Catalyst Bancorp, Inc.
For the period ended Dec 31, 2024. Filed Mar 28, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 28, 2025
CLST$17.50-2.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-28.
0001558370-24-004220
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-28.
0001558370-25-003964
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 95 previous paragraphs and 94 current paragraphs.
39 unchanged; 38 reworded; 17 added; 17 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 51 previous and 59 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (17)
Current report
**Income Taxes.Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. **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 December 31, 2024, the Company’s net deferred tax asset totaled $1.5 million and is included in other assets on the statement of financial condition. The most significant portions of the net deferred tax asset are the deferred tax benefits related to the Company’s net operating loss for 2024 and unrealized losses on available-for-sale securities.
Current report
According to Subtopic 740-10 of the Accounting Standards Codification (“ASC 740-10”), the 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 December 31, 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.
Current report
Revision of Prior Period Financial Statements
Current report
As discussed in detail in Note 1 of the notes to our consolidated financial statements included in Item 8 of this Form 10-K, during June of 2024, the Bank became aware of interest owed by it to a deposit customer that was not properly accrued or paid by the Bank during the period beginning August 1, 2022 and ending March 31, 2024. Accordingly, management revised the prior period financial statements, related disclosures and supplemental information presented in this filing to correct the misstatement. The Company will also revise previously reported financial information for these immaterial errors in its future filings, as applicable. The information in this Item 7 and throughout this Annual Report on Form 10-K has been adjusted to reflect these revisions as described in Note 1 to the Company’s financial statements of this Annual Report on Form 10-K.
Current report
Total Assets. Total assets increased $5.8 million, or 2.1%, to $276.7 million at December 31, 2024 from $270.9 million at December 31, 2023. The increase was largely due to an increase in cash from deposit growth, which was partially offset by the repayment of outstanding borrowings under the BTFP and repurchases of common stock.
Current report
During 2024, loan growth was primarily driven by commercial construction and non-real estate commercial loan growth. This was largely the result of our focused business strategy. Since 2021, we have increased our commercial lending activities to grow the loan portfolio with greater diversification.
Current report
The following table presents certain major segments of our commercial real estate, construction and land, and commercial and industrial loan balances as of the dates indicated.
Current report
During the three months ended March 31, 2024, the Company sold 50 available-for-sale investment securities for a total pre-tax loss of $5.5 million. Proceeds from the sales totaled $42.6 million, inclusive of accrued interest. During the nine-month period ending December 31, 2024, the Company re-deployed a portion of the sales proceeds by purchasing $7.9 million of fixed-rate government-sponsored mortgage-backed securities.
Current report
The ratio of the Company’s total loans to deposits was 90.0% and 87.5% as of December 31, 2024 and 2023, respectively.
Current report
Since the announcement of our first share repurchase plan on January 26, 2023 and through December 31, 2024, the Company has repurchased a total of 1,011,850 shares of its common stock, or approximately 19% of the common shares originally issued, at an average cost per share of $11.93. At December 31, 2024, the Company had common shares outstanding of 4,278,150.
Current report
General. For the year ended December 31, 2024, the Company reported a net loss of $3.1 million, compared to net income of $526,000 for the year ended December 31, 2023. Net interest income for 2024 was up $1.8 million, or 23.9%, compared to 2023. The provision for credit losses totaled $531,000 in 2024, compared to $128,000 in 2023. Non-interest income for 2024 was down $5.4 million compared to 2023, primarily due to losses on the sales of investment securities. Non-interest expense for 2024 was up $578,000, or 6.7%, compared to 2023, primarily due to expenses associated with the Company’s upgrade to a new core processing system.
Current report
Non-interest Income*.* Non-interest income for the year ended December 31, 2024 was down $5.4 million from $1.6 million for 2023. Non-interest income for 2024 includes the $5.5 million loss on the sales of investment securities discussed previously. During 2023, the Company reported a loss on the sale of investment securities of $92,000.
Current report
Non-interest Expense. Non-interest expense totaled $9.2 million for the year ended December 31, 2024, up $578,000, or 6.7%, compared to 2023. Non-interest expense for 2024 included $531,000 of data conversion and other associated expenses related to the Company’s upgrade to a new core processing system, which occurred during the first three months of 2024.
Current report
Salaries and employee benefits expense totaled $4.8 million for the year ended December 31, 2024, up $159,000, or 3.4%, compared to 2023. The increase was primarily due to an increase in bonus expense and annual raises during 2024. Stock compensation expense also contributed to the increase in salaries and employee benefits expense due to additional grants under the 2022 stock compensation plans.
Current report
ATM and debit card expense totaled $141,000 for the year ended December 31, 2024, down $109,000, or 43.6%, compared to 2023. The decline is largely the result of reductions in debit card processing costs after the Company’s upgrade to a new core processing system during 2024.
Current report
Other non-interest expense totaled $533,000 for the year ended December 31, 2024, up $172,000, or 47.6%, compared to 2023 primarily due to increased loan collection expenses, service charges from correspondent banks and fraud losses during the 2024 period.
Current report
Management expects that a majority of the maturing certificates of deposit will be retained. However, if a substantial portion of these deposits is not retained, we may utilize borrowings from our secondary funding sources or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.
Removed paragraphs (17)
Previous report
For reporting periods prior to January 1, 2023, management evaluated securities for other-than-temporary impairment. If declines in the estimated fair value of individual investment securities below their cost were considered other-than-temporary, impairment losses were recognized in the statement of income with an offset to the carrying value of the investment security. Factors affecting the determination of whether an other-than-temporary impairment had occurred include, among other things, the length of time and the extent to which the fair value has been less than cost, the financial condition and near term prospects of the issuer, that the Company does not intend to sell these securities, and it is more likely than not that the Company will not be required to sell before a period of time sufficient to allow for any anticipated recovery in fair value.
Previous report
Total Assets. Total assets increased $7.6 million, or 2.9%, to $270.9 million at December 31, 2023 from $263.4 million at December 31, 2022. The increase was primarily due to additional borrowings in 2023 which were used to fund loan growth and invested in interest-bearing cash.
Previous report
Loans. Total loans increased by $11.3 million, or 8.5%, to $144.9 million at December 31, 2023, compared to $133.6 million at December 31, 2022. During 2023, loan growth was primarily driven by commercial business. Construction loan growth was largely driven by three separate projects involving the purchase and renovation of a hotel, the construction of a retail health care center, and the purchase and renovation of an industrial warehouse. Commercial and industrial loan growth was mainly driven by loans secured by industrial equipment and accounts receivable. A significant driver of commercial real estate loan growth was a loan to finance the purchase of a multi-tenant office building in Lafayette, Louisiana.
Previous report
Approximately 60% of our real estate loans have adjustable rates and, of our total real estate loans, approximately $60.7 million, or 50%, are scheduled to re-price or mature during the next 12 months. The largest segment of our total loan portfolio consists of one- to four-family residential real estate loans, and approximately 74% of these loans were originated prior to 2021.
Previous report
Our commercial and industrial loans largely consist of loans to local businesses involved in industrial manufacturing and equipment, communications, professional services, and oil and gas support services. Approximately 39% of our commercial and industrial loans have adjustable rates and, of total commercial and industrial loans, approximately $10.2 million, or 51%, are scheduled to re-price or mature during the next 12 months.
Previous report
Allowance for Credit Losses. As of January 1, 2023, the Company adopted the guidance under ASC 326. The adoption of ASC 326 resulted in a $209,000, or 12%, increase in the allowance for loan losses, and a $216,000 increase in other liabilities due to the allowance for credit losses on unfunded commitments. At adoption, we also recorded a corresponding $335,000 after-tax decrease in retained earnings. The increase in the total allowance for credit losses, which is inclusive of the reserve for unfunded commitments, was primarily due to the addition of forecasted credit losses. Refer to Note 1 of the financial statements for more information on the adoption of ASC 326.
Previous report
The increases in savings and certificates of deposits were largely driven by rate specials offered to depositors during 2023. Of the $5.5 million decline in non-interest-bearing demand deposits from December 31, 2022 to December 31, 2023, approximately $3.5 million was attributable to two commercial deposit account closures.
Previous report
General. For the year ended December 31, 2023, the Company reported net income of $602,000, compared to $180,000 for the year ended December 31, 2022. Net interest income was up $470,000, or 6.4%, in 2023 compared to 2022. The provision for credit losses totaled $128,000 in 2023, compared to a reversal of loan losses of $375,000 for 2022. During 2023 and 2022, the Company recognized income of $437,000 and $171,000, respectively, due to Bank Enterprise Award (“BEA”) Program grants received from the Community Financial Institution (“CDFI”) Fund. During 2022, the Company officially changed the name of the Bank to Catalyst Bank and incurred pre-tax costs of $269,000.
Previous report
Non-interest income for 2023 also included the $92,000 loss on the sale of investment securities discussed previously. The securities were sold for a total of $1.9 million.
Previous report
Income from bank-owned life insurance (“BOLI”) increased by $95,000, or 30.3%, to $409,000 for the year ended December 31, 2023, compared to 2022, largely due to an aggregate of $10.0 million in additional BOLI policies purchased in March and April of 2022.
Previous report
Non-interest income for the year ended December 31, 2022 included losses on the disposal of fixed assets of $77,000. Of the losses on disposed assets, $55,000 was attributable to branch signage that was replaced due to our rebranding.
Previous report
Non-interest Expense. Non-interest expense totaled $8.6 million for the year ended December 31, 2023, down $141,000, or 1.6%, compared to 2022. Total non-interest expense for year ended December 31, 2022 included $214,000 of rebranding-related expenses.
Previous report
Salaries and employee benefits expense totaled $4.7 million for the year ended December 31, 2023, down $151,000, or 3.1%, compared to 2022 primarily due to a lower employee count in 2023. These cost savings were partially offset by higher stock compensation expense in 2023. Stock compensation expense related to awards granted in September 2022 and included in salaries and employee benefits expense totaled $277,000 for the year ended December 31, 2023, compared to $110,000 in 2022.
Previous report
Directors’ fees for the year ended December 31, 2023 included $245,000 of stock compensation expense, compared to $82,000 in 2022. Total directors’ fees were $463,000 in 2023, up $161,000 compared to 2022.
Previous report
Foreclosed assets expense totaled $72,000 for the year ended December 31, 2023, compared to $5,000 for 2022. The Company realized losses of $66,000 on the sale of real estate held as foreclosed assets during 2023. Prior to the losses recorded in 2023, the real estate properties had a total carrying value of $381,000, of which $320,000 was held at December 31, 2022. The remaining properties were acquired and sold in 2023.
Previous report
Advertising and marketing expense totaled $100,000 for the year ended December 31, 2023, down $140,000 from 2022. Advertising and marketing expense for the year ended December 31, 2022 included rebranding-related expenses of $124,000.
Previous report
Pledged securities under the BTFP are valued at par when determining borrowing capacity. The total par value of unpledged investment securities eligible as collateral for advances under the BTFP was $16.5 million at December 31, 2023. The Bank refinanced and acquired additional BTFP advances during January 2024. At March 22, 2024, the Bank had one $20.0 million BTFP advance with a rate of 4.76% and a maturity date of January 15, 2025.
Reworded paragraphs (38)
Previous wording
This discussion and analysis reflects our financial statements and other relevant statistical data, and is intended to enhance your understanding of the financial condition and results of operations of Catalyst Bancorp, Inc. (the “Company”) and its wholly owned subsidiary, Catalyst Bank (the “Bank”), formerly known as St. Landry Homestead Federal Savings Bank (“St. Landry Homestead”). The information in this section has been derived from the audited financial statements, which appear in Item 8 of this Annual Report on Form 10-K. The information in this section should be read in conjunction with the Consolidated Financial Statements and related notes included herein in “Item 8. Financial Statements and Supplementary Data” and the description of our business included herein in “Item 1. Business”.
Current wording
This discussion and analysis reflects our financial statements and other relevant statistical data, and is intended to enhance your understanding of the financial condition and results of operations of Catalyst Bancorp, Inc. (the “Company”) and its wholly owned subsidiary, Catalyst Bank (the “Bank”). The information in this section has been derived from the audited financial statements, which appear in Item 8 of this Annual Report on Form 10-K. The information in this section should be read in conjunction with the Consolidated Financial Statements and related notes included herein in “Item 8. Financial Statements and Supplementary Data” and the description of our business included herein in “Item 1. Business”.
Previous wording
Allowance for Credit Losses. We have identified the evaluation of the allowance for credit losses as a critical accounting policy where amounts are sensitive to material variation. On January 1, 2023, the Company adopted the guidance under ASU No. 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments. The main provisions of the ASU have been codified by the FASB under ASC 326. The amendments introduced an impairment model that is based on current expected credit losses, rather than incurred losses, to estimate credit losses on loans. For reporting periods beginning on or after January 1, 2023, the allowance for credit losses reflects management’s current estimate of expected credit losses over the remaining life of its loans as of the end of the reporting period. For reporting periods prior to January 1, 2023, the allowance for credit losses represented management’s estimate for probable and reasonably estimable loan losses, but which had not yet been realized as of the end of the reporting period. Refer to Note 1 of the consolidated financial statements included in Item 8 of this Form 10-K for more information on the adoption of ASC 326.
Current wording
Allowance for Credit Losses. We have identified the evaluation of the allowance for credit losses as a critical accounting policy where amounts are sensitive to material variation. On January 1, 2023, the Company adopted the guidance under ASU No. 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments. The main provisions of the ASU have been codified by the FASB under ASC 326. The amendments introduced an impairment model that is based on current expected credit losses, rather than incurred losses, to estimate credit losses on loans. For reporting periods beginning on or after January 1, 2023, the allowance for credit losses reflects management’s current estimate of expected credit losses over the remaining life of its loans as of the end of the reporting period.
Previous wording
The allowance for credit losses includes the allowance for loan losses and the allowance for credit losses on unfunded lending commitments, which is recorded in other liabilities on the statement of financial condition. The allowance for credit losses is established through a provision for credit losses charged to earnings. Loans, or portions of loans, are charged off against the allowance in the period that such loans, or portions thereof, are deemed uncollectible. Subsequent recoveries are added to the allowance. The allowance for loan losses totaled $2.1 million, or 1.47% of total loans, at December 31, 2023 and $1.8 million, or 1.35% of total loans, at December 31, 2022. The increase in the allowance for loan losses from December 31, 2022 largely reflects the addition of forecasted credit losses due to the adoption ASC 326 and the impact of loan growth in 2023.
Current wording
The allowance for credit losses includes the allowance for loan losses and the allowance for credit losses on unfunded lending commitments, which is recorded in other liabilities on the statement of financial condition. The allowance for credit losses is established through a provision for credit losses charged to earnings. Loans, or portions of loans, are charged off against the allowance in the period that such loans, or portions thereof, are deemed uncollectible. Subsequent recoveries are added to the allowance. The allowance for loan losses totaled $2.5 million, or 1.51% of total loans, at December 31, 2024 and $2.1 million, or 1.47% of total loans, at December 31, 2023. The increase in the allowance for loan losses from December 31, 2023 largely reflects the impact of loan growth in 2024.
Previous wording
While management uses the best information available to make loan loss allowance evaluations, adjustments to the allowance may be necessary based on changes in economic and other conditions or changes in accounting guidance. In addition, the Office of the Comptroller of the Currency as an integral part of their examination processes periodically reviews our allowance for credit losses. While management is responsible for the establishment of the allowance for credit losses and for adjusting such allowance through provisions for credit losses, management may determine, as a result of
Current wording
While management uses the best information available to make loan loss allowance evaluations, adjustments to the allowance may be necessary based on changes in economic and other conditions or changes in accounting guidance. In addition, the Office of the Comptroller of the Currency as an integral part of their examination processes periodically reviews our allowance for credit losses. While management is responsible for the establishment of the allowance for credit losses and for adjusting such allowance through provisions for credit losses, management may determine, as a result of such regulatory reviews, that an increase or decrease in the allowance or provision for credit losses may be necessary or that loan charge-offs are needed. To the extent that actual outcomes differ from management’s estimates, additional provisions to the allowance for credit losses may be required that would adversely impact earnings in future periods.
Previous wording
**Investment Securities.**Available-for-sale securities consist of investment securities not classified as trading securities or held-to-maturity securities. Available-for-sale securities are reported at fair value and unrealized holding gains and losses, net of tax, on available-for-sale securities are included in other comprehensive income. The fair market values of investment securities are obtained from a third party service provider, whose prices are based on a combination of observed market prices for identical or similar instruments and various matrix pricing programs. The fair market values of investment securities are classified within Level 2 of the fair value hierarchy. At December 31, 2023 and 2022, net unrealized losses on available-for-sale securities totaled $9.2 million and $11.5 million, respectively. Unrealized losses on our available-for-sale securities relate principally to the increases in market rates of similar types of securities. The Company has not realized or recognized any losses in the statement of income for any investment securities held at December 31, 2023 or 2022.
Current wording
**Investment Securities.**Available-for-sale securities consist of investment securities not classified as trading securities or held-to-maturity securities. Available-for-sale securities are reported at fair value and unrealized holding gains and losses, net of tax, on available-for-sale securities are included in other comprehensive income. The fair market values of investment securities are obtained from a third-party service provider, whose prices are based on a combination of observed market prices for identical or similar instruments and various matrix pricing programs. The fair market values of investment securities are classified within Level 2 of the fair value hierarchy. At December 31, 2024 and 2023, net unrealized losses on available-for-sale securities totaled $4.5 million and $9.2 million, respectively. Unrealized losses on our available-for-sale securities relate principally to the increases in market rates of similar types of securities. During the year ended December 31, 2024, the Company sold 50 available- for-sale investment securities for a total loss of $5.5 million, which is reported in the consolidated statements of income. Proceeds from the investment sales totaled $42.6 million, inclusive of accrued interest.
Previous wording
The adoption of ASC 326 amended the guidance applicable to measuring and recognizing losses on available-for-sale securities. Under ASC 326, expected credit related losses for available-for-sale debt securities are recorded through an allowance for credit losses, while non-credit related losses will continue to be recognized through other comprehensive income as unrealized holding gains and losses, net of tax. Under former GAAP, we assessed our investment securities for other-than-temporary impairment and any declines in fair value that were deemed other-than-temporary resulted in a direct write-down to the amortized cost basis of the related security. The allowance approach allows estimated expected credit losses to be adjusted from period-to-period, as opposed to a permanent write-down.
Current wording
The adoption of ASC 326 amended the guidance applicable to measuring and recognizing losses on available-for-sale securities. Under ASC 326, expected credit related losses for available-for-sale debt securities are recorded through an allowance for credit losses, while non-credit related losses will continue to be recognized through other comprehensive income as unrealized holding gains and losses, net of tax.
Previous wording
For reporting periods on or after January 1, 2023 and the adoption of ASC 326, management evaluates available-for-sale securities in unrealized loss positions to determine if the decline in the fair value of each security below its amortized cost basis is due to credit-related factors or noncredit-related factors. Consideration is given to the extent to which that fair value is less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment in the issuer for a period sufficient to allow for any anticipated recovery in fair value.
Current wording
For reporting periods on or after January 1, 2023 and the adoption of ASC 326, management evaluates available-for-sale securities in unrealized loss positions to determine if the decline in the fair value of each security below its amortized cost basis is due to credit-related factors or noncredit-related factors. Consideration is given to the extent to which that fair value is less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment in the issuer for a period sufficient to allow for any anticipated recovery in fair value. Similarly, ASC 326 requires held-to-maturity debt securities to be presented at an amount net of a current estimate of expected credit losses, though the held-to-maturity debt securities are still reported at amortized cost under the new guidance.
Previous wording
The following table shows the composition of our loan portfolio by type of loan at the dates indicated.
Current wording
Loans. The following table summarizes the changes in the composition of our loan portfolio by type of loan as of the dates indicated.
Previous wording
At January 1, 2023, the allowance for loan losses totaled $2.0 million, or 1.51% of total loans, compared to $1.8 million, or 1.35% of total loans, at December 31, 2022. At December 31, 2023, the allowance for loan losses totaled $2.1 million, or 1.47% of total loans, and the allowance for credit losses on unfunded commitments totaled $257,000, up $41,000 from the date of adoption of ASC 326. The total provision for credit losses on loans and unfunded commitments was $128,000 for 2023, which was largely attributable to loan growth that necessitated additional loan provisions according to the Bank’s current expected credit losses model.
Current wording
Allowance for Credit Losses. At December 31, 2024, the allowance for loan losses totaled $2.5 million, or 1.51% of total loans, compared to 1.47% of total loans at December 31, 2023. The allowance for credit losses on unfunded commitments totaled $121,000, down $136,000 from December 31, 2023. The total provision for credit losses on loans and unfunded commitments was $531,000 for 2024 and was largely attributable to commercial loan growth and an increase in the allowance for credit losses on individually evaluated loans.
Previous wording
Non-performing Assets. The following table shows the amounts of our non-performing assets, which include non-accruing loans, accruing loans 90 days or more past due and foreclosed assets at the dates indicated. The increase in non-performing loans from December 31, 2022 to December 31, 2023, was primarily driven by an increase in our non-accruing one- to four-family residential loans. Persistent inflation and a decline in state government assistance impacted our residential borrowers in both 2022 and 2023.
Current wording
Non-performing Assets. The following table shows the amounts of our non-performing assets, which include non-accruing loans, accruing loans 90 days or more past due and foreclosed assets at the dates indicated.
Previous wording
Investment Securities*.*Total investment securities, available-for-sale and held-to-maturity, amounted to $84.0 million at December 31, 2023, down $9.1 million, or 9.8%, compared to $93.1 million in investment securities at December 31, 2022. Net unrealized losses on securities available-for-sale totaled $9.2 million at December 31, 2023, compared to $11.5 million at December 31, 2022. Unrealized losses on available-for-sale securities relate principally to increases in market interest rates for similar securities. Our investment securities portfolio consists primarily of debt obligations issued by the U.S. government and government agencies and government-sponsored mortgage-backed securities. During 2023, investment security maturities, calls and principal repayments totaled $9.1 million. The Company has not purchased investment securities since the fourth quarter of 2022. During the fourth quarter of 2023, the Company sold two available-for-sale investment securities for a pre-tax loss of $92,000. Cash proceeds from the sales totaled $1.9 million.
Current wording
Investment Securities*.*Total investment securities, available-for-sale and held-to-maturity, amounted to $42.2 million at December 31, 2024, down $41.8 million, or 49.8%, compared to $84.0 million in investment securities at December 31, 2023. Net unrealized losses on securities available-for-sale totaled $4.5 million at December 31, 2024, compared to $9.2 million at December 31, 2023. Unrealized losses on available-for-sale securities relate principally to increases in market interest rates for similar securities. Our investment securities portfolio consists primarily of debt obligations issued by the U.S. government and government agencies and government-sponsored mortgage-backed securities.
Previous wording
Deposits*.*Total deposits were $165.6 million at December 31, 2023, up $528,000, or less than 1%, compared to December 31, 2022. The following table presents total deposits by account type as of the dates indicated.
Current wording
Deposits*.*The following table presents total deposits by account type as of the dates indicated.
Previous wording
Our public fund deposits totaled $23.3 million, or 14.1% of total deposits, at December 31, 2023, compared to $21.0 million, or 12.7% of total deposits, at December 31, 2022. At December 31, 2023, approximately 78% of our total public funds consisted of non-interest-bearing and interest-bearing demand deposits from municipalities within our market.
Current wording
The increase in interest-bearing demand deposits was largely due to a seasonal increase in public funds. Total public fund deposits totaled $35.6 million, or 19.2% of total deposits, at December 31, 2024, compared to $23.3 million, or 14.1% of total deposits, at December 31, 2023. At December 31, 2024, approximately 83% of our total public fund deposits consisted of non-interest-bearing and interest-bearing demand deposits from municipalities within our market, compared to 78% at December 31, 2023. The increase in savings deposits was largely driven by rate specials offered to depositors during 2024, while the increase in certificates of deposit was primarily due to the acquisition of brokered funding during the fourth quarter of 2024.
Previous wording
Our total uninsured deposits (that is deposits in excess of the FDIC’s insurance limit), inclusive of public funds, were approximately $44.6 million at December 31, 2023 and $43.4 million at December 31, 2022. Total uninsured non-public funds deposits were approximately $26.3 million and $26.9 million at December 31, 2023 and 2022, respectively. The full amount of our public fund deposits in excess of the FDIC’s insurance limit are secured by pledging investment securities.
Current wording
The estimated amount of our total uninsured deposits (that is deposits in excess of the FDIC’s insurance limit), inclusive of public funds, was approximately $53.7 million at December 31, 2024 and $44.6 million at December 31, 2023. Total uninsured non-public funds deposits were approximately $22.5 million and $26.3 million at December 31, 2024 and 2023, respectively. At December 31, 2024, the full amount of our public fund deposits in excess of the FDIC’s insurance limit were secured by either pledged investment securities of $15.1 million or $25.0 million of a custodial letter of credit granted by the Federal Home Loan Bank of Dallas.
Previous wording
Borrowings.* *Total borrowings at December 31, 2023 were $19.4 million, up $10.2 million from December 31, 2022. During the fourth quarter of 2023, the Bank began borrowing from the Federal Reserve Bank of Atlanta through its Bank Term Funding Program (“BTFP”). At December 31, 2023, the Bank had one $10.0 million BTFP loan outstanding with a contractual interest rate of 4.83% and a maturity date of December 27, 2024.
Current wording
Borrowings.* *Total borrowings at December 31, 2024 were $9.6 million, down $9.8 million, or 50.7%, from December 31, 2023. During the fourth quarter of 2023, the Bank began borrowing from the Federal Reserve Bank of Atlanta through its Bank Term Funding Program (“BTFP”), and at December 31, 2023, the Bank had one $10.0 million BTFP loan outstanding. The BTFP debt was repaid during 2024 and the Bank had no outstanding borrowings under the program at December 31, 2024.
Previous wording
Other borrowings outstanding at December 31, 2023 consisted of FHLB advances totaling $9.4 million and $9.2 million at December 31, 2023 and 2022, respectively. The change in the carrying value of our FHLB advances reflects the amortization of deferred prepayment penalties on $10.0 million in advances restructured in December of 2020. Deferred prepayment penalties on our FHLB advances totaled $622,000 and $802,000 at December 31, 2023 and 2022, respectively.
Current wording
Borrowings outstanding at December 31, 2024 consisted of FHLB advances totaling $9.6 million, compared to $9.4 million at December 31, 2023. The change in the carrying value of our FHLB advances reflects the amortization of deferred prepayment penalties on $10.0 million in advances restructured in December of 2020. Deferred prepayment penalties on our FHLB advances totaled $442,000 and $622,000 at December 31, 2024 and 2023, respectively.
Previous wording
Shareholders’ Equity. Shareholders’ equity totaled $84.7 million, or 31.2% of total assets, at December 31, 2023, down $3.9 million, or 4.4%, from $88.5 million, or 33.6% of total assets, at December 31, 2022. During 2023, shareholders’ equity decreased by $6.3 million due to the Company’s repurchases of its common stock. This was partially offset by a $1.8 million decrease in accumulated other comprehensive loss due to the change in unrealized losses on available-for-sale investment securities.
Current wording
Shareholders’ Equity. Shareholders’ equity totaled $80.2 million, or 29.0% of total assets, at December 31, 2024, down $4.4 million, or 5.2%, from $84.6 million, or 31.2% of total assets, at December 31, 2023. During 2024, shareholders’ equity decreased by $5.8 million due to the Company’s repurchases of its common stock. The Company’s net loss of $3.1 million for 2024 was offset by other comprehensive income of $3.7 million, which was largely the result of the reclassification adjustment for realized losses on available-for-sale securities sold during the first quarter of 2024.
Previous wording
During the year ended December 31, 2023, the Company repurchased 528,674 shares of its common stock at an average cost per share of $11.94 through the completion of repurchases of 265,000 shares under its January 2023 Repurchase Plan and 252,000 under its April 2023 Repurchase Plan, and the repurchase of another 11,674 shares pursuant to a third repurchase plan announced in November (the “November 2023 Repurchase Plan”). At December 31, 2023, the Company had common shares outstanding of 4,761,326 and 228,326 of those shares were available for repurchase under the November 2023 Repurchase Plan.
Current wording
During the year ended December 31, 2024, the Company repurchased 483,176 shares of its common stock at an average cost of $11.91 per share. Of those shares, 228,326 shares were repurchased under the Company’s November 2023 Repurchase Plan and 227,000 shares were repurchased under the May 2024 Repurchase Plan. The remaining 27,850 shares were repurchased pursuant to the Company’s fifth repurchase plan announced in November 2024 (the “November 2024 Repurchase Plan”). Under the November 2024 Repurchase Plan, 187,150 shares of the Company’s common stock were available for repurchase at December 31, 2024.
Previous wording
Average Balances, Net Interest Income, and Yields Earned and Rates Paid. The following table shows for the periods indicated the total dollar amount of interest from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. Taxable equivalent (“TE”) yields have been calculated using a marginal tax rate of 21%. All average balances are based on daily balances.
Current wording
Average Balances, Net Interest Income, and Yields Earned and Rates Paid. The following table shows for the periods indicated the total dollar amount of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. Taxable equivalent (“TE”) yields have been calculated using a marginal tax rate of 21%. All average balances are based on daily balances.
Previous wording
Rate/Volume Analysis. The following table shows the extent to which changes in interest rates and changes in volume of interest-earning assets and interest-bearing liabilities affected our interest income and expense during the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in rate, which is the change in rate multiplied by prior year volume, and (2) changes in volume, which is the change in volume multiplied by prior year rate. The combined effect of changes in both rate and volume has been allocated proportionately to the change due to rate and the change due to volume.
Current wording
Rate/Volume Analysis. The following table shows the extent to which changes in interest rates and changes in volume of interest-earning assets and interest-bearing liabilities affected our interest income and interest expense during the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in rate, which is the change in rate multiplied by prior year volume, and (2) changes in volume, which is the change in volume multiplied by prior year rate. The combined effect of changes in both rate and volume has been allocated proportionately to the change due to rate and the change due to volume.
Previous wording
Interest Income. Total interest income increased $1.6 million, or 20.6%, to $9.7 million for the year ended December 31, 2023, compared to 2022. Interest income on loans, investment securities, and other interest-earning assets were up by $1.1 million, $163,000, and $373,000, respectively.
Current wording
Interest Income. Total interest income increased $4.2 million, or 43.5%, to $13.9 million for the year ended December 31, 2024, compared to 2023. Interest income on loans and other interest-earning assets were up by $2.9 million and $1.9 million, respectively, for the year ended December 31, 2024, compared to 2023. These increases were partially offset by a decrease in interest income on investment securities of $580,000 over the same comparable periods.
Previous wording
The average loan yield was 5.33% for the year ended December 31, 2023, up from 4.62% for the year ended December 31, 2022. Average loans were $135.7 million for the year ended December 31, 2023, up $3.2 million, or 2.4%, compared to 2022. At December 31, 2023, approximately 56% of our total loans have adjustable rates and approximately 49% of total loans are scheduled to re-price or mature during the next 12 months.
Current wording
The average loan yield was 6.50% for the year ended December 31, 2024, up from 5.33% for 2023. Average loans were $155.9 million for the year ended December 31, 2024, up $20.2 million, or 14.9%, compared to 2023. At December 31, 2024, approximately 50% of our total loans have adjustable rates and approximately 50% of total loans are scheduled to re-price or mature during the next 12 months.
Previous wording
The increase in interest income on investment securities was due to an increase in the average rate earned on our investment securities portfolio. The average rate earned on our investment securities portfolio was 1.66% for the year ended December 31, 2023, up 23 basis points compared to 1.43% for 2022.
Current wording
The decrease in interest income on investment securities was primarily due to the decrease in the average balance of total investment securities due to the sales executed during the three months ended March 31, 2024. The average balance of total investment securities for 2024 was down $46.1 million, or 45.9%, compared to 2023. The average rate earned on our investment securities portfolio was 1.97% for the year ended December 31, 2024, up 31 basis points compared to 1.66% for 2023 primarily due to investment securities purchased during 2024.
Previous wording
Interest income on other interest-earning assets, consisting primarily of interest-earning cash and deposits at other financial institutions, increased due to the impact of higher average short-term interest rates during 2023 compared to 2022.
Current wording
The increase in interest income on other interest-earning assets, consisting primarily of interest-earning cash and deposits at other financial institutions, was mainly due to the re-investment of proceeds from investment securities sales discussed previously, as well as the impact of higher average short-term interest rates during 2024 compared to 2023.
Previous wording
Interest Expense. Total interest expense increased $1.2 million, or 172.3%, to $1.9 million for the year ended December 31, 2023, compared to $683,000 for 2022. Interest expense on deposits was $1.5 million during 2023, up $1.1 million, or 283.3%, from $402,000 for 2022. The average rate paid on interest-bearing deposits was 1.13% during 2023, up 86 basis points from 0.27% during 2022.
Current wording
Interest Expense. Total interest expense increased $2.4 million, or 120.7%, to $4.3 million for the year ended December 31, 2024, compared to $2.0 million for 2023. Interest expense on deposits was $3.2 million during 2024, up $1.6 million, or 97.3%, from $1.6 million for 2023. The average rate paid on interest-bearing deposits was 2.25% during 2024, up 105 basis points from 1.20% during 2023. Interest expense on borrowings increased by $769,000 during the year ended December 31, 2024, compared to 2023 largely due to interest expense on BTFP advances.
Previous wording
Net Interest Income. Net interest income was $7.8 million for the year ended December 31, 2023, up $470,000, or 6.4%, compared to 2022. Our interest rate spread was 2.56% for the years ended December 31, 2023 and 2022, respectively. Our net interest margin was 3.10% and 2.75% for the years ended December 31, 2023 and 2022, respectively. The increase in net interest margin and net interest income over the comparable periods was primarily the result of increased yields on our interest-earning assets due to significant increases in market interest rates during 2022 and 2023. Rising market rates have also led to an increase in the average cost of our deposits.
Current wording
Net Interest Income. Net interest income was $9.5 million for the year ended December 31, 2024, up $1.8 million, or 23.9%, compared to 2023. Our interest rate spread was 2.76% and 2.50% for the years ended December 31, 2024 and 2023, respectively. Our net interest margin was 3.65% and 3.06% for the years ended December 31, 2024 and 2023, respectively. The increase in net interest margin and net interest income over the comparable periods was primarily the result of an increase in the yield and a change in the mix of our interest-earning assets, partially offset by the impact of an increase in the average volume and average rate paid on interest-bearing liabilities.
Previous wording
Provision for Credit Losses. The total provision for credit losses on loans and unfunded commitments was $128,000 for the year ended December 31, 2023, compared to a reversal of $375,000 in 2022. In 2023, the provision for credit losses was largely attributable to loan growth that necessitated additional loan provisions according to the Bank’s current expected credit losses model. The reversal during the 2022 period primarily reflected the release of reserve builds recorded during 2020 for the estimated effects of the COVID-19 pandemic on credit quality.
Current wording
Provision for Credit Losses. The total provision for credit losses on loans and unfunded commitments was $531,000 for the year ended December 31, 2024, compared to $128,000 in 2023. In 2024, the provision for credit losses was largely attributable to commercial loan growth and an increase in the allowance for credit losses on individually evaluated loans.
Previous wording
Non-interest Income*.* Non-interest income totaled $1.6 million for the year ended December 31, 2023, up $416,000, or 35.5%, compared to $1.2 million for 2022. In 2023, income from the CDFI Fund’s BEA Program grant totaled $437,000, up $266,000 from the amount received and recognized in 2022. The BEA Program grants awards to depository institutions that have successfully increased their investments in economically distressed communities through certain qualified activities, including investments in CDFIs and providing loans, investments and financial services to businesses and residents located in distressed communities.
Current wording
During 2024 and 2023, the Company recognized income of $280,000 and $437,000, respectively, due to the Bank Enterprise Award (“BEA”) Program grants received from the Community Financial Institution (“CDFI”) Fund. The BEA Program grants awards to depository institutions that have successfully increased their investments in economically distressed communities through certain qualified activities, including investments in CDFIs and providing loans, investments and financial services to businesses and residents located in distressed communities.
Previous wording
Data processing and communication expense totaled $911,000 for the year ended December 31, 2023, up $70,000, or 8.3%, compared to 2022 primarily due to annual rate increases by our core system provider and growth in the volume of accounts. For the year ended December 31, 2022, data processing and communication expense included $30,000 of re-branding related expenses.
Current wording
Data processing and communication expense totaled $1.3 million for the year ended December 31, 2024, up $438,000, or 48.1%, compared to 2023. Data processing and communication expense for 2024 included $509,000 of data conversion and other associated expenses associated with the Company’s upgrade to a new core processing system.
Previous wording
Professional fees totaled $486,000 for the year ended December 31, 2023, down $52,000, or 9.7%, from 2022. The Company incurred professional fees in 2022 for assistance with the initial grants under our 2022 Stock Option Plan and 2022 Recognition and Retention Plan. Professional fees associated with obtaining our 2023 and 2022 BEA grants totaled $66,000 and $26,000, respectively.
Current wording
Professional fees totaled $469,00 for the year ended December 31, 2024, down $17,000, or 3.5%, from 2023. Professional fees associated with obtaining our 2024 and 2023 BEA grants totaled $42,000 and $66,000, respectively.
Previous wording
Income Tax Expense. The Company reported income tax expense of $81,000 for the year ended December 31, 2023 and an income tax benefit of $21,000 for the year ended December 31, 2022. The change in income taxes over the comparable periods was primarily due to the increase in taxable earnings during 2023.
Current wording
Income Tax Expense. The Company reported an income tax benefit of $894,000 for the year ended December 31, 2024, compared to income tax expense of $61,000 for the year ended December 31, 2023. The change in income taxes over the comparable periods was largely due to the loss on sales of investment securities in 2024.
Previous wording
Our ability to maintain net interest income depends upon our ability to earn a higher yield on interest-earning assets than the rates we pay on deposits and borrowings. The majority of our interest-earning assets largely consist of fixed-rate investment securities and adjustable rate residential and commercial mortgage loans. Consequently, our ability to maintain a positive spread between the interest earned on assets and the interest paid on deposits and borrowings can be adversely affected when market rates of interest change. Interest rate sensitivity is monitored by management through the use of models which generate estimates of changes in net interest income and the economic value of our assets and liabilities over a range of interest rate scenarios.
Current wording
Our ability to maintain net interest income depends upon our ability to earn a higher yield on interest-earning assets than the rates we pay on deposits and borrowings. Consequently, our ability to maintain a positive spread between the interest earned on assets and the interest paid on deposits and borrowings can be adversely affected when market rates of interest change. Interest rate sensitivity is monitored by management through the use of models which generate estimates of changes in net interest income and the economic value of our assets and liabilities over a range of interest rate scenarios.
Previous wording
The above table indicates that as of December 31, 2023, in the event of an immediate and sustained 100 basis point decrease in interest rates, our net interest income for the 12 months ending December 31, 2024 would be expected to decrease by $158,000 or 1.9%. In January 2024, the Company initiated a strategy involving the sale of a substantial portion of its available-for-sale investment securities. The Company expects to deploy the net sales proceeds into a mix of cash and higher-yielding earning assets to improve net interest income and our exposure to interest rate risk. Refer to Note 17 of the financial statements included in Item 8 of this Form 10-K for more information.
Current wording
The above table indicates that as of December 31, 2024, in the event of an immediate and sustained 100 basis point decrease in interest rates, our net interest income for the 12 months ending December 31, 2025 would be expected to decrease by $200,000 or 1.9%. During the first quarter of 2024, the Company executed a strategy involving the sale of a substantial portion of its available-for-sale investment securities. The Company sold 50 available-for-sale investment securities for a pre-tax loss of $5.5 million and collected proceeds from the sales of $42.6 million. The Company deployed the net sales proceeds into a mix of cash and higher-yielding earning assets to improve net interest income and our exposure to interest rate risk.
Previous wording
Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities. We also have the ability to borrow from the FHLB, Federal Reserve Bank of Atlanta, and our primary correspondent bank.
Current wording
Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities or sales of securities. We also have the ability to borrow from the FHLB, Federal Reserve Bank of Atlanta, and our primary correspondent bank.
Previous wording
At December 31, 2023, our borrowed funds consisted of a $10 million BTFP advance and FHLB advances with a carrying value of $9.4 million. The table below summarizes our unused and available liquidity sources as of December 31, 2023.
Current wording
At December 31, 2024, our borrowed funds consisted of FHLB advances with a net carrying value of $9.6 million. The table below summarizes our unused and available liquidity sources as of December 31, 2024.
Previous wording
The Company also had a $20.0 million custodial letter of credit outstanding from the FHLB as of December 31, 2023, which is included in the calculation of our available capacity with the FHLB. The Company can allocate portions of this letter of credit to collateralize certain deposit balances in excess of the FDIC’s insurance limit as an alternative to pledging investment securities for the same purpose. During the first quarter of 2024, the Company increased this letter of credit to $40.0 million to collateralize public fund deposits as we pursue the investment securities strategy discussed in Note 17 of the financial statements included in Item 8 of this Form 10-K.
Current wording
The Bank’s available borrowing capacity with the FHLB is secured though a blanket floating lien on real estate loans. For more detail on loans pledged to the FHLB, refer to Note 4 of the financial statements included in Item 8 of this Form 10-K. The Company also has a $25.0 million custodial letter of credit outstanding from the FHLB as of December 31, 2024, which is included in the calculation of our available capacity with the FHLB. The Company can allocate portions of this letter of credit to collateralize certain deposit balances in excess of the FDIC’s insurance limit as an alternative to pledging investment securities for the same purpose. At December 31, 2024, the Company used $25.0 million of the FHLB custodial letter of credit to collateralize public fund deposits.
Previous wording
Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. The details of these cash flow classifications are presented on the statement of cash flows included in Item 8 of this Form 10-K. The most significant uses and sources of cash flows during the year ended December 31, 2023 included: $11.4 million in outflows due to the net increase in loans, $11.0 million in proceeds from maturities, paydowns, and sales of investment securities, $10.0 million in proceeds from BTFP advances, and $6.3 million in outflows for the repurchase of the Company’s common stock.
Current wording
Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. The details of these cash flow classifications are presented on the statement of cash flows included in Item 8 of this Form 10-K. The most significant uses and sources of cash flows during the year ended December 31, 2024 included:
Previous wording
The Bank exceeded all regulatory capital requirements and was categorized as well-capitalized at December 31, 2023 and December 31, 2022. Management is not aware of any conditions or events since the most recent notification that would change our category. The following table presents actual and required capital.
Current wording
The Bank exceeded all regulatory capital requirements and was categorized as well-capitalized at December 31, 2024 and December 31, 2023. Management is not aware of any conditions or events since the most recent notification that would change our category. Refer to Note 9 of the financial statements included in Item 8 of this Form 10-K for more detail on the Bank’s capital.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
such regulatory reviews, that an increase or decrease in the allowance or provision for credit losses may be necessary or that loan charge-offs are needed. To the extent that actual outcomes differ from management’s estimates, additional provisions to the allowance for credit losses may be required that would adversely impact earnings in future periods.