Pulaski Financial Corp. (Nasdaq Global Select: PULB) today reported net income for the quarter ended December 31, 2010 of $3.1 million, or $0.24 per diluted common share, compared with net income of $1.3 million, or $0.07 per diluted common share, for the December 2009 quarter and net income of $3.2 million, or $0.25 per diluted common share, for the quarter ended September 30, 2010. Reducing income available to common shares were dividends and the related discount accretion on the Company's preferred stock, issued in January 2009 as part of the U.S. Treasury's TARP Capital Purchase Program, totaling $0.05 per diluted common share in each of the quarters ended December 31, 2010, December 31, 2009, and September 30, 2010.
Gary Douglass, President and Chief Executive Officer commented, ?We are pleased to report the third successive quarter of solid earnings in the midst of continued difficult economic times. Our pretax earnings increased 30% over the linked quarter, primarily as the result of an increase in net interest income. We also saw meaningful linked-quarter increases in mortgage revenues and retail banking fees. However, as the result of an unusually low income tax rate in our prior fiscal year, net income in the December 2010 quarter was down 2% compared with the linked quarter as our fiscal 2011 tax rate returned to a more normal level.?
Net Interest Income Increased on Growth in Average Mortgage Loans Held for Sale Combined with Improved Net Interest Margin
Net interest income rose $1.0 million, or 8%, to $13.4 million for the quarter ended December 31, 2010 compared with $12.4 million for the quarter ended September 30, 2010 and rose $1.9 million, or 16%, compared with $11.5 million for the same period a year ago. The increases were primarily the result of increases in the average balance of mortgage loans held for sale and expansion in the net interest margin, which increased to 3.78% for the quarter ended December 31, 2010 compared with 3.72% for the quarter ended September 30, 2010 and 3.42% for the December 2009 quarter. The net interest margin benefited from market-driven declines in the cost of deposits and wholesale borrowings and growth in mortgage loans held for sale, which typically produce higher interest-rate spreads than other interest-earning assets held by the Company.
Mortgage Revenues Remain Robust, But Below Prior Year Highs
Non-interest income increased 6% to $3.6 million for the quarter ended December 31, 2010 compared with $3.5 million for the quarter ended September 30, 2010, but decreased 18% compared with $4.4 million for the December 2009 quarter.
Mortgage revenues totaled $1.8 million on loan sales of $612 million for the quarter ended December 31, 2010 compared with $1.7 million on loan sales of $489 million for the quarter ended September 30, 2010, and $2.7 million on loan sales of $414 million for the December 2009 quarter. The Company continued to realize lower profit margins on loans sold during the December 2010 quarter as the result of: a high percentage of loan activity related to mortgage refinancings, which generally result in lower profit margins than home purchase activity; a lower percentage of FHA and VA loan originations, which generally produce higher sales margins than conventional mortgages; extended commitment periods for delivery of loans to the Company's investors, resulting in lower sales margins; and increased variable costs on loans originated. In addition, the Company increased its reserve for amounts potentially due to the Company's loan investors under guarantees related to loans that were previously sold and became delinquent or defaulted.
Mortgage loans originated for sale totaled $598 million for the quarter ended December 31, 2010 compared with $612 million for the quarter ended September 30, 2010, and $472 million for the December 2009 quarter. Mortgage loans held for sale increased $17.6 million, or 7%, to $271.2 million at December 31, 2010 compared with $253.6 million at September 30, 2010.
Douglass noted, ?Our mortgage division produced yet another quarter of strong mortgage revenues in the face of tightening underwriting criteria required by our mortgage loan investors and increasing regulatory compliance requirements. Like most other mortgage banking operations, this tightening combined with a high level of loan origination activity created the need to extend our commitment times for delivery of loans to our investors, which resulted in an increased number of days held in warehouse pending their final delivery to our mortgage investors and lower profit margins on loans sold. However, we benefited greatly from the extended delivery times as we realized a 53% linked-quarter increase in net interest income related to these loans while they were awaiting their final delivery to our investors.?
Asset Quality
The provision for loan losses for the three months ended December 31, 2010 was $4.3 million compared with $4.3 million for the quarter ended September 30, 2010 and $6.1 million for the December 2009 quarter. Net charge offs for the quarter ended December 31, 2010 totaled $4.0 million, or 1.51% of average loans on an annualized basis, compared with $4.1 million, or 1.51% of average loans on an annualized basis, for the quarter ended September 30, 2010 and $3.7 million, or 1.30% of average loans on an annualized basis, for the December 2009 quarter.
Non-performing assets increased to $78.0 million at December 31, 2010 from $74.5 million at September 30, 2010. The increase was primarily attributable to a $3.2 million increase in non-accruing residential real estate loans and a $1.9 million increase in non-accruing commercial loans.
Douglass commented, ?We have previously cautioned our shareholders that we might experience temporary upticks in non-performing asset levels in future quarters as we continue to work through economic and portfolio issues with our borrowers. On the positive side, our total level of our internal adversely classified assets continues to slowly decline as we expected. On the negative side, several commercial borrowers have migrated to the more severe non-accrual category over the past two quarters. We believe we have appropriately dealt with these credits through a combination of additional specific reserves and partial charge-offs. Also contributing to the increase in non-performing assets were increased delinquencies in our residential mortgage loan portfolio. We believe these increased delinquencies are related to continuing high unemployment levels, coupled with the seasonal financial demands many consumers face during the holiday season.?
Management continued its efforts to proactively modify loan repayment terms with residential borrowers who were experiencing financial difficulties in the current economic climate with the belief that these actions would maximize the Bank's ultimate recoveries on these loans. The restructured terms of the loans generally included a reduction of the interest rates and the addition of past due interest to the principal balance of the loans. During the quarter ended December 31, 2010, the Company restructured approximately $834,000 of loans to troubled residential borrowers and returned approximately $2.2 million of previously restructured residential loans to performing status as the result of the borrowers' favorable performance history since restructuring. At December 31, 2010, $28.4 million, or 85% of total restructured loans, related to residential borrowers compared with $27.6 million, or 84% of total restructured loans, at September 30, 2010. At December 31, 2010, 66% of these residential borrowers were performing as agreed under the modified terms of the loans compared with 70% at September 30, 2010.
Douglass noted, ?As we have indicated in prior periods, we have been optimistic that our efforts to work with many of our troubled borrowers who demonstrate the ability and intent to repay their obligations under the modified loan terms will help them manage through this difficult economic period and will maximize the bank's ultimate recoveries on these loans. During the quarter, we saw a small decrease in the percentage of residential borrowers that were performing as agreed under the modified terms. We continue to believe this is still the best approach to resolving these troubled loans. Since we began our efforts to work with these residential borrowers in earnest during the last half of calendar year 2008, we have been able to return to performing status approximately $10.2 million of restructured residential loans because of the borrowers' favorable performance history.?
Conclusion / Outlook
Douglass commented, ?The general economic environment that has existed during the past two years continues to present the banking industry with significant challenges. Elevated unemployment levels coupled with softness in both commercial and residential real estate values have placed unprecedented stress on our commercial and retail borrowers. In the face of these challenges, we reported solid results for the first fiscal quarter of 2011, which followed on the strong finish during the last half of fiscal 2010. While we expect good earnings in our second fiscal quarter, they may likely not reach the levels we saw during the last three consecutive quarters. We anticipate noticeable declines in mortgage revenues and net interest income related to our mortgage banking operation based on an expectation of seasonally lower loan origination volumes, lower refinancing activity and a shrinking warehouse of loans held for sale as loan sales exceed originations. We expect these mortgage-related declines to be partially offset by growth in interest income from selective commercial loan growth and modestly lower credit-related costs. With moderate improvement in overall economic conditions, including unemployment rates, we believe asset quality will slowly but steadily improve, resulting in a continuation of credit provision normalization, which in turn, will be a primary driver of meaningful earnings growth for the year.?
Conference Call Tomorrow
Pulaski Financial's management will discuss first quarter results and other developments tomorrow, January 20, 2011, during a conference call beginning at 11 a.m. EDT (10 a.m. CDT). The call also will be simultaneously webcast and archived for three months at: http://www.snl.com/irweblinkx/corporateprofile.aspx?iid=4044240. Participants in the conference call may dial 877-473-3757 a few minutes before start time. The call also will be available for replay through February 3, 2011 at 800-642-1687 or 706-645-9291, conference ID 35478763.
About Pulaski Financial
Pulaski Financial Corp., operating in its 89th year through its subsidiary, Pulaski Bank, serves customers throughout the St. Louis and Kansas City metropolitan areas. The bank offers a full line of quality retail and commercial banking products through 12 full-service branch offices in the St. Louis metropolitan area and offers mortgage loan products through six loan production offices in the St. Louis and Kansas City metropolitan areas and Wichita, Kansas. The Company's website can be accessed at www.pulaskibankstl.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, 2010 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, | |||||||
2010 | 2010 | 2009 | |||||||
Interest income | $ | 17,124 | $ | 16,299 | $ | 16,837 | |||
Interest expense | 3,708 | 3,892 | 5,312 | ||||||
Net interest income | 13,416 | 12,407 | 11,525 | ||||||
Provision for loan losses | 4,300 | 4,250 | 6,074 | ||||||
Net interest income after provision for loan losses | 9,116 | 8,157 | 5,451 | ||||||
Retail banking fees | 1,026 | 971 | 932 | ||||||
Mortgage revenues | 1,847 | 1,706 | 2,701 | ||||||
Investment brokerage revenues | 446 | 417 | 424 | ||||||
Other | 329 | 359 | 390 | ||||||
Total non-interest income | 3,648 | 3,453 | 4,447 | ||||||
Compensation expense | 3,402 | 3,262 | 3,897 | ||||||
Occupancy, equipment and data processing expense | 2,072 | 2,180 | 2,005 | ||||||
Advertising | 100 | 189 | 147 | ||||||
Professional services | 445 | 391 | 517 | ||||||
Real estate foreclosure losses and expenses, net | 1,085 | 919 | 436 | ||||||
FDIC deposit insurance premiums | 623 | 502 | 492 | ||||||
Other | 574 | 727 | 688 | ||||||
Total non-interest expense | 8,301 | 8,170 | 8,182 | ||||||
Income before income taxes | 4,463 | 3,440 | 1,716 | ||||||
Income tax expense | 1,346 | 253 | 466 | ||||||
Net income after tax | 3,117 | 3,187 | 1,250 | ||||||
Preferred stock dividends | 516 | 515 | 514 | ||||||
Earnings available for common shares | $ | 2,601 | $ | 2,672 | $ | 736 | |||
Annualized Performance Ratios | |||||||||
Return on average assets | 0.83% | 0.91% | 0.35% | ||||||
Return on average common equity | 11.71% | 12.42% | 3.32% | ||||||
Interest rate spread | 3.61% | 3.54% | 3.20% | ||||||
Net interest margin | 3.78% | 3.72% | 3.42% | ||||||
SHARE DATA | |||||||||
Weighted average shares outstanding - basic | 10,507,158 | 10,466,557 | 10,274,066 | ||||||
Weighted average shares outstanding - diluted | 10,925,023 | 10,807,056 | 10,483,880 | ||||||
Basic earnings per common share | $0.25 | $0.26 | $0.07 | ||||||
Diluted earnings per common share | $0.24 | $0.25 | $0.07 | ||||||
Dividends per common share | $0.095 | $0.095 | $0.095 | ||||||
PULASKI FINANCIAL CORP. | ||||||||||||||
BALANCE SHEET DATA | ||||||||||||||
(Unaudited) | ||||||||||||||
(Dollars in thousands) | ||||||||||||||
December 31, | September 30, | |||||||||||||
2010 | 2010 | |||||||||||||
Total assets | $ | 1,466,924 | $ | 1,452,817 | ||||||||||
Loans receivable, net | 1,041,169 | 1,046,273 | ||||||||||||
Allowance for loan losses | 27,275 | 26,976 | ||||||||||||
Mortgage loans held for sale, net | 271,152 | 253,578 | ||||||||||||
Investment securities | 13,594 | 8,001 | ||||||||||||
FHLB stock | 10,184 | 9,774 | ||||||||||||
Mortgage-backed & related securities | 16,159 | 19,142 | ||||||||||||
Cash and cash equivalents | 16,001 | 15,603 | ||||||||||||
Deposits | 1,151,152 | 1,115,203 | ||||||||||||
FHLB advances | 161,800 | 181,000 | ||||||||||||
Subordinated debentures | 19,589 | 19,589 | ||||||||||||
Stockholders' equity - preferred | 31,197 | 31,088 | ||||||||||||
Stockholders' equity - common | 87,473 | 85,265 | ||||||||||||
Book value per common share | $7.99 | $7.87 | ||||||||||||
December 31, | September 30, | |||||||||||||
2010 | 2010 | |||||||||||||
LOANS RECEIVABLE | ||||||||||||||
Real estate mortgage: | ||||||||||||||
Residential first mortgages | $ | 237,930 | $ | 243,650 | ||||||||||
Residential second mortgages | 57,765 | 60,281 | ||||||||||||
Home equity lines of credit | 193,016 | 201,922 | ||||||||||||
Multi-family residential | 42,282 | 43,736 | ||||||||||||
Commercial real estate | 282,506 | 256,224 | ||||||||||||
Land acquisition and development | 68,511 | 74,790 | ||||||||||||
Total real estate mortgage | 882,010 | 880,603 | ||||||||||||
Real estate construction and development: | ||||||||||||||
One to four family residential | 6,798 | 8,127 | ||||||||||||
Multi-family residential | 3,418 | 3,876 | ||||||||||||
Commercial real estate | 7,072 | 19,068 | ||||||||||||
Total real estate construction and development | 17,288 | 31,071 | ||||||||||||
Commercial & industrial loans | 162,141 | 155,294 | ||||||||||||
Consumer and installment | 3,699 | 3,512 | ||||||||||||
1,065,138 | 1,070,480 | |||||||||||||
Add (less): | ||||||||||||||
Deferred loan costs | 3,803 | 3,884 | ||||||||||||
Loans in process | (497 | ) | (1,115 | ) | ||||||||||
Allowance for loan losses | (27,275 | ) | (26,976 | ) | ||||||||||
(23,969 | ) | (24,207 | ) | |||||||||||
Total | $ | 1,041,169 | $ | 1,046,273 | ||||||||||
Weighted average rate at end of period | 5.37 | % | 5.34 | % | ||||||||||
December 31, 2010 | September 30, 2010 | |||||||||||||
Weighted | Weighted | |||||||||||||
Average | Average | |||||||||||||
Interest | Interest | |||||||||||||
DEPOSITS | Balance | Rate | Balance | Rate | ||||||||||
Demand Deposit Accounts: | ||||||||||||||
Non-interest-bearing checking | $ | 121,101 | 0.00 | % | $ | 149,186 | 0.00 | % | ||||||
Interest-bearing checking | 376,232 | 0.71 | % | 345,013 | 0.90 | % | ||||||||
Passbook savings accounts | 29,009 | 0.14 | % | 30,296 | 0.18 | % | ||||||||
Money market | 205,069 | 0.48 | % | 189,851 | 0.52 | % | ||||||||
Total demand deposit accounts | 731,411 | 0.51 | % | 714,346 | 0.58 | % | ||||||||
Certificates of Deposit: | ||||||||||||||
Retail | 332,846 | 2.01 | % | 328,394 | 2.20 | % | ||||||||
CDARS | 78,477 | 0.57 | % | 64,051 | 0.65 | % | ||||||||
Brokered | 8,418 | 5.23 | % | 8,412 | 5.23 | % | ||||||||
Total certificates of deposit | 419,741 | 1.81 | % | 400,857 | 2.02 | % | ||||||||
Total deposits | $ | 1,151,152 | 0.98 | % | $ | 1,115,203 | 1.09 | % | ||||||
PULASKI FINANCIAL CORP. | |||||||
NONPERFORMING ASSETS | |||||||
(Unaudited) | |||||||
(In thousands) | |||||||
December 31, | September 30, | ||||||
NONPERFORMING ASSETS | 2010 | 2010 | |||||
Non-accrual loans: | |||||||
Residential real estate first mortgages | $ | 8,858 | $ | 6,727 | |||
Residential real estate second mortgages | 1,492 | 1,522 | |||||
Home equity | 3,266 | 2,206 | |||||
Commercial and multi-family | 9,513 | 5,539 | |||||
Land acquisition and development | 6,739 | 8,796 | |||||
Real estate-construction and development | 1,136 | 1,189 | |||||
Commercial and industrial | 414 | 417 | |||||
Consumer and other | 286 | 100 | |||||
Total non-accrual loans | 31,704 | 26,496 | |||||
Troubled debt restructured: (1) | |||||||
Current under the restructured terms: | |||||||
Residential real estate first mortgages | 15,760 | 16,093 | |||||
Residential real estate second mortgages | 1,929 | 2,186 | |||||
Home equity | 1,039 | 1,050 | |||||
Commercial and multi-family | 162 | 184 | |||||
Land acquisition and development | 121 | 97 | |||||
Real estate-construction and development | 2,934 | 3,306 | |||||
Commercial and industrial | 618 | 1,684 | |||||
Consumer and other | 59 | 83 | |||||
Total current restructured loans | 22,622 | 24,683 | |||||
Past due greater than 30 days under restructured terms: | |||||||
Residential real estate first mortgages | 8,537 | 7,251 | |||||
Residential real estate second mortgages | 483 | 339 | |||||
Home equity | 674 | 728 | |||||
Land acquisition and development | 41 | 65 | |||||
Real estate-construction and development | 51 | - | |||||
Commercial and industrial | 882 | - | |||||
Total past due restructured loans | 10,668 | 8,383 | |||||
Total restructured loans | 33,290 | 33,066 | |||||
Total non-performing loans | 64,994 | 59,562 | |||||
Real estate acquired in settlement of loans: | |||||||
Residential real estate | 2,615 | 3,632 | |||||
Commercial real estate | 10,395 | 11,268 | |||||
Total real estate acquired in settlement of loans | 13,010 | 14,900 | |||||
Other nonperforming assets | 12 | - | |||||
Total non-performing assets | $ | 78,016 | $ | 74,462 | |||
(1) | Troubled debt restructured includes non-accrual loans totaling $33.3 million and $33.1 million at December 31, 2010 and September 30, 2010, 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 | 2010 | 2009 | ||||||
Allowance for loan losses, beginning of period | $ | 26,976 | $ | 20,579 | ||||
Provision charged to expense | 4,300 | 6,074 | ||||||
(Charge-offs) recoveries, net: | ||||||||
Residential real estate first mortgages | (166 | ) | (930 | ) | ||||
Residential real estate second mortgages | (302 | ) | (185 | ) | ||||
Home equity | (521 | ) | (722 | ) | ||||
Commercial and multi-family | (721 | ) | 5 | |||||
Land acquisition & development | (2,117 | ) | (327 | ) | ||||
Real estate-construction and development | - | (1,436 | ) | |||||
Commercial and industrial | (141 | ) | (63 | ) | ||||
Consumer and other | (33 | ) | (72 | ) | ||||
Total loans charged off, net | (4,001 | ) | (3,730 | ) | ||||
Allowance for loan losses, end of period | $ | 27,275 | $ | 22,923 | ||||
December 31, | September 30, | |||||||
ASSET QUALITY RATIOS | 2010 | 2010 | ||||||
Nonperforming loans as a percent of total loans | 6.10 | % | 5.56 | % | ||||
Nonperforming loans excluding current troubled debt restructurings as a percent of total loans | 3.98 | % | 3.26 | % | ||||
Nonperforming assets as a percent of total assets | 5.32 | % | 5.13 | % | ||||
Nonperforming assets excluding current troubled debt restructurings as a percent of total assets | 3.78 | % | 3.43 | % | ||||
Allowance for loan losses as a percent of total loans | 2.56 | % | 2.52 | % | ||||
Allowance for loan losses as a percent of nonperforming loans | 41.97 | % | 45.29 | % | ||||
Allowance for loan losses as a percent of nonperforming loans excluding current troubled debt restructurings and related allowance for loan losses | 65.89 | % | 75.47 | % | ||||
PULASKI FINANCIAL CORP. | |||||||||||||||||
AVERAGE BALANCE SHEETS | |||||||||||||||||
(Unaudited) | |||||||||||||||||
(Dollars in thousands) | |||||||||||||||||
Three Months Ended | |||||||||||||||||
December 31, 2010 | December 31, 2009 | ||||||||||||||||
Interest | Average | Interest | Average | ||||||||||||||
Average | and | Yield/ | Average | and | Yield/ | ||||||||||||
Interest-earning assets: | Balance | Dividends | Cost | Balance | Dividends | Cost | |||||||||||
Loans receivable | $ | 1,064,170 | $ | 13,585 | 5.11% | $ | 1,148,807 | $ | 14,859 | 5.17% | |||||||
Mortgage loans held for sale | 305,905 | 3,229 | 4.22% | 134,745 | 1,620 | 4.81% | |||||||||||
Other interest-earning assets | 49,650 | 310 | 2.50% | 63,603 | 358 | 2.25% | |||||||||||
Total interest-earning assets | 1,419,725 | 17,124 | 4.82% | 1,347,155 | 16,837 | 5.00% | |||||||||||
Noninterest-earning assets | 85,062 | 66,533 | |||||||||||||||
Total assets | $ | 1,504,787 | $ | 1,413,688 | |||||||||||||
Interest-bearing liabilities: | |||||||||||||||||
Deposits | $ | 982,640 | $ | 3,198 | 1.30% | $ | 1,061,314 | $ | 4,627 | 1.74% | |||||||
Borrowed money | 242,287 | 510 | 0.84% | 118,922 | 685 | 2.30% | |||||||||||
Total interest-bearing liabilities | 1,224,927 | 3,708 | 1.21% | 1,180,236 | 5,312 | 1.80% | |||||||||||
Noninterest-bearing deposits | 141,331 | 97,538 | |||||||||||||||
Noninterest-bearing liabilities | 18,533 | 16,450 | |||||||||||||||
Stockholders' equity | 119,996 | 119,464 | |||||||||||||||
Total liabilities and stockholders' equity | $ | 1,504,787 | $ | 1,413,688 | |||||||||||||
Net interest income | $ | 13,416 | $ | 11,525 | |||||||||||||
Interest rate spread | 3.61% | 3.20% | |||||||||||||||
Net interest margin | 3.78% | 3.42% |
Pulaski Financial Corp.
Paul Milano, 314-878-3523 Ext. 5046
Chief
Financial Officer