Catalyst Bancorp, Inc. (CLST) stock intrinsic value fair value estimate & owner earnings analysis

Catalyst Bancorp is the holding company for Catalyst Bank, a savings bank founded in 1922 in Opelousas, Louisiana, with six branches in Opelousas, Eunice, Port Barre, Carencro and Lafayette in the Acadiana region. It converted from depositor-owned (mutual) form to a public company in October 2021, and since then has been shifting from a traditional home-mortgage thrift toward commercial lending to local small businesses and professionals. At June 30, 2026 it had $290 million of assets, $196 million of deposits, about $170 million of loans and $82.5 million of shareholders' equity — about 28% of assets, roughly three times what a typical community bank carries. Earning power. We measure owner earnings as cash from operations with working-capital timing swings removed, less stock and employee-stock-ownership-plan compensation (about $0.9 million a year, a real and meaningful cost here that we charge in full) and the capital spending needed to maintain the branches. On that basis the bank earned about $0.96 million in 2021, $0.37 million in 2022, $1.09 million in 2023, $1.96 million in 2024 and $2.49 million in 2025 ($0.68 per diluted share). The step-up in 2024-2025 came mainly from a 2024 restructuring in which the bank sold about $42.5 million of low-yielding securities at a $5.5 million loss and reinvested at higher rates, lifting its net interest margin to 3.92% in 2025. That loss recognised value already lost when rates rose in 2022; it is sunk and we do not deduct it from ongoing earnings. We measure the business from 2024 onward, after the restructuring and the post-conversion build-out, and use about $2.2 million a year (about $0.60 per share on 3.65 million diluted shares) as the normal level — the midpoint of 2024 and 2025, and in line with the first half of 2026, which annualises to about $2.2 million. Although 2025 owner earnings grew 27%, we assume no growth from here: in the first half of 2026 non-interest expense rose 12% while net interest income rose only 6%, and first-half owner earnings came in below the same period of 2025. Surplus capital is the central fact. We estimate a bank this size needs roughly 10% of assets as equity to operate comfortably, leaving about $53 million of surplus held largely in cash and securities earning roughly 4.25% before tax, about 3.4% after. On that estimate most of today's earnings are simply the return on surplus capital, and the lending franchise itself earns only about $0.4 million a year after its costs. Capital earning 3.4% is worth its face value to shareholders only as it is handed back; left on the balance sheet it is worth what it earns. Management has a real record here: six successive buyback programs of about 5% of shares each, $17.7 million spent from 2022 through mid-2026, cutting diluted shares from 4.87 million to 3.65 million. The pace has slowed, from $6.3 million in 2023 and $5.8 million in 2024 to $2.6 million in 2025 and $0.65 million in the first half of 2026. Deposits and Federal Home Loan Bank advances ($9.8 million at June 30, 2026) are the raw material of a bank rather than debt standing ahead of the business, so each case values the owners' cash flow directly and nothing further is subtracted; no case depends on refinancing. Base case, about $13.57 per share (about $49.5 million): owner earnings of $2.2 million a year, with about $2.5 million a year of surplus capital returned on top of earnings — roughly the 2025 buyback pace — until the surplus is used up after about 21 years. Earnings shrink as the surplus leaves, settling at the roughly $0.4 million a year the lending franchise earns, which a century-old deposit base in its home parishes supports continuing. Bull case, about $15.70 per share (about $57 million): earnings hold at the 2025 level of $2.5 million and surplus capital is returned at $4 million a year on top of earnings, near the 2023-2024 buyback pace, with the franchise then earning about $0.7 million a year. Bear case, about $7.31 per share (about $26.7 million): buybacks dwindle to nothing, as the first-half 2026 pace hints, so the surplus stays on the balance sheet earning its low return indefinitely, while expenses growing faster than revenue and lower rates on the bank's roughly $37 million of cash push owner earnings back to about $1.6 million a year, between the 2023 and 2024 levels. Non-performing assets rose 47% in 2025 to $2.7 million — small against the capital, but a watch item for a loan book concentrated in rural Acadiana residential property and a regional economy long tied to oil and gas. What we left out: loan growth from the commercial-banking strategy, because it depends on winning market share and is not yet a sustained record (loans grew $22.7 million in 2024 but only $3.1 million in 2025); and any sale of the bank, which would be speculation. All three cases sit well below book equity of about $22.60 per diluted share because the bank earns only about 3% on that equity. A much faster return of capital or a sale of the bank would be the main ways the shares prove worth more than our base; credit losses, or a decision to put the surplus into low-return lending or acquisitions, would push toward the bear. The 2020 year, before the conversion, is excluded because no public shares existed and the balance sheet was very different.