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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K


☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2025


☐	TRANSITION REPORT PURSUANT TO 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 or Organization)		(I.R.S. Employer Identification No.)


235 N. Court Street, Opelousas, Louisiana		70570
(Address of Principal Executive Offices)		(Zip Code)


Registrant’s telephone number, including area code: (337) 948-3033

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 (par value $.01 per share)		CLST		Nasdaq Capital Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ◻ No ⌧

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ◻ No ⌧

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 5(d) of the Securities and Exchange Act of 1934 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, or 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

The aggregate market value of the voting common equity held by non-affiliates of the Registrant, based upon the closing price of $12.39 for the common stock on June 30, 2025, as reported by the Nasdaq Stock Market, was approximately $43.0 million.

Number of shares of Common Stock outstanding as of March 30, 2026: 4,058,297.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Definitive Proxy Statement for the 2026 Annual Meeting of Shareholders are incorporated into Part III, Items 10 through 14.

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CATALYST BANCORP, INC.

Form 10-K

For the Year Ended December 31, 2025


PART I.
Item 1.	Business	3
Item 1A.	Risk Factors	22
Item 1B.	Unresolved Staff Comments	22
Item 1C.	Cybersecurity	22
Item 2.	Properties	23
Item 3.	Legal Proceedings	23
Item 4.	Mine Safety Disclosures	23
PART II.
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	24
Item 6.	[Reserved.]	24
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 7A.	Quantitative and Qualitative Disclosure About Market Risk	47
Item 8.	Financial Statements and Supplementary Data	48
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	89
Item 9A.	Controls and Procedures	89
Item 9B.	Other Information	90
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	90
PART III.
Item 10.	Directors, Executive Officers and Corporate Governance	90
Item 11.	Executive Compensation	90
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	90
Item 13.	Certain Relationships and Related Transactions, and Director Independence	91
Item 14.	Principal Accountant Fees and Services	91
PART IV.
Item 15.	Exhibits and Financial Statement Schedules	91
Item 16.	Form 10-K Summary	93
SIGNATURES		93

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PART I

Forward-Looking Statements

This Annual Report on Form 10-K contains certain forward-looking statements (as defined in the Securities Exchange Act of 1934 and the regulations thereunder). Forward-looking statements are not historical facts but instead represent only the beliefs, expectations or opinions of Catalyst Bancorp and its management regarding future events, many of which, by their nature, are inherently uncertain. Forward-looking statements may be identified by the use of such words as: “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, or words of similar meaning, or future or conditional terms such as “will”, “would”, “should”, “could”, “may”, “likely”, “probably”, or “possibly.” Forward-looking statements include, but are not limited to, financial projections and estimates and their underlying assumptions; statements regarding plans, objectives and expectations with respect to future operations, products and services; and statements regarding future performance. Such statements are subject to certain risks, uncertainties and assumptions, many of which are difficult to predict and generally are beyond the control of Catalyst Bancorp and its management, that could cause actual results to differ materially from those expressed in, or implied or projected by, forward-looking statements. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) general economic and competitive conditions, either nationally or in our market area, which if worse than expected could negatively affect aspects of the business of Catalyst Bancorp including but not limited to the volume of loan originations, deposit flows, asset quality and real estate values; (2) the levels of non-interest income and expense and the amount of loan losses; (3) competitive pressure among depository institutions increasing significantly; (4) changes in inflation and in the interest rate environment causing reduced interest margins or lower fair values of financial instruments; (5) reliance on third-party vendors for key services; (6) political and social unrest including acts of war or terrorism; (7) cyber threats, attacks or events; (8) legislation or changes in regulatory requirements or accounting policies and practices adversely affecting the business in which Catalyst Bancorp will be engaged; (9) failure to fully realize all the benefits we anticipate in connection with any future acquisitions of other institutions or our assumptions made in connection therewith being inaccurate; and (10) other liquidity, interest rate, and operational risks associated with our business. Catalyst Bancorp undertakes no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.

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Item 1. Business

BUSINESS OF CATALYST BANCORP, INC.

Catalyst Bancorp, Inc. (“Catalyst Bancorp” or the “Company”) was incorporated by St. Landry Homestead Federal Savings Bank (“St. Landry Homestead” or the “Bank”) in February 2021 as part of the conversion of St. Landry Homestead from the mutual to the stock form of organization. In June 2022, St. Landry Homestead changed its name to Catalyst Bank (the “Bank”).

The conversion of the Bank from the mutual to the stock form of organization (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 and became the holding company for the Bank. As a result of the Conversion, the Bank is a wholly owned subsidiary of Catalyst Bancorp. Concurrently with consummation of the Conversion, the Company completed its initial public offering and issued 5,290,000 shares of its common stock.

Catalyst Bancorp is a registered bank holding company and is authorized to pursue business activities permitted by applicable laws and regulations, which may include the acquisition of banking and financial services companies. See “Supervision and Regulation – Holding Company Regulation” for a discussion of the activities that are permitted for bank holding companies. We have not entered into a definitive agreement to acquire any other financial institution, but we may determine to do so in the future.

Catalyst Bancorp’s cash flow depends on earnings from the investment of the net proceeds from the offering that it retains and any dividends it receives from the Bank. The Bank is subject to regulatory limitations on the amount of dividends that it may pay. See “Supervision and Regulation – Federal Banking Regulation – Capital Distributions.” The Company neither owns nor leases any property, but instead utilizes the premises, equipment and furniture of the Bank. At the present time, the Company employs only persons who are officers of the Bank to serve as officers of the Company. The Company does, however, use the support staff of the Bank from time to time. Catalyst Bancorp may hire additional employees, as appropriate, to the extent we expand our business in the future.

Our headquarters is located at 235 N. Court Street, Opelousas, Louisiana, and our telephone number is (337) 948-3033. We maintain a website at www.catalystbank.com, and we provide our customers with online banking services. This Annual Report on Form 10-K, as well as all other filings we make with the U.S. Securities and Exchange Commission, are available on our website under the “Investor Relations” tab. Information on our website should not be considered a part of this Annual Report on Form 10-K.

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.

BUSINESS OF CATALYST BANK

General

Catalyst Bank is a federally-chartered community-oriented savings bank which was originally organized in 1922 under the name St. Landry Homestead Federal Savings Bank and is headquartered in Opelousas, Louisiana. St. Landry Homestead Federal Savings Bank changed its name to Catalyst Bank in June 2022. The Bank currently conducts its business from its main office as well as five additional full-service branch offices. Our branch offices are located in Eunice, Port Barre and Opelousas, in St. Landry Parish, and Lafayette and Carencro, in Lafayette Parish. St. Landry and Lafayette Parishes are in the Acadiana region of south central Louisiana. Our newest branch offices, located in Carencro and Lafayette, Louisiana, opened for business in October 2020 and November 2021, respectively.

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We are primarily engaged in attracting deposits from the general public and using those funds to invest in loans and securities. Our principal sources of funds are customer deposits, repayments of loans, maturities of investments and funds borrowed from outside sources such as the Federal Home Loan Bank (“FHLB”) of Dallas or the Federal Reserve Bank of Atlanta. These funds are primarily used for the origination of loans, including single-family residential first mortgage loans, commercial real estate mortgage loans, multi-family residential mortgage loans, commercial and industrial loans, construction and land loans and other loans. The Bank derives its income principally from interest earned on loans and investment securities and, to a lesser extent, from fees received in connection with the origination of loans, service charges on deposit accounts and for other services. The Bank’s primary expenses are compensation and benefits, interest expense on deposits and borrowings and other general operating expenses.

Historically, the Bank was a traditional thrift institution with an emphasis on long-term single-family residential first mortgage loans secured by residences located in our traditional market area centered in Opelousas, Louisiana. In 2021, our business strategy shifted to enhance our products and services and embrace a full-service community bank model by focusing on attracting a greater number of small-to mid-sized businesses and business professionals in our market area and increasing our holdings of commercial and multi-family residential real estate loans and commercial and industrial loans. Commercial real estate loans and commercial and industrial loans are deemed attractive due to their generally higher yields and shorter anticipated lives compared to single-family residential mortgage loans.

Market Area and Competition

Historically, our business focus has centered on areas within a short drive from our banking offices in St. Landry Parish and adjoining areas. We expanded our branch office network into neighboring Lafayette Parish by opening our Carencro office in October 2020 and our Lafayette office in November 2021. Lafayette is the hub of economic growth in the Acadiana region of south-central Louisiana. We expect to continue to increase our penetration in both St. Landry and Lafayette Parishes with a focus on serving small- to mid-sized businesses and professionals.

The oil and gas industry has had sizable influence on the economic activity in the Acadiana region of south-central Louisiana over the last several decades. In recent years, Acadiana has diversified and other sectors have emerged as drivers of the local economy, including alternative energy support services, healthcare, technology, manufacturing, finance, tourism and other service-related industries. The education, healthcare and social service sectors represent the largest employment sectors in St. Landry Parish and Lafayette Parish.

We face significant competition in originating loans and attracting deposits. This competition stems primarily from commercial banks, other savings banks and savings associations, credit unions and mortgage-banking companies. Many of the financial service providers operating in our market area are significantly larger, and have greater financial resources, than us. We face additional competition for deposits from short-term money market funds, other corporate and government securities funds, mutual funds, and other non-depository financial institutions such as brokerage firms and insurance companies.

Lending Activities

General. At December 31, 2025, our loan portfolio totaled $170.2 million, or 60.2% of total assets. Historically, our principal lending activity has been the origination of loans collateralized by one- to four-family, also known as “single-family,” residential real estate loans located in our market area. Since 2021, we have been focused on increasing our commercial loan portfolio by originating commercial real estate and multi-family residential mortgage loans, commercial and industrial loans, and construction and land loans. In addition, we originate consumer loans, consisting primarily of loans secured by deposits at the Bank, automobile, recreational vehicle and boat loans, and other loans.

Loan Originations. Our lending activities are subject to underwriting standards and loan origination procedures established by our Board of Directors and management. Loan originations are obtained through a variety of sources, including existing customers as well as new customers obtained from referrals and local advertising and promotional efforts. Single-family residential mortgage loan applications and consumer loan applications are taken at any of the Bank’s branch offices. Applications for other loans typically are taken personally by one of our commercial bankers. All loan

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applications are processed and underwritten by our credit department personnel under the supervision of our Chief Risk Officer.

Our underwriting standards do not require that new single-family residential mortgage loans conform to secondary market standards and a significant portion of our single-family residential mortgage loans are considered “non-conforming” due to factors such as the borrower’s job status or income, the condition or age of the residence or other factors. For loans which are secured by real estate, property valuations are undertaken by independent third-party appraisers approved by our Board of Directors.

In addition to originating loans, we occasionally purchase participation interests in larger balance loans, typically commercial real estate mortgage loans or construction and land development loans, from other financial institutions in our market area or other markets in Louisiana. At December 31, 2025, we held purchased participation interests in 12 loans with an aggregate outstanding balance of $26.3 million. Full underwriting and credit analysis procedures are performed by our credit department before such participations are purchased to verify compliance with our loan policy. Generally, we purchase such loans without any recourse to the seller. However, we actively monitor the performance of such loans through the receipt of regular reports from the lead lender regarding the loan’s performance, physically inspecting the loan security property on a periodic basis, discussing the loan with the lead lender on a regular basis and receiving copies of the borrower’s updated financial statements.

In addition, the Bank also occasionally sells participation interests in loans it originates. During 2025, the Bank sold participation interests in an $11.8 million construction loan commitment. The Bank retained 42% of this loan commitment and the outstanding principal balance of the Bank’s share of the loan totaled $4.2 million at December 31, 2025. We had no sold loan participation interests at December 31, 2024. We generally have sold participation interests in loans when a loan would exceed our loans-to-one borrower limits. Our legal loans-to-one borrower limit, with certain exceptions, generally is 15% of the Bank’s unimpaired capital and surplus, or $11.6 million at December 31, 2025. At December 31, 2025, the five largest aggregate amounts outstanding to a single borrower and related entities amounted to $8.6 million, $8.2 million, $7.3 million, $7.1 million, and $5.0 million, respectively, and all of such loans were performing in accordance with their terms.

One- to Four-Family Residential Mortgage Lending. Historically, our primary lending focus was the origination of loans secured by first mortgages on one- to four-family residences in our market area. At December 31, 2025, $80.1 million, or 47.1% of our total loan portfolio, consisted of single-family residential mortgage loans with an average outstanding balance of $75,000 per loan. At December 31, 2025, non-performing loans totaled $2.6 million and 94.6% of total non-performing loans were one- to four-family residential mortgages.

Applications for one-to four-family residential mortgage loans are accepted at any of our banking offices and are then referred to our credit department for processing. This involves obtaining all documents required to complete the underwriting and determining whether the loan meets our policy standards. Our underwriting standards do not require that new single-family residential mortgage loans conform to secondary market standards. We underwrite one- to four-family residential mortgage loans with loan-to-value ratios which generally do not exceed 80%. Loan-to-value ratios are based upon an appraisal of the collateral performed by a licensed and Company-approved appraiser. If appropriate, we also require that title insurance, hazard insurance and flood insurance be maintained on all properties securing real estate loans.

We currently originate fixed-rate, fully amortizing mortgage loans with maturities up to 30 years. We also offer adjustable rate mortgage (“ARM”) loans where the interest rate is generally fixed for the initial three to five years and then adjusts every three to five years thereafter. At December 31, 2025, 54.6% of our single-family residential mortgage loans were ARM loans. Our ARM loans have a cap on any increase or decrease in the interest rate of up to 2.5% at any adjustment date and a 6% cap above or below the initial interest rate over the life of the loan. On and prior to December 31, 2021, the interest rate on our ARM loans was based on the Semi-Annual Weighted Average Cost of Funds Index of the FHLB for the 11^th District. The 11^th District Cost of Funds Index (“COFI”) was discontinued after the publication of the index for the period ended December 2021. As a result, we have replaced the 11^th District Cost of Funds Index with the Enterprise 11^th District COFI Replacement Index, which is administered and published by the Federal Home Loan Mortgage Corporation.

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Although adjustable-rate one- to four-family residential real estate loans may reduce our vulnerability to changes in market interest rates because they periodically reprice, as interest rates increase, the required payments due from the borrower also increase (subject to rate caps), increasing the potential for default by the borrower. At the same time, the ability of the borrower to repay the loan and the marketability of the underlying collateral may be adversely affected by higher interest rates. Upward adjustments of the contractual interest rate are also limited by the maximum periodic and lifetime rate adjustments permitted by our loan documents. As a result, the effectiveness of adjustable-rate one- to four-family residential real estate loans in compensating for changes in market interest rates may be limited during periods of rapidly rising interest rates.

Commercial Real Estate Loans and Multi-Family Residential Loans. At December 31, 2025, our commercial real estate and multi-family residential loans totaled $38.2 million, or 22.4% of our total loan portfolio at such date. We have increased our emphasis on commercial real estate loans and multi-family residential real estate loans as they generally have shorter terms to maturity, improving the Bank’s interest rate risk profile, and provide higher yields than single-family residential mortgage loans.

Our commercial real estate loan portfolio totaled $32.9 million, or 19.3% of the total loan portfolio, at December 31, 2025 and consists primarily of loans secured by retail and office space, industrial use buildings, hotels, medical and health services properties, and other real estate used for commercial purposes located in our market area. The five largest commercial real estate loans outstanding at December 31, 2025 were $6.1 million, $2.9 million, $2.7 million, $2.2 million and $1.6 million, and all of such loans were performing in accordance with their terms. At such date, the average outstanding balance per commercial real estate loan was $358,000.

At December 31, 2025, the Bank’s multi-family residential mortgage loans amounted to $5.3 million, or 3.1% of the total loan portfolio. The Bank’s multi-family residential mortgage loans, which are underwritten and approved in a manner consistent with the Bank’s commercial real estate loans, are secured by residential properties with more than four units located in the Bank’s market area. At December 31, 2025, the Bank’s two largest multi-family residential mortgage loans totaled $2.9 million and $1.6 million and were performing in accordance with their terms. At December 31, 2025, we had a total of six multi-family residential mortgage loans with an average outstanding balance of $885,000 per loan.

Although terms for commercial real estate and multi-family residential loans vary, our underwriting standards generally allow for terms not exceeding 20 years and loan-to-value ratios of not more than 80%. Interest rates are typically adjustable, based upon designated market indices such as The Wall Street Journal prime rate, or fixed-rate, and fees are charged to the borrower at the origination of the loan. The actual lives of such loans generally are less than their contractual terms to maturity due to prepayments and re-financings. Generally, we obtain personal guarantees of the principals as additional collateral for commercial real estate and multi-family residential loans.

Commercial real estate and multi-family residential lending can involve a greater degree of risk than single-family residential lending. These risks include larger loans to individual borrowers and loan payments that are dependent upon the successful operation of the project or the borrower’s business. These risks can be affected by supply and demand conditions of rental housing units, office and retail space and other commercial space in the project’s market area. Various aspects of commercial real estate and multi-family residential transactions are evaluated in an effort to mitigate the additional risk in these types of loans. In our underwriting procedures, consideration is given to the stability of the property’s cash flow history, future operating projections, current and projected occupancy levels, location and physical condition. We also evaluate the credit and financial condition of the borrower, and if applicable, the guarantor. Generally, we impose a debt service ratio (the ratio of net cash flows from operations before the payment of debt service to debt service) of not less than 125% in the case of commercial real estate and multi-family residential loans. Appraisal reports prepared by independent appraisers are obtained on each loan to substantiate the property’s market value, and are reviewed by us prior to the closing of the loan.

At December 31, 2025, one commercial real estate loan with an outstanding balance of $32,000 was greater than 30 days past-due, and no multi-family residential loans were past-due greater than 30 days. In addition, none of our commercial real estate or multifamily loans were on non-accrual status at December 31, 2025. In aggregate, the Company recorded zero charge-offs of commercial real estate or multi-family residential loans during the year ended December 31, 2025, compared to $14,000 of net charge-offs during the year ended December 31, 2024.

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Construction and Land Loans. At December 31, 2025, construction and land loans totaled $18.8 million, or 11.0% of our total loans outstanding. This portfolio largely consists of loans for the construction of multi-family residential and health care properties. This portfolio also includes residential construction loans and loans secured by raw land (unimproved and unplatted) and lots (land which has been subdivided and platted).

The outstanding balance of our non-residential commercial construction loans at December 31, 2025 totaled $17.0 million. Of this amount, $12.3 million was attributable to four separate purchased participation interests, which are supporting the construction of apartment complexes, health care service facilities, and commercial subdivision development. The remaining balance of our non-residential commercial construction loans at December 31, 2025 was primarily related to the construction of a hospital. All of our non-residential commercial construction loans were performing in accordance with their terms as of December 31, 2025.

As of December 31, 2025, the outstanding balance of our land loans totaled $975,000 with an average outstanding balance per loan of $36,000. Such loans are generally secured by properties in our market area and have original terms to maturity ranging from two to thirty years. Our policy generally is that such loans have loan-to-value ratios not to exceed 70% in the case of personal land loans or 65% in the case of commercial land loans. At December 31, 2025, one land loan totaling $20,000 was on non-accrual status.

Single-family residential construction loans totaled $882,000 at December 31, 2025. Generally, the Bank’s single-family residential construction loans are for the construction and permanent financing (“construction/permanent loans”) of the related property. The Bank’s construction/permanent loans are structured to provide one closing for both the construction loan and the permanent financing. Generally, employees of the Bank make periodic inspections of the construction site during the construction phase and loan proceeds are disbursed directly to the contractors as construction progresses. Typically, disbursements are made in five draws during the construction period. Construction/permanent loans require payment of interest only during the construction phase and are structured to be converted to fixed- or adjustable-rate permanent loans at the end of the construction phase. Prior to making a commitment to fund a construction loan, the Bank requires an appraisal. Our construction/permanent loans have a maximum loan-to-value ratio of 80% during the construction phase, and the construction phase is generally less than 24 months. Loan proceeds are disbursed based on a percentage of completion.

Construction financing is generally considered to involve a higher degree of credit risk than long-term financing on improved, owner-occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the property’s value at completion of construction compared to the estimated cost, including interest, of construction and other assumptions. Additionally, if the estimate of value proves to be inaccurate, the Bank may be confronted with a project, when completed, having a value less than the loan amount. The Bank has attempted to minimize these risks by generally concentrating on construction and development loans in its market area to contractors who have established a quality reputation.

Commercial and Industrial Loans. Our commercial and industrial loans totaled $31.2 million or 18.3% of the total loan portfolio, at December 31, 2025. Our commercial and industrial loans are typically made to small and mid-sized businesses in our market area and may be for working capital, equipment financing, inventory financing or accounts receivable financing. These loans may have adjustable or fixed rates of interest and generally have terms of five years or less. Our commercial and industrial loans include unsecured loans and loans secured by equipment, machinery or other corporate, non-real estate assets. Our maximum loan to value ratio for commercial and industrial loans is generally 80% and we typically require a minimum debt service coverage ratio of 125% on such loans. In addition, we generally obtain personal guarantees from the principals of the borrower with respect to all commercial and industrial loans.

Total commercial and industrial loans at December 31, 2025 largely consisted of loans to local businesses involved in oil and gas support services, industrial equipment, and professional services. The five largest relationships included in our commercial and industrial loans at December 31, 2025 had total outstanding loan balances of $8.6 million, $8.2 million, $2.5 million, $1.9 million and $1.5 million, and all of which were performing in accordance with their terms. At December 31, 2025, approximately $2.4 million of our commercial and industrial loans were unsecured. During the year ended December 31, 2025, the Company did not charge-off any commercial and industrial loans. Net charge-offs of commercial and industrial loans totaled $128,000 and were largely attributable to unsecured loans in 2024.

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Commercial and industrial loans generally are deemed to involve a greater degree of risk than single-family residential mortgage loans. Repayment of our commercial and industrial loans is often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans may fluctuate in value. Credit support provided by the borrower for most of these loans and the probability of repayment is based on the liquidation of the pledged collateral and enforcement of a personal guarantee, if any exists. As a result, in the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers. The collateral securing other loans, such as inventory or equipment, may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business.

Consumer Lending Activities. In our efforts to provide a full range of financial services to our customers, we offer various types of consumer loans. Our consumer loans totaled $1.9 million, or 1.2% of our total loan portfolio at December 31, 2025. Our consumer loans are largely comprised of loans secured by deposits at the Bank, which amounted to $1.2 million at December 31, 2025. In addition, our consumer loans include automobile loans, boat loans, recreational vehicle loans and unsecured personal loans.

Consumer loans generally have higher interest rates and shorter terms than residential loans. However, consumer loans have additional credit risk due to the type of collateral securing the loan or in some cases the absence of collateral. In the years ended December 31, 2025 and 2024, net charge-offs of consumer loans totaled $30,000 and $35,000, respectively, and were primarily attributable to losses on overdrawn deposit accounts.

Loan Approval Procedures and Authority. Our Board of Directors establishes the Bank’s lending policies. Our loan policy is reviewed at least annually by our management team in order to propose modifications as a result of market conditions, regulatory changes and other factors. All modifications must be approved by our Board of Directors.

Various officers or combinations of officers of the Bank have the authority within specifically identified limits to approve new loans. The maximum loan amount that may be approved by an individual officer is $300,000. Loans up to $400,000 may be approved by the President and an additional designated officer. All other loans must be approved by our Board-level Loan Committee or the full Board of Directors.

Asset Quality

General. One of our key objectives has been, and continues to be, maintaining a high level of asset quality. In addition to maintaining credit standards for new originations which we believe are sound, we are proactive in our loan monitoring, collection and workout processes in dealing with delinquent or problem loans.

When a borrower fails to make a scheduled payment, we attempt to cure the deficiency by making personal contact with the borrower. Initial contacts are generally made within 30 days after the date the payment is due. In most cases, deficiencies are promptly resolved. If the delinquency continues, late charges are assessed and additional efforts are made to collect the deficiency. Delinquent loans are reviewed and monitored by management and the Board of Directors.

We stop accruing interest on loans (“non-accrual” loans) when the loan is determined by management to be uncollectible due to the borrower’s failure to meet repayment terms, the borrower’s deteriorating or deteriorated financial condition, or the depreciation of underlying collateral. Interest income is not accrued on these loans until the borrower’s financial condition and payment record demonstrate an ability to service the debt.

Property acquired by the Bank through foreclosure is recorded at fair value, less estimated cost to sell, at the date of acquisition. Thereafter, if there is a further deterioration in value, we charge earnings for the decrease in value. When appropriate, the Bank obtains an appraisal on real estate subject to foreclosure proceedings prior to the time of foreclosure. Periodically, we obtain re-appraisals and conduct inspections on our foreclosed properties.

Federal regulations and our policies require that we utilize an internal asset classification system as a means of reporting problem and potential problem assets. We have incorporated an internal asset classification system, consistent with Federal banking regulations, as a part of our credit monitoring system. We currently classify problem and potential problem assets

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as “special mention,” “substandard,” “doubtful” or “loss” assets. An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the insured institution will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. Assets which do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are required to be designated “special mention.”

We review and classify loans at least quarterly and the Board of Directors is provided with reports on our classified and criticized assets. We classify assets in accordance with the management guidelines described above. At December 31, 2025 and 2024, loans classified as “substandard” totaled $5.0 million and $2.8 million, respectively. Loans classified as “special mention totaled $3.6 million and $478,000 at December 31, 2025 and 2024, respectively. During 2025, the Company downgraded a $3.3 million non-real estate, commercial relationship to substandard and a $2.5 million commercial real estate relationship to special mention due to declines in debt service coverage. At December 31, 2025, all loans within the downgraded relationships were current and performing. Generally, loans classified as “doubtful” or “loss” are charged-off. As such, total loans at December 31, 2025 or 2024 did not include any balances attributable to loans classified as “doubtful” or “loss”.

For all loans, the Company estimates and records an allowance for credit losses in accordance with an accepted methodology. Refer to Note 1 of Item 8 – Financial Statements and Supplementary Data for more detail on the Company’s policies related to its estimate of an allowance for credit losses on loans and other financial assets. The allowance for credit losses on loans represents the Company’s best estimate of losses expected over the life of the loan portfolio as of the relevant reporting date. The allowance is established through a provision 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. The sum of the allowance for credit losses on loans, other financial assets held at amortized cost, and unfunded lending commitments is referred to as the allowance for credit losses.

A bank or savings institution’s determination as to the classification of its assets and the amount of its allowance for credit losses is subject to review by Federal bank regulators. While management is responsible for the establishment of the allowance for credit losses and for adjusting such allowance through provisions for credit losses, management may determine, as a result of such regulatory reviews, that an increase or decrease in the allowance or provision for credit losses may be necessary or that loan charge-offs are needed. The Federal banking agencies have adopted an interagency policy statement on the allowance for credit losses. The policy statement provides guidance for financial institutions on both the responsibilities of management for the assessment and establishment of allowances and guidance for banking agency examiners to use in determining the adequacy of general valuation guidelines. Generally, the policy statement recommends that institutions have effective systems and controls to identify, monitor and address asset quality problems; that management analyze all significant factors that affect the collectibility of the portfolio in a reasonable manner; and that management establish acceptable allowance evaluation processes that meet the objectives set forth in the policy statement. Our management believes that, based on information currently available, the allowance for credit losses represents our best estimate of losses expected over the life of the loan portfolio at each relevant reporting date. However, actual losses are dependent upon future events and, as such, further additions to the level of the allowance for credit losses may become necessary.

Loan Modifications. We occasionally modify loans to extend the term or make other concessions to help a borrower who is experiencing financial difficulty stay current on his or her loan and to avoid foreclosure. We consider modifications only after analyzing the borrower’s current repayment capacity, evaluating the strength of any guarantors based on documented current financial information, and assessing the current value of any collateral pledged. We generally do not forgive principal or interest on loans, but may do so if it is in our best interest and increases the likelihood that we can collect the remaining principal balance. We may modify the terms of loans to lower interest rates (which may be at or below market rates), to provide for fixed interest rates on loans where fixed rates are otherwise not available, to provide for longer

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amortization schedules, or to provide for interest-only terms. These modifications are made only when a workout plan has been agreed to by the borrower that we believe is reasonable and attainable and in our best interests.

At December 31, 2025 and 2024, loans with modifications for borrowers experiencing financial difficulty totaled $719,000 and $583,000, respectively. The Company was not committed to lend any additional funds to borrowers with modified terms and experiencing financial difficulty at December 31, 2025 or 2024.

Allowance for Credit Losses. The Company calculates its estimate of current expected credit losses under the guidance in Topic 326 of the Financial Accounting Standard Board’s (“FASB”) Accounting Standards Codification (“ASC 326”). Loans with similar risk characteristics are grouped into pools or segments and collectively evaluated to estimate the allowance for credit losses. Loans are individually evaluated for credit losses when they do not share similar risk characteristics with our identified loan pools or segments. Refer to Note 1 of Item 8 – Financial Statements and Supplementary Data for more detail on the Company’s policies related to its estimate of the allowance for credit losses on loans and other financial assets. During the year ended December 31, 2025 and 2024, the provision for credit losses totaled $60,000 and $531,000, respectively. The ratio of our allowance for credit losses on loans as a percentage of total loans was 1.39% at December 31, 2025, compared to 1.51% at December 31, 2024.

Management reassesses the allowance for credit losses at least quarterly. Our evaluation process includes, among other things, an analysis of delinquency trends, non-performing loan trends, the level of charge-offs and recoveries, prior loss experience, total loans outstanding, the volume of loan originations, the type, size and geographic concentration of our loans, the value of collateral securing the loan, the borrower’s ability to repay and repayment performance, the number of loans requiring heightened management oversight, current and future economic conditions and industry experience. The establishment of the allowance for credit losses is significantly affected by management judgment and uncertainties and there is a likelihood that different amounts would be reported under different conditions or assumptions. Various regulatory agencies, as an integral part of their examination process, periodically review our allowance for credit losses. While management is responsible for the establishment of the allowance for credit losses and for adjusting such allowance through provisions for credit losses, management may determine, as a result of such regulatory reviews, that an increase or decrease in the allowance or provision for credit losses may be necessary or that loan charge-offs are needed.

Investment Securities

We have authority to invest in various types of securities, including mortgage-backed securities, U.S. Treasury obligations, securities of various federal agencies and of state and municipal governments, certificates of deposit at federally insured banks and savings institutions, and federal funds. Our investment policy is approved by the Board of Directors.

The investment policy is designed primarily to manage the interest rate sensitivity of our assets and liabilities, to generate a favorable return without incurring undue interest rate and credit risk, to complement our lending activities and to provide and maintain liquidity. The current investment policy generally permits investments in debt securities issued by the U.S. government and U.S. agencies, municipal bonds, and corporate debt obligations, as well as investments in preferred and common stock of government agencies and government sponsored enterprises such as Fannie Mae, Freddie Mac and the FHLB (federal agency securities). The policy also permits investments in mortgage-backed securities, including pass-through securities issued and guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae.

At December 31, 2025, our investment securities portfolio totaled $65.4 million, or 23.1% of total assets at such date. The largest component of our investment securities portfolio at December 31, 2025 was pass-through mortgage-backed securities issued by Fannie Mae, Ginnie Mae and Freddie Mac, which totaled $48.9 million, followed by our investment in U.S. government and federal agency obligations, which totaled $13.0 million at such date. During the year ended December 31, 2024, the Company sold 50 available- for-sale investment securities for a total pre-tax loss of $5.5 million. Proceeds from the investment sales totaled $42.6 million and were deployed into a mix of cash and higher-yielding earning assets to improve net interest income and our exposure to interest rate risk.

Ginnie Mae securities are backed by loans insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. The timely payment of principal and interest on Ginnie Mae securities is guaranteed by Ginnie Mae and backed by the full faith and credit of the U.S. Government. Freddie Mac is a private corporation chartered by the U.S.

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Government. Freddie Mac guarantees the timely payment of interest and the ultimate return of principal on participation certificates. Fannie Mae is a private corporation chartered by the U.S. Congress with a mandate to establish a secondary market for mortgage loans. Fannie Mae guarantees the timely payment of principal and interest on Fannie Mae securities. Freddie Mac and Fannie Mae securities are not backed by the full faith and credit of the U.S. Government.

Investments in mortgage-backed securities involve the risk that actual prepayments will be greater than estimated prepayments over the life of the security, which may require adjustments to the amortization of any premium or accretion of any discount relating to such instruments thereby changing the net yield on such securities. There is also reinvestment risk associated with the cash flows from such securities or in the event such securities are redeemed by the issuer. In addition, the market value of such securities may be adversely affected by changes in interest rates.

Investment securities are classified at the time of acquisition as available for sale, held to maturity or trading. Securities classified as held to maturity must be purchased with the intent and ability to hold that security until its final maturity, and can be sold prior to maturity only under rare circumstances. Held-to-maturity securities are accounted for based upon the amortized cost of the security. Available-for-sale securities can be sold at any time based upon needs or market conditions. Available-for-sale securities are accounted for at fair value, with unrealized gains and losses on these securities, net of income tax provisions, reflected as accumulated other comprehensive income. At December 31, 2025, we had $50.5 million of investment securities classified as available-for-sale, $14.9 million of investment securities classified as held-to-maturity and no securities classified as trading securities.

Sources of Funds

General. Deposits, loan repayments and prepayments, proceeds from investment sales, calls, maturities and pay-downs, cash flows generated from operations and borrowings from the FHLB of Dallas or Federal Reserve Bank of Atlanta are the primary sources of our funds for use in lending, investing and for other general purposes.

Deposits. We offer a variety of deposit accounts with a range of interest rates and terms. For the years ended December 31, 2025 and 2024, total deposits averaged $179.5 million and $172.1 million, respectively. Our deposits consist of checking, both interest-bearing and non-interest-bearing, money market, savings and certificate of deposit accounts. The flow of deposits is influenced significantly by general economic conditions, changes in money market rates, prevailing interest rates and competition. Our deposits are obtained predominantly from the areas where our branch offices are located. We have historically relied primarily on customer service and long-standing relationships with customers to attract and retain these deposits; however, interest rates offered by competing financial institutions significantly affect our ability to attract and retain deposits.

The Bank uses traditional means of attracting and retaining deposits, including in-person business development and targeted advertising in our market area. Secondarily, we may acquire brokered deposits from outside our market area to meet funding needs. We had no brokered deposits as of December 31, 2025. At December 31, 2024, the Company had $5.0 million of brokered certificates of deposit. In addition, we solicit deposits from local government municipalities. At December 31, 2025 and 2024, our public fund deposits totaled $26.4 million and $35.6 million, respectively.

Borrowings. We utilize advances from the FHLB of Dallas and the Federal Reserve Bank of Atlanta as an alternative to retail deposits to fund operations as part of our operating strategy. Advances from the FHLB are collateralized primarily by certain of our mortgage loans and secondarily by our investment in capital stock of the FHLB. FHLB advances are made pursuant to several different credit programs, each of which has its own interest rate and range of maturities. The maximum amount that the FHLB will advance to member institutions, including the Bank, fluctuates from time to time in accordance with the policies of the FHLB. At December 31, 2025 and 2024 our outstanding advances from the FHLB totaled $14.7 million and $9.6 million, respectively.

Advances from the Federal Reserve Bank of Atlanta are collateralized by certain of our investment securities and the maximum amount available to the Bank is dependent upon the valuation of the relevant investment securities. On March 12, 2023, the Federal Reserve Board developed the Bank Term Funding Program (“BTFP”), which offered loans to banks with a term of up to one year. The loans are secured by pledging the banks’ U.S. treasuries, agency securities, agency mortgage-backed securities, and any other qualifying assets. These pledged securities were valued at par for collateral

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purposes. The BTFP debt was repaid during 2024. At December 31, 2025 and 2024, the Bank had no outstanding borrowings from the Federal Reserve Bank of Atlanta.

Subsidiaries

Catalyst Bank is a wholly owned subsidiary of Catalyst Bancorp. The Company has no other subsidiaries and the Bank has no subsidiaries.

Employees and Human Capital Resources

At December 31, 2025, we had 49 full-time equivalent employees. None of our employees are represented by a collective bargaining group, and we believe that our relationship with our employees is excellent. In 2024, Catalyst Bank was named as one of the Best Community Banks to Work For by the Independent Community Bankers of America.

We believe that our ability to attract and retain top quality employees will be key to the Company’s future success. During the year ended December 31, 2020, we hired a new President and Chief Executive Officer. Since then, we have made several additional new hires, including but not limited to: a Chief Operations Officer, an Acadiana Market President, a Chief Financial Officer, a Chief Risk Officer, and several bankers. We expect to continue to assess our management and staffing needs and are likely to add personnel in the future in order to fully implement our business strategy.

SUPERVISION AND REGULATION

General

As a federal savings association that has elected to operate as a covered savings association under Section 5A of the Home Owners’ Loan Act, Catalyst Bank is subject to examination and regulation by the Office of the Comptroller of the Currency (the “OCC”) and is required to be a member of the Federal Reserve Bank of Atlanta. It is also subject to oversight by the Federal Deposit Insurance Corporation (the “FDIC”) as deposit insurer. The federal system of regulation and supervision establishes a comprehensive framework of activities in which Catalyst Bank may engage and is intended primarily for the protection of depositors and the FDIC’s Deposit Insurance Fund, and not for the protection of shareholders. Catalyst Bank also is a member of and owns stock in the Federal Home Loan Bank of Dallas, which is one of the 11 regional banks in the Federal Home Loan Bank System.

Under this system of regulation, the regulatory authorities have extensive discretion in connection with their supervisory, enforcement, rulemaking and examination activities and policies, including rules or policies that: establish minimum capital levels; restrict the timing and amount of dividend payments; govern the classification of assets; provide oversight for the adequacy of loan loss reserves for regulatory purposes; and establish the timing and amounts of assessments and fees. Moreover, as part of their examination authority, the banking regulators assign numerical ratings to banks and savings institutions relating to capital, asset quality, management, liquidity, earnings and other factors. These ratings are inherently subjective and the receipt of a less than satisfactory rating in one or more categories may result in enforcement action by the banking regulators against a financial institution. A less than satisfactory rating may also prevent a financial institution, such as Catalyst Bank or its holding company, Catalyst Bancorp, from obtaining necessary regulatory approvals to access the capital markets, pay dividends, acquire other financial institutions or establish new branches.

In addition, we must comply with significant anti-money laundering and anti-terrorism laws and regulations, Community Reinvestment Act laws and regulations, and fair lending laws and regulations. Government agencies have the authority to impose monetary penalties and other sanctions on institutions that fail to comply with these laws and regulations, which could significantly affect our business activities, including our ability to acquire other financial institutions or expand our branch network.

As a bank holding company, Catalyst Bancorp is required to comply with the rules and regulations of the Federal Reserve Board (the “FRB”). It is required to file certain reports with the FRB and is subject to examination by and the enforcement

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authority of the FRB. Catalyst Bancorp also is subject to the rules and regulations of the Securities and Exchange Commission under the federal securities laws.

Any change in applicable laws or regulations, whether by the OCC, the FDIC, the FRB, the Securities and Exchange Commission or Congress, could have a material adverse impact on the operations and financial performance of Catalyst Bancorp and Catalyst Bank.

Set forth below is a brief description of material regulatory requirements that are applicable to Catalyst Bank and Catalyst Bancorp. The description is limited to certain material aspects of the statutes and regulations addressed, and is not intended to be a complete description of such statutes and regulations and their effects on Catalyst Bank and Catalyst Bancorp.

Federal Banking Regulation

Business Activities. A federal savings association derives its lending and investment powers from the Home Owners’ Loan Act, as amended, and applicable federal regulations. Under these laws and regulations, a federal savings association may generally invest in mortgage loans secured by residential real estate without an aggregate limit, and commercial business, commercial real estate and consumer loans, certain types of debt securities and certain other assets, subject to overall percentage of assets or capital limits. Federal savings associations are also subject to a “Qualified Thrift Lender Test,” or “QTL Test,” which generally requires that a specified percentage of overall assets be residential mortgages and related investments. However, these limitations do not apply to Catalyst Bank, as described below.

Effective July 1, 2019, the OCC issued a final rule, pursuant to a provision of the Economic Growth Regulatory Relief and Consumer Protection Act (“EGRRCPA”), that permits a federal savings association to elect to exercise national bank powers without converting to a national bank charter. The election is available to federal savings associations that had total consolidated assets of $20 billion or less as of December 31, 2017. Catalyst Bank exercised the covered savings association election effective October 16, 2019.

A federal savings association that has exercised the “covered savings association” election generally has the same rights and privileges as a national bank that has its main office in the same location as the home office of the covered savings association. The covered savings association is also subject to the same duties, restrictions, liabilities and limitations applicable to a national bank, and its holding company is treated as a bank holding company instead of as a savings and loan holding company. A covered savings association retains its federal savings association charter and continues to be subject to the corporate governance laws and regulations applicable to such associations, including as to its bylaws, board of directors and shareholders, capital distributions and mergers.

A covered savings association may make loans to its customers without regard to the lending restrictions applicable to federal savings associations, such as the percentage of capital or assets limits on various types of loans and the QTL Test. However, federal savings associations that have made such an election are subject to the narrower authority of national banks in certain areas such as branching and subsidiary activities in certain respects. A covered savings association may generally not retain any assets, subsidiaries or activities not permitted for national banks.

Applicable regulations authorize a federal association that has exercised the covered savings association election to terminate the election and thereby again operate as a federal savings association that has not made a covered savings association election. Catalyst Bank has no current plans to terminate its election.

Capital Requirements. Federal regulations require federally insured depository institutions to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets ratio of 8.0%, and a 4.0% Tier 1 capital to total assets leverage ratio. At December 31, 2025, Catalyst Bank’s capital exceeded all applicable requirements.

In determining the amount of risk-weighted assets for calculating risk-based capital ratios, all assets, including certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes, residual interests) are multiplied by a risk-weight factor assigned by the regulations based on the risks believed inherent in the type of asset. Higher levels of capital are

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required for asset categories believed to present greater risk. Common equity Tier 1 capital is generally defined as common shareholders’ equity and retained earnings. Tier 1 capital is generally defined as common equity Tier 1 and additional Tier 1 capital. Additional Tier 1 capital includes certain non-cumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries. Total capital includes Tier 1 capital (common equity Tier 1 capital plus additional Tier 1 capital) and Tier 2 capital. Tier 2 capital is comprised of capital instruments and related surplus, meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt. Also included in Tier 2 capital is the allowance for credit losses limited to a maximum of 1.25% of risk-weighted assets. Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations. In assessing an institution’s capital adequacy, the OCC takes into consideration not only these numeric factors, but qualitative factors as well, and has the authority to establish higher capital requirements for individual institutions where deemed necessary.

In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements.

EGRRCPA required the federal banking agencies, including the OCC, to establish a “community bank leverage ratio” of between 8% and 10% for institutions with assets of less than $10 billion. Institutions with capital complying with the ratio and otherwise meeting the specified requirements and electing the alternative framework are considered to comply with the applicable regulatory capital requirements, including the risk-based requirements. A qualifying institution may opt in and out of the community bank leverage ratio framework on its quarterly call report. Catalyst Bank has not elected to utilize the community bank leverage ratio.

Loans-to-One Borrower. Generally, a federal savings association, including a covered savings association, may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of unimpaired capital and surplus. An additional amount may be loaned, equal to 10% of unimpaired capital and surplus, if the excess is secured by readily marketable collateral, which generally does not include real estate. At December 31, 2025, Catalyst Bank is in compliance with the loans-to-one borrower limitations.

Capital Distributions. Federal regulations govern capital distributions by a federal savings association, which include cash dividends, stock repurchases and other transactions charged to the savings association’s capital account. A federal savings association must file an application with the OCC for approval of a capital distribution if:

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the total capital distributions for the applicable calendar year exceed the sum of the savings association’s net income for that year to date plus the savings association’s retained net income for the preceding two years;

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the savings association would not be at least adequately capitalized following the distribution;

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the distribution would violate any applicable statute, regulation, agreement or regulatory condition; or

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the savings association is not eligible for expedited treatment of its filings, generally due to an unsatisfactory CAMELS rating or being subject to a cease and desist order or formal written agreement that requires action to improve the institution’s financial condition.

An application related to a capital distribution may be disapproved if:

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the federal savings association would be undercapitalized following the distribution;

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the proposed capital distribution raises safety and soundness concerns; or

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the capital distribution would violate a prohibition contained in any statute, regulation or agreement.

In addition, the Federal Deposit Insurance Act generally provides that an insured depository institution may not make any capital distribution if, after making such distribution, the institution would fail to meet any applicable regulatory capital

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requirement. A federal savings association also may not make a capital distribution that would reduce its regulatory capital below the amount required for the liquidation account established in connection with its conversion to stock form.

Community Reinvestment Act and Fair Lending Laws. All insured depository institutions have a responsibility under the Community Reinvestment Act (“CRA”) and related regulations to help meet the credit needs of their communities, including low- and moderate-income borrowers. The OCC is required to assess the federal savings association’s record of compliance with the Community Reinvestment Act. A savings association’s failure to comply with the provisions of the Community Reinvestment Act could, at a minimum, result in denial of certain corporate applications such as branches or mergers, or in restrictions on its activities. In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices. The failure to comply with the Equal Credit Opportunity Act and the Fair Housing Act could result in enforcement actions by the OCC, as well as other federal regulatory agencies and the Department of Justice.

The Community Reinvestment Act requires all institutions insured by the FDIC to publicly disclose their rating. Catalyst Bank received an “outstanding” Community Reinvestment Act rating in its most recent federal examination.

On October 24, 2023, the Office of the Comptroller of the Currency (“OCC”), Federal Reserve, and FDIC issued a final rule to modernize their respective CRA regulations. The revised rules substantially alter the methodology for assessing compliance with the CRA, with material aspects taking effect January 1, 2026, and revised data reporting requirements taking effect January 1, 2027. Among other things, the revised rules evaluate lending outside traditional assessment areas generated by the growth of non-branch delivery systems, such as online and mobile banking, apply a metrics-based benchmarking approach to assessment, and clarify eligible CRA activities.

On July 16, 2025, the OCC, Federal Reserve, and the FDIC issued a joint notice of proposed rulemaking (“NPR”) to rescind the CRA final rule issued on October 24, 2023 (“2023 CRA Final Rule”). The NPR would replace the 2023 CRA Final Rule with regulations substantively identical to those in effect on March 29, 2024—first adopted by the agencies in 1995 and reinstated by the OCC in 2021 (“1995/2021 CRA regulation”). The proposed rule is intended to restore certainty in the CRA regulatory framework for stakeholders and limit regulatory burden on financial institutions. Although the 2023 CRA Final Rule has not been officially rescinded, governing agencies continue to use the 1995/2021 CRA regulations.

If the 2023 CRA Final Rule is enforced, management does not expect it to have a meaningful impact on the Bank’s operations. Under the rule, smaller institutions would continue to be evaluated under the existing framework with the option to be evaluated under the new framework. The rule also exempts smaller institutions from new data requirements that apply to institutions with assets of at least $2 billion.

Transactions with Related Parties. An insured depository institution’s authority to engage in transactions with its affiliates is limited by Sections 23A and 23B of the Federal Reserve Act and federal regulation. An affiliate is generally a company that controls, or is under common control with, an insured depository institution such as Catalyst Bank. Catalyst Bancorp is an affiliate of Catalyst Bank because of its control of Catalyst Bank. In general, transactions between an insured depository institution and its affiliates are subject to certain quantitative limits and collateral requirements. Finally, transactions with affiliates must be consistent with safe and sound banking practices, not involve the purchase of low-quality assets and be on terms that are as favorable to the institution as comparable transactions with non-affiliates.

Catalyst Bank’s authority to extend credit to its directors, executive officers and 10% shareholders, as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the FRB. Among other things, these provisions generally require that extensions of credit to insiders:

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be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features; and

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not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of Catalyst Bank’s capital.

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In addition, extensions of credit in excess of certain limits must be approved by Catalyst Bank’s Board of Directors. Extensions of credit to executive officers are subject to additional limits based on the type of extension involved.

Enforcement. The OCC has primary enforcement responsibility over federal savings associations and has authority to bring enforcement action against all “institution-affiliated parties,” including directors, officers, shareholders, attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on a federal savings association. Formal enforcement action by the OCC may range from the issuance of a capital directive or cease and desist order to removal of officers and/or directors of the institution and the appointment of a receiver or conservator. Civil penalties cover a wide range of violations and actions. The FDIC also has the authority to terminate deposit insurance or recommend to the OCC that enforcement action be taken with respect to a particular federal savings association. If such action is not taken, the FDIC has authority to take the action under specified circumstances.

Standards for Safety and Soundness. Federal law requires each federal banking agency to prescribe certain standards for all insured depository institutions. These standards relate to, among other things, internal controls, information systems and audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, compensation and other operational and managerial standards as the agency deems appropriate. Interagency guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard. If an institution fails to meet these standards, the appropriate federal banking agency may require the institution to implement an acceptable compliance plan. Failure to implement such a plan can result in further enforcement action, including the issuance of a cease and desist order or the imposition of civil money penalties.

Branching. A federal savings association that has elected covered savings association status is subject to the laws and regulations governing the establishment of branches by national banks. Generally, intrastate and interstate branching is authorized to the extent that the law of the state involved authorizes branching for banks that it charters. Such authority is subject to OCC approval for new branches.

Prompt Corrective Action. Federal law requires, among other things, that federal bank regulators take “prompt corrective action” with respect to institutions that do not meet minimum capital requirements. For this purpose, the law establishes five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. Under applicable regulations, an institution is deemed to be “well capitalized” if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a leverage ratio of 5.0% or greater and a common equity Tier 1 ratio of 6.5% or greater. An institution is “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, a leverage ratio of 4.0% or greater and a common equity Tier 1 ratio of 4.5% or greater. An institution is “undercapitalized” if it has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a leverage ratio of less than 4.0% or a common equity Tier 1 ratio of less than 4.5%. An institution is deemed to be “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a leverage ratio of less than 3.0% or a common equity Tier 1 ratio of less than 3.0%. An institution is considered to be “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2.0%.

At each successive lower capital category, an insured depository institution is subject to more restrictions and prohibitions, including restrictions on growth, restrictions on interest rates paid on deposits, restrictions or prohibitions on the payment of dividends, and restrictions on the acceptance of brokered deposits. Furthermore, if an insured depository institution is classified in one of the undercapitalized categories, it is required to submit a capital restoration plan to the appropriate federal banking agency, and the holding company must guarantee the performance of that plan. Based upon its capital levels, a bank that is classified as well-capitalized, adequately capitalized, or undercapitalized may be treated as though it were in the next lower capital category if the appropriate federal banking agency, after notice and opportunity for hearing, determines that an unsafe or unsound condition, or an unsafe or unsound practice, warrants such treatment. An undercapitalized bank’s compliance with a capital restoration plan is required to be guaranteed by any company that controls the undercapitalized institution in an amount equal to the lesser of 5.0% of the institution’s total assets when deemed undercapitalized or the amount necessary to achieve the status of adequately capitalized. If an “undercapitalized”

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bank fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.” “Significantly undercapitalized” banks must comply with one or more of a number of additional restrictions, including a regulatory order to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets, ceasing receipt of deposits from correspondent banks, dismissal of directors or officers, and restrictions on interest rates paid on deposits, compensation of executive officers and capital distributions by the parent holding company. “Critically undercapitalized” institutions are subject to additional measures including, subject to a narrow exception, the appointment of a receiver or conservator within 270 days after it obtains such status.

The previously referenced final rule establishing an elective “community bank leverage ratio” regulatory capital framework provides that a qualifying institution whose capital exceeds the community bank leverage ratio and opts to use that framework will be considered “well-capitalized” for purposes of prompt corrective action.

At December 31, 2025, Catalyst Bank met the criteria for being considered “well capitalized.”

Insurance of Deposit Accounts. The Deposit Insurance Fund (the “DIF”) of the FDIC insures deposits at FDIC-insured financial institutions such as Catalyst Bank, generally up to a maximum of $250,000 per separately insured depositor. The FDIC charges insured depository institutions premiums to maintain the Deposit Insurance Fund.

Under the FDIC’s risk-based assessment system, institutions deemed less risky of failure pay lower assessments. Assessments for institutions of less than $10 billion of assets are based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of an institution’s failure within three years.

The FDIC has authority to increase insurance assessments. Extraordinary growth in insured deposits during the first and second quarters of 2020 caused the DIF reserve ratio to decline below the statutory minimum of 1.35 percent as of June 30, 2020. As a result, the FDIC proposed an increase in initial base deposit insurance assessment rate schedules uniformly by 2 basis points, applicable to all insured depository institutions. In October 2022, the FDIC Board finalized the increase with an effective date of January 1, 2023, applicable to the first quarterly assessment period of 2023. The revised assessment rate schedules are intended to increase the likelihood that the reserve ratio of the DIF reaches the statutory minimum level of 1.35 percent by September 30, 2028. Any significant increases would have an adverse effect on the operating expenses and results of operations of Catalyst Bank. We cannot predict what assessment rates will be in the future.

Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. We do not know of any practice, condition or violation that may lead to termination of our deposit insurance.

Privacy Regulations. Federal regulations generally require that Catalyst Bank disclose its privacy policy, including identifying with whom it shares a customer’s “non-public personal information,” to customers at the time of establishing the customer relationship and annually thereafter. In addition, Catalyst Bank is required to provide its customers with the ability to “opt-out” of having their personal information shared with unaffiliated third parties and not to disclose account numbers or access codes to non-affiliated third parties for marketing purposes. Catalyst Bank currently has a privacy protection policy in place and believes that such policy is in compliance with the regulations.

USA PATRIOT Act. Catalyst Bank is subject to the USA PATRIOT Act, which gives federal agencies additional powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing, and broadened anti-money laundering requirements. The USA PATRIOT Act contains provisions intended to encourage information sharing among bank regulatory agencies and law enforcement bodies and imposes affirmative obligations on financial institutions, such as enhanced recordkeeping and customer identification requirements.

Cybersecurity. The federal bank regulatory agencies have adopted guidelines for establishing information security standards and cybersecurity programs for implementing safeguards under the supervision of a banking organization’s board of directors. This guidance, along with related regulatory materials, increasingly focuses on risk management, processes related to information technology and the use of third parties in the provision of financial products and services.

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The federal bank regulatory agencies expect financial institutions to establish appropriate security controls and to ensure that their risk management processes address the risk posed by compromised customer credentials. They also expect financial institutions to maintain sufficient business continuity planning processes to ensure rapid recovery, resumption, and maintenance of the institution’s operations after a cyberattack. If we fail to meet the expectations set forth in such regulatory guidance, we could be subject to various regulatory sanctions, including financial penalties.

In November 2021, the federal bank regulatory agencies issued a final rule to improve the sharing of information about cyber incidents that may affect the U.S. banking system. The rule, which became effective on May 1, 2022, requires a banking organization to notify its primary federal regulator within 36 hours of determining that a “computer-security incident” has materially affected, or is reasonably likely to materially affect, the viability of the banking organization’s operations, its ability to deliver banking products and services, or the stability of the financial sector. In addition, the rule requires a bank service provider to notify affected banking organization customers as soon as possible when the provider determines that it has experienced a computer security incident that has materially affected, or is reasonably likely to materially affect, banking organization customers for four or more hours.

Prohibitions Against Tying Arrangements. Federal savings associations are prohibited, subject to some exceptions, from extending credit to or offering any other service, or fixing or varying the consideration for such extension of credit or service, on the condition that the customer obtain some additional service from the institution or its affiliates or not obtain services of a competitor of the institution.

Other Regulations

Interest and other charges collected or contracted for by Catalyst Bank are subject to state usury laws and federal laws concerning interest rates. Loan operations are also subject to state and federal laws applicable to credit transactions, such as the:

●

Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

●

Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

●

Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies; and

●

Rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

The deposit operations of Catalyst Bank also are subject to, among others, the:

●

Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

●

Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check; and

●

Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services.

Federal Home Loan Bank System

Catalyst Bank is a member of the Federal Home Loan Bank System, which consists of 11 regional Federal Home Loan Banks. The Federal Home Loan Bank provides a central credit facility primarily for member institutions, and such member institutions are required to acquire and hold shares of capital stock in the Federal Home Loan Bank. Catalyst Bank is

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required to own stock in the Federal Home Loan Bank of Dallas in specified amounts and was in compliance with this requirement at December 31, 2025 based on its ownership of $745,000 in capital stock of the Federal Home Loan Bank of Dallas. Since the stock has no quoted market value, it is carried at cost and assessed for impairment. At December 31, 2025, no impairment on our stock in the Federal Home Loan Bank of Dallas had been recognized.

Holding Company Regulation

As the holding company for a covered savings association, Catalyst Bancorp is a bank holding company subject to regulation and supervision by the FRB under the Bank Holding Company Act of 1956, as amended. The FRB has enforcement authority over Catalyst Bancorp and its non-savings institution subsidiaries. Among other things, this authority permits the FRB to restrict or prohibit activities that are determined to be a risk to Catalyst Bank.

The FRB has promulgated regulations implementing the “source of strength” doctrine that require bank holding companies to act as a source of financial and managerial strength to their subsidiary depository institutions by providing capital, liquidity and other support in times of financial stress.

Catalyst Bancorp is required to obtain the prior approval of the FRB to acquire all, or substantially all, of the assets of any bank or bank holding company. Prior FRB approval is required for Catalyst Bancorp to acquire direct or indirect ownership or control of any voting securities of any bank or bank holding company if, after such acquisition, it would, directly or indirectly, own or control more than 5% of any class of voting shares of the bank or bank holding company. The FRB has adopted a final rule, effective September 30, 2020, that revises its framework for determining whether a company, under the Bank Holding Company Act, has a “controlling influence” over a bank or bank holding company. In addition to the approval of the FRB, prior approval may also be necessary from other agencies having supervisory jurisdiction over the bank to be acquired before any bank acquisition can be completed.

A bank holding company is generally prohibited from engaging in non-banking activities, or acquiring direct or indirect control of more than 5% of the voting securities of any company engaged in non-banking activities. One of the principal exceptions to this prohibition is for activities found by the FRB to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. Some of the principal activities that the FRB has determined by regulation to be so closely related to banking are: (i) making or servicing loans; (ii) performing certain data processing services; (iii) providing discount brokerage services; (iv) acting as fiduciary, investment or financial advisor; (v) leasing personal or real property; (vi) making investments in corporations or projects designed primarily to promote community welfare; and (vii) acquiring a savings and loan association whose direct and indirect activities are limited to those permitted for bank holding companies.

The Gramm-Leach-Bliley Act of 1999 authorized a bank holding company that meets specified conditions, including being “well capitalized” and “well managed,” to opt to become a “financial holding company” and thereby engage in a broader array of financial activities than previously permitted. Such activities can include insurance underwriting and investment banking.

Catalyst Bancorp is subject to the FRB’s capital adequacy guidelines for bank holding companies (on a consolidated basis) which have historically been similar to, though less stringent than, those required of banks and savings associations. The Dodd-Frank Act, however, required the FRB to promulgate consolidated capital requirements for depository institution holding companies that are no less stringent, both quantitatively and in terms of components of capital, than those applicable to institutions themselves. Consolidated regulatory capital requirements identical to those applicable to the subsidiary banks apply to bank holding companies; as is the case with institutions themselves, the capital conservation buffer was phased in between 2016 and 2019. However, the FRB has provided a “small bank holding company” exception to its consolidated capital requirements, and legislation and the related issuance of regulations by the FRB has increased the threshold for the exception to $3.0 billion. As a result, Catalyst Bancorp is not subject to the capital requirement until such time as its consolidated assets exceed $3.0 billion.

A bank holding company is generally required to give the FRB prior written notice of any purchase or redemption of then outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the

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company’s consolidated net worth. The FRB may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe and unsound practice, or would violate any law, regulation, FRB order or directive, or any condition imposed by, or written agreement with, the FRB. There is an exception to this approval requirement for well-capitalized bank holding companies that meet certain other conditions.

The FRB has issued supervisory policies regarding the payment of dividends and the repurchase of shares of common stock by bank holding companies. In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall financial condition. Regulatory guidance provides for prior regulatory consultation with respect to capital distributions in certain circumstances such as where the company’s net income for the past four quarters, net of capital distributions previously paid over that period, is insufficient to fully fund the dividend or the company’s overall rate of earnings retention is inconsistent with the company’s capital needs and overall financial condition. The ability of a holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized. The policy statement also states that a holding company should inform the FRB supervisory staff before redeeming or repurchasing common stock or perpetual preferred stock if the holding company is experiencing financial weaknesses or if the repurchase or redemption would result in a net reduction, at the end of a quarter, in the amount of such equity instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred. These regulatory policies may affect the ability of Catalyst Bancorp to pay dividends, repurchase shares of common stock or otherwise engage in capital distributions.

Change in Control Regulations

Under the Change in Bank Control Act, no person may acquire “control” of a bank holding company, such as Catalyst Bancorp, unless the FRB has been given 60 days’ prior written notice and has not issued a notice disapproving the proposed acquisition, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the competitive effects of the acquisition. Control, as defined under federal law, means ownership, control of or holding irrevocable proxies representing more than 25% of any class of voting stock, control in any manner of the election of a majority of the institution’s directors, or a determination by the regulator that the acquirer has the power, directly or indirectly, to exercise a controlling influence over the management or policies of the institution. There is a presumption of control upon the acquisition of 10% or more of a class of voting stock if the holding company involved has its shares registered under the Securities Exchange Act of 1934, or, if the holding company involved does not have its shares registered under the Securities Exchange Act of 1934, if no other persons will own, control or hold the power to vote a greater percentage of that class of voting security after the acquisition.

Federal Securities Laws

Catalyst Bancorp common stock is registered with the Securities and Exchange Commission. Catalyst Bancorp is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 is intended to improve corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws.

Emerging Growth Company Status

Catalyst Bancorp is an emerging growth company. For as long as Catalyst Bancorp continues to be an emerging growth company, it may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies, including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. As an emerging growth company, Catalyst Bancorp also is not subject to Section 404(b) of the

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Sarbanes-Oxley Act of 2002, which would require that our independent auditors review and attest as to the effectiveness of our internal control over financial reporting. We have elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Such an election is irrevocable during the period a company is an emerging growth company. Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

Catalyst Bancorp will cease to be an emerging growth company upon the earliest of: (i) the end of the fiscal year following the fifth anniversary of the completion of the Conversion and offering; (ii) the first fiscal year after our annual gross revenues are $1.07 billion (adjusted for inflation) or more; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (iv) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million at the end of the second quarter of that fiscal year. Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

TAXATION

Federal Taxation

General. Catalyst Bancorp and Catalyst Bank are subject to federal income taxation in the same general manner as other corporations with some exceptions listed below. The following discussion of federal and state income taxation is only intended to summarize certain pertinent income tax matters and is not a comprehensive description of the applicable tax rules. Our tax returns have not been audited during the past five years.

Method of Accounting. For federal income tax purposes, Catalyst Bancorp reports income and expenses on the accrual method of accounting.

Bad Debt Reserves. The Small Business Job Protection Act of 1996 eliminated the use of the reserve method of accounting for bad debt reserves by savings associations, effective for taxable years beginning after 1995. Prior to that time, Catalyst Bank was permitted to establish a reserve for bad debts and to make additions to the reserve. These additions could, within specified formula limits, be deducted in arriving at taxable income. As a result of the Small Business Job Protection Act of 1996, savings associations must use the experience method in computing their bad debt deduction beginning with their 1996 federal tax return. In addition, federal legislation required the recapture over a six year period of the excess of tax bad debt reserves at December 31, 1995 over those established as of December 31, 1987.

Taxable Distributions and Recapture. Prior to the Small Business Job Protection Act of 1996, bad debt reserves created prior to January 1, 1988 were subject to recapture into taxable income if the Bank failed to meet certain thrift asset and definitional tests. New federal legislation eliminated these savings association related recapture rules. However, under current law, pre-1988 reserves remain subject to recapture should the Bank make certain non-dividend distributions or cease to maintain a bank charter.

At December 31, 2025, the total federal pre-1988 reserve was approximately $1.9 million. The reserve reflects the cumulative effects of federal tax deductions by the Bank for which no federal income tax provisions have been made.

State and Local Taxation

Catalyst Bancorp is subject to the Louisiana Corporation Income Tax based on our Louisiana taxable income and Louisiana Corporation Franchise Tax based on the Company’s capital not attributable to the Bank. “Louisiana taxable income” means net income which is earned by us within or derived from sources within the State of Louisiana, after adjustments permitted under Louisiana law, including a federal income tax deduction. The Corporation Income Tax for 2024 applies at graduated rates from 3.5% upon the first $50,000 of Louisiana taxable income to 7.5% on all Louisiana taxable income in excess of $150,000. For periods beginning on or after January 1, 2025, Louisiana has implemented a flat corporate income tax rate of 5.5%.

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The Louisiana Corporation Franchise Tax rate for years beginning on or after January 1, 2023, is $2.75 for each $1,000 in excess of $300,000 of capital employed in Louisiana. For periods beginning on or after January 1, 2026, Louisiana has repealed its corporate franchise tax.

The Bank is subject to the Louisiana Shares Tax which is imposed on the assessed value of a company’s stock. The formula for deriving the assessed value is to calculate 15% of the sum of:

(a)

20% of our capitalized earnings, plus

(b)

80% of our taxable shareholders’ equity, minus

(c)

50% of our real and personal property assessment.

There are certain limitations in place that reduce to the amount of our shareholders’ equity subject to Louisiana Shares Tax and various items may also be subtracted in calculating a company’s capitalized earnings. Effective January 1, 2026, Louisiana increased the allowable deduction of real and personal property assessments from 50% to 100%. This measure is expected to reduce shares tax expense for 2026.

Item 1A. Risk Factors

Not applicable.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 1C. Cybersecurity

The Bank, as part of its risk management process, has implemented an information security program that encompasses the Bank’s cybersecurity efforts. The Bank’s goals of confidentiality, availability and integrity of its information are key to this process and program. The Bank’s goals of protecting confidential information and safeguarding our digital assets are foundational objectives of the program.

The Boards of Directors of the Company and Bank and the Audit Committee of the Company are responsible for ultimate oversight of cybersecurity risks managed daily by management pursuant to the Bank’s information security program. The Boards of Directors annually approve this information security program and regularly receive a report from the Bank’s Information Security Officer that outlines the steps undertaken to protect the information and data assets of the Bank and Company. Additionally, the Information Security Officer updates the Boards of Directors through supplementary reports on issues related to Cybersecurity readiness. Our Information Security Officer has over 20 years of relevant experience in the areas of information security and cyber security risk management.

The Bank’s information security program is developed and implemented by the Bank’s Information Security Officer. Together with the Bank’s Information Technology Committee, comprised of relevant information technology and business unit stakeholders within Bank management, the Information Security Officer of the Bank works to manage, control and mitigate cybersecurity risks. The Bank’s employees are regularly trained on cybersecurity awareness, and testing is performed to monitor the success of the training. The Board of Directors receives training annually.

The Bank engages third parties to audit and examine its processes, review the security of its network infrastructure, and assist the Bank in designing and implementing robust cybersecurity systems. These third parties help the Bank improve and test its cybersecurity readiness. The Bank engages third-party vendors to monitor and test its network infrastructure. These third-party vendors take an active role in ensuring that the Bank’s systems are protected by testing, reviewing and advising the Bank to strengthen cybersecurity controls when necessary.

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The Bank has a vendor oversight risk management process that helps to validate the security and integrity of information collected and maintained by third-party vendors that the Bank uses to provide banking services. A key goal of the Bank’s vendor management program includes assessing risks, which include but are not limited to operational, strategic, reputational, cyber, and credit risks. These processes are supported by specialized vendors that assist the Bank’s management and Board of Directors with properly assessing these risks. Finally, the Bank also has an incident response and business continuity program that is intended to address operational concerns, including cybersecurity risks, during contingency scenarios that may create unknown circumstances. This program is tested annually.

Although the Company and Bank have not, as of the date of this Annual Report on Form 10-K, experienced a cybersecurity threat or incident that materially affected their business strategy, results of operations or financial condition, there can be no guarantee that the Company or Bank will not experience such an incident in the future.

As regulated financial institutions, the Company and Bank are also subject to financial privacy laws and their cybersecurity practices are subject to oversight by the federal banking agencies. For additional information, see “Supervision and Regulation –Cybersecurity” included in Part I. Item 1 – Business of this report.

Item 2. Properties

We currently conduct business from our main office and five full-service banking offices. The aggregate net book value of the land, building and leasehold improvements with respect to our offices at December 31, 2025 was $5.1 million. We owned all of such offices at December 31, 2025. No offices were leased. We believe that our current facilities are adequate to meet our present and foreseeable needs, other than routine and customary repair and maintenance needs.

Item 3. Legal Proceedings

Catalyst Bancorp and Catalyst Bank are not involved in any pending legal proceedings other than nonmaterial legal proceedings occurring in the ordinary course of business.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

(a)Catalyst Bancorp’s common stock is traded on the Nasdaq Capital Market under the symbol “CLST.” The common stock was issued at a price of $10.00 per share in connection with the Bank’s mutual to stock Conversion and the initial public offering of the Company’s common stock. The common stock commenced trading on the Nasdaq Capital Market on October 13, 2021. As of the close of business on December 31, 2025, there were 4,074,911 shares of common stock outstanding, held by approximately 210 shareholders of record, not including the number of persons or entities whose stock is held in nominee or “street” name through various brokerage firms and banks.

(b)

Not applicable.

(c)On November 25, 2024, the Company’s Board of Directors approved the Company’s fifth share repurchase program (the “November 2024 Repurchase Plan”). Under the November 2024 Repurchase Plan, the Company purchased 215,000 shares, or approximately 5%, of the Company's outstanding common stock. The Company completed the November 2024 Repurchase Plan in December 2025. On November 20, 2025, the Company announced its sixth share repurchase plan (the “November 2025 Repurchase Plan”). Under the November 2025 Repurchase Plan, the Company may purchase up to 205,000 shares, or approximately 5%, of the Company's outstanding common stock.


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
October 31, 2025		14,455	$	13.35		14,455		24,149
November 30, 2025		19,251		14.87		19,251		209,898
December 31, 2025		20,987		15.12		20,987		188,911
Total		54,693	$	14.56		54,693

Item 6. [Reserved.]

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion and analysis reflects our financial statements and other relevant statistical data, and is intended to enhance your understanding of the financial condition and results of operations of Catalyst Bancorp, Inc. (the “Company”) and its wholly owned subsidiary, Catalyst Bank (the “Bank”). The information in this section has been derived from the audited financial statements, which appear in Item 8 of this Annual Report on Form 10-K. The information in this section should be read in conjunction with the Consolidated Financial Statements and related notes included herein in “Item 8. Financial Statements and Supplementary Data” and the description of our business included herein in “Item 1. Business”.

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.

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 year ended December 31, 2025, compared to December 31, 2024:

●

Total assets of $282.9 million at December 31, 2025, up $6.2 million or 2.3%

●

Loans of $170.2 million, or 60.2% of total assets, at December 31, 2025, up $3.1 million or 1.9%

●

Non-performing assets of $2.7 million at December 31, 2025, up $852,000 or 46.7%

●

Investment securities of $65.4 million, or 23.1% of total assets, at December 31, 2025, up $23.2 million or 55.1%

●

Deposits of $185.3 million at December 31, 2025, down $400,000 or 0.2%

●

Average deposits of $179.5 million for 2025, up $7.4 million or 4.3% over 2024

●

Borrowings of $14.7 million at December 31, 2025, up $5.2 million or 54.1%

●

Total shareholders’ equity of $81.7 million, or 28.9% of total assets, at December 31, 2025, up $1.5 million or 1.9%

●

Net interest income increased $245,000, or 2.6%, to $9.8 million and net interest margin increased 27 basis points (“bps”) to 3.92%

●

Provision for credit losses of $60,000 for 2025, compared to $531,000 for 2024

●

No losses on the sales of investment securities for 2025, compared to total losses on investment securities sales of $5.5 million for 2024

●

Non-interest expense of $8.6 million for the year ended December 31, 2025, down $573,000, or 6.3%, compared to 2024, primarily due to expenses related to the Company’s upgrade to a new core processing system in 2024

●

Net income of $2.1 million, or $0.56 per diluted common share (“diluted EPS”), for 2025, compared to a net loss of $3.1 million for 2024

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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.

Business Strategy

Our business strategy is focused on embracing a relationship-oriented community bank model targeting small- to mid-sized businesses and business professionals in our market areas while continuing to serve our traditional customer base. Highlights of our business strategy, which is designed to facilitate our ability to operate and grow as a profitable community-based banking institution, include the following:

●

Growing the loan portfolio with greater diversification. Historically, our primary lending focus was the origination of one- to four-family residential mortgage loans. We have increased our commercial lending activities and, we are focused on building full-service banking relationships with small- to mid-sized businesses and business professionals in our market area. We believe that increased commercial lending offers an opportunity to enhance our profitability and our growth prospects.

●

Grow our franchise organically through enhanced banking products and services. We have implemented a strategy of prudent growth. We believe we have an opportunity to grow organically by focusing on building relationships with small- to mid-sized businesses and business professionals in our market area and by enhancing the products and services we offer. During the first quarter of 2024, the Company converted to a new core processing system. The core system conversion brings new and enhanced technology tools and online services preferred by many of our existing and prospective customers. In addition, we will continue to enhance our staff capacity through training and hiring of new employees as needed to facilitate our growth.

●

Recruiting and retaining top talent and personnel. Since August 2020, the Company has made several personnel changes and additional hires, including but not limited to: a new President and CEO, Chief Operations Officer, Acadiana Market President, Chief Financial Officer, Chief Risk Officer and several commercial bankers. Recruiting and retaining talented individuals to guide us through the implementation of our business strategy is critical to our success. Our mutual-to-stock Conversion was a key contributor to our ability to attract and retain talent. In September 2022, the Company issued its initial grants under the Company’s 2022 Stock Option Plan and 2022 Recognition and Retention Plan and Trust Agreement.

●

Expand our franchise through possible acquisition of other financial institutions. We intend to take advantage of opportunities to utilize our strong capital position for expansion through acquisitions of other financial institutions in our current market area and adjoining markets in south Louisiana.

●

Rebranded franchise. We completed our re-branding and changed the Bank’s name to Catalyst Bank in June 2022. In addition to a new name, our re-branding efforts included new marketing campaigns, updated online and website materials and new signage and logos to capture and reflect the mission of the Bank.

●

Manage credit risk to limit non-performing assets. We believe that strong asset quality is a key to long-term financial success. Our strategy for credit risk management focuses on an experienced team of credit professionals, well-defined credit policies and procedures, appropriate loan underwriting criteria and active credit monitoring.

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Critical Accounting Estimates

In reviewing and understanding financial information for the Company, you are encouraged to read and understand the significant accounting policies used in preparing our financial statements. These policies are described in Note 1 of the notes to our consolidated financial statements included in Item 8 of this Form 10-K. Our accounting and financial reporting policies conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry. Accordingly, the financial statements require certain estimates, judgments, and assumptions, which are believed to be reasonable based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the periods presented. The JOBS Act of 2012 contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an emerging growth company, we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We are taking advantage of the benefits of this extended transition period. Accordingly, our financial statements may not be comparable to companies that comply with such new or revised accounting standards.

SEC guidance requires disclosure of “critical accounting estimates.” The SEC defines “critical accounting estimates” as those estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the registrant. Not all significant accounting policies require management to make difficult, subjective or complex judgments. However, management believes the policy noted below meet the SEC’s definition of critical accounting policies. This policy requires 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.

Allowance for Credit Losses. We have identified the evaluation of the allowance for credit losses as a critical accounting policy where amounts are sensitive to material variation. The Company’s allowance for credit losses reflects management’s current estimate of expected credit losses over the remaining life of its loans as of the end of the reporting period.

The allowance for credit losses includes the allowance for credit losses on loans and the allowance for credit losses on unfunded lending commitments, which is recorded in other liabilities on the statement of financial condition. The allowance for credit losses is established through a provision for credit losses charged to earnings. Loans, or portions of loans, are charged off against the allowance in the period that such loans, or portions thereof, are deemed uncollectible. Subsequent recoveries are added to the allowance. The allowance for credit losses on loans totaled $2.4 million, or 1.39% of total loans, at December 31, 2025 and $2.5 million, or 1.51% of total loans, at December 31, 2024. The decline in the allowance for credit losses on loans from December 31, 2024 largely reflects the impact of net charge-offs and a decline in the estimated allowance for credit losses on individually evaluated loans.

Management’s estimate of the allowance for credit losses considers factors such as changes in the types and amount of loans in the loan portfolio, historical loss experience, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, estimated losses relating to specifically identified loans, current and future economic conditions, and forecasted information. This evaluation is inherently subjective as it requires material estimates including, among others, average historical loss experience, expected future loss rates, the amount and timing of expected future pay-downs on existing loans and fundings on unfunded commitments, and the value of underlying collateral. All of these estimates may be susceptible to significant changes as more information becomes available.

While management uses the best information available to make loan loss allowance evaluations, adjustments to the allowance may be necessary based on changes in economic and other conditions or changes in accounting guidance. In addition, the Office of the Comptroller of the Currency as an integral part of their examination processes periodically reviews our allowance for credit losses. While management is responsible for the establishment of the allowance for credit losses and for adjusting such allowance through provisions for credit losses, management may determine, as a result of such regulatory reviews, that an increase or decrease in the allowance or provision for credit losses may be necessary or that loan charge-offs are needed. To the extent that actual outcomes differ from management’s estimates, additional provisions to the allowance for credit losses may be required that would adversely impact earnings in future periods.

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Selected Financial and Other Data

Set forth below is selected financial and other data of the Company at and for the dates indicated. The following is only a summary and should be read in conjunction with the business and financial information regarding the Company included elsewhere herein, including the financial statements included in Item 8 of this Annual Report on Form 10-K. The information at and for the years ended December 31, 2025 and 2024 is derived from the audited financial statements that appear elsewhere in this Annual Report on Form 10-K.


	At December 31,
(Dollars in thousands)	2025		2024
Selected Financial Condition Data:
Total assets	$	282,927	$	276,697
Cash and cash equivalents		25,205		44,295
Investment securities:
Available for sale, at fair value		50,467		28,712
Held to maturity		14,917		13,447
Loans receivable, net of unearned income		170,210		167,076
Allowance for credit losses		2,367		2,522
Total deposits		185,274		185,674
Borrowings		14,732		9,558
Shareholders’ equity		81,725		80,204


	Year Ended December 31,
(Dollars in thousands)	2025			2024
Selected Operating Data:
Total interest income	$	13,896		$	13,862
Total interest expense		4,106			4,317
Net interest income		9,790			9,545
Provision for credit losses		60			531
Net interest income after provision for credit losses		9,730			9,014
Total non-interest income (loss)		1,358			(3,840)
Total non-interest expense		8,584			9,157
Income (loss) before income tax expense (benefit)		2,504			(3,983)
Income tax expense (benefit)		452			(894)
Net income (loss)	$	2,052		$	(3,089)

Selected Performance Ratios:⁽¹⁾
Average yield on interest-earning assets		5.55	%		5.30	%
Average rate on interest-bearing liabilities		2.55			2.54
Average interest rate spread⁽²⁾		3.00			2.76
Net interest margin⁽²⁾		3.92			3.65
Average interest-earning assets to average interest-bearing liabilities		155.44			154.24
Net interest income after provision for credit losses to non-interest expense		113.35			98.44
Total non-interest expense to average assets		3.15			3.25
Efficiency ratio⁽³⁾		76.99			160.51
Return on average assets (ratio of net income (loss) to average total assets)		0.75			(1.10)
Return on average equity (ratio of net income (loss) to average total equity)		2.53			(3.79)

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	At or For the
	Year Ended December 31,
	2025		2024
Asset Quality Ratios:⁽⁴⁾
Non-accrual loans as a percent of total loans outstanding	1.32	%	0.94	%
Non-performing assets as a percent of total assets⁽⁵⁾	0.95		0.66
Allowance for credit losses on loans as a percent of total loans outstanding	1.39		1.51
Allowance for credit losses on loans as a percent of non-performing loans	89.56		154.63
Net charge-offs to average loans receivable	(0.07)		(0.17)

Capital Ratios:⁽⁶⁾
Common equity Tier 1 capital	42.45	%	45.81	%
Tier 1 leverage capital	27.36		28.73
Tier 1 risk-based capital	42.45		45.81
Total risk-based capital	43.71		47.06
Average equity to average assets	29.73		28.91

Other Data:
Banking offices	6		6
Full-time equivalent employees	49		49

(1)	With the exception of end of period ratios, all ratios are based on average daily balances during the indicated periods.

(2)	Average interest rate spread represents the difference between the average yield on interest-earning assets and the average rate paid on interest-bearing liabilities, and net interest margin represents net interest income as a percentage of average interest-earning assets.

(3)	The efficiency ratio (a non-GAAP measure) represents the ratio of non-interest expense divided by the sum of net interest income and non-interest income.

(4)	Asset quality ratios are end of period ratios, except for net (charge-offs) recoveries to average loans receivable.

(5)

Non-performing assets consist of non-performing loans and foreclosed assets. Non-performing loans consist of all non-accruing loans and loans 90 days or more past due. Foreclosed assets consist of real estate acquired through foreclosure or real estate acquired by acceptance of a deed-in-lieu of foreclosure.

(6)	Capital ratios are end of period ratios for the Bank only.

Non-GAAP Measures. The efficiency ratio is a non-GAAP financial measure used by the Company that the Company believes is useful to investors in understanding the Company's performance and trends and facilitates comparison with the performance of its peers. The efficiency ratio represents non-interest expense as a percentage of total revenues. Total revenues is the sum of net interest income and non-interest income.

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

Total Assets. Total assets increased $6.2 million, or 2.3%, to $282.9 million at December 31, 2025 from $276.7 million at December 31, 2024. The increase was largely driven by an increase in borrowings, which were used to partially fund growth in investment securities and loans.

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


	December 31, 2025					December 31, 2024
(Dollars in thousands)	Amount			%		Amount			%		Change
Real estate loans
One- to four-family residential	$	80,123		47.1	%	$	81,097		48.5	%	$	(974)	(1.2)	%
Commercial real estate		32,872		19.3			22,108		13.2			10,764	48.7
Construction and land		18,806		11.0			32,941		19.7			(14,135)	(42.9)
Multi-family residential		5,309		3.1			2,570		1.5			2,739	106.6
Total real estate loans		137,110		80.5			138,716		82.9			(1,606)	(1.2)
Other loans
Commercial and industrial		31,205		18.3			26,439		15.8			4,766	18.0
Consumer		1,895		1.2			1,921		1.3			(26)	(1.4)
Total other loans		33,100		19.5			28,360		17.1			4,740	16.7
Total loans	$	170,210		100.0	%	$	167,076		100.0	%	$	3,134	1.9

During 2025, a multi-family construction loan with an outstanding balance of $4.4 million at December 31, 2024 paid-off and $16.5 million of outstanding construction loans at December 31, 2024 were converted to amortizing real estate loans following the completion of their respective construction projects. At December 31, 2025, the outstanding balance of the converted construction loans totaled $19.0 million. Of the $19.0 million, $4.4 million was classified as one- to four-family residential, $2.9 million was classified as multi-family, and the remaining balance was classified as commercial real estate as of December 31, 2025. The increase in commercial and industrial loans during 2025 was largely driven by growth within the industrial equipment and oilfield services segments of our loan portfolio.

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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.


	December 31,
(Dollars in thousands)	2025		2024		Change
Commercial real estate
Retail	$	9,455	$	4,005	$	5,450	136.1	%
Hospitality		5,632		3,460		2,172	62.8
Health service facilities		3,300		393		2,907	739.7
Restaurants		1,071		1,091		(20)	(1.8)
Oilfield services		365		402		(37)	(9.2)
Other non-owner occupied		2,349		2,658		(309)	(11.6)
Other owner occupied		10,700		10,099		601	6.0
Total commercial real estate	$	32,872	$	22,108	$	10,764	48.7
Construction and land
Multi-family residential	$	4,749	$	10,031	$	(5,282)	(52.7)	%
Health service facilities		10,547		7,139		3,408	47.7
Hospitality		-		2,716		(2,716)	(100.0)
Retail		-		5,106		(5,106)	(100.0)
Other commercial construction and land		2,112		4,364		(2,252)	(51.6)
Consumer residential construction and land		1,398		3,585		(2,187)	(61.0)
Total construction and land	$	18,806	$	32,941	$	(14,135)	(42.9)
Commercial and industrial
Oilfield services	$	17,295	$	14,823	$	2,472	16.7	%
Industrial equipment		7,064		2,831		4,233	149.5
Professional services		3,531		3,127		404	12.9
Other commercial and industrial		3,315		5,658		(2,343)	(41.4)
Total commercial and industrial loans	$	31,205	$	26,439	$	4,766	18.0

The following table shows the scheduled contractual maturities of our loans as of December 31, 2025. Demand loans, loans having no stated schedule of repayments and no stated maturity, and overdrafts are reported as due in one year or less. The amounts shown below do not take into account loan prepayments.


	Amounts due after December 31, 2025 in
(Dollars in thousands)	One year or less		After one year through five years		After five years through 15 years		After 15 years		Total
One- to four-family residential	$	902	$	6,312	$	32,076	$	40,833	$	80,123
Commercial real estate		951		24,579		6,708		634		32,872
Construction and land		13,269		5,055		447		35		18,806
Multi-family residential		469		2,940		1,900		-		5,309
Commercial and industrial		9,655		18,747		2,775		28		31,205
Consumer		441		1,360		94		-		1,895
Total	$	25,687	$	58,993	$	44,000	$	41,530	$	170,210

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The following table shows the dollar amount of our loans at December 31, 2025, due after December 31, 2026, as shown in the preceding table, which have fixed interest rates or which have floating or adjustable interest rates.


(Dollars in thousands)	Fixed-Rate		Floating or Adjustable-Rate		Total
Amounts due after December 31, 2026
One- to four-family residential	$	35,727	$	43,494	$	79,221
Commercial real estate		21,794		10,127		31,921
Construction and land		547		4,990		5,537
Multi-family residential		2,940		1,900		4,840
Commercial and industrial		17,916		3,634		21,550
Consumer		1,317		137		1,454
Total	$	80,241	$	64,282	$	144,523

Allowance for Credit Losses. At December 31, 2025, the allowance for credit losses on loans totaled $2.4 million, or 1.39% of total loans, compared to $2.5 million, or 1.51% of total loans, at December 31, 2024. The decline in the ratio of the allowance to total loans largely reflects the impact of net charge-offs and a decline in the estimated allowance for credit losses on individually evaluated loans during 2025. The allowance for credit losses on unfunded commitments totaled $211,000, up $90,000 from December 31, 2024. The total provision for credit losses on loans and unfunded commitments was $60,000 for 2025 and was largely attributable to increases in construction loan commitments and outstanding loan balances during 2025.

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


	Year Ended December 31,
(Dollars in thousands)	2025			2024
Allowance for credit losses:
Loans:
Balance, beginning of period	$	2,522		$	2,124
Provision for (reversal of) credit losses		(30)			667
Net loan (charge-offs) recoveries:
One- to four-family residential		(112)			(92)
Commercial real estate		-			(14)
Construction and land		-			-
Multi-family residential		-			-
Commercial and industrial		17			(128)
Consumer		(30)			(35)
Total net charge-offs		(125)			(269)
Balance, end of period	$	2,367		$	2,522

Unfunded lending commitments:
Balance, beginning of period	$	121		$	257
Provision for (reversal of) credit losses on unfunded lending commitments		90			(136)
Balance, end of period	$	211		$	121

Total provision for credit losses	$	60		$	531

Total loans at end of period	$	170,210		$	167,076
Total non-accrual loans at end of period		2,248			1,567
Total non-performing loans at end of period		2,643			1,631
Total average loans		167,038			155,867

Allowance for credit losses on loans as a percent of:
Total loans		1.39	%		1.51	%
Non-accrual loans		105.29			160.94
Non-performing loans		89.56			154.63

Net annualized (charge-offs) recoveries as a percent of average loans by portfolio:
One- to four-family residential		(0.14)	%		(0.11)	%
Commercial real estate		-			(0.06)
Construction and land		-			-
Multi-family residential		-			-
Commercial and industrial		0.07			(0.56)
Consumer		(1.38)			(1.51)
Total loans		(0.07)			(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 2025, the Company downgraded a $3.3 million non-real estate, commercial loan relationship to substandard due to declines in debt service coverage. All loans within the relationship have paid as agreed and, at December 31, 2025, were current and performing.


	At December 31,
(Dollars in thousands)	2025			2024
Substandard loans
One- to four-family residential	$	2,699		$	2,417
Commercial real estate		254			227
Construction and land		128			158
Multi-family residential		-			-
Commercial and industrial		1,949			-
Consumer		-			-
Total substandard loans	$	5,030		$	2,802

Non-accruing loans
One- to four-family residential	$	2,228		$	1,530
Commercial real estate		-			-
Construction and land		20			37
Multi-family residential		-			-
Commercial and industrial		-			-
Consumer		-			-
Total non-accruing loans		2,248			1,567
Accruing loans 90 days or more past due
One- to four-family residential		272			64
Commercial real estate		32			-
Construction and land		-			-
Multi-family residential		-			-
Commercial and industrial		91			-
Consumer		-			-
Total accruing loans 90 days or more past due		395			64
Total non-performing loans		2,643			1,631
Foreclosed assets		34			194
Total non-performing assets	$	2,677		$	1,825

Total loans	$	170,210		$	167,076
Total assets		282,927			276,697

Total non-accruing loans as a percentage of total loans		1.32	%		0.94	%
Total non-performing loans as a percentage of total loans		1.55			0.98
Total non-performing loans as a percentage of total assets		0.93			0.59
Total non-performing assets as a percentage of total assets		0.95			0.66

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The following table shows how our allowance for credit losses is allocated by type of loan at each of the dates indicated.


	December 31,
	2025							2024
(Dollars in thousands)	Amount of Allowance			Percent of Allowance to Total Allowance		Percent of Loans in Category to Total Loans		Amount of Allowance			Percent of Allowance to Total Allowance		Percent of Loans in Category to Total Loans
One-to four-family residential	$	1,323		55.9	%	47.1	%	$	1,164		46.2	%	48.5	%
Commercial real estate		267		11.3		19.3			192		7.6		13.2
Construction and land		295		12.5		11.0			528		20.9		19.7
Multi-family residential		80		3.4		3.1			35		1.4		1.5
Commercial and industrial		371		15.7		18.3			372		14.8		15.8
Consumer		31		1.2		1.2			26		1.0		1.3
Unallocated		-		-		-			205		8.1		-
Total	$	2,367		100.0	%	100.0	%	$	2,522		100.0	%	100.0	%

Investment Securities. Total investment securities, available-for-sale and held-to-maturity, amounted to $65.4 million at December 31, 2025, up $23.2 million, or 55.1%, compared to $42.2 million in investment securities at December 31, 2024. During 2025, the Company purchased $20.2 million of variable-rate and $6.3 million of fixed-rate securities. The weighted average yield of the securities purchased during 2025 was 4.72% at December 31, 2025.

During the three months ended March 31, 2024, the Company sold 50 available-for-sale investment securities for a total pre-tax loss of $5.5 million. Proceeds from the sales totaled $42.6 million, inclusive of accrued interest. During the nine-month period ending December 31, 2024, the Company re-deployed a portion of the sales proceeds by purchasing $7.9 million of fixed-rate government-sponsored mortgage-backed securities.

Net unrealized losses on securities available-for-sale totaled $3.1 million at December 31, 2025, compared to $4.5 million at December 31, 2024. Unrealized losses on available-for-sale securities relate principally to higher 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 sets forth the composition of our investment securities portfolio as of the dates indicated.


	December 31,
	2025								2024
(Dollars in thousands)	Amortized Cost			% of Total		Fair Value			Amortized Cost		% of Total			Fair Value
Securities available-for-sale
Mortgage-backed securities	$	51,820		75.7	%	$	48,888		$	31,511	67.5	%		$	27,202
U.S. Government and agency obligations		-		-			-			-	-				-
Municipal obligations		1,697		2.5			1,579			1,704	3.7				1,510
Total securities available-for-sale		53,517		78.2			50,467			33,215	71.2				28,712

Securities held-to-maturity
U.S. Government and agency obligations		13,000		19.0			11,577			13,000	27.9				10,860
Municipal obligations		1,917		2.8			1,990			447	0.9				424
Total securities held to maturity		14,917		21.8			13,567			13,447	28.8				11,284
Total investment securities	$	68,434		100.0	%	$	64,034		$	46,662	100.0	%		$	39,996

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The following table presents the amortized cost of our total investment securities portfolio that matures during each of the periods indicated and the weighted average yields for each range of maturities at December 31, 2025.


	Contractual Maturity as of December 31, 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	$	-		$	5,312		$	338		$	46,170		$	51,820
U.S. Government and agency obligations		-			9,000			4,000			-			13,000
Municipal obligations		-			1,070			2,544			-			3,614
Total	$	-		$	15,382		$	6,882		$	46,170		$	68,434

Weighted average yield
Mortgage-backed securities		-	%		4.45	%		4.70	%		3.46	%		3.57	%
U.S. Government and agency obligations		-			1.24			2.46			-			1.61
Municipal obligations		-			3.36			3.39			-			3.38
Total weighted average yield		-			2.50			2.91			3.46			3.19

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 by the average amortized cost of the applicable securities.

The following table sets forth the dollar value of our investment securities which have fixed interest rates or which have floating or adjustable interest rates at each of the dates indicated.


	December 31,
(Dollars in thousands)		2025		2024

Fixed-rate
Available-for-sale, at fair value	$	31,659	$	28,679
Held-to-maturity		14,917		13,447
Total fixed-rate		46,576		42,126

Adjustable-rate
Available-for-sale, at fair value		18,808		33
Held-to-maturity		-		-
Total adjustable-rate		18,808		33
Total investment securities	$	65,384	$	42,159

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


	December 31, 2025					December 31, 2024
(Dollars in thousands)	Amount			%		Amount			%		Change
Non-interest-bearing demand deposits	$	29,991		16.2	%	$	28,281		15.2	%	$	1,710	6.0	%
Interest-bearing demand deposits		32,851		17.7			48,334		26.0			(15,483)	(32.0)
Money market		10,235		5.5			10,729		5.8			(494)	(4.6)
Savings		53,831		29.1			37,639		20.3			16,192	43.0
Certificates of deposit		58,366		31.5			60,691		32.7			(2,325)	(3.8)
Total deposits	$	185,274		100.0	%	$	185,674		100.0	%	$	(400)	(0.2)

The ratio of the Company’s total loans to deposits was 91.9% and 90.0% as of December 31, 2025 and 2024, respectively.

The decline in interest-bearing demand deposits was largely due to fluctuations in public fund balances. Total public fund deposits were $26.4 million, or 14.3% of total deposits, at December 31, 2025, compared to $35.6 million, or 19.2% of total deposits, at December 31, 2024. At December 31, 2025, approximately 59% of our total public fund deposits consisted of non-interest-bearing and interest-bearing demand deposits from municipalities within our market, compared to 83% at December 31, 2024. At December 31, 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 was partially offset by growth driven by in-market 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 $50.1 million at December 31, 2025 and $53.7 million at December 31, 2024. Total uninsured non-public funds deposits were approximately $28.8 million and $22.5 million at December 31, 2025 and 2024, respectively. At December 31, 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 $25.3 million or $20.0 million of a custodial letter of credit granted by the Federal Home Loan Bank of Dallas.

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The following table shows the average balance of each type of deposit and the average rate paid on each type of interest-bearing deposit for the periods indicated.


	Year Ended December 31,
	2025						2024
(Dollars in thousands)	Average Balance		Interest Expense		Average Rate Paid		Average Balance		Interest Expense		Average Rate Paid
Interest-bearing demand deposits	$	36,276	$	379	1.04	%	$	37,242	$	287	0.77	%
Money market		10,226		236	2.31			13,467		266	1.98
Savings accounts		47,059		1,330	2.83			36,043		881	2.44
Certificates of deposit		56,919		1,846	3.24			56,498		1,795	3.18
Total interest-bearing deposits		150,480		3,791	2.52			143,250		3,229	2.25
Non-interest-bearing demand deposits		29,006		-				28,842		-
Total deposits	$	179,486	$	3,791			$	172,092	$	3,229

The following table shows the maturities and weighted average contractual interest rates of our total certificates of deposit at December 31, 2025 by time remaining to maturity.


(Dollars in thousands)	Amount		Weighted Average Rate
Balance at December 31, 2025 maturing in:
Three months or less	$	19,309	3.54	%
Over three months through six months		18,671	3.31
Over six through 12 months		14,927	2.94
Over 12 months		5,459	1.70
Total certificates of deposit	$	58,366	3.14

The following table shows the maturities and weighted average contractual interest rates of our certificates of deposit in excess of the FDIC insurance limit (generally, $250,000) at December 31, 2025 by time remaining to maturity.


(Dollars in thousands)		Amount		Weighted Average Rate
Balance at December 31, 2025 maturing in:
Three months or less		$	9,354	4.00	%
Over three months through six months			5,329	3.39
Over six through 12 months			4,330	2.95
Over 12 months			469	1.75
Total certificates of deposit with balances in excess of $250,000		$	19,482	3.55

Table of Contents

Borrowings. Total borrowings at December 31, 2025 were $14.7 million, up $5.2 million, or 54.1%, from December 31, 2024. The Company increased borrowings to partially fund the growth in investment securities during 2025.

Borrowings outstanding at December 31, 2025 consisted of FHLB advances. The carrying value of our FHLB advances reflects deferred prepayment penalties on advances restructured in December of 2020. Deferred prepayment penalties on our FHLB advances totaled $268,000 and $442,000 at December 31, 2025 and 2024, respectively.

The following table shows certain information regarding our borrowings at or for the dates indicated:


		At or For the Year Ended
		December 31,
(Dollars in thousands)		2025			2024
Advance from Federal Reserve Bank of Atlanta
Average balance		$	-		$	16,918
Maximum balance at any month-end during the period			-			21,000
Balance at end of period			-			-

Average interest rate during the period			-	%		4.81	%
Weighted average interest rate at end of period⁽¹⁾			-			-

Advances from FHLB
Average balance		$	10,676		$	9,475
Maximum balance at any month-end during the period			19,723			10,261
Balance at end of period			14,732			9,558

Average interest rate during the period			2.94	%		2.89	%
Weighted average interest rate at end of period⁽¹⁾			2.49			0.93

(1)	Reflects the weighted average contractual rate of advances.

Shareholders’ Equity. Shareholders’ equity totaled $81.7 million, or 28.9% of total assets, at December 31, 2025, up $1.5 million, or 1.9%, from $80.2 million, or 29.0% of total assets, at December 31, 2024. During 2025, the impacts of net income and the decline in unrealized losses on available-for-sale securities were partially offset by the Company’s repurchases of its common stock.

During the year ended December 31, 2025, the Company repurchased 203,239 shares of its common stock at an average cost of $12.72 per share. Of those shares, 187,150 shares were repurchased under the Company’s November 2024 Repurchase Plan and 16,089 shares were repurchased under the November 2025 Repurchase Plan. Under the November 2025 Repurchase Plan, 188,911 shares of the Company’s common stock were available for repurchase at December 31, 2025.

Since the announcement of our first share repurchase plan on January 26, 2023 and through December 31, 2025, the Company has repurchased a total of 1,215,089 shares of its common stock, or approximately 23% of the common shares originally issued, at an average cost per share of $12.06. At December 31, 2025, the Company had common shares outstanding of 4,074,911.

Table of Contents

Average Balances, Net Interest Income, and Yields Earned and Rates Paid. The following table shows for the periods indicated the total dollar amount of interest income from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. Taxable equivalent (“TE”) yields have been calculated using a marginal tax rate of 21%. All average balances are based on daily balances.


		Year Ended December 31,
		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⁾		$	167,038	$	11,161	6.68	%	$	155,867	$	10,128	6.50	%
Investment securities⁽²⁾			53,129		1,425	2.72			54,235		1,063	1.97
Other interest-earning assets			30,379		1,310	4.31			51,552		2,671	5.18
Total interest-earning assets			250,546		13,896	5.55			261,654		13,862	5.30
Non-interest-earning assets			21,869						20,163
Total assets		$	272,415					$	281,817
Interest-bearing liabilities:
Demand deposits, money market and savings accounts			93,561		1,945	2.08	%		86,752		1,434	1.65	%
Certificates of deposit			56,919		1,846	3.24			56,498		1,795	3.18
Total interest-bearing deposits			150,480		3,791	2.52			143,250		3,229	2.25
Borrowings			10,703		315	2.94			26,393		1,088	4.12
Total interest-bearing liabilities			161,183		4,106	2.55			169,643		4,317	2.54
Non-interest-bearing liabilities			30,250						30,694
Total liabilities			191,433						200,337
Shareholders' equity			80,982						81,480
Total liabilities and shareholders' equity		$	272,415					$	281,817
Net interest-earning assets		$	89,363					$	92,011
Net interest income; average interest rate spread				$	9,790	3.00	%			$	9,545	2.76	%
Net interest margin⁽³⁾						3.92						3.65
Average interest-earning assets to average interest-bearing liabilities						155.44						154.24

(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%.

Table of Contents

Rate/Volume Analysis. The following table shows the extent to which changes in interest rates and changes in volume of interest-earning assets and interest-bearing liabilities affected our interest income and interest expense during the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in rate, which is the change in rate multiplied by prior year volume, and (2) changes in volume, which is the change in volume multiplied by prior year rate. The combined effect of changes in both rate and volume has been allocated proportionately to the change due to rate and the change due to volume.


		Year Ended
		December 31, 2025 vs 2024
		Increase (Decrease) Due to				Total
(Dollars in thousands)		Rate		Volume		Increase (Decrease)
Interest income:
Loans receivable		$	293	$	740	$	1,033
Investment securities			388		(26)		362
Other interest-earning assets			(395)		(966)		(1,361)
Total interest income			286		(252)		34
Interest expense:
Demand deposits, money market and savings accounts			392		119		511
Certificates of deposit			38		13		51
Total deposits			430		132		562
Borrowings			(394)		(379)		(773)
Total interest expense			36		(247)		(211)
Increase (decrease) in net interest income		$	250	$	(5)	$	245

Comparison of Results of Operation for the Years Ended December 31, 2025 and 2024

General. For the year ended December 31, 2025, the Company reported net income of $2.1 million, or $0.56 diluted EPS, compared to a net loss of $3.1 million for the year ended December 31, 2024. The following table summarizes the changes in net income (loss) for the periods indicated.


	Year Ended December 31,
(Dollars in thousands)	2025		2024		Change
Selected Operating Data
Total interest income	$	13,896	$	13,862	$	34	0.2	%
Total interest expense		4,106		4,317		(211)	(4.9)
Net interest income		9,790		9,545		245	2.6
Provision for credit losses		60		531		(471)	(88.7)
Total non-interest income (loss)		1,358		(3,840)		5,198	135.4
Total non-interest expense		8,584		9,157		(573)	(6.3)
Income tax expense (benefit)		452		(894)		1,346	150.6
Net income (loss)	$	2,052	$	(3,089)	$	5,141	166.4

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 2025 was down compared to 2024 primarily due to expenses incurred during 2024 related to the Company’s upgrade to a new core processing system.

Table of Contents

Interest Income. The following table summarizes the changes in interest income for the periods indicated.


	Year Ended December 31,
(Dollars in thousands)	2025		2024		Change
Interest Income
Loans receivable, including fees	$	11,161	$	10,128	$	1,033	10.2	%
Investment securities		1,425		1,063		362	34.1
Cash and due from banks		1,254		2,585		(1,331)	(51.5)
Other earning assets

Catalyst Bancorp, Inc. 10-K