CB Financial Services repositions investment portfolio for higher yields

WASHINGTON, Pa. - CB Financial Services, Inc. (NASDAQGM:CBFV), the holding company of Community Bank with a market capitalization of $164 million, announced Tuesday the implementation of a balance sheet repositioning strategy involving its portfolio of available-for-sale investment securities. The bank, which has maintained dividend payments for 32 consecutive years and currently offers a 3.12% dividend yield, is trading near its 52-week high of $33.98. According to InvestingPro analysis, the stock appears slightly undervalued based on its Fair Value assessment.

The bank sold $129.6 million in book value of investment securities with an average yield of 2.87%, resulting in an estimated after-tax realized loss of $9.3 million. The sold securities included $121.1 million of mortgage-backed securities/collateralized mortgage obligations issued by U.S. government-sponsored agencies, $5.0 million of U.S. government agency securities, and $3.5 million of municipal securities.

Community Bank plans to purchase $117.8 million of higher-yielding securities with an average yield of approximately 5.51%. These new investments will include mortgage-backed securities/collateralized mortgage obligations issued by U.S. government-sponsored agencies, municipal securities, subordinated debt investments, and non-agency guaranteed securitizations.

According to the company, the purchased securities are expected to have a positive spread differential of about 264 basis points over the securities that were sold, potentially adding approximately $2.2 million of after-tax earnings. The bank estimates it will recover the $9.3 million after-tax realized loss in about 4.2 years. This strategic move comes as the company demonstrates strong financial performance, with InvestingPro data showing a notable 24.73% total return over the past year and a moderate P/E ratio of 14.51x.

John H. Montgomery, President and CEO, stated that the company anticipates the repositioning will add approximately 20 basis points to its net interest margin and approximately $0.41 to annual earnings per share.

The loss on the sale of securities is expected to have a neutral impact on the company’s consolidated shareholders’ equity and tangible book value per share, according to the press release statement. The bank indicated that its regulatory capital levels continue to remain above the requirements to be categorized as well-capitalized.

CB Financial Services operates its branch network in southwestern Pennsylvania and West Virginia. For investors seeking deeper insights into CBFV’s financial health and growth prospects, InvestingPro offers additional exclusive tips and comprehensive financial metrics, including detailed profitability scores and growth forecasts.

In other recent news, CB Financial Services reported impressive second-quarter earnings that significantly exceeded analyst expectations. The company announced adjusted earnings per share of $0.74, surpassing estimates by $0.32. Revenue for the quarter reached $13.53 million, beating the consensus estimate of $12.79 million. Additionally, net interest income rose by 9.3% year-over-year to $12.5 million, with the net interest margin improving to 3.54% from 3.18% in the previous year. In terms of analyst ratings, Keefe, Bruyette & Woods (KBW) upgraded CB Financial Services from Market Perform to Outperform. This upgrade was accompanied by an increase in the price target from $31.00 to $39.00. The upgrade reflects the benefits CB Financial Services is beginning to realize from its strategic investments, which have contributed to a 42 basis point expansion in net interest margin year-to-date. These developments highlight the company’s recent financial achievements and strategic progress.

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