CLST Catalyst Bancorp Inc

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No. _____)

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:

☐Preliminary Proxy Statement

☐Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

☒Definitive Proxy Statement

☐Definitive Additional Materials

☐Soliciting Material Pursuant to §240.14a-12

Catalyst Bancorp, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than Registrant)

Payment of Filing Fee (Check the appropriate box):

☒No fee required.

☐Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1)Title of each class of securities to which transaction applies:

(2)Aggregate number of securities to which transaction applies:

(4)Proposed maximum aggregate value of transaction:

(5)Total fee paid:

☐Fee paid previously with preliminary materials.

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April 11, 2023

Dear Shareholder:

You are cordially invited to attend the Annual Meeting of Shareholders of Catalyst Bancorp, Inc. The meeting will be held at our headquarters, located at 235 North Court Street, Opelousas, Louisiana, 70570, on Tuesday, May 16, 2023 at 8:00 a.m., Central time. The matters to be considered by shareholders at the annual meeting are described in the accompanying materials.

It is very important that your shares be voted at the annual meeting regardless of the number you own or whether you are able to attend the meeting in person. We urge you to mark, sign, and date your proxy card today and return it in the envelope provided, even if you plan to attend the annual meeting. This will not prevent you from voting in person, but will ensure that your vote is counted if you are unable to attend.

On behalf of the Board of Directors and all of the employees of Catalyst Bancorp, I thank you for your continued interest and support.

Sincerely,

Joseph B. Zanco

President and Chief Executive Officer

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CATALYST BANCORP, INC.

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Can I attend the meeting and vote my shares in person?

All shareholders are invited to attend the annual meeting. Shareholders of record can vote in person at the annual meeting. If your shares are held in “street name,” then you are not the shareholder of record and you must ask your broker or other nominee about how you can vote at the annual meeting.

Can I change my vote after I return my proxy card?

Yes. If you are a shareholder of record, there are three ways you can change your vote or revoke your proxy after you have sent in your proxy card.

If your shares are held in street name and you have instructed a broker or other nominee to vote your shares, you must follow directions you receive from your broker or other nominee to change your vote.

What constitutes a quorum?

The presence at the annual meeting, in person or by proxy, of the holders of a majority of the votes that all shareholders are entitled to cast at the annual meeting will constitute a quorum. Proxies received but marked as abstentions and broker non-votes will be included in the calculation of the number of votes considered to be present at the meeting.

What are the Board of Directors’ recommendations?

The recommendations of the Board of Directors are set forth under the description of each proposal in this proxy statement. In summary, the Board of Directors recommends that you vote (i) FOR the nominees for director described herein, and (ii) FOR ratification of the appointment of Castaing, Hussey & Lolan, LLC as our independent registered public accounting firm for the year ending December 31, 2023.

The proxy solicited hereby, if properly signed and returned to us and not revoked prior to its use, will be voted in accordance with your instructions contained in the proxy. If no contrary instructions are given, each proxy signed and received will be voted in the manner recommended by the Board of Directors and, upon the transaction of such other business as may properly come before the meeting, in accordance with the best judgment of the persons appointed as proxies. Proxies solicited hereby may be exercised only at the annual meeting and any adjournment of the annual meeting and will not be used for any other meeting.

What vote is required to approve each item?

Directors are elected by a plurality of the votes cast with a quorum, a majority of the outstanding shares entitled to vote represented in person or by proxy, present. The two persons who receive the greatest number of votes of the holders of common stock represented in person or by proxy at the annual meeting will be elected directors. The affirmative vote of a majority of the votes cast by shareholders entitled to vote at the annual meeting is required for the approval of the proposal to ratify the appointment of our independent registered public accounting firm for the year ending December 31, 2023. Abstentions and broker non-votes are considered in determining the presence of a quorum, but will not affect the vote required on the proposals to be considered at the Annual Meeting.

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Executive Officers Who Are Not Also Directors

Set forth below is information with respect to the principal occupations during the last five years for the three executive officers of Catalyst Bancorp and/or our subsidiary, Catalyst Bank, who do not also serve as directors of Catalyst Bancorp. Ages are reflected as of March 27, 2023.

Jacques L. J. Bourque, CPA, MBA, age 30, has served as Chief Financial Officer of Catalyst Bank and Catalyst Bancorp since February 2022. Mr. Bourque joined the company as Treasurer in October 2021. Previously, Senior Accountant for Home Bank, N.A., Lafayette, Louisiana, from October 2018 to October 2021. Prior thereto, Staff Auditor for Postlethwaite & Netterville from June 2018 to October 2018, and Internal Auditor for Home Bank, N.A. from January 2017 to May 2018.

Simone S. Perry, age 50 has served as Senior Vice President and Chief Credit Officer of Catalyst Bank since April 2021. Previously, Senior Vice President and Commercial Underwriting Manager for Iberiabank, Lafayette, Louisiana, from October 2009 through March 2021. Prior thereto, Business Lender, Commercial Underwriter and Portfolio Manager for Whitney Bank in Lafayette and Baton Rouge, Louisiana from October 1999 through October 2009.

Amanda Quebedeaux, age 49, has served as Senior Vice President and Director of Operations of Catalyst Bank since February 2022. Previously, Vice President and Director of Operations of Catalyst Bank since June 2021. Prior thereto, Vice President, Client Solutions System Administrator Manager, Hancock Whitney Bank and Senior Vice President, Director of Loan Operations, MidSouth Bank, a subsidiary of MidSouth Bancorp from 2004 to October 2018.

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Committees and Meetings of the Board of Directors

The Board of Directors of Catalyst Bancorp has established a Compensation Committee, Audit Committee and Nominating and Corporate Governance Committee. During the fiscal year ended December 31, 2022, the Board of Directors of Catalyst Bancorp held eight meetings. Mr. Bellard attended fewer than 75% of the total number of Board meetings and committee meetings on which he served that were held during this period. The Board of Directors has determined that a majority of its members are independent directors as “independent director” is defined in the Nasdaq listing standards. Our independent directors are Messrs. Kidder, Bellard, Kleiser, Lafleur, LeBouef and Scruggins.

Audit Committee. The primary purpose of the Audit Committee, as set forth in the committee’s charter, is to assist the Board of Directors in fulfilling its fiduciary responsibilities relating to corporate accounting and reporting practices. The Audit Committee reviews with management and the independent auditors the systems of internal control, reviews the annual financial statements, including the Annual Report on Form 10-K, and monitors our adherence in accounting and financial reporting to generally accepted accounting principles. The Board of Directors has identified Mr. LeBouef as a member of the Audit Committee who meets the Securities and Exchange Commission’s definition of audit committee financial expert. The Board of Directors believes that all of the Audit Committee members have sufficient expertise to fulfill their fiduciary duties.

The Audit Committee meets on an as needed basis and met four times in 2022. The Board of Directors and the Audit Committee adopted an Audit Committee Charter which is available on our website at www.catalystbank.com under the “Investor Relations” heading.

Compensation Committee. The Compensation Committee reviews the compensation of our executive officers and met four times in 2022. No member of the Compensation Committee is a current or former officer or employee of Catalyst Bancorp or Catalyst Bank. The Compensation Committee has adopted a written charter which is available on our website at www.catalystbank.com under the “Investor Relations” heading.

Nominating and Corporate Governance Committee. Nominations for director of Catalyst Bancorp are reviewed by the Nominating and Corporate Governance Committee and submitted to the full Board of Directors for approval. The Nominating and Corporate Governance Committee did not meet during 2022. The Charter of the Nominating and Corporate Governance Committee is available on our website at www.catalystbank.com under the “Investor Relations” heading.

Committee Membership. The following table sets forth the membership of the committees as of the date of this proxy statement.

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Board Leadership Structure

Our Board of Directors is led by a Chairman selected by the Board from time to time. Presently, Mr. Kidder serves as Chairman of the Board. Other than Mr. Zanco, our President and Chief Executive Officer, all of our other directors are independent.

The Board of Directors has determined that the separation of the offices of Chairman of the Board and President enhances Board independence and oversight. Further, the separation of the Chairman of the Board permits the President and Chief Executive Officer to better focus on his responsibilities of managing the daily operations of Catalyst Bancorp and Catalyst Bank, enhancing shareholder value and expanding and strengthening our franchise while allowing the Chairman of the Board to lead the Board of Directors in its fundamental role of providing independent oversight and advice to management. Mr. Kidder is an independent director under the rules of the Nasdaq Stock Market.

Board’s Role in Risk Oversight

Risk is inherent with every business, particularly financial institutions. We face a number of risks, including credit risk, interest rate risk, liquidity risk, operational risk, strategic risk, cybersecurity risk and reputational risk. Management is responsible for the day-to-day management of the risks Catalyst Bancorp and Catalyst Bank face, while the Board, as a whole and through its committees, has responsibility for the oversight of risk management. The Board of Directors regularly discusses with management our major risk exposures, their potential impact on our business and steps taken to address them.

Members of senior management regularly attend meetings of the Board of Directors and address any questions or concerns raised by the Board on risk management or other matters. The Board’s risk oversight function is carried out through, among other factors, its review and approval of various policies and procedures, such as Catalyst Bank’s lending and investment policies, ratification or approval of investments and loans exceeding certain thresholds, and regular review of risk elements such as interest rate risk exposure, liquidity and problem assets. In addition, members of management keep the Board informed of the state of our cybersecurity posture and any developments or incidents related to our cybersecurity exposure.

Directors’ Attendance at Annual Meetings

Although we do not have a formal policy regarding attendance by members of the Board of Directors at annual meetings of shareholders, we expect that our directors will attend, absent a valid reason for not doing so. Six of our seven directors attended our  annual meeting of shareholders held on May 17, 2022.

Director Nominations

The Nominating and Corporate Governance Committee’s charter sets forth certain criteria the committee may consider when recommending individuals for nomination to the Board including:

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The committee also may consider the extent to which the candidate would fill a present need on the Board of Directors. The Nominating and Corporate Governance Committee will also consider candidates for director suggested by other directors, as well as our management and shareholders. A shareholder who desires to recommend a prospective nominee for the Board of Directors should notify our Corporate Secretary in writing providing whatever supporting material the shareholder considers appropriate. Any shareholder wishing to make a nomination must follow our procedures for shareholder nominations which are described under “Shareholder Proposals, Nominations and Communications with the Board of Directors.”

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Narrative to Director Compensation Table. Each director of Catalyst Bank currently receives $2,000 monthly, regardless of meeting attendance, and $600 and $400 per month for loan and audit committee membership, respectively. Directors did not receive a discretionary annual bonus for the 2022 fiscal year. The Chairman and Secretary receive an additional $250 per month. Each of the current directors of Catalyst Bancorp also serves as a director of Catalyst Bank. No additional director fees are being paid to directors for their service on the Catalyst Bancorp Board of Directors.

In September 2022, members of the Board of Directors received stock options and stock awards under the Catalyst Bancorp, Inc. 2022 Stock Option Plan and the Catalyst Bancorp, Inc. 2022 Recognition and Retention Plan and Trust Agreement. Each of our non-employee directors received 21,160 stock options and 8,464 stock awards. All of the September 2022 stock options and stock awards are vesting at a rate of 20% per year commencing on the one-year anniversary of the date of grant, September 1, 2023.

Transactions With Related Persons

Catalyst Bank offers extensions of credit to its directors, officers and employees as well as members of their immediate families for the financing of their primary residences and other purposes. These loans are made in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to Catalyst Bank, and none of such loans involve more than the normal risk of collectability or present other unfavorable features.

Section 22(h) of the Federal Reserve Act generally provides that any credit extended by a savings institution, such as Catalyst Bank, to its executive officers, directors and, to the extent otherwise permitted, principal shareholder(s), or any related interest of the foregoing, must be on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions by the savings institution with non-affiliated parties; unless the loans are made pursuant to a benefit or compensation program that (i) is widely available to employees of the institution and (ii) does not give preference to any director, executive officer or principal shareholder, or certain affiliated interests of either, over other employees of the savings institution, and must not involve more than the normal risk of repayment or present other unfavorable features.

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Narrative to Summary Compensation Table. The board of directors approved Mr. Zanco’s base salary of $260,000 in 2020, which increased to $300,000 after completion of the conversion in October 2021. The dollar amount of total salary was based on the board’s perception of the local market for chief executive officer compensation and was intended to ensure that Catalyst Bank remained competitive in attracting and retaining a qualified chief executive officer. Catalyst Bank does not maintain a written bonus plan, although we have historically paid bonuses to our employees. Mr. Zanco received a $100,000 bonus in 2021 upon completion of the conversion pursuant to the terms of his employment agreement. Mr. Zanco’s Restricted Executive Benefit Agreement provides that Catalyst Bank pays the annual premium of $25,600 plus reimbursement of the related tax obligation on a $750,000 (face amount) life insurance policy owned by Mr. Zanco. Mr. Zanco will become vested in the cash value of the policy over 10 years commencing on December 31, 2024. Mr. Zanco is also provided with a monthly vehicle allowance of $1,500 and health insurance premium for Mr. Zanco and his eligible family members.

In September 2022, Mr. Zanco received stock options and stock awards under the Catalyst Bancorp, Inc. 2022 Stock Option Plan and the Catalyst Bancorp, Inc. 2022 Recognition and Retention Plan and Trust Agreement. Mr. Zanco received 52,900 stock options and 21,160 stock awards. All of the September 2022 stock options and stock awards are vesting at a rate of 20% per year commencing on the one-year anniversary of the date of grant, September 1, 2023.

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Employment Agreement

Catalyst Bank has entered into an employment agreement with Mr. Zanco. Pursuant to the agreement, Mr. Zanco serves as President and Chief Executive Officer for a term of three years ending August 17, 2023. Prior to the expiration of the term of the agreement, the board of directors will review the agreement to determine whether to extend the term of the employment agreement for three additional years or such other time period mutually agreed upon. The employment agreement provides for an initial base salary of $260,000, which increased to $300,000 after completion of the conversion in October 2021. Mr. Zanco’s base salary may be increased at the discretion of the Board of Directors of Catalyst Bank.

The employment agreement provided that Catalyst Bank will offer Mr. Zanco the maximum allocation allowed for stock options and restricted stock awards under any established stock-based benefit plan (currently 25% of the stock compensation pools). In addition to life insurance benefits applicable for all employees, Mr. Zanco receives additional life insurance of $500,000 payable to his spouse or other beneficiary upon his death. The employment agreement provides that Mr. Zanco will receive a supplemental benefit of $750,000 vesting over 15 years pursuant to his Restricted Executive Benefit Agreement.

The employment agreement is terminable with or without cause by Catalyst Bank. Mr. Zanco has no right to compensation or other benefits pursuant to the employment agreement for any period after termination for cause, as defined in the agreement. The employment agreement provides that in the event of an involuntary termination of employment (including a voluntary termination by Mr. Zanco as a result of a material breach of the agreement by Catalyst Bank or for “good reason”, including a change in the executive’s position, salary or duties without his consent), Mr. Zanco would be entitled to (1) a lump sum cash severance payment which is equal to twelve months of his base salary as of the date of termination, subject to Mr. Zanco executing a release of any claims against Catalyst Bank or its affiliates and (2) continued health insurance coverage until the earlier of twelve months or the date he receives substantially similar benefits from another employer.

The employment agreement provides that if Mr. Zanco’s employment terminates without cause or with good reason on the effective date of a change in control, as defined in the agreement, or within 30 calendar days after a change in control, then Mr. Zanco would be entitled to (1) a lump sum cash severance payment equal to 36 months of the greater of his base salary at the time of the change in control or the date of his termination and (2) continued health insurance coverage until the earlier of 36 months or the date he receives substantially similar benefits from another employer. If the agreement terminates as a result of Mr. Zanco’s death, his estate or beneficiary will be paid his base salary for twelve weeks and continued health coverage for his family over the same period.

Retirement Benefits

Retirement benefits are an important element of a competitive compensation program for attracting senior executives, especially in the financial services industry. Our executive compensation program currently includes (i) a 401(k) profit sharing plan which enables our employees to supplement their retirement savings with elective deferral contributions and permits matching and discretionary contributions by us, and (ii) an employee stock ownership plan that allows participants to accumulate retirement benefits in the form of employer stock at no current cost to the participant.

401(k) Plan. Catalyst Bank sponsors the Catalyst Bank 401(k) Plan, which is a qualified, tax-exempt defined contribution plan with a salary deferral feature under Section 401(k) of the Internal Revenue Code. An employee of Catalyst Bank is eligible to become a participant in the plan after completing one month of employment in which the employee completed at least 83.3 hours of service. Eligible employees are entitled to enter the 401(k) plan on a monthly basis.

Under the 401(k) plan, during 2022 participants were permitted to make salary deferral contributions (in whole percentages) up to the maximum percentage of compensation allowed by law ($20,500 for 2022). Participants who are age 50 or older are permitted to make “catch up” contributions to the plan up to $6,500 (for 2022, as indexed annually). During 2022, Catalyst Bank contributed a matching contribution amount up to 4% of the participant’s annual compensation.

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Upon termination of employment, including following retirement or disability, a participant may withdraw his or her vested account balance or defer commencement of the receipt of benefits until April 1 of the calendar year following the later of (i) the calendar year in which the participant reaches age 72 if the participant was born before 1951, age 73 for those born during the period January 1, 1951 through and including December 31, 1959, or age 75 for those born on or after January 1, 1960, or (ii) the calendar year in which he or she retires. Normal retirement age under the 401(k) plan is age 65. A participant may elect a single lump sum payment or annual installments over a period not in excess of the participant’s remaining life expectancy. If a participant dies prior to receipt of the entire value of his or her 401(k) plan account, the beneficiary can elect from among the benefit payment forms available under the 401(k) plan, including a lump sum distribution, installment payments and life expectancy distributions.

Employee Stock Ownership Plan. Catalyst Bancorp has established an employee stock ownership plan for our employees who have been credited with at least 1,000 hours of service during a 12-month period. As part of the conversion offering completed in October 2021, the employee stock ownership plan purchased 8.0% of the common stock issued in the conversion, or 423,200 shares, from Catalyst Bancorp utilizing a loan equal to 100% of the aggregate purchase price of the common stock acquired by our employee stock ownership plan. The loan to the employee stock ownership plan, which has a term of 20 years, is being repaid principally from Catalyst Bank’s contributions to the employee stock ownership plan, and the collateral for the loan is the common stock purchased by the employee stock ownership plan. We may, in any plan year, make additional discretionary contributions for the benefit of plan participants in either cash or shares of common stock, which may be acquired through the purchase of outstanding shares in the market or from individual shareholders, upon the original issuance of additional shares by Catalyst Bancorp or upon the sale of treasury shares by Catalyst Bancorp.

Shares purchased by our employee stock ownership plan with the loan proceeds are held in a suspense account and released for allocation to participants on a pro rata basis as debt service payments are made. Shares released from the employee stock ownership plan are allocated to each eligible participant’s employee stock ownership plan account based on the ratio of each such participant’s compensation, consisting of salary and bonus, to the total of such compensation of all eligible employee stock ownership plan participants. Forfeitures may be used for several purposes such as the payment of expenses or be reallocated among remaining participating employees. Account balances of participants in the employee stock ownership plan will be 100% vested after five years of service. Credit is given for years of service with Catalyst Bank prior to adoption of the employee stock ownership plan. In the case of a “change in control,” as defined in the employee stock ownership plan, however, participants will become immediately fully vested in their account balances. Participants will also become fully vested in their account balances upon death, disability or retirement. Benefits may be payable upon retirement or separation from service.

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Our Audit Committee has appointed Castaing, Hussey & Lolan, LLC independent registered public accounting firm, to perform the audit of Catalyst Bancorp’s financial statements for the year ending December 31, 2023, and further directed that their selection be submitted for ratification by the shareholders at the annual meeting.

We have been advised by Castaing, Hussey & Lolan that neither that firm nor any of its associates has any relationship with Catalyst Bancorp or Catalyst Bank other than the usual relationship that exists between independent registered public accounting firms and their clients. Castaing, Hussey & Lolan will have one or more representatives at the annual meeting who will have an opportunity to make a statement, if they so desire, and will be available to respond to appropriate questions.

In determining whether to appoint Castaing, Hussey & Lolan as our independent registered public accounting firm, the Audit Committee considered whether the provision of services, other than auditing services, by Castaing, Hussey & Lolan is compatible with maintaining their independence. Each new engagement of Castaing, Hussey & Lolan was approved in advance by the Audit Committee, and none of those engagements made use of the de minimis exception to pre-approval contained in the SEC’s rules.

The Audit Committee selects our independent registered public accounting firm and pre-approves all audit services to be provided by it to Catalyst Bancorp. The Audit Committee also reviews and pre-approves all audit-related and non-audit related services rendered by our independent registered public accounting firm in accordance with the Audit Committee’s charter. In its review of these services and related fees and terms, the Audit Committee considers, among other things, the possible effect of the performance of such services on the independence of our independent registered public accounting firm. The Audit Committee separately approves other individual engagements as necessary. The chair of the Audit Committee has been delegated the authority to approve audit-related and non-audit related services in lieu of the full Audit Committee and presents all such previously-approved engagements to the full Audit Committee.

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The Board of Directors recommends that you vote FOR the ratification of the appointment
of Castaing, Hussey & Lolan as our independent registered public accounting firm
for the fiscal year ending December 31, 2023.

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The Audit Committee has reviewed and discussed Catalyst Bancorp’s audited consolidated financial statements with management. The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed in PCAOB Auditing Standard No. 16, (Communications with Audit Committees). The Audit Committee has received the written disclosures and the letter from the independent accountant required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence and has discussed with the independent accountant their independence. Based on the review and discussions referred to above in this report, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in Catalyst Bancorp’s Annual Report on Form 10-K for fiscal year ended December 31, 2022, for filing with the Securities and Exchange Commission.

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The following tables below set forth, as of March 27, 2023 the voting record date, certain information as to our common stock beneficially owned by (a) each person or entity, including any “group” as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934 who or which was known to us to be the beneficial owner of more than 5% of our issued and outstanding common stock, (b) our directors, (c) certain executive officers of Catalyst Bancorp and/or Catalyst Bank, and (d) all directors and executive officers as a group.

(Footnotes continued on following page)

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Delinquent Section 16(a) Reports

Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who own more than 10% of Catalyst Bancorp, Inc.’s common stock to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, directors and greater than 10% shareholders are required by regulation to furnish us with copies of all Section 16(a) forms they file. Based solely on review of the copies of such forms furnished to us, or written representations from our officers and directors, we believe that during, and with respect to, 2022, all of our officers and directors complied in all respects with the reporting requirements promulgated under Section 16(a).

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