Catalyst Bancorp(CLST) - 2021 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION This section provides the unaudited financial statements, management's analysis of financial condition and operations, market risk disclosures, and internal controls for St. Landry Homestead Federal Savings Bank Financial Statements (Unaudited) This section presents the unaudited financial statements of St. Landry Homestead Federal Savings Bank, showing asset growth to $238.6 million, stable net income, and the bank's well-capitalized status amid its conversion plan - Catalyst Bancorp, Inc., the holding company, had no assets or liabilities as of June 30, 2021, with all financial statements pertaining solely to the Bank[8] Statements of Financial Condition Total assets increased to $238.6 million by June 30, 2021, driven by a rise in available-for-sale securities and cash, while net loans decreased and deposits grew Statement of Financial Condition Highlights (in thousands) | Account | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Assets | $238,640 | $224,688 | | Total cash and cash equivalents | $29,087 | $25,245 | | Securities available-for-sale, at fair value | $41,856 | $20,730 | | Loans receivable, net | $137,950 | $148,778 | | Total Liabilities | $187,908 | $174,155 | | Total deposits | $177,888 | $164,598 | | Total Equity | $50,732 | $50,533 | Statements of Income Net income remained $260,000 for Q2 2021 and slightly decreased to $411,000 for H1 2021, largely influenced by a $286,000 reversal of loan loss provision Income Statement Summary (in thousands) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $1,639 | $1,705 | $3,323 | $3,425 | | (Reversal of) Provision for loan loss | ($286) | — | ($286) | $65 | | Total non-interest income | $364 | $168 | $587 | $357 | | Total non-interest expense | $1,967 | $1,524 | $3,692 | $3,163 | | Net Income | $260 | $260 | $411 | $415 | Statements of Cash Flows Net cash from operations significantly decreased to $459,000 for H1 2021, while investing activities used $9.9 million and financing provided $13.3 million, resulting in a $3.8 million increase in cash Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $459 | $1,661 | | Net cash used in investing activities | ($9,907) | ($5,233) | | Net cash provided by financing activities | $13,290 | $18,719 | | Net Increase in Cash and Cash Equivalents | $3,842 | $15,147 | Notes to Unaudited Financial Statements Notes detail accounting policies, the $57.4 million investment portfolio, $140.6 million loan portfolio, the Bank's well-capitalized status with a 21.34% Tier 1 Leverage Ratio, and conversion plan details - The Bank has opted to delay the implementation of the new CECL accounting standard until January 2023[36] - The Bank's Board adopted a plan of conversion to a stock-form savings bank structure with Catalyst Bancorp, Inc., incurring $498,000 in deferred conversion costs by June 30, 2021[103][104] Loan Portfolio Composition (in thousands) | Loan Type | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | One- to four-family residential | $91,778 | $99,869 | | Commercial real estate | $28,217 | $30,304 | | Construction & land | $4,527 | $5,538 | | Commercial and industrial | $7,039 | $6,736 | | Other | $4,738 | $4,552 | | Total Loans | $140,599 | $151,800 | Capital Ratios as of June 30, 2021 | Ratio | Bank's Ratio | Well-Capitalized Requirement | | :--- | :--- | :--- | | Common Equity Tier 1 Capital | 41.81% | >6.5% | | Tier 1 Risk-Based Capital | 41.81% | >8.0% | | Total Risk-Based Capital | 43.07% | >10.0% | | Tier 1 Leverage Capital | 21.34% | >5.0% | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the Bank's strategic shift, 6.2% asset growth to $238.6 million, $411,000 net income for H1 2021, and a decrease in non-performing assets to 0.83% of total assets - The Bank is strategically re-focusing from a traditional thrift model to a relationship-based community bank model[119] - The Bank funded 240 SBA PPP loans totaling approximately $8.5 million and modified 199 loans with $28.0 million in principal balances due to COVID-19[127] - The Bank expects to recognize a $1.8 million grant from the U.S. Treasury's CDFI Rapid Response Program as non-interest income over the next 2.5 years[158] Comparison of Financial Condition at June 30, 2021 and December 31, 2020 Total assets grew 6.2% to $238.6 million, driven by a 50.0% increase in investment securities, an 8.1% rise in deposits, and a 7.3% decrease in net loans - Total assets increased by $14.0 million, or 6.2%, reaching $238.6 million by June 30, 2021[130] - Net loans receivable decreased by $10.8 million (7.3%) to $138.0 million, while total investment securities increased by $19.1 million (50.0%) to $57.4 million[132][133] - Total deposits increased by $13.3 million, or 8.1%, to $177.9 million, boosted by SBA PPP loan proceeds and government stimulus[134] Non-performing Assets Total non-performing assets decreased to $2.0 million, representing 0.83% of total assets, while non-performing loans also declined to $1.4 million or 0.99% of total loans Non-performing Assets (in thousands) | Metric | At June 30, 2021 | At December 31, 2020 | | :--- | :--- | :--- | | Total non-performing loans | $1,395 | $1,672 | | Real estate owned | $590 | $415 | | Total non-performing assets | $1,985 | $2,087 | | Total non-performing assets as a percentage of total assets | 0.83% | 0.93% | Comparison of Results of Operations Net income for H1 2021 was $411,000, slightly down from 2020, as a 3.0% decrease in net interest income and 16.7% rise in non-interest expense were largely offset by a $286,000 loan loss provision reversal and 64.4% increase in non-interest income - Net income for Q2 2021 remained flat at $260,000, with a $286,000 reversal to the allowance for loan losses offsetting lower net interest income and higher non-interest expenses[141] - Net income for H1 2021 was $411,000, a slight decrease from H1 2020, primarily due to lower net interest income and higher non-interest expense, mitigated by a loan loss provision reversal[162] - Net interest margin for H1 2021 decreased to 3.09% from 3.26%, reflecting the prevailing low interest rate environment[166] Liquidity and Capital Resources The Bank maintains strong liquidity with $52.8 million in FHLB borrowing capacity and is well-capitalized, exceeding all regulatory requirements with a 21.3% Tier 1 leverage ratio - As of June 30, 2021, the Bank had access to an additional $52.8 million from the FHLB and $17.8 million from a line of credit with First National Bankers Bank[172] - The Bank exceeded all regulatory capital requirements, maintaining a 43.1% total risk-based capital ratio against a 10.0% well-capitalized requirement[176] - Outstanding commitments as of June 30, 2021, included $4.2 million for loan originations and $1.5 million in undisbursed construction loans[177] Quantitative and Qualitative Disclosures about Market Risk There have been no material changes to the market risk disclosures previously provided in the company's Prospectus - No material changes have occurred in the market risk disclosures presented in the Prospectus[183] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO affirmed the effectiveness of the company's disclosure controls and procedures as of June 30, 2021[184] - No material changes to internal control over financial reporting occurred during the quarter[184] PART II OTHER INFORMATION This section details legal proceedings, risk factors, unregistered equity sales, and a list of exhibits filed with the report Legal Proceedings The company is not involved in any material pending legal proceedings beyond routine ordinary course of business matters - The company is not involved in any material pending legal proceedings beyond routine matters in the ordinary course of business[189] Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's Prospectus - The evaluation of applicable risk factors has not materially changed from those disclosed in the Prospectus[190] Unregistered Sales of Equity Securities and Use of Proceeds The company reports no information under this item for the current period - No information to report for this period[191] Exhibits This section provides a list of exhibits filed with the Form 10-Q, including corporate documents and certifications