8-K: Catalyst Bancorp Reports Q3 Net Income Dip to $489K

Catalyst Bancorp, Inc. announced third quarter 2025 net income of $489,000, a decrease from the prior quarter, alongside a 2% decline in total loans and a 2% increase in deposits.

Summary

• Net income for Q3 2025 was $489,000, a decrease from $521,000 in Q2 2025.
• Total loans decreased by $2.8 million, or 2%, to $164.8 million at September 30, 2025, compared to June 30, 2025.
• Total deposits increased by $4.2 million, or 2%, to $186.4 million at September 30, 2025, driven by high-yield account specials.
• Net interest margin declined by ten basis points to 3.88% in Q3 2025 from 3.98% in Q2 2025.
• Non-performing assets increased to $1.9 million, or 0.67% of total assets, at September 30, 2025, from $1.8 million, or 0.64%, at June 30, 2025.
• The company repurchased 13,212 shares of common stock at an average cost per share of $12.93 during Q3 2025.

Sentiment

Score: 4

Explanation: Net income and net interest margin declined, and loan growth was negative. However, deposit growth was positive, credit quality metrics remained relatively stable with a reversal of provision, and share repurchases continued, indicating management's confidence and capital strength. The increase in NPAs and NPLs, though slight, warrants attention.

Positives

• Total deposits increased by $4.2 million (2%) to $186.4 million, primarily due to successful high-yield account specials.
• Growth observed in the health and oilfield services segments of the loan portfolio, partially offsetting overall loan declines.
• Net loan charge-offs significantly decreased to $2,000 in Q3 2025 from $42,000 in Q2 2025.
• A reversal of provision for credit losses of $36,000 was recorded in Q3 2025, largely due to a reduction in expected credit losses on individually evaluated loans and a decline in total loans.
• Investment securities increased by $15.6 million (35%) to $59.8 million, with new purchases yielding a weighted average of 5.17%.
• The company continues its share repurchase program, having bought back 1,160,396 shares (approximately 22% of original shares) since January 26, 2023.

Negatives

• Net income decreased to $489,000 in Q3 2025 from $521,000 in Q2 2025.
• Total loans decreased by $2.8 million (2%) to $164.8 million, with significant pay-offs including a $4.6 million construction loan.
• Net interest margin declined by ten basis points to 3.88% in Q3 2025, primarily due to an 11 basis point increase in the average rate paid on interest-bearing liabilities.
• Non-interest income decreased by $29,000 (8%) to $315,000, mainly due to refunds for foreign ATM fees applied in error.
• Non-performing assets increased to $1.9 million (0.67% of total assets) at September 30, 2025, from $1.8 million (0.64%) at June 30, 2025.
• Non-interest-bearing demand deposits decreased by $3.538 million (11%).

Risks

• The company's actual results and experience could differ materially from forward-looking statements due to various risk factors and uncertainties described in its Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and other SEC filings.
• Slow loan growth has been observed, which could impact future interest income and overall profitability.
• A commercial and industrial relationship was downgraded to substandard during Q1 2025, totaling $2.1 million as of September 30, 2025, despite being current and performing, indicating potential credit quality concerns.

Future Outlook

Management expects increased economic activity in the coming quarters to spur loan growth opportunities. The company also anticipates continued success in attracting new deposit customers.

Management Comments

• "Our team has done a good job attracting new deposit customers in 2025."
• "While loan growth has been slow, we are beginning to see signs of increased economic activity, which we expect will spur loan growth opportunities in the coming quarters."

Industry Context

The banking industry is currently navigating a complex environment with competitive pressures for deposits, as evidenced by Catalyst Bancorp's use of high-yield account specials to attract new customers. Slow loan growth, as noted by management, is a common challenge for many regional banks amidst economic uncertainties, while targeted growth in specific sectors like health and oilfield services indicates strategic focus. The decline in net interest margin reflects the broader trend of rising funding costs impacting bank profitability.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or results to assess against global benchmarks.
• The reported capital ratios (Common Equity Tier 1 at 43.95%, Tier 1 Leverage at 27.58%, Total Risk-Based at 45.20%) appear significantly above typical regulatory minimums for banks, suggesting a strong capital position relative to the broader industry.

Stakeholder Impact

• Shareholders are impacted by decreased net income and a declining net interest margin, potentially affecting profitability and future dividends. Share repurchases continue to return capital to shareholders and reduce share count.
• Customers (Depositors) benefited from high-yield account specials, attracting new deposits and deepening relationships.
• Customers (Borrowers) experienced slow loan growth, indicating potentially tighter lending conditions or reduced demand.
• Employees saw an increase in salaries and employee benefits due to new share-based compensation grants and payroll tax expenses for vesting awards.

Next Steps

• Monitor for signs of increased economic activity to spur loan growth, as anticipated by management.
• Continue efforts to attract new deposit customers and deepen existing relationships.
• Manage the classified commercial and industrial relationship to ensure continued performance.

Key Dates

Recommendation

While Catalyst Bancorp reported a decline in net income and net interest margin, along with negative loan growth, there are mitigating factors. The company successfully grew deposits through competitive offerings and maintained a strong capital position. The decrease in net charge-offs and a reversal of credit loss provision are positive signs for asset quality. However, the increase in non-performing assets and the overall slowdown in loan origination warrant caution. The stock is likely to experience some downward pressure due to the weaker headline numbers, but the underlying efforts in deposit gathering and capital management suggest a 'hold' recommendation for investors awaiting clearer signs of loan growth and margin stabilization.

Keywords

Catalyst Bancorp, CLST, Bank, Financial Results, Q3 2025, Net Income, Loans, Deposits, Net Interest Margin, Non-performing Assets, Share Repurchase, Banking Industry, Louisiana, Community Bank