Pulaski Financial (PULB) 10-K 2014 FY Annual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2014

OR

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to              

Commission File No.: 0-24571

PULASKI FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

Missouri	43-1816913
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

12300 Olive Boulevard, St. Louis, Missouri  63141

(Address of principal executive offices)

Registrant’s telephone number, including area code: (314) 878-2210

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, par value $0.01 per share	The Nasdaq Stock Market LLC
(Title of Each Class)	(Name of Each Exchange on Which Registered)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o  No x.

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o  No x.

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.  Yes x  No o.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o.

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check One):

Large Accelerated Filer o	Accelerated Filer x
Non-accelerated Filer o	Smaller Reporting Company o
(Do not check if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.)  Yes o  No x.

The aggregate market value of the voting and non-voting common equity held by non-affiliates as of the last business day of the registrant’s most recently completed second fiscal quarter was $97 million.                

There were issued and outstanding 12,073,054 shares of the registrant’s common stock as of December 12, 2014.

Documents Incorporated by Reference

Portions of 2014 Annual Report to Stockholders (Part II).

Portions of the Definitive Proxy Statement for the 2015 Annual Meeting of Stockholders (Part III).

INDEX

		Page No.
PART I
Item 1.	Business	3
Item 1A.	Risk Factors	40
Item 1B.	Unresolved Staff Comments	51
Item 2.	Properties	51
Item 3.	Legal Proceedings	51
Item 4.	Mine Safety Disclosures	51
PART II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	52
Item 6.	Selected Financial Data	53
Item 7.	Management’s Discussion and Analysis of Financial1Condition and Results of Operations	53
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	53
Item 8.	Financial Statements and Supplementary Data	53
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	53
Item 9A.	Controls and Procedures	53
Item 9B.	Other Information	54
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	55
Item 11.	Executive Compensation	55
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	56
Item 13.	Certain Relationships, Related Transactions and Director Independence	56
Item 14.	Principal Accountant Fees and Services	56
PART IV
Item 15.	Exhibits and Financial Statement Schedules	57
SIGNATURES		60

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This report contains certain “forward-looking statements” within the meaning of the federal securities laws, which are made in good faith pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.  These statements are not historical facts.  Rather, they are statements based on Pulaski Financial Corp.’s current expectations regarding its business strategies, intended results and future performance.  Forward-looking statements are generally preceded by terms such as “expects,” “believes,” “anticipates,” “intends” and similar expressions.

Management’s ability to predict results or the effect of future plans or strategies is inherently uncertain.  Factors which could cause actual results to differ from anticipated results include interest rate trends, the economic climate in the market area in which Pulaski Financial Corp. operates, as well as nationwide, Pulaski Financial Corp.’s ability to control costs and expenses, competitive products and pricing, loan delinquency rates, demand for loans and deposits, changes in the quality or composition of our loan portfolio, changes in federal and state legislation and regulation and changes in accounting principles. Additional factors that may affect our results are discussed in “Item 1A — Risk Factors” and in other reports filed with the Securities and Exchange Commission.  These factors should be considered in evaluating the forward-looking statements and undue reliance should not be placed on such statements.  Subject to applicable law and regulation, Pulaski Financial Corp. assumes no obligation to update any forward-looking statements.

Unless the context indicates otherwise, all references in this annual report on Form 10-K to the “Company,” “we,” “us” and “our” refer to Pulaski Financial Corp. and its subsidiaries.

PART I

Item 1. Business

General

Pulaski Financial Corp. (the “Company”) is the holding company for Pulaski Bank, a federally chartered savings bank (the “Bank”). The Company’s primary assets are its investment in the Bank and cash.  The Company also maintains two special-purpose subsidiaries that issued trust preferred securities. Management of the Company and the Bank are substantially similar and the Company neither owns nor leases any property, but instead uses the office properties and equipment of the Bank.  Accordingly, the information set forth in this annual report on Form 10-K, including the consolidated financial statements and related financial data, relates primarily to the Bank.

Pulaski Bank provides an array of financial products and services for businesses and retail customers primarily through its thirteen full-service offices in the St. Louis metropolitan area and residential mortgage loan production offices in the St. Louis, Kansas City, Chicago and Denver metropolitan areas, mid-Missouri, southwestern Missouri, eastern Kansas, Omaha, Nebraska, and Council Bluffs, Iowa.  Pulaski Bank is primarily engaged in attracting deposits from individuals and businesses and using these deposits, together with borrowed funds, to originate primarily one-to four-family residential mortgage loans, commercial real estate and commercial and industrial loans principally within its St. Louis lending market.  In addition, the Bank originates one- to four-family residential mortgage loans primarily for sale in the secondary market in the other markets identified above.

Available Information

We maintain an Internet website at www.pulaskibank.com.  We make available our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended, and other information related to us, free of charge, on this site as soon as reasonably practicable after we electronically file those documents with, or otherwise furnish them to, the Securities and Exchange Commission.  Our Internet website and the information contained therein or connected thereto are not intended to be incorporated into this annual report on Form 10-K.

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Market Area

We provide a wide array of residential mortgage loan, commercial loan and deposit products through our thirteen full-service branch offices and loan production offices in the St. Louis metropolitan area.  We also originate residential mortgage loans, principally for sale in the secondary market, through our mortgage loan production offices in the Kansas City, Chicago and Denver metropolitan areas, mid-Missouri, southwestern Missouri, eastern Kansas, Omaha, Nebraska, and Council Bluffs, Iowa.

Competition

We face intense competition when attracting savings deposits (our primary source of lendable funds) and originating loans.  Direct competition for savings deposits has historically come from commercial banks, other thrift institutions and credit unions located in our market area.  We have faced additional significant competition for investors’ funds from short-term money market securities and other corporate and government securities.

At June 30, 2014, which is the most recent date for which data is available from the Federal Deposit Insurance Corporation (the “FDIC”), we held approximately 1.08% of the deposits in our primary market area, which is the St. Louis, Missouri-Illinois Metropolitan Statistical Area.  This represents the sixteenth largest market share out of 138 financial institutions with offices in this metropolitan statistical area.  Banks owned by large bank holding companies, such as US Bancorp, Bank of America Corporation, Regions Financial Corp. and PNC Financial Group, operate in our market area.  These institutions are significantly larger than us and, therefore, have significantly greater resources that could allow them to offer a wider variety of products and services.

Our competition for loans comes principally from other financial institutions, mortgage banking companies and mortgage brokers.  We expect competition for our products to increase in the future as a result of legislative, regulatory and technological changes.  Technological advances, for example, have lowered barriers to market entry, allowing banks to expand their geographic reach by providing services over the Internet and made it possible for non-depository institutions to offer products and services that traditionally have been provided by banks.  The Gramm-Leach-Bliley Act, which permits affiliation among banks, securities firms and insurance companies, also has changed the competitive environment as several non-traditional banking companies are collecting deposits in the St. Louis metropolitan area.

Lending Activities

Residential Mortgage Lending.  Substantially all of our residential first mortgage loan production is sold on a servicing-released, best-efforts, flow basis to a number of regional and national secondary market investors. This strategy enables us to have a much larger lending capacity, provide a much more comprehensive product offering and reduce the interest rate, prepayment and credit risks associated with residential lending.  This strategy also allows us to offer more competitive interest rates.  Loans originated for sale are closed in our name and held in “warehouse” until they are sold to the investors, typically within 30 to 60 days.  The loans held in warehouse provide an attractive asset yield during the short time we hold them pending their sale, because we are able to fund these longer-term assets (typically thirty-year, fixed-rate mortgages) with low-cost, short-term funds.  Loan sale activity generates one of our largest sources of non-interest income.

We are a direct endorsement lender with the Federal Housing Administration (“FHA”). Consequently, our FHA-approved, direct endorsement underwriters are authorized to approve or reject FHA-insured loans up to maximum amounts established by FHA.  We are also an automatic lender with the Veterans’ Administration (“VA”), which enables our designated qualified personnel to approve or reject loans on behalf of the VA.

We primarily originate thirty-year, fixed-rate mortgage loans, and to a lesser extent, fifteen-year, fixed-rate mortgage loans. Generally, substantially all of such loans are sold in the secondary market.  We also offer a variety of adjustable-rate mortgage (“ARM”) loans.  These ARM loans may be sold in the secondary market or originated for portfolio investment.  The loan fees charged, interest rates and other provisions of our ARM loans are

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determined by us on the basis of our own pricing criteria, the composition and interest rate risk of our current loan portfolio and market conditions.  Interest rates and payments on our ARM loans generally are adjusted periodically to a rate typically equal to 2.00% to 3.75% above the one-year constant maturity U.S. Treasury index.  The periodic interest rate cap (the maximum amount by which the interest rate may be increased or decreased in a given period) on our ARM loans is generally 2% per adjustment period and the lifetime interest rate cap is generally 6% over the initial interest rate of the loan. We qualify the borrower based on the borrower’s ability to repay the ARM loan based on the maximum interest rate at the first adjustment in the case of one-year ARM loans, and based on the initial interest rate in the case of ARM loans that adjust after two or more years.   We do not originate negative amortization loans for portfolio investment.  We believe that the periodic adjustment feature of our ARM loans provides us the flexibility to offer initial interest rates that are competitive while limiting our long-term exposure to interest rate risk.

The relative amount of fixed-rate mortgage loans and ARM loans that can be originated at any time is largely determined by the demand for each.  Borrower demand for ARM loans versus fixed-rate mortgage loans is a function of current and expected market interest rates and the difference between the initial interest rates and fees charged for each type of loan.  As the result of the low interest rate environment during the years ended September 30, 2014 and 2013, the demand for our fixed-rate mortgage loan products greatly exceeded the demand for ARM loans.  If the current low level of interest rates continues, we expect this weakening of demand for ARM loans to continue.

We require title insurance insuring the status of our lien on all of our residential mortgage loans and also require that fire and extended coverage casualty insurance (and, if appropriate, flood insurance) be maintained in an amount equal to the greater of the outstanding loan balance or the full replacement cost of the dwelling.

Our lending policies generally limit the maximum loan-to-value ratio on first mortgage loans secured by owner-occupied properties to 80% of the lesser of the appraised value or the purchase price.  We will make loans in excess of this limit provided the borrower obtains mortgage insurance.  Prior to 2008, we offered second mortgage loans that exceeded 80% combined loan-to-value ratios, which were priced with enhanced yields.  We still offer second mortgage loans that exceed 80% of the collateral values on a very limited basis to credit-worthy borrowers.  However, the current underwriting guidelines are more stringent due to the current adverse economic environment.  At September 30, 2014, the Company had $39.6 million of second mortgage loans, of which $11.8 million had combined loan-to-value ratios in excess of 90% based on appraisals obtained at the time of origination.

We obtain appraisals on our real estate loans from our in-house staff of licensed appraisers and independent appraisers.  During the year ended September 30, 2014, we performed approximately 36% of our appraisals through our in-house staff.

Home Equity Lines of Credit.  Home equity lines of credit are secured with a deed of trust on residential real estate and are generally issued in an amount up to 80% of the appraised value of the property securing the line of credit, less the outstanding balance on the first mortgage.  On a limited basis, home equity lines of credit might be issued in an amount up to 90% of the appraised value of the property securing the line of credit.  Our credit underwriting standards for home equity loans have generally followed conforming loan guidelines.  This type of loan is generally originated in conjunction with the origination of first mortgage loans eligible for sale in the secondary market.  In prior periods, we originated certain home equity loans with available lines up to 100% of the appraised value of the home when combined with the balance of the first mortgage loans.  This practice has been discontinued.  At September 30, 2014, we had $90.2 million in home equity lines of credit, of which approximately $8.4 million had combined loan-to-value ratios of at least 100% based on a combination of original and updated appraisals.

Interest rates on home equity lines of credit are adjustable and are tied to the prime interest rate. This rate is based on the rates published in the Wall Street Journal and adjusts on a monthly basis.  The rate at the date of origination is also the floor rate for the life of the loan.  Interest rates are based upon the loan-to-value ratio of the property, with lower rates given to borrowers with lower loan-to-value ratios.  Because home equity lines of credit adjust monthly with fluctuations in the prime interest rate, they present less interest rate risk to us.  However,

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lending up to 100% of the value of the property and the potential for increased payments due to increased interest rates present greater credit risk to us.  Due to the downturn in local and national economic conditions, the increased risks associated with this type of lending, and the significant level of our existing loan balances, we de-emphasized home equity lending during the three years ended September 30, 2014.  See Loan Underwriting Risks below.  During the three years ended September 30, 2014, we originated $20.4 million, $22.9 million and $29.0 million, respectively, of home equity lines of credit, representing only 1.5%, 1.2% and 1.5% of total loans originated during those periods, respectively.

Commercial Real Estate Loans.  We engage in commercial real estate lending, typically through direct originations.  The types of properties we finance include retail, industrial, office and multi-family real estate.  All borrowers are evaluated for adequacy of repayment sources at the time of approval and are regularly reviewed for any possible deterioration in their ability to repay the loan.  Real estate collateral with loan-to-value ratios meeting our underwriting criteria based on the property type and other borrower-specific information is required, and personal guarantees are generally obtained.  We have expanded our commercial real estate portfolio, which includes both owner and non-owner occupied properties, to provide diversification and to generate assets that are sensitive to fluctuations in interest rates.  Commercial real estate loans are generally prime-based, floating-rate loans, or short-term (one to seven year) fixed-rate loans.

Commercial and Industrial Loans.  We originate commercial and industrial loans that are secured by property such as inventory, equipment, finished goods and accounts receivable.  All borrowers are evaluated for the adequacy of repayment sources at the time of approval and are regularly reviewed for any possible deterioration in their ability to repay the loan.  In most instances, collateral is required to provide an additional source of repayment in the event of default by the borrower.  The structure of the collateral varies for each loan depending on the financial strength of the borrower, the amount and terms of the loan, and the collateral available to be pledged.  Because the value of this type of collateral is subject to greater fluctuation than real estate, these types of loans are typically structured with short-term maturities and are monitored by periodic borrowing-base certificates.  Loans on equipment are also generally short-term and do not exceed the useful life of the equipment.  Personal guarantees are generally obtained.

Real Estate Construction and Land Acquisition and Development Loans.  We originate real estate construction loans that consist of one- to four-family residential construction loans made to retail mortgage customers and builders and loans for the construction of multi-family and commercial properties.  We also originate land acquisition and development loans for the development of land to be used for residential or commercial real estate construction.  Loan disbursements are closely monitored by management to ensure that funds are being used strictly for the purposes agreed upon in the loan covenants.  We employ both internal staff and external experts to ensure that loan disbursements are substantiated by regular inspections and review.  These loans are underwritten according to the adequacy of the borrower’s repayment sources.  Signs of deterioration in the borrower’s ability to repay the loan are measured throughout the life of the loan and not just at origination or when the loan becomes past due.  In most instances, loan amounts are limited to 80% of the “as completed” appraised value of the construction project and 75% of wholesale values for land development projects.  The borrowers are generally required to infuse equity into the project at closing.  Personal guarantees are generally obtained.  During the three years ended September 30, 2014, we originated $66.9 million, $38.4 million and $23.2 million, respectively, of real estate construction loans, representing 4.9%, 2.1% and 1.2% of total loans originated during those periods, respectively.  Due to the downturn in local and economic conditions and the increased risks associated with this type of lending, we de-emphasized land acquisition and development lending during the three years ended September 30, 2014.  See Loan Underwriting Risks below.  During the three years ended September 30, 2014, we originated $12.1 million, $4.8 million and $8.7 million, respectively, of land acquisition and development loans, representing 0.9%, 0.3% and 0.5% of total loans originated during those periods, respectively.

Consumer and Other Loans.  On a limited basis, we originate consumer loans to residents of the St. Louis metropolitan area, including automobile loans and other secured consumer goods loans.  These loans are generally offered to our customers as a convenience and are not considered to be among our primary products.  Automobile loans currently in the portfolio consist of fixed-rate loans secured by both new and used cars and light trucks.  New

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cars are financed for a period of up to 72 months while used cars are financed for 60 months or less depending on the year and model.  Collision and comprehensive insurance coverage is required on all automobile loans.

Loan Marketing and Processing.  Loan applicants come through direct marketing efforts by the Bank’s loan officers, loan officers employed by two 50%-owned joint ventures with local realtors in St. Louis, referrals by realtors, financial planners, previous and present customers and, to a far lesser extent, through television, radio, internet and print advertising promotions.  Residential mortgage loans may be originated in any of our offices, while commercial and consumer loans are originated only from our St. Louis offices.  Loans we retain in our portfolio are serviced from our main office.  Loans sold into the secondary mortgage market are generally sold on a “best efforts,” “servicing released” basis.  Mortgage loan officers are compensated for their loan production based upon the dollar volume closed.  The commission rate paid to these loan officers generally does not vary based on the specific terms of individual loans, but may be increased or decreased based on total monthly and annual volume levels and meeting certain minimum quality control criteria and other productivity measures.

Upon receipt of a loan application from a prospective borrower, a credit report and other data are obtained to verify specific information relating to the loan applicant’s employment, income and credit standing.  An appraisal of the real estate offered as collateral is performed by one of our in-house licensed appraisers or an appraiser generally approved by the board of directors and licensed or certified by the states in which we do business.

The board of directors has granted loan approval authority to certain officers up to prescribed limits, depending on their experience and tenure.  The CEO or the President may approve secured loans up to $1.0 million and unsecured loans up to $250,000.  An internal loan committee, consisting of five senior officers approves secured loans up to $8.0 million and unsecured loans up to $2.0 million.  All loans above these levels are approved by the full board of directors.

Interest rates are subject to change if the approved loan is not closed within the time of the commitment, which is usually 45 to 60 days for residential mortgage loans and 30 days for commercial loans.

Loan Underwriting Risks.

Adjustable-Rate Residential Mortgage Loans.  The retention of adjustable-rate mortgage loans in our loan portfolio helps reduce our exposure to changes in interest rates.  There are, however, credit risks resulting from the potential of increased amounts to be paid by the borrower due to increasing interest rates.  During periods of rising interest rates, the risk of default on ARM loans increases as a result of repricing and the increased payments required from the borrower. Furthermore, because the ARM loans we originate could provide initial rates of interest below the fully-indexed rates, these loans are subject to increased risks of default, delinquency, or prepayment as the rates adjust upward to the fully-indexed rates.

Residential Second Mortgage Loans and Home Equity Lines of Credit.  Second mortgage loans and home equity lines of credit generally involve greater credit risk than first mortgage loans because they are secured by mortgages that are subordinate to the first mortgage on the property.  If the borrower is forced into foreclosure, we will receive no proceeds from the sale of the property until the first mortgage has been completely repaid.  Second mortgage loans and home equity lines of credit often have high loan-to-value ratios when combined with the first mortgage on the property.  Loans with high combined loan-to-value ratios will be more sensitive to declining property values than loans with lower combined loan-to-value ratios and, therefore, may experience a higher incidence of default and severity of losses.  Over the past several years, we have repeatedly tightened our underwriting standards in response to the prevailing economic conditions and have de-emphasized these types of lending.  As a result, the balances of second mortgage loans decreased to $39.6 million at September 30, 2014 compared with $43.2 million at September 30, 2013. Home equity lines of credit decreased to $90.2 million at September 30, 2014 compared with $110.9 million at September 30, 2013.

Since substantially all second mortgage loans and home equity lines of credit are originated in conjunction with the origination of first mortgage loans eligible for sale in the secondary market, and we typically do not

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service the related first mortgage loans if they are sold, we may be unable to track the delinquency status of the related first mortgage loans and whether such loans are at risk of foreclosure by others.  At September 30, 2014, second mortgage loans and home equity lines of credit for which we did not own or service the related first mortgage loans totaled approximately $35.9 million and $88.0 million, respectively, which represented approximately 90.8% and 97.6% of the second mortgage loan and home equity line of credit portfolios, respectively.  We monitor the increased credit risk associated with second mortgage loans and home equity lines of credit for which we do not own or service the related first mortgage loans by obtaining updated credit information on all borrowers from the credit bureaus at least annually, or more frequently based on negative trends in portfolio delinquencies or overall economic conditions.  If the circumstances warrant, we may obtain updated appraisals or other information, such as brokers’ opinions of value, indicating the fair value of the underlying collateral.  If these procedures identify significant deterioration in a borrower’s credit quality or the underlying property’s estimated fair value, we may freeze the borrower’s ability to make additional principal draws under the home equity lines of credit.

Home equity lines of credit are initially offered as “revolving” lines of credit whereby funds can be borrowed during a “draw” period. The only required payments during the draw period are scheduled monthly interest payments.  In previous years, we offered home equity lines of credit with ten-year maturities that included a draw period for the entire ten years. The full principal amount was due at the end of the draw period as a lump-sum balloon payment and no required monthly principal payments were due prior to maturity.  Beginning in 2012, we discontinued this product and began offering home equity lines of credit with 15-year maturities, which are structured with an initial five-year draw period requiring interest-only payments, followed by the required monthly payment of principal and interest on a fully-amortizing basis for the remaining ten-year term.

At maturity, home equity loans are re-underwritten based on our current underwriting standards and updated appraisals are generally obtained.  Our underwriting criteria for such loans require the borrowers to qualify as if the loans require principal and interest payments for the complete term of the loans sufficient to fully amortize the loans.  If the borrowers qualify under our current underwriting standards, the loans are either renewed under our new 15-year home equity loan product or are converted to conventional second mortgage loans that are fully amortizing and contain no initial draw period.  Borrowers may be required to repay a portion of the outstanding principal balance to qualify for such renewals.  The conversion of a home equity line of credit to a fully amortizing basis presents an increased level of default risk to us since the borrower no longer has the ability to make principal draws on the line, and the amount of the required monthly payment could substantially increase to provide for scheduled repayment of principal and interest.  During the year ended September 30, 2014, we renewed approximately $3.6 million of maturing home equity lines into our new 15-year home equity line of credit product and converted approximately $3.8 million of maturing home equity lines into fully-amortizing second mortgage loans.  At September 30, 2014, all of our home equity lines of credit were in the interest-only payment phase and all of our second mortgage loans were fully amortizing.  The following table summarizes when our home equity lines of credit at September 30, 2014 are scheduled to convert to a fully-amortizing basis:

	Principal Balance
	At September 30,
	2014
	(In thousands)
Year ended September 30,
2015	$	12,281
2016	16,623
2017	22,084
2018	28,061
2019	9,879
Thereafter	1,251
Total	$	90,179

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Commercial Real Estate Loans.  Loans secured by commercial real estate generally have larger loan balances and involve greater risks than one- to four-family residential mortgage loans because the properties securing these loans might have unpredictable cash flows and are more difficult to evaluate and monitor.  Payments on loans secured by such properties are often dependent on successful management and operation of the properties or the businesses occupying the properties.  Repayment of such loans may be affected, to a greater extent, by adverse conditions in the real estate market or the economy.  If the cash flows from the property are reduced (for example, if leases are not obtained or renewed), the borrower’s ability to repay the loan and the value of the property securing the loan may be impaired.  We seek to minimize these risks in a variety of ways, including limiting the size of such loans, reviewing the financial condition of the borrower, verifying the quality of the collateral and scrutinizing the management of the property securing the loan.  We also generally obtain loan guarantees from financially capable parties.  Our lending personnel or one of our agents inspects all of the properties securing our commercial real estate loans before the loan is made.

Commercial and Industrial Loans.  Unlike residential mortgage loans, which generally are made on the basis of a borrower’s ability to make repayment from his or her employment or other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial and industrial loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flows of the borrower’s business, including, in the case of loans secured by accounts receivable, the ability of the borrower to collect amounts due from its customers.  The secondary source of repayment is based almost solely on the liquidation of the pledged collateral and the ability to collect on personal guarantees, if any.  As a result, the availability of funds for the repayment of commercial loans may depend substantially on the success of the business itself, which may be subject to adverse conditions in the economy.  Further, any collateral securing such loans may depreciate over time, be difficult to appraise, fluctuate in value and provide an insufficient source of repayment.

Real Estate Construction and Land Acquisition and Development Loans.  Real estate construction and land acquisition and development loans involve greater credit risks than permanent residential or commercial real estate loans.  Our risk of loss on these types of loans is dependent largely upon the accuracy of the initial estimate of the property’s value, the marketability of the project upon the completion of construction, and the borrower’s ability to financially support the property if changes occur over time.  If the estimate of construction costs is inaccurate, we may be required to advance additional funds to complete the development.  If, upon completion of the project, the estimate of the marketability of the property is inaccurate, the borrower may be unable to sell the completed project in a timely manner or obtain adequate proceeds to repay the loan.  Delays in completing the project may arise from inclement weather, labor problems, material shortages and other unpredictable contingencies.  In some instances where the collateral value supports a further increase in the outstanding loan amount, no payment from the borrower is required during the term of a construction loan since the accumulated interest is generally added to the principal of the loan.  However, there are times when additional cash equity injections from the borrower are necessary for project completion and loan repayment.  Therefore, a thorough analysis of the borrower and any guarantor’s ability to support the project on an ongoing basis is necessary during the underwriting process.  Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the completed project and the ability of the borrower to sell or lease the property or obtain permanent take-out financing, rather than the ability of the borrower or guarantor to repay principal and interest.  Furthermore, if our estimate of value of a completed project is inaccurate, then we may be confronted with, at or prior to the maturity of the loan, a project with a value that is insufficient to assure full repayment and we may incur a loss.

Consumer Loans.  Consumer loans entail greater risk than residential mortgage loans, particularly in the case of consumer loans that are unsecured or secured by rapidly depreciating assets such as automobiles. In such cases, any repossessed collateral obtained from a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation.  The remaining deficiency often does not warrant further collection efforts against the borrower beyond obtaining a deficiency judgment.  In addition, consumer loan repayments are dependent on the borrower’s continuing financial stability, and thus are more likely to be adversely affected by loss of employment, divorce, illness or personal bankruptcy.  Furthermore, the application of various Federal and state laws, including Federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.

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TABLE 1:  Loans Receivable

	At September 30,
	2014					2013					2012					2011					2010
	Amount			Percent of Total		Amount			Percent of Total		Amount			Percent of Total		Amount			Percent of Total		Amount			Percent of Total
	(Dollars in thousands)
Single-family residential:
Residential first mortgage	$	273,370		24.36	%	$	212,357		21.14	%	$	211,760		21.37	%	$	242,091		23.19	%	$	243,649		22.75	%
Residential second mortgage	39,554			3.52	%	43,208			4.30	%	42,091			4.25	%	51,535			4.94	%	60,281			5.63	%
Home equity lines of credit	90,179			8.03	%	110,905			11.03	%	143,932			14.53	%	176,324			16.89	%	201,922			18.86	%
Commercial:
Multi-family residential	63,021			5.61	%	48,706			4.85	%	44,339			4.48	%	38,580			3.70	%	43,736			4.09	%
Commercial real estate	333,537			29.71	%	299,297			29.78	%	278,995			28.16	%	277,631			26.59	%	256,224			23.94	%
Land acquisition and development	37,051			3.30	%	40,430			4.02	%	47,263			4.77	%	51,497			4.93	%	74,462			6.96	%
Real estate construction and development	46,777			4.17	%	20,549			2.04	%	21,907			2.21	%	22,331			2.14	%	31,071			2.90	%
Commercial and industrial	235,297			20.96	%	226,829			22.57	%	197,755			19.96	%	180,821			17.32	%	155,622			14.54	%
Consumer and installment:
Automobile	117			0.01	%	120			0.01	%	112			0.01	%	342			0.03	%	845			0.08	%
Installment	3,908			0.33	%	2,641			0.26	%	2,561			0.26	%	2,775			0.27	%	2,668			0.25	%
Total loans	1,122,811			100.00	%	1,005,042			100.00	%	990,715			100.00	%	1,043,927			100.00	%	1,070,480			100.00	%
Add (less):
Deferred loan costs	4,669					3,188					3,116					3,626					3,884
Loans in process	(641		)			(1,256		)			(986		)			(566		)			(1,115		)
Allowance for loan losses	(15,978		)			(18,306		)			(17,117		)			(25,714		)			(26,976		)
Total loans receivable, net	$	1,110,861				$	988,668				$	975,728				$	1,021,273				$	1,046,273

TABLE 2:  Loan Maturities (1)

	At September 30, 2014
	Due WithinOne Year		Due AfterOne Year Through Five Years		DueBeyondFive Years		Total
	(In thousands)
Single-family residential:
Residential first mortgage	$	11,925	$	11,676	$	249,769	$	273,370
Residential second mortgage	4,462		16,887		18,205		39,554
Home equity lines of credit	12,556		57,037		20,586		90,179
Commercial:
Multi-family residential	6,317		36,438		20,266		63,021
Commercial real estate	74,335		207,085		52,117		333,537
Land acquisition and development	26,344		9,643		1,064		37,051
Real estate construction and development	10,443		28,956		7,378		46,777
Commercial and industrial	92,474		121,312		21,511		235,297
Consumer and installment	2,108		1,528		389		4,025
Total loans	$	240,964	$	490,562	$	391,285	$	1,122,811

(1)Demand loans, loans having no stated schedule of repayments and no stated maturity, and overdrafts are reported as due in one year or less.

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TABLE 3:  Fixed and Adjustable Rate Loans

	Loans due or re-pricing after September 30, 2015
	Fixed Rate		Adjustable  Rate
	(In thousands)
Single-family residential:
Residential first mortgage	$	79,268	$	182,177
Residential second mortgage	19,545		15,547
Home equity lines of credit	—		77,623
Commercial:
Multi-family residential	40,077		16,627
Commercial real estate	188,521		70,681
Land acquisition and development	9,327		1,380
Real estate construction and development	16,927		19,407
Commercial and industrial	85,790		57,033
Consumer and installment	1,583		334
Total	$	441,038	$	440,809

Scheduled contractual principal repayments of loans generally do not reflect the actual life of such assets.  The average life of loans is substantially less than their contractual terms because of principal prepayments.  In addition, due-on-sale clauses on loans generally give us the right to declare loans immediately due and payable if, among other things, the borrower sells the property subject to the mortgage and the loan is not repaid.  The average life of mortgage loans tends to increase, however, when current mortgage loan market rates are substantially higher than rates on existing mortgage loans and, conversely, decreases when rates on existing mortgage loans are substantially higher than current mortgage loan market rates.

Loan Originations, Sales and Purchases.  We generally sell substantially all of the fixed-rate residential first mortgage loans that we originate, which helps us minimize our interest rate risk position.  The sale of such loans in the secondary mortgage market reduces our risk that the interest rates paid on our primary funding source (short-term deposits with maturities generally less than three years) will increase while we hold long-term, fixed-rate loans in our portfolio.  It also allows us to continue to fund loans when deposit flows decline or funds are not otherwise available.  We generally sell all residential mortgage loans on a “servicing released” basis, meaning we do not service or retain the right to service such loans after the sale.  Gains, net of direct origination expense, from the sale of such loans are realized at the time of sale.  Generally, a loan is committed to be sold and a price for the loan is determined at the same time the interest rate on the loan is locked with the customer, which may be at the time the applicant applies for the loan or any time up to the date of closing.  This eliminates the risk to us that a rise in market interest rates will reduce the value of a mortgage before it can be sold.

Additionally, we generally negotiate a “best-efforts” delivery to the investor whereby we are not required to deliver the loan to the investor if the loan does not close for any reason.  Such delivery minimizes exposure from loans that do not close and, for loans that close, minimizes exposure to changes in market interest rates prior to the sale of the loans to the investors.

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TABLE 4:  Loan Activity

	Years Ended September 30,
	2014			2013			2012
	(In thousands)
Total gross loans, including loans held for sale, at beginning of period	$	1,076,455		$	1,189,770		$	1,166,043
Loans originated:
Residential real estate - held to maturity	113,247			56,884			39,512
Residential real estate - held for sale	738,541			1,293,912			1,408,653
Multi-family real estate	23,989			14,708			15,425
Commercial real estate	83,362			83,821			48,369
Land acquisition and development	12,116			4,841			8,662
Real estate construction and development	66,854			38,387			23,165
Commercial and industrial	316,218			349,687			365,398
Consumer and installment	1,376			957			806
Total loans originated	1,355,703			1,843,197			1,909,990
Net decrease in home equity lines of credit	(20,726		)	(33,026		)	(32,393		)
Loans purchased:
Residential real estate	1,649			2,619			1,093
Commercial real estate	96,222			59,451			23,327
Loans sold:
Residential real estate originated for sale	(741,624		)	(1,395,781		)	(1,322,480		)
Commercial real estate	(796		)	(858		)	(12,716		)
Loans principal repayments, charge offs, and foreclosures	(587,506		)	(588,917		)	(543,094		)
Net loan activity	102,922			(113,315		)	23,747
Total gross loans, including loans held for sale, at end of period	$	1,179,377		$	1,076,455		$	1,189,770

Under standard representations and warranties and early payment default clauses in our mortgage loan sale agreements, we may be required to repurchase mortgage loans sold to our investors or reimburse our investors for credit losses incurred on loans (collectively referred to as “repurchase”) in the event of borrower default within a defined period after origination (generally 90 days), or in the event of breaches of contractual representations or warranties made at the time of sale that are not remedied within a defined period after we receive notice of such breaches (generally 90 days).  Because the level of mortgage loan repurchase losses depends upon economic factors, investor demand strategies and other external conditions that may change over the life of the underlying loans, the level of the liability for mortgage loan repurchase losses is difficult to estimate and requires considerable management judgment.  In addition, we do not service the loans that we sell to our investors and are unable to track the remaining unpaid balances after sale.  As a result, there may be a range of possible losses in excess of the estimated liability that cannot be estimated.  Management maintains regular contact with the Company’s investors to monitor and address their repurchase demand practices and concerns.  For further discussion of our treatment and the financial impact of these mortgage loan repurchase demands, refer to Note 10 of the Notes to the Consolidated Financial Statements contained in the Company’s 2014 Annual Report to Stockholders included herein as Exhibit 13.1.

We purchase commercial real estate loans from other financial institutions.  We may purchase the entire amount of the loan, including the right to service the loan, or only a portion of the loan in a participation arrangement with the originating lender.  Under such participation arrangements, the originating lender typically retains ownership of a portion of the loan and provides servicing of the loan.  All loans purchased are subject to the same underwriting standards as the loans we originate.  We generally only purchase loans within our St. Louis market area.

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Non-performing Assets and Delinquencies

The following is a summary of non-performing assets at the dates indicated.  The balances of non-performing loans represent the unpaid principal balances, net of amounts charged off. The balances of real estate acquired in settlement of loans are net of amounts charged off and any related valuation allowances.

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TABLE 5:  Non-performing Assets

	At September 30,
	2014		2013		2012		2011		2010
	(In thousands)
Loans accounted for on a non-accrual basis:
Single-family residential:
Residential first mortgage	$	4,026	$	5,335	$	4,248	$	5,871	$	6,727
Residential second mortgage	354		442		610		1,177		1,522
Home equity lines of credit	1,479		2,124		1,613		4,084		2,206
Commercial:
Commercial and multi-family real estate	457		1,774		6,119		2,375		5,539
Land acquisition and development	3,734		—		—		229		8,796
Real estate-construction and development	—		—		358		854		1,189
Commercial and industrial	348		—		4,412		210		417
Consumer and installment	—		78		102		240		100
Total	10,398		9,753		17,462		15,040		26,496
Accruing loans which are contractually past due 90 days or more:
Total	—		—		—		—		—
Troubled debt restructurings: (1)
Current under restructured terms:
Single-family residential:
Residential first mortgage	4,668		5,169		11,809		14,911		16,093
Residential second mortgage	1,126		904		1,473		1,861		2,186
Home equity lines of credit	741		498		1,266		1,248		1,050
Commercial:
Commercial and multi-family real estate	3,335		2,585		6,388		4,359		426
Land acquisition and development	—		43		—		—		184
Real estate-construction and development	—		23		34		1,538		3,306
Commercial and industrial	1,102		2,055		1,186		560		1,355
Consumer and installment	13		28		42		—		83
Total	10,985		11,305		22,198		24,477		24,683
Past due under restructured terms:
Single-family residential:
Residential first mortgage	3,477		3,974		5,463		9,372		7,251
Residential second mortgage	483		155		166		452		339
Home equity lines of credit	395		178		542		999		728
Commercial:
Commercial and multi-family real estate	669		1,652		1,607		2,226		—
Land acquisition and development	38		—		39		121		65
Real estate-construction and development	39		19		—		51		—
Commercial and industrial	488		572		—		417		—
Consumer and installment	—		—		—		226		—
Total	5,589		6,550		7,817		13,864		8,383
Total restructured loans	16,574		17,855		30,015		38,341		33,066
Total non-performing loans	26,972		27,608		47,477		53,381		59,562
Real estate acquired in settlement of loans, net	5,802		6,395		13,952		18,718		14,900
Total non-performing assets	$	32,774	$	34,003	$	61,429	$	72,099	$	74,462

(1) All loans classified as troubled debt restructurings in this table were accounted for on a non-accrual basis.

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TABLE 5:  Non-performing Assets, Continued

	At September 30,
	2014		2013		2012		2011		2010
Total non-performing loans as a percentage of net loans receivable	2.40	%	2.75	%	4.79	%	5.11	%	5.56	%
Total non-performing loans as a percentage of total assets	1.95	%	2.16	%	3.52	%	4.08	%	4.10	%
Total non-performing assets as a percentage of total assets	2.37	%	2.66	%	4.56	%	5.51	%	5.13	%
Non-performing loans excluding current troubled debt restructurings as a percentage of total loans	1.42	%	1.62	%	2.55	%	2.77	%	3.26	%
Non-performing assets excluding current troubled debt restructurings as a percentage of total assets	1.58	%	1.78	%	2.91	%	3.64	%	3.43	%
Allowance for loan losses as a percent of non-performing loans	59.24	%	66.31	%	36.05	%	48.17	%	45.29	%
Allowance for loan losses as a percent of non-performing loans excluding current troubled debt restructurings and related allowances for loan losses	97.06	%	106.56	%	65.56	%	84.50	%	75.47	%

Interest income recognized on impaired loans was approximately $989,000, $1.1 million and $2.1 million for the years ended September 30, 2014, 2013 and 2012, respectively.  The gross interest income that would have been recorded in such periods if impaired loans had been current in accordance with their terms and had been outstanding throughout the periods was $2.4 million, $3.0 million and $3.4 million for the years ended September 30, 2014, 2013 and 2012, respectively. Refer to Note 4 of the Notes to the Consolidated Financial Statements contained in the Company’s 2014 Annual Report to Stockholders included herein as Exhibit 13.1 for a further discussion of impaired loans and the related accrued interest.

Real Estate Acquired in Settlement of Loans.  Real estate acquired in settlement of loans consists of loan collateral that has been repossessed through foreclosure or obtained by deed in lieu of foreclosure. This collateral is comprised of commercial and residential real estate. Such assets are recorded as held for sale initially at the lower of the loan balance or fair value of the collateral less estimated selling costs.  If the loan balance exceeds the fair value of the collateral less estimated selling costs at the time of foreclosure, the difference is recorded as a charge-off to the allowance for loan losses.  Any decline in the fair value of the property subsequent to acquisition is recorded as a charge to non-interest expense.  Refer to Note 19 of the Notes to the Consolidated Financial Statements contained in the Company’s 2014 Annual Report to Stockholders included herein as Exhibit 13.1 for a discussion of fair value measurements of real estate acquired in settlement of loans.

The balance of real estate acquired in settlement of loans decreased $592,000 from $6.4 million at September 30, 2013 to $5.8 million at September 30, 2014.  The balance at September 30, 2014 consists of twelve residential properties and four commercial properties acquired in settlement of debts outstanding.  Refer to Note 4 of the Notes to the Consolidated Financial Statements contained in the Company’s 2014 Annual Report to Stockholders included herein as Exhibit 13.1 for a summary of real estate acquired in settlement of loans and the related allowance of losses.

Credit Monitoring and Asset Classification.  The Bank’s Risk Management Committee has the overall responsibility for the proper identification and classification of troubled assets, the continued monitoring of such assets, the establishment of the appropriate level of loss reserves, the charge-off of uncollectible loans and the implementation of action plans for significant classified or watch list loans.  The committee consists of the President of the Bank, the President of the commercial lending division, the Chief Financial Officer, the Vice President of mortgage loan servicing, and the Senior Vice President of commercial loan underwriting and administration.  The Director of Internal Audit also attends the meetings as an independent observer.

The committee generally meets quarterly or more frequently if circumstances dictate, and reviews all problem and potential problem assets, consisting primarily of loans receivable.  The status of significant classified and watch list loans, including workout plans, and emerging trends are discussed in detail.  Following the meetings, the list of classified assets is updated, the appropriate level of loss reserves is recorded (quarterly), significant loan

15

charge-offs are recorded and classified asset action plans are updated.  Troubled assets are subject to continuous monitoring between meetings.  In addition to oversight by the committee, the board of directors reviews delinquent loans, classified assets and watch list loans, the level of the allowance for loan losses, portfolio mix and the status of workout efforts for large commercial credits at its regular monthly meetings.  We engage a regional accounting firm specializing in asset reviews to perform periodic reviews of management’s loan reviews and classifications.

Residential Real Estate Loans.  We have a staff of full-time collectors who are responsible for following up on all past due residential loans.  Residential borrowers are contacted almost immediately after a loan payment becomes past due.  Attempts to contact the borrower by telephone generally begin approximately seven days after the payment due date.  The first past due notice is mailed to the borrower eight days after the payment due date.  On the thirtieth day after the due date, a 30-day past due letter is sent.  If a satisfactory response is not obtained, continuous follow-up contacts are attempted until the loan has been brought current. On the forty-fifth day after the due date, a 45-day past due notice is sent.  Before the forty-fifth day of delinquency, attempts to interview the borrower, preferably in person, are made to establish:  (1) the cause of the delinquency; (2) whether the cause is temporary; (3) the attitude of the borrower toward the debt; and (4) a mutually satisfactory arrangement for curing the default.  Also, in the case of second mortgage loans and home equity lines of credit, after the sixtieth day of delinquency, management determines: (1) the status and unpaid principal balance of each superior lien; (2) whether any mortgage constituting a superior lien has been sold to any investor; and (3) whether the borrower is also delinquent under a superior lien and what the affected lien holder intends to do to resolve the delinquency.

If the borrower cannot be reached and does not respond to collection efforts, a personal collection visit or property inspection is made and a photograph of the exterior of the property is taken.  The physical condition and occupancy status of the property is determined before recommending further action.  Such inspection normally occurs on or about the forty-fifth day of delinquency.  At 45 days into the delinquency procedure, we notify the borrower that home ownership counseling is available for eligible homeowners.  If by the one hundred twenty first day of delinquency, or sooner if the borrower is chronically delinquent and all reasonable means of obtaining payment on time have been exhausted, foreclosure, according to the terms of the security instrument and applicable law, is initiated.

All residential loans that are past due 60 days or more are reviewed during weekly meetings between management and the collectors.  These meetings allow management to understand the collection activity and past payment history, review collection methods and make suggestions for alternative solutions to problems inherent with certain past-due customers.  Individual action plans are often formulated during these meetings, such as charge-offs, troubled debt restructurings, skip tracing, or forbearance plans.  These meetings are critical to the identification of troubled loans and allow management to take proactive steps to either resolve a problem or prepare for further action.

We have proactively modified loan repayment terms with certain residential borrowers who were experiencing financial difficulties in the current economic climate with the belief that these actions would maximize our recoveries on these loans.  These modifications are known as troubled debt restructurings.  Substantially all of our portfolio residential loans are to borrowers who live in the communities that we serve, which has enabled us to work closely with these troubled borrowers.  The restructured terms of the loans generally include a reduction of the interest rates and/or the addition of past due interest to the principal balance of the loans.  Many of these borrowers were current at the time of their modifications and showed strong intent and ability to repay their obligations under the modified terms.

Identification of restructuring candidates is a combined effort of the collection staff, management, and loan origination personnel.  Restructuring candidates are referred to the loss mitigation staff and counseled on available options.  Each applicant is required to submit a loan application, provide proof of income, and a hardship letter describing their deteriorating financial condition.  Once completed, the loan is evaluated on its own merit, including a new appraisal and, if appropriate, a workout plan is drafted and a modification to the note and deed, if necessary, is reviewed by senior management and executed.  The restructured terms are entered onto the Bank’s loan system and the loan is flagged for future reporting and tracking.

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A loan is classified as a troubled debt restructuring if the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider.  This includes a modification of loan terms (such as a reduction of the rate to below-market terms, adding past-due interest to the loan balance or extending the maturity date) and possibly a partial forgiveness of debt.  In addition, a loan could be classified as a troubled debt restructuring if the loan matures, the borrower is considered troubled and the scheduled renewal rate on the loan is determined to be less than a risk-adjusted market interest rate on a similar credit.  Refer to Note 4 of the Notes to the Consolidated Financial Statements contained in the Company’s 2014 Annual Report to Stockholders included herein as Exhibit 13.1 for a further discussion of troubled debt restructurings.

Commercial Loans.  Unlike residential mortgage and consumer loan monitoring, which is largely based on the past due status of the loan, effective monitoring of a commercial portfolio must be much more proactive.  Early identification of problem assets is essential to managing and controlling risk.  Troubled assets are closely tracked by senior management and are formally reviewed at least quarterly by the Risk Management Committee.  We recognize that the originating loan officers usually have the closest relationship with our borrowers and are generally in the best position to identify potential problems in a timely manner.  Therefore, in addition to their traditional business development responsibilities, the Bank’s commercial loan officers are required to remain in close contact with existing borrowers so they can better monitor their financial health on an on-going basis.  When a borrower’s problems are identified early, the Bank often has the opportunity to be “first in line” to secure additional collateral before the borrower’s financial condition deteriorates into a severe condition.

Each commercial loan officer meets quarterly (or more frequently if required by specific circumstances) with the President of the Bank, the President of the commercial lending division and the senior loan underwriter to review their entire portfolio.  The meetings address the status of all identified problem or classified credits and any other credits that might potentially become a problem if conditions do not improve.  This procedure has been an effective tool in keeping senior management abreast of changes within the Bank’s commercial loan portfolio and has identified loans that warrant additional monitoring by placement on the Bank’s watch list.  We also utilize various sources of real estate market data to monitor potential problems within the loan portfolio.

Consumer Loans.  When a consumer loan borrower fails to make a required payment, we institute collection procedures.  We receive a computer-generated collection report daily.  The first notice is mailed to the borrower seven days following the payment due date.  The customer is contacted by telephone to ascertain the nature of the delinquency.  If by the forty-fifth day following the payment due date, no progress has been made, a written notice is mailed informing the borrowers of their right to cure the delinquency within 20 days and of our intent to begin legal action if the delinquency is not corrected.  Depending on the type of property held as collateral, we may obtain a judgment in small claims court, take action to repossess the collateral, or collect under the existing note, whatever is most economically efficient.

Non-Accrued Interest.  Our policy is to discontinue the accrual of interest income on any loan when, in the opinion of management, the ultimate collectability of contractual interest or principal is no longer probable.  Non-accrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates that the timely collectability of interest and principal is probable and the borrower demonstrates the ability to pay under the terms of the note through a sustained period of repayment performance, which is generally six months.  Refer to Note 4 of the Notes to the Consolidated Financial Statements contained in the Company’s 2014 Annual Report to Stockholders included herein as Exhibit 13.1 for a further discussion of the Company’s treatment of non-accrued interest.

Classification of Troubled Assets.  The Bank has adopted the Uniform Credit Classification Policy issued by the Federal Financial Institutions Examination Council, which was subsequently adopted by the Office of the Comptroller of the Currency (“OCC”), the Bank’s primary regulator.  The regulations require that each insured institution regularly review and classify its assets based on asset quality.  In addition, OCC examiners have authority to identify problem assets in connection with examinations of insured institutions and, if appropriate, require them to be classified.  There are three adverse classifications for problem assets:  substandard, doubtful and loss.  The “substandard” rating is assigned to loans where the borrower exhibits well-defined weaknesses that

17

jeopardize its continued performance and are of a severity that the distinct possibility of default exists.  The “doubtful” rating is assigned to loans that have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, questionable resulting in a high probability of loss.  An asset classified as “loss” is considered uncollectible and of such little value that charge-off is generally warranted.  In limited circumstances, the Company might establish a specific allowance on assets classified as loss if a charge-off is not yet warranted because circumstances are changing and the exact amount of the loss cannot be determined.  A portion of general loan loss allowances established to cover probable losses related to classified assets may be included in determining an institution’s regulatory capital, while specific valuation allowances for loan losses generally do not qualify as regulatory capital.  OCC regulations also require that assets that do not currently expose an institution to a sufficient degree of risk to warrant classification as substandard, doubtful or loss but do possess credit deficiencies or potential weakness deserving management’s close attention shall be designated “special mention” by either the institution or its examiners.  Refer to Note 4 of the Notes to the Consolidated Financial Statements contained in the Company’s 2014 Annual Report to Stockholders included herein as Exhibit 13.1 for a further discussion of credit quality monitoring.

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TABLE 6:  Classified Loans 

	At September 30, 2014
	Loss			Doubtful				Substandard				Special Mention
	Number	Amount		Number	Amount			Number	Amount			Number	Amount
	(Dollars in thousands)
Residential first mortgage	—	$	—	38	$	3,840		72	$	9,378		1	$	132
Residential second mortgage	—	—		11	303			39	1,762			—	—
Home equity lines of credit	—	—		22	561			63	2,055			3	94
Commercial and multi-family real estate	—	—		—	—			22	7,848			8	10,207
Land acquisition and development	—	—		1	38			2	5,068			2	2,589
Real estate construction and development	—	—		3	39			—	—			—	—
Commercial and industrial	—	—		—	—			17	2,496			7	2,618
Consumer and installment	—	—		—	—			1	14			2	234
Total classified loans	—	—		75	4,781			216	28,621			23	15,874
Less specific allowance for loan losses	—	—		—	(470		)	—	(728		)	—	—
Total classified loans, net of specific allowance	—	$	—	75	$	4,311		216	$	27,893		23	$	15,874

	At September 30, 2013
	Loss			Doubtful				Substandard				Special Mention
	Number	Amount		Number	Amount			Number	Amount			Number	Amount
	(Dollars in thousands)
Residential first mortgage	—	$	—	43	$	5,141		75	$	10,834		2	$	270
Residential second mortgage	—	—		8	410			29	1,101			1	50
Home equity lines of credit	—	—		37	1,574			43	1,371			—	—
Commercial and multi-family real estate	—	—		1	60			34	16,159			8	6,940
Land acquisition and development	—	—		—	—			4	5,884			3	6,954
Real estate construction and development	—	—		—	—			3	38			—	—
Commercial and industrial	—	—		—	—			14	3,267			10	4,936
Consumer and installment	—	—		3	107			—	—			—	—
Total classified loans	—	—		92	7,292			202	38,654			24	19,150
Less specific allowance for loan losses	—	—		—	(1,348		)	—	(1,058		)	—	—
Total classified loans, net of specific allowance	—	$	—	92	$	5,944		202	$	37,596		24	$	19,150

Other than as disclosed in the table above, there are no other loans at September 30, 2014 that management has serious doubts about the ability of the borrowers to comply with the present loan repayment terms.

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Allowance for Loan Losses.  We maintain an allowance for loan losses to absorb probable losses in our loan portfolio.  Loan losses are charged against and recoveries are credited to the allowance.  Provisions for loan losses are charged to income and credited to the allowance in an amount necessary to maintain an appropriate allowance given the risks identified in the portfolio.  The allowance is comprised of specific allowances on impaired loans (assessed for loans that have known credit weaknesses) and pooled or general allowances based on assigned risk ratings and historical loan loss experience for each loan type.  The allowance is based upon management’s estimates of probable losses inherent in the loan portfolio.  Refer to Note 4 of the Notes to the Consolidated Financial Statements contained in the Company’s 2014 Annual Report to Stockholders included herein as Exhibit 13.1 for a further discussion of the allowance for loan losses.

TABLE 7:  Allowance for Loan Losses

	Year Ended September 30,
	2014			2013			2012			2011			2010
	(Dollars in thousands)
Balance, beginning of period	$	18,306		$	17,117		$	25,714		$	26,976		$	20,579
Provision charged to expense	1,210			12,090			14,450			14,800			26,064
Charge-offs:
Single-family residential:
Residential first mortgage	1,772			3,364			8,035			4,520			3,774
Residential second mortgage	618			1,633			2,696			2,094			2,099
Home equity lines of credit	1,577			2,402			6,029			3,002			4,165
Commercial:
Land acquisition and development	1,883			73			262			4,382			1,145
Real estate construction and development	—			260			298			50			2,254
Commercial and multi-family real estate	15			1,013			4,050			1,545			4,323
Commercial and industrial	1			6,834			2,067			774			2,540
Consumer and installment	128			107			215			101			174
Total charge-offs	5,994			15,686			23,652			16,468			20,474
Recoveries:
Single-family residential:
Residential first mortgage	396			80			81			67			384
Residential second mortgage	92			232			103			117			76
Home equity lines of credit	323			544			150			154			23
Commercial:
Land acquisition and development	1			23			8			2			—
Real estate construction and development	—			1,800			10			1			5
Commercial and multi-family real estate	765			1,638			114			11			88
Commercial and industrial	848			422			117			45			223
Consumer and installment	31			46			22			9			8
Total recoveries	2,456			4,785			605			406			807
Net charge-offs	3,538			10,901			23,047			16,062			19,667
Balance, end of period	$	15,978		$	18,306		$	17,117		$	25,714		$	26,976
Ratio of allowance to total loans outstanding at the end of the period	1.42		%	1.82		%	1.73		%	2.46		%	2.52		%
Ratio of net charge-offs to average loans outstanding during the period	0.34		%	1.08		%	2.26		%	1.51		%	1.76		%
Allowance for loan losses to non-performing loans	59.24		%	66.31		%	36.05		%	48.17		%	45.29		%

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TABLE 8:  Allocation of Allowance for Loan Losses

	At September 30,
	2014				2013				2012				2011				2010
	Amount		Percent of Loans in Each Category to Total Loans		Amount		Percent of Loans in Each Category to Total Loans		Amount		Percent of Loans in Each Category to Total Loans		Amount		Percent of Loans in Each Category to Total Loans		Amount		Percent of Loans in Each Category to Total Loans
	(Dollars in thousands)
Single-family residential:
Residential first mortgage	$	4,727	24.35	%	$	5,247	21.14	%	$	4,832	21.37	%	$	7,945	23.19	%	$	4,773	22.76	%
Residential second mortgage	1,395		3.52		1,845		4.30		1,548		4.25		2,776		4.94		2,269		5.63
Home equity lines of credit	1,743		8.03		3,078		11.03		3,076		14.53		6,293		16.89		4,366		18.86
Commercial:
Commercial, multi-family real estate and land	4,852		38.62		5,525		38.65		5,292		37.41		6,503		35.22		11,579		35.01
Real estate construction and development	207		4.17		86		2.04		117		2.21		337		2.14		1,079		2.90
Commercial and industrial	3,025		20.96		2,500		22.57		2,224		19.96		1,416		17.32		2,760		14.51
Consumer and installment	29		0.35		25		0.27		28		0.27		444		0.30		150		0.33
Total allowance for loan losses	$	15,978	100.00	%	$	18,306	100.00	%	$	17,117	100.00	%	$	25,714	100.00	%	$	26,976	100.00	%

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Investment Activities

The Bank is permitted, under applicable law, to invest in various types of liquid assets, including U.S. Treasury obligations, securities of various federal agencies and state and municipal governments, deposits at the Federal Home Loan Bank (“FHLB”) of Des Moines, certificates of deposit of federally insured institutions, certain bankers’ acceptances and federal funds.  Subject to various restrictions, savings institutions may also invest a portion of their assets in commercial paper, corporate debt securities, equity securities and mutual funds.  Savings institutions like the Bank are also required to maintain an investment in FHLB stock and a minimum level of liquid assets.

We maintain a portfolio of U.S. Treasury obligations and investment grade mortgage-backed securities in the form of Ginnie Mae, Freddie Mac and Fannie Mae participation certificates and, to a much lesser extent, collateralized mortgage obligations.  Ginnie Mae certificates are guaranteed as to principal and interest by the full faith and credit of the United States, while Freddie Mac and Fannie Mae certificates are guaranteed by the respective agencies.  Mortgage-backed securities generally entitle us to receive a pro rata portion of the cash flows from an identified pool of mortgages.  Collateralized mortgage obligations are types of debt securities issued by a special purpose entity that aggregates pools of mortgages and mortgage-backed securities and creates different classes of securities with varying maturities and amortization schedules, as well as a residual interest, with each class possessing different risk characteristics.  The cash flows from the underlying collateral are generally divided into “tranches” or classes that have descending priorities with respect to the distribution of principal and interest cash flows.

The Asset Liability Management Committee, which includes our executive officers and other key personnel, determines appropriate investments in accordance with the board of directors’ approved investment policies and procedures.  Investments are made following certain considerations, which include our liquidity position and anticipated cash needs and sources, which in turn include outstanding commitments, upcoming maturities of securities, estimated deposit inflows and outflows and anticipated loan amortization and repayments.  Further, the effect that the proposed investment would have on our credit and interest rate risk, and risk-based capital is considered.  The interest rate, yield, settlement date and maturity are also reviewed.

All of our debt securities and mortgage-backed securities carry market risk insofar as increases in market interest rates would generally cause a decline in their fair value.  Certain of these securities also carry prepayment risk insofar as they may be called or repaid before their stated maturity during times of low market interest rates, so that we may have to reinvest the funds at a lower interest rate.

Our investment securities portfolio at September 30, 2014 did not contain securities of any issuer with an aggregate book value and aggregate market value in excess of 10% of stockholders’ equity, excluding those issued by the United States government or its agencies.

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TABLE 9:  Investment and Mortgage-Backed Securities

	At September 30,
	2014		2013		2012
	(In thousands)
Held to maturity, at amortized cost:
Investment securities - U.S. Treasury and agency obligations	$	25,084	$	—	$	—
Mortgage-backed securities:
Ginnie Mae	44		64		90
Fannie Mae	3,220		4,226		5,562
Collateralized mortgage obligations — Freddie Mac	4		4		5
Total	$	28,352	$	4,294	$	5,657
Available for sale, at fair value:
Investment securities - U.S. Treasury and agency obligations	$	12,898	$	38,691	$	21,595
Mortgage-backed securities - Ginnie Mae	182		226		326
Total	$	13,080	$	38,917	$	21,921

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TABLE 10:  Maturities and Yields

	At September 30, 2014
	Due in Less Than One Year				Due in One to Five Years				Due in Five to Ten Years				Due in Over Ten Years				Total
	Amount		Weighted Average Yield		Amount		Weighted Average Yield		Amount		Weighted Average Yield		Amount		Weighted Average Yield		Amount		Weighted Average Yield
	(Dollars in thousands)
Held to maturity:
Investment securities:
U.S. Treasury and agency obligations	$	15,005	0.14	%	$	10,079	0.27	%	$	—	—		$	—	—		$	25,084	0.19	%
Mortgage-backed securities:
Mortgage-backed securities	—		—		45		8.34	%	137		3.91	%	3,082		3.48	%	3,264		3.56	%
CMOs	—		—		—		—		4		1.04	%	—		—		4		1.04	%
Total debt and mortgage-backed and related securities	$	15,005	0.14	%	$	10,124	0.31	%	$	141	3.84	%	$	3,082	3.48	%	$	28,352	0.58	%
Available for sale:
Investment securities:
U.S. Treasury and agency obligations	$	—	—		$	12,898	0.56	%	$	—	—		$	—	—		$	12,898	0.56	%
Mortgage-backed securities	—		—		—		—		82		3.66	%	100		7.18	%	182		5.64	%
Total debt and mortgage-backed and related securities	$	—			$	12,898	0.56	%	$	82	3.66	%	$	100	7.18	%	$	13,080	0.63	%

The above table is presented based upon contractual maturities.  Expected maturities of mortgage-backed securities and CMOs will differ from contractual maturities due to scheduled repayments and because borrowers may have the right to call or prepay obligations with or without prepayment penalties.  At September 30, 2014, the Company’s portfolio included callable securities.  This table does not take into consideration the effects of scheduled repayments or the effects of possible prepayments.

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Sources of Funds

General.  Deposits, loan repayments, loan sales, FHLB borrowings and retail repurchase agreements are the major sources of our funds for lending and other investment purposes.  In addition, we have the ability to borrow from the Federal Reserve Bank.  Scheduled loan repayments are a relatively stable source of funds, while deposit inflows and outflows, loan prepayments and the amount of retail repurchase agreements are influenced significantly by the level of market interest rates.  Borrowings from the FHLB of Des Moines and borrowings from the Federal Reserve Bank may be used to compensate for reductions in the availability of funds from these other sources.  Management chooses among these wholesale funding sources depending on their relative costs, our overall interest rate risk exposure and our overall borrowing capacity at the FHLB and the Federal Reserve.

Deposit Accounts.  Our depositors reside predominately in the St. Louis metropolitan area.  Deposits are attracted from within our market area through the offering of a broad selection of commercial and retail deposit instruments, including checking accounts, negotiable order of withdrawal (“NOW”) accounts, money market deposit accounts, regular savings accounts, certificates of deposit, retirement savings plans and treasury management services.  Deposit account terms vary according to the minimum balance required, the time periods the funds must remain on deposit, and the interest rate, among other factors.  In determining the terms of our deposit accounts, we consider current market interest rates, the pricing of competitors, our profitability, the Company’s overall interest rate risk profile, the Company’s liquidity needs and our customer preferences and concerns.  Our Asset Liability Management Committee regularly reviews our deposit mix and pricing.

TABLE 11:  Deposits

	At September 30,
	2014				2013				2012
	Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total
	(Dollars in thousands)
Demand deposits:
Non-interest-bearing checking	$	189,642	18.56	%	$	168,032	16.62	%	$	173,374	16.03	%
Interest-bearing checking	222,156		21.74		237,363		23.48		276,542		25.57
Passbook savings accounts	43,640		4.27		39,845		3.94		37,258		3.44
Money market	203,974		19.97		206,927		20.47		149,194		13.79
Total demand deposits	659,412		64.54		652,167		64.51		636,368		58.83
Certificates of deposit which mature:
Within 1 year	262,736		25.72		252,961		25.03		302,270		27.94
After 1 year, but within 3 years	93,656		9.17		100,647		9.96		137,187		12.68
Thereafter	5,849		0.57		5,037		0.50		5,874		0.55
Total certificates of deposit	362,241		35.46		358,645		35.49		445,331		41.17
Total deposits	$	1,021,653	100.00	%	$	1,010,812	100.00	%	$	1,081,698	100.00	%

Included in certificates of deposits at September 30, 2014 were brokered time deposits totaling $44.1 million of which no deposits were scheduled to mature during the year ending September 30, 2014.  No brokered deposits were included in certificates of deposit at September 30, 2013 or 2012.

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At September 30, 2014, 2013 and 2012, certificates of deposit with a minimum principal amount of $100,000 totaled $216.0 million, $184.7 million, and $246.5 million, respectively.  At September 30, 2014, such deposits were scheduled to mature as follows:

TABLE 12:  Certificates of Deposit with Minimum Balances of $100,000

Maturity Period	Amount as of September 30, 2014
	(In thousands)
Three months or less	$	60,321
Over 3 through 6 months	58,945
Over 6 through 12 months	40,615
Over 12 months	56,086
Total	$	215,967

TABLE 13:  Certificates of Deposits by Rates

	At September 30,
	2014		2013		2012
	(In thousands)
0.00 – 1.99%	$	360,209	$	355,777	$	433,034
2.00 – 2.99%	1,918		2,073		9,981
3.00 – 3.99%	113		108		666
4.00 – 4.99%	1		—		1,650
Total	$	362,241	$	358,645	$	445,331

	Amount Due as of September 30, 2014
	Within One Year		After 1 Year But Within Two Years		After 2 Years But Within Three Years		After 3 Years But Within Four Years		Thereafter		Total
	(In thousands)
0.00 – 1.99%	$	262,151	$	71,128	$	21,163	$	2,287	$	3,480	$	360,209
2.00 – 2.990%	584		1,252		—		—		82		1,918
3.00 – 3.99%	—		—		113		—		—		113
4.00 – 4.99%	1		—		—		—		—		1
Total	$	262,736	$	72,380	$	21,276	$	2,287	$	3,562	$	362,241

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TABLE 15:  Deposit Activity

	Years Ended September 30,
	2014		2013			2012
	(In thousands)
Beginning balance	$	1,010,812	$	1,081,698		$	1,103,169
Net increase (decrease) excluding interest credited	7,976		(75,065		)	(23,781		)
Interest credited	2,865		4,179			2,310
Net increase (decrease) in deposits	10,841		(70,886		)	(21,471		)
Ending balance	$	1,021,653	$	1,010,812		$	1,081,698

TABLE 16:  Average Balances and Rates Paid on Deposits

	Years Ended September 30,
	2014				2013				2012
	Average Balance		Average Rate Paid		Average Balance		Average Rate Paid		Average Balance		Average Rate Paid
	(Dollars in thousands)
Non-interest-bearing checking	$	180,896	—	%	$	172,814	—	%	$	160,331	—	%
Interest-bearing checking	245,485		0.17		261,178		0.18		305,525		0.39
Passbook savings	41,649		0.17		38,874		0.18		36,689		0.22
Money market	212,315		0.31		182,834		0.28		163,222		0.50
Certificates of deposit	340,949		0.70		416,355		0.94		431,627		1.18
Total	$	1,021,294	0.35	%	$	1,072,055	0.46	%	$	1,097,394	0.65	%

Borrowings.  We use advances from the FHLB of Des Moines and retail repurchase agreements to supplement our supply of lendable funds and to meet deposit withdrawal requirements.  The FHLB of Des Moines functions as a central reserve bank providing credit for savings associations and certain other member financial institutions.  As a member, we are required to own capital stock in the FHLB of Des Moines and we are authorized to apply for advances on the security of such stock and certain of our mortgage loans and other assets (principally securities which are obligations of, or guaranteed by, the U.S. Government) provided certain creditworthiness standards have been met.  Advances are made pursuant to several different credit programs.  Each credit program has its own interest rate and range of maturities.  Depending on the program, limitations on the amount of advances are based on the financial condition of the member institution and the adequacy of collateral pledged to secure the credit.  The line of credit is subject to available collateral of one- to four-family residential loans, home equity loans and loans held for sale.  Periodically, the FHLB performs collateral audits in order to review the quality of the collateral, which could result in reduced borrowing capacity.

We offer a sweep account program for which certain customer demand deposits in excess of a certain amount are “swept” on a daily basis into retail repurchase agreements pursuant to individual repurchase agreements.  Retail repurchase agreements represent overnight borrowings that are secured by certain of the Bank’s investment securities.  Unlike regular savings deposits, retail repurchase agreements are not insured by the Federal Deposit Insurance Corporation.  At September 30, 2014 and 2013, we had $35.2 million and $40.2 million, respectively, in U.S. Treasury, debt and mortgage-backed securities pledged to secure retail repurchase agreements.

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TABLE 17:  Borrowed Money

	Years Ended September 30,
	2014			2013			2012
	(Dollars in thousands)
Maximum balance at any month end during the period	$	224,113		$	145,877		$	109,981
Average balance during the period	107,940			72,032			51,901
Period-end balance	210,940			113,483			109,981
Weighted-average interest rate:
At end of period	0.72		%	0.93		%	0.97		%
During the period	1.13		%	1.35		%	1.82		%

We also have the ability to borrow funds from the Federal Reserve under an agreement which assigns certain qualifying loans as collateral to secure the amounts borrowed.  These borrowings represent short-term borrowings from the Federal Reserve Bank of St. Louis’ discount window and are typically extended for periods of 28 days or less.  At September 30, 2014, there were no borrowings outstanding under this arrangement and $198.0 million of commercial loans were assigned under this arrangement.  The assets underlying these borrowings are under the Bank’s physical control.

During January 2014, the Company entered into a $10.0 million term loan agreement with a commercial bank.  The proceeds of the term loan were used to finance the repurchase from a private investor of $10.0 million of the Company’s Preferred Stock during January 2014.  The loan agreement also provides a $2.0 million revolving line of credit to the Company.  There was no balance outstanding under the revolving line of credit during the fiscal year ended September 30, 2014.  The rate of interest on these borrowings equals the daily LIBOR rate plus 2.50%.  Monthly payments under the term loan began on March 31, 2014 and are scheduled to end on January 17, 2021.  All of the common stock of the Bank that was held by the Company was pledged as collateral to secure the loans.

The loan agreement requires the Company to adhere to certain covenants while the borrowings are outstanding, including that the Company will:  (1) require the Bank to maintain a minimum ratio of Tier 1 capital to risk-weighted assets of at least 8%; (2) maintain consolidated net income in an amount equal to or greater than the sum of (a) the total amount of principal installments required to be paid under the term loan plus (b) the total amount of cash distributions paid to its common shareholders; and (3) cause the Bank to maintain a ratio of adversely classified assets to Tier 1 capital plus loan loss reserves of not more than 50%.  Failure to comply with these covenants will result in any outstanding principal balances and all accrued and unpaid interest becoming immediately due and payable.

We issued subordinated debentures from two separate special purpose trusts that are wholly-owned subsidiaries of the Company.  At September 30, 2014, we had outstanding subordinated debentures totaling $19.6 million.  Payments of the principal and interest on the subordinated debentures of these special purpose trusts are unconditionally guaranteed by the Company. Further, the accompanying junior subordinated debentures we issued to the special purpose trusts are senior to our shares of common stock.

Non-Banking Operations

The Bank’s subsidiary, Pulaski Service Corporation, sells fixed rate annuities.  Federal savings associations generally may invest up to 3% of their assets in service corporations, provided that any amount in excess of 2% is used primarily for community, inner city and community development projects.  At September 30, 2014, the Bank’s equity investment in its subsidiary was $245,000 or 0.02% of the Bank’s assets.

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Personnel

As of September 30, 2014, we had 441 full-time equivalent employees.  The employees are not represented by a collective bargaining unit, and we believe our relationship with our employees is good.

Executive Officers of the Registrant

The following table sets forth certain information regarding the executive officers of the Company and the Bank.

Name	Age (1)	Position
Gary W. Douglass	63	President and Chief Executive Officer of Pulaski Financial Corp. and Chairman and Chief Executive Officer of Pulaski Bank
W. Thomas Reeves	60	President of Pulaski Bank
Paul J. Milano	58	Executive Vice President, Chief Financial Officer, Treasurer and Secretary of Pulaski Financial Corp. and Pulaski Bank
Brian J. Björkman	43	President of Commercial Lending Division of Pulaski Bank
Cheri G. Bliefernich	46	Executive Vice President of Banking Operations and Human Resources of Pulaski Bank
Stephan R. Greiff	40	Co-President, Mortgage Division
Christopher M. Simms	37	Co-President, Mortgage Division
James W. Sullivan	58	Executive Vice President, Corporate Planning and Analysis of Pulaski Bank Chief Financial Officer of Mortgage Division of Pulaski Bank

(1)As of September 30, 2014.

Biographical Information

Set forth below is certain information regarding the executive officers of the Company and the Bank.  There are no family relationships among the executive officers.

Gary W. Douglass was named President and Chief Executive Officer of the Company and Chief Executive Officer of the Bank on May 1, 2008, and was named Chairman of the Bank on May 1, 2009.  Mr. Douglass previously held the position of Executive Vice President and Chief Financial Officer of Roosevelt Financial Group, Inc., parent of Roosevelt Bank, before its merger with Mercantile Bancorporation, Inc. in 1997.  Mr. Douglass is a certified public accountant and a former partner with Deloitte and Touche LLP, where he headed that firm’s accounting and auditing practice and its financial institutions practice in St. Louis.

W. Thomas Reeves has served as President of the Bank since March 2006.  Prior to joining Pulaski, Mr. Reeves served as Executive Director of Downtown Now!, a not-for-profit organization dedicated to generating investment in, and development of, the downtown St. Louis area from October

29

1999 to March 2006. Mr. Reeves also served as Senior Vice President and Chief Lending Officer of Mercantile Bank of St. Louis, where he oversaw all middle market and real estate lending activity in five states. He was Senior Vice President and Chief Lending officer and served in various executive and board positions with Mark Twain Bancshares Inc. and its affiliates. He also served as a bank regulator with the Missouri Division of Finance.

Paul J. Milano, CPA was appointed Chief Financial Officer on April 1, 2009.  He joined Pulaski Bank in January 2006 and had served as Secretary, Treasurer and Controller.  He previously served as a director and consultant for Premier Bancshares, Inc., a $148 million bank holding company headquartered in Dallas, Texas.  Before joining Premier, he served as Senior Vice President, Secretary, Treasurer and Chief Financial Officer of Jefferson Savings Bancorp, Inc., a $2 billion publicly traded thrift, until it was merged into Union Planters Bank in 2002 following its purchase.  He was a director of Jefferson’s subsidiary, First Federal Savings Bank, from 1995 to 1999.  Mr. Milano also served nine years with the public accounting firm of KPMG LLP, leaving in 1990 as Senior Manager to join Jefferson Savings.  Mr. Milano is a member of the American Institute of Certified Public Accountants, the Missouri Society of Certified Public Accountants and the Financial Managers Society.

Brian J. Björkman joined the Bank in 2003 and currently serves as the President of the Commercial Division.  Prior to joining the Bank, Mr. Björkman was President of Commercial Lending at Founders Bank in Chesterfield, Missouri prior to its acquisition by Bank Midwest.  Mr. Björkman is a graduate of Drake University.

Cheri G. Bliefernich joined the Bank in 2003 and has served as Executive Vice President, Banking Operations since October 2008.  In November 2012, Mrs. Bliefernich assumed the additional responsibility of the Human Resources Director.  Currently, Mrs. Bliefernich oversees all aspects of the banking area including the retail branch network, banking operations, security/fraud, facilities, marketing and human resources for the entire organization.  Prior to assuming the current position, Mrs. Bliefernich served as Senior Vice President, Banking beginning in January 2007 and Vice President of Retail Banking beginning in November 2004.  She has also served as Senior Vice President of Retail Banking at Royal Banks and Vice President of Retail Banking at Founders Bank.  Mrs. Bliefernich maintains active involvement in several community service organizations.  She attended University of Missouri- Columbia.

Stephan R. Greiff joined the Bank in June 2013 and has served as Co-President of the Mortgage Division since January 2014.  Currently, Mr. Greiff oversees all aspects of Mortgage Operations along with Business Development for the Mortgage Channel.  Prior to joining Pulaski Bank, Mr. Greiff served as Vice President of Site Operations with Chase Home Lending, managing one of their largest retail lending fulfillment centers.  Previous experience and responsibilities have included sales management, marketing, recruiting, process engineering and customer service.

Christopher M. Simms joined one of Pulaski’s joint venture partnerships in March 2007 as a Senior Loan Officer.  Mr. Simms was listed as one of the top 110 mortgage loan originators in the United States in 2009 according to Scottsman’s Guide.  In 2011, he was promoted to regional sales manager for the Company’s St. Louis mortgage operation.  In 2012, Mr. Simms was promoted to Co-President of the Company’s mortgage division.  Mr. Simms is currently responsible for all sales, business development, and capital market operations of the mortgage division.  Mr. Simms attended the United States Military Academy at West Point.

James W. Sullivan joined the Bank in 2009 and currently serves as Executive Vice President, Corporate Planning and Analysis of Pulaski Bank and Chief Financial Officer of the Mortgage Division

30

of Pulaski Bank.  Prior to assuming the current position, Mr. Sullivan served as Senior Vice President of Financial Planning and Analysis. He also served as Chief Financial Officer of two St. Louis-based community bank holding companies: Reliance Bancshares, Inc. and Midwest BankCentre, Inc.  Earlier in his career, he started the corporate finance consulting practice for PriceWaterhouse in St. Louis.  Mr. Sullivan is a graduate of Georgetown University, the University of Chicago Graduate School of Business and has over 30 years of banking and corporate finance experience.

31

REGULATION

General

Pulaski Bank is subject to extensive regulation, examination and supervision by the OCC, as its primary federal regulator, and the FDIC, as the deposit insurer.  The Bank is a member of the FHLB System and its deposit accounts are insured up to applicable limits by the Deposit Insurance Fund managed by the FDIC.  The Bank must file reports with the OCC concerning its activities and financial condition in addition to obtaining regulatory approvals prior to entering into certain transactions such as mergers with, or acquisitions of, other financial institutions.  There are periodic examinations by the OCC to test the Bank’s safety and soundness and compliance with various laws and regulatory requirements.  This regulation and supervision establishes a comprehensive framework of activities in which an institution can engage and is intended primarily for the protection of the insurance fund and depositors.  The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes.  Any change in such regulatory requirements and policies, whether by the OCC, the FDIC or through legislation, could have a material adverse impact on our operations.

Certain of the regulatory requirements applicable to the Bank and to the Company are referred to below or elsewhere herein.  The discussion of statutes and regulations is not intended to be a complete description of such statutes and regulations and their effect on the Company and the Bank.  To the extent statutory or regulatory provisions are described in this section, such descriptions are qualified in their entirety by reference to the particular statutory or regulatory provisions.

Regulatory Reform

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) made extensive changes in the regulation of financial institutions and their holding companies.  Under the Dodd-Frank Act, the Office of Thrift Supervision was eliminated and the responsibility for the supervision and regulation of federal savings banks was transferred to the Office of the Comptroller of the Currency on July 21, 2011.  On the same date, responsibility for the regulation and supervision of savings and loan holding companies was transferred to the Board of Governors of the Federal Reserve System.

Additionally, the Dodd-Frank Act created a Consumer Financial Protection Bureau as an independent bureau of the Federal Reserve Board.  The Consumer Financial Protection Bureau assumed responsibility for the implementation of the federal financial consumer protection and fair lending laws and regulations, a function currently assigned to prudential regulators, and has authority to impose new requirements.  However, institutions of less than $10 billion in assets, such as the Bank, will continue to be examined for compliance with consumer protection and fair lending laws and regulations by, and be subject to the enforcement authority of, their primary regulator.

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Federal Savings Institution Regulation

Business Activities.  The activities of federal savings institutions, such as the Bank, are governed by federal laws and regulations.  These laws and regulations delineate the nature and extent of the activities in which federal associations may engage.  In particular, certain lending authority for federal associations, e.g., commercial, non-residential real property and consumer loans, are limited to a specified percentage of the institution’s capital or assets.

Loans to One Borrower.  Federal law provides that savings institutions are generally subject to the national bank limits on loans to one borrower. A savings institution may generally not make a loan or extend credit to a single or related group of borrowers in excess of 15% of the Bank’s unimpaired capital and surplus. An additional amount may be loaned, equal to 10% of unimpaired capital and surplus, if secured by readily-marketable collateral.  Our legal lending limit was approximately $22 million at September 30, 2014.  However, our maximum exposure to any one borrower did not exceed $16 million at September 30, 2014.

Qualified Thrift Lender Test.  Federal law requires savings institutions to meet a qualified thrift lender (“QTL”) test.  Under the test, a savings bank is required to either qualify as a “domestic building and loan association” under the Internal Revenue Code or maintain at least 65% of its “portfolio assets” (total assets less (i) specified liquid assets up to 20% of total assets, (ii) intangibles, including goodwill, and (iii) the value of property used to conduct business) in certain “qualified thrift investments” (primarily residential mortgages and related investments, including certain mortgage-backed securities, but also including education, credit card and small business loans) on a monthly basis in nine out of every twelve months.

A savings institution that fails the QTL test is subject to certain operating restrictions.  The Dodd-Frank Act subjects violations of the QTL test requirements to possible enforcement actions for a violation of law and could impose dividend limitations.  As of September 30, 2014, the Bank met the QTL test.

Limitations on Capital Distributions.  Federal regulations restrict capital distributions by a savings institution, such as cash dividends, stock repurchases and other transactions charged to the capital account of a savings institution.  Under the regulations, an application to and the prior approval of the Federal Reserve Board is required prior to any capital distribution if the institution does not meet the criteria for “expedited treatment” of applications under applicable regulations (i.e., generally examination ratings in the top two categories), the total capital distributions for the calendar year exceed net income for that year plus the amount of retained net income for the preceding two years, the institution would be undercapitalized following the distribution or the distribution would otherwise be contrary to a statute, regulation or agreement with the OCC.  If an application is not required, the institution must still provide prior notice to, and receive the non-objection of, the Federal Reserve Board of the capital distribution since it is a subsidiary of the holding company. Notice must also be provided to the OCC.  If the Bank’s capital fell below its regulatory requirements or the OCC notified it that it was in need of increased supervision, the Bank’s ability to make capital distributions could be restricted.  In addition, the OCC could prohibit a proposed capital distribution by any institution, which would otherwise be permitted by the regulation, if the OCC determines that such distribution would constitute an unsafe or unsound practice.

Community Reinvestment Act.  The Community Reinvestment Act (“CRA”) requires the OCC, in connection with its examination of a savings institution, to assess the institution’s record of meeting the credit needs of its community, including low- and moderate-income neighborhoods, and to take such record into account in its evaluation of certain applications by such institution.  An institution’s failure to

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satisfactorily comply with the provisions of the CRA could result in denials of regulatory applications.  The Bank received an “Outstanding” CRA rating in its most recent examination.

Transactions with Related Parties.  The Bank’s authority to engage in certain transactions with “affiliates” (i.e., any company that controls or is under common control with an institution, including the Company and any non-savings institution subsidiaries) is limited by federal law.  The aggregate amount of covered transactions with any individual affiliate is limited to 10% of the capital and surplus of the savings institution.  The aggregate amount of covered transactions with all affiliates is limited to 20% of the savings institution’s capital and surplus.  Certain transactions with affiliates are required to be secured by collateral in an amount and of a type described in federal law.  The purchase of low quality assets from affiliates is generally prohibited.  Transactions with affiliates must be on terms and under circumstances that are at least as favorable as those prevailing at the time for comparable transactions with non-affiliated companies.  In addition, savings institutions are prohibited from lending to any affiliate that is engaged in activities that are not permissible for bank holding companies and no savings institution may purchase the securities of any affiliate other than a subsidiary.

The Sarbanes-Oxley Act generally prohibits loans by the Bank to its executive officers and directors.  However, the law contains a specific exemption for loans by a depository institution to its executive officers and directors in compliance with federal banking laws.  Under such laws, the Bank’s authority to extend credit to executive officers, directors and 10% shareholders (“insiders”), as well as entities controlled by such persons, is limited.  Such loans are required to be made on terms substantially the same as those offered to unaffiliated individuals and may not involve more than the normal risk of repayment.  An exception exists for loans made pursuant to a benefit or compensation program that is widely available to all employees of the institution and does not give preference to insiders over other employees.  The law limits both the individual and aggregate amount of loans the Bank may make to insiders based, in part, on the Bank’s capital position and requires certain board approval procedures to be followed. There are additional restrictions on extensions of credit to executive officers.

Enforcement.  The OCC has primary enforcement responsibility over savings institutions and has the authority to bring actions against the institution and all institution-affiliated parties, including stockholders, and any attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on an insured institution.  Formal enforcement action may include the issuance of a capital directive or cease and desist order, removal of officers and/or directors, institution of receivership, conservatorship, or termination of deposit insurance.  Civil penalties cover a wide range of violations and can amount to $25,000 per day, or even $1 million per day in especially egregious cases.  The FDIC has the authority to recommend to the OCC that an enforcement action be taken with respect to a particular savings institution.  If action is not taken by the OCC, the FDIC has the authority to take such action under certain circumstances.  Federal law also establishes criminal penalties for certain violations.

Capital Requirements.  Applicable capital regulations require savings institutions to meet three minimum capital standards:  a 1.5% tangible capital ratio, a 4% leverage ratio (3% for institutions receiving the highest rating on the CAMELS financial institution rating system), and an 8% risk-based capital ratio.  In addition, the prompt corrective action standards discussed below also establish, in effect, a minimum 2% tangible capital standard, a 4% leverage capital ratio (3% for institutions receiving the highest rating in the CAMELS financial institution rating system) and, together with the risk-based capital standard itself, a 4% Tier I risk-based capital standard.  The regulations also require that, in meeting the tangible, leverage and risk-based capital standards, institutions must generally deduct investments in and loans to subsidiaries engaged in activities as principal that are not permissible for a national bank.

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The risk-based capital standard for savings institutions requires the maintenance of Tier 1 (core) and total capital (which is defined as core capital and supplementary capital less certain specified deductions from total capital such as reciprocal holdings of depository institution capital instruments and equity investments) to risk weighted assets of 4% and 8%, respectively.  In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet assets, recourse obligations, residual interests and direct credit substitutes, are multiplied by a risk-weight factor assigned by the capital regulation based on the risks believed are inherent in the type of asset.  Core capital is generally defined as common stockholders’ equity (including retained earnings), certain non-cumulative perpetual preferred stock and related surplus, and minority interests in equity accounts of consolidated subsidiaries, less intangibles other than certain mortgage servicing rights and credit card relationships.  The components of supplementary capital include cumulative preferred stock, long-term perpetual preferred stock, mandatory convertible securities, subordinated debt and intermediate preferred stock. The allowance for loan and lease losses is includable in supplementary capital up to 1.25% of risk-weighted assets And up to 45% of unrealized gains on available-for-sale securities with readily determinable fair values.  Overall, the amount of supplementary capital included as part of total capital cannot exceed 100% of core capital.

The OCC also has authority to establish individual minimum capital requirements in appropriate cases upon a determination that an institution’s capital level is or may become inadequate in light of the particular circumstances.  At September 30, 2014, the Bank met each of its capital requirements.

Savings and loan holding companies are not currently subject to specific regulatory capital requirements. The Dodd-Frank Act, however, required the Federal Reserve Board to promulgate consolidated capital requirements for depository institution holding companies, including savings and loan holding companies, that are no less stringent, both quantitatively and in terms of components of capital, than those applicable to institutions themselves. In early July 2013, the Federal Reserve Board and the OCC approved revisions to their capital adequacy guidelines and prompt corrective action rules that implement the revised standards of the Basel Committee on Banking Supervision, commonly called Basel III, and address relevant provisions of the Dodd-Frank Act. “Basel III” refers to two consultative documents released by the Basel Committee on Banking Supervision in December 2009, the rules text released in December 2010, and loss absorbency rules issued in January 2011, which include significant changes to bank capital, leverage and liquidity requirements.

The rules include new risk-based capital and leverage ratios, which are effective January 1, 2015, and revise the definition of what constitutes “capital” for purposes of calculating those ratios. The proposed new minimum capital level requirements applicable to the Company and the Bank will be: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 capital ratio of 6% (increased from 4%); (iii) a total capital ratio of 8% (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 4% for all institutions. The rules eliminate the inclusion of certain instruments, such as trust preferred securities, from Tier 1 capital. Instruments issued prior to May 19, 2010 will be grandfathered for companies with consolidated assets of $15 billion or less. The rules also establish a “capital conservation buffer” of 2.5% above the new regulatory minimum capital requirements, which must consist entirely of common equity Tier 1 capital and would result in the following minimum ratios: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%. The new capital conservation buffer requirement will be phased in beginning in January 2016 at 0.625% of risk-weighted assets and would increase by that amount each year until fully implemented in January 2019. An institution would be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations would establish a maximum percentage of eligible retained income that could be utilized for such actions.

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Insurance of Deposit Accounts. The Bank’s deposits are insured up to applicable limits by the Deposit Insurance Fund of the FDIC.  Deposit insurance per account owner is currently $250,000.  Under the FDIC’s risk-based assessment system, insured institutions are assigned to one of four risk categories based on supervisory evaluations, regulatory capital levels and certain other factors.  An institution’s assessment rate depends upon the category to which it is assigned, and certain adjustments specified by the FDIC regulations.  Institutions deemed less risky pay lower assessments.  The FDIC may adjust the scale uniformly, except that no adjustment can deviate more than two basis points from the base scale without notice and comment.  No institution may pay a dividend if in default of the federal deposit insurance assessment.

The Dodd-Frank Act required the FDIC to revise its procedures to base its assessments upon each insured institution’s total assets less tangible equity instead of deposits. The FDIC finalized a rule, effective April 1, 2011, that set the assessment range at 2.5 to 45 basis points of total assets less tangible equity.

The FDIC has authority to increase insurance assessments. A significant increase in insurance premiums would likely have an adverse effect on our operating expenses and results of operations. Management cannot predict what insurance assessment rates will be in the future.

Federal Home Loan Bank System.  The Bank is a member of the FHLB System, which consists of 12 regional FHLBs.  The FHLB provides a central credit facility primarily for member institutions.  The Bank, as a member of the FHLB, is required to acquire and hold shares of capital stock in that FHLB.  The Bank was in compliance with this requirement with an investment in FHLB stock at September 30, 2014 of $8.3 million.

Federal Reserve System.The FRB regulations require savings institutions to maintain non-interest-earning reserves against their transaction accounts (primarily NOW and regular checking accounts).  The regulations generally require that reserves be maintained against aggregate transaction accounts as follows:  a 3% reserve ratio is assessed on net transaction accounts up to and including $89.0 million; a 10% reserve ratio is applied over $89.0 million.  The first $13.3 million of otherwise reservable balances (subject to adjustments by the FRB) were exempted from the reserve requirements.  The Bank has complied with the foregoing requirements.

Other Regulations

Pulaski Bank’s operations are also subject to federal laws applicable to credit transactions, such as the:

·Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

·Real Estate Settlement Procedures Act, requiring that borrowers for mortgage loans for one- to four-family residential real estate receive various disclosures, including good faith estimates of settlement costs, lender servicing and escrow account practices, and prohibiting certain practices that increase the cost of settlement services;

·Truth in Savings Act;

·Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

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·Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

·Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies;

·Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and

·Rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

The operations of Pulaski Bank also are subject to the:

·Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

·Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services;

·Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check; and

·The USA PATRIOT Act, which requires banks and savings institutions to, among other things, establish broadened anti-money laundering compliance programs and due diligence policies and controls to ensure the detection and reporting of money laundering. Such required compliance programs are intended to supplement pre-existing compliance requirements that apply to financial institutions under the Bank Secrecy Act and the Office of Foreign Assets Control regulations.

Holding Company Regulation

General.  The Company is subject to Federal Reserve Board regulations, examinations, supervision and reporting requirements. Among other things, this authority permits the Federal Reserve Board to restrict or prohibit activities that are determined to be a serious risk to the Bank.

Pursuant to federal law and regulations and policy, a savings and loan holding company such as the Company may generally engage in the activities permitted for financial holding companies under Section 4(k) of the Bank Holding Company Act and certain other activities that have been authorized for savings and loan holding companies by regulation.

A savings and loan holding company is prohibited from, directly or indirectly, acquiring more than 5% of the voting stock of another savings institution or savings and loan holding company without prior written approval of the Federal Reserve Board, and from acquiring or retaining, with certain exceptions, more than 5% of a non-subsidiary holding company or savings association. A savings and loan holding company is also prohibited from acquiring more than 5% of a company engaged in activities other than those authorized by federal law or acquiring or retaining control of a depository institution that is not insured by the FDIC.  In evaluating applications by holding companies to acquire savings institutions, the Federal Reserve Board considers among other things, the financial and managerial

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resources and future prospects of the company and institution involved, the effect of the acquisition on the risk to the Deposit Insurance Fund, the convenience and needs of the community and competitive factors.

The Federal Reserve Board may not approve any acquisition that would result in a multiple savings and loan holding company controlling savings institutions in more than one state, except:  (1) the approval of interstate supervisory acquisitions by savings and loan holding companies; and (2) the acquisition of a savings institution in another state if the laws of the state of the target savings institution specifically permit such acquisitions.  The states vary in the extent to which they permit interstate savings and loan holding company acquisitions.

Capital Requirements. Savings and loan holding companies historically have not been subject to consolidated regulatory capital requirements. However, in July 2013, the Federal Reserve Board approved a new rule that implements the “Basel III” regulatory capital reforms and changes required by the Dodd-Frank Act. The final rule established consolidated capital requirements for many savings and loan holding companies, including the Company. See “Regulation and Supervision-Federal Savings Institution Regulation-Capital Requirements.”

Source of Strength.  The Dodd-Frank Act also extends the “source of strength” doctrine to include savings and loan holding companies.  The federal regulatory agencies are required to issue joint rules requiring all holding companies to serve as a source of strength for depository institution subsidiaries by providing capital, liquidity and other support in times of financial distress.

Dividends and Stock Repurchases. The Federal Reserve Board has the power to prohibit dividends by savings and loan holding companies if their actions constitute unsafe or unsound practices. The Federal Reserve Board has issued a policy statement on the payment of cash dividends by bank holding companies, which also applies to savings and loan holding companies, and that expresses the Federal Reserve Board’s view that a holding company should pay cash dividends only to the extent that the company’s net income for the past year is sufficient to cover both the cash dividends and a rate of earnings retention that is consistent with the company’s capital needs, asset quality and overall financial condition.  The Federal Reserve Board also indicated that it would be inappropriate for a holding company experiencing serious financial problems to borrow funds to pay dividends.  Under the prompt corrective action regulations, the Federal Reserve Board may prohibit a bank holding company from paying any dividends if the holding company’s bank subsidiary is classified as “undercapitalized.”

Federal Reserve Board policy also provides that a holding company should inform the Federal Reserve Board supervisory staff prior to redeeming or repurchasing common stock or perpetual preferred stock if the holding company is experiencing financial weaknesses or if the repurchase or redemption would result in a net reduction, as of the end of a quarter, in the amount of such equity instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred.

Acquisition of the Company.  Under the Federal Change in Bank Control Act (“CIBCA”), a notice must be submitted to the Federal Reserve Board if any person (including a company), or a group acting in concert, seeks to acquire direct or indirect “control” of a savings and loan holding company or savings association.  Under certain circumstances, a change in control may occur, and prior notice is required, upon the acquisition of 10% or more of the outstanding voting stock of the company or institution, unless the Federal Reserve Board has found that the acquisition will not result in a change in control of the Company.  Under the CIBCA, the Federal Reserve Board generally has 60 days from the filing of a complete notice to act, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the anti-trust effect of the acquisition.  Any company that so acquires control would then be subject to regulation as a savings and loan holding company.

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Participation in the U.S. Department of Treasury’s Capital Purchase Program.  On January 16, 2009, as part of the Capital Purchase Program under the U.S. Department of Treasury’s Troubled Asset Relief Program, the Company issued 32,538 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A, $1,000 per share liquidation preference, and a warrant to purchase up to 778,421 shares of the Company’s common stock for a period of ten years at an exercise price of $6.27 per share in exchange for $32.5 million in cash from the U.S. Department of Treasury.

The preferred stock paid cumulative dividends of 5% per year for the first five years and 9% per year thereafter.  The Company could, at its option, redeem the preferred stock at its liquidation preference plus accrued and unpaid dividends.

The Treasury Department sold all of the Preferred Stock to private investors in a dutch auction that was completed in July 2012.  On several dates subsequent to the Treasury’s auction through January 2014, the Company repurchased from private investors an aggregate of $15.2 million in liquidation value of the Preferred Stock in exchange for $14.6 million in cash and repurchased the Warrant from the Treasury in exchange for $1.1 million in cash.  Following the Treasury’s auction of the Preferred Stock and the Company’s repurchase of the Warrant, the U.S. Treasury has no remaining equity stake in the Company.

During January 2014, the Company repurchased $10.0 million in liquidation value of the Preferred Stock from a private investor using the proceeds from a term loan obtained from a commercial bank.  During June 2014, the Company issued 68,818 shares of its common stock in exchange for $735,000 in liquidation value of the Preferred Stock, representing a premium paid of $26,815.  The common shares were issued in a private transaction exempt from registration under the federal securities laws.  Following these transactions, $6.7 million of the Preferred Stock remained outstanding.  On July 31, 2014 the Company completed the mandatory redemption of the remaining balance of its Preferred Stock using $6.7 million in cash obtained from the common shares issued during June 2014.  The transaction reduced total shareholders’ equity by the same amount.

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Item 1A. Risk Factors

An investment in shares of our common stock involves various risks.  Before deciding to invest in our common stock, you should carefully consider the risks described below in conjunction with the other information in this annual report on Form 10-K and information incorporated by reference into this annual report on Form 10-K, including our consolidated financial statements and related notes.  Our business, financial condition and results of operations could be harmed by any of the following risks or by other risks that have not been identified or that we may believe are immaterial or unlikely.  The value or market price of our common stock could decline due to any of these risks, and you may lose all or part of your investment. The risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements.

We may be required to make further increases in our provision for loan losses and to charge-off additional loans in the future, especially due to our level of non-performing assets.  Further, our allowance for loan losses may prove to be insufficient to absorb losses in our loan portfolio.

For the year ended September 30, 2014, we recorded a provision for loan losses of $1.2 million and net loan charge-offs of $3.5 million.  While our non-performing assets decreased from $34.0 million, or 2.66% of total assets, at September 30, 2013 to $32.8 million, or 2.37% of total assets, at September 30, 2014, the amount at September 30, 2014 remained elevated compared to historical levels that we experienced prior to the economic downturn in 2007.  The elevated level of non-performing assets was primarily due to the weakened economy and the soft real estate market.  If the economy and/or the real estate market remain weak, these assets may not perform according to their terms and the value of the collateral may be insufficient to repay any remaining loan balance.  If this occurs, we may experience losses, which could have a negative effect on our results of operations.  We maintain an allowance for loan losses to provide for loans in our portfolio that may not be repaid in their entirety.  We believe that our allowance for loan losses is maintained at a level adequate to absorb probable losses inherent in our loan portfolio as of the corresponding balance sheet date based on various assumptions and judgments about the collectability of our loan portfolio. Including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans.  However, if the results of our analyses are not correct, our allowance for loan losses may not be sufficient to cover actual loan losses, and future provisions for loan losses could have a material adverse effect on our operating results.

Federal regulators, as an integral part of their examination process, periodically review our allowance for loan losses and could require us to increase our allowance for loan losses by recognizing additional provisions for loan losses charged to expense, or to decrease our allowance for loan losses by recognizing loan charge-offs.  Any such additional provisions for loan losses or charge-offs, as required by these regulatory agencies, could have a material adverse effect on our financial condition and results of operations.

Our commercial lending exposes us to lending risks.

At September 30, 2014, $715.7 million, or 63.7%, of our loan portfolio consisted of loans to commercial borrowers, including commercial and multi-family real estate loans and commercial and industrial loans, and to a lesser extent, land acquisition and development loans and real estate construction and development loans.  We intend to continue to offer these types of lending, with an emphasis in owner-occupied commercial real estate loans and commercial and industrial loans.  Commercial loans generally expose a lender to greater risk of non-payment and loss than one- to four-family residential

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mortgage loans because repayment of the loans often depends on the successful operation of the business and the income stream of the borrowers.  Such loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to one- to four-family residential mortgage loans.  Also, many of our commercial borrowers have more than one loan outstanding with us.  Consequently, an adverse development with respect to one loan or one credit relationship can expose us to a significantly greater risk of loss compared to an adverse development with respect to a one- to four-family residential mortgage loan.  Commercial business loans expose us to additional risk since they typically are dependent on the borrower’s ability to make repayments from the cash flows of the business and are secured by secured by non-real estate collateral that may depreciate over time.  Further, unlike residential mortgages or multi-family or commercial real estate loans, commercial and industrial loans may be secured by collateral other than real estate, such as inventory and accounts receivable, the value of which may be more difficult to appraise and may be more susceptible to fluctuation in value at the time of default.

Our emphasis on residential mortgage loans and home equity lines of credit exposes us to lending risks.

At September 30, 2014, $273.4 million, or 24.3%, of our loan portfolio consisted of one- to four-family residential first mortgage loans, $39.6 million, or 3.5%, of our loan portfolio consisted of one- four-family residential second mortgage loans and $90.2 million, or 8.0%, of our loan portfolio consisted of home equity lines of credit.  Declines in the housing market in recent years resulted in declines in real estate values in our market areas.  These declines in real estate values could cause some of our mortgage and home equity lines of credit to be inadequately collateralized, which would expose us to a greater risk of loss if we seek to recover on defaulted loans by selling the real estate collateral.  During the years ended September 30, 2014, 2013 and 2012, we experienced net charge-offs of $3.2 million, $6.5 million and $16.4 million, respectively, on residential mortgage loans and home equity lines of credit.

Since a large portion of home equity lines of credit are generally originated in conjunction with the origination of first mortgage loans eligible for sale in the secondary market, and we typically do not service the related first mortgage loans if they are sold, we may be unable to track the delinquency status of the related first mortgage loans and whether such loans are at risk of foreclosure by others.  In addition, home equity lines of credit are initially offered as “revolving” lines of credit whereby the borrowers are only required to make scheduled interest payments during the initial term of the loans, which is generally five years.  Thereafter, the borrowers no longer have the ability to make principal draws from the lines and the loans convert to a fully-amortizing basis, requiring scheduled principal and interest payments sufficient to repay the loans within a certain period of time, which is generally 10 years.  The conversion of a home equity line of credit to a fully amortizing basis presents an increased level of default risk to us since the borrower no longer has the ability to make principal draws on the line, and the amount of the required monthly payment could substantially increase to provide for scheduled repayment of principal and interest.  Refer to Item 1, Business, Loan Underwriting Risks, for a more complete discussion of the risks associated with home equity lines of credit.

High loan-to-value ratios on a portion of our residential mortgage and home equity line of credit portfolios expose us to greater risk of loss.

A portion of our residential mortgage loans are secured by liens on properties in which the borrowers have little or no equity because we originated a first mortgage with an 80% loan-to-value ratio at the time of purchase and a concurrent second mortgage with a combined loan-to-value ratio of up to 100%.  At September 30, 2014, approximately $11.8 million of second mortgage loans, or 2.8% of our $403.1 million residential mortgage loan portfolio, had original combined loan-to-value ratios in excess of 90% based on appraisals obtained at the time of origination.  In addition, our home equity lines of

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credit may have, when added to existing senior lien balances, a combined loan-to-value ratio at the date of origination based upon the fully-disbursed amount of up to 100% of the value of the home securing the loan. At September 30, 2014, we held $19.4 million of uninsured home equity lines of credit with a combined loan-to-value ratio in excess of 90% based on a combination of original and updated appraisals.  Subsequent declines in real estate values have likely resulted in an increase in such loan-to-value ratios. Residential loans with high combined loan-to-value ratios will be more sensitive to declining property values than would those with lower combined loan-to-value ratios and, therefore, may experience a higher incidence of default and severity of losses. In addition, if the borrowers sell their homes, such borrowers may be unable to repay their loans in full from the proceeds of the sale.

Our earnings could be negatively affected if the level of our non-performing assets increases.

While our non-performing assets decreased from $34.0 million, or 2.66% of total assets, at September 30, 2013 to $32.8 million, or 2.37% of total assets, at September 30, 2014, the amount at September 30, 2014 remained elevated compared to historical levels that we experienced prior to the economic downturn in 2007. We do not record interest income on non-accrual loans or real estate acquired through or in lieu of foreclosure, which has a negative impact on our net interest margin.  An increase in non-performing assets might require additions to our allowance for loan losses through provisions for loan losses, which are recorded as charges to income.  From time to time, we may record write downs of the value of properties that we previously acquired through foreclosure to reflect changing market values, which are also recorded as charges to income.  There are legal fees associated with the resolution of problem assets as well as carrying costs such as taxes, insurance and maintenance related to foreclosed properties.

A return of recessionary conditions could result in increases in our level of non-performing loans and/or reduce demand for our products and services, which could have an adverse effect on our results of operations.

Although the U.S. economy has emerged from the severe recession that occurred in 2008 and 2009, economic growth has been slow and uneven, and unemployment levels remain high.  Recovery by many businesses has been impaired by lower consumer spending.  A return to prolonged deteriorating economic conditions could significantly affect the markets in which we do business, the value of our loans and investments, and our ongoing operations, costs and profitability.  Further declines in real estate values and sales volumes and continued elevated unemployment levels may result in higher than expected loan delinquencies, increases in our non-performing and criticized classified assets and a decline in demand for our products and services.  These events may cause us to incur losses and may adversely affect our financial condition and results of operations. As a result of the economic downturn, our non-performing assets and troubled debt restructurings jumped from $24.4 million at September 30, 2008 to $67.8 million at September 30, 2009 and then to $74.5 million at September 30, 2010. Since that time, the amount of non-performing assets and troubled debt restructurings has declined to $32.8 million at September 30, 2014.  Reduction in problem assets has been slow, and the process has been exacerbated by the condition of some of the properties securing non-performing loans and extended workout plans with certain borrowers. As we work through the resolution of these assets, the continued economic problems that exist in the financial markets could have a negative impact on the Company.

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If the value of real estate in the St. Louis, Kansas City and Omaha metropolitan areas were to decline, a significant portion of our loan portfolio could become under-collateralized, which could have a material adverse effect on us.

The St. Louis, Kansas City and Omaha metropolitan areas experienced declines in home prices over the past several years.  Weak local economic conditions could have an additional adverse affect on the value of the real estate collateral securing our loans. A further decline in property values would diminish our ability to recover on defaulted loans by selling the real estate collateral, making it more likely that we would suffer losses on defaulted loans. Additionally, a decrease in asset quality could require additions to our allowance for loan losses through increased provisions for loan losses, which would reduce our earnings. Also, a decline in local economic conditions may have a greater effect on our earnings and capital than on the earnings and capital of larger financial institutions whose real estate loan portfolios are more geographically diverse. Real estate values are affected by various factors in addition to local economic conditions, including, among other things, changes in general or regional economic conditions, governmental rules or policies and natural disasters.

If our foreclosed real estate is not properly valued or if our reserves are insufficient, our earnings could be reduced.

We obtain updated valuations in the form of appraisals and broker price opinions when a loan has been foreclosed and the property taken in as foreclosed real estate and at certain other times during the holding period of the asset. Our net book value in the loan at the time of foreclosure and thereafter is compared to the updated fair value of the foreclosed property less estimated selling costs (fair value). A charge-off is recorded for any excess in the asset’s net book value over its fair value less estimated selling costs. If our valuation process is incorrect, or if property values decline, the fair value of our foreclosed real estate may not be sufficient to recover our carrying value in such assets, resulting in the need for additional charge-offs. In addition, bank regulators periodically review our foreclosed real estate and may require us to recognize further charge-offs. Significant charge-offs to our foreclosed real estate could have a material adverse effect on our financial condition and results of operations.

Adverse conditions in the local economy could decrease our earnings.

Since the latter half of 2007, depressed economic conditions have existed throughout the United States, including our market areas.  During this period, our market areas experienced home price declines, increased foreclosures and increased unemployment rates.  Continued weak economic conditions in our market areas could reduce or limit our growth rate, affect the ability of our customers to repay their loans and generally affect our financial condition and results of operations.  Conditions such as inflation, recession, unemployment, high interest rates, short money supply, scarce natural resources, international disorders, terrorism and other factors beyond our control may adversely affect our profitability.  We are less able than a larger institution to spread the risks of unfavorable local economic conditions across a large number of diversified economies.  Any sustained period of increased loan delinquencies, foreclosures or losses caused by adverse market or economic conditions in our market areas could adversely affect our results of operations and financial condition. Moreover, we cannot give any assurance we will benefit from any market growth or favorable economic conditions in our primary market areas if they do occur.

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An increase in interest rates may reduce our mortgage revenues, which would negatively impact our non-interest income.

Our mortgage banking operations provide a significant portion of our interest and non-interest income. We generate mortgage revenues primarily from gains on the sale of mortgage loans to investors on a servicing-released basis. We also earn interest on loans held for sale while they are awaiting delivery to our investors.  In a rising or higher interest rate environment, our originations of mortgage loans may decrease, resulting in fewer loans that are available to be sold to investors. This would result in a decrease in interest income and a decrease in mortgage revenues.  In addition, our results of operations are affected by the amount of non-interest expenses associated with mortgage banking activities, such as salaries and employee benefits, occupancy, equipment and data processing expense and other operating costs. During periods of reduced loan demand, our results of operations may be adversely affected to the extent that we are unable to reduce expenses commensurate with the decline in mortgage loan origination activity.

Our mortgage originations could continue to decrease due to a slowdown in refinance activity, which could result in less non-interest income.

Mortgage revenues, which we recognize from the sale in the secondary market of mortgage loans originated by our mortgage lending division, have traditionally been our largest source of non-interest income and a significant contributor to our net income.  As the result of the low level of market interest rates that existed throughout fiscal 2012 and the first half of fiscal 2013, we saw strong demand for loans to refinance existing mortgages during these periods.  However, a rise in market interest rates during mid-June 2013 dampened this demand for refinancings during the remaining part of fiscal 2013 and all of fiscal 2014.  Loans originated to refinance existing mortgages totaled $120.2 million, or 16.3% of total loans originated for sale, for the year ended September 30, 2014 compared with $594.4 million, or 45.9% of total loans originated for sale, in 2013 and $798.5 million, or 56.6% of total loans originated for sale, in 2012.  If market interest rates remain at these elevated levels, we believe there will be fewer opportunities for financial institutions to originate loans to refinance existing mortgages.  If our mortgage originations decrease, our mortgage revenues and non-interest income will decrease.

Secondary mortgage market conditions could have a material impact on our financial condition and results of operations.

In addition to being affected by interest rates, the secondary mortgage markets are also subject to investor demand for residential mortgage loans and increased investor yield requirements for those loans.  These conditions may fluctuate or even worsen in the future.  In light of current conditions, there is a higher risk to retaining a larger portion of mortgage loans than we would in other environments until they are sold to investors.  We believe our ability to retain fixed-rate residential mortgage loans is limited.  As a result, a prolonged period of secondary market illiquidity may reduce our loan production volumes and could have a material adverse effect on our financial condition and results of operation.

If we are required to repurchase mortgage loans that we have previously sold, it would negatively affect our earnings.

One of our primary business operations is our mortgage banking operations, under which we sell residential mortgage loans in the secondary market.  Our agreements with these investors contain standard representations and warranties and early payment default clauses that could require us to repurchase mortgage loans sold to these investors or reimburse the investors for losses incurred on loans in the event of borrower default within a defined period after origination (generally 90 days), or in the event of breaches of contractual representations or warranties made at the time of sale that are not remedied within

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a defined period after we receive notice of such breaches (generally 90 days).  In addition, we may be required to refund the profit received from the sale of a loan to an investor if the borrower pays off the loan within a defined period after origination, which is generally 120 days.  We have experienced increasing repurchase demands from and disputes with these buyers.  If we are required to repurchase mortgage loans or provide indemnification or other recourse, this could significantly increase our costs and thereby affect our future earnings.

Fluctuations in interest rates could reduce our profitability and affect the value of our assets.

Our primary source of income is net interest income, which is the difference between interest earned on loans and investments and the interest paid on deposits and borrowings.  We anticipate that we will periodically experience imbalances in the interest rate sensitivities of our assets and liabilities and the relationships of various interest rates to each other.  Over any defined period of time, our interest-earning assets may be more sensitive to changes in market interest rates than our interest-bearing liabilities, or vice versa.  In addition, the individual market interest rates underlying our loan and deposit products (e.g., the prime rate) may not change to the same degree over a given time period.  In any event, if market interest rates should move contrary to our position, our earnings may be negatively affected.  Additionally, an increase in the general level of interest rate may also adversely affect the ability of certain borrowers to pay the interest on and principal of their obligations.  In addition, loan volume and quality and deposit volume and mix can be affected by market interest rates.  Changes in levels of market interest rates could materially adversely affect our net interest spread, asset quality, origination volume and overall profitability.

We principally manage interest rate risk by managing our volume and mix of our earning assets and funding liabilities.  In a changing interest rate environment, we may not be able to manage this risk effectively.  If we are unable to manage interest rate risk effectively, our business, financial condition and results of operations could be materially harmed.

Legislative financial reforms and future regulatory reforms required by such legislation could have a significant impact on our business, financial condition and results of operations.

The Dodd-Frank Act, which was signed into law on July 21, 2010, will have a broad impact on the financial services industry, including significant regulatory and compliance changes.  Many of the requirements called for in the Dodd-Frank Act will be implemented over time and most will be subject to implementing regulations over the course of several years.  Given the uncertainty associated with the manner in which the provisions of the Dodd-Frank Act will be implemented by the various regulatory agencies and through regulations, the full extent of the impact such requirements will have on our operations is unclear.  Under the Dodd-Frank Act, the Office of Thrift Supervision was merged into the Office of the Comptroller of the Currency. Savings and loan holding companies, including the Company, became regulated by the Federal Reserve Board.

Although savings and loan holding companies are not currently subject to specific regulatory capital requirements, the Dodd-Frank Act requires the Federal Reserve Board to promulgate consolidated capital requirements for all depository institution holding companies that are no less stringent, both quantitatively and in terms of components of capital, than those applicable to institutions themselves.  In addition, the Dodd-Frank Act codifies the Federal Reserve Board’s existing “source of strength” policy that holding companies act as a source of strength to their insured institution subsidiaries by providing capital, liquidity and other support in times of distress.  The Dodd-Frank Act also provides for the creation of a new agency, the Consumer Financial Protection Bureau, to assure the implementation of federal consumer financial protection and fair lending laws for the depository institution regulators.  Furthermore,

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the Dodd-Frank Act repealed payment of interest on commercial demand deposits, forced originators of securitized loans to retain a percentage of the risk for the transferred loans, required regulatory rate-setting for certain debit card interchange fees and contained a number of reforms related to mortgage origination.  In response to the changing regulatory environment, we have made enhancements to people, processes, and controls to ensure we are complying with new regulations.  It is unclear what impact the Dodd-Frank Act will have on our business in the future as many of the regulations under the act are still being developed.  However, we expect that we will need to continue to make additional investments in people, systems and outside consulting and legal resources to comply with the new regulations.

While it is difficult to predict at this time what specific impact the Dodd-Frank Act and the related yet to be written implementing rules and regulations will have on us, we expect that, at a minimum, our operating and compliance costs will increase, and our interest expense could increase, as a result of these new rules and regulations.

In addition to the enactment of the Dodd-Frank Act, the federal regulatory agencies recently have begun to take stronger supervisory actions against financial institutions that have experienced increased loan losses and other weaknesses as a result of the recent economic crisis.  The actions include the entering into of written agreements and cease and desist orders that place certain limitations on their operations.  Federal bank regulators recently have also been using with more frequency their ability to impose individual minimal capital requirements on banks, which requirements may be higher than those imposed under the Dodd-Frank Act or that would otherwise qualify the bank as being “well capitalized” under the Federal Deposit Insurance Corporation’s prompt corrective action regulations. If we were to become subject to a supervisory agreement or higher individual capital requirements, such action may have a negative impact on our ability to execute our business plans, as well as our ability to grow, pay dividends or engage in mergers and acquisitions and may result in restrictions in our operations. See “Regulation and Supervision—Federal Savings Institution Regulation—Capital Requirements” for a discussion of regulatory capital requirements.

The Company’s ability to pay dividends and meet its interest obligations are subject to the ability of the Bank to make capital distributions to the Company.

The Company’s ongoing liquidity needs include funding its general operating expenses, paying dividends on its common and preferred stock and paying interest on its subordinated debentures.  The Company is dependent on the receipt of dividends from the Bank to satisfy these obligations.  Under federal regulations as they currently apply to the Bank, the Bank is required to obtain prior approval from the OCC and non-objection from the Federal Reserve before it can make a capital distribution to the Company.  If the Bank cannot obtain such approvals and is unable to make a capital distribution to the Company, the Company would need to find other sources of liquidity or reduce its obligations, which could require it to reduce or eliminate its dividend to common shareholders and/or suspend its dividend payments on its preferred stock and its interest payments on its subordinated debentures.

Additionally, the Federal Reserve has issued a policy statement regarding the payment of dividends and the repurchase of shares of common stock by bank holding companies that it has also made applicable to savings and loan holding companies.  In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall financial condition.  These regulatory policies could affect our ability to pay dividends, repurchase shares of common stock or otherwise engage in capital distributions.

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If the goodwill that we recorded in connection with a business acquisition becomes impaired, it could have a negative impact on our profitability.

Goodwill represents the amount of acquisition cost over the fair value of net assets we acquired in the purchase of another financial institution.  We review goodwill for impairment at least annually, or more frequently if events or changes in circumstances indicate the carrying value of the asset might be impaired.  We determine impairment by comparing the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill.  If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.  Any such adjustments are reflected in our results of operations in the periods in which they become known.  At September 30, 2014, our goodwill totaled $3.9 million.  While we have recorded no impairment charges since we initially recorded the goodwill, there can be no assurance that our future evaluations of goodwill will not result in findings of impairment and related write-downs, which may have a material adverse effect on our financial condition and results of operations.

Our business strategy includes moderate growth plans, and our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively.

Over the next several years, we expect to experience moderate growth in the amount of our assets, the level of our deposits and the scale of our operations.  Achieving our growth targets requires us to attract customers that currently bank at other financial institutions in our market, thereby increasing our share of the market.  Our ability to successfully grow will depend on a variety of factors, including our ability to attract and retain experienced bankers, the continued availability of desirable business opportunities, the competitive responses from other financial institutions in our market areas and our ability to manage our growth.  While we believe we have the management resources and internal systems in place to successfully manage our future growth, there can be no assurance growth opportunities will be available or that we will successfully manage our growth.  If we do not manage our growth effectively, we may not be able to achieve our business plan, and our business and prospects could be harmed.

Our continued pace of growth may require us to raise additional capital in the future, but that capital may not be available when it is needed.

We are required by federal regulatory authorities to maintain adequate levels of capital to support our operations.  We anticipate that we will have sufficient capital resources to satisfy our capital requirements for the foreseeable future.  We may at some point, however, need to raise additional capital to support our continued growth.  If we raise capital through the issuance of additional shares of our common stock or other securities, it would dilute the ownership interests of existing shareholders and may dilute the per share book value of our common stock.  New investors may also have rights, preferences and privileges senior to our current shareholders, which may adversely impact our current shareholders.  Also, the need to raise additional capital may force our management to spend more time in managerial and financing-related activities than in operational activities.

Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside of our control, and on our financial performance.  Accordingly, we may not be able to raise additional capital, if needed, with favorable terms.  If we cannot raise additional capital when needed, our ability to further expand our operations through internal growth and acquisitions could be materially impaired.

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Our wholesale funding sources may prove insufficient to replace deposits at maturity and support our future growth.

We must maintain sufficient funds to respond to the needs of depositors and borrowers.  As a part of our liquidity management, we use a number of funding sources in addition to deposits and funds from the repayments and maturities of loans and investments.  As we continue to grow, we may become more dependent on these sources, which include FHLB advances, borrowings from the Federal Reserve Bank, proceeds from the sale of loans, and brokered certificates of deposit.  At September 30, 2014, we had $167.9 million of FHLB advances outstanding with an additional $63.7 million available borrowing capacity, no borrowings from the Federal Reserve Bank outstanding with $152.3 million of available borrowing capacity and certificates of deposit obtained through national brokers totaling $44.1 million.  If we were to become less than “well capitalized,” as defined by applicable federal regulations, it would materially restrict our ability to acquire and retain brokered deposits and could reduce the maximum borrowing limits we currently have available through the FHLB and the Federal Reserve Bank.  Additionally, adverse operating results or changes in industry conditions could lead to difficulty or an inability to access these additional funding sources.  Our financial flexibility will be severely constrained if we are unable to maintain our access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates.  Finally, if we are required to rely more heavily on more expensive funding sources to support future growth, our revenues may not increase proportionately to cover our costs.  In this case, our operating margins and profitability would be adversely affected.

The building of market share through the creation of new branches or loan production offices could cause our expenses to increase faster than revenues.

We may continue to build market share in the St. Louis metropolitan area by opening new full-service banking branches and in other midwestern and contiguous markets by opening residential loan production offices.  There are considerable costs involved in opening branches and loan production offices and such new locations generally require a period of time to generate sufficient revenues to offset their costs, especially in areas in which we do not have an established presence.  Accordingly, any new branch or loan production office can be expected to negatively impact our earnings for some period of time until they reach certain economies of scale.  We have no assurance any new branches or loan production offices will be successful even after they have been established.

We are dependent upon the services of our management team.

Our future success and profitability is substantially dependent upon the management and banking abilities of our senior executives.  We believe that our future results will also depend, in part, upon our ability to attract and retain highly skilled and qualified management.  We are especially dependent on a limited number of key management personnel, none of whom has an employment agreement with us, except for our chief executive officer.  The loss of the chief executive officer and other senior executive officers could have a material adverse impact on our operations because other officers may not have the experience and expertise to readily replace these individuals.  Competition for such personnel is intense, and we cannot assure you that we will be successful in attracting or retaining such personnel.  Changes in key personnel and their responsibilities may be disruptive to our business and could have a material adverse effect on our business, financial condition and results of operations.

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Our failure to continue to recruit and retain qualified loan originators could adversely affect our ability to compete successfully and affect our profitability.

Our continued success and future growth depend heavily on our ability to attract and retain highly skilled and motivated loan originators and other banking professionals.  We compete against many institutions with greater financial resources both within our industry and in other industries to attract these qualified individuals.  Our failure to recruit and retain adequate talent could reduce our ability to compete successfully and adversely affect our business and profitability.

We operate in a highly regulated environment and we may be adversely affected by changes in laws and regulations.

Pulaski Bank is subject to extensive regulation, supervision and examination by the OCC, its chartering authority, and by the FDIC, as insurer of its deposits.  The Company is subject to regulation and supervision by the Federal Reserve.  Such regulation and supervision govern the activities in which an institution and its holding company may engage, and are intended primarily for the protection of the FDIC insurance fund and for the depositors and borrowers of Pulaski Bank rather than the holders of our common stock.  Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination of the level of our allowance for loan losses.  Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our operations.  In addition, the Sarbanes-Oxley Act of 2002, and the related rules and regulations promulgated by the Securities and Exchange Commission and Nasdaq that are applicable to us, have, in recent years, increased the scope, complexity and cost of corporate governance, reporting and disclosure practices, including the costs of completing our audit and maintaining our internal controls.

We are subject to security and operational risks relating to our use of technology that could damage our reputation and our business.

Security breaches in our internet banking activities could expose us to possible liability and damage our reputation.  Any compromise of our security also could deter customers from using our internet banking services that involve the transmission of confidential information.  We rely on standard internet security systems to provide the security and authentication necessary to effect secure transmission of data.  These precautions may not protect our systems from compromises or breaches of our security measures that could result in damage to our reputation and our business.  Additionally, we outsource our data processing to a third party.  If our third party provider encounters difficulties or if we have difficulty in communicating with such third party, it will significantly affect our ability to adequately process and account for customer transactions, which would significantly affect our business operations.

We are subject to losses due to the errors or fraudulent behavior of employees or third parties.

We are exposed to many types of operational risk, including the risk of fraud by employees and outsiders, clerical recordkeeping errors and transactional errors.  Our business is dependent on our employees as well as third-party service providers to process a large number of increasingly complex transactions. We could be materially adversely affected if one of our employees causes a significant operational breakdown or failure, either as a result of human error or where an individual purposefully sabotages or fraudulently manipulates our operations or systems. When we originate loans, we rely upon information supplied by loan applicants and third parties, including the information contained in the loan application, property appraisal and title information, if applicable, and employment and income

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documentation provided by third parties. If any of this information is misrepresented and such misrepresentation is not detected prior to loan funding, we generally bear the risk of loss associated with the misrepresentation. Any of these occurrences could result in a diminished ability of us to operate our business, potential liability to customers, reputational damage and regulatory intervention, which could negatively impact our business, financial condition and results of operations.

We may have fewer resources than many of our competitors to invest in technological improvements.

The financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products and services.  The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs.  Our future success will depend, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands for convenience, as well as to create additional efficiencies in our operations.  Many of our competitors have substantially greater resources to invest in technological improvements.  We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers.

Competition from financial institutions and other financial service providers may adversely affect our growth and profitability.

The banking business is highly competitive and we experience competition from many other financial institutions.  We compete with commercial banks, credit unions, savings and loan associations, mortgage banking firms, consumer finance companies, securities brokerage firms, insurance companies, money market funds, and other mutual funds, as well as other super-regional, national and international financial institutions that operate offices in our primary market areas.

We compete with these institutions both in attracting deposits and in making loans.  This competition has made it more difficult for us to make new loans and has occasionally forced us to offer higher deposit rates or experience a significant decline in the balance of our deposits.  Price competition for loans and deposits might result in us earning less on our loans and paying more on our deposits, which reduces net interest income.  In addition, such competition could result in a significant decline in the balance of our deposits.  Many of our competitors are larger financial institutions. While we believe we can and do successfully compete with these other financial institutions in our primary markets, we may face a competitive disadvantage as a result of our smaller size, smaller resources and smaller lending limits, lack of geographic diversification and inability to spread our marketing costs across a broader market.  Although we compete by concentrating our marketing efforts in our primary markets with local advertisements, personal contacts and greater flexibility and responsiveness in working with local customers, we can give no assurance this strategy will be successful.

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Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

We currently conduct business through thirteen full-service banking offices, which include one office in each of Creve Coeur, Hazelwood, Chesterfield, Richmond Heights, Clayton and Ballwin, Missouri, two offices in St. Charles, Missouri and five offices in St. Louis, Missouri.  We own all of our offices, except for two in St. Louis and the offices in Ballwin, Clayton and Hazelwood. The leases for our offices have terms that expire between 2017 and 2022. We also own land in Florissant, Missouri and an administrative office in Creve Coeur, Missouri.

We also conduct business through loan production offices in Belton, Chesterfield, Lee’s Summit, Liberty, Osage Beach, Pevely, Springfield, Warrensburg, and Sedalia, Missouri, Godfrey and Shiloh, Illinois, Council Bluffs, Iowa, Omaha, Nebraska, Overland Park, Parkville, and Wichita, Kansas and Naperville, Illinois.  Each of these offices is leased with terms that expire between 2015 and 2019.

The net book value of the land, buildings, furniture, fixtures and equipment owned by us was $17.3 million at September 30, 2014.

Item 3. Legal Proceedings

The Company is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business which, in the aggregate, involve amounts which are believed by management to be not material to the financial condition and results of operations of the Company.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5.  Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The market for the registrant’s common equity and related stockholders matters required by this item is incorporated herein by reference to the section captioned “Common Stock Information” in the Annual Report to Stockholders.

For a description of restrictions on the Bank’s ability to pay cash dividends to Pulaski Financial Corp., see “Regulation — Federal Savings Institution Regulation — Limitations on Capital Distributions.”  The following table provides certain information with regard to shares repurchased by the Company during the fourth quarter of fiscal 2014.

ISSUER PURCHASES OF EQUITY SECURITIES

Period	(a) Total Number of Shares (or Units) Purchased (1)	(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (2)	(d) Maximum Number (or approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (2)
July 1, 2014 through July 31, 2014	706	$	11.26	—	403,800
August 1, 2014 through August 31, 2014	384	11.54		—	403,800
September 1, 2014 through September 30, 2014	382	11.46		—	403,800
Total	1,472	$	11.38

(1)Represents shares withheld as payment for taxes due upon the vesting of salary stock and equity trust distributions.

(2)In February 2007, the Company announced a repurchase program under which it could repurchase up to 497,000 shares of the Company’s common stock.  The repurchase program will continue until it is completed or terminated by the Board of Directors.

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Item 6. Selected Financial Data

The information required by this item is incorporated herein by reference to the section captioned “Selected Consolidated Financial Information” in the 2014 Annual Report to Stockholders.

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information required by this item is incorporated herein by reference to the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2014 Annual Report to Stockholders.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

The information required by this item is incorporated herein by reference to the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Market Risk Analysis” in the 2014 Annual Report to Stockholders.

Item 8.  Financial Statements and Supplementary Data

The financial statements required by this item are incorporated herein by reference to the audited consolidated financial statements and notes thereto included in the 2014 Annual Report to Stockholders.

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.  Controls and Procedures

The Company’s management, including the Company’s principal executive officer and principal financial officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”).  Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.  In addition, based on that evaluation, no change in the Company’s internal control over financial reporting occurred during the quarter ended September 30, 2014 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting is included on page 34 in the 2014 Annual Report to Stockholders and is incorporated by reference into this Form 10-K.

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Item 9B.  Other Information

None

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PART III

Item 10. Directors and Executive Officers of the Registrant

Directors

For information concerning the Board of Directors of the Company, the information contained under the section captioned “Proposal 1 - Election of Directors” in the Proxy Statement is incorporated herein by reference.

Executive Officers

For information concerning officers of the Company, see Part I, Item I, “Business — Executive Officers of the Registrant.”

Compliance with Section 16(a) of the Exchange Act

Reference is made to the cover page of this Form 10-K and to the section captioned “Compliance with Section 16(a) of the Exchange Act” in the Proxy Statement for information regarding compliance with Section 16(a) of the Exchange Act.

Code of Ethics

We have adopted a written code of ethics, which applies to our senior financial officers.  We intend to disclose any changes or waivers from our Code of Ethics applicable to any senior financial officers on our website at http://www.pulaskibank.com or in a report on Form 8-K.  A copy of the Code of Ethics is available, without charge, upon written request to Paul Milano, Corporate Secretary, Pulaski Financial Corp., 12300 Olive Blvd, St. Louis, MO, 63141.

Corporate Governance

For information regarding the audit committee and its composition and the audit committee financial expert, the section captioned “Corporate Governance — Meetings and Committees of the Board of Directors — Audit Committee” in the Proxy Statement is incorporated herein by reference.

Item 11. Executive Compensation

Executive Compensation

The information contained under the sections captioned “Executive Compensation” and “Corporate Governance — Director Compensation” in the Proxy Statement is incorporated herein by reference.

Corporate Governance

For information regarding the Compensation Committee report, the section captioned “Compensation Committee Report”

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

(a)Security Ownership of Certain Beneficial Owners

Information required by this item is incorporated herein by reference to the section captioned “Stock Ownership” in the Proxy Statement.

(b)Security Ownership of Management

The information required by this item is incorporated herein by reference to the sections captioned “Stock Ownership” in the Proxy Statement.

(c)Changes in Control

The Company is not aware of any arrangements, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the Company.

(d)Equity Compensation Plan Information

The following table sets forth information about Company common stock that may be issued upon exercise of options, warrants and rights under all of the Company’s equity compensation plans as of September 30, 2014.

Plan category	Number of securitiesto be issued uponexercise of outstanding options, warrants and rights(a)	Weighted-averageexercise price ofoutstanding options,warrants and rights(b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))(c)
Equity compensation plans approved by security holders	552,160	$	11.28	637,238
Equity compensation plans not approved by security holders	—	—		—

Item 13. Certain Relationships, and Director Independence Related Transactions

The information set forth under the sections captioned “Corporate Governance — Independent Directors,” “- Policy and Procedures Governing Related Party Transactions,” and “Transactions with Related Persons” in the Proxy Statement is incorporated by reference.

Item 14. Principal Accountant Fees and Services

The information set forth under the section captioned “Proposal 2-Ratification of Independent Registered Public Accounting Firm” in the Proxy Statement is incorporated by reference.

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PART IV

Item 15. Exhibits and Financial Statement Schedules

The following documents are filed as part of this report:

1.Financial Statements

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets at September 30, 2014 and 2013

Consolidated Statements of Income and Comprehensive Income for the Years Ended September 30, 2014, 2013 and 2012

Consolidated Statements of Stockholders’ Equity for the Years Ended September 30, 2014, 2013 and 2012

Consolidated Statements of Cash Flows for the Years Ended September 30, 2014, 2013 and 2012

Notes to Consolidated Financial Statements for the Years ended September 30, 2014, 2013 and 2012

Such financial statements are incorporated herein by reference to the Consolidated Financial Statements and Notes thereto included in the 2014 Annual Report to Stockholders.

2.Financial Statement Schedules

None.

3.Exhibits

The exhibits listed below are filed as part of this report or are incorporated by reference herein.

Exhibit No.	Description	Incorporated by Reference to
3.1	Articles of Incorporation of Pulaski Financial Corp.	Definitive Proxy Statement as filed on December 27, 2002
3.2	Certificate of Amendment to Articles of Incorporation of Pulaski Financial Corp.	Form 10-Q for the quarterly period ended December 31, 2003, as filed on February 17, 2004
3.3	Bylaws of Pulaski Financial Corp.	Form 8-K, as filed on December 17, 2010
4.1	Form of Certificate for Common Stock	Form S-1 (Registration No. 333-56465), as amended, as filed on June 9, 1998

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4.2	No long-term debt instrument issued by the Registrant exceeds 10% of consolidated assets or is registered. In accordance with paragraph 4(iii) of Item 601(b) of Regulation S-K, the Registrant will furnish the Securities and Exchange Commission copies of long-term debt instruments and related agreements upon request.
10.1*	Employment Agreement by and among Pulaski Bank, Pulaski Financial Corp. and Gary W. Douglass	Form 10-Q for the quarterly period ended March 31, 2008, as filed on May 12, 2008
10.2*	Pulaski Financial Corp. 2002 Stock Option Plan.	Definitive Proxy Statement as filed on December 27, 2001
10.3*	Pulaski Financial Corp. 2000 Stock-Based Incentive Plan	Definitive Proxy Statement as filed on December 12, 1999
10.4*	Amendment to Pulaski Financial Corp. 2002 Stock Option Plan	Form 10-Q for the quarterly period ended March 31, 2004, as filed on May 14, 2004
10.5*	Pulaski Financial Corp. Deferred Compensation Plan (“Equity Trust Plan”)	Form 10-K for the year ended September 30, 2003, as filed on December 29, 2003
10.6*	Form of Stock Option Agreement	Form 10-Q for the year period ended March 31, 2005, as filed on May 10, 2005
10.7*	Pulaski Financial Corp. Cash-Based Deferred Compensation Plan, as amended and restated	Form 10-Q for the quarterly period ended March 31, 2009, as filed on May 8, 2009
10.8*	Pulaski Financial Corp. Stock-Based Deferred Compensation Plan, as amended and restated	Form 10-Q for the quarterly period ended March 31, 2009, as filed on May 8, 2009
10.9*	Form of Pulaski Financial Corp. Cash-Based Deferred Compensation Plan Election Form	Definitive Proxy Statement as filed on December 13, 2005
10.10*	Form of Pulaski Financial Corp. Stock-Based Deferred Compensation Plan Election Form	Form 10-K for the year ended September 30, 2005, as filed on December 30, 2005
10.11*	Pulaski Financial Corp. 2006 Long-Term Incentive Plan	Definitive Proxy Statement for the 2006 Annual Meeting of Stockholders

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10.12*	Form of Non-Solicitation and Confidentiality Agreement between Pulaski Financial Corp. and each of Paul J. Milano and W. Thomas Reeves	Form 10-K for the year ended September 30, 2008, as filed on December 12, 2008
10.13	Sales Agency Agreement, dated May 7, 2013 among Pulaski Financial Corp., Pulaski Bank and Sandler O’Neill & Partners, L.P.	Form 8-K, as filed on May 7, 2013
10.14*	Amendment to the Pulaski Financial Corp. 2006 Long-Term Incentive Plan	Form 10-K for the year ended September 30, 2013, as filed on December 16, 2013
10.15*	Pulaski Financial Corp. Short-Term Incentive Outperformance Plan	Form 10-K for the year ended September 30, 2013, as filed on December 16, 2013
13.1	2014 Annual Report to Stockholders
21.1	Subsidiaries of Pulaski Financial Corp.
23.1	Consent of KPMG LLP
31.1	Rule 13a-14(a) 15d-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a) 15d-14(a) Certification of Chief Financial Officer
32.1	Chief Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Chief Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following materials from Pulaski Financial Corp.’s Annual Report on Form 10-K for the year ended September 30, 2014 formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations and Comprehensive Income, (iii) the Consolidated Statement of Stockholders’ Equity; (iv) the Consolidated Statements of Cash Flows and (v) related notes.

* Management contract or compensatory plan or arrangement filed pursuant to Item 15(a) of this Report.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

(Registrant)

/s/ Gary W. Douglass

Gary W. Douglass

President and Chief Executive Officer

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

NAME	TITLE	DATE
/s/ Gary W. Douglass	President and Chief Executive Officer	December 12, 2014
Gary W. Douglass	(principal executive officer)
/s/ Paul J. Milano	Chief Financial Officer	December 12, 2014
Paul J. Milano	(principal accounting and financial officer)
/s/ Stanley J. Bradshaw	Chairman of the Board	December 12, 2014
Stanley J. Bradshaw
/s/ Lee S. Wielansky	Director	December 12, 2014
Lee S. Wielansky
/s/ William M. Corrigan, Jr.	Director	December 12, 2014
William M. Corrigan, Jr.
/s/ Leon A. Felman	Director	December 12, 2014
Leon A. Felman
/s/ Michael R. Hogan	Director	December 12, 2014
Michael R. Hogan
/s/ Timothy K. Reeves	Director	December 12, 2014
Timothy K. Reeves
/s/ Sharon A. Tucker	Director	December 12, 2014
Sharon A. Tucker

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