Affinity Bancshares, Inc Announces Third Quarter 2021 Financial Results

Rhea-AI Summary

Affinity Bancshares, Inc. (NASDAQ: AFBI) reported a net income of $1.8 million for Q3 2021, down from $1.9 million in Q3 2020, but net income rose to $6.3 million for nine months, up from $1.7 million year-over-year. Total assets decreased to $790 million while non-performing loans increased to $6.2 million. The net interest margin fell to 3.78% in Q3, yet increased to 4.17% over nine months. Total stockholders' equity saw a boost to $119.7 million as of September 30, 2021, attributed to a recent stock offering.

Positive

• Net income for nine months increased to $6.3 million from $1.7 million in the prior year.
• Total stockholders' equity rose to $119.7 million as of September 30, 2021.
• Non-interest income grew due to increased service charges and gains from property sales.

Negative

• Net income for Q3 2021 fell to $1.8 million, down from $1.9 million in Q3 2020.
• Total assets decreased by $60.7 million to $790 million since December 31, 2020.
• Non-performing loans increased to $6.2 million from $4.9 million at the end of 2020.

 

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 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.

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/

Edward J. Cooney

Chief Executive Officer

(678) 742-9990

Source: Affinity Bancshares, Inc.

FAQ

What were Affinity Bancshares' earnings for Q3 2021?

Affinity Bancshares reported net income of $1.8 million for Q3 2021.

How did Affinity Bancshares perform in the nine months ended September 30, 2021?

The company reported a net income of $6.3 million for the nine months, significantly up from $1.7 million in the prior year.

What is the current status of Affinity Bancshares' assets?

As of September 30, 2021, Affinity Bancshares had total assets of $790 million, a decrease from $850.6 million at the end of 2020.

What is the net interest margin for Affinity Bancshares in Q3 2021?

The net interest margin for Q3 2021 was 3.78%, down from 3.81% in Q3 2020.

What impact did the stock offering have on Affinity Bancshares?

The recent stock offering increased total stockholders' equity to $119.7 million as of September 30, 2021.