Catalyst Bancorp, Inc. Announces 2023 Fourth Quarter Results

News provided by

Jan 25, 2024, 07:00 ET

OPELOUSAS, La., Jan. 25, 2024 /PRNewswire/ -- Catalyst Bancorp, Inc. (Nasdaq: CLST) (the "Company"), the parent company for Catalyst Bank (the "Bank") (www.catalystbank.com), reported net income of $320,000 for the fourth quarter of 2023 which included a net pre-tax benefit of $371,000 due to a Bank Enterprise Award ("BEA") Program grant from the Community Development Financial Institution ("CDFI") Fund and a $92,000 loss on the sale of investment securities. For the year ended December 31, 2023, net income totaled $602,000, compared to $180,000 for 2022.

"We produced over $9 million of loan growth during the fourth quarter – our strongest quarter since becoming a public company," said Joe Zanco, President and Chief Executive Officer of the Company and the Bank. "This growth was fueled by the high level of responsiveness our bankers provide to our customers."

Loans

Loans totaled $144.9 million at December 31, 2023, up $9.2 million, or 7%, from September 30, 2023. The increase in total loans during the fourth quarter of 2023 was primarily due to commercial construction and commercial real estate loans. Construction loan growth was largely driven by three separate projects involving the purchase and renovation of a hotel, the construction of a retail health care center, and the purchase and renovation of an industrial warehouse. A significant driver of commercial real estate loan growth was a loan to finance the purchase of a multi-tenant office building in Lafayette, Louisiana.

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


*(Dollars in thousands)*	12/31/2023		9/30/2023		Increase (Decrease)
Real estate loans
One- to four-family residential	$	83,623	$	83,973	$	(350)	-	%
Commercial real estate		21,478		19,113		2,365	12
Construction and land		13,857		6,622		7,235	109
Multi-family residential		3,373		3,424		(51)	(1)
Total real estate loans		122,331		113,132		9,199	8
Other loans
Commercial and industrial		19,984		19,634		350	2
Consumer		2,605		2,906		(301)	(10)
Total other loans		22,589		22,540		49	-
Total loans	$	144,920	$	135,672	$	9,248	7	%

Loans secured by one- to four-family residential properties accounted for 58% of total loans and commercial real estate loans accounted for 15% of total loans at December 31, 2023. Approximately 60% of our real estate loans have adjustable rates and, of our total real estate loans, approximately $60.7 million, or 50%, are scheduled to re-price or mature during the next 12 months.

Our non-real estate loans primarily consist of commercial and industrial loans, which amounted to 14% of total loans at December 31, 2023. This segment of the portfolio largely consists of loans to local businesses involved in industrial manufacturing and equipment, communications, professional services, and oil and gas support services. Approximately 39% of our commercial and industrial loans have adjustable rates and, of total commercial and industrial loans, approximately $10.2 million, or 51%, are scheduled to re-price or mature during the next 12 months.

Credit Quality and Allowance for Credit Losses

At each of December 31 and September 30, 2023, non-performing assets ("NPAs") totaled $2.1 million and the ratio of NPAs to total assets was 0.76% and 0.82% at such dates, respectively. Non-performing loans ("NPLs") comprised 1.37% of total loans at December 31, 2023, and 1.54% of total loans at September 30, 2023. At December 31 and September 30, 2023, 95% and 96% of total NPLs, respectively, were one- to four-family residential mortgage loans.

At December 31, 2023, the allowance for loan losses totaled $2.1 million, or 1.47% of total loans, compared to $2.0 million at September 30, 2023, or 1.50% of total loans. For the quarter and year ended December 31, 2023, the provision for credit losses totaled $128,000, which was largely attributable to loan growth in the fourth quarter of 2023 that necessitated additional loan provisions according to the Bank's Current Expected Credit Losses model.

Net loan charge-offs totaled $63,000 during the fourth quarter of 2023, compared to net recoveries of $17,000 for the third quarter of 2023. Net loan charge-offs in the fourth quarter of 2023 were primarily attributable to one- to four-family residential loans.

Investment Securities

Total investment securities were $84.0 million, or 31% of total assets, at December 31, 2023. The Company's investment securities portfolio consists primarily of government-sponsored mortgage-backed securities and debt obligations issued by the U.S. government and government agencies. The Company has not purchased investment securities since the fourth quarter of 2022. During the fourth quarter of 2023, the Company sold two available-for-sale investment securities for a pre-tax loss of $92,000. Cash proceeds from the sales totaled $1.9 million.

At December 31, 2023, 86% of total investment securities, based on amortized cost, were classified as available-for-sale. Net unrealized losses on securities classified as available-for-sale totaled $9.2 million at December 31, 2023, compared to $12.8 million at September 30, 2023.

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


	December 31, 2023
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available-for-sale
Mortgage-backed securities	$	65,704	$	14	$	(8,206)	$	57,512
U.S. Government and agency obligations		7,999		-		(611)		7,388
Municipal obligations		5,998		7		(365)		5,640
Total available-for-sale	$	79,701	$	21	$	(9,182)	$	70,540
Securities held-to-maturity
U.S. Government and agency obligations	$	13,003	$	-	$	(2,210)	$	10,793
Municipal obligations		458		-		(24)		434
Total held-to-maturity	$	13,461	$	-	$	(2,234)	$	11,227

At December 31, 2023, the amortized cost and fair value of pledged investment securities totaled $61.9 million and $53.9 million, respectively. The amortized cost and fair value of investment securities pledged to secure uninsured public fund deposits totaled $49.3 million and $43.2 million, respectively, at December 31, 2023. The remainder of the pledged investment securities at December 31, 2023 served as collateral for borrowings from the Federal Reserve Bank of Atlanta.

Deposits

Total deposits were $165.6 million at December 31, 2023, up $402,000, or less than 1%, from September 30, 2023. A $3.2 million decline in total public funds over the fourth quarter was offset by growth in consumer and commercial deposits that was largely driven by rate specials offered to depositors during the quarter.

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


*(Dollars in thousands)*	12/31/2023		9/30/2023		Increase (Decrease)
Non-interest-bearing demand deposits	$	28,183	$	33,222	$	(5,039)	(15)	%
Interest-bearing demand deposits		36,867		38,881		(2,014)	(5)
Money market		15,126		15,473		(347)	(2)
Savings		31,518		27,237		4,281	16
Certificates of deposit		53,928		50,407		3,521	7
Total deposits	$	165,622	$	165,220	$	402	-	%

At December 31, 2023, approximately 78% of our total public funds consisted of non-interest-bearing and interest-bearing demand deposits from municipalities within our market. Total public fund deposits amounted to $23.3 million, or 14% of total deposits, at December 31, 2023, compared to $26.4 million, or 16% of total deposits, at September 30, 2023.

Our total uninsured deposits (that is deposits in excess of the FDIC's insurance limit), inclusive of public funds, were approximately $44.6 million at December 31, 2023 and $45.2 million at September 30, 2023. Total uninsured non-public funds deposits were approximately $26.3 million and $23.9 million at December 31 and September 30, 2023, respectively. The full amount of our public fund deposits in excess of the FDIC's insurance limit are secured by pledging investment securities.

Borrowings and Liquidity

Total borrowings at December 31, 2023 were $19.4 million, up $10.0 million from September 30, 2023. During the fourth quarter of 2023, the Bank began borrowing from the Federal Reserve Bank of Atlanta through its Bank Term Funding Program ("BTFP"). At December 31, 2023, the Bank had one $10.0 million BTFP loan outstanding with a contractual interest rate of 4.83% and a maturity date of December 24, 2024.

The ratio of the Company's total loans to total deposits was 88% and 82% as of December 31 and September 30, 2023, respectively. The table below summarizes our unused and available liquidity sources as of December 31, 2023.


*(Dollars in thousands)*	12/31/2023
Advances from the Federal Home Loan Bank of Dallas	$	48,467
Line of credit with primary correspondent bank		17,800
Federal Reserve's Bank Term Funding Program		1,434
Federal Reserve Discount Window		718
Unpledged available-for-sale investment securities, at fair value		25,385
Total unused and available liquidity	$	93,804

Pledged securities under the BTFP are valued at par when determining borrowing capacity. The total par value of unpledged investment securities eligible as collateral for advances under the BTFP was $16.5 million at December 31, 2023.

Capital and Share Repurchases

The Bank's total risk-based capital ratio was 53.60% and 56.23% at December 31, 2023 and September 30, 2023, respectively. At December 31, 2023 and September 30, 2023, consolidated shareholders' equity totaled $84.6 million, or 31.2% of total assets, and $82.2 million, or 31.9% of total assets, respectively.

The Company repurchased 86,964 shares of its common stock at an average cost per share of $11.24 during the fourth quarter of 2023. During the year ended December 31, 2023, the Company repurchased 528,674 shares of its common stock at an average cost per share of $11.94 through the completion of repurchases of 265,000 shares under its January 2023 Repurchase Plan and 252,000 under its April 2023 Repurchase Plan, and the repurchase of another 11,674 shares pursuant to a third repurchase plan announced in November (the "November 2023 Repurchase Plan"). At December 31, 2023, the Company had common shares outstanding of 4,761,326 and 228,326 of those shares were available for repurchase under the November 2023 Repurchase Plan.

Net Interest Income

The net interest margin for the fourth quarter of 2023 was 3.14%, up one basis point compared to the prior quarter. For the fourth quarter of 2023, the average yield on interest-earning assets was 4.17%, up 26 basis points from the prior quarter, while the average rate paid on interest-bearing liabilities was 1.73%, up 35 basis points from the third quarter of 2023.

Net interest income for the fourth quarter of 2023 was $2.0 million, down $12,000, or 1%, compared to the third quarter of 2023. Total interest income was up $134,000, or 5%, while total interest expense increased by $146,000, or 29%, in the fourth quarter of 2023 compared to the prior quarter.

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
	12/31/2023						9/30/2023
*(Dollars in thousands)*	Average Balance		Interest		Average Yield/ Rate		Average Balance		Interest		Average Yield/ Rate
INTEREST-EARNING ASSETS
Loans receivable⁽¹⁾	$	140,757	$	2,066	5.82	%	$	134,851	$	1,852	5.45	%
Investment securities^(TE)(2)		96,640		400	1.67			99,373		403	1.64
Other interest earning assets		11,276		137	4.83			16,915		214	5.02
Total interest-earning assets^(TE)	$	248,673	$	2,603	4.17	%	$	251,139	$	2,469	3.91	%
INTEREST-BEARING LIABILITIES
Demand deposits, money market, and savings accounts	$	82,474	$	185	0.89	%	$	83,051	$	154	0.73	%
Certificates of deposit		51,707		344	2.64			50,526		274	2.15
Total interest-bearing deposits		134,181		529	1.56			133,577		428	1.27
Borrowings		13,016		114	3.50			9,306		69	2.93
Total interest-bearing liabilities	$	147,197	$	643	1.73	%	$	142,883	$	497	1.38	%
Net interest-earning assets	$	101,476					$	108,256
Net interest income; average interest rate spread^(TE)			$	1,960	2.44	%			$	1,972	2.53	%
Net interest margin^(TE)(3)					3.14	%					3.13	%


(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 fourth quarter of 2023 was $672,000, up $366,000, or a 120% increase from the third quarter of 2023. The Company received and recognized as income a $437,000 Bank Enterprise Award ("BEA") Program grant from the CDFI Fund during the fourth quarter of 2023. Non-interest income for the fourth quarter of 2023 also included the $92,000 loss on the sale of investment securities discussed previously. The securities were sold for a total of $1.9 million.

Non-interest Expense

Non-interest expense for the fourth quarter of 2023 totaled $2.1 million, up $41,000, or 2%, compared to the third quarter of 2023. Professional fees totaled $140,000 for the fourth quarter of 2023, up $40,000, or 40%, from the prior quarter. Professional fees associated with obtaining the BEA Program grant totaled $66,000 and were expensed in the fourth quarter of 2023.

During the first quarter of 2024, the Company is converting to a new core processing system and expects to incur approximately $500,000 (pre-tax) of data conversion and other associated costs. The core system conversion will significantly enhance our customer-facing and internal banking technology. The Company also estimates annualized savings of greater than $200,000 after completing the conversion.

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 $270.9 million in assets at December 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 Bancorp and Catalyst Bank, visit www.catalystbank.com, or the website of the Securities and Exchange Commission, www.sec.gov.

Forward-looking Statements

This news release reflects industry conditions, Company performance and financial results and contains "forward-looking statements,' which may include forecasts of our financial results and condition, expectations for our operations and businesses, and our assumptions for those forecasts and expectations. Do not place undue reliance on forward-looking statements. These forward-looking statements are subject to a number of risk factors and uncertainties which could cause the Company's actual results and experience to differ materially from the anticipated results and expectation expressed in such forward-looking statements.

Factors that could cause our actual results to differ materially from our forward-looking statements are described under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Supervision and Regulation" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and in other documents subsequently filed by the Company with the Securities and Exchange Commission, available at the SEC's website and the Company's website, each of which are referenced above. To the extent that statements in this news release relate to future plans, objectives, financial results or performance by the Company, these statements are deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are generally identified by use of words such as "may," "believe," "expect," "anticipate," "intend," "will," "should," "plan," "estimate," "predict," "continue" and "potential" or the negative of these terms or other comparable terminology.

Forward-looking statements represent management's beliefs, based upon information available at the time the statements are made, with regard to the matters addressed; they are not guarantees of future performance. Forward-looking statements are subject to numerous assumptions, risks and uncertainties that change over time and could cause actual results or financial condition to differ materially from those expressed in or implied by such statements. All information is as of the date of this news release. Except to the extent required by applicable law or regulation, the Company undertakes no obligation to revise or update publicly any forward-looking statement for any reason.


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

	(Unaudited)		(Unaudited)
*(Dollars in thousands)*	12/31/2023		9/30/2023		12/31/2022
ASSETS
Non-interest-bearing cash	$	3,654	$	3,497	$	5,092
Interest-bearing cash and due from banks		15,357		9,769		8,380
Total cash and cash equivalents		19,011		13,266		13,472
Investment securities:
Securities available-for-sale, at fair value		70,540		71,808		79,602
Securities held-to-maturity		13,461		13,464		13,475
Loans receivable, net of unearned income		144,920		135,672		133,607
Allowance for loan losses		(2,124)		(2,036)		(1,807)
Loans receivable, net		142,796		133,636		131,800
Accrued interest receivable		906		806		673
Foreclosed assets		60		37		320
Premises and equipment, net		6,072		6,160		6,303
Stock in correspondent banks, at cost		1,878		1,858		1,808
Bank-owned life insurance		14,026		13,917		13,617
Other assets		2,141		2,956		2,254
TOTAL ASSETS	$	270,891	$	257,908	$	263,324

LIABILITIES
Deposits:
Non-interest-bearing	$	28,183	$	33,222	$	33,657
Interest-bearing		137,439		131,998		131,437
Total deposits		165,622		165,220		165,094
Borrowings		19,378		9,333		9,198
Other liabilities		1,274		1,147		558
TOTAL LIABILITIES		186,274		175,700		174,850

SHAREHOLDERS' EQUITY
Common stock		48		48		53
Additional paid-in capital		45,020		45,855		51,062
Unallocated common stock held by benefit plans		(6,221)		(6,274)		(6,307)
Retained earnings		53,007		52,687		52,740
Accumulated other comprehensive income (loss)		(7,237)		(10,108)		(9,074)
TOTAL SHAREHOLDERS' EQUITY		84,617		82,208		88,474
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	270,891	$	257,908	$	263,324


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

	Three Months Ended						Year Ended
*(Dollars in thousands)*	12/31/2023		9/30/2023		12/31/2022		12/31/2023		12/31/2022
INTEREST INCOME
Loans receivable, including fees	$	2,066	$	1,852	$	1,543	$	7,238	$	6,127
Investment securities		400		403		418		1,643		1,480
Other		137		214		145		780		407
Total interest income		2,603		2,469		2,106		9,661		8,014
INTEREST EXPENSE
Deposits		529		428		130		1,541		402
Borrowings		114		69		76		319		281
Total interest expense		643		497		206		1,860		683
Net interest income		1,960		1,972		1,900		7,801		7,331
Provision for (reversal of) credit losses		128		-		-		128		(375)
Net interest income after provision for (reversal of) credit losses		1,832		1,972		1,900		7,673		7,706
NON-INTEREST INCOME
Service charges on deposit accounts		201		190		189		774		731
Bank-owned life insurance		109		104		98		409		314
Gain (loss) on sales of investment securities		(92)		-		-		(92)		-
Gain (loss) on disposals and sales of fixed assets		-		-		-		-		(77)
Federal community development grant		437		-		-		437		171
Other		17		12		14		61		34
Total non-interest income		672		306		301		1,589		1,173
NON-INTEREST EXPENSE
Salaries and employee benefits		1,149		1,141		1,175		4,671		4,822
Occupancy and equipment		193		198		193		802		833
Data processing and communication		236		228		175		911		841
Professional fees		140		100		66		486		538
Directors' fees		118		116		117		463		302
ATM and debit card		63		68		61		250		245
Foreclosed assets, net		5		2		5		72		5
Advertising and marketing		23		25		53		100		240
Franchise and shares tax		10		19		(16)		81		115
Other		185		184		173		743		779
Total non-interest expense		2,122		2,081		2,002		8,579		8,720
Income before income tax expense (benefit)		382		197		199		683		159
Income tax expense (benefit)		62		27		28		81		(21)
NET INCOME	$	320	$	170	$	171	$	602	$	180

Earnings per share:
Basic	$	0.08	$	0.03	$	0.03	$	0.14	$	0.04
Diluted		0.08		0.03		0.03		0.14		0.04


CATALYST BANCORP, INC. AND SUBSIDIARY
SELECTED FINANCIAL DATA

	Three Months Ended									Year Ended
*(Dollars in thousands)*	12/31/2023			9/30/2023			12/31/2022			12/31/2023			12/31/2022
EARNINGS DATA
Total interest income	$	2,603		$	2,469		$	2,106		$	9,661		$	8,014
Total interest expense		643			497			206			1,860			683
Net interest income		1,960			1,972			1,900			7,801			7,331
Provision for (reversal of) credit losses		128			-			-			128			(375)
Total non-interest income		672			306			301			1,589			1,173
Total non-interest expense		2,122			2,081			2,002			8,579			8,720
Income tax expense (benefit)		62			27			28			81			(21)
Net income	$	320		$	170		$	171		$	602		$	180

AVERAGE BALANCE SHEET DATA
Total loans	$	140,757		$	134,851		$	133,102		$	135,713		$	132,503
Total interest-earning assets		248,673			251,139			256,033			252,616			267,300
Total assets		261,657			265,057			270,121			266,655			282,931
Total interest-bearing deposits		134,181			133,577			139,134			136,321			147,266
Total interest-bearing liabilities		147,197			142,883			149,064			146,529			156,560
Total deposits		165,102			170,589			170,952			170,677			179,826
Total shareholders' equity		82,227			84,021			88,558			84,739			93,074

SELECTED RATIOS
Return on average assets		0.49	%		0.25	%		0.25	%		0.23	%		0.06	%
Return on average equity		1.54			0.80			0.76			0.71			0.19
Efficiency ratio		80.61			91.34			90.99			91.36			102.55
Net interest margin^(TE)		3.14			3.13			2.96			3.10			2.75
Average equity to average assets		31.43			31.70			32.78			31.78			32.90
Common equity Tier 1 capital ratio⁽¹⁾		52.34			54.97			56.17
Tier 1 leverage capital ratio⁽¹⁾		31.67			31.08			30.37
Total risk-based capital ratio⁽¹⁾		53.60			56.23			57.42

NON-FINANCIAL DATA
Total employees (full-time equivalent)		48			47			50
Common shares issued and outstanding, end of period		4,761,326			4,848,290			5,290,000

(1) Capital ratios are preliminary end-of-period ratios for the Bank only and are subject to change.


CATALYST BANCORP, INC. AND SUBSIDIARY
SELECTED FINANCIAL DATA
(continued)

	Three Months Ended									Year Ended
*(Dollars in thousands)*	12/31/2023			9/30/2023			12/31/2022			12/31/2023		12/31/2022
ALLOWANCE FOR CREDIT LOSSES
Allowance for loan losses:
Beginning balance	$	2,036		$	2,081		$	1,804		$	1,807	$	2,276
CECL adoption impact		-			-			-			209		-
Provision for (reversal of) loan losses		151			(62)			-			87		(375)
Charge-offs		(76)			(9)			(19)			(102)		(210)
Recoveries		13			26			22			123		116
Net (charge-offs) recoveries		(63)			17			3			21		(94)
Ending balance	$	2,124		$	2,036		$	1,807		$	2,124	$	1,807

Allowance for unfunded commitments:
Beginning balance		280			218			-			-		-
CECL adoption impact		-			-			-			216		-
Provision for losses on unfunded commitments		(23)			62			-			41		-
Ending balance	$	257		$	280		$	-		$	257	$	-

Total allowance for credit losses, end of period	$	2,381		$	2,316		$	1,807		$	2,381	$	1,807
Total provision for (reversal of) credit losses		128			-			-			128		(375)

CREDIT QUALITY⁽¹⁾
Non-accruing loans	$	1,967		$	1,961		$	1,494
Accruing loans 90 days or more past due		24			127			191
Total non-performing loans		1,991			2,088			1,685
Foreclosed assets		60			37			320
Total non-performing assets	$	2,051		$	2,125		$	2,005

Total non-performing loans to total loans		1.37	%		1.54	%		1.26	%
Total non-performing assets to total assets		0.76			0.82			0.76