<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
---------------------------------------
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to ______________________
Pulaski Financial Corp.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
0-24571
- --------------------------------------------------------------------------------
Commission File Number
Delaware 43-1816913
- ------------------------------------ ---------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
12300 Olive Boulevard
St. Louis, Missouri 63141-6434
- ------------------------------------ --------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (314) 878-2210
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 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.
Yes X No _______
------
Indicate the number of shares outstanding of the registrant's classes of common
stock, as of the latest practicable date.
Class Outstanding at May 12, 2000
- -------------------------------------- ---------------------------------
Common Stock, par value $.01 per share 3,238,398 shares
<PAGE>
PULASKI FINANCIAL CORP. AND SUBSIDIARIES
FORM 10-Q
MARCH 31, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 2000 and
September 30, 1999 (Unaudited) 1
Consolidated Statements of Income and Comprehensive Income for
the Three and Six Months Ended March 31, 2000 and 1999 (Unaudited) 2
Consolidated Statement of Stockholders' Equity for the Six Months Ended
March 31, 2000 (Unaudited) 3
Consolidated Statements of Cash Flows for the Six Months Ended
March 31, 2000 and 1999 (Unaudited) 4-5
Notes to Unaudited Consolidated Financial Statements (Unaudited) 6-7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-13
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
PART II OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities and Use of Proceeds 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security-Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 15
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
<PAGE>
PULASKI FINANCIAL CORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 AND SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, September 30,
ASSETS 2000 1999
<S> <C> <C>
Cash and amounts due from depository institutions $ 639,931 $ 3,486,957
Federal funds sold and overnight deposits 5,500,000 5,400,000
------------ ------------
Total cash and cash equivalents 6,139,931 8,886,957
Investment securities available for sale, at market value 4,401,281 4,234,145
Investments in debt securities held to maturity, at amortized cost (market value, $4,969,819
and $9,002,455, at March 31 and September 30, 1999, respectively) 5,008,330 9,010,427
Mortgage-backed and related securities held to maturity, at amortized cost (market value,
$3,682,813 and $4,154,784 at March 31 and September 30, 1999, respectively) 3,574,742 3,996,748
Mortgage-backed and related securities available for sale, at market value 20,263,509 21,356,446
Loans receivable held for sale, at lower of cost or market 6,164,630 8,159,085
Loans receivable, net of allowance for loan losses of $1,158,284 and
$985,773 at March 31 and September 30, 1999, respectively 196,026,033 181,532,561
Federal Home Loan Bank stock - at cost 1,980,000 1,501,200
Real estate acquired in settlement of loans, net of allowance for losses of
$10,198 and $17,161 at March 31 and September 30, 1999, respectively 135,494 228,002
Premises and equipment - net 2,630,428 2,235,412
Accrued interest receivable:
Investment securities 147,874 153,637
Mortgage-backed securities 145,132 151,903
Loans 1,130,738 1,041,503
Other 939 818
Other assets 2,977,101 1,485,537
------------ ------------
TOTAL $250,726,162 $243,974,381
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits $161,318,501 $161,370,542
Advances from Federal Home Loan Bank of Des Moines 39,600,000 28,600,000
Advance payments by borrowers for taxes and insurance 1,140,309 2,440,520
Accrued interest payable 205,956 221,881
Dividends payable 14,280,718 339,740
Other liabilities 977,005 1,096,855
------------ ------------
Total liabilities 217,522,489 194,069,538
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock - $.01 par value per share, authorized 1,000,000 shares; none issued or
outstanding
Common stock - $.01 par value per share, authorized 25,000,000 shares; 3,972,886
and 3,972,886 shares issued at March 31, 2000 and September 30, 1999, respectively 39,729 39,729
Treasury stock - at cost (shares, 481,488 and 198,000 respectively) (5,366,054) (2,322,004)
Additional paid-in capital 23,053,726 35,685,866
Unearned MRDP shares (1,140,266) (18,400)
Unearned ESOP shares (unreleased shares, 128,501 and 217,242 respectively) (1,256,897) (2,172,420)
Accumulated other comprehensive loss (489,963) (235,360)
Retained earnings 18,363,398 18,927,432
------------ ------------
Total stockholders' equity 33,203,673 49,904,843
------------ ------------
TOTAL $250,726,162 $243,974,381
============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
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<PAGE>
PULASKI FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
THREE AND SIX MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
------------------------ ------------------------
2000 1999 2000 1999
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans receivable $3,687,271 $3,108,274 $7,163,561 $6,193,816
Investment securities 166,303 254,757 347,275 543,411
Mortgage-backed and related securities 433,886 118,482 879,413 248,994
Other 81,272 214,270 180,901 334,306
---------- ---------- ---------- ----------
Total interest income 4,368,732 3,695,783 8,571,150 7,320,527
---------- ---------- ---------- ----------
INTEREST EXPENSE:
Deposits 1,596,282 1,658,577 3,187,966 3,399,669
Advances from Federal Home Loan Bank of Des Moines 534,516 42,642 946,092 112,082
Other 46,010
---------- ---------- ---------- ----------
Total interest expense 2,130,798 1,701,219 4,134,058 3,557,761
---------- ---------- ---------- ----------
NET INTEREST INCOME 2,237,934 1,994,564 4,437,092 3,762,766
PROVISION FOR LOAN LOSSES 71,568 43,832 198,642 83,414
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 2,166,366 1,950,732 4,238,450 3,679,352
---------- ---------- ---------- ----------
OTHER INCOME:
Retail banking fees 194,194 107,853 367,894 197,434
Mortgage revenues 219,190 281,616 494,985 594,365
Insurance commissions 85,621 87,929 207,185 158,837
Other 48,389 30,141 96,080 57,173
---------- ---------- ---------- ----------
Total other income 547,394 507,539 1,166,144 1,007,809
---------- ---------- ---------- ----------
OTHER EXPENSES:
Compensation expense-special dividend 1,322,954 1,322,954
Salaries and employee benefits 1,055,774 848,181 1,915,931 1,644,288
Occupancy, equipment and data processing expense 414,409 347,726 897,933 672,864
Federal insurance premiums 8,796 25,508 33,293 49,098
Advertising 107,786 96,937 184,921 201,527
Professional services 157,556 76,203 269,788 119,682
Other 255,193 218,388 506,742 376,654
---------- ---------- ---------- ----------
Total other expenses 3,322,468 1,612,943 5,131,562 3,064,113
---------- ---------- ---------- ----------
<LOSS> INCOME BEFORE INCOME TAXES (608,708) 845,328 273,032 1,623,048
INCOME TAXES (214,849) 315,254 100,723 604,091
---------- ---------- ---------- ----------
NET <LOSS> INCOME (393,859) 530,074 172,309 1,018,957
OTHER COMPREHENSIVE LOSS ITEMS (68,216) (5,938) (254,603) (9,731)
---------- ---------- ---------- ----------
COMPREHENSIVE <LOSS> INCOME $ (462,075) $ 524,136 $ (82,294) $1,009,226
========== ========== ========== ==========
NET <LOSS> INCOME PER COMMON SHARE - BASIC $ (0.12) n/m $ 0.05 n/m
========== ========== ========== ===========
NET <LOSS> INCOME PER COMMON SHARE - DILUTED $ (0.12) n/m $ 0.05 n/m
========== ========== ========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
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<PAGE>
PULASKI FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED MARCH 31, 2000 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unearned
Management Accumulated
Additional Recognition and Other Unearned
Common Treasury Paid-In Development Comprehensive ESOP Retained
Stock Stock Capital Plan Shares Loss Shares Earnings Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
October 1, 1999 $39,729 $(2,322,004) $ 35,685,866 $ (18,400) $(235,360) $(2,172,420) $18,927,432 $ 49,904,843
------------
Comprehensive income:
Net income 172,309 172,309
Change in net unrealized
losses on securities (254,603) (254,603)
------------
Total
comprehensive
income <loss> (82,294)
------------
Dividends declared ($.09
per share) (596,666) (596,666)
Treasury stock issued and 58,650 4,832 (22,900) 40,582
related tax benefit
Stock repurchase (4,419,758) (4,419,758)
Release of ESOP shares 41,456 915,523 956,979
Amortization of Management
Recognition and
Development Plan shares 78,415
78,415
Management Recognition and
Development Plan shares
issued (eff 1/00) 1,317,058 (1,200,281) (116,777) -
Special cash dividend
($4.00 per share) (12,678,428) (12,678,428)
-------- ------------ ------------ ----------- --------- ----------- ----------- ------------
BALANCE,
March 31, 2000 $39,729 $(5,366,054) $ 23,053,726 $(1,140,266) $(489,963) $(1,256,897) $18,363,398 $ 33,203,673
======= =========== ============ =========== ========= =========== =========== ============
</TABLE>
-3-
<PAGE>
PULASKI FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 172,309 $ 1,018,957
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation, amortization and accretion:
Premises and equipment 241,574 172,929
Management Recognition and Development Plan stock awards 78,415 27,600
ESOP shares committed to be released 956,979 74,293
Loan fees, discounts and premiums - net 6,949 (29,166)
Deferred income taxes 155,499 (40,683)
Provision for loan losses 198,642 83,414
Provision for losses on real estate acquired in settlement of loans 4,679 14,828
(Gains) losses on sales of real estate acquired in settlement of loans 13,746 (6,401)
Gain on sale of investments (1,750)
Gains on sales of loans (384,226) (452,162)
Originations of loans receivable for sale to correspondent lenders (45,453,545) (70,810,853)
Proceeds from sales of loans to correspondent lenders 47,832,226 70,401,162
Changes in other assets and liabilities (479,796) 43,827
------------ -----------
Net adjustments 3,171,142 (522,962)
------------ -----------
Net cash provided by operating activities 3,343,451 495,995
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales and maturities of investment securities 7,532,215 8,550,000
Purchases of investment securities and FHLB stock (4,088,929) (4,078,018)
Principal payments received on mortgage-backed and related securities 1,129,873 983,205
Loan originations - net (14,878,952) (13,956,206)
Proceeds from sales of real estate acquired in settlement of
loans receivable 180,000 113,501
Net additions to premises and equipment (636,590) (217,694)
------------ -----------
Net cash used in investing activities (10,762,383) (8,605,212)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in deposits (52,041) 5,595,832
Federal Home Loan Bank advances - net 11,000,000 (300,000)
Net decrease in advance payments by borrowers for taxes and insurance (1,300,211) (1,500,363)
Dividends declared on common stock (596,666) (672,928)
Treasury stock issued under stock option plan 40,582
Stock repurchase (4,419,758)
Issuance of common stock under conversion/reorganization 19,440,662
------------ -----------
Net cash provided by financing activities 4,671,906 22,563,203
------------ -----------
</TABLE>
(Continued)
-4-
<PAGE>
PULASKI FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
NET <DECREASE> INCREASE IN CASH AND CASH EQUIVALENTS $(2,747,026) $14,453,986
CASH AND CASH EQUIVALENTS AT SEPTEMBER 30, 1999 8,886,957 3,047,328
----------- -----------
CASH AND CASH EQUIVALENTS AT MARCH 31, 2000 $ 6,139,931 $17,501,314
=========== ===========
ADDITIONAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest on deposits $ 3,203,892 $ 3,426,930
Interest on advances from the Federal Home Loan Bank
of Des Moines 946,091 112,082
Income taxes 695,062 501,000
NONCASH INVESTING ACTIVITIES:
Write-down of real estate owned 4,679 14,363
Real estate acquired in settlement of loans 105,917 211,251
(Decrease) increase in investments for changes in unrealized
gains and losses (404,133) 14,400
NONCASH FINANCING ACTIVITIES:
Dividends declared 14,280,718 339,740
Issuance of common stock:
Decrease in stock subscriptions - 5,129,497
Purchase by ESOP - 2,327,600
Proceeds received from deposit transfers - 1,987,515
</TABLE>
See accompanying notes to the consolidated financial statements. (Concluded)
-5-
<PAGE>
PULASKI FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. FINANCIAL STATEMENTS
The unaudited consolidated financial statements include the accounts of
Pulaski Financial Corp. (the "Company") and its wholly owned subsidiary,
Pulaski Bank, A Federal Savings Bank (the "Bank"), and its wholly owned
subsidiary, Pulaski Service Corporation. All significant intercompany
accounts and transactions have been eliminated.
On December 2, 1998, the conversion of Pulaski Bancshares, M.H.C. from a
federal mutual holding company to a stock holding company was completed,
resulting in the Company becoming the holding company for the Bank. In
connection with the Conversion and Reorganization, the Company sold
2,909,500 shares of its common stock to the public at $10 per share in a
public offering ("Offering"), including 232,760 shares purchased by the
Company's Employee Stock Ownership Plan. In addition, 1,056,003 shares of
common stock of the Company were issued in exchange for shares of stock of
the Bank previously held by public stockholders at an exchange ratio of
1.6608 shares for each share of Bank common stock, resulting in 3,965,503
shares of common stock of the Company outstanding at the Conversion and
Reorganization. The Company has no significant assets, other than all of
the outstanding shares of the Bank and the portion of the net proceeds from
the Offering retained by the Company, and no significant liabilities.
Management of the Company and the Bank are substantially similar and the
Company neither owns nor leases any property, but instead uses the
premises, equipment and furniture of the Bank. Accordingly, the information
set forth in this report, including the consolidated financial statements
and related financial data, relates primarily to the Bank. The Company
operates as a single business segment, that of providing traditional
community banking services through its full service branch network.
In the opinion of management, the preceding unaudited consolidated
financial statements contain all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the financial
condition of the Company as of March 31, 2000 and September 30, 1999 and
the results of its operations for the three and six month periods ended
March 31, 2000 and 1999. The results of operations for the three and six
month periods ended March 31, 2000 are not necessarily indicative of the
results which may be expected for the entire fiscal year. These unaudited
consolidated financial statements should be read in conjunction with the
audited consolidated financial statements of the Company for the year ended
September 30, 1999 contained in the Company's 1999 Annual Report to
Stockholders which is filed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended September 30, 1999.
2. EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Weighted average shares 3,378,878 3,736,665 3,428,147 n/m
outstanding - basic
Common stock equivalent 17,584 6,830 18,277 n/m
----------------------------------------------------------------
Weighted average shares 3,396,462 3,743,495 3,446,424 n/m
outstanding - diluted
----------------------------------------------------------------
Anti-dilutive shares 9,495 9,909 16,745 n/m
</TABLE>
Under the Treasury Stock method, outstanding stock options are dilutive
when then average market price of the Company's common stock exceeds the
option price during a period. In addition, proceeds from the assumed
exercise of dilutive options along with the related tax benefit are assumed
to be used to repurchase common shares
-6-
<PAGE>
at the average market price of such stock during the period. Anti-dilutive
shares are those option shares with exercise prices in excess of current
market value. Earnings per share for the six months ended March 31, 1999
are not meaningful due to the stock conversion/reorganization which was
completed December 2, 1998.
3. STOCK COMPENSATION PLANS
Restricted Stock - On January 21, 2000, shareholders approved a Management
Recognition and Development Plan (MRDP) granting up to 116,380 shares of
restricted stock to be awarded to participants. On that same day the Board
of Directors approved allocation of 112,307 shares. The restricted stock
awards vest over a five-year period. The 112,307 shares of stock were
issued from Treasury Stock on the date of the grant. The Company recorded
the stock award at market value ($10.69 per share) as Unearned MRDP shares
in stockholder's equity and will amortize the unearned MRDP shares to
compensation expense over the vesting period.
As a result of the declaration of a special $4.00 cash dividend (see
footnote 4), dividends of approximately $449,000 will be paid on unvested
shares included in the Company's MRDP, and accounted for as compensation
expense. On or about August 1, 2000 (the record date for special cash
dividend) Unearned MRDP Shares will be reduced, with a corresponding change
to additional paid-in capital, to reflect the reduction in the value of the
shares held by the Plan.
Stock Option Plan - On January 21, 2000, as a result of shareholder
approval on that date of Stock-Based Incentive Plan, the Company granted
options to purchase 258,979 shares of Company stock at an exercise price of
$10.69 per share to officers and directors of the Company and the Bank. As
a result of the special cash dividend (see footnote 4), the option exercise
price will be repriced on or about August 1, 2000 to reflect the
proportional change in value.
Employee Stock Option Plan - The special cash distribution to be received
by the ESOP was used to prepay a portion of the internally financed debt
obligation, and resulted in a charge of approximately $874,000 compensation
expense and release of additional shares to plan participants. Fewer shares
will remain to be allocated in the future as a result of this accelerated
allocation.
4. DECLARATION OF $4.00 PER SHARE SPECIAL CASH DISTRIBUTION
On March 31, 2000 the Board of Directors declared a special cash
distribution in the amount of $4.00 per share. The dividend will be paid on
September 1, 2000 to holders of record as of August 1, 2000. The
distribution is being made to reduce the excess capital levels created when
the Company converted to full stock in December 1998. The Company expects
that most of the distribution will be a non-taxable return of capital.
5. RECLASSIFICATIONS
Certain reclassifications have been made to 1999 amounts to conform to the
2000 presentation.
* * * * * *
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<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Forward Looking Statements
This report contains forward-looking statements within the meaning of the
federal securities laws. These statements are not historical facts, rather
statements based on the Company's current expectations regarding its business
strategies and their intended results and its future performance. Forward-
looking statements are preceded by terms such as "expects," "believes,"
"anticipates," "intends," and similar expressions.
Forward-looking statements are not guarantees of future performance. Numerous
risks and uncertainties could cause or contribute to the Company's actual
results, performance and achievements to be materially different from those
expressed or implied by the forward-looking statements. Factors that may cause
or contribute to these differences include, without limitation, general economic
conditions, including changes in market interest rates and changes in monetary
and fiscal policies of the federal government; legislative and regulatory
changes; and other factors disclosed periodically in the Company's filings with
the Securities and Exchange Commission.
Because of the risks and uncertainties inherent in forward-looking statements,
readers are cautioned not to place undue reliance on them, whether included in
this report or made elsewhere from time to time by the Company or on its behalf.
The Company assumes no obligation to update any forward-looking statements.
General
Management's discussion and analysis of financial condition and results of
operations is intended to assist in understanding the financial condition and
results of operations of the Company. The information contained in this section
should be read in conjunction with the unaudited consolidated financial
statements and accompanying notes thereto.
Financial Condition
Total assets at March 31, 2000 were $250.7 million, an increase of $6.7 million
from $244.0 million at September 30, 1999. The increase in total assets was
primarily attributable to increases in loans receivable, offset by decreases in
investments and debt securities, cash equivalents, mortgage-backed securities,
and loans held for sale.
Loans receivable increased $14.5 million from $181.5 million at September 30,
1999 to $196.0 million at March 31, 2000. The increase was largely due to a
greater volume of non-conforming (to secondary market guidelines) loans
originated for portfolio. Non-conforming loans are usually characterized as
having credit histories, and/or underwriting qualities that render them
unsaleable to secondary markets. The Bank provides financing for these mortgage
loans at slightly higher rates, subject to well-defined underwriting criteria.
Non-conforming loans have increased as a result of hiring four commissioned loan
officers capable of generating higher yielding assets.
Cash and cash equivalents decreased from $8.9 million at September 30, 1999 to
$6.1 million at March 31, 2000. Investments and debt securities declined from
$13.2 million at September 30, 1999 to $9.4 million at March 31, 2000.
Mortgage-backed securities decreased from $25.4 million at September 30, 1999 to
$23.8 million at March 31, 2000. These declines were due to utilization of
overnight investments, maturities, and cash flows to fund loan growth.
Total liabilities at March 31, 2000 were $217.5 million, an increase of $23.4
million from $194.1 million at September 30, 1999. The increase in total
liabilities was primarily attributable to recording a special $4.00 return of
capital dividend, payable in September 2000, and increased borrowings from the
Federal Home Loan Bank of Des Moines, offset by a reduction in borrowers escrow
funds for payment of real estate taxes and insurance.
On March 31, 2000, the Board of Directors of the Company declared a special
$4.00 per share dividend payable September 1, 2000 to holders of record August
1, 2000. Management expects that most, if not all, of that dividend will be a
non-taxable return of capital, although the exact amount of the distribution
that could be considered non-taxable cannot
-8-
<PAGE>
be confirmed until the Company's operating results for the tax year ending
September 30, 2000 have been determined. The amount of the special cash
distribution that would be treated as a return of capital would be considered a
reduction in the cost basis of each share and will not be subject to income tax
as a dividend to shareholders. Based upon current outstanding shares, an accrual
of $14.0 million was made to reflect this special dividend payable. The Company
is continuing in its authorized share repurchase program, and consequently, this
ultimate liability may decrease if additional shares are repurchased.
Deposit account balances remain unchanged from $161.3 million at September 30,
1999. The Bank's checking and money market accounts increased $3.2 million
since September 30, 1999 to $35.2 million, but this growth was offset by a
similar decline in the passbook and certificate balances that was attributed to
the closing in September 1999 of a branch office located in Sunset Hills,
Missouri. A new branch office was opened in February 2000 in St. Charles
County, Missouri.
Borrowings increased $11.0 million, from $28.6 million at September 30, 1999 to
$39.6 million at March 31, 2000, as proceeds were used to fund portfolio loan
growth and payment of borrowers escrowed real estate taxes of approximately $2.6
million in December 1999.
Total stockholders' equity at March 31, 2000 was $33.2 million, a decrease of
$16.7 million from the $49.9 million at September 30, 1999. The decrease is
primarily attributable to declaration of a potential special dividend, and the
repurchase of 400,795 shares for $4.4 million, payment of regular dividends of
$597,000, increase in the amount of unrealized losses on securities held for
sale of $255,000, and net income for the six months ended March 31, 2000 of
$172,000.
Non-Performing Assets and Delinquencies
Non-accrual loans amounted to $216,000 at March 31, 2000 as compared to $258,000
at September 30, 1999. The non-accrual loans consisted primarily of single
family residential loans. Accruing loans that were contractually past due 90
days or more at March 31, 2000 amounted to $1.4 million, of which $486,000 were
FHA/VA government-insured loans, compared to $363,000 of FHA/VA loans at
September 30, 1999. Real estate acquired in settlement of loans, net of
allowance for losses decreased to $135,000 at March 31, 2000 from $228,000 at
September 30, 1999, and consisted of single-family residences. The allowance
for loan losses was $1.2 million at March 31, 2000, or .57% of total loans and
73% of non-performing loans (non-accrual loans and accruing loans past due 90
days or more).
Comparison of Operating Results for the Three and Six Months Ended March 31,
2000 and 1999:
All trends for the three months ended March 31, 2000 and 1999 are reflective of
the trends for the six month periods ended March 31, 2000 and 1999, in all
material respects, unless otherwise noted.
General
Net loss for the three months ended March 31, 2000 was ($394,000), compared to
net income of $530,000 for the three months ended March 31, 1999. Net income
for the six months ended March 31, 2000 was $172,000 compared to the six-month
period ended March 31, 1999 of $1.0 million. The current period loss is caused
by a one-time non-recurring recognition of compensation expense totaling
$847,000 on an after- tax basis associated with the Company's $4.00 a share
special dividend declaration and its effect on restricted stock awards under the
Company's 2000 Stock-Based Benefit Plan and on the Employee Stock Ownership
Plan.
Interest Income
Interest income increased $672,000, or 18% for the three months ended March 31,
2000, compared to the three months ended March 31, 1999. The increase resulted
primarily from an increase in interest on loans of $579,000, as well as an
-9-
<PAGE>
increase of $315,000 in interest on mortgage-backed securities. These increases
are offset by a decrease in interest on investments of $88,000, and decreased
income on overnight investments of $133,000.
The increase in interest income on loans resulted from an increase in the
average balance of loans outstanding for the six months ended March 31, 1999 of
$164.7 million to $193.7 million at March 31, 2000. The weighted average yield
on loans increased from 7.55% to 7.62% over the same time period.
The increase in interest income from mortgage-backed securities resulted
primarily from an increase in the average balance from $6.1 million for the
three months ended March 31, 1999 to $24.1 million for the quarter ended March
31, 2000, offset by a reduction in the weighted average yield from 7.64% in 1999
to 7.18% in 2000. The decrease in the average yield is a reflection of the
amortization and prepayment of older higher rate securities.
The decrease in income from investments was due to a decline in the average
balance, from $18.4 million for the three months ended March 31, 1999 to $11.6
million for the three months ended March 31, 2000, as maturing securities, as
well as funds invested in overnight deposits were used to fund additional
lending activity and stock repurchases. The average balance of overnight
deposits decreased from $18.4 million for the March 1999 quarter to $5.8 million
for the March 2000 quarter.
Interest Expense
Interest expense increased $430,000 for the three months ended March 31, 2000
compared to the same period last year. The additional expense resulted
primarily from increased interest expense of $492,000 on borrowings from the
FHLB of Des Moines. The average balance of borrowings increased from $2.9
million for the quarter ended March 31, 1999 to $35.0 million for the quarter
ended March 31, 2000. The weighted average rate on FHLB borrowings increased
from 5.87% for the quarter ended March 31, 1999 to 6.11% for the quarter ended
March 31, 2000. The increase in the average balance is attributable primarily
to the use of advances to purchase mortgage-backed securities, fund loan
originations, payment of borrowers' funds escrowed for annual real estate taxes,
and net savings withdrawals.
Interest on deposits declined $62,000 or 4% for the quarter ended March 31, 2000
compared to the same quarter of the prior year, due to a 20 basis point decline
in average rates from 4.27% for the three months ended March 31, 1999 to 4.07%
for the three months ended March 31, 2000. The Bank's management adopted a
pricing strategy to reduce overall cost of funds in March 1999. The decline in
interest expense on deposits was offset by an increase in the average balance
from $155.3 million to $156.7 million.
Provision for Loan Losses
The provision for loan losses was $72,000 for the three months ended March 31,
2000 compared to $44,000 for the three months ended March 31, 1999. Management
of the Bank deemed it necessary to increase the provision for loan losses after
considering an increase in total nonperforming loans to $1.6 million at March
31, 2000 from $1.4 million at September 30, 1999 and because of the Bank's
investment in high loan to value residential loans and home equity loans has
increased. Loans up to 100% of the purchase price are made to borrowers having
excellent credit histories and high personal income. To date, the balances in
these high loan to value category of loans is less than 6% of total outstanding
loans. The Company closely monitors delinquencies on these loans.
The provision for loan losses is determined by management as the amount to be
added to the allowance for loan losses after net charge-offs have been deducted
to bring the allowance to a level which is considered adequate to absorb losses
inherent in the loan portfolio. Because management adheres to specific loan
underwriting guidelines focusing on mortgage loans secured by one-to-four-family
residences, the Bank's historical loan loss experience has been low. No
assurances, however, can be given as to future loan loss levels.
-10-
<PAGE>
Other Income
Other income increased $40,000 for the three months ended March 31, 2000 from
$508,000 for the three months ended March 31, 1999. The increase in other
income was primarily the result of an increase in retail banking fees of $86,000
and other income of $18,000. Offsetting these increases was a decline in
mortgage revenues, which fell from $282,000 for the March 1999 quarter to
$219,000 for the current quarter.
Retail banking fees rose from $108,000 in the March 1999 quarter to $194,000 for
the March 2000 quarter, which represents a 80% increase over the corresponding
period of the prior year as a result of the growth in checking accounts. The
number of net new checking accounts increased by 11%. Other income increased
primarily as a result of increased dividends received on greater Federal Home
Loan Bank of Des Moines stock holdings, which are required to support additional
borrowings from the Federal Home Loan Bank. For the year, approximately $480,000
additional stock has been purchased.
Insurance commissions for the three months ended March 31, 2000 were $86,000
compared to $88,000 for the March 31, 1999 quarter. Commissions from the sale of
annuities increased 30% from $159,000 for the six months ended March 31, 1999 to
$207,000 for the six months ended March 31, 2000. Increased sale of annuities is
attributed to the promotion of the top sales person into manager and a focused
approach with incentives for greater sales of annuities.
Mortgage revenues declined 22%, or $62,000, from $281,000 for the quarter ended
March 1999 to $219,000 for the quarter ended March 2000. For the six-month
period ending March 31, 2000, these revenues totaled $495,000 compared to
$594,000 for the same period one year ago. This 17% decline in revenue was due
to a 32% decline in total volume of loans sold. However, mortgage and home
equity lines of credit loans closed during the month of March 2000 totaled $23.9
million. The majority of these closed loans will be sold, and any resulting
revenues will be realized in the subsequent quarter. That is a new monthly
record for Pulaski Bank, and is a result of concentrated effort to grow lending
activity. In November 1999, the Bank hired a Senior Vice-President/Sales Manager
and subsequently four-commissioned loan officers to implement the Bank's growth
strategy.
Other Expenses
Other expenses increased $1.7 million, from $1.6 million for the March 1999
quarter, to $3.3 million for the three months ended March 31, 2000. The
increase was primarily due to the declaration of a special $4.00 per share
dividend. Compensation expense in the amount of $1.3 million was recorded to
reflect accelerated releasing of shares of stock for benefit of the employees
stock ownership program and dividends on unvested shares of restricted stock
awards. These expenses are expected to be non-recurring, and are further
expected to result in reduced compensation expense in future periods. Excluding
the compensation expense relating to the special dividend, compensation expense
increased $208,000 for the quarter, and $272,000 for the six-month period
compared to the previous year. Compensation expense increased primarily as a
result of an expanded work force, salary increases and impact of the decline in
year to date mortgage-lending volume on the deferral of loan origination
expense. Mortgage lending volume declined 27% for the six-month period ending
March 31, 2000 compared to the six months ended March 31, 1999.
Occupancy and equipment expenses increased from $348,000 for the quarter ended
March 31, 1999 to $414,000 for the 2000 quarter, due to higher amounts of rent,
taxes and depreciation resulting from opening a new branch office in St. Charles
County, Missouri.
Professional services cost increased from $76,000 for the three months ended
March 31, 1999 to $158,000 for the three months ended March 31, 2000. For the
six months ended March 31, 2000, professional services cost was $270,000,
compared to $120,000 for the six months ended March 31, 1999. Increased used of
professional service providers, and increased legal and accounting expenses
associated with review and professional opinions relating to the special $4.00
return of capital dividend were responsible for these increases.
Other miscellaneous expenses increased $37,000 for the quarter and $130,000 for
the six months year to date, primarily as a result of increased purchases of
stationery and supplies, and losses on dispositions of foreclosed properties.
-11-
<PAGE>
Income Taxes
The provision for income taxes decreased $530,000 to ($215,000) for the three
months ended March 31, 2000 from $315,000 for the three months ended March 31,
1999. The decrease was primarily attributable to the net operating loss for the
quarter.
Liquidity and Capital Resources
Federal regulations require the Bank to maintain minimum levels of liquid assets
(i.e., cash and eligible investments). The required percentage has varied from
time to time based upon economic conditions and savings flows and is currently
4% of the average daily balance of its net withdrawable savings deposits and
short-term borrowings. The Bank attempts to maintain levels of liquidity at
levels in excess of those required by regulation. Maintaining levels of
liquidity acts, in part, to reduce the Company's balance sheet exposure to
interest rate risk. For the quarter ended March 31, 2000, the Bank's average
liquidity ratio (liquid assets as a percentage of net withdrawable savings
deposits and short-term borrowings) was 20.65%.
The Bank must also maintain adequate levels of liquidity to ensure the
availability of funds to satisfy loan commitments and deposit withdrawals. At
March 31, 2000, the Bank had outstanding commitments to originate loans of $16.1
million, and commitments to sell loans of $15.2 million. At the same date,
certificates of deposit that are scheduled to mature in one year or less totaled
$77.3 million. Based on past experience, management believes the majority of
maturing certificates of deposit will remain with the Bank.
Management believes its ability to generate funds internally will satisfy its
liquidity requirements. If the Bank or the Company requires funds beyond its
ability to generate them internally, the Bank has the ability to borrow funds
from the Federal Home Loan Bank of Des Moines (FHLB) under a blanket agreement
which assigns all investments in FHLB stock as well as qualifying first mortgage
loans equal to 150% of the outstanding advances as collateral to secure the
amounts borrowed. At March 31, 2000, the Bank had approximately $58.2 million
available to it under the above-mentioned borrowing arrangement. At March 31,
2000, the Bank had $39.6 million in advances from the FHLB. The Company believes
it has the ability to borrow from other sources.
The Bank is required to maintain specific amounts of capital pursuant to Office
of Thrift Supervision (OTS) regulations on minimum capital standards. The OTS'
minimum capital standards generally require the maintenance of regulatory
capital sufficient to meet each of three tests, hereinafter described as the
tangible capital requirement, the core capital requirement and the risk-based
requirement. The tangible capital requirement provides for minimum tangible
capital (defined as stockholders' equity less all intangible assets) equal to
1.5% of adjusted total assets. The core capital requirement provides for
minimum core capital (tangible capital plus certain forms of supervisory
goodwill and other qualifying intangible assets) equal to 3.0% of adjusted total
assets. The risk-based capital requirements provides for the maintenance of
core capital plus a portion of unallocated loss allowances equal to 8.0% of
risk-weighted assets. In computing risk-weighted assets the Bank multiplies the
value of each asset on its balance sheet by a defined risk-weighting factor
(e.g., one- to four-family conventional residential loans carry a risk-weighted
factor of 50%).
The following table illustrates the Bank's regulatory capital levels compared to
its regulatory capital requirements at March 31, 2000.
-12-
<PAGE>
<TABLE>
<CAPTION>
To be Catagorized as
"Well Capitalized"
Under Prompt
For Capital Corrective Action
Actual Adequacy Purposes Provisions
---------------- ----------------- ----------------
(Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
As of March 31, 2000
Tangible capital
(to total assets) $ 40,312 16.49% $ 3,667 1.50% N/A N/A
Core capital (to total
assets) 40,312 16.49% 7,348 3.00% N/A N/A
Total risk-based capital
(to risk-weighted assets) 41,468 27.14% 12,225 8.00% 15,281 10.00%
Tier 1 risk-based capital
(to risk-weighted assets) 40,312 26.38% N/A N/A 9,168 6.00%
Tier 1 leverage capital
(to average assets) 40,312 17.00% N/A N/A 11,859 5.00%
</TABLE>
Quantitative and Qualitative Disclosures About Market Risk
There has been no significant change in the Company's quantitative or
qualitative aspects of market risk during the quarter ended March 31, 2000 from
that disclosed in the Company's Annual Report on Form 10-K for the year ended
September 30, 1999.
-13-
<PAGE>
PART II - OTHER INFORMATION
<PAGE>
Item 1. Legal Proceedings:
Periodically, there have been various claims and lawsuits involving
the Bank, such as claims to enforce liens, condemnation proceedings on
properties in which the Bank holds security interests, claims
involving the making and servicing of real property loans and other
issues incident to the Bank's business. The Bank is not a party to any
pending legal proceedings that it believes would have a material
adverse effect on the financial condition or operations of the Bank.
Item 2. Changes in Securities and Use of Proceeds:
a. Changes in Securities: Not applicable
b. Use of Proceeds: Not applicable
Item 3. Defaults Upon Senior Securities: Not applicable
Item 4. Submission of Matters to a Vote of Security-Holders:
The Annual Meeting of the Stockholders of the Company was held on January
21, 2000.
The results of the vote were as follows:
1. The following individuals were elected as directors, each for a three-
year term:
Votes For Votes Withheld
--------- --------------
E. Douglas Britt 2,843,546 447,801
Michael J. Donius 2,986,584 304,763
Garland A. Dorn 2,843,751 447,596
2. The Pulaski Financial Corp. 2000 Stock-Based Incentive Plan was
approved by stockholders by the following vote:
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
2,191,214 628,374 38,709 433,050
3. The appointment of Deloitte & Touche LLP as independent auditors of
Pulaski Financial Corp. for the fiscal year ended September 30, 2000
was ratified by the stockholders by the following vote:
For Against Abstain
--- ------- -------
3,183,131 89,999 20,239
Item 5. Other Information: Not applicable
-14-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K:
3.1 Certificate of Incorporation of Pulaski Financial Corp.*
3.2 Bylaws of Pulaski Financial Corp.*
4.0 Form of Certificate for Common Stock*
10.1 Pulaski Financial Corp. 2000 Stock-Based Incentive Plan**
27.0 Financial Data Schedule
* Incorporated by reference from the Form S-1 (Registration No.333-
56465), as amended, as filed on June 9, 1998.
** Incorporated herein by reference to Pulaski Financial Corp.'s
Definitive Proxy Statement for the 2000 Annual Meeting of
Stockholders.
-15-
<PAGE>
SIGNATURES
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PULASKI FINANCIAL CORP.
Date: May 15, 2000 /s/ William A. Donius
---------------------- -----------------------
William A. Donius
Chairman and Chief Executive Officer
Date: May 15, 2000 /s/ Thomas F. Hack
--------------------- -----------------------
Thomas F. Hack
Chief Financial Officer/Treasurer
-15-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION CONTRACTED FROM THE CONSOLIDATED
FINANCIAL STATEMENTS OF PULASKI FINANCIAL CORP. FOR THE SIX MONTHS ENDED MARCH
31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 640
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 24,665
<INVESTMENTS-CARRYING> 8,583
<INVESTMENTS-MARKET> 8,653
<LOANS> 202,191
<ALLOWANCE> 1,158
<TOTAL-ASSETS> 250,726
<DEPOSITS> 161,318
<SHORT-TERM> 15,300
<LIABILITIES-OTHER> 16,604
<LONG-TERM> 24,300
0
0
<COMMON> 40
<OTHER-SE> 33,164
<TOTAL-LIABILITIES-AND-EQUITY> 250,726
<INTEREST-LOAN> 7,164
<INTEREST-INVEST> 1,226
<INTEREST-OTHER> 181
<INTEREST-TOTAL> 8,571
<INTEREST-DEPOSIT> 3,188
<INTEREST-EXPENSE> 4,134
<INTEREST-INCOME-NET> 4,437
<LOAN-LOSSES> 198
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,132
<INCOME-PRETAX> 273
<INCOME-PRE-EXTRAORDINARY> 273
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 172
<EPS-BASIC> 0.05
<EPS-DILUTED> 0.05
<YIELD-ACTUAL> 7.28
<LOANS-NON> 216
<LOANS-PAST> 1,365
<LOANS-TROUBLED> 14
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 986
<CHARGE-OFFS> 28
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 1,158
<ALLOWANCE-DOMESTIC> 104
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,054
</TABLE>
