Affinity Bancshares, Inc. Announces First Quarter 2022 Financial Results

Rhea-AI Summary

Affinity Bancshares (NASDAQ: AFBI) reported a net income of $1.8 million for Q1 2022, down from $2.1 million in Q1 2021. Key metrics included a return on average assets of 0.97% and a net interest margin of 4.53%. Net interest income decreased by $590,000 to $7.8 million due to reduced Payroll Protection Program (PPP) loan interest and fee income. Non-interest income fell to $595,000, while operating expenses decreased to $5.8 million. Total assets declined to $760.2 million, with deposits increasing by $13.2 million. Stockholders’ equity decreased to $116.4 million following share repurchases.

Positive

• Return on average assets increased to 0.97% from 0.66% quarter-over-quarter.
• Net interest margin improved to 4.53% despite decreased net interest income.
• Total deposits increased by $13.2 million to $628 million.

Negative

• Net income decreased from $2.1 million in Q1 2021 to $1.8 million in Q1 2022.
• Net interest income fell by $590,000 to $7.8 million due to PPP loan income decline.
• Stockholders' equity decreased by $4.6 million to $116.4 million, impacted by share repurchase.

COVINGTON, Ga.--(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 March 31, 2022 as compared to $2.1 million for the three months ended March 31, 2021.

		For the three months ended,
Performance Ratios:		March 31, 2022		December 31, 2021		September 30, 2021		June 30, 2021		March 31, 2021
Return on average assets		0.97%		0.66%		0.91%		1.18%		1.11%
Return on average equity		5.97%		4.36%		6.00%		7.95%		8.03%
Net interest margin		4.53%		3.64%		3.78%		4.10%		4.65%
Efficiency ratio		69.00%		74.29%		65.87%		58.30%		64.96%

Results of Operations

Net income was $1.8 million for the three months ended March 31, 2022, as compared to $2.1 million for the three months ended March 31, 2021, as a result of a decrease in Payroll Protection Program (PPP) loan related interest and fee income as we have been receiving forgiveness payments for these loans partially offset by a decrease in interest expense mostly related to the recognition of remaining discounts upon the payoff of acquired FHLB advances.

Net Interest Income and Margin

Net interest income decreased $590,000, and was $7.8 million for the three months ended March 31, 2022, compared to $8.3 million for the three months ended March 31, 2021. Average interest-earning assets decreased by $33.2 million, and was $684.6 million for the three months ended March 31, 2022 compared to $717.8 for the three months ended March 31, 2021. This decrease was a result of the decrease in PPP loans as forgiveness payments were received. Net interest margin for the three months ended March 31, 2022, decreased to 4.53% from 4.65% for the three months ended March 31, 2021. The decrease in net interest margin was primarily due to the decrease in PPP loans as forgiveness payments were received and partially offset by the decrease in interest expense from recognition of remaining discounts upon the payoff of acquired FHLB advances. For the three months ended March 31, 2022, the cost of average interest-bearing liabilities decreased to (0.44)% from 0.76% for the three months ended March 31, 2021, as a result of paying off Federal Home Loan Bank advances and recognizing $1.0 million in accretion from marks on acquired advances. The total cost of deposits was 0.48% for the three months ended March 31, 2022, compared to 0.72% for the three months ended March 31, 2021. The decrease was due to decreasing deposit rates related to the decrease in market rates.

Provision for Loan Losses

For the three months ended March 31, 2022, the provision for loan loss expense was $250,000 compared to $450,000 for the three months ended March 31, 2021. We increased our provision expense in 2021 due to the uncertainty related to the COVID-19 pandemic. As the economy began to improve in 2021 and continued to improve in 2022, less provision expense was required. Net loan charge offs were $3,000 for the three months ended March 31, 2022, compared to net loan recoveries of $1.1 million for the three months ended March 31, 2021. The increase in net recoveries for 2021 was primarily driven by a $1.0 million recovery on a previously charged off commercial real estate loan.

Non-interest Income

For the three months ended March 31, 2022, noninterest income decreased $134,000 to $595,000 compared to $729,000 for the three months ended March 31, 2021. This was a result of the decrease in other non-interest income as income was received in 2021 for a bank-owned life insurance death benefit claim and no such benefit claim was received in 2022.

Non-interest Expense

Operating expenses decreased $134,000, and was $5.8 million for the three months ended March 31, 2022, compared to $5.9 million for the three months ended March 31, 2021, primarily as a result of a decrease in occupancy expense due to facilities consolidation partially offset by an increase in salaries and employee benefits due to the Company’s strategic initiative to attract and retain talent.

Income Tax Expense

We recorded income tax expense of $547,000 for three months ended March 31, 2022, compared to $596,000 for the three months ended March 31, 2021. The higher tax expense for the three months ended March 31, 2021, was primarily due to higher pretax income.

Financial Condition

Total assets decreased by $27.9 million to $760.2 million for the three months ended March 31, 2022, from $788.1 million at December 31, 2021. The decrease was due primarily to a decrease in cash and cash equivalents of $41.9 million due to paying off Federal Home Loan Bank advances and partially offset by an increase in net loans. Cash and equivalents decreased $41.9 million, to $69.9 million for the three months ended March 31, 2022, from $111.8 million at December 31, 2021, as excess liquidity was utilized to payoff Federal Home Loan Bank advances. Total investment securities available for sale decreased by $2.6 million for the three months ended March 31, 2022, as compared to December 31, 2021, as our unrealized loss on the investment portfolio increased. Total net loans increased $17.1 million to $592.9 million at March 31, 2022 from $575.8 million at December 31, 2021, including Paycheck Protection Program (PPP) loans of $7.1 million and $17.9 million at March 31, 2022 and December 31, 2021, respectively. Deposits increased by $13.2 million to $628.0 million at March 31, 2022 compared to $614.8 million at December 31, 2021, which reflected an increase in interest-bearing, market rate, and non-interest-bearing deposits of $17.7 million. The loan-to-deposit ratio at March 31, 2022 was 94.4%, as compared to 93.7% at December 31, 2021. Stockholders’ equity decreased to $116.4 million at March 31, 2022, as compared to $121.0 million at December 31, 2021, primarily due to the decrease in additional paid in capital from the repurchase of 253,779 shares of AFBI stock totaling $3.9 million with an average price per share of $15.53 as well as an increase in accumulated other comprehensive loss related to our investment portfolio.

Asset Quality

The Company’s non-performing loans decreased to $6.3 million at March 31, 2022, as compared to $7.0 million at December 31, 2021. The allowance for loan losses as a percentage of non-performing loans was 138.9% at March 31, 2022, as compared to 122.1% at December 31, 2021. The Company’s allowance for loan losses was 1.46% of total loans for both March 31, 2022 and December 31, 2021.

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 table sets 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 March 31,
		2022												2021
		Average Outstanding Balance				Interest				Average Yield/Rate				Average Outstanding Balance				Interest				Average Yield/Rate
		(Dollars in thousands)
Interest-earning assets:
Loans excluding PPP loans		$	574,393			$	6,792				4.73	%		$	490,660			$	6,204				5.06	%
PPP loans			12,369				204				6.59	%			123,457				2,890				9.36	%
Securities			48,648				260				2.14	%			23,751				94				1.59	%
Interest-earning deposits			48,231				17				0.14	%			77,950				42				0.22	%
Other investments			1,000				6				2.33	%			1,990				18				3.56	%
Total interest-earning assets			684,641				7,279				4.25	%			717,808				9,248				5.15	%
Non-interest-earning assets			62,343												62,054
Total assets		$	746,984											$	779,862
Interest-bearing liabilities:
Savings accounts		$	86,195				83				0.38	%		$	94,167				107				0.45	%
Interest-bearing checking accounts			96,273				42				0.17	%			96,513				52				0.22	%
Market rate checking accounts			144,455				88				0.25	%			124,209				133				0.43	%
Certificates of deposit			94,465				290				1.23	%			129,913				506				1.56	%
Total interest-bearing deposits			421,388				503				0.48	%			444,802				798				0.72	%
FHLB advances (4)			8,821				(975	)			(44.20	)%			29,549				95				1.29	%
PPPLF borrowings			—				—				—				4,150				4				0.35	%
Other borrowings			—				—				—				1,555				10				2.69	%
Total interest-bearing liabilities			430,209				(472	)			(0.44	)%			480,056				907				0.76	%
Non-interest-bearing liabilities			195,024												192,150
Total liabilities			625,233												672,206
Total stockholders' equity			121,751												107,656
Total liabilities and stockholders' equity		$	746,984											$	779,862
Net interest income						$	7,751											$	8,341
Net interest rate spread (1)											4.69	%											4.39	%
Net interest-earning assets (2)		$	254,432											$	237,752
Net interest margin (3)											4.53	%											4.65	%
Average interest-earning assets to interest-bearing liabilities			159.14	%											149.53	%

(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.
(4)		Interest and yield/rate for FHLB advances is negative as a result of paying off FHLB advances and recognizing $1.0 million in accretion from the marks on acquired advances.

AFFINITY BANCSHARES, INC.
Consolidated Balance Sheets
		March 31, 2022				December 31, 2021
		(unaudited)				(audited)
		(In thousands)
Assets
Cash and due from banks, including reserve requirement of $0 at March 31, 2022 and December 31, 2021		$	14,302			$	16,239
Interest-earning deposits in other depository institutions			55,596				95,537
Cash and cash equivalents			69,898				111,776
Investment securities available-for-sale			45,911				48,557
Other investments			1,022				2,476
Loans, net			592,887				575,825
Other real estate owned			3,538				3,538
Premises and equipment, net			3,955				3,783
Bank owned life insurance			15,462				15,377
Intangible assets			18,701				18,749
Accrued interest receivable and other assets			8,834				8,007
Total assets		$	760,208			$	788,088
Liabilities and Stockholders' Equity
Liabilities:
Savings accounts		$	86,717			$	86,745
Interest-bearing checking			95,555				91,387
Market rate checking			151,443				145,969
Non-interest-bearing checking			202,042				193,940
Certificates of deposit			92,288				96,758
Total deposits			628,045				614,799
Federal Home Loan Bank advances			10,000				48,988
Accrued interest payable and other liabilities			5,805				3,333
Total liabilities			643,850				667,120
Stockholders' equity:
Common stock (par value $0.01 per share, 40,000,000 shares authorized; 6,618,685 issued and outstanding at March 31, 2022 and 6,872,634 issued and outstanding at December 31, 2021)			66				69
Preferred stock (10,000,000 shares authorized, no shares outstanding at March 31, 2022 and December 31, 2021)			—				—
Additional paid in capital			64,241				68,038
Unearned ESOP shares			(4,952	)			(5,004	)
Retained earnings			60,014				58,223
Accumulated other comprehensive loss			(3,011	)			(358	)
Total stockholders' equity			116,358				120,968
Total liabilities and stockholders' equity		$	760,208			$	788,088

AFFINITY BANCSHARES, INC.
Consolidated Statements of Income
(unaudited)
		Three Months Ended March 31,
		2022				2021
		(In thousands)
Interest income:
Loans, including fees		$	6,996			$	9,094
Investment securities, including dividends			266				112
Interest-earning deposits			17				42
Total interest income			7,279				9,248
Interest expense:
Deposits			503				798
Borrowings			(975	)			109
Total interest expense			(472	)			907
Net interest income before provision for loan losses			7,751				8,341
Provision for loan losses			250				450
Net interest income after provision for loan losses			7,501				7,891
Noninterest income:
Service charges on deposit accounts			392				334
Other			203				395
Total noninterest income			595				729
Noninterest expenses:
Salaries and employee benefits			2,942				2,383
Deferred compensation			66				64
Occupancy			582				1,052
Advertising			80				80
Data processing			494				481
Other real estate owned			—				12
Net (gain) loss on sale of other real estate owned			—				(1	)
Legal and accounting			182				177
Organizational dues and subscriptions			131				71
Director compensation			51				50
Federal deposit insurance premiums			60				73
Writedown of premises and equipment			—				873
FHLB prepayment penalties			647				—
Other			523				577
Total noninterest expenses			5,758				5,892
Income before income taxes			2,338				2,728
Income tax expense			547				596
Net income		$	1,791			$	2,132
Basic earnings per share		$	0.26			$	0.31
Diluted earnings per share		$	0.26			$	0.31

Explanation of Non-GAAP Financial Measures

Reported amounts are presented in accordance with GAAP. The Company’s management believes that the supplemental non-GAAP information, which consists of reported net income less interest and fees income on PPP loans plus expenses related to the write-off of a branch building and lease provides a better comparison of the amount of the Company’s earnings. Management also believes that reported loans less 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 regulators and 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. Refer to the Non-GAAP Reconciliation table at the end of this document for details on the earnings impact of these items.

		March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021
		(In thousands)
Non-GAAP Reconciliation
Total Loans		$	601,693		$	584,384		$	571,170		$	590,011		$	626,096
Plus:
Fair Value Marks			1,239			1,350			1,422			1,529			1,607
Deferred Loan fees			958			958			1,077			1,666			2,466
Less:
Payroll Protection
Program Loans			7,146			18,124			32,204			73,020			126,054
Indirect Auto
Dealer Reserve			2,058			1,846			1,724			1,495			1,302
Other Loan
Adjustments			69			224			102			447			0
Gross Loans		$	594,617		$	566,498		$	539,639		$	518,244		$	502,813
		March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021
		(In thousands)
Non-GAAP Reconciliation
Net Income		$	1,791		$	1,318		$	1,805		$	2,318		$	2,132
Less:
PPP Interest Income			30			59			121			269			312
PPP Fee Income			174			271			741			1,419			2,578
Plus:
Branch Building and
Lease Write-Off															1,186
Tax Effect			47			84			208			403			372
Non-GAAP Net Income		$	1,634		$	1,072		$	1,151		$	1,033		$	800

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220422005578/en/

Edward J. Cooney

Chief Executive Officer

(678)742-9990

Source: Affinity Bancshares, Inc.

FAQ

What were Affinity Bancshares' earnings for Q1 2022?

Affinity Bancshares reported a net income of $1.8 million for Q1 2022.

How did net interest income change for AFBI in Q1 2022?

Net interest income for AFBI decreased by $590,000 to $7.8 million in Q1 2022.

What was the net interest margin for Affinity Bancshares in Q1 2022?

The net interest margin for Affinity Bancshares in Q1 2022 was 4.53%.

Did Affinity Bancshares see an increase or decrease in total assets in Q1 2022?

Total assets decreased by $27.9 million to $760.2 million in Q1 2022.

How much did the deposits increase for AFBI in Q1 2022?

Deposits for Affinity Bancshares increased by $13.2 million to $628 million in Q1 2022.