CrossFirst Bankshares, Inc. Announces Bond Portfolio Repositioning
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Insights
The decision by CrossFirst Bankshares, Inc. to sell off its available-for-sale municipal securities and reinvest in higher-yielding agency mortgage-backed products indicates a strategic shift towards assets with potentially higher returns. While the transaction resulted in an after-tax loss of $0.8 million, the anticipated positive effect on diluted earnings per share (EPS) suggests a calculated move to enhance future profitability. The short-term loss is mitigated by the expectation of a less than one-year earn-back period and the neutral impact on shareholders’ equity and book value per share.
However, the move also reflects a broader risk management strategy, aiming to improve liquidity and regulatory capital ratios by lowering risk-weighted assets. This could be an indicator of the bank's proactive approach to regulatory compliance and capital adequacy, which are critical factors for financial institutions in maintaining investor confidence and market stability. The payoff of existing wholesale borrowings with the proceeds is a deleveraging step, which may appeal to risk-averse investors.
From a market perspective, such strategic portfolio adjustments can signal a bank's adaptability to changing economic conditions. Investors might view this as a positive sign of management's commitment to optimizing the bank's balance sheet and enhancing shareholder value in the long run.
The sale of municipal securities by CrossFirst Bankshares, Inc. reflects a nuanced approach to risk management. The bank's initiative to reduce its concentration of municipal securities aligns with a broader trend of financial institutions adjusting asset allocations in response to the interest rate environment and credit risk considerations. By shifting towards agency mortgage-backed securities, the bank is likely targeting a diversification of its asset base and a more favorable risk-return profile.
For stakeholders, the immediate improvement in regulatory capital ratios is a critical takeaway, as it suggests a strengthening of the bank's capital position. This move can potentially lead to a more favorable assessment from regulators and rating agencies, which in turn might impact the bank's cost of capital positively. Investors should, however, remain cognizant of the inherent risks associated with mortgage-backed securities, including prepayment risk and sensitivity to changes in interest rates.
Overall, the strategic reallocation of assets should be seen in the context of the bank's long-term financial health and risk exposure. While the sale has resulted in a nominal loss, the proactive management of the asset portfolio could be indicative of a robust risk management framework, which is essential for investor confidence and the bank's resilience against financial headwinds.
LEAWOOD, Kan., Dec. 19, 2023 (GLOBE NEWSWIRE) -- (Nasdaq: CFB) -- CrossFirst Bankshares, Inc. (the “Company”), the bank holding company for CrossFirst Bank (the “Bank”) announced the sale of approximately
The Company expects the transaction will contribute additional diluted earnings per share accretion of
Investor Contact
Mike Daley| CrossFirst Bankshares, Inc.
913.754.9707| mike.daley@crossfirstbank.com
About CrossFirst Bankshares, Inc.
CrossFirst Bankshares, Inc. (Nasdaq: CFB) is a Kansas corporation and a registered bank holding company for its wholly owned subsidiary, CrossFirst Bank, a full-service financial institution that offers products and services to businesses, professionals, individuals, and families. CrossFirst Bank, headquartered in Leawood, Kansas, has locations in Kansas, Missouri, Oklahoma, Texas, Arizona, Colorado, and New Mexico.
This press release contains forward–looking statements regarding, among other things, the Company’s future financial performance and the expected impact of the repositioning of its investment securities portfolio. These statements are often, but not always, made through the use of words or phrases such as “estimated,” “approximately,” “expects,” “goal” and similar words or phrases of a future or forward-looking nature. The inclusion of forward-looking information should not be regarded as a representation that the future plans, estimates or expectations will be achieved. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections, management’s beliefs, certain assumptions made by management, and financial trends that may affect our financial condition, results of operations, business strategy or financial needs, many of which, by their nature, are inherently uncertain and beyond our control. Our actual results could differ materially from those anticipated in such forward-looking statements. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected are reasonable as of the date made, actual results may differ due to a number of factors, including without limitation, the following: a decline in general business and economic conditions; interest rate fluctuations; fluctuations in fair value of our investments due to factors outside of our control; our ability to attract, hire and retain key personnel; maintaining and increasing customer deposits, funding availability, liquidity and our ability to raise and maintain sufficient capital; accounting estimates; risk exposure from transactions with financial counterparties; and changes in laws, rules, regulations, interpretations or policies relating to financial institutions; or other external events. These and other factors that could cause results to differ materially from those described in the forward-looking statements, as well as a discussion of the risks and uncertainties that may affect our business, can be found in our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and in other filings we make with the Securities and Exchange Commission. These forward-looking statements are made as of the date hereof, and we disclaim any obligation to update any forward-looking statement or to publicly announce the results of any revisions to any of the forward-looking statements included herein, except as required by law.
FAQ
What is the recent announcement from CrossFirst Bankshares, Inc. (Nasdaq: CFB)?
What will the proceeds from the sale be used for?
How is the company expecting the transaction to impact earnings per share in 2024?
What is the expected impact of the loss on the sale of securities on consolidated shareholders’ equity and the company’s book value per share?
How does the sale of securities contribute to the company's goal of reducing its municipal securities concentration?
