UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(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
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Commission File Number 0-26681
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PULASKI BANCORP, INC.
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(Exact name of Small Business issuer as specified in its charter)
FEDERALLY-CHARTERED 22-3652847
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
130 Mountain Avenue, Springfield, New Jersey 07081
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code 973-564-9000
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
As of August 2, 2000, 1,959,545 common shares, $.01 par value, were
outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
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<PAGE>
PULASKI BANCORP, INC. AND SUBSIDIARY
INDEX
Page
Number
------
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of
June 30, 2000 and December 31, 1999 (Unaudited) 1
Consolidated Statements of Income for the Three and
Six Months Ended June 30, 2000 and 1999 (Unaudited) 2
Consolidated Statements of Comprehensive Income for the
Three and Six Months Ended June 30, 2000 and 1999 3
(Unaudited)
Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 2000 and 1999 (Unaudited) 4 - 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of Operation 7 - 12
PART II OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
<PAGE>
<TABLE>
<CAPTION>
PULASKI BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
(Unaudited)
June 30, December 31,
Assets 2000 1999
------ ------------- -------------
<S> <C> <C>
Cash and amounts due from depository institutions $ 3,659,212 $ 3,966,072
Interest-bearing deposits 1,250,765 454,547
Federal funds sold 400,000 2,350,000
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Total cash and cash equivalents 5,309,977 6,770,619
Term deposits 197,000 197,000
Trading account securities 2,380,000 2,790,500
Securities available for sale 6,076,370 5,906,451
Investment securities held to maturity 6,947,310 6,947,017
Mortgage-backed securities held to maturity 65,442,066 71,399,443
Loans receivable 148,342,255 134,522,001
Real estate owned 29,076 49,822
Premises and equipment 3,918,938 4,037,888
Federal Home Loan Bank of New York stock, at cost 2,350,000 2,100,000
Interest receivable 1,358,616 1,218,056
Other assets 768,018 611,493
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Total assets $ 243,119,626 $ 236,550,290
============= =============
Liabilities and stockholders' equity
------------------------------------
Liabilities
-----------
Deposits $ 174,312,224 $ 169,007,650
Advances from Federal Home Loan Bank of New York 43,000,000 42,000,000
Advance payments by borrowers for taxes 984,229 919,231
Other liabilities 1,105,909 840,521
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Total liabilities 219,402,362 212,767,402
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Stockholders' equity
--------------------
Preferred stock; authorized 2,000,000 shares; issued and
outstanding-none -- --
Common stock; par value $.01; authorized 13,000,000 shares;
2,108,088 shares issued; 1,959,545 shares (2000)
and 2,080,488 shares (1999) outstanding 21,081 21,081
Paid-in-capital 9,813,900 9,833,349
Retained earnings - substantially restricted 15,748,460 14,912,410
Unearned Incentive Plan Award shares (352,526) (428,702)
Unearned Employee Stock Ownership Plan shares (190,488) (278,439)
Accumulated other comprehensive income - Unrealized (loss) on
securities available for sale, net (94,000) (52,480)
Treasury stock, at cost; 148,543 shares (2000) and 27,600 shares (1999) (1,229,163) (224,331)
------------- -------------
Total stockholders' equity 23,717,264 23,782,888
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Total liabilities and stockholders' equity $ 243,119,626 $ 236,550,290
============= =============
</TABLE>
See notes to consolidated financial statements.
1
<PAGE>
<TABLE>
<CAPTION>
PULASKI BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(Unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
--------------------------- ----------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income:
Loans $ 5,689,071 $ 4,247,712 $ 2,956,318 $ 2,187,222
Mortgage-backed securities held to maturity 2,234,988 1,705,914 1,130,502 842,008
Investment securities held to maturity 222,203 187,545 110,212 96,615
Securities available for sale 181,919 149,232 93,730 74,992
Other interest-earning assets 210,650 383,272 134,327 153,075
----------- ----------- ----------- -----------
Total interest income 8,538,831 6,673,675 4,425,089 3,353,912
----------- ----------- ----------- -----------
Interest expense:
Deposits 3,653,599 3,808,125 1,873,820 1,897,182
Advances and other borrowed money 1,247,343 17,948 665,571 8,563
----------- ----------- ----------- -----------
Total interest expense 4,900,942 3,826,073 2,539,391 1,905,745
----------- ----------- ----------- -----------
Net interest income 3,637,889 2,847,602 1,885,698 1,448,167
Provision for loan losses 50,000 61,000 25,000 36,000
----------- ----------- ----------- -----------
Net interest income after provision for loan losses 3,587,889 2,786,602 1,860,698 1,412,167
----------- ----------- ----------- -----------
Non-interest income:
Fees and service charges 108,894 72,235 55,201 36,026
Trading account income (loss) 324,021 3,548 102,480 (23,021)
Gain on real estate owned -- 1,180 -- --
Miscellaneous 10,752 9,338 5,154 5,019
----------- ----------- ----------- -----------
Total non-interest income 443,667 86,301 162,835 18,024
----------- ----------- ----------- -----------
Non-interest expenses:
Salaries and employee benefits 1,469,260 1,276,728 725,128 638,350
Net occupancy expense of premises 289,518 194,407 144,605 102,019
Equipment 211,464 186,568 107,705 96,690
Advertising 46,421 56,985 24,851 51,535
Loss (gain) on foreclosed real estate 2,889 -- (505) --
Federal insurance premium 17,741 50,709 8,769 25,466
Miscellaneous 450,904 468,828 216,258 238,215
----------- ----------- ----------- -----------
Total non-interest expenses 2,488,197 2,234,225 1,226,811 1,152,275
----------- ----------- ----------- -----------
Income before income taxes 1,543,359 638,678 796,722 277,916
Income taxes 575,652 267,293 295,285 105,000
----------- ----------- ----------- -----------
Net income $ 967,707 $ 371,385 $ 501,437 $ 172,916
=========== =========== =========== ===========
Net income per common shares:
Basic/diluted $ 0.50 $ 0.18 $ 0.26 $ 0.08
=========== =========== =========== ===========
Dividends per common share $ 0.08 $ 0.08 $ 0.08 $ 0.08
=========== =========== =========== ===========
Weighted average number of share outstanding:
Basic/diluted 1,941,867 2,037,216 1,926,888 2,041,382
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
PULASKI BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
-----------------------------------------------
(Unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
------------------------ ------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income $ 967,707 $ 371,385 $ 501,437 $ 172,916
Other comprehensive income-unrealized
holding (losses) on securities available
for sale, net of income taxes (41,520) (10,880) (12,000) (10,880)
--------- --------- --------- ---------
Comprehensive income $ 926,187 360,505 489,437 162,036
========= ======= ======= =======
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
PULASKI BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
Six Months Ended
June 30,
-------------------------------
2000 1999
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 967,707 $ 371,385
Adjustments to reconcile net income to
cash provided by (used in) operating activities:
Depreciation and amortization of premises and equipment 145,494 129,428
Accretion of discounts and amortization of premium, net (11,850) 34,849
Accretion of deferred loan fees and discounts (184,471) (127,695)
Provision for loan losses 50,000 61,000
Purchase of trading account securities (2,854,120) (6,523,624)
Proceeds from sales of trading account securities 3,630,167 4,289,672
Realized gains on sale of trading account securities (99,827) (41,011)
Unrealized (gain) loss of trading account securities (224,193) 37,463
(Gain) on sales of real estate owned (906) (3,226)
(Increase) in interest receivable (140,560) (60,680)
(Increase) in other assets (186,045) (147,414)
Increase (decrease) in interest payable on deposits 88,254 (70,395)
Increase (decrease) in other liabilities 265,388 (367,230)
ESOP committed to be released 73,207 102,067
Amortization of cost of stock contributed to Incentive Plan 76,176 76,176
------------ ------------
Net cash provided by (used in) operating activities 1,594,421 (2,239,235)
------------ ------------
Cash flows from investing activities:
Purchase of securities available for sale (181,919) (149,232)
Proceeds from maturities of investment securities held to maturity -- 1,000,000
Proceeds from calls of investment securities held to maturity -- 2,000,000
Purchases of investment securities held to maturity -- (3,000,000)
Purchases of mortgage-backed securities held to maturity -- (12,197,102)
Principal repayments on mortgage backed securities held to maturity 5,927,407 13,364,123
Purchases of loans (4,559,383) (4,781,228)
Net change in loans receivable (9,148,005) (9,842,807)
Capitalized cost on real estate owned (7,471) (10,003)
Proceeds from sales of real estate owned 50,728 133,852
Additions to premises and equipment (26,544) (318,707)
Purchase of Federal Home Loan Bank of New York stock (250,000) --
------------ ------------
Net cash (used in) investing activities (8,195,187) (13,801,104)
------------ ------------
Cash flow from financing activities:
Net increase in deposits 5,216,320 2,518,635
Net increase in advances from Federal Home Loan Bank of New York 1,000,000 --
Net (decrease) in other borrowed money -- (88,279)
Net increase in payments by borrowers for taxes 64,998 63,465
Cash dividends paid (136,362) (151,169)
Purchase of treasury stock (1,004,832) --
------------ ------------
Net cash provided by financing activities 5,140,124 2,342,652
------------ ------------
Net (decrease) in cash and cash equivalents (1,460,642) (13,697,687)
Cash and cash equivalents - beginning 6,770,619 23,364,562
------------ ------------
Cash and cash equivalents - ending $ 5,309,977 $ 9,666,875
============ ============
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------
2000 1999
---------- -----------
<S> <C> <C>
Supplemental information:
Transfer of loans receivable to real estate owned $ 21,605 $ 39,819
Cash paid during the period for:
Income taxes 696,697 227,588
Interest on deposits and borrowings 4,654,676 3,896,468
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
PULASKI BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
-------------------------
The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-QSB and Regulation SB 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 consolidated financial statements have been included.
The results of operations for the three and six months ended June 30, 2000, 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 and six months ended June 30, 2000 and 1999.
3. FORMATION OF STOCK HOLDING COMPANY
---------------------------------------
On July 12, 1999, Pulaski Savings Bank (the "Bank") reorganized into a two-tier
mutual holding company structure pursuant to an Agreement and Plan of
Reorganization which was unanimously adopted by the Board of Directors of the
Bank on January 28, 1999 ("Plan of Reorganization") and approved by the
shareholders of the Bank on April 23, 1999. Under the Plan of Reorganization
(the "Reorganization"), the Bank became a wholly owned subsidiary of Pulaski
Bancorp, Inc. (the "Company"), a federally-chartered stock holding company, a
majority of the Common Stock of which is now owned by the Pulaski Bancorp,
M.H.C. (the "Mutual Holding Company"), the Bank's parent mutual holding company.
In the Reorganization, each outstanding share of Bank common stock was converted
into one share of Company common stock and the holders of Bank common stock
became the holders of all of the outstanding shares of Company common stock.
Accordingly, as a result of the Reorganization, the Bank's minority
stockholders, became minority stockholders of the Company and the Bank's
majority stockholder, the Mutual Holding Company, became the majority
stockholder of the Company.
After the Reorganization, the Bank has continued its business and operations as
a wholly owned subsidiary of the Company and the consolidated capitalization,
assets, liabilities, income and financial statements, and management of the
Company immediately following the Reorganization is substantially the same as
those of the Bank immediately prior to consummation of the Reorganization. The
Charter and Bylaws of the Bank continue in effect, and have not been affected in
any manner by the Reorganization. The name "Pulaski Savings Bank" continues to
be utilized by the Bank. The corporate existence of the Bank has continued
unaffected and unimpaired by the Reorganization except that all of its
outstanding stock is now owned by the Company.
6
<PAGE>
PULASKI BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
Discussion of Forward-Looking Statements
When used or incorporated by reference in disclosure documents, the words
"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, 2000 and December 31, 1999
The Company's assets at June 30, 2000 totalled $243.1 million, which represents
an increase of $6.5 million or 2.7% as compared with $236.6 million at December
31, 1999.
Cash and cash equivalents decreased $1.5 million or 22.1% to $5.3 million at
June 30, 2000 from $6.8 million at December 31, 1999, primarily reflecting a
decrease in federal funds sold of $2.0 million, sufficient to offset a $796,000
increase in interest-bearing deposits.
Term deposits at June 30, 2000 and December 31, 1999 remained the same at
$197,000. Trading account securities at June 30, 2000 decreased $411,000 or
14.7% to $2.4 million when compared with $2.8 million at December 31, 1999. The
decrease during the six months ended June 30, 2000 resulted from sales of
trading account securities of $3.5 million offset by purchases of $2.9 million
along with an unrealized gain of $224,000. Securities available for sale at June
30, 2000 increased $170,000 or 2.9% to $6.1 million when compared with $5.9
million at December 31, 1999, which resulted primarily from purchases of
securities available for sale. Investment securities held to maturity remained
unchanged at June 30, 2000 at $6.9 million when compared with December 31, 1999.
Mortgage-backed securities held to maturity decreased $6.0 million or 8.3% to
$65.4 million at June 30, 2000 when compared to $71.4 million at December 31,
1999. The decrease during the six months ended June 30, 2000 resulted primarily
from repayments on mortgage-backed securities of $5.9 million.
Net loans increased $13.8 million or 10.3% to $148.3 million at June 30, 2000 as
compared to $134.5 million at December 31, 1999. The increase during the six
months ended June 30, 2000, resulted primarily from loan originations and
purchases exceeding loan principal repayments.
Deposits at June 30, 2000 increased $5.3 million or 3.1% to $174.3 million when
compared with $169.0 million at December 31, 1999.
7
<PAGE>
PULASKI BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
Comparison of Financial Condition at June 30, 2000 and December 31, 1999
(Cont'd.)
Advances from the Federal Home Loan Bank of New York ("FHLB") totalled $43.0
million and $42.0 million at June 30, 2000 and December 31, 1999, respectively,
representing an increase of $1.0 million or 2.4%.
Stockholders' equity amounted to $23.7 million and $23.8 million at June 30,
2000 and December 31, 1999, respectively. During the six months ended June 30,
2000 and 1999, net income of $968,000 and $371,000, respectively, was recorded
and cash dividends of $136,000 and $151,000, respectively, were paid on the
common stock. During the six months ended June 30, 2000, the Company repurchased
120,943 shares of its common stock, at prices ranging from $7.94 to $8.50 per
share, for $1.0 million under a stock repurchase program.
Comparison of Operating Results for the Three Months Ended June 30, 2000 and
1999
Net income increased $328,000 or 190.0% to $501,000 for the three months ended
June 30, 2000 compared with $173,000 for the same 1999 period. The increase in
net income during the 2000 period resulted from an increase in total interest
income combined with an increase in non-interest income and a decrease in
provision for loan loss which were partially offset by increases in total
interest expense, non-interest expenses and income taxes.
Interest income on loans increased by $769,000 or 35.2% to $3.0 million during
the three months ended June 30, 2000 when compared with $2.2 million during the
same 1999 period. The increase during the 2000 period resulted from an increase
of 31 basis points in the yield earned on the loan portfolio along with an
increase of $33.2 million or 29.9% in the average balance of loans outstanding.
Interest on mortgage-backed securities increased $289,000 or 34.3% to $1.1
million during the three months ended June 30, 2000 when compared with $842,000
for the same 1999 period. The increase during the 2000 period resulted from an
increase in the average balance of mortgage-backed securities outstanding of
$9.5 million or 16.6%, along with an increase of 89 basis points in the yield
earned thereon. Interest earned on investment securities, including available
for sale and held to maturity issues, increased $32,000 or 18.6% to $204,000
during the three months ended June 30, 2000 when compared with $172,000 for the
same 1999 period. The increase during the 2000 period resulted from a 41 basis
point increase in the yield earned on such securities, accompanied by an
increase of $1.3 million or 11.0% in the average balance of investment
securities outstanding. Interest earned on other interest-earning assets
decreased by $19,000 or 12.4% to $134,000 during the three months ended June 30,
2000 when compared with $153,000 for the same 1999 period. The decrease during
the 2000 period resulted from a decrease of $4.6 million or 35.9% in the average
balance of other interest-earning assets outstanding, sufficient to offset an
increase of 174 basis points in the yield earned thereon.
Interest expense on deposits decreased $23,000 or 1.2% to $1.874 million during
the three months ended June 30, 2000 when compared to $1.897 million during the
same 1999 period. Such decrease during the 2000 period was attributable to a
decrease of $1.9 million or 1.1% in the average balance of interest-bearing
deposits outstanding, along with a decrease of 1 basis point in the cost of
interest-bearing deposits. Interest on borrowed money amounted to $665,000 and
$9,000 during the three months ended June 30, 2000 and 1999, respectively. The
increase during the 2000 period resulted primarily from an increase of $41.6
million in the average balance of borrowed money, which was used to cover
increased loan demand and securities purchases.
8
<PAGE>
PULASKI BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
Comparison of Operating Results for the Three Months Ended June 30, 2000 and
1999 (Cont'd.)
Net interest income increased $438,000 or 30.2% to $1.9 million during the three
months ended June 30, 2000 when compared with $1.4 million during the same 1999
period. Such increase was due to an increase in total interest income of $1.1
million, which was sufficient to offset an increase in total interest expense of
$633,000. The net interest rate spread increased to 2.84% in 2000 from 2.54% in
1999. The increase in the interest rate spread in 2000 resulted from an increase
of 66 basis points in the yield earned on interest-earning assets, which was
more than sufficient to offset a 36 basis point increase in the cost of
interest-bearing liabilities.
During the three months ended June 30, 2000 and 1999, the Bank provided $25,000
and $36,000, 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. 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, 2000 and 1999, the Bank's non-performing loans, which were delinquent
ninety days or more, totalled $402,000 or .17% of total assets and $635,000 or
.31% of total assets, respectively. At June 30, 2000 and 1999, all
non-performing loans were on non-accrual status.
Non-interest income increased by $145,000 to $163,000 during the three months
ended June 30, 2000 when compared to $18,000 during the same 1999 period. The
increase during the 2000 period resulted primarily from increases in fees and
service charges of $19,000 and trading account income of $125,000. During the
three months ended June 30, 2000, the Bank purchased $1.8 million and sold
$462,000 in trading securities, resulting in a realized loss of $4,000, and
recorded unrealized gains on trading account securities of $106,000. During the
three months ended June 30, 1999, the Bank purchased $1.8 million and did not
sell any trading account securities, however, an unrealized loss of $23,000 was
recorded.
Non-interest expenses increased by $75,000, or 6.5%, to $1.227 million during
the three months ended June 30, 2000 when compared with $1.152 million during
the same 1999 period. During the 2000 period, increases in salaries and employee
benefits, occupancy and equipment of $87,000, $43,000, and $11,000,
respectively, were partially offset by decreases in advertising, federal
insurance premiums and miscellaneous expense of $27,000, $17,000 and $22,000,
respectively, when compared with the same 1999 period.
Income taxes totalled $295,000 and $105,000 during the three months ended June
30, 2000 and 1999, respectively. The increase during the 2000 period resulted
primarily from an increase in pre-tax income.
9
<PAGE>
PULASKI BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
Comparison of Operating Results for the Six Months Ended June 30, 2000 and 1999
Net income increased $597,000 or 160.9% to $967,000 for the six months ended
June 30, 2000 compared with $371,000 for the same 1999 period. The increase in
net income during the 2000 period resulted from an increase in total interest
income combined with an increase in non-interest income and a decrease in
provision for loan losses which were partially offset by increases in total
interest expense, non-interest expenses and income taxes.
Interest income on loans increased by $1.4 million or 33.9% to $5.69 million
during the six months ended June 30, 2000 when compared with $4.25 million
during the same 1999 period. The increase during the 2000 period resulted from
an increase of 18 basis points in the yield earned on the loan portfolio along
with an increase of $33.3 million or 31.0% in the average balance of loans
outstanding. Interest on mortgage-backed securities increased $529,000 or 31.0%
to $2.2 million during the six months ended June 30, 2000 when compared with
$1.7 million for the same 1999 period. The increase during the 2000 period
resulted from an increase in the average balance of mortgage-backed securities
outstanding of $10.6 million or 18.4%, along with an increase of 63 basis points
in the yield earned thereon. Interest earned on investment securities, including
available for sale and held to maturity issues, increased $67,000 or 19.9% to
$404,000 during the six months ended June 30, 2000 when compared with $337,000
for the same 1999 period. The increase during the 2000 period resulted from a 56
basis point increase in the yield earned on such securities, accompanied by an
increase of $1.1 million or 9.3% in the average balance of investment securities
outstanding. Interest earned on other interest-earning assets decreased by
$172,000 to $211,000 during the six months ended June 30, 2000 when compared
with $383,000 for the same 1999 period. The decrease during the 2000 period
resulted from a decrease of $8.1 million or 52.3% in the average balance of
other interest-earning assets outstanding, sufficient to offset an increase of
77 basis points in the yield earned thereon.
Interest expense on deposits decreased $154,000 or 4.0% to $3.7 million during
the six months ended June 30, 2000 when compared to $3.8 million during the same
1999 period. Such decrease during the 2000 period was attributable to a decrease
of $3.5 million or 2.0% in the average balance of interest-bearing deposits
outstanding, along with a decrease of 10 basis points in the cost of
interest-bearing deposits. Interest on borrowed money amounted to $1.2 million
and $18,000 during the six months ended June 30, 2000 and 1999, respectively.
The increase during the 2000 period resulted primarily from an increase of $39.8
million in the average balance of borrowed money, which was used to cover
increased loan demand and securities purchases.
Net interest income increased $790,000 or 27.7% to $3.6 million during the six
months ended June 30, 2000 when compared with $2.8 million during the same 1999
period. Such increase was due to an increase in total interest income of $1.9
million, which was sufficient to offset an increase in total interest expense of
$1.1 million. The net interest rate spread increased to 2.76% in 2000 from 2.50%
in 1999. The increase in the interest rate spread in 2000 resulted from an
increase of 51 basis points in the yield earned on interest-earning assets,
which was more than sufficient to offset a 25 basis point increase in the cost
of interest-bearing liabilities.
During the six months ended June 30, 2000 and 1999, the Bank provided $50,000
and $61,000, respectively, for loan losses.
10
<PAGE>
PULASKI BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Comparison of Operating Results for the Six Months Ended June 30, 2000 and 1999
(Cont'd.)
Non-interest income increased by $358,000 to $444,000 during the six months
ended June 30, 2000 when compared to $86,000 during the same 1999 period. The
increase during the 2000 period resulted primarily from increases in fees and
service charges of $37,000 and trading account income of $320,000. During the
six months ended June 30, 2000, the Bank purchased $2.9 million and sold $3.6
million in trading securities, resulting in a realized gain of $100,000, and
recorded unrealized gains on trading account securities of $224,000. During the
six months ended June 30, 1999, the Bank purchased $6.5 million and sold $4.3 in
trading account securities resulting in realized gain of $41,000 offset by
recorded unrealized losses of $37,000.
Non-interest expenses increased by $254,000, or 11.4%, to $2.5 million during
the six months ended June 30, 2000 when compared with $2.2 million during the
same 1999 period. During the 2000 period, increases in salaries and employee
benefits, occupancy, equipment and loss on real estate owned of $193,000,
$95,000, and $25,000 and $3,000, respectively, were partially offset by
decreases in advertising, federal insurance premiums and miscellaneous expenses
of $11,000, $33,000 and $18,000, respectively, when compared with the same 1999
period.
Income taxes totalled $576,000 and $267,000 during the six months ended June 30,
2000 and 1999, respectively. The increase during the 2000 period resulted
primarily from an increase in pre-tax income.
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 24.35%
during the month of June 2000. 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 operating, financing, lending and investing
activities during any given period. At June 30, 2000, interest-bearing deposits,
term deposits, federal funds sold and securities available for sale totalled
$7.9 million. The Bank has other sources of liquidity if a need for additional
funds arises, including advances from the FHLB. At June 30, 2000, advances from
the FHLB amounted to $43.0 million.
During the six months ended June 30, 2000 and 1999, cash dividends paid on
common stock amounted to $136,000 and $151,000, 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, 2000, would have been increased by
$89,000 and $179,000, respectively.
11
<PAGE>
PULASKI BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
Liquidity and Capital Resources (Cont'd.)
The Bank anticipates that it will have sufficient funds available to meet its
current loan commitments. At June 30, 2000, the Bank had outstanding commitments
to originate and purchase loans of $7.9 million and commitments to fund unused
credit lines and construction loans in process of $24.3 million. Certificates of
deposit scheduled to mature in one year or less at June 30, 2000, totalled
$104.7 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.
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 adjusted total 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, 2000 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) $ 24,297 19.43% $ 10,002 8.00% $ 12,502 10.00%
Tier 1 Capital
(to risk-weighted assets) 23,179 18.54% - - 7,501 6.00%
Core (Tier 1) Capital
(to adjusted total assets) 23,179 9.53% 9,724 4.00% 12,155 5.00%
Tangible Capital
(to adjusted total assets) 23,179 9.53% 3,647 1.50% - -
</TABLE>
12
<PAGE>
PULASKI BANCORP, INC. AND SUBSIDIARY
PART II . OTHER INFORMATION
ITEM 1. Legal Proceedings
-----------------
None.
ITEM 2. Changes in Securities
---------------------
None.
ITEM 3. Defaults Upon Senior Securities
-------------------------------
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
This information was reported in the Company's Form 10-QSB for the
quarter ended March 31, 2000.
ITEM 5. Other Information
-----------------
None
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
3.1 Stock Charter of Pulaski Bancorp, Inc. *
3.2 Bylaws of Pulaski Bancorp, Inc. *
4.0 Form of Common Stock Certificate *
11.0 Computation of earnings per share
27.0 Financial Data Schedule
* 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:
None.
13
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act of 1934, the issuer has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
PULASKI BANCORP, INC.
Date: August 11, 2000 By /S/ Thomas Bentkowski
--------------- ---------------------
Thomas Bentkowski
President and Chief Executive Officer
(Principal Executive Officer)
Date: August 11, 2000 By: /S/ Lee Wagstaff
--------------- ----------------
Lee Wagstaff
Vice President and Treasurer
(Principal Financial and
Accounting Officer)
14
