1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2000
-----------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to ______________________
Pulaski Financial Corp.
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(Exact name of registrant as specified in its charter)
0-24571
- --------------------------------------------------------------------------------
Commission File Number
Delaware 43-1816913
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
12300 Olive Boulevard
St. Louis, Missouri 63141-6434
- --------------------------------------- --------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (314) 878-2210
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ -----
Indicate the number of shares outstanding of the registrant's classes of common
stock, as of the latest practicable date.
Class Outstanding at February 12, 2001
- -------------------------------------- ---------------------------------------
Common Stock, par value $.01 per share 3,021,298 shares
2
PULASKI FINANCIAL CORP. AND SUBSIDIARIES
FORM 10-Q
DECEMBER 31, 2000
TABLE OF CONTENTS
PAGE
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at December 31, 2000 and
September 30, 2000 (Unaudited) 1
Consolidated Statements of Income and Comprehensive Income for
the Three Months Ended December 31, 2000 and 1999 (Unaudited) 2
Consolidated Statement of Stockholders' Equity for the Three Months
Ended December 31, 2000 (Unaudited) 3
Consolidated Statements of Cash Flows for the Three Months Ended
December 31, 2000 and 1999 (Unaudited) 4-5
Notes to Unaudited Consolidated Financial Statements (Unaudited) 6-7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 8-13
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
PART II OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities and Use of Proceeds 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security-Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
3
PART I - FINANCIAL INFORMATION
4
PULASKI FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND SEPTEMBER 30, 2000 (UNAUDITED)
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December 31, September 30,
2000 2000
ASSETS
Cash and amounts due from depository institutions $ 3,519,567 $ 3,762,265
Federal funds sold and overnight deposits 2,875,000 3,800,000
------------- -------------
Total cash and cash equivalents 6,394,567 7,562,265
Investment securities available for sale, at market value 5,874,640 5,493,159
Investment securities held to maturity, at amortized cost (market value, $1,796,901
and $13,615,012, at December 31, 2000 and at September 30, 2000, respectively) 1,799,876 13,634,391
Mortgage-backed and related securities held to maturity, at amortized cost (market value,
$3,128,640 and $3,237,467 at December 31, 2000 and at September 30, 2000, respectively) 3,005,330 3,133,691
Mortgage-backed and related securities available for sale, at market value 19,427,821 19,470,455
Federal Home Loan Bank stock - at cost 3,760,000 3,580,000
Loans receivable held for sale, at lower of cost or market 17,431,165 14,374,186
Loans receivable, net of allowance for loan losses of $1,391,516 and $1,365,776 at
December 31, 2000 and at September 30, 2000, respectively 214,340,799 209,919,196
Real estate acquired in settlement of loans, net of allowance for losses of
$5,105 and $2,108 at December 31, 2000 and at September 30, 2000, respectively 67,827 28,008
Premises and equipment - net 3,451,014 2,933,683
Accrued interest receivable 1,823,305 1,589,923
Other assets 1,657,657 1,400,995
------------- -------------
TOTAL $ 279,034,001 $ 283,119,952
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits $ 170,718,686 $ 168,412,670
Advances from Federal Home Loan Bank of Des Moines 75,200,000 66,100,000
Advance payments by borrowers for taxes and insurance 593,778 2,786,928
Accrued interest payable 12,317 212,509
Note payable - 12,500,000
Other liabilities 1,855,532 1,908,178
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Total liabilities 248,380,313 251,920,285
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock - $.01 par value per share, authorized 10,000,000 shares; none issued or
outstanding
Common stock - $.01 par value per share, authorized 25,000,000 shares; 3,972,885
shares issued at December 31, 2000 and September 30, 2000, respectively 39,729 39,729
Treasury stock - at cost (shares, 947,549 and 815,791 respectively) (10,709,805) (9,396,438)
Additional paid-in capital 23,932,808 23,933,327
Unearned MRDP shares (686,355) (728,812)
Unearned ESOP shares (unreleased shares, 117,007 and 119,301 respectively) (1,170,064) (1,193,007)
Accumulated other comprehensive loss 132,428 (241,347)
Retained earnings 19,114,947 18,786,215
------------- -------------
Total stockholders' equity 30,653,688 31,199,667
------------- -------------
TOTAL $ 279,034,001 $ 283,119,952
============= =============
See accompanying notes to the unaudited consolidated financial statements.
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5
PULASKI FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
THREE MONTHS ENDED DECEMBER 31, 2000 (UNAUDITED) AND DECEMBER 31, 1999 (UNAUDITED)
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Three Months Ended
December 31,
------------------------------------------
2000 1999
INTEREST INCOME:
Loans receivable $ 4,458,336 $ 3,476,289
Investment securities 112,498 180,972
Mortgage-backed and related securities 400,523 445,527
Other 68,064 99,630
----------- -----------
Total interest income 5,039,421 4,202,418
----------- -----------
INTEREST EXPENSE:
Deposits 1,858,064 1,591,684
Advances from Federal Home Loan Bank of Des Moines 1,107,656 411,576
Other 37,500 -
----------- -----------
Total interest expense 3,003,220 2,003,260
----------- -----------
NET INTEREST INCOME 2,036,201 2,199,158
PROVISION FOR LOAN LOSSES 89,664 127,074
----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 1,946,537 2,072,084
----------- -----------
NON-INTEREST INCOME:
Retail banking fees 364,384 173,700
Mortgage revenues 663,794 275,794
Insurance commissions 72,439 121,564
Other 84,448 47,692
----------- -----------
Total non-interest income 1,185,065 618,750
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NON-INTEREST EXPENSE:
Salaries and employee benefits 1,419,995 860,157
Occupancy, equipment and data processing expense 361,227 483,524
Advertising 85,932 77,135
Professional services 134,011 112,232
Other 267,953 276,045
----------- -----------
Total non-interest expense 2,269,118 1,809,093
----------- -----------
INCOME BEFORE INCOME TAXES 862,484 881,741
INCOME TAXES 319,098 315,572
----------- -----------
NET INCOME 543,386 566,169
OTHER COMPREHENSIVE INCOME (LOSS) ITEMS 373,775 (186,387)
----------- -----------
COMPREHENSIVE INCOME $ 917,161 $ 379,782
=========== ===========
NET INCOME PER COMMON SHARE - BASIC $ 0.18 $ 0.16
=========== ===========
NET INCOME PER COMMON SHARE - DILUTED $ 0.18 $ 0.16
=========== ===========
See accompanying notes to the unaudited consolidated financial statements.
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PULASKI FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED DECEMBER 31, 2000 (UNAUDITED)
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Unearned
Management Accumulated
Additional Recognition and Other Unearned
Common Treasury Paid-In Development Comprehensive ESOP Retained
Stock Stock Capital Plan Shares Income (Loss) Shares Earnings Total
BALANCE,
September 30, 2000 $ 39,729 $ (9,396,438) $ 23,933,327 $ (728,812) $ (241,347) $ (1,193,007) $ 18,786,215 $31,199,667
Comprehensive income:
Net income 543,385 543,385
Change in net unreal-
ized gains (losses) on securities 373,775 373,775
----------
Total comprehen-
sive income 917,160
----------
Dividends declared ($.065
per share) (183,103) (183,103)
Stock options exercised 58,650 (31,550) 27,100
Stock repurchase (1,372,017) (1,372,017)
Release of ESOP shares (519) 22,943 22,424
Amortization of Management
Recognition and Development
Plan shares issued 42,457 42,457
-------- ------------- ------------ ---------- ---------- ------------ ------------ -----------
BALANCE,
December 31, 2000 $ 39,729 $ (10,709,805) $ 23,932,808 $ (686,355) $ 132,428 $ (1,170,064) $ 19,114,947 $30,653,688
======== ============= ============ ========== =========== ============ ============ ===========
See accompanying notes to the unaudited consolidated financial statements.
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PULASKI FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THREE MONTHS
ENDED DECEMBER 31, 2000 (UNAUDITED) AND DECEMBER 31,1999 (UNAUDITED)
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2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 543,385 $ 566,169
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation, amortization and accretion:
Premises and equipment 112,380 129,900
Management Recognition and Development Plan stock awards 42,457 13,800
ESOP shares committed to be released 22,424 41,399
Loan fees, discounts and premiums - net 91,545 (6,851)
Deferred income taxes - 37,827
Provision for loan losses 89,664 127,074
Provision for losses on real estate acquired in settlement of loans 2,997 -
Losses on sale of real estate acquired in settlement of loans - 25,364
(Gain) loss on sale of loans 593,864 (213,838)
Originations of loans receivable for sale to correspondent lenders (55,191,979) (20,628,082)
Proceeds from sales of loans to correspondent lenders 51,541,136 24,912,838
Changes in other assets and liabilities (950,793) (237,260)
----------- -----------
Net adjustments (3,646,305) 4,202,171
----------- -----------
Net cash provided by (used in) operating activities (3,102,920) 4,768,340
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales and maturities of investment securities 11,823,100 3,000,000
Purchases of investment securities and FHLB stock (461,078) (2,165,576)
Principal payments received on mortgage-backed and related
securities 685,961 673,729
Purchases of mortgage-backed and related securities
Loan originations - net (4,667,901) (4,983,905)
Proceeds from sales of real estate acquired in settlement of
loans receivable - 121,000
Disposal of equipment 12,330 -
Net additions to premises and equipment (642,041) (189,892)
----------- -----------
Net cash provided by (used in) investing activities 6,750,371 (3,544,644)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) increase in deposits 2,306,016 (1,313,435)
Federal Home Loan Bank advances - net 9,100,000 6,000,000
Retire other debt (12,500,000) -
Net decrease in advance payments by borrowers for taxes and
insurance (2,193,150) (2,011,857)
Dividends declared on common stock (183,103) (301,644)
Common stock issued under stock option plan 27,100 -
Stock repurchase (1,372,017) (2,182,507)
----------- -----------
Net cash provided by (used in)financing activities (4,815,154) 190,557
----------- -----------
(Continued)
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8
PULASKI FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THREE MONTHS ENDED
ENDED DECEMBER 31, 2000 (UNAUDITED) AND DECEMBER 31,1999 (UNAUDITED)
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2000 1999
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ (1,167,698) $ 1,414,253
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 7,562,265 8,886,957
------------ -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 6,394,567 $ 10,301,210
============ ===========
ADDITIONAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest on deposits $ 2,058,255 $ 1,809,372
Interest on advances from the Federal Home Loan Bank
of Des Moines 1,107,656 411,576
NONCASH INVESTING ACTIVITIES:
Write-down of real estate owned 2,997 -
Real estate acquired in settlement of loans 42,816 39,075
Decrease in investments for changes in unrealized
gains and losses 603,584 (295,853)
NONCASH FINANCING ACTIVITIES:
Dividends declared 196,647 321,893
See accompanying notes to the unaudited consolidated financial statements.
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PULASKI FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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1. FINANCIAL STATEMENTS
The unaudited consolidated financial statements include the accounts of
Pulaski Financial Corp. (the "Company") and its wholly owned subsidiary,
Pulaski Bank (the "Bank"), and its wholly owned subsidiary, Pulaski Service
Corporation. All significant intercompany accounts and transactions have
been eliminated. The Company has no significant assets, other than all of
the outstanding shares of the Bank and the portion of the net proceeds from
the Offering retained by the Company, and no significant liabilities.
Accordingly, the information set forth in this report, including the
consolidated financial statements and related financial data, relates
primarily to the Bank. The Company operates as a single business segment,
providing traditional community banking services through its full service
branch network.
In the opinion of management the unaudited consolidated financial statements
contain all adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation of the financial condition of the Company
as of December 31, 2000 and September 30, 2000 and its results of operations
for the three month period ended December 31, 2000 and 1999. The results of
operations for the three month periods ended December 31, 2000 are not
necessarily indicative of the results which may be expected for the entire
fiscal year. These unaudited consolidated financial statements should be
read in conjunction with the audited consolidated financial statements of
the Company for the year ended September 30, 2000 contained in the Company's
2000 Annual Report to Stockholders which is filed as an exhibit to the
Company's Annual Report on Form 10-K for the year ended September 30, 2000.
2. EARNINGS PER SHARE
Three Months Ended
December 31,
--------------------------------
2000 1999
Weighted average shares
outstanding - basic 2,958,288 3,476,880
Common stock equivalent 65,976 18,962
--------- ---------
Weighted average shares
outstanding - diluted 3,024,264 3,495,842
========= =========
Anti-dilutive shares 16,940 16,940
========= =========
Under the Treasury Stock method, outstanding stock options are dilutive when
the average market price of the Company's common stock exceeds the option
exercise price during a period. In addition, proceeds from the assumed
exercise of dilutive options along with the related tax benefit are assumed
to be used to repurchase common shares at the average market price of such
stock during the period. Anti-dilutive shares are those option shares with
exercise prices in excess of the current market value.
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3. RECLASSIFICATIONS
Certain reclassifications have been made to 1999 amounts to conform to the
2000 presentation and are not material.
* * * * * *
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of the
federal securities laws. These statements are not historical facts, rather
statements based on the Company's current expectations regarding its business
strategies and their intended results and its future performance.
Forward-looking statements are preceded by terms such as "expects," "believes,"
"anticipates," "intends," and similar expressions.
Forward-looking statements are not guarantees of future performance. Numerous
risks and uncertainties could cause or contribute to the Company's actual
results, performance and achievements to be materially different from those
expressed or implied by the forward-looking statements. Factors that may cause
or contribute to these differences include, without limitation, general economic
conditions, including changes in market interest rates and changes in monetary
and fiscal policies of the federal government; legislative and regulatory
changes; and other factors disclosed periodically in the Company's filings with
the Securities and Exchange Commission.
Because of the risks and uncertainties inherent in forward-looking statements,
readers are cautioned not to place undue reliance on them, whether included in
this report or made elsewhere from time to time by the Company or on its behalf.
The Company assumes no obligation to update any forward-looking statements.
GENERAL
Management's discussion and analysis of financial condition and results of
operations is intended to assist in understanding the financial condition and
results of operations of the Company. The information contained in this section
should be read in conjunction with the unaudited consolidated financial
statements and accompanying notes thereto.
FINANCIAL CONDITION
Total assets at December 31, 2000 were $279.0 million, a decrease of $4.1
million from $283.1 million at September 30, 2000. The decrease in total assets
was primarily attributable to decreases in investments and cash and cash
equivalents, offset by an increase in loans receivable, and loans held for sale.
Cash and cash equivalents decreased from $7.6 million at September 30, 2000 to
$6.4 million at December 31, 2000. Investments and debt securities declined from
$19.1 million at September 30, 2000 to $7.7 million at December 31, 2000. The
decrease in cash and investments was primarily attributable to the use of liquid
assets and other cash flows during the quarter to fund the repayment of other
borrowings, which were $12.5 million at September 30, 2000.
Loans receivable increased $4.4 million from $209.9 million at September 30,
2000 to $214.3 million at December 31, 2000. The increase was largely due to a
greater volume of non-conforming (to secondary market guidelines) loans
originated for portfolio. Non-conforming loans are usually characterized as
having credit histories, and/or underwriting qualities that render them
unsaleable in secondary markets. The Bank provides financing for these mortgage
loans at higher rates, subject to well-defined underwriting criteria.
Non-conforming loans have increased as a result of hiring nine commissioned loan
officers. In addition, Home Equity Line of Credit loans have grown $2.5 million,
from $14.4 million at September 30, 2000 to $16.9 million at December 31, 2000.
This growth in prime-based adjustable loans has been offset by a
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decline in the amount of consumer loans (primarily indirect auto loans) which
were $23.3 million at September 30, 2000 and are $21.2 million at December 31,
2000 Loans held for sale increased from $14.4 million at September 30, 2000 to
$17.4 million at December 31, 2000 as a result of origination, of over $55.2
million of mortgage loans during the December 2000 quarter.
Total liabilities at December 31, 2000 were $248.4 million, a decrease of $3.5
million from $251.9 million at September 30, 2000. The decrease in total
liabilities was primarily attributable to a decrease in Notes Payable and a
decrease in borrower's escrow accounts, offset by increases in deposits and
advances from the Federal Home Loan Bank.
Repayment of the $12.5 million Note payable at September 30, 2000 was made in
October of 2000. Borrowings were obtained in September of 2000 to facilitate the
payment of a special $4.00 return of capital dividend of approximately $12.5
million. Repayment of the note was made after receipt of permission from the
Bank's regulator OTS (Office of Thrift Supervision) to pay a dividend of $15.5
million to the Company. Advance payments by borrowers for taxes and insurance
decreased from $2.8 million at September 30, 2000 to $594,000 at December 31,
2000 as a result of payment of escrowed real estate taxes and insurance
premiums.
Deposit account balances increased from $168.4 million at September 30, 2000 to
$170.7 million at December 31, 2000. The Bank's checking and money market
accounts increased $7.2 million since September 30, 2000 to $42.7 million, but
this growth was offset by a decline of $4.9 million in the passbook and
certificate balances. The Bank is aggressively advertising for checking and
money market deposits through direct mail, television and radio advertising. The
decline in passbook and certificates is due to an aging customer base, customers
moving outside Bank marketing areas, and competition with alternative
investments.
Borrowings increased $9.1 million, from $66.1 million at September 30, 2000 to
$75.2 million at December 31, 2000; as proceeds were used to fund portfolio loan
growth, increases in loans held for sale, and payment of borrowers escrowed real
estate taxes of approximately $2.7 million in December 2000.
Total stockholders' equity at December 31, 2000 was $30.7 million, a decrease of
$500,000 from $31.2 million at September 30, 2000. The decrease is primarily
attributable to the repurchase of 136,758 shares of common stock for $1.4
million and payment of regular dividends of $183,000, offset by increase in the
amount of unrealized gains on securities held for sale of $374,000, and net
income for the three months ended December 31, 2000 of $543,000.
NON-PERFORMING ASSETS AND DELINQUENCIES
Non-accrual loans amounted to $193,000 at December 31, 2000 compared to $413,000
at September 30, 2000. The non-accrual loans consisted of single-family
residential loans, and consumer loans The balance decline is attributed to
adoption of the Uniform Asset Classification Policy of the OTS. Implementation
of that policy enabled loans previously considered non-performing, to be
reclassified as performing as a result of consistent payments made on loan
obligations of persons in bankruptcy. In addition improved collections on
delinquent loans reduced the amount of non accrual accounts. Accruing loans that
were contractually past due 90 days or more at December 31, 2000 amounted to
$2.0 million, of which $409,000 were FHA/VA government-insured loans, compared
to $443,000 of FHA/VA loans at September 30, 2000. The accruing loans past 90
days delinquent increased from $1.5 million at September 30, 2000 as a result of
seasonal delinquencies. Real estate acquired in settlement of loans, net of
allowance for losses increased to $68,000 at December 31, 2000 from $28,000 at
September 30, 2000, and consisted of single-family residences. The allowance for
loan losses was $1.4 million at December 31, 2000, or .62% of total loans and
66% of non-
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13
performing loans (non-accrual loans and accruing loans past due 90 days or
more), compared with $1.4 million at September 30, 2000 or .61% of total loans
and 71% of non-performing loans.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2000 AND
1999:
GENERAL
Net income for the three months ended December 31, 2000 was $543,000, compared
to net income of $566,000 for the three months ended December 31, 1999.
INTEREST INCOME
Interest income increased $837,000, or 20% for the three months ended December
31, 2000, compared to the three months ended December 31, 1999. The increase
resulted primarily from an increase in interest on loans of $982,000, offset by
decreased interest on investments of $68,000, decreased interest income on
mortgage-backed securities of $45,000 and decreased income on overnight
investments of $32,000.
The increase in interest income on loans resulted primarily from an increase in
the average balance of loans outstanding for the three months ended December 31,
2000 of $224.3 million compared to $188.7 million at December 31, 1999. The
weighted average yield on loans increased from 7.37% to 7.95% over the same time
period.
The decrease in income from investments was due to a decline in the average
balance, from $13.3 million for the three months ended December 31, 1999 to $7.2
million for the three months ended December 31, 2000, as maturing securities, as
well as funds invested in overnight deposits were used to fund additional
lending activity and stock repurchases. The average balance of overnight
deposits decreased from $7.6 million for the December 1999 quarter to
$4.1 million for the December 2000 quarter. The weighted average yield on
investments increased from 5.45% to 6.25%, and the weighted average rate on
overnight funds increased from 5.94% to 6.58% over the same period of time. The
rate increases reflect the upward movement in interest rates during the period.
The decrease in interest income from mortgage-backed securities resulted
primarily from a decrease in the average balance from $24.8 million for the
three months ended December 31, 1999 to $22.3 million for the quarter ended
December 31, 2000. The average balance declined as a result of normal
amortization and prepayments, no sales of mortgage-backed securities were made.
INTEREST EXPENSE
Interest expense increased $1.0 million for the three months ended December 31,
2000 compared to the same period last year. The additional expense resulted
primarily from increased interest expense of $696,000 on borrowings from the
FHLB of Des Moines. The average balance of borrowings increased from $27.9
million for the quarter ended December 31, 1999 to $67.4 million for the quarter
ended December 31, 2000. The weighted average rate on FHLB borrowings increased
from 5.90% for the quarter ended December 31, 1999 to 6.80% for the quarter
ended December 31, 2000. The increase in advances were used to fund loan
originations. Interest on deposits increased $266,000 for the quarter ended
December 31, 2000 compared to the same quarter of the prior year, due to an
increase in the average rates paid on deposits, from 4.02% for the
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14
December 1999 quarter to 4.52% for the December 2000 quarter. The average
balance of interest-bearing deposits also increased, from $158.5 million to
$164.3 million for the same period. Other interest expense of $37,500 related to
the short-term borrowings of $12.5 million at September 30, 2000, which was
repaid in October of 2000.
PROVISION FOR LOAN LOSSES
The provision for loan losses was $90,000 for the three months ended December
31, 2000 compared to $127,000 for the three months ended December 31, 1999. The
provision for loan losses, of $90,000 was in response to the changes in
delinquencies and charge offs, and because the Bank's investment in high loan to
value residential loans and home equity loans has increased.
Non-performing loans were $2.2 million at December 31, 2000, compared to $1.9
million at September 30, 2000. Charge offs were $62,000 for the December 2000
quarter as a result of losses sustained from auto loans. The Bank discontinued
significant investment in auto loans in June of 1999, and decided to emphasize
home equity lines of credit, which are prime-based adjustable loans. As a result
of recording $90,000 in loan loss provision, the ratio of loan loss allowance to
non-performing loans was 63.17%, and the ratio of total loan loss allowance to
total loans was .60%, as of December 31, 2000.
Loans up to 100% of the purchase price are made to borrowers having excellent
credit histories and meeting specific underwriting guidelines. The Company
closely monitors delinquencies on all loans.
The provision for loan losses is determined by management as the amount to be
added to the allowance for loan losses after net charge-offs have been deducted
to bring the allowance to a level which is considered adequate to absorb losses
inherent in the loan portfolio. Because management adheres to specific loan
underwriting guidelines focusing on mortgage loans secured by one to four-family
residences, the Bank's historical loan loss experience has been low. No
assurances, however, can be given as to future loan loss levels.
NON-INTEREST INCOME
Non-interest income increased $566,000 for the three months ended December 31,
2000 from $619,000 to $1.2 million. The increase in non-interest income was the
result of an increase in mortgage revenues of $388,000, increased retail banking
fees of $191,000, increased other income of $37,000 offset by a decline in
insurance commissions of $49,000.
Mortgage revenues increased $388,000, or 141%, from $276,000 for the December
31, 1999 quarter, to $664,000 for the quarter ended December 31, 2000. The
revenues were generated primarily from sales of loans to investors, with
servicing released. The volume of loans sold for the three months ended December
31, 2000 increased 111% over the three months ended December 31, 1999. The
higher volume of loans sold is the result of hiring a senior vice president to
generate increased volume, and the subsequent addition of 7 commissioned loan
officers, managers and staff over the twelve month period ended December 31,
2000. Retail banking fees rose 110% from $174,000 in the December 31, 1999
quarter, to $364,000 in the December 31, 2000 quarter. Management continues to
focus on growth of checking accounts, and has seen the number of total checking
accounts increase 30%, from 8,137 at December 31, 1999 to 10,573 at December 31,
2000.
Other income increased $37,000 over the three months ended December 31, 1999,
and was primarily the result of increased dividends on the stock of the Federal
Home Loan Bank of Des Moines. Stock purchases are required to support additional
borrowings at the Federal Home Loan Bank. The Bank has increased its
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stock investment from $1.8 million at December 31, 1999 to $3.8 million at
December 31, 2000. Insurance commissions declined $49,000, or 40%. as a result
of a corresponding decline in the volume of annuity sales.
NON-INTEREST EXPENSE
Non-interest expense increased $460,000, from $1.8 million in the December 1999
quarter to $2.3 million for the quarter ended December 31, 2000. The increase
was primarily due to increases in compensation expense of $560,000; offset by
decreases in occupancy and equipment expenses of $122,000. Compensation expense
increased $560,000 over the prior year, but includes bonus payments related to
increased lending volume during calendar 2000, and certain one-time expenses.
Occupancy and equipment expenses decreased from $483,000 for the three months
ended December 31, 1999 to $361,000 for the three months ended December 31, 2000
due to reduced rent and depreciation expenses. In December 1999, rent expense of
approximately $63,000, and leasehold improvements of approximately $34,000 were
expensed in connection with the closing of a branch office.
INCOME TAXES
The provision for income taxes of $319,000 for the three-month period ended
December 31, 2000, was consistent with the three-month period expense of
$316,000 for December 31, 1999. The effective tax rate for the quarter was 37%.
LIQUIDITY AND CAPITAL RESOURCES
Federal regulations require the Bank to maintain minimum levels of liquid assets
(i.e., cash and eligible investments). The required percentage has varied from
time to time based upon economic conditions and savings flows and is currently
4% of the average daily balance of net withdrawable savings deposits and
short-term borrowings. The Bank attempts to maintain liquidity at levels in
excess of those required by regulation. Maintaining levels of liquidity acts, in
part, to reduce the Company's balance sheet exposure to interest rate risk. For
the quarter ended December 31, 2000, the Bank's average liquidity ratio (liquid
assets as a percentage of net withdrawable savings deposits and short-term
borrowings) was 20.78%. The Bank must also maintain adequate levels of liquidity
to ensure the availability of funds to satisfy loan commitments and deposit
withdrawals. At December 31, 2000, the Bank had outstanding commitments to
originate loans of $7.2 million, and commitments to sell loans of $19.6 million.
At the same date, certificates of deposit that are scheduled to mature in one
year or less totaled $75.8 million. Based on past experience, management
believes the majority of maturing certificates of deposit will remain with the
Bank.
Management believes its ability to generate funds internally will satisfy its
liquidity requirements for funding of loans and withdrawals of deposits. If the
Bank or the Company requires funds beyond its ability to generate them
internally, the Bank has the ability to borrow funds from the Federal Home Loan
Bank of Des Moines (FHLB) under a blanket agreement which assigns all
investments in FHLB stock as well as qualifying first mortgage loans equal to
125% of the outstanding advances as collateral to secure the amounts borrowed.
Total borrowings from the Federal Home Loan Bank are subject to limitations
based upon the asset size of the Bank. At December 31, 2000, the Bank had
approximately $21.3 million additional available to it under the above-mentioned
borrowing arrangement. At December 31, 2000, the Bank had $75.2 million in
advances from the FHLB. The Company believes it has the ability to borrow from
other sources.
The Bank is required to maintain specific amounts of capital pursuant to Office
of Thrift Supervision (OTS) regulations on minimum capital standards. The OTS'
minimum capital standards generally require the maintenance of regulatory
capital sufficient to meet each of three tests, hereinafter described as the
tangible
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capital requirement, the core capital requirement and the risk-based
requirement. The tangible capital requirement provides for minimum tangible
capital (defined as stockholders' equity less all intangible assets) equal to
1.5% of adjusted total assets. The core capital requirement provides for minimum
core capital (tangible capital plus certain forms of supervisory goodwill and
other qualifying intangible assets) equal to 3.0% of adjusted total assets. The
risk-based capital requirements provide for the maintenance of core capital plus
a portion of unallocated loss allowances equal to 8.0% of risk-weighted assets.
In computing risk-weighted assets the Bank multiplies the value of each asset on
its balance sheet by a defined risk-weighting factor (e.g., one-to four-family
conventional residential loans carry a risk-weighted factor of 50%).
The following table illustrates the Bank's regulatory capital levels compared to
its regulatory capital requirements at December 31, 2000.
"Well Capitalized"
Under Prompt
For Capital Corrective Action
Actual Adequacy Purposes Provisions
----------------------------- --------------------------- ---------------------------
(Dollars in Thousands) Amount Ratio Amount Ratio Amount Ratio
As of December 31, 2000:
Tangible capital (to
total assets) $ 26,638 9.69 % $ 4,124 1.50 % N/A N/A
Core capital (to total
assets) 26,638 9.69 % 8,245 3.00 % N/A N/A
Total risk-based capital
(to risk-weighted assets) 28,030 15.46 % 14,501 8.00 % $ 18,127 10.00 %
Tier I risk-based capital
(to risk-weighted assets) 26,638 14.70 % 9,063 5.00 % 10,876 6.00 %
Tier I leverage capital (to
average assets) 26,638 9.85 % 10,822 4.00 % 13,527 5.00 %
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no material change in the Company's quantitative or qualitative
aspects of market risk during the quarter ended December 31, 2000 from that
disclosed in the Company's Annual Report on Form 10-K for the year ended
September 30, 2000 other than an increase in borrowings from the Federal Home
Loan Bank of Des Moines - as disclosed in the financial statements.
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PART II - OTHER INFORMATION
18
Item 1. Legal Proceedings:
Periodically, there have been various claims and lawsuits involving the
Bank, such as claims to enforce liens, condemnation proceedings on
properties in which the Bank holds security interests, claims involving
the making and servicing of real property loans and other issues
incident to the Bank's business. The Bank is not a party to any pending
legal proceedings that it believes would have a material adverse effect
on the financial condition or operations of the Bank.
Item 2. Changes in Securities and Use of Proceeds: Not applicable
Item 3. Defaults Upon Senior Securities: Not applicable
Item 4. Submission of Matters to a Vote of Security-Holders: Not Applicable
Item 5. Other Information: Not applicable
Item 6. Exhibits and Reports on Form 8-K:
A. Exhibits
3.1 Certificate of Incorporation of Pulaski Financial Corp.*
3.2 Bylaws of Pulaski Financial Corp.*
4.0 Form of Certificate for Common Stock*
B. Reports on Form 8-K
On December 28, 2000, the Company filed a current report on Form 8-K to
report a change in its independent public accountants.
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* Incorporated by reference from the Form S-1 (Registration No.333-56465),
as amended, asfiled on June 9, 1998.
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SIGNATURES
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PULASKI FINANCIAL CORP.
Date: February 14, 2001 /s/ William A. Donius
-----------------------------------------
William A. Donius
Chairman and Chief Executive Officer
Date: February 14, 2001 /s/ Thomas F. Hack
-----------------------------------------
Thomas F. Hack
Chief Financial Officer/Treasurer
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