Central Plains Bancshares, Inc. Reports Strong Loan Growth and Improved Profitability

Central Plains Bancshares, Inc., the parent company of Central Plains Bank, has reported its financial results for the three and nine months ended December 31, 2024. The company saw solid growth in its loan portfolio and improved profitability compared to the same periods in the prior year.

Loan Growth Drives Asset Expansion

Total assets increased by $21.0 million, or 4.5%, to $484.3 million at December 31, 2024 from $463.3 million at March 31, 2024. This growth was primarily driven by a $24.6 million, or 6.6%, increase in the company’s net loan portfolio.

The largest increase occurred in the agriculture loan category, which grew by $24.4 million, or 123.9%, to $44.1 million. This was due to the addition of new agriculture lenders to the team. Loans also increased across other categories like commercial real estate and residential mortgages, reflecting the company’s focus on diversifying its lending activities.

To support this loan growth, the company also saw a $19.2 million, or 5.1%, increase in total deposits to $394.3 million. This was driven by higher balances in time deposits and money market accounts as the bank offered competitive certificate of deposit specials.

Improved Profitability

For the three months ended December 31, 2024, the company reported net income of $951,000, compared to $937,000 in the same period of 2023. Over the nine-month period, net income was $2.8 million, down slightly from $2.9 million a year earlier.

The improvement in quarterly earnings was primarily due to a 14.8% increase in interest and dividend income, which rose to $6.2 million. This was driven by higher yields on the loan portfolio as market interest rates increased. The net interest margin expanded by 8 basis points to 3.55% for the quarter.

However, the company also saw a 24.9% rise in interest expense to $2.1 million, as the cost of deposits increased along with market rates. Noninterest income declined 26.3% to $656,000, largely due to a decrease in other income related to the recovery of a previously written-off receivable in the prior year period.

Noninterest expenses increased 7.5% to $3.5 million, with higher salaries, employee benefits, and other general and administrative costs. The company began recognizing expenses related to its new 2024 Equity Incentive Plan in the current quarter.

Overall, the company maintained strong profitability, with a return on average assets of 0.79% and a return on average equity of 6.12% for the three months ended December 31, 2024.

Solid Capital and Liquidity Positions

Stockholders’ equity increased $3.0 million, or 3.8%, to $81.3 million at December 31, 2024. This was driven by the company’s net income, as well as a decrease in the unrealized loss position on its securities portfolio.

The company’s capital ratios remained well above regulatory minimums for “well-capitalized” status. The total risk-based capital ratio was 15.2% at the end of the quarter, providing a strong buffer against potential losses.

In terms of liquidity, cash and cash equivalents decreased $4.9 million to $6.6 million, as the company used funds to support loan growth and construct new branch locations. However, the company maintains access to additional liquidity through its borrowing capacity with the Federal Home Loan Bank and a private bankers’ bank.

Outlook and Risks

Looking ahead, Central Plains Bancshares is well-positioned to continue its growth trajectory. The company’s focus on expanding its commercial and agricultural lending activities, while maintaining credit quality, should support future profitability. The construction of two new branch offices is also expected to enhance the bank’s service capabilities and drive further customer engagement in its key markets.

However, the company does face some risks and challenges that could impact its performance. These include:

• Potential economic slowdown or recession that could lead to increased loan delinquencies and credit losses
• Further increases in market interest rates that could squeeze the net interest margin
• Competition from other financial institutions for loans and deposits
• Regulatory changes that could affect the company’s operations or profitability
• Cybersecurity threats and operational risks

To mitigate these risks, the company will need to maintain disciplined underwriting standards, closely monitor its interest rate risk exposure, and continue investing in technology and talent to enhance its operational efficiency and security.

Overall, Central Plains Bancshares has demonstrated its ability to navigate the current economic environment and deliver solid financial results. With its strong capital position, diversified loan portfolio, and strategic initiatives, the company appears well-equipped to capitalize on future growth opportunities while managing potential risks.