Pulaski of Mo. Borrows $10 Million to Buy Back Tarp Shares

Pulaski Financial (PULB) in St. Louis plans to take out a $10 million loan in order to redeem preferred stock shares issued to the Treasury Department under the Troubled Asset Relief Program.

The company's loan agreement with First Bank also includes a $2 million revolving line of credit, according to a Wednesday filling with the Securities and Exchange Commission. The loan will carry an interest rate equal to the daily London interbank offered rate plus 2.5%.

Pulaski will have roughly $7.3 million of Tarp shares outstanding after the redemption, according to a Thursday company note from an analyst at Sandler O'Neill. The $1.3 billion-asset Pulaski originally received a $32.5 million investment from the Treasury Department in January 2009. The Treasury later sold the shares in an auction and Pulaski itself bought back some of those shares.

The company could buy back the remaining $7.3 million worth of shares "using internally generated capital or perhaps work with the shareholders to convert it to common," Sandler O'Neill analyst Andrew Liesch wrote. "With the dividend rate on the preferred stock increasing to 9% from 5%, we are pleased to see the company announce this loan agreement and note that following this transaction, it will have repurchased 78% of the preferred shares without a dilutive capital raise."

Pulaski plans to use the $2 million revolving line of credit for working capital.