Pulaski Financial : Reports 30% Increase in First Quarter EPS

Pulaski Financial Corp. (Nasdaq Global Select: PULB, the “Company”) reported net income available to common shareholders for the quarter ended December 31, 2014 of $3.1 million, or $0.26 per diluted common share, compared with $3.3 million, or $0.27 per diluted common share, for the linked quarter ended September 30, 2014 and $2.2 million, or $0.20 per diluted common share, for the same quarter last year.

The Company saw its fifth consecutive quarter of growth in portfolio loans. The total balance of portfolio loans at December 31, 2014 increased $19.8 million, or 2%, from September 30, 2014, due to increases in commercial loans and residential first mortgage loans. The commercial loan portfolio increased $14.5 million, or 2%, with meaningful growth in commercial and industrial loans and real estate construction loans. However, this growth was partially offset by shrinkage in non-owner occupied commercial real estate loans and land acquisition and development loans. In addition, the Company continued to be successful in marketing two “niche” adjustable-rate loan products, resulting in a $10.0 million, or 4%, increase in residential first mortgage loans during the quarter.

Net interest income for the quarter decreased 2% compared with the September 2014 quarter, but increased 7% compared with the same quarter last year. The net interest margin decreased to 3.43% for the December 2014 quarter compared with 3.56% for the September 2014 quarter and 3.53% in the December 2013 quarter primarily as the result of market-driven declines in the average yield on portfolio loans. The combined average balances of portfolio loans and loans held for sale grew 13% in the December 2014 quarter compared with the same quarter last year, which more than offset the negative impact of the decline in the net interest margin on net interest income. However, when compared with the September 2014 quarter, the combined average balance of portfolio loans and loans held for sale grew only 1%, which was not sufficient to offset the negative impact of the decline in the net interest margin. The Company’s total cost of funds remained almost constant among the quarters.

Noninterest income for the quarter increased 42% compared with the September 2014 quarter and 50% compared with the December 2013 quarter as the result of increases in mortgage revenues and revenues realized on SBA loan sales. In addition, the Company received $688,000 from its insurance carrier during the December 2014 quarter, representing a partial recovery of a loss incurred in a prior fiscal year as the result of a fraud perpetrated against the Bank by one of its commercial loan customers.

Mortgage revenues increased $341,000, or 30%, compared with the September 2014 quarter primarily as the result of an increase in the net profit margin on loans sold. The net profit margin on loans sold increased to 0.64% in the December 2014 quarter compared with 0.48% in the September 2014 quarter due to higher sales prices realized from the Company’s mortgage loan investors combined with a proportionately lower level of origination costs. Loan sales decreased 3% to $229.6 million. The level of mortgage loans originated for sale during the quarter increased 11% compared with the September 2014 quarter primarily as the result of an increase in loan refinancing activity. A decrease in market interest rates created an increase in consumer demand for mortgage loan refinancings during the last half of the quarter. As a result, loans originated to refinance existing mortgages increased 151% to $94.7 million. Loans originated to finance home purchases saw a seasonal decrease of 15% to $167.5 million. Mortgage revenues increased $441,000, or 43%, compared with the December 2013 quarter as the result of an increase in volume of loans sold combined with an increase in the net profit margin.

Gary Douglass, President and Chief Executive Officer, commented, “We were pleased to see that the performance expectations I shared with you in last quarter’s release and conference call were achieved in the current quarter. As expected, we saw continued loan portfolio growth, with solid growth in commercial loans, additional fee income from the operation of our new SBA lending platform, continued growth of mortgage-related revenues and controlled credit costs during the quarter. We were also pleased to see that our focused effort to raise core deposits resulted in 8% deposit growth during the quarter with minimal impact on the total cost of deposits.”

Douglass continued, “Looking forward to the balance of fiscal 2015, we continue to remain optimistic about our prospects for meaningful earnings growth. We expect our second fiscal quarter to produce core earnings that are reasonably similar to the just completed first quarter. The increased demand for mortgage loan refinancings during the second half of the just completed quarter resulted in significant growth in our loans held for sale at a time when the decreased seasonal demand for purchase money mortgages would have historically had a negative impact on the balance. In addition, we saw a significant increase in quarter-end interest-rate lock commitments extended to our residential loan customers compared with September 30, 2014. This activity is expected to position us for another quarter of solid mortgage revenues in our March 2015 quarter, which has traditionally represented the seasonal low point in our mortgage operation. Finally, we expect a 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 modest commercial portfolio growth, bolstered by our renewed focus on new business development.”

Conference Call Tomorrow

Pulaski Financial’s management will discuss first quarter results and other developments tomorrow, January 28, 2015, during a conference call beginning at 11 a.m. EST (10 a.m. CST). The call will also be simultaneously webcast and archived for three months at: http://www.pulaskibank.com/our-story/shareholder-relations/. Participants in the conference call may dial 877-473-3757, conference ID 67756655, a few minutes before the start time. The call will also be available for replay through February 28, 2015 at 855-859-2056 or 404-537-3406, conference ID 67756655.

About Pulaski Financial

Pulaski Financial Corp., operating in its 93rd 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, Chicago and Denver 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, 2014 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.