Catalyst Bancorp, Inc. Reports Higher Q1 2026 Earnings, Deposit Growth, and Lakeside Acquisition Progress

Catalyst Bancorp, Inc. Reports First Quarter 2026 Results: Growth, Acquisition Progress, and Capital Strength

Key Highlights

Net income rises to \$558,000 (\$0.15 per diluted share), up from \$456,000 (\$0.13 per diluted share) in Q4 2025.
Acquisition in progress: Professional fees of \$95,000 (pre-tax) incurred for the planned acquisition of Lakeside Bancshares, Inc. and Lakeside Bank.
Loans declined: Total loans fell to \$163.7 million, down 4% from December 2025, driven by a large commercial payoff.
Deposits increased: Total deposits climbed 5% to \$195.4 million, with significant growth in non-interest and savings accounts.
Strong capital position: Shareholders’ equity stands at \$82.2 million (28.5% of assets), with robust capital and liquidity ratios.
Continued share repurchases: 16,614 shares repurchased in Q1 2026; 1.23 million shares (23% of original shares) retired since Jan 2023.
Credit quality remains strong: Non-performing assets (NPAs) steady at \$2.7 million, allowance for credit losses at \$2.3 million (1.40% of loans).
Net interest margin narrows: Net interest margin at 3.83% (down 8 bps from Q4), but net interest income up 2% sequentially.

Detailed Financial Performance

Profitability

Catalyst Bancorp, Inc. delivered net income of \$558,000 or \$0.15 per diluted share for the first quarter of 2026, representing a sequential improvement from the previous quarter. Notably, this result included \$95,000 in professional fees (pre-tax) related to the announced agreement to acquire Lakeside Bancshares, Inc. and its subsidiary, Lakeside Bank. Excluding this one-off expense, core earnings would have been higher, reflecting operational improvement.

Acquisition of Lakeside Bancshares, Inc.

The company is advancing its strategic acquisition of Lakeside, which is expected to expand its presence in Southwest Louisiana. The integration process is underway, and while the transaction is not yet complete, related professional fees are already impacting Q1 financials. Investors should monitor the progress of this acquisition as it signals a growth trajectory and could materially affect future performance, market share, and earnings power.

Loan Portfolio Dynamics

Total loans at March 31, 2026 were \$163.7 million, down \$6.5 million (4%) from year-end 2025. The decline was primarily attributed to the payoff of a \$5.9 million commercial and industrial loan after the sale of the borrower’s business. Loan composition shifted slightly, with:

One- to four-family residential loans: \$78.1M (-3%)
Commercial real estate: \$33.7M (+2%)
Construction and land: \$19.8M (+5%)
Commercial and industrial: \$25.6M (-18%)

A notable increase occurred in multi-family construction lending (+22%), and a \$1.6 million construction loan was reclassified to commercial real estate.

Credit Quality and Allowance for Credit Losses

Asset quality remains stable:

Non-performing assets (NPAs): \$2.7 million (0.94% of total assets, unchanged from Q4 2025)
Non-performing loans (NPLs): 1.64% of total loans (vs. 1.55% in Q4 2025)
Allowance for credit losses: \$2.3 million (1.40% of loans)
Net loan charge-offs: \$37,000 during the quarter

The company recorded a \$70,000 reversal of provision for credit losses (vs. a \$96,000 provision in Q4 2025), driven by declining loan balances in key segments.

Investment Securities

Securities totaled \$63.1 million (22% of assets), down 3% from year-end. No new securities were purchased in Q1, following a \$7.4 million purchase of government-sponsored MBS in Q4 2025 (yielding 4.39%).

Deposit Growth and Funding Mix

Deposits rose 5% to \$195.4 million, with notable increases in non-interest-bearing demand and savings accounts. The loan-to-deposit ratio improved to 84% (from 92%), enhancing liquidity. Public fund deposits (often viewed as more volatile) were \$29.8 million (15% of total).

Capital and Shareholder Returns

Shareholders’ equity reached \$82.2 million (28.5% of assets), reflecting robust capitalization. The company continued its aggressive share repurchase program, retiring 16,614 shares in Q1 (vs. 54,693 in Q4) at an average cost of \$15.71. Repurchases were paused during due diligence for the Lakeside deal but are expected to resume in Q2. Since January 2023, 1.23 million shares (23% of original shares) have been repurchased at \$12.11 average.

Net Interest Income and Margin

Net interest income: \$2.5 million (+2% Q/Q)
Net interest margin: 3.83% (down 8 basis points)
Yield on earning assets: 5.36%
Cost of interest-bearing liabilities: 2.35% (down 15 bps)

Margin compression was offset by higher interest income from increased cash balances and lower interest expense, as a short-term Federal Home Loan Bank advance was repaid.

Non-Interest Income and Expense

Non-interest income: \$352,000 (down 3% Q/Q, mainly on lower deposit service charges)
Non-interest expense: \$2.3 million (up 3% Q/Q, driven by higher professional fees related to the Lakeside acquisition)

Operational and Regulatory Strength

The company remains well-capitalized, with strong capital ratios:

Common equity Tier 1: 44.29%
Tier 1 leverage: 26.22%
Total risk-based capital: 45.55%

The bank operates six branches in Louisiana, employs 49 FTEs, and focuses on both organic and acquisition-driven growth.

Shareholder-Relevant and Price-Sensitive Factors

The Lakeside Bancshares acquisition is a major strategic initiative. Its completion is likely to expand Catalyst’s market, boost earnings, and affect share value. Any delays, integration risks, or regulatory hurdles could affect sentiment.
Share repurchases have been significant, reducing the share count by 23% since 2023. This supports EPS and may underpin share price, but the temporary pause for due diligence signals management’s conservative stance during M&A activity.
Credit quality remains solid, but investors should note the slight uptick in non-performing loans (NPLs), though these remain predominantly residential and well-reserved.
Net interest margin compression reflects the broader rate environment and could pressure future earnings if not offset by growth or cost control.

Outlook

Management is optimistic about 2026, with a focus on successfully integrating Lakeside, growing the core franchise, and resuming share buybacks. The company is well-capitalized, liquid, and positioned for future expansion, but the success of the Lakeside deal and broader economic trends will be key determinants for shareholders.

Forward-Looking Statements

This article contains forward-looking statements subject to risks and uncertainties. Actual results may differ materially due to various factors including, but not limited to, economic conditions, regulatory changes, and the outcome of the Lakeside acquisition. Investors should not rely solely on these statements and are encouraged to review Catalyst Bancorp’s filings with the SEC for additional information.