Catalyst Bancorp Inc (CLST, Financial) released its 8-K filing on October 24, 2024, detailing its financial performance for the third quarter of 2024. The company, a federally chartered community-oriented savings bank, reported a net income of $447,000, a decrease from $527,000 in the previous quarter. This decline occurred despite a notable increase in the loan portfolio, which grew by $12.6 million during the quarter.
Company Overview
Catalyst Bancorp Inc is engaged in attracting deposits from the general public and using those funds to invest in loans and securities. The bank derives its income primarily from interest earned on loans and investment securities, along with fees from loan origination and service charges on deposit accounts.
Performance and Challenges
The third quarter saw Catalyst Bancorp Inc's loan portfolio reach $165.9 million, marking an 8% increase from the previous quarter. This growth was driven by significant increases in construction and land loans, particularly in health service facilities and retail sectors. However, the company's net income was impacted by increased non-interest expenses and a higher provision for credit losses, which totaled $337,000, primarily due to commercial loan growth.
Financial Achievements
The bank's net interest margin improved to 3.86%, up 14 basis points from the prior quarter, reflecting a higher average yield on interest-earning assets. Total interest income rose by 4%, largely due to the expansion in the loan portfolio. These achievements are crucial for banks as they indicate efficient asset utilization and profitability in lending activities.
Income Statement and Key Metrics
Net interest income for the quarter was $2.5 million, a 3% increase from the second quarter. Non-interest income also saw a boost, totaling $620,000, up from $366,000, aided by a $280,000 grant from the Bank Enterprise Award Program. However, non-interest expenses increased by 9% to $2.3 million, driven by higher salaries, data processing, and professional fees.
Balance Sheet and Cash Flow
Total assets stood at $280.6 million, with investment securities accounting for $45.6 million, or 16% of total assets. The bank's deposits decreased by 7% to $167.4 million, with a notable decline in public fund deposits due to seasonal fluctuations. The loan-to-deposit ratio increased to 99%, indicating a higher reliance on loans relative to deposits.
Credit Quality and Capital Management
Non-performing assets decreased slightly to $1.6 million, with non-performing loans comprising 0.87% of total loans. The allowance for loan losses was $2.4 million, representing 1.46% of total loans. The company continued its share repurchase program, buying back 79,400 shares at an average cost of $11.75 per share during the quarter.
Our loan portfolio grew a record $12.6 million during the quarter," said Joe Zanco, President and Chief Executive Officer of the Company and Bank. "This marks our second consecutive quarter of outstanding loan growth."
Analysis and Outlook
Catalyst Bancorp Inc's performance in the third quarter highlights its ability to grow its loan portfolio significantly, which is a positive indicator for future interest income. However, the decline in net income and increased expenses pose challenges that the company needs to address. The bank's focus on managing credit quality and optimizing its capital structure will be crucial in navigating these challenges and sustaining growth.
Explore the complete 8-K earnings release (here) from Catalyst Bancorp Inc for further details.
