Central Plains Bancshares, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended December 31, 2023. Amounts are in thousands of dollars unless stated otherwise. The company became the holding company for Home Federal Savings and Loan Association of Grand Island upon its mutual-to-stock conversion on October 19, 2023; earlier-period results relate to the Association and subsidiary.
Business context and financial performance
The Association is a Nebraska-based lender and deposit-taking institution focused on residential, commercial real estate, commercial, agricultural and consumer lending. Its primary market is the Grand Island area, with some lending through bank participations.
| Metric | Three months ended Dec. 31, 2023 | Nine months ended Dec. 31, 2023 |
|---|---|---|
| Interest and dividend income | $5.4 million | $15.2 million |
| Net interest income, before provision | $3.7 million | $10.6 million |
| Provision for credit losses | $191,000 | $99,000 |
| Net interest income after provision | $3.6 million | $10.5 million |
| Noninterest income | $890,000 | $2.2 million |
| Noninterest expense | $3.3 million | $9.1 million |
| Net income | $937,000 | $2.9 million |
| Net interest margin | 3.47% | 3.33% |
- Quarterly basic and diluted earnings per share were $0.31. The company did not present nine-month EPS because the conversion during the period made the weighted-average share calculation, in its view, unhelpful to investors.
- At December 31, total assets were $454.3 million; gross loans were $376.0 million and net loans were $370.2 million. Available-for-sale securities were $57.3 million.
- Total deposits were $367.4 million, including $82.4 million noninterest-bearing and $285.1 million interest-bearing deposits. Stockholders’ equity was $77.8 million.
- Cash and cash equivalents were $11.7 million, down from $16.6 million at March 31. The company reported no outstanding borrowings; available FHLB borrowing capacity was approximately $40.9 million, subject to FHLB discretion, and private-bank borrowing capacity was $5.0 million.
- Nine-month operating cash flow was $4.2 million; investing cash use was $21.4 million and financing cash provided was $12.3 million. Cash decreased by $4.9 million over the period.
Changes versus comparable periods
- Quarterly net income of $937,000 compared with a $1.1 million loss a year earlier. Nine-month net income was $2.9 million versus $691,000. Management attributed much of the improvement to substantially lower credit-loss provisions; the prior-year quarter included a $2.4 million charge-off on a commercial and industrial loan.
- Quarterly interest income rose 28.4% year over year, while interest expense rose 96.7%. For the nine months, interest income increased 28.6% and interest expense increased 180.2%, largely reflecting higher market rates and increased deposit costs.
- Net interest margin increased 13 basis points year over year in the quarter to 3.47%, but declined 4 basis points for the nine-month period to 3.33%. The net interest rate spread narrowed in both comparisons.
- Gross loans increased $22.3 million, or 6.3%, from March 31, led by commercial real estate loans, up $21.4 million. Deposits declined $23.5 million, or 6.0%, which management linked to customers using funds to buy shares in the conversion. Certificates of deposit increased, while $8.1 million of brokered deposits outstanding at March 31 had been eliminated by December 31.
- Equity increased $39.1 million, principally from the stock offering. The offering sold 4,130,815 shares at $10 each, generating $39.4 million net of offering costs. The company funded a $3.3 million ESOP loan and invested $19.7 million of proceeds in the Association.
Outlook, risks and unusual items
- No quantitative earnings or financial guidance is provided. Management describes its priorities as loan growth while maintaining asset quality, liquidity management, and reducing interest-rate exposure through loan sales and a diversified loan portfolio.
- Management identifies interest-rate, credit, real-estate-value, deposit-funding, competition, economic, regulatory, technology, cybersecurity, third-party and employee-retention risks. It cautions that actual results may differ materially from forward-looking statements.
- Interest-rate modeling estimated that a gradual 200-basis-point increase would reduce one-year net interest income by 1.38%; an immediate 200-basis-point increase would reduce modeled market value of equity by 4.00%. Management cautions that model assumptions may not reflect actual results.
- The company adopted CECL on April 1, 2023. Adoption increased the loan allowance by $299,000, established a $210,000 allowance for unfunded commitments, and reduced retained earnings by $402,000 net of tax. The allowance for credit losses on loans was $5.9 million, or 1.56% of total loans, at December 31.
- Nonaccrual loans totaled $557,000 at December 31; $954,000 of loans were past due, including $176,000 past due 90 days or more and still accruing. Management notes that future changes in estimates or regulatory review could require higher credit-loss provisions.
- Available-for-sale securities had $5.6 million of gross unrealized losses, mostly on positions held for at least 12 months. Management attributed the declines primarily to interest rates and stated it did not intend, and was unlikely to be required, to sell before recovery.
- Other notable items: quarterly other income included a recovery of a previously written-off receivable; employee expenses included ESOP costs and reflected comparison against a prior-year executive bonus accrual reversal. The filing reports no material subsequent events through February 13, 2024, and no material pending legal proceedings. Disclosure controls were assessed as effective.
Important facts for investors to verify
- Whether deposit trends, certificate-of-deposit repricing and funding costs continue to pressure margins and liquidity.
- Commercial real estate loan growth and concentrations, credit migration, delinquencies, nonaccruals, and the adequacy of the CECL allowance.
- Interest-rate sensitivity and the assumptions behind the NII and market-value-of-equity models.
- Use of the remaining stock-offering proceeds, ESOP share releases and associated compensation expense.
- The effects of the conversion and newly adopted CECL accounting when comparing results with prior periods.