Catalyst Bancorp, Inc. Announces 2023 First Quarter Results and Approval of New Share Repurchase Plan

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Apr 27, 2023, 07:00 ET

OPELOUSAS, La., April 27, 2023 /PRNewswire/ -- Catalyst Bancorp, Inc. (Nasdaq: "CLST") (the "Company"), the parent company for Catalyst Bank (the "Bank") (www.catalystbank.com), reported financial results for the first quarter of 2023. For the quarter, the Company reported net income of $73,000 compared to $171,000 for the fourth quarter of 2022.

"As our nation's economic angst rises, our capital strength positions us to grow and thrive through whatever challenges the economy offers," said Joe Zanco, President and Chief Executive Officer of the Company and the Bank. "Our focus remains on helping locally-owned businesses grow so that, together, we can increase employment across our communities."

Capital and Share Repurchases

The Bank continues to maintain an exceptional capital position with a total risk-based capital ratio of 57.69% and 57.42% at March 31, 2023 and December 31, 2022, respectively. At March 31, 2023 and December 31, 2022, consolidated shareholders' equity totaled $86.1 million, or 31.2% of total assets, and $88.5 million, or 33.6% of total assets, respectively.

The Company announced that its Board of Directors approved the Company's second share repurchase plan (the "April 2023 Repurchase Plan"). Under the April 2023 Repurchase Plan, the Company may purchase up to 252,000 shares, or approximately 5% of the Company's outstanding shares of common stock. Share repurchases under the April 2023 Repurchase Plan are expected to commence during the second quarter of 2023.

The Company announced its first share repurchase plan (the "January 2023 Repurchase Plan") on January 26, 2023, and completed repurchases under the January 2023 Repurchase Plan in April 2023. Under the January 2023 Repurchase Plan, the Company repurchased 265,000 shares of its common stock at an average cost per share of $12.62.

Loans and Credit Quality

Loans totaled $132.7 million at March 31, 2023, down $917,000, or less than 1%, from December 31, 2022. During the first quarter of 2023, fundings on existing construction loans and new originations of commercial and industrial loans were offset by paydowns across other segments of the portfolio.

The majority of the Company's loan portfolio consists of real estate loans secured by properties in our local market area, the Acadiana region of south Louisiana. Loans secured by one- to four-family residential properties totaled $86.5 million, or 65% of total loans, and commercial real estate loans totaled $19.3 million, or 15% of total loans, at March 31, 2023. Our commercial real estate loans are generally secured by retail and industrial use buildings, hotels, strip shopping centers and other properties used for commercial purposes in our market area. Approximately 66% of our real estate loans have adjustable rates and, of these adjustable-rate real estate loans, approximately $47.0 million are scheduled to re-price during the next 12 months.

Our non-real estate loans primarily consist of commercial and industrial loans of $14.1 million, or 11% of total loans, at March 31, 2023. The commercial and industrial portfolio mainly consists of direct loans to small and mid-sized businesses located in our market area. Since March 31, 2022, the Company has grown this segment of the portfolio by $4.0 million, which was largely driven by loans to local businesses involved in industrial manufacturing and equipment, communications, and professional services. Approximately 39% of our commercial and industrial loans have adjustable rates and, of these adjustable-rate commercial and industrial loans, approximately $5.5 million are scheduled to re-price during the next 12 months.

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


*(Dollars in thousands)*	3/31/2023		12/31/2022		Increase (Decrease)
Real estate loans
One- to four-family residential	$	86,464	$	87,508	$	(1,044)	(1)	%
Commercial real estate		19,303		19,437		(134)	(1)
Construction and land		6,536		6,172		364	6
Multi-family residential		3,146		3,200		(54)	(2)
Total real estate loans		115,449		116,317		(868)	(1)
Other loans
Commercial and industrial		14,109		13,843		266	2
Consumer		3,132		3,447		(315)	(9)
Total other loans		17,241		17,290		(49)	-
Total loans	$	132,690	$	133,607	$	(917)	(1)	%

At both March 31, 2023 and December 31, 2022, non-performing assets ("NPAs") totaled $2.0 million and the ratio of NPAs to total assets was 0.73% and 0.76%, respectively. Non-performing loans ("NPLs") totaled $1.7 million, or 1.27% of total loans, at March 31, 2023 and $1.7 million, or 1.26% of total loans, at December 31, 2022. At March 31, 2023 and December 31, 2022, approximately 94% of total NPLs were one- to four-family residential mortgage loans.

Net loan recoveries totaled $54,000 during the first quarter of 2023, compared to net loan recoveries of $3,000 for the fourth quarter of 2022. During the first quarter of 2023, the Company recovered $41,000 of principal from a previously charged-off residential mortgage loan. In addition to the recovery of principal, the Company recovered $29,000 of interest income related to the same loan during the first quarter of 2023.

CECL Adoption and Allowance for Credit Losses

As of January 1, 2023, the Company adopted Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced a new framework known as CECL. The adoption of CECL resulted in a $209,000, or 12%, increase in the allowance for loan losses, and a $216,000 increase in other liabilities due to the allowance for credit losses on unfunded commitments. At adoption, we also recorded a corresponding $335,000 after-tax decrease in retained earnings. The increase in the total allowance for credit losses, which is inclusive of the reserve for unfunded commitments, was primarily due to the addition of forecasted credit losses.

At January 1, 2023, the allowance for loan losses totaled $2.0 million, or 1.51% of total loans, compared to $1.8 million, or 1.35% of total loans, at December 31, 2022. At March 31, 2023, the allowance for loan losses totaled $2.1 million, or 1.56% of total loans, and the allowance for credit losses on unfunded commitments totaled $216,000, unchanged from the date of adoption. The Company did not record a provision for or a reversal of loan losses during the first quarter of 2023.

Investment Securities

Total investment securities were $92.4 million at March 31, 2023, down $669,000, or 1%, from December 31, 2022. At March 31, 2023 and December 31, 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 $10.1 million at March 31, 2023, compared to $11.5 million at December 31, 2022. For the first quarter of 2023, the average yield on the investment securities portfolio was 1.66%, up five basis points from the fourth quarter of 2022.

The following table summarizes the amortized cost and fair value of our investment securities portfolio as of March 31, 2023.


	March 31, 2023
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available-for-sale
Mortgage-backed securities	$	72,032	$	24	$	(8,818)	$	63,238
U.S. Government and agency obligations		10,981				(905)		10,076
Municipal obligations		6,048		12		(437)		5,623
Total available-for-sale	$	89,061	$	36	$	(10,160)	$	78,937
Securities held-to-maturity
U.S. Government and agency obligations	$	13,005	$	-	$	(2,327)	$	10,678
Municipal obligations		466		-		(25)		441
Total held-to-maturity	$	13,471	$	-	$	(2,352)	$	11,119

Deposits and Liquidity

Total deposits were $179.7 million at March 31, 2023, up $14.6 million, or 9%, from December 31, 2022. The increase in deposits was primarily due to an increase in the balance of public funds. Our public funds consist primarily of non-interest bearing and NOW account deposits from municipalities within our market. At March 31, 2023, total public fund deposits amounted to $40.1 million, or 22% of total deposits.

Our total uninsured deposits (that is deposits in excess of the FDIC's insurance limit), inclusive of public funds, were approximately $59.7 million at March 31, 2023. Total uninsured non-public funds deposits were approximately $24.6 million at March 31, 2023. The full amount of our public funds deposits in excess of the FDIC's insurance limit are secured by pledging investment securities or by allocating available portions of a letter of credit from the FHLB to collateralize the balances. At March 31, 2023, the amortized cost and fair value of investment securities pledged to secure public fund deposits totaled $36.9 million and $31.6 million, respectively.

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


*(Dollars in thousands)*	3/31/2023		12/31/2022		Increase (Decrease)
Non-interest-bearing demand deposits	$	35,483	$	33,657	$	1,826	5	%
NOW		49,252		36,991		12,261	33
Money market		16,153		15,734		419	3
Savings		28,200		26,209		1,991	8
Certificates of deposit		50,624		52,503		(1,879)	(4)
Total deposits	$	179,712	$	165,094	$	14,618	9	%

The ratio of the Company's total loans to total deposits was 73% and 80% as of March 31, 2023 and December 31, 2022, respectively. In addition to our deposit base, our secondary sources of liquidity include borrowings from the FHLB and a line of credit from our primary correspondent bank. At March 31, 2023, we had available capacity to borrow $34.3 million from the FHLB and an additional $17.8 million on a line of credit with our primary correspondent bank.

Net Interest Income

Net interest margin for the first quarter of 2023 was 3.10%, up 14 basis points compared to the prior quarter. The average yield on interest-earning assets increased by 29 basis points to 3.57% for the first quarter of 2023, while the average rate on interest-bearing liabilities increased by 25 basis points to 0.80%, compared to the fourth quarter of 2022.

Net interest income for the first quarter of 2023 was $2.0 million, up $66,000, or 3%, from the fourth quarter of 2022 primarily due to an increase in interest income from loans (up $86,000, or 6%) and other interest income (up $66,000, or 46%). These increases were partially offset by an increase in interest expense on deposits (up $103,000, or 79%). The Company's interest-earning asset yield continues to benefit from rising interest rates due to increasing yields on our adjustable-rate loan portfolio and our interest-earning cash, which is included in other interest-earning assets. However, rising interest rates have also increased competition for deposits and have led us to offer higher rates on our deposit accounts.

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
	3/31/2023						12/31/2022
*(Dollars in thousands)*	Average Balance		Interest		Average Yield/ Rate		Average Balance		Interest		Average Yield/ Rate
INTEREST-EARNING ASSETS
Loans receivable⁽¹⁾	$	133,781	$	1,629	4.94	%	$	133,102	$	1,543	4.60	%
Investment securities^(TE)(2)		103,739		427	1.66			105,488		418	1.61
Other interest earning assets		19,820		211	4.33			17,443		145	3.29
Total interest-earning assets^(TE)	$	257,340	$	2,267	3.57	%	$	256,033	$	2,106	3.28	%
INTEREST-BEARING LIABILITIES
NOW, money market and savings accounts	$	90,972	$	81	0.36	%	$	84,157	$	37	0.18	%
Certificates of deposit		51,528		152	1.20			54,977		93	0.67
Total interest-bearing deposits		142,500		233	0.66			139,134		130	0.37
FHLB advances		9,216		68	2.96			9,930		76	3.07
Total interest-bearing liabilities	$	151,716	$	301	0.80	%	$	149,064	$	206	0.55	%
Net interest-earning assets	$	105,624					$	106,969
Net interest income; average interest rate spread^(TE)			$	1,966	2.77	%			$	1,900	2.73	%
Net interest margin^(TE)(3)					3.10	%					2.96	%


(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 first quarter of 2023 was $294,000, down $7,000, or 2%, from the fourth quarter of 2022 primarily due to a decrease in debit card and ATM transaction fees included in service charges on deposit accounts.

Non-interest Expense

Non-interest expense for the first quarter of 2023 totaled $2.2 million, up $183,000, or 9%, compared to the fourth quarter of 2022.

Data processing and communication expense totaled $227,000 for the first quarter of 2023, up $52,000, or 30%, from the prior quarter. During the fourth quarter of 2022, the Company received a credit from our core system provider, which lowered data processing and communication expense by $26,000 for the fourth quarter. The remaining increase in data processing and communication expense was primarily due to annual rate increases by our core system provider.

Professional fees totaled $129,000 for the first quarter of 2023, up $63,000, or 95%, from the prior quarter primarily due to increases in expenses related to audit and consulting services and 2022 annual reporting.

Franchise and shares tax expense increased $43,000, compared to the fourth quarter of 2022. During the fourth quarter of 2022, the Company recorded a reversal of franchise and shares tax expense of $16,000. Shares tax due for 2022 was received during the fourth quarter of 2022 and the actual expense was less than our initial estimate.

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 $275.8 million in assets at March 31, 2023. Catalyst Bank, formerly St. Landry Homestead Federal Savings Bank, has been in operation in the Acadiana region of south-central Louisiana for over 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)				(Unaudited)
*(Dollars in thousands)*	3/31/2023		12/31/2022		3/31/2022
ASSETS
Non-interest-bearing cash	$	3,531	$	5,092	$	511
Interest-bearing cash and due from banks		23,996		8,380		39,585
Total cash and cash equivalents		27,527		13,472		40,096
Investment securities:
Securities available-for-sale, at fair value		78,937		79,602		84,649
Securities held-to-maturity		13,471		13,475		13,492
Loans receivable, net of unearned income		132,690		133,607		132,252
Allowance for loan losses		(2,070)		(1,807)		(2,173)
Loans receivable, net		130,620		131,800		130,079
Accrued interest receivable		675		673		536
Foreclosed assets		320		320		320
Premises and equipment, net		6,202		6,303		6,475
Stock in correspondent banks, at cost		1,823		1,808		1,794
Bank-owned life insurance		13,714		13,617		8,824
Other assets		2,539		2,254		1,204
TOTAL ASSETS	$	275,828	$	263,324	$	287,469

LIABILITIES
Deposits:
Non-interest-bearing	$	35,483	$	33,657	$	33,056
Interest-bearing		144,229		131,437		150,028
Total deposits		179,712		165,094		183,084
Federal Home Loan Bank advances		9,243		9,198		9,063
Other liabilities		747		558		663
TOTAL LIABILITIES		189,702		174,850		192,810

SHAREHOLDERS' EQUITY
Common stock		51		53		53
Additional paid-in capital		48,259		51,062		50,821
Unallocated common stock held by benefit plans		(6,664)		(6,307)		(4,126)
Retained earnings		52,478		52,740		52,419
Accumulated other comprehensive income (loss)		(7,998)		(9,074)		(4,508)
TOTAL SHAREHOLDERS' EQUITY		86,126		88,474		94,659
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	275,828	$	263,324	$	287,469


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

	Three Months Ended
*(Dollars in thousands)*	3/31/2023		12/31/2022		3/31/2022
INTEREST INCOME
Loans receivable, including fees	$	1,629	$	1,543	$	1,563
Investment securities		427		418		329
Other		211		145		19
Total interest income		2,267		2,106		1,911
INTEREST EXPENSE
Deposits		233		130		92
Advances from Federal Home Loan Bank		68		76		68
Total interest expense		301		206		160
Net interest income		1,966		1,900		1,751
Provision for (reversal of) credit losses		-		-		(71)
Net interest income after provision for (reversal of) loan losses		1,966		1,900		1,822
NON-INTEREST INCOME
Service charges on deposit accounts		183		189		168
Bank-owned life insurance		97		98		21
Other		14		14		8
Total non-interest income		294		301		197
NON-INTEREST EXPENSE
Salaries and employee benefits		1,203		1,175		1,261
Occupancy and equipment		213		193		210
Data processing and communication		227		175		208
Professional fees		129		66		140
Directors' fees		115		117		55
ATM and debit card		58		61		49
Foreclosed assets, net		2		5		(4)
Advertising and marketing		30		53		42
Franchise and shares tax		27		(16)		58
Other		181		173		182
Total non-interest expense		2,185		2,002		2,201
Income (loss) before income tax expense		75		199		(182)
Income tax expense (benefit)		2		28		(41)
NET INCOME (LOSS)	$	73	$	171	$	(141)

Earnings (loss) per share:
Basic	$	0.02	$	0.04	$	(0.03)
Diluted		0.02		0.04		N/A


CATALYST BANCORP, INC. AND SUBSIDIARY
SELECTED FINANCIAL DATA

	Three Months Ended
*(Dollars in thousands)*	3/31/2023			12/31/2022			3/31/2022
EARNINGS DATA
Total interest income	$	2,267		$	2,106		$	1,911
Total interest expense		301			206			160
Net interest income		1,966			1,900			1,751
Provision for (reversal of) credit losses		-			-			(71)
Total non-interest income		294			301			197
Total non-interest expense		2,185			2,002			2,201
Income tax expense (benefit)		2			28			(41)
Net income (loss)	$	73		$	171		$	(141)

AVERAGE BALANCE SHEET DATA
Total assets	$	271,910		$	270,121		$	286,955
Total interest-earning assets		257,340			256,033			274,249
Total loans		133,781			133,102			131,009
Total interest-bearing deposits		142,500			139,134			147,824
Total interest-bearing liabilities		151,716			149,064			156,858
Total deposits		174,597			170,952			179,615
Total shareholders' equity		87,350			88,558			97,366

SELECTED RATIOS
Return on average assets		0.11	%		0.25	%		(0.20)	%
Return on average equity		0.34			0.76			(0.59)
Efficiency ratio		96.68			90.99			112.98
Net interest margin^(TE)		3.10			2.96			2.59
Average equity to average assets		32.12			32.78			33.93
Common equity Tier 1 capital ratio⁽¹⁾		56.43			56.17			57.98
Tier 1 leverage capital ratio⁽¹⁾		30.11			30.37			28.39
Total risk-based capital ratio⁽¹⁾		57.69			57.42			59.24

ALLOWANCE FOR LOANS LOSSES
Beginning balance	$	1,807		$	1,804		$	2,276
CECL adoption impact		209			-			-
Provision for (reversal of) credit losses		-			-			(71)
Charge-offs		(7)			(19)			(63)
Recoveries		61			22			31
Net (charge-offs) recoveries		54			3			(32)
Ending balance	$	2,070		$	1,807		$	2,173

CREDIT QUALITY
Non-accruing loans	$	1,618		$	1,494		$	1,269
Accruing loans 90 days or more past due		69			191			-
Total non-performing loans		1,687			1,685			1,269
Foreclosed assets		320			320			320
Total non-performing assets	$	2,007		$	2,005		$	1,589

Total non-performing loans to total loans		1.27	%		1.26	%		0.96	%
Total non-performing assets to total assets		0.73			0.76			0.55