Catalyst Bancorp, Inc. (NASDAQ: CLST) is a Louisiana-based bank holding company that has been serving the Acadiana region since 1922. The company's wholly-owned subsidiary, Catalyst Bank, operates six full-service branches in south-central Louisiana, offering a range of commercial and retail banking products and services.

Financials

Catalyst Bancorp's recent financial performance has been marked by both challenges and opportunities. For the fiscal year ended December 31, 2023, the company reported annual net income of $602,000, annual revenue of $10,741,000, annual operating cash flow of $2,008,000, and annual free cash flow of $1,836,000.

In the first quarter of 2024, Catalyst Bancorp reported a net loss of $4.7 million, compared to net income of $73,000 in the same period of 2023. This decline was primarily driven by a $5.5 million loss on the sale of investment securities. Net interest income, however, increased by $142,000, or 7.2%, to $2.1 million, reflecting the company's efforts to optimize its interest-earning assets and liabilities.

The company's loan portfolio stood at $143.5 million as of March 31, 2024, down 1.0% from the end of 2023. This decrease was largely due to net declines in the commercial and industrial and residential loan segments, which were partially offset by strong growth in construction loans. The allowance for loan losses as a percentage of total loans was 1.44% at the end of the first quarter of 2024, compared to 1.47% at the end of 2023.

Catalyst Bancorp's investment securities portfolio totaled $39.0 million as of March 31, 2024, down significantly from $84.0 million at the end of 2023. This reduction was primarily due to the sale of $42.6 million in available-for-sale securities, which resulted in a $5.5 million pre-tax loss. The company's focus on optimizing its balance sheet and liquidity position led to these strategic investment sales.

Deposits grew by $4.0 million, or 2.4%, to $169.6 million during the first quarter of 2024. The company's loan-to-deposit ratio improved to 84.6% at the end of the quarter, compared to 87.5% at the end of 2023. Catalyst Bancorp's total borrowings increased by $10.0 million, or 51.8%, to $29.4 million, primarily due to additional advances from the Federal Reserve Bank of Atlanta through the Bank Term Funding Program.

Shareholders' equity declined by $3.3 million, or 3.9%, to $81.4 million at the end of the first quarter of 2024, largely due to the company's repurchase of 202,997 shares of its common stock at an average cost of $12.12 per share. Catalyst Bancorp's capital ratios remained well above regulatory requirements, with a Common Equity Tier 1 Capital ratio of 52.09% and a Total Risk-Based Capital ratio of 53.34% as of March 31, 2024.

The company's non-performing assets, which include non-accruing loans and foreclosed assets, decreased by $332,000, or 16.2%, to $1.7 million at the end of the first quarter of 2024. This improvement was primarily driven by the resolution of $275,000 in non-performing loans during the quarter.

Business Overview

Catalyst Bancorp's geographic footprint is concentrated in the Acadiana region of south-central Louisiana, with its six full-service branches serving customers in St. Landry Parish and the surrounding areas. The company's business model is focused on serving the banking needs of small- to mid-sized businesses and business professionals in its local market.

In terms of revenue breakdowns, the company's interest income is primarily generated from its loan portfolio, which accounted for 70.2% of total interest income in the first quarter of 2024. Investment securities contributed 10.3% of total interest income, while other interest-earning assets, such as cash and deposits at other financial institutions, made up the remaining 19.5%.

The company's non-interest income, which represented 30.8% of total revenue in the first quarter of 2024, was negatively impacted by the $5.5 million loss on the sale of investment securities. Excluding this one-time event, the company's non-interest income would have been $342,000, or 10.8% of total revenue.

Recent Developments

Catalyst Bancorp's management team has been actively navigating the evolving banking landscape, as evidenced by the company's strategic initiatives. In 2021, the bank transitioned from a traditional thrift model to a more dynamic, relationship-based community bank, targeting small- to mid-sized businesses and business professionals in its market area. This shift has been a key focus for the company as it seeks to diversify its revenue streams and enhance profitability.

Outlook

Looking ahead, Catalyst Bancorp's management has not provided specific financial guidance for the remainder of 2024. However, the company has highlighted its ongoing efforts to optimize its balance sheet, improve operational efficiency, and capitalize on growth opportunities within its local market. The successful execution of these initiatives will be crucial in determining the company's future performance and its ability to navigate the challenges and opportunities that lie ahead in the banking industry.

Conclusion

Catalyst Bancorp is a community-oriented bank that is navigating the evolving banking landscape with a focus on serving the needs of its local market. While the company's recent financial results have been impacted by one-time events, such as the loss on the sale of investment securities, Catalyst Bancorp's management team is actively working to position the company for long-term success. Investors will want to closely monitor the company's progress in executing its strategic initiatives and its ability to generate sustainable growth and profitability in the quarters and years ahead.