UNITED STATES
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, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to _________________
Commission File Number 0-26681
PULASKI BANCORP, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
United States 22-3652847
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
130 Mountain Avenue, Springfield, New Jersey 07081
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(973) 564-9000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changes since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. (1) Yes X No (2) Yes No X
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of June 30, 1999, there were no shares of the registrant's common stock,
par value $.01 per share, outstanding.
<PAGE>
Pulaski Bancorp, Inc.
Form 10-Q
For the Quarter Ended June 30, 1999
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements...............................................1
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..........................................1
Item 3. Quantitative and Qualitative Disclosures About Market Risk.........1
PART II: OTHER INFORMATION..................................................2
Item 1. Legal Proceedings..................................................2
Item 2. Changes in Securities and Use of Proceeds..........................2
Item 3. Defaults Upon Senior Securities....................................2
Item 4. Submission of Matters to a Vote of Security Holders................2
Item 5. Other Information..................................................2
Item 6. Exhibits and Reports on Form 8-K...................................2
SIGNATURES.....................................................................3
<PAGE>
PART I. FINANCIAL INFORMATION
PULASKI BANCORP, INC.
JUNE 30, 1999
ITEM 1. FINANCIAL STATEMENTS.
Pulaski Bancorp, Inc., (the "Company") was formed to serve as the stock
holding company for Pulaski Savings Bank (the "Bank") pursuant to the Bank's
reorganization into the two-tier mutual holding company structure. As of June
30, 1999, the Bank had not completed its reorganization, and, accordingly, the
Company had no assets or liabilities.
Effective July 12, 1999, the Bank completed its reorganization and the
Company became the stock holding company parent of the Bank. Pulaski Bancorp,
MHC, the Bank's mutual holding company, became the owner of a majority of the
common stock of the Company, which became the owner of 100% of the common stock
of the Bank. In connection with the reorganization, each share of Bank common
stock was converted into one share of common stock of the Company.
The common stock of the Bank was previously registered under Section 12(g)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), with
the OTS under OTS docket number 05016. Pursuant to Rule 12g-3 promulgated under
the Exchange Act, the Company's common stock was deemed automatically registered
under the Exchange Act. In addition, the common stock of the Company has been
substituted for the common stock of the Bank on the Nasdaq SmallCap Market under
the symbol. "PLSK."
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
See Item 1.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
See Item 1.
1
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (ss.249.308 OF THIS CHAPTER).
(a) Exhibits
3.1 Charter of Pulaski Bancorp, Inc.*
3.2 Bylaws of Pulaski Bancorp, Inc.*
4.0 Form of Common Stock Certificate*
27.0 Financial Data Schedule
99.0 Quarterly information for Pulaski Savings Bank,
Pulaski Bancorp, Inc.'s
predecessor company
- -------------------
* Incorporated herein by reference into this document from the Exhibits
to the Current Report on Form 8-K, filed July 12, 1999.
(b) Reports on Form 8-K
On July 12, 1999, the Company filed a Form 8-K, reporting the
completion of the Pulaski Savings Bank's reorganization into the two-tier mutual
holding company structure and the conversion of all of the outstanding shares of
Pulaski Savings Bank's common stock into shares of Pulaski Bancorp common stock.
2
<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 hereunto duly authorized.
PULASKI BANCORP, INC.
Dated: August 16, 1999 By:/s/ Thomas Bentkowski
-------------------------------------
Thomas Bentkowski
President and Chief Executive Officer
(principal executive officer)
Dated: August 16, 1999 By:/s/ Lee Wagstaff
---------------------------------
Lee Wagstaff
Vice President, Chief Financial Officer and
Treasurer
(principal financial and accounting officer)
3
Exhibit 11.0
PULASKI SAVINGS BANK
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, 1999 June 30, 1999
-------------------------- --------------------------
<S> <C> <C>
Net income $ 371,385 $ 172,916
Weighted average shares outstanding - basic and diluted 2,037,216 2,041,382
Basic and diluted earnings per share $ 0.18 $ 0.08
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the form
10-Q for the quarter ended June 30, 1999 and is qualified in its entirety by
reference to the unaudited financial statements contained therin.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 0
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 0
<ALLOWANCE> 0
<TOTAL-ASSETS> 0
<DEPOSITS> 0
<SHORT-TERM> 0
<LIABILITIES-OTHER> 0
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 0
<INTEREST-LOAN> 0
<INTEREST-INVEST> 0
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 0
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 0
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 0
<INCOME-PRETAX> 0
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
OTS Docket Number 05016
PULASKI SAVINGS BANK
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
FEDERALLY-CHARTERED 22-1402632
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
130 Mountain Avenue, Springfield, New Jersey 07081
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 973-564-9000
-----------------------------
Indicate by check X whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
(1) Yes X No
------- -------
(2) Yes X No
------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
As of July 31, 1999, 2,108,088 common shares, $.01 par value, were outstanding.
<PAGE>
PULASKI SAVINGS BANK
INDEX
<TABLE>
<CAPTION>
Page
Number
------------
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Financial Condition as of
June 30, 1999 and December 31, 1998 (Unaudited) 1
Statements of Income for the Six and
Three Months Ended June 30, 1999 and 1998 (Unaudited) 2
Statements of Comprehensive Income for the Six and
Three Months Ended June 30, 1999 and 1998 (Unaudited) 3
Statements of Cash Flows for the
Six Months Ended June 30, 1999 and 1998 (Unaudited) 4 - 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7 - 13
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 14
PART II OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
</TABLE>
<PAGE>
PULASKI SAVINGS BANK
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
Assets 1999 1998
- ------ ---------- ----------
<S> <C> <C>
Cash and amounts due from depository institutions $ 2,465,289 $ 2,336,949
Interest-bearing deposits in other banks 751,586 2,377,613
Federal funds sold 6,450,000 18,650,000
---------- ----------
Cash and cash equivalents 9,666,875 23,364,562
Term deposits 197,000 197,000
Trading account securities 2,237,500 -
Securities available for sale 5,774,730 5,642,498
Investment securities held to maturity 6,946,679 6,946,353
Mortgage-backed securities held to maturity 54,526,294 55,728,490
Loans receivable 115,545,091 100,894,180
Real estate owned 49,822 130,626
Premises and equipment 4,051,811 3,862,532
Federal Home Loan Bank of New York stock 1,446,200 1,446,200
Accrued interest receivable 1,032,246 971,566
Other assets 761,430 607,896
-------- -------
Total assets $ 202,235,678 $ 199,791,903
============== =============
Liabilities and stockholders' equity
- ------------------------------------
Liabilities
- -----------
Deposits $ 177,256,264 $ 174,808,024
Borrowed money 366,526 454,805
Advance payments by borrowers for taxes 836,826 773,361
Other liabilities 582,894 950,124
-------- -------
Total liabilities 179,042,510 176,986,314
------------ -----------
Stockholders' equity
- --------------------
Preferred stock; $.01 par value, 5,000,000 shares
authorized; issued and outstanding - none - -
Common stock; $.01 par value, 10,000,000 shares
authorized; issued and outstanding 2,108,088 shares 21,081 21,081
Paid-in-capital 9,850,183 9,854,730
Retained earnings - substantially restricted 14,249,231 14,029,016
Unearned Incentive Plan Award shares (504,878) (581,054)
Unearned Employee Stock Ownership Plan ("ESOP") shares (388,529) (495,144)
Accumulated other comprehensive income - Unrealized (loss) on
securities available for sale, net (33,920) (23,040)
-------- --------
Total stockholders' equity 23,193,168 22,805,589
----------- ----------
Total liabilities and stockholders' equity $ 202,235,678 $ 199,791,903
============== =============
</TABLE>
See notes to financial statements.
1
<PAGE>
PULASKI SAVINGS BANK
STATEMENTS OF INCOME
--------------------
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
------------------------------ ------------------------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Interest income:
Loans $ 4,247,712 $ 4,267,103 $ 2,187,222 $ 2,133,686
Mortgage-backed securities held to maturity 1,705,914 1,638,207 842,008 832,973
Investment securities held to maturity 187,545 296,367 96,615 134,768
Securities available for sale 149,232 153,954 74,992 76,790
Other interest-earning assets 383,272 369,625 153,075 209,935
-------- -------- -------- -------
Total interest income 6,673,675 6,725,256 3,353,912 3,388,152
---------- ---------- ---------- ---------
Interest expense:
Deposits 3,808,125 3,731,532 1,897,182 1,901,000
Borrowed money 17,948 136,054 8,563 43,739
------- -------- ------ ------
3,826,073 3,867,586 1,905,745 1,944,739
---------- ---------- ---------- ---------
Net Interest Income 2,847,602 2,857,670 1,448,167 1,443,413
Provision for Loan Losses 61,000 63,000 36,000 29,000
------- ------- ------- ------
Net intrest income after
provision for loan losses 2,786,602 2,794,670 1,412,167 1,414,413
---------- ---------- ---------- ---------
Non-interest income:
Fees and service charges 72,235 75,682 36,026 41,297
Trading account income (loss) 3,548 55,628 (23,021) 28,003
Gain on real estate owned 1,180 - - -
Miscellaneous 9,338 9,339 5,019 5,008
------ ------ ------ -----
Total non-interest income 86,301 140,649 18,024 74,308
------- -------- ------- ------
</TABLE>
2
<PAGE>
(continued) PULASKI SAVINGS BANK
STATEMENTS OF INCOME
--------------------
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
------------------------------ ------------------------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Non-interest expenses:
Salaries and employee benefits 1,276,728 1,243,917 638,350 640,237
Occupancy expense of premises 194,407 142,671 102,019 70,196
Equipment 186,568 336,991 96,690 264,084
Loss on real estate owned - 3,235 - 1,582
Advertising 56,985 4,390 51,535 2,626
Federal insurance premium 50,709 47,228 25,466 23,695
Miscellaneous 468,828 409,988 238,215 215,045
-------- -------- -------- -------
Total non-interest expenses 2,234,225 2,188,420 1,152,275 1,217,465
---------- ---------- ---------- ---------
Income before income taxes 638,678 746,899 277,916 271,256
Income taxes 267,293 294,340 105,000 109,000
-------- -------- -------- -------
Net income $ 371,385 $ 452,559 $ 172,916 $ 162,256
========= ========= ========== =========
Net income per common share:
Basic/diluted $ 0.18 $ 0.22 $ 0.08 $ 0.08
====== ====== ======= ======
Weighted average number of
common shares outstanding:
Basic/diluted 2,037,216 2,012,381 2,041,382 2,015,238
========= ========= ========== =========
</TABLE>
See notes to financial statements.
3
<PAGE>
PULASKI SAVINGS BANK
STATEMENTS OF COMPREHENSIVE INCOME
----------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
------------------------------ ------------------------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net income $ 371,385 $ 452,559 $ 172,916 $ 162,256
Other comprehensive income-unrealized
holding (losses) on securities available
for sale, net of income taxes (10,880) (13,360) (10,880) (10,240)
-------- -------- -------- --------
Comprehensive income $ 360,505 $ 439,199 $ 162,036 $ 152,016
========== ========== ========== =========
</TABLE>
See notes to financial statements.
4
<PAGE>
PULASKI SAVINGS BANK
STATEMENTS OF CASH FLOWS
------------------------
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------------------------
1999 1998
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 371,385 $ 452,559
Adjustments to reconcile net income to
net cash (used in) provided by operating activities:
Depreciation and amortization of premises and equipment 129,428 93,519
Amortization of premiums and accretion of discounts, net 34,849 4,057
Accretion of deferred loan fees (127,695) (241,147)
Provision for loan losses 61,000 63,000
Purchase of trading account securities (6,523,624) (11,667,596)
Proceeds from sales of trading account securities 4,289,672 11,723,224
Realized gains on sale of trading account securities (41,011) (55,628)
Unrealized loss of trading account securities 37,463 -
Gain on sale of real estate owned (3,226) -
(Increase) in accrued interest receivable (60,680) (15,428)
(Increase) in other assets (147,414) (222,832)
(Decrease) increase in accrued interest payable on deposits (70,395) 24,586
(Decrease) increase in other liabilities (367,230) 171,282
ESOP shares committed to be released 102,067 141,560
Amortization of cost of stock contributed to Incentive Plan 76,176 76,176
------- ------
Net cash (used in) provided by operating activities (2,239,235) 547,332
----------- -------
Cash flows from investing activities:
Purchase of securities available for sale (149,232) (153,954)
Proceeds from maturities of investment securities held to maturity 1,000,000 5,000,000
Proceeds from call of investment securities held to maturity 2,000,000 -
Purchase of investment securities held to maturity (3,000,000) (2,000,000)
Purchases of mortgage-backed securities held to maturity (12,197,102) (15,793,758)
Principal repayments on mortgage backed securities held to maturity 13,364,123 10,724,272
Purchase of loans (4,781,228) (61,000)
Net (increase) decrease in loan receivable (9,842,807) 2,854,205
Capitalized cost on real estate owned (10,003) -
Proceeds from sale of real estate owned 133,852 -
Additions to premises and equipment (318,707) (305,310)
--------- ---------------------
</TABLE>
5
<PAGE>
(continued)
PULASKI SAVINGS BANK
STATEMENTS OF CASH FLOWS
------------------------
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------------------------
1999 1998
------------------ ------------------
<S> <C> <C>
Net cash (used in) provided by investing activities (13,801,104) 264,455
------------ -------
Cash flows from financing activities:
Net increase in deposits 2,518,635 10,461,008
Net change in borrowed money (88,279) (5,093,316)
Net increase (decrease) in advance
payments by borrowers for taxes 63,465 (36,764)
Cash dividends paid (151,169) (139,003)
--------- ---------
Net cash provided by financing activities 2,342,652 5,191,925
---------- ---------
Net (decrease) increase in cash and cash equivalents (13,697,687) 6,003,712
Cash and cash equivalents - beginning 23,364,562 6,429,709
----------- ---------
Cash and cash equivalents - ending $ 9,666,875 $ 12,433,421
============ ============
</TABLE>
6
<PAGE>
PULASKI SAVINGS BANK
STATEMENTS OF CASH FLOWS
------------------------
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------------------------
1999 1998
------------------ ------------------
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid, net of refunds, during the period for:
Income taxes $ 227,588 $ 406,740
Interest 3,896,468 3,891,611
Supplemental schedule of noncash investing activities:
Change in unrealized loss on securities
available for sale, net of income taxes (10,880) (13,360)
Transfer of loans receivable to real estate owned 39,819 -
</TABLE>
See notes to financial statements.
7
<PAGE>
PULASKI SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
-----------------------------
1. BASIS OF PRESENTATION
- -------------------------
The accompanying unaudited financial statements were prepared in accordance with
instructions for Form 10-Q and Regulation S-X and do not include information or
footnotes necessary for a complete presentation of financial condition, results
of operations, and cash flows in conformity with generally accepted accounting
principles. However, in the opinion of management, all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation of the
financial statements have been included. The results of operations for the three
months and six months ended June 30, 1999, are not necessarily indicative of the
results which may be expected for the entire fiscal year.
2. NET INCOME PER COMMON SHARE
- --------------------------------
Basic net income per common share is based on the weighted average number of
common shares actually outstanding, adjusted for unearned shares of the ESOP and
the Incentive Plan. Diluted net income per share is calculated by adjusting the
weighted average number of shares of common stock outstanding to include the
effect of potential common shares. Potential common shares related to unearned
incentive plan awards, unearned ESOP shares and stock options were not dilutive
during the three months and six months ended June 30, 1999 and 1998.
3. FORMATION OF STOCK HOLDING COMPANY
- ---------------------------------------
The Agreement and Plan of Reorganization was unanimously adopted by the Board of
Directors on January 28, 1999 ("Plan of Reorganization"). Under the Plan of
Reorganization which was completed on July 12, 1999, the Bank became a wholly
owned subsidiary of Pulaski Bancorp, Inc. (the "Stock Holding Company"), a
federally-chartered stock holding company, a majority of the Common Stock of
which is now owned by the Mutual Holding Company, the Bank's current mutual
holding company. In the Reorganization, each outstanding share of Bank common
stock was converted into one share of Stock Holding Company common stock and the
holders of Bank common stock became the holders of all of the outstanding shares
of Stock Holding Company common stock. Accordingly, as a result of the
Reorganization, the Bank's minority stockholders, became minority stockholders
of the Stock Holding Company and the Bank's majority stockholder, the Mutual
Holding Company, became the majority stockholder of the Stock Holding Company.
After the Reorganization, the Bank will continue its existing business and
operations as a wholly owned subsidiary of the Stock Holding Company and the
consolidated capitalization, assets, liabilities, income and financial
statements, and management of the Stock Holding Company immediately following
the Reorganization will be substantially the same as those of the Bank
immediately prior to consummation of the Reorganization. The Charter and Bylaws
of the Bank will continue in effect, and will not be affected in any manner by
the Reorganization. The name "Pulaski Savings Bank" will continue to be utilized
by the Bank. The corporate existence of the Bank will continue unaffected and
unimpaired by the Reorganization except that all of its outstanding stock is now
owned by the Stock Holding Company.
8
<PAGE>
PULASKI SAVINGS BANK
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Discussion of Forward-Looking Statements
When used or incorporated by reference in disclosure documents, the works
"anticipate", "estimate", "expect", "project", "target", "goal" and similar
expressions are intended to identify forward-looking statements. Such
forward-looking statements are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated, expected or projected. These
forward-looking statements speak only as of the date of the document. The Bank
expressly disclaims any obligation or undertaking to publicly release any
updates or revisions to any forward-looking statement contained herein to
reflect any change in the Bank's expectation with regard thereto or any change
in events, conditions or circumstances on which any such statement is based.
Comparison of Financial Condition at June 30, 1999 and December 31, 1998
The Bank's assets at June 30, 1999 totalled $202.2 million, which represents an
increase of $2.4 million or 1.2% as compared with $199.8 million at December 31,
1998.
Cash and cash equivalents decreased $13.7 million or 58.6% to $9.7 million at
June 30, 1999 from $23.4 million at December 31, 1998, primarily reflecting a
$12.2 million decrease in federal funds sold. The decrease was used to fund loan
originations and purchases.
Term deposits at June 30, 1999 and December 31, 1998 remained the same at
$197,000. Trading account securities of June 30, 1999 amounted to $2.2 million.
The Bank did not have trading account securities at December 31, 1998.
Securities available for sale at June 30, 1999 increased $133,000 or 2.4% to
$5.8 million when compared with $5.6 million at December 31, 1998, which
resulted from purchases of securities available for sale. Investment securities
held to maturity at June 30, 1999 and December 31, 1998 totalled $6.9 million.
During the six months ended June 30, 1999, proceeds from calls and maturities of
investment securities held to maturity totalled $3.0 million, offset by
purchases of $3.0 million.
Mortgage-backed securities held to maturity decreased $1.2 million or 2.2% to
$54.5 million at June 30, 1999 when compared to $55.7 million at December 31,
1998. The decrease during the six months ended June 30, 1999 resulted primarily
from repayments on mortgage-backed securities of $13.4 million offset partially
by purchases of mortgage-backed securities of $12.2 million.
Net loans increased $14.6 million or 14.5% to $115.5 million at June 30, 1999 as
compared to $100.9 million at December 31, 1998. The increase during the six
months ended June 30, 1999, resulted primarily from loan originations and
purchases exceeding loan principal repayments.
Deposits at June 30, 1999 increased $2.5 million to $177.3 million when compared
with $174.8 million at December 31, 1998.
At June 30, 1999 and December 31, 1998, borrowed money amounted to $367,000 and
$455,000, respectively.
Stockholders' equity totalled $23.2 million and $22.8 million at June 30, 1999
and December 31, 1998, respectively.
9
<PAGE>
PULASKI SAVINGS BANK
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Comparison of Operating Results for the Three Months Ended June 30, 1999 and
1998
Net income increased $11,000 or 6.8% to $173,000 for the three months ended June
30, 1999 compared with $162,000 for the same 1998 period. The increase in net
income during the 1999 period resulted from decreases in total interest expense,
non-interest expenses and income taxes which were partially offset by decreases
in total interest income and non-interest income combined with an increase in
provision for loan losses.
Interest income on loans increased by $53,000 or 2.5% to $2.19 million during
the three months ended June 30, 1999 when compared with $2.13 million during the
same 1998 period. The increase during the 1999 period resulted from an increase
of $10.8 million in the average balance of loans outstanding sufficient to
offset a decrease of 64 basis points in the yield earned on the loan portfolio.
Interest on mortgage-backed securities increased $9,000 or 1.1% to $842,000
during the three months ended June 30, 1999 when compared with $833,000 for the
same 1998 period. The increase during the 1999 period resulted from an increase
in the average balance of mortgage-backed securities outstanding of $3.4
million, which was sufficient to offset a decrease of 31 basis points in the
yield earned thereon. Interest earned on investment securities, including
available for sale and held to maturity issues, decreased $40,000 or 18.9% to
$172,000 during the three months ended June 30, 1999 when compared with $212,000
for the same 1998 period. The decrease during the 1999 period resulted from a
decrease of $3.0 million in the average balance of investment securities
outstanding which more than offset an increase of 12 basis points in the yield
earned on such securities. Interest earned on other interest-earning assets,
which includes trading account securities decreased by $57,000 or 27.1% to
$153,000 during the three months ended June 30, 1999 when compared with $210,000
for the same 1998 period. The decrease during the 1999 period resulted from a
decrease of $2.6 million in the average balance of other interest-earning assets
outstanding accompanied by a decrease of 66 basis points in the yield earned
thereon.
Interest expense on deposits decreased $4,000 or 0.2% to $1.897 million during
the three months ended June 30, 1999 when compared to $1.901 million during the
same 1998 period. Such decrease during the 1999 period was attributable to a
decrease of 35 basis points in cost of interest-bearing deposits which was
sufficient to offset an increase of $12.4 million in the average balance of
interest-bearing deposits outstanding. Interest on borrowed money amounted to
$9,000 and $44,000 during the three months ended June 30, 1999 and 1998,
respectively. The decrease during the 1999 period resulted primarily from a
decrease of $2.7 million or 87.0%, in the average balance of borrowed money.
Net interest income increased $5,000 or 0.3% to $1.448 million during the three
months ended June 30, 1999 when compared with $1.443 million during the same
1998 period. Such increase was due to a decrease in total interest expense of
$39,000, which was sufficient to offset a decrease in total interest income of
$34,000. The Bank's net interest rate spread decreased to 2.54% in 1999 from
2.58% in 1998. The decrease in the interest rate spread in 1999 resulted from a
decrease of 40 basis points in the yield earned on interest-earning assets,
which was more than sufficient to offset a 36 basis point decrease in the cost
of interest-bearing liabilities.
During the three months ended June 30, 1999 and 1998, the Bank provided $36,000
and $29,000, respectively, for loan losses. The allowance for loan losses is
based on management's evaluation of the risks inherent in the loan portfolio and
gives due consideration to changes in general market conditions and in the
nature and volume of the Bank's loan activity. The Bank intends to continue to
provide for loan losses based on its periodic review of the loan portfolio and
general market conditions.
10
<PAGE>
PULASKI SAVINGS BANK
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Comparison of Operating Results for the Three Months Ended June 30, 1999 and
1998 (Cont'd.)
Management believes that, based on information currently available, the
allowance for loan losses is sufficient to cover losses inherent in its loan
portfolio at this time. However, no assurance can be given that the level of the
allowance for loan losses will be sufficient to cover future possible loan
losses incurred by the Bank or that future adjustments to the allowance for loan
losses will not be necessary if economic and other conditions differ
substantially from the economic and other conditions used by management to
determine the current level of the allowance for loan losses. Management may in
the future increase the level of the allowance for loan losses as a percentage
of total loans and non-performing loans in the event it increases the level of
commercial real estate, multifamily, or consumer lending as a percentage of its
total loan portfolio. In addition, various regulatory agencies, as an integral
part of their examination process, periodically review the allowance for loan
losses. Such agencies may require the Bank to provide additions to the allowance
based upon judgments different from management. At June 30, 1999 and 1998, the
Bank's non-performing loans, which were delinquent ninety days or more, totalled
$635,000 or .31% of total assets and $1.1 million or .59% of total assets,
respectively. At June 30, 1999 and 1998, all non-performing loans were on
non-accrual status.
Non-interest income decreased by $56,000 or 75.7% to $18,000 during the three
months ended June 30, 1999 when compared to $74,000 during the same 1998 period.
The decrease during the 1999 period resulted from decreases in fees and service
charges of $5,000 and in trading account income of $51,000. During the three
months ended June 30, 1999, the Bank purchased trading account securities of
$1.8 million and did not sell any securities, however, unrealized loss on
trading account securities amounted to $23,000.
Non-interest expenses decreased by $65,000, or 5.3%, to $1.15 million during the
three months ended June 30, 1999 when compared with $1.22 million during the
same 1998 period. During the 1999 period, increases in occupancy, advertising,
federal insurance premium and miscellaneous expenses of $32,000, $49,000,
$2,000, and $23,000, respectively, which were partially offset by decreases in
salaries and employee benefits, equipment and loss on real estate owned of
$2,000, $167,000 and $2,000, respectively, when compared with the same 1998
period. The increase in occupancy expense is largely the result of the opening
of a new branch location during the first quarter of 1999. Equipment expenses
during the 1998 period included the cost incurred in connection with the change
in the Bank's outside computer service center.
Income taxes totalled $105,000 and $109,000 during the three months ended June
30, 1999 and 1998, respectively.
Comparison of Operating Results for the Six Months Ended June 30, 1999 and 1998
Net income decreased $82,000 or 18.1% to $371,000 for the six months ended June
30, 1999 compared with $453,000 for the same 1998 period. The decrease in net
income during the 1999 period resulted from decreases in total interest income
and non-interest income combined with an increase in non-interest expenses,
which were partially offset by decreases in total interest expense, provision
for loan losses and income taxes.
Interest income on loans decreased by $19,000 or 0.5% to $4.248 million during
the six months ended June 30, 1999 when compared with $4.267 million during the
same 1998 period. The decrease during the 1999 period resulted from a decrease
of 55 basis points in the yield earned on the loan portfolio,
11
<PAGE>
PULASKI SAVINGS BANK
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Comparison of Operating Results for the Six Months Ended June 30, 1999 and 1998
(Cont'd.)
sufficient to offset an increase of $6.5 million in the average balance of loans
outstanding. Interest on mortgage-backed securities increased $68,000 or 4.2% to
$1.7 million during the six months ended June 30, 1999 when compared with $1.6
million for the same 1998 period. The increase during the 1999 period resulted
from an increase in the average balance of mortgage-backed securities
outstanding of $5.2 million, which was sufficient to offset a decrease of 34
basis points in the yield earned thereon. Interest earned on investment
securities, including available for sale and held to maturity issues, decreased
$113,000 or 25.1% to $337,000 during the six months ended June 30, 1999 when
compared with $450,000 for the same 1998 period. The decrease during the 1999
period resulted from a 31 basis point decrease in the yield earned on such
securities, accompanied by a decrease of $3.2 million in the average balance of
investment securities outstanding. Interest earned on other interest-earning
assets, which includes trading account securities, increased by $13,000 or 3.5%
to $383,000 during the six months ended June 30, 1999 when compared with
$370,000 for the same 1998 period. The increase during the 1999 period resulted
from an increase of $1.8 million in the average balance of other
interest-earning assets outstanding, which more than offset a decrease of 46
basis points in the yield earned thereon.
Interest expense on deposits increased $76,000 or 2.0% to $3.8 million during
the six months ended June 30, 1999 when compared to $3.7 million during the same
1998 period. Such increase during the 1999 period was attributable to an
increase of $14.7 million in the average balance of interest-bearing deposits
outstanding, which was sufficient to offset a decrease of 31 basis points in the
cost of interest-bearing deposits. Interest on borrowed money amounted to
$18,000 and $136,000 during the six months ended June 30, 1999 and 1998,
respectively. The decrease during the 1999 period resulted primarily from a
decrease of $3.7 million or 89.9%, in the average balance of borrowed money.
Net interest income decreased $10,000 or 0.3% to $2.848 million during the six
months ended June 30, 1999 when compared with $2.858 million during the same
1998 period. Such decrease was due to a decrease in total interest income of
$52,000, which was sufficient to offset a decrease in total interest expense of
$42,000. The Bank's net interest rate spread decreased to 2.50% in 1999 from
2.60% in 1998. The decrease in the interest rate spread in 1999 resulted from a
decrease of 45 basis points in the yield earned on interest-earning assets,
which was more than sufficient to offset a 35 basis point decrease in the cost
of interest-bearing liabilities.
During the six months ended June 30, 1999 and 1998, the Bank provided $61,000
and $63,000, respectively, for loan losses.
Non-interest income decreased by $55,000 or 39.0% to $86,000 during the six
months ended June 30, 1999 when compared to $141,000 during the same 1998
period. The decrease during the 1999 period resulted from decreases in fees and
service charges of $4,000 and trading account income of $52,000 sufficient to
offset an increase of $1,000 in gain as real estate owned. During the six months
ended June 30, 1998, the Bank purchased and sold securities of $11.7 million
resulting in income of $56,000 from such trading. During the six months ended
June 30, 1999, the Bank purchased $6.5 million and sold $4.3 million in trading
securities, resulting in a realized gains of $41,000, and recorded unrealized
losses on trading account securities of $37,000.
Non-interest expenses increased by $46,000, or 2.1%, to $2.23 million during the
six months ended June 30, 1999 when compared with $2.19 million during the same
1998 period. During the 1999 period, increases in salaries and employee
benefits, occupancy, advertising, federal insurance premium and
12
<PAGE>
PULASKI SAVINGS BANK
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Comparison of Operating Results for the Six Months Ended June 30, 1999 and 1998
(Cont'd.)
miscellaneous expenses of $33,000, $51,000, $53,000, $3,000, and $59,000,
respectively, which were partially offset by decreases in equipment and loss on
real estate owned of $150,000 and $3,000, respectively, when compared with the
same 1998 period. The increase in occupancy expense is largely the result of the
opening of a new branch location during the first quarter of 1999. Equipment
expenses during the 1998 period included the cost incurred in connection with
the change of the Bank's outside computer service center.
Liquidity and Capital Resources
The Bank is required to maintain minimum levels of liquid assets as defined by
the Office of Thrift Supervision (the "OTS") regulations. The requirement, which
the OTS may vary from time to time, depending upon economic conditions and
deposit flows, is based upon a percentage of deposits and short-term borrowings.
The required ratio currently is 4.0%. The Bank's liquidity averaged 39.5% during
the month of June 1999. The Bank adjusts its liquidity levels in order to meet
funding needs for deposit outflows, payment of real estate taxes from escrow
accounts on mortgage loans, repayment of borrowings, when applicable, and loan
funding commitments. The Bank also adjusts its liquidity level as appropriate to
meet its asset/liability objectives.
The Bank's primary sources of funds are deposits, amortization and prepayments
of loans and mortgage-backed securities principal, maturities of investment
securities and funds provided by operations. While scheduled loan and
mortgage-backed securities amortization and maturing term deposits and
investment securities are relatively predictable sources of funds, deposit flows
and loan and mortgage-backed securities prepayments are greatly influenced by
market interest rates, economic conditions and competition. The levels of these
assets are dependent on the Bank's operating, financing, lending and investing
activities during any given period. At June 30, 1999, interest-bearing deposits,
term deposits, federal funds sold and securities available for sale totalled
$13.2 million. The Bank has other sources of liquidity if a need for additional
funds arises, including advances from the FHLB. At June 30, 1999, borrowed money
amounted to $367,000.
During the six months ended June 30, 1999 and 1998, cash dividends paid on
common stock amounted to $151,000 and $139,000, respectively. The mutual holding
company waived its right to receive dividends. If the mutual holding company had
not waived its right to receive dividends, the amount of such dividends, during
the three and six months ended June 30, 1999, would have been increased by
$89,000 and $178,000, respectively.
The Bank anticipates that it will have sufficient funds available to meet its
current loan commitments. At June 30, 1999, the Bank had outstanding commitments
to fund, originate and purchase loans of $31.4 million. Certificates of deposit
scheduled to mature in one year or less at June 30, 1999, totalled $98.6
million. Management believes that, based upon its experience and the Bank's
deposit flow history, a significant portion of such deposits will remain with
the Bank.
13
<PAGE>
PULASKI SAVINGS BANK
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Liquidity and Capital Resources (Cont'd.)
Under OTS regulations, three separate measurements of capital adequacy (the
"Capital Rule") are required. The Capital Rule requires each savings institution
to maintain tangible capital equal to at least 1.5% and core capital equal to at
least 4.0% of its total adjusted assets. The Capital Rule further requires each
savings institution to maintain total capital equal to at least 8.0% of its
risk-weighted assets. The following table sets forth the Bank's capital position
at June 30, 1999 as compared to the minimum regulatory capital requirements:
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
Minimum Capital Prompt Corrective
Actual Requirements Actions Provisions
----------------------------- ---------------------------- ----------------------------
Amount Ratio Amount Ratio Amount Ratio
-------------- ----------- ------------- ----------- ------------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Total Capital
(to risk-weighted assets) $ 24,211 24.69% $ 7,843 8.00% $ 9,804 10.00%
Tier 1 Capital
(to risk-weighted assets) 23,193 23.66% - - 5,882 6.00%
Core (Tier 1) Capital
(to adjusted total assets) 23,193 11.47% 8,089 4.00% 10,112 5.00%
Tangible Capital
(to adjusted total assets) 23,193 11.47% 3,034 1.50% - -
</TABLE>
Sale of Branch
On April 30, 1999, the Bank entered into an agreement to sell deposits held at
its Harrison, New Jersey branch office (the "Branch") to another financial
institution (the "Purchaser"). The amount to be paid by the Bank to the
Purchaser in consideration of the assumption by the Purchaser of the deposit
liabilities shall equal the outstanding balances and accrued interest on the
deposit liabilities as of the close of business on the closing date reduced by
the adjustments. The adjustments should equal the deposit premium less
$22,000.00. The deposit premium shall be calculated as the product of 8.00% of
the deposit liabilities transferred as of the closing date.
The sale is subject to the approval of the OTS. The closing is expected to take
place during the third quarter of 1999. At June 30, 1999, deposits held at the
Branch amounted to $6.7 million.
Impact of the Year 2000 Issue
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Bank's
computer programs that would have date sensitive software may recognize a date
during "00" as the year 1900 rather than the year 2000. This could result in a
system failure or miscalculations causing disruptions of operations, including
among other things a temporary inability to process transactions, or engage in
similar normal business activities.
14
<PAGE>
PULASKI SAVINGS BANK
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Impact of the Year 2000 Issue (Cont'd.)
Based on a recent assessment, the Bank has determined that it will be required
to modify or replace portions of its software so that its computer systems will
properly utilize dates beyond December 31, 1999. The Bank presently believes
that with modifications to existing software and conversion to new software, the
year 2000 Issue can be mitigated. However, if such modifications and conversions
are not made, or are not completed on a timely basis, the Year 2000 Issue may
have a material impact on the operations of the Bank.
The Bank now includes Year 2000 verbiage requirements in its loan documentation
for large borrowers. Given the composition of the Bank's loan portfolio which
consists primarily of loans on residential properties but also includes some
commercial and mixed use properties, the Bank does not believe that it has a
material amount of loans to individuals or entities that are susceptible to Year
2000 issues such that their noncompliance with year 2000 issues will materially
affect their ability to repay such loans.
The Bank has also initiated formal communications with all of its significant
suppliers and vendors to determine the extent to which the Bank is vulnerable to
those third parties' failure to remediate their own Year 2000 issues. The Bank
is in the process of reviewing the Year 2000 compliance of its third party data
processing vendor. The vendor has completed both proxy and end to end testing
with the Bank and also with other third party providers of services to the Bank
with minor exceptions. The Bank will perform further testing with this vendor.
At this time, the Bank is not aware of any problems that will lead to a material
loss of revenue related to Year 2000 issue. The Bank is in the process of
determining the costs and time associated with the Year 2000 project. The Bank
does not expect that the total cost of the Year 2000 project would have a
material adverse impact on the financial condition or operations of the Bank. To
date, the Bank has incurred approximately $6,300 related to the assessment of,
and preliminary efforts in connection with its Year 2000 project and the
development of a remediation plan. It is anticipated that additional costs
related to Y2K compliance will not exceed $30,000. These amounts do not include
internal Y2K-related costs which are primarily payroll costs which are not
separately tracked. The Bank has completed general and branch operating
contingency plans in the event of unforeseen problems. The contingency plans
will be tested during the third quarter of 1999. In the event that any of the
Bank's major customers, significant suppliers, or other vendors do not
successfully achieve Year 2000 compliance in a timely manner, the Bank's
business or operations could be adversely affected. The Bank has prepared a
contingency plan in the event that there are any system interruptions. As part
of the contingency plan, the Bank intends to engage alternative suppliers or
other vendors if its current significant suppliers or other vendors fail to meet
Year 2000 operating requirements. There can be no assurances, however, that such
plan or the performances by any of the Bank' suppliers and vendors will be
effective to remedy all potential problems.
15
<PAGE>
PULASKI SAVINGS BANK
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
The ability to maximize net interest income is largely dependent upon the
achievement of a positive interest rate spread that can be sustained during
fluctuations in prevailing interest rates. Interest rate sensitivity is a
measure of the difference between amounts of interest-earning assets and
interest-bearing liabilities which either reprice or mature within a given
period of time. The difference, or the interest rate repricing "gap", provides
an indication of the extent to which an institution's interest rate spread will
be affected by changes in interest rates. A gap is considered positive when the
amount of interest-rate sensitive assets exceeds the amount of interest-rate
sensitive liabilities, and is considered negative when the amount of
interest-rate sensitive liabilities exceeds the amount of interest-rate
sensitive assets. Generally, during a period of rising interest rates, a
negative gap within shorter maturities would adversely affect net interest
income, while a positive gap within shorter maturities would result in an
increase in net interest income, and during a period of falling interest rates,
a negative gap within shorter maturities would result in an increase in net
interest income while a positive gap within shorter maturities would result in a
decrease in net interest income.
Because the Bank's interest-bearing liabilities which mature or reprice within
short periods exceed its interest-earning assets with similar characteristics,
material and prolonged increases in interest rates generally would adversely
affect net interest income, while material and prolonged decreases in interest
rates generally would have a positive effect on net interest income.
The Bank's current investment strategy is to maintain an overall securities
portfolio that provides a source of liquidity and that contributes to the Bank's
overall profitability and asset mix within given quality and maturity
considerations. The securities portfolio is concentrated in U.S. Treasury and
federal government agency securities providing high asset quality to the overall
balance sheet mix. Securities classified as available for sale provide
management with the flexibility to make adjustments to the portfolio given
changes in the economic or interest rate environment, to fulfill unanticipated
liquidity needs, or to take advantage of alternative investment opportunities.
There have been no material changes in information regarding qualitative and
quantitative disclosures about market risk as of June 30, 1999 from the
information presented as of December 31, 1998.
16
<PAGE>
PULASKI SAVINGS BANK
PART II . OTHER INFORMATION
ITEM 1. Legal Proceedings
-----------------
The Bank is not involved in any pending legal proceedings other than
routine legal proceedings occurring in the ordinary course of business,
which involve amounts which in the aggregate are believed by management
to be immaterial to 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
---------------------------------------------------
This information was reported in the Bank's Form 10-Q for the quarter
ended March 31, 1999.
ITEM 5. Other Information
-----------------
None
ITEM 6. Exhibits and Reports on Form 8-K
----------------------------------
(a) Exhibits:
3.1 Stock Charter of Pulaski Savings Bank *
3.2 Bylaws of Pulaski Savings Bank *
11.0 Statement regarding computation of per share earnings.
* Incorporated herein by reference into this document from the
Exhibits to Form MHC-1, Notice of Mutual Holding Company
Reorganization, and any amendments or supplements thereto
filed with the OTS on December 20, 1996.
(b) Reports on Form 8-K:
None
17
