[10-Q] Catalyst Bancorp, Inc. Quarterly Earnings Report

Q: How did Catalyst Bancorp (CLST) perform in Q3 2025?

Net income was $489 thousand with diluted EPS of $0.13 . Net interest income was $2.45 million and non‑interest expense was $2.20 million .

Q: What changed in Catalyst Bancorp’s balance sheet?

Total assets were $283.8 million . Deposits were $186.4 million and borrowings rose to $14.7 million . Equity increased to $81.6 million .

Q: How did securities and AOCI move during the quarter?

AFS securities fair value was $44.85 million . Accumulated other comprehensive loss improved to $2.65 million from $3.56 million at year‑end.

Q: What is the status of loans and credit quality?

Loans, net, were $162.37 million . The allowance was $2.40 million , and nonaccrual loans totaled $1.46 million .

Q: What were Catalyst Bancorp’s funding costs and borrowings?

Borrowings included $15.0 million of FHLB advances at a 2.05% rate; total borrowings were $14.69 million after discounts.

Q: Did Catalyst Bancorp note any special items?

Yes. A $30,000 out‑of‑period correction refunded certain foreign ATM fees, reducing service charge income.

Filing Impact

(Moderate)

Filing Sentiment

(Neutral)

Form Type

10-Q

Rhea-AI Filing Summary

Catalyst Bancorp (CLST) filed its Q3 2025 10‑Q, reporting net income of $489 thousand and diluted EPS of $0.13, up from $0.11 a year ago. Net interest income was $2.45 million versus $2.53 million, supported by a $36 thousand reversal of credit losses compared with a $337 thousand provision last year. Non‑interest expense declined to $2.20 million from $2.26 million.

Total assets were $283.8 million, up from $276.7 million at year‑end. Deposits were $186.4 million and borrowings rose to $14.7 million, reflecting $15.0 million of FHLB advances at a 2.05% rate. Shareholders’ equity increased to $81.6 million as accumulated other comprehensive loss improved to $2.65 million from $3.56 million with higher available‑for‑sale securities valuations ($44.9 million fair value vs. $28.7 million at year‑end).

Loans, net, were $162.4 million (down from $164.6 million) while the allowance for credit losses was $2.40 million. Nonaccrual loans totaled $1.46 million, slightly lower than year‑end. The company recorded a $30,000 refund related to a foreign ATM fee correction. There were 4,113,660 common shares outstanding as of November 7, 2025.

Insights

Stable quarter with modest earnings and improved AOCI.

Catalyst Bancorp posted steady profitability in Q3: net income of $489k and EPS of $0.13. Net interest income of $2.45M was slightly lower year over year, but results benefited from a $36k credit loss reversal. Operating costs dipped to $2.20M, helping offset softer fee income.

Securities marks improved: available‑for‑sale fair value rose to $44.85M with accumulated other comprehensive loss narrowing to $2.65M. Loans, net, were $162.37M with the allowance at $2.40M; nonaccruals were $1.46M. Borrowings increased to $14.69M, including $15.0M in FHLB advances at 2.05%.

Future performance hinges on deposit costs, loan growth, and credit quality trends. Subsequent filings may detail funding mix shifts and any further AOCI changes tied to rates.

11/13/2025 - 10:53 AM

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Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2025

☐	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to

Commission file number: 001-40893

CATALYST BANCORP, INC.

(Exact name of registrant as specified in its charter)

Louisiana		86-2411762
(State or other jurisdiction of incorporation of organization)		(I.R.S. Employer Identification No.)

235 N. Court Street, Opelousas, Louisiana 70570

(Address of principal executive offices; Zip Code)

(337) 948-3033

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock		CLST		Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 and 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 4,113,660 shares of Registrant’s common stock, par value of $0.01 per share, issued and outstanding as of November 7, 2025.

Table of Contents

CATALYST BANCORP, INC.

FORM 10-Q

TABLE OF CONTENTS


PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Consolidated Statements of Financial Condition	2

	Consolidated Statements of Income (Loss)	3

	Consolidated Statements of Comprehensive Income	4

	Consolidated Statements of Changes in Shareholders' Equity	5

	Consolidated Statements of Cash Flows	6

	Notes to Unaudited Consolidated Financial Statements	7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	28

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	45

Item 4.	Controls and Procedures	45

PART II	OTHER INFORMATION	46

Item 1.	Legal Proceedings	46

Item 1A.	Risk Factors	46

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46

Item 3.	Defaults Upon Senior Securities	46

Item 4.	Mine Safety Disclosures	46

Item 5	Other Information	47

Item 6.	Exhibits	48

SIGNATURES		49

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CATALYST BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


	(Unaudited)
	September 30,		December 31,
(Dollars in thousands)	2025		2024
ASSETS
Non-interest-bearing cash	$	4,515	$	4,076
Interest-bearing cash and due from banks		32,756		40,219
Total cash and cash equivalents		37,271		44,295
Investment securities:
Securities available-for-sale, at fair value (amortized cost of $48,206 and $33,215, respectively)		44,853		28,712
Securities held-to-maturity (fair value of $13,464 and $11,284, respectively)		14,945		13,447
Loans receivable, net of unearned income		164,767		167,076
Allowance for credit losses		(2,397)		(2,522)
Loans receivable, net		162,370		164,554
Accrued interest receivable		861		851
Foreclosed assets		76		194
Premises and equipment, net		5,954		6,085
Stock in correspondent banks, at cost		939		1,961
Bank-owned life insurance		14,849		14,489
Other assets		1,716		2,109
TOTAL ASSETS	$	283,834	$	276,697

LIABILITIES
Deposits
Non-interest-bearing	$	27,617	$	28,281
Interest-bearing		158,755		157,393
Total deposits		186,372		185,674
Borrowings		14,693		9,558
Other liabilities		1,184		1,261
TOTAL LIABILITIES		202,249		196,493

SHAREHOLDERS' EQUITY
Preferred stock, $0.01 par value - 5,000,000 shares authorized; none issued or outstanding		-		-
Common stock, $0.01 par value; 30,000,000 shares authorized; 4,129,604 and 4,278,150 issued and outstanding at September 30, 2025 and December 31, 2024, respectively		41		43
Additional paid-in capital		37,997		39,561
Unallocated common stock held by benefit plans		(5,260)		(5,702)
Retained earnings		51,456		49,860
Accumulated other comprehensive loss		(2,649)		(3,558)
TOTAL SHAREHOLDERS' EQUITY		81,585		80,204
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	283,834	$	276,697

The accompanying Notes are an integral part of these consolidated financial statements.

Table of Contents

CATALYST BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands, except per share data)	2025		2024		2025		2024
INTEREST INCOME
Loans receivable, including fees	$	2,816	$	2,717	$	8,346	$	7,314
Investment securities		345		255		914		790
Cash and due from banks		345		678		1,039		2,184
Other earning assets		7		21		49		63
Total interest income		3,513		3,671		10,348		10,351
INTEREST EXPENSE
Deposits		983		830		2,849		2,370
Borrowings		80		309		216		908
Total interest expense		1,063		1,139		3,065		3,278
Net interest income		2,450		2,532		7,283		7,073
Provision for (reversal of) credit losses		(36)		337		(36)		531
Net interest income after provision for (reversal of) credit losses		2,486		2,195		7,319		6,542
NON-INTEREST INCOME (LOSS)
Service charges on deposit accounts		172		200		571		597
Bank-owned life insurance		123		118		360		344
Loss on sale of investment securities		-		-		-		(5,507)
Other income on foreclosed assets		-		-		216		-
Gain (loss) on sale of fixed assets		(1)		-		(1)		6
Federal community development grant		-		280		-		280
Other		21		22		66		103
Total non-interest income (loss)		315		620		1,212		(4,177)
NON-INTEREST EXPENSE
Salaries and employee benefits		1,312		1,200		3,819		3,603
Occupancy and equipment		220		193		627		572
Data processing and communication		179		238		537		1,170
Professional fees		91		151		306		375
Directors’ fees		123		116		354		345
ATM and debit card		24		24		75		124
Foreclosed assets, net		7		33		114		67
Advertising and marketing		35		31		94		112
Regulatory fees and assessments		34		42		102		111
Franchise and shares tax		14		15		41		46
Other		163		217		509		594
Total non-interest expense		2,202		2,260		6,578		7,119
Income (loss) before income tax expense (benefit)		599		555		1,953		(4,754)
Income tax expense (benefit)		110		108		357		(1,039)
NET INCOME (LOSS)	$	489	$	447	$	1,596	$	(3,715)

Earnings (loss) per share - basic	$	0.13	$	0.11	$	0.43	$	(0.93)
Earnings (loss) per share - diluted		0.13		0.11		0.43		(0.93)

The accompanying Notes are an integral part of these consolidated financial statements.

Table of Contents

CATALYST BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands)	2025		2024		2025		2024
Net income (loss)	$	489	$	447	$	1,596	$	(3,715)
Net unrealized gains on available-for-sale securities		282		1,185		1,150		261
Reclassification adjustment for losses included in net income (loss)		-		-		-		5,507
Income tax effect		(59)		(249)		(241)		(1,212)
Total other comprehensive income		223		936		909		4,556
Total comprehensive income	$	712	$	1,383	$	2,505	$	841

The accompanying Notes are an integral part of these consolidated financial statements.

Table of Contents

CATALYST BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)


	Three Months Ended September 30, 2025 and 2024
(Dollars in thousands)	Common Stock		Additional Paid-in Capital		Unallocated Common Stock Held by Benefit Plans		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
BALANCE, JUNE 30, 2025	$	41	$	38,259	$	(5,596)	$	50,967	$	(2,872)	$	80,799
Net income		-		-		-		489		-		489
Other comprehensive income		-		-		-		-		223		223
ESOP shares released for allocation		-		14		53		-		-		67
2022 Recognition and Retention Plan shares released for allocation, including excise tax benefit		-		(277)		283		-		-		6
Stock compensation expense		-		172		-		-		-		172
Repurchase of common stock		-		(171)		-		-		-		(171)
BALANCE, SEPTEMBER 30, 2025	$	41	$	37,997	$	(5,260)	$	51,456	$	(2,649)	$	81,585

BALANCE, JUNE 30, 2024	$	45	$	41,914	$	(6,116)	$	48,787	$	(3,617)	$	81,013
Net income		-		-		-		447		-		447
Other comprehensive income		-		-		-		-		936		936
ESOP shares released for allocation		-		8		53		-		-		61
2022 Recognition and Retention Plan shares released for allocation		-		(286)		286		-		-		-
Stock compensation expense		-		143		-		-		-		143
Repurchase of common stock		(1)		(932)		-		-		-		(933)
BALANCE, SEPTEMBER 30, 2024	$	44	$	40,847	$	(5,777)	$	49,234	$	(2,681)	$	81,667

	Nine Months Ended September 30, 2025 and 2024
(Dollars in thousands)	Common Stock		Additional Paid-in Capital		Unallocated Common Stock Held by Benefit Plans		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
BALANCE, DECEMBER 31, 2024	$	43	$	39,561	$	(5,702)	$	49,860	$	(3,558)	$	80,204
Net income		-		-		-		1,596		-		1,596
Other comprehensive income		-		-		-		-		909		909
ESOP shares released for allocation		-		32		159		-		-		191
2022 Recognition and Retention Plan shares released for allocation, including excise tax benefit		-		(277)		283		-		-		6
Stock compensation expense		-		458		-		-		-		458
Repurchase of common stock		(2)		(1,777)		-		-		-		(1,779)
BALANCE, SEPTEMBER 30, 2025	$	41	$	37,997	$	(5,260)	$	51,456	$	(2,649)	$	81,585

BALANCE, DECEMBER 31, 2023	$	48	$	45,020	$	(6,221)	$	52,949	$	(7,237)	$	84,559
Net loss		-		-		-		(3,715)		-		(3,715)
Other comprehensive income		-		-		-		-		4,556		4,556
ESOP shares released for allocation		-		27		158		-		-		185
2022 Recognition and Retention Plan shares released for allocation		-		(286)		286		-		-		-
Stock compensation expense		-		423		-		-		-		423
Repurchase of common stock		(4)		(4,337)		-		-		-		(4,341)
BALANCE, SEPTEMBER 30, 2024	$	44	$	40,847	$	(5,777)	$	49,234	$	(2,681)	$	81,667

The accompanying Notes are an integral part of these consolidated financial statements.

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CATALYST BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
(Dollars in thousands)	2025		2024
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	1,596	$	(3,715)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Investment securities amortization, net		60		119
Stock dividends from correspondent banks		(41)		(62)
Amortization of prepayment penalties on debt restructuring		135		135
Provision for (reversal of) credit losses		(36)		531
Increase in cash surrender value of bank-owned life insurance		(360)		(344)
Loss on sales of investment securities		-		5,507
Loss (gain) on disposals and sales of premises and equipment		1		(6)
Stock-based compensation		649		608
Depreciation of premises and equipment		315		306
Net write-downs and losses on the sale of foreclosed assets		106		57
Deferred income tax expense (benefit)		248		(1,039)
Increase in other assets		(107)		(215)
Increase (decrease) in other liabilities		(76)		654
Net cash provided by operating activities		2,490		2,536
CASH FLOWS FROM INVESTING ACTIVITIES
Activity in available-for-sale securities:
Proceeds from maturities, calls, and paydowns		2,485		3,845
Proceeds from sales		-		42,525
Purchases		(17,528)		(7,873)
Activity in held-to-maturity securities:
Purchases		(1,506)		-
Net decrease (increase) in loans		2,209		(21,515)
Proceeds from sale of foreclosed assets		29		114
Purchases of premises and equipment		(185)		(375)
Purchase of Federal Home Loan Bank Stock		(108)		-
Proceeds from redemption of Federal Home Loan Bank Stock		1,171		-
Proceeds from sale of premises and equipment		-		12
Net cash (used in) provided by investing activities		(13,433)		16,733
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits		698		1,814
Borrowings from the Federal Home Loan Bank of Dallas		5,001		793
Repayments of borrowings from Federal Home Loan Bank of Dallas		(1)		(793)
Borrowings from the Federal Reserve Bank of Atlanta		-		43,000
Repayments of borrowings from the Federal Reserve Bank of Atlanta		-		(33,000)
Repurchase of common stock		(1,779)		(4,341)
Net cash provided by financing activities		3,919		7,473
NET CHANGE IN CASH AND CASH EQUIVALENTS		(7,024)		26,742
CASH AND CASH EQUIVALENTS, beginning of period		44,295		19,011
CASH AND CASH EQUIVALENTS, end of period	$	37,271	$	45,753

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES
Acquisition of real estate in settlement of loans	$	17	$	284

SUPPLEMENTAL SCHEDULE OF INTEREST AND TAXES PAID
Cash paid for interest	$	2,950	$	2,547
Cash paid for income taxes		66		200

The accompanying Notes are an integral part of these consolidated financial statements.

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CATALYST BANCORP, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Catalyst Bancorp, Inc. (“Catalyst Bancorp” or the “Company”) is the holding company for Catalyst Bank (the “Bank”), formerly known as St. Landry Homestead Federal Savings Bank. The Bank has been in operation in the Acadiana region of south-central Louisiana since 1922 and offers commercial and retail banking products through six full-service locations. The Company was incorporated by the Bank in February 2021 as part of the conversion of the Bank from the mutual to the stock form of organization (the “Conversion”). The Conversion was completed on October 12, 2021. The Company was not engaged in operations and had not issued any shares of stock prior to the completion of the Conversion.

As used in this report, unless the context otherwise requires, the terms “we,” “our,” “us,” or the “Company” refer to Catalyst Bancorp, and the term the “Bank” refers to Catalyst Bank, the wholly owned subsidiary of the Company. In addition, unless the context otherwise requires, references to the operations of the Company include the operations of the Bank.

Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company were prepared in accordance with instructions for Form 10-Q and Regulation S-X and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, comprehensive income, changes in equity and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the results for the interim periods presented have been included. The results of operations for the interim periods presented are not necessarily indicative of the results which may be expected for the entire fiscal year. These statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K.

Certain amounts reported in prior periods may have been reclassified to conform to the current period presentation. Such reclassifications had no effect on previously reported equity or net income.

Segment Reporting

The Company determined that all of its banking operations serve a similar customer base, offer similar products and services, and are managed through similar processes. Therefore, the Company’s banking operations are aggregated into one reported operating segment, which generates income principally from interest on loans and investment securities, as well as from fees charged in connection with various loan and deposit services. The chief operating decision maker (“CODM”) is the Chief Executive Officer, who for the purposes of assessing performance, making operating decisions, and allocating Company resources, regularly reviews net income as reported in the accompanying consolidated statements of income. The level of disaggregation and amounts of significant segment income and expenses, such as interest income, interest expense, provision for credit losses, salaries and employee benefits expense and other items, that are regularly provided to the CODM are the same as those presented in the accompanying consolidated statements of income. Likewise, the measure of segment assets is reported on the accompanying consolidated statements of financial condition as total assets.

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Critical Accounting Policies and Estimates

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties and could reflect materially different results under different assumptions and conditions. Methodologies the Company uses when applying critical accounting policies and developing critical estimates are included in its Annual Report on Form 10-K for the year ended December 31, 2024. Our accounting policies for allowance for credit losses, investment securities, and income taxes comprise those that management believes involve the most critical estimates and aid in fully understanding and evaluating our reported financial results.

There were no material changes from the significant accounting policies or critical accounting estimates previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. In preparing the financial statements, the Company is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the Company’s financial condition, results of operations, comprehensive income, changes in equity and cash flows for the interim periods presented. These adjustments are of a normal recurring nature and include appropriate estimated provisions.

Out-of-period Adjustment

During the three months ended September 30, 2025, the Company corrected a technical error related to fees charged for the use of foreign ATMs and refunded $30,000 of fees that were applied in error. The Company evaluated the error’s impact on prior periods and determined it was immaterial. The Company also evaluated the impact of recognizing the full correction during the three months ended September 30, 2025, and determined that it was immaterial as well. Therefore, the correction resulted in a corresponding decrease in income from service charges on deposit accounts during the three months ended September 30, 2025.

Recently Adopted Accounting Standards

ASU No. 2023-09. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this ASU require further granularity on the disclosure of income taxes. The guidance in ASU 2023-09 requires that public business entities disclose specific categories in the income tax rate reconciliation and provide additional qualitative information for reconciling items that meet a quantitative threshold. In addition, the amendments in ASU 2023-09 require that all entities disclose the amount of income taxes paid disaggregated by federal, state, and foreign taxes and disaggregated by individual jurisdictions. The ASU also includes other disclosure amendments related to the disaggregation of income tax expense between federal, state and foreign taxes. The Company has adopted the amendments in ASU 2023-09 as of January 1, 2025 and the required annual-only disclosures will be provided in its Annual Report on Form 10-K for the year ended December 31, 2025. There was no impact on the Company’s financial condition or results of operations upon adoption.

Accounting Standards Updates Issued, but Not Adopted

ASU No. 2024-03. In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendments in this ASU require disclosure, in the notes to the financial statements, of specified qualitative and quantitative information about certain costs and expenses, such as employee compensation, depreciation, and intangible asset amortization. Disclosure requirements also include a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, among other items. The Company expects to adopt the amendments in ASU 2024-03 for periods beginning after December 31, 2026. As the update contains only amendments to disclosure requirements, adoption will have no impact to the Company’s consolidated results of operations or financial condition.

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NOTE 2. EARNINGS (LOSS) PER SHARE

Earnings (loss) per common share was computed based on the following:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands, except per share data)	2025		2024		2025		2024
Numerator
Net income (loss) available to common shareholders	$	489	$	447	$	1,596	$	(3,715)

Denominator
Weighted average common shares outstanding		4,138		4,439		4,183		4,537
Weighted average unallocated common stock held by benefit plans		(501)		(546)		(510)		(555)
Weighted average shares - basic		3,637		3,893		3,673		3,982
Effect of dilutive stock-based awards⁽¹⁾:
Stock options		-		-		-		-
Restricted stock		21		12		11		-
Weighted average shares - assuming dilution		3,658		3,905		3,684		3,982

Basic earnings (loss) per common share	$	0.13	$	0.11	$	0.43	$	(0.93)
Diluted earnings (loss) per common share		0.13		0.11		0.43		(0.93)

(1)	The computation of diluted earnings (loss) per common share for the nine months ended September 30, 2024 does not include the impact of dilutive stock-based awards because to do so would be antidilutive for a period with a net loss.

Diluted earnings per share was computed using the treasury stock method. The weighted average of potentially dilutive common shares attributable to outstanding stock options that were anti-dilutive totaled 353,250 and 294,573 for the three months ended September 30, 2025 and 2024, respectively, and were excluded from the calculation of diluted earnings per share. The weighted average of potentially dilutive common shares attributable to restricted stock that were anti-dilutive totaled 326 for the three months ended September 30, 2025 and 2024, respectively, and were excluded from the calculation of diluted earnings per share.

The weighted average of potentially dilutive common shares attributable to outstanding stock options that were anti-dilutive totaled 319,150 and 294,647 for the nine months ended September 30, 2025 and 2024, respectively, and were excluded from the calculation of diluted earnings per share. The weighted average of potentially dilutive common shares attributable to restricted stock that were anti-dilutive totaled 2,120 and 537 for the nine months ended September 30, 2025 and 2024, respectively, and were excluded from the calculation of diluted earnings per share.

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NOTE 3. INVESTMENT SECURITIES

Investment securities have been classified according to management’s intent. The amortized cost of securities and their fair values are as follows:


	September 30, 2025
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available-for-sale
Mortgage-backed securities	$	46,507	$	116	$	(3,321)	$	43,302
Municipal obligations		1,699		18		(166)		1,551
Total available-for-sale	$	48,206	$	134	$	(3,487)	$	44,853
Securities held-to-maturity
U.S. Government and agency obligations	$	13,000	$	-	$	(1,547)	$	11,453
Municipal obligations		1,945		77		(11)		2,011
Total held-to-maturity	$	14,945	$	77	$	(1,558)	$	13,464


	December 31, 2024
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available-for-sale
Mortgage-backed securities	$	31,511	$	18	$	(4,327)	$	27,202
Municipal obligations		1,704		4		(198)		1,510
Total available-for-sale	$	33,215	$	22	$	(4,525)	$	28,712
Securities held-to-maturity
U.S. Government and agency obligations	$	13,000	$	-	$	(2,140)	$	10,860
Municipal obligations		447		-		(23)		424
Total held-to-maturity	$	13,447	$	-	$	(2,163)	$	11,284

There were no securities transferred between classifications during the nine months ended September 30, 2025 or 2024. There were no sales of investment securities during the nine months ended September 30, 2025. During the nine months ended September 30, 2024, the Company sold 50 available-for-sale investment securities for a total pre-tax loss of $5.5 million.

Accrued interest receivable on the Company’s investment securities totaled $169,000 and $142,000 at September 30, 2025 and December 31, 2024, respectively.

Investment securities with a carrying amount of $25.5 million and $15.1 million were pledged to secure public deposits as required or permitted by law at September 30, 2025 and December 31, 2024, respectively. The Company also uses a custodial letter of credit granted by the Federal Home Loan Bank of Dallas to collateralize public fund deposits. At September 30, 2025 and December 31, 2024, $20.0 million and $25.0 million, respectively, of the custodial letter of credit was pledged as collateral for public deposits.

At September 30, 2025 and December 31, 2024, other than securities issued by U.S. Government agencies or government-sponsored enterprises, we had no investments in a single issuer which had an aggregate book value in excess of 10% of the Company’s shareholders’ equity.

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The following is a summary of maturities of securities available-for-sale and held-to-maturity at September 30, 2025:


	September 30, 2025
	Available-for-Sale				Held-to-Maturity
(Dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Amounts maturing in:
One year or less	$	-	$	-	$	-	$	-
After one through five years		632		650		9,439		8,512
After five through ten years		-		-		5,506		4,952
After ten years		1,067		901		-		-
Subtotal		1,699		1,551		14,945		13,464
Mortgage-backed securities		46,507		43,302		-		-
Total	$	48,206	$	44,853	$	14,945	$	13,464

Securities, other than mortgage-backed securities, are classified according to their contractual maturities without consideration of principal amortization, potential prepayments, or call options. The expected maturities may differ from contractual maturities because of the exercise of call options and potential paydowns. Accordingly, actual maturities may differ from contractual maturities.

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Information pertaining to securities with gross unrealized losses at September 30, 2025 and December 31, 2024 aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:


	September 30, 2025
	Less than 12 Months				12 Months or Greater				Total
(Dollars in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Securities available-for-sale
Mortgage-backed securities	$	15,706	$	(63)	$	20,158	$	(3,258)	$	35,864	$	(3,321)
Municipal obligations		-		-		901		(166)		901		(166)
Total available-for-sale	$	15,706	$	(63)	$	21,059	$	(3,424)	$	36,765	$	(3,487)
Securities held-to-maturity
U.S. Government and agency obligations	$	-	$	-	$	11,452	$	(1,547)	$	11,452	$	(1,547)
Municipal obligations		-		-		428		(11)		428		(11)
Total held-to-maturity	$	-	$	-	$	11,880	$	(1,558)	$	11,880	$	(1,558)
Total	$	15,706	$	(63)	$	32,939	$	(4,982)	$	48,645	$	(5,045)


	December 31, 2024
	Less than 12 Months				12 Months or Greater				Total
(Dollars in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Securities available-for-sale
Mortgage-backed securities	$	3,274	$	(90)	$	18,135	$	(4,237)	$	21,409	$	(4,327)
Municipal obligations		-		-		878		(198)		878		(198)
Total available-for-sale	$	3,274	$	(90)	$	19,013	$	(4,435)	$	22,287	$	(4,525)
Securities held-to-maturity
U.S. Government and agency obligations	$	-	$	-	$	10,860	$	(2,140)	$	10,860	$	(2,140)
Municipal obligations		-		-		424		(23)		424		(23)
Total held-to-maturity	$	-	$	-	$	11,284	$	(2,163)	$	11,284	$	(2,163)
Total	$	3,274	$	(90)	$	30,297	$	(6,598)	$	33,571	$	(6,688)

At September 30, 2025 and December 31, 2024, the Company held 48 and 41 securities, respectively, with an unrealized loss. The securities with unrealized losses consisted of mortgage-backed securities guaranteed by the government-sponsored enterprises that have a credit rating consistent with the U.S. Government, and debt obligations guaranteed by federal, state and local government entities. These unrealized losses relate principally to noncredit related factors, including changes in current interest rates for similar types of securities. 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 the securities before recovery of their amortized cost basis. Based on management’s evaluation of the securities portfolio, the Company did not establish an allowance for credit losses for its available-for-sale or held-to-maturity securities at September 30, 2025 or December 31, 2024.

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NOTE 4. LOANS RECEIVABLE

Loans receivable at September 30, 2025 and December 31, 2024 are summarized as follows:



	September 30,		December 31,
(Dollars in thousands)	2025		2024
Real estate loans
One- to four-family residential	$	78,373	$	81,097
Commercial real estate		33,679		22,108
Construction and land		18,850		32,941
Multi-family residential		5,367		2,570
Total real estate loans		136,269		138,716
Other loans
Commercial and industrial		25,665		26,439
Consumer		2,833		1,921
Total other loans		28,498		28,360
Total loans		164,767		167,076
Less: Allowance for credit losses		(2,397)		(2,522)
Net loans	$	162,370	$	164,554

At September 30, 2025 and December 31, 2024, real estate loans totaling $84.7 million and $80.6 million, respectively, were pledged as collateral to the Federal Home Loan Bank of Dallas for borrowings under a blanket lien agreement.

Accrued interest receivable on the Company’s loans totaled $687,000 and $704,000 at September 30, 2025 and December 31, 2024, respectively. Accrued interest receivable is excluded from the Company’s estimate of the allowance for credit losses.

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The following describes the general risk characteristics of each segment of the loan portfolio disclosed in this note:

One- to four-family residential – This category primarily consists of loans secured by residential real estate located in our market. The performance of these loans may be adversely affected by, among other factors, unemployment rates, local residential real estate market conditions and the interest rate environment. Generally, these loans are for longer terms than commercial and construction loans.

Commercial real estate – This category generally consists of loans secured by retail and industrial use buildings, hotels, strip shopping centers and other properties used for commercial purposes. The performance of these loans may be adversely affected by, among other factors, conditions specific to the relevant industry, the real estate market for the property type and geographic region where the property or borrower is located.

Construction and land – This category consists of loans to finance the ground-up construction and/or improvement of residential and commercial properties and loans secured by land. The performance of these loans is generally dependent upon the successful completion of improvements and/or land development for the end user, the sale of the property to a third party, or a secondary source of cash flow from the owners. The successful completion of planned improvements and development may be adversely affected by changes in the estimated property value upon completion of construction, projected costs and other conditions leading to project delays.

Multi-family residential – This category consists of loans secured by apartment or residential buildings with five or more units used to accommodate households on a temporary or permanent basis. The performance of multi-family loans is generally dependent on the receipt of rental income from the tenants who occupy the subject property. The occupancy rate of the subject property and the ability of the tenants to pay rent may be adversely affected by the location of the subject property and local economic conditions.

Commercial and industrial – This category primarily consists of secured and unsecured loans to small and mid-sized businesses to fund operations or purchase non-real estate assets. Secured loans are primarily secured by accounts receivable, inventory, equipment and certain other business assets. The performance of these loans may be adversely affected by, among other factors, conditions specific to the relevant industry, fluctuations in the value of the collateral and individual performance factors related to the borrower.

Consumer – This category consists of loans to individuals for household, family and other personal use. The performance of these loans may be adversely affected by national and local economic conditions, unemployment rates and other factors affecting the borrower’s income available to service the debt.

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The following tables outline the changes in the allowance for credit losses for the nine months ended September 30, 2025 and 2024.


	For the Nine Months Ended September 30, 2025
(Dollars in thousands)	Beginning Balance		Provision (Reversal)		Charge-offs		Recoveries		Ending Balance
Allowance for credit losses
One- to four-family residential	$	1,164	$	81	$	(113)	$	34	$	1,166
Commercial real estate		192		110		-		-		302
Construction and land		528		(246)		-		-		282
Multi-family residential		35		37		-		-		72
Commercial and industrial		372		(57)		-		17		332
Consumer		26		33		(40)		19		38
Unallocated		205		-		-		-		205
Total for loans	$	2,522	$	(42)	$	(153)	$	70	$	2,397
Unfunded lending commitments⁽¹⁾		121		6		-		-		127
Total	$	2,643	$	(36)	$	(153)	$	70	$	2,524

(1)

The allowance for credit losses on unfunded lending commitments is recorded within “other liabilities” on the statement of financial condition. The related provision for credit losses for unfunded lending commitments is recorded with the provision for credit losses on loans and reported in aggregate as the provision for credit losses on the income statement.


	For the Nine Months Ended September 30, 2024
(Dollars in thousands)	Beginning Balance		Provision (Reversal)		Charge-offs		Recoveries		Ending Balance
Allowance for credit losses
One- to four-family residential	$	1,240	$	62	$	(160)	$	68	$	1,210
Commercial real estate		213		17		(28)		14		216
Construction and land		283		258		-		-		541
Multi-family residential		50		(13)		-		-		37
Commercial and industrial		302		206		(133)		4		379
Consumer		36		27		(43)		11		31
Total for loans	$	2,124	$	557	$	(364)	$	97	$	2,414
Unfunded lending commitments		257		(26)		-		-		231
Total	$	2,381	$	531	$	(364)	$	97	$	2,645

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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, if any, are credited to the allowance. The Company groups loans and unfunded lending commitments with similar risk characteristics into pools or segments and collectively evaluates each pool to estimate the allowance for credit losses. For each loan pool, the Company uses the remaining life method to calculate its credit loss estimate. Loans are individually evaluated for credit losses when they do not share similar risk characteristics with our identified loan pools. The allowance for credit losses reflects the Company’s estimate of current expected credit losses (“CECL”) over the full life of the financial assets.

The following tables outline the allowance for credit losses and the balance of loans by method of loss evaluation at September 30, 2025 and December 31, 2024.


	September 30, 2025						December 31, 2024
(Dollars in thousands)	Individually Evaluated		Collectively Evaluated		Total		Individually Evaluated		Collectively Evaluated		Total
Allowance for credit losses
One- to four-family residential	$	54	$	1,112	$	1,166	$	104	$	1,060	$	1,164
Commercial real estate		-		302		302		-		192		192
Construction and land		-		282		282		35		493		528
Multi-family residential		-		72		72		-		35		35
Commercial and industrial		-		332		332		-		372		372
Consumer		-		38		38		-		26		26
Unallocated		-		205		205		-		205		205
Total	$	54	$	2,343	$	2,397	$	139	$	2,383	$	2,522
Loans
One- to four-family residential	$	508	$	77,865	$	78,373	$	589	$	80,508	$	81,097
Commercial real estate		-		33,679		33,679		-		22,108		22,108
Construction and land		-		18,850		18,850		120		32,821		32,941
Multi-family residential		-		5,367		5,367		-		2,570		2,570
Commercial and industrial		2,055		23,610		25,665		-		26,439		26,439
Consumer		-		2,833		2,833		-		1,921		1,921
Total	$	2,563	$	162,204	$	164,767	$	709	$	166,367	$	167,076

At September 30, 2025 and December 31, 2024, all loans individually evaluated for credit losses were considered collateral-dependent financial assets under ASC 326. Loans are considered collateral-dependent and individually evaluated when, based on management’s assessment as of the reporting date, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The following describes the types of collateral that secure collateral dependent loans:

●

One- to four-family first mortgages are primarily secured by first liens on residential real estate.

●

Construction and land loans are primarily secured by residential and commercial properties, which are under construction and/or redevelopment, and by raw land.

●

Commercial and industrial loans considered collateral dependent are primarily secured by accounts receivable, inventory and equipment.

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A summary of current, past due and non-accrual loans as of September 30, 2025 and December 31, 2024 follows:


	As of September 30, 2025
(Dollars in thousands)	Past Due 30-89 Days and Accruing		Past Due Over 90 Days and Accruing		Past Due Over 30 Days and Non-accruing		Total Past Due		Current and Accruing		Current and Non-accruing		Total Loans
One- to four-family residential	$	2,664	$	364	$	654	$	3,682	$	73,907	$	784	$	78,373
Commercial real estate		342		-		-		342		33,337		-		33,679
Construction and land		-		-		-		-		18,829		21		18,850
Multi-family residential		-		-		-		-		5,367		-		5,367
Commercial and industrial		68		-		-		68		25,597		-		25,665
Consumer		6		-		-		6		2,827		-		2,833
Total	$	3,080	$	364	$	654	$	4,098	$	159,864	$	805	$	164,767


	As of December 31, 2024
(Dollars in thousands)	Past Due 30-89 Days and Accruing		Past Due Over 90 Days and Accruing		Past Due Over 30 Days and Non-accruing		Total Past Due		Current and Accruing		Current and Non-accruing		Total Loans
One- to four-family residential	$	2,926	$	64	$	767	$	3,757	$	76,577	$	763	$	81,097
Commercial real estate		-		-		-		-		22,108		-		22,108
Construction and land		81		-		13		94		32,823		24		32,941
Multi-family residential		-		-		-		-		2,570		-		2,570
Commercial and industrial		1		-		-		1		26,438		-		26,439
Consumer		8		-		-		8		1,913		-		1,921
Total	$	3,016	$	64	$	780	$	3,860	$	162,429	$	787	$	167,076

A summary of total non-accrual loans as of September 30, 2025 and December 31, 2024 follows:



	September 30, 2025						December 31, 2024
(Dollars in thousands)	With Allowance for Credit Loss		Without Allowance for Credit Loss		Total		With Allowance for Credit Loss		Without Allowance for Credit Loss		Total
Non-accrual loans
One- to four-family residential	$	1,392	$	46	$	1,438	$	1,518	$	12	$	1,530
Commercial real estate		-		-		-		-		-		-
Construction and land		21		-		21		37		-		37
Multi-family residential		-		-		-		-		-		-
Commercial and industrial		-		-		-		-		-		-
Consumer		-		-		-		-		-		-
Total	$	1,413	$	46	$	1,459	$	1,555	$	12	$	1,567

The Company was not committed to lend any additional funds on non-accrual loans at September 30, 2025 or December 31, 2024. The Company does not recognize interest income while loans are on non-accrual status. All payments received while on non-accrual status are applied against the principal balance of non-accrual loans.

At September 30, 2025, the Company had no outstanding loans for which formal foreclosure proceedings were in process. At December 31, 2024, loans secured by residential real estate for which formal foreclosure proceedings were in process totaled $37,000.

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Occasionally loans are modified to assist borrowers experiencing financial difficulty. We consider modifications such as term extensions, principal forgiveness, payment delays or alternate payment schedules, and alternate interest rate terms. At September 30, 2025 and December 31, 2024, loans with modifications for borrowers experiencing financial difficulty totaled $658,000 and $583,000, respectively. At September 30, 2025 and December 31, 2024, all loans with modifications for borrowers experiencing financial difficulty were one- to four-family residential loans and totaled less than 1.0% of total one- to four-family residential loans at such dates.

During the nine months ended September 30, 2025, the Company granted one loan modification to borrowers experiencing financial difficulty that resulted in a more than minor change in the timing or amount of contractual cash flows. The Company consolidated the debt of two related borrowers into a new residential mortgage loan totaling $131,000 to extend the maturity date and lower the monthly payment. During the year ended December 31, 2024, the Company granted one loan modification to a borrower experiencing financial difficulty that resulted in a more than minor change in the timing or amount of contractual cash flows. The maturity date was extended by three years for a residential mortgage loan with a balance of $20,000. The loans modified in 2025 and 2024 for borrowers experiencing financial difficulty have performed in accordance with their terms after modification. The Company was not committed to lend any additional funds to borrowers with modified terms and experiencing financial difficulty at September 30, 2025 or December 31, 2024.

Loans are categorized by credit quality indicators based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. Credit quality classifications follow regulatory guidelines and can generally be described as follows:

Pass – Loans in this category have strong asset quality and liquidity along with a multi-year track record of profitability.

Special Mention – Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard – Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loss – Loans classified as loss have been identified as uncollectible and are generally charged-off in the period identified.

The information for each of the credit quality indicators is updated at least quarterly in conjunction with the determination of the adequacy of the allowance for credit losses.

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The following table presents the Company’s loan portfolio by credit quality classification and origination year as of September 30, 2025. The Company uses the latter of origination or renewal date to classify term loans into vintages.


															Line-of-credit
															Arrangements
	Term Loans by Origination Year												Line-of-credit		Converted to
(Dollars in thousands)	2025		2024		2023		2022		2021		Prior		Arrangements		Term Loans		Total
One- to four-family residential
Pass	$	2,375	$	3,695	$	3,762	$	11,826	$	2,491	$	47,219	$	2,011	$	2,410	$	75,789
Special Mention		-		-		-		-		54		-		244		-		298
Substandard		-		21		10		-		-		2,255		-		-		2,286
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	2,375	$	3,716	$	3,772	$	11,826	$	2,545	$	49,474	$	2,255	$	2,410	$	78,373
Commercial real estate
Pass	$	1,749	$	4,187	$	4,922	$	1,439	$	810	$	8,041	$	82	$	11,783	$	33,013
Special Mention		-		-		-		98		312		-		-		-		410
Substandard		-		222		-		-		-		34		-		-		256
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	1,749	$	4,409	$	4,922	$	1,537	$	1,122	$	8,075	$	82	$	11,783	$	33,679
Construction and land
Pass	$	368	$	196	$	-	$	99	$	48	$	282	$	17,725	$	-	$	18,718
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		111		-		-		-		-		21		-		-		132
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	479	$	196	$	-	$	99	$	48	$	303	$	17,725	$	-	$	18,850
Multi-family residential
Pass	$	-	$	-	$	-	$	-	$	470	$	1,939	$	-	$	2,958	$	5,367
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	-	$	-	$	-	$	-	$	470	$	1,939	$	-	$	2,958	$	5,367
Commercial and industrial
Pass	$	1,877	$	10,259	$	2,093	$	179	$	168	$	442	$	8,573	$	-	$	23,591
Special Mention		19		-		-		-		-		-		-		-		19
Substandard		867		392		-		796		-		-		-		-		2,055
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	2,763	$	10,651	$	2,093	$	975	$	168	$	442	$	8,573	$	-	$	25,665
Consumer
Pass	$	1,780	$	282	$	281	$	165	$	130	$	195	$	-	$	-	$	2,833
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	1,780	$	282	$	281	$	165	$	130	$	195	$	-	$	-	$	2,833
Total
Pass	$	8,149	$	18,619	$	11,058	$	13,708	$	4,117	$	58,118	$	28,391	$	17,151	$	159,311
Special Mention		19		-		-		98		366		-		244		-		727
Substandard		978		635		10		796		-		2,310		-		-		4,729
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	9,146	$	19,254	$	11,068	$	14,602	$	4,483	$	60,428	$	28,635	$	17,151	$	164,767

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The following table presents the Company’s loan portfolio by credit quality classification and origination year as of December 31, 2024. The Company uses the latter of origination or renewal date to classify term loans into vintages.


															Line-of-credit
															Arrangements
	Term Loans by Origination Year												Line-of-credit		Converted to
(Dollars in thousands)	2024		2023		2022		2021		2020		Prior		Arrangements		Term Loans		Total
One- to four-family residential
Pass	$	2,255	$	2,702	$	12,205	$	3,054	$	2,731	$	50,193	$	2,488	$	2,996	$	78,624
Special Mention		-		-		-		56		-		-		-		-		56
Substandard		22		21		-		-		24		2,350		-		-		2,417
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	2,277	$	2,723	$	12,205	$	3,110	$	2,755	$	52,543	$	2,488	$	2,996	$	81,097
Commercial real estate
Pass	$	3,176	$	4,691	$	1,729	$	1,070	$	3,236	$	5,673	$	-	$	1,884	$	21,459
Special Mention		-		-		102		320		-		-		-		-		422
Substandard		227		-		-		-		-		-		-		-		227
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	3,403	$	4,691	$	1,831	$	1,390	$	3,236	$	5,673	$	-	$	1,884	$	22,108
Construction and land
Pass	$	1,731	$	48	$	102	$	51	$	53	$	347	$	30,451	$	-	$	32,783
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		121		13		24		-		-		158
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	1,731	$	48	$	102	$	172	$	66	$	371	$	30,451	$	-	$	32,941
Multi-family residential
Pass	$	-	$	-	$	-	$	470	$	-	$	2,100	$	-	$	-	$	2,570
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	-	$	-	$	-	$	470	$	-	$	2,100	$	-	$	-	$	2,570
Commercial and industrial
Pass	$	11,095	$	3,640	$	1,142	$	429	$	243	$	281	$	7,944	$	1,665	$	26,439
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	11,095	$	3,640	$	1,142	$	429	$	243	$	281	$	7,944	$	1,665	$	26,439
Consumer
Pass	$	519	$	551	$	239	$	304	$	74	$	234	$	-	$	-	$	1,921
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	519	$	551	$	239	$	304	$	74	$	234	$	-	$	-	$	1,921
Total
Pass	$	18,776	$	11,632	$	15,417	$	5,378	$	6,337	$	58,828	$	40,883	$	6,545	$	163,796
Special Mention		-		-		102		376		-		-		-		-		478
Substandard		249		21		-		121		37		2,374		-		-		2,802
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	19,025	$	11,653	$	15,519	$	5,875	$	6,374	$	61,202	$	40,883	$	6,545	$	167,076

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The following table presents gross charge-offs for the nine months ended September 30, 2025 by origination year of the related loans. The Company uses the latter of origination or renewal date to classify loans into vintages.


	Loan Origination Year
(Dollars in thousands)	2025		2024		2023		2022		2021		Prior		Total
Charge-offs
One- to four-family residential	$	-	$	-	$	-	$	-	$	-	$	113	$	113
Consumer		19		21		-		-		-		-		40
Total	$	19	$	21	$	-	$	-	$	-	$	113	$	153

The following table presents gross charge-offs for the year ended December 31, 2024 by origination year of the related loans. The Company uses the latter of origination or renewal date to classify loans into vintages.


	Loan Origination Year
(Dollars in thousands)	2024		2023		2022		2021		2020		Prior		Total
Charge-offs
One- to four-family residential	$	-	$	-	$	-	$	-	$	-	$	182	$	182
Commercial real estate		-		-		-		-		-		28		28
Commercial and industrial		43		45		45		-		-		-		133
Consumer		43		2		1		1		-		2		49
Total	$	86	$	47	$	46	$	1	$	-	$	212	$	392

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NOTE 5. BORROWED FUNDS

Borrowed funds and the weighted-average contractual interest rate on borrowings at September 30, 2025 and December 31, 2024 are summarized as follows:


	September 30, 2025				December 31, 2024
(Dollars in thousands)	Rate		Amount		Rate		Amount
Advances from Federal Home Loan Bank of Dallas	2.05	%	$	15,000	0.93	%	$	10,000
Debt modification discount on FHLB Advances				(307)				(442)
Total borrowings			$	14,693			$	9,558

In December of 2020, the Bank restructured $10.0 million of its long-term borrowings from the FHLB. The debt was restructured to longer maturities at current interest rates. A fee for the restructuring of $1.2 million was treated as a discount on the debt. The deferred fee is amortized into interest expense using the interest method over the life of the restructured borrowings.

Interest payments are due monthly for FHLB advances. A schedule of maturities for borrowings outstanding at September 30, 2025 are as follows:


(Dollars in thousands)	Amount
Amounts maturing in:
2025	$	8,000
2026		-
2027		3,000
2028		4,000
2029		-
Total	$	15,000

At September 30, 2025 and December 31, 2024, the Company had $50.9 million and $45.7 million, respectively, in available borrowing capacity with the Federal Home Loan Bank (“FHLB”). Borrowings from the FHLB are secured though a blanket floating lien on real estate loans. Refer to Note 4 for more detail on loans pledged to the FHLB. The Company has a $20.0 million custodial letter of credit outstanding from the FHLB as of September 30, 2025, 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 September 30, 2025, the Company used $20.0 million of the FHLB custodial letter of credit to collateralize public fund deposits.

Other available funding includes an Unsecured Federal Funds Master Purchase Agreement with First National Bankers Bank for $17.8 million. At September 30, 2025 and December 31, 2024, this credit facility was unused.

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NOTE 6. FAIR VALUE MEASUREMENTS

In accordance with fair value guidance, the Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

Level 1 — Valuation is based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 — Valuation is based on inputs other than quoted prices included with Level 1 that are observable for the asset or liability, either directly or indirectly. The valuation may be based on quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term for the asset or liability.

Level 3 — Valuation is based on unobservable income inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which determination of fair value requires significant management judgment or estimation.

Fair value is an exit price, representing the amount that would be received to sell an asset or to transfer a liability in an orderly transaction between market participants. Fair value measurements are not adjusted for transaction costs. A fair value hierarchy is used that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quotes priced in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

Fair values of assets and liabilities measured on a recurring basis at September 30, 2025 and December 31, 2024 follows:


	Fair Value Measurements at Reporting Date Using
(Dollars in thousands)	Fair Value		Level 1		Level 2		Level 3
September 30, 2025
Securities available-for-sale:
Mortgage-backed securities	$	43,302	$	-	$	43,302	$	-
Municipal obligations		1,551		-		1,551		-
Total	$	44,853	$	-	$	44,853	$	-

December 31, 2024
Securities available-for-sale:
Mortgage-backed securities	$	27,202	$	-	$	27,202	$	-
Municipal obligations		1,510		-		1,510		-
Total	$	28,712	$	-	$	28,712	$	-

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Fair values of assets and liabilities measured on a nonrecurring basis at September 30, 2025 and December 31, 2024 follows:


	Fair Value Measurements at Reporting Date Using
(Dollars in thousands)	Fair Value		Level 1		Level 2		Level 3
September 30, 2025
Loans individually evaluated for credit losses	$	160	$	-	$	-	$	160
Foreclosed assets		76		-		-		76
Total	$	236	$	-	$	-	$	236
December 31, 2024
Loans individually evaluated for credit losses	$	314	$	-	$	-	$	314
Foreclosed assets		194		-		-		194
Total	$	508	$	-	$	-	$	508

At September 30, 2025 and December 31, 2024, individually evaluated loans with a recorded investment of $214,000 and $452,000, respectively, have been written down to their fair value by a charge to the allowance for credit losses. Foreclosed assets are adjusted to fair value by recording a related gain or loss through foreclosed asset expense. Foreclosed asset expense for the three and nine months ended September 30, 2025 included write-downs of $4,000 and $18,000, respectively, to adjust foreclosed assets to fair value. Foreclosed asset expense for the three and nine months ended September 30, 2024 included net losses of $39,000 and $37,000, respectively, to adjust foreclosed assets to fair value.

The fair value of foreclosed assets is estimated using third-party appraisals of the asset held less estimated costs to sell and discounts to reflect current conditions. The fair value of collateral-dependent loans individually evaluated for credit losses is estimated using third-party appraisals of the collateral less estimated costs to sell and discounts to reflect current conditions. The fair value of loans individually evaluated for credit losses that are not collateral-dependent is estimated by discounting expected cash flows using discount rates determined with reference to current market rates at which similar loans would be made.

The following table shows significant unobservable inputs used in the fair value measurement of Level 3 assets. The weighted average presented in the following table was weighted based on the undiscounted result of the valuation technique.


(Dollars in thousands)	Fair Value		Valuation Technique	Unobservable Inputs	Range of Discounts			Weighted Average Discount
September 30, 2025
Loans individually evaluated for credit losses	$	160	Third party appraisals	Market discounts and estimated costs to sell	6%	-	30%	24%
Foreclosed assets		76	Third party appraisals and sales contracts	Market discounts and estimated costs to sell	6%	-	100%	49%

December 31, 2024
Loans individually evaluated for credit losses	$	314	Third party appraisals	Market discounts and estimated costs to sell	0%	-	30%	18%
Foreclosed assets		194	Third party appraisals and sales contracts	Market discounts and estimated costs to sell	6%	-	54%	22%

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The following methods and assumptions were used to estimate the fair value of each class of financial instruments of which it is practicable to estimate that value. The derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

Cash and cash equivalents - The carrying amounts reported in the statements of financial condition for cash and cash equivalents approximate those assets’ fair values and are classified within Level 1 of the fair value hierarchy.

Investment securities - The fair market values of investments 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.

Loans receivable, net – The fair value of loans are generally determined by discounting scheduled cash flows using discount rates determined with reference to current market rates at which similar loans would be made. Loans receivable are classified within Level 3 of the fair value hierarchy.

Loans individually evaluated for credit losses - The fair value of loans individually evaluated for credit losses is measured by the fair value of the collateral if the loan is collateral dependent. Fair value of the collateral is determined by appraisals or by independent valuation. Loans individually evaluated for credit losses are classified within Level 3 of the fair value hierarchy.

Bank-owned life insurance - The cash surrender value of bank-owned life insurance approximates its fair value and is classified within Level 2 of the fair value hierarchy.

Non-maturity deposit liabilities - The fair value of deposits with no stated maturity, such as non-interest-bearing demand deposits, savings, NOW, money market and checking accounts, is equal to the amount payable on demand at the reporting date. These non-maturity deposit liabilities are classified within Level 1 of the fair value hierarchy.

Certificates of deposit – Fair values are estimated by discounting scheduled cash flows using the rates currently offered for deposits of similar remaining maturities. Certificates of deposit are classified within Level 2 of the fair value hierarchy.

Borrowings – The fair value is estimated by discounting the future contractual cash flows using current market rates at which debt with similar terms could be obtained. Borrowings are classified within Level 2 of the fair value hierarchy.

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Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business or the value of assets and liabilities that are not considered financial instruments.

The estimated fair values of the Company’s financial instruments as of September 30, 2025 and December 31, 2024 are as follows:


	September 30, 2025
(Dollars in thousands)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	37,271	$	37,271	$	37,271	$	-	$	-
Investment securities:
Available-for-sale		44,853		44,853		-		44,853		-
Held-to-maturity		14,945		13,464		-		13,464		-
Loans receivable, net		162,370		157,811		-		-		157,811
Bank-owned life insurance		14,849		14,849		-		14,849		-
Financial Liabilities:
Deposits		186,372		186,012		127,300		58,712		-
Borrowed funds		14,693		14,466		-		14,466		-


	December 31, 2024
(Dollars in thousands)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	44,295	$	44,295	$	44,295	$	-	$	-
Investment securities:
Available-for-sale		28,712		28,712		-		28,712		-
Held-to-maturity		13,447		11,284		-		11,284		-
Loans receivable, net		164,554		161,412		-		-		161,412
Bank-owned life insurance		14,489		14,489		-		14,489		-
Financial Liabilities:
Deposits		185,674		185,087		124,983		60,104		-
Borrowed funds		9,558		9,069		-		9,069		-

The carrying amounts in the preceding table are included in the statement of financial condition under the applicable captions. It is not practical to estimate the fair value of stock in correspondent banks because the equity securities are not marketable. The carrying amount of investments without readily determinable fair value are reported in the statements of financial condition at historical cost.

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NOTE 7. COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, the Company has various outstanding commitments and contingent liabilities that are not reflected in the accompanying financial statements. In the opinion of management, the ultimate disposition of these matters is not expected to have a material adverse effect on our financial statements.

The Company is not involved in any pending legal proceedings as a plaintiff or defendant other than routine legal proceedings occurring in the ordinary course of business, and at September 30, 2025, we were not involved in any legal proceedings, the outcome of which would be material to our financial condition or results of operations.

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments consist of unfunded commitments to extend credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amounts recognized in the statement of financial position. The contract or notional amounts of these instruments reflect the extent of the Company’s involvement in particular classes of instruments. The following table summarizes the Company’s financial instruments with off-balance-sheet risk as of the dates indicated.


	Contract or Notional Amount at
(Dollars in thousands)	September 30, 2025		December 31, 2024
Financial instruments with off-balance-sheet risk:
Commitments to originate loans	$	120	$	11,979
Undisbursed portion of construction loans in process		10,525		7,635
Unused lines of credit		16,385		15,391
Unused overdraft privilege amounts		1,220		1,167
Letters of credit		-		19
Total	$	28,250	$	36,191

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

Management’s Discussion and Analysis of Financial Condition and Results of Operations at September 30, 2025 and for the three and nine months ended September 30, 2025 and 2024 is intended to assist in understanding our financial condition and results of operations. The information contained in this section should be read in conjunction with the unaudited consolidated financial statements of the Company and the notes thereto appearing in Part I, Item 1, of this Quarterly Report on Form 10-Q as well as the business and financial information included in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2024.

Cautionary Note Regarding Forward-Looking Statements

Certain matters in this Form 10-Q may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact, are based on certain assumptions and are generally identified by use of words such as “believes,” “expects,” “anticipates,” “estimates,” “forecasts,” “intends,” “plans,” “targets,” “potentially,” “probably,” “projects,” “outlook” or similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would,” and “could.” These forward-looking statements include, but are not limited to:

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statements of our goals, intentions and expectations;

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statements regarding our business plans, prospects, growth and operating strategies;

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statements regarding the quality of our loan and investment portfolios; and

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estimates of our risks and future costs and benefits.

You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. These forward-looking statements are based on our current beliefs and expectations and, by their nature, are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.

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Important factors that could cause our actual results to differ materially from the results anticipated or projected, include, but are not limited to, the following:

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general economic conditions, either nationally or in our market areas, that are different than expected;

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conditions relating to infectious disease outbreaks, including the severity and duration of the associated economic slowdown, either nationally or in our market areas, that are worse than expected;

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changes in the level and direction of loan delinquencies and charge-offs and changes in estimates of the adequacy of the allowance for credit losses;

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our ability to access cost-effective funding;

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major catastrophes such as hurricanes, floods or other natural disasters, the related disruption to local, regional and global economic activity and financial markets, and the impact that any of the foregoing may have on us and our customers and other constituencies;

●

technological changes that may be more difficult or expensive than expected;

●

success or consummation of new business initiatives may be more difficult or expensive than expected;

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the inability of third-party service providers to perform;

●

fluctuations in real estate values and both residential and commercial real estate market conditions;

●

demand for loans and deposits in our market area;

●

our ability to continue to implement our business strategies;

●

competition among depository and other financial institutions;

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inflation and changes in the interest rate environment that reduce our margins and yields, reduce the fair value of financial instruments or reduce the origination levels in our lending business, or increase the level of defaults, losses and prepayments on loans;

●

adverse changes in the securities markets;

●

changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;

●

our ability to manage market risk, credit risk and operational risk in the current economic conditions;

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our ability to enter new markets successfully and capitalize on growth opportunities;

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our ability to successfully integrate any assets, liabilities, customers, systems and management personnel we may acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto;

●

changes in consumer spending, borrowing and savings habits;

●

changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the U. S. Securities and Exchange Commission or the Public Company Accounting Oversight Board;

●

our ability to retain key employees; and our compensation expense associated with equity allocated or awarded to our employees.

We undertake no obligation to publicly update or revise any forward-looking statements included in this report or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this report might not occur and you should not put undue reliance on any forward-looking statements.

Overview

Catalyst Bancorp, Inc. (“Catalyst Bancorp” or the “Company”) is the holding company for Catalyst Bank (the “Bank”), formerly known as St. Landry Homestead Federal Savings Bank. The Company was incorporated by the Bank in February 2021 as part of the conversion of the Bank from the mutual to the stock form of organization (the “Conversion”). The Conversion was completed on October 12, 2021, at which time the Company acquired all of the issued and outstanding shares of common stock of the Bank, which became the wholly-owned subsidiary of Catalyst Bancorp. The Bank officially changed its name to Catalyst Bank in June 2022.

Founded in 1922, the Bank is a community-oriented savings bank serving the banking needs of customers in the Acadiana region of south-central Louisiana. We are headquartered in Opelousas, Louisiana and serve our customers through six full-service branches located in Carencro, Eunice, Lafayette, Opelousas, and Port Barre. Our primary business consists of attracting deposits from the general public and using those funds together with funds we borrow from the Federal Home Loan Bank (“FHLB”) of Dallas, Federal Reserve Bank of Atlanta, and other sources to originate loans to our customers and invest in securities.

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Historically, we operated as a traditional thrift relying on long-term, single-family residential mortgage loans secured by properties located primarily in St. Landry Parish and adjoining areas to generate interest income. In 2021, we re-focused our business strategy to a relationship-based community bank model targeting small- to mid-sized businesses and business professionals in our market areas while continuing to serve our traditional customer base. The Conversion and offering were important factors in our efforts to become a more dynamic, profitable and growing institution.

The following is an overview of financial results for the three and nine months ended September 30, 2025:

●

Total assets of $283.8 million at September 30, 2025, up $7.1 million, or 2.6%, from December 31, 2024

●

Loans of $164.8 million at September 30, 2025, down $2.3 million, or 1.4%, from December 31, 2024

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Non-performing assets of $1.9 million at September 30, 2025, up $74,000, or 4.1%, from December 31, 2024

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Investment securities of $59.8 million at September 30, 2025, up $17.6 million, or 41.8%, from December 31, 2024

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Deposits of $186.4 million at September 30, 2025, up $698,000, or 0.4%, from December 31, 2024

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Borrowings of $14.7 million at September 30, 2025, up $5.1 million, or 53.7%, from December 31, 2024

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Total shareholders’ equity of $81.6 million at September 30, 2025, up $1.4 million, or 1.7%, from December 31, 2024

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For the three months ended September 30, 2025, net interest income of $2.5 million, down $82,000, or 3.2%, and net interest margin of 3.88%, up two basis points (“bps”) compared to the same period in 2024

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For the nine months ended September 30, 2025, net interest income of $7.3 million, up $210,000, or 3.0%, and net interest margin of 3.92%, up 36 bps compared to the same period in 2024

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No loss on sales of investment securities in 2025, compared to a loss of $5.5 million for the nine months ended September 30, 2024

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For the three months ended September 30, 2025, non-interest expense of $2.2 million, down $58,000, or 2.6%, compared to the same period in 2024

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For the nine months ended September 30, 2025, non-interest expense of $6.6 million, down $541,000, or 7.6%, compared to the same period in 2024, which included expenses related to the Company’s upgrade to a new core processing system

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For the three months ended September 30, 2025, net income of $489,000, up $42,000, or 9.4%, compared to the same period in 2024

●

For the nine months ended September 30, 2025, net income of $1.6 million, compared to a net loss of $3.7 million for the same period in 2024

Our results of operations depend, to a large extent, on net interest income, which is the difference between the income earned on our loan and investment portfolios and interest expense on deposits and borrowings. Our net interest income is largely determined by our net interest spread, which is the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities, and the relative amounts of interest-earning assets and interest-bearing liabilities. Results of operations are also affected by our provisions for credit losses, fee income and other non-interest income and non-interest expense. Non-interest expense principally consists of compensation, office occupancy and equipment expense, data processing, and other expense. Our results of operations are also significantly affected by general economic and competitive conditions, particularly changes in interest rates, government policies and actions of regulatory authorities. Future changes in applicable law, regulations or government policies may materially impact our financial condition and results of operations.

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Critical Accounting Policies and Estimates

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties and could reflect materially different results under different assumptions and conditions. Methodologies the Company uses when applying critical accounting policies and developing critical estimates are included in its Annual Report on Form 10-K for the year ended December 31, 2024. Our accounting policies for allowance for credit losses, investment securities, and income taxes comprise those that management believes involve the most critical estimates to aid in fully understanding and evaluating our reported financial results. These policies require numerous estimates or economic assumptions that may prove inaccurate or may be subject to variations which may significantly affect our reported results and financial condition for the period or in future periods.

There were no changes from the significant accounting policies or critical accounting estimates previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. In preparing the financial statements, the Company is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the Company’s financial condition, results of operations, comprehensive income, changes in equity and cash flows for the interim periods presented. These adjustments are of a normal recurring nature and include appropriate estimated provisions.

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Comparison of Financial Condition at September 30, 2025 and December 31, 2024

Total Assets. Total assets increased by $7.1 million, or 2.6%, to $283.8 million at September 30, 2025 from $276.7 million at December 31, 2024. Total asset growth was primarily due to investments in available-for-sale securities funded by a mix of excess cash and additional borrowings.

Loans. The following table summarizes the changes in the composition of our loan portfolio by type of loan as of the dates indicated.


	September 30, 2025				December 31, 2024
(Dollars in thousands)	Amount		%		Amount		%		Change
Real estate loans
One- to four-family residential	$	78,373	47.6	%	$	81,097	48.5	%	$	(2,724)	(3.4)	%
Commercial real estate		33,679	20.4			22,108	13.2			11,571	52.3
Construction and land		18,850	11.4			32,941	19.7			(14,091)	(42.8)
Multi-family residential		5,367	3.3			2,570	1.5			2,797	108.8
Total real estate loans		136,269	82.7			138,716	82.9			(2,447)	(1.8)
Other loans
Commercial and industrial		25,665	15.6			26,439	15.8			(774)	(2.9)
Consumer		2,833	1.7			1,921	1.3			912	47.5
Total other loans		28,498	17.3			28,360	17.1			138	0.5
Total loans	$	164,767	100.0	%	$	167,076	100.0	%	$	(2,309)	(1.4)	%

During the nine months ended September 30, 2025, a $4.6 million multi-family construction loan paid-off and $15.8 million of outstanding construction loans at December 31, 2024 were converted to amortizing real estate loans following the completion of their respective construction projects. Of the total converted construction loans, $2.8 million was classified as multi-family, $2.2 million was classified as one- to four-family residential, and the remaining balance was classified as commercial real estate.

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.


(Dollars in thousands)	September 30, 2025		December 31, 2024		Change
Commercial real estate
Retail	$	9,725	$	4,005	$	5,720	142.8	%
Hospitality		5,742		3,460		2,282	66.0
Health service facilities		3,325		393		2,932	746.1
Restaurants		1,095		1,091		4	0.4
Oilfield services		374		402		(28)	(7.0)
Other non-owner occupied		2,380		2,658		(278)	(10.5)
Other owner occupied		11,038		10,099		939	9.3
Total commercial real estate	$	33,679	$	22,108	$	11,571	52.3
Construction and land
Multi-family residential	$	4,692	$	10,031	$	(5,339)	(53.2)	%
Health service facilities		9,695		7,139		2,556	35.8
Hospitality		-		2,716		(2,716)	(100.0)
Retail		-		5,106		(5,106)	(100.0)
Other commercial construction and land		1,772		4,364		(2,592)	(59.4)
Consumer residential construction and land		2,691		3,585		(894)	(24.9)
Total construction and land	$	18,850	$	32,941	$	(14,091)	(42.8)
Commercial and industrial
Oilfield services	$	9,532	$	14,823	$	(5,291)	(35.7)	%
Industrial equipment		7,865		2,831		5,034	177.8
Professional services		3,187		3,127		60	1.9
Other commercial and industrial		5,081		5,658		(577)	(10.2)
Total commercial and industrial loans	$	25,665	$	26,439	$	(774)	(2.9)

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Allowance for Credit Losses. At September 30, 2025, the allowance for credit losses on loans totaled $2.4 million, or 1.45% of total loans, compared to $2.5 million, or 1.51% of total loans at December 31, 2024. The allowance for credit losses on unfunded commitments totaled $127,000, up $6,000 from December 31, 2024. The Company recorded a reversal of provision for credit losses of $36,000 and net loan charge-offs were $83,000 for the nine months ended September 30, 2025. The reversal of provision for credit losses was largely due to a reduction in expected credit losses on individually evaluated loans and a decline in total loans. Net loan charge-offs were primarily related to residential mortgages and overdrawn deposit accounts.

The following table presents the changes in the allowance for credit losses and other related data for the periods indicated.


	Nine Months Ended September 30,							Year Ended December 31,
(Dollars in thousands)	2025			2024			2024
Allowance for credit losses:
Loans:
Balance, beginning of period	$	2,522		$	2,124		$	2,124
Provision for (reversal of) credit losses		(42)			557			667
Net loan (charge-offs) recoveries:
One- to four-family residential		(79)			(92)			(92)
Commercial real estate		-			(14)			(14)
Construction and land		-			-			-
Multi-family residential		-			-			-
Commercial and industrial		17			(129)			(128)
Consumer		(21)			(32)			(35)
Total net charge-offs		(83)			(267)			(269)
Balance, end of period	$	2,397		$	2,414		$	2,522

Unfunded lending commitments:
Balance, beginning of period	$	121		$	257		$	257
Provision for (reversal of) credit losses on unfunded lending commitments		6			(26)			(136)
Balance, end of period	$	127		$	231		$	121

Total provision for (reversal of) credit losses	$	(36)		$	531		$	531

Total loans at end of period	$	164,767		$	165,882		$	167,076
Total non-accrual loans at end of period		1,459			1,423			1,567
Total non-performing loans at end of period		1,823			1,438			1,631
Total average loans		166,938			152,066			155,867

Allowance for credit losses on loans as a percent of:
Total loans		1.45	%		1.46	%		1.51	%
Non-accrual loans		164.29			169.64			160.94
Non-performing loans		131.49			167.87			154.63

Net annualized (charge-offs) recoveries as a percent of average loans by portfolio:
One- to four-family residential		(0.13)	%		(0.15)	%		(0.11)	%
Commercial real estate		-			(0.08)			(0.06)
Construction and land		-			-			-
Multi-family residential		-			-			-
Commercial and industrial		0.09			(0.80)			(0.56)
Consumer		(1.37)			(1.77)			(1.51)
Total loans		(0.07)			(0.23)			(0.17)

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Substandard Loans and Non-performing Assets. The following table shows the amounts of our substandard loans and non-performing assets, which include non-accruing loans, accruing loans 90 days or more past due and foreclosed assets at the dates indicated. During the nine months ended September 30, 2025, the Company downgraded a $3.3 million non-real estate, commercial loan relationship to substandard due to declines in debt service coverage. At September 30, 2025, all loans within the downgraded relationship were current and performing.


	September 30,			December 31,
(Dollars in thousands)	2025			2024
Substandard loans
One- to four-family residential	$	2,286		$	2,417
Commercial real estate		256			227
Construction and land		132			158
Multi-family residential		-			-
Commercial and industrial		2,055			-
Consumer		-			-
Total substandard loans	$	4,729		$	2,802

Non-accruing loans
One- to four-family residential	$	1,438		$	1,530
Commercial real estate		-			-
Construction and land		21			37
Multi-family residential		-			-
Commercial and industrial		-			-
Consumer		-			-
Total non-accruing loans		1,459			1,567
Accruing loans 90 days or more past due
One- to four-family residential		364			64
Commercial real estate		-			-
Construction and land		-			-
Multi-family residential		-			-
Commercial and industrial		-			-
Consumer		-			-
Total accruing loans 90 days or more past due		364			64
Total non-performing loans		1,823			1,631
Foreclosed assets		76			194
Total non-performing assets	$	1,899		$	1,825

Total loans	$	164,767		$	167,076
Total assets		283,834			276,697

Total non-accruing loans as a percentage of total loans		0.89	%		0.94	%
Total non-performing loans as a percentage of total loans		1.11			0.98
Total non-performing loans as a percentage of total assets		0.64			0.59
Total non-performing assets as a percentage of total assets		0.67			0.66

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Investment Securities. Total investment securities were $59.8 million at September 30, 2025, up $17.6 million, or 41.8%, compared to $42.2 million at December 31, 2024. During 2025, the Company purchased $15.1 million of variable-rate and $3.9 million of fixed-rate securities. The weighted average yield of the securities purchased during the nine months ended September 30, 2025 was 5.12% at September 30, 2025.

Net unrealized losses on securities available-for-sale totaled $3.4 million at September 30, 2025, compared to $4.5 million at December 31, 2024. 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.

The following table presents the amortized cost of our total investment securities portfolio that mature during each of the periods indicated and the weighted average yields for each range of maturities at September 30, 2025.


	Contractual Maturity as of September 30, 2025
(Dollars in thousands)	One Year or Less			After One Through Five Years			After Five Through Ten Years			Over Ten Years			Total
Total investment securities
Mortgage-backed securities	$	-		$	5,322		$	377		$	40,808		$	46,507
U.S. Government and agency obligations		-			9,000			4,000			-			13,000
Municipal obligations		-			1,071			1,506			1,067			3,644
Total	$	-		$	15,393		$	5,883		$	41,875		$	63,151

Weighted average yield
Mortgage-backed securities		-	%		4.46	%		4.56	%		3.43	%		3.56	%
U.S. Government and agency obligations		-			1.24			2.46			-			1.61
Municipal obligations		-			3.35			4.81			1.41			3.39
Total weighted average yield		-			2.50			3.20			3.38			3.15

Securities are classified according to their contractual maturities without consideration of principal amortization, potential prepayments, or call options. The expected maturities may differ from contractual maturities because of the exercise of call options and potential paydowns. Accordingly, actual maturities may differ from contractual maturities. Weighted average yields are calculated by dividing the estimated annual income divided by the average amortized cost of the applicable securities.

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Deposits. The following table presents total deposits by account type for the dates indicated.


	September 30, 2025				December 31, 2024
(Dollars in thousands)	Amount		%		Amount		%		Change
Non-interest-bearing demand deposits	$	27,617	14.8	%	$	28,281	15.2	%	$	(664)	(2.3)	%
Interest-bearing demand deposits		35,748	19.2			48,334	26.0			(12,586)	(26.0)
Money market		11,783	6.3			10,729	5.8			1,054	9.8
Savings		52,152	28.0			37,639	20.3			14,513	38.6
Certificates of deposit		59,072	31.7			60,691	32.7			(1,619)	(2.7)
Total deposits	$	186,372	100.0	%	$	185,674	100.0	%	$	698	0.4

The ratio of the Company’s total loans to total deposits was 88.4% and 90.0% as of September 30, 2025 and December 31, 2024, respectively.

The decline in interest-bearing demand deposits was largely due to fluctuations in public fund balances. Total public fund deposits amounted to $30.5 million, or 16% of total deposits, at September 30, 2025, compared to $35.6 million, or 19% of total deposits, at December 31, 2024. At September 30, 2025, approximately 64% of our total public fund deposits consisted of non-interest-bearing and interest-bearing demand deposits, compared to 83% at December 31, 2024. At September 30, 2025, a larger portion of public funds were held in savings accounts and certificates of deposit.

The increase in savings deposits was primarily attributable to our high-yield savings special. The competitive offering has been successful at attracting new deposits and deepening relationships with existing customers. Certificates of deposit declined primarily due to the scheduled maturity of $5.0 million of brokered deposits, which has been partially offset by growth driven by rate specials.

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 $50.7 million at September 30, 2025 and $53.7 million at December 31, 2024. Total uninsured non-public fund deposits were approximately $25.2 million and $22.5 million at September 30, 2025 and December 31, 2024, respectively. At September 30, 2025, the full amount of our public fund deposits in excess of the FDIC’s insurance limit were secured by either pledged investment securities of $25.5 million or $20.0 million of a custodial letter of credit granted by the Federal Home Loan Bank of Dallas.

Borrowings. Borrowings outstanding at September 30, 2025 and December 31, 2024 consisted of FHLB advances totaling $14.7 million and $9.6 million. The Company increased borrowings to partially fund the growth in investment securities during the three-months ended September 30, 2025.

Shareholders’ Equity. Shareholders’ equity totaled $81.6 million, or 28.7% of total assets, at September 30, 2025, up $1.4 million, or 1.7%, from $80.2 million, or 29.0% of total assets, at December 31, 2024. During the nine months ended September 30, 2025, shareholders’ equity increased by the Company’s net income of $1.6 million and other comprehensive income of $909,000, which was the result of the change in unrealized losses on available-for-sale investment securities. These increases were partially offset by the Company’s repurchases of its common stock.

The Company repurchased 148,546 shares of its common stock at an average cost per share of $11.98 during the nine months ended September 30, 2025. Under the November 2024 Repurchase Plan, 38,604 shares of the Company’s common stock were available for repurchase at September 30, 2025. Since the announcement of our first share repurchase plan on January 26, 2023 and through September 30, 2025, the Company has repurchased a total of 1,160,396 shares of its common stock, or approximately 22% of the common shares originally issued, at an average cost per share of $11.94.

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Average Balances, Net Interest Income, and Yields Earned and Rates Paid. The following tables show 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.


	Three Months Ended September 30,
	2025						2024
(Dollars in thousands)	Average Balance		Interest		Average Yield/Rate^(TE)		Average Balance		Interest		Average Yield/Rate^(TE)
Interest-earning assets:
Loans receivable⁽¹⁾	$	167,032	$	2,816	6.69	%	$	161,410	$	2,717	6.70	%
Investment securities⁽²⁾		51,731		345	2.71			48,517		255	2.11
Other interest-earning assets		32,241		352	4.33			51,142		699	5.45
Total interest-earning assets		251,004		3,513	5.56			261,069		3,671	5.60
Non-interest-earning assets		21,983						21,371
Total assets	$	272,987					$	282,440
Interest-bearing liabilities:
Demand deposits, money market and savings accounts		94,308		529	2.22			85,164		382	1.78
Certificates of deposit		56,113		454	3.21			55,910		448	3.19
Total interest-bearing deposits		150,421		983	2.59			141,074		830	2.34
Borrowings		10,699		80	2.97			29,502		309	4.17
Total interest-bearing liabilities		161,120		1,063	2.62			170,576		1,139	2.66
Non-interest-bearing liabilities		30,731						30,557
Total liabilities		191,851						201,133
Shareholders' equity		81,136						81,307
Total liabilities and shareholders' equity	$	272,987					$	282,440
Net interest-earning assets	$	89,884					$	90,493
Net interest income; average interest rate spread			$	2,450	2.94	%			$	2,532	2.94	%
Net interest margin⁽³⁾					3.88						3.86
Average interest-earning assets to average interest-bearing liabilities					155.79						153.05

(1)	Includes non-accrual loans during the respective periods. Calculated net of deferred fees and discounts and loans in process.

(2)	Average investment securities does not include unrealized holding gains/losses on available-for-sale securities.

(3)	Equals net interest income divided by average interest-earning assets. Taxable equivalent yields are calculated using a marginal tax rate of 21%.

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	Nine Months Ended September 30,
	2025						2024
(Dollars in thousands)	Average Balance		Interest		Average Yield/Rate^(TE)		Average Balance		Interest		Average Yield/Rate^(TE)
Interest-earning assets:
Loans receivable⁽¹⁾	$	166,938	$	8,346	6.68	%	$	152,066	$	7,314	6.42	%
Investment securities⁽²⁾		49,010		914	2.52			56,408		790	1.88
Other interest-earning assets		33,011		1,088	4.41			56,738		2,247	5.29
Total interest-earning assets		248,959		10,348	5.56			265,212		10,351	5.22
Non-interest-earning assets		21,727						19,752
Total assets	$	270,686					$	284,964
Interest-bearing liabilities:
Demand deposits, money market and savings accounts		93,510		1,478	2.11	%		87,300		1,040	1.59	%
Certificates of deposit		56,327		1,371	3.25			56,319		1,330	3.15
Total interest-bearing deposits		149,837		2,849	2.54			143,619		2,370	2.20
Borrowings		9,968		216	2.89			28,989		908	4.18
Total interest-bearing liabilities		159,805		3,065	2.56			172,608		3,278	2.54
Non-interest-bearing liabilities		30,154						30,711
Total liabilities		189,959						203,319
Shareholders' equity		80,727						81,645
Total liabilities and shareholders' equity	$	270,686					$	284,964
Net interest-earning assets	$	89,154					$	92,604
Net interest income; average interest rate spread			$	7,283	3.00	%			$	7,073	2.68	%
Net interest margin⁽³⁾					3.92						3.56
Average interest-earning assets to average interest-bearing liabilities					155.79						153.65

(1)	Includes non-accrual loans during the respective periods. Calculated net of deferred fees and discounts and loans in process.

(2)	Average investment securities does not include unrealized holding gains/losses on available-for-sale securities.

(3)	Equals net interest income divided by average interest-earning assets. Taxable equivalent yields are calculated using a marginal tax rate of 21%.

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Rate/Volume Analysis. The following tables show 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.


	Three Months Ended						Nine Months Ended
	September 30, 2025 vs 2024						September 30, 2025 vs 2024
	Increase (Decrease) Due to				Total		Increase (Decrease) Due to				Total
(Dollars in thousands)	Rate		Volume		Increase (Decrease)		Rate		Volume		Increase (Decrease)
Interest income:
Loans receivable	$	4	$	95	$	99	$	297	$	735	$	1,032
Investment securities		74		16		90		239		(115)		124
Other interest-earning assets		(124)		(223)		(347)		(333)		(826)		(1,159)
Total interest income		(46)		(112)		(158)		203		(206)		(3)
Interest expense:
Demand deposits, money market and savings accounts		103		44		147		359		79		438
Certificates of deposit		4		2		6		41		-		41
Total deposits		107		46		153		400		79		479
Borrowings		(116)		(113)		(229)		(349)		(343)		(692)
Total interest expense		(9)		(67)		(76)		51		(264)		(213)
Increase (decrease) in net interest income	$	(37)	$	(45)	$	(82)	$	152	$	58	$	210

Comparison of Results of Operations for the Three Months Ended September 30, 2025 and 2024.

General. For the three months ended September 30, 2025, the Company reported net income of $489,000, compared to net income of $447,000 for the three months ended September 30, 2024. Net interest income was down $82,000, or 3.2%, for the three months ended September 30, 2025, compared to the same period in 2024. The Company recorded a reversal of provision for credit losses of $36,000 for the three months ended September 30, 2025, compared to provision for credit losses expense of $337,000 for the same period in 2024. Non-interest income was $315,000 for the three months ended September 30, 2025, compared to $620,000 for the same period in 2024. Non-interest income for the 2024 period included grant income of $280,000 due to a Bank Enterprise Award (“BEA”) Program grant from the Community Development Financial Institution (“CDFI”) Fund. Non-interest expense for the three months ended September 30, 2025 was down $58,000, or 2.6%, compared to the same period in 2024.

Interest Income. Total interest income decreased $158,000, or 4.3%, to $3.5 million for the three months ended September 30, 2025, compared to the same period in 2024. Interest income on loans and investment securities were up $99,000, or 3.6%, and $90,000, or 35.3%, respectively, for the three months ended September 30, 2025, compared to the same period in 2024. These increases were offset by a decrease in interest income on cash and due from banks of $333,000, or 49.1%, for the three months ended September 30, 2025, compared to the same period in 2024.

The average loan yield was 6.69% for the three months ended September 30, 2025, down from 6.70% for the same period in 2024. Average loans were $167.0 million for the three months ended September 30, 2025, up $5.6 million, or 3.5%, compared to the same period in 2024. At September 30, 2025, approximately 47% of our total loans have adjustable rates and approximately 45% of total loans are scheduled to re-price or mature during the next 12 months.

The increase in interest income on investment securities was primarily due to an increase in the average rate earned on investment securities as a result of security purchases during 2024 and 2025. The average rate earned on our investment securities portfolio was 2.71% for the three months ended September 30, 2025, up 60 bps compared to the same period in 2024.

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balance and average rate earned on other interest-earning assets were $32.2 million and 4.33%, respectively, for the three months ended September 30, 2025, down $18.9 million, or 37.0%, and 112 bps, respectively, compared to the same period in 2024.

Interest Expense. Total interest expense decreased $76,000, or 6.7%, to $1.1 million for the three months ended September 30, 2025, compared to the same period in 2024. Interest expense on deposits was $983,000 during the three months ended September 30, 2025, up $153,000, or 18.4%, compared to the same period in 2024. The average rate paid on interest-bearing deposits was 2.59% during the three months ended September 30, 2025, up 25 bps compared to the same period in 2024 largely driven by growth in high-yield savings account balances. Interest expense on borrowings decreased by $229,000, or 74.1%, during the three months ended September 30, 2025 compared to the same period in 2024 mainly due to the payoff of an advance under the Bank Term Funding Program (“BTFP”) during the fourth quarter of 2024.

Net Interest Income. Net interest income was $2.5 million for the three months ended September 30, 2025, down $82,000, or 3.2%, compared to the same period in 2024. Our interest rate spread was 2.94% for the three months ended September 30, 2025 and 2024. Our net interest margin was 3.88% and 3.86% for the three months ended September 30, 2025 and 2024, respectively. The increase in net interest margin over the comparable periods was largely the result of growth in loans and investment securities and the payoff of our BTFP advance.

Provision for Credit Losses. The Company recorded a reversal of provision for credit losses of $36,000 for the three months ended September 30, 2025, compared to provision for credit losses expense of $337,000 for the same period in 2024. The reversal was largely due to a reduction in expected credit losses on individually evaluated loans and a decline in total loans. 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 residential loans.

Non-interest Income. Non-interest income for the three months ended September 30, 2025 totaled $315,000, down $305,000 compared to the same period in 2024. The Company recognized as income a $280,000 Bank Enterprise Award (“BEA”) Program grant from the CDFI Fund during the three months ended September 30, 2024. During the three months ended September 30, 2025, we corrected an immaterial technical error related to fees charged for the use of foreign ATMs and refunded $30,000 of fees that were applied in error. The refunded fees were the primary reason for the decrease in income from service charges on deposit accounts when comparing the three months ended September 30, 2025 and 2024.

Non-interest Expense. Non-interest expense totaled $2.2 million for the three months ended September 30, 2025, down $58,000, or 2.6%, compared to the three months ended September 30, 2024.

Salaries and employee benefits expense totaled $1.3 million for the three months ended September 30, 2025, up $112,000, or 9.3%, compared to the same period in 2024 primarily due to raises issued during the third quarter of 2024, an increase in bonus expense, and new grants of share-based compensation issued in June 2025.

Occupancy and equipment expense totaled $220,000 for the three months ended September 30, 2025, up $27,000 or 14.0%, compared to the same period in 2024 mainly due to new ATMs, computers, and other technology upgrades.

Data processing and communication expense totaled $179,000 for the three months ended September 30, 2025, down $59,000, or 24.8%, compared to the same period in 2024. The Company upgraded to a new core processing system in 2024, and we settled our initial billings from the new service provider during the three months ended September 30, 2024, which resulted in an increase in expense for the period. In addition, data processing and communication expense in 2025 benefited from our transition to a new internet provider and a new contract for our loan document management solution.

Professional fees totaled $91,000 for the three months ended September 30, 2025, down $60,000, or 39.7%, compared to the same period in 2024. In 2024, professional fees associated with obtaining the BEA Program grant totaled $42,000 and were expensed during the three months ended September 30, 2024.

Other non-interest expense totaled $163,000 for the three months ended September 30, 2025, down $54,000, or 24.9%, compared to the same period in 2024 primarily due to decreased loan collection expenses and fraud losses during the 2025 period.

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Comparison of Results of Operations for the Nine Months Ended September 30, 2025 and 2024.

General. For the nine months ended September 30, 2025, the Company reported net income of $1.6 million, compared to a net loss of $3.7 million for the nine months ended September 30, 2024. Net interest income increased $210,000, or 3.0%, for the nine months ended September 30, 2025, compared to the same period in 2024. The Company recorded a reversal of provision for credit losses of $36,000 for the nine months ended September 30, 2025, compared to provision for credit losses expense of $531,000 for the same period in 2024. Non-interest income was $1.2 million for the nine months ended September 30, 2025, compared to a net loss of $4.2 million for the same period in 2024. 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. Non-interest expense for the nine months ended September 30, 2025 was down $541,000, or 7.6%, compared to the same period in 2024, primarily due to expenses incurred during the 2024 period related to the Company’s upgrade to a new core processing system.

Interest Income. Total interest income was $10.3 million and $10.4 million for the nine months ended September 30, 2025 and 2024, respectively. Interest income on loans and investment securities were up $1.0 million, or 14.1%, and $124,000, or 15.7%, respectively. These increases were partially offset by a decrease in interest income on cash and due from banks of $1.1 million, or 52.4%.

The average yield on loans was 6.68% for the nine months ended September 30, 2025, up from 6.42% for the same period in 2024. Average loans were $166.9 million for the nine months ended September 30, 2025, up $14.9 million, or 9.8%, compared to the same period in 2024.

The increase in interest income on investment securities was primarily due to an increase in the average rate earned on our investment securities portfolio for the nine months ended September 30, 2025, compared to the same period in 2024. The average rate earned on our investment securities portfolio was 2.52% for the nine months ended September 30, 2025, up 64 bps compared to the same period in 2024 primarily due to higher-yielding investment securities purchased during 2024 and 2025.

Interest income on interest-earning cash and due from banks, included in other interest-earning assets in the preceding tables, decreased mainly due to the decline in the average balance of interest-earning cash, as well as a decline in the average rate earned. The average rate earned on other interest-earning assets was 4.41% for the nine months ended September 30, 2025, down 88 bps compared to the same period in 2024.

Interest Expense. Total interest expense decreased $213,000, or 6.5%, to $3.1 million for the nine months ended September 30, 2025, compared to $3.3 million for the same period in 2024. Interest expense on deposits was $2.8 million during the nine months ended September 30, 2025, up $479,000, or 20.2%, compared to the same period in 2024. The average rate paid on interest-bearing deposits was 2.54% during the nine months ended September 30, 2025, up 34 bps compared to the same period in 2024 largely driven by growth in high-yield savings account balances and an increase in the average rate paid on interest-bearing demand deposits. Interest expense on borrowings decreased by $692,000, or 76.2%, during the nine months ended September 30, 2025, compared to the same period in 2024, mainly due to the payoff of a BTFP advance during the fourth quarter of 2024.

Net Interest Income. Net interest income was $7.3 million for the nine months ended September 30, 2025, up $210,000, or 3.0%, compared to the same period in 2024. Our interest rate spread was 3.00% and 2.68% for the nine months ended September 30, 2025 and 2024, respectively. Our net interest margin was 3.92% and 3.56% for the nine months ended September 30, 2025 and 2024, respectively. The increase in net interest margin and net interest income over the comparable periods was primarily the result of loan growth during the last nine months of 2024 and the payoff of our BTFP advance.

Provision for Credit Losses. The Company recorded a reversal of provision for credit losses of $36,000 for the nine months ended September 30, 2025, compared to provision for credit losses expense of $531,000 for the same period in 2024. The reversal was largely due to a reduction in expected credit losses on individually evaluated loans and a decline in total loans. 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 residential loans.

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Non-interest Income. Non-interest income for the nine months ended September 30, 2025 totaled $1.2 million, up $5.4 million compared to the same period in 2024. Non-interest income for the nine months ended September 30, 2025 included insurance proceeds of $216,000 for fire and flood damages related to foreclosed properties. During the 2024 period, the Company sold 50 available-for-sale investment securities for a total pre-tax loss of $5.5 million and recognized as income a $280,000 Bank Enterprise Award (“BEA”) Program grant from the CDFI Fund.

Non-interest Expense. Non-interest expense totaled $6.6 million for the nine months ended September 30, 2025, down $541,000, or 7.6%, compared to the same period in 2024. Non-interest expense for the nine months ended September 30, 2024 includes $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.

Salaries and employee benefits expense totaled $3.8 million for the nine months ended September 30, 2025, up $216,000, or 6.0%, compared to the same period in 2024 primarily due to higher salaries and wages, increased bonus expense, and new grants of share based compensation issued in June 2025.

Occupancy and equipment expense totaled $627,000 for the nine months ended September 30, 2025, up $55,000 or 9.6%, compared to the same period in 2024 mainly due to new ATMs, computers, and other technology upgrades.

Data processing and communication expense totaled $537,000 for the nine months ended September 30, 2025, down $633,000, or 54.1%, compared to the same period in 2024. Data processing and communication expense for the 2024 period included $509,000 of data conversion and other associated expenses due to the Company’s upgrade to a new core processing system. In addition to the expense savings related to our new core processing system, data processing and communication expense in 2025 also benefited from our transition to a new internet provider and a new contract for our loan document management solution.

Professional fees totaled $306,000 for the nine months ended September 30, 2025, down $69,000, or 18.4%, compared to the same period in 2024. In 2024, professional fees associated with obtaining the BEA Program grant totaled $42,000 and were expensed during the three months ended September 30, 2024. Lower legal expenses also contributed to lower professional fees during the 2025 period compared to 2024.

ATM and debit card expense totaled $75,000 for the nine months ended September 30, 2025, down $49,000, or 39.5%, compared to the same period in 2024 largely due to reductions in processing costs following the Company’s upgrade to a new core processing system.

Foreclosed assets expense totaled $114,000 for the nine months ended September 30, 2025, up $47,000, or 70.1%, compared to the same period in 2024. Net write-downs and losses on the sale of foreclosed assets totaled $106,000 for the nine months ended September 30, 2025, compared to $57,000 for the same period in 2024.

Other non-interest expense totaled $509,000 for the nine months ended September 30, 2025, down $85,000, or 14.3%, compared to the same period in 2024 primarily due to decreased loan collection expenses and fraud losses during the 2025 period.

Income Tax Expense. The Company reported income tax expense of $357,000 for the nine months ended September 30, 2025, compared to an income tax benefit of $1.0 million for the nine months ended September 30, 2024. The change in income taxes over the comparable prior period was largely due to the loss on sales of investment securities in 2024.

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Liquidity and Capital Resources

The Company maintains levels of liquid assets deemed adequate by management. We adjust our liquidity levels to fund deposit outflows, repay our borrowings, and to fund loan commitments. We also adjust liquidity, as appropriate, to meet asset and liability management objectives.

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.

At September 30, 2025, our borrowed funds consisted of FHLB advances with a total net carrying value of $14.7 million. The table below summarizes our unused and available liquidity sources as of September 30, 2025.


(Dollars in thousands)	September 30, 2025
Advances from the FHLB of Dallas	$	50,903
Line of credit with primary correspondent bank		17,800
Unpledged available-for-sale investment securities, at fair value		26,960
Total unused and available liquidity	$	95,663

The Bank’s available borrowing capacity with the FHLB is secured through a blanket floating lien on real estate loans. The Company also has a $20.0 million custodial letter of credit outstanding from the FHLB as of September 30, 2025, which is included in the calculation of our available capacity with the FHLB indicated above. 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 September 30, 2025, the Company used $20.0 million of the FHLB custodial letter of credit to collateralize public fund deposits.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and short-term investments. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. The most significant uses and sources of cash flows during the nine months ended September 30, 2025 included:

●

$19.0 million in outflows due to purchases of investment securities

●

$5.0 million in net advances from the FHLB

●

$2.5 million in net cash provided by operations

●

$2.5 million in proceeds from maturities and paydowns of investment securities

●

$2.2 million in proceeds from net decrease in total loans

●

$1.8 million in outflows for the repurchase of the Company’s common stock

We are committed to maintaining a strong liquidity position. We monitor our liquidity position daily and anticipate that we will have sufficient funds to meet our current funding commitments. Based on our deposit retention experience and current pricing strategy, we anticipate that the majority of maturing time deposits will be retained. We also anticipate continued use of our secondary funding sources.

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The following table summarizes our outstanding commitments to originate loans and to advance additional amounts pursuant to outstanding letters of credit, lines of credit and undisbursed construction loans at September 30, 2025.


			Amount of Commitment Expiration — Per Period
(Dollars in thousands)	Total Amounts Committed at September 30, 2025		To 1 Year		1 - 3 Years		3 - 5 Years		After 5 Years
Commitments to originate loans	$	120	$	120	$	-	$	-	$	-
Undisbursed portion of construction loans in process		10,525		5,218		5,307		-		-
Unused lines of credit		16,385		12,040		2,811		11		1,523
Unused overdraft privilege amounts		1,220		-		-		-		1,220
Letters of credit		-		-		-		-		-
Total commitments	$	28,250	$	17,378	$	8,118	$	11	$	2,743

The following table summarizes our contractual cash obligations at September 30, 2025.


			Payments Due By Period
(Dollars in thousands)	Total at September 30, 2025		To 1 Year		1 - 3 Years		3 - 5 Years		After 5 Years
Certificates of deposit	$	59,072	$	53,158	$	5,424	$	490	$	-
Borrowings		15,000		8,000		3,000		4,000		-
Total term debt	$	74,072	$	61,158	$	8,424	$	4,490	$	-

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.

Recent Accounting Pronouncements

For a discussion of the impact of recent accounting pronouncements, see Note 1 of the notes to our consolidated financial statements.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required.

ITEM 4. CONTROLS AND PROCEDURES

An evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Act”)) as of September 30, 2025, was carried out under the supervision and with the participation of our Chief Executive Officer, Chief Financial Officer and several other members of our senior management. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective to ensure that the information required to be disclosed by the Company in the reports it files or submits under the Securities and Exchange Act of 1934 is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms. There have been no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Act) that occurred during the three months ended September 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We do not expect that our disclosure controls and procedures and internal control over financial reporting will prevent all errors and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls may be circumvented by the individual acts of some persons, by collusion of two or more people, or by override of the control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not involved in any pending legal proceedings as a plaintiff or defendant other than routine legal proceedings occurring in the ordinary course of business, and at September 30, 2025, we were not involved in any legal proceedings, the outcome of which would be material to our financial condition or results of operations.

ITEM 1A. RISK FACTORS

Not applicable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company’s purchases of its common stock made during the three months ended September 30, 2025 consisted of share repurchases under the Company’s approved plans and are set forth in the following table.


For the Month Ended	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet be Purchased Under Plans or Programs
July 31, 2025		3,140	$	12.31		3,140		48,676
August 31, 2025		1,787		12.62		1,787		46,889
September 30, 2025		8,285		12.97		8,285		38,604
Total		13,212	$	12.77		13,212

On November 25, 2024, the Company announced that its Board of Directors approved the Company’s fifth share repurchase plan (the “November 2024 Repurchase Plan”). Under the November 2024 Repurchase Plan, the Company may purchase up to 215,000 shares, or approximately 5%, of the Company’s outstanding shares of common stock. Following the repurchases of common stock made during the three months ended September 30, 2025, 38,604 shares were still available for repurchase under the November 2024 Repurchase Plan. Since October 1, 2025 through November 7, 2025, the Company repurchased 15,944 shares of its common stock at an average price paid per share of $13.43 under the November 2024 Repurchase Plan.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Nothing to report.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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ITEM 5. OTHER INFORMATION

During the fiscal quarter ended September 30, 2025, none of the Company’s directors or executive officers informed the Company of the adoption, modification, or termination of any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any non-Rule 10b5-1 trading arrangement.

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ITEM 6. EXHIBITS


31.1	Rule 13a-14(a) Certifications (Chief Executive Officer)

31.2	Rule 13a-14(a) Certifications (Chief Financial Officer)

32.0	Section 1350 Certifications

101.INS	XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH	XBRL Taxonomy Extension Schema Document

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB	XBRL Taxonomy Extension Label Linkbase Document

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF	XBRL Taxonomy Extension Definitions Linkbase Document

104	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	CATALYST BANCORP, INC.


Date: November 13, 2025	By:	/s/ Joseph B. Zanco
		Joseph B. Zanco
		President and Chief Executive Officer
		(Duly Authorized Officer)

Date: November 13, 2025	By:	/s/ Jacques L. J. Bourque
		Jacques L. J. Bourque
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

Source: View Original Filing on SEC EDGAR

FAQ

How did Catalyst Bancorp (CLST) perform in Q3 2025?

Net income was $489 thousand with diluted EPS of $0.13. Net interest income was $2.45 million and non‑interest expense was $2.20 million.

What changed in Catalyst Bancorp’s balance sheet?

Total assets were $283.8 million. Deposits were $186.4 million and borrowings rose to $14.7 million. Equity increased to $81.6 million.

How did securities and AOCI move during the quarter?

AFS securities fair value was $44.85 million. Accumulated other comprehensive loss improved to $2.65 million from $3.56 million at year‑end.

What is the status of loans and credit quality?

Loans, net, were $162.37 million. The allowance was $2.40 million, and nonaccrual loans totaled $1.46 million.

What were Catalyst Bancorp’s funding costs and borrowings?

Borrowings included $15.0 million of FHLB advances at a 2.05% rate; total borrowings were $14.69 million after discounts.

How many CLST shares were outstanding?

There were 4,113,660 common shares outstanding as of November 7, 2025.

Did Catalyst Bancorp note any special items?

Yes. A $30,000 out‑of‑period correction refunded certain foreign ATM fees, reducing service charge income.

[10-Q] Catalyst Bancorp, Inc. Quarterly Earnings Report

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How did Catalyst Bancorp (CLST) perform in Q3 2025?

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Did Catalyst Bancorp note any special items?

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[10-Q] Catalyst Bancorp, Inc. Quarterly Earnings Report

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Banking analyst neutral

FAQ

How did Catalyst Bancorp (CLST) perform in Q3 2025?

What changed in Catalyst Bancorp’s balance sheet?

How did securities and AOCI move during the quarter?

What is the status of loans and credit quality?

What were Catalyst Bancorp’s funding costs and borrowings?

How many CLST shares were outstanding?

Did Catalyst Bancorp note any special items?

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