Affinity Bancshares, Inc. Announces 2021 Year End Financial Results

Rhea-AI Summary

Affinity Bancshares (AFBI) reported a significant increase in net income to $7.6 million for the year ended December 31, 2021, up from $3.1 million in 2020. Total assets decreased $62.5 million to $788.1 million, primarily due to a reduction in cash and net loans. Net interest income rose $4.1 million to $29.3 million, driven by an improved net interest margin of 4.04%.

Provision for loan losses was $1.1 million, down from $2.0 million in 2020, reflecting reduced risk. Stockholders' equity increased to $121.0 million following a successful stock offering.

Positive

• Net income increased by $4.5 million from 2020 to 2021.
• Net interest income rose by $4.1 million, reaching $29.3 million.
• Net interest margin improved to 4.04% from 3.77% year-over-year.
• Stockholders' equity grew to $121.0 million, up from $80.8 million.

Negative

• Total assets decreased by $62.5 million during the year.
• Net loans decreased by $14.2 million, including a drop in PPP loans.
• Non-performing loans increased to $7.0 million from $4.9 million.

COVINGTON, Ga.--(BUSINESS WIRE)-- Affinity Bancshares, Inc. (NASDAQ:“AFBI”) (the “Company”), the holding company for Affinity Bank (the “Bank”), today announced net income of $7.6 million for the year ended December 31, 2021 as compared to $3.1 million for the year ended December 31, 2020.

AFBI Selected Data (Graphic: Business Wire)

	For the three months ended,												For the year ended,
Performance Ratios:	December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2021			December 31, 2020
Return on average assets	0.66	%		0.91	%		1.18	%		1.11	%		0.96	%		0.42	%
Return on average equity	4.36	%		6.00	%		7.95	%		8.03	%		6.52	%		3.97	%
Net interest margin	3.64	%		3.78	%		4.10	%		4.65	%		4.04	%		3.77	%
Efficiency ratio	74.29	%		65.87	%		58.30	%		64.96	%		65.62	%		78.46	%

Results of Operations

Net income was $7.6 million for the year ended December 31, 2021 as compared to $3.1 million for the year ended December 31, 2020, as we have increased our interest income while reducing interest and non-interest expense. Our net income in 2020 was reduced as a result of merger related expenses. Merger related expenses for the year ended December 31, 2020, were $2.8 million.

Net Interest Income and Margin

Net interest income increased $4.1 million, and was $29.3 million for the year ended December 31, 2021, compared to $25.1 million for the year ended December 31, 2020. Average interest-earning assets increased by $57.8 million for the year ended December 31, 2021. Net interest margin for the year ended December 31, 2021, increased to 4.04%, from 3.77% for the year ended December 31, 2020. The increase in net interest margin was primarily due to the decrease in the cost of funds. For the year ended December 31, 2021, the cost of average interest-bearing liabilities decreased to 0.67% from 1.10% for the year ended December 31, 2020. The total cost of deposits was 0.63% for the year ended December 31, 2021 compared to 1.12% for the year ended December 31, 2020. The decrease was due to decreasing deposit rates related to the decrease in market rates.

Provision for Loan Losses

For the year ended December 31, 2021, the provision for loan loss expense was $1.1 million compared to $2.0 million for the year ended December 31, 2020. We increased our provision expense in 2020 due to the uncertainty related to the COVID-19 pandemic. As the economy began to improve in 2021, less provision expense was required. Net loan recoveries were $1.1 million for the year ended December 31, 2021, compared to $227,000 for the year ended December 31, 2020. The increase in net recoveries was primarily driven by a $1.0 million recovery on a previously charged off commercial real estate loan.

Non-interest Income

For the year ended December 31, 2021, noninterest income increased $522,000 to $2.7 million compared to $2.2 million for the year ended December 31, 2020. This was a result of increases in service charges on deposits accounts, interchange income, and secondary market fee income.

Non-interest Expense

Operating expenses decreased $450,000 to $21.0 million for the year ended December 31, 2021, compared to $21.4 million for the year ended December 31, 2020. We saw an increase in legal and accounting fees as well as salary and employee expense in 2020 due to the merger.

Income Tax Expense

We recorded income tax expense of $2.3 million for year ended December 31, 2021, compared to $792,000 for the year ended December 31, 2020. The higher tax expense for the year ended December 31, 2021, was primarily due to higher pretax income.

Financial Condition

Total assets decreased by $62.5 million to $788.1 million at December 31, 2021, from $850.6 million at December 31, 2020. The decrease was due primarily to a decrease in cash and cash equivalents of $66.5 million due to our no longer using the Paycheck Protection Program Liquidity Facility (PPPLF) for funding as well as a decrease in net loans of $16.4 million. Cash and equivalents decreased $66.5 million, to $111.8 million at December 31, 2021, from $178.3 million at December 31, 2020, as the PPPLF was not used for funding at year end and excess cash from the stock offering was returned. Total investment securities available for sale increased by $24.6 million at December 31, 2021, as compared to December 31, 2020, as we deployed excess liquidity. Total loans decreased $14.2 million to $584.4 million at December 31, 2021 from $598.6 million at December 31, 2020, including Paycheck Protection Program (PPP) loans of $17.9 million and $101.7 million at December 31, 2021 and December 31, 2020, respectively. Deposits decreased by $25.4 million to $614.8 million at December 31, 2021 compared to $640.2 million at December 31, 2020, which reflected a decrease in certificate of deposits of $34.9 million, partly offset by an increase in non-interest-bearing deposits of $33.1 million. The loan-to-deposit ratio at December 31, 2021 was 93.7%, as compared to 92.5% at December 31, 2020. Interest-bearing checking accounts decreased $38.4 million as a result of the completion of the second step conversion. Stockholders’ equity increased to $121.0 million at December 31, 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 $7.0 million at December 31, 2021, as compared to $4.9 million at December 31, 2020. The allowance for loan losses as a percentage of non-performing loans was 122.1% at December 31, 2021, as compared to 129.8% at December 31, 2020. The Company’s allowance for loan losses was 1.46% of total loans at December 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 as well as a large recovery of a previously charged off loan.

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 yields and costs, and certain other information for the years 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 Year Ended December 31,
		2021												2020
		Average Outstanding Balance				Interest				Average Yield/Rate				Average Outstanding Balance				Interest				Average Yield/Rate
		(Dollars in thousands)
Interest-earning assets:
Loans		$	588,976			$	31,484				5.35	%		$	575,548			$	29,933				5.20	%
Securities			35,109				709				2.02	%			19,917				380				1.91	%
Interest-earning deposits and federal funds			98,554				180				0.18	%			69,137				212				0.31	%
Other investments			2,324				80				3.43	%			2,523				107				4.24	%
Total interest-earning assets			724,963				32,453				4.48	%			667,125				30,632				4.59	%
Noninterest-earning assets			63,373												60,601
Total assets		$	788,336											$	727,726
Interest-bearing liabilities:
Savings accounts		$	93,113				403				0.43	%		$	88,425				878				0.99	%
Interest-bearing checking accounts			88,852				185				0.21	%			70,678				286				0.40	%
Money market checking accounts			133,835				469				0.35	%			112,863				965				0.86	%
Certificates of deposit			110,742				1,623				1.47	%			154,020				2,623				1.70	%
Total interest-bearing deposits			426,542				2,680				0.63	%			425,986				4,752				1.12	%
Federal Home Loan Bank advances			43,370				482				1.11	%			44,574				569				1.28	%
Paycheck Protection Program Liquidity Facility borrowings			1,023				4				0.35	%			20,324				72				0.35	%
Other borrowings			418				11				2.59	%			8,184				97				1.18	%
Total interest-bearing liabilities			471,353				3,177				0.67	%			499,068				5,490				1.10	%
Noninterest-bearing liabilities			200,756												150,781
Total liabilities			672,109												649,849
Total stockholders' equity		$	116,227											$	77,877
Total liabilities and retained earnings		$	788,336											$	727,726
Net interest income						$	29,276											$	25,142
Net interest rate spread (1)											3.81	%											3.49	%
Net interest-earning assets (2)		$	253,610											$	168,057
Net interest margin (3)											4.04	%											3.77	%
Average interest-earning assets to interest- bearing liabilities			153.80	%											133.67	%

(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
		December 31, 2021				December 31, 2020
		(In thousands except share amounts)
Assets
Cash and due from banks, including reserve requirement of $0 at December 31, 2021 and 2020, respectively		$	16,239				5,552
Interest-earning deposits in other depository institutions			95,537				172,701
Cash and cash equivalents			111,776				178,253
Investment securities available-for-sale			48,557				24,005
Other investments			2,476				1,596
Loans, net			575,825				592,254
Other real estate owned			3,538				1,292
Premises and equipment, net			3,783				8,617
Bank owned life insurance			15,377				15,311
Intangible assets			18,749				18,940
Accrued interest receivable and other assets			8,007				10,360
Total assets		$	788,088				850,628
Liabilities and Stockholders' Equity
Liabilities :
Savings accounts		$	86,745				96,591
Interest-bearing checking			91,387				129,813
Market rate checking			145,969				121,317
Noninterest-bearing checking			193,940				160,819
Certificate of deposits			96,758				131,625
Total deposits			614,799				640,165
Federal Home Loan Bank (FHLB) advances			48,988				19,117
Paycheck Protection Program Liquidity Facility (PPPLF) borrowings			—				100,814
Other borrowings			—				5,000
Accrued interest payable and other liabilities			3,333				4,748
Total liabilities			667,120				769,843
Commitments
Stockholders' equity:
Common stock (par value $0.01 per share, 40,000,000 shares authorized, 6,872,634 issued and outstanding at December 31, 2021 and 19,000,000 shares authorized, 6,968,469 issued and 6,865,653 outstanding at December 31, 2020) (1)			69				69
Preferred stock (1,000,000 shares authorized, no shares outstanding)			—				—
Additional paid in capital			68,038				33,628
Treasury stock, 0 shares at December 31, 2021 and 102,816 shares at December 31, 2020, at cost			—				(1,268	)
Unearned ESOP shares			(5,004	)			(2,453	)
Retained earnings			58,223				50,650
Accumulated other comprehensive (loss) income			(358	)			159
Total stockholders' equity			120,968				80,785
Total liabilities and stockholders' equity		$	788,088				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).

AFFINITY BANCSHARES, INC. Consolidated Statements of Income
		For the Year Ended December 31,				For the Year Ended December 31,
		2021				2020
		(In thousands except per share amounts)
Interest income:
Loans, including fees		$	31,484				29,933
Investment securities, including dividends			789				487
Interest-earning deposits			180				212
Total interest income			32,453				30,632
Interest expense:
Deposits			2,680				4,752
Borrowings			497				738
Total interest expense			3,177				5,490
Net interest income before provision for loan losses			29,276				25,142
Provision for loan losses			1,075				2,000
Net interest income after provision for loan losses			28,201				23,142
Noninterest income:
Service charges on deposit accounts			1,506				1,359
Gain on sales of investment securities available-for-sale			—				20
Other			1,172				777
Total noninterest income			2,678				2,156
Noninterest expenses:
Salaries and employee benefits			10,415				10,969
Deferred compensation			248				279
Occupancy			2,935				2,820
Advertising			339				200
Data processing			1,975				2,343
Other real estate owned			18				20
Net loss (gain) on sale and write-down of other real estate owned			(127	)			289
Legal and accounting			827				1,447
Organizational dues and subscriptions			363				306
Director compensation			198				203
Federal deposit insurance premiums			260				401
Other			3,517				2,141
Total noninterest expenses			20,968				21,418
Income before income taxes			9,911				3,880
Income tax expense			2,338				792
Net income		$	7,573				3,088
Basic earnings per share (1)		$	1.10				0.41
Diluted earnings per share (1)		$	1.09			$	0.41

(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).

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.

		December 31, 2021				September 30, 2021				June 30, 2021				March 31, 2021				December 31, 2020
		(In thousands)
Non-GAAP Reconciliation
Total Loans		$	584,384			$	571,170			$	590,011			$	626,096			$	598,615
Plus:
Fair Value Marks			1,350				1,422				1,529				1,607				1,772
Deferred loan fees			953				1,077				1,666				2,466				1,980
Less:
Payroll Protection Program			18,124				32,204				73,020				126,054				101,749
loans
Indirect Auto Dealer Reserve			1,846				1,724				1,495				1,302				1,167
Other Loan Adjustments			219				102				447				0				591
Gross Loans		$	566,498			$	539,639			$	518,244			$	502,813			$	498,860

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220222006171/en/

Edward J. Cooney

Chief Executive Officer

(678) 742-9990

Source: Affinity Bancshares, Inc.

FAQ

What were Affinity Bancshares' earnings for 2021?

Affinity Bancshares reported net income of $7.6 million for the year ended December 31, 2021.

How did total assets change for Affinity Bancshares in 2021?

Total assets decreased by $62.5 million to $788.1 million at the end of 2021.

What was the net interest margin for Affinity Bancshares in 2021?

The net interest margin improved to 4.04% for the year ended December 31, 2021.

Did Affinity Bancshares experience a change in stockholders' equity in 2021?

Yes, stockholders' equity increased to $121.0 million, up from $80.8 million in 2020.

What was the provision for loan losses for Affinity Bancshares in 2021?

The provision for loan losses for the year ended December 31, 2021 was $1.1 million, down from $2.0 million in 2020.