UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended | |
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to |
Commission file number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation | (I.R.S. Employer Identification No.) |
(Address of principal executive offices; Zip Code)
(
(Registrant’s telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 and 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
There were
CATALYST BANCORP, INC.
FORM 10-Q
TABLE OF CONTENTS
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Management's Discussion and Analysis of Financial Condition and Results of Operations | 29 | ||
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i
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CATALYST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
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June 30, | December 31, | |||||
(Dollars in thousands) | 2024 | 2023 | ||||
ASSETS |
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Non-interest-bearing cash | $ | | $ | | ||
Interest-bearing cash and due from banks |
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Total cash and cash equivalents |
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Investment securities: |
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Securities available-for-sale, at fair value (amortized cost of $ |
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Securities held-to-maturity (fair values of $ |
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Loans receivable, net of unearned income |
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Allowance for loan losses |
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Loans receivable, net |
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Accrued interest receivable |
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Foreclosed assets |
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Premises and equipment, net |
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Stock in correspondent banks, at cost |
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Bank-owned life insurance |
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Other assets |
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TOTAL ASSETS | $ | | $ | | ||
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LIABILITIES |
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Deposits |
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Non-interest-bearing | $ | | $ | | ||
Interest-bearing |
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Total deposits |
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Borrowings |
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Other liabilities |
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TOTAL LIABILITIES |
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SHAREHOLDERS' EQUITY |
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Preferred stock, $ | ||||||
Common stock, $ | | | ||||
Additional paid-in capital | | | ||||
Unallocated common stock held by benefit plans | ( | ( | ||||
Retained earnings |
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Accumulated other comprehensive income (loss) |
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TOTAL SHAREHOLDERS' EQUITY |
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | | $ | |
The accompanying Notes are an integral part of these financial statements.
2
CATALYST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
(Dollars in thousands) | 2024 | 2023 | 2024 | 2023 | ||||||||
INTEREST INCOME |
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Loans receivable, including fees | $ | | $ | | $ | | $ | | ||||
Investment securities |
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Other |
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Total interest income |
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INTEREST EXPENSE |
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Deposits |
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Borrowings |
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Total interest expense |
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Net interest income |
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Provision for credit losses |
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Net interest income after provision for credit losses |
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NON-INTEREST INCOME |
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Service charges on deposit accounts |
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Bank-owned life insurance |
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Gain (loss) on sales of investment securities |
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Gain (loss) on disposals and sales of fixed assets |
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Other |
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Total non-interest income (loss) |
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NON-INTEREST EXPENSE |
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Salaries and employee benefits |
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Occupancy and equipment |
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Data processing and communication |
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Professional fees |
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Directors’ fees |
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ATM and debit card |
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Foreclosed assets, net |
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Advertising and marketing |
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Franchise and shares tax | | | | | ||||||||
Regulatory fees and assessments | | | | | ||||||||
Insurance | | | | | ||||||||
Printing, supplies and postage | | | | | ||||||||
Other |
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Total non-interest expense |
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Income (loss) before income tax expense (benefit) |
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Income tax expense (benefit) |
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NET INCOME (LOSS) | $ | | $ | | $ | ( | $ | | ||||
Earnings (loss) per share - basic | $ | | $ | - | $ | ( | $ | | ||||
Earnings (loss) per share - diluted | | - | ( | |
The accompanying Notes are an integral part of these financial statements.
3
CATALYST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
(Dollars in thousands) | 2024 |
| 2023 | 2024 |
| 2023 | ||||||
Net income (loss) | $ | | $ | | $ | ( | $ | | ||||
Net change in unrealized gains (losses) on available-for-sale securities |
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Reclassification adjustment for losses included in net income | - | - | | - | ||||||||
Income tax effect |
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Total other comprehensive income (loss) |
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Total comprehensive income (loss) | $ | | $ | ( | $ | ( | $ | |
The accompanying Notes are an integral part of these financial statements.
4
CATALYST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
(Dollars in thousands) | Common Stock | Additional Paid-in Capital | Unallocated Common Stock Held by Benefit Plans | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total | ||||||||||||
BALANCE, MARCH 31, 2023 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | ||||||
Net income |
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Other comprehensive income (loss) |
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Excise tax on stock purchased to fund the 2022 Recognition and Retention Plan |
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ESOP shares released for allocation |
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Stock compensation expense |
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Repurchase of common stock |
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BALANCE, JUNE 30, 2023 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | ||||||
BALANCE, MARCH 31, 2024 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | ||||||
Net income |
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Other comprehensive income (loss) |
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ESOP shares released for allocation |
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Stock compensation expense |
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Repurchase of common stock |
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BALANCE, JUNE 30, 2024 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | ||||||
BALANCE, DECEMBER 31, 2022 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | ||||||
Impact of adoption of ASC 326 |
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Net income |
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Other comprehensive income |
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Stock purchased to fund the 2022 Recognition and Retention Plan | - | - | ( | - | - | ( | ||||||||||||
ESOP shares released for allocation |
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Stock compensation expense |
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Repurchase of common stock |
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BALANCE, JUNE 30, 2023 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | ||||||
BALANCE, DECEMBER 31, 2023 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | ||||||
Net income (loss) |
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Other comprehensive income |
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ESOP shares released for allocation |
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Stock compensation expense |
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Repurchase of common stock |
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BALANCE, JUNE 30, 2024 | $ | | $ | | $ | ( | $ | | $ | ( | $ | |
The accompanying Notes are an integral part of these financial statements.
5
CATALYST BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30, | ||||||
(Dollars in thousands) | 2024 |
| 2023 | |||
CASH FLOWS FROM OPERATING ACTIVITIES |
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Net income (loss) | $ | ( | $ | | ||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
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Investment securities amortization, net |
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Federal Home Loan Bank stock dividends |
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Amortization of prepayment penalties on debt restructuring | | | ||||
Provision for credit losses |
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Increase in cash surrender value of bank-owned life insurance | ( | ( | ||||
Loss on sales of investment securities |
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Gain on disposals and sales of premises and equipment |
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Stock-based compensation | | | ||||
Depreciation of premises and equipment |
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Net write-downs and losses on the sale of foreclosed assets |
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Deferred income tax expense (benefit) |
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(Increase) decrease in other assets |
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Increase (decrease) in other liabilities |
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Net cash provided by operating activities |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Activity in available-for-sale securities: |
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Proceeds from maturities, calls, and paydowns |
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Proceeds from sales | | - | ||||
Purchases |
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Net (increase) decrease in loans |
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Proceeds from sale of foreclosed assets |
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Purchases of premises and equipment |
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Proceeds from sale of premises and equipment |
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Net cash provided by investing activities |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Net increase in deposits |
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Net advances from the Federal Home Loan Bank of Dallas | | - | ||||
Net advances from the Federal Reserve Bank of Atlanta | | - | ||||
Purchase of stock to fund the 2022 Recognition and Retention Plan | - | ( | ||||
Repurchase of common stock | ( | ( | ||||
Net cash provided by financing activities |
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NET CHANGE IN CASH AND CASH EQUIVALENTS |
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CASH AND CASH EQUIVALENTS, beginning of period |
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CASH AND CASH EQUIVALENTS, end of period | $ | | $ | | ||
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES |
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Acquisition of real estate in settlement of loans | $ | | $ | | ||
SUPPLEMENTAL SCHEDULE OF INTEREST AND TAXES PAID |
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Cash paid for interest | $ | | $ | | ||
Cash paid for income taxes | | - |
The accompanying Notes are an integral part of these financial statements.
6
CATALYST BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
Catalyst Bancorp, Inc. (“Catalyst Bancorp” or the “Company”) is the holding company for Catalyst Bank (the “Bank”), formerly known as St. Landry Homestead Federal Savings Bank. The Bank has been in operation in the Acadiana region of south-central Louisiana since 1922 and offers commercial and retail banking products through
The Company was incorporated by the Bank in February 2021 as part of the conversion of the Bank from the mutual to the stock form of organization (the “Conversion”). The Conversion was completed on October 12, 2021, at which time the Company acquired all of the issued and outstanding shares of common stock of the Bank and became the holding company for the Bank. Shares of the Company’s common stock were issued and sold in an offering to certain depositors of the Bank and others. The Company was not engaged in operations and had not issued any shares of stock prior to the completion of the Conversion.
As used in this report, unless the context otherwise requires, the terms “we,” “our,” “us,” or the “Company” refer to Catalyst Bancorp, and the term the “Bank” refers to Catalyst Bank, the wholly owned subsidiary of the Company. In addition, unless the context otherwise requires, references to the operations of the Company include the operations of the Bank.
The accompanying unaudited consolidated financial statements of the Company were prepared in accordance with instructions for Form 10-Q and Regulation S-X and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, comprehensive income, changes in equity and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements have been included. The results of operations for the three and six months ended June 30, 2024 and 2023 are not necessarily indicative of the results which may be expected for the entire fiscal year. These statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2023.
Certain amounts reported in prior periods may have been reclassified to conform to the current period presentation. Such reclassifications had no effect on previously reported equity or net income.
Revision of Prior Period Financial Statements
During the three months ended June 30, 2024, it was discovered that the rate of interest paid on one interest-bearing checking account did not reconcile with the contract with the customer. The checking account is a public fund deposit with a negotiated arrangement managed by a lead financial institution that billed the Bank periodically for interest then owed to the municipality. The Bank is a party to the agreement with the municipality but participated in only a portion of the total funds deposited by the municipality and did not deal directly with the municipality with respect to the funds deposited or the interest paid. These responsibilities are handled indirectly through the lead institution. During June of 2024, the Bank became aware of the additional interest owed by it pursuant to the agreement. As a result of the error, $
7
The following highlights the primary changes to prior period financial statements presented in this Form 10-Q caused by the correction of the misstated interest expense:
(Dollars in thousands) | As Reported | Adjustment | As Revised | ||||||
Revised Consolidated Statements of Condition as of December 31, 2023 | |||||||||
Other liabilities | $ | | $ | | $ | | |||
Retained earnings | | ( | | ||||||
Total shareholders' equity | | ( | | ||||||
Revised Consolidated Statements of Income for the Three Months Ended June 30, 2023 | |||||||||
Interest expense - Deposits | $ | | $ | | $ | | |||
Total interest expense | | | | ||||||
Net interest income | | ( | | ||||||
Income tax expense (benefit) | ( | ( | ( | ||||||
Net income (loss) | | ( | | ||||||
Revised Consolidated Statements of Income for the Six Months Ended June 30, 2023 | |||||||||
Interest expense - Deposits | $ | | $ | | $ | | |||
Total interest expense | | | | ||||||
Net interest income | | ( | | ||||||
Income tax expense (benefit) | ( | ( | ( | ||||||
Net income (loss) | | ( | | ||||||
Revised Consolidated Statements of Changes in Shareholders' Equity | |||||||||
Retained earnings, as of December 31, 2022 | $ | | $ | ( | $ | | |||
Retained earnings, as of March 31, 2023 | | ( | | ||||||
Retained earnings, as of June 30, 2023 | | ( | | ||||||
Retained earnings, as of March 31, 2024 | | ( | | ||||||
Revised Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 | |||||||||
Increase (decrease) in other liabilities | $ | | $ | | $ | |
Management performed a review of all similar contracts with deposit customers and verified that the error was isolated to this unique deposit account. Management and the Audit Committee also assessed the error’s impact on internal controls over financial reporting and did not identify any material weaknesses. For further information on Management’s evaluation of the Company’s internal controls, see Item 4 of this Quarterly Report on Form 10-Q.
Critical Accounting Policies and Estimates
Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties and could reflect materially different results under different assumptions and conditions. Methodologies the Company uses when applying critical accounting policies and developing critical estimates are included in its Annual Report on Form 10-K for the year ended December 31, 2023. Our accounting policies for allowance for credit losses, investment securities, and income taxes comprise those that management believes involve the most critical estimates and aid in fully understanding and evaluating our reported financial results.
During the three months ended March 31, 2024, the measurement of the Company’s deferred income tax assets and liabilities was identified as a critical accounting estimate. Deferred income tax assets and liabilities are determined based on the tax effects of the temporary differences between the book and tax bases of the various assets and liabilities and gives current recognition to changes in tax rates and laws. At June 30, 2024, the Company’s net deferred tax asset totaled $
8
measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized. At June 30, 2024, the Company has not recorded a valuation allowance for its deferred tax assets. Realizing our deferred tax assets principally depends upon our achieving projected future taxable income. We may change our judgments regarding future profitability due to future market conditions and other factors. We may adjust our deferred tax asset balances if our judgments change, which may impact total income tax expense in future periods.
There were no other material changes from the significant accounting policies or critical accounting estimates previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. In preparing the financial statements, the Company is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the Company’s financial condition, results of operations, comprehensive income, changes in equity and cash flows for the interim periods presented. These adjustments are of a normal recurring nature and include appropriate estimated provisions.
NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS
Accounting Standards Updates Issued, but Not Adopted
ASU No. 2023-09. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this ASU add specific requirements for income tax disclosures to improve transparency and decision usefulness. The guidance in ASU 2023-09 requires that public business entities disclose specific categories in the income tax rate reconciliation and provide additional qualitative information for reconciling items that meet a quantitative threshold. In addition, the amendments in ASU 2023-09 require that all entities disclose the amount of income taxes paid disaggregated by federal, state, and foreign taxes and disaggregated by individual jurisdictions. The ASU also includes other disclosure amendments related to the disaggregation of income tax expense between federal, state and foreign taxes. The Company expects to adopt the amendments in ASU 2023-09 for periods beginning after December 31, 2024.
9
NOTE 3. EARNINGS (LOSS) PER SHARE
Earnings (loss) per common share was computed based on the following:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
(In thousands, except per share data) | 2024 |
| 2023 | 2024 |
| 2023 | ||||||
Numerator |
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Net income (loss) available to common shareholders | $ | | $ | | $ | ( | $ | | ||||
Denominator |
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Weighted average common shares outstanding |
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Weighted average unallocated common stock held by benefit plans | ( | ( | ( | ( | ||||||||
Weighted average shares - basic | | | | | ||||||||
Effect of dilutive stock-based awards: | ||||||||||||
Stock options | - | - | - | - | ||||||||
Restricted stock | | - | - | - |