<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 June 30, 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 August 10, 2000
-------------------------------------- ----------------------------------
Common Stock, par value $.01 per share 3,217,322 shares
<PAGE>
PULASKI FINANCIAL CORP. AND SUBSIDIARIES
FORM 10-Q
JUNE 30, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at June 30, 2000 and September 30, 1999 (Unaudited) 1
Consolidated Statements of Income and Comprehensive Income for
the Three and Nine Months Ended June 30, 2000 and 1999 (Unaudited) 2
Consolidated Statement of Stockholders' Equity for the Nine months Ended
June 30, 2000 (Unaudited) 3
Consolidated Statements of Cash Flows for the Nine months Ended
June 30, 2000 and 1999 (Unaudited) 4-5
Notes to Unaudited Consolidated Financial Statements (Unaudited) 6-8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-15
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
PART II OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security-Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
Financial Data Schedule 18
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
<PAGE>
PULASKI FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND SEPTEMBER 30, 1999 (UNAUDITED)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, September 30,
ASSETS 2000 1999
<S> <C> <C>
Cash and amounts due from depository institutions $ 4,391,435 $ 3,486,957
Federal funds sold and overnight deposits 5,000,000 5,400,000
------------- -------------
Total cash and cash equivalents 9,391,435 8,886,957
Investment securities available for sale, at market value 4,415,281 4,234,145
Investment securities held to maturity, at amortized cost (market value,
$6,964,729 and $9,002,455, at June 30, 2000 and September 30, 1999, respectively 6,994,565 9,010,427
Mortgage-backed and related securities held to maturity, at amortized cost (market value,
$3,426,058 and $4,154,784 at June 30, 2000 and September 30, 1999, respectively) 3,329,206 3,996,748
Mortgage-backed and related securities available for sale, at market value 19,855,991 21,356,446
Loans receivable held for sale, at lower of cost or market 14,901,427 8,159,085
Loans receivable, net of allowance for loan losses of $1,245,074 and $985,773 at
June 30, 2000 and September 30, 1999, respectively 206,255,196 181,532,561
Federal Home Loan Bank stock - at cost 3,380,000 1,501,200
Real estate acquired in settlement of loans, net of allowance for losses of
$4,486 and $17,161 at June 30, 2000 and September 30, 1999, respectively 59,603 228,002
Premises and equipment - net 2,982,378 2,235,412
Accrued interest receivable:
Investment securities 112,375 153,637
Mortgage-backed securities 140,266 151,903
Loans 1,271,675 1,041,503
Other 979 818
Other assets 2,504,885 1,485,537
-------------- --------------
TOTAL $ 275,595,262 $ 243,974,381
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits $ 159,663,758 $ 161,370,542
Advances from Federal Home Loan Bank of Des Moines 67,600,000 28,600,000
Advance payments by borrowers for taxes and insurance 1,959,039 2,440,520
Accrued interest payable 41,419 221,881
Dividends payable 13,295,105 339,740
Other liabilities 1,289,459 1,096,855
-------------- --------------
Total liabilities 243,848,780 194,069,538
-------------- --------------
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 shares issued at June 30, 2000 and September 30, 1999, respectively 39,729 39,729
Treasury stock - at cost (shares, 722,249 and 198,000 respectively) (8,304,653) (2,322,004)
Additional paid-in capital 24,018,359 35,685,866
Unearned MRDP shares (1,080,251) (18,400)
Unearned ESOP shares (unreleased shares, 124,622 and 217,242 respectively) (1,218,104) (2,172,420)
Accumulated other comprehensive loss (389,817) (235,360)
Retained earnings 18,681,219 18,927,432
--------------- --------------
Total stockholders' equity 31,746,482 49,904,843
--------------- --------------
TOTAL $ 275,595,262 $ 243,974,381
=============== ==============
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
-1-
<PAGE>
PULASKI FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
THREE AND NINE MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
--------------------------- -----------------------------
2000 1999 2000 1999
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans receivable $ 3,971,259 $ 3,235,699 $ 11,134,820 $ 9,429,514
Investment securities 169,296 231,066 516,571 774,477
Mortgage-backed and related securities 425,539 242,949 1,304,952 491,943
Other 81,481 146,052 262,382 480,358
------------ ------------ ------------ ------------
Total interest income 4,647,575 3,855,766 13,218,725 11,176,292
------------ ------------ ------------ ------------
INTEREST EXPENSE:
Deposits 1,619,647 1,644,737 4,807,613 5,044,406
Advances from Federal Home Loan Bank of Des Moines 800,587 114,847 1,746,679 226,930
Other 46,010
------------ ------------ ------------ ------------
Total interest expense 2,420,234 1,759,584 6,554,292 5,317,346
------------ ------------ ------------ ------------
NET INTEREST INCOME 2,227,341 2,096,182 6,664,433 5,858,946
PROVISION FOR LOAN LOSSES 164,783 60,739 363,425 144,153
------------ ------------ ------------ ------------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 2,062,558 2,035,443 6,301,008 5,714,793
------------ ------------ ------------ ------------
OTHER INCOME:
Retail banking fees 257,686 132,196 625,580 329,630
Mortgage revenues 487,388 272,508 982,373 866,873
Insurance commissions 48,774 86,851 255,959 245,688
Other 60,669 28,224 156,750 85,399
------------ ------------ ------------ ------------
Total other income 854,517 519,779 2,020,662 1,527,590
------------ ------------ ------------ ------------
OTHER EXPENSES:
Compensation expense - special dividend 1,322,954
Salaries and employee benefits 1,050,900 800,372 2,966,831 2,444,660
Occupancy, equipment and data processing expense 419,086 342,549 1,317,020 1,015,413
Federal insurance premiums 8,404 23,741 41,697 72,839
Advertising 109,522 122,273 294,443 323,800
Professional services 96,713 115,531 366,501 235,213
Other 195,763 212,257 702,504 588,912
------------ ------------ ------------ ------------
Total other expenses 1,880,388 1,616,723 7,011,950 4,680,837
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 1,036,687 938,499 1,309,720 2,561,546
INCOME TAXES 366,557 363,607 467,280 967,698
------------ ------------ ------------ ------------
NET INCOME 670,130 574,892 842,440 1,593,848
OTHER COMPREHENSIVE GAIN (LOSS) ITEMS 100,147 (177,644) (154,457) (187,375)
------------ ------------ ------------ ------------
COMPREHENSIVE INCOME $ 770,277 $ 397,248 $ 687,983 $ 1,406,375
============ ============ ============ ============
NET INCOME PER COMMON SHARE - BASIC $ 0.21 $ 0.15 $ 0.25 n/m
============ ============ ============ ============
NET INCOME PER COMMON SHARE - DILUTED $ 0.21 $ 0.15 $ 0.25 n/m
============ ============ ============ ============
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
-2-
<PAGE>
PULASKI FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unearned Accumulated
Management Other
Additional Recognition and Comprehen- Unearned
Common Treasury Paid-In Development sive 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 $49,904,843
----------
Comprehensive income:
Net income 842,440 842,440
Change in net unreal-
ized losses on securi- (154,457) (154,457)
ties
---------
Total comprehensive
income (loss) 687,983
---------
Dividends declared ($.09
per share) (870,020) ( 870,020)
Treasury stock issued and
related tax benefit 58,650 (22,900) 35,750
Stock options exercised 202,214 (78,956) 123,258
Stock repurchase (7,560,571) (7,560,571)
Release of ESOP shares 47,877 954,316 1 ,002,193
Amortization of Manage-
ment Recognition and
Development Plan shares 138,430 138,430
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) (11,715,384) (11,715,384)
------- ------------ ----------- ------------- ---------- ----------- ------------ -----------
BALANCE,
June 30, 2000 $39,729 $(8,304,653) $24,018,359 $(1,080,251) $(389,817) $(1,218,104) $18,681,219 $31,746,482
======= ============ =========== ============= ========== =========== ============ ===========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
-3-
<PAGE>
PULASKI FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 842,440 $ 1,593,848
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation, amortization and accretion:
Premises and equipment 373,600 267,581
Management Recognition and Development Plan stock awards 138,430 41,400
ESOP shares committed to be released 1,002,193 114,923
Loan fees, discounts and premiums - net 122,053 (18,504)
Deferred income taxes 245,271 (75,580)
Provision for loan losses 363,425 144,153
Provision for losses on real estate acquired in settlement of loans 4,679 14,828
Losses on sale of real estate acquired in settlement of loans 12,137 1,828
Gain on sale of investments (1,750)
Gains on sales of loans (814,990) (655,926)
Originations of loans receivable for sale to correspondent lenders (97,378,342) (101,176,629)
Proceeds from sales of loans to correspondent lenders 91,450,990 101,784,926
Changes in other assets and liabilities (122,359) 44,351
------------- ------------
Net adjustments (4,602,914) 485,601
------------- ------------
Net cash (used in) provided by operating activities (3,760,474) 2,079,449
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales and maturities of investment securities 8,523,143 13,201,750
Purchases of investment securities and FHLB stock (8,509,929) (8,734,261)
Principal payments received on mortgage-backed and related
securities 1,939,002 1,281,820
Purchases of mortgage-backed and related securities (20,713,884)
Loan originations - net (25,364,350) (30,793,912)
Proceeds from sales of real estate acquired in settlement of
loans receivable 257,500 271,627
Net additions to premises and equipment (1,120,566) (264,182)
------------- ------------
Net cash used in investing activities (24,275,200) (45,751,042)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in deposits (1,706,784) 6,564,360
Federal Home Loan Bank advances - net 39,000,000 25,200,000
Net decrease in advance payments by borrowers for taxes and
insurance (481,481) (837,421)
Dividends declared on common stock (870,020) (1,009,991)
Common stock issued under stock option plan 159,008 49,943
Stock repurchase (7,560,571)
Issuance of common stock under conversion/reorganization 19,440,662
------------- ------------
Net cash provided by financing activities 28,540,152 49,407,553
------------- ------------
</TABLE>
-4-
<PAGE>
PULASKI FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
NET INCREASE IN CASH AND CASH EQUIVALENTS $ 504,478 $ 5,735,960
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 8,886,957 3,047,328
------------- ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 9,391,435 $ 8,783,288
============= ============
ADDITIONAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest on deposits $ 4,988,075 $ 5,265,646
Interest on advances from the Federal Home Loan Bank
of Des Moines 1,746,679 226,930
Income taxes 684,397 721,000
NONCASH INVESTING ACTIVITIES:
Write-down of real estate owned 4,679 14,828
Real estate acquired in settlement of loans 105,917 319,518
Decrease in investments for changes in unrealized
gains and losses (245,171) (296,376)
NONCASH FINANCING ACTIVITIES:
Dividends declared 13,295,105 356,931
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 unaudited 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 (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 upon the completion of 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.
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 June 30, 2000 and September 30, 1999 and its results of
operations for the three and nine month periods ended June 30, 2000 and 1999.
The results of operations for the three and nine month periods ended June 30,
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.
-6-
<PAGE>
2. EARNINGS PER SHARE
Three Months Ended Nine Months Ended
June 30, June 30,
---------------------- --------------------
2000 1999 2000 1999
Weighted average shares
outstanding - basic 3,218,301 3,743,244 3,358,453 n/m
Common stock equivalent 41,198 16,716 25,890 n/m
----------- --------- ---------
Weighted average shares
outstanding - diluted 3,259,499 3,759,960 3,384,343 n/m
========== ========= =========
Anti-dilutive shares 5,391 9,555 22,136 n/m
========== ========= =========
Under the Treasury Stock method, outstanding stock options are dilutive
when the 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 at the average market price of such
stock during the period. Anti-dilutive shares are those option shares with
exercise prices in excess of the current market value. Earnings per share
for the nine months ended June 30, 1999 are not meaningful because the
conversion and reorganization 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 awards 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 per share 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 September 5, 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 September 5, 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 to
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.
-7-
<PAGE>
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. Under NASDAQ stock market
rules, the ex-dividend date for the distribution is September 5, 2000.
Management expects that it is likely that most, if not all, of that dividend
will be considered a non-taxable return of capital, although the exact amount
of the distribution that could be considered non-taxable cannot 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 outstanding shares as of June 30, the
Company has recorded an accrual of $13.0 million to reflect this special
dividend payable.
5. RECLASSIFICATIONS
Certain reclassifications have been made to 1999 amounts to conform to the
2000 presentation and are not material.
* * * * * *
-8-
<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 June 30, 2000 were $275.6 million, an increase of $31.6 million
from $244.0 million at September 30, 1999. The increase in total assets was
primarily attributable to increases in loans receivable and loans held for sale,
offset by a decrease in mortgage-backed securities and investment securities.
Loans receivable increased $24.8 million from $181.5 million at September 30,
1999 to $206.3 million at June 30, 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 higher rates, subject to well-defined underwriting criteria. Non-
conforming loans have increased as a result of hiring nine commissioned loan
officers capable of generating larger volumes of higher yielding assets. Home
Equity Line of Credit loans have grown $7.4 million, from $5.0 million at
September 30, 1999 to $12.4 million at June 30, 2000, this growth in prime-based
adjustable loans has been offset by a decline in the amount of consumer loans
(primarily indirect auto loans) which were $33.8 million at September 30, 1999
and are $26.1 million at June 30, 2000. Management of the Bank has made
origination of Home Equity Lines of Credit loans a priority, and has been able
to fund this product with the cash flows generated from the normal amortization
and prepayments generated by the consumer loan portfolio.
-9-
<PAGE>
Cash and cash equivalents increased slightly, from $8.9 million at September 30,
1999 to $9.4 million at June 30, 2000. Investments and debt securities declined
from $13.2 million at September 30, 1999 to $11.4 million at June 30, 2000.
Mortgage-backed securities decreased from $25.4 million at September 30, 1999 to
$23.2 million at June 30, 2000 as a result of regular amortization and
prepayments. No new investments have been made in mortgage-backed securities.
Total liabilities at June 30, 2000 were $243.8 million, an increase of $49.7
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 and a decline in total
deposits.
On March 31, 2000, the Board of Directors of the Company declared a special
$4.00 per share dividend payable September 1, 2000. Management expects that it
is likely that most, if not all, of that dividend will be considered a non-
taxable return of capital, although the exact amount of the distribution that
could be considered non-taxable cannot 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, the Company has recorded an accrual of $13.0
million 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 declined from $161.3 million at September 30, 1999 to
$159.7 million at June 30, 2000. The Bank's checking and money market accounts
increased $3.3 million since September 30, 1999 to $35.3 million, but this
growth was offset by a decline of $5.0 million 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. Deposit growth at the new St. Charles
office has surpassed management's budgeted expectations in its first five months
of operations.
Borrowings increased $39.0 million, from $28.6 million at September 30, 1999 to
$67.6 million at June 30, 2000; as proceeds were used to fund portfolio loan
growth, deposit outflow and payment of borrowers escrowed real estate taxes of
approximately $2.6 million in December 1999.
Total stockholders' equity at June 30, 2000 was $31.7 million, a decrease of
$18.2 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 658,795 shares for $7.6 million, payment of regular dividends of
$870,000, increase in the amount of unrealized losses on securities held for
sale of $154,000, and net income for the nine months ended June 30, 2000 of
$842,000. The book value of one share of stock declined from $13.22 at
September 30, 1999, to $9.76 at June 30, 2000, and reflects the impact of the
special $4.00 per share dividend declared March 31, 2000 and Treasury Stock
repurchases.
Non-Performing Assets and Delinquencies
Non-accrual loans amounted to $225,000 at June 30, 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 June 30, 2000 amounted to $1.5 million, of which $447,000 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 $60,000 at June 30, 2000 from
-10-
<PAGE>
$228,000 at September 30, 1999, and consisted of single-family residences. The
allowance for loan losses was $1.2 million at June 30, 2000, or .56% of total
loans and 71% of non-performing loans (non-accrual loans and accruing loans past
due 90 days or more), compared with $986,000 at September 30, 1999 or .52% of
total loans and 70% of non-performing loans.
Comparison of Operating Results for the Three and Nine Months Ended June 30,
2000 and 1999:
All trends for the three months ended June 30, 2000 and 1999 are reflective of
the trends for the nine-month periods ended June 30, 2000 and 1999, in all
material respects, unless otherwise noted.
General
Net income for the three months ended June 30, 2000 was $670,000, compared to
net income of $575,000 for the three months ended June 30, 1999. Net income
for the nine months ended June 30, 2000 was $842,000 compared to the nine-month
period ended June 30, 1999 of $1.6 million. Comparable fiscal 2000 earnings
adjusted for the after-tax impact of the $1.3 million non-recurring compensation
expense associated with the special $4.00 return of capital is $1.7 million, a
6% increase over the prior year.
Interest Income
Interest income increased $792,000, or 21% for the three months ended June 30,
2000, compared to the three months ended June 30, 1999. The increase resulted
primarily from an increase in interest on loans of $736,000, as well as an
increase of $182,000 in interest on mortgage-backed securities. These increases
were offset by a decrease in interest on investments of $62,000, and decreased
income on overnight investments of $64,000.
The increase in interest income on loans resulted from an increase in the
average balance of loans outstanding for the three months ended June 30, 1999 of
$175.2 million to $209.7 million at June 30, 2000. The weighted average yield
on loans increased from 7.39% to 7.58% over the same time period.
The increase in interest income from mortgage-backed securities resulted
primarily from an increase in the average balance from $12.2 million for the
three months ended June 30, 1999 to $23.5 million for the quarter ended June 30,
2000, offset by a reduction in the weighted average yield from 7.97% in 1999 to
7.26% in 2000. The decrease in the average yield was a reflection of the
amortization and prepayment of older higher rate securities, and the purchase of
approximately $20.0 million of lower coupon securities in June 1999.
The decrease in income from investments was due to a decline in the average
balance, from $17.1 million for the three months ended June 30, 1999 to $11.1
million for the three months ended June 30, 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 $12.2 million for the June 1999 quarter to $5.3 million
for the June 2000 quarter. The weighted average yield on investments increased
from 5.39% to 6.11%, and the weighted average rate on overnight funds increased
from 4.66% to 6.16% over the same period of time. The rate increases reflect
the upward movement in interest rates during the period.
Interest Expense
Interest expense increased $661,000 for the three months ended June 30, 2000
compared to the same period last year. The additional expense resulted
primarily from increased interest expense of $686,000 on
-11-
<PAGE>
borrowings from the FHLB of Des Moines. The average balance of borrowings
increased from $7.9 million for the quarter ended June 30, 1999 to $50.2 million
for the quarter ended June 30, 2000. The weighted average rate on FHLB
borrowings increased from 5.82% for the quarter ended June 30, 1999 to 6.38% for
the quarter ended June 30, 2000. The increase of advances was used to fund loan
originations, purchase mortgage-backed securities, fund net savings withdrawals
and to pay borrowers' funds escrowed for annual real estate taxes.
Interest on deposits declined $25,000 for the quarter ended June 30, 2000
compared to the same quarter of the prior year, due to a decrease in the average
balance from $158.4 million for the June 1999 quarter to $156.9 million for the
June 2000 quarter, a decline of about 1%.
Provision for Loan Losses
The provision for loan losses was $165,000 for the three months ended June 30,
2000 compared to $61,000 for the three months ended June 30, 1999. Management
of the Bank deemed it appropriate to increase the provision for loan losses
after considering the increase in total non-performing loans, and the increase
in consumer loan charge offs.
Non-performing loans were $1.8 million at June 30, 2000, compared to $1.4
million at September 30, 1999. Net charge offs were $78,000 for the June 2000
quarter as a result of losses sustained from auto loans. The Bank discontinued
significant investment in auto loans in June of 1999, and decided to emphasize
home equity lines of credit, which are prime-based adjustable loans.
The provision for loan losses has increased from $144,000 for the nine months
ended June 30, 1999 to $363,000 for the nine months ended June 30, 2000 in
response to the changes in delinquencies and charge offs, and because 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 meeting specific underwriting guidelines. 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.
Other Income
Other income increased $335,000 for the three months ended June 30, 2000 from
$520,000 to $855,000. The increase in other income was the result of an increase
in mortgage revenues of $215,000, increased retail banking fees of $125,000,
other income of $32,000 offset by a decline in insurance commissions of $38,000
Mortgage revenues increased $215,000, or 79%, from $273,000 for the June 30,
1999 quarter, to $487,000 for the quarter ended June 30, 2000. For the nine-
month period ended June 30, 2000, total mortgage revenues were $982,000 compared
to $867,000 for the same period one year ago. The revenues were generated
primarily from sales of loans to investors, with servicing released. The volume
of loans sold for the three months ended June 30, 2000 increased 39% over the
three months ended June 30, 1999. The higher volume of loans sold is the result
of addition of 11 commissioned loan officers managers and staff this year. For
the nine months ended, the volume of loans sold was 10% less than in fiscal
1999.
-12-
<PAGE>
Retail banking fees rose 31% from $132,000 in the June 30, 1999 quarter, to
$258,000 in the June 30, 2000 quarter. Year to date fees have grown 90%, from
$330,000 in fiscal 1999 to $626,000, providing $296,000 additional revenue this
year. Management continues to focus on growth of checking accounts, and has seen
the number of total checking accounts increase 25%, from 7,800 at September 30,
1999 to 9,700 currently.
Other income increased $32,000 over the three months ended June 30, 1999 and
$71,000 over the nine month period ended June 30, 1999. The increase was
primarily the result of increased dividends on the stock of the Federal Home
Loan Bank of Des Moines. Stock purchases are required to support additional
borrowings at the Federal Home Loan Bank. The Bank has increased its stock
investment $1.9 million this year. Insurance commissions declined as a result of
the sale of the property and casualty book of business, in the fourth quarter of
fiscal 1999.
Other Expenses
Other expenses increased $263,000, from $1.6 million in the June 1999 quarter to
$1.9 million for the quarter ended June 30, 2000. The increase was primarily due
to increases in compensation expense of $251,000; occupancy, equipment and data
processing expense of $77,000, offset by decreases in miscellaneous expenses of
$63,000. For the nine-month period, other expenses have increased $2.3 million,
from $4.7 million in fiscal 1999, to $7.0 million in fiscal 2000. Compensation
expense increased $1.9 million over the prior year, but includes $1.3 million of
compensation expense resulting from the 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.
Occupancy and equipment expenses increased from $342,000 for the three months
ended June 30, 1999 to $419,000 for the three months ended June 30, 2000 due to
higher rent and depreciation expenses. Capital improvements of approximately
$1.0 million have been made to upgrade existing offices and to equip the new
branch location in St. Charles. Compensation expense for the June 2000 quarter
rose as a result of increases in benefits expenses, higher compensation expense
relating to restricted stock awards, and higher amounts paid to loan origination
employees in connection with the largest quarterly volume of loans closed in the
history of the Bank. Lending volume increased from $46.1 million for the June
30, 1999 quarter, to $71.8 million for the June 30, 2000 quarter.
Professional services expense decreased from $116,000 for the quarter ended June
30, 1999 to $97,000 for the quarter ended June 30, 2000. Year to date,
professional services increased $131,000, from $235,000 for the nine-month
period ended June 30, 1999 to $366,000 for the nine months ended June 30, 2000,
and were primarily associated with the special $4.00 return of capital dividend.
Other expenses decreased $16,000 for the quarter, but for the nine months ended
June 30, 2000, other expense have risen $114,000 from $589,000 for the June 30,
1999 period, to $703,000 for the June 30, 2000 period, primarily as a result of
increased purchases of stationery and supplies, and losses on dispositions of
foreclosed properties, increased postage expense, and costs associated with home
equity lines of credit.
Income Taxes
The provision for income taxes of $367,000 for the three-month period ended June
30, 2000, was little changed compared to the three-month period expense of
$364,000 for June 30, 1999. For the nine months year to date, taxes have
decreased from $968,000 for the nine months ended June 30, 1999 to $467,000 for
-13-
<PAGE>
the nine months ended June 30, 2000. The decrease was primarily attributable to
the net operating loss recorded in the quarter ended March 31, 2000 that
resulted from the recording of compensation expense of approximately $1.3
million associated with the recording of the special $4.00 per share cash
dividend. The effective tax rate for the quarter was 35.3%, and for the year to
date is 35.7%.
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 June 30, 2000, the Bank's average
liquidity ratio (liquid assets as a percentage of net withdrawable savings
deposits and short-term borrowings) was 20.78%.
The Bank must also maintain adequate levels of liquidity to ensure the
availability of funds to satisfy loan commitments and deposit withdrawals. At
June 30, 2000, the Bank had outstanding commitments to originate loans of $7.2
million, and commitments to sell loans of $19.6 million. At the same date,
certificates of deposit that are scheduled to mature in one year or less totaled
$75.8 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 for funding of loans and withdrawals of deposits. 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 June 30, 2000, the Bank had approximately $41.9 million available to it under
the above-mentioned borrowing arrangement. At June 30, 2000, the Bank had $67.6
million in advances from the FHLB. The Company believes it has the ability to
borrow from other sources.
At June 30, 2000 the Company was engaged in negotiations with another financial
institution to borrow $13.0 million in September 2000 to fund the special $4.00
cash dividend. The borrowings are expected to be short-term and prime-based.
The collateral requirement for the loan is 100% of the common stock of Pulaski
Bank.
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 provide 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 June 30, 2000.
-14-
<PAGE>
<TABLE>
<CAPTION>
To be Categorized 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 June 30, 2000:
Tangible capital (to total assets) $41,005 15.10% $ 4,074 1.50% N/A N/A
Core capital (to total assets) 41,005 15.10% 8,158 3.00% N/A N/A
Total risk-based capital (to risk-
weighted assets) 42,248 25.76% 13,122 8.00% $ 16,403 10.00%
Tier I risk-based capital (to risk-
weighted assets) 41,005 25.00% N/A N/A 9,842 6.00%
</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 June 30, 2000 from
that disclosed in the Company's Annual Report on Form 10-K for the year ended
September 30, 1999 other than an increase in borrowings from the Federal Home
Loan Bank of Des Moines - as disclosed in the financial statements.
-15-
<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: Not applicable
Item 3. Defaults Upon Senior Securities: Not applicable
Item 4. Submission of Matters to a Vote of Security-Holders: Not Applicable
Item 5. Other Information: Not applicable
Item 6. Exhibits and Reports on Form 8-K:
A. Exhibits
3.1 Certificate of Incorporation of Pulaski Financial Corp.*
3.2 Bylaws of Pulaski Financial Corp.*
4.0 Form of Certificate for Common Stock*
27.0 Financial Data Schedule
B. Reports on Form 8-K
On April 4, 2000 the Company filed an 8-K announcing the Board of
Directors declaration of a $4.00 special cash distribution payable on
September 1, 2000 to all stockholders as of August 1, 2000. The press
release announcing the declaration of the special cash distribution was
filed by exhibit.
---------------------------------------------------------------------
* Incorporated by reference from the Form S-1 (Registration No.333-
56465), as amended, as filed on June 9, 1998.
-16-
<PAGE>
SIGNATURES
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PULASKI FINANCIAL CORP.
Date: August 11, 2000 /S/ William A. Donius
---------------------- ------------------------------------
William A. Donius
Chairman and Chief Executive Officer
Date: August 11, 2000 /S/Thomas F. Hack
---------------------- ------------------------------------
Thomas F. Hack
Chief Financial Officer/Treasurer
-17-
