CPBI 10-K & 10-Q changes, risk factors and insider trading
Central Plains Bancshares, Inc. · Nasdaq · Savings Institution, Federally Chartered · CIK 1979332 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Monetary policies of the Federal Reserve may adversely affect our business and results of operations.”
New heading “Capital requirements may limit our operations and adversely affect our return on equity.”
New heading “Our status as a smaller reporting company may also reduce disclosure comparability.”
New heading “Our concentration in real estate lending and our limited geographic diversification increase our exposure to adverse economic conditions.”
New heading “Significant changes to the size, structure, powers and operations of the federal government, changes to U.S. economic policies, and uncertainties regarding the potential for these changes may cause economic disruptions that could, in turn, adversely impact our business, results of operations and financial condition.”
New heading “Our growth strategy may not be successful and may adversely affect our financial condition and results of operations.”
New heading “Liquidity constraints or funding disruptions could adversely affect our operations and financial condition.”
New heading “Future potential reliance on and integration of artificial intelligence (AI) and machine learning (ML) technologies could expose us to various risks, including operational, data, regulatory, and reputational risks, which could materially affect our business and financial results.”
New heading “The financial condition of other financial institutions could adversely affect us.”
New heading “Our inability to tailor our retail delivery model to respond to consumer preferences in banking may negatively affect earnings.”
New heading “Acquisitions may not achieve expected benefits and may adversely affect our financial condition.”
New heading “Our reputation is critical to our success.”
New heading “Anti-takeover provisions may limit changes in control.”
Removed heading “We are subject to stringent capital requirements, which may adversely impact our return on equity, require us to raise additional capital, or limit our ability to pay dividends or repurchase shares.”
Removed heading “We are also a smaller reporting company, and even if we no longer qualify as an emerging growth company, any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to smaller reporting companies could make our common stock less attractive to investors.”
Removed heading “We have a high concentration of loans secured by real estate in our market area. Adverse economic conditions, both generally and in our market area, could adversely affect our financial condition and results of operations.”
Removed heading “Our business strategy includes growth, and our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively. Growing our operations could also cause our expenses to increase faster than our revenues.”
Removed heading “We depend on our management team to implement our business strategy and execute successful operations and we could be harmed by the loss of their services.”
Removed heading “Our funding sources may prove insufficient to replace deposits at maturity and support our future growth. A lack of liquidity could adversely affect our financial condition and results of operations and result in regulatory limits being placed on us.”
Removed heading “Acquisitions may disrupt our business and dilute stockholder value.”
Removed heading “We are a community bank and our ability to maintain our reputation is critical to the success of our business. The failure to do so may materially adversely affect our performance.”
Removed heading “A protracted government shutdown may result in reduced loan originations and related gains on sale and could negatively affect our financial condition and results of operations.”
Removed heading “Various factors may make takeover attempts more difficult to achieve.”
Largest changes
“The financial services industry is subject to intense scrutiny from bank supervisors in the examination process and aggressive enforcement of federal and state regulations, particularly with respect to mortgage-related practices and other consumer compliance matters, and compliance with anti-money laundering, Bank Secrecy Act and Office of Foreign Assets Control regulations, and economic sanctions against certain foreign countries and nationals. Enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices. …”see in full comparison
“A significant portion of our loan portfolio is secured by real estate, and we could become subject to environmental liabilities with respect to one or more of these properties, or with respect to properties that we own in operating our business. During the ordinary course of business, we may foreclose on and take title to properties securing defaulted loans and, in doing so, there is a risk that hazardous or toxic substances could be found on these properties. …”see in full comparison
“The USA PATRIOT and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are suspected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts. …”see in full comparison
“Failure to comply with these requirements could result in significant regulatory penalties, including fines, sanctions, restrictions on acquisitions or expansion activities, and reputational harm. Although we maintain policies and procedures designed to promote compliance with these laws and regulations, such measures may not be fully effective in preventing violations. Additionally, these regulatory requirements continue to evolve, increasing compliance complexity and cost.”see in full comparison
“We have relatively few loans outside of our market area. Consequently, we have a greater risk of loan defaults and losses in the event of a further economic downturn in our market area, as adverse economic conditions may have a negative effect on the ability of our borrowers to make timely payments of their loans. …”see in full comparison
see in full comparisonMonetaryAnypoliciesfailureandtoregulationscomplyofwiththeapplicableFederallaws,Reserveregulations,Boardor supervisory expectations may result in fines, penalties, legal proceedings, regulatory restrictions, or reputational damage, which could materially adversely affect our business, financialconditioncondition, and results of operations.
Full comparison: every changed paragraph (188)
Net income is the amount by which net interest income and non-interest income exceed non-interest expense and the provision for loan losses. Net interest income makes up a majority of our income and is based on the difference between:
theNet interest income wecomprises earna significant portion of our earnings and represents the difference between interest income earned on interest-earning assets, such as loans and securities;securities, and the interest expense we paypaid on interest-bearing liabilities, such as deposits and borrowings.
A substantial portion of our loansloan areportfolio consists of fixed-rate loans.loans, Furthermore,and themany rates we earn onof our other interest-earning assets and the rates we pay on our interest-bearing liabilities are generallysubject fixed for ato contractual periodrepricing ofover time.different timeframes. Our interest-bearing liabilities generally havereprice shorteror contractualmature maturitiesmore quickly than our interest-earning assets.assets, Thiswhich imbalancemay canresult createin significantincreased earningssensitivity volatilityof asour net interest income to changes in market interest ratesrates. change over time. Generally, inIn a periodrising ofrate risingenvironment, interest rates, the interest income we earn on our assets may not increase as rapidly as the interest we payexpense on deposits and borrowings may increase more rapidly than interest income on assets, which could negatively impact our othernet liabilities.interest margin and earnings.
Changes in interest rates also affect the average lives of loans and mortgage-backed and related securities. In declining rate environments, prepayments typically increase as borrowers refinance, which accelerates the amortization of premiums and creates reinvestment risk, as we may be unable to reinvest these funds at comparable yields.
In addition, an inverted yield curve—where short-term interest rates exceed long-term interest rates—may compress our net interest margin and adversely affect profitability, particularly on longer-term fixed-rate assets.
In addition, changes in interest rates can affect the average life of loans and mortgage-backed and related securities. A decline in interest rates results in increased prepayments of loans and mortgage-backed and related securities as borrowers refinance their debt to reduce their borrowing costs. This creates reinvestment risk, which is the risk that we may not be able to reinvest prepayments at rates that are comparable to the rates we earned on the prepaid loans or securities. Furthermore, an inverted interest rate yield curve, where short-term interest rates (which are usually the rates at which financial institutions borrow funds) are higher than long-term interest rates (which are usually the rates at which financial institutions lend funds for fixed-rate loans) can reduce a financial institution’s net interest margin and create financial risk for financial institutions that originate longer-term, fixed rate mortgage loans.
Any substantial,substantial or prolonged changechanges in market interest rates could have a material adverse effect on our financial condition, liquidityliquidity, and results of operations. ChangesInterest inrate the level of interest rateschanges may also negativelyreduce loan demand, adversely affect the fair value of our assets,assets (including available-for-sale securities), and limit our ability to realize gains on asset sales. Additionally, our interest rate risk management models and assumptions may not fully capture the valueactual impact of ourrate available-for-salechanges investment securities, which generally decreases when market interest rates rise, and ultimately affecton our earnings.balance sheet or operating results.
During the year ended March 31, 2025, we had $1.2 million net unrealized gains on available-for-sale investment securities caused by market interest rates leveling out during the period. In addition, as a result of rising interest rates, we have experienced a shift in deposits from lower-cost savings, NOW and money market accounts to higher-cost certificates of deposit. However, the rates we earn on our loans did not increase as rapidly during the year ended March 31, 2025, as we have a significant amount of fixed-rate residential real estate loans where the interest rates did not increase commensurate with the increase in market interest rates. In addition, not all of our adjustable-rate loans reprice immediately, such that changes in market interest rates take a period of time to affect our portfolio yields.
Changes in the level of interest rates also may negatively affect our ability to originate real estate loans, the value of our assets, and our ability to realize gains from the sale of our assets, all of which ultimately affect our earnings. Also, our interest rate risk modeling techniques and assumptions likely may not fully predict or capture the impact of actual interest rate changes on our balance sheet or projected operating results.
At March 31, 2025,2026, commercial real estate loans totaledcomprised $120.2approximately million, or 29.88%28.82% of our loan portfolio. Given their larger balances and the complexity of the underlying collateral, commercial real estate loans generally haveinvolve moregreater risk than the one- to four-family residential real estate loans we originate. Because theThe repayment of commercial real estatethese loans depends on the successful management and operation of the borrower’s properties or related businesses,businesses theirand repayment canmay be adversely affected by adverse conditions in the local real estate market or economy. A downturn in the real estate marketmarkets or the local economyeconomic conditions could adverselyreduce impactproperty the value of properties securing the loanvalues or theborrower revenues from the borrower’s business, therebyrevenues, increasing the risk of non-performing loans.loans and losses. We intend to increase our commercial real estate loan portfolioportfolio, and,and as it increases,grows, the correspondingassociated risks and potential for losses from these loans may also increase.
At March 31, 2025,2026, agricultural loans totaledcomprised $42.8approximately million, or 10.65%12.19% of our loan portfolio. AAgricultural portion of our loan portfolio is comprised of loans to borrowers in the agricultural sector, whichlending exposes us to risks unique risks associated withto this industry.industry, Agriculturalincluding lendingvolatility isin highlycommodity dependent on the prices of commodities,prices, weather conditions, input costs, government support programs, and global markettrade trends, all of which can be volatile and unpredictable.dynamics. Adverse developments such as droughts,drought, flooding, fluctuating input costs,disease, trade restrictions, or reductions in government subsidies couldmay impair our borrowers’ abilityrepayment tocapacity repayand theircould loans, resultingresult in increased delinquencies or loan losses. Additionally,In addition, concentrations in agricultural lending may heightenincrease our exposure to localized economic downturns or natural disasters. Any deterioration in the agricultural economy could materially and adversely affect the performance of our loan portfolio and our overall financial condition and results of operations.
At March 31, 2025,2026, commercial and industrial loans totaledcomprised $32.0approximately million, or 7.96%10.79% of our loan portfolio. UnlikeThese residentialloans real estate loans, whichare generally are madebased on the basis of the borrower’s ability to makegenerate repaymentcash flow from hisbusiness oroperations, herrather employmentthan oron othercollateral income,values and whichthat are securedmore byreadily ascertainable, as is often the case with residential real propertyestate whoselending. value tends to be more easily ascertainable, commercial loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flows of the borrower’s business, and the collateralCollateral securing these loans may fluctuate in value.value Further, any collateral securing commercial loans may depreciate over time,and may be difficult to appraise andor mayliquidate. fluctuateRepayment inis value.therefore Asmore a result, the availability of funds for the repayment of commercial loans may depend substantiallydependent on the success of the businessunderlying itself.business. Accordingly, these loans may present a higher level of risk than other types of lending.
At March 31, 2025,2026, construction real estate loans totaledcomprised $15.1approximately million, or 3.75%6.39% of our loan portfolio. Construction lending involves additional risks when compared withto permanent finance lendingfinancing because funds are advanced uponbased on the securityprojected value of the project, which is ofinherently uncertain valueprior before itsto completion. Because of the uncertainties inherent in estimatingEstimating construction costs,costs as well asand the market value of the completed project can be difficult, and cost overruns or project delays may occur. Repayment is typically dependent on the effectssuccessful completion of governmental regulation of real property, it is relatively difficult to accurately evaluate the total funds required to complete a project and the related loan-to-value ratio. In addition, generally during the term of a construction loan, interest may be funded by the borrower or disbursed from an interest reserve set aside from the construction loan budget. These loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project and theborrower’s ability of the borrower to sell or lease the property or obtain permanent take-out financing, rather than the ability of the borrower or guarantor to repay principal and interest.financing. If the appraised value of a completed project proves to beis overstated, we may have inadequateinsufficient securitycollateral forto fully recover the repaymentloan, ofwhich could result in losses. As this portfolio grows, the loanassociated upon completion of construction of the project andrisks may incur a loss. As our construction real estate loan portfolio increases, the corresponding risks and potential for losses from these loans may also increase.
At March 31, 2025,2026, $161.1approximately million, or 40.06%36.14% of our loan portfolio,portfolio was secured by one- to four-family and multi-family residential real estateestate. and multi-family real estate loans. One- to four-family residentialResidential mortgage lending is generally sensitive to regional and local economic conditions that significantlyaffect impactborrowers’ ability to repay. Declines in real estate values could result in inadequately collateralized loans, increasing the abilityrisk of borrowersloss if we are required to meetforeclose theirand loansell paymentthe obligations,underlying making loss levels difficult to predict.collateral.
Declines in real estate values could cause some of our residential mortgage loans to be inadequately collateralized, which would expose us to a greater risk of loss if we seek to recover on defaulted loans by selling the real estate collateral.
We make various assumptions and judgments about the collectability of our loan portfolio, including theborrower creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans.values. In determining the amountadequacy of theour allowance for credit losses, we reviewconsider ourhistorical loansloss experience, current economic conditions, and ourother lossrelevant and delinquency experience, and we evaluate economic conditions.factors. If our assumptions prove incorrect, or theif resultseconomic ofconditions our analyses are incorrect,deteriorate, our allowance for credit losses may not be sufficient to cover expected credit losses, resultingrequiring additional provisions that would reduce earnings. Growth in additions to our allowance. In addition, our emphasis onhigher-risk loan growthportfolios, and on increasing our portfolios ofincluding commercial real estate and commercial and industrial loans, as well as any future credit deterioration, could requirealso usnecessitate to increase our allowance for credit lossesincreases in the future. Material additions to our allowance would materially decrease our net income.allowance.
In addition, bank regulatorsregulatory agencies periodically review our allowance for credit losses and, as a result of such reviews, weand may deciderequire us to increase ourthe provision for loan lossesallowance or recognize further loanadditional charge-offs. Any increase in our allowance for credit losses or loan charge-offs as a result of such reviewactions or otherwise maycould have a material adverse effect on our financial condition and results of operations.
We are subject to environmental liability risk associated with our lending activities orand propertiesowned we own.properties.
A significant portion of our loan portfolio is secured by real estate. We may become subject to environmental liabilities associated with properties securing our loans or properties we acquire through foreclosure. Hazardous substances or environmental contamination could result in liability for remediation costs, personal injury, property damage, civil penalties, or criminal sanctions, regardless of when the contamination occurred. Environmental laws may require significant expenditures and could reduce property values or limit our ability to sell such properties. Although we conduct environmental reviews prior to foreclosure on non-residential properties, these reviews may not identify all potential risks. Any such environmental liability could have a material adverse effect on our financial condition and results of operations.
A significant portion of our loan portfolio is secured by real estate, and we could become subject to environmental liabilities with respect to one or more of these properties, or with respect to properties that we own in operating our business. During the ordinary course of business, we may foreclose on and take title to properties securing defaulted loans and, in doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous conditions or toxic substances are found on these properties, we may be liable for remediation costs, as well as for personal injury and property damage, civil fines and criminal penalties regardless of when the hazardous conditions or toxic substances first affected any particular property. Environmental laws may require us to incur substantial expenses to address unknown liabilities and may materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability. Our policies, which require us to perform an environmental review before initiating any foreclosure action on non-residential real property, may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on us.
We sell a portion of our originated mortgage loans in the secondary market to generate non-interest income and earn fees from servicing mortgage loans. Changes in interest rates significantly affect these activities. Rising interest rates typically reduce mortgage origination volume and gain-on-sale income, while potentially increasing servicing income due to slower prepayment speeds. Conversely, declining rates may increase originations but reduce the value of mortgage servicing rights. As a result, our mortgage banking revenue may be volatile.
We plan to continue to sell in the secondary market and to other financial institutions longer-term, conforming and non-conforming fixed-rate and, to a lesser extent, adjustable-rate loans that we originate to generate non-interest income. We also earn revenue from fees we receive for servicing mortgage loans. Changes in interest rates may impact our mortgage banking revenues, which could negatively impact our non-interest income. When rates rise, the demand for mortgage loans usually tends to fall, reducing loan origination volume and the related amount of gains on the sales of loans. Under the same conditions, net revenue from our mortgage servicing activities can increase due to slower prepayments, which reduces our amortization expense for mortgage servicing rights. When rates fall, mortgage originations usually tend to increase and the value of our mortgage servicing rights usually tends to decline, also with some offsetting revenue effect.
In addition, our results of operations are affected by the amount ofAdditionally, non-interest expenses associated with mortgage banking activities, —such as salaries and employee benefits (including commissions),compensation, occupancy, equipment and data processing—may expense,not anddecline otherproportionately operating costs. Duringduring periods of reduced loan demand, which could adversely affect our results of operations may be adversely affected to the extent that we are unable to reduce expenses commensurate with the decline in mortgage loan origination activity.operations.
Foreclosure processes may be lengthy and subject to regulatory and legal constraints, which can delay the resolution of non-performing loans. Extended timelines may result from evolving regulatory requirements, increased judicial scrutiny, and borrower protections, including loan modification programs.
The judicial foreclosure process is protracted, which delays our ability to resolve non-performing loans through the sale of the underlying collateral. The longer timelines have been the result of the economic environment, additional consumer protection initiatives related to the foreclosure process, increased documentary requirements and judicial scrutiny, and, both voluntary and mandatory programs under which lenders may consider loan modifications or other alternatives to foreclosure. These reasons and the legal and regulatory responses have impacted the foreclosure process and completion time of foreclosures for residential mortgage lenders. This may result in a material adverse effect on collateral values and our ability to minimize our losses.
Changes in laws and regulations and the cost of regulatory compliance with new laws and regulations may adversely affect our operations and/or increase our costs of operations.expenses.
Home Federal Savings is subject to extensive regulation, supervision, and examination by the Office of the Comptroller of the Currency (the “OCC”), and Central Plains Bancshares is subject to oversight by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Such regulation governs the activities in which we and our subsidiaries may engage and is intended primarily for the protection of the Deposit Insurance Fund and depositors, rather than our stockholders.
Regulatory authorities have broad discretion in their supervisory and enforcement activities, including the authority to impose restrictions on our operations, classify assets, and determine the adequacy of our allowance for credit losses. These regulations, together with applicable tax, accounting, securities, insurance, and monetary laws, rules, standards, and interpretations, govern our business practices, strategic initiatives, financial reporting, and disclosures.
Changes in applicable laws, regulations, or regulatory policies—whether through legislation, rulemaking, or supervisory guidance—may materially affect our business, financial condition, and results of operations. In addition, changes in accounting standards can be difficult to predict and may require significant judgment in interpretation and application by management and our independent auditors. Such changes could materially affect how we report our financial condition and results of operations, potentially on a retrospective basis.
Home Federal Savings is subject to extensive regulation, supervision and examination by the OCC. Central Plains Bancshares is subject to extensive regulation, supervision and examination by the Federal Reserve Board. Such regulation and supervision govern the activities in which an institution and its holding company may engage and is intended primarily for the protection of the federal deposit insurance fund and the depositors of Home Federal Savings rather than the protection of Central Plains Bancshares’ stockholders. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination of the adequacy of the level of our allowance for credit losses. These regulations, along with existing tax, accounting, securities, insurance and monetary laws, rules, standards, policies, and interpretations, control the methods by which financial institutions conduct business, implement strategic initiatives and tax compliance, and govern financial reporting and disclosures. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our operations. Further, changes in accounting standards can be both difficult to predict and involve judgment and discretion in their interpretation by us and our independent accounting firm. These changes could materially impact, potentially even retroactively, how we report our financial condition and results of operations.
Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws andrelated regulations could result in finessignificant or sanctions.penalties.
The Bank Secrecy Act (“BSA”), the USA PATRIOT Act, and related regulations require financial institutions to implement programs designed to prevent money laundering and terrorist financing. These requirements include, among other things, customer identification and due diligence procedures, monitoring and reporting of suspicious activities to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”), and maintaining appropriate internal controls.
Failure to comply with these requirements could result in significant regulatory penalties, including fines, sanctions, restrictions on acquisitions or expansion activities, and reputational harm. Although we maintain policies and procedures designed to promote compliance with these laws and regulations, such measures may not be fully effective in preventing violations. Additionally, these regulatory requirements continue to evolve, increasing compliance complexity and cost.
We have not incurred material penalties or experienced material reputational harm related to money laundering or related activities; however, there can be no assurance that such issues will not arise in the future.
The USA PATRIOT and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are suspected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts. Failure to comply with these regulations could result in fines or sanctions, including restrictions on pursuing any acquisitions or establishing or acquiring new branches. The policies and procedures we have adopted that are designed to assist in compliance with these laws and regulations may not be effective in preventing violations of these laws and regulations. Furthermore, these rules and regulations continue to evolve and expand. We have not been subject to fines or other penalties, or have suffered business or reputational harm, as a result of money laundering activities in the past.
We may become subject to enforcement actionsactions, even thoughin non-compliancecases wasof inadvertent or unintentionalnoncompliance.
The financial services industry is subject to heightened regulatory scrutiny and enforcement, particularly with respect to consumer protection, mortgage lending practices, anti-money laundering compliance, and adherence to Office of Foreign Assets Control (“OFAC”) regulations and economic sanctions.
Enforcement actions may be initiated for violations of laws or regulations, as well as for practices deemed unsafe or unsound. While we maintain systems, policies, and procedures designed to ensure compliance, certain regulatory frameworks allow for the imposition of penalties even where non-compliance is inadvertent or unintentional.
The financial services industry is subject to intense scrutiny from bank supervisors in the examination process and aggressive enforcement of federal and state regulations, particularly with respect to mortgage-related practices and other consumer compliance matters, and compliance with anti-money laundering, Bank Secrecy Act and Office of Foreign Assets Control regulations, and economic sanctions against certain foreign countries and nationals. Enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices. We maintain systems and procedures designed to ensure that we comply with applicable laws and regulations; however, some legal/regulatory frameworks provide for the imposition of fines and penalties for non-compliance even though the non-compliance was inadvertent or unintentional and even though there was in place at the time systems and procedures designed to ensure compliance. Failure to comply with these and other regulations, and supervisory expectations related thereto, may result in fines, penalties, lawsuits, regulatory sanctions, reputation damage, or restrictions on our business.
MonetaryAny policiesfailure andto regulationscomply ofwith theapplicable Federallaws, Reserveregulations, Boardor supervisory expectations may result in fines, penalties, legal proceedings, regulatory restrictions, or reputational damage, which could materially adversely affect our business, financial conditioncondition, and results of operations.
Monetary policies of the Federal Reserve may adversely affect our business and results of operations.
Our earnings and growth are significantly influenced by the monetary and fiscal policies of the Federal Reserve, in addition to general economic conditions. The Federal Reserve regulates the money supply and credit conditions through various tools, including open market operations, adjustments to the discount rate, and changes in reserve requirements.
These policies directly and indirectly affect interest rates, loan demand, deposit levels, and the overall availability and cost of credit. As a result, they have had, and are expected to continue to have, a material impact on the operations and profitability of financial institutions, including us.
The effects of future monetary policy actions on our business, financial condition, and results of operations are inherently uncertain and cannot be predicted.
Capital requirements may limit our operations and adversely affect our return on equity.
We are subject to regulatory capital requirements that establish minimum risk-based and leverage ratios and define qualifying capital instruments. These requirements include minimum ratios for common equity Tier 1, Tier 1 capital, total capital, and leverage, as well as a capital conservation buffer of 2.5%, which effectively increases the minimum required levels.
Failure to maintain required capital levels, including the buffer, may result in restrictions on capital distributions, including dividends and share repurchases, as well as limitations on discretionary bonus payments. In addition, higher capital requirements may reduce our return on equity and constrain growth.
In addition to being affected by general economic conditions, our earnings and growth are affected by the policies of the Federal Reserve Board. An important function of the Federal Reserve Board is to regulate the money supply and credit conditions. Among the instruments used by the Federal Reserve Board to implement these objectives are open market purchases and sales of U.S. government securities, adjustments to the discount rate and changes in banks’ reserve requirements against bank deposits. These instruments are used in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits. Their use also affects interest rates charged on loans or paid on deposits. The monetary policies and regulations of the Federal Reserve Board have had a significant effect on the operating results of financial institutions in the past and are expected to continue to do so in the future. The effects of such policies upon our business, financial condition and results of operations cannot be predicted.
We are subject to stringent capital requirements, which may adversely impact our return on equity, require us to raise additional capital, or limit our ability to pay dividends or repurchase shares.
Federal regulations establish minimum capital requirements for insured depository institutions, including minimum risk-based capital and leverage ratios, and define “capital” for calculating these ratios. The minimum capital requirements are: (1) a common equity Tier 1 capital ratio of 4.5%; (2) a Tier 1 to risk-based assets capital ratio of 6%; (3) a total capital ratio of 8%; and (4) a Tier 1 leverage ratio of 4%. The regulations also establish a “capital conservation buffer” of 2.5%, which resulted in the following minimum ratios: (1) a common equity Tier 1 capital ratio of 7.0%; (2) a Tier 1 to risk-based assets capital ratio of 8.5%; and (3) a total capital ratio of 10.5%. An institution will be subject to limitations on paying dividends, engaging in share repurchases and paying discretionary bonuses if its capital level falls below the capital conservation buffer amount.
The application of these capital requirements could, among other things, result in lower returns on equity, and result in regulatory actions if we are unable to comply with such requirements. Specifically, Home Federal Savings’ ability to pay dividends to Central Plains Bancshares willis bedependent limitedon ifmaintaining Home Federal Savings does not maintain therequired capital conservation buffer required by the capital rules,levels, which in turn may limitaffect our ability to pay dividends to our stockholders.
WeOur arestatus as an emerging growth company,company and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies couldmay make our common stock less attractive to investors.
Central Plains Bancshares qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act (the “JOBS Act”). As an emerging growth company, we may elect to take advantage of certain reduced reporting and disclosure requirements, including exemptions from certain executive compensation disclosures and the requirement to obtain an auditor attestation of internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act.
We have also elected to use the extended transition period for adopting new or revised accounting standards applicable to private companies, which may result in our financial statements being less comparable to those of other public companies.
If investors perceive our reduced disclosure as less transparent, it could adversely affect the marketability and trading price of our common stock
Our status as a smaller reporting company may also reduce disclosure comparability.
We also qualify as a “smaller reporting company” under federal securities laws, which allows us to provide reduced disclosures in our periodic reports and proxy statements. While these accommodations reduce compliance costs, they may limit the information available to investors.
If investors view our reduced disclosure unfavorably, it could result in decreased market liquidity and increased volatility in the trading price of our common stock.
Central Plains Bancshares qualifies as an “emerging growth company” under the JOBS Act. For as long as it continues to be an emerging growth company, it may choose to take advantage of exemptions from various reporting requirements applicable to public companies but not applicable to emerging growth companies, including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation. As an emerging growth company, Central Plains Bancshares also will not be subject to Section 404(b) of the Sarbanes-Oxley Act, which would require that our independent auditors audit our internal control over financial reporting. In addition, as an emerging growth company, we have elected to take advantage of the extended transition periods for adopting new or revised financial accounting standards until the date they are required to be adopted by private companies (however, if any new or revised financial accounting standards would not apply to private companies, we would not be able to delay their adoption). Accordingly, our financial statements may not be comparable to those of public companies that adopt new or revised financial accounting standards as of an earlier date. Investors may find our common stock less attractive since we have chosen to rely on these exemptions. If some investors find our common stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our common stock and the price of our common stock may be more volatile.
We are also a smaller reporting company, and even if we no longer qualify as an emerging growth company, any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to smaller reporting companies could make our common stock less attractive to investors.
Management's Discussion & Analysis (MD&A)
Largest changes
“the allowance for credit losses is influenced by factors outside of our control such as industry and business trends, geopolitical events and the effects of laws and regulations as well as economic conditions such as trends in housing prices, interest rates, GDP, inflation, energy prices and unemployment; and considerable judgment is required to determine whether the models used to generate the allowance for credit losses produce an estimate that is sufficient to encompass the current view of lifetime expected credit losses.”see in full comparison
“The Board of Directors regularly reviews the interest rate risk inherent in our assets and liabilities and establishes the level of risk deemed appropriate. These reviews are conducted in the context of our overall business strategy, operating environment, capital position, liquidity profile and performance objectives, and are guided by policies and limits approved by the Board.”see in full comparison
General. Our most significant form of market risk is interest ratesee in full comparisonriskrisk.because, asAs a financial institution, the majority of our assets and liabilities are sensitive to changes in interest rates.Therefore,Accordingly, a principalpartcomponent of our operations is to manage interest rate risk and to limit the exposure of our financial condition and results of operations to changes in market interest rates.All directors participate in discussions during the regular board meetings evaluating the interest rate risk inherent in our assets and liabilities, and the level of risk that is appropriate. These discussions take into consideration our business strategy, operating environment, capital, liquidity and performance objectives consistent with the policy and guidelines approved by them.
“estimates relating to the allowance for credit losses require us to project future borrower performance, including cash flows, delinquencies and charge-offs, along with, when applicable, collateral values, based on a reasonable and supportable forecast period utilizing forward-looking economic scenarios in order to estimate probability of default and loss given default;”see in full comparison
“The average balances of certificates of deposit increased $17.6 million, or 17.3% to $119.4 million for the year ended March 31, 2026 from $101.8 million for the year ended March 31, 2025. Included in the increase in time deposits was $20.3 million of brokered deposits obtained during the year to support balance sheet growth and liquidity management. The average balances of NOW accounts increased $4.5 million, or 3.5% to $133.0 million for the year ended March 31, 2026 from $128.5 million for the year ended March 31, 2025. …”see in full comparison
While contractual maturities and scheduled amortization of loans and investment securities are relatively predictable sources ofsee in full comparisonfunds,liquidity, deposit flows and loan prepayments aregreatlyinfluenced by market interest rates, general economic conditions, andcompetition.competitive factors. Our most liquid assetsareconsist of cash and short-terminvestments.investments,Thethe levels ofthese assetswhich are dependent on our operating, financing,lendinglending, and investing activities during any given period.
Full comparison: every changed paragraph (60)
The Jumpstart Our Business Startups ("JOBS") Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company” we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We intenddetermined to take advantage of the benefits of this extended transition period. Accordingly, our financial statements may not be comparable to companies that comply with such new or revised accounting standards.
Allowance for Credit Losses. The Current Expected Credit Losses ("CECL") accounting methodology requires entities to estimate and recognize an allowance for lifetime expected credit losses for loans and other financial assets measured at amortized cost. The accounting estimates relating to the allowance for credit losses is a “critical accounting policy” as:
changes in the provision for credit losses can materially affect our financial results;
estimates relating to the allowance for credit losses require us to project future borrower performance, including cash flows, delinquencies and charge-offs, along with, when applicable, collateral values, based on a reasonable and supportable forecast period utilizing forward-looking economic scenarios in order to estimate probability of default and loss given default;
the allowance for credit losses is influenced by factors outside of our control such as industry and business trends, geopolitical events and the effects of laws and regulations as well as economic conditions such as trends in housing prices, interest rates, GDP, inflation, energy prices and unemployment; and considerable judgment is required to determine whether the models used to generate the allowance for credit losses produce an estimate that is sufficient to encompass the current view of lifetime expected credit losses.
Allowance for Credit Losses. Determining the allowance for loan and lease losses has historically been identified as a critical accounting policy. On April 1, 2023, we adopted the new CECL accounting methodology. The CECL model utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to-maturity securities, and other receivables at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. For available for-sale securities where fair value is less than cost, credit-related impairment, if any, will be recognized in an allowance for credit losses and adjusted each period for changes in expected credit risk. This model replaced the previous existing impairment models, which generally required that a loss be incurred before it is recognized.
The following tablestable setsets forth selected historical financial and other data at the dates and for the fiscal years presented. The information at and for the fiscal years ended March 31, 2025 and 2024 is derived in part from, and should be read together with, the audited consolidated financial statements and related notes included in this Annual Report on Form 10-K.
Cash and Cash Equivalents. Cash and cash equivalents increased $17.2$1.2 million, or 150.4%,4.3%, to $29.9 million at March 31, 2026 from $28.7 million at March 31, 20252025. from $11.5 million at March 31, 2024. ThisThe increase was primarily dueattributable to proceedsthe fromtiming principalof paymentpayments onrelated securitiesto accounts payable and anaccrued increaseexpenses, including fluctuations in deposits.vendor disbursements near period end. We regularly reviewevaluate our liquidity position basedin onlight of alternative uses of available funds asand well asprevailing market conditions.
Investment Securities Available for Sale. Securities available-for-sale decreasedincreased $1.0$3.1 million, or 1.6%,5.3%, to $62.5 million at March 31, 2026 from $59.4 million at March 31, 2025 from $60.4 million at March 31, 2024.2025. We purchased $6.2$10.4 million in securities, received principal payments of $8.3$8.5 million, had net premiumdiscount amortization and discount accretion of $71,000$19,000 and had a decrease in the unrealized loss on the securities portfolio of $1.2 million during the year ended March 31, 2025.2026.
Gross Loans. Gross loans held for investment increased $22.0$46.1 million, or 5.8%,11.5%, to $448.3 million at March 31, 2026, from $402.2 million at March 31, 2025 from $380.2 million at March 31, 2024.2025. We experienced increases in twofive loan categories, residentialcategories: real estate construction, real estate residential, real estate commercial, commercial non-real estate, and agriculture loans. The largest increase was in agriculturecommercial non-real estate loans, which increased $23.1$16.4 million, or 117.50%,51.2%, to $42.8$48.4 million from $19.7$32.0 at March 31, 2024.2025.
Total Deposits. Total deposits increased $41.1$44.2 million, or 10.9%,10.6%, to $460.4 million at March 31, 2026 from $416.2 million at March 31, 2025 from $375.1 million at March 31, 2024.2025. The increase in deposits reflected increases in NOW, money market, savings accountsaccounts, and time deposits, which increased by $43.4$52.9 million from $308.3$198.9 million at March 31, 20242025 to $351.7$251.8 million at March 31, 2025.2026. Included in the increase in time deposits was $20.3 million of brokered deposits obtained during the year to support balance sheet growth and liquidity management.
Non-interest bearing deposits and NOW accounts decreased $2.4$8.7 million, or 3.6%,6.0%, to $64.5$208.6 million at March 31, 20252026 from $66.9$217.3 million at March 31, 2024.2025. We believe that long-term customers have continued to seek higher-yield deposits in the current market interest rate environment. We also had brokered deposits of $27.6 million at March 31, 2026 and $7.3 million at March 31, 20252025, thatwhich are included in the $94.1 million total under other time deposits.
Borrowings. We had no borrowings at March 31, 20252026 or March 31, 2024.2025. We have had limited borrowings in recent periods, as we have generally been able to utilize cash provided by our increase in deposits to fund our operations, although we will utilize FHLB and FRB's Discount Window advances as needed to support increased loan funding.
Total Equity. Total equity increased $5.0$5.7 million, or 6.5%6.8% to $89.0 million at March 31, 2026 from $83.3 million at March 31, 2025 from $78.3 million at March 31, 2024.2025. This increase in total equity is the result of net income of $3.7$4.0 million for the periodyear ended March 31, 20252026 and other comprehensive income of $1.4 million.
The following tablestable setsets forth selected historical financial and other data at the dates and for the fiscal years presented. The information at and for the fiscal years ended March 31, 2025 and 2024 is derived in part from, and should be read together with, the audited consolidated financial statements and related notes included in this Annual Report on Form 10-K.
General. Net income decreasedincreased $105,000,$346,000, or 2.8%,9.5%, to $4.0 million for the year ended March 31, 2026, compared to $3.7 million for the year ended March 31, 2025, compared to $3.8 million for the year ended March 31, 2024.2025.
Interest and Dividend Income. Interest and dividend income increased $3.7$3.0 million, or 17.8%,12.0%, to $27.7 million for the year ended March 31, 2026 from $24.7 million for the year ended March 31, 2025 from $21.0 million for the year ended March 31, 2024.2025. The increase was due primarily to an increase in interest income on loans, which is our primary source of interest income, due to increases in market interest rates.income.
Interest income on loans increased $3.2$2.9 million, or 17.3%,12.8%, to $25.1 million for the year ended March 31, 2026 from $22.2 million for the year ended March 31, 20252025. fromThe $19.0average balance of loans increased $27.4 million, or 7.0%, to $418.7 million for the year ended March 31, 2024.2026 The average balance of loans and loan balances increased $29.3 million, or 8.1%, tofrom $391.3 million for the year ended March 31, 2025 from $362.0 million for the year ended March 31, 2024.2025. The increase is due to our continued focus on growing our loan portfolio consistent with maintaining asset quality. Our yield on loans increased 4431 basis points to 5.99% for the year ended March 31, 2026 from 5.68% for the year ended March 31, 2025 from 5.24% for the year ended March 31, 2024.2025. The increase in yield was primarily due to increasesloan repricing upon reaching scheduled reset dates and growth in marketthe interestloan rates.portfolio.
Interest income on securities increased $419,000,$136,000, or 24.3%,6.3%, to $2.3 million for the year ended March 31, 2026 from $2.1 million for the year ended March 31, 2025 from $1.7 million for the year ended March 31, 2024,2025, due to a 6716 basis point increase in the average yield from 2.95% for the year ended March 31, 2024 to 3.62% for the year ended March 31, 2025,2025 to 3.78% for the year ended March 31, 2026, and by a $757,000$1.2 million increase in the average balance of securities to $60.4 million for the year ended March 31, 2026 from $59.2 million for the year ended March 31, 2025 from $58.4 million for the year ended March 31, 2024.2025.
Interest Expense. Interest expense increased $1.7 million,$777,000, or 26.6%,9.5%, to $9.0 million for the year ended March 31, 2026 compared to $8.2 million for the year ended March 31, 20252025, compared to $6.5 million for the year ended March 31, 2024, duedriven primarily toby increasesan increase in the average balance and higher costs of interest-bearing liabilities.
Interest expense on deposits increased $817,000, or 10.1%, to $8.9 million for the year ended March 31, 2026 compared to $8.1 million for the year ended March 31, 2025. The increase was due to an increase in the average balances of all interest-bearing liabilities.
The average balances of certificates of deposit increased $17.6 million, or 17.3% to $119.4 million for the year ended March 31, 2026 from $101.8 million for the year ended March 31, 2025. Included in the increase in time deposits was $20.3 million of brokered deposits obtained during the year to support balance sheet growth and liquidity management. The average balances of NOW accounts increased $4.5 million, or 3.5% to $133.0 million for the year ended March 31, 2026 from $128.5 million for the year ended March 31, 2025. The average balances of savings accounts increased $4.2 million, or 9.7% to $47.1 million for the year ended March 31, 2026 from $42.9 million for the year ended March 31, 2025. The average balances of money market accounts increased $5.6 million, or 20.4% to $33.1 million for the year ended March 31, 2026 from $27.5 million for the year ended March 31, 2025. The average balances of individual retirement accounts increased $876,000, or 5.2% to $17.6 million for the year ended March 31, 2026 from $16.7 million for the year ended March 31, 2025.
Interest expense on deposits increased $1.7 million, or 27.1%, to $8.1 million for the year ended March 31, 2025 compared to $6.4 million for the year ended March 31, 2024. The increase was due to a 32 basis point increase in the average cost of deposits to 2.56% for the year ended March 31, 2025 from 2.24% for the year ended March 31, 2024. The increase in the average cost of deposits was due to the higher interest rate environment and an increase in the average balances of certificates of deposit, NOW accounts, savings accounts and money market accounts. The average balances of certificates of deposit increased $15.0 million, or 17.2% to $101.8 million for the year ended March 31, 2025 from $86.8 million for the year ended March 31, 2024. The average balances of NOW accounts increased $9.6 million, or 8.1% to $128.5 million for the year ended March 31, 2025 from $118.9 million for the year ended March 31, 2024. The average balances of savings accounts increased $1.4 million, or 3.5% to $42.9 million for the year ended March 31, 2025 from $41.5 million for the year ended March 31, 2024. The average balances of money market accounts increased $5.7 million, or 26.4% to $27.5 million for the year ended March 31, 2025 from $21.8 million for the year ended March 31, 2024.
Provision for Credit Losses. Provision for credit losses was $306,000 for the year ended March 31, 2026, compared to $200,000 for the year ended March 31, 2025. The increase in provision expense was primarily attributable to loan growth during the period, as gross loans held for investment increased $46.1 million, or 11.5%, with notable growth in commercial non-real estate, real estate, and agricultural loan segments.
The allowance for credit losses increased to $5.8 million at March 31, 2026 from $5.4 million at March 31, 2025, reflecting the higher level of outstanding loans as well as continued evaluation of portfolio risk characteristics. Despite the increase in the allowance balance, the allowance for credit losses as a percentage of total loans decreased to 1.30% at March 31, 2026 from 1.35% at March 31, 2025, primarily due to the mix and relative credit quality of loan growth during the period.
Provision for Credit Losses. We recorded a provision for credit losses of $200,000 for the year ended March 31, 2025 compared to a provision for credit losses of $88,000 for the year ended March 31, 2024. Our allowance for credit losses was $5.4 million at March 31, 2025 compared to an allowance for credit losses of $5.9 million at March 31, 2024. The ratio of our allowance for credit losses to total loans was 1.35% at March 31, 2025 compared to 1.54% at March 31, 2024.
We will continue to assess and evaluate the estimated future credit loss impact of current market conditions in subsequent reporting periods, which will be highly dependent on credit quality, macroeconomic forecasts and conditions, as well as the composition of our loan and available-for-sale securities portfolios. In addition, the OCC, as an integral part of its examination process, will periodically review our allowance for credit losses, and as a result of such reviews, we may have to adjust our allowance for credit losses.
Non-Interest Income. Non-interest income increased $60,000, or 2.3%, to $2.7 million for the year ended March 31, 2026 compared to $2.6 million for the year ended March 31, 2025. Gain on sale of loans increased $156,000, or 72.6%, to $371,000 for the year ended March 31, 2026 from $215,000 for the year ended March 31, 2025. Service charges on deposit accounts decreased $146,000, or 16.0%, to $766,000 for the year ended March 31, 2026 compared to $912,000 for the year ended March 31, 2025, primarily due to decreases in ATM surcharges and miscellaneous operating income. Other income from the Company's insurance and investment subsidiary increased $57,000, or 73.1%, to $135,000 for the year ended March 31, 2026, from $78,000 for the year ended March 31, 2025, primarily reflecting improved market performance.
Non-Interest Income. Non-interest income decreased $243,000, or 8.5%, to $2.6 million for the year ended March 31, 2025 compared to $2.9 million for the year ended March 31, 2024. Service charges on deposit accounts increased $143,000, or 18.6%, to $912,000 for the year ended March 31, 2025 compared to $769,000 for the year ended March 31, 2024, primarily due to increases in overdraft income and debit card usage. Other income decreased $385,000, or 83.2%, to $78,000 for the year ended March 31, 2025 compared to $463,000 for the year ended March 31, 2024, due primarily to the recovery of loans previously written off on the books of an acquired institution for year ending March 31, 2024. Gain on sale of loans increased $20,000, or 10.3%, to $215,000 for the year ended March 31, 2025 from $195,000 for the year ended March 31, 2024.
Non-Interest Expense. Non-interest expense increased $1.8$1.6 million, or 14.1%,11.6%, to $16.0 million for the year ended March 31, 2026 from $14.4 million for the year ended March 31, 20252025. fromSalaries $12.6and employee benefits increased $874,000, or 11.1%, to $8.8 million for the year ended March 31, 2024.2026 Salaries and employee benefits increased $940,000, or 13.5%, tofrom $7.9 million for the year ended March 31, 2025 from $7.0 million for the year ended March 31, 2024,2025, due to ourannual hiringwage additionaladjustments lenders.and Additionally,a full year of recognizing stock based compensation expense from stock options and restricted stock awards granted under the 2024 Equity Incentive Plan. The Company implemented the 2024 Equity Incentive Plan on November 26, 2024, and began recognizing expense associated with this plan in December 2024. Other general and administrative expenses increased $622,000,$273,000, or 31.3%,10.5%, to $2.9 million for the year ended March 31, 2026 from $2.6 million for the year ended March 31, 2025 from $2.0 million for the year ended March 31, 2024,2025, due to a combination of increases in insurance, auditing and consulting fees. TheseThe additionalincrease was primarily attributable to higher insurance, audit, and consulting expenses, as well as incremental costs related to recruiter fees relate to public company filing requirements and furthersoftware regulatory compliance consulting.licensing.
Occupancy and equipment expenses increased $529,000, or 50.2%, to $1.6 million for the year ended March 31, 2026 from $1.1 million for the year ended March 31, 2025, due to recognizing a full year of depreciation for our newly constructed branches in Lincoln and Hastings, Nebraska.
Income Tax Expense. Income tax expense increased $122,000, or 14.0%, to $991,000 for the year ended March 31, 2026, compared to $869,000 for the year ended March 31, 2025, primarily reflecting higher pre-tax income. The effective tax rate increased to 19.9% for the year ended March 31, 2026 from 19.2% for the year ended March 31, 2025.
The increase in the effective tax rate was primarily driven by changes in the composition of taxable income and a lower relative benefit from permanent tax differences, including tax-exempt income, compared to the prior year.
Income Tax Expense. Income tax expense decreased $8,000, or 0.9%, to $869,000 for the year ended March 31, 2025 from $877,000 for the year ended March 31, 2024. The effective tax rate for the years ended March 31, 2025 and 2024 were 19.2% and 18.9%, respectively. The most significant difference between our effective tax rate and statutory rates results from investment partnership tax credits.
General. Our most significant form of market risk is interest rate riskrisk. because, asAs a financial institution, the majority of our assets and liabilities are sensitive to changes in interest rates. Therefore,Accordingly, a principal partcomponent of our operations is to manage interest rate risk and to limit the exposure of our financial condition and results of operations to changes in market interest rates. All directors participate in discussions during the regular board meetings evaluating the interest rate risk inherent in our assets and liabilities, and the level of risk that is appropriate. These discussions take into consideration our business strategy, operating environment, capital, liquidity and performance objectives consistent with the policy and guidelines approved by them.
The Board of Directors regularly reviews the interest rate risk inherent in our assets and liabilities and establishes the level of risk deemed appropriate. These reviews are conducted in the context of our overall business strategy, operating environment, capital position, liquidity profile and performance objectives, and are guided by policies and limits approved by the Board.
Our asset/liability management strategy attemptsis designed to manage the impact of changes in interest rates on net interest income, which is our primary source of earnings. AmongThe theprimary techniques we are usinguse to manage interest rate risk areinclude:
maintaining capital levels thatin exceedexcess of the regulatory thresholds for "well-capitalized" status under federal regulationsinstitutions;
maintaining adequate levels of on-balance sheet and contingent liquidity;
selling longer-term, fixed-rate loans,loans into the secondary market, subject to market conditions; and continuing to diversifydiversifying our loan portfolio by addingincreasing morethe commercial-relatedproportion of commercial loans, which typicallygenerally have shorter maturities and/or adjustable interest rates.
By followingThrough these strategies, we believe that we are better positioned to reactrespond to increases and decreaseschanges in market interest rates.
We havedo not engagedcurrently engage in hedging activities, such as engagingthe inuse of interest rate futures or options.options, Weand we do not presently anticipate entering into similarsuch transactions in the future.transactions.
Net Interest Income Analysis. We analyzeassess our sensitivity to changes in interest rates throughusing a third-party net interest income ("“NII"”) model.simulation NIImodel isprovided by a third-party vendor. Net interest income represents the difference between the interest income we earnearned on our interest-earning assets, such as loans and securities, and the interest weexpense paypaid on our interest-bearing liabilities, such as deposits and borrowings. We estimate what our NII would be for a one-year period and then calculate what the NII would be for the same period under the assumptions that the United States Treasury yield curve increases or decreases gradually by up to 400 basis points. A basis point equals one-hundredth of one percent, and 100 basis points equals one percent. An increase in the interest rates from 3% to 4% would mean, for example, a 100 basis point increase in the "Change in Interest Rates" column below.
Using this model, we estimate net interest income over a one-year horizon under various interest rate scenarios. These scenarios assume gradual and parallel shifts in the United States Treasury yield curve, both upward and downward, of up to 400 basis points. A basis point equals one one-hundredth of one percent; therefore, 100 basis points equals 1.0%. For example, an increase in interest rates from 3.0% to 4.0% represents a 100 basis point increase.
The table above indicates that at March 31, 2025,2026, we would have experienced a 3.35%4.27% increase in market value of equity MVE in the event of an instantaneous parallel 200 basis point increase in the market interest rates and a 13.87%12.43% decrease in MVE in the event of an instantaneous 200 basis point decrease in market interest rates. As of March 31, 2026, all changes in net interest income NII and MVE reflected in the above tables were within policy limits established by the Board of Directors.
Liquidity. Liquidity refers to our ability to generate sufficient cash flows to fund loan demand, repay maturing borrowings, meet deposit withdrawal requirements, and fund operating expenses. Our primary sources of funds include deposits; scheduled repayments of loans and investment securities, including interest payments; maturities and sales of loans and investment securities; borrowings from the FRB; advances from the FHLB; and cash flows generated from operations.
Our funding needs vary from period to period based on loan demand, deposit activity, and the level of amortization and prepayments on loans and investment securities. The use of borrowings from the FRB, FHLB advances, and other sources is influenced by loan originations, deposit inflows and outflows, and balance sheet management strategies designed to enhance net interest income.
Liquidity. Liquidity describes our ability to meet financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities. We also have the ability to borrow from the FHLB. The Association had remaining availability for FHLB borrowings of approximately $40.5 million at March 31, 2025. The FHLB has sole discretion to deny additional advances. Additionally, the Association had the capacity to borrow $5.0 million from a private bankers’ bank at March 31, 2025. We could significantly increase our borrowing capacity from the FHLB Topeka if we pledged additional assets as security. We also have the ability to participate in the Federal Reserve Board's Bank Term Funding Program if needed.
While contractual maturities and scheduled amortization of loans and investment securities are relatively predictable sources of funds,liquidity, deposit flows and loan prepayments are greatly influenced by market interest rates, general economic conditions, and competition.competitive factors. Our most liquid assets areconsist of cash and short-term investments.investments, Thethe levels of these assetswhich are dependent on our operating, financing, lendinglending, and investing activities during any given period.
For the year ended March 31, 2025,2026, cash flows from operating, investing, and financing activities resulted in a net increase in cash and cash equivalents of $17.2$1.2 million. Net cash provided by operating activities amountedtotaled to $4.5$6.4 million, driven primarily due toby net income of $3.7$4.0 million. Net cash used in investing activities amounted to $27.9 million, primarily due to a net increase in loans of $22.6 million and the purchase of available-for-sale investment securities of $6.2 million, partially offset by proceeds from paydowns of available-for-sale investment securities of $8.3 million. Net cash provided by financing activities amounted to $40.7 million, consisting primarily of the activity in deposit accounts.
For the year ended March 31, 2024, cash flows from operating, investing, and financing activities resulted in a net decrease in cash and cash equivalents of $5.1 million. Net cash provided by operating activities amounted to $5.7 million, primarily due to net income of $3.8 million. Net cash used in investing activities amountedtotaled to $31.1$48.7 million, primarily due toreflecting a net increase in loans of $26.4$46.1 million and the purchasepurchases of available-for-sale investment securities of $11.6$10.5 million, partially offset by proceeds from principal paydowns and maturities of available-for-sale investment securities of $9.0$8.5 million. Net cash provided by financing activities amounted to $20.3 million, consisting primarily of the activity in deposit accounts and proceeds from the issuance of common stock.
Net cash provided by financing activities totaled $43.5 million, consisting primarily of net increases in deposit accounts.
For the year ended March 31, 2025, cash flows from operating, investing, and financing activities resulted in a net increase in cash and cash equivalents of $17.2 million. Net cash provided by operating activities totaled $4.5 million, driven primarily by net income of $3.7 million.
Net cash used in investing activities totaled $27.9 million, primarily reflecting a net increase in loans of $22.6 million and purchases of available-for-sale investment securities of $6.2 million, partially offset by proceeds from principal paydowns and maturities of available-for-sale investment securities of $8.3 million.
Net cash provided by financing activities totaled $40.7 million, consisting primarily of net increases in deposit accounts.
Off-Balance Sheet Arrangements. At March 31, 2025,2026, we had $45.0$48.4 million of unfunded loan commitments, $12.8$10.2 million of which represents the balance of remaining funds to be disbursed on construction loans in process. Certificates of deposit (excluding retirement account deposits) that are scheduled to mature in less than one year from March 31, 20252026 totaled $86.7$89.0 million at March 31, 2025.2026. Management expects that a substantial portion of the maturing certificates of deposit will be renewed. However, if a substantial portion of these deposits is not retained, we may utilize FederalFHLB Homeadvances, LoanFRB Bank of Topeka advancesborrowings, or our private bankers’ bank line of credit or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.
In November 2024, the FASB issued ASU 2024‑03, "Income Statement Reporting—Comprehensive Income (Topic 220): Disaggregation of Income Statement Expenses," which requires expanded disclosures regarding the disaggregation of certain expense categories, including employee compensation, depreciation, and other material components of operating expenses. In January 2025, the FASB issued ASU 2025‑01, which clarifies the effective date of ASU 2024‑03. The guidance is effective for the Company for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this guidance; however, as the update is limited to expanded disclosures, it is not expected to have a material effect on the Company’s consolidated financial statements.
On November 27, 2023, the FASB issued ASU 2023-07, "Segment Reporting (ASC 280): Improvements to Reportable Segment Disclosures", intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. Provisions in the amendment include: (1) Requirement that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit or loss (collectively referred to as the "significant expense principle"); (2) Requirement that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition. The other segment items category is the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss; (3) Requirement that a public entity provide all annual disclosures about a reportable segment's profit or loss and assets currently required by ASC 280 in interim periods; (4) Clarification that if the CODM uses more than one measure of a segment's profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit. However, at least one of the reported segment profit or loss measures (or the single reported measure, if only one is disclosed) should be the measure that is most consistent with the measurement principles used in measuring the corresponding amounts in the public entity's consolidated financial statements; (5) Requirement that a public entity disclose the title and position of the CODM and explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources; and (6) Requirement that a public entity that has a single reportable segment provide all the disclosures by the amendments in the update and all existing segment disclosures in ASC 280.
The amendments in the update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. For public business entities, amendments in the update should be applied retrospectively to all periods presented in the financial statements, and upon transition the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. The Company adopted this standard effective January 1, 2024, and it did not have a material impact on the consolidated financial statements.
On December 14, 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The amendments require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation, and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate). The amendments require that all entities disclose on an annual basis the following information about income taxes paid: (1) The amount of income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes, and (2) The amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received). The amendments also require that all entities disclose the following information: (1) Income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign, and (2) Income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign. The ASU is effective for public business entities for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments should be applied on a prospective basis. Retrospective application is permitted. The Company will adopt this ASU for the reporting period beginning April 1, 2025, and does not expect the amendments to have a material impact on the consolidated financial statements.
What changed in the latest 10-Q
Risk Factors
Not required for smaller reporting companies.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
Largest changes
While contractual maturities and scheduled amortization of loans and investment securities are relatively predictable sources ofsee in full comparisonfunds,liquidity, deposit flows and loan prepayments aregreatlyinfluenced by market interest rates, general economic conditions, andcompetition.competitive factors. Our most liquid assetsareconsist of cash and short-terminvestments.investments,Thethe levels ofthese assetswhich are dependent on our operating, financing,lendinglending, and investing activities during any given period.
“Liquidity. Liquidity describes our ability to meet financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities. We also have the ability to borrow from the FHLB or FRB. The Association had remaining availability for FHLB and FRB borrowings of approximately $57.0 million at December 31, 2025. …”see in full comparison
“Liquidity. Liquidity refers to our ability to generate sufficient cash flows to fund loan demand, repay maturing borrowings, meet deposit withdrawal requirements, and fund operating expenses. Our primary sources of funds include deposits; scheduled repayments of loans and investment securities, including interest payments; maturities and sales of loans and investment securities; borrowings from the FRB; advances from the FHLB; and cash flows generated from operations.”see in full comparison
“We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained.”see in full comparison
Cash andsee in full comparisoncashCashequivalents.Equivalents. Cash and cash equivalentsdecreasedincreased$574,000,$4.5 million, or2.0%,15.1%, to$28.1$34.4 million atDecemberJune31,30,2025,2026, from$28.7$29.9 million at March 31,2025.2026. Thisdecreaseincrease was primarily attributable to increasedloan funding. Management continues to monitor liquidity based on alternative uses of funds and prevailing market conditions.deposits.
“Our interest rate spread increased 46 basis points to 3.24% for the three months ended December 31, 2025, compared to 2.78% for the same period in 2024. Our net interest margin increased 43 basis points to 3.98% for the three months ended December 31, 2025 compared to 3.55% for the same period in 2024.”see in full comparison
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Management’s discussion and analysis of financial condition and results of operations at DecemberJune 31,30, 20252026 and March 31, 20252026 and for the three and nine months ended DecemberJune 31,30, 20252026 and 20242025 is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto appearing in Part I, Item 1, of this Quarterly Report on Form 10-Q.
Comparison of Financial Condition at DecemberJune 31,30, 20252026 and March 31, 20252026
Total Assets. Total assets increased by $27.0$3.8 million, or 5.3%,0.7%, to $535.7$562.4 million at DecemberJune 31,30, 2025,2026, compared to $508.7$558.6 million at March 31, 2025.2026. The increase primarily reflects a $28.0$4.5 million, or 7.0%,15.1%, increase in grosstotal loans.cash and cash equivalents.
Cash and cashCash equivalents.Equivalents. Cash and cash equivalents decreasedincreased $574,000,$4.5 million, or 2.0%,15.1%, to $28.1$34.4 million at DecemberJune 31,30, 2025,2026, from $28.7$29.9 million at March 31, 2025.2026. This decreaseincrease was primarily attributable to increased loan funding. Management continues to monitor liquidity based on alternative uses of funds and prevailing market conditions.deposits.
Investment Securities Available for Sale. Securities available-for-sale decreasedincreased $480,000,$931,000, or 0.8%,1.5%, to $58.9$63.5 million at DecemberJune 31,30, 2025,2026, from $59.4$62.5 million at March 31, 2025.2026. During the nine-monththree-month period, we purchased $4.4$3.4 million in securities and received $6.4$2.3 million in principal payments. Additionally, net unrealized losses on the securities portfolio decreasedincreased by $1.5 million.$205,000.
Gross Loans. Loans increaseddecreased $28.0 million,$910,000, or 7.0%,0.2%, to $430.2$447.4 million at DecemberJune 31,30, 2025,2026, from $402.2$448.3 million at March 31, 2025.2026. GrowthWe wassaw drivengrowth byin increasestwo acrosscategories, allreal loanestate categories except land developmentcommercial and SIDs,agriculture, andbut otherdeclines consumerin loans.the remainder. The largest increase occurred in commercial non-realreal estate loans, which rose $12.8$11.6 million, or 40.1%,9.0%, to $44.8$140.8 million from $32.0$129.2 million,million. primarilyWe duehave expanded our focus on higher yielding commercial lending, including both commercial real estate and commercial non-real estate loans, while also continuing to additionalgrow commercialour businessagricultural soughtreal byestate and operating loan portfolios. This strategic emphasis reflects our commitment to diversifying our loan mix and supporting the Association.credit needs of businesses and agricultural producers within our market area. Management continues to look for high-quality loans to add to its portfolio and will continue to emphasize loan originations to the extent that it is profitable, prudent and consistent with our interest rate risk strategies.
Premises and Equipment, Net. Premises and equipment increaseddecreased $235,000,$223,000, or 1.8%,1.7%, to $13.2$12.5 million at DecemberJune 31,30, 2025,2026, from $12.9$12.7 million at March 31, 2025.2026. The increasedecrease reflects additionaldepreciation upgradesof forpremises technologyand across the Association.equipment.
Total Deposits. Total deposits increased $23.8$5.4 million, or 5.7%,1.2%, to $440.0$465.8 million at DecemberJune 31,30, 2025,2026, from $416.2$460.4 million at March 31, 2025.2026. Management believes this demonstrates customer confidence as well as the strength and loyalty of the Association's core deposit base. Additionally, the Association acquiredmaintained $10.2$27.6 million in brokered time deposits, with a balance of $27.6 million at DecemberJune 31,30, 2025,2026, and $7.3 million at March 31, 2025.2026. Management continues to actively monitor deposit balances and interest rates to maintain adequate liquidity.
Noninterest-bearing deposits decreasedincreased $2.5$3.3 million, or 3.9%,5.1%, to $62.0$67.8 million, while certificatestime of depositdeposits increased $25.8$1.5 million, or 21.1%,0.9%, to $148.6$164.5 million, including brokered deposits. Savings, demand, NOW, and money market accounts combined increased $404,000,$763,000, or 0.2%,0.3%, to $229.4$233.6 million at DecemberJune 31,30, 2025.2026.
Borrowings. The Company had no outstanding borrowings at DecemberJune 31,30, 2025,2026, and March 31, 2025.2026. While borrowingsBorrowings have been limited in recent periods, as the Association has generally utilized deposit growthdeposits to fund operations.operations and loan growth. Management remains prepared to access FHLB and FRB advances if necessary to support additional loan funding.
Stockholders' Equity. Stockholders' equity increased $4.4$1.3 million, or 5.3%1.5% to $87.7$90.3 million at DecemberJune 31,30, 2025,2026, from $83.3$89.0 million at March 31, 2025.2026. The increase was primarily driven by net income of $3.0$1.5 millionmillion, andoffset aby $1.2$163,000 million decreaseincrease in unrealized losses on securities valuations, net of tax, partially offsetand by share repurchases under the Company's stock repurchase program. The decreaseincrease in the unrealized losses reflects changes in market interest rates during the nine-monththree-month period ended DecemberJune 31,30, 2025.2026.
On October 22, 2024, the Company adopted a program to repurchase up to 200,000 shares, or 5%, of its then outstanding common stock. The program may be suspended, terminated or modified at any time based on market conditions, repurchase costs, alternative investment opportunities, liquidity, and other factors. Repurchases will be made at management’s discretion at prices deemed attractive and in the best interests of the Company and its stockholders, subject to availability, market conditions, trading price, alternative uses of capital, and financial performance. Open market purchases will comply with Rule 10b-18 of the Securities and Exchange Commission and other applicable requirements. As of DecemberJune 31,30, 2025,2026, 136,374112,330 shares remained available for repurchase.
During the ninethree months ended DecemberJune 31,30, 2025,2026, the Company repurchased 35,48716,348 shares at a weighted average price of $15.36,$18.11, for a total of $544,000.$296,000.
(1)
Represents investments in municipal bonds.
(2)
Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.
(3)
Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(4)
Net interest margin represents net interest income divided by average total interest-earning assets.
Comparison of Operating Results for the Three and Nine Months Ended DecemberJune 31,30, 20252026 and 20242025
General. Net income was $1.2 million for the three months ended December 31, 2025, compared to $951,000 for the same period in 2024. For the nine months ended December 31, 2025, net income was $3.0 million, compared to net income of $2.8 million for the nine months ended December 31, 2024.
Interest and Dividend Income. Interest and dividend income increased $924,000, or 14.8%, to $7.2 million for the three months ended December 31, 2025, compared to $6.2 million for the same period in 2024. The increase was primarily driven by higher yields on interest-earning assets and loan growth. These increases were partially offset by lower income on interest‑earning cash balances, including Federal funds sold, due to both lower average balances and lower short‑term market rates.
Interest income on loans increased $926,000, or 16.4%, to $6.6 million for the three months ended December 31, 2025 from $5.6 million for the same period in 2024. The average balance of loans rose $26.0 million, or 6.5%, to $422.6 million from $396.6 million. Yield on loans increased 52 basis points to 6.22% from 5.70%, reflecting loan growth and the repricing of existing loans.
Interest income on securities increased $29,000, or 5.5%, to $558,000 for the three months ended December 31, 2025 from $529,000 for the same period in 2024, due to a 13 basis point increase in average yield to 3.76% from 3.63%. The average balance of securities increased slightly to $59.4 million from $58.3 million.
Interest and dividend income increased $2.2 million, or 12.2%, to $20.5 million for the nine months ended December 31, 2025 from $18.3 million in 2024. These increases were partially offset by lower income on interest‑earning cash balances, including Federal funds sold, due to both lower average balances and lower short‑term market rates.
Interest income on loans increased $2.1 million, or 12.7%, to $18.7 million for the nine months ended December 31, 2025 from $16.6 million for the same period in 2024. The average balance of loans rose $22.0 million, or 5.6%, to $412.1 million from $390.1 million. Yield on loans increased 38 basis points to 6.04% from 5.66%. The increase in yield was driven by loan growth and the repricing of existing loans during the period.
Interest income on securities increased $124,000, or 7.8%, to $1.7 million for the nine months ended December 31, 2025 from $1.6 million for the same period in 2024, due to a 23 basis point increase in the average yield to 3.80% from 3.57%. The average balance of securities increased slightly to $60.2 million from $59.6 million.
Interest Expense. Interest expense increased $201,000, or 9.5%, to $2.3 million for the three months ended December 31, 2025, compared to $2.1 million for the same period in 2024. While average yields on certificates of deposit, IRAs and money market accounts decreased, rates on savings and NOW accounts were higher.
Interest expense on deposits increased $179,000, or 8.5%, to $2.3 million for the three months ended December 31, 2025, compared to $2.1 million for the same period in 2024. The increase was driven by higher average balances across all interest-bearing accounts, except NOW accounts and increased yields on savings and NOW accounts, partially offset by lower yields on certificates of deposit, IRAs and money market accounts.
Interest expense increased $455,000, or 7.4%, to $6.6 million for the nine months ended December 31, 2025, compared to $6.2 million for the same period in 2024. The increase was driven entirely by higher deposit costs. Interest expense on deposits increased $495,000, or 8.2%, to $6.5 million, reflecting higher average balances and increased rates on savings, money market, and NOW accounts, partially offset by lower yields on certificates of deposit and IRAs.
Total interest expense grew by less than the increase in deposit interest expense, indicating that interest expense on borrowings declined during the period. This decrease in borrowing costs partially offset the rise in deposit costs and contributed to keeping the overall increase in total interest expense below the growth in deposit-related expense.
Interest expense on deposits increased $495,000, or 8.2%, to $6.5 million for the nine months ended December 31, 2025, compared to $6.1 million for the same period in 2024. The increase was due to higher average balances and increased yields on savings, money market, and NOW accounts, offset by lower yields on certificates of deposit and IRAs.
Net Interest Income.General. Net interest income beforewas provision for credit losses increased $723,000, or 17.5%, to $4.9$1.5 million for the three months ended DecemberJune 31,30, 20252026, compared to $4.1 million$988,000 for the same period in 2024.2025.
Our interest rate spread increased 46 basis points to 3.24% for the three months ended December 31, 2025, compared to 2.78% for the same period in 2024. Our net interest margin increased 43 basis points to 3.98% for the three months ended December 31, 2025 compared to 3.55% for the same period in 2024.
NetInterest interestand Dividend Income. Interest and dividend income before provision for credit losses increased $1.7$1.1 million, or 14.6%,16.8%, to $13.9$7.7 million for the ninethree months ended DecemberJune 31,30, 20252026, compared to $12.2$6.6 million for the same period in 2024.2025. The increase was primarily driven by higher yields on interest-earning assets, loan growth, and larger average balance of federal funds sold.
Interest income on loans increased $963,000, or 16.3%, to $6.9 million for the three months ended June 30, 2026 from $5.9 million for the same period in 2025. The average balance of loans rose $39.3 million, or 9.7%, to $442.9 million from $403.6 million. Yield on loans increased 35 basis points to 6.20% from 5.85%, reflecting new loan pricing and the repricing of existing loans.
Interest income on securities increased $8,000, or 1.4%, to $592,000 for the three months ended June 30, 2026 from $584,000 for the same period in 2025, due to the average balance of securities increasing from $60.8 million to $63.3 million.
Interest Expense. Interest expense increased $365,000, or 17.5%, to $2.5 million for the three months ended June 30, 2026, compared to $2.1 million for the same period in 2025. The increase was primarily driven by higher average balances on interest bearing deposits.
Interest expense on deposits increased $367,000, or 17.6%, to $2.5 million for the three months ended June 30, 2026, compared to $2.1 million for the same period in 2025. The increase was driven by higher average balances and higher costs of funds across all interest-bearing accounts.
Net Interest Income. Net interest income before provision for credit losses increased $740,000, or 16.5%, to $5.2 million for the three months ended June 30, 2026 compared to $4.5 million for the same period in 2025.
Our interest rate spread increased 4517 basis points to 3.16%3.22% for the ninethree months ended DecemberJune 31,30, 2025,2026, compared to 2.71%3.05% for the same period in 2024.2025. Our net interest margin increased 3420 basis points to 3.87%3.95% for the ninethree months ended DecemberJune 31,30, 2025,2026 compared to 3.53%3.75% for the same period in 2024.2025.
Provision for Credit Losses. During the three months ended December 31, 2025, no provision for credit losses was recorded. During the three months ended December 31, 2024, we recorded a provision for credit losses of $57,000.
Provision for Credit Losses. During the ninethree months ended DecemberJune 31,30, 2025,2026, we recorded a provision for credit losses of $86,000$51,000. andDuring $56,000the three months ended June 30, 2025, we recorded a reversal of provision for thecredit samelosses periodof in 2024.$3,000.
Noninterest income increaseddecreased $48,000,$11,000, or 7.3%,1.7%, to $704,000$643,000 for the three months ended DecemberJune 31,30, 2025,2026, compared to $656,000$654,000 for the same period in 2024.2025. The increasedecrease was primarily due to gainsservice charges on saledeposit of loans,accounts, which rosedeclined $33,000,$15,000, or 52.4%,7.8%, to $96,000$177,000 from $63,000.$192,000.
Noninterest income increased $145,000, or 7.7%, to $2.0 million for the nine months ended December 31, 2025, compared to $1.9 million for the same period in 2024. The increase was primarily due to the gains on sale of loans, which rose $117,000, or 76.0%, to $271,000 from $154,000.
Non-interest expense increased $544,000,$55,000, or 15.4%1.4% to $4.1$4.0 million for the three months ended DecemberJune 31,30, 2025,2026, compared to $3.5$3.9 million for the same period in 2024.2025. The largest increase in non-interest expense during the three months ended DecemberJune 31,30, 20252026 was in salaries and employee benefits, which rose $295,000,$141,000, or 15.1%,6.7%, to $2.2 million, compared to $1.9$2.1 million for the same period in 2024.2025. TheseThis increasesincrease werewas primarily due to higher staffing levels and costs associated with the 2024 Equity Incentive Plan. Occupancy and equipment expense increased $154,000,$49,000, or 57.9%,15.4%, to $420,000$367,000 for the three months ended DecemberJune 31,30, 2025,2026, compared to $266,000$318,000 for the same period in 2024.2025. This increase is due to maintenance, utilities, and depreciation related to new branches in Hastings and Lincoln.
The largest decrease in non-interest expense during the three months ended June 30, 2026 was in data processing, which declined $165,000, or 33.0%, to $335,000, compared to $500,000 for the same period in 2025. This decrease was primarily due to adjusted pricing with our core provider.
Non-interest expense increased $1.5 million, or 14.5% to $12.1 million for the nine months ended December 31, 2025, compared to $10.5 million for the same period in 2024. The largest increase in non-interest expense during the nine months ended December 31, 2025 was salaries and employee benefits, which rose $811,000, or 14.2%, to $6.5 million, compared to $5.7 million for the same period in 2024. These increases were primarily due to higher staffing levels and costs associated with the 2024 Equity Incentive Plan. Occupancy and equipment expense increased $379,000, or 48.1%, to $1.2 million for the nine months ended December 31, 2025, compared to $788,000 for the same period in 2024. This increase is due to maintenance, utilities, and depreciation related to new branches in Hastings and Lincoln. Other general and administrative expenses increased $176,000, or 8.9%, to $2.2 million for the nine months ended December 31, 2025, compared to $2.0 million for the same period in 2024, due to higher insurance, audit, and consulting fees related to public filing and regulatory compliance.
Income Tax Expense. Income tax expense was $300,000$357,000 for the three months ended DecemberJune 31,30, 2025,2026, compared to $240,000$241,000 for the same period in 2024,2025, resulting in effective tax rates of 20.3%19.3% and 20.2%,19.6%, respectively.
Income tax expense was $774,000 for the nine months ended December 31, 2025, compared to $652,000 for the same period in 2024, resulting in effective tax rates of 20.3% and 18.9%, respectively. The increase in the effective tax rate for the nine months ended December 31, 2025 reflects a higher proportion of net income being subject to taxation compared to the same period last year.
The following table sets forth, at DecemberJune 31,30, 2025,2026, the calculation of the estimated changes in our NII that would result from the designated changes in the United States Treasury yield curve over a one-year period.
(1)
The table above indicates that at DecemberJune 31,30, 2025,2026, we would have experienced a 1.11%0.98% increase in NII in the event of a gradual, one-year 200 basis point increase in market interest rates, and a 1.37%0.73% decrease in NII in the event of a gradual, one-year 200 basis point decrease in market interest rates.
The following table sets forth, at DecemberJune 31,30, 2025,2026, the calculation of the estimated changes in our MVE that would result from the designated immediate changes in the United States Treasury yield curve.
(1)
The table above indicates that at DecemberJune 31,30, 2025,2026, we would have experienced a 7.38%3.57% increase in MVE in the event of an instantaneous parallel 200 basis point increase in the market interest rates and a 12.79%11.39% decrease in MVE in the event of an instantaneous 200 basis point decrease in market interest rates.
Liquidity. Liquidity refers to our ability to generate sufficient cash flows to fund loan demand, repay maturing borrowings, meet deposit withdrawal requirements, and fund operating expenses. Our primary sources of funds include deposits; scheduled repayments of loans and investment securities, including interest payments; maturities and sales of loans and investment securities; borrowings from the FRB; advances from the FHLB; and cash flows generated from operations.
Our funding needs vary from period to period based on loan demand, deposit activity, and the level of amortization and prepayments on loans and investment securities. The use of borrowings from the FRB, FHLB advances, and other sources is influenced by loan originations, deposit inflows and outflows, and balance sheet management strategies designed to enhance net interest income.
CPBI insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding CPBI (13F)
None of the 59 investors we track reported a position in their latest 13F.