News Column

Pulaski Financial Reports First Fiscal Quarter Results

January 28, 2014

Highlights for the Quarter Diluted EPS $0.20 in 2014 versus $0.25 in 2013 Credit costs decreased 90% to $327,000 in 2014 versus $3.3 million in 2013 Mortgage revenues down 65% on sharp drop in loan refinancing activity Commercial loan portfolio increased $15.3 million , or 2% Net interest income declined 14%; commercial loan growth only partially offsets impact of market-driven yield declines and expected legacy residential mortgage portfolio runoff Internal adversely classified assets represented only 35% of regulatory capital plus the allowance for loan losses ST. LOUIS --(BUSINESS WIRE)-- Pulaski Financial Corp. (Nasdaq Global Select: PULB, the “Company”) reported net income available to common shareholders for the quarter ended December 31, 2013 of $2.2 million , or $0.20 per diluted common share compared with $2 .7 million, or $0.25 per diluted common share, for the same quarter last year. Earnings for the quarter benefited from a sharp decline in credit costs as asset quality remained stable. Total credit costs, consisting of the provision for loan losses and foreclosed property losses and expense, fell to $327,000 for the December 2013 quarter compared with $3 .3 million in the same quarter last year. Net charge-offs decreased to $836,000 compared with $1 .2 million in last year’s quarter. The quarter-end level of non-performing assets increased $2.9 million from September 30, 2013 primarily as the result of the classification as non-accrual of a $3.9 million loan secured by commercial real estate in the St. Louis metropolitan area that had been on the Company’s list of adversely classified loans for several quarters. However, the combined level of adversely classified and watch list loans declined 4% during the quarter. Noninterest income for the quarter decreased $2.2 million compared with the same quarter last year primarily as the result of a 65% decrease in mortgage revenues. The Company saw a 56% decrease in the amount of mortgage loans originated for sale during the quarter compared with last year’s quarter. Dampened by the higher level of market interest rates, and directionally consistent with industry-wide trends, the level of mortgage loan refinancings decreased 87%. However, the volume of loans to finance home purchases decreased only 9%. Net interest income for the quarter was down $1.6 million compared with the same quarter last year primarily as the result of lower levels of interest income on loans. Interest income on mortgage loans held for sale decreased $1.0 million primarily due to the lower average balance resulting from the decreased mortgage origination activity. Interest income on portfolio loans decreased $1.1 million primarily as the result of a decrease in the average yield. Gary Douglass , President and Chief Executive Officer, commented, “Although down from the comparable quarter last year, our first fiscal quarter earnings in 2014 remained at a respectable level in light of the difficult operating environment we faced. The dramatic industry-wide decrease in consumer demand for mortgage refinancings had a significant negative impact on mortgage revenues and the amount of interest earned on loans held for sale. In addition, the continued strong competition for commercial loans held down the interest rates we were able to charge on new and renewing loans. Fortunately, a significant portion of our revenue decline was offset by significantly lower overall credit costs as we continue to reap the benefits of our hard work in problem asset management over the past several years.” Douglass continued, “Looking forward to the balance of fiscal 2014, we continue to remain optimistic about our prospects for meaningful earnings growth. We expect our second fiscal quarter to produce reasonably similar results to the just completed first quarter as the seasonal nature of purchase mortgage demand and minimal refinance activity continue to depress mortgage-related revenues. However, we expect a much stronger second half of our fiscal year driven by increased home purchase activity and an expanded staff of mortgage loan originators. We also expect continued commercial portfolio growth, bolstered by our renewed focus on new business and expanded production capacity. Earnings for the balance of the fiscal year should also benefit from the repurchase of additional preferred stock funded by lower-cost, tax-deductible bank borrowings. Finally, we will opportunistically review and evaluate shareholder-beneficial, in-market acquisition opportunities and possible niche loan production activities as drivers of potential future revenue growth.” Other News – Company Completes Repurchase of $10 Million of Preferred Stock The Company also today announced that it recently completed another repurchase of its preferred stock from a private investor. During January 2014 , the Company repurchased $10 million in par value, or approximately 58% of the outstanding shares, of its Fixed Rate Cumulative Perpetual Preferred Stock, Series A, using proceeds from a loan obtained from a commercial bank. Following the repurchase, $7.3 million in par value, or 23% of the original amount issued, remains outstanding. Conference Call Tomorrow Pulaski Financial’s management will discuss first fiscal quarter results and other developments tomorrow, January 29, 2014 , during a conference call beginning at 11 a.m. EDT ( 10 a.m. CDT ). The call will also be simultaneously webcast and archived for three months at: http://pulaskibank.com/corporate-profile.aspx . Participants in the conference call may dial 877-473-3757, conference ID 44426431, a few minutes before the start time. The call will also be available for replay through March 1, 2014 at 855-859-2056 or 404-537-3406, conference ID 44426431. About Pulaski Financial Pulaski Financial Corp. , operating in its 92nd year through its subsidiary, Pulaski Bank , offers a full line of quality retail and commercial banking products through 13 full-service branch offices in the St. Louis metropolitan area. The Bank also offers mortgage loan products through loan production offices in the St. Louis and Kansas City metropolitan areas, mid- Missouri , southwestern Missouri , eastern Kansas , Omaha, Nebraska , and Council Bluffs, Iowa . The Company’s website can be accessed at www.pulaskibank.com . This news release may contain forward-looking statements about Pulaski Financial Corp. , which the Company intends to be covered under the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements. These forward-looking statements cover, among other things, anticipated future revenue and expenses and the future plans and prospects of the Company. These statements often include the words "may," "could," "would," "should," "believes," "expects," "anticipates," "estimates," "intends," "plans," "targets," "potentially," "probably," "projects," "outlook" or similar expressions. You are cautioned that forward-looking statements involve uncertainties, and important factors could cause actual results to differ materially from those anticipated, including changes in general business and economic conditions, changes in interest rates, legal and regulatory developments, increased competition from both banks and non-banks, changes in customer behavior and preferences, and effects of critical accounting policies and judgments. For discussion of these and other risks that may cause actual results to differ from expectations, refer to our Annual Report on Form 10-K for the year ended September 30, 2013 on file with the SEC , including the sections entitled "Risk Factors." These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update them in light of new information or future events. PULASKI FINANCIAL CORP. CONDENSED STATEMENTS OF INCOME (Unaudited) (Dollars in thousands except per share data) Three Months Ended December 31 , September 30 , December 31 , 2013 2013 2012 Interest income $ 11,498 $ 12,117 $ 13,613 Interest expense 1,323 1,406 1,806 Net interest income 10,175 10,711 11,807 Provision for loan losses 200 6,850 2,065 Net interest income after provision for loan losses 9,975 3,861 9,742 Mortgage revenues 1,033 2,752 2,988 Retail banking fees 1,046 1,050 1,153 Investment brokerage revenues 99 231 293 Other 294 471 282 Total non-interest income 2,472 4,504 4,716 Salaries and employee benefits 4,191 4,354 4,566 Occupancy, equipment and data processing expense 2,627 2,543 2,360 Advertising 179 157 119 Professional services 822 600 554 FDIC deposit insurance premium expense 261 276 434 Real estate foreclosure losses and expense, net 127 644 1,214 Other 493 908 611 Total non-interest expense 8,700 9,482 9,858 Income (loss) before income taxes 3,747 (1,117 ) 4,600 Income tax expense (benefit) 1,244 (537 ) 1,472 Net income (loss) after tax 2,503 (580 ) 3,128 Benefit from repurchase of preferred stock, net - (20 ) - Preferred stock dividends (295 ) (342 ) (406 ) Earnings (loss) available to common shares $ 2,208 $ (942 ) $ 2,722 Annualized Performance Ratios Return on average assets 0.81 % (0.18 %) 0.96 % Return on average common equity 8.83 % (3.71 %) 11.40 % Interest rate spread 3.42 % 3.54 % 3.73 % Net interest margin 3.53 % 3.65 % 3.87 % SHARE DATA Weighted average common shares outstanding - basic 10,948,781 10,922,253 10,815,633 Weighted average common shares outstanding - diluted 11,220,002 11,181,889 11,066,355 Basic earnings (loss) per common share $0.20 ( $0.09 ) $0.25 Diluted earnings (loss) per common share $0.20 ( $0.08 ) $0.25 Dividends per common share $0.095 $0.095 $0.095 PULASKI FINANCIAL CORP. BALANCE SHEET DATA (Unaudited) (Dollars in thousands) December 31 , September 30 , 2013 2013 Total assets $ 1,293,704 $ 1,275,944 Loans receivable, net 1,003,726 988,668 Allowance for loan losses 17,670 18,306 Mortgage loans held for sale, net 56,031 70,473 Investment securities 42,380 43,211 Capital stock of Federal Home Loan Bank 4,617 4,777 Cash and cash equivalents 105,057 86,309 Deposits 1,030,128 1,010,812 Borrowed money 114,543 113,483 Subordinated debentures 19,589 19,589 Stockholders' equity - preferred 17,388 17,310 Stockholders' equity - common 99,551 98,748 Total book value per common share $8.76 $8.65 Tangible book value per common share $8.41 $8.30 Regulatory capital ratios - Pulaski Bank only: (1) Tier 1 leverage capital (to average assets) 10.00 % 10.05 % Total risk-based capital (to risk-weighted assets) 14.03 % 14.03 % (1) September 30, 2013 regulatory capital ratios are estimated. December 31 , September 30 , 2013 2013 LOANS RECEIVABLE Single-family residential: First mortgage $ 214,918 $ 212,357 Second mortgage 43,420 43,208 Home equity lines of credit 107,228 110,906 Total single-family residential real estate 365,566 366,471 Commercial: Commercial and multi-family real estate 366,954 348,003 Land acquisition and development 37,941 40,430 Real estate construction and development 35,964 20,548 Commercial and industrial 210,298 226,829 Total commercial 651,157 635,810 Consumer and installment 2,742 2,761 1,019,465 1,005,042 Add (less): Deferred loan costs 2,902 3,188 Loans in process (971 ) (1,256 ) Allowance for loan losses (17,670 ) (18,306 ) Total $ 1,003,726 $ 988,668 Weighted average rate at end of period 4.38 % 4.45 % December 31, 2013 September 30, 2013 Weighted Weighted Average Average Interest Interest DEPOSITS Balance Rate Balance Rate Demand deposits: (Dollars in thousands) Non-interest-bearing checking $ 177,825 0.00 % $ 168,033 0.00 % Interest-bearing checking 254,882 0.10 % 237,362 0.10 % Savings accounts 39,693 0.13 % 39,845 0.13 % Money market 208,559 0.27 % 206,927 0.26 % Total demand deposits 680,959 0.13 % 652,167 0.13 % Certificates of Deposit: Traditional 299,573 0.77 % 313,217 0.84 % CDARS 49,596 0.26 % 45,428 0.28 % Total certificates of deposit 349,169 0.70 % 358,645 0.77 % Total deposits $ 1,030,128 0.32 % $ 1,010,812 0.35 % PULASKI FINANCIAL CORP. RESIDENTIAL MORTGAGE LOAN ACTIVITY (Unaudited) RESIDENTIAL MORTGAGE LOANS ORIGINATED FOR SALE 2014 2013 Mortgage Home Mortgage Home Refinancings Purchases Total Refinancings Purchases Total (In thousands) First quarter $ 29,996 $ 136,423 $ 166,419 $ 230,399 $ 149,241 $ 379,640 RESIDENTIAL MORTGAGE LOANS SOLD TO INVESTORS 2014 2013 Net Net Loans Mortgage Profit Loans Mortgage Profit Sold Revenues Margin Sold Revenues Margin (Dollars in thousands) First quarter $ 179,919 $ 1,033 0.57 % $ 367,388 $ 2,988 0.81 % PULASKI FINANCIAL CORP. NONPERFORMING ASSETS (Unaudited) (In thousands) December 31 , September 30 , NON-PERFORMING ASSETS 2013 2013 Non-accrual loans: Single-family residential real estate: First mortgage $ 5,145 $ 5,335 Second mortgage 585 442 Home equity lines of credit 1,866 2,124 Total single-family residential real estate 7,596 7,901 Commercial: Commercial and multi-family real estate 1,492 1,774 Land acquisition and development 3,429 - Commercial and industrial 357 - Total commercial 5,278 1,774 Consumer & installment 62 78 Total non-accrual loans 12,936 9,753 Non-Accrual Troubled debt restructurings: (1) Current under the restructured terms: Single-family residential real estate: First mortgage 6,938 5,169 Second mortgage 1,289 904 Home equity lines of credit 427 498 Total single-family residential real estate 8,654 6,571 Commercial: Commercial and multi-family real estate 1,647 2,585 Land acquisition and development - 43 Real estate construction and development - 23 Commercial and industrial 1,970 2,055 Total commercial 3,617 4,706 Consumer and installment 23 28 Total current troubled debt restructurings 12,294 11,305 Past due under restructured terms: Single-family residential real estate: First mortgage 2,141 3,974 Second mortgage 234 155 Home equity lines of credit 234 178 Total single-family residential real estate 2,609 4,307 Commercial: Commercial and multi-family real estate 2,780 1,652 Land acquisition and development 42 19 Real estate construction and development 42 - Commercial and industrial 451 572 Total commercial 3,315 2,243 Total past due troubled debt restructurings 5,924 6,550 Total non-accrual troubled debt restructurings 18,218 17,855 Total non-performing loans 31,154 27,608 Real estate acquired in settlement of loans: Residential real estate 2,403 3,019 Commercial real estate 3,347 3,376 Total real estate acquired in settlement of loans 5,750 6,395 Total non-performing assets $ 36,904 $ 34,003 (1) Troubled debt restructured includes non-accrual loans totaling $18.2 million and $17.9 million at December 31, 2013 and September 30, 2013 , respectively. These totals are not included in non-accrual loans above. PULASKI FINANCIAL CORP. ALLOWANCE FOR LOAN LOSSES AND ASSET QUALITY RATIOS (Unaudited) (Dollars in thousands) Three Months Ended December 31 , ALLOWANCE FOR LOAN LOSSES 2013 2012 Allowance for loan losses, beginning of period $ 18,306 $ 17,117 Provision charged to expense 200 2,065 Charge-offs: Single-family residential real estate: First mortgage 717 1,236 Second mortgage 196 351 Home equity 354 713 Total single-family residential real estate 1,267 2,300 Commercial: Commercial and multi-family real estate - 523 Land acquisition and development 465 23 Real estate construction and development - 260 Commercial and industrial - 484 Total commercial 465 1,290 Consumer and installment 21 34 Total charge-offs 1,753 3,624 Recoveries: Single-family residential real estate: First mortgage 59 25 Second mortgage 47 34 Home equity 159 86 Total single-family residential real estate 265 145 Commercial: Commercial and multi-family real estate 186 1,042 Land acquisition and development - 17 Real estate construction and development - 1,169 Commercial and industrial 458 15 Total commercial 644 2,243 Consumer and installment 8 11 Total recoveries 917 2,399 Net charge-offs 836 1,225 Balance, end of period $ 17,670 $ 17,957 December 31 , September 30 , ASSET QUALITY RATIOS 2013 2013 Non-performing loans as a percent of total loans 3.06 % 2.75 % Non-performing loans excluding current troubled debt restructurings as a percent of total loans 1.85 % 1.62 % Non-performing assets as a percent of total assets 2.85 % 2.66 % Non-performing assets excluding current troubled debt restructurings as a percent of total assets 1.90 % 1.78 % Allowance for loan losses as a percent of total loans 1.73 % 1.82 % Allowance for loan losses as a percent of non-performing loans 56.72 % 66.31 % Allowance for loan losses as a percent of non-performing loans excluding current troubled debt restructurings and related allowance for loan losses 90.27 % 106.56 % PULASKI FINANCIAL CORP. AVERAGE BALANCE SHEETS (Unaudited) (Dollars in thousands) Three Months Ended December 31, 2013 December 31, 2012 Interest Average Interest Average Average and Yield/ Average and Yield/ Interest-earning assets: Balance Dividends Cost Balance Dividends Cost Loans receivable $ 1,008,591 $ 10,836 4.30 % $ 987,147 $ 11,939 4.84 % Mortgage loans held for sale 54,239 567 4.18 % 183,801 1,569 3.41 % Other interest-earning assets 90,618 95 0.42 % 50,761 105 0.83 % Total interest-earning assets 1,153,448 11,498 3.99 % 1,221,709 13,613 4.46 % Non-interest-earning assets 79,097 86,550 Total assets $ 1,232,545 $ 1,308,259 Interest-bearing liabilities: Deposits $ 838,101 $ 958 0.46 % $ 911,539 $ 1,435 0.63 % Borrowed money 88,562 365 1.64 % 76,874 371 1.92 % Total interest-bearing liabilities 926,663 1,323 0.57 % 988,413 1,806 0.73 % Non-interest-bearing deposits 175,062 182,531 Non-interest-bearing liabilities 13,462 16,773 Stockholders' equity 117,358 120,542 Total liabilities and stockholders' equity $ 1,232,545 $ 1,308,259 Net interest income $ 10,175 $ 11,807 Interest rate spread 3.42 % 3.73 % Net interest margin 3.53 % 3.87 % Pulaski Financial Corp. Paul Milano , 314-878-2210 Chief Financial Officer Source: Pulaski Financial Corp.


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