Valley Republic Bancorp Reports Record Annual and Fourth Quarter 2021 Earnings

Rhea-AI Summary

Valley Republic Bancorp (OTCQX: VLLX) reported strong fourth-quarter results for 2021, with net income up 32.8% to $4.7 million, translating to $1.08 per diluted share, compared to $3.5 million in Q4 2020. Total assets grew 11.7% to $1.4 billion, while deposits rose 12.3% to $1.2 billion. Gross loans increased 16.8% to $787.5 million, excluding PPP loans. The merger with Tri Counties Bank is expected to finalize in Q1 2022, enhancing operational capacity. For the year, net income reached $16.3 million, up from $12.5 million, affecting overall shareholder equity positively.

Positive

• Net income for Q4 2021 increased 32.8%, reaching $4.7 million.
• Total assets rose by 11.7% year-over-year to $1.4 billion.
• Deposits increased 12.3% to $1.2 billion, indicating strong customer trust.
• Gross loans increased by 16.8% to $787.5 million, excluding PPP loans.
• Shareholders' equity increased 15.6% to $110.0 million.
• Merger with Tri Counties Bank expected to boost operational efficiency.

Negative

• Total loans decreased by $20.5 million or 2.4% due to PPP loan forgiveness.
• Noninterest expenses rose by 32.4% to $6.1 million, impacting profitability.

BAKERSFIELD, Calif., Jan. 31, 2022 /PRNewswire/ -- Valley Republic Bancorp (the "Company") (OTCQX: VLLX), the parent company of Valley Republic Bank (the "Bank"), today announced its unaudited financial results for the fourth quarter of 2021.

4^th Quarter 2021 Compared to 4^th Quarter 2020:

• Net income after tax increased 32.8% to $4.7 million or $1.08 per diluted share
• Total assets increased 11.7% to $1.4 billion
• Deposits increased 12.3% to $1.2 billion
• Gross loans, excluding Paycheck Protection Program (PPP) loans increased 16.8% to $787.5 million
• Shareholders' equity increased 15.6%% to $110.0 million
• Book value increased to $25.75 per share
• YTD return on average assets was 1.20%
• YTD return on average equity was 16.02%

Overview: 

Geraud Smith, President and CEO said, "The Company generated tremendous operating results and double-digit core balance sheet growth in 2021, which is a testament to Valley Republic's dedicated team and the continued support of our loyal and valued customers. The Company performed exceedingly well despite the continued challenges caused by COVID-19, a near zero interest rate environment, and our focus on ensuring a smooth transition for our customers as we work towards our merger with Tri Counties Bank, which was announced in July of 2021.  I'm extremely proud of the Bank and all of its accomplishments in 2021 and I look forward to closing our merger with Tri Counties Bank in the 1st quarter of 2022."

Financial Performance

Net income for the fourth quarter of 2021 was $4.7 million compared to $3.5 million reported in the same quarter in the prior year, an increase of $1.2 million or 32.8%. Earnings per share for the fourth quarter of 2021 were $1.08 per diluted share outstanding compared to $0.83 per diluted share reported in the fourth quarter of 2020, an increase of 30.1%. In the fourth quarter of 2021, income before taxes was $6.5 million compared to $4.8 million in the same quarter of 2020. Income before taxes included $264 thousand in merger related expenses. Excluding these expenses, income before taxes would have been $6.8 million, an increase of $2.0 million, or 41.1%, compared to the same quarter in the prior year.

For the year ended December 31, 2021, net income was $16.3 million compared to $12.5 million in the prior year, an increase of $3.8 million or 30.1%. Year to date earnings per diluted share were $3.81 compared to $2.97 in the same period of 2020. For the year ended December 31, 2021, income before taxes was $22.9 million compared to $17.2 million, an increase of $5.7 million, or 33.4%. For  the year ended December 31, 2021, income before taxes included $812 thousand in merger related expenses. Excluding these expenses, income before taxes would have been $23.7 million, an increase of $6.6 million,  or 38.3%, compared to the  prior year.

For the three months and twelve months ended December 31, 2021, the Company's return on average assets was 1.30% and 1.20%, respectively, and the return on average equity was 17.16% and 16.02%, respectively.

The following tables set forth a summary of average balances and rates for the periods presented. Average loans include nonaccrual loans. Interest income includes fee income of $2.7 million and $1.2 million for  the three months ended December 31, 2021 and 2020, respectively. Interest income includes net fees and (costs) of $5.9 million and $1.6 million for the years ended December 31, 2021 and 2020, respectively. Certain loans and debt securities were tax exempt, however, the income derived from these earning assets was not significant, therefore there have been no adjustments made to reflect interest earned on these earning assets on a tax-equivalent basis.

	Three months ended December 31,
	2021						2020
(Dollars in thousands)	Avg Balance		Interest		Weighted Avg Yield/Cost		Avg Balance		Interest		Weighted Avg Yield/Cost
ASSETS
Earning assets:
Loans; less PPP, Net of Unearned Income	776,360		8,526		4.36%		652,684		7,188		4.37%
PPP Loans	89,747		3,040		13.44%		197,358		2,018		4.06%
Debt Securities	234,817		974		1.65%		217,286		1,038		1.90%
Fed funds sold and other interest-bearing balances	273,370		102		0.15%		108,778		27		0.10%
Total earning assets	1,374,294		12,642		3.65%		1,176,106		10,271		3.46%
Total nonearning assets	48,453						44,927
Total Assets	1,422,747						1,221,033
LIABILITIES
Interest-bearing liabilities:
MMDA & Interest Checking	717,939		373		0.21%		588,468		329		0.22%
Savings	75,077		30		0.16%		55,912		22		0.16%
Time deposits	30,312		23		0.30%		35,529		69		0.77%
Subordinated Debt	39,505		588		5.91%		39,346		571		5.76%
Total interest-bearing liabilities	862,833		1,014		0.47%		719,255		991		0.55%
Noninterest-bearing deposits	438,854						386,208
Other liabilities	13,195						23,689
Total liabilities	1,314,882						1,129,152
SHAREHOLDERS' EQUITY
Shareholders' equity	107,865						91,881
Total Liabilities and Shareholders' Equity	1,422,747						1,221,033
Net Interest Income and Net Interest Margin			11,628		3.36%				9,280		3.13%

 

	Twelve months ended December 31,
	2021						2020
(Dollars in thousands)	Avg Balance		Interest		Weighted Avg Yield/Cost		Avg Balance		Interest		Weighted Avg Yield/Cost
ASSETS
Earning assets:
Loans; less PPP, Net of Unearned Income	742,691		32,204		4.34%		640,812		28,892		4.51%
PPP Loans	168,437		8,188		4.86%		140,688		3,943		2.80%
Debt Securities	224,109		3,936		1.76%		180,252		3,696		2.05%
Fed funds sold and other interest-bearing balances	182,864		229		0.13%		114,672		353		0.31%
Total earning assets	1,318,101		44,557		3.38%		1,076,424		36,884		3.43%
Total nonearning assets	47,374						43,308
Total Assets	1,365,475						1,119,732
LIABILITIES
Interest-bearing liabilities:
MMDA & Interest Checking	682,535		1,472		0.22%		513,476		1,657		0.32%
Savings	68,815		107		0.16%		51,666		120		0.23%
Time deposits	31,460		133		0.42%		51,289		733		1.43%
Subordinated Debt	39,446		2,352		5.96%		26,538		1,544		5.82%
PPPLF	-		-		0.00%		11,861		42		0.35%
Total interest-bearing liabilities	822,256		4,064		0.49%		654,830		4,096		0.63%
Noninterest-bearing deposits	425,982						359,069
Other liabilities	15,465						19,599
Total liabilities	1,263,703						1,033,498
SHAREHOLDERS' EQUITY
Shareholders' equity	101,772						86,234
Total Liabilities and Shareholders' Equity	1,365,475						1,119,732
Net Interest Income and Net Interest Margin			40,493		3.07%				32,788		3.05%

For the fourth quarter of 2021, the Company's net interest income increased by $2.3 million to $11.6 million. At the same time, the Company's net interest margin increased to 3.36% compared to 3.13% in the same period in 2020. The increase in the net interest income for the fourth quarter of 2021 was driven by an increase in the yield on earning assets primarily due to accretion of fee income on PPP loans.

For the year ended December 31, 2021, the Company's net interest margin increased to 3.07% compared to 3.05% in 2020.

For the fourth quarter of 2021, noninterest income increased from $723 thousand to $977 thousand, an increase of 35.1% for the quarter. The increase was primarily the result of additional service charges on deposits, increases in loan servicing income, and increases in credit card interchange fee income. Management is focused on helping customers identify additional treasury management products that will be accretive to our customers' businesses while driving service charge income growth for the Company. For the twelve months ended December 31, 2021 and 2020, noninterest income was $3.0 million and $3.5 million, respectively. Excluding the gain on sale of securities that occurred in 2020, noninterest income increased from $2.4 million in 2020 to $3.0 million in 2021, an increase of $587 thousand, or 24.2%.

Noninterest expense increased by 32.4% to $6.1 million in the fourth quarter of 2021 compared to the fourth quarter of 2020. Salaries and employee expense increased $609 thousand or 21.7%. This increase was primarily due to an additional accrual for incentive compensation due to the Bank's record earnings. Noninterest expense for the fourth quarter of 2021 included $264 thousand in merger related expenses. Excluding those expenses, noninterest expense would have only increased by $1.2 million, or 26.7%. In the fourth quarter of 2021 and 2020, the Company's efficiency ratio was 48.1% and 45.8%, respectively. For the years ended December 31, 2021 and 2020, our efficiency ratio was 46.2% and 46.5%, respectively. Excluding the merger related expenses, the Company's efficiency ratio for the three months and twelve months ended December 31, 2021 was 46.0% and 41.6%, respectively.

PPP Loans

The Bank began originating PPP loans to both customers and noncustomers at the outset of the program in 2020 and continued to do so until funding was exhausted in the second quarter of 2021. PPP1 originations totaled $219.4 million to 672 borrowers. PPP2 originations totaled $108.7 million to 527 borrowers. PPP1 forgiveness application submission began in 4th quarter 2020. In the fourth quarter of 2021, the Bank began processing PPP2 forgiveness applications. As of December 31, 2021, total PPP loans outstanding were $40.9 million. As of December 31, 2021, PPP loan fees totaling $780 thousand remain to be accreted as a component of interest and fee income on loans. In the fourth quarter of 2021, PPP loans generated $2.8 million in interest and fee income as compared to $1.5 million in the same quarter of the prior year. These amounts are included in interest income on loans in the income statement.

Loan Portfolio Composition & Credit Quality

The following table sets forth information concerning the composition of our loan portfolio as of the dates presented:

(In thousands)	December 31, 2021	December 31, 2020
Real Estate:
Construction and Land Development	$                 58,851	$                 67,903
1-4 Family Residential	43,100	50,212
Multifamily Residential	20,953	4,587
Secured by Farmland	74,948	64,029
Commercial Real Estate	385,808	344,642
Total Real Estate Loans	583,660	531,373
Commercial and Industrial	165,475	97,810
Payment Protection Program	40,873	177,304
Agriculture	29,933	33,689
Loans to Municipalities	7,494	10,013
Consumer and Other	901	1,215
Total Loans	828,336	851,404
Deferred Loan (Fees) Costs, Net	860	(2,178)
Loans, Net of Deferred Costs and Fees	829,196	849,226
Allowance for Loan Losses	(11,124)	(10,624)
Net Loans	$               818,072	$               838,602

The following table sets forth the Company's loan portfolio allocated by Management's internal risk ratings:

Loan Risk Rating (In thousands)	December 31, 2021	December 31, 2020
Pass	796,217	814,594
Special Mention	14,588	32,550
Substandard	13,369	-
Substandard-Impaired	4,162	4,260
Total	828,336	851,404
Deferred Loan Fees & Costs, Net	860	(2,178)
Loans Net of Fees & Costs	829,196	849,226

At December 31, 2021, loans past due 30 days or more and still accruing totaled $3.8 million compared to $0 at December 31, 2020. Past due loans at year end consisted of a single PPP loan that is being processed for forgiveness.  At December 31, 2021, non-accrual loans totaled $2.3 million compared to $1.1 million at December 31, 2020. The total of Adversely Classified loans – Special Mention, Substandard and Substandard-Impaired – at December 31, 2021 decreased to $32.1 million compared to December 31, 2020 of $36.8 million. The $13.4 million increase in Substandard loans at December 31, 2021 is from the reclassification of a borrowing relationship that was previously rated Special Mention. The reclassified relationship is well-collateralized. Despite a loan's  adverse classification, management maintains an active dialogue with all borrowers in order to maximize the opportunity for full collection of the balances owed to the Bank.

The Company assesses and manages credit risk on an ongoing basis through formal lending policies of the Bank, internal monitoring and formal credit reviews by an outside firm. The Company believes that the Bank's ability to identify and assess risk and return characteristics of the loan portfolio is critical for profitability and growth. The Company emphasizes credit quality in the loan approval process and engages in active credit administration and regular monitoring. Management has designed and implemented a comprehensive loan review and grading system that functions to monitor and assess the credit risk inherent in the loan portfolio. This system is incorporated in an incurred loss methodology used to determine an appropriate Allowance for Loan and Lease Loss ("ALLL") reserve for the Bank. As of December 31, 2021 and 2020, the  ratio of ALLL to total loans was 1.34% and 1.25%, respectively. Excluding PPP loans that carry an SBA guarantee, reserves have decreased from 1.58% of gross core loans at December 31, 2020 to 1.41% at December 31, 2021. As the trend of adversely classified loans has improved and the economic risks related to the COVID-19 pandemic have moderated, the Bank did not record a provision for loan losses for the fourth quarter of 2021. The provision for the years ended December 31, 2021 and 2020 was $500 thousand and $2.3 million, respectively. The loans downgraded  to substandard did not have a material impact on the level of the ALLL.

John C. Smith, Executive Vice President & Chief Credit Officer said, "Credit quality trends continue to be positive. The Bank's loan portfolio is very sound. Despite the reclassification in the 2nd quarter that increased substandard loans, the total of Special Mention, Substandard and Impaired loans at December 31, 2021 declined to $32.1 million, or 3.87% of gross loans outstanding, from $33.8 million, or 3.82% of gross loans outstanding, at September 30, 2021.  Substandard-Impaired loans of $4.2 million are comprised of four loans, all secured by 1^st Deeds of Trust with LTV estimates less than 60%, and no calculated estimated loss."

Growth

Total assets for the fourth quarter of 2021 were $1.4 billion, which represents a year-over-year increase of $144.3 million, or 11.7%. Total loans were $829.2 million, which represents a year-over-year decrease of $20.5 million, or 2.4%, due to PPP forgiveness. The Bank's PPP loan balance as of December 31, 2021 was $40.8 million, a decrease of $136.4 million compared to December 31, 2020. The Bank's gross core loans increased by $113.3 million, or 16.8%, since year-end 2020. During 2021, total deposits increased $133.5 million, or 12.3%, ending the year at $1.2 billion.

Growth in loans and deposits was primarily due to the addition of 131 new relationships. Developing new banking relationships and enhancing the Bank's non-interest income remain a major focus of Valley Republic Bank.

Eugene Voiland, Chairman of the Board of Directors, noted "The Company's financial and operating performance in 2021 was outstanding!  To maintain a focus on growing the business while providing exceptional customer service in this COVID environment and ongoing merger environment is remarkable.  We are extremely grateful to our employees and customers.  In my opinion, the Company's efforts to provide PPP loans to customers and non-customers alike and help Kern County administer its programs have contributed greatly to our community as a whole".

Capital

The Company's total shareholders' equity at December 31, 2021 was $110.0 million. Total shareholders' equity increased by $14.9 million, or 15.6%, over the last 12 months. Book value per share for the same time period grew to $25.75, compared to $22.55 for the same period last year.

Merger

During the third quarter of 2021, the Company, together with TriCo Bancshares, announced a strategic merger. The merger is expected to close in the first quarter of 2022. Branch and account conversion is expected to occur within the same time frame.

Mr. Voiland also stated, "We believe the pending merger is in its final stage of approval; this has taken longer than we had hoped.  The combination of this and the onslaught of the COVID Omicron spike has put much stress on everyone.  We appreciate and are thankful for the patience everyone has shown as we work through this together.

The Company's goal is to do our best to provide our customers, employees, and shareholders the most seamless and smooth transition possible.  In the long run, the merger will be good for everyone - however, we recognize that it presents a major change.  Geraud and his team are doing everything possible to provide the customer service needed to accomplish this successfully.  Thank you for being our valued shareholders and customers".

About Valley Republic Bancorp and Valley Republic Bank

Valley Republic Bancorp is a bank holding company formed in 2016. Valley Republic Bank, established in 2009, is a wholly owned subsidiary of Valley Republic Bancorp, headquartered in Bakersfield, California. The Bancorp is subject to the regulatory oversight of the Federal Reserve Bank, and the Bank is subject to the regulatory oversight of the Federal Deposit Insurance Corporation and the California Department of Financial Protection and Innovation. Valley Republic Bank is an insured, state-chartered, non-member bank of the Federal Reserve System. Valley Republic Bank is a full-service, community bank with three full-service banking offices in Bakersfield, one full-service banking office in Delano, and a loan production office in Fresno. Valley Republic Bank emphasizes professional, high quality banking services provided to a wide range of businesses and professionals. The Bank also provides a full complement of banking services that are available to individuals and non-profit organizations.

Valley Republic Bancorp and Subsidiary
Balance Sheet
(Unaudited. Dollars in thousands, except per share data.)	December 31, 2021		December 31, 2020
ASSETS
Cash and Due From Banks	$                      10,924		$                      10,585
Federal Funds Sold & Interest-Bearing Deposits in Banks	278,308		130,141
Total Cash and Equivalents	289,232		140,726
Debt Securities	230,529		212,317
Loans, Net of Deferred Fees and Costs	829,196		849,226
Allowance for Loan losses	(11,124)		(10,624)
Net Loans	818,072		838,602
Premises and Equipment	5,783		6,948
Bank Owned Life Insurance	13,545		13,264
Interest Receivable and Other Assets	23,187		24,153
TOTAL ASSETS	$                 1,380,348		$                 1,236,010
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-Bearing	$                    420,496		$                    381,733
Interest-Bearing	796,859		702,140
Total Deposits	1,217,355		1,083,873
Short-Term FHLB Borrowing	-		5,000
Long-Term Debt	39,530		39,371
Accrued Interest Payable and Other Liabilities	13,483		12,652
Total Liabilities	1,270,368		1,140,896
Shareholders' Equity
Common Stock, no Par Value	49,459		48,530
Additional Paid-in Capital	1,106		808
Retained Earnings	58,444		42,143
Accumulated Other Comprehensive Income (Loss)	971		3,633
Total Shareholders' Equity	109,980		95,114
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$                 1,380,348		$                 1,236,010
Shares of Common Stock Outstanding at End of Period	4,271,811		4,217,267
Book Value per Share	$                        25.75		$                        22.55

 

Valley Republic Bancorp and Subsidiary
Income Statement
(Unaudited. Dollars in thousands, except per share data.)	Quarters Ended December 31,				Year to Date Ended December 31,
	2021		2020		2021		2020
INTEREST INCOME
Loans (Including Fees and Costs)	$               11,566		$             9,206		$            40,392		$            32,835
Debt Securities	974		1,038		3,936		3,696
Other	102		27		229		353
Total Interest Income	12,642		10,271		44,557		36,884
INTEREST EXPENSE
Deposits	426		420		1,713		2,510
Other	588		571		2,352		1,586
Total Interest Expense	1,014		991		4,065		4,096
Net Interest Income	11,628		9,280		40,492		32,788
Provision For Loan Losses	-		600		500		2,275
Net Interest Income After Provision for Loan Losses	11,628		8,680		39,992		30,513
NON-INTEREST INCOME
Service Charges and Fees on Deposits	267		183		957		660
Other Non-Interest Income	710		518		2,058		1,768
Gain (Loss) on Sale of Securities	-		22		-		1,111
Total Non-Interest Income	977		723		3,015		3,539
NON-INTEREST EXPENSE
Salaries and Employee Benefits	3,410		2,801		11,159		10,016
Occupancy & Equipment	504		501		2,005		1,939
Other	2,147		1,275		6,935		4,930
Total Non-Interest Expense	6,061		4,577		20,099		16,885
Income Before Taxes	6,544		4,826		22,908		17,167
Income Taxes	1,879		1,312		6,607		4,636
NET INCOME	$                 4,665		$             3,514		$            16,301		$             12,531
Basic Earnings per Share	$                   1.10		$               0.83		$                3.85		$                 2.99
Diluted Earnings per Share	$                   1.08		$               0.83		$                3.81		$                 2.97
Weighted Average Shares	4,255,448		4,210,513		4,236,632		4,193,464
Weighted Average Diluted Shares	4,307,915		4,228,432		4,273,950		4,217,728
Average Assets	1,422,747		1,221,033		1,365,475		1,119,732
Average Equity	107,856		91,881		101,998		86,234

Forward Looking Statements

This news release may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended and Valley Republic Bancorp and Valley Republic Bank (together, the "Company") intend for such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Future events are difficult to predict, and the expectations described above are necessarily subject to risk and uncertainty that may cause actual results to differ materially and adversely.

Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include the words "believe," "expect," "anticipate," "intend," "plan," "estimate," or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could," or "may." These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing management's views as of any subsequent date. Forward-looking statements involve significant risks and uncertainties and actual results may differ materially from those presented, either expressed or implied, in this news release. Factors that might cause such differences include, but are not limited to: the Company's ability to successfully execute its business plans and achieve its objectives; changes in general economic and financial market conditions, either nationally or locally, in areas in which the Company conducts its operations; changes in interest rates; continuing consolidation in the financial services industry; new litigation or changes in existing litigation; increased competitive challenges and expanding product and pricing pressures among financial institutions; legislation or regulatory changes which adversely affect the Company's operations or business; loss of key personnel; and changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies.

The Company undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances.

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SOURCE Valley Republic Bancorp

FAQ

What were Valley Republic Bancorp's Q4 2021 earnings results?

In Q4 2021, Valley Republic Bancorp reported a net income of $4.7 million, or $1.08 per diluted share, a 32.8% increase from $3.5 million in Q4 2020.

How have Valley Republic Bancorp’s assets changed in 2021?

Total assets increased by 11.7% year-over-year to reach $1.4 billion as of December 31, 2021.

What is the impact of the merger with Tri Counties Bank on VLLX?

The merger with Tri Counties Bank is expected to close in Q1 2022, potentially enhancing operational capacity and efficiency for Valley Republic Bancorp.

How did the deposit levels change for Valley Republic Bancorp in 2021?

Deposits rose by 12.3% to $1.2 billion, reflecting strong customer engagement and trust.

What is the year-to-date net income for Valley Republic Bancorp in 2021?

The net income for the year 2021 was $16.3 million, compared to $12.5 million in 2020.