Pulaski Financial Reports Second Fiscal Quarter Results

Highlights for the Quarter

  • Diluted EPS was $0.17 in 2014 versus $0.29 in 2013
  • Credit costs decreased 95% to $88,000 in 2014 versus $1.6 million in 2013
  • Mortgage revenues down 84% on sharp drop in loan refinancing activity and weak purchase mortgage demand
  • Commercial loan portfolio increased $28.1 million, or 4%
  • Net interest income declined 12%; commercial loan growth unable to offset impact of market-driven yield declines and expected legacy residential mortgage portfolio runoff
  • Level of non-performing assets remained almost constant with December 31, 2013, but declined 18% from March 31, 2013

ST. LOUIS--()--Pulaski Financial Corp. (Nasdaq Global Select: PULB, the “Company”) reported net income available to common shareholders for the quarter ended March 31, 2014 of $1.9 million, or $0.17 per diluted common share compared with $3.2 million, or $0.29 per diluted common share, for the same quarter last year. For the six-month period, the Company reported net income available to common shareholders of $4.1 million, or $0.36 per diluted common share, in 2014 compared with $6.0 million, or $0.54 per diluted common share, in 2013.

Earnings for the quarter benefited from a sharp decline in credit costs as asset quality remained stable during the quarter, but improved significantly from a year ago. Non-performing assets totaled $36.8 million at March 31, 2014 compared with $36.9 million at December 31, 2013 and $44.9 million at March 31, 2013. The combined level of adversely classified and watch list loans declined 2% during the quarter and 15% compared with the March 31, 2013 levels. Total credit costs, consisting of the provision for loan losses and foreclosed property losses and expense, fell to $88,000 for the March 2014 quarter compared with $1.6 million in the same quarter last year. The provision for loan losses for the March 2014 quarter totaled $500,000 versus net charge-offs of $1.3 million compared with $1.4 million and $724,000, respectively, in the same quarter last year. Reserves established in prior periods when asset quality was deteriorating were used to absorb charge-offs recorded in the current period. Credit costs in the March 2014 quarter were also lower as the result of a $410,000 recovery of foreclosed property losses and expense resulting from the adjusted valuation of a parcel of commercial-use land that was acquired through foreclosure in a prior period and sold subsequent to March 31, 2014.

Non-interest income for the quarter decreased $2.8 million compared with the same quarter last year as the result of an 84% decrease in mortgage revenues. The Company saw a 60% decrease in the amount of mortgage loans originated for sale during the quarter compared with last year’s quarter. The higher level of market interest rates continued to dampen consumer demand for mortgage loan refinancings, which decreased 87%. The home purchase market also remained soft, resulting in a 20% decrease in the volume of loans originated to finance home purchases. In addition, the net profit margin on loans sold declined to 0.37% in the March 2014 quarter compared with 0.90% in the March 2013 quarter as loan production costs remained high in proportion to the volume of loans originated. Back-office mortgage production staffing levels were not reduced in proportion to the decreased origination volumes experienced during the quarter because of an anticipated seasonal rebound in mortgage origination activity in the second half of the fiscal year. Also, the Company expects additional loan origination activity to be generated by an expanded staff of mortgage loan originators in new and existing loan origination offices in future quarters.

Net interest income for the quarter was down $1.4 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 mainly due to a lower average balance resulting from the decreased mortgage origination activity. Interest income on portfolio loans decreased $746,000 primarily as the result of a decrease in the average yield, which more than offset the positive impact of the increased average balance. The total balance of commercial loans at March 31, 2014 increased 4% from December 31, 2013, showing increases in each major category.

Gary Douglass, President and Chief Executive Officer, commented, “While our earnings for the quarter were certainly not where we would like them to be, they were pretty much in line with our expectations, with the exception of the steeper than expected decline in residential mortgage-related revenues. Unfortunately, this seems to be occurring throughout the mortgage industry. On the positive side, our renewed focus on commercial loan production resulted in 4% linked-quarter growth in our commercial loan portfolio and 2.5% overall growth in our total loan portfolio. These are very strong and encouraging numbers given that we continue to operate in a relatively low-growth environment. In addition, our ongoing efforts to improve asset quality, including working on recoveries of previously charged-off loans and recoveries related to foreclosed properties, continue to show results as our overall net credit costs continue to decline to low levels.”

Douglass continued, “We remain very optimistic about our prospects for significant earnings growth in the second half of our fiscal year compared to what we earned in the first half. As we enter the traditionally stronger home buying season, we expect mortgage-related revenues to rebound to much higher levels than we have experienced over the last two quarters. We also expect that we will be able to continue to grow our commercial loan portfolio in the second half of the fiscal year. Increased mortgage loan volumes and commercial loan balances coupled with continued low funding costs should result in growth of both net interest income and net interest margin in each of the next two quarters. We also have an expectation of continued low net credit costs and effective control over non-interest expenses. Taking all of these expectations of our fiscal second half into consideration, we believe we will deliver meaningful earnings growth in fiscal 2014 compared to fiscal 2013.”

Conference Call Tomorrow

Pulaski Financial’s management will discuss second fiscal quarter results and other developments tomorrow, April 30, 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: https://www.pulaskibank.com/our-story/shareholder-relations/. Participants in the conference call may dial 877-473-3757, conference ID 44447001, a few minutes before the start time. The call will also be available for replay through May 30, 2014 at 855-859-2056 or 404-537-3406, conference ID 44447001.

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, Kansas City and Chicago 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
March 31, December 31, March 31,
2014 2013 2013
Interest income $ 11,374 $ 11,498 $ 13,176
Interest expense   1,313     1,323     1,687  
 
Net interest income 10,061 10,175 11,489
Provision for loan losses   500     200     1,375  
 
Net interest income after provision for loan losses   9,561     9,975     10,114  
 
Mortgage revenues 506 1,033 3,148
Retail banking fees 988 1,046 994
Investment brokerage revenues 63 99 264
Other   297     294     230  
Total non-interest income   1,854     2,472     4,636  
 
Salaries and employee benefits 4,574 4,191 4,413
Occupancy, equipment and data processing expense 2,732 2,627 2,545
Advertising 126 179 111
Professional services 503 822 801
FDIC deposit insurance premium expense 263 261 276
Real estate foreclosure losses and expense, net (412 ) 127 240
Other   452     493     720  
Total non-interest expense   8,238     8,700     9,106  
 
Income before income taxes 3,177 3,747 5,644
Income tax expense   1,074     1,244     1,992  
Net income after tax 2,103 2,503 3,652
Preferred stock dividends   (188 )   (295 )   (406 )
Earnings available to common shares $ 1,915   $ 2,208   $ 3,246  
 
Annualized Performance Ratios
Return on average assets 0.67 % 0.81 % 1.09 %
Return on average common equity 7.57 % 8.83 % 13.36 %
Interest rate spread 3.31 % 3.42 % 3.55 %
Net interest margin 3.41 % 3.53 % 3.67 %
 
SHARE DATA
Weighted average common shares outstanding - basic 10,969,484 10,948,781 10,916,522
Weighted average common shares outstanding - diluted 11,357,212 11,220,002 11,136,801
Basic earnings per common share $0.17 $0.20 $0.30
Diluted earnings per common share $0.17 $0.20 $0.29
Dividends per common share $0.095 $0.095 $0.095
 
 
PULASKI FINANCIAL CORP.
CONDENSED STATEMENTS OF INCOME, Continued
(Unaudited)
       
(Dollars in thousands except per share data)
 
Six Months Ended March 31,
2014 2013
Interest income $ 22,873 $ 26,789
Interest expense   2,636     3,493  
 
Net interest income 20,237 23,296
Provision for loan losses   700     3,440  
 
Net interest income after provision for loan losses   19,537     19,856  
 
Mortgage revenues 1,540 6,136
Retail banking fees 2,034 2,147
Investment brokerage revenues 162 557
Other   590     512  
Total non-interest income   4,326     9,352  
 
Salaries and employee benefits 8,765 8,979
Occupancy, equipment and data processing expense 5,360 4,905
Advertising 306 231
Professional services 1,325 1,355
FDIC deposit insurance premiums 524 710
Real estate foreclosure losses and expenses, net (285 ) 1,454
Other   943     1,330  
Total non-interest expense   16,938     18,964  
 
Income before income taxes 6,925 10,244
Income tax expense   2,319     3,464  
Net income after tax 4,606 6,780
Preferred stock dividends   (483 )   (811 )
Earnings available to common shares $ 4,123   $ 5,969  
 
Annualized Performance Ratios
Return on average assets 0.74 % 1.03 %
Return on average common equity 8.20 % 12.39 %
Interest rate spread 3.36 % 3.64 %
Net interest margin 3.47 % 3.77 %
 
SHARE DATA
Weighted average shares outstanding - basic 10,959,019 10,865,523
Weighted average shares outstanding - diluted 11,349,010 11,101,194
Basic earnings per common share $0.38 $0.55
Diluted earnings per common share $0.36 $0.54
Dividends per common share $0.19 $0.19
 
   
PULASKI FINANCIAL CORP.
BALANCE SHEET DATA
(Unaudited)
       
(Dollars in thousands)
 
March 31, December 31, September 30,
2014 2013 2013
Total assets $ 1,337,492 $ 1,293,704 $ 1,275,944
Loans receivable, net 1,028,785 1,003,726 988,668
Allowance for loan losses 16,829 17,670 18,306
Mortgage loans held for sale, net 37,724 56,031 70,473
Investment securities 58,709 42,380 43,211
Capital stock of Federal Home Loan Bank 6,232 4,617 4,777
Cash and cash equivalents 125,522 105,057 86,309
Deposits 1,031,965 1,030,128 1,010,812
Borrowed money 165,632 114,543 113,483
Subordinated debentures 19,589 19,589 19,589
Stockholders' equity - preferred 7,388 17,388 17,310
Stockholders' equity - common 100,624 99,551 98,748
Total book value per common share $8.83 $8.76 $8.65
Tangible book value per common share $8.48 $8.41 $8.30

Regulatory capital ratios - Pulaski Bank only: (1)

Tier 1 leverage capital (to average assets) 9.73 % 10.00 % 10.05 %
Total risk-based capital (to risk-weighted assets) 13.86 % 14.03 % 14.03 %
 
(1) March 31, 2014 regulatory capital ratios are estimated.
 
March 31, December 31, September 30,
2014 2013 2013
LOANS RECEIVABLE
Single-family residential:
First mortgage $ 218,978 $ 214,918 $ 212,357
Second mortgage 41,696 43,420 43,208
Home equity lines of credit   101,276     107,228     110,906  
Total single-family residential real estate   361,950     365,566     366,471  
Commercial:
Commercial and multi-family real estate 377,992 366,954 348,003
Land acquisition and development 41,042 37,941 40,430
Real estate construction and development 44,327 35,964 20,548
Commercial and industrial   215,928     210,298     226,829  
Total commercial   679,289     651,157     635,810  
Consumer and installment   2,554     2,742     2,761  
1,043,793 1,019,465 1,005,042
Add (less):
Deferred loan costs 3,364 2,902 3,188
Loans in process (1,543 ) (971 ) (1,256 )
Allowance for loan losses   (16,829 )   (17,670 )   (18,306 )
Total $ 1,028,785   $ 1,003,726   $ 988,668  
 
Weighted average rate at end of period   4.32 %   4.38 %   4.45 %
 
 
March 31, 2014 December 31, 2013 September 30, 2013
Weighted Weighted Weighted
Average Average Average
Interest Interest Interest
DEPOSITS Balance   Rate   Balance   Rate   Balance   Rate
Demand deposits: (Dollars in thousands)
Non-interest-bearing checking $ 182,788 0.00 % $ 177,825 0.00 % $ 168,033 0.00 %
Interest-bearing checking 258,553 0.10 % 254,882 0.10 % 237,362 0.10 %
Savings accounts 42,254 0.13 % 39,693 0.13 % 39,845 0.13 %
Money market   211,045   0.29 %   208,559   0.27 %   206,927   0.26 %
Total demand deposits   694,640   0.13 %   680,959   0.13 %   652,167   0.13 %
 
Certificates of Deposit:
Traditional 289,587 0.72 % 299,573 0.77 % 313,217 0.84 %
CDARS   47,738   0.25 %   49,596   0.26 %   45,428   0.28 %
Total certificates of deposit   337,325   0.66 %   349,169   0.70 %   358,645   0.77 %
Total deposits $ 1,031,965   0.30 % $ 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
 
Second quarter $ 24,376 $ 98,065 $ 122,441 $ 186,515 $ 123,009 $ 309,524
 
 
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 %
 
Second quarter $ 136,231 $ 507 0.37 % $ 349,870 $ 3,148 0.90 %
 
 
PULASKI FINANCIAL CORP.
NONPERFORMING ASSETS
(Unaudited)
           
(In thousands)
 
March 31, December 31, September 30,
NON-PERFORMING ASSETS 2014 2013 2013
Non-accrual loans:
Single-family residential real estate:
First mortgage $ 4,352 $ 5,145 $ 5,335
Second mortgage 588 585 442
Home equity lines of credit   1,926   1,866   2,124
Total single-family residential real estate   6,866   7,596   7,901
Commercial:
Commercial and multi-family real estate 1,471 1,492 1,774
Land acquisition and development 2,928 3,429 -
Real estate construction and development - - 23
Commercial and industrial   312   357   -
Total commercial   4,711   5,278   1,797
Consumer & installment   93   62   78
Total non-accrual loans   11,670   12,936   9,776
 

Non-Accrual Troubled debt restructurings: (1)

Current under the restructured terms:
Single-family residential real estate:
First mortgage 5,646 6,938 5,169
Second mortgage 1,097 1,289 904
Home equity lines of credit   835   427   498
Total single-family residential real estate   7,578   8,654   6,571
Commercial:
Commercial and multi-family real estate 1,308 1,647 2,585
Land acquisition and development - - 43
Real estate construction and development 43 - 23
Commercial and industrial   1,996   1,970   2,055
Total commercial   3,347   3,617   4,706
Consumer and installment   21   23   28
Total current troubled debt restructurings   10,946   12,294   11,305
Past due under restructured terms:
Single-family residential real estate:
First mortgage 3,772 2,141 3,974
Second mortgage 92 234 155
Home equity lines of credit   178   234   178
Total single-family residential real estate   4,042   2,609   4,307
Commercial:
Commercial and multi-family real estate 3,093 2,780 1,652
Land acquisition and development 41 42 19
Real estate construction and development - 42 -
Commercial and industrial   451   451   572
Total commercial   3,585   3,315   2,243
Total past due troubled debt restructurings   7,627   5,924   6,550
Total non-accrual troubled debt restructurings   18,573   18,218   17,855
Total non-performing loans   30,243   31,154   27,631
Real estate acquired in settlement of loans:
Residential real estate 2,809 2,403 3,019
Commercial real estate   3,751   3,347   3,376
Total real estate acquired in settlement of loans   6,560   5,750   6,395
Total non-performing assets $ 36,803 $ 36,904 $ 34,026
 

(1)

Troubled debt restructured includes non-accrual loans totaling $18.6 million, $18.2 million and $17.9 million at March 31, 2014, 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 Six Months
Ended March 31, Ended March 31,
ALLOWANCE FOR LOAN LOSSES 2014 2013 2014 2013
Allowance for loan losses, beginning of period $ 17,670 $ 17,957 $ 18,306 $ 17,117
Provision charged to expense 500 1,375 700 3,440
Charge-offs:
Single-family residential real estate:
First mortgage 258 366 975 1,602
Second mortgage 173 517 369 868
Home equity   658     635     1,012     1,349
Total single-family residential real estate   1,089     1,518     2,356     3,819
Commercial:
Commercial and multi-family real estate - 42 - 564
Land acquisition and development 562 - 1,027 23
Real estate construction and development - - - 260
Commercial and industrial   1     -     1     484
Total commercial   563     42     1,028     1,331
Consumer and installment   33     25     54     59
Total charge-offs   1,685     1,585     3,438     5,209
Recoveries:
Single-family residential real estate:
First mortgage 133 4 192 29
Second mortgage 11 75 58 109
Home equity   71     71     230     157
Total single-family residential real estate   215     150     480     295
Commercial:
Commercial and multi-family real estate 107 67 293 1,109
Land acquisition and development - - 1 17
Real estate construction and development - 628 - 1,797
Commercial and industrial   14     10     471     25
Total commercial   121     705     765     2,948
Consumer and installment   8     6     16     17
Total recoveries   344     861     1,261     3,260
Net charge-offs   1,341     724     2,177     1,949
Balance, end of period $ 16,829   $ 18,608   $ 16,829   $ 18,608
 
 
March 31, December 31, September 30,
ASSET QUALITY RATIOS 2014 2013 2013
Non-performing loans as a percent of total loans 2.90 % 3.06 % 2.75 %

Non-performing loans excluding current troubled debt restructurings as a percent of total loans

1.85 % 1.85 % 1.62 %
Non-performing assets as a percent of total assets 2.75 % 2.85 % 2.66 %

Non-performing assets excluding current troubled debt restructurings as a percent of total assets

1.93 % 1.90 % 1.78 %
Allowance for loan losses as a percent of total loans 1.61 % 1.73 % 1.82 %

Allowance for loan losses as a percent of non-performing loans

55.65 % 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

83.37 % 90.27 % 106.56 %
 
 
PULASKI FINANCIAL CORP.
AVERAGE BALANCE SHEETS
(Unaudited)
               
(Dollars in thousands)
 
Three Months Ended
March 31, 2014 March 31, 2013
Interest Average Interest Average
Average and Yield/ Average and Yield/
Interest-earning assets: Balance   Dividends   Cost Balance   Dividends   Cost
Loans receivable $ 1,020,247 $ 10,899 4.27 % $ 1,007,196 $ 11,644 4.62 %
Mortgage loans held for sale 35,331 365 4.13 % 178,783 1,413 3.16 %
Other interest-earning assets   125,911     111 0.35 %   66,180     119 0.72 %
Total interest-earning assets 1,181,489   11,375 3.85 % 1,252,159   13,176 4.21 %
Non-interest-earning assets   80,621   82,207
Total assets $ 1,262,110 $ 1,334,366
 
Interest-bearing liabilities:
Deposits $ 870,054 $ 907 0.42 % $ 942,363 $ 1,327 0.56 %
Borrowed money   94,108     407 1.73 %   87,209     360 1.64 %
Total interest-bearing liabilities 964,162   1,314 0.54 % 1,029,572   1,687 0.66 %
Non-interest-bearing deposits 176,095 169,058
Non-interest-bearing liabilities 10,728 13,410
Stockholders' equity   111,125   122,326
Total liabilities and stockholders' equity $ 1,262,110 $ 1,334,366
Net interest income $ 10,061 $ 11,489
Interest rate spread 3.31 % 3.55 %
Net interest margin 3.41 % 3.67 %
 
 
(Dollars in thousands)
 
Six Months Ended
March 31, 2014 March 31, 2013
Interest Average Interest Average
Average and Yield/ Average and Yield/
Interest-earning assets: Balance   Dividends   Cost Balance   Dividends   Cost
Loans receivable $ 1,014,355 $ 21,734 4.29 % $ 997,061 $ 23,583 4.73 %
Mortgage loans held for sale 44,889 932 4.15 % 181,319 2,982 3.29 %
Other interest-earning assets   108,070     207 0.38 %   58,387     224 0.77 %
Total interest-earning assets 1,167,314   22,873 3.92 % 1,236,767   26,789 4.33 %
Non-interest-earning assets   79,851   84,402
Total assets $ 1,247,165 $ 1,321,169
 
Interest-bearing liabilities:
Deposits $ 853,902 $ 1,864 0.44 % $ 926,782 $ 2,761 0.60 %
Borrowed money   91,305     772 1.69 %   81,984     732 1.79 %
Total interest-bearing liabilities 945,207   2,636 0.56 % 1,008,766   3,493 0.69 %
Non-interest-bearing deposits 175,573 175,869
Non-interest-bearing liabilities 12,109 15,110
Stockholders' equity   114,276   121,424
Total liabilities and stockholders' equity $ 1,247,165 $ 1,321,169
Net interest income $ 20,237 $ 23,296
Interest rate spread 3.36 % 3.64 %
Net interest margin 3.47 % 3.77 %

Contacts

Pulaski Financial Corp.
Paul Milano, 314-878-2210
Chief Financial Officer

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Contacts

Pulaski Financial Corp.
Paul Milano, 314-878-2210
Chief Financial Officer