Affinity Bancshares, Inc Announces Third Quarter 2021 Financial Results

 

AFBI Selected Data (Graphic: Business Wire)

COVINGTON, Ga.--()--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.

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

 

Contacts

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

Contacts

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