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Pulaski Financial Corp – ‘424B4’ on 2/7/06

On:  Tuesday, 2/7/06, at 11:23am ET   ·   Accession #:  1193125-6-21751   ·   File #:  333-129026

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 2/07/06  Pulaski Financial Corp            424B4                  1:2.4M                                   RR Donnelley/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 424B4       Prospectus                                          HTML   1.83M 

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Filed pursuant to Rule 424(b)(4)

Registration No. 333-129026

PROSPECTUS

1,000,000 Shares

Common Stock

We are offering up to 1,000,000 shares of our common stock. The public offering price is $15.25 per share.

Our common stock is currently quoted and traded on the Nasdaq National Market under the symbol “PULB.” On February 6, 2006, the last reported sale price of our common stock on the Nasdaq National Market was $17.10 per share.

Investing in our common stock involves risks. See “ Risk Factors” beginning on page 11 to read about factors you should consider before you make your investment decision.

We have granted the underwriters an option to purchase up to 150,000 additional shares of common stock to cover over-allotments, if any. The underwriters may exercise this option at any time within 30 days after the offering.

These securities are not savings accounts, deposits or other obligations of any bank and are not insured or guaranteed by the Federal Deposit Insurance Corporation’s Bank Insurance Fund, Savings Insurance Fund or any other governmental agency.

Neither the Securities and Exchange Commission nor any state securities commission or other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares to purchasers on or about February 10, 2006.

The date of this prospectus is February 6, 2006.

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ABOUT THIS PROSPECTUS

You should rely only on the information contained or incorporated by reference in this prospectus. See “Documents Incorporated by Reference.” We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We and the underwriters are not making an offer to sell these shares of common stock in jurisdictions where offers and sales are not permitted. You should assume that the information contained in this prospectus is accurate only as of the date on the front cover of this prospectus, regardless of the time of delivery of this prospectus or any sale of the common stock. Our business, financial condition, results of operations and prospects may have changed since the date of this prospectus. Unless otherwise indicated, all information in this prospectus assumes that the underwriters will not exercise their option to purchase additional common stock to cover over-allotments.

In this prospectus, we refer to information and statistics regarding the banking industry in the United States and the banking market in the St. Louis and Kansas City metropolitan areas. We obtained this market data from independent publications or other publicly available information. Although we believe these sources are reliable, we have not independently verified and do not guarantee the accuracy and completeness of this information.

Unless the context indicates otherwise, all references in this prospectus to “Pulaski Financial,” “we,” “us” and “our” refer to Pulaski Financial Corp. and its subsidiaries. References to the “Bank” refer to Pulaski Bank.

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PROSPECTUS SUMMARY

This summary highlights specific information contained elsewhere or incorporated by reference in this prospectus. This summary is not complete and does not contain all of the information that you should consider before investing in our common stock and is qualified in its entirety by the more detailed information included or incorporated by reference in this prospectus. To understand this offering fully, you should carefully read this entire prospectus, including the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and the documents incorporated by reference.

Our Company

We are a diversified, community-based, financial institution holding company headquartered in St. Louis, Missouri. We conduct operations primarily through Pulaski Bank, a federally chartered savings bank. Pulaski Bank provides an array of financial products and services for businesses and retail customers primarily through its seven full-service offices in the St. Louis metropolitan area, as indicated in the map on the inside front cover of the prospectus. Pulaski Bank is primarily engaged in attracting deposits from individuals and businesses and using these deposits, together with borrowed funds, to originate one- to four-family residential mortgage loans, home equity lines of credit, and commercial real estate and commercial and industrial loans within its lending market.

We have grown our assets, deposits and profits internally by building our residential lending operation, opening de novo branches, and hiring experienced bankers with existing customer relationships in our market. Although we intend to expand primarily through internal growth, we will continue to explore opportunities to expand through acquisitions of other banks and bank branches. Our goal is to continue to enhance our franchise value and earnings through controlled growth in our banking operations, while maintaining the community-oriented customer service that has characterized our success to date.

From September 30, 2001 to September 30, 2005, we have achieved strong growth. Specifically, we have:

In addition to balance sheet growth, we have achieved significant earnings growth. Net income per share (diluted) has increased from $0.36 for fiscal 2001 to $0.85 for fiscal 2005.

A major driver of our growth has been our residential mortgage business, which generates significant income through loan sales and which provides a source for portfolio loans. Residential mortgage loan originations totaled $1.2 billion for the year ended September 30, 2005. At September 30, 2005, we employed 55 residential lenders. In June 2005, we acquired a 50% interest in a joint venture with one of Kansas City’s largest real estate firms, which will provide an additional source of originations.

Additional information about us is included in this prospectus and in documents incorporated by reference in this prospectus. See “Business,” “Where You May Find More Information” and “Documents Incorporated by Reference.”

Market Areas and Growth Strategy

We currently conduct our business primarily in the St. Louis metropolitan area and to a lesser extent in the Kansas City metropolitan area. In the St. Louis metropolitan area, we conduct operations out of our main office

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and six branch offices. In the Kansas City metropolitan area, we operate out of a mortgage lending office in Johnson County, Kansas, which we opened in fiscal 2003, and a retail branch location in Kansas City, Missouri, which we acquired in fiscal 2003. On October 7, 2005, as discussed below under “—Recent Developments,” we signed a definitive agreement to sell our branch office located in Kansas City. Based upon Federal Deposit Insurance Corporation data as of June 30, 2005, our total deposits ranked 15th among 138 financial institutions in the St. Louis metropolitan area, representing approximately 1.03% of the total deposits in our market.

We have a community banking strategy that emphasizes responsive and personalized service to our customers. Due to the consolidation of financial institutions in our market, we believe there is a significant opportunity for a community-focused bank to provide a full range of financial services to small and middle-market commercial and retail customers. By offering quicker decision making in the delivery of banking products and services, offering customized products where appropriate, and providing customer access to our senior managers, we distinguish ourselves from larger, regional banks operating in our market areas, while our larger capital base and product mix enable us to compete effectively against smaller banks. As a result, we believe we have a substantial opportunity to attract experienced management, loan officers and banking customers. We believe this will provide us a competitive advantage as we continue to expand into attractive, high growth markets around the St. Louis metropolitan area through the establishment of de novo bank branch offices, acquisitions of community banks and bank branches, and organic expansion where possible by growing our existing branches in their respective communities.

Our strategies center around our continued development into a full-service, community-oriented bank and the expansion of our branch network to more adequately cover the large geography of the St. Louis metropolitan area. Our efforts to grow assets and earnings are focused on the growth and efficiency of five core products: residential, commercial and home equity loans and checking and money market accounts. In order to realize these objectives, we are pursuing the following strategies:

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Recent Developments

On October 7, 2005, we entered into a purchase and assumption agreement pursuant to which we will sell our Kansas City, Missouri branch office to UMB Bank. We expect the transaction to close the first calendar quarter of 2006. As of September 30, 2005, the deposits to be assumed by UMB Bank totaled approximately $25.4 million. No loans will be transferred in connection with the branch sale. We expect to recognize a gain of approximately $2,750,000 in connection with the transaction. Although we are selling our retail branch in Kansas City, Missouri, we remain committed to our loan production office in Overland Park, Kansas and to the joint venture that we established in June 2005 with a large Kansas City-area real estate firm. In deciding to sell the Kansas City branch, we determined that our loan origination efforts could continue to be successful without a retail presence and that our capital could be put to more effective use by focusing on expansion within our core retail and commercial banking market—the St. Louis metropolitan area.

On October 25, 2005, we entered into an Agreement and Plan of Merger with CWE Bancorp, Inc., pursuant to which we will acquire CWE Bancorp and its wholly owned subsidiary, Central West End Bank, A Federal Savings Bank. Central West End Bank operates two full-service banking offices in St. Louis, Missouri. At September 30, 2005, CWE Bancorp had total assets of $46.2 million, deposits of $40.6 million and stockholders’ equity of $4.5 million. Under the terms of the merger agreement, stockholders of CWE Bancorp will be entitled to elect to receive, in exchange for each share of CWE common stock held, either $8.25 cash or 0.4853 shares of our common stock. The merger consideration is subject to adjustment in connection with the disposition by CWE Bancorp of certain fixed-rate loans and to certain allocation and proration mechanisms as part of the election process. We estimate that we will issue approximately 214,000 shares of our common stock in the transaction and that the total value of the proposed transaction will be $7.6 million. We expect to complete the merger in the first calendar quarter of 2006, pending CWE Bancorp stockholder approval, regulatory approval, and other customary conditions of closing.

Corporate Information

Our headquarters are located at 12300 Olive Boulevard, St. Louis, Missouri 63141 and our telephone number at that address is (314) 878-2210. We maintain a website at www.pulaskibankstl.com. Information on the website is not incorporated by reference and is not a part of this prospectus.

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THE OFFERING

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SUMMARY CONSOLIDATED FINANCIAL DATA

Our summary consolidated financial data is presented below as of and for the years ended September 30, 2001 through 2005. The summary consolidated financial data presented below as of September 30, 2005 and 2004 and for the years ended September 30, 2005, 2004 and 2003 is derived from our audited consolidated financial statements included in and incorporated by reference in this prospectus. The summary consolidated financial data as of September 30, 2003, 2002 and 2001 and for the years ended September 30, 2002 and 2001 is derived from our audited financial statements, which are not included or incorporated by reference in this prospectus. This table is a summary and should be read in conjunction with the consolidated financial statements and related notes contained in this prospectus and in our Annual Report on Form 10-K for the fiscal year ended September 30, 2005 which is incorporated in this prospectus by reference, along with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” found elsewhere in this prospectus. The per share financial data presented below has been adjusted to give effect to the three-for-two stock split that occurred on July 18, 2005, and the two-for-one stock split that occurred on July 21, 2003.

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GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures

“Tangible book value per share” included in our summary consolidated financial data is determined by methods other than in accordance with accounting principles generally accepted within the United States, or GAAP. Our management uses this non-GAAP measure in its analysis of our performance.

“Tangible book value per share” is defined as total equity reduced by recorded goodwill and other intangible assets divided by total common shares outstanding. This measure is important to investors interested in changes from period-to-period in book value per share exclusive of changes in intangible assets.

This disclosure should not be viewed as a substitute for results determined in accordance with GAAP and is not necessarily comparable to non-GAAP performance measures that may be presented by other companies.

The following reconciliation table provides a more detailed analysis of this non-GAAP performance measure:

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RECENT DEVELOPMENTS

The selected financial condition and operating data presented below at December 31, 2005, and for the three months ended December 31, 2005 and 2004 are unaudited. In the opinion of management, the unaudited selected data contains all adjustments (none of which are other than normal recurring entries) necessary for a fair presentation of the results of such periods. This information and the discussion that follows should be read in conjunction with the financial statements and notes beginning on page F-1.

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Overview

On January 24, 2006, we reported our results of operations for the quarter ended December 31, 2005. As reported, our net income decreased 2.4% to $1.8 million for the quarter ended December 31, 2005 from $1.9 million for the same quarter in the prior year. Diluted earnings per share decreased to $0.21 for the quarter ended December 31, 2005 from $0.22 for the same quarter in the prior year.

Negatively impacting the 2005 quarter was a loss on derivative financial instruments, which had a net after-tax impact of $256,000, or $0.03 per diluted share. During the quarter, we identified prior accounting errors in our treatment of certain derivative financial instruments. Specifically, we determined that certain interest rate swap agreements that we had acquired to hedge the interest rate risk inherent in certain brokered certificates of deposit did not qualify for the “short-cut” method of fair value hedge accounting under Financial Accounting Standards (FAS) 133. As a result, FAS 133 required us to reflect changes in the fair value of the derivative instruments as a charge to earnings, and we have restated our financial statements for the quarters ended December 31, 2004, March 31, 2005 and June 30, 2005 to reflect this accounting treatment. For periods subsequent to December 31, 2005, we expect to be able to use the “long-haul” method of hedge accounting under FAS 133, which will permit us to offset changes in value of the derivative instruments with changes in value of the hedged items.

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Net Interest Income

Net interest income grew 16.9% to $5.9 million in the first quarter compared with $5.0 million for the same quarter in the prior year. Our net interest margin increased 15 basis points to 3.20% for the quarter ended December 31, 2005 from 3.05% for the quarter ended September 30, 2005. The increase was the result of growth of low cost transaction accounts, a decline in the average balance of loans held for sale and upwards repricing of the loan portfolio. Our assets and liabilities remain well matched, with approximately two-thirds of assets and liabilities set to reprice during the next year.

Non-Interest Income

Non-interest income decreased 4.5% to $2.2 million for the three months ended December 31, 2005 compared to $2.3 million for the same period in the prior year. Mortgage revenue decreased 30.8% during the quarter to $774,000. In the quarter ended December 31, 2005, we sold $267.7 million of loans, compared with $209.3 million a year ago. However, compressed revenue margin, caused by rising market interest rates, reduced the profitability of loan sales in the quarter. Retail banking revenue grew 20.8% compared to the same quarter last year to $748,000 on changes in customer overdraft policies. Revenue from title company operations grew $40,000 over the same quarter last year, while revenue from investment division operations and insurance commissions were both lower than the same quarter in the prior year. Other non-interest income increased primarily as a result of increased income from bank-owned life insurance.

Non-Interest Expense

Non-interest expense increased 23.6% to $4.9 million for the quarter ended December 31, 2005 compared to $3.9 million for the same quarter in the prior year, primarily as a result of the $407,000 loss on derivative financial instruments discussed above and related legal, accounting and consulting expenses associated with hedge accounting issues. Also contributing to the increase in non-interest expense was greater occupancy, equipment and data processing expense, which rose $172,000, or 18.4%, over the same quarter last year due to continued investment in our infrastructure. Compensation expense was essentially unchanged. Increases in advertising expenses, supplies, service charges, Sarbanes-Oxley compliance, and reserves for real estate owned all contributed to the increase in other non-interest expenses.

Changes in Financial Condition

Total assets increased $15.8 million during the quarter ended December 31, 2005 to $805.6 million. Net loans receivable grew $33.3 million, or 5.3%, during the quarter to $666.4 million at December 31, 2005.

Non-performing assets increased from $6.8 million at September 30, 2005 to $7.5 million at December 31, 2005. The increase in non-performing assets was primarily the result of an increase in non-performing residential mortgage loans. We have entered into an agreement to sell approximately $3.0 million of non-performing and other classified residential loans and expect to recognize a small gain upon completion of the transaction. These loans have been classified as loans held for sale at December 31, 2005 and are not included in non-performing assets. The provision for loan losses for the quarter totaled $407,000 compared with $349,000 for the same quarter in the prior year. The larger provision was due primarily to the increase in non-performing loans, which is reflective of the growth in residential lending. At December 31, 2005, the allowance for loan losses was 0.96% of total loans and represented 112.93% of non-performing loans.

For the quarter, deposits decreased $6.5 million to $489.7 million, excluding deposits that will be transferred in connection with the pending sale of our Kansas City branch. Demand deposit accounts, including money market deposits, increased $10.8 million during the quarter to $151.6 million, with $8.4 million of the increase coming in commercial transaction accounts, which totaled $43.6 million at December 31, 2005. These gains were offset by the managed run-off of $21.5 million of brokered deposits. The increase in net loans receivable and decline in deposits were funded by a $29.0 million increase in Federal Home Loan Bank advances.

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RISK FACTORS

An investment in shares of our common stock involves various risks. Before deciding to invest in our common stock, you should carefully consider the risks described below in conjunction with the other information in this prospectus and information incorporated by reference into this prospectus, including our consolidated financial statements and related notes. Our business, financial condition and results of operations could be harmed by any of the following risks or by other risks that have not been identified or that we may believe are immaterial or unlikely. The value or market price of our common stock could decline due to any of these risks, and you may lose all or part of your investment. The risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements.

Risks Related to Our Business

Our business strategy includes the continuation of significant growth plans, and our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively.

Our assets have increased $388.5 million, or 96.8%, from $401.4 million at September 30, 2003 to $789.9 million at September 30, 2005, primarily due to increases in residential, home equity and commercial loans. We expect to continue to experience growth in the amount of our assets, the level of our deposits and the scale of our operations. Achieving our growth targets requires us to attract customers that currently bank at other financial institutions in our market, thereby increasing our share of the market. Our ability to successfully grow will depend on a variety of factors, including our ability to attract and retain experienced bankers, the continued availability of desirable business opportunities, the competitive responses from other financial institutions in our market areas and our ability to manage our growth. While we believe we have the management resources and internal systems in place to successfully manage our future growth, there can be no assurance growth opportunities will be available or that we will successfully manage our growth. If we do not manage our growth effectively, we may not be able to achieve our business plan, and our business and prospects could be harmed.

Our recent results may not be indicative of our future operating results.

We have achieved significant growth in earnings per share in recent years. For example, net income per share (diluted) grew from $0.36 for the year ended September 30, 2001 to $0.85 for the year ended September 30, 2005. Our strong performance during this time period was, in part, the result of an extremely favorable residential mortgage financing market. In the future, we may not have the benefit of a favorable interest rate environment or a strong residential mortgage market. Various factors, such as economic conditions, regulatory and legislative considerations and competition, may also impede or restrict our ability to increase earnings at this same rate.

Most of the residential mortgage loans in our portfolio do not conform to secondary market requirements, which may make them riskier and more difficult to sell.

Most of the residential mortgage loans that we retain in our loan portfolio do not conform to or satisfy the requirements for sale in the secondary market. These loans generally do not conform to Fannie Mae or Freddie Mac underwriting guidelines as a result of characteristics of the property, the loan terms or exceptions from agency underwriting guidelines. For example, we may make loans to borrowers who provide limited or no documentation of assets or income and have higher debt-to-income ratios than our loans conforming to secondary market guidelines. At September 30, 2005, our mortgage loan portfolio contained mostly non-conforming loans and included $61.6 million of loans with a combined loan-to-value ratio greater than 90% and $17.1 million of mortgage loans rated at the lowest acceptable internal credit grading level. Nonconforming one- to four-family residential loans are generally considered to have an increased risk of delinquency and foreclosure than conforming loans and may result in higher levels of realized loss. Although we have not experienced such increased delinquencies or foreclosures in the current economy, we cannot assure you that our nonconforming loan portfolio would not be adversely affected in the event of a downturn in regional economic conditions.

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Furthermore, nonconforming loans are not as readily saleable as loans that conform to agency guidelines and often can be sold only after discounting the purchase price.

High loan-to-value ratios on a significant portion of our residential mortgage and home equity line of credit portfolios expose us to greater risk of loss.

Many of our residential mortgage loans are secured by liens on mortgage properties in which the borrowers have little or no equity because we originated upon purchase of the underlying residence a first mortgage with an 80% loan-to-value ratio and a concurrent second mortgage with a combined loan-to-value ratio of up to 100%. At September 30, 2005, approximately $61.6 million, or 24%, of our $255.7 million residential mortgage loans had original combined loan-to-value ratios in excess of 90%. In addition, our home equity lines of credit may have, when added to existing senior lien balances, a post-funding combined loan-to-value ratio of up to 100% of the value of the home securing the loan. At September 30, 2005, we held $5.3 million of uninsured home equity lines of credit with a combined loan-to-value ratio in excess of 90%. Our average loan to value ratio in our home equity line of credit portfolio is 77%. Residential loans with high combined loan-to-value ratios will be more sensitive to declining property values than would those with lower combined loan-to-value ratios and, therefore, may experience a higher incidence of default and severity of losses. In addition, if the borrowers sell their homes, such borrowers may be unable to repay their loans in full from the sale. Almost all of our residential mortgage loans and home equity lines of credit have adjustable interest rates. As a result, these loans may experience a higher rate of default in a rising interest rate environment. For these reasons as well, these loans may experience higher rates of delinquencies, defaults and losses.

The unseasoned nature of our commercial loan portfolio may result in errors in judging its collectibility, which may lead to additional provisions or charge-offs, which would hurt our profits.

Our commercial division’s loan portfolio, which includes loans secured by commercial, multi-family and residential real estate as well as business assets, has increased from $13.7 million, or 4.8% of total loans, at September 30, 2003 to $179.3 million, or 27.8% of total loans, at September 30, 2005. A large portion of our commercial loan portfolio is unseasoned and our limited experience in originating these types of loans does not provide us with a significant payment history pattern with which to judge future collectibility. These loans have also not been subjected to unfavorable economic conditions. As a result, it is difficult to predict the future performance of this part of our loan portfolio. These loans may have delinquency or charge-off levels above our historical experience, which could adversely affect our future performance. Further, commercial loans generally have larger balances and involve a greater risk than one- to four-family residential mortgage loans. Accordingly, if we make any errors in judgment in the collectibility of our commercial loans, any resulting charge-offs may be larger on a per loan basis than those incurred with our residential mortgage loan portfolio.

We may be unable to successfully integrate CWE Bancorp’s operations and retain CWE Bancorp’s employees.

Our pending acquisition of CWE Bancorp involves the integration of two companies that have previously operated independently. The difficulties of combining the operations of the two companies include: integrating personnel with different business backgrounds; combining different corporate cultures; and retaining key employees. The process of integrating operations could cause an interruption of, or loss of momentum in, the activities of the business and the loss of customers and key personnel. The integration of the two companies will require the experience and expertise of certain key employees of CWE Bancorp whom we expect to retain. We may not be successful in retaining these employees for the time period necessary to successfully integrate CWE Bancorp’s operations into ours. The diversion of management’s attention and any delays or difficulties encountered in connection with the merger and the integration of the two companies’ operations could have an adverse effect on our business and results of operations following the acquisition.

An increase in interest rates may reduce our mortgage revenues, which would negatively impact our non-interest income, and may reduce our originations of home equity lines of credit, which would negatively impact our net interest income.

Our mortgage banking operations provide a significant portion of our non-interest income. We generate mortgage revenues primarily from gains on the sale of loans to investors on a servicing released basis. In a rising

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or higher interest rate environment, our originations of mortgage loans may decrease, resulting in fewer loans that are available to be sold to investors. This would result in a decrease in mortgage revenues and a corresponding decrease in non-interest income. In addition, our results of operations are affected by the amount of non-interest expenses associated with mortgage banking activities, such as salaries and employee benefits, occupancy, equipment and data processing expense and other operating costs. During periods of reduced loan demand, our results of operations may be adversely affected to the extent that we are unable to reduce expenses commensurate with the decline in loan originations.

We typically approve home equity lines of credit in connection with a borrower’s first mortgage loan application. The large volume of mortgage loans originated in recent years has provided many opportunities to cross-sell our home equity line of credit, which has resulted in consistent strong growth of this product. However in a rising interest rate environment, our originations of mortgage loans may decrease, thus offering us fewer opportunities to cross-sell our home equity line of credit.

If the value of real estate in the St. Louis and Kansas City metropolitan areas were to decline materially, a significant portion of our loan portfolio could become under-collateralized, which could have a material adverse effect on us.

With most of our loans concentrated in the St. Louis and Kansas City metropolitan areas, a decline in local economic conditions could adversely affect the value of the real estate collateral securing our loans. A decline in property values would diminish our ability to recover on defaulted loans by selling the real estate collateral, making it more likely that we would suffer losses on defaulted loans. Additionally, a decrease in asset quality could require additions to our allowance for loan losses through increased provisions for loan losses, which would hurt our profits. Also, a decline in local economic conditions may have a greater effect on our earnings and capital than on the earnings and capital of larger financial institutions whose real estate loan portfolios are more geographically diverse. Real estate values are affected by various factors in addition to local economic conditions, including, among other things, changes in general or regional economic conditions, governmental rules or policies and natural disasters.

Our business is subject to the success of the local economy in which we operate.

Because the majority of our borrowers and depositors are individuals and businesses located and doing business in the St. Louis metropolitan area, our success depends to a significant extent upon economic conditions in the St. Louis metropolitan area. Adverse economic conditions in our market area could reduce our growth rate, affect the ability of our customers to repay their loans and generally affect our financial condition and results of operations. Conditions such as inflation, recession, unemployment, high interest rates, short money supply, scarce natural resources, international disorders, terrorism and other factors beyond our control may adversely affect our profitability. We are less able than a larger institution to spread the risks of unfavorable local economic conditions across a large number of diversified economies. Any sustained period of increased payment delinquencies, foreclosures or losses caused by adverse market or economic conditions in the State of Missouri could adversely affect the value of our assets, revenues, results of operations and financial condition. Moreover, we cannot give any assurance we will benefit from any market growth or favorable economic conditions in our primary market areas if they do occur.

The building of market share through our branching strategy could cause our expenses to increase faster than revenues.

We intend to continue to build market share in the St. Louis metropolitan area through our branching strategy. We are planning four new branches that we intend to open within the next 24 months (including the two offices of Central West End Bank that we will acquire through our acquisition of CWE Bancorp). There are considerable costs involved in opening branches and new branches generally require a period of time to generate sufficient revenues to offset their costs, especially in areas in which we do not have an established presence.

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Accordingly, any new branch can be expected to negatively impact our earnings for some period of time until the branch reaches certain economies of scale. Our expenses could be further increased if we encounter delays in the opening of any of our new branches. Finally, we have no assurance our new branches will be successful even after they have been established.

Our continued pace of growth may require us to raise additional capital in the future, but that capital may not be available when it is needed.

We are required by federal regulatory authorities to maintain adequate levels of capital to support our operations. We anticipate our capital resources following this offering will satisfy our capital requirements for the foreseeable future. We may at some point, however, need to raise additional capital to support our continued growth. If we raise capital through the issuance of additional shares of our common stock or other securities, it would dilute the ownership interests of the investors in the offering in us and may dilute the per share book value of our common stock. New investors may also have rights, preferences and privileges senior to our current shareholders which may adversely impact our current shareholders.

Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside our control, and on our financial performance. Accordingly, we cannot assure you of our ability to raise additional capital, if needed, on terms acceptable to us. If we cannot raise additional capital when needed, our ability to further expand our operations through internal growth and acquisitions could be materially impaired.

Our wholesale funding sources may prove insufficient to replace deposits at maturity and support our future growth.

We must maintain sufficient funds to respond to the needs of depositors and borrowers. As a part of our liquidity management, we use a number of funding sources in addition to core deposit growth and repayments and maturities of loans and investments. As we continue to grow, we are likely to become more dependent on these sources, which include Federal Home Loan Bank advances, proceeds from the sale of loans, brokered certificates of deposit and a line of credit from another financial institution. At September 30, 2005, we had approximately $171.0 million of FHLB advances outstanding with an additional $104.5 million available borrowing capacity, $118.9 million in brokered certificates of deposit and an additional $12.0 million in unused liquidity through a line of credit. If we were to become less than “well capitalized,” as defined by applicable Office of Thrift Supervision regulations, it would materially restrict our ability to acquire and retain brokered certificates of deposit. Additionally, adverse operating results or changes in industry conditions could lead to difficulty or an inability to access these additional funding sources. Our financial flexibility will be severely constrained if we are unable to maintain our access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates. Finally, if we are required to rely more heavily on more expensive funding sources to support future growth, our revenues may not increase proportionately to cover our costs. In this case, our operating margins and profitability would be adversely affected.

Competition from financial institutions and other financial service providers may adversely affect our growth and profitability.

The banking business is highly competitive and we experience competition in each of our markets from many other financial institutions. We compete with commercial banks, credit unions, savings and loan associations, mortgage banking firms, consumer finance companies, securities brokerage firms, insurance companies, money market funds, and other mutual funds, as well as other super-regional, national and international financial institutions that operate offices in our primary market areas and elsewhere.

We compete with these institutions both in attracting deposits and in making loans. This competition has made it more difficult for us to make new loans and has occasionally forced us to offer higher deposit rates. Price competition for loans and deposits might result in us earning less on our loans and paying more on our deposits, which reduces net interest income. As of June 30, 2005, according to the Federal Deposit Insurance Corporation,

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we held 1.03% of the deposits in St. Louis, Missouri-Illinois Metropolitan Statistical Area, which was the 15^th largest share of deposits out of 138 financial institutions. Many of our competitors are larger financial institutions. While we believe we can and do successfully compete with these other financial institutions in our primary markets, we may face a competitive disadvantage as a result of our smaller size, smaller resources and smaller lending limits, lack of geographic diversification and inability to spread our marketing costs across a broader market. In recent years, several new financial institutions have formed in the St. Louis area. These de novo banks may price their loans and deposits aggressively in order to attract customers. Although we compete by concentrating our marketing efforts in our primary markets with local advertisements, personal contacts, and greater flexibility and responsiveness in working with local customers, we can give no assurance this strategy will be successful.

Fluctuations in interest rates could reduce our profitability and affect the value of our assets.

Like other financial institutions, we are subject to interest rate risk. Our primary source of income is net interest income, which is the difference between interest earned on loans and investments and the interest paid on deposits and borrowings. We expect that we will periodically experience imbalances in the interest rate sensitivities of our assets and liabilities and the relationships of various interest rates to each other. Over any defined period of time, our interest-earning assets may be more sensitive to changes in market interest rates than our interest-bearing liabilities, or vice versa. In addition, the individual market interest rates underlying our loan and deposit products (e.g., prime) may not change to the same degree over a given time period. In any event, if market interest rates should move contrary to our position, our earnings may be negatively affected. In addition, loan volume and quality and deposit volume and mix can be affected by market interest rates. Changes in levels of market interest rates could materially adversely affect our net interest spread, asset quality, origination volume and overall profitability.

Interest rates have recently been at historically low levels. However, since June 30, 2004, the U.S. Federal Reserve has increased its target for the federal funds rate 14 times, from 1.00% to 4.50%. While these short-term market interest rates (which we use as a guide to price our deposits) have increased, longer-term market interest rates (which we use as a guide to price our longer-term loans) have not. This “flattening” of the market yield curve has had a negative impact on our interest rate spread and net interest margin to date. If short-term interest rates continue to rise, and if rates on our deposits and borrowings continue to reprice upwards faster than the rates on our long-term loans and investments, we would experience further compression of our interest rate spread and net interest margin, which would have a negative effect on our profitability.

We principally manage interest rate risk by managing our volume and mix of our earning assets and funding liabilities. In a changing interest rate environment, we may not be able to manage this risk effectively. If we are unable to manage interest rate risk effectively, our business, financial condition and results of operations could be materially harmed.

Changes in the level of interest rates also may negatively affect our ability to originate real estate loans, the value of our assets and our ability to realize gains from the sale of our assets, all of which ultimately affect our earnings.

Our allowance for loan losses may prove to be insufficient to absorb losses in our loan portfolio.

Like all financial institutions, we maintain an allowance for loan losses to provide for loans in our portfolio that may not be repaid in their entirety. We believe that our allowance for loan losses is maintained at a level adequate to absorb probable losses inherent in our loan portfolio as of the corresponding balance sheet date. However, our allowance for loan losses may not be sufficient to cover actual loan losses, and future provisions for loan losses could materially adversely affect our operating results.

In evaluating the adequacy of our allowance for loan losses, we consider numerous quantitative factors, including our historical charge-off experience, growth of our loan portfolio, changes in the composition of our

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loan portfolio and the volume of delinquent and criticized loans. In addition, we use information about specific borrower situations, including their financial position and estimated collateral values, to estimate the risk and amount of loss for those borrowers. Finally, we also consider many qualitative factors, including general and economic business conditions, duration of the current business cycle, current general market collateral valuations, trends apparent in any of the factors we take into account and other matters, which are by nature more subjective and fluid. Our estimates of the risk of loss and amount of loss on any loan are complicated by the significant uncertainties surrounding our borrowers’ abilities to successfully execute their business models through changing economic environments, competitive challenges and other factors. Because of the degree of uncertainty and susceptibility of these factors to change, our actual losses may vary from our current estimates.

At September 30, 2005, our allowance for loan losses as a percentage of total loans was 0.97%. Federal regulators, as an integral part of their examination process, periodically review our allowance for loan losses and may require us to increase our allowance for loan losses by recognizing additional provisions for loan losses charged to expense, or to decrease our allowance for loan losses by recognizing loan charge-offs, net of recoveries. Any such additional provisions for loan losses or charge-offs, as required by these regulatory agencies, could have a material adverse effect on our financial condition and results of operations.

We are dependent upon the services of our management team.

Our future success and profitability is substantially dependent upon the management and banking abilities of our senior executives. We believe that our future results will also depend in part upon our attracting and retaining highly skilled and qualified management. We are especially dependent on a limited number of key management personnel, none of whom has an employment agreement with us, except for our chief executive officer. The loss of the chief executive officer or other senior executive officers could have a material adverse impact on our operations because other officers may not have the experience and expertise to readily replace these individuals. Competition for such personnel is intense, and we cannot assure you that we will be successful in attracting or retaining such personnel. Changes in key personnel and their responsibilities may be disruptive to our business and could have a material adverse effect on our business, financial condition and results of operations.

Our failure to continue to recruit and retain qualified loan originators could adversely affect our ability to compete successfully and affect our profitability.

Our continued success and future growth depend heavily on our ability to attract and retain highly skilled and motivated loan originators and other banking professionals. We compete against many institutions with greater financial resources both within our industry and in other industries to attract these qualified individuals. Our failure to recruit and retain adequate talent could reduce our ability to compete successfully and adversely affect our business and profitability.

Our profitability could be adversely affected if we are unable to promptly deploy the capital raised in the offering.

We may not be able to immediately deploy all of the capital raised in the offering. Investing the offering proceeds in securities until we are able to deploy the proceeds will provide lower margins than we generally earn on loans, potentially adversely affecting shareholder returns, including earnings per share, return on assets and return on equity.

We operate in a highly regulated environment and we may be adversely affected by changes in laws and regulations.

Pulaski Bank is subject to extensive regulation, supervision and examination by the Office of Thrift Supervision, its chartering authority, and by the Federal Deposit Insurance Corporation, as insurer of its deposits. Pulaski Financial is subject to regulation and supervision by the Office of Thrift Supervision. Such regulation and supervision govern the activities in which an institution and its holding company may engage, and are

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intended primarily for the protection of the insurance fund and for the depositors and borrowers of Pulaski Bank. The regulation and supervision by the Office of Thrift Supervision and the Federal Deposit Insurance Corporation are not intended to protect the interests of investors in our common stock. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination of the level of our allowance for loan losses. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our operations. In addition, the Sarbanes-Oxley Act of 2002, and the related rules and regulations promulgated by the Securities and Exchange Commission and Nasdaq that are now applicable to us, have increased the scope, complexity and cost of corporate governance, reporting and disclosure practices, including the costs of completing our audit and maintaining our internal controls.

We are subject to security and operational risks relating to our use of technology that could damage our reputation and our business.

Security breaches in our internet banking activities could expose us to possible liability and damage our reputation. Any compromise of our security also could deter customers from using our internet banking services that involve the transmission of confidential information. We rely on standard internet security systems to provide the security and authentication necessary to effect secure transmission of data. These precautions may not protect our systems from compromises or breaches of our security measures that could result in damage to our reputation and our business. Additionally, we outsource our data processing to a third party. If our third party provider encounters difficulties or if we have difficulty in communicating with such third party, it will significantly affect our ability to adequately process and account for customer transactions, which would significantly affect our business operations.

We may have fewer resources than many of our competitors to invest in technological improvements.

The financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. Our future success will depend, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands for convenience, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers.

Our ability to service our debt, pay dividends and otherwise pay our obligations as they come due is substantially dependent on capital distributions from Pulaski Bank, and these distributions are subject to regulatory limits and other restrictions.

A substantial source of our income from which we service our debt, pay our obligations and from which we can pay dividends is the receipt of dividends from Pulaski Bank. The availability of dividends from Pulaski Bank is limited by various statutes and regulations. It is possible, depending upon the financial condition of Pulaski Bank, and other factors, that the applicable regulatory authorities could assert that payment of dividends or other payments is an unsafe or unsound practice. In the event that Pulaski Bank is unable to pay dividends to us, we may not be able to service our debt, pay our obligations or pay dividends on our common stock. The inability to receive dividends from Pulaski Bank would adversely affect our business, financial condition, results of operations and prospects.

Risks Related to An Investment in Our Common Stock

Future capital needs could result in dilution of your investment.

Our board of directors may determine from time to time there is a need to obtain additional capital through the issuance of additional shares of our common stock or other securities. These issuances would dilute the

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ownership interests of the investors in the offering in us and may dilute the per share book value of our common stock. New investors may also have rights, preferences and privileges senior to our current shareholders which may adversely impact our current shareholders.

The market price of our common stock may decline after the stock offering.

The price per share at which we sell the common stock may be more or less than the market price of our common stock on the date the stock offering is consummated. If the actual purchase price is less than the market price for the shares of common stock, some purchasers in the stock offering may be inclined to immediately sell shares of common stock to attempt to realize a profit. Any such sales, depending on the volume and timing, could cause the market price of our common stock to decline. Additionally, because stock prices generally fluctuate over time, there is no assurance that purchasers of common stock in the offering will be able to sell shares after the offering at a price equal to or greater than the actual purchase price. Purchasers should consider these possibilities in determining whether to purchase shares of common stock and the timing of any sale of shares of common stock.

The trading history of our common stock is characterized by low trading volume. The value of your investment may be subject to sudden decreases due to the volatility of the price of our common stock.

Our common stock trades on The Nasdaq National Market. The average daily trading volume of our common stock over the 50 trading days prior to January 23, 2006 was approximately 4,715 shares. We cannot predict the extent to which investor interest in us will lead to a more active trading market in our common stock or how liquid that market might become. A public trading market having the desired characteristics of depth, liquidity and orderliness depends upon the presence in the marketplace of willing buyers and sellers of our common stock at any given time, which presence is dependent upon the individual decisions of investors, over which we have no control.

The market price of our common stock may be highly volatile and subject to wide fluctuations in response to numerous factors, including, but not limited to, the factors discussed in other risk factors and the following:

These factors may adversely affect the trading price of our common stock, regardless of our actual operating performance, and could prevent you from selling your common stock at or above the public offering price. In addition, the stock markets, from time to time, experience extreme price and volume fluctuations that may be unrelated or disproportionate to the operating performance of companies. These broad fluctuations may adversely affect the market price of our common stock, regardless of our trading performance. In the past, shareholders often have brought securities class action litigation against a company following periods of volatility in the market price of their securities. We may be the target of similar litigation in the future, which could result in substantial costs and divert management’s attention and resources.

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We will retain broad discretion in using the net proceeds from this offering, and may not use the proceeds effectively.

We intend to use the net proceeds of this offering for general corporate purposes, which may include our working capital needs, for bank and branch acquisitions and for investments in Pulaski Bank to support our continued growth. However, we have not designated the amount of net proceeds we will use for any particular purpose. Accordingly, our management will retain broad discretion to allocate the net proceeds of this offering. The net proceeds may be applied in ways with which you and other investors in the offering may not agree. Moreover, our management may use the proceeds for corporate purposes that may not increase our market value or make us profitable. In addition, it may take us some time to effectively deploy the proceeds from this offering. Until the proceeds are effectively deployed, our return on equity and earnings per share may be negatively impacted. Management’s failure to use the net proceeds of this offering effectively could have an adverse effect on our business, financial condition and results of operations.

Provisions of our articles of incorporation, bylaws and Missouri law, as well as state and federal banking regulations, could delay or prevent a takeover of us by a third party.

Provisions in our articles of incorporation and bylaws, the corporate law of the State of Missouri, and federal regulations could delay, defer or prevent a third party from acquiring us, despite the possible benefit to our shareholders, or otherwise adversely affect the price of our common stock. These provisions include: limitations on voting rights of beneficial owners of more than 10% of our common stock, supermajority voting requirements for certain business combinations; the election of directors to staggered terms of three years; and advance notice requirements for nominations for election to our board of directors and for proposing matters that shareholders may act on at shareholder meetings. In addition, we are subject to Missouri laws, including one that prohibits us from engaging in a business combination with any interested shareholder for a period of five years from the date the person became an interested shareholder unless certain conditions are met. These provisions may discourage potential takeover attempts, discourage bids for our common stock at a premium over market price or adversely affect the market price of, and the voting and other rights of the holders of, our common stock. These provisions could also discourage proxy contests and make it more difficult for you and other shareholders to elect directors other than the candidates nominated by our Board.

Holders of our junior subordinated debentures have rights that are senior to those of our common shareholders.

We have supported our continued growth through two issuances of trust preferred securities from two separate special purpose trusts. Payments of the principal and interest on the trust preferred securities of these special purpose trusts are fully and unconditionally guaranteed by us. Further, the accompanying junior subordinated debentures we issued to the special purpose trusts are senior to our shares of common stock. As a result, we must make payments on the junior subordinated debentures before any dividends can be paid on our common stock and, in the event of our bankruptcy, dissolution or liquidation, the holders of the junior subordinated debentures must be satisfied before any distributions can be made on our common stock. We have the right to defer distributions on our junior subordinated debentures (and the related trust preferred securities) for up to five years, during which time no cash dividends may be paid on our common stock. At September 30, 2005, we had outstanding junior subordinated debentures totaling $19.6 million.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements, which can be identified by the use of words such as “believes,” “expects,” “anticipates,” “estimates” or similar expressions. Forward-looking statements include:

These forward-looking statements are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking statements due to, among others, the following factors:

Any of the forward-looking statements that we make in this prospectus and in other public statements we make may turn out to be wrong because of inaccurate assumptions we might make, because of the factors illustrated above or because of other factors that we cannot foresee. Consequently, no forward-looking statement can be guaranteed.

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USE OF PROCEEDS

We estimate that the net proceeds we will receive from our sale of the shares of common stock we are offering will be approximately $14.1 million, or approximately $16.3 million if the underwriters’ over-allotment option is exercised in full. In each case, this reflects the deduction of the underwriting discount and estimated offering expenses.

We intend to use the net proceeds of this offering for investment in Pulaski Bank to support its growth. Until Pulaski Bank designates the use of the net proceeds, Pulaski Bank will either reduce its outstanding Federal Home Loan Bank overnight advances or invest the net proceeds temporarily in liquid short-term securities. The precise amounts and timing of our use of the net proceeds will depend upon market conditions and the availability of other funds, among other factors. The proceeds from the sale of our common stock in this offering are not required to fund our acquisition of CWE Bancorp, Inc.

From time to time, we may engage in additional capital financings as we determine to be appropriate based upon our needs and prevailing market conditions. These additional capital financings may include the sale of securities other than or in addition to common stock.

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CAPITALIZATION

The following table sets forth our capitalization as of September 30, 2005. Our capitalization is presented on an actual basis and on an as adjusted basis as if the offering had been completed as of September 30, 2005 and assumes:

The data should be read in conjunction with the consolidated financial statements and notes thereto included in and incorporated by reference into this prospectus from our Annual Report on Form 10-K for the year ended September 30, 2005.

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PRICE RANGE OF OUR COMMON STOCK AND DIVIDEND INFORMATION

Our common stock trades on the Nasdaq National Market under the symbol “PULB.” The following table sets forth, for the indicated periods, the high and low closing prices for our common stock as reported by the Nasdaq National Market and the cash dividends declared per share of our common stock. The stock prices and dividend information presented below have been adjusted to give effect to the three-for-two stock split effected in the form of a stock dividend on July 18, 2005 and the two-for-one stock split effected in the form of a stock dividend on July 21, 2003.

Payments of the distributions on the trust preferred securities of Pulaski Financial Statutory Trust I, a wholly owned Connecticut statutory trust, and Pulaski Financial Statutory Trust II, a wholly owned Delaware statutory trust, are fully and unconditionally guaranteed by us. The junior subordinated debentures that we have issued to our subsidiary trusts are senior to our shares of common stock. As a result, we must make required payments on the junior subordinated debentures before any dividends can be paid on our common stock and, in the event of our bankruptcy, dissolution or liquidation, the interest and principal obligations under the junior subordinated debentures must be satisfied before any distributions can be made on our common stock. We may defer the payment of interest on each of the junior subordinated debentures for a period not to exceed 20 consecutive quarters, provided that the deferral period does not extend beyond the stated maturity. During such deferral period, distributions on the corresponding trust preferred securities will also be deferred and we may not pay cash dividends to the holders of shares of our common stock.

On February 6, 2006, the last reported sale price of our common stock on the Nasdaq National Market was $17.10 per share. As of January 23, 2006, there were 800 holders of record of our common stock, based upon securities position listings furnished to us by our transfer agent.

Dividends are paid at the discretion of our board of directors. We have historically paid dividends on a quarterly basis as set forth in the table above. We intend to continue paying cash dividends, but the amount and frequency of cash dividends, if any, will be determined by our board of directors after consideration of earnings, capital requirements, and our financial condition and will depend on cash dividends paid to us by our subsidiary bank. Dividends from our subsidiary bank are our primary source of funds for the payment of dividends to our shareholders, and there are various legal and regulatory limits on the extent to which our subsidiary bank may pay dividends or otherwise supply funds to us. In addition, federal and state agencies have the authority to prevent us from paying a dividend to our shareholders. Thus, while we intend to continue paying dividends, we can make no assurances that we will continue to pay dividends or that we will not reduce the amount of dividends paid in the future.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis of financial condition and results of operations is intended to assist in understanding our financial condition and results of operations. The information contained in this section should be read in conjunction with the consolidated financial statements and accompanying notes contained elsewhere in this prospectus.

Summary of Performance

From September 30, 2001 to September 30, 2005, we have achieved strong growth. Specifically, we have:

A major driver of our growth has been our residential mortgage business, which generates significant income through loan sales and which provides a source for portfolio loans. Residential mortgage loan originations totaled $1.2 billion for the year ended September 30, 2005 and $1.1 billion for the year ended September 30, 2004. These loans were primarily originated for sale and fueled our mortgage revenue, which totaled $5.4 million for the year ended September 30, 2005 and $4.6 million for the year ended September 30, 2004. At September 30, 2005, we employed 55 residential lenders. In June 2005, we acquired a 50% interest in a joint venture with one of Kansas City’s largest real estate firms, which will provide an additional source of originations.

In the last two years, our earnings have become less dependent on sources of non-interest income as our loan portfolio has expanded, resulting in higher interest income and ultimately higher net interest income. Net interest income increased $5.1 million to $21.1 million for the year ended September 30, 2005 compared to $16.0 million for the year ended September 30, 2004 and $13.7 million for the year ended September 30, 2003. Our loan portfolio has increased 128.7% over the last two years, from $276.9 million at September 30, 2003 to $510.6 million at September 30, 2004 to $633.2 million at September 30, 2005, primarily due to growth in the commercial loan portfolio. At September 30, 2003, we had a commercial loan portfolio of $16.4 million and were principally a residential lender, with 92% of our portfolio consisting of residential or home equity loans. At the end of fiscal 2003, we hired several commercial lenders to expand and diversify our loan portfolio. Over the past two years, the commercial lending division has been a significant contributor to our growth, with $74.0 million of new loan growth in fiscal year 2005 and $88.8 million of new loan growth in fiscal year 2004. The commercial division’s loan portfolio, comprised of residential real estate, commercial real estate and commercial and industrial loans originated by our commercial loan division, totaled $179.3 million at September 30, 2005.

We continue to overcome competitive challenges primarily through growth of core deposit accounts. For the year, deposits increased $114.7 million to $521.5 million from $406.8 million at September 30, 2004, including $25.4 million of deposits that will be transferred in connection with the pending sale of our Kansas City branch. Demand deposit accounts, including money market accounts and passbooks, increased $15.4 million during the year while commercial transaction accounts increased $19.0 million to $35.4 million at September 30, 2005 from $16.4 million at September 30, 2004. Over the last year, our non-interest bearing checking account balances increased 85% to $30.0 million due primarily to the growth in commercial relationships. In an effort to become less reliant on wholesale funds, we have focused greater efforts on attracting commercial accounts and on expanding our branch network. During the year, the Company supplemented its core deposit growth with the

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addition of $37.0 million of additional brokered deposits with $118.9 million at September 30, 2005 compared to $81.9 million at September 30, 2004. We currently have seven bank locations in St. Louis and are planning to increase our bank locations to 12 over the next five years, including the two bank locations in the recently announced Central West End acquisition.

During the year, our efficiency remained strong despite significant growth in expenses related to entering new lines of business with the title and bond divisions and expanding our audit and compliance divisions in response to the Sarbanes-Oxley Act. Our efficiency ratio in fiscal 2005 was 57.77% compared to 56.56% in fiscal 2004 and 55.87% in fiscal 2003. The efficiency ratio is a metric that we use to measure our operating efficiency and is determined by dividing the annual non-interest expense by net interest income plus non-interest income, excluding gains from sales of securities.

Critical Accounting Policies

We have established various accounting policies that govern the application of U.S. generally accepted accounting principles in the preparation of our financial statements. Our significant accounting policies are described in the footnotes to the consolidated financial statements that appear in this prospectus. Certain accounting policies involve significant judgments and assumptions by management that have a material impact on the carrying value of certain assets and liabilities. Management considers such accounting policies to be critical accounting policies. The judgments and assumptions used by management are based on historical experience and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ from these judgments and estimates that could have a material impact on the carrying values of assets and liabilities and our results of operations.

We consider the following to be our critical accounting policies: allowance for loan losses and derivative instruments. Determining the amount of the allowance for loan losses involves a high degree of judgment. Refer to Note 1 to our consolidated financial statements, “Accounting Policies,” for a detailed description of our estimation processes and methodology related to the allowance for loan losses.

We employ derivative financial instruments to assist in our management of interest rate sensitivity by modifying the repricing, maturity and option characteristics of certain assets and liabilities. The judgments and assumptions that are most critical to the application of this critical accounting policy are those affecting the estimation of fair value. Fair value is based on quoted market prices. Refer to note 1 to our Consolidated Financial Statements, “Accounting Policies,” for a detailed description of our estimation processes and methodology related to the fair value of derivative financial instruments.

In November 2005, in conjunction with KPMG LLP, our independent registered public accounting firm, we determined that various interest rate swaps we entered into to hedge the interest rate risk inherent in some of our brokered certificates of deposit (“CD”) do not qualify for the “short-cut” method of fair value hedge accounting under Financial Accounting Standards 133. As discussed in note 23 to our Consolidated Financial Statements, we restated our results for the quarters ended December 31, 2004, March 31, 2005 and June 30, 2005 as a result of this issue.

Business Strategy

We have a community banking strategy that emphasizes high-quality, responsive and personalized service to our customers. Due to the consolidation of financial institutions in our market, we believe there is a significant opportunity for a community-focused bank to provide a full range of financial services to small and middle-market commercial and retail customers. By offering quicker decision making in the delivery of banking products and services, offering customized products where appropriate, and providing customer access to our senior managers, we distinguish ourselves from larger, regional banks operating in our market areas, while our larger capital base and product mix enable us to compete effectively against smaller banks. As a result, we believe we have a substantial opportunity to attract experienced management, loan officers and banking customers. We believe this will provide us a competitive advantage as we continue to expand into attractive, high

growth markets around the St. Louis metropolitan area through the establishment of de novo bank branch offices,

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acquisitions of community banks and bank branches, and organic expansion where possible by growing our existing branches in their respective communities.

Our strategy centers around our continued development into a full-service, community-oriented bank and the expansion of our physical footprint to more adequately cover the large geography of the St. Louis metropolitan area. Our efforts to grow assets and earnings are dependant upon the successful growth in each of our five core products: residential, commercial and home equity loans and checking and money market accounts. These five products provide the primary source of our operating income and are the focus of our growth in the balance sheet. We believe the marketplace to be more competitive than ever and that to achieve sustained growth these products must be delivered with both superior and efficient customer care. Driving these relationships are seasoned residential and commercial lenders in our two market areas.

Residential Loans. We have 83 years of experience in residential lending and, as of September 30, 2005, employed 55 residential loan officers in St. Louis and Kansas City. We have become a leading mortgage originator in these two markets, originating $1.2 billion in residential loans during the year ended September 30, 2005, as compared to $1.1 billion for the year ended September 30, 2004 and $1.6 billion for the year ended September 30, 2003. Originations increased in fiscal 2005 primarily as a result of the increased size of the commissioned residential lending staff.

The majority of loans originated in the mortgage division are one- to four-family residential loans, which we sell to investors on a servicing-released basis. Residential mortgage loans sold to investors on a servicing-released basis are our largest source of non-interest income and are the primary component of mortgage revenue. For the year ended September 30, 2005, we sold $1.1 billion of residential loans to investors and had mortgage revenue of $5.4 million, compared to $872.3 million in loans sold and $4.6 million in revenue for the year ended September 30, 2004. The average balance of mortgage loans held for sale for the year ended September 30, 2005 was $50.8 million compared to $50.9 million for the year ended September 30, 2004. The flattening of the yield curve continues to negatively impact our spread on loans held for sale. Our margin on loans held for sale has steadily declined with the compressing yield curve from more than 400 basis points for the quarter ended September 30, 2004 to 171 basis points for the quarter ended September 30, 2005. The consolidated net interest margin declined twenty-eight basis points from 3.47% for the year ended September 30, 2004 to 3.19% for the year ended September 30, 2005 primarily because of the narrowing margin on the held-for-sale portfolio. We fund loans held for sale with overnight and short-term advances because the loans are typically sold within 30 days of origination. Following a string of rate hikes by the Federal Reserve, our short-term borrowing costs have increased approximately 275 basis points since May 2004, while the average yield on the loans held for sale portfolio increased just 29 basis points from 5.17% for the year ended September 30, 2004 to 5.46% during the year ended September 30, 2005.

Qualifying residential mortgage loans that do not meet the standards for sale in the secondary market are retained in our portfolio and priced on a risk/reward basis. Residential loan balances increased $22.0 million to $289.4 million at September 30, 2005 from $267.4 million at September 30, 2004. The residential retained portfolio consists primarily of 3-year ARM loans that generally do not conform to investor criteria. These loans are underwritten using an internal credit-scoring model, which assesses credit risk and assigns one of five risk-based ratings to the loan. At September 30, 2005, we had approximately $17.1 million in the highest risk category.

During the year ended September 30, 2005, we sold $9.1 million of second mortgage residential loans from portfolio. Each pool was sold as we sought to reduce our concentration in second mortgage residential loans that have combined loan-to-values greater than 90%. We realized gains of $224,000 on the loan pool sales ($140,000 after tax). At September 30, 2005, we had $87.9 million of residential first and second mortgage loans that exceeded 90% loan-to-value.

Commercial Real Estate and Commercial and Industrial Loans. Since fiscal year 2004, we have made the expansion of our commercial division an important priority. As of September 30, 2005, this division had a staff of 14, including five loan officers. In the commercial division, commercial real estate and commercial and industrial loans increased $74.0 million to $179.3 million at September 30, 2005 compared to $105.3 million at

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September 30, 2004. During the year, the commercial division contributed 59.1% of the growth in the Company’s retained loan portfolio. At September 30, 2005, the commercial division’s loan portfolio consisted of $104.1 million of commercial real estate loans, $26.3 million of commercial and industrial loans, $29.4 million of residential mortgage loans, $18.5 million in construction and development loans and $975,000 in equity lines. The weighted average rate on the commercial division’s loan portfolio was 6.67% at September 30, 2005, compared to 5.41% at September 30, 2004.

The development of commercial relationships is also enhancing our ability to generate non-interest bearing checking account balances. At September 30, 2005, we had commercial checking and money market accounts of $35.3 million, which represented growth of $19.0 million in core business deposits. At September 30, 2005 the commercial division had $20.9 million in non-interest bearing deposits compared to $9.1 million at September 30, 2004.

Home Equity Lines of Credit. The home equity lines of credit portfolio has grown consistently since fiscal 2001, although continued increases in prime rates slowed the growth of this product in the latter part of fiscal 2005 as fewer customers chose prime-based equity lines with the origination of their first mortgages. Home equity loans consist primarily of revolving lines of credit secured by residential real estate. Equity line balances increased $37.3 million to $195.6 million at September 30, 2005 from $158.3 million at September 30, 2004. The weighted average rate on home equity loans was 7.05% at September 30, 2005 compared to 5.21% at September 30, 2004. Home equity lines of credit are typically approved for qualified borrowers in conjunction with first mortgage loan applications. The large volume of mortgage loans originated in recent years has provided many opportunities to cross-sell this product to customers, which has resulted in consistent strong growth. As a revolving line of credit, we originate the loans as a prime-based asset with low interest rate risk characteristics and attractive yields, lending stability to our net interest margin.

Because home equity lines of credit are generally subordinated to first mortgage loans, the risk of loss increases when the combined loan-to-value ratio increases in relation to the value of the property. Loan balances that exceed 90% of property values are generally insured for loss through mortgage insurance up to 90% of the value of the property.

Checking Accounts. Checking accounts are the cornerstone relationship product in retail banking and the most valuable source of low cost deposits. Our “Totally Free Checking” account not only supports the lowest cost source of liquidity, but also generates important fee income through fees and service charges. The balance of checking accounts increased $9.4 million, or 18.6% during the year ended September 30, 2005 to $61.0 million from $51.5 million at September 30, 2004. The growth in checking account balances was fueled by growth in commercial checking accounts from the expanded commercial division. At September 30, 2005, the weighted average cost of interest-bearing checking accounts was 0.16%.

Retail banking revenue was $2.5 million for the year ended September 30, 2005 compared to $2.4 million for the year ended September 30, 2004. Our marketing focuses much of its resources on cross-selling checking accounts and developing new checking account relationships. We have established a consistent formula for growing fee income from “Free Checking” and have seen revenues increase from $1.3 million in fiscal 2001 to $2.5 million in fiscal 2005, primarily through an increase in clearing and honoring checks for customers who did not have sufficient funds in their checking account to allow the check to clear (“checking account overdrafts”). A fee is charged for every overdraft check. Credit risk can and does arise during the process of honoring overdraft checks. Retail banking fees are generated principally by honoring or rejecting these checks. Historic trends indicate most customers will eventually honor the overdraft checks; however, declines in market conditions could result in higher credit risk.

Money Market Deposits. Our strategic focus includes growing money market deposits as a second core liability product. The balance of money market accounts increased $7.2 million to $87.2 million at September 30,

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2005 from $80.0 million at September 30, 2004. We are in our fifth year of pursuing money market accounts as a core product and in our fourth year of a successful marketing campaign, “the Big Bertha Money Market Account.” The product carries interest rate characteristics similar to our home equity loans and is an ideal source of funds for the growth of our line of credit portfolio. Money market accounts are generally less interest rate sensitive and more stable than CD balances. Competition for money market accounts increased during the third quarter of fiscal 2005, as several banks made aggressive marketing efforts to expand their share of this market. We stayed disciplined in our pricing and experienced slower growth toward the end of the year. At September 30, 2005, money market deposits had a weighted average cost of 2.37% compared to the weighted average coupon on the home equity loan portfolio of 7.05%, yielding a net spread of 4.68%. At September 30, 2004, money market deposits had a weighted average cost of 1.42% compared to the weighted average coupon on the home equity loan portfolio of 5.21%, yielding a net spread of 3.79% on these two products.

Comparison of Operating Results from 2005 and 2004

Overview. Fiscal year 2005 was another successful year as the Company grew diluted earnings per share 26.9% to $0.85 from $0.67 on net income of $7.5 million for the year ended September 30, 2005, compared to $5.9 million for the year ended September 30, 2004. The Company also increased assets 23.8% to $789.9 million at September 30, 2005 from $637.9 million at September 30, 2004.

Net income increased $1.6 million to $7.5 million primarily on the growth of net interest income. Net interest income expanded $5.1 million to $21.1 million for the year ended September 30, 2005 compared to $16.0 million for the year ended September 30, 2004 due primarily to growth in the loan portfolio, which increased 24.0% to $633.2 million at September 30, 2005 from $510.6 million at September 30, 2004, and was offset by growth in interest bearing liabilities. Commercial lending drove approximately 60% of the growth in the retained loan portfolio during the year ended September 30, 2005, while increases in home equity loans and residential loans accounted for 40%.

Non-interest income grew primarily from growth in the mortgage division. In fiscal year 2005, the Company had a strong mortgage-lending year originating $1.6 billion in loans. As a top lender in St. Louis and Kansas City, the Company generated mortgage revenue of $5.4 million for the year ended September 30, 2005, compared to $4.6 million for the year ended September 30, 2004.

The loan portfolio grew $122.6 million, or 24.0%, during fiscal year 2005 to $633.2 million and $233.7 million, or 84.4%, in fiscal year 2004.

For the year, loan growth slightly outpaced deposit growth. For the year, deposits increased $114.7 million to $521.5 million, including $25.4 million of deposits that will be transferred in connection with the pending sale of our Kansas City branch. Demand deposit accounts, including money market and passbooks, increased $15.4 million during the year while commercial transaction accounts increased $15.9 million to $35.4 million. Over the last year, our non-interest-bearing checking account balances increased 85% to $30.0 million due primarily to the growth in commercial relationships. At September 30, 2005, the weighted average cost of interest-bearing checking accounts was 0.16% and totaled $31.0 million. During the year, the growth in the loan portfolio was primarily funded by growth in CD deposits. At September 30, 2005, CD balances totaled $341.0 million. Brokered deposits made up approximately 34.9%, or $118.9 million, of the CD balances at September 30, 2005. Brokered CD balances were $81.9 million at September 30, 2004.

During the year, our efficiency ratio remained strong despite significant growth in expenses related to entering new lines of business with the title and bond divisions and expanding our audit and compliance divisions as a result of the Sarbanes-Oxley Act. Our efficiency ratio in fiscal 2005 was 57.77% compared to 56.56% in fiscal 2004.

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Average Balance Sheet. The following table sets forth information regarding average balances of assets and liabilities as well as the total dollar amounts of interest income from average interest-earning assets and interest expense on average interest-bearing liabilities, resultant yields, interest rate spread, net interest margin, and ratio of average interest-earning assets to average interest-bearing liabilities for the periods indicated.