Catalyst Bancorp, Inc. Announces 2022 Third Quarter Results

News provided by

Oct 27, 2022, 07:00 ET

OPELOUSAS, La., Oct. 27, 2022 /PRNewswire/ -- Catalyst Bancorp, Inc. (Nasdaq: CLST) (the "Company"), the parent company for Catalyst Bank (the "Bank") (www.catalystbank.com), reported financial results for the third quarter of 2022. For the quarter, the Company reported net income of $139,000, up $121,000 from the second quarter of 2022. During the second quarter of 2022, the Bank rebranded from St. Landry Homestead Federal Savings Bank to Catalyst Bank. Pre-tax costs associated with the rebranding of the Bank totaled $208,000 during the second quarter of 2022, compared to $28,000 during the third quarter of 2022. The second quarter of 2022 also included $171,000 of non-interest income attributable to a Bank Enterprise Award ("BEA") Program grant from the Community Development Financial Institution ("CDFI") Fund.

"We just celebrated our first anniversary as a public company and will celebrate the Bank's centennial in November," said Joe Zanco, President and Chief Executive Officer of the Company and the Bank. "Our team is tremendously excited with the response we've received from our rebranding to Catalyst Bank."

Loans and Credit Quality

Loans receivable totaled $131.7 million at September 30, 2022, down $1.9 million, or 1%, from June 30, 2022. During the third quarter of 2022, additional fundings on existing construction and land loans were largely offset by paydowns across other segments of the portfolio. PPP loans, which totaled $22,000 at June 30, 2022, were fully paid-off during the third quarter of 2022.

The following table sets forth the composition of the Company's loan portfolio as of the dates indicated.


*(Dollars in thousands)*	9/30/2022		6/30/2022		Increase (Decrease)
Real estate loans
One- to four-family residential	$	88,327	$	89,531	$	(1,204)	(1)	%
Commercial real estate		21,073		21,521		(448)	(2)
Construction and land		4,450		3,843		607	16
Multi-family residential		3,252		3,315		(63)	(2)
Total real estate loans		117,102		118,210		(1,108)	(1)
Other loans
Commercial and industrial		11,087		11,410		(323)	(3)
Consumer		3,512		4,004		(492)	(12)
Total other loans		14,599		15,414		(815)	(5)
Total loans	$	131,701	$	133,624	$	(1,923)	(1)	%

Non-performing assets ("NPAs") totaled $1.9 million at September 30, 2022, up $313,000, or 19%, compared to June 30, 2022, primarily due to an increase in past due loans. The ratio of NPAs to total assets was 0.68% at September 30, 2022, compared to 0.57% at June 30, 2022. Non-performing loans ("NPLs") totaled $1.6 million, or 1.21% of total loans, at September 30, 2022 and $1.3 million, or 0.96% of total loans, at June 30, 2022. At September 30, 2022, approximately 88% of total NPLs were one- to four-family residential mortgage loans, compared to 91% at June 30, 2022.

The allowance for loan losses totaled $1.8 million, or 1.37% of total loans, at September 30, 2022, down $176,000 from $2.0 million, or 1.48% of total loans, at June 30, 2022. The reduction in the allowance for loan losses largely reflects the reversal of certain provisions made for estimated loan losses during 2020 associated with our initial assessment of COVID-19's impact on credit risk. The Company recorded a reversal to the allowance for loan losses of $115,000 during the third quarter of 2022, compared to a reversal of $189,000 for the second quarter of 2022. Net loan charge-offs totaled $61,000 during the third quarter of 2022, compared to net loan charge-offs of $4,000 for the second quarter of 2022. The third quarter charge-offs were primarily related to two residential mortgage loans.

Investment Securities

Total investment securities were $92.0 million at September 30, 2022, down $3.7 million, or 4%, from June 30, 2022. At September 30 and June 30, 2022, 87% of total investment securities, based on amortized cost, were classified as available-for-sale. Net unrealized losses on securities available-for-sale totaled $12.6 million at September 30, 2022, compared to $8.4 million at June 30, 2022. The increase in unrealized losses on available-for-sale securities related principally to increases in market interest rates for similar securities. For the third quarter of 2022, the average yield on the investment securities portfolio was 1.48%, up 11 basis points from the second quarter of 2022.

Deposits

Total deposits were $184.2 million at September 30, 2022, up $5.5 million, or 3%, from June 30, 2022. The increase in deposits was primarily due to an increase in NOW account balances, partially offset by declines in certificates of deposit and money market accounts. Total average deposits were $185.5 million for the third quarter of 2022, up $2.1 million, or 1%, from the prior quarter.

The following table sets forth the composition of the Bank's deposits as of the dates indicated.


*(Dollars in thousands)*	9/30/2022		6/30/2022		Increase (Decrease)
Demand deposits	$	31,988	$	30,400	$	1,588	5	%
NOW		50,547		39,454		11,093	28
Money market		17,129		19,525		(2,396)	(12)
Savings		26,874		27,388		(514)	(2)
Certificates of deposit		57,689		61,968		(4,279)	(7)
Total deposits	$	184,227	$	178,735	$	5,492	3	%

Net Interest Income

Our net interest margin for the third quarter of 2022 was 2.75%, up four basis points compared to the prior quarter. The average yield on interest-earning assets increased by five basis points to 2.99% for the third quarter of 2022, while the average rate on interest-bearing liabilities increased by one basis point to 0.40%, compared to the second quarter of 2022.

Net interest income for the third quarter of 2022 was $1.9 million, up $60,000, or 3%, from the second quarter of 2022 primarily due to an increase in interest income from interest-bearing cash included in other interest income (up $127,000, or 219%), partially offset by a decline in interest income from loans. Rising market interest rates have increased the yields on our interest-bearing cash accounts and securities portfolio.

The following table sets forth, for the periods indicated, the Company's total dollar amount of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. Taxable equivalent ("TE") yields have been calculated using a marginal tax rate of 21%. All average balances are based on daily balances.


	Three Months Ended
	9/30/2022						6/30/2022
*(Dollars in thousands)*	Average Balance		Interest		Average Yield/ Rate		Average Balance		Interest		Average Yield/ Rate
INTEREST-EARNING ASSETS
Loans receivable⁽¹⁾	$	131,583	$	1,466	4.42	%	$	133,810	$	1,555	4.66	%
Investment securities^(TE)(2)		104,403		381	1.48			104,137		352	1.37
Other interest earning assets		34,548		185	2.12			30,108		58	0.78
Total interest-earning assets^(TE)	$	270,534	$	2,032	2.99	%	$	268,055	$	1,965	2.94	%
INTEREST-BEARING LIABILITIES
NOW, money market and savings accounts	$	91,738	$	29	0.13	%	$	85,646	$	24	0.11	%
Certificates of deposit		59,833		64	0.43			64,936		63	0.39
Total interest-bearing deposits		151,571		93	0.24			150,582		87	0.23
FHLB advances		9,126		69	2.99			9,079		68	3.00
Total interest-bearing liabilities	$	160,697	$	162	0.40	%	$	159,661	$	155	0.39	%
Net interest-earning assets	$	109,837					$	108,394
Net interest income; average interest rate spread^(TE)			$	1,870	2.59	%			$	1,810	2.55	%
Net interest margin^(TE)(3)					2.75	%					2.71	%


(1)	Includes non-accrual loans during the respective periods. Calculated net of deferred fees and discounts and loans in-process.
(2)	Average investment securities does not include unrealized holding gains/losses on available-for-sale securities.
(3)	Equals net interest income divided by average interest-earning assets. Taxable equivalent yields are calculated using a marginal tax rate of 21%.

Non-interest Income

Non-interest income for the third quarter of 2022 was $296,000, down $83,000, or 22%, from the second quarter of 2022. During the second quarter of 2022, the Company received and recognized into income a $171,000 BEA Program grant from the CDFI Fund. In addition, the Company disposed of fixed assets totaling $77,000, net of accumulated depreciation, during the second quarter of 2022. Of the assets disposed, $55,000 was attributable to branch signage that was replaced due to our rebranding.

Non-interest Expense

Non-interest expense for the third quarter of 2022 totaled $2.1 million, down $253,000, or 11%, compared to the second quarter of 2022. Total non-interest expense for the third quarter of 2022 included $28,000 of rebranding-related expenses, compared to $153,000 for the second quarter of 2022.

Salaries and employee benefits expense totaled $1.2 million for the third quarter of 2022, down $50,000, or 4%, from the second quarter of 2022 primarily due to a decrease in our employee count.

Directors' fees totaled $75,000 for the third quarter of 2022, up $20,000, or 36%, from the second quarter of 2022 mainly due to stock compensation expense related to awards granted under the Company's 2022 Stock Option Plan and 2022 Recognition and Retention Plan and Trust Agreement in September 2022. Total stock compensation expense, allocated between salaries and employee benefits expense and directors' fees, during the fourth quarter of 2022 is expected to be approximately $141,000, compared to $47,000 for the third quarter of 2022.

Data processing and communication expense totaled $216,000, down $26,000, or 11%, from the previous quarter primarily due to the absence of rebranding expenses during the third quarter of 2022.

Advertising and marketing expense totaled $36,000 for the third quarter of 2022, down $73,000, or 67%, from the second quarter of 2022. Advertising and marketing expense included rebranding costs of $3,000 in the third quarter of 2022, compared to $87,000 in the second quarter of 2022.

Other non-interest expense totaled $184,000 for the third quarter of 2022, down $56,000, or 23%, from the second quarter of 2022. Other non-interest expense included rebranding costs of $7,000 and $18,000 during the third and second quarters of 2022, respectively. In addition, the Company benefited from recoveries on charged-off deposit accounts and certain cost saving initiatives during the third quarter of 2022.

About Catalyst Bancorp, Inc.

Catalyst Bancorp, Inc. (Nasdaq: CLST) is a Louisiana corporation and registered bank holding company for Catalyst Bank, its wholly-owned subsidiary, with $283.4 million in assets at September 30, 2022. Catalyst Bank, formerly St. Landry Homestead Federal Savings Bank, has been in operation in the Acadiana region of south-central Louisiana for 100 years. With a focus on fueling business and improving lives throughout the region, Catalyst Bank offers commercial and retail banking products through our six full-service branches located in Carencro, Eunice, Lafayette, Opelousas, and Port Barre. To learn more about Catalyst Bank, visit www.catalystbank.com.

Forward-looking Statements

This press release contains certain forward-looking statements. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words like "believe," "expect," "anticipate," "estimate" and "intend" or future or conditional verbs such as "will," "would," "should," "could" or "may." Certain factors that could cause actual results to differ materially from expected results include changes in the interest rate environment, changes in general economic conditions, legislative and regulatory changes that adversely affect the business of Catalyst Bancorp, Inc. and Catalyst Bank, and changes in the securities markets. Except as required by law, the Company does not undertake any obligation to update any forward-looking statements to reflect changes in belief, expectations or events.


CATALYST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)

*(Dollars in thousands)*	9/30/2022		6/30/2022		9/30/2021⁽¹⁾
ASSETS
Non-interest-bearing cash	$	4,558	$	4,553	$	5,117
Interest-bearing cash and due from banks		31,639		24,582		95,287
Total cash and cash equivalents		36,197		29,135		100,404
Investment securities:
Securities available-for-sale, at fair value		78,563		82,276		49,682
Securities held-to-maturity		13,480		13,486		13,504
Loans receivable, net of unearned income		131,701		133,624		136,720
Allowance for loan losses		(1,804)		(1,980)		(2,646)
Loans receivable, net		129,897		131,644		134,074
Accrued interest receivable		566		556		511
Foreclosed assets		320		320		399
Premises and equipment, net		6,392		6,494		6,658
Stock in correspondent banks, at cost		1,799		1,795		1,792
Bank-owned life insurance		13,519		13,422		3,280
Other assets		2,681		1,855		1,259
TOTAL ASSETS	$	283,414	$	280,983	$	311,563

LIABILITIES
Deposits:
Non-interest-bearing	$	31,988	$	30,400	$	102,091
Interest-bearing		152,239		148,335		147,369
Total deposits		184,227		178,735		249,460
Federal Home Loan Bank advances		9,153		9,108		8,973
Other liabilities		706		727		1,130
TOTAL LIABILITIES		194,086		188,570		259,563

SHAREHOLDERS' EQUITY
Common stock		53		53		-
Additional paid-in capital		50,902		50,838		-
Unallocated common stock held by Employee Stock Ownership Plan		(4,020)		(4,073)		-
Retained earnings		52,379		52,240		52,270
Accumulated other comprehensive income (loss)		(9,986)		(6,645)		(270)
TOTAL SHAREHOLDERS' EQUITY		89,328		92,413		52,000
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	283,414	$	280,983	$	311,563


(1)	Data at September 30, 2021 is Bank-only.


CATALYST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

	Three Months Ended						Nine Months Ended
*(Dollars in thousands)*	9/30/2022		6/30/2022		9/30/2021⁽¹⁾		9/30/2022		9/30/2021⁽¹⁾
INTEREST INCOME
Loans receivable, including fees	$	1,466	$	1,555	$	1,671	$	4,584	$	5,344
Investment securities		381		352		172		1,062		434
Other		185		58		13		262		37
Total interest income		2,032		1,965		1,856		5,908		5,815
INTEREST EXPENSE
Deposits		93		87		124		272		414
Advances from Federal Home Loan Bank		69		68		68		205		204
Total interest expense		162		155		192		477		618
Net interest income		1,870		1,810		1,664		5,431		5,197
Provision for (reversal of) loan losses		(115)		(189)		-		(375)		(286)
Net interest income after provision for (reversal of) loan losses		1,985		1,999		1,664		5,806		5,483
NON-INTEREST INCOME
Service charges on deposit accounts		192		182		165		542		448
Gain (loss) on disposals and sales of fixed assets		-		(77)		-		(77)		25
Bank-owned life insurance		97		98		22		216		67
Federal community development grant		-		171		1,826		171		1,826
Other		7		5		12		20		36
Total non-interest income		296		379		2,025		872		2,402
NON-INTEREST EXPENSE
Salaries and employee benefits		1,168		1,218		1,084		3,647		3,331
Occupancy and equipment		203		227		200		640		554
Data processing and communication		216		242		201		666		556
Professional fees		157		175		88		472		255
Directors' fees		75		55		70		185		211
ATM and debit card		76		59		48		184		137
Foreclosed assets, net		(2)		(2)		39		(21)		74
Advertising and marketing		36		109		14		187		35
Franchise and shares tax		15		58		-		131		-
Other		184		240		140		606		423
Total non-interest expense		2,128		2,381		1,884		6,697		5,576
Income (loss) before income tax expense		153		(3)		1,805		(19)		2,309
Income tax expense (benefit)		14		(21)		372		(45)		465
NET INCOME	$	139	$	18	$	1,433	$	26	$	1,844

Earnings per share:
Basic	$	0.03	$	0.01	$	N/A	$	0.01	$	N/A
Diluted		0.03		N/A		N/A		0.01		N/A


(1)	Data for the periods ended September 30, 2021 are Bank-only.


CATALYST BANCORP, INC. AND SUBSIDIARY
SELECTED FINANCIAL DATA

	Three Months Ended									Nine Months Ended
*(Dollars in thousands)*	9/30/2022			6/30/2022			9/30/2021⁽¹⁾			9/30/2022			9/30/2021⁽¹⁾
EARNINGS DATA
Total interest income	$	2,032		$	1,965		$	1,856		$	5,908		$	5,815
Total interest expense		162			155			192			477			618
Net interest income		1,870			1,810			1,664			5,431			5,197
Provision for (reversal of) loan losses		(115)			(189)			-			(375)			(286)
Total non-interest income		296			379			2,025			872			2,402
Total non-interest expense		2,128			2,381			1,884			6,697			5,576
Income tax expense (benefit)		14			(21)			372			(45)			465
Net income	$	139		$	18		$	1,433		$	26		$	1,844

AVERAGE BALANCE SHEET DATA
Total assets	$	288,052		$	286,288		$	253,176		$	287,000		$	240,345
Total interest-earning assets		270,534			268,055			235,447			270,848			224,873
Total loans		131,583			133,810			137,031			132,052			143,075
Total interest-bearing deposits		151,571			150,582			150,726			150,006			147,085
Total interest-bearing liabilities		160,697			159,661			159,692			159,086			155,992
Total deposits		185,453			183,316			191,060			182,816			179,462
Total shareholders' equity		92,764			93,318			50,950			94,400			50,678

SELECTED RATIOS
Return on average assets		0.19	%		0.02	%		2.25	%		0.01	%		1.03	%
Return on average equity		0.60			0.08			11.16			0.04			4.86
Efficiency ratio		98.24			108.78			51.06			106.25			73.38
Net interest margin^(TE)		2.75			2.71			2.81			2.69			3.09
Average equity to average assets		32.20			32.60			20.12			32.89			21.09
Common equity Tier 1 capital ratio⁽²⁾		57.84			58.51			38.94
Tier 1 leverage capital ratio⁽²⁾		28.29			28.43			20.65
Total risk-based capital ratio⁽²⁾		59.09			59.76			40.20

ALLOWANCE FOR LOANS LOSSES
Beginning balance	$	1,980		$	2,173		$	2,649		$	2,276		$	3,022
Provision for (reversal of) loan losses		(115)			(189)			-			(375)			(286)
Charge-offs		(90)			(38)			(18)			(191)			(150)
Recoveries		29			34			15			94			60
Net (charge-offs) recoveries		(61)			(4)			(3)			(97)			(90)
Ending balance	$	1,804		$	1,980		$	2,646		$	1,804		$	2,646

CREDIT QUALITY
Non-accruing loans	$	1,221		$	1,246		$	752
Accruing loans 90 days or more past due		379			41			165
Total non-performing loans		1,600			1,287			917
Foreclosed assets		320			320			399
Total non-performing assets	$	1,920		$	1,607		$	1,316

Total non-performing loans to total loans		1.21	%		0.96	%		0.67	%
Total non-performing assets to total assets		0.68			0.57			0.42


(1)	Data at and for the periods ended September 30, 2021 are Bank-only.
(2)	Capital ratios are preliminary end-of-period ratios for the Bank only and are subject to change.