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.

The growth in loans was funded by a $19.2 million, or 5.1%, increase in total deposits to $394.3 million. This included higher balances in time deposits and money market accounts as the bank offered competitive certificate of deposit specials during the period.

Improved Net Interest Income

The company’s net interest income, which is the difference between the interest it earns on loans and investments versus the interest it pays on deposits and borrowings, increased by $384,000, or 10.2%, to $4.1 million for the three months ended December 31, 2024 compared to the same period in 2023.

For the nine-month period, net interest income grew by $1.6 million, or 15.1%, to $12.2 million. This was driven by an increase in interest income on loans due to both higher market interest rates and growth in the loan portfolio. The net interest margin, which measures the profitability of the bank’s interest-earning assets, increased by 20 basis points to 3.53% for the nine months ended December 31, 2024.

Provision for Loan Losses Declines

The bank recorded a provision for credit losses of $57,000 in the third quarter of 2024, down from $191,000 in the same quarter of 2023. For the nine-month period, the provision declined to $56,000 from $99,000 in the prior year.

This reduction reflects the bank’s strong credit quality and the generally favorable economic conditions in its markets. Management will continue to closely monitor the loan portfolio and make adjustments to the provision as needed based on changes in economic forecasts and the composition of the loan book.

Noninterest Income Declines, Noninterest Expense Increases

Noninterest income, which includes fees and other revenue sources outside of interest income, decreased by $234,000, or 26.3%, to $656,000 in the third quarter of 2024. This was primarily due to a decline in other income, which included a one-time recovery in the prior year period.

For the nine-month period, noninterest income declined by $326,000, or 14.7%, to $1.9 million. The decrease was again driven by lower other income and reduced loan servicing fees.

On the expense side, noninterest expense increased by $248,000, or 7.5%, to $3.5 million in the third quarter. This was largely due to higher other general and administrative costs related to public company compliance and consulting fees. For the nine months, noninterest expense grew by $1.4 million, or 15.5%, to $10.5 million, with increases in both salaries and administrative costs.

Strong Capital Position Supports Growth

Stockholders’ equity increased by $3.0 million, or 3.8%, to $81.3 million at December 31, 2024. This was driven by the company’s net income of $2.8 million for the nine-month period, as well as an increase in equity from the release of ESOP shares. The company also initiated a stock repurchase program, buying back 9,386 shares at an average price of $14.59 per share.

Central Plains’ capital ratios remain well above regulatory minimums for a “well-capitalized” institution. The bank’s total risk-based capital ratio was 15.2% at December 31, 2024, providing ample cushion to support continued asset growth and lending activities.

Interest Rate Risk Management

The company closely monitors and manages its exposure to changes in interest rates, which is a key risk for banks. Its net interest income simulation model indicates that a 200 basis point increase in rates would result in a 0.77% decrease in net interest income over a one-year period. Conversely, a 200 basis point rate decrease would lead to a 0.20% increase in net interest income.

The bank’s market value of equity (MVE) model shows that an instantaneous 200 basis point increase in rates would result in a 0.75% decline in MVE, while a 200 basis point decrease would lead to a 14.73% drop. Management believes these interest rate risk metrics demonstrate the company’s ability to withstand moderate changes in the interest rate environment.

Outlook and Conclusion

Central Plains Bancshares delivered solid financial performance in the first nine months of fiscal 2024, driven by continued growth in its loan portfolio and improved profitability. The bank’s focus on diversifying its lending activities, maintaining strong credit quality, and prudently managing interest rate risk have positioned it well for the future.

Looking ahead, the company plans to further expand its branch network with the construction of two new locations, which should support additional customer acquisition and business development. Central Plains remains well-capitalized and has ample liquidity to fund future loan growth through both deposits and borrowing capacity.

Overall, Central Plains Bancshares has demonstrated the ability to navigate the current economic environment effectively. The company’s solid financial performance, diversified business model, and proactive risk management approach provide a strong foundation for continued success.