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Affinity Bancshares, Inc Announces Third Quarter 2021 Financial Results

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COVINGTON, Ga., October 28, 2021--(BUSINESS WIRE)--Affinity Bancshares, Inc. (NASDAQ:"AFBI"), (the "Company"), the holding company for Affinity Bank (the "Bank"), today announced net income of $1.8 million for the three months ended September 30, 2021 as compared to $1.9 million for the corresponding prior year period. For the nine months ended September 30, 2021, the Company reported net income of $6.3 million as compared to $1.7 million for the corresponding prior year period.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20211027006210/en/

AFBI Selected Data (Graphic: Business Wire)

For the three months ended,

For the nine months ended,

Performance Ratios:

September
30,2021

June
30,2021

March
31,2021

September
30,2020

September
30,2021

September
30, 2020

Return on average assets

0.91

%

1.18

%

1.11

%

0.90

%

1.06

%

0.31

%

Return on average equity

6.00

%

7.95

%

8.03

%

9.46

%

7.29

%

2.86

%

Net interest margin

3.78

%

4.10

%

4.65

%

3.81

%

4.17

%

3.69

%

Efficiency ratio

65.87

%

58.30

%

64.96

%

60.95

%

63.08

%

82.94

%

Results of Operations

Net income was $1.8 million for the three months ended September 30, 2021, compared to $1.9 million for the three months ended September 30, 2020. We have strategically made additional hires to further enhance our business development efforts. Net income increased $4.6 million to $6.3 million for the nine months ended September 30, 2021, compared to $1.7 million for the nine months ended September 30, 2020. Our net income in 2020 was reduced as a result of merger related expenses. Merger related expenses for the nine months ended September 30, 2020, were $2.8 million.

Net Interest Income and Margin

Net interest income decreased $300,000, and was $6.9 million for the three months ended September 30, 2021, compared to $7.2 million for the three months ended September 30, 2020. Average interest-earning assets decreased by $34.5 million for the three months ended September 30, 2021. Net interest income increased $4.4 million, and was $22.6 million for the nine months ended September 30, 2021, compared to $18.2 million for the nine months ended September 30, 2020. Average interest-earning assets increased by $66.2 million for the nine months ended September 30, 2021. Net interest margin for the three months ended September 30, 2021, decreased to 3.78%, from 3.81% for the same prior year period. The net interest margin compression was primarily due to the excess balance sheet liquidity and the lower interest rate environment. Net interest margin for the nine months ended September 30, 2021, increased to 4.17% from 3.69% for the same prior year period. For the three months ended September 30, 2021, the cost of average interest-bearing liabilities decreased to 0.65% from 1.00% for the corresponding prior year period. For the nine months ended September 30, 2021, the cost of average interest-bearing liabilities decreased to 0.69% from 1.18% for the corresponding prior year period. The total cost of deposits (including non-interest-bearing deposits) was 0.60% for the three months ended September 30, 2021 compared to 1.03% for the three months ended September 30, 2020. For the nine months ended September 30, 2021, the cost of deposits was 0.66% compared to 1.21% for the nine months ended September 30, 2020. The decrease was due to decreasing deposit rates related to the decrease in market rates.

Provision for Loan Losses

For the three months ended September 30, 2021, the provision for loan loss expense was $225,000 compared to $600,000 for the three months ended September 30, 2020. We increased our provision expense in 2020 due to the uncertainty related to the pandemic. For the nine months ended September 30, 2021, the provision for loan loss expense was $975,000 compared to $1.4 million for the nine months ended September 30, 2020. As the economy began to improve in 2021, less provision expense was required. Net loan recoveries were $19,000 for the three months ended September 30, 2021, compared to $125,000 for the three months ended September 30, 2020. Net loan recoveries were $295,000 for the nine months ended September 30, 2021, compared to $177,00 for the nine months ended September 30, 2020.

Non-interest Income

For the three months ended September 30, 2021, noninterest income increased $225,000 to $771,000 compared to $546,000 for the three months ended September 30, 2020. This was a result of increases in service charges on deposits accounts, interchange income, and secondary market fee income. For the nine months ended September 30, 2021, noninterest income increased $508,000 to $2.1 million compared to $1.6 million the nine months ended September 30, 2020, due to income received from a bank-owned life insurance death benefit claim, an increase in service charges on deposits accounts, and gains on the sale of Bank owned properties.

Non-interest Expense

Operating expenses increased $275,000 to $5.0 million for the three months ended September 30, 2021, compared to $4.8 million for the three months ended September 30, 2020. We have strategically made additional hires to further enhance our business development efforts. Operating expenses decreased $817,000 to $15.6 million for the nine months ended September 30, 2021 compared to $16.4 million for the nine months ended September 30, 2020. We had an increase in salary and employee expense in 2020 due to the merger.

Income Tax Expense

We recorded income tax expense of $575,000 for each of the three months ended September 30, 2021 and 2020. We recorded income tax expense of $1.9 million for the nine months ending September 30, 2021 compared to $324,000 for the nine months ended September 30, 2020. The effective tax rate was 24.17% for the three months ended September 30, 2021 compared to 23.53% for the three months ended September 30, 2020. The effective tax rate was 23.26% for the nine months ended September 30, 2021 compared to 16.40% for the nine months ended September 30, 2020. The higher effective tax rate for the current year nine-month period was primarily due to higher net income before taxes in 2021.

Financial Condition

Total assets decreased by $60.7 million to $790.0 million at September 30, 2021, from $850.6 million at December 31, 2020. The decrease was due primarily to a decrease in cash and cash equivalents of $47.3 million due to our no longer using the Paycheck Protection Liquidity Facility (PPPLF) for funding as well as a decrease in net loans of $28.7 million. Cash and equivalents decreased $47.3 million, to $130.9 million at September 30, 2021, from $178.3 million at December 31, 2020, as the PPPLF was not used for funding at quarter end and excess cash from the stock offering was returned. Total investment securities available for sale increased by $20.0 million at September 30, 2021, as compared to December 31, 2020, as we deployed excess liquidity. Total loans decreased $27.4 million to $571.2 million at September 30, 2021 from $598.6 million at December 31, 2021, including PPP loans of $31.7 million and $101.8 million at September 30, 2021 and December 31, 2020, respectively. Deposits decreased by $24.9 million to $615.2 million at September 30, 2021 compared to $640.2 million at December 31, 2020, which reflected a decrease in certificate of deposits of $26.7 million, partly offset by an increase in non-interest-bearing deposits of $36.2 million. The loan-to-deposit ratio at September 30, 2021 was 91.6%, as compared to 92.5% at December 31, 2020. Interest-bearing checking accounts decreased $47.1 million as a result of the completion of the second step conversion. Stockholders’ equity increased to $119.7 million at September 30, 2021, as compared to $80.8 million at December 31, 2020, primarily due to the completion of our mutual-to-stock conversion and related stock offering on January 20, 2021. We sold 3,701,509 shares of common stock at $10.00 per share and raised gross proceeds of $37.1 million in the offering.

Asset Quality

The Company’s non-performing loans increased to $6.2 million at September 30, 2021, as compared to $4.9 million at December 31, 2020. The allowance for loan losses as a percentage of non-performing loans was 122.8% at September 30, 2021, as compared to 129.8% at December 31, 2020. The Company’s allowance for loan losses was 1.33% of total loans at September 30, 2021, as compared to 1.06% at December 31, 2020. The allowance as a percentage of total loans increased due to the decrease in PPP loans.

About Affinity Bancshares, Inc.

The Company is a Maryland corporation based in Covington, Georgia. The Company’s banking subsidiary, Affinity Bank, opened in 1928 and currently operates a full-service office in Atlanta, Georgia, two full-service offices in Covington, Georgia, and a loan production office serving the Alpharetta and Cumming, Georgia markets.

Average Balance Sheets

The following tables set forth average balance sheets, average annualized yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are monthly average balances. Non-accrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense.

For the Three Months Ended September 30,

2021

2020

Average
Outstanding
Balance

Interest

Average
Yield/Rate

Average
Outstanding
Balance

Interest

Average
Yield/Rate

(Dollars in thousands)

Interest-earning assets:

Loans excluding PPP loans

$

520,273

$

6,470

4.97

%

$

500,615

$

6,418

5.13

%

PPP loans

48,169

862

7.16

%

130,352

2,108

6.47

%

Securities

40,569

216

2.13

%

20,619

80

1.55

%

Interest-earning deposits

115,330

53

0.18

%

107,029

36

0.13

%

Other investments

2,476

21

3.37

%

2,722

29

4.26

%

Total interest-earning assets

726,817

7,622

4.19

%

761,338

8,671

4.56

%

Non-interest-earning assets

64,408

67,455

Total assets

$

791,225

$

828,793

Interest-bearing liabilities:

Savings accounts

$

93,717

100

0.43

%

$

100,335

206

0.82

%

Interest-bearing checking accounts

83,519

43

0.21

%

71,374

69

0.38

%

Market rate checking accounts

136,984

117

0.34

%

121,118

227

0.75

%

Certificates of deposit

105,285

369

1.40

%

157,911

661

1.68

%

Total interest-bearing deposits

419,505

629

0.60

%

450,738

1,163

1.03

%

FHLB advances

49,039

132

1.07

%

46,362

159

1.37

%

PPPLF borrowings

59,118

52

0.35

%

Other borrowings

10,717

46

1.72

%

Total interest-bearing liabilities

468,544

761

0.65

%

566,935

1,420

1.00

%

Non-interest-bearing liabilities

203,336

183,275

Total liabilities

671,880

750,210

Total stockholders' equity

119,345

78,583

Total liabilities and stockholders' equity

$

791,225

$

828,793

Net interest income

$

6,861

$

7,251

Net interest rate spread (1)

3.55

%

3.56

%

Net interest-earning assets (2)

$

258,273

$

194,403

Net interest margin (3)

3.78

%

3.81

%

Average interest-earning assets to interest-bearing liabilities

155.12

%

134.29

%

____________________________

(1)

Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.

(2)

Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3)

Net interest margin represents net interest income divided by average total interest-earning assets.

For the Nine Months Ended September 30,

2021

2020

Average
Outstanding
Balance

Interest

Average
Yield/Rate

Average
Outstanding
Balance

Interest

Average
Yield/Rate

(Dollars in thousands)

Interest-earning assets:

Loans excluding PPP loans

$

503,373

$

18,985

5.03

%

$

497,271

$

19,497

5.23

%

PPP loans

92,651

5,439

7.83

%

67,871

2,549

5.01

%

Securities

31,374

472

2.01

%

18,871

304

2.15

%

Interest-earning deposits

92,880

134

0.19

%

69,617

185

0.35

%

Federal Home Loan Bank of Atlanta stock

2,273

57

3.32

%

2,692

88

4.36

%

Total interest-earning assets

722,551

25,087

4.63

%

656,322

22,623

4.60

%

Non-interest-earning assets

63,028

60,721

Total assets

$

785,579

$

717,043

Interest-bearing liabilities:

Savings accounts

$

93,823

310

0.44

%

$

85,261

725

1.13

%

Interest-bearing checking accounts

88,154

138

0.21

%

65,285

214

0.44

%

Market rate checking accounts

130,933

378

0.39

%

108,383

794

0.98

%

Certificates of deposit

114,623

1,284

1.49

%

159,240

2,056

1.72

%

Total interest-bearing deposits

427,533

2,110

0.66

%

418,169

3,790

1.21

%

FHLB advances

41,471

350

1.13

%

49,770

531

1.42

%

PPPLF borrowings

1,368

4

0.35

%

24,255

63

0.35

%

Other borrowings

559

11

2.58

%

8,054

55

0.92

%

Total interest-bearing liabilities

470,931

2,475

0.69

%

500,248

4,439

1.18

%

Non-interest-bearing liabilities

199,971

139,728

Total liabilities

670,902

639,976

Total stockholders' equity

114,677

77,066

Total liabilities and stockholders' equity

$

785,579

$

717,042

Net interest income

$

22,612

$

18,184

Net interest rate spread (1)

3.94

%

3.42

%

Net interest-earning assets (2)

$

251,620

$

156,074

Net interest margin (3)

4.17

%

3.69

%

Average interest-earning assets to interest-bearing liabilities

153.43

%

131.20

%

____________________________

(1)

Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.

(2)

Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3)

Net interest margin represents net interest income divided by average total interest-earning assets.

AFFINITY BANCSHARES, INC.
Consolidated Balance Sheets

September 30, 2021

December 31, 2020

(unaudited)

(In thousands)

Assets

Cash and due from banks, including reserve requirement of $0 at September 30, 2021
and December 31, 2020

$

17,321

$

5,552

Interest-earning deposits in other depository institutions

113,589

172,701

Cash and cash equivalents

130,910

178,253

Investment securities available-for-sale

44,071

24,005

Other investments

2,476

1,596

Loans, net

563,539

592,254

Other real estate owned

1,292

Premises and equipment, net

7,425

8,617

Bank owned life insurance

15,285

15,311

Intangible assets

18,797

18,940

Accrued interest receivable and other assets

7,462

10,360

Total assets

$

789,965

$

850,628

Liabilities and Stockholders' Equity

Liabilities:

Savings accounts

$

92,003

$

96,591

Interest-bearing checking

82,750

129,813

Market rate checking

138,592

121,317

Non-interest-bearing checking

196,990

160,819

Certificate of deposits

104,896

131,625

Total deposits

615,231

640,165

Federal Home Loan Bank advances

49,020

19,117

Paycheck Protection Program Liquidity Facility (PPPLF) borrowings

100,813

Other borrowings

5,000

Accrued interest payable and other liabilities

6,011

4,748

Total liabilities

670,262

769,843

Stockholders' equity:

Common stock (par value $0.01 per share, 40,000,000 shares authorized,
6,872,634 issued and outstanding at September 30, 2021 and 19,000,000
shares authorized, 6,968,469 issued and 6,865,653 outstanding at December 31, 2020) (1)

69

77

Preferred stock (10,000,000 shares authorized, no shares outstanding at September 30,
2021 and 1,000,000 shares authorized, no shares outstanding at December 31, 2020)

Additional paid in capital

67,899

33,620

Treasury stock, 102,816 shares at December 31, 2020, at cost (1)

(1,268

)

Unearned ESOP shares

(5,056

)

(2,453

)

Retained earnings

56,905

50,650

Accumulated other comprehensive (loss) income

(114

)

159

Total stockholders' equity

119,703

80,785

Total liabilities and stockholders' equity

$

789,965

$

850,628

(1)

Amounts related to periods prior to the date of Conversion (January 20, 2021) have been restated to give the retroactive recognition to the exchange ratio applied in the Conversion (0.90686) (see Note 1).
See accompanying notes to unaudited consolidated financial statements.

AFFINITY BANCSHARES, INC.
Consolidated Statements of Operations
(unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

(In thousands)

Interest income:

Loans, including fees

$

7,332

$

8,526

$

24,424

$

22,046

Investment securities, including dividends

237

109

529

392

Interest-earning deposits

53

36

134

185

Total interest income

7,622

8,671

25,087

22,623

Interest expense:

Deposits

629

1,163

2,110

3,789

Borrowings

132

257

365

649

Total interest expense

761

1,420

2,475

4,438

Net interest income before provision for loan losses

6,861

7,251

22,612

18,185

Provision for loan losses

225

600

975

1,400

Net interest income after provision for loan losses

6,636

6,651

21,637

16,785

Noninterest income:

Service charges on deposit accounts

416

351

1,126

1,009

Gain on sales of investment securities available-for-sale

20

Other

355

195

980

569

Total noninterest income

771

546

2,106

1,598

Noninterest expenses:

Salaries and employee benefits

2,715

2,415

7,609

8,767

Deferred compensation

62

70

188

211

Occupancy

633

734

2,329

2,071

Advertising

116

40

296

173

Data processing

520

523

1,518

1,773

Other real estate owned

9

19

11

Net (gain) loss on sale of other real estate owned

159

(127

)

188

Legal and accounting

153

230

555

1,196

Organizational dues and subscriptions

105

70

266

238

Director compensation

50

51

150

153

Federal deposit insurance premiums

61

51

201

304

Writedown of premises and equipment

14

888

Other

598

400

1,700

1,324

Total noninterest expenses

5,027

4,752

15,592

16,409

Income before income taxes

2,380

2,445

8,151

1,974

Income tax expense

575

575

1,896

324

Net income (loss)

$

1,805

$

1,870

$

6,255

$

1,650

Basic earnings per share (1)

$

0.26

$

0.25

$

0.90

$

0.22

Diluted earnings per share (1)

$

0.26

$

0.25

$

0.89

$

0.22

(1)

Amounts related to periods prior to the date of the Conversion (January 20, 2021) have been restated to give the retroactive recognition to the exchange ratio applied in the Conversion (0.90686-to-one) (see Note 1).

Non-GAAP Reconciliation

Reported amounts for total loans are presented in accordance with GAAP. The Company’s management believes that the following supplemental non-GAAP information, which consists of total loans excluding PPP loans, deferred loan fees and other loan adjustments (consisting of loans in process), provides a better comparison of the amount of the Company’s loan portfolio. Additionally, the Company believes this information is utilized by market analysts to evaluate a company’s financial condition and, therefore, such information is useful to investors. These disclosures should not be viewed as a substitute for financial results in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies.

September 30,
2021

June 30,
2021

March 31,
2021

December 31,
2020

(In thousands)

Non-GAAP Reconciliation

Total Loans

$

571,170

$

590,011

$

626,096

$

598,615

Plus:

Fair Value Marks

1,423

1,497

1,607

1,773

Less:

Payroll Protection Program

loans

31,715

71,862

123,996

100,142

Deferred loan fees

1,136

987

878

795

Other Loan Adjustments

103

415

16

591

Gross Loans

$

539,639

$

18,244

$

502,813

$

498,860

View source version on businesswire.com: https://www.businesswire.com/news/home/20211027006210/en/

Contacts

Edward J. Cooney
Chief Executive Officer
(678) 742-9990

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