The purpose of this study was to examine the impact of Loan Defaults on Profitability of Financial Institutions with a Case Study of Centenary Bank Gulu Branch and it was guided by the following objectives; To establish the effect of loan appraisal practices on Profitability in Centenary Bank, to examine the effect of loan monitoring practices on loan Profitability in Centenary Bank and to analyze the effect of loan recovery procedures on Profitability in Centenary Bank. The study targeted 120 sample units though only 92responded, which translated in a response rate of 76.7. From the Further, the majority of the respondents (51) were females (55.4%) and 41 of them were males (44.6%). This distribution indicates that the variation in gender representation was not very big to cause worry arising from gender bias. In terms of the level of education, many of respondents were degree holders (43.5%) followed by 21.7% belonging to the category of Masters, 17.4% diploma holders, 10.9 others and 6.5% certificate holders. The results indicate that the respondents had reasonably good education qualifications and the desired skills and knowledge to enable them read and interpret the issues presented to them in the questionnaires and interviews. According to the findings; the majority of the respondents agreed that loan appraisal has an impact on profitability in Centenary Bank, their average percentage was 32.3%. These were followed by those who strongly agree with average percentage of 30.2%, 15.5% they disagreed, 9.8% strongly disagreed, and 12.2% were neutral. This result indicated that there is high response towards the effect of loan appraisal practices on Profitability in Centenary Bank. The average percentage of those who strongly agreed was 27.9%and these were followed by those who disagree with the average percentage of 17%, 12.5% they strongly disagreed and 10.2% were neutral. The researcher also recommends that Centenary bank staff should: As often as possible compile a watch list of possible defaulters thus define indicators that qualify the client to be in that watch list such as poor communication in the course of the relationship and take action as soon as any risk matures tight from the point of extending the loan