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Civista (CIVB) Undertakes Efforts to Solidify Business Operations

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Last week, Civista Bancshares, Inc. (CIVB - Free Report) undertook a few strategic transactions. The efforts are not only going to strengthen its balance sheet but are also likely to improve the company’s earnings, going forward.

Here are the “three tactical transactions” that Civista Bancshares undertook:

1. It entered into an agreement to divest 7,361 shares of Visa Inc. (V - Free Report) Class B common stock. This will result in a pre-tax gain of nearly $1.8 million. Notably, the carrying value of these shares on the bank's balance sheet was $100 as it had “no other historical cost basis in the shares.”

2. Civista Bancshares completed pre-payment of long-term Federal Home Loan Bank advances worth $50 million, which had an interest rate of 2.05% and a remaining maturity of roughly eight years. The transaction, accounted for as an early debt extinguishment, will lead to a loss of $3.7 million in the second quarter of 2021 and be reported within the non-interest expenses. Nonetheless, debt prepayment, which was funded with excess cash, will result in approximately $1.0 million of savings in annual interest expenses.

3. Civista Bancshares redeployed $100 million of excess cash into a mix of investments, which will yield 1.50% with an average duration of 5.2 years.

The company anticipates the net impact from these three transactions to be a pre-tax net loss of $1.9 million. Additionally, these will lead to 12 cents accretion to earnings per share on an annualized basis and also improve Civista Bancshares’ net interest margin by 17 basis points on an annualized basis.

At the time when all banks big and small including Civista Bancshares, Associated Banc-Corp (ASB - Free Report) and East West Bancorp, Inc. (EWBC - Free Report) are facing concerns related to lower interest rates and faltering loan demand, the efforts to strengthen financials is a step in right direction. This will also improve the company’s operating efficiency in the quarters ahead.

Shares of Civista Bancshares have rallied 35.1% so far this year, outperforming the industry’s growth of 26.5%.



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.

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