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Civista Bancshares' (CIVB) Q2 Earnings Beat, Stock Down 1.5%

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Civista Bancshares, Inc (CIVB - Free Report) reported second-quarter 2020 earnings per share of 41 cents which surpassed the Zacks Consensus Estimate of 30 cents. However, the reported figure declined 19.6%, year over year.

Results benefited from growth in revenues, as well as loan and deposit balances. However, escalating expenses, shrinking margins and a higher efficiency ratio were negatives. The company’s shares depreciated 1.5% following the release most likely due to these concerns.

Net income for the quarter declined 23.5% year over year to $6.5 million.

Revenues Increase, Costs Flare Up

Net revenues for the quarter came in at $28.9 million, up 7.8% from the year-ago quarter. Moreover, the revenue figure outpaced the Zacks Consensus Estimate of $27.6 million.

Net interest income for the quarter was $22.1 million, up 1.5% from the year-earlier quarter. Further, tax equivalent net interest margin contracted 88 basis points (bps) year over year to 3.61%.

Non-interest income of $6.9 million climbed 34.3% year over year. This upside was mainly driven by an increase in net gain on sale of loans, ATM/Interchange and swap fees.

Non-interest expenses flared up 8.9% from the prior-year quarter to $18.1 million. Rise in all components of non-interest expenses, except ATM/Interchange expense, marketing and amortization expenses resulted in this upswing.

The company’s efficiency ratio was 61.7%, up from the prior-year quarter’s 61.1%. A rise in efficiency ratio indicates lower profitability.

At the end of the reported quarter, return on average equity was 7.91%, down from the 11.01% witnessed in the comparable period last year. Return on average assets was 0.93% in the June-end quarter compared with the 1.58% recorded at the end of the year-ago quarter.

Loans & Deposits Rise

As of Jun 30, 2020, net loans amounted to $2 billion, up from $1.7 billion recorded as of Mar 31, 2020. Also, customer deposit accounts were $2.1 billion as of Jun 30, 2020, up from $2 billion as of Mar 31, 2020.

Credit Quality Deteriorates

As of Jun 30, 2020, the ratio of allowance for loan losses to total loans was 1.01%, up 15 bps from 0.86% recorded as of Jun 30, 2019. Additionally, the allowance for loan losses to non-performing loans was 262.1%, up from the 164.69% recorded at the end of the year-earlier quarter.

Moreover, the company recorded net charge-off of $14,000 compared with the net charge-offs of $36,000 reported in the year-ago quarter. Also, provision for loan losses for the reported quarter was $3.5 million compared with no such provisions in the prior-year quarter. However, total non-performing assets were $7.8 million, down from the prior-year quarter’s $8.4 million.

Capital Ratio Deteriorates

As of Jun 30, 2020, tier I leverage ratio and tier I risk based capital ratio was 10.43% and 12.99%, down from 12.44% and 15.94%, respectively, witnessed at the end of the year-ago quarter.

Share Repurchase Update

As of Apr 4, 2020, the company repurchased 0.7 million shares for $11.4 million. Thus, the company completed the buyback plan authorized in December 2019.

In April, the bank approved a new share-repurchase plan amounting to $13.5 million. There have been no share repurchases under this program so far.

Our View

Civista Bancshares is well poised to grow organically on continued rise in loan and deposit balances. Moreover, increasing revenues will fuel the company’s growth. Nevertheless, rising expenses and contracting margins might keep curbing bottom-line growth.

Civista Bancshares, Inc. Price, Consensus and EPS Surprise

Civista Bancshares, Inc. Price, Consensus and EPS Surprise

Civista Bancshares, Inc. price-consensus-eps-surprise-chart | Civista Bancshares, Inc. Quote

Currently, Civista Bancshares carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Associated Banc-Corp’s (ASB - Free Report) second-quarter 2020 adjusted earnings of 26 cents per share came in line with the Zacks Consensus Estimate. The figure reflected a year-over-year decline of 49%.

Zions Bancorporation’s (ZION - Free Report) net earnings of 34 cents per share missed the Zacks Consensus Estimate of 37 cents in the June-end quarter. Moreover, the bottom line compared unfavorably with the year-ago quarter’s 99 cents.

BancorpSouth Bank delivered an earnings surprise of a whopping 90.3% in the second quarteron higher interest income. Net operating earnings of 59 cents per share outpaced the Zacks Consensus Estimate of 31 cents. However, the bottom line compared unfavorably with the year-ago quarter’s 61 cents.

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