Catalyst Bancorp, Inc. Announces 2024 First Quarter Results and Approval of New Share Repurchase Plan

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May 02, 2024, 07:00 ET

OPELOUSAS, La., May 2, 2024 /PRNewswire/ -- Catalyst Bancorp, Inc. (Nasdaq: "CLST") (the "Company"), the parent company for Catalyst Bank (the "Bank") (www.catalystbank.com), reported a net loss of $4.7 million for the first quarter of 2024, which includes a $5.5 million loss on the sale of investment securities and $560,000 of data conversion and other expenses associated with the Bank's upgrade to a new core processing system.

"Our net loss resulted from two strategic moves that significantly enhance our growth prospects," said Joe Zanco. "First, we completed a full upgrade of our banking systems and now offer among the very best technology in banking. We're incredibly proud of our team for executing such a successful systems upgrade."

"Second, we repositioned our balance sheet by selling lower-yielding investment securities. The sales generated $42.6 million in cash which we plan to invest in new loans, higher-yielding investment securities, share repurchases and debt repayments," continued Zanco.

Loans

Loans totaled $143.5 million at March 31, 2024, down $1.4 million, or less than 1%, from December 31, 2023. The following table sets forth the composition of the Company's loan portfolio as of the dates indicated.


*(Dollars in thousands)*	3/31/2024		12/31/2023		Increase (Decrease)
Real estate loans
One- to four-family residential	$	81,686	$	83,623	$	(1,937)	(2)	%
Commercial real estate		21,130		21,478		(348)	(2)
Construction and land		19,369		13,857		5,512	40
Multi-family residential		3,061		3,373		(312)	(9)
Total real estate loans		125,246		122,331		2,915	2
Other loans
Commercial and industrial		15,711		19,984		(4,273)	(21)
Consumer		2,534		2,605		(71)	(3)
Total other loans		18,245		22,589		(4,344)	(19)
Total loans	$	143,491	$	144,920	$	(1,429)	(1)	%

In the first quarter of 2024, strong construction loan growth was offset primarily by net declines in our commercial and industrial and residential loan portfolios. Construction loan growth was largely driven by multi-family residential development and additional fundings on several existing construction loans.

The following table summarizes the composition of our construction and land loan balances and commitments, including the related undisbursed amounts for construction projects in process as of March 31, 2024.


*(Dollars in thousands)*	Loan Balance		Undisbursed		Total Commitment
Commercial construction and land loans
Multi-family residential	$	4,782	$	3,218	$	8,000
Retail		711		4,769		5,480
Health service facilities		2,749		2,663		5,412
Hospitality		2,716		700		3,416
Residential subdivision development		813		9		822
Commercial land		297		-		297
Other commercial construction and development		3,790		289		4,079
Total commercial construction and land	$	15,858	$	11,648	$	27,506
Consumer construction and land loans
Residential construction		2,851		1,241		4,092
Consumer land		660		-		660
Total consumer construction and land		3,511		1,241		4,752
Total construction and land	$	19,369	$	12,889	$	32,258

Based on total commitment and contractual maturity date, the weighted average term to maturity of our construction and land loan portfolio is approximately 11 months as of March 31, 2024.

Credit Quality and Allowance for Credit Losses

At March 31, 2024, non-performing assets ("NPAs") totaled $1.7 million, down $331,000, or 16.1%, compared to $2.1 million at December 31, 2023. Non-performing loans totaling $275,000 as of December 31, 2023 were paid-off or returned to accrual status during the first quarter of 2024. The ratio of NPAs to total assets was 0.61% and 0.76% at March 31, 2024 and December 31, 2023, respectively. Non-performing loans ("NPLs") comprised 1.03% of total loans at March 31, 2024, and 1.37% of total loans at December 31, 2023. At March 31, 2024 and December 31, 2023, 98% and 95% of total NPLs, respectively, were one- to four-family residential mortgage loans.

At March 31, 2024, the allowance for loan losses totaled $2.1 million, or 1.44% of total loans, compared to 1.47% of total loans at December 31, 2023. The allowance for credit losses on unfunded lending commitments totaled $310,000 and $257,000 at March 31, 2024 and December 31, 2023, respectively. The provision for credit losses, inclusive of the provision for unfunded commitments, for the first quarter of 2024 totaled $95,000 and was largely attributable to growth in total construction loan commitments.

Net loan charge-offs totaled $98,000 during the first quarter of 2024, compared to net charge-offs of $63,000 for the fourth quarter of 2023. Net loan charge-offs in both periods were primarily attributable to one- to four-family residential loans.

Investment Securities

Total investment securities were $39.0 million, or 13.8% of total assets, at March 31, 2024, down $45.0 million, or 53.6%, compared to December 31, 2023. During the first quarter of 2024, the Company sold $48.0 million of available-for-sale securities (quoted at book value) for a pre-tax loss of $5.5 million. Cash proceeds from the sale totaled $42.6 million. The Company expects to re-deploy the sales proceeds into a mix of loans, higher-yielding investment securities, share repurchases, and debt repayments.

At March 31, 2024 the amortized cost and fair value of pledged investment securities totaled $25.4 million and $21.3 million, respectively. The amortized cost and fair value of investment securities pledged as collateral for borrowings through the Bank Term Funding Program ("BTFP") totaled $21.6 million and $18.0 million, respectively at March 31, 2024. The remainder of the pledged investment securities at March 31, 2024 served as collateral for public fund deposits.

Deposits

Total deposits were $169.6 million at March 31, 2024, up $4.0 million, or 2%, from December 31, 2023. The following table sets forth the composition of the Bank's deposits as of the dates indicated. The ratio of the Company's total loans to total deposits was 85% and 88% as of March 31, 2024, and December 31, 2023, respectively.

*(Dollars in thousands)*	3/31/2024		12/31/2023		Increase (Decrease)
Non-interest-bearing demand deposits	$	28,836	$	28,183	$	653	2	%
Interest-bearing demand deposits		35,374		36,867		(1,493)	(4)
Money market		14,712		15,126		(414)	(3)
Savings		33,675		31,518		2,157	7
Certificates of deposit		57,040		53,928		3,112	6
Total deposits	$	169,637	$	165,622	$	4,015	2	%

Total public fund deposits amounted to $22.7 million, or 13% of total deposits, at March 31, 2024, compared to $23.3 million, or 14% of total deposits, at December 31, 2023. At March 31, 2024, approximately 78% of our total public fund deposits consisted of non-interest-bearing and interest-bearing demand deposits from municipalities within our market.

Our total uninsured deposits (that is deposits in excess of the FDIC's insurance limit), inclusive of public funds, were approximately $41.7 million at March 31, 2024 and $44.6 million at December 31, 2023. Total uninsured non-public funds deposits were approximately $23.9 million and $26.3 million at March 31, 2024 and December 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 and portions of a custodial letter of credit from the Federal Home Loan Bank of Dallas.

Borrowings

Total borrowings at March 31, 2024 were $29.4 million, up $10.0 million from December 31, 2023. During the first quarter of 2024, the Bank increased its borrowings from the Federal Reserve Bank of Atlanta through the BTFP. At March 31, 2024, the Bank had one $20.0 million BTFP advance outstanding with a contractual interest rate of 4.76% and a maturity date of January 15, 2025.

Capital and Share Repurchases

The Company announced that its Board of Directors approved the Company's fourth share repurchase plan (the "May 2024 Repurchase Plan"). Under the May 2024 Repurchase Plan, the Company may purchase up to 227,000 shares, or approximately 5%, of the Company's outstanding shares of common stock.

The Company repurchased 202,997 shares of its common stock at an average cost per share of $12.12 during the first quarter of 2024 under its November 2023 Repurchase Plan. At March 31, 2024, the Company had common shares outstanding of 4,558,329 and 25,329 of those shares were available for repurchase under the November 2023 Repurchase Plan. The Company completed the November 2023 Repurchase Plan in April 2024.

At March 31, 2024 and December 31, 2023, consolidated shareholders' equity totaled $81.4 million, or 28.8% of total assets, and $84.7 million, or 31.2% of total assets, respectively.

Net Interest Income

The net interest margin for the first quarter of 2024 was 3.15%, up one basis point compared to the prior quarter. For the first quarter of 2024, the average yield on interest-earning assets was 4.71%, up 54 basis points from the prior quarter, while the average rate paid on interest-bearing liabilities was 2.42%, up 69 basis points from the fourth quarter of 2023.

Net interest income for the first quarter of 2024 was $2.1 million, up $148,000, or 8%, compared to the fourth quarter of 2023. Total interest income was up $552,000, or 21%, while total interest expense increased $404,000, or 63%, in the first quarter of 2024 compared to the prior quarter. Interest expense increased largely due to an increase in the average rate paid for deposits and an increase in the volume of BTFP borrowings during the first quarter of 2024.

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
	3/31/2024						12/31/2023
*(Dollars in thousands)*	Average Balance		Interest		Average Yield/ Rate		Average Balance		Interest		Average Yield/ Rate
INTEREST-EARNING ASSETS
Loans receivable⁽¹⁾	$	144,428	$	2,214	6.17	%	$	140,757	$	2,066	5.82	%
Investment securities^(TE)(2)		76,432		325	1.72			96,640		400	1.67
Other interest earning assets		48,779		616	5.08			11,276		137	4.83
Total interest-earning assets^(TE)	$	269,639	$	3,155	4.71	%	$	248,673	$	2,603	4.17	%
INTEREST-BEARING LIABILITIES
Demand deposits, money market, and savings accounts	$	89,109	$	317	1.43	%	$	82,474	$	185	0.89	%
Certificates of deposit		57,092		437	3.08			51,707		344	2.64
Total interest-bearing deposits		146,201		754	2.07			134,181		529	1.56
Borrowings		27,991		293	4.21			13,016		114	3.50
Total interest-bearing liabilities	$	174,192	$	1,047	2.42	%	$	147,197	$	643	1.73	%
Net interest-earning assets	$	95,447					$	101,476
Net interest income; average interest rate spread^(TE)			$	2,108	2.29	%			$	1,960	2.44	%
Net interest margin^(TE)(3)					3.15	%					3.14	%

(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

For the first quarter of 2024, non-interest income was down $5.8 million compared to $672,000 for the fourth quarter of 2023. Non-interest income for the first quarter of 2024 includes the $5.5 million loss on the sale of investment securities discussed previously.

Non-interest Expense

Non-interest expense for the first quarter of 2024 totaled $2.8 million, up $669,000, or 32%, compared to the fourth quarter of 2023. During the first quarter of 2024, the Company upgraded to a new core processing system and incurred $560,000 of data conversion and other associated expenses. Most of these costs are included in data processing and communication expense. The Company estimates annual savings of greater than $200,000 due to the change in our core processing system.

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 $282.0 million in assets at March 31, 2024. 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, 2023, 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)*	3/31/2024		12/31/2023		3/31/2023
ASSETS
Non-interest-bearing cash	$	3,118	$	3,654	$	3,531
Interest-bearing cash and due from banks		72,893		15,357		23,996
Total cash and cash equivalents		76,011		19,011		27,527
Investment securities:
Securities available-for-sale, at fair value		25,534		70,540		78,937
Securities held-to-maturity		13,457		13,461		13,471
Loans receivable, net of unearned income		143,491		144,920		132,690
Allowance for loan losses		(2,068)		(2,124)		(2,070)
Loans receivable, net		141,423		142,796		130,620
Accrued interest receivable		733		906		675
Foreclosed assets		237		60		320
Premises and equipment, net		5,995		6,072		6,202
Stock in correspondent banks, at cost		1,898		1,878		1,823
Bank-owned life insurance		14,139		14,026		13,714
Other assets		2,622		2,182		2,577
TOTAL ASSETS	$	282,049	$	270,932	$	275,866

LIABILITIES
Deposits:
Non-interest-bearing	$	28,836	$	28,183	$	35,483
Interest-bearing		140,801		137,439		144,229
Total deposits		169,637		165,622		179,712
Borrowings		29,423		19,378		9,243
Other liabilities		1,628		1,277		747
TOTAL LIABILITIES		200,688		186,277		189,702

SHAREHOLDERS' EQUITY
Common stock		46		48		51
Additional paid-in capital		42,711		45,020		48,259
Unallocated common stock held by benefit plans		(6,169)		(6,221)		(6,664)
Retained earnings		48,368		53,045		52,516
Accumulated other comprehensive income (loss)		(3,595)		(7,237)		(7,998)
TOTAL SHAREHOLDERS' EQUITY		81,361		84,655		86,164
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	282,049	$	270,932	$	275,866

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

	Three Months Ended
*(Dollars in thousands)*	3/31/2024		12/31/2023		3/31/2023
INTEREST INCOME
Loans receivable, including fees	$	2,214	$	2,066	$	1,629
Investment securities		325		400		427
Other		616		137		211
Total interest income		3,155		2,603		2,267
INTEREST EXPENSE
Deposits		754		529		233
Borrowings		293		114		68
Total interest expense		1,047		643		301
Net interest income		2,108		1,960		1,966
Provision for credit losses		95		128		-
Net interest income after provision for credit losses		2,013		1,832		1,966
NON-INTEREST INCOME
Service charges on deposit accounts		197		201		183
Bank-owned life insurance		113		109		97
Loss on sales of investment securities		(5,507)		(92)		-
Gain (loss) on disposals and sales of fixed assets		11		-		-
Federal community development grant		-		437		-
Other		23		17		14
Total non-interest income (loss)		(5,163)		672		294
NON-INTEREST EXPENSE
Salaries and employee benefits		1,260		1,149		1,203
Occupancy and equipment		196		193		213
Data processing and communication		794		236		227
Professional fees		107		140		129
Directors' fees		115		118		115
ATM and debit card		69		63		58
Foreclosed assets, net		8		5		2
Advertising and marketing		38		23		30
Franchise and shares tax		16		10		27
Other		188		185		181
Total non-interest expense		2,791		2,122		2,185
Income before income tax expense (benefit)		(5,941)		382		75
Income tax expense (benefit)		(1,264)		62		2
NET INCOME (LOSS)	$	(4,677)	$	320	$	73

Earnings (loss) per share:
Basic	$	(1.14)	$	0.08	$	0.02
Diluted		(1.14)		0.08		0.02

CATALYST BANCORP, INC. AND SUBSIDIARY
SELECTED FINANCIAL DATA

	Three Months Ended
*(Dollars in thousands)*	3/31/2024			12/31/2023			3/31/2023
EARNINGS DATA
Total interest income	$	3,155		$	2,603		$	2,267
Total interest expense		1,047			643			301
Net interest income		2,108			1,960			1,966
Provision for credit losses		95			128			-
Total non-interest income (loss)		(5,163)			672			294
Total non-interest expense		2,791			2,122			2,185
Income tax expense (benefit)		(1,264)			62			2
Net income (loss)	$	(4,677)		$	320		$	73

AVERAGE BALANCE SHEET DATA
Total loans	$	144,428		$	140,757		$	133,781
Total interest-earning assets		269,639			248,673			257,340
Total assets		286,431			261,657			271,976
Total interest-bearing deposits		146,201			134,181			142,500
Total interest-bearing liabilities		174,192			147,197			151,716
Total deposits		174,656			165,102			174,597
Total shareholders' equity		82,395			82,227			87,388

SELECTED RATIOS
Return on average assets		(6.57)	%		0.49	%		0.11	%
Return on average equity		(22.83)			1.54			0.34
Efficiency ratio		(91.37)			80.61			96.68
Net interest margin^(TE)		3.15			3.14			3.10
Average equity to average assets		28.77			31.43			32.13
Common equity Tier 1 capital ratio		52.09			52.34			56.43
Tier 1 leverage capital ratio		26.84			31.67			30.11
Total risk-based capital ratio		53.34			53.60			57.69

NON-FINANCIAL DATA
Total employees (full-time equivalent)		47			48			51
Common shares issued and outstanding, end of period		4,558,329			4,761,326			5,058,612

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

	Three Months Ended
*(Dollars in thousands)*	3/31/2024			12/31/2023			3/31/2023
ALLOWANCE FOR CREDIT LOSSES
Allowance for loan losses:
Beginning balance	$	2,124		$	2,036		$	1,807
CECL adoption impact		-			-			209
Provision for loan losses		42			151			-
Charge-offs		(123)			(76)			(7)
Recoveries		25			13			61
Net (charge-offs) recoveries		(98)			(63)			54
Ending balance	$	2,068		$	2,124		$	2,070

Allowance for unfunded commitments:
Beginning balance		257			280			-
CECL adoption impact		-			-			216
Provision for (reversal of) losses on unfunded commitments		53			(23)			-
Ending balance	$	310		$	257		$	216

Total allowance for credit losses, end of period	$	2,378		$	2,381		$	2,286
Total provision for credit losses		95			128			-

CREDIT QUALITY⁽¹⁾
Non-accruing loans	$	1,453		$	1,967		$	1,618
Accruing loans 90 days or more past due		29			24			69
Total non-performing loans		1,482			1,991			1,687
Foreclosed assets		237			60			320
Total non-performing assets	$	1,719		$	2,051		$	2,007

Total non-performing loans to total loans		1.03	%		1.37	%		1.27	%
Total non-performing assets to total assets		0.61			0.76			0.73