum of the Account balances under
                  the aggregated qualified defined contribution plan or plans
                  determined in accordance with (i) above, for all Participants
                  and the sum of the Present Value of Accrued Benefits under the
                  aggregated qualified defined benefit plan or plans for all
                  Participants as of the Determination Date, all determined in
                  accordance with Section 416 of the Code and the regulations
                  thereunder. The accrued benefits under a qualified defined
                  benefit plan in both the numerator and denominator of the
                  Top-Heavy Ratio are adjusted for any distribution of an
                  accrued benefit made in the five (5) year period ending on the
                  Determination Date.


- --------------------------------------------------------------------------------
787                                  83              Carver Federal Savings Bank
<PAGE>

                                                                   Article XII -
                                                       Top-Heavy Plan Provisions
- --------------------------------------------------------------------------------

            (iii) For purposes of (i) and (ii) above, the value of Account
                  balances and the Present Value of Accrued Benefits will be
                  determined as of the most recent Valuation Date that falls
                  within the twelve (12) month period ending on the
                  Determination Date, except as provided in Section 416 of the
                  Code and the regulations thereunder for the first and second
                  Plan Years of a qualified defined benefit plan. The Account
                  balances and Present Value of Accrued Benefits of a
                  Participant (A) who is a Non-Key Employee but who was a Key
                  Employee in a prior year, or (B) who has not been credited
                  with at least an Hour of Service with any employer maintaining
                  the Plan at any time during the five (5) year period ending on
                  the Determination Date will be disregarded. The calculation of
                  the Top-Heavy Ratio, and the extent to which distributions,
                  rollovers, and transfers are taken into account will be made
                  in accordance with Section 416 of the Code and the regulations
                  thereunder. When aggregating plans, the value of Account

                  balances and the Present Value of Accrued Benefits will be
                  calculated with reference to the Determination Date that falls
                  within the same calendar year.

      (p)   "Valuation Date", for the purpose of computing the Top-Heavy Ratio
            (as defined under subsection (o)) under subsections (1) and (n)
            means the last date of the Plan Year.

      For purposes of subsections (h), (j) and (k), the rules of Sections
      414(b), (c), (m) and (o) of the Code shall be applied in determining the
      meaning of the term "Employer."

12.3  Minimum Contributions

      If the Plan becomes a Top-Heavy Plan, then any provision of Article III to
      the contrary notwithstanding, the following provisions shall apply:

      (a)   Subject to subsection (b), the Employer shall contribute on behalf
            of each Participant who is employed by the Employer on the last day
            of the Plan Year and who is a Non-Key Employee an amount with
            respect to each Top-Heavy year which, when added to the amount of
            Special Contributions, Nonelective Employer Contributions,
            Discretionary Employer Contributions and Forfeitures made on behalf
            of such Participant, shall not be less than the lesser of: (i) three
            percent (3%) of such Participant's Section 415 Compensation (as
            defined under Section 3.12(a)(vii) of the Plan and modified by
            Section 401(a)(17) of the Code), or (ii) if the Employer has no
            defined benefit plan which is designated to satisfy Section 416 of
            the Code, the largest of the total of each Key Employee's Matching
            Contributions, Before-Tax Contributions, Special Contributions,
            Nonelective Employer Contributions, Discretionary Employer
            Contributions and Forfeitures, as a percentage of the Key Employees'
            Top-Heavy Earnings; provided, however, that in no event shall any
            contributions be made under this Section 12.3 in an amount which
            will cause the percentage of contributions made by the Employer on
            behalf of any Participant who is a Non-Key Employee to exceed the
            percentage at which contributions are made by the Employer on behalf
            of the Key


- --------------------------------------------------------------------------------
787                                  84              Carver Federal Savings Bank
<PAGE>

                                                                   Article XII -
                                                       Top-Heavy Plan Provisions
- --------------------------------------------------------------------------------

            Employee for whom the percentage of the total of Matching
            Contributions, Before-Tax Contributions, Special Contributions,
            Discretionary Employer Contributions, Nonelective Employer
            Contributions and Forfeitures, is highest in such Top-Heavy year.
            Any such contribution shall be allocated to the Matching
            Contribution Account of each such Participant and, for purposes of
            vesting and withdrawals only, shall be deemed to be a Matching
            Contribution. Any such contribution shall not be deemed to be a
            Matching Contribution for any other purpose.

      (b)   Notwithstanding the foregoing, this Section 12.3 shall not apply to
            any Participant to the extent that such Participant is covered under
            any other plan or plans of the Employer (determined in accordance
            with Sections 414(b), (c), (m) and (o) of the Code) and such other
            plan provides that the minimum allocation or benefit requirement
            will be met by such other plan should this Plan become Top-Heavy. If
            such other plan does not provide for a minimum allocation or benefit
            requirement, a minimum of five percent (5%) of a Participant's
            Section 415 Compensation, as defined in Section 12.3(a) above, shall
            be provided under this Plan.

      (c)   For purposes of this Article XII, the following shall be considered
            as a contribution made by the Employer:

            (i)   Qualified Nonelective Contributions;

            (ii)  Matching Contributions made by the Employer on behalf of Key
                  Employees; and

            (iii) Before-Tax Contributions made by the Employer on behalf of Key
                  Employees;

            (iv)  Discretionary Employer Contributions made by the Employer on
                  behalf of Key Employees and Non-Key Employees; and

            (v)   Nonelective Employer Contributions made by the Employer on
                  behalf of Key Employees and Non-Key Employees.

      (d)   Subject to the provisions of subsection (b), all Non-Key Employee
            Participants who are employed by the Employer on the last day of the
            Plan Year shall receive the defined contribution minimum provided
            under subsection (a). A Non-Key Employee may not fail to accrue a
            defined contribution minimum merely because such Employee was
            excluded from participation or failed to accrue a benefit because
            (i) his Compensation is less than a stated amount, or (ii) he failed
            to make Before-Tax Contributions.

12.4  Impact on Section 415 Maximum Benefits

      For any Plan Year commencing prior to January 1, 2000, in which the Plan
      is a Super Top-Heavy Plan, Sections 3.12(a)(iv) and (v) shall be read by
      substituting the number l.0 for the number 1.25 wherever it appears
      therein.


- --------------------------------------------------------------------------------
787                                  85              Carver Federal Savings Bank
<PAGE>

                                                                   Article XII -
                                                       Top-Heavy Plan Provisions
- --------------------------------------------------------------------------------

      For any Plan Year in which the Plan is a Top-Heavy Plan but not a Super
      Top-Heavy Plan, the Plan shall be treated as a Super Top-Heavy Plan under
      this Section 12.4, unless each Non-Key Employee who is entitled to a
      minimum contribution or benefit receives an additional minimum
      contribution or benefit. If the Non-Key Employee is entitled to a minimum
      contribution under Section 12.3(a), the Plan shall not be treated as a
      Super Top-Heavy Plan under this Section 12.4 if the minimum contribution
      satisfies Section 12.3(a) when four percent (4%) is substituted for three
      percent (3%) in Section 12.3(a)(i). If the Non-Key Employee is entitled to
      a minimum contribution under Section 12.3(b), the Plan shall not be
      treated as a Super Top-Heavy Plan under this Section 12.4, if the minimum
      contribution satisfies Section 12.3(b) when seven and one-half percent
      (7-1/2%) is substituted for five percent (5%).

12.5  Vesting

      If the Plan becomes a Top-Heavy Plan, then, notwithstanding Section
      4.1(c), the Vested Percentage of a Participant who has at least one (1)
      Hour of Service with the Employer after the Plan becomes Top-Heavy shall
      not be less than the following Vested Percentage of his accrued benefit,
      determined in accordance with the following table:

           Period of Service                              Vested Percentage
           -----------------                              -----------------
           Less than 2 years                                      0%
           2 years but less than 3 years                         20%
           3 years but less than 4 years                         40%
           4 years but less than 5 years                         60%
           5 years but less than 6 years                         80%
           6 years or more                                      100%

      Notwithstanding the foregoing provision, each Participant with at least a
      Period of Service of three (3) years with the Employer shall at all times
      have his vested percentage computed under the greater of the provisions of
      this Section 12.5 or the provisions of Section 4.1(c).

      For those Plan Years in which the Plan ceases to be a Top-Heavy Plan, the
      vesting schedule shall be determined in accordance with the provisions of
      Section 4.1(c), except that the vested percentage of a Participant's
      accrued benefit before the Plan ceased to be a Top-Heavy Plan shall not be
      reduced.


- --------------------------------------------------------------------------------
787                                  86              Carver Federal Savings Bank
<PAGE>

                                                                  Article XIII -
                                                        Miscellaneous Provisions
- --------------------------------------------------------------------------------

                                 ARTICLE XIII -
                            MISCELLANEOUS PROVISIONS

13.1  No Right to Continued Employment

      Neither the establishment of the Plan, nor any provisions of the Plan or
      of the Agreement establishing the Trust, or of any Separate Agreement nor
      any action of any Named Fiduciary, Plan Administrator or the Employer,
      shall be held or construed to confer upon any Employee any right to a
      continuation of his employment by the Employer. The Employer reserves the
      right to dismiss any Employee or otherwise deal with any Employee to the
      same extent and in the same manner that it would if the Plan had not been
      adopted.

13.2  Merger, Consolidation, or Transfer

      The Plan shall not be merged or consolidated with, nor transfer its assets
      or liabilities to, any other plan unless each Employee, Participant,
      Beneficiary and other person entitled to benefits under the Plan, would
      (if such other plan then terminated) receive a benefit immediately after
      the merger, consolidation or transfer which is equal to or greater than
      the benefit he would have been entitled to receive if the Plan had
      terminated immediately before the merger, consolidation or transfer.

13.3  Nonalienation of Benefits

      Except, effective August 5, 1997, to the extent of any offset of a
      Participant's benefits as a result of any judgment, order, decree or
      settlement agreement provided in Section 401(a)(13)(C) of the Code,
      benefits payable under the Plan shall not be subject in any manner to
      anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
      charge, garnishment, execution, or levy of any kind, either voluntary or
      involuntary and any attempt to so anticipate, alienate, sell, transfer,
      assign, pledge, encumber, charge, garnish, execute, levy or otherwise
      affect any right to benefits payable hereunder, shall be void.
      Notwithstanding the foregoing, the Plan shall permit the payment of
      benefits in accordance with a qualified domestic relations order as
      defined under Section 414(p) of the Code.

13.4  Missing Payee

      Any other provision in the Plan or Agreement to the contrary
      notwithstanding, if the Trustees and, if appropriate, any Separate Agency
      are unable to make payment to any Employee, Participant, Beneficiary or
      other person to whom a payment is due ("Payee") under the Plan because the
      identity or whereabouts of such Payee cannot be ascertained after
      reasonable efforts have been made to identify or locate such person
      (including mailing a certified notice of the payment due to the last known
      address of such Payee as shown on the records of the Employer), such
      payment and all subsequent payments otherwise due to such Payee shall be
      forfeited twenty-four (24) months after the date such payment first became
      due. However, such


- --------------------------------------------------------------------------------
787                                  87              Carver Federal Savings Bank
<PAGE>

                                                                  Article XIII -
                                                        Miscellaneous Provisions
- --------------------------------------------------------------------------------

      payment and any subsequent payments shall be reinstated retroactively,
      without interest, no later than sixty (60) days after the date on which
      the Payee is identified and located.

13.5  Affiliated Employers

      All employees of all Affiliated Employers shall, for purposes of the
      limitations in Article XII and for measuring Hours of Service and Periods
      of Service, be treated as employed by a single employer. No employee of an
      Affiliated Employer shall become a Participant of this Plan unless
      employed by the Employer or an Affiliated Employer which has adopted the
      Plan.

13.6  Successor Employer

      In the event of the dissolution, merger, consolidation or reorganization
      of the Employer, the successor organization may, upon satisfying the
      provisions of the Agreement and the Plan, adopt and continue this Plan.
      Upon adoption, the successor organization shall be deemed the Employer
      with all its powers, duties and responsibilities and shall assume all Plan
      liabilities.

13.7  Return of Employer Contributions

      Any other provision of the Plan, Separate Agreement or Agreement to the
      contrary notwithstanding, upon the Employer's request and with the consent
      of the Trustees and, if appropriate, any Separate Agency, a contribution
      to the Plan by the Employer which was (a) made by mistake of fact, or (b)
      conditioned upon initial qualification of the Plan with the Internal
      Revenue Service, or (c) conditioned upon the deductibility by the Employer
      of such contributions under Section 404 of the Code, shall be returned to
      the Employer within one (1) year after: (i) the payment of a contribution
      made by mistake of fact, or (ii) the denial of such qualification or (iii)
      the disallowance of the deduction (to the extent disallowed), as the case
      may be.

      Any such return shall not exceed the lesser of (A) the amount of such
      contributions (or, if applicable, the amount of such contribution with
      respect to which a deduction is denied or disallowed) or (B) the amount of
      such contributions net of a proportionate share of losses incurred by the
      Plan during the period commencing on the Valuation Date as of which such
      contributions are made and ending on the Valuation Date as of which such
      contributions are returned. All such refunds shall be limited in amount,
      circumstances and timing to the provisions of Section 403(c) of ERISA.

13.8  Adoption of Plan by Affiliated Employer

      An Affiliated Employer of the Sponsoring Employer may adopt the Plan and
      Agreement upon satisfying the requirements set forth in the Agreement.
      Upon such adoption, such Affiliated Employer shall become a Participating
      Affiliate in the Plan, which Plan shall be deemed a "single plan" within
      the meaning of Income Tax Regulations Section 1.414(1)-1(b)(1).


- --------------------------------------------------------------------------------
787                                  88              Carver Federal Savings Bank
<PAGE>

                                                                  Article XIII -
                                                        Miscellaneous Provisions
- --------------------------------------------------------------------------------

      For purposes of Article IX, Employer shall mean only the Sponsoring
      Employer and each Participating Affiliate shall be deemed to accept and
      designate the Named Fiduciaries, Committee, Plan Administrator, Trustee
      Administrator and voter of Units designated by the Sponsoring Employer to
      act on its behalf in accordance with the provisions of the Plan and
      Agreement.

      The Sponsoring Employer shall solely exercise for and on behalf of such
      Participating Affiliate the powers reserved to the Employer under Articles
      IX and XI. However, such Participating Affiliate may at anytime terminate
      its future participation in the Plan for the purposes and in the manner
      set forth in the Agreement.

13.9  Construction of Language

      Wherever appropriate in the Plan, words used in the singular may be read
      in the plural; words used in the plural may be read in the singular; and
      words importing the masculine gender shall be deemed equally to refer to
      the female gender. Any reference to a section number shall refer to a
      section of this Plan, unless otherwise indicated.

13.10 Headings

      The headings of articles and sections are included solely for convenience
      of reference, and if there be any conflict between such headings and the
      text of the Plan, the text shall control.

13.11 Governing Law

      The Plan shall be governed by and construed and enforced in accordance
      with the laws of the State of New York, except to the extent that such
      laws are preempted by the Federal laws of the United States of America.


- --------------------------------------------------------------------------------
787                                  89              Carver Federal Savings Bank

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>6
<FILENAME>d156285.txt
<DESCRIPTION>MATERIAL CONTRACTS
<TEXT>
                                                                    Exhibit 10.4

                              CARVER BANCORP, INC.

                          EMPLOYEE STOCK OWNERSHIP PLAN

<PAGE>

                              CARVER BANCORP, INC.

                          EMPLOYEE STOCK OWNERSHIP PLAN










                          Incorporating Amendment No. 1
                         Incorporating Second Amendment
                          Incorporating Amendment No. 2
                         Incorporating Amendment No. 2A
                          Incorporating Amendment No. 3
                          Incorporating Amendment No. 4

<PAGE>

                           CARVER FEDERAL SAVINGS BANK

                          EMPLOYEE STOCK OWNERSHIP PLAN

                                TABLE OF CONTENTS

Exhibit A   Carver Bancorp, Inc. Employee Stock Ownership Plan

Exhibit B   Amendments to the Carver Bancorp, Inc. Employee Stock Ownership Plan

Exhibit C   Trust Agreement between Carver Bancorp, Inc. and Marine Midland Bank
            for the Carver Bancorp, Inc. Employee Stock Ownership Plan dated
            June 1, 1997.

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                              CARVER BANCORP, INC.

                          EMPLOYEE STOCK OWNERSHIP PLAN

                                   ----------

                  UNDER SECTIONS 401 (a) AND 4975(e)(7) OF THE
                    INTERNAL REVENUE CODE OF 1986, AS AMENDED

                         EFFECTIVE DATE: JANUARY 1, 1994

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                                     Part I
                                Table of Contents

Section                                                                     Page
- -------                                                                     ----

Definitions ...............................................................    1

Eligibility ...............................................................   10

Employer Contributions ....................................................   12

Participants Contributions ................................................   14

Allocation of Contributions ...............................................   14

Allocation to Participant's Accounts ......................................   19

Retirement and Distribution of Benefits ...................................   22

In Event of Disability ....................................................   26

In the Event of Death .....................................................   27

In the Event of Termination of Employment or Change in Status .............   28

Top-Heavy Definitions and Rules ...........................................   31

Administration of the Plan ................................................   38

Management and Investment of Trust Assets .................................   40

Obligations of the Employer ...............................................   43

Miscellaneous .............................................................   43

Amendments ................................................................   45

Suspension, Discontinuance and Plan Termination ...........................   46

Inclusion of Other Companies ..............................................   47

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                                    SECTION 1

                                   Definitions

The following words and phrases used herein have the following meanings, unless
a different meaning is plainly required by the context:

         The masculine pronoun wherever used shall include the feminine pronoun
and the singular shall include the plural.

1.1      "Account" means the record of the Participant's interest in the Trust
         Fund, maintained by the Committee pursuant to Section 5.

1.2      "Acquisition Loan" means an Exempt Loan (or other extension of credit)
         used by the Trust to finance the acquisition of Qualifying Employer
         Securities which loan may constitute an extension of credit to the
         Trust from a party in interest.

1.3      "Adjustment Factor" means the cost of living adjustment factor
         prescribed by the Secretary of the Treasury under Section 415(d) of the
         Code for years beginning after December 31, 1988, as applied to such
         items and in such manner as the Secretary shall provide.

1.4      "Affiliate" means any employer aggregated with the Employer under
         Section 414(b), (c), (m), or (o) of the Code.

1.5      "Anniversary Date" means the last day of the Plan Year.

1.6      "Board of Directors" means the Board of Directors of the Company.

1.7      "Cash Compensation" means the sum of (i) an Employee's wages which are
         subject to federal income tax withholding pursuant to Section 3401(a)
         of the Code, and (ii) any amounts withheld from the Employee under a
         plan qualified under Section 125 or 401(k) of the Code and sponsored by
         the Employer within a Plan Year. In no event, however, shall an
         Employee's Cash Compensation (a) for any Plan Year beginning after
         December 31, 1993 and before January 1, 2002 include any compensation
         in excess of $150,000 (or such other amount as may be permitted under
         section 401(a)(17) of the Code); and (b) for any Plan Year beginning
         after December 31, 2001 include any compensation in excess of $200,000
         (or such other amount as may be permitted under section 401(a)(17) of
         the Code). If there are less than twelve (12) months in the Plan Year,
         the compensation limitation (as adjusted) shall be prorated by
         multiplying such limitation by a fraction, the numerator of which is
         the number of months in the Plan Year and the denominator of which is
         twelve (12). For purposes of applying the foregoing limitation in any
         Plan Year beginning prior to January 1, 1997 to any person who is a
         Five Percent Owner or who is one of the 10 Highly Compensated Employees
         with the highest Total Compensation (determined prior to the
         application of this sentence), any Cash Compensation paid to the spouse
         of such person or to any lineal descendant of such person who has not
         attained age 19 on or before the last day of such calendar year shall
         be deemed to have been paid to such person. If, as a result of the
         application of such family

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         aggregation rules the adjusted compensation limitation is exceeded,
         then the limitation shall be prorated among the affected individuals in
         proportion to each such individual's compensation as determined under
         this Section prior to the application of this limitation.

1.8      "Code" means the Internal Revenue Code of 1986, as amended, together
         with regulations promulgated pursuant thereto.

1.9      "Committee" or "Administrative Committee" means the committee appointed
         to manage and administer the Plan as provided in Section 12.

1.10     "Company" means Carver Bancorp, Inc., its successors and assigns.

1.11     "Designated Beneficiary" means a natural person designated by a
         Participant or Former Participant as a Beneficiary and shall not
         include any Beneficiary designated by a person other than a Participant
         or Former Participant or any Beneficiary other than a natural person.
         If a natural person is the beneficiary of a trust which a Participant
         or Former Participant has named as his Beneficiary, such natural person
         shall be treated as a Designated Beneficiary if: (a) the trust is a
         valid trust under applicable state law (or would be a valid trust
         except for the fact that it does not have a corpus); (b) the trust is
         irrevocable or will, by its terms, become irrevocable upon the death of
         the Participant or Former Participant; (c) the beneficiaries of the
         trust who are beneficiaries with respect to the trust's interest as a
         Beneficiary are identifiable from the terms of the trust instrument;
         and (d) the following information is furnished to the Committee:

                 (i)    by the Participant or Former Participant, if any
                        distributions are required to be made pursuant to
                        Section 7.6 prior to the death of the Participant or
                        Former Participant, either: (A) a copy of the trust
                        instrument, together with a written undertaking by the
                        Participant or Former Participant to furnish to the
                        Committee a copy of any subsequent amendment within a
                        reasonable time after such amendment is made; or (B)(I)
                        a list of all of the beneficiaries of the trust
                        (including contingent and remainderman beneficiaries
                        with a description of the conditions on their
                        entitlement); (II) a certification of the Participant or
                        Former Participant to the effect that, to the best of
                        his knowledge, such list is correct and complete and
                        that the conditions of Section 1.11(a), (b) and (c) are
                        satisfied; (III) a written undertaking to provide a new
                        certification to the extent that an amendment changes
                        any information previously certified; and (IV) a written
                        undertaking to furnish a copy of the trust instrument to
                        the Committee on demand; and

                 (ii)   by the trustee of the trust within nine months after the
                        death of the Participant or Former Participant, if any
                        distributions are required to be made pursuant to
                        Section 7.6 after the death of the Participant or Former
                        Participant, either: (A) a copy of the actual trust
                        instrument for the trust; or (B)(1) a final list of all
                        of the beneficiaries of the trust (including contingent
                        and remainderman beneficiaries with a description of the
                        conditions on their entitlement) as of the date of
                        death; (II) a certification of the trustee to the effect
                        that, to the best


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                        of his knowledge, such list is correct and complete and
                        that the conditions of Section 1.11(a), (b) and (c) are
                        satisfied; and (III) a written undertaking to furnish a
                        copy of the trust instrument to the Committee on demand.

1.12     "Domestic Relations Order" means a judgment, decree or order (including
         the approval of a property settlement) that is made pursuant to a state
         domestic relations or community property law and relates to the
         provision of child support, alimony payments, or marital property
         rights to a spouse, child or other dependent of a Participant or Former
         Participant.

1.13     "Effective Date" of the Plan means January 1, 1994, subject to the
         condition subsequent that it be approved and qualified under the
         Internal Revenue Code.

1.14     "Employee" shall mean any person who (a) is in the employment of the
         Employer, and (b) whose wages from the Employer are subject to
         withholding for the purposes of Federal Income Taxes and the Federal
         Insurance Contribution Act. "Employee" shall not include any person who
         is paid by an Employer as an independent contractor.

1.15     "Employer" means the Company, Carver Federal Savings Bank, and any
         other company which, with the Company's consent, adopts the Plan and
         joins in the Trust Agreement.

1.16     "Entry Date" means the Effective Date and the first day of the first
         and seventh months of the Plan Year. Additionally, the Committee may,
         on a uniform and nondiscriminatory basis, at any time and from time to
         time authorize a special entry date for eligible participants, but
         prior to the next regularly scheduled Entry Date.

1.17     "ESOP" means an Employee Stock Ownership Plan as defined in Section
         4975(e)(7) of the Code.

1.18     "Exempt Loan" means a loan made to the Plan which satisfies the
         requirements of Section 2550.408b-3 of the Department of Labor
         Regulations, Section 54.4975-7(b) of the Treasury Regulations, and the
         Trust Agreement.

1.19     "Financed Shares" means shares of Qualifying Employer Securities
         acquired by the Trust with the proceeds of an Acquisition Loan, whether
         or not pledged as collateral to secure the repayment of such
         Acquisition Loan.

1.20     "Five Percent Owner" means, for any Plan Year, a person who, during
         such Plan Year, owned (or was considered as owning for purposes of
         section 318 of the Code): (a) more than 5% of the value of all classes
         of outstanding stock of any Affiliate; or (b) stock possessing more
         than 5% of the combined voting power of all classes of outstanding
         stock of any Affiliate.

1.21     "Forfeiture" shall mean that portion of a Participant's Account that is
         not vested, and occurs on the earlier of (1) the last day of the Plan
         Year in which the Participant terminates employment, provided the
         Participant is not reemployed prior thereto, or (2) the last day of the
         Plan Year in which the Participant incurs his fifth consecutive Break
         in Service.


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1.22     "Former Participant" means a Participant whose participation in the
         Plan has terminated due to termination of employment, death, Disability
         or retirement after attaining the Normal Retirement Age.

1.23     "Highly Compensated Employee" means, for any Plan Year, an Employee

         (a)     for Plan Years beginning before January 1, 1997, any Employee
                 or person employed by an Affiliate who:

                 (i)    at any time during such Plan Year or the immediately
                        preceding Plan Year was a Five Percent Owner; or

                 (ii)   is a member of the group consisting of the 100 Employees
                        and persons employed by any Affiliate who received the
                        greatest Total Compensation for such Plan Year and
                        during such Plan Year:

                        (A)     received Total Compensation for such Plan Year
                                in excess of $75,000 (or such higher amount as
                                may be permitted under section 414(q) of the
                                Code); or

                        (B)     received Total Compensation for such Plan Year
                                that was in excess of both (I) $50,000 (or such
                                higher amount as may be permitted under section
                                414(q) of the Code) and (II) the Total
                                Compensation for such Plan Year of at least 80%
                                of the Employees and persons employed by any
                                Affiliate for such Plan Year; or

                        (C)     was an Officer of the Employer or any Affiliate
                                and received Total Compensation for such Plan
                                Year in excess of 50% of the amount in effect
                                under section 415(b)(1)(A) of the Code for such
                                Plan Year; or

                 (iii)  during the immediately preceding Plan Year:

                        (A)     received Total Compensation for such Plan Year
                                in excess of $75,000 (or such higher amount as
                                may be permitted under section 414(q) of the
                                Code); or

                        (B)     received Total Compensation for such Plan Year
                                that was in excess of both (I) $50,000 (or such
                                higher amount as may be permitted under section
                                414(q) of the Code) and (II) the Total
                                Compensation for such Plan Year of at least 80%
                                of the Employees and persons employed by an
                                Affiliate for such Plan Year; or

                        (C)     was an Officer of the Employer or any Affiliate
                                and received Total Compensation for such Plan
                                Year in excess of 50% of the amount in effect
                                under section 415(b)(1)(A) of the Code for such
                                Plan Year; or


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         (b)     for Plan Years beginning after December 31, 1996, any Employee
                 or person employed by an Affiliate who:

                 (i)    was a Five Percent Owner at any time during such Plan
                        Year or the immediately preceding Plan Year; or

                 (ii)   received Total Compensation during the immediately
                        preceding Plan Year (A) in excess of $80,000 (or such
                        other amount as may be prescribed by the Secretary of
                        the Treasury pursuant to section 401(a)(17) of the
                        Code); and (B) if elected by the Committee in such form
                        and manner as the Secretary of the Treasury may
                        prescribe, is a member of the group consisting of the
                        top 20% of Employees when ranked on the basis of Total
                        Compensation paid to Employees during such year.

                 The Company has not elected to use the top 20% election
                 mentioned in subparagraph (b) of this section. The
                 determination of who is a Highly Compensated Employee will be
                 made in accordance with section 414(q) of the Code and the
                 regulations thereunder.

1.24     "Late Retirement Date" means the Anniversary Date coinciding with or
         next following a Participant's actual Retirement Date after having
         reached his Normal Retirement Date.

1.25     (a) Subject to Section 1.25(b), a Leased Employee shall be treated as
         an Employee for purposes of the Plan. For purposes of this Section
         1.25, the term "Leased Employee" means any person (i) who would not,
         but for the application of this Section 1.25, be an Employee and (ii)
         who pursuant to an agreement between an Affiliate and any other person
         ("leasing organization") has performed for the Affiliate (or for the
         Affiliate and related persons determined in accordance with section
         414(n)(6) of the Code), on a substantially full-time basis for a period
         of at least one year, services of a type historically performed by
         employees in the business field of the Employer under the primary
         direction or control of an Affiliate.

         (b)     For purposes of the Plan:

                 (i)    contributions or benefits provided to the leased
                        employee by the leasing organization which are
                        attributable to services performed for the Employer
                        shall be treated as provided by the Employer; and

                 (ii)   Section 1.25(a) shall not apply to a Leased Employee if:

                        (A)     the number of Leased Employees performing
                                services for the Employer does not exceed 20% of
                                the number of the Employer's Employees who are
                                not Highly Compensated Employees; and

                        (B)     such Leased Employee is covered by a money
                                purchase pension plan providing (I) a
                                nonintegrated contribution rate of at least 10%
                                of the


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                                Leased Employee's compensation; (II) immediate
                                participation; (III) full and immediate vesting;
                                and (IV) coverage for all of the employees of
                                the leasing organization (other than employees
                                who perform substantially all of their services
                                for the leasing organization).

1.26     "Limitation Year" means the Plan Year.

1.27     "Loan Suspense Account" means an account in which Qualifying Employer
         Securities are held and which has not been allocated to Participant's
         Accounts because they were purchased with borrowed funds pursuant to
         the provisions of Section 13.4 hereof or transferred to such account
         pursuant to the terms hereof.

1.28     "Military Service" means service in the armed forces of the United
         States, including but not limited to, Qualified Military Service. It
         may also include, if and to the extent that the Board so provides and
         if all Participants and Former Participants in like circumstances are
         similarly treated, special service for the government of the United
         States and other public service.

1.29     "Non Highly Compensated Employee" means an Employee who is not a Highly
         Compensated Employee.

1.30     "Non-Key Employee" means an Employee who is not a Key Employee. Non-Key
         Employees shall include Employees who are former Key Employees.

1.31     "Normal Retirement Age" means the date a Plan Participant, if still an
         Employee, attains age 65.

1.32     "Normal Retirement Date" means the last day of the month coincident
         with, or next following, the date upon which a Participant attains his
         Normal Retirement Age.

1.33     "Officer" means an Employee who is an administrative executive in
         regular and continued service with any Affiliate; provided, however,
         that at no time shall more than the lesser of (a) 50 Employees or (b)
         the greater of (i) 3 Employees or (ii) 10% of all Employees be treated
         as Officers. The determination of whether an Employee is to be
         considered an Officer shall be made in accordance with section 416(1)
         of the Code.

1.34     "Other Investments Account" means the Account of a Participant which
         reflects his interest in the Plan attributable to Trust assets other
         than Qualifying Employer Securities.

1.35     "Participant" means an Employee who is included in the Plan as provided
         in Section 2.1.

1.36     "Participant's Account" means a separate account, maintained in the
         aggregate by the Committee, for each Participant with respect to his
         total interest in the Plan and Trust.

1.37     "Participant's Company Stock Account" means the Participant's Account
         credited with Qualifying Employer Securities.


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1.38     "Plan" means the Carver Bancorp, Inc. Employee Stock Ownership Plan as
         set forth herein.

1.39     "Plan Year" means the 12 month period ending on December 31 of each
         year. The initial Plan Year shall begin on the Effective Date and end
         on December 31.

1.40     "Pregnancy or Child Care Leave of Absence" shall mean, with respect to
         a Plan Year commencing on or after July 1, 1984, a compensated or
         uncompensated leave of absence of fixed or indefinite duration granted
         to an Employee by the Employer or an Affiliate pursuant to a written
         request which is submitted to the Employer or Affiliate by the Employee
         no later than thirty (30) days prior to the first day of the proposed
         leave of absence that is sought (i) because of the pregnancy of the
         Employee, (ii) because of the birth of a child of the Employee, (iii)
         because of the placement of a child with the Employee in connection
         with the adoption of such child by such Employee or for the purpose of
         enabling the Employee to care for a child for a period beginning
         immediately after the birth of such child to the Employee, or (iv)
         because of the placement of such child with the Employee, or (v)
         because of an absence of not more than two (2) consecutive calendar
         years in duration which, upon his return to the employ of an Employer
         or an Affiliate, the Employee demonstrates to the satisfaction of the
         Employer to have been for one of the four aforementioned purposes.

1.41     "Qualified Domestic Relations Order" means a Domestic Relations Order
         that: clearly specifies (i) the name and last known mailing address of
         the Participant or Former Participant and of each person given rights
         under such Domestic Relations Order, (ii) the amount or percentages of
         the Participant's or Former Participant's benefits under this Plan to
         be paid to each person covered by such Domestic Relations Order, (iii)
         the number of payments or the period to which such Domestic Relations
         Order applies, and (iv) the name of this Plan; and (b) does not require
         the payment of a benefit in a form or amount that is not otherwise
         provided for under the Plan, or (ii) inconsistent with a previous
         Qualified Domestic Relations Order.

1.42     "Qualified Election Period" means the six Plan Year period beginning
         with the Plan Year after the Plan Year in which the Participant first
         becomes a Qualified Participant.

1.43     "Qualified Military Service" means with respect to any person on any
         date, any service in the uniformed services of the United States (as
         defined in chapter 43 of Title 38 of the United States Code) completed
         prior to such date, but only if, on such date, such person is entitled
         to re-employment rights with respect to an Affiliate on account of such
         service.

1.44     "Qualified Participant" means a Participant who has attained age 55 and
         who has completed at least 10 years of participation in the Plan.

1.45     "Qualifying Employer Securities" or "Company Stock" means the shares of
         common stock of the Company as described in Section 4975(e)(8) of the
         Code (or of a corporation which is a member of a controlled group with
         the Company) which is readily tradeable on an established securities
         market; or if not readily tradeable, meets the following criteria:


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         (a)     is a common stock issued by the Company (or by a corporation
                 which is a member of the same controlled group) having a
                 combination of voting power and dividend rights equal to or in
                 excess of that class of common stock having the greatest voting
                 power, and

         (b)     that class of common stock having the greatest dividend rights.

         Noncallable preferred stock shall be deemed to be "Qualifying Employer
         Securities" if such stock is convertible at any time into stock which
         constitutes "Qualifying Employer Securities" hereunder and if such
         conversion is at a conversion price which (as of the date of the
         acquisition by the Trust) is reasonable.

1.46     "Retroactive Contribution" means a contribution made on a retroactive
         basis in respect of a period of Qualified Military Service in
         accordance with Section 6.2.

1.47     "Service" means any computation period during which an Employee was in
         the employment of the Employer or an Affiliate including service before
         the Effective Date of this Plan. It shall include any period during
         which an Employee is on leave of absence authorized by his Employer.
         All leaves of absence shall be granted in a uniform and
         non-discriminatory manner to all Employees in similar circumstances.

         (a)     Any Participant who leaves the active Service of the Employer
                 or an Affiliate Company to enter the Armed Forces of the United
                 States of America during a period of national emergency or
                 compulsory military Service law of the United States of America
                 shall be deemed to be on leave of absence during the period of
                 his Service in such Armed Forces and during any period after
                 his discharge from such Armed Forces in which his re-employment
                 rights are guaranteed by law.

         (b)     "Year of Service" shall mean any computation period during
                 which an Employee completes one thousand (1,000) or more Hours
                 of Service. A Year of Service for purposes of determining an
                 Employee's eligibility to participate in the Plan shall be
                 defined as a twelve consecutive month period during which the
                 Employee remains in the Service of the Employer (regardless of
                 his Hours of Service). The initial eligibility computation
                 period is the twelve-consecutive month period beginning on the
                 date the Employee first performs an Hour of Service for the
                 Employer. Succeeding eligibility computation periods shall
                 commence with the first Plan Year which commences prior to the
                 first anniversary of the Employee's initial eligibility
                 computation period regardless of whether the Employee remains
                 in the Service of the Employer during his initial eligibility
                 computation period. For vesting purposes, a Year of Service
                 shall be any Plan Year, or calendar year prior to the Effective
                 Date, in which an Employee completes 1,000 Hours of Service
                 after attainment of age 18; provided that no more than five
                 Years of Service shall be credited for employment before the
                 Effective Date.

         (c)     "Hour of Service" means each hour for which an Employee is
                 directly or indirectly paid or entitled to payment by the
                 Employer or an Affiliate for the performance of duties.


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                 These hours shall be credited to the Employee for the
                 computation period or periods in which the duties are
                 performed.

                 Hours of service to be credited for each hour for which an
                 Employee is paid, or entitled to payment, by the Employer or an
                 Affiliate on account of a period of time during which no duties
                 are performed, irrespective of whether the employment
                 relationship has terminated due to vacation, holiday, illness,
                 incapacity (including disability), layoff, jury duty, military
                 duty, or leave of absence. No more than 501 Hours of Service
                 shall be credited under this paragraph for any single
                 continuous period (whether or not such period occurs in a
                 single computation period).

                 Hours of service to be credited for each hour for which back
                 pay, irrespective of mitigation of damage, has been either
                 awarded or agreed to by the Employer. These hours shall be
                 credited to the Employee for the computation period or periods
                 to which the award or agreement pertains rather than the
                 computation period in which the award, agreement, or payment
                 was made.

                 For purposes of crediting Hours of Service for periods during
                 which no duties were performed, the method of determining the
                 number of hours to be credited and the method of crediting such
                 hours to computation periods shall conform to the requirements
                 set forth in Sections 2530.200(b) 2(b) and (c) of the
                 Department of Labor Regulations.

                 Solely for purposes of determining whether a Break in Service
                 for participation and vesting purposes has occurred in a
                 computation period, an individual who is absent from work for
                 maternity or paternity reasons shall receive credit for the
                 hours of Service which would otherwise have been credited to
                 such individual, but for such absence, or in any case in which
                 such hours cannot be determined, 8 hours of Service per day of
                 such absence. For purposes of this paragraph, an absence from
                 work for maternity or paternity reasons means an absence (1) by
                 reason of the pregnancy of the individual, (2) by reason of a
                 birth of a child of the individual, (3) by reason of the
                 placement of a child with the individual in connection with the
                 adoption of such child by such individual, or (4) for purposes
                 of caring for such child for a period beginning immediately
                 following such birth or placement. The hours of Service
                 credited under this paragraph shall be credited (1) in the
                 computation period in which the absence begins if the crediting
                 is necessary to prevent a break in Service in that period, or
                 (2) in all other cases, in the following computation period.

         (d)     "Benefit Accrual Computation Period" means defined as the Plan
                 Year.

         (e)     "Vesting Computation Period" means the Plan Year.

         (f)     "Break in Service" means any computation period in which an
                 Employee works five hundred (500) Hours of Service or less.
                 Except as otherwise provided above, any year in which an
                 Employee works more than five hundred (500) Hours of Service,
                 but less


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                 than one thousand (1,000) Hours of Service shall not be
                 recognized as Service, but this shall not be a Break in
                 Service.

         (g)     In the event that an Employee who incurred a Break in Service
                 is subsequently re-employed, his Years of Service shall be
                 cumulative for vesting purposes, except that if the Employee,
                 at the time of his Break in Service, had no vested interest and
                 the number of consecutive one-year Breaks in Service equals or
                 exceeds the greater of five or the number of pre-break Years of
                 Service, Years of Service prior to such Breaks in Service shall
                 be disregarded. The same provision shall apply in the case of
                 an Employee whose Service has been broken because he worked
                 less than five-hundred (500) Hours of Service in a given Plan
                 Year when he resumes working at least one thousand (1,000)
                 Hours of Service per Plan Year.

1.48     "Spouse" shall mean the lawful husband or wife of a Participant on the
         date specified.

1.49     "Taxable Year" means, with respect to each Employer, the fiscal year
         adopted by such company from time to time for Federal income tax
         purposes.

1.50     "Total Disability" or "Disability" means a physical or mental condition
         of a Participant resulting from bodily injury, disease, or mental
         disorder which renders him incapable of continuing any gainful
         occupation and which condition constitutes total disability under the
         Federal Social Security Acts.

1.51     "Trust Agreement" means the trust agreement set forth in Part II of
         this Plan.

1.52     "Trust Fund" means the fund described in Section 13, and maintained in
         accordance with the terms of the Trust Agreement.

1.53     "Trustee(s)" means the person(s), or corporation(s), accepting the
         appointment of Trustee(s) and acting as such, including any successor
         Trustee(s), pursuant to the Trust Agreement.

1.54     "Valuation Date" means the last day of the Plan Year of the Trust Fund.
         The fair market value of the assets in the Trust Fund as of any
         valuation date shall be determined as the close of business on such
         date, or, if such date is not a business day, as of the close of
         business on the next preceding business day. On the Valuation Date the
         Account balances are valued to determine if the plan is top-heavy. The
         Valuation Date shall also be the Determination Date for Top-Heavy Plan
         calculations.

                                    SECTION 2

                                   Eligibility

2.1      Participation. Subject to Section 2.6, each Employee shall become a
         Participant, if still an Employee, on the Entry Date next following the
         later of (i) his attainment of age 21, and (ii) his completion of one
         (1) Year of Service for eligibility purposes; provided that anyone who


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         is an Employee on the date of the conversion of Carver Federal Savings
         Bank from a mutual to a stock form of ownership shall become a
         Participant as of the Effective Date.

         An Employee who terminates employment prior to meeting the service
         requirement set forth in Section 2.1 shall be treated as a new Employee
         on the date of his rehire, but only if a Break in Service has occurred
         prior to such date of rehire. An Employee meeting the above-stated
         service requirement, but who terminates employment prior to becoming a
         Participant, shall become a Participant as of the date of rehire, if a
         Break in Service has not occurred prior to such rehire. A rehired
         Employee who was a former Participant, shall become a Participant upon
         his date of rehire.

2.2      Annual Allocations. A Participant shall be entitled to share in any
         allocation of the Employer's contribution for a particular Plan Year if
         and only if: (i) the Participant completes 1000 or more Hours of
         Service during the Plan Year and remains an Employee as of the last day
         of such Plan Year; or (ii) the Participant ceases to be an Employee
         during the Plan Year because of his Normal Retirement Age, death or
         Disability.

2.3      Annual Employer Report to Committee. Within sixty (60) days after the
         last day of the Fiscal Year, the Employer shall certify to the
         Committee in writing such information from its records with respect to
         Employees as the Committee may require in order to determine the
         identity and interests of the Participants and otherwise to perform its
         duties hereunder.

         Any certification by the Employer of information to the Committee
         pursuant to this Plan shall, for all purposes of this Plan, be binding
         on all parties in interest, provided that whenever any Employee proves
         to the satisfaction of the Employer that his period of Service or his
         Cash Compensation as so certified is incorrect, the Employer shall
         correct such certification. The Service of any Employee shall be
         determined solely by reference to the data certified to the Committee
         by the Employer.

         The determination of the Committee as to the identity of the respective
         Participants and as to their respective interests shall be binding upon
         the Employer, the Trustees, the Employees, the Participants and all
         beneficiaries.

2.4      Transfers. Whenever any Participant is transferred from one Employer
         who is a party to the Plan to another Employer who is a party to the
         Plan, the Participant may continue on as a Participant in the Plan
         without any interruption as if the Participant had at all times been an
         Employee of the new Employer; and in the event an affiliated company
         ceases to be an Affiliate for any reason whatsoever, this event shall
         not affect the continued participation in this Plan of any Participant
         who becomes an Employee of the Employer or any other Affiliate under
         this Plan, and the Committee shall transfer the Participant's Account
         from the account of the withdrawing Affiliate to the Employer or new
         Affiliate.

2.5      Breaks-in-Service. A Participant who terminates employment with an
         Employer or suffers a Break-in-Service shall cease to be an active
         Participant in this Plan and his Participant's Account shall be placed
         on inactive status. Except as provided in Section 2.2, the inactive
         Participant shall not share in the Employer's contribution for that
         Plan year, but his accounts


                                       11
<PAGE>

         shall continue to receive income allocations. Thus, he shall remain a
         Participant until his account balances have been distributed to him.
         Termination of employment may have resulted from voluntary or
         involuntary termination of employment, unauthorized absence, or by
         failure to return to active employment with the Employer by the date on
         which an Authorized Leave of Absence expired.

2.6      Military Service. In the case of a termination of service of any
         Employee to enter directly into Military Service, the entire period of
         his absence shall be treated, for purposes of vesting and eligibility
         for Participation (but not, except as required by law, for purposes of
         eligibility to share in allocations of contributions in accordance with
         Sections 5 and 6), as if he had continued employment during the period
         of his absence. In the event of the re-employment of such person by any
         Affiliate within a period of not more than six months:

         (a)     after he becomes entitled to release or discharge, if he has
                 entered into the uniformed services of the United States;

         (b)     release from hospitalization continuing after discharge from
                 the uniformed services of the United States for a period of not
                 more than two years; or

         (c)     after such service terminates, if he has entered into other
                 service defined as Military Service;

         such period, also, shall be deemed to be Military Service.

2.7      Excluded Employees. An Employee shall not participate in the Plan if he
         is either (i) a Leased Employee, (ii) classified as an "independent
         contractor" by the Employer, even if considered an employee under
         applicable law or (iii) is included in a unit of Employees covered by
         an agreement which the Secretary of Labor finds to be a collective
         bargaining agreement between Employee representatives and the Employer
         or one or more Affiliates, including the Company, if there is evidence
         that retirement benefits were the subject of good faith bargaining
         between such Employee representatives and the Employer or such
         Affiliates. For this purpose, "Employee Representatives" will not
         include any organization more than half of whose members are Employees
         who are owners, officers, or executives of the Employer or an
         Affiliate.

                                    SECTION 3

                             Employer Contributions

3.1      Amount of Employer Contributions.

         (a)     The amount to be contributed by an Employer shall be determined
                 annually by resolution of its Board of Directors, but shall not
                 exceed the maximum amount deductible under the applicable
                 provisions of Section 404 of the Code.


                                       12
<PAGE>

         (b)     The Committee shall maintain a separate Account for each
                 Participant, to which it shall credit the Participant's share
                 of all contributions, in accordance with Section 5, and which
                 shall be revalued in accordance with Section 6.

         (c)     The fact that the Company or another Employer may make no
                 contribution hereunder for any Taxable Year shall not be deemed
                 to terminate the Plan or the Trust created hereunder.

3.2      Payment of Employer Contributions.

         (a)     The Employer's contributions for each Taxable Year shall be
                 paid directly to the Trustees. As soon as practicable after the
                 time of each such payment, the Employer shall notify the
                 Committee of the amount of such contribution. The amount of
                 each such contribution shall be certified to be true and
                 correct and accordance with the terms of the Plan by the
                 Employer or by the independent accounting firm regularly
                 employed by the Employer, and such certification shall be final
                 and conclusive upon all persons interested in the Plan. No
                 adjustment affecting the Employer's net profit for any taxable
                 year, made subsequent to the payment of the Employer's
                 contribution to the Trustees and resulting from audit of the
                 Employer's Federal income tax return or otherwise, shall change
                 the amount of such contributions. The Employer's contribution
                 for any Plan Year shall be paid in full during the Plan Year,
                 or as soon as practicable after the close of such year, but not
                 later than the time prescribed by law for filing the Employer's
                 Federal income tax return for such year (including extensions
                 thereof).

         (b)     Employer contributions will be paid in cash or Qualifying
                 Employer Securities as the Employer's Board of Directors may
                 from time to time determine. Shares of Qualifying Employer
                 Securities will be valued at their then fair market value.
                 However, to the extent that the Trust has current obligations,
                 including amounts necessary to provide sufficient cash to pay
                 any currently maturing obligations under an Acquisition Loan,
                 the Employer contributions will be paid to the Trust in cash
                 subject to the discretion of the Employer's Board of Directors.
                 The Employer contribution will be paid to the Trust on or
                 before the date required to make such contribution qualify as a
                 deduction on the Employer's Federal income tax return for the
                 year.

         (c)     The Employer may make contributions to the Plan in whole or in
                 part in the form of Qualifying Employer Securities, provided
                 the Employer uses the fair market value of the securities as of
                 the date such contribution is made, as determined by an
                 independent appraiser, if required under Section 401(a)(28)(C)
                 of the Code, engaged by the Committee. Such stock may be
                 obtained from its own reserve or treasury stock, or it may be
                 obtained from open market purchases.

3.3      Payment of Administrative Expenses. The Employer intends to provide all
         funds required for the administrative expenses of the Plan. Funds not
         so provided by the Employer may be


                                       13
<PAGE>

         paid first from any other Employer, next from the Trust's earnings, and
         then from its principal.

3.4      Mistake in Fact. If, due to a mistake in fact, the Employer
         contributions to the Trust for any Plan Year exceeds the amount to be
         contributed by it, notwithstanding any provision to the contrary, the
         Committee shall direct the Trustee, as soon as such a mistake in fact
         is discovered, to either segregate such amount and return such amount
         to the Employer within one year after the payment of the contribution
         or apply it towards the contribution of the Employer for the next Plan
         Year(s).

3.5      Failure of Initial Plan Qualification. In the event that the
         Commissioner of Internal Revenue determines that the Plan is not
         initially qualified under the Code, any contribution made incident to
         that initial qualification by the Employer shall be returned to the
         Employer within one year after the date the initial qualification is
         denied, but only if the application for the qualification is made by
         the time prescribed by law for filing the Employer's return for the
         taxable year in which the Plan is adopted, or such later date as the
         Secretary of the Treasury may prescribe.

                                    SECTION 4

                           Participants Contributions

4.1      No Employee Contributions. No Employee contributions shall be permitted
         under this Plan.

4.2      No Rollovers. The Trustee shall not accept "Rollover Contributions"
         from any Participant.

                                    SECTION 5

                           Allocation of Contributions

5.1      Allocations Generally. The Employer contribution, as determined under
         Section 3.1, and Forfeitures for each Plan Year shall be allocated by
         the Committee, as of the close of such Plan Year, between the Accounts
         of all Participants entitled under Section 2.2 to share in the
         allocation, as follows:

         The Employer contribution and Forfeitures shall be allocated to each
         such Participant's Account in proportion to the ratio which his Cash
         Compensation for the Plan Year bears to the total Cash Compensation of
         all such Participants eligible to share in Employer contributions for
         the Plan Year; provided that with respect to Participants who are
         Highly Compensated Employer's and entitled under Section 2.2 hereof to
         share in an allocation for the Plan Year, their Cash Compensation for
         purposes of this Section shall be reduced pro rata to the extent
         necessary to ensure that their aggregate Cash Compensation for the Plan
         Year does not exceed one third of the aggregate Cash Compensation of
         all Participants who are entitled under Section 2.2 to share in an
         allocation for the Plan Year.


                                       14
<PAGE>

5.2      Maximum Limitations on Allocations of Contributions.

         (a)     The maximum annual additions that may be contributed or
                 allocated to a Participant's Account for any Limitation Year
                 shall not exceed the lesser of the "defined contribution dollar
                 limitation" (as defined in Section 5.2(b) hereof), and 25
                 percent of the Participant's "Total Compensation" (as defined
                 in Section 5.2(c) hereof). Annual additions to a Participant's
                 Account include the sum of:

                 (i)    Employer contributions and contributions made under a
                        salary reduction agreement pursuant to sections 401(k),
                        408(k) or 403(b) of the Code under any qualified defined
                        contribution plan (other than this Plan) or a
                        tax-deferred annuity maintained by the Employer,

                 (ii)   Forfeitures,

                 (iii)  the sum of all of the Participant's after-tax
                        contributions and nondeductible voluntary contributions
                        under any other qualified plan maintained by the
                        Employer,

                 (iv)   amounts allocated, after March 31, 1984, to an
                        individual medical account, as defined in Code Section
                        415(1)(2), that is part of a pension or annuity plan
                        maintained by the Employer,

                 (v)    amounts derived from contributions paid or accrued after
                        December 31, 1985, in taxable years ending after such
                        date, that are attributable to post-retirement medical
                        benefits allocated to the separate account of a Key
                        Employee, as defined in Section 11.7.7 hereof, under a
                        welfare benefit fund, as defined in Code Section 419(e),
                        maintained by the Employer, and

                 (vi)   allocations under a simplified employee pension.

         (b)     The defined contribution dollar limitation shall be:

                 (i)    for Limitation Years beginning after December 31, 1994
                        and before January 1, 2002, the lesser of: (A) $30,000
                        (or such other amount as is permissible under section
                        415(c)(1)(A) of the Code), or (B) twenty-five percent
                        (25%) of the Participant's Total Compensation paid
                        during such Limitation Year; and

                 (ii)   for Limitation Years beginning after December 31, 2001,
                        the lesser of: (A) $40,000 (or such other amount as is
                        permissible under section 415(c)(1)(A) of the Code), or
                        (B) one hundred percent (100%) of the Participant's
                        Total Compensation paid during such Limitation Year.

                 In determining the above limitations, all defined contribution
                 plans of the Employer shall be considered as one plan.


                                       15
<PAGE>

         (c)     "Total Compensation" for any person during any period means the
                 total compensation paid to such person during such period by
                 all Affiliates which is required to be reported to such person
                 on a written statement under section 6041(d), 6051(a)(3) and
                 6052 of the Code, plus any elective deferrals (within the
                 meaning of section 402(g) of the Code) under any qualified cash
                 or deferred arrangement described in section 401(k) of the Code
                 and maintained by any Affiliate, any tax- deferred annuity
                 described in section 403(b) of the Code and maintained by any
                 Affiliate, any salary reduction simplified employee pension
                 plan described in section 408(k) of the Code and maintained by
                 any Affiliate, any salary reduction contributions under any
                 cafeteria plan described in section 125 of the Code and
                 maintained by any Affiliate and any salary reduction
                 contributions under any qualified transportation fringe
                 benefits plan described in section 132(f) of the Code and
                 maintained by an Affiliate. In no event shall a person's Total
                 Compensation (a) for any Plan Year beginning after December 31,
                 1993 and before January 1, 2002 include any compensation in
                 excess of $150,000 (or such other amount as may be permitted
                 under section 401(a)(17) of the Code); and (b) for any Plan
                 Year beginning after December 31, 2001 include any compensation
                 in excess of $200,000 (or such other amount as may be permitted
                 under section 401(a)(17) of the Code). If there are less than
                 twelve (12) months in the Plan Year, the compensation
                 limitation (as adjusted) shall be prorated by multiplying such
                 limitation by a fraction, the numerator of which is the number
                 of months in the Plan Year and the denominator of which is
                 twelve (12). In addition, for Limitation Years after 1997, each
                 Employee's Total Compensation shall include any amounts by
                 which the Employee's compensation paid by the Employer or any
                 Affiliate has been reduced pursuant to a compensation reduction
                 agreement under the terms of any plan described in section 457
                 of the Code.

                 Notwithstanding the foregoing, for purposes of this Section 5.2
                 only, Total Compensation for a Participant who is Totally
                 Disabled is the Total Compensation such Participant would have
                 received for the Plan Year if the Participant had been paid at
                 the annual rate of Total Compensation paid immediately before
                 becoming Totally Disabled; such imputed Total Compensation for
                 the disabled Participant may be taken into account only if the
                 Participant is not a Highly Compensated Employee and
                 contributions made on behalf of such Participant are
                 nonforfeitable when made.

         (d)     If a short Plan Year is created because of an amendment
                 changing the Plan Year to a different 12-consecutive month
                 period, the maximum permissible annual additions will not
                 exceed the defined contribution dollar limitation multiplied by
                 the following fraction:

                         Number of months in the short Plan Year
                         ---------------------------------------
                                           12

         (e)     Should not more than one-third of the Employer contributions
                 for a year which are deductible be allocated to Highly
                 Compensated Employees, the above annual addition limits shall
                 not include Forfeitures of Qualifying Employer Securities if
                 such


                                       16
<PAGE>

                 securities were acquired with the proceeds of an Acquisition
                 Loan or acquired with deductible Employer contributions used to
                 pay interest on such Acquisition Loan and charged to such
                 Participant's Account.

         (f)     If there should be an excessive annual addition for any
                 Participant's Account as a result of the allocation of
                 Forfeitures, a reasonable error in estimating a Participant's
                 annual Total Compensation, a reasonable error in determining
                 the amount of "elective deferrals" within the meaning of Code
                 Section 402(g)(3) that may be made with respect to any
                 individual under the limits of Code Section 415, or under other
                 limited facts and circumstances which the Commissioner of the
                 Internal Revenue Service finds justifiable, the excess shall be
                 held in a suspense account for the benefit of the Participant,
                 and be allocated in the subsequent Plan Year pursuant to the
                 following:

                 (i)    Any nondeductible voluntary Employee contributions, to
                        the extent they would reduce the excessive annual
                        addition, will be returned to the Participant;

                 (ii)   If after the application of paragraph (i) an excessive
                        annual addition still exists, and the Participant is
                        covered by the Plan at the end of the Limitation Year,
                        the excess in the Participant's Account will be used to
                        reduce Employer contributions (including any allocation
                        of Forfeitures) to such Account in the next Limitation
                        Year, and each succeeding Limitation Year if necessary;
                        provided that the Committee shall have the discretion,
                        to be exercised on a uniform and nondiscriminatory
                        basis, to allocate said excess to the Participant's
                        Account together with the amount otherwise allocable
                        under Section 5.1 hereof, but only to the extent
                        permissible under Code Section 401(a)(4).

                 (iii)  If after the application of paragraphs (i) and (ii) an
                        excessive annual addition still exists, and the
                        Participant is not covered by the Plan at the end of the
                        Limitation Year, the excessive annual addition will be
                        held unallocated in a suspense account. The suspense
                        account will be applied to reduce future Employer
                        contributions (including allocation of any Forfeitures)
                        for all remaining Participants in the next Limitation
                        Year, and each succeeding Limitation Year if necessary;

                 (iv)   If a suspense account is in existence at any time during
                        the Limitation Year pursuant to this section, it will
                        not participate in the allocation of the trust's
                        investment gains and losses. If a Suspense Account is in
                        existence at any time during a particular Limitation
                        Year, all amounts in the Suspense Account must be
                        allocated and reallocated to Participants' Accounts
                        before any Employer or Employee Contributions may be
                        made to the Plan for that Limitation Year. Excess
                        amounts may not be distributed directly to Participants
                        or former Participants.


                                       17
<PAGE>

5.3      Multiple Plan Reduction: If an Employee is a Participant in one or more
         defined benefit plans and one or more defined contribution plans
         maintained by the Employer, the sum of the defined benefit plan
         fraction and the defined contribution plan fraction for any year may
         not exceed 1.0 for any Limitation Year beginning prior to January 1,
         2000; provided however, that this limitation shall only apply if and to
         the extent that the benefits under the Employers qualified defined
         benefit plan or any other qualified defined contribution plan of the
         Employer are not limited so that such sum is not exceeded. The defined
         benefit plan fraction for any year is a fraction (1) the numerator of
         which is the projected "annual benefit" of the Participant under the
         Plan (determined as of the close of the Plan Year), and (b) the
         denominator of which is the lesser of: (1) the product of 1.25
         multiplied by the maximum dollar limitation in effect under Section
         415(b)(1)(A) of the Code for such year, or (2) the product of 1.4
         multiplied by the amount which may be taken into account under Section
         415(b)(1)(B) of the Code for such year.

         The defined contribution plan fraction for any year is a fraction (a)
         the numerator of which is the sum of the "annual additions" to the
         Participant's Account as of the close of the Plan Year and (b) the
         denominator of which is the sum of the lesser of the following amounts
         determined for such year and each prior year of service with the
         Employer: (1) the product of 1.25 multiplied by the dollar limitation
         in effect under Section 415(c)(1)(A) of the Code for such year
         (determined without regard to Section 415(c)(6) of the Code), or (2)
         the product of 1.4 multiplied by the amount which may be taken into
         account under Section 415(c)(1)(B) of the Code for such year. The
         compensation limitation referred to in (2) shall not apply to any
         contribution for medical benefits (within the meaning of section 401(h)
         of the Code) which is otherwise treated as an annual addition under
         Section 415(l)(1) of the Code.

         (a)     Ton-Heavy Plans. Notwithstanding the foregoing, for any
                 Top-Heavy Plan Year, 1.0 shall be substituted for 1.25 unless
                 the extra minimum allocation pursuant to Section 11.5 is being
                 made. However, for any Plan Year in which this Plan is a Super
                 Top-Heavy Plan, 1.0 shall be substituted for 1.25 in any
                 event.

                 (i)    Special Rule for Defined Contribution Fraction: At the
                        election of the Administrator, in applying the
                        provisions of Section 5.4 with respect to the defined
                        contribution plan fraction for any Plan Year ending
                        after December 31, 1982, the amount taken into account
                        for the denominator for each Participant for all Plan
                        Years ending before January 1, 1983 shall be an amount
                        equal to the product of (a) the amount of the
                        denominator determined under Section 5.2 for Plan Years
                        ending before January 1, 1982, multiplied by (b) the
                        "transition fraction".

                              For purposes of the preceding paragraph, the term
                              "transition fraction" means a fraction (a) the
                              numerator of which is the lesser of (1) $51,875 or
                              (2) 1.4 multiplied by twenty-five percent (25%) of
                              the Participant's Total Compensation for the Plan
                              Year ending in 1981, and (b) the denominator of
                              which is the lesser of (1) $41,500 or (2)
                              twenty-five percent (25%) of the Participant's
                              Total Compensation for the Plan Year ending in
                              1981.


                                       18
<PAGE>

                 (ii)   Excessive Benefit: If the sum of the defined benefit
                        plan fraction and the defined contribution plan fraction
                        shall exceed 1.0 in any year for any Participant in this
                        Plan, the Employer shall adjust the numerator of the
                        defined contribution plan fraction so that the sum of
                        both fractions shall not exceed 1.0 in any year for such
                        Participant.

                 (iii)  Limitation Year: For purposes of determining "annual
                        additions", the limitation year shall be the Plan Year.

                 (iv)   In the case of a group of Employers which constitutes
                        either a controlled group of corporations, trades or
                        businesses under a common control (as defined in Section
                        1563(a) or Section 414(b) or (c) as modified by Section
                        415(h) of the Code), or an affiliated service group (as
                        defined by Section 414(m) of the Code), all such
                        Employers shall be considered as a single Employer for
                        purposes of applying the limitation of Section 415 of
                        the Code.

         (b)     Coordination of Plans. If the Employer maintains one or more
                 defined contribution plans in addition to this Plan, and there
                 is an excessive annual addition to any Participant's Account,
                 said excess shall be addressed in the first instance under the
                 other defined contribution plans. To the extent an excess
                 remains after exhaustion of the procedures set forth under such
                 other defined contribution plans, the excess shall be
                 eliminated pursuant to Section 5.2(f) of this Plan.

                                    SECTION 6

                      Allocation to Participant's Accounts

6.1      General Rules.

         (a)     The Company Stock Account maintained for each Participant will
                 be credited annually with his allocable share of Qualifying
                 Employer Securities (including fractional shares) purchased and
                 paid for by the Trust or contributed in kind to the Trust.

                 Financed Shares shall initially be credited to a "Loan Suspense
                 Account" and shall be allocated to the Company Stock Accounts
                 of Participants only as payments on the Acquisition Loan are
                 made by the Trustee. The number of Financed Shares to be
                 released from the Loan Suspense Account for allocation to
                 Participant's Company Stock Accounts for each Plan Year shall
                 be determined by the Plan Committee in the Exempt Loan
                 documents under either method (1) or (2) below, as follows:

                 (1)    General Method - The number of Financed Shares held in
                        the Loan Suspense Account immediately before the release
                        for the current Plan Year shall be multiplied by a
                        fraction. The numerator of the fraction shall be the
                        amount of principal and interest paid on the Acquisition
                        Loan for that Plan Year. The denominator of the fraction
                        shall be the sum of the numerator plus the total


                                       19
<PAGE>

                        payments of principal and interest on that Acquisition
                        Loan projected to be paid for all future Plan Years. For
                        this purpose, the interest to be paid in future years is
                        to be computed by using the interest rate in effect as
                        of the current allocation date.

                 (2)    Alternative Method - The Plan Committee may elect at the
                        time an Acquisition Loan is incurred (or the provisions
                        of the Acquisition Loan may provide) for the release of
                        Financed Shares from the Loan Suspense Account based
                        solely on the ratio that the payments of principal for
                        each Plan Year bear to the total principal amount of the
                        Acquisition Loan. This method may be used only to the
                        extent that: (a) the Acquisition Loan provides for
                        annual payments of principal and interest at a
                        cumulative rate that is not less rapid at any time than
                        level annual payments of such amounts for ten years; (b)
                        interest included in any payment on the Acquisition Loan
                        is disregarded only to the extent that it would be
                        determined to be interest under standard loan
                        amortization tables; and (c) the entire duration of the
                        Acquisition Loan repayment period does not exceed ten
                        years, even in the event of a renewal, extension or
                        refinancing of the Acquisition Loan.

                 The Other Investments Account maintained for each Participant
                 will be credited (or debited) annually with his share of any
                 net income (or loss) of the Trust, and with his share of
                 Employer contributions in cash. It will be debited for its
                 proportionate share of any cash payments made by the Trust for
                 the purchase of Qualifying Employer Securities or the repayment
                 of principal and interest on any Acquisition Loan.

         (b)     The Trustee shall, as of each Valuation Date, adjust each
                 Participant's Company Stock Account and Other Investments
                 Account for transactions since the date of the preceding
                 adjustment. Separate adjustments shall be made for each
                 Participant's Account as follows:

                 (i)    The number of shares of Qualifying Employer Securities
                        in each Participant's Company Stock Account shall be the
                        number of shares as of the date of the preceding
                        adjustment, but increased by (A) Qualifying Employer
                        Securities allocated to it pursuant to Section 5.1, (B)
                        stock dividends on Qualifying Employer Securities
                        previously allocated to said Account, and (C) Qualifying
                        Employer Securities acquired with funds from the
                        corresponding Other Investments Account, and shall be
                        decreased by distributions from said Account.

                 (ii)   The fair market value of each Other Investments Account
                        shall be the fair market value of assets in such Account
                        as of the date of the preceding adjustment, but
                        increased by (A) money allocated to it pursuant to
                        Section 5.1, (B) dividends on Qualifying Employer
                        Securities previously allocated to the corresponding
                        Participant's Company Stock Account, and (C) investment
                        gains, including gains attributable to the discharge of
                        an Acquisition Loan or Loans; and shall be decreased by
                        (1) distributions from said Account, (2)


                                       20
<PAGE>

                        amounts used to acquire Qualifying Employer Securities
                        for the corresponding Participant's Company Stock
                        Account, and (3) investment losses.

                 (iii)  For the purposes of subsection (b)(ii) hereof, the
                        investment gain or loss in each Other Investments
                        Account since the last adjustment shall be its pro rata
                        share of the investment gain or loss of all assets in
                        the Other Investments Account based on the change in
                        fair market value of assets therein since the last
                        adjustment and computed in accordance with uniform
                        valuation procedures established by the Trustee.

                 (iv)   Shares of Qualifying Employer Securities held in the
                        Loan Suspense Account and dividends paid thereon, funds
                        borrowed for the purchase of Qualifying Employer
                        Securities, and interest and all other costs
                        attributable to the Loan Suspense Account shall be
                        excluded for all purposes under this Section, except to
                        the limited extent provided in Section 13.7(b).

                 (v)    Adjustments made pursuant to subsections (i)(B), (i)(C),
                        (ii)(B), and (ii)(C) shall not be considered "annual
                        additions" within the meaning of Section 5.2.

6.2      Retroactive Contributions. A Participating Employer shall make a
         Retroactive Contribution in respect of any individual previously
         employed by it who is re-employed by any Affiliate after December 12,
         1994 following the completion of a period of Qualified Military
         Service. Such Retroactive Contribution shall be made in the following
         manner for each Plan Year that includes any part of the period of
         Qualified Military Service:

         (a)     An allocation percentage shall be computed by dividing (i) the
                 sum of the fair market value of all Financed Shares and only
                 other Shares made from Employer Contributions in such Plan Year
                 plus the remaining cash amount from Employer Contributions for
                 such Plan Year by (ii) the aggregate amount of Cash
                 Compensation used in the allocation for such Plan Year. Fair
                 market value for such purposes shall be determined as of the
                 last day of the Plan Year.

         (b)     A notional allocation shall be determined by multiplying (A)
                 the percentage determined under Section 6.2(a) by (B) the Cash
                 Compensation which the individual would have had for such Plan
                 Year if he had remained in the service of his Participating
                 Employer in the same capacity and earning Cash Compensation and
                 Total Compensation at the annual rate in effect immediately
                 prior to the commencement of the Qualified Military Service
                 (or, if such rates are not reasonably certain, at an annual
                 rate equal to the actual Cash Compensation and Total
                 Compensation paid to him for the 12-month period immediately
                 preceding the Qualified Military Service).

         (c)     An actual Retroactive Contribution for the Plan Year shall be
                 determined by computing the excess of (A) the notional
                 allocation determined under Section 5.4(b) over (B) the sum of
                 the fair market value of all Financed Shares and only other


                                       21
<PAGE>

                 Shares made from Employer Contributions in such Plan Year plus
                 the remaining cash amount from Employer Contributions for such
                 Plan Year actually allocated to such individual for such Plan
                 Year.

6.3      Reports to Participants. As soon as practicable after each annual
         Valuation Date, the Committee shall advise each Participant of the
         amount then credited to his Account.

6.4      Diversification -- Elections. Each Qualified Participant shall be
         permitted to direct the Plan as to the investment of twenty-five
         percent (25%) of the value of the Participant's Account Balance
         attributable to Qualifying Employer Securities. Such direction shall be
         made within the Qualified Election Period and shall be made no later
         than 90 days after the close of each Plan Year which occurs within the
         Qualified Election Period. In the case of the last Plan Year in which
         such direction may be made, the amount of permitted investment shall be
         increased to fifty percent (50%) of the Participant's Account.

6.5      Diversification -- Distributions. The portion of a Qualified
         Participant's Account Balance with respect to which a diversification
         election is made under Section 6.3 shall be distributed (without regard
         to the distribution limitations of Section 409(d) of the Code) to the
         Qualified Participant within 90 days after the last day of the period
         during which the election may be made.

6.6      Diversification -- Required Consents. Notwithstanding the foregoing,
         any election under this Section by a Qualified Participant which
         results in a distribution to such Participant shall be subject to the
         consent provisions of Section 9.4 and 10.5 of the Plan. If the consent
         is not secured, then amounts otherwise distributable under this Section
         will remain in the Plan.

                                    SECTION 7

                     Retirement and Distribution of Benefits

7.1      Vesting. At Normal Retirement Age, the Participant shall have a 100%
         nonforfeitable interest in his account. If a Participant defers his
         retirement beyond his Normal Retirement Date, he shall continue as a
         Participant until his actual retirement, but no distributions shall be
         made from his Accounts until his actual retirement (other than
         distributions required under Section 7.6), unless the Participant
         elects to withdraw all or part of his Participant's Account pursuant to
         this Section.

7.2      Distribution -- Timing. If a Participant's Service terminates by reason
         of his retirement pursuant to Section 7.1, the total balance of his
         Account (including his Other Investments Account), as of the Valuation
         Date which coincides with or next follows the date of his retirement,
         shall be distributed to him as soon as practicable thereafter.

7.3      Distribution -- Method. At such time that distributions are permissible
         under the Plan, the Participant's Company Stock Account and Other
         Investment Account shall be distributed in a lump sum.


                                       22
<PAGE>

         Unless otherwise elected by a Participant, the distribution of his
         account attributable to Qualifying Employer Securities as well as other
         (diversified) investment shall commence not later than sixty (60) days
         after the Anniversary Date coinciding with or next following his Normal
         Retirement Age (or his termination of Service, if later). However, if
         the amount of a Participant's account attributable to both Qualifying
         Employer Securities as well as other (diversified) investments cannot
         be ascertained by the Committee by the date on which such distribution
         should commence, or if the Participant cannot be located, distribution
         of his account shall commence within sixty (60) days after the date on
         which his Company Stock Account Value can be determined or after the
         date on which the Committee locates the Participant.

7.4      Distribution -- Form. Distribution of a Participant's Company Stock
         Account will be made as elected by the Participant or his Beneficiary
         either in cash or whole shares of Qualifying Employer Securities, with
         cash being paid in lieu of fractional shares. Any balance in a
         Participant's Other Investments Account will be paid in cash. If
         Qualifying Employer Securities are not available for purchase by the
         Trustee, then the Trustee shall hold such balance until Qualifying
         Employer Securities are acquired and then make such distribution. If
         the Trustee is unable to purchase Qualifying Employer Securities
         required for distribution, he shall make distribution in cash within
         one year after the date the distribution was to be made; except in the
         case of a retirement, distribution shall be made within sixty (60) days
         after the close of the Plan Year in which a Participant's retirement
         occurs. Notwithstanding the foregoing, in the case of a Plan
         established and maintained by a company, as described in Section
         409(h)(2) of the Code, which is prohibited by law or the company's
         charter or bylaws from redeeming or purchasing its own securities,
         Qualifying Employer Securities will not be required to be distributed
         if the Participant is permitted to receive a distribution in cash.

7.5      (a)     Right of First Refusal

                 Shares of the Qualifying Employer Securities distributed by the
                 Trustee shall be subject to a "right of first refusal". The
                 right of first refusal shall provide that, prior to any
                 subsequent transfer, such Qualifying Employer Securities must
                 first be offered in writing to the Employer, and then, if
                 refused by the Employer, to the Trust, at the then fair market
                 value. The Company and the Committee (on behalf of the Trust)
                 shall have a total of fourteen (14) days (from the date the
                 Participant or Beneficiary gives written notice to the
                 Employer) to exercise the right of first refusal on the same
                 terms offered by a prospective buyer. A Participant (or
                 Beneficiary) entitled to a distribution of Qualifying Employer
                 Securities may be required to execute an appropriate stock
                 transfer agreement (evidencing the right of first refusal)
                 prior to receiving a certificate for such Securities.

                 Notwithstanding the foregoing, a "right of first refusal" shall
                 not be permitted in the case of Qualifying Employer Securities
                 which are publicly traded on an established securities market.


                                       23
<PAGE>

         (b)     Put Option

                 In the case of a distribution of Qualifying Employer Securities
                 which are not readily tradeable on an established securities
                 market, the Plan shall provide the Participant with a put
                 option that complies with the requirements of Section 409(h) of
                 the Code.

                 The Employer shall issue such a "put option" to each
                 Participant receiving a distribution of Qualifying Employer
                 Securities from the Trust subject to the availability of
                 retained earnings in such amount that complying with the "put
                 option" shall not be ultra vires. The put option shall permit
                 the Participant to sell such Qualifying Employer Securities to
                 the Employer, at any time during two option periods, at the
                 then fair market value as determined as of the most recent
                 valuation date (prior to the exercise of such right) by an
                 independent appraiser meeting requirements similar to the
                 requirements of the regulations prescribed under Sections
                 170(a)(1) and 401(a)(28)(C) of the Code engaged by the
                 Committee. The first put option period shall be a period of
                 sixty (60) days beginning on the date of distribution of
                 Qualifying Employer Securities to the Participant. The second
                 put option period shall be a period of sixty (60) days
                 beginning after the new determination of the fair market value
                 of such Qualifying Employer Securities by the Committee in the
                 next following Plan Year provided that if such determination is
                 made before the 13-month anniversary date of distribution of
                 Qualifying Employer Securities to the Participant, then the
                 second put option period shall be a period of sixty (60) days
                 beginning after the new determination of the fair market value
                 of such Qualifying Employer Securities by the Committee in the
                 next following Plan Year.

                 The Trust shall have the option to assume the rights and
                 obligations of the Employer at the time the Participant
                 requires the purchase by the Employer. The Committee may be
                 permitted by the Employer to direct the Trustee to purchase
                 Qualifying Employer Securities tendered to the Employer under a
                 put option.

                 Such put option shall provide that if an Employee exercises the
                 put option, the Employer (or the Plan if the Trustee so
                 elects), shall repurchase the Qualifying Employer Securities by
                 paying the fair market value of a Participant's Account balance
                 in cash, in up to five substantially equal annual payments. The
                 first installment shall be paid no later than 30 days after the
                 Participant exercises the put option. The payor under the put
                 option will pay a reasonable rate of interest and provide
                 adequate security on amounts not paid after 30 days.

         (c)     Placement of Restrictions on Stock Certificates

                 Shares of Qualifying Employer Securities held or distributed by
                 the Trustee may include such legend restrictions on
                 transferability as the Company may reasonably require in order
                 to assure compliance with applicable Federal and State
                 securities law and with the provisions of this paragraph.
                 Except as otherwise provided in the Section, no shares of
                 Qualifying Employer Securities held or distributed by the
                 Trustee may be subject to a put, call or other option or
                 buy-sell, or similar


                                       24
<PAGE>

                 arrangement. The provisions of this Section shall continue to
                 be applicable to shares of such Securities, even if the Plan
                 ceases to be an employee stock ownership plan under Section
                 4975(e)(7) of the Code.

7.6      Minimum Required Distributions.

         (a)     Required minimum distributions of a Participant's or Former
                 Participant's Account shall commence no later than:

                 (i)    if the Participant or Former Participant attains age 70
                        1/2 before January 1, 1997, the calendar year in which
                        the Participant or Former Participant attains age
                        70 1/2; or

                 (ii)   if the Participant or Former Participant attains age 70
                        1/2 after December 31, 1996 and was not a Five Percent
                        Owner at any time during the Plan Year ending in the
                        calendar year in which he attained age 70 1/2 or during
                        any subsequent years, the later of (A) the calendar year
                        in which he attains or attained age 70 1/2 or (B) the
                        calendar year in which he terminates employment with the
                        Employer and all Affiliates; provided, however, that a
                        Participant or Former Participant may elect that his
                        distribution commence in the calendar year in which he
                        attains age 70 1/2; or

                 (iii)  if the Participant or Former Participant attains age 70
                        1/2 after December 31, 1996 and is or was a Five Percent
                        Owner at any time during the Plan Year ending in the
                        calendar year in which he attained age 70 1/2 or during
                        any subsequent years, the later of (A) the calendar year
                        in which he attains age 70 1/2 or (B) the calendar year
                        in which he first becomes a Five Percent Owner;
                        provided, however, that any Participant who is employed
                        by an Employer after December 31, 1996 may elect not to
                        receive, or to discontinue receiving, such required
                        minimum distributions until April l of the year
                        following the year in which such Participant terminates
                        employment or is or becomes a Five Percent Owner,
                        whichever is earlier.

         (b)     The required minimum distributions contemplated by Section 7.6
                 (a) shall be made as follows:

                 (i)    The minimum required distribution to be made for the
                        calendar year for which the first minimum distribution
                        is required shall be no later than April 1st of the
                        immediately following calendar year and shall be equal
                        to the quotient obtained by dividing (A) the vested
                        balance credited to the Participant's or Former
                        Participant's Account as of the last Valuation Date to
                        occur in the calendar year immediately preceding the
                        calendar year in which the first minimum distribution is
                        required (adjusted to account for any additions thereto
                        or subtractions therefrom after such Valuation Date but
                        on or before December 31st of such calendar year); by
                        (B) the Participant's or Former Participant's life
                        expectancy (or, if his Beneficiary is a Designated


                                       25
<PAGE>

                        Beneficiary, the joint life and last survivor expectancy
                        of him and his Beneficiary); and

                 (ii)   the minimum required distribution to be made for each
                        calendar year following the calendar year for which the
                        first minimum distribution is required shall be made no
                        later than December 31st of the calendar year for which
                        the distribution is required and shall be equal to the
                        quotient obtained by dividing (A) the vested balance
                        credited to the Participant's or Former Participant's
                        Account as of the last Valuation Date to occur in the
                        calendar year prior to the calendar year for which the
                        distribution is required (adjusted to account for any
                        additions thereto or subtractions therefrom after such
                        Valuation Date but on or before December 31st of such
                        calendar year and, in the case of the distribution for
                        the calendar year immediately following the calendar
                        year for which the first minimum distribution is
                        required, reduced by any distribution for the prior
                        calendar year that is made in the current calendar
                        year); by (B) the Participant's or Former Participant's
                        life expectancy (or, if his Beneficiary is a Designated
                        Beneficiary, the joint life and last survivor expectancy
                        of him and his Beneficiary).

                 For purposes of this Section 7.6 (b), the life expectancy of a
                 Participant or Former Participant (or the joint life and last
                 survivor expectancy of a Participant or Former Participant and
                 his Designated Beneficiary) for the calendar year in which the
                 Participant or Former Participant attains age 70 1/2 shall be
                 determined on the basis of Tables V and VI, as applicable, of
                 section 1.72-9 of the Income Tax Regulations as of the
                 Participant's or Former Participant's and Beneficiary's
                 birthday in such year. Such life expectancy or joint life and
                 last survivor expectancy for any subsequent year shall be equal
                 to the excess of (1) the life expectancy or joint life and last
                 survivor expectancy for the year in which the Participant or
                 Former Participant attains age 70 1/2, over (2) the number of
                 whole years that have elapsed since the Participant or Former
                 Participant attained age 70 1/2.

         (c)     Payment of the distributions required to be made to a
                 Participant or Former Participant under this Section 7.6 shall
                 be made in accordance with Sections 7.3 and 7.4.

                                    SECTION 8

                             In Event of Disability

8.1      Vesting; Timing. In the event a Participant suffers a Total Disability,
         the total balance of his Participant Account, as of the Valuation Date
         which coincides with or next follows the determination of disability,
         shall become 100% vested and distributed to him in a lump sum as soon
         as administratively practicable after such Valuation Date. All such
         distributions shall be made in accordance with Sections 7.3, 7.4 and
         7.5, except as specifically noted to the contrary herein.


                                       26
<PAGE>

8.2      Subsequent Evidence of Disability. Once each year the Committee may
         require any disabled Participant receiving a disability retirement
         benefit who has not reached his Normal Retirement date to submit
         evidence that he is still disabled.

                                    SECTION 9

                              In the Event of Death

9.1      Vesting; Timing. In the event of the death of a Participant prior to
         the distribution of the total balance of his Participant Account, the
         total balance of his Accounts, as of the Valuation Date which coincides
         with or next follows the date of his death, shall be immediately 100%
         vested and distributed in one lump sum to his primary beneficiary or,
         if the primary beneficiary does not survive the Participant, then to
         his secondary beneficiary, or if no beneficiary has been designated or
         survives, then to the Participant's estate. All such distributions
         shall be made in accordance with Sections 7.3, 7.4, and 7.5, except as
         specifically noted to the contrary herein. If the Participant dies
         after distribution of his Participant Account has begun, the remaining
         balance will continue to be paid at least as rapidly as under the
         method of distribution being used prior to the Participant's death.

9.2      Beneficiary. At any time during his life, a Participant shall be
         entitled to designate a beneficiary (including a secondary beneficiary,
         if the Participant so desires), to whom in the event of death the
         distribution provided herein shall be paid, by signing and filing with
         the Committee a written designation of beneficiary in such form as
         shall be required by the Committee. Any beneficiary so designated may
         be changed by the Participant at any time or from time to time during
         his life, by signing and filing with the Committee a written
         notification of change of beneficiary in such form as shall be required
         by the Committee. If the Participant is married, the designated
         beneficiary shall be the Participant's spouse unless an election was
         made under Section 9.4.

9.3      Beneficiary of Married Participants. In the event a married Participant
         dies while still employed by the Employer or before the Participant's
         Account is paid to the Participant, the Participant's Account must be
         paid to the Participant's surviving spouse in a lump sum within five
         years. If a Participant dies before distributions have commenced and is
         not survived by a spouse, the Participant's entire remaining interest
         must be distributed within five years after the Participant's death to
         the Participant's beneficiary or beneficiaries (or, in the absence of a
         properly appointed beneficiary or beneficiaries, pursuant to Section
         9.5).

9.4      Designation of Beneficiary. The designated beneficiary of all benefits
         payable under this Plan shall be the Spouse of such Participant on the
         date of death, unless a waiver to such designation has been completed
         and received by the Committee in the form acceptable to the Committee.
         The waiver must be in writing and must be consented to by the
         Participant's spouse with such waiver specifically acknowledging the
         non-spouse beneficiary or any subsequent change in a non-spouse
         beneficiary. The spouse's consent to a waiver must be witnessed by a
         plan representative or notary public. Notwithstanding this consent
         requirement, if the Participant establishes to the satisfaction of a
         plan representative that such written consent may not be obtained
         because there is no spouse or the spouse cannot be


                                       27
<PAGE>

         located, a waiver will be deemed a qualified election. Any consent
         necessary under this provision will be valid only with respect to the
         spouse who signs the consent. Additionally, a revocation of a prior
         waiver may be made by a Participant without the consent of the spouse
         at any time before the commencement of benefits. The number of
         revocations shall not be limited.

9.5      Absence of Beneficiary Designation. If a Participant files no
         designation of beneficiary or revokes a designation previously filed
         without filing a new designation of beneficiary, or if all persons so
         designated as beneficiary shall predecease the Participant or die prior
         to complete distribution to them, the Trustee, pursuant to Employer
         instructions, shall distribute such death benefit or balance thereof to
         the following who shall be deemed beneficiaries: to such Participant's
         surviving spouse, or if none, to such Participant's surviving issue per
         stirpes and not per capita, or if none, to the Participant's estate.

                                   SECTION 10

          In the Event of Termination of Employment or Change in Status

10.1     General Rule. Subject to the provisions of Section 7.6 "Late
         Retirement", there shall be no distributions made to a Participant
         except on account of termination of employment, death, disability as
         provided for in Section 8, or termination of the Plan. All such
         distributions shall be made in accordance with Sections 7.3, 7.4, and
         7.5, except as specifically noted to the contrary herein.

10.2     Distribution -- Timing and Form. Distribution of the Participant's
         vested interest in his Account will be made as soon as practicable
         after the end of the Plan Year in which the Participant either (i)
         terminates Service otherwise than by his death, retirement, or
         disability, and is not re-employed by the Employer or an Affiliate on
         or before receiving a distribution hereunder, or (ii) incurs his fifth
         consecutive Break in Service. Said distribution shall be made in a lump
         sum, in whole shares of Company Stock (with cash paid in lieu of
         fractional shares and with respect to the vested balance of the
         Participant's Other Investments Account).

10.3     Vesting. The non-forfeitable portion of the Participant's Account
         balance of a Participant's Account shall be a percentage of such
         Account based upon the number of Years of Service that such Participant
         has credited from his date of employment after attainment of age 18
         according to the following schedule:

                Years of Service               Present Vested
                ----------------               --------------
               Less than 2 years                      0%
                       2                             25%
                       3                             50%
                       4                             75%
                5 or more years                     100%


                                       28
<PAGE>

10.4     Forfeitures. As of each Anniversary Date, any amounts which became
         Forfeitures since the last Anniversary Date shall first be made
         available to reinstate previously forfeited account balances of Former
         Participants, if any, in accordance with Section 10.5. The remaining
         Forfeitures, if any, shall be added to the Employer's contribution made
         pursuant to Section 5.1 and allocated among the Participant's Accounts
         in the same manner as the Employer's contribution for the current year.
         In the event the allocation of Forfeitures provided herein shall cause
         the "annual addition" (as defined in Section 5.2) to any Participant's
         Account to exceed the amount allowable by the Code, the excess shall be
         reallocated in accordance with Section 5.2(b). However, a Participant
         who performs less than a Year of Service during any Plan Year shall not
         share in Forfeitures for that year, unless required pursuant to Section
         11.3. If a portion of a Participant's Account is forfeited, Company
         Stock allocated to the Participant's Company Stock Account must be
         forfeited only after the Participant's Other Investments Account has
         depleted. If interest in more than one class of Company Stock has been
         allocated to a Participant's Account, the Participant must be treated
         as forfeiting the same proportion of each such class.

10.5     Restoration of a Participant's Account Upon Reemployment. If a former
         Participant is reemployed by the Employer before incurring five (5)
         consecutive one-year Breaks-in-Service, and such Participant had
         received a distribution of his entire vested interest in his Account
         pursuant to Section 10.1 prior to being reemployed, the full amount in
         such Participant's Employer contribution Account on the date of the
         prior distribution (including vested and nonvested portions) will be
         restored if:

         (a)     The Participant repays to the Plan the full amount of the prior
                 distribution, other than his voluntary contribution, before the
                 Participant incurs five (5) consecutive one-year
                 Breaks-in-Service commencing after such withdrawal; and

         (b)     The Participant was not fully vested in the portion his
                 Participant's Account attributable to Employer contributions at
                 the time of the distribution.

10.6     Voluntary and Involuntary Cash-outs. Notwithstanding any provision of
         the Plan to the contrary, a lump sum shall be made in lieu of all
         vested benefits if the value of the vested portion of the Former
         Participant's Account $3,500 (or such other amount as may be permitted
         under section 417(e) of the Code) or less and the distribution is made
         prior to January 1, 1998 and $5,000 (or such other amount as may be
         permitted under section 417(e) of the Code) or less and the
         distribution is made on or after January 1, 1998. Such immediate lump
         sum payment shall be made in cash (unless the Participant elects to
         receive such payment in shares of Qualifying Employer Securities)
         without regard to the Participant's election related to the timing of
         such payments as soon as administratively practicable following the
         Participant's termination of employment with all Affiliates. If the
         Participant, upon termination of Service for any reason other than
         retirement, death, or Total Disability, does not consent to the payment
         of the vested portion of the Participant's Account, and if the value of
         such Account exceeds $3,500 (or such other amount as may be permitted
         under section 417(e) of the Code) and the distribution is made prior to
         January 1, 1998 and $5,000 (or such other amount as may be permitted
         under section 417(e) of the Code) on the Valuation Date immediately
         following the Employees termination of Service (or as of any


                                       29
<PAGE>

         prior Valuation Date) and the distribution is made on or after January
         1, 1998, the Committee shall direct the Trustee to place the then value
         of such Account in one (1) or more investment accounts permitted under
         the Plan in trust for the named Employee for distribution commencing on
         the Valuation Date immediately following his attainment of age 65 (or
         death, if earlier). The Account and all accumulated interest shall be
         paid to the Employee at the time he attains his Normal Retirement Age.
         In the event the Employee dies before reaching retirement age, the
         Account balance shall be paid to any beneficiary the Employee has named
         in a written designation filed with the Committee or, in the absence of
         such designation, to the Employee's estate subject to the terms of
         Section 9 of the Plan. The Trustee shall have no other responsibilities
         with respect to such accounts except that, if the balance of any such
         account shall approach the amount of federal insurance, the Trustee
         shall split the account into two (2) or more accounts.

10.7     Changes in Address. It shall be the responsibility of the terminating
         Participant to keep the Committee informed as to his address, and the
         Trustee and the Committee shall not be required to do anything further
         than sending all papers, notices, payments, or the like to the last
         address given them by such Participant unless they can be shown to have
         acted in bad faith, having had knowledge of the Participant's actual
         whereabouts.

10.8     Latest Time for Distribution. Except as limited by Sections 7, 8, 9 and
         10, whenever the Trustee is to make a distribution or to commence a
         series of payments on or before an Anniversary Date, the distribution
         or series of payments may be made or begun on such date or as soon
         thereafter as is practicable, but in no event later than 180 days after
         the Anniversary Date. Except, however, unless a Former Participant
         elects in writing to defer the receipt of benefits (such election may
         not result in a death benefit that is more than incidental), the
         payment of benefits shall begin not later than the 60th day after the
         close of the Plan Year in which the latest of the following events
         occurs:

         (a)     the date on which the Participant attains the earlier of age 65
                 or the Normal Retirement Date specified herein,

         (b)     the 5th anniversary of the year in which the Participant
                 commenced participation in the Plan, or

         (c)     the date the Participant terminates his service with the
                 Employer.

10.9     Age 70-1/2 Rule. Notwithstanding any provisions of the Plan, in no
         event shall a distribution schedule or form of distribution pursuant to
         Articles 7, 8, 9, or 10 exceed the period permitted under Section
         401(a)(9) of the Code or Treasury Regulations Section 1.401 (a)(9)-1 or
         Section 1.401(a)(9)-2.

10.10    Deemed Cash-outs if 0% Vesting. Notwithstanding anything to the
         contrary, if the value of a Participant's vested portion of the
         Participant's Account is zero on the date of termination of employment,
         then the Participant shall be deemed to have received a total
         distribution of the vested portion of such Participant's Account on
         such date.


                                       30
<PAGE>

10.11    Eligible Rollover Distributions. This Section applies to distributions
         made from the Plan to Distributees on or after January 1, 1993.
         Notwithstanding any provision of the Plan to the contrary that would
         otherwise limit a Distributee's election under this Section, a
         Distributee may elect at the time and in the manner prescribed by the
         Plan Administrator, to have any portion of an Eligible Rollover
         Distribution paid directly to an Eligible Retirement Plan specified by
         the Distributee in a Direct Rollover. For purposes of this Section --

         "Distributee" means the Employee or former Employee, the Employee's or
         former Employee's surviving spouse and the Employee's or former
         Employee's spouse or former spouse who is the alternate payee under a
         Qualified Domestic Relations Order, as defined in Section 414(p) of the
         Code, are Distributees with regard to the interest of the spouse or
         former spouse.

         "Eligible Retirement Plan" means an individual retirement account
         described in Section 408(a) of the Code, an individual retirement
         annuity described in Section 408(b) of the Code, an annuity plan
         described in Section 403(a) of the Code, or a qualified trust described
         in Section 401 (a) of the Code that accepts the Distributee's Eligible
         Rollover Distribution. However, in the case of an Eligible Rollover
         Distribution to the surviving spouse of a Participant, an Eligible
         Retirement Plan is an individual retirement account or individual
         retirement annuity.

         "Direct Rollover" means a payment by the Plan to the Eligible
         Retirement Plan specified by the Distributee.

         "Eligible Rollover Distribution" means any distribution of all or any
         portion of the balance to the credit of the Distributee, except that an
         Eligible Rollover Distribution does not include: any distribution that
         is one of a series of substantially equal periodic payments (not less
         frequently than annually) made for the life (or life expectancy) of the
         Distributee or the joint lives (or joint life expectancies) of the
         Distributee and the Distributee's designated Beneficiary, or for a
         specified period of ten (10) years or more; any distribution to the
         extent such distribution is required under section 401(a)(9) of the
         Code; any distribution made after December 31, 1999 on account of
         hardship; and in the case of a distribution made before January 1,
         2002, the portion of any distribution that is not includable in gross
         income (determined without regard to the exclusion for net unrealized
         appreciation with respect to employer securities). A portion of a
         distribution that is includable in the gross income of the Distributee
         that is treated as an Eligible Rollover Distribution may only be
         transferred in a direct rollover to an Eligible Retirement Plan that
         agrees to account separately for such portion of the distribution.

                                   SECTION 11

                         Top-Heavy Definitions and Rules

11.1     Effective Date of Top-Heavy Provisions. If the Plan is or becomes
         Top-Heavy in any Plan Year beginning after December 31, 1983, the
         provisions of Sections 11 will supersede any conflicting provision in
         the Plan.


                                       31
<PAGE>

11.2     Top-Heavy Vesting Schedule. If the Plan is determined to be Top-Heavy
         for any Plan Year, a Participant's vested percentage interest in his
         Participant's Account shall be determined in accordance with the
         Top-Heavy Vesting Schedule set forth in 11.2(d) of this Plan, subject
         to the following additional requirements:

         (a)     Years of Service for purposes of vesting under a Top-Heavy
                 Vesting Schedule shall include Years of Service when the Plan
                 was not Top-Heavy;

         (b)     If any Participant in the Plan is not credited with an Hour of
                 Service after the Plan becomes Top-Heavy, that Participant
                 shall not be subject to the Top-Heavy Vesting Schedule, but
                 shall remain subject to the vesting schedule set forth in
                 Section 10.2 and the rules in effect prior to the date the Plan
                 becomes Top-Heavy; and

         (c)     If the Plan ceases to be Top-Heavy, an Employee's vested
                 percentage interest in the contributions allocated to his
                 Participant's Account for Plan Years after the Plan Year in
                 which the Plan ceases to be Top-Heavy shall be determined in
                 accordance with the vesting schedule set forth in Section 10.2
                 of the Plan, unless otherwise set forth in Section 11.2 of this
                 Plan.

         (d)     If the Plan is a Top-Heavy Plan in a Plan Year, a Participant
                 who is credited with an Hour of Service in such Plan Year shall
                 have the non-forfeitable interest in his Accrued Benefit for
                 such Plan Year determined in accordance with the following
                 schedule:

                                                   Non-forfeitable
                                                       (Vested)
                         Years of Service             Percentage
                         ----------------          ---------------

                         Less than 3                      0%
                         3 years or more                100%

         (e)     Notwithstanding any provision to the contrary, the vested
                 benefit derived from Employer contributions of a Participant
                 may not be reduced below what it was before the Plan ceased to
                 be Top-Heavy and the vesting schedule was changed. In addition,
                 each Participant with three (3) or more Years of Service shall
                 be given the option of remaining under the Top-Heavy Vesting
                 Schedule within the same period as set forth in Section 16.3.

11.3     Minimum Contributions. If this Plan is Top-Heavy during any Plan Year,
         the Employer must make a Minimum Contribution consisting of Employer
         contributions and forfeitures on behalf of each Plan Participant who is
         a Non-Key Employee equal to an amount which is not less than three (3%)
         percent of such Participant's Total Compensation. A Minimum
         Contribution shall be made on behalf of such Participant even though,
         under other Plan provisions, the Participant would not otherwise be
         entitled to receive an allocation, or would


                                       32
<PAGE>

         have received a lesser allocation for the Plan Year due to (i) the
         Participant's failure to complete one thousand (1000) Hours of Service,
         or (ii) the Participant's failure to make mandatory contributions to
         the Plan, if required; or (iii) the Participant's Total Compensation is
         less than a stated amount.

         Notwithstanding the preceding paragraph, if the Employer's Minimum
         Contribution on behalf of each Plan Participant who is a Key Employee
         equals an amount which is less than three (3%) percent of such
         Participant's Total Compensation, then the Minimum Contribution
         required to be made for each Non-Key Employee is limited to not more
         than the highest contribution rate under the Plan for each Key
         Employee. Therefore, if no Employer contribution is made on behalf of a
         Key Employee, then no Minimum Contribution is required to be made on
         behalf of each Non-Key Employee. However, if the Plan is included in a
         Required Aggregation Group and it enables a defined benefit plan of the
         Employer to meet the requirements of Sections 401(a)(4) or 410 of the
         Internal Revenue Code, then the Minimum Contribution for Non-Key
         Employees cannot be less than three (3%) percent, regardless of the
         contribution rate for Key Employees. For purposes of this subparagraph,
         all defined contribution plans included in a Required Aggregation Group
         shall be treated as one Plan.

         A Minimum Contribution shall not be made on behalf of any Participant
         who is not employed by the Employer on the last day of the Plan Year.
         For purposes of computing the Minimum Contribution for any Plan
         Participant, amounts paid by the Employer to Social Security shall be
         disregarded. Also, for all Plan years, except those beginning before
         January 1, 1985, any Employer contribution attributable on behalf of
         any Key Employee to a salary reduction or similar plan shall be taken
         into account.

11.4     Minimum Contributions or Minimum Benefits in Two or More Plans. If the
         Employer maintains both a defined benefit plan and a defined
         contribution plan and either of the plans is Top-Heavy then the Minimum
         Benefit will be provided to the Participant under the defined benefit
         plan. If the Employer maintains a defined contribution plan in addition
         to this Plan, and either of the plans is Top-Heavy, then the Minimum
         Benefit will be provided to the Participant not under this Plan but
         under the other defined contribution plan.

11.5     Aggregate Limit on Contributions and Benefits for Key Employees. If any
         Participant is a Key Employee and is, or was, covered under both a
         defined benefit plan and a defined contribution plan which are both
         included in a Top-Heavy Group of the Employer, then for any Plan Year
         in which the Plans are Top-Heavy beginning before January 1, 2000, the
         number "1.0" shall be substituted for "1.25" in each place where it
         appears in Section 5.3, unless the Additional Minimum Contribution is
         being made pursuant to this Section 11.5.

         Notwithstanding the above paragraph, if the Plan is Top-Heavy, but is
         not Super Top-Heavy, Section 5.3 without modification, shall continue
         to govern the overall limitations on contributions and benefits for Key
         Employees if an Additional Minimum Benefit or an Additional Minimum
         Contribution equal to seven and one-half (7-1/2%) percent shall be
         received by each Participant who is a Non-Key Employee in any one
         qualified plan maintained by the Employer. However, for any Plan Year
         in which this Plan is a Super Top-


                                       33
<PAGE>

         Heavy Plan beginning before January 1, 2000, 1.0 shall be substituted
         for 1.25 in any event, where it appears in Section 5.3.

11.6     Miscellaneous Total Compensation Provisions. For any Plan Year in which
         a Plan is Top-Heavy, the annual Total Compensation of each Participant
         which may be taken into account for the purpose of determining Employer
         contributions or benefits under the Plan, including the computation of
         the contribution rate for Key Employees in Section 11.3, shall not
         exceed $200,000, or such other amount as may be determined by the
         Secretary of the Treasury in accordance with Section 415(d) of the
         Internal Revenue Code and the regulations promulgated thereunder, for
         Plan Years ending on or after January 1, 1988. Notwithstanding this
         limitation, benefits attributable to annual Total Compensation while
         the Plan was not Top-Heavy shall not be reduced.

11.7     Top-Heavy Definitions

11.7.1   "Additional Minimum Benefit" means the Minimum Benefit described in
         Section 11.4; however, in determining the applicable percentage in
         Section 11.4, "three (3%) percent" shall be substituted for "two (2%)
         percent" and "twenty (20%) percent" shall be increased by 1 percentage
         point for each year for which the Plan is Top-Heavy, up to a maximum of
         thirty (30%) percent.

11.7.2   "Additional Minimum Contribution" means the Minimum Contribution
         described in Section 11.3; however, in determining the Minimum
         Contribution "four (4%) percent" shall be substituted for "three (3%)
         percent" wherever it appears throughout Section 11.3.

11.7.3   "Aggregation Group" means one of the following:

         (a)     Required Aggregation Group:

                 "Required Aggregation Group" means a group that consists of (a)
                 this Plan; (b) any other qualified plans currently maintained
                 (or previously maintained and terminated within the five year
                 period ending on the Determination Date) by the Employer and
                 any Affiliates that cover Key Employees; and (c) any other
                 qualified plans currently maintained (or previously maintained
                 and terminated within the five year period ending on the
                 Determination Date) by the Employer and any Affiliates that
                 cover Key Employees that are required to be aggregated for
                 purposes of satisfying the requirements of sections 401(a)(4)
                 or 410(b) of the Code.

         (b)     Permissive Aggregation Group:

                 "Permissive Aggregation Group" means each Plan in the Required
                 Aggregation Group and any Plan the Employer elects to place
                 into the Aggregation Group, if this expanded group continues to
                 satisfy the requirements of Sections 401(a)(4) and 410 of the
                 Internal Revenue Code.


                                       34
<PAGE>

11.7.4   "Annual Retirement Benefit" means a benefit payable annually in the
         form of a single life annuity with no ancillary benefits and beginning
         at the Normal Retirement Age under the Plan.

11.7.5   "Total Compensation" under Section 11 shall be determined under Section
         5.2 of the Plan, without regard to Sections 125, 402(a)(8), and
         402(h)(1)(B) of the Code, and the case of employer contributions made
         pursuant to a salary reduction agreement, without regard to Section
         403(b) of the Code.

11.7.6   "Determination Date" for any Plan Year means either (i) the last day of
         the preceding Plan Year, or (ii) in the case of the first Plan Year of
         any Plan, the last day of such Plan Year.

11.7.7   "Key Employee" means any Employee, former Employee, or the Beneficiary
         of such Employee, who at any time during the current Plan Year or, for
         Plan Years ending before January 1, 2002, during any of the four
         preceding Plan Years, is described in one or more of the following
         three categories:

         (a)     For Plan Years ending before January 1, 2002, an Officer of the
                 Employer who receives from such Employer an annual Total
                 Compensation which exceeds fifty percent (50%) of the maximum
                 dollar limitation under Section 415(b)(1)(A) of the Code, as in
                 effect for the calendar year in which the Determination Date
                 falls, or, for Plan Years beginning after December 31, 2001, an
                 Officer of the Employer having an annual Total Compensation
                 greater than $130,000 or such higher amount as may be
                 prescribed under section 416(i) of the Code. The maximum number
                 of Employees required to be treated as Key Employees for the
                 Plan Year by reason of being Officers is the greater of 3
                 Employees or ten (10%) percent of the number of Employees of
                 the Employer, but such number shall not exceed 50 Employees. If
                 the number of Employees who are Officers of the Employer exceed
                 the maximum number required to be counted as Key Employees, the
                 Officers to be considered as Key Employees are those with the
                 highest annual Total Compensation from the Employer.

         (b)     For Plan Years ending before January 1, 2002, one of the
                 Employees owning or considered as owning within the meaning of
                 Section 318 of the Internal Revenue Code, as modified by
                 Section 416(i)(1)(B)(iii) of the Code, the largest interests in
                 the Company, unless such Employee receives Total Compensation
                 from the Employer which is less than $30,000 per year, or the
                 maximum dollar limitation under Section 415(c)(1)(A) of the
                 Code, as in effect for the calendar year which the
                 Determination Date falls. An Employee who has some ownership
                 interest in the Company is considered to be one of the top ten
                 owners unless at least ten (10) other Employees own a greater
                 interest than such Employee. If more than one Employee has the
                 same interest in the Company, the Employee having the greater
                 annual Total Compensation from the Employer shall be treated as
                 having a larger interest in the Company.


                                       35
<PAGE>

         (c)     A Percentage Owner of the Company. A "percentage owner" means
                 any person who owns, or is considered as owning within the
                 meaning of Section 318, as modified by Section
                 416(i)(1)(B)(iii) of the Internal Revenue Code, either

                 (1)    more than five (5%) percent of the outstanding stock of
                        the Company or stock possessing more than five (5%)
                        percent of the total combined voting power of all stock
                        of the Company; or

                 (2)    more than one (1%) percent of the outstanding stock of
                        the Company or stock possessing more than one (1%)
                        percent of the total combined voting power of all stock
                        of the Company, if such person has an annual Total
                        Compensation from the Employer of more than $150,000.

                 If a person is considered during a Plan Year to be a Key
                 Employee under two or more categories, due to his status other
                 than as a Beneficiary, the present value of his accrued benefit
                 or the sum of his account balance is counted only once during
                 the Plan Year in testing whether the Plan is Top-Heavy. If a
                 person is considered during the Plan Year to be a Key Employee
                 because the person is both a Beneficiary and owner of the
                 Company, then the present value of the person's inherited
                 account balance and the present value of the person's accrued
                 benefit or the sum of his account balance as an Employee or
                 owner will be counted as the total accrued benefit or account
                 balance of the individual as a Key Employee in determining
                 whether the Plan is Top-Heavy. The determination of an
                 individual's status as a Key Employee is based on the Plan Year
                 containing the Determination Date.

11.7.8   "Minimum Benefit" means the benefit described in Section 11.4.

11.7.9   "Minimum Contribution" means the contribution described in Section
         11.3.

11.7.10  "Non-Key Employee" means an Employee who is not a Key Employee or is
         the Beneficiary of such Employee.

11.7.11  "Rollover Contributions and Similar Transfers" means the following:

         (a)     Related rollover contributions or similar transfers are those

                 (i)    not initiated by the Employee;

                 (ii)   made on or before December 31, 1983; or

                 (iii)  made to a plan maintained by the same Employer, such as
                        in a merger or consolidation of two or more plans or the
                        division of a single plan into two or more plans.

         (b)     Unrelated rollover contributions or similar transfers are those
                 which are both


                                       36
<PAGE>

                 (i)    initiated by the Employee; and

                 (ii)   made after December 31, 1983; and

                 (iii)  made from a plan maintained by one Employer to a plan
                        maintained by another Employer.

11.7.12  "Super Top-Heavy" means a Plan which would be Top-Heavy if "ninety
         (90%) percent" were substituted for "sixty (60%) percent" in each place
         it appears in Section 11.7.16.

11.7.13  "Top-Heavy" means a qualified Plan which is a Top-Heavy Plan pursuant
         to the provisions of Section 11.7.16.

11.7.14  "Top-Heavy Group" means an Aggregation Group in which, as of the
         Determination Date, the sum of the present value of the accumulated
         accrued benefits for Participants who are Key Employees under all
         defined benefit plans included in such Aggregation Group and the sum of
         the account balances for Participants who are Key Employees under all
         defined contribution plans included in such Aggregation Group exceeds
         sixty (60%) percent of a similar sum determined for all Employees,
         including their Beneficiaries, who are participating under all Plans
         included in the Aggregation Group.

11.7.15  "Top-Heavy Vesting Schedule" means the vesting schedule set forth in
         Section 11.2(d).

11.7.16  "Top-Heavy Plan" means a Plan for a Plan Year in which, as of the
         Determination Date:

         (a)     The sum of the account balances of Participants in the Plan who
                 are Key Employees for the Plan Year exceeds sixty (60%) percent
                 of the sum of the account balances under the Plan for all
                 Employees, including their Beneficiaries participating under
                 the Plan, and this Plan is not part of any Aggregation Group;
                 or

         (b)     Plan is part of a Top-Heavy Group and is included in the
                 Required Aggregation Group. Notwithstanding the preceding
                 sentence, collectively-bargained plans are not subject to the
                 rules of Section 11. December 31, 1983 shall not be taken into
                 account under the Plan for purposes of computing the Top-Heavy
                 status of the Plan or group of Plans, except to the extent
                 provided in regulations.

11.7.17  Determination of Top-Heavy Status. In making the determination of the
         Top-Heavy status of a Plan or group of Plans, the accrued benefits or
         account balances derived from Employer and Employee contributions are
         taken into account, but accumulated deductible Employee contributions
         are disregarded. Also, the determination of the present value of the
         accumulated accrued benefits and the account balances of a Key Employee
         or Non-Key Employee participating in the plans includes such amounts
         distributed to the Employee or to the Beneficiary of such Employee
         during the Plan Year that includes the Determination Date and, for Plan
         Years ending before January 1, 2002, the preceding four Plan Years,
         even if such distribution occurred before the effective date of Section
         416 of the Code. The preceding amount also includes distributions under
         a plan which has been terminated


                                       37
<PAGE>

         which, if it had not been terminated, would have been included in a
         Required Aggregation Group. An Unrelated rollover contribution or
         similar transfer accepted by the Plan after December 31, 1983 shall not
         be taken into account under the Plan for purposes of computing the
         Top-Heavy status of the Plan or group of Plans, except to the extent
         provided in regulations.

         If any individual ceases to be a Key Employee with respect to any Plan
         for any Plan Year, but such individual was a Key Employee with respect
         to such Plan for any prior Plan Year, any accrued benefit or account
         balance of such Employee shall not be taken into account in determining
         whether the Plan or group of Plans is Top-Heavy for any Plan Year
         following the last Plan Year in which such Employee was treated as a
         Key Employee. For Plan Years beginning after December 31, 1984, if any
         individual has not performed any service during the Plan Year that
         includes the Determination Date and, for Plan Years ending before
         January 1, 2002, the preceding four Plan Years for the Employer, other
         than benefits under this Plan, then any accrued benefit or account
         balance of such individual shall not be taken into account in
         determining whether the Plan or group of Plans is Top- Heavy for the
         Plan Year.

         When aggregating two or more Plans in accordance with Section 416(g)(2)
         of the Code, or as it may be amended, the present value of the accrued
         benefits or account balances will be determined separately for each
         plan as of such Plan's Determination Date. These Plans will then be
         aggregated by adding together the results for each Plan as of the
         Determination Dates that fall within the same calendar year.

         The present value of the account balance of any Plan Participant as of
         the Determination Date is the sum of (a) the Participant's account
         balance as of the most recent valuation date occurring within a
         12-month period ending on the Determination Date, and (b) an adjustment
         for the amount of any Employer contribution actually made on behalf of
         the Participant after the valuation date, but on or before the
         Determination Date. Notwithstanding the above, in the first Plan Year,
         the adjustment set forth in paragraph (b) shall include the amount of
         any Employer contribution made after the Determination Date if such
         contributions are allocated to a Participant's Employer contribution
         Account during the first Plan Year.

                                   SECTION 12

                           Administration of the Plan

12.1     Administrative Committee. The Plan shall be administered by the
         Committee which shall be responsible for carrying out the provisions of
         the Plan, and which shall be the Plan Administrator and Named Fiduciary
         as these terms are defined under ERISA. The Committee shall consist of
         at least two (2) members who shall be appointed from time to time by
         the Board of Directors. Vacancies on the Committee shall be filled in
         the same manner as appointment. The Employer shall act as the Committee
         at any time during which no committee is appointed or duly constituted
         hereunder.


                                       38
<PAGE>

         Each person appointed a member of the Committee shall signify his
         acceptance by filing a written acceptance with the Board of Directors.
         Any member of the Committee may be removed by his own accord by
         delivering his written resignation to the Board of Directors and to the
         Secretary of the Committee.

12.2     Chairman; Subcommittees. The members of the Committee shall elect from
         their number a Chairman and shall appoint a Secretary, who need not be
         a member of the Committee. They may appoint from their number such
         subcommittees with such power as they shall determine, may authorize
         one or more of their number or any agent to execute or deliver any
         instrument or make any payment in their behalf, and may employ such
         clerks, counsel, accounts and actuaries as may be required in carrying
         out the provisions of the Plan.

12.3     Meetings. The Committee shall hold meetings upon such notice, at such
         time, and at such place as it may determine.

12.4     Action. A majority of the members of the Committee at the time in
         office shall constitute a quorum for the transaction of business. All
         resolutions or other actions taken by the Committee shall be by vote of
         a majority of those present at a meeting, but not less than two, or in
         writing by all the members at the time in office, if they act without a
         meeting.

12.5     Compensation. No member of the Committee, who is also an Employee,
         shall receive any compensation for his service as such, but the
         Employer may reimburse any member for reasonable and necessary expenses
         incurred.

12.6     Administrative Rulemaking. The Committee shall from time to time
         establish rules for the administration of the Plan and the transaction
         of its business. Except as herein otherwise expressly provided, the
         Committee shall have the exclusive right to interpret the Plan and to
         decide any matters arising thereunder in connection with the
         administration of the Plan. It shall endeavor to act by general rules
         so as not to discriminate in favor of any person. Its decision and the
         records of the Committee shall be conclusive and binding upon the
         Employer, Participants, and all other persons having any interest under
         the Plan.

12.7     Plan Records. The Committee shall maintain accounts showing the fiscal
         transactions of the Plan, and in connection therewith shall require the
         Trustees to submit any necessary reports, and shall keep in convenient
         form such data as may be necessary for the determination of the assets
         and liabilities of the Plan. The Committee shall prepare, annually, a
         report showing in reasonable detail the assets and liabilities of the
         Plan and giving a brief account of the operation of the Plan for the
         past year. Such report shall be submitted to the Board of Directors and
         shall be filed in the Office of the Secretary of the Committee where it
         shall be open to inspection by any Participant of the Plan.

12.8     Reliance on Advice From Professionals. The members of the Committee and
         the officers and directors of the Employer shall be entitled to rely
         upon all certificates and reports made by any duly appointed legal
         counsel. The members of the Committee and the officers and directors of
         the Employer shall be fully protected against any action taken in good
         faith in


                                       39
<PAGE>

         reliance upon any such certificates, reports or opinions. All actions
         so taken shall be conclusive upon each of them and upon all persons
         having any interest under the Plan. Each member of the Committee shall
         be indemnified by the Employer against any and all claims, loss,
         damages, expense and liability to which he may be a party by reason of
         his membership in the Committee, except in relation to matters as to
         which he shall be adjudged in such action to be liable for gross
         negligence or willful misconduct in the performance of his duty as such
         member. The foregoing right of indemnification shall be in addition to
         any other rights to which any such member may be entitled as a matter
         of law.

12.9     Claims. Claims for benefits under the Plan shall be filed, on the forms
         supplied by the Committee. Written notice of the disposition of a claim
         shall be furnished the claimant within thirty (30) days after the
         application therefor is filed. In the event the claim is denied, the
         reasons for the denial shall be cited and, where appropriate, an
         explanation as to how the claimant can perfect the claim will be
         provided.

12.10    Appeals. Any Employee, former Employee, or beneficiary of either, who
         has been denied a benefit, or feels aggrieved by any other action of
         the Employer, Committee or the Trustee, shall be entitled, upon request
         to the Committee and if he has not already done so, to receive a
         written notice of such action, together with a full and clear statement
         of the reasons for the action. If the claimant wishes further
         consideration of his position, he may obtain a form from the Committee
         on which to request a hearing. Such form, together with a written
         statement of the claimant's position, shall be filed with the Committee
         no later than ninety (90) days after receipt of the written
         notification provided for above or in Section 12.10. The Committee
         shall schedule an opportunity for a full and fair hearing of the issue
         within the next thirty (30) days. The decision following such hearing
         shall be made within thirty (30) days and shall be communicated in
         writing to the claimant.

12.11    Fiduciary Action. Any action taken or omitted by any fiduciary with
         respect to the Plan, including any decision, interpretation, claim
         denial or review on appeal, shall be conclusive and binding on all
         interested parties and shall be subject to judicial modification or
         reversal only to the extent it is determined by a court of competent
         jurisdiction that such action or omission was arbitrary and capricious
         and contrary to the terms of the Plan.

                                   SECTION 13

                    Management and Investment of Trust Assets

13.1     Exclusive Benefit Rule. All assets for providing the benefits of the
         Plan shall be held as a trust for the exclusive benefit of Participants
         and beneficiaries under the Plan, and no part of the corpus or income
         shall be used for, or diverted to, purposes other than for the
         exclusive benefit of Participants and beneficiaries under the Plan. No
         Participant or beneficiary under the Plan, nor any other person, shall
         have any interest in or right to any part of the earnings of the Trust,
         or any rights in, to or under the Trust or any part of its assets,
         except to the extent expressly provided in the Plan.


                                       40
<PAGE>

13.2     Investment Control. All contributions to the Plan by either the
         Participants or the Employer shall be committed in trust to the
         Trustees. The Trustees shall be appointed from time to time by the
         Board of Directors by appropriate instrument, with such powers in the
         Trustees as to investment, re-investment control and disbursement of
         the funds as the Board of Directors shall approve and as shall be in
         accordance with the Plan. The Board of Directors may remove any Trustee
         at any time, upon reasonable notice, and upon such removal or upon the
         resignation of any Trustee, the Board of Directors shall designate a
         successor Trustee.

13.3     Investment in Qualifying Employer Securities. Trust Assets under the
         Plan will be invested primarily in Qualifying Employer Securities, as
         provided in the Trust Agreement. Trust Assets may be used to purchase
         shares of Qualifying Employer Securities from Company shareholders or
         from the Company. The Trustee may also invest Trust Assets in savings
         accounts, certificates of deposit, high-grade short-term securities,
         equity stocks, bonds, or other investments, or Trust Assets may be held
         in cash. All investments of Trust Assets shall be made by the Trustee
         only upon the direction of the Committee, and all purchases of
         Qualified Employer Securities by the Trustee shall be made at prices
         which do not exceed the fair market value of such shares, as determined
         in good faith by the Committee. The Committee may direct the Trustee to
         invest and hold up to 100% of the Trust Assets in Qualified Employer
         Securities. Notwithstanding anything in the Plan to the contrary, all
         determinations as to the fair market value of Qualified Employer
         Securities shall be made (i) in accordance with Treasury Regulation
         ss.54.4975-11(d)(5), (ii) by an independent appraiser, pursuant to
         Section 401(a)(28) of the Code, in the event such Qualified Employer
         Securities are not readily tradable on an established securities
         market, and (iii) as of the most recent Valuation Date, provided that
         transactions involving Participants who are "disqualified persons"
         within the meaning of Section 4975 of the Code shall be valued as of
         the transaction date.

13.4     Acquisition Loans. The Committee may direct the Trustee to incur
         Acquisition Loans from time to time to finance the acquisition of
         Qualified Employer Securities (Financed Shares) for the Trust or to
         repay a prior Acquisition Loan. An installment obligation incurred in
         connection with the purchase of Qualified Employer Securities shall
         constitute an Acquisition Loan. An Acquisition Loan shall be for a
         specific term, shall bear a reasonable rate of interest and shall not
         be payable on demand except in the event of default. An Acquisition
         Loan may be secured by a collateral pledge of the Financed Shares so
         acquired. No other Trust Assets may be pledged as collateral for an
         Acquisition Loan, and no lender shall have recourse against Trust
         Assets other than any Financed Shares remaining subject to pledge. Any
         pledge of Financed Shares must provide for the release of shares so
         pledged on pro-rata basis as principal and interest on the Acquisition
         Loan are repaid by the Trustee and such Financed Shares are allocated
         to Participants' Company Stock Accounts (as provided in Section 6).
         Repayments of principal and interest on any Acquisition Loan shall be
         made by the Trustee (as directed by the Committee) only from Employer
         contributions paid in cash to enable the Trustee to repay such Loan,
         forfeitures from Participant accounts, from earnings attributable to
         such Employer contributions and from cash dividends received by the
         trust. The payments made with respect to an Acquisition Loan by the
         Trust during a Plan Year shall not exceed an amount equal to the sum of
         such contributions and


                                       41
<PAGE>

         earnings received during or prior to the Plan Year less such payments
         in prior years. Such contributions and earnings must be accounted for
         separately in the books of accounts of the Trust until the Acquisition
         Loan is repaid. The proceeds of an Acquisition Loan shall be used
         within a reasonable time after receipt by the Trust to purchase Common
         Stock. Further, all income earned with respect to Unallocated Company
         Stock shall be used at the discretion of the Committee to repay the
         Acquisition Loan used to purchase such Company Stock. Any income not so
         used shall be allocated as income of the Plan.

         Should the Employer contributions, earnings attributable to such
         Employer contributions and cash dividends received by the Trust on
         Financed Shares be insufficient to meet the obligations created by the
         Acquisition Loan, then the Trustee shall so advise the Committee. The
         Committee may recommend certain actions including but not limited to,
         refinancing the original Loan, amendment of the original Loan
         Agreement, or the entering into of an additional Acquisition Loan to
         repay a prior Acquisition Loan.

13.5     Disbursements. The Committee shall determine the manner in which the
         funds of the Plan shall be disbursed in accordance with the Plan and
         provisions of the trust instrument, including the form of voucher or
         warrant to be used in making disbursements and the qualifications of
         persons authorized to approve and sign the same and any other matters
         incident to the disbursements of such funds.

13.6     Voting of Company Stock. Pursuant to Section 409(e) of the Code, all
         "Registration-Type" Company Stock allocated to a Participant Account
         shall be voted by the Trustee in accordance with the instructions of
         the Participant. If the Company Stock is not a registration-type class
         of securities pursuant to Section 409(e) of the Code, then Participants
         are entitled to direct the Trustee concerning voting allocated stock
         with respect to any corporate matter which involves the approval or
         disapproval of any corporate merger, consolidation, recapitalization,
         reclassification, liquidation, dissolution, sale of substantially all
         assets or similar transaction. The Committee shall direct the voting of
         such stock in all other matters.

         Company Stock which has not yet been allocated and allocated stock for
         which no voting direction has been received by Participants in a timely
         manner shall be voted by the Trustee in the same proportion as
         Participants vote allocated stock; provided that, in the absence of any
         voting directions as to allocated stock, (i) the Company's Board of
         Directors shall direct the Trustee as to the voting of all shares of
         unallocated stock, (ii) and in the absence of such direction from the
         Company's Board of Directors, the Trustee shall have sole discretion as
         to the voting of such shares.

13.7     Dividends. Dividends paid with respect to Qualifying Employer
         Securities held by the Trust shall be applied as follows:

         (a)     The dividends paid with respect to shares which are both
                 purchased with the proceeds of an Acquisition Loan and
                 allocated to the accounts of Participants at the direction of
                 the Plan Committee shall be either (1) paid in cash directly to
                 such Participants or their Beneficiaries, or (2) if paid into
                 the plan, distributed in cash


                                       42
<PAGE>

                 to Participants or their Beneficiaries not later than 90 days
                 after the close of Plan Year in which paid, or (3) if permitted
                 by Section 404(k) of the Code, paid into the Plan and used to
                 repay the Acquisition Loan, with shares released thereby
                 allocated to such Participants in an amount proportional to
                 such dividends for the year for which such dividends would have
                 been allocated to such Participants, or (4) in the case of
                 dividends received after December 31, 2001, to the extent
                 permitted by the Plan Committee and if elected by a Participant
                 or Beneficiary, retained in the Trust Fund and invested in
                 additional Shares; provided, however, that the fair market
                 value of said shares is not less than the amount of such
                 dividend that the Participant would have otherwise received;
                 and

         (b)     The dividends paid with respect to unallocated shares shall be
                 used to repay the Acquisition Loan.

                 To the extent so applied in either (a) or (b) above, the
                 dividends so paid shall be deductible to the Employer (as
                 permitted under Section 404(k) of the Code) in the taxable year
                 of the Employer in which the dividend is paid or distributed to
                 Participants, or applied to repay the Acquisition Loan.

                                   SECTION 14

                           Obligations of the Employer

14.1     Limited Liability. The Employer shall have no liability in respect to
         payments or benefits or otherwise under the Plan, and the Employer
         shall have no liability in respect to the administration of the Trust
         or of the funds, securities or other assets paid over to the Trustees,
         and each Participant, each contingent Participant, and each beneficiary
         shall look solely to such Trust Fund for any payments or benefits under
         the Plan.

                                   SECTION 15

                                  Miscellaneous

15.1     No Assignment Etc. No benefit payable under the Plan shall be subject
         in any manner to anticipation, alienation, sale, transfer, assignment,
         pledge, encumbrance, or charge and any action by way of anticipating,
         alienating, selling, transferring, assigning, pledging, encumbering, or
         charging the same shall be void and of no effect; nor shall any benefit
         be in any manner liable for or subject to the debts, contracts,
         liabilities, engagements, or torts of the person entitled to such
         benefit, except as specifically provided in the Plan.

15.2     Non-alienation. No benefits under this Plan shall be in any manner
         anticipated, alienated, sold, transferred, assigned, pledged,
         encumbered or charged, and any attempt to so anticipate, alienate,
         sell, transfer, assign, pledge, encumber or charge the same shall be
         void; nor shall any such benefits in any manner be liable for or
         subject to the debts, contracts, liabilities or engagements of the
         person entitled to such benefits as herein provided for him. The
         preceding sentence shall also apply to the creation, assignment or


                                       43
<PAGE>

         recognition of right to any benefit payable with respect to a
         Participant pursuant to a Domestic Relations Order, unless such order
         is determined, by the Committee in its sole and absolute discretion, to
         be a Qualified Domestic Relations Order.

15.3     Procedures Involving Domestic Relations Orders. Upon receiving a
         Domestic Relations Order, the Plan Administrator shall segregate in a
         separate account or in an escrow account or separately account for the
         amounts payable to any person pursuant to such Domestic Relations
         Order, pending a determination whether such Domestic Relations Order
         constitutes a Qualified Domestic Relations Order, and shall give notice
         of the receipt of the Domestic Relations Order to the Participant or
         Former Participant and each other person affected thereby. If, within
         18 months after receipt of such Domestic Relations Order, the Plan
         Administrator, a court of competent jurisdiction or another appropriate
         authority determines that such Domestic Relations Order constitutes a
         Qualified Domestic Relations Order, the Plan Administrator shall direct
         the Trustee to pay the segregated amounts (plus any interest thereon)
         to the person or persons entitled thereto under the Qualified Domestic
         Relations Order. If it is determined that the Domestic Relations Order
         is not a Qualified Domestic Relations Order or if no determination is
         made within the prescribed 18-month period, the segregated amounts
         shall be distributed as though the Domestic Relations Order had not
         been received, and any later determination that such Domestic Relations
         Order constitutes a Qualified Domestic Relations Order shall be applied
         only with respect to benefits that remain undistributed on the date of
         such determination. The Plan Administrator shall be authorized to
         establish such reasonable administrative procedures as he deems
         necessary or appropriate to administer this Section 15.3. This Section
         15.3 shall be construed and administered so as to comply with the
         requirements of section 401(a)(13) of the Code.

15.4     Offset. Notwithstanding anything in the Plan to the contrary, a
         Participant's, Former Participant's or Beneficiary's Accounts under the
         Plan may be offset by any amount such Participant, Former Participant
         or Beneficiary is required or ordered to pay to the Plan if:

                 (a)    the order or requirement to pay arises: (i) under a
                        judgment issued on or after August 5, 1997 of conviction
                        for a crime involving the Plan; (ii) under a civil
                        judgment (including a consent order or decree) entered
                        by a court on or after August 5, 1997 in an action
                        brought in connection with a violation (or alleged
                        violation) of part 4 of subtitle B of title I of ERISA;
                        or (iii) pursuant to a settlement agreement entered into
                        on or after August 5, 1997 between the Participant,
                        Former Participant or Beneficiary and one or both of the
                        United States Department of Labor and the Pension
                        Benefit Guaranty Corporation in connection with a
                        violation (or alleged violation) of part 4 of subtitle B
                        of title I of ERISA by a fiduciary or any other person;
                        and

                 (b)    the judgment, order, decree or settlement agreement
                        expressly provides for the offset of all or part of the
                        amount ordered or required to be paid to the Plan
                        against the Participant's, Former Participant's or
                        Beneficiary's benefits under the Plan.


                                       44
<PAGE>

15.5     No Employment Rights. The establishment of the Plan shall not be
         construed as conferring any rights upon any Employee or any person for
         a continuation of employment, and shall not be construed as limiting in
         any way the right of the Employer to discharge any Employee or to treat
         without regard to the effect which such treatment might have upon him
         as a Participant in the Plan.

15.6     Incompetence of Beneficiary. If any person entitled to receive any
         benefits from the Trust Fund is, in the judgment of the Committee,
         legally, physically, or mentally incapable of personally receiving and
         receipting for any distribution, the Committee may instruct the
         Trustees to make distribution to such other person, persons or
         institutions as, in the judgment of the Committee are then maintaining
         or have custody of such distributee.

15.7     Conclusiveness of Committee Decisions. The determination of the
         Committee as to the identity of the proper payee of any benefit under
         the Plan and the amount of such benefit properly payable shall be
         conclusive, and payment in accordance with such determination shall
         constitute a complete discharge of all obligations on account of such
         benefit.

15.8     Inability to Locate Beneficiary. In the event an amount is payable from
         the Trust Fund to a beneficiary or the executor or administrator of any
         deceased Participant and if, after written notice from the Trustees
         mailed to such person's last known address as certified to the Trustees
         by the Committee, such person or such executor or administrator shall
         not have presented himself to the Trustees within six (6) years after
         the mailing of such notice, the Trustees shall notify the Committee and
         the Committee shall instruct the Trustees to distribute such amount due
         to such beneficiary or such executor or administrator among one or more
         of the spouse and blood relatives of such deceased person, designated
         by the Committee.

15.9     Mergers, Etc. In the case of any merger, consolidation with or transfer
         of assets or liabilities to any other plan, each Participant in the
         Plan shall, (if the plan is terminated), receive a benefit under this
         Plan immediately after the merger, consolidation or transfer, which is
         equal to or greater than the benefit under this Plan he would have been
         entitled to receive immediately before the merger, consolidation or
         transfer if the plan had been terminated.

                                   SECTION 16

                                   Amendments

16.1     Amendments. The Company reserves the right at any time, and from time
         to time, by action of its Board of Directors, to modify or amend in
         whole or in part any or all of the provisions of the Plan. This right
         of the Company is subject to the conditions:

         (a)     that no modification or amendment may be made which will
                 adversely affect the existing account balances or optional
                 forms of benefits of any Participant or beneficiary; and


                                       45
<PAGE>

         (b)     that no part of the assets of the Plan shall, by reason of any
                 modification or amendment, be used for or diverted to, purposes
                 other than for the exclusive benefit of Participants and
                 beneficiaries under the Plan.

16.2     ESOP Status. If the Company amends this Plan to no longer primarily
         invest in Qualifying Employer Securities, thus ceasing to be an ESOP,
         Section 17.2 will apply.

16.3     Vesting Rule. In the event that the vesting schedule of this Plan is
         amended, any Participant who has completed at least three (3) Years of
         Service may elect to have his vested interest determined without regard
         to such amendment by notifying the Plan Administrator in writing during
         the election period as hereinafter defined. The election period shall
         begin on the date such amendment is adopted and shall end no earlier
         than the latest of the following dates:

         (a)     The date which is sixty (60) days after the day the amendment
                 is adopted;

         (b)     The date which is sixty (60) days after the day the amendment
                 becomes effective; or

         (c)     The date which is sixty (60) days after the day the Participant
                 is issued written notice of the amendment by the Employer or
                 Plan Administrator.

         Such election shall be available only to an individual who is a
         Participant at the time such election is made and such election shall
         be irrevocable.

         If the Plan is amended pursuant to this Section and an Employee is a
         Participant as of the later of the date the amendment is adopted or the
         date the amendment becomes effective, then the nonforfeitable
         percentage of the Participant's Account shall not be less than such
         percentage when determined under the Plan without regard to the
         amendment.

                                   SECTION 17

                 Suspension, Discontinuance and Plan Termination

17.1     Permanence. The Employer intends this Plan to be permanent and to
         qualify under Section 401 of the Internal Revenue Code of 1986, as that
         statute may from time to time be amended or supplemented. However, the
         Plan may be discontinued by the Board of Directors, but only upon
         condition that such action is taken under the Trust Agreement
         established under the Plan and as such shall render it impossible for
         any part of the corpus of the Trust or income thereon to be at any time
         used for, or diverted to, purposes other than for the exclusive benefit
         of Participants and beneficiaries. Upon termination, partial
         termination, or upon complete discontinuance of contributions all
         affected Participants' Accounts shall be considered as fully vested and
         non-forfeitable and all unallocated assets of the Trust, including but
         not limited to Employer contributions and unallocated Trust assets and
         earnings thereon, shall be allocated to the accounts of all
         Participants as of the next Valuation Date (or if the Plan is being
         terminated immediately, then on the date of such Plan termination as if
         it were the next Valuation Date) in accordance with the


                                       46
<PAGE>

         provisions of the Plan hereof, and shall be applied for the benefit of
         each such Participant either by a lump-sum distribution, or by the
         continuance of the Trust and the payments of benefits thereunder in the
         manner provided in the Plan. After initial qualification by the
         Internal Revenue Service, there will be no reversion of assets to the
         Employer under any circumstances. All Participants shall be treated in
         a uniform and nondiscriminatory manner.

17.2     Cessation of ESOP Status. If this Plan ceases to be an ESOP, the
         proceeds of an Acquisition Loan will be used within a reasonable time
         after receipt by the Plan either to acquire Qualifying Employer
         Securities or to repay the loan or a prior Acquisition Loan. Even if
         the Plan ceases as an ESOP, any Qualifying Employer Security acquired
         with the proceeds of an Acquisition Loan will be subject to a put
         option if the Company Stock is not publicly traded when distributed, or
         if the Company Stock is subject to a trading limitation when
         distributed. The put option must be exercisable at least during a
         15-month period which begins on the date the Company Stock is subject
         to the put option is distributed by the Plan. The price at which the
         put option will be exercisable will be the value of the Company Stock
         as of the date of exercise or as of the most recent Valuation Date. If
         the transaction takes place between the Plan and a disqualified person,
         value will be determined as of the date of the transaction.

17.3     Cash Merger or Sale of the Company. Notwithstanding anything herein to
         the contrary, in the event that the Company or all of the Company's
         outstanding Company Stock shall be acquired for cash through merger or
         sale by an unrelated third party, then the Plan shall automatically be
         terminated without further action or notice effective on the date of
         such sale or merger; all Participant Accounts shall be considered fully
         vested and non-forfeitable as of such date of termination; all Employer
         contributions, dividends on Company Stock and earnings on Participant
         Account assets paid to the Trust or earned by the Trust since the most
         recent Valuation Date shall be allocated to the accounts of all
         Participants as of the date of termination of the Plan as if it were
         the next Valuation Date in accordance with the provisions of the Plan;
         and all funds realized by the Trust with respect to any Financed Shares
         remaining as collateral on any Acquisition Loans which shall be
         exchanged for cash in such merger or sale after repayment of all
         Acquisition Loans shall have been made shall be allocated to the
         accounts of all Participants pro rata based on the total value of
         assets allocated to each Participant's Account as a percentage of the
         total value of assets allocated to all Participant Accounts and held in
         the Trust as of the date of termination of the Plan. Upon such
         termination of the Plan and completion of the final accounting and
         allocation of the Trust assets, all such Participant Accounts which
         shall account for all Trust assets shall be distributed in a lump-sum
         to each Participant as soon as administratively feasible.

                                   SECTION 18

                          Inclusion of Other Companies

18.1     Joinder Generally. Any company which is or becomes a subsidiary,
         Affiliate or associated company of the Employer, may, with the approval
         of the Board of Directors of the Company, adopt this Plan with respect
         to its Employees.


                                       47
<PAGE>

18.2     Joinder -- Terms and Conditions. With respect to the Employees of any
         such subsidiary, Affiliate or associated companies which may become
         included in the Plan, the Board of Directors of the Company shall
         determine the extent, if any, to which the period of prior employment
         therewith or with any predecessors thereof shall be recognized as
         service for the purposes of this Plan.


                                       48

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.19
<SEQUENCE>7
<FILENAME>d155770.txt
<DESCRIPTION>MATERIAL CONTRACTS
<TEXT>
                                                                   EXHIBIT 10.19

                              Carver Bancorp, Inc.

                  Compensation Plan for Non-Employee Directors

1.    Purpose of the Plan.

            The purpose of the Compensation Plan for Non-Employee Directors (the
      "Plan") is to strengthen the link of the compensation of non-employee
      directors of Carver Bancorp, Inc., a Delaware corporation or any successor
      corporation (the "Company"), directly with the interests of its
      stockholders.

2.    Participants.

            Participants in the Plan shall consist of directors of the Company
      who are not employees of the Company or any of its subsidiaries (each, a
      "Participant" or "Non-Employee Director"). The term "subsidiary" as used
      in the Plan means a corporation more than 50% of the voting stock of
      which, or an unincorporated business entity more than 50% of the equity
      interest in which, shall at the time be owned directly or indirectly by
      the Company.

3.    Shares Available Under the Plan.

            Subject to the provisions of Section 8 of the Plan, a maximum of
      50,000 shares of common stock, par value $0.01 per share ("Shares"), of
      the Company may be delivered under the Plan. Shares to be delivered under
      the Plan shall be Shares held in treasury acquired through open market
      purchases from time to time or otherwise available to the Company.

4.    Administration of the Plan.

            The Plan shall be administered by the Compensation Committee of the
      Board of Directors of the Company (the "Committee") which shall have the
      authority to designate one of its members and/or the Secretary of the
      Company to take action on behalf of the Committee. The Committee shall
      have authority to interpret the Plan, and to prescribe, amend and rescind
      rules and regulations relating to the administration of the Plan, and all
      such interpretations, rules and regulations shall be conclusive and
      binding on all persons.

5.    Effective Date of the Plan.

            At the March 21, 2000 meeting of the Board of Directors of the
      Company, the Board approved the compensation of the members of the Board
      of Directors, at each director's option, to include compensation in the
      form of common stock or options of the Company. At the April 17, 2000
      meeting of the Board of Directors of Carver Federal Savings Bank (the
      "Bank"), the Bank's Board approved an amendment of the Bank's By-laws to
      permit compensation by the members of the Board of Directors in the form
      of common stock or options of the Company in lieu of cash.

            This Plan shall be submitted to the Board of Directors of the
      Company and the Bank for approval at the meeting to be held on June 25,
      2002, or any adjournment thereof, and, if approved by the directors, shall
      become effective as of July 1, 2001.

<PAGE>
                                                                               2


6.    Shares or Options in Lieu of Cash Compensation.

      A. Shares in Lieu of Cash Compensation.

            Each Non-Employee Director may elect ("Share Payment Election") to
      be compensated for all of the (i) cash retainer, (ii) meeting fees and/or
      (iii) other fees to be paid for board, committee or other service to the
      Company or its subsidiaries through the issuance or transfer of Shares,
      valued at the closing price on the American Stock Exchange on the day of
      the month during which each payment of such retainer and/or fee amount
      would otherwise be earned. A Non-Employee Director may make a Share
      Payment Election by submitting a Directors Compensation Election form, in
      the form prescribed by the Committee, to the Secretary of the Company.

            Each Non-Employee Director who makes a Share Payment Election shall
      become a Participant in the Plan effective with respect to fees accruing
      on or after the first day of the calendar month beginning six months after
      the date of such Share Payment Election. Any Share Payment Election
      relating to the cash retainer or meeting fees or other fees shall be one
      hundred percent (100%) of such retainer or meeting or other fees.

            A Participant may change his or her Directors Compensation Election
      form with respect to compensation to be earned and payable thereafter in
      Shares by submitting a modified Directors Compensation Election form to
      the Secretary of the Company, effective with respect to fees or retainer
      earned on or after the first day of the calendar month beginning six
      months after the date such Directors Compensation Election form is filed
      with the Secretary of the Company.

      B. Stock Options in Lieu of Cash Compensation.

            Each Non-Employee Director may elect ("Option Payment Election") to
      be compensated for all of the (i) cash retainer, (ii) meeting fees and/or
      (iii) other fees otherwise payable to him or her for any and all service
      to be paid for board, committee or other service to the Company or its
      subsidiaries through the award of options to purchase common stock of the
      Company. The number of such options granted to a Participant shall be
      determined by an independent compensation consultant using a generally
      accepted stock option pricing model, such as Black-Scholes option pricing
      model, and shall be granted with an exercise price equal to the average of
      the closing price of a share of common stock of the Company on the
      American Stock Exchange over the period for which such payment is
      calculated. Such options shall vest six months from the date of grant,
      which shall be the Effective Date (as defined below), if the Participant
      remains a Director on such date and shall be immediately vested in the
      case of the Participant's death or disability. If a Participant leaves the
      Board prior to any vesting event (other than by reason of death or
      disability), the Participant shall forfeit the non-vested portion of the
      option. The option shall have a ten year term. Once the option has vested,
      a Participant (or the beneficiary in the event of the Participant's death)
      may exercise it at any time prior to its expiration date whether or not
      the Participant remains on the Board. A Non-Employee Director may make an
      Option Payment Election by submitting a Directors Compensation Election
      form, in the form prescribed by the Committee, to the Secretary of the
      Company.

            Each Non-Employee Director who makes an Option Payment Election
      shall become a Participant in the Plan effective with respect to fees
      accruing on or after the first day of the calendar month beginning six
      months after the date of such Option Payment Election ("Effective Date").
      Any Option Payment Election relating to retainer or meeting fees or other
      fees shall be one hundred percent (100%) of such retainer or meeting or
      other fees.

<PAGE>
                                                                               3


            A Participant may change his or her Directors Compensation Election
      form with respect to compensation to be earned and payable thereafter in
      options by submitting a modified Directors Compensation Election form to
      the Secretary of the Company, effective with respect to fees or retainer
      earned on or after the first day of the calendar month beginning six
      months after the date such Directors Compensation Election form is filed
      with the Secretary of the Company.

      C. Directors Compensation Election Form

            Each Participant shall indicate on the Directors Compensation
      Election form (i) whether meeting and other fees are to be paid in cash,
      Shares or options and (ii) the Participant's beneficiary or beneficiaries.
      A Participant shall be permitted at any time to modify his or her
      beneficiary or beneficiaries, effective as of the date such modified
      Directors Compensation Election form is received by the Secretary of the
      Company. The term "beneficiary" shall mean any person or entity designated
      as such in a Directors Compensation Election form submitted to the
      Secretary of the Company, or if no designated beneficiary survives the
      Non-Employee Director or is in existence on the date of the Non-Employee
      Director's death, the beneficiary shall be the Non-Employee Director's
      estate.

7.    Restriction on Transfer of Shares.

            No Shares or options received by a Participant under Section 6 of
      the Plan may be sold, assigned, transferred, pledged or otherwise
      encumbered or disposed of for a period of six months after receipt of
      those Shares, except in the case of the Participant's death or disability
      during that six-month period.

8.    Adjustments Upon Changes In Capitalization.

            If there shall be any change in or affecting Shares on account of
      any merger, consolidation, reorganization, recapitalization,
      reclassification, stock dividend, stock split or combination, or other
      distribution to holders of Shares or options (other than a cash dividend),
      there shall be made or taken such amendments to the Plan and such
      adjustments and actions thereunder as the Board of Directors of the
      Company may deem appropriate under the circumstances.

9.    Government and Other Regulations.

            The obligations of the Company to deliver Shares under Section 6 of
      the Plan shall be subject to (i) all applicable laws, rules and
      regulations and such approvals by any governmental agencies as may be
      required, including, without limitation, compliance with the Securities
      Act of 1933, as amended, and (ii) the condition that such Shares shall
      have been duly listed on the American Stock Exchange.

10.   Amendment and Termination of the Plan.

            The Plan may be amended by the Board of Directors of the Company in
      any respect. The Plan may also be terminated at any time by the Board of
      Directors of the Company. Upon termination of the Plan, the amounts then
      due to each Non-Employee Director shall be paid in accordance with the
      Directors Compensation Election form then in effect.

<PAGE>
                                                                               4


11.   Adoption of Procedures.

            The Secretary of the Company shall have the authority to adopt such
      procedures as are appropriate to administer the Plan.

12.   Miscellaneous.

      A.    Nothing contained in this Plan shall be deemed to confer upon any
            person any right to continue as a director of or to be associated in
            any other way with the Company.

      B.    To the extent that Federal laws do not otherwise control, the Plan
            and all determinations made and actions taken pursuant hereto shall
            be governed by the law of the State of Delaware.

      C.    Headings are given to sections of the Plan solely as a convenience
            to facilitate reference. The reference to any statute, regulation,
            or other provision of law shall be construed to refer to any
            amendment or successor to such provision of law.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.20
<SEQUENCE>8
<FILENAME>d156268.txt
<DESCRIPTION>MATERIAL CONTRACTS
<TEXT>
                                                                   EXHIBIT 10.20

                              AMENDMENT NUMBER ONE

                                       TO

                           CARVER FEDERAL SAVINGS BANK

                             RETIREMENT INCOME PLAN

            (As Amended and Restated Effective as of January 1, 1997
                 and as Further Amended Through January 1, 2001)

      Pursuant to Section 14.1 of Carver Federal Savings Bank Retirement Income
Plan as amended and restated effective January 1, 1997 and further amended and
restated through January 1, 2001 ("Plan"), the Plan is amended effective as
follows:

1.    Preamble
      --------

      The following amendments to the Plan are adopted to reflect certain
      provisions of the Economic Growth and Tax Relief Reconciliation Act of
      2001 ("EGTRRA"). The amendments are intended as good faith compliance with
      the requirements of EGTRRA and are to be construed in accordance with
      EGTRRA and guidance issued thereunder. Except as otherwise provided, the
      amendments shall be effective as of the first day of the first Plan Year
      beginning after December 31, 2001.

      These amendments shall supersede the provisions of the Plan to the extent
      Plan provisions are inconsistent with the provisions of the following
      amendments.

2.    Earnings (Plan Section 1.1(J))
      ------------------------------

      For Plan Years beginning after December 31, 2001, the first sentence of
      the second paragraph of Section 1.1(J) is restated in its entirety, to
      read as follows:

            "The amount of Compensation taken into account for a Plan Year
            consisting of twelve (12) months for Plan Years commencing on and
            after January 1, 1997, shall not exceed one hundred sixty thousand
            dollars ($160,000) for the 1997, 1998 and 1999 Plan Years, one
            hundred seventy thousand dollars ($170,000) for the 2000 and 2001
            Plan Years and two hundred thousand dollars ($200,000) for the 2002
            Plan Year, thereafter adjusted in multiples of five thousand dollars
            ($5,000) for increases in the cost-of-living as prescribed by the
            Secretary of the Treasury under Section 401(a)(17)(B) of the Code."

3.    Section 415 Limitations on Benefits (Plan Section 6.1)
      ------------------------------------------------------

      Section 6.1(A)(8) is restated as follows, effective for Limitation Years
      ending after December 31, 2001:

            (8)   "MAXIMUM PERMISSIBLE DOLLAR AMOUNT" - one hundred sixty
                  thousand dollars ($160,000). Such amount shall be adjusted in
                  accordance with the provisions of Section 6.1(C).


                                  Page 1 of 4
<PAGE>

      Section 6.1(A)(10) is amended by the addition of the following new
      paragraph at the end thereof, effective for Limitation Years ending after
      December 31, 2001:

                  Benefit increases resulting from the increase in the Maximum
                  Permissible Dollar Amount for Limitation Years ending after
                  December 31, 2001 shall be provided to all current and former
                  Participants who have an Accrued Benefit on the last day of
                  the Limitation Year immediately prior to the Limitation Year
                  ending after December 31, 2001 (other than an Accrued Benefit
                  resulting from a benefit increase solely as a result of the
                  increase in the Maximum Permissible Dollar Amount for
                  Limitation Years ending after December 31, 2001).

      Section 6.1(C)(6) is restated as follows, effective for Limitation Years
      ending after December 31, 2001:

            (6)   A Participant's benefit which commences after attainment of
                  age 65 may exceed the Maximum Permissible Dollar Amount,
                  provided the Actuarial Equivalent of such annual benefit
                  commencing at age 65 satisfies such Maximum Permissible Dollar
                  Amount actuarially adjusted to the date of retirement. The
                  actuarial equivalent of the Maximum Permissible Dollar Amount
                  commencing at an age after age 65 shall be determined as the
                  lesser of: (1) the Actuarial Equivalent annual benefit
                  calculated using the interest rate and mortality table (or
                  tabular factors) as set forth in Appendix A of the Plan for
                  purposes of determining the Actuarial Equivalent for a
                  Postponed Retirement Benefit, and (2) the equivalent annual
                  benefit calculated using a five percent (5%) interest rate
                  assumption and the GATT Applicable Mortality Table as set
                  forth in Table A. For these purposes, mortality between age 65
                  and the age at which benefits commence shall be ignored.

      Section 6.1(C)(7)(c) is restated as follows, effective for Limitation
      Years ending after December 31, 2001:

            (c)   If a Participant's benefit commences prior to attainment of
                  age 62, the Maximum Permissible Dollar Amount shall be equal
                  to a benefit commencing at age 62, reduced to the actuarial
                  equivalent of such benefit determined as of the benefit
                  commencement date. In determining the actuarial equivalent of
                  a benefit commencing prior to age 62, such benefit shall be
                  determined as the lesser of: (1) the Actuarial Equivalent
                  annual benefit calculated using the interest rate and
                  mortality table (or tabular factors) as set forth in Appendix
                  A of the Plan, and (2) the equivalent annual benefit
                  calculated using a five percent (5%) interest rate assumption
                  and the GATT Applicable Mortality Table as set forth in Table
                  A of the Plan. Any decrease in the Maximum Permissible Dollar
                  Amount determined hereunder shall not reflect a mortality
                  decrement if benefits are not forfeited upon the death of a
                  Participant. If any benefits are forfeited upon death, the
                  full mortality decrement is taken into account.

4.    Modification of Top-Heavy Plan Provisions (Section 6.2)

      This Section shall apply for purposes of determining whether the Plan is a
      top-heavy plan under Section 416(g) of the Code for Plan Years beginning
      after December 31, 2001, and whether the Plan satisfies the minimum
      benefits requirements of Section 416(c) of the Code for such years. This
      Section amends Section 6.2 of the Plan.


                                  Page 2 of 4
<PAGE>

      Determination of top-heavy status

      Key Employee. Key Employee means any Employee or former Employee
      (including any deceased Employee) who at any time during the Plan Year
      that includes the Determination Date was an officer of the Employer having
      annual Compensation greater than one hundred thirty thousand dollars
      ($130,000) (as adjusted under Section 416(i)(1) of the Code for Plan Years
      beginning after December 31, 2002), a 5-percent owner of the Employer, or
      a 1-percent owner of the Employer having Annual Compensation of more than
      one hundred fifty thousand dollars ($150,000). For this purpose, "Annual
      Compensation" means compensation within the meaning of Section 415(c)(3)
      of the Code. The determination of who is a Key Employee will be made in
      accordance with Section 416(i)(1) of the Code and the applicable
      regulations and other guidance of general applicability issued thereunder.

      Determination of present values and amounts. The following subparagraphs
      (a) and (b) shall apply for purposes of determining the present values of
      Accrued Benefits of Employees as of the Determination Date.

            (a)   Distributions during year ending on the Determination Date.
                  The present values of Accrued Benefits of an Employee as of
                  the Determination Date shall be increased by the distributions
                  made with respect to the Employee under the Plan and any plan
                  aggregated with the Plan under Section 416(g)(2) of the Code
                  during the 1-year period ending on the Determination Date. The
                  preceding sentence shall also apply to distributions under a
                  terminated plan which, had it not been terminated, would have
                  been aggregated with the Plan under Section 416(g)(2)(A)(i) of
                  the Code. In the case of a distribution made for a reason
                  other than separation from service, death, or disability, this
                  provision shall be applied by substituting "5-year period" for
                  "1-year period."

            (b)   Employees not performing services during year ending on the
                  Determination Date. The Accrued Benefits of any individual who
                  has not performed services for the Employer during the 1-year
                  period ending on the Determination Date shall not be taken
                  into account.

      Top-Heavy Earnings. Top-Heavy Earnings means, for any year, an
      individual's annual compensation as defined under Section 414(q)(4) of the
      Code, up to a maximum of two hundred thousand dollars ($200,000), adjusted
      in multiples of five thousand dollars ($5,000) for increases in the
      cost-of-living as prescribed by the Secretary of the Treasury under
      Section 401(a)(17)(B) of the Code.

      Minimum benefits

      For purposes of satisfying the minimum benefit requirements of Section
      416(c)(1) of the Code and the Plan, in determining years of service with
      the Employer, any service with the Employer shall be disregarded to the
      extent that such service occurs during a Plan Year when the Plan benefits
      (within the meaning of Section 410(b) of the Code) no key employee or
      former key employee.

5.    Direct Rollover of Eligible Rollover Distributions (Plan Section 8.4)

      Modification of definition of "Eligible Retirement Plan." Effective with
      Plan distributions made after December 31, 2001, for purposes of the
      direct rollover provision in Plan Section 8.4, an


                                  Page 3 of 4
<PAGE>

      Eligible Retirement Plan shall also mean an annuity contract described in
      Section 403(b) of the Code and an eligible plan under Section 457(b) of
      the Code which is maintained by a state, political subdivision of a state,
      or any agency or instrumentality of a state or political subdivision of a
      state and which agrees to separately account for amounts transferred into
      such plan from this Plan. The definition of Eligible Retirement Plan shall
      also apply in the case of a distribution to a surviving spouse, or to a
      spouse or former spouse who is the alternate payee under a qualified
      domestic relations order, as defined in Section 414(p) of the Code.


                                  Page 4 of 4

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.21
<SEQUENCE>9
<FILENAME>d156265.txt
<DESCRIPTION>MATERIAL CONTRACTS
<TEXT>
                                                                   EXHIBIT 10.21

                                                                    Attachment 2

                             FIRST AMENDMENT TO THE

                               RESTATEMENT OF THE

                 CARVER FEDERAL SAVINGS BANK 401(K) SAVINGS PLAN

                               W I T N E S S E T H

      WHEREAS, the terms of the 401(k) retirement plan maintained by Carver
Federal Savings Bank (hereinafter referred to as the "Employer") are set forth
under a written restatement generally effective the 1st day of January, 1997;
and

      WHEREAS, the Employer desires to amend that plan pursuant to Article XI in
order to recognize the removal of RSI Retirement Trust as trustee of plan assets
not held under the separate trust for company stock and to make such
modifications associated with that removal and establishment of a new trust
agreement;

      NOW THEREFORE, it is agreed by the parties hereto that the aforesaid
restatement hereby amended in the following respects, effective as of the 1st
day of July, 2002.

FIRST: Section 1.6 is hereby deleted and replaced by the following:
- -----

"1.6  AGREEMENT means the Carver Federal Savings Bank 410(k) Savings Plan Trust
      as established effective July 1, 2002 and as shall be amended from time to
      time. The Agreement shall be incorporated herein and constitute a part of
      the Plan."

SECOND: Section 1.49 is hereby deleted and replaced by the following:
- ------

"1.49 PLAN means the Carver Federal Savings Bank 401(k) Savings Plan, as herein
      restated and as it may be amended from time to time."

THIRD: Section 1.69 is hereby deleted and replaced by the following:
- -----

"1.69 TRUSTEES means the Trustees of the Carver Federal Savings Bank 401(k)
      Savings Plan Trust."

FOURTH: The first paragraph pf Section 9.4 is hereby deleted and replaced by the
- ------  following:

      "The Sponsoring Employer shall designate one or more persons to act as
      Plan Administrator and to perform those functions set forth in the
      Agreement, the Plan or the Separate Agreement

<PAGE>

      that are assigned to the Plan Administrator."

<PAGE>

      This Amendment is executed as of the 26th day of June, 2002 and shall be
effective as set forth above.

                                                CARVER FEDERAL SAVINGS BANK.


                                                BY: /s/ Deborah C. Wright
                                                   -----------------------------
                                                   Deborah C. Wright
                                                   President

ATTEST:                                         (Corporate Seal)

/s/ Linda Dunn
- ------------------------
Linda Dunn
Secretary


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.22
<SEQUENCE>10
<FILENAME>d156262.txt
<DESCRIPTION>MATERIAL CONTRACTS
<TEXT>
                                                                   EXHIBIT 10.22

                                                                    Attachment 3

                             SECOND AMENDMENT TO THE

                               RESTATEMENT OF THE

                 CARVER FEDERAL SAVINGS BANK 401(k) SAVINGS PLAN

                                   FOR EGTRRA

PREAMBLE

1. Adoption and effective date of amendment. This amendment of the plan is
adopted to reflect certain provisions of the Economic Growth and Tax Relief
Reconciliation Act of 2001 (EGTRRA). This amendment is intended as good faith
compliance with the requirements of EGTRRA and is to be construed in accordance
with EGTRRA and guidance issued thereunder. Except as otherwise provided, this
amendment shall be effective as of the first day of the first plan year
beginning after December 31, 2001.

2. Supersession of inconsistent provisions. This amendment shall supersede the
provisions of the plan to the extent those provisions are inconsistent with the
provisions of this amendment.

<PAGE>

SECTION 1. PLAN LOANS FOR OWNER EMPLOYEES AND SHAREHOLDER EMPLOYEES

Effective for plan loans made after December 31, 2001, plan provisions
prohibiting loans to any owner-employee or shareholder-employee shall cease to
apply.

SECTION 2. LIMITATIONS ON CONTRIBUTIONS

1. Effective date. This section shall be effective for limitation years
beginning after December 31, 2001.

2. Maximum annual addition. Except to the extent permitted under Section 11 of
this amendment and Section 414(v) of the Internal Revenue Code (hereinafter
referred to as "the Code"), if applicable, the annual addition that may be
contributed or allocated to a participant's account under the plan for any
limitation year shall not exceed the lesser of:

(a)   $40,000 as adjusted for increases in the cost-of-living under Section
      415(d) of the Code, or

(b)   100 percent of the participant's compensation, within the meaning of
      Section 415(c)(3) of the Code, for the limitation year.

The compensation limit referred to in (b) shall not apply to any contribution
for medical benefits after separation from service (within the meaning of
Section 401(h) or Section 419A(f)(2) of the Code) which is otherwise treated as
an annual addition.

SECTION 3. INCREASE IN COMPENSATION LIMIT

The annual compensation of each participant taken into account in determining
allocations for any plan year beginning after December 31, 2001, shall not
exceed $200,000, as adjusted for cost-of-living increases in accordance with
Section 401(a)(17)(B) of the Code. Annual compensation means compensation during
the plan year or such other consecutive 12-month period over which compensation
is otherwise determined under the plan (the determination period). The
cost-of-living adjustment in effect for a calendar year applies to annual
compensation for the determination period that begins with or within such
calendar year.

SECTION 4. MODIFICATION OF TOP-HEAVY RULES

1. Effective date. This section shall apply for purposes of determining whether
the plan is a top-heavy plan under Section 416(g) of the Code for plan years
beginning after December 31, 2001, and whether the plan satisfies the minimum
benefits requirements of Section 416(c) of the Code for such years. This section
amends the provisions of the Article XII of the plan.

2. Determination of top-heavy status.


                                   Page 2 of 9
<PAGE>

2.1 Key employee. Key employee means any employee or former employee (including
any deceased employee) who at any time during the plan year that includes the
determination date was an officer of the employer having annual compensation
greater than $130,000 (as adjusted under Section 416(i)(1) of the Code for plan
years beginning after December 31, 2002), a 5-percent owner of the employer, or
a 1-percent owner of the employer having annual compensation of more than
$150,000. For this purpose, annual compensation means compensation within the
meaning of Section 415(c)(3) of the Code. The determination of who is a key
employee will be made in accordance with Section 416(i)(1) of the Code and the
applicable regulations and other guidance of general applicability issued
thereunder.

2.2 Determination of present values and amounts. This Section 2.2 shall apply
for purposes of determining the present values of accrued benefits and the
amounts of account balances of employees as of the determination date.

2.2.1 Distributions during year ending on the determination date. The present
values of accrued benefits and the amounts of account balances of an employee as
of the determination date shall be increased by the distributions made with
respect to the employee under the plan and any plan aggregated with the plan
under Section 416(g)(2) of the Code during the 1-year period ending on the
determination date. The preceding sentence shall also apply to distributions
under a terminated plan which, had it not been terminated, would have been
aggregated with the plan under Section 416(g)(2)(A)(i) of the Code. In the case
of a distribution made for a reason other than separation from service, death,
or disability, this provision shall be applied by substituting 5-year period for
1-year period.

2.2.2 Employees not performing services during year ending on the determination
date. The accrued benefits and accounts of any individual who has not performed
services for the employer during the 1-year period ending on the determination
date shall not be taken into account.

3. Minimum benefits.

3.1 Matching contributions. Employer matching contributions shall be taken into
account for purposes of satisfying the minimum contribution requirements of
Section 416(c)(2) of the Code and the plan. The preceding sentence shall apply
with respect to matching contributions under the plan or, if the plan provides
that the minimum contribution requirement shall be met in another plan, such
other plan. Employer matching contributions that are used to satisfy the minimum
contribution requirements shall be treated as matching contributions for
purposes of the actual contribution percentage test and other requirements of
Section 401(m) of the Code.

3.2 Contributions under other plans. The employer may provide that the minimum
benefit requirement shall be met in another plan (including another plan that
consists solely of a cash or deferred arrangement which meets the requirements
of Section 401(k)(12) of the Code and matching contributions with respect to
which the requirements of Section 401(m)(11) of the Code are met).

SECTION 5. ROLLOVERS FROM OTHER PLANS


                                   Page 3 of 9
<PAGE>

If provided by Carver Federal Savings Bank, the plan will accept participant
rollover contributions and/or direct rollovers of distributions made after
December 31, 2001, from the types of plans specified below, beginning on the
effective date specified below.

1.    Direct Rollovers: (check each that applies or none)

|X|   a qualified plan described in Section 401(a) or 403(a) of the Code,
      excluding after-tax employee contributions.

|X|   an annuity contract described in Section 403(b) of the Code, excluding
      after-tax employee contributions.

|X|   an eligible plan under Section 457(b) of the Code, which is maintained by
      a state, political subdivision of a state, or any agency or
      instrumentality of a state or political subdivision of a state.

2. Participant Rollover Contributions from Other Plans:

The plan will accept a participant contribution of an eligible rollover
distribution from: (Check each that applies or none.)

|X|   a qualified plan described in Section 401(a) or 403(a) of the Code:

|X|   an annuity contract described in Section 403(b) of the Code.

|X|   an eligible plan under Section 457(b) of the Code, which is maintained by
      a state, political subdivision of a state, or any agency or
      instrumentality of a state or political subdivision of a state.

3. Participant Rollover Contributions from IRAs:

      The plan: (Choose one.)

|_|   will

|X|   will not

      accept a participant rollover contribution of the portion of a
      distribution from an individual retirement account or annuity described in
      Section 408(a) or 408(b) of the Code that is eligible to be rolled over
      and would otherwise be includible in gross income.

4. Effective Date of Direct Rollover and Participant Rollover Contribution
Provisions January 1, 2002 (enter a date no earlier than January 1, 2002).

SECTION 6. DIRECT ROLLOVERS OF PLAN DISTRIBUTIONS

1. Effective date. This section shall apply to distributions made after December
31, 2001.


                                   Page 4 of 9
<PAGE>

2. Modification of definition of eligible retirement plan. For purposes of the
direct rollover provisions in Article VII, Section 9 of the plan document
(hereinafter referred to as "the Plan"), an eligible retirement plan shall also
mean an annuity contract described in Section 403(b) of the Code and an eligible
plan under Section 457(b) of the Code which is maintained by a state, political
subdivision of a state, or any agency or instrumentality of a state or political
subdivision of a state and which agrees to separately account for amounts
transferred into such plan from this plan. The definition of eligible retirement
plan shall also apply in the case of a distribution to a surviving spouse, or to
a spouse or former spouse who is the alternate payee under a qualified domestic
relation order, as defined in Section 404(p) of the Code.

3. Modification of definition of eligible rollover distribution to exclude
hardship distributions. For purposes of the direct rollover provisions in
Article VII, Section 9 of the Plan, any amount that is distributed on account of
hardship shall not be an eligible rollover distribution and the distributee may
not elect to have any portion of such a distribution paid directly to an
eligible retirement plan.

4. Modification of definition of eligible rollover distribution to include
after-tax employee contributions. For purposes of the direct rollover provisions
in Article VI, Section 4(b)(iv) of the Plan, a portion of a distribution shall
not fail to be an eligible rollover distribution merely because the portion
consists of after-tax employee contributions which are not includible in gross
income. However, such portion may be transferred only to an individual
retirement account or annuity described in Section 408(a) or (b) of the Code, or
to a qualified defined contribution plan described in Section 401(a) or 403(a)
of the Code that agrees to separately account for amounts so transferred,
including separately accounting for the portion of such distribution which is
includible in gross income and the portion of such distribution which is not so
includible.

SECTION 7. ROLLOVERS DISREGARDED IN INVOLUNTARY CASH-OUTS

1. Applicability and effective date. This section shall apply if elected by
Carver Federal Savings Bank in the plan and shall be effective as specified
herein.

2. Rollovers disregarded in determining value of account balance for involuntary
distributions. If elected by the employer below, for purposes of Article VII,
Section 5(g) of the Plan, the value of a participant's nonforfeitable account
balance shall be determined without regard to that portion of the account
balance that is attributable to rollover contributions (and earnings allocable
thereto) within the meaning of Sections 402(c), 403(a)(4), 403(b)(8),
408(d)(3)(A)(ii), and 457(e)(16) of the Code. If the value of the participant's
nonforfeitable account balance as so determined is $5,000 or less, the plan
shall immediately distribute the participant's entire nonforfeitable account
balance.

3. Treatment of Rollovers in Application of Involuntary Cash-out Provisions:

      The employer: (choose one)

      |X|   elects


                                   Page 5 of 9
<PAGE>

      |_|   does not elect

to exclude rollover contributions in determining the value of the participant's
nonforfeitable account balance for purposes of the plan's involuntary cash-out
rules.

4. If Carver Federal Savings Bank has elected to exclude rollover contributions,
the election shall apply with respect to distributions made after:

      December 31, 2001 (Enter a date no earlier than December 31, 2001.)

with respect to participants who separated from service after:

      January 1, 2001 (The date may be earlier than December 31, 2001.)

SECTION 8. REPEAL OF MULTIPLE USE TEST

The multiple use test described in Treasury Regulation Section 1.401(m)-2 and
Section 4.3(c) of the plan shall not apply for plan years beginning after
December 31, 2001.

SECTION 9. ELECTIVE DEFERRALS - CONTRIBUTION LIMITATION

No participant shall be permitted to have elective deferrals made under this
plan, or any other qualified plan maintained by the employer during any taxable
year, in excess of the dollar limitation contained in Section 402(g) of the Code
in effect for such taxable year, except to the extent permitted under Section 11
of this amendment and Section 414(v) of the Code, if applicable.

SECTION 10. MODIFICATION OF TOP-HEAVY RULES

The top-heavy requirements of Section 416 of the Code and Article XII of the
plan shall not apply in any year beginning after December 31, 2001, in which the
plan consists solely of a cash or deferred arrangement which meets the
requirements of Section 401(k)(12) of the Code and matching contributions with
respect to which the requirements of Section 401(m)(11) of the Code are met.

SECTION 11. CATCH-UP CONTRIBUTIONS

If elected by Carver Federal Savings Bank below, all employees who are eligible
to make elective deferrals under this plan and who have attained age 50 before
the close of the plan year shall be eligible to make catch-up contributions in
accordance with, and subject to the limitations of, Section 414(v) of the Code.
Such catch-up contributions shall not be taken into account for purposes of the
provisions of the plan implementing the required limitations of Sections 402(g)
and 415 of the Code. The plan shall not be


                                   Page 6 of 9
<PAGE>

treated as failing to satisfy the provisions of the plan implementing the
requirements of Section 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416 of the
Code, as applicable, by reason of the making of such catch-up contributions.

Catch-up Contributions: (Choose one.)

|X|   shall apply to contributions after January 1, 2002 (Must be December 31,
      2001 or a later date).

|_|   shall not apply.

SECTION 12. SUSPENSION PERIOD FOLLOWING HARDSHIP DISTRIBUTION

A participant who receives a distribution of elective deferrals after December
31, 2001, on account of hardship shall be prohibited from making elective
deferrals and employee contributions under this and all other plans of the
employer for 6 months after receipt of the distribution. A participant who
receives a distribution of elective deferrals in calendar year 2001 on account
of hardship shall be prohibited from making elective deferrals and employee
contributions under this and all other plans of the employer for the period
specified by the employer below.

Suspension Period for Hardship Distributions: (Choose one.)

|X|   A participant who receives a distribution of elective deferrals in
      calendar year 2001 on account of hardship shall be prohibited from making
      elective deferrals and employee contributions under this and all other
      plans of the employer for 6 months after receipt of the distribution or
      until January 1, 2002, if later.

|_|   A participant who receives a distribution of elective deferrals in
      calendar year 2001 on account of hardship shall be prohibited from making
      elective deferrals and employee contributions under this and all other
      plans of the employer for the period specified in the provisions of the
      plan relating to suspension of elective deferrals that were in effect
      prior to this amendment.

SECTION 13. DISTRIBUTION UPON SEVERANCE FROM EMPLOYMENT

1. Effective Date. If elected by Carver Federal Savings Bank below, this section
shall apply for distributions and severances from employment occurring after the
dates specified below.

2. New distributable event. A participant's elective deferrals, qualified
non-elective contributions, qualified matching contributions, and earnings
attributable to these contributions shall be distributed on account of the
participant's severance from employment. However, such a distribution shall be
subject to the other provisions of the plan regarding distributions, other than
provisions that require a separation from service before such amounts may be
distributed.

3. Distribution Upon Severance from Employment, shall apply for distributions
after:


                                   Page 7 of 9
<PAGE>

      December 31, 2001 (Enter a date no earlier than December 31, 2001).

(Choose one.)

|_|   regardless of when the severance from employment occurred.

|X|   for severances from employment occurring after January 1, 2001.


                                   Page 8 of 9
<PAGE>

SECTION 14. INCREASE IN DEFERRAL PERCENTAGE

1. Applicability. This section shall apply for plan years beginning after
December 31, 2001.

2. The Employer shall make Before-Tax contributions for each payroll period in
an amount equal to the amount by which a Participant's Compensation has been
reduced with respect to such period under his Compensation Reduction Agreement.
Subject to the limitations set forth in Article III, Sections 2 and 12, of the
Plan, the amount of the reduction authorized by the Eligible Employee shall be
limited to whole percentages of Compensation and shall not be less than one
percent (1%) nor greater than fifty percent (50%). The Before-Tax Contributions
made on behalf of a Participant shall be credited to such Participant's
Before-Tax Contribution Account and shall be invested in accordance with Article
VI of the Plan.


                                   Page 9 of 9
<PAGE>

      IN WITNESS WHEREOF, this Amendment is adopted this 25th day of June, 2002.

                                        CARVER FEDERAL SAVINGS BANK


                                        By : /s/ Linda Dunn
                                             ------------------------
                                             Linda Dunn
<PAGE>

                          SALARY DEFERRAL CONTRIBUTIONS

The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) has
provided a way for certain employees to make larger 401(k) contributions.

EGTRRA permits employees who are age 50 or older (at any time during 2002) to
make an additional contribution over and above the maximum annual Internal
Revenue Code deferral limit ($11,000 for 2002). In addition, if the plan limits
deferrals to a certain percentage of compensation (e.g., 15%), you will be
permitted to make this additional "catch-up" contribution even though your total
deferrals are less than the $11,000 maximum.

The table below (Subject to the plan's maximum contribution) sets forth the
maximum annual Internal Revenue Code 401(k) contribution and additional
"catch-up" contribution that may be made for plan years 2002 through 2006.

         ====================================================
                                 DEFERRAL LIMITS
         ====================================================
                                       EGTRRA Catch-up amount
          Year            401(k)         at age 50 or older
         ====================================================
          2002            11,000               1,000
         ----------------------------------------------------
          2003            12,000               2,000
         ----------------------------------------------------
          2004            13,000               3,000
         ----------------------------------------------------
          2005            14,000               4,000
         ----------------------------------------------------
          2006            15,000               5,000
         ====================================================

If you wish to make these additional contributions, please contact your Plan
Administrator for more information.

<PAGE>

                  Notice to Employees Regarding Saver's Credit:

This notice explains how you may be able to pay less tax by contributing to the
Carver Federal Savings Bank 401(k) Savings Plan or to an individual retirement
arrangement ("IRA").

Beginning in 2002, if you make contributions to the Plan or to an IRA, you may
be eligible for a tax credit, called the "saver's credit." This credit could
reduce the federal income tax you pay dollar-for-dollar. The amount of the
credit you can get is based on the contributions you make and your credit rate.
The credit can be as low as 10% or as high as 50%, depending on your adjusted
gross income - the lower your income, the higher the credit rate. The credit
rate also depends on your filing status. See the tables at the end of this
notice to determine your credit rate.

The maximum contribution taken into account for the credit for an individual is
$2,000. If you are married and filing jointly, the maximum contribution taken
into account for the credit is $2,000 each for you and your spouse.

      The credit is available to you if you:

      o  Are 18 or older,

      o  Are not a full-time student,

      o  Are not claimed as a dependent on someone else's return, and

      o  Have adjusted gross income (shown on your tax return for the year of
         the credit) that does not exceed:

           $50,000 if you are married filing jointly,
           $37,500 if you are head of the household with a qualifying person, or
           $25,000 if you are single or married filing separately.

Example: Susan and John are married and file their federal income tax return
jointly. For 2002, their adjusted gross income would have been $34,000 if they
had not made any retirement contributions. During 2002, Susan elected to have
$2,000 contributed to her employer's 401(k) plan. John made a deductible
contribution of $2,000 to an IRA for 2002. As a result of these contributions,
their 2002 adjusted gross income is $30,000. If their Federal income tax would
have been $3,000 (after applying any other credits to which they are entitled)
without having made any retirement contributions, then their Federal income tax
as a result of making the $4,000 retirement contributions will only be $400
after application of the saver's credit and other tax benefits for the
retirement contributions. Thus, by saving $4,000 for their retirement, Susan and
John have reduced their taxes by $2,600.

The annual contribution eligible for the credit may have to be reduced by any
taxable distributions from a retirement plan or IRA that you or your spouse
receive during the year you claim the credit, during the 2 preceding years, or
during the period after the end of the year for which you claim the credit and
before the due date for filing your return for that year. A distribution from a
Roth IRA that is not rolled over is taken into account for this reduction, even
if the distribution is not taxable. After these reductions, the maximum annual
contribution eligible for the credit per person is $2,000.

Example: Mark's adjusted gross income for 2002 is low enough for him to be
eligible for credit that year and he defers $3,000 of his pay to his employer's
401(k) plan during 2002. During 2001, Mark took a $400 hardship withdrawal from
his employer's plan and during 2002 he takes an $800 IRA withdrawal. Mark's 2002
saver's credit will be based on contributions of $1,800 ($3,000 - $400 - $800).

<PAGE>

The amount of your saver's credit will not change the amount of your refundable
tax credits. A refundable tax credit, such as the earned income credit or the
refundable amount of your child tax credit, is an amount that you would receive
as a refund even if you did not otherwise owe any taxes.

The amount of your saver's credit in any year cannot exceed the amount of tax
that you would otherwise pay (not counting any refundable credits or the
adoption credit) in any year. If your tax liability is reduced to zero because
of other nonrefundable credits, such as the Hope Scholarship Credit, then you
will not be entitled to the saver's credit.

<PAGE>

CREDIT RATES

If your income tax filing status is "married filing joint" and your adjusted
gross income is:

$0-$30,000
$30,001-$32,500
$32,501-$50,000
Over $50,000

Your saver's credit rate is:

50% of contribution
20% of contribution
10% of contribution
credit not available

If your income tax filing status is "head of household" and your adjusted gross
income is:

$0-$22,500
$22,501-$24,375
$24,376-$37,500
Over $37,500

Your saver's credit rate is:

50% of contribution
20% of contribution
10% of contribution
credit not available


If your income tax filing status is "single" "married filing separate," or
"qualifying widow(er)" and your adjusted gross income is:

$0-$15,000
$15,001-$16,250
$16,251-$25,000
Over $25,000

Your saver's credit rate is:

50% of contribution
20% of contribution
10% of contribution
credit not available

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21.1
<SEQUENCE>11
<FILENAME>d155769.txt
<DESCRIPTION>SUBSIDIARIES OF THE REGISTRANT
<TEXT>
                                                                    EXHIBIT 21.1

SUBSIDIARIES OF THE REGISTRANT

      Carver Bancorp, Inc. (the "Company") is the holding company for Carver
Federal Savings Bank (the "Bank"), a federally chartered stock savings bank. The
Bank, in turn, wholly owns three subsidiaries: CSFB Credit Corp. and CSFB Realty
Corp., both incorporated in the State of New York and Carver Asset Corp., which
is incorporated in the State of Delaware.

      The Company is the sole stockholder of Alhambra Holding Corp., a Delaware
corporation ("Alhambra"). Alhambra owns 80% of the common stock and 100% of the
preferred stock of Alhambra Realty Corp., a Delaware corporation.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.2
<SEQUENCE>12
<FILENAME>d156083.txt
<DESCRIPTION>CONSENTS OF EXPERTS AND COUNSEL
<TEXT>
                                                                    Exhibit 23.2

                          Independent Auditor's Report

To the Board of Directors and Stockholders
Carver Bancorp, Inc.:

We consent to incorporation by reference in the annual report on Form 10-K of
Carver Bancorp, Inc. and subsidiaries of our report dated June 24, 2003 relating
to the consolidated statements of financial condition of Carver Bancorp, Inc.
and subsidiaries as of March 31, 2003 and 2002, and the related consolidated
statements of operations, changes in stockholders' equity and comprehensive
income, and cash flows for each of the years in the three-year period ended
March 31, 2003, which report appears in the March 31, 2003 annual report on Form
10-K of Carver Bancorp, Inc. and subsidiaries.


                                                       /s/ KPMG LLP

New York, New York

June 27, 2003

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>13
<FILENAME>d85557.txt
<DESCRIPTION>ADDITIONAL EXHIBITS
<TEXT>
                                                                    Exhibit 99.1

           WRITTEN STATEMENT FURNISHED PURSUANT TO SECTION 906 OF THE
               SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350

      The undersigned, Deborah C. Wright, is the President and Chief Executive
Officer of Carver Bancorp, Inc. (the "Company").

      This statement is being furnished in connection with the filing by the
Company of the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 2003 (the "Report").

      By execution of this statement, I certify that:

            A)    the Report fully complies with the requirements of Section
                  13(a) or 15(d) of the Securities Exchange Act of 1934 (15
                  U.S.C. 78m(a) or 78o(d)) and

            B)    the information contained in the Report fairly presents, in
                  all material respects, the financial condition and results of
                  operations of the Company as of the dates and for the periods
                  covered by the Report.

      This statement is authorized to be attached as an exhibit to the Report so
that this statement will accompany the Report at such time as the Report is
filed with the Securities and Exchange Commission, pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. It is not intended that
this statement be deemed to be filed for purposes of the Securities Exchange Act
of 1934, as amended.

June 27, 2003                               /s/ Deborah C. Wright
- ------------------------                    ------------------------------------
Dated                                                  Deborah C. Wright

* A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>14
<FILENAME>d85558.txt
<DESCRIPTION>ADDITIONAL EXHIBITS
<TEXT>
                                                                    EXHIBIT 99.2

           WRITTEN STATEMENT FURNISHED PURSUANT TO SECTION 906 OF THE
               SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350

      The undersigned, William C. Gray, is the Senior Vice President and Chief
Financial Officer of Carver Bancorp, Inc. (the "Company").

      This statement is being furnished in connection with the filing by the
Company of the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 2003 (the "Report").

      By execution of statement, I certify that:

            A)    the Report fully complies with the requirements of Section
                  13(a) or 15(d) of the Securities Exchange Act of 1934 (15
                  U.S.C. 78m(a) or 78o(d)) and

            B)    the information contained in the Report fairly presents, in
                  all material respects, the financial condition and results of
                  operations of the Company as of the dates and for the periods
                  covered by the Report.

      This statement is authorized to be attached as an exhibit to the Report so
that this statement will accompany the Report at such time as the Report is
filed with the Securities and Exchange Commission, pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. It is not intended that
this statement be deemed to be filed for purposes of the Securities Exchange Act
of 1934, as amended.

June 27, 2003                               /s/ William C. Gray
- ------------------------                    ------------------------------------
Dated                                                   William C. Gray


* A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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