Columbia Financial, Inc. has announced a repositioning of its balance sheet, which involved selling approximately $321 million of available-for-sale debt securities with a weighted average book yield of 1.53% and an average life of 3.6 years. The company used the proceeds from the sale to fund loan growth of $85 million, purchase $66 million of higher yielding debt securities, and prepay $170 million of higher cost borrowings. This repositioning is expected to be immediately accretive to net interest income, despite resulting in a pre-tax loss of approximately $38 million.
The company's strategy aims to improve future earnings and expand its net interest margin, particularly in response to the decline in interest rates. Columbia Financial, Inc. believes this transaction is well-timed and expects it to increase 2025 earnings by approximately 24% relative to the current analyst earnings consensus, as well as expand the 2025 net interest margin by approximately 15 basis points relative to the current analyst earnings consensus. The company also anticipates achieving a conservative payback estimate of 3.1 years and reducing its reliance on wholesale funding.
After the repositioning, the company's regulatory capital ratios are expected to remain strong and above "well capitalized" levels, with an estimated total capital to risk weighted assets ratio at 13.87% and an estimated tier 1 leverage capital ratio at 9.99% on an estimated pro forma basis using actual September 30, 2024, capital.
Thomas J. Kemly, President and Chief Executive Officer of Columbia Financial, Inc., stated that this repositioning accelerates the company's strategy to realign its balance sheet towards higher-yielding assets and enhances the flexibility of its funding.
Today the company's shares have moved -0.6% to a price of $17.69. For more information, read the company's full 8-K submission here.
