SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 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.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
0-24571
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Commission File Number
Delaware 43-1816913
- -------------------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
12300 Olive Boulevard
St. Louis, Missouri 63141-6434
- -------------------------------------------- ---------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (314) 878-2210
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- ------
Indicate the number of shares outstanding of the registrant's classes of common
stock, as of the latest practicable date.
Class Outstanding at May 12, 2000
- -------------------------------------------- ---------------------------
Common Stock, par value $.01 per share 3,238,398 shares
PULASKI FINANCIAL CORP. AND SUBSIDIARIES
FORM 10-Q/A
MARCH 31, 2000
TABLE OF CONTENTS
The undersigned registrant hereby amends the following items of its Quarterly
Report on Form 10Q/A for the fiscal quarter ended March 31, 2000, as set forth
in the pages attached hereto (see Note 6 to the consolidated financial
statements).
PART I FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 2000 and September 30, 1999 (Unaudited) 1
Consolidated Statements of Income and Comprehensive (Loss) Income for
the Three and Six Months Ended March 31, 2000 and 1999 (Unaudited) 2
Consolidated Statement of Stockholders' Equity for the Six Months Ended
March 31, 2000 (Unaudited) 3
Consolidated Statements of Cash Flows for the Six Months Ended
March 31, 2000 and 1999 (Unaudited) 4-5
Notes to Consolidated Financial Statements (Unaudited) 6-9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10-16
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
PART II OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities and Use of Proceeds 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security-Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
Financial Data Schedule 20
PART I - FINANCIAL INFORMATION
PULASKI FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 AND SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
March 31, September 30,
ASSETS 2000 1999
(As restated,
see Note 6)
Cash and amounts due from depository institutions $ 639,931 $ 3,486,957
Federal funds sold and overnight deposits 5,500,000 5,400,000
-------------- -------------
Total cash and cash equivalents 6,139,931 8,886,957
Investment securities available for sale, at market value 4,401,281 4,234,145
Investments in debt securities held to maturity, at amortized cost (market value, $4,969,819
and $9,002,455, at March 31, 2000 and September 30, 1999, respectively) 5,008,330 9,010,427
Mortgage-backed and related securities held to maturity, at amortized cost (market value,
$3,682,813 and $4,154,784 at March 31, 2000 and September 30, 1999, respectively) 3,574,742 3,996,748
Mortgage-backed and related securities available for sale, at market value 20,263,509 21,356,446
Loans receivable held for sale, at lower of cost or market 6,164,630 8,159,085
Loans receivable, net of allowance for loan losses of $1,158,284 and $985,773 at
March 31, 2000 and September 30, 1999, respectively 196,026,033 181,532,561
Federal Home Loan Bank stock - at cost 1,980,000 1,501,200
Real estate acquired in settlement of loans, net of allowance for losses of
$10,198 and $17,161 at March 31, 2000 and September 30, 1999, respectively 135,494 228,002
Premises and equipment - net 2,630,428 2,235,412
Accrued interest receivable:
Investment securities 147,874 153,637
Mortgage-backed securities 145,132 151,903
Loans 1,130,738 1,041,503
Other 939 818
Other assets 2,673,763 1,485,537
-------------- -------------
TOTAL $ 250,422,824 $ 243,974,381
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits $ 161,318,501 $ 161,370,542
Advances from Federal Home Loan Bank of Des Moines 39,600,000 28,600,000
Advance payments by borrowers for taxes and insurance 1,140,309 2,440,520
Accrued interest payable 205,956 221,881
Dividends payable 14,280,718 339,740
Other liabilities 977,005 1,096,855
-------------- -------------
Total liabilities 217,522,489 194,069,538
-------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock - $.01 par value per share, authorized 1,000,000 shares; none
issued or outstanding
Common stock - $.01 par value per share, authorized 25,000,000 shares; 3,972,886
and 3,972,886 shares issued at March 31, 2000 and September 30, 1999, respectively 39,729 39,729
Treasury stock - at cost (481,488 and 198,000 shares, respectively) (5,366,054) (2,322,004)
Additional paid-in capital 23,099,736 35,685,866
Unearned MRDP shares (1,140,266) (18,400)
Unearned ESOP shares (unreleased shares, 125,475 and 217,242 respectively) (1,254,743) (2,172,420)
Accumulated other comprehensive loss (489,963) (235,360)
Retained earnings 18,011,896 18,927,432
-------------- -------------
Total stockholders' equity 32,900,335 49,904,843
-------------- -------------
TOTAL $ 250,422,824 $ 243,974,381
============== =============
See accompanying notes to the unaudited consolidated financial statements.
-1-
PULASKI FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE (LOSS) INCOME
THREE AND SIX MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
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Three Months Ended Six Months Ended
March 31, March 31,
-------------------------- ----------------------------
2000 1999 2000 1999
(As restated, (As restated,
see Note 6) see Note 6)
INTEREST INCOME:
Loans receivable $ 3,687,271 $ 3,108,274 $ 7,163,561 $ 6,193,816
Investment securities 166,303 254,757 347,275 543,411
Mortgage-backed and related securities 433,886 118,482 879,413 248,994
Other 81,272 214,270 180,901 334,306
----------- ----------- ----------- -----------
Total interest income 4,368,732 3,695,783 8,571,150 7,320,527
----------- ----------- ----------- -----------
INTEREST EXPENSE:
Deposits 1,596,282 1,658,577 3,187,966 3,399,669
Advances from Federal Home Loan Bank 534,516 42,642 946,092 112,082
Other 46,010
----------- ----------- ----------- -----------
Total interest expense 2,130,798 1,701,219 4,134,058 3,557,761
----------- ----------- ----------- -----------
NET INTEREST INCOME 2,237,934 1,994,564 4,437,092 3,762,766
PROVISION FOR LOAN LOSSES 71,568 43,832 198,642 83,414
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 2,166,366 1,950,732 4,238,450 3,679,352
----------- ----------- ----------- -----------
OTHER INCOME:
Retail banking fees 194,194 107,853 367,894 197,434
Mortgage revenues 219,190 281,616 494,985 594,365
Insurance commissions 85,621 87,929 207,185 158,837
Other 48,389 30,141 96,080 57,173
----------- ----------- ----------- -----------
Total other income 547,394 507,539 1,166,144 1,007,809
----------- ----------- ----------- -----------
OTHER EXPENSES:
Compensation expense - special dividend 1,355,602 - 1,355,602 -
Salaries and employee benefits 1,055,774 848,181 1,915,931 1,644,288
Occupancy, equipment and data processing expense 414,409 347,726 897,933 672,864
Federal insurance premiums 8,796 25,508 33,293 49,098
Advertising 107,786 96,937 184,921 201,527
Professional services 157,556 76,203 269,788 119,682
Other 255,193 218,388 506,742 376,654
----------- ----------- ----------- -----------
Total other expenses 3,355,116 1,612,943 5,164,210 3,064,113
----------- ----------- ----------- -----------
(LOSS) INCOME BEFORE INCOME TAXES (641,356) 845,328 240,384 1,623,048
INCOME TAXES 104,005 315,254 419,577 604,091
----------- ----------- ----------- -----------
NET (LOSS) INCOME (745,361) 530,074 (179,193) 1,018,957
OTHER COMPREHENSIVE LOSS ITEMS (68,216) (5,938) (254,603) (9,731)
----------- ----------- ----------- -----------
COMPREHENSIVE (LOSS) INCOME $ (813,577) $ 524,136 $ (433,796) $ 1,009,226
=========== =========== =========== ===========
NET (LOSS) INCOME PER COMMON SHARE - BASIC $ (0.22) $ 0.14 $ (0.05) n/m
=========== =========== =========== ===========
NET (LOSS) INCOME PER COMMON SHARE - DILUTED $ (0.22) $ 0.14 $ (0.05) n/m
=========== =========== =========== ===========
See accompanying notes to the unaudited consolidated financial statements
-2-
PULASKI FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED MARCH 31, 2000 (UNAUDITED)
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Unearned
Management Accumulate
Additional Recognition and Other Unearned
Common Treasury Paid-In Development Comprehensive ESOP Retained
Stock Stock Capital Plan Shares Loss Shares Earnings Total
BALANCE,
October 1, 1999 $39,729 $(2,322,004) $ 35,685,866 $ (18,400) $(235,360) $(2,172,420) $18,927,432 $49,904,843
-----------
Comprehensive loss:
Net loss (As restated,
see Note 6) (179,193) (179,193)
Change in net unrealized
losses on securities (254,603) (254,603)
-----------
Total comprehensive
loss (433,796)
-----------
Dividends declared
($.09 per share) (596,666) (596,666)
Stock options exercised
and related tax benefit 58,650 4,832 (22,900) 40,582
Stock repurchase (4,419,758) (4,419,758)
Release of ESOP shares
(As restated, see Note 6) 87,466 917,677 1,005,143
Amortization of Manage-
ment Recognition and
Development Plan shares 78,415 78,415
Management Recognition
and Development Plan
shares issued 1,317,058 (1,200,281) (116,777) -
Special cash dividend
($4.00 per share) (12,678,428) (12,678,428)
------- ----------- ------------- ----------- --------- ----------- ----------- -----------
BALANCE,
March 31, 2000 $39,729 $(5,366,054) $ 23,099,736 $(1,140,266) $(489,963) $(1,254,743) $18,011,896 $32,900,335
======= =========== ============= =========== ========= =========== =========== ===========
See accompanying notes to the unaudited consolidated financial statements.
-3-
PULASKI FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
2000 1999
(As restated,
see Note 6)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (179,193) $ 1,018,957
Adjustments to reconcile net (loss) income to net cash provided
by operating activities:
Depreciation, amortization and accretion:
Premises and equipment 241,574 172,929
Management Recognition and Development Plan stock awards 78,415 27,600
ESOP shares committed to be released 1,005,143 74,293
Loan fees, discounts and premiums - net 6,949 (29,166)
Deferred income taxes 155,499 (40,683)
Provision for loan losses 198,642 83,414
Provision for losses on real estate acquired in settlement of loans 4,679 14,828
(Gains) losses on sales of real estate acquired in settlement of loans 13,746 (6,401)
Gain on sale of investments (1,750)
Gains on sales of loans (384,226) (452,162)
Originations of loans receivable for sale to correspondent lenders (45,453,545) (70,810,853)
Proceeds from sales of loans to correspondent lenders 47,832,226 70,401,162
Changes in other assets and liabilities (176,458) 43,827
---------- ----------
Net adjustments 3,522,644 (522,962)
---------- ----------
Net cash provided by operating activities 3,343,451 495,995
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales and maturities of investment securities 7,532,215 8,550,000
Purchases of investment securities and FHLB stock (4,088,929) (4,078,018)
Principal payments received on mortgage-backed and related
securities 1,129,873 983,205
Loan originations - net (14,878,952) (13,956,206)
Proceeds from sales of real estate acquired in settlement of
loans receivable 180,000 113,501
Net additions to premises and equipment (636,590) (217,694)
---------- ----------
Net cash used in investing activities (10,762,383) (8,605,212)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in deposits (52,041) 5,595,832
Federal Home Loan Bank advances - net 11,000,000 (300,000)
Net decrease in advance payments by borrowers for taxes and
insurance (1,300,211) (1,500,363)
Dividends paid on common stock (596,666) (672,928)
Treasury stock issued under stock option plan 40,582
Stock repurchases (4,419,758)
Issuance of common stock under conversion/reorganization 19,440,662
---------- ----------
Net cash provided by financing activities 4,671,906 22,563,203
---------- ----------
(Continued)
-4-
PULASKI FINANCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
2000 1999
(As restated,
see Note 6)
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS $ (2,747,026) $14,453,986
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 8,886,957 3,047,328
------------ -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,139,931 $17,501,314
============ ===========
ADDITIONAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest on deposits $ 3,203,892 $ 3,426,930
Interest on advances from the Federal Home Loan Bank
of Des Moines 946,091 112,082
Income taxes 695,062 501,000
NONCASH INVESTING ACTIVITIES:
Write-down of real estate owned 4,679 14,363
Real estate acquired in settlement of loans 105,917 211,251
(Decrease) increase in investments for changes in unrealized
gains and losses (404,133) 14,400
NONCASH FINANCING ACTIVITIES:
Dividends declared 14,280,718 339,740
Issuance of common stock:
Decrease in stock subscriptions - 5,129,497
Purchase by ESOP - 2,327,600
Proceeds received from deposit transfers - 1,987,515
See accompanying notes to the unaudited consolidated financial statements (Concluded)
-5-
PULASKI FINANCIAL CORP. AND SUBSIDIARIES
NOTES TO 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 subsidiaries,
Pulaski Bank, A Federal Savings Bank (the "Bank") and Pulaski Service
Corporation. All significant intercompany accounts and transactions have
been eliminated.
On December 2, 1998, the conversion of Pulaski Bancshares, M.H.C. from a
federal mutual holding company to a stock holding company was completed,
resulting in the Company becoming the holding company for the Bank. In
connection with the Conversion and Reorganization, the Company sold
2,909,500 shares of its common stock to the public at $10 per share in a
public offering ("Offering"), including 232,760 shares purchased by the
Company's Employee Stock Ownership Plan. In addition, 1,056,003 shares of
common stock of the Company were issued in exchange for shares of stock of
the Bank previously held by public stockholders at an exchange ratio of
1.6608 shares for each share of Bank common stock, resulting in 3,965,503
shares of common stock of the Company outstanding at the completion of the
Conversion and Reorganization. The Company has no significant assets,
other than all of the outstanding shares of the Bank and the portion of
the net proceeds from the Offering retained by the Company, and no
significant liabilities. Management of the Company and the Bank are
substantially similar and the Company neither owns nor leases any
property, but instead uses the premises, equipment and furniture of the
Bank. 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 accompanying 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 March 31, 2000 and September 30, 1999 and
the results of its operations for the three and six month periods ended
March 31, 2000 and 1999. The results of operations for the three and six
month periods ended March 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, 1999 contained in the Company's 1999 Annual Report to
Stockholders which is filed as an exhibit to the Company's Annual Report
on Form 10-K for the year ended September 30, 1999.
-6-
2. EARNINGS PER SHARE
Three Months Ended Six Months Ended
March 31, March 31,
------------------------- -----------------------
2000 1999 2000 1999
Weighted average shares
outstanding - basic 3,378,878 3,736,665 3,428,147 n/m
Dilutive common shares - 6,830 - n/m
---------- ---------- ----------
Weighted average shares
outstanding - diluted 3,378,878 3,743,495 3,428,147 n/m
========= ========= =========
Anti-dilutive shares 273,082 9,909 172,494 n/m
========= ========= =========
Under the Treasury Stock method, outstanding stock options are dilutive
when the average market price of the Company's common stock exceeds the
option price during a period. In addition, proceeds from the assumed
exercise of dilutive options along with the related tax benefit are
assumed to be used to repurchase common shares at the average market price
of such stock during the period. Anti-dilutive shares are those option
shares with exercise prices in excess of the current market value.
Earnings per share for the six months ended March 31, 1999 are not
meaningful due to the stock conversion/ reorganization which was completed
December 2, 1998.
3. STOCK COMPENSATION PLANS
Restricted Stock - On January 21, 2000, shareholders approved a Management
Recognition and Development Plan ("MRDP") granting up to 116,380 shares of
restricted stock to be awarded to participants. On that same day the Board
of Directors approved allocation of 112,307 shares. The restricted stock
awards vest over a five-year period. The 112,307 shares of stock were
issued from Treasury Stock on the date of the grant. The Company recorded
the stock award at market value ($10.69 per share) as unearned MRDP shares
in stockholder's equity and will amortize the unearned MRDP shares to
compensation expense over the vesting period.
As a result of the declaration of a special cash dividend of $4.00 per
share (see Note 4), dividends of approximately $449,000 will be paid on
unvested shares included in the Company's MRDP, and accounted for as
compensation expense. On or about September 1, 2000 (the payment date for
the special cash dividend) unearned MRDP shares will be reduced, with a
corresponding charge to additional paid-in capital, to reflect the
reduction in the value of the shares held by the Plan.
Stock Option Plan - On January 21, 2000, as a result of shareholder
approval on that date of the Company's Stock-Based Incentive Plan, the
Company granted options to purchase 258,979 shares of common stock at an
exercise price of $10.69 per share to officers and directors of the
Company and the Bank. As a result of the special cash dividend (see Note
4), the option exercise price will be repriced on or about September 5,
2000, the x-dividend date, to reflect the proportional change in value.
Employee Stock Option Plan - It is anticipated that the special cash
distribution to be received by the ESOP will be used to prepay a portion
of the internally financed debt obligation. This resulted in a charge of
approximately $906,000 compensation expense related to the commitment to
release additional shares to plan participants. This compensation charge
will not be deductible for income tax purposes and results in an abnormal
tax rate for the period. Fewer shares will remain to be allocated in the
future as a result of this accelerated allocation.
-7-
4. DECLARATION OF $4.00 PER SHARE SPECIAL CASH DISTRIBUTION
On March 31, 2000, the Board of Directors declared a special cash
distribution in the amount of $4.00 per share. The dividend will be paid
on September 1, 2000. The distribution is being made to reduce the excess
capital levels created when the Company converted to full stock in
December 1998. The Company expects that most of the distribution will be a
non-taxable return of capital.
5. RECLASSIFICATIONS
Certain reclassifications have been made to 1999 amounts to conform to the
2000 presentation.
6. RESTATEMENT
In September 2000, the Company paid a $4.00 a share return of capital (see
Note 4) to the Company's Employee Stock Ownership Plan ("ESOP").
Subsequent to the issuance of the Company's consolidated financial
statements for the three and six months ended March 31, 2000, a
determination was made by the Company that the compensation expense
(approximately $906,000) associated with the payment of the $4.00 return
of capital to the Employees Stock Ownership Plan would not be deductible
for income tax purposes. In addition, the Company determined that the
actual number of unallocated ESOP shares which were subject to the $4.00 a
share return of capital was 213,363, rather than 209,484 as previously
reported. These additional shares resulted in additional compensation
expense of approximately $33,000. As a result, the consolidated financial
statements as of and for the three and six months ended March 31, 2000
have been restated from amounts previously reported.
A summary of the significant effects of the restatement is as follows:
As Previously As
Reported Restated
As of March 31, 2000:
Other assets $ 2,977,101 $ 2,673,763
Total assets 250,726,162 250,422,824
Additional paid-in capital 23,053,726 23,099,736
Unearned ESOP shares (1,256,897) (1,254,743)
Retained earnings 18,363,398 18,011,896
Stockholders' equity 33,203,673 32,900,335
Total liabilities and stockholders' equity 250,726,162 250,422,824
For the three months ended March 31, 2000:
Compensation expense - special dividend $ 1,322,954 $ 1,355,602
Total other expenses 3,322,468 3,355,116
Loss before income taxes (608,708) (641,356)
Income taxes (benefit) expense (214,849) 104,005
Net loss (393,859) (745,361)
Comprehensive loss (462,075) (813,577)
Net loss per common share - basic (0.12) (0.22)
Net loss per common share - diluted (0.12) (0.22)
-8-
As Previously As
Reported Restated
For the six months ended March 31, 2000:
Compensation expense - special dividend $1,322,954 $1,355,602
Total other expenses 5,131,562 5,164,210
Income before income taxes 273,032 240,384
Income taxes 100,723 419,577
Net income (loss) 172,309 (179,193)
Comprehensive loss (82,294) (433,796)
Net income (loss) per common share - basic 0.05 (0.05)
Net income (loss) per common share - diluted 0.05 (0.05)
* * * * * *
-9-
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.
RESTATEMENT
In September 2000, the Company paid a $4.00 a share return of capital (see Note
4 to the consolidated financial statements) to the Company's Employee Stock
Ownership Plan ("ESOP"). Subsequent to the issuance of the Company's
consolidated financial statements for the three and six months ended March 31,
2000, a determination was made by the Company that the compensation expense
(approximately $906,000) associated with the payment of the $4.00 return of
capital to the Employees Stock Ownership Plan would not be deductible for income
tax purposes. In addition, the Company determined that the actual number of
unallocated ESOP shares which were subject to the $4.00 a share return of
capital was 213,363, rather than 209,484 as previously reported. These
additional shares resulted in additional compensation expense of approximately
$33,000. As a result, the consolidated financial statements as of and for the
three and six months ended March 31, 2000 have been restated from amounts
previously reported (see Note 6 to the consolidated financial 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 March 31, 2000 were $250.4 million, an increase of $6.4 million
from $244.0 million at September 30, 1999. The increase in total assets was
primarily attributable to increases in loans receivable,
-10-
offset by decreases in investments and debt securities, cash equivalents,
mortgage-backed securities, and loans held for sale.
Loans receivable increased $14.5 million from $181.5 million at September 30,
1999 to $196.0 million at March 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 to secondary markets. The Bank provides financing for these mortgage
loans at slightly higher rates, subject to well-defined underwriting criteria.
Non-conforming loans have increased as a result of hiring four commissioned loan
officers capable of generating higher yielding assets.
Cash and cash equivalents decreased from $8.9 million at September 30, 1999 to
$6.1 million at March 31, 2000. Investments and debt securities declined from
$13.2 million at September 30, 1999 to $9.4 million at March 31, 2000.
Mortgage-backed securities decreased from $25.4 million at September 30, 1999 to
$23.8 million at March 31, 2000. These declines were due to utilization of
overnight investments, maturities and cash flows to fund loan growth.
Total liabilities at March 31, 2000 were $217.5 million, an increase of $23.4
million from $194.1 million at September 30, 1999. The increase in total
liabilities was primarily attributable to recording a special $4.00 return of
capital dividend, payable in September 2000, and increased borrowings from the
Federal Home Loan Bank , offset by a reduction in borrowers' escrow funds for
payment of real estate taxes and insurance.
On March 31, 2000, the Board of Directors of the Company declared a special
$4.00 per share dividend payable September 1, 2000. Management expects that
most, if not all, of that dividend will be a non-taxable return of capital,
although the exact amount of the distribution that could be considered
non-taxable cannot be confirmed until the Company's operating results for the
tax year ending September 30, 2000 have been determined. The amount of the
special cash distribution that would be treated as a return of capital would be
considered a reduction in the cost basis of each share and will not be subject
to income tax as a dividend to shareholders. Based upon current outstanding
shares, an accrual of approximately $14.0 million was made to reflect this
special dividend payable. The Company is continuing in its authorized share
repurchase program, and consequently, this ultimate liability may decrease if
additional shares are repurchased.
Deposit account balances remain unchanged from $161.3 million at September 30,
1999. The Bank's checking and money market accounts increased $3.2 million since
September 30, 1999 to $35.2 million, but this growth was offset by a similar
decline in the passbook and certificate balances that was attributed to the
closing in September 1999 of a branch office located in Sunset Hills, Missouri.
A new branch office was opened in February 2000 in St. Charles County, Missouri.
Borrowings increased $11.0 million, from $28.6 million at September 30, 1999 to
$39.6 million at March 31, 2000, as proceeds were used to fund portfolio loan
growth and payment of borrowers escrowed real estate taxes of approximately $2.6
million in December 1999.
Total stockholders' equity at March 31, 2000 was $32.9 million, a decrease of
$17.0 million from the $49.9 million at September 30, 1999. The decrease is
primarily attributable to declaration of a potential special dividend, and the
repurchase of 400,795 shares for $4.4 million, payment of regular dividends of
$597,000, increase in the amount of unrealized losses on securities held for
sale of $255,000, and net loss for the six months ended March 31, 2000 of
$179,000.
-11-
NON-PERFORMING ASSETS AND DELINQUENCIES
Non-accrual loans amounted to $216,000 at March 31, 2000 as compared to $258,000
at September 30, 1999. The non-accrual loans consisted primarily of
single-family residential loans. Accruing loans that were contractually past due
90 days or more at March 31, 2000 amounted to $1.4 million, of which $486,000
were FHA/VA government-insured loans, compared to $363,000 of FHA/VA loans at
September 30, 1999. Real estate acquired in settlement of loans, net of
allowance for losses decreased to $135,000 at March 31, 2000 from $228,000 at
September 30, 1999, and consisted of single-family residences. The allowance for
loan losses was $1.2 million at March 31, 2000, or .57% of total loans and 73%
of non-performing loans (non-accrual loans and accruing loans past due 90 days
or more).
COMPARISON OF OPERATING RESULTS FOR THE THREE AND SIX MONTHS ENDED MARCH 31,
2000 AND 1999:
All trends for the three months ended March 31, 2000 and 1999 are reflective of
the trends for the six month periods ended March 31, 2000 and 1999, in all
material respects, unless otherwise noted.
GENERAL
Net loss for the three months ended March 31, 2000 was $745,000, compared to net
income of $530,000 for the three months ended March 31, 1999. Net loss for the
six months ended March 31, 2000 was $179,000 compared to the six-month period
ended March 31, 1999 of $1.0 million. The current period loss is caused by a
one-time non-recurring recognition of compensation expense totaling $1.4 million
associated with the Company's $4.00 a share special dividend declaration and its
effect on restricted stock awards under the Company's 2000 Stock-Based Benefit
Plan and on the Employee Stock Ownership Plan.
INTEREST INCOME
Interest income increased $672,000, or 18% for the three months ended March 31,
2000, compared to the three months ended March 31, 1999. The increase resulted
primarily from an increase in interest on loans of $579,000, as well as an
increase of $315,000 in interest on mortgage-backed securities. These increases
are offset by a decrease in interest on investments of $88,000, and decreased
income on overnight investments of $133,000.
The increase in interest income on loans resulted from an increase in the
average balance of loans outstanding for the six months ended March 31, 1999 of
$164.7 million to $193.7 million at March 31, 2000. The weighted average yield
on loans increased from 7.55% to 7.62% over the same time period.
The increase in interest income from mortgage-backed securities resulted
primarily from an increase in the average balance from $6.1 million for the
three months ended March 31, 1999 to $24.1 million for the quarter ended March
31, 2000, offset by a reduction in the weighted average yield from 7.64% in 1999
to 7.18% in 2000. The decrease in the average yield is a reflection of the
amortization and prepayment of older higher rate securities.
The decrease in income from investments was due to a decline in the average
balance, from $18.4 million for the three months ended March 31, 1999 to $11.6
million for the three months ended March 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 $18.4 million for the March 1999 quarter to $5.8 million
for the March 2000 quarter.
-12-
INTEREST EXPENSE
Interest expense increased $430,000 for the three months ended March 31, 2000
compared to the same period last year. The additional expense resulted primarily
from increased interest expense of $492,000 on borrowings from the Federal Home
Loan Bank (FHLB). The average balance of borrowings increased from $2.9 million
for the quarter ended March 31, 1999 to $35.0 million for the quarter ended
March 31, 2000. The weighted average rate on FHLB borrowings increased from
5.87% for the quarter ended March 31, 1999 to 6.11% for the quarter ended March
31, 2000. The increase in the average balance is attributable primarily to the
use of advances to purchase mortgage-backed securities, fund loan originations,
payment of borrowers' funds escrowed for annual real estate taxes, and net
savings withdrawals.
Interest on deposits declined $62,000 or 4% for the quarter ended March 31, 2000
compared to the same quarter of the prior year, due to a 20 basis point decline
in average rates from 4.27% for the three months ended March 31, 1999 to 4.07%
for the three months ended March 31, 2000. The Bank's management adopted a
pricing strategy to reduce overall cost of funds in March 1999. The decline in
interest expense on deposits was offset by an increase in the average balance
from $155.3 million to $156.7 million.
PROVISION FOR LOAN LOSSES
The provision for loan losses was $72,000 for the three months ended March 31,
2000 compared to $44,000 for the three months ended March 31, 1999. Management
of the Bank deemed it necessary to increase the provision for loan losses after
considering an increase in total non-performing loans to $1.6 million at March
31, 2000 from $1.4 million at September 30, 1999 and because of the Bank's
investment in high loan to value residential loans and home equity loans has
increased. Loans up to 100% of the purchase price are made to borrowers having
excellent credit histories and high personal income. To date, the balances in
these high loan to value category of loans is less than 6% of total outstanding
loans. The Company closely monitors delinquencies on these loans.
The provision for loan losses is determined by management as the amount to be
added to the allowance for loan losses after net charge-offs have been deducted
to bring the allowance to a level which is considered adequate to absorb losses
inherent in the loan portfolio. Because management adheres to specific loan
underwriting guidelines focusing on mortgage loans secured by one-to-four-family
residences, the Bank's historical loan loss experience has been low. No
assurances, however, can be given as to future loan loss levels.
OTHER INCOME
Other income increased $40,000 for the three months ended March 31, 2000 from
$508,000 for the three months ended March 31, 1999. The increase in other income
was primarily the result of an increase in retail banking fees of $86,000 and
other income of $18,000. Offsetting these increases was a decline in mortgage
revenues, which fell from $282,000 for the March 1999 quarter to $219,000 for
the current quarter.
Retail banking fees rose from $108,000 in the March 1999 quarter to $194,000 for
the March 2000 quarter, which represents an 80% increase over the corresponding
period of the prior year as a result of the growth in checking accounts. The
number of net new checking accounts increased by 11%. Other income increased
primarily as a result of increased dividends received on greater FHLB stock
holdings, which are required to support additional borrowings from the FHLB. For
the year, approximately $480,000 additional stock has been purchased.
-13-
Insurance commissions for the three months ended March 31, 2000 were $86,000
compared to $88,000 for the March 31, 1999 quarter. Commissions from the sale of
annuities increased 30% from $159,000 for the six months ended March 31, 1999 to
$207,000 for the six months ended March 31, 2000. Increased sale of annuities is
attributed to the promotion of the top sales person into manager and a focused
approach with incentives for greater sales of annuities.
Mortgage revenues declined 22%, or $62,000, from $281,000 for the quarter ended
March 1999 to $219,000 for the quarter ended March 2000. For the six-month
period ended March 31, 2000, these revenues totaled $495,000 compared to
$594,000 for the same period one year ago. This 17% decline in revenue was due
to a 32% decline in total volume of loans sold. However, mortgage and home
equity lines of credit loans closed during the month of March 2000 totaled $23.9
million. The majority of these closed loans will be sold, and any resulting
revenues will be realized in the subsequent quarter. That is a new monthly
record for Pulaski Bank, and is a result of concentrated effort to grow lending
activity. In November 1999, the Bank hired a Senior Vice-President/Sales Manager
and subsequently four-commissioned loan officers to implement the Bank's growth
strategy.
OTHER EXPENSES
Other expenses increased $1.7 million, from $1.6 million for the March 1999
quarter, to $3.3 million for the three months ended March 31, 2000. The increase
was primarily due to the declaration of a special $4.00 per share dividend.
Compensation expense in the amount of $1.4 million was recorded to reflect
accelerated releasing of shares of stock for benefit of the employees stock
ownership program and dividends on unvested shares of restricted stock awards.
These expenses are expected to be non-recurring, and are further expected to
result in reduced compensation expense in future periods. Excluding the
compensation expense relating to the special dividend, compensation expense
increased $208,000 for the quarter, and $272,000 for the six-month period
compared to the previous year. Compensation expense increased primarily as a
result of an expanded work force, salary increases and impact of the decline in
year to date mortgage-lending volume on the deferral of loan origination
expense. Mortgage lending volume declined 27% for the six-month period ended
March 31, 2000 compared to the six months ended March 31, 1999.
Occupancy and equipment expenses increased from $348,000 for the quarter ended
March 31, 1999 to $414,000 for the 2000 quarter, due to higher amounts of rent,
taxes and depreciation resulting from opening a new branch office in St. Charles
County, Missouri.
Professional services cost increased from $76,000 for the three months ended
March 31, 1999 to $158,000 for the three months ended March 31, 2000. For the
six months ended March 31, 2000, professional services cost was $270,000,
compared to $120,000 for the six months ended March 31, 1999. Increased used of
professional service providers, and increased legal and accounting expenses
associated with review and professional opinions relating to the special $4.00
return of capital dividend were responsible for these increases.
Other miscellaneous expenses increased $37,000 for the quarter and $130,000 for
the six months year to date, primarily as a result of increased purchases of
stationery and supplies, and losses on dispositions of foreclosed properties.
INCOME TAXES
The provision for income taxes decreased $211,000 to $104,000 for the three
months ended March 31, 2000 from $315,000 for the three months ended March 31,
1999. The decrease was primarily attributable to lower operating results for the
quarter. The non-deductibility of approximately $906,000 of compensation expense
-14-
relating to the release of shares that resulted from the use of the special
$4.00 return of capital paid to the Employee Stock Ownership Plan that are not
deductible for income tax purposes resulted in an abnormal tax rate for the
period.
LIQUIDITY AND CAPITAL RESOURCES
Federal regulations require the Bank to maintain minimum levels of liquid assets
(i.e., cash and eligible investments). The required percentage has varied from
time to time based upon economic conditions and savings flows and is currently
4% of the average daily balance of its net withdrawable savings deposits and
short-term borrowings. The Bank attempts to maintain levels of liquidity at
levels in excess of those required by regulation. Maintaining levels of
liquidity acts, in part, to reduce the Company's balance sheet exposure to
interest rate risk. For the quarter ended March 31, 2000, the Bank's average
liquidity ratio (liquid assets as a percentage of net withdrawable savings
deposits and short-term borrowings) was 20.65%.
The Bank must also maintain adequate levels of liquidity to ensure the
availability of funds to satisfy loan commitments and deposit withdrawals. At
March 31, 2000, the Bank had outstanding commitments to originate loans of $16.1
million, and commitments to sell loans on a best-efforts basis of $15.2 million.
At the same date, certificates of deposit that are scheduled to mature in one
year or less totaled $77.3 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. 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 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. At March 31,
2000, the Bank had approximately $77.8 million available to it under the
above-mentioned borrowing arrangement. At March 31, 2000, the Bank had $39.6
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 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%).
-15-
The following table (as restated, see Note 6 to the consolidated financial
statements) illustrates the Bank's regulatory capital levels compared to its
regulatory capital requirements at March 31, 2000.
To be Categorized as
"Well Capitalized"
Under Prompt
For Capital Corrective Action
Actual Adequacy Purposes Provisions
----------------------------- -------------------------- ---------------------------
(Dollars in Thousands) Amount Ratio Amount Ratio Amount Ratio
As of March 31, 2000:
Tangible capital (to
total assets) $39,993 16.35 % $ 3,667 1.50 % N/A N/A
Core capital (to total
assets) 39,993 16.35 % 7,348 3.00 % N/A N/A
Total risk-based capital
(to risk-weighted assets) 41,149 26.17 % 12,225 8.00 % $15,281 10.00 %
Tier I risk-based capital
(to risk-weighted assets) 39,993 26.17 % N/A N/A 9,168 6.00 %
Tier I leverage capital (to
average assets) 39,993 16.83 % N/A N/A 11,859 5.00 %
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no significant change in the Company's quantitative or
qualitative aspects of market risk during the quarter ended March 31, 2000 from
that disclosed in the Company's Annual Report on Form 10-K for the year ended
September 30, 1999.
-16-
PART II - OTHER INFORMATION
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:
a. Changes in Securities: Not applicable
b. Use of Proceeds: Not applicable
Item 3. Defaults Upon Senior Securities: Not applicable
Item 4. Submission of Matters to a Vote of Security-Holders:
The Annual Meeting of the Stockholders of the Company was held on
January 21, 2000. The results of the vote were as follows:
1. The following individuals were elected as directors, each for a three-year term:
Votes For Votes Withheld
--------- --------------
E. Douglas Britt 2,843,546 447,801
Michael J. Donius 2,986,584 304,763
Garland A. Dorn 2,843,751 447,596
2. The Pulaski Financial Corp. 2000 Stock-Based Incentive Plan was approved by stockholders by the
following vote:
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
2,191,214 628,374 38,709 433,050
3. The appointment of Deloitte & Touche LLP as independent auditors of Pulaski Financial Corp. for the
fiscal year ended September 30, 2000 was ratified by the stockholders by the following vote:
For Against Abstain
--- ------- -------
3,183,131 89,999 20,239
Item 5. Other Information: Not applicable
-17-
Item 6. Exhibits and Reports on Form 8-K:
2.1 Certificate of Incorporation of Pulaski Financial Corp.*
2.2 Bylaws of Pulaski Financial Corp.*
4.0 Form of Certificate for Common Stock*
10.1 Pulaski Financial Corp. 2000 Stock-Based Incentive Plan**
27.0 Financial Data Schedule
- --------------------------------------------------------------------------------
* Incorporated by reference from the Form S-1 (Registration
No.333-56465), as amended, as filed on June 9, 1998.
** Incorporated herein by reference to Pulaski Financial Corp.'s
Definitive Proxy Statement for the 2000 Annual Meeting of
Stockholders.
-18-
SIGNATURES
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PULASKI FINANCIAL CORP.
Date: December 29, 2000 /S/William A. Donius
----------------------- -------------------------------------
William A. Donius
Chairman and Chief Executive Officer
Date: December 29, 2000 /S/Thomas F. Hack
----------------------- -------------------------------------
Thomas F. Hack
Chief Financial Officer/Treasurer
- 19 -