SOURCE: Pulaski Financial

October 24, 2006 17:43 ET

Pulaski Financial Reports Fourth Quarter Net Income Up 63% to $2.6 Million

ST. LOUIS, MO -- (MARKET WIRE) -- October 24, 2006 --Pulaski Financial Corp. (NASDAQ: PULB)

--  Quarter-to-Date Diluted EPS Up 44% and Full-Year Diluted EPS Up 19%
    
--  Money Market Balances Expand 42% During the Quarter
    
--  Total Deposits Increase 32% for the Year
    
--  Net Interest Income Expands 19% to $6.7 Million in Current Quarter and
    18% to $24.8 Million for the Year on Strong Loan and Deposit Growth
    
--  Retained Loan Portfolio Grows 5% in the Quarter and 24% for the Year
    
Pulaski Financial Corp. (NASDAQ: PULB) today announced net income for the quarter ended September 30, 2006 of $2.6 million, or $0.26 per diluted share, compared with $1.6 million, or $0.18 per diluted share, in the same quarter a year ago. Earnings for both periods were impacted by changes in value of derivative financial instruments, totaling a gain of $140,000, or $0.01 per diluted share after-tax, for the quarter ended September 30, 2006 and a loss of $724,000, or $0.05 per diluted share after-tax, for the quarter ended September 30, 2005.

Net income for the year ended September 30, 2006 increased 32% to $9.8 million, or $1.01 per diluted share, compared with $7.5 million, or $0.85 per diluted share, for the year ended September 30, 2005. In February 2006, the Company benefited from a $2.5 million gain on the sale of a branch location, which resulted in an after-tax gain of approximately $0.16 per diluted share. Diluted earnings per share for the quarter and year ended September 30, 2006 were reduced due to a 1.2 million increase in the number of shares outstanding resulting from stock issued in a secondary public offering in February 2006.

Net Interest Income Sees Strong Growth

Driven by growth in loans and lower-cost transaction deposits, net interest income grew 19% to $6.7 million in the fourth quarter compared with $5.6 million in the same period in 2005. This was due in large part to continued growth in commercial loans. "Several years ago we saw an opportunity for growth in commercial lending to small and medium-sized businesses. Our strategy has been to build a first-rate commercial lending team and empower them to do their job. As a result of that effort, our commercial loan portfolio remains the fastest growing segment of our business," William A. Donius, Chairman and Chief Executive Officer, commented.

Total assets at quarter-end increased to $961.8 million from $789.9 million at September 30, 2005, due to strong growth in loans, which was entirely funded during the year by deposit growth. Loan balances expanded 5%, or $35.5 million, to $785.2 million during the quarter ended September 30, 2006. For the year, the retained loan portfolio increased 24%, or $152.0 million, from September 30, 2005. Net interest income increased 18% to $24.8 million for the twelve months.

During the quarter ended September 30, 2006, deposits increased $31.8 million, or 5%, due primarily to a $39.9 million increase in money market balances. "We were very pleased with the success of our 'Big Bertha Bundle' money market campaign. We believe the market was well positioned for this campaign, which involved offering a special rate to large deposit customers who maintain both a money market and primary checking account with the Company," said Donius. The campaign was limited to large retail customers, which was designed to limit the repricing of the Company's existing money market balances. The result was growth in the new product at a cost less than the Company's incremental cost of borrowings and with less than 20% of existing money market balances repricing.

For the year, total deposits increased 32% to $655.6 million at September 30, 2006, while the balances of brokered deposits and borrowings from the Federal Home Loan Bank at September 30, 2006 remained relatively unchanged at $118.5 million and $172.8 million, respectively. As a result, wholesale funding, as a percent of total assets, declined from 39.6% at September 30, 2005 to 32.7% at year end 2006.

"Earlier this year, we raised additional capital through a common stock offering to support the improvement and expansion of our bank facilities, staff and banking technologies. We added two new bank locations this year and plan to add two to three more in the next 24 months. We expanded core transaction account balances 51%, or nearly $88 million for the year, which is essential for the long-term growth of our Company. Many of these new balances are at a higher cost today. However, in time we believe the new accounts will grow in value," Donius commented.

Retail Banking Income Expands

Retail banking income increased 26% to $816,000 for the quarter due to growth in bank locations and transaction account relationships. "We added approximately 2,600 checking accounts during the year, a 17% increase. This was due in part to the acquisition of Central West End Bank. However, the growth in accounts can also be attributed to the success of our marketing efforts aimed at attracting new retail customers. We believe the planned new locations and resulting additional relationships will continue to grow our retail banking revenue. Core deposit growth remains a key element of our strategy," Donius noted.

Mortgage Revenues Decline while Other Revenues Rise

Mortgage revenues decreased $613,000, or 35%, to $1.1 million for the quarter ended September 30, 2006 compared with $1.8 million during the same quarter in 2005, and increased $27,000 on a linked-quarter basis from June 30, 2006. The decline in mortgage revenues was due primarily to a lower volume of loans sold during the quarter. Loan sales totaled $327 million during the fourth quarter of 2006 compared with $374 million in the fourth quarter a year ago. Total loans sold for the twelve months ended September 30, 2006 were $1.15 billion compared to $1.06 billion for the twelve months ended September 30, 2005.

Other noninterest income sources continued to expand. During the September quarter, the Company realized $186,000 in appraisal revenues from a new line of business within the mortgage division, which helped offset a decline in title division revenues to $183,000 from $261,000 in the comparable 2005 quarter. "Cross-selling is one of our core strategic values. We recognize that the hundreds of loan applications we close every month provide opportunities to cross-sell appraisal and title services. Through our premier mortgage operation, we have the opportunity to capture significant additional fee income and a larger percentage of the total fees each new mortgage generates," Donius said. "We hope to achieve a 50% efficiency ratio on these divisions as they grow."

The investment division's revenues increased to $179,000 in the September 2006 quarter from $160,000 in last year's quarter. "With the pause in interest rates, bond sales are starting to pick up. The division is becoming profitable," Donius commented.

Noninterest Expense Declines due to Derivative Gains

Noninterest expense decreased $395,000, or 7.0%, to $5.2 million for the quarter ended September 30, 2006 compared with the same 2005 quarter primarily due to a gain on derivative financial instruments in the 2006 quarter compared with a loss in the previous period. Excluding the impact from derivatives, noninterest expense increased $469,000 for the three months ended September 30, 2006 compared to the 2005 quarter. The most significant increases were in advertising, occupancy and equipment expenses. Current period advertising increased 62% over the same period a year ago to $381,000. The increase was due largely to a strong television and newspaper campaign to support the "Big Bertha Bundle Campaign" which has yielded excellent results. Occupancy and equipment expense increased following the addition of two banking locations acquired in the Central West End Bank purchase combined with other building and facility improvements.

Asset Quality Remains Strong

Nonperforming assets remained relatively unchanged at $9.8 million at September 30, 2006 compared with $10.0 million at June 30, 2006, but increased from $6.8 million at September 30, 2005. The provision for loan losses for the quarter totaled $350,000 compared with $639,000 in the same period a year ago. The lower provision resulted primarily from changes in management's risk assessment of certain portions of the retained home equity loan portfolio and loans acquired in the purchase of Central West End Bank. The level of nonperforming loans to total loans was 0.82% at September 30, 2006 compared with 0.85% at September 30, 2005. The allowance for loan losses at September 30, 2006 was $7.8 million, or 111.9% of nonperforming loans and 0.92% of total loans, compared with $6.8 million, or 113.5% of nonperforming loans and 0.97% of total loans at September 30, 2005. Net charge-offs for the year totaled $772,000, or 0.09% of net loans, compared with $407,000 of net charge-offs, or 0.06% of net loans in 2005. Current year activity included $378,000 in charge offs from sales of non-performing residential pools. Real estate acquired in settlement of loans totaled $2.8 million at September 30, 2006 compared with $3.1 million at June 30, 2006 and $754,000 at September 30, 2005.

Outlook

"The growth opportunities for Pulaski are better today than at any time in our 85 year history," Donius noted. He continued, "We believe 2007 will be a year of significant expansion as we plan to open two to three new banking locations in the central corridor of metropolitan St. Louis. Early 2006 operating earnings were slightly below our expectations, but we saw significant improvement in the second half of the year. We are expecting continued double digit growth in net interest income combined with improved mortgage revenues and retail banking revenues. Similar to 2006, we expect the seasonality of the mortgage business to result in better earnings in the June and September quarters compared with the first half of 2007." Management expects to see an increase in operating earnings during 2007. However, due to the one-time gain on the sale of a banking location included in 2006 results, net income in 2007 is expected to approximate the full year earnings in fiscal 2006.

"The business environment remains challenging, with a softer housing market and intensifying competition. Nevertheless, the combination of our effective strategic plan and talented staff has allowed us to make solid progress and we expect that to continue in the coming year. Our emphasis on customer service continues to attract new deposits. The expansion of our commercial lending division continues to help us balance the cyclical fluctuations we experience in mortgage lending. The majority of our assets and liabilities are structured to reprice within one year, allowing us to adapt to a changing interest rate environment. Finally, we expect to expand our presence with the addition of two to three new bank locations in key areas of metropolitan St. Louis over the next two years," Donius concluded.

Conference Call Tomorrow

Pulaski Financial management will discuss fourth quarter results and other developments tomorrow during a conference call beginning at 10 a.m. Central Daylight Time. The call also will be simultaneously webcast and archived for three months at: http://www.viavid.net/detailpage.aspx?sid=000035EF. Participants in the conference call may dial 877-407-9039 a few minutes before start time. The call also will be available for replay through November 8, 2006 at 877-660-6853, account number 3055 and conference I.D. 215407.

Pulaski Financial Corp., operating in its 84th year through its subsidiary, Pulaski Bank, serves customers throughout the St. Louis metropolitan area. The bank offers a full line of quality retail-banking products through nine full-service branch offices in St. Louis and a loan production office in Kansas City. The company's website can be accessed at www.pulaskibankstl.com.

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 as amended, and is including this statement for purposes of these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of Pulaski Financial Corp., are generally identifiable by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," or similar expressions. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on the operations and future prospects of the Company include, but are not limited to, changes in: interest rates; general economic conditions; legislative/regulatory provisions; monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board; the quality and composition of the loan or investment portfolios; demand for loan products; deposit flows; competition; demand for financial services in the Company's market area; and accounting principles, policies, and guidelines. Additional factors that could materially affect the Company's financial results, is included in its filings with the Securities and Exchange Commission including Item 1A -- Risk Factors -- in the Company's Form 10-K. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Statements herein are made only as of the date of this presentation. Except as required by applicable law or other regulation, Pulaski Financial Corp. does not undertake, and specifically disclaims any obligation to release publicly, the result of any revisions, which may be made to any forward-looking statements to reflect events or circumstances after the date of this news release or reflect the occurrence of anticipated or unanticipated events.


                          PULASKI FINANCIAL CORP.
                UNAUDITED CONSOLIDATED FINANCIAL HIGHLIGHTS


SELECTED BALANCE SHEET DATA                   At         At         At
(Dollars in thousands except per share     Sept. 30,   June 30,  Sept. 30,
 data)                                       2006       2006       2005
                                           ---------  ---------  ---------
Total assets                               $ 961,818  $ 938,888  $ 789,861
Loans receivable, net                        785,199    749,734    633,195
Allowance for loan losses                      7,817      7,635      6,806
Loans held for sale, net                      60,371     76,335     64,335
Investment securities (includes equity
 securities)                                  17,449     13,957     10,228
FHLB stock                                     9,524      9,426      8,462
Mortgage-backed & related securities           3,631      3,843      4,833
Cash and cash equivalents                     22,116     20,621     25,688
Deposits                                     655,577    623,785    496,171
Deposit liabilities held for sale                  -          -     25,375
FHLB advances                                172,800    188,500    171,000
Subordinated debentures                       19,589     19,589     19,589
Stockholders' equity                          75,027     73,735     48,246
Total book value per share                     $7.54      $7.46      $5.72
Tangible book value per share                  $7.08      $7.00      $5.66

Asset Quality Ratios
Nonperforming loans as a percent of total
 loans                                          0.82%      0.82%      0.85%
Nonperforming assets as a percent of total
 assets                                         1.02%      1.07%      0.85%
Allowance for loan losses as a percent of
 total loans                                    0.92%      0.92%      0.97%
Allowance for loan losses as a percent of
 nonperforming loans                          111.90%    111.74%    113.51%


                                    Three months         Twelve months
SELECTED OPERATING DATA            ended Sept. 30,       ended Sept. 30,
(Dollars in thousands except    --------------------  --------------------
 per share data)                   2006       2005       2006       2005
                                ---------  ---------  ---------  ---------
Interest income                 $  15,653  $  11,046  $  53,843  $  37,792
Interest expense                    8,982      5,459     29,027     16,732
                                ---------  ---------  ---------  ---------

Net interest income                 6,671      5,587     24,816     21,060
Provision for loan losses             350        639      1,501      1,635
                                ---------  ---------  ---------  ---------

Net interest income after
 provision for loan losses          6,321      4,948     23,315     19,425
                                ---------  ---------  ---------  ---------

Retail banking fees                   815        650      3,033      2,467
Mortgage revenues                   1,144      1,757      3,999      5,508
Gain (loss) on loan pool sales          -          -       (122)       224
Revenue from title company
 operations                           183        261        742        756
Revenue from investment
 division operations                  179        160        598        668
Revenue from appraisal division
 operations                           186          -        186          -
Gain on sale of branch                  -          -      2,474          -
Gain on sale of securities             67          -        123          -
Other                                 425        382      1,678      1,283
                                ---------  ---------  ---------  ---------
   Total non-interest income        2,999      3,210     12,711     10,906
                                ---------  ---------  ---------  ---------

Compensation expense                2,381      2,420      9,582      9,239
Occupancy, equipment and data
 processing                         1,321      1,139      5,083      4,180
Loss (gain) on derivative
 financial instruments               (140)       724        194        320
Charitable contributions               48         31        373        114
Other                               1,624      1,315      5,531      4,581
                                ---------  ---------  ---------  ---------
   Total non-interest expense       5,234      5,629     20,763     18,434
                                ---------  ---------  ---------  ---------

Income before income taxes          4,086      2,529     15,263     11,897
Income taxes                        1,468        925      5,425      4,418
                                ---------  ---------  ---------  ---------
Net income                      $   2,618  $   1,604  $   9,838  $   7,479
                                =========  =========  =========  =========

Performance Ratios
Return on average assets             1.11%      0.82%      1.14%      1.05%
Return on average equity            13.73%     13.08%     14.98%     16.55%
Interest rate spread                 2.76%      2.86%      2.87%      3.04%
Net interest margin                  3.07%      3.04%      3.12%      3.18%
                                =========  =========  =========  =========
SHARE DATA
Weighted average shares
 outstanding-basic              9,644,120  7,985,038  9,108,621  7,925,974
Weighted average shares
 outstanding-diluted           10,256,175  8,888,655  9,723,571  8,828,224
EPS-basic                           $0.27      $0.20      $1.08      $0.94
EPS-diluted                         $0.26      $0.18      $1.01      $0.85
Dividends                           $0.09      $0.08      $0.34      $0.28



                          PULASKI FINANCIAL CORP.
          UNAUDITED CONSOLIDATED FINANCIAL HIGHLIGHTS, Continued
                          (Dollars in Thousands)


LOANS RECEIVABLE                           Sept. 30,  June 30,   Sept. 30,
(Dollars in thousands)                       2006       2006       2005
                                           =========  =========  =========

Commercial & Industrial Loans              $  48,785  $  45,508  $  26,306
Real estate mortgage:
  One to four family residential             314,746    297,908    255,729
  Multi-family residential                    13,629     12,499     13,994
  Commercial real estate                     150,529    136,783    104,701
                                           ---------  ---------  ---------
    Total real estate mortgage               478,904    447,190    374,424
                                           ---------  ---------  ---------
Real estate construction and development:
  One to four family residential              30,586     31,023     33,652
  Multi-family residential                     6,042      6,186      1,790
  Commercial real estate                      20,567     19,714      9,580
                                           ---------  ---------  ---------
    Total real estate construction and
     development                              57,195     56,923     45,022
                                           ---------  ---------  ---------
Equity line of credit                        207,153    208,051    195,647
Consumer and installment                       6,276      6,042      3,514
                                           ---------  ---------  ---------
                                             798,313    763,714    644,913
                                           ---------  ---------  ---------
Add (less):
  Deferred loan (costs) fees                   4,879      4,672      3,931
  Loans in process                           (10,176)   (11,017)    (8,843)
  Allowance for loan losses                   (7,817)    (7,635)    (6,806)
                                           ---------  ---------  ---------
                                             (13,114)   (13,980)   (11,718)
                                           ---------  ---------  ---------
       Total                               $ 785,199  $ 749,734  $ 633,195
                                           =========  =========  =========
Weighted average rate at end of period          7.50%      7.40%      6.59%
                                           =========  =========  =========


                   September 30, 2006    June 30, 2005   September 30, 2005
DEPOSITS                     Weighted           Weighted           Weighted
(Dollars in                  Average            Average            Average
 thousands)                  Interest           Interest           Interest
                   Balance     Rate   Balance     Rate   Balance     Rate
                   =======================================================
Demand Deposit
 Accounts:
   Noninterest-
    bearing
    checking       $  38,830    0.00% $  36,975    0.00% $  29,192    0.00%
   Interest-
    bearing
    checking          53,448    1.66%    58,867    1.57%    28,994    0.16%
   Money market      134,383    4.12%    94,508    3.29%    82,638    2.34%
   Passbook
    savings
    accounts:         31,895    0.39%    33,737    0.36%    30,230    0.35%
                   ---------          ---------          ---------
     Total
      demand
      deposit
      accounts       258,556    2.53%   224,087    1.85%   171,054    1.22%
                   ---------          ---------          ---------
Certificates of
 Deposit: (*)
   $100,000 or
    less             207,900    4.91%   197,918    4.58%   162,798    3.11%
   Greater than
    $100,000         189,121    4.43%   201,780    4.21%   162,319    3.53%
                   ---------          ---------          ---------
     Total
      certificates
      of deposit     397,021    4.68%   399,698    4.39%   325,117    3.32%
                   ---------          ---------          ---------
     Total
      deposits     $ 655,577    3.83% $ 623,785    3.48% $ 496,171    2.60%
                   =========          =========          =========
 (*) Includes
 brokered deposits $ 118,500          $ 141,969          $ 118,856
                   =========          =========          =========


NONPERFORMING ASSETS
(Dollars in       September 30,        June 30,         September 30,
 thousands)           2006               2006               2005
                   =========          =========          =========
Non-accrual loans:
  Residential
   real estate     $     794          $   1,123          $     142
  Home equity            119                310                  -
  Other                   27                 45                 24
                   ---------          ---------          ---------
     Total
      non-accrual
      loans              940              1,478                166
                   ---------          ---------          ---------
Accruing loans
 past due 90 days
 or more:
  Residential
   real estate         3,984              3,708              4,742
  Home equity          1,456              1,112                618
  Other                   84                163                457
                   ---------          ---------          ---------
     Total
      accruing
      loans past
      due 90 days
      or more          5,524              4,983              5,817
                   ---------          ---------          ---------
Restructured loans       220                219                 13
Other nonperforming
 loans                   303                153                  -
                   ---------          ---------          ---------
     Total
      non-performing
      loans            6,987              6,833              5,996
Real estate
 acquired in
 settlement of
 loans                 2,764              3,082                754
Other
 nonperforming
 assets                   43                117                  -
                   ---------          ---------          ---------
     Total
      non-performing
      assets       $   9,794          $  10,032          $   6,750
                   =========          =========          =========



                          PULASKI FINANCIAL CORP.
                          AVERAGE BALANCE SHEETS
                          (Dollars in Thousands)


                                        Three Months Ended
                        --------------------------------------------------
                             Sept. 30, 2006            Sept. 30, 2005
                        ------------------------  ------------------------
                                 Interest Average          Interest Average
                        Average     and    Yield/  Average     and   Yield/
                        Balance  Dividends  Cost  Balance  Dividends  Cost
                        ------------------------  ------------------------
Interest-earning
 assets:
    Loans receivable    $ 781,026 $ 14,339  7.34% $ 632,524 $  9,852  6.23%
    Loans available
     for sale              58,569      969  6.62%    74,216    1,002  5.40%
    Other interest-
     earning assets        28,897      346  4.77%    27,426      192  2.79%
                        --------- --------        --------- --------
      Total
       interest-
       earning assets     868,492   15,654  7.21%   734,166   11,046  6.02%
                                  --------                  --------
Noninterest-earning
 assets                    72,816                    50,375
                        ---------                 ---------
      Total assets      $ 941,308                 $ 784,541
                        =========                 =========

Interest-bearing
 liabilities:
    Deposits            $ 602,249 $  6,172  4.10% $ 486,491 $  3,398  2.79%
    Borrowed money        205,437    2,810  5.47%   205,200    2,061  4.02%
                        --------- --------        --------- --------
      Total
       interest-bearing
       liabilities        807,686    8,982  4.45%   691,691    5,459  3.16%
                                  --------                  --------
Noninterest-bearing
 deposits                  36,998                    26,251
Noninterest-bearing
 liabilities               20,370                    17,545
Stockholders' equity       76,254                    49,054
                        ---------                 ---------
      Total
       liabilities
       and
       stockholders'
       equity           $ 941,308                 $ 784,541
                        =========                 =========
Net interest income               $  6,672                  $  5,587
                                  ========                  ========
Interest rate spread                        2.76%                     2.86%
Net interest margin                         3.07%                     3.04%


                                       Twelve Months Ended
                        --------------------------------------------------
                             Sept. 30, 2006            Sept. 30, 2005
                        ------------------------  ------------------------
                                 Interest Average          Interest Average
                        Average     and    Yield/  Average     and   Yield/
                        Balance  Dividends  Cost  Balance  Dividends  Cost
                        ------------------------  ------------------------
Interest-earning
 assets:
    Loans receivable    $ 716,045 $ 49,592  6.93% $ 584,134 $ 34,155  5.85%
    Loans available for
     sale                  48,656    3,000  6.16%    50,815    2,774  5.46%
    Other
     interest-earning
     assets                30,962    1,251  4.04%    27,284      863  3.16%
                        --------- --------        --------- --------
      Total
       interest-
       earning assets     795,663   53,843  6.77%   662,233   37,792  5.71%
                                  --------                  --------
Noninterest-earning
 assets                    66,371                    45,909
                        ---------                 ---------
      Total assets      $ 862,034                 $ 708,142
                        =========                 =========

Interest-bearing
 liabilities:
    Deposits            $ 552,626 $ 19,625  3.55% $ 442,927 $ 10,223  2.31%
    Borrowed money        191,166    9,402  4.92%   184,243    6,509  3.53%
                        --------- --------        --------- --------
      Total
       interest-
       bearing
       liabilities        743,792   29,027  3.90%   627,170   16,732  2.67%
                                  --------                  --------
Noninterest-bearing
 deposits                  31,365                    21,256
Noninterest-bearing
 liabilities               21,203                    14,039
Stockholders' equity       65,674                    45,677
                        ---------                 ---------
      Total
       liabilities
       and
       stockholders'
       equity           $ 862,034                 $ 708,142
                        =========                 =========
Net interest income               $ 24,816                  $ 21,060
                                  ========                  ========
Interest rate spread                        2.87%                     3.04%
Net interest margin                         3.12%                     3.18%

Contact Information

  • For Additional Information Contact:
    William A. Donius
    Chairman & CEO
    Pulaski Financial Corp.
    (314) 878-2210 Ext. 3610

    Michael Arneth or Tad Gage
    The Investor Relations Company
    (312) 245-2700