Catalyst Bancorp, Inc. Announces 2023 Second Quarter Results

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Jul 27, 2023, 07:00 ET

OPELOUSAS, La., July 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 second quarter of 2023. For the quarter, the Company reported net income of $39,000, compared to $73,000 for the first quarter of 2023.

"One by one, we're adding new customers and expanding existing relationships as our bankers deliver responsive and customized service across Acadiana," said Joe Zanco, President and Chief Executive Officer of the Company and the Bank. "We're building a dedicated, fully engaged, high character company where people want to bank and maximize the impact of their work."

Capital and Share Repurchases

The Bank continues to maintain an exceptional capital position with a total risk-based capital ratio of 57.27% and 57.69% at June 30, 2023 and March 31, 2023, respectively. At June 30, 2023 and March 31, 2023, consolidated shareholders' equity totaled $84.3 million, or 31.7% of total assets, and $86.1 million, or 31.2% of total assets, respectively.

On April 27, 2023, the Company announced its 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. During the second quarter of 2023, the Company repurchased 129,070 shares of its common stock at an average cost per share of $10.65. At June 30, 2023, 156,542 shares were available for repurchase under the April 2023 Repurchase Plan.

Loans

Loans totaled $133.5 million at June 30, 2023, up $803,000, or less than 1%, from March 31, 2023. During the second quarter of 2023, commercial and industrial loan growth was partially offset by net declines in our real estate loan portfolio. The decline in construction and land loans was primarily driven by the conversion of construction loans to permanent financing.

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

*(Dollars in thousands)*	6/30/2023		3/31/2023		Increase (Decrease)
Real estate loans
One- to four-family residential	$	85,655	$	86,464	$	(809)	(1)	%
Commercial real estate		19,175		19,303		(128)	(1)
Construction and land		4,620		6,536		(1,916)	(29)
Multi-family residential		3,094		3,146		(52)	(2)
Total real estate loans		112,544		115,449		(2,905)	(3)
Other loans
Commercial and industrial		17,609		14,109		3,500	25
Consumer		3,340		3,132		208	7
Total other loans		20,949		17,241		3,708	22
Total loans	$	133,493	$	132,690	$	803	1	%

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 accounted for 64% of total loans and commercial real estate loans accounted for 14% of total loans at June 30, 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. Approximately 66% of our real estate loans have adjustable rates and, of our total real estate loans, approximately $55.1 million, or 49%, 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 13% of total loans, at June 30, 2023. This segment of the portfolio largely consists of loans to local businesses involved in industrial manufacturing and equipment, communications, and professional services. Approximately 37% of our commercial and industrial loans have adjustable rates and, of total commercial and industrial loans, approximately $8.8 million, or 50% are scheduled to re-price or mature during the next 12 months.

Credit Quality and Allowance for Loan Losses

At June 30 and March 31, 2023, non-performing assets ("NPAs") totaled $2.2 million and $2.0 million, respectively, and the ratio of NPAs to total assets was 0.82% and 0.73%, respectively, at such dates. Non-performing loans ("NPLs") totaled $1.9 million, or 1.42% of total loans, at June 30, 2023 and $1.7 million, or 1.27% of total loans, at March 31, 2023. At June 30, 2023 and March 31, 2023, greater than 94% of total NPLs were one- to four-family residential mortgage loans.

Net loan recoveries totaled $13,000 during the second quarter of 2023, compared to net recoveries of $54,000 for the first quarter of 2023. During the first quarter of 2023, the Company recovered $41,000 of principal from a previously charged-off residential mortgage loan.

At June 30 and March 31, 2023, the allowance for loan losses totaled $2.1 million, or 1.56% of total loans. The total provision for credit losses on loans and unfunded commitments was zero for the first six months of 2023.

Investment Securities

Total investment securities were $89.3 million, or 34% of total assets, at June 30, 2023. Our investment securities portfolio consists primarily of debt obligations issued by the U.S. government and government agencies and government-sponsored mortgage-backed securities. The Company has not purchased investment securities since the fourth quarter of 2022. We have also not sold or reclassified securities during this current period of interest rate hikes by the Federal Reserve, which began in March 2022.

At June 30, 2023, 87% of total investment securities, based on amortized cost, were classified as available-for-sale. Net unrealized losses on securities available-for-sale totaled $10.9 million at June 30, 2023, compared to $10.1 million at March 31, 2023. For the second quarter of 2023, the average yield on the total investment securities portfolio was 1.65%, down one basis point from the first quarter of 2023.

The following table summarizes the amortized cost and fair value of our investment securities portfolio as of June 30, 2023.

	June 30, 2023
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available-for-sale
Mortgage-backed securities	$	69,804	$	1	$	(9,477)	$	60,328
U.S. Government and agency obligations		10,984		-		(976)		10,008
Municipal obligations		6,031		1		(492)		5,540
Total available-for-sale	$	86,819	$	2	$	(10,945)	$	75,876
Securities held-to-maturity
U.S. Government and agency obligations	$	13,005	$	-	$	(2,487)	$	10,518
Municipal obligations		463		-		(31)		432
Total held-to-maturity	$	13,468	$	-	$	(2,518)	$	10,950

Deposits and Liquidity

Total deposits were $171.4 million at June 30, 2023, down $8.3 million, or 5%, from March 31, 2023. Compared to December 31, 2022, total deposits were up $6.3 million, or 4%, at June 30, 2023. During the first and second quarters of 2023, the average balance of total deposits was $174.6 million and $172.5 million, respectively. The decrease during the second quarter of 2023 was primarily due to decreases in public fund deposits.

Our public funds consist primarily of non-interest bearing and NOW account deposits from municipalities within our market. At June 30, 2023, total public fund deposits amounted to $24.7 million, or 14% of total deposits, compared to $40.1 million, or 22% of total deposits, at March 31, 2023.

Our total uninsured deposits (that is deposits in excess of the FDIC's insurance limit), inclusive of public funds, were approximately $50.2 million at June 30, 2023 and $59.7 million at March 31, 2023. Total uninsured non-public funds deposits were approximately $30.5 million and $24.6 million at June 30 and March 31, 2023, respectively. The full amount of our public fund 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 June 30, 2023, the amortized cost and fair value of investment securities pledged to secure public fund deposits totaled $48.3 million and $41.8 million, respectively.

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

*(Dollars in thousands)*	6/30/2023		3/31/2023		Increase (Decrease)
Non-interest-bearing demand deposits	$	41,482	$	35,483	$	5,999	17	%
NOW		34,159		49,252		(15,093)	(31)
Money market		18,798		16,153		2,645	16
Savings		26,927		28,200		(1,273)	(5)
Certificates of deposit		50,007		50,624		(617)	(1)
Total deposits	$	171,373	$	179,712	$	(8,339)	(5)	%

The ratio of the Company's total loans to total deposits was 78% and 74% as of June 30 and March 31, 2023, 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 June 30, 2023, we had available capacity to borrow $47.9 million from the FHLB and an additional $17.8 million on a line of credit with our primary correspondent bank.

Net Interest Income

The net interest margin for the second quarter of 2023 was 3.02%, down eight basis points compared to the prior quarter. The average yield on interest-earning assets increased by 11 basis points to 3.68% for the second quarter of 2023, while the average rate on interest-bearing liabilities increased by 37 basis points to 1.17%, compared to the first quarter of 2023.

Net interest income for the second quarter of 2023 was $1.9 million, down $63,000, or 3%, from the first quarter of 2023 primarily due to an increase in interest expense on deposits (up $118,000, or 51%) partially offset by an increase in interest income on loans (up $62,000, or 4%). Demand for higher rates on deposit accounts remained persistent during the second quarter of 2023 largely driven by competitor offerings.

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
	6/30/2023						3/31/2023
*(Dollars in thousands)*	Average Balance		Interest		Average Yield/ Rate		Average Balance		Interest		Average Yield/ Rate
INTEREST-EARNING ASSETS
Loans receivable⁽¹⁾	$	133,394	$	1,691	5.09	%	$	133,781	$	1,629	4.94	%
Investment securities^(TE)(2)		101,630		413	1.65			103,739		427	1.66
Other interest earning assets		18,403		218	4.73			19,820		211	4.33
Total interest-earning assets^(TE)	$	253,427	$	2,322	3.68	%	$	257,340	$	2,267	3.57	%
INTEREST-BEARING LIABILITIES
NOW, money market and savings accounts	$	83,962	$	142	0.68	%	$	90,972	$	81	0.36	%
Certificates of deposit		51,185		209	1.64			51,528		152	1.20
Total interest-bearing deposits		135,147		351	1.04			142,500		233	0.66
FHLB advances		9,264		68	2.94			9,216		68	2.96
Total interest-bearing liabilities	$	144,411	$	419	1.17	%	$	151,716	$	301	0.80	%
Net interest-earning assets	$	109,016					$	105,624
Net interest income; average interest rate spread^(TE)			$	1,903	2.51	%			$	1,966	2.77	%
Net interest margin^(TE)(3)					3.02	%					3.10	%


(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 second quarter of 2023 was $317,000, up $23,000, or 8%, from the first quarter of 2023 primarily due to higher debit card income.

Non-interest Expense

Non-interest expense for the second quarter of 2023 totaled $2.2 million, up $6,000 compared to the first quarter of 2023.

Salaries and employee benefits expense totaled $1.2 million for the second quarter of 2023, down $25,000, or 2%, from the prior quarter. Compensation expense related to our ESOP was down from the prior quarter due to a decline in the average market price of the Company's common stock.

Occupancy and equipment expense totaled $198,000 for the second quarter of 2023, down $15,000, or 7%, from the prior quarter primarily due to a decline in repairs and maintenance expense.

Professional fees totaled $117,000 for the second quarter of 2023, down $12,000, or 9%, from the prior quarter primarily due to lower audit and consulting expenses.

Foreclosed assets expense totaled $63,000 for the second quarter of 2023, up $61,000 from the prior quarter. During the second quarter of 2023, the Company recorded a write-down of $62,000 on real estate held as foreclosed assets. The real estate had a carrying value of $320,000 at March 31, 2023 and the sale of the property closed in July 2023.

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 $266.0 million in assets at June 30, 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)				(Unaudited)
*(Dollars in thousands)*	6/30/2023		3/31/2023		12/31/2022		6/30/2022
ASSETS
Non-interest-bearing cash	$	4,769	$	3,531	$	5,092	$	4,553
Interest-bearing cash and due from banks		15,022		23,996		8,380		24,582
Total cash and cash equivalents		19,791		27,527		13,472		29,135
Investment securities:
Securities available-for-sale, at fair value		75,876		78,937		79,602		82,276
Securities held-to-maturity		13,468		13,471		13,475		13,486
Loans receivable, net of unearned income		133,493		132,690		133,607		133,869
Allowance for loan losses		(2,081)		(2,070)		(1,807)		(1,980)
Loans receivable, net		131,412		130,620		131,800		131,889
Accrued interest receivable		707		675		673		556
Foreclosed assets		296		320		320		320
Premises and equipment, net		6,111		6,202		6,303		6,494
Stock in correspondent banks, at cost		1,839		1,823		1,808		1,795
Bank-owned life insurance		13,813		13,714		13,617		13,422
Other assets		2,662		2,539		2,254		1,804
TOTAL ASSETS	$	265,975	$	275,828	$	263,324	$	281,177

LIABILITIES
Deposits:
Non-interest-bearing	$	41,482	$	35,483	$	33,657	$	30,400
Interest-bearing		129,891		144,229		131,437		148,335
Total deposits		171,373		179,712		165,094		178,735
Federal Home Loan Bank advances		9,288		9,243		9,198		9,108
Other liabilities		977		747		558		727
TOTAL LIABILITIES		181,638		189,702		174,850		188,570

SHAREHOLDERS' EQUITY
Common stock		49		51		53		53
Additional paid-in capital		47,032		48,259		51,062		50,838
Unallocated common stock held by benefit plans		(6,616)		(6,664)		(6,307)		(4,073)
Retained earnings		52,517		52,478		52,740		52,434
Accumulated other comprehensive income (loss)		(8,645)		(7,998)		(9,074)		(6,645)
TOTAL SHAREHOLDERS' EQUITY		84,337		86,126		88,474		92,607
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	265,975	$	275,828	$	263,324	$	281,177

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

	Three Months Ended						Six Months Ended
*(Dollars in thousands)*	6/30/2023		3/31/2023		6/30/2022		6/30/2023		6/30/2022
INTEREST INCOME
Loans receivable, including fees	$	1,691	$	1,629	$	1,555	$	3,320	$	3,118
Investment securities		413		427		352		840		681
Other		218		211		58		429		77
Total interest income		2,322		2,267		1,965		4,589		3,876
INTEREST EXPENSE
Deposits		351		233		87		584		179
Advances from Federal Home Loan Bank		68		68		68		136		136
Total interest expense		419		301		155		720		315
Net interest income		1,903		1,966		1,810		3,869		3,561
Provision for (reversal of) credit losses		-		-		(189)		-		(260)
Net interest income after provision for (reversal of) loan losses		1,903		1,966		1,999		3,869		3,821
NON-INTEREST INCOME
Service charges on deposit accounts		200		183		182		383		350
Gain (loss) on disposals and sales of fixed assets		-		-		(77)		-		(77)
Bank-owned life insurance		99		97		98		196		119
Federal community development grant		-		-		171		-		171
Other		18		14		5		32		13
Total non-interest income		317		294		379		611		576
NON-INTEREST EXPENSE
Salaries and employee benefits		1,178		1,203		1,218		2,381		2,479
Occupancy and equipment		198		213		227		411		437
Data processing and communication		220		227		242		447		450
Professional fees		117		129		175		246		315
Directors' fees		114		115		55		229		110
ATM and debit card		61		58		59		119		108
Foreclosed assets, net		63		2		1		65		(3)
Advertising and marketing		22		30		109		52		151
Franchise and shares tax		25		27		58		52		116
Other		193		181		240		374		422
Total non-interest expense		2,191		2,185		2,384		4,376		4,585
Income (loss) before income tax expense		29		75		(6)		104		(188)
Income tax expense (benefit)		(10)		2		(21)		(8)		(62)
NET INCOME (LOSS)	$	39	$	73	$	15	$	112	$	(126)

Earnings (loss) per share:
Basic	$	0.01	$	0.02	$	0.01	$	0.03	$	(0.02)
Diluted		0.01		0.02		N/A		0.03		N/A

CATALYST BANCORP, INC. AND SUBSIDIARY
SELECTED FINANCIAL DATA

	Three Months Ended									Six Months Ended
*(Dollars in thousands)*	6/30/2023			3/31/2023			6/30/2022			6/30/2023			6/30/2022
EARNINGS DATA
Total interest income	$	2,322		$	2,267		$	1,965		$	4,589		$	3,876
Total interest expense		419			301			155			720			315
Net interest income		1,903			1,966			1,810			3,869			3,561
Provision for (reversal of) credit losses		-			-			(189)			-			(260)
Total non-interest income		317			294			379			611			576
Total non-interest expense		2,191			2,185			2,384			4,376			4,585
Income tax expense (benefit)		(10)			2			(21)			(8)			(62)
Net income (loss)	$	39		$	73		$	15		$	112		$	(126)

AVERAGE BALANCE SHEET DATA
Total assets	$	268,095		$	271,940		$	286,529		$	270,007		$	286,741
Total interest-earning assets		253,427			257,340			268,303			255,373			271,259
Total loans		133,394			133,781			134,058			133,586			132,542
Total interest-bearing deposits		135,147			142,500			150,582			138,803			149,210
Total interest-bearing liabilities		144,411			151,716			159,661			148,043			158,267
Total deposits		172,526			174,597			183,316			173,555			181,476
Total shareholders' equity		85,421			87,350			93,514			86,380			95,429

SELECTED RATIOS
Return on average assets		0.06	%		0.11	%		0.02	%		0.08	%		(0.09)	%
Return on average equity		0.18			0.34			0.06			0.26			(0.27)
Efficiency ratio		98.73			96.68			108.93			97.69			110.84
Net interest margin^(TE)		3.02			3.10			2.71			3.06			2.65
Average equity to average assets		31.86			32.12			32.64			31.99			33.28
Common equity Tier 1 capital ratio⁽¹⁾		56.02			56.43			58.51
Tier 1 leverage capital ratio⁽¹⁾		30.64			30.11			28.43
Total risk-based capital ratio⁽¹⁾		57.27			57.69			59.76


(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									Six Months Ended
*(Dollars in thousands)*	6/30/2023			3/31/2023			6/30/2022			6/30/2023		6/30/2022
ALLOWANCE FOR CREDIT LOSSES
Allowance for loan losses:
Beginning balance	$	2,070		$	1,807		$	2,173		$	1,807	$	2,276
CECL adoption impact		-			209			-			209		-
Provision for (reversal of) loan losses		(2)			-			(189)			(2)		(260)
Charge-offs		(10)			(7)			(38)			(17)		(101)
Recoveries		23			61			34			84		65
Net (charge-offs) recoveries		13			54			(4)			67		(36)
Ending balance	$	2,081		$	2,070		$	1,980		$	2,081	$	1,980

Allowance for unfunded commitments:
Beginning balance		216			-			-			-		-
CECL adoption impact		-			216			-			216		-
Provision for losses on unfunded commitments		2			-			-			2		-
Ending balance	$	218		$	216		$	-		$	218	$	-

Total allowance for credit losses, end of period	$	2,299		$	2,286		$	1,980		$	2,299	$	1,980
Total provision for (reversal of) credit losses		-			-			(189)			-		(260)

CREDIT QUALITY
Non-accruing loans	$	1,629		$	1,618		$	1,246
Accruing loans 90 days or more past due		260			69			41
Total non-performing loans		1,889			1,687			1,287
Foreclosed assets		296			320			320
Total non-performing assets	$	2,185		$	2,007		$	1,607

Total non-performing loans to total loans		1.42	%		1.27	%		0.96	%
Total non-performing assets to total assets		0.82			0.73			0.57