Pulaski Financial Reports 47% Linked Quarter Increase in Third Fiscal Quarter Diluted EPS

Pulaski Financial Corp. (Nasdaq Global Select: PULB, the “Company”) reported net income available to common shareholders for the quarter ended June 30, 2014 of $2.8 million, or $0.25 per diluted common share, compared with $1.9 million, or $0.17 per diluted common share, for the linked quarter ended March 31, 2014 and $3.3 million, or $0.29 per diluted common share, for the same quarter last year. For the nine-month period, the Company reported net income available to common shareholders of $6.9 million, or $0.61 per diluted common share, in 2014 compared with $9.2 million, or $0.83 per diluted common share, in 2013.

The Company saw strong growth in portfolio loans and a significant decline in non-performing assets during the quarter resulting in an increase in interest earned on portfolio loans and continued low credit costs compared with the linked and prior-year quarters. The Company also saw a seasonal rebound in consumer demand for loans to finance home purchases during the quarter resulting in increases in mortgage revenues and interest income earned on loans held for sale compared with the March 2014 quarter. However, this level of consumer demand was weaker than what was experienced during the June 2013 quarter due to the higher interest rate environment and resulting decrease in refinancing activity. As a result, the Company saw decreases in mortgage revenues and interest income on loans held for sale compared with the June 2013 quarter.

Net interest income for the quarter was up 8.1% compared with the March 2014 quarter primarily as the result of strong growth in portfolio loans combined with an increase in loans held for sale. The total balance of portfolio loans at June 30, 2014 increased $64.5 million, or 6.3%, from March 31, 2014, showing almost equal increases in the amounts of residential first mortgage and commercial loans. The residential loan portfolio experienced significant growth for the first time in several years. The Company was successful in marketing two “niche” adjustable-rate loan products, resulting in a $34.0 million, or 15.5%, increase in residential first mortgage loans during the quarter. The commercial loan portfolio also continued to experience strong growth in commercial real estate and commercial and industrial loans. The portfolio loan growth, combined with increases in the average balance and average yield on loans held for sale, contributed to an improvement in the net interest margin from 3.41% for the March 2014 quarter to 3.68% for the June 2014 quarter. However, when compared with the June 2013 quarter, net interest income decreased 2.5% primarily due to a 60.6% decrease in interest income on loans held for sale, which was negatively impacted by the sharp drop in refinancing activity.

Non-interest income for the quarter increased 40.0% compared with the quarter ended March 31, 2014, but was down 47.2% compared with the same quarter last year primarily as the result of fluctuations in the level of mortgage revenues. Mortgage revenues increased $738,000, or 145.7%, compared with the March 2014 quarter. The level of mortgage loans originated for sale during the quarter increased 71.9% compared with the March 2014 quarter. The level of loans originated to finance home purchases increased 90.4% to $186.7 million, during the quarter, while the demand for mortgage loan refinancings remained soft. Loan sales increased 38.3% to $188.4 million. The net profit margin on loans sold improved to 0.66% in the June 2014 quarter compared with 0.37% in the March 2014 quarter primarily due to a proportionately lower level of origination costs as the increased loan production volume was absorbed by existing loan production staff. However, the levels of loans originated and sold during the June 2014 quarter were 41.2% and 46.9%, respectively, lower than the levels experienced during the June 2013 quarter as the higher level of market interest rates continued to dampen consumer demand for mortgage loan refinancings.

Non-performing assets decreased to $31.3 million at June 30, 2014 compared with $36.8 million at March 31, 2014 and $42.9 million at June 30, 2013. The combined level of adversely classified and watch list loans declined 11% during the quarter and 21% compared with the June 30, 2013 levels. Total credit costs, consisting of the provision for loan losses and foreclosed property losses, net of recoveries, and expense, was $189,000 for the June 2014 quarter compared with $88,000 for the March 2014 quarter and $1.9 million in the same quarter last year. The provision for loan losses for the June 2014 quarter totaled $200,000 versus net charge-offs of $199,000.

Gary Douglass, President and Chief Executive Officer, commented, “We are very pleased with the rebound in our third quarter results when compared with the first two quarters of fiscal 2014. It is also gratifying that all of the performance expectations I shared with you in last quarter’s release and conference call were achieved in the current quarter. These include net interest income growth and net interest margin expansion, strong commercial and residential portfolio loan growth, a significant rebound in residential mortgage loan originations, sales and revenues and a continued decline in non-performing assets and low net credit costs. In addition, we strengthened our capital structure by completing an exchange offer and private placement of common stock that should result in the redemption of all of our remaining high-cost preferred stock by July 31, 2014. Notably, insiders either converted or acquired common shares accounting for 83% of the total common equity raised in the transactions, reflecting their high level of confidence in our prospects going forward.”

Douglass concluded, “We expect to finish our fourth fiscal quarter on a high note by reporting an even stronger earnings performance than the just-completed June quarter. The upcoming quarterly performance should be marked by a further rebound in mortgage originations and revenues, continued strength in commercial loan portfolio growth, and continued low net credit costs. We expect to see continued growth in net interest income as strong loan growth more than offsets modest pressure on the net interest margin. Finally, we anticipate a modest contribution to non-interest income generated by our new SBA lending platform and effective control over non-interest expense.”

Conference Call Tomorrow

Pulaski Financial’s management will discuss third fiscal quarter results and other developments tomorrow, July 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 44447048, a few minutes before the start time. The call will also be available for replay through August 29, 2014 at 855-859-2056 or 404-537-3406, conference ID 44447048.

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.