UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period

Commission File No. 001-39914

 

Affinity Bancshares, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Maryland

 

86-1339773

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

3175 Highway 278

Covington, Georgia

 

30014

(Address of Principal Executive Offices)

 

(Zip Code)

 

(770) 786-7088

(Registrant’s Telephone Number, Including Area Code)

 

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.01 per share         AFBIThe NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. YES     NO 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  YES      NO  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.   See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.  

 

Large accelerated filer

 

 

  

Accelerated filer

 

 

 

 

 

 

Non-accelerated filer

 

 

  

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES      NO  

 

 

 

 

 

 

 

 

 

 

 

As of May 10, 2021, 6,872,634 shares of the Registrant’s common stock, par value $0.01 per share, were outstanding.

 

 

 

 

 


 

 

Affinity Bancshares, Inc.

Form 10-Q

Table of Contents

 

 

 

 

 

Page

PART I.  FINANCIAL INFORMATION

 

 

 

 

 

Item 1.

 

Financial Statements

 

2

 

 

 

 

 

 

 

Consolidated Balance Sheets at March 31, 2021 (unaudited) and December 31, 2020 (audited)

 

2

 

 

 

 

 

 

 

Consolidated Statements of Operations for the Three Months Ended March 31, 2021 and 2020 (unaudited)

 

3

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2021 and 2020 (unaudited)

 

4

 

 

 

 

 

 

 

Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2021 and 2020 (unaudited)

 

5

 

 

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020 (unaudited)

 

6

 

 

 

 

 

 

 

Notes to Unaudited Consolidated Financial Statements

 

7

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

21

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

35

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

35

 

 

 

 

 

PART II.  OTHER INFORMATION

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

36

 

 

 

 

 

Item 1A.

 

Risk Factors

 

36

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

36

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

36

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

36

 

 

 

 

 

Item 5.

 

Other Information

 

36

 

 

 

 

 

Item 6.

 

Exhibits

 

37

 

 

 

 

 

 

 

SIGNATURES

 

38

 

 

1


 

 

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

AFFINITY BANCSHARES, INC.

Consolidated Balance Sheets

 

     March 31, 2021             December 31, 2020

 

 

(unaudited)

 

 

 

 

 

 

 

(In thousands)

 

Assets

 

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

 

$

10,048

 

 

 

5,552

 

Interest-earning deposits in other depository institutions

 

 

91,350

 

 

 

172,701

 

Cash and cash equivalents

 

 

101,398

 

 

 

178,253

 

Investment securities available-for-sale

 

 

24,021

 

 

 

24,005

 

Other investments

 

 

2,101

 

 

 

1,596

 

Loans, net

 

 

619,224

 

 

 

592,254

 

Other real estate owned

 

 

315

 

 

 

1,292

 

Premises and equipment, net

 

 

7,635

 

 

 

8,617

 

Bank owned life insurance

 

 

15,100

 

 

 

15,311

 

Intangible assets

 

 

18,893

 

 

 

18,940

 

Accrued interest receivable and other assets

 

 

8,581

 

 

 

10,360

 

Total assets

 

$

797,268

 

 

 

850,628

 

Liabilities and Stockholders' Equity

 

Liabilities:

 

 

 

 

 

 

 

 

Savings accounts

 

$

93,603

 

 

 

96,591

 

Interest-bearing checking

 

 

80,849

 

 

 

129,813

 

Market rate checking

 

 

128,798

 

 

 

121,317

 

Noninterest-bearing checking

 

 

207,930

 

 

 

160,819

 

Certificate of deposits

 

 

123,935

 

 

 

131,625

 

Total deposits

 

 

635,115

 

 

 

640,165

 

Federal Home Loan Bank (FHLB) advances

 

 

39,084

 

 

 

19,117

 

Paycheck Protection Program Liquidity Facility (PPPLF) borrowings

 

 

 

 

 

100,813

 

Other borrowings

 

 

 

 

 

5,000

 

Accrued interest payable and other liabilities

 

 

7,815

 

 

 

4,748

 

Total liabilities

 

 

682,014

 

 

 

769,843

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock (par value $0.01 per share, 40,000,000 shares authorized, 6,875,275 issued and outstanding at March 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 (10,000,000 shares authorized, no shares outstanding at March 31, 2021 and 1,000,000 shares authorized, no shares outstanding at December 31, 2020)

 

 

 

 

 

 

Additional paid in capital

 

 

67,884

 

 

 

33,628

 

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

 

 

 

 

 

(1,268

)

Unearned ESOP shares

 

 

(5,362

)

 

 

(2,453

)

Retained earnings

 

 

52,782

 

 

 

50,650

 

Accumulated other comprehensive (loss) income

 

 

(119

)

 

 

159

 

Total stockholders' equity

 

 

115,254

 

 

 

80,785

 

Total liabilities and stockholders' equity

 

$

797,268

 

 

 

850,628

 

 

(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).

See accompanying notes to unaudited consolidated financial statements.

2


 

AFFINITY BANCSHARES, INC.

Consolidated Statements of Operations

(unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Interest income:

 

 

 

 

 

 

 

 

Loans, including fees

 

$

9,094

 

 

 

6,397

 

Investment securities, including dividends

 

 

112

 

 

 

165

 

Interest-earning deposits

 

 

42

 

 

 

136

 

Total interest income

 

 

9,248

 

 

 

6,698

 

Interest expense:

 

 

 

 

 

 

 

 

Deposits

 

 

798

 

 

 

1,263

 

Borrowings

 

 

109

 

 

 

208

 

Total interest expense

 

 

907

 

 

 

1,471

 

Net interest income before provision for loan losses

 

 

8,341

 

 

 

5,227

 

Provision for loan losses

 

 

450

 

 

 

500

 

Net interest income after provision for loan losses

 

 

7,891

 

 

 

4,727

 

Noninterest income:

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

 

334

 

 

 

353

 

Other

 

 

395

 

 

 

160

 

Total noninterest income

 

 

729

 

 

 

513

 

Noninterest expenses:

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

2,383

 

 

 

4,173

 

Deferred compensation

 

 

64

 

 

 

63

 

Occupancy

 

 

1,052

 

 

 

647

 

Advertising

 

 

80

 

 

 

62

 

Data processing

 

 

481

 

 

 

644

 

Other real estate owned

 

 

12

 

 

 

 

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

 

 

(1

)

 

 

29

 

Legal and accounting

 

 

177

 

 

 

683

 

Organizational dues and subscriptions

 

 

71

 

 

 

88

 

Director compensation

 

 

50

 

 

 

49

 

Federal deposit insurance premiums

 

 

73

 

 

 

112

 

Writedown of premises and equipment

 

 

873

 

 

 

 

Other

 

 

577

 

 

 

531

 

Total noninterest expenses

 

 

5,892

 

 

 

7,081

 

Income (loss) before income taxes

 

 

2,728

 

 

 

(1,841

)

Income tax expense (benefit)

 

 

596

 

 

 

(543

)

Net income (loss)

 

$

2,132

 

 

 

(1,298

)

Basic and diluted earnings (loss) per share (1)

 

$

0.31

 

 

 

(0.19

)

 

(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).

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited consolidated financial statements.

3


 

AFFINITY BANCSHARES, INC.

Consolidated Statements of Comprehensive Income (Loss)

(unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Net income (loss)

 

$

2,132

 

 

 

(1,298

)

 

 

 

 

 

 

 

 

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized (loss) gain on available-for-sale securities, net of taxes of $95 and $(43)

 

 

(278

)

 

 

121

 

 

 

 

 

 

 

 

 

 

Total other comprehensive (loss) income

 

 

(278

)

 

 

121

 

 

 

 

 

 

 

 

 

 

Total comprehensive income (loss)

 

$

1,854

 

 

 

(1,177

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited consolidated financial statements.

4


 

AFFINITY BANCSHARES, INC.

Consolidated Statements of Changes in Stockholders’ Equity

(unaudited)

 

 

 

Three Months Ended March 31, 2020 and 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

Common

 

 

Paid In

 

 

Treasury

 

 

Unearned

 

 

Retained

 

 

Comprehensive

 

 

 

 

 

 

 

Stock (1)

 

 

Capital

 

 

Stock

 

 

ESOP Shares

 

 

Earnings

 

 

Income (Loss)

 

 

Total

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

Beginning balance December 31, 2019

 

$

69

 

 

$

33,366

 

 

$

(1,268

)

 

$

(2,571

)

 

$

47,562

 

 

$

9

 

 

$

77,167

 

ESOP loan payment and release of ESOP shares

 

 

 

 

 

 

 

 

 

 

 

30

 

 

 

 

 

 

 

 

 

30

 

Stock based compensation

   expense

 

 

 

 

 

(80

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(80

)

Change in unrealized gain on investment securities available-for-sale, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

121

 

 

 

121

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,298

)

 

 

 

 

 

(1,298

)

Ending balance March 31, 2020

 

$

69

 

 

$

33,286

 

 

$

(1,268

)

 

$

(2,541

)

 

$

46,264

 

 

$

130

 

 

$

75,940

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance December 31, 2020

 

$

69

 

 

$

33,628

 

 

$

(1,268

)

 

$

(2,453

)

 

$

50,650

 

 

$

159

 

 

$

80,785

 

ESOP loan payment and release of ESOP shares

 

 

 

 

 

5

 

 

 

 

 

 

52

 

 

 

 

 

 

 

 

 

57

 

Stock-based compensation expense

 

 

 

 

 

110

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

110

 

Change in unrealized loss on investment securities available-for-sale, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(278

)

 

 

(278

)

Corporate reorganization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Issuance of common stock (less     .     stock offering expenses of .    …  .     $1,699)

 

 

 

 

 

32,448

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32,448

 

      Issuance of shares and loan to .     .     ESOP

 

 

 

 

 

2,961

 

 

 

 

 

 

(2,961

)

 

 

 

 

 

 

 

 

 

     Treasury stock retired

 

 

 

 

 

(1,268

)

 

 

1,268

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,132

 

 

 

 

 

 

2,132

 

Ending balance March 31, 2021

 

$

69

 

 

$

67,884

 

 

$

 

 

$

(5,362

)

 

$

52,782

 

 

$

(119

)

 

$

115,254

 

 

 

(1)

Amounts concerning shares 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 accompanying notes to unaudited consolidated financial statements.

5


 

AFFINITY BANCSHARES, INC.

Consolidated Statements of Cash Flows

(unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

2,132

 

 

 

(1,298

)

Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities, net of effects of acquisition:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

188

 

 

 

28

 

Stock-based compensation expense

 

 

110

 

 

 

(80

)

Provision for loan losses

 

 

450

 

 

 

500

 

ESOP expense

 

 

52

 

 

 

30

 

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

 

 

(1

)

 

 

29

 

Increase in cash surrender value of life insurance

 

 

(89

)

 

 

(98

)

Loss on writedown of premises and equipment

 

 

873

 

 

 

 

Change in:

 

 

 

 

 

 

 

 

Accrued interest receivable and other assets

 

 

1,871

 

 

 

(1,784

)

Accrued interest payable and other liabilities

 

 

3,080

 

 

 

(185

)

Net cash provided by (used in) operating activities

 

 

8,666

 

 

 

(2,858

)

Cash flows from investing activities, net of effects of acquisition:

 

 

 

 

 

 

 

 

Purchases of investment securities available-for-sale

 

 

(1,516

)

 

 

 

Purchases of premises and equipment

 

 

(190

)

 

 

(104

)

Proceeds from paydowns of investment securities available-for-sale

 

 

1,061

 

 

 

1,842

 

Purchases of other investments

 

 

(850

)

 

 

(896

)

Proceeds from sales of other investments

 

 

345

 

 

 

 

Proceeds from bank owned life insurance death claim

 

 

300

 

 

 

 

Net change in loans

 

 

(27,254

)

 

 

(11,533

)

Proceeds from sales of other real estate owned

 

 

979

 

 

 

128

 

Net cash paid in business combination

 

 

 

 

 

(22,749

)

Net cash used in investing activities

 

 

(27,125

)

 

 

(33,312

)

Cash flows from financing activities, net of effects of acquisition:

 

 

 

 

 

 

 

 

Net change in demand and savings deposits

 

 

(5,039

)

 

 

10,990

 

Proceeds from FHLB advances

 

 

20,000

 

 

 

20,000

 

Net change in repurchase agreements and other borrowings

 

 

 

 

 

5,372

 

Repayment of PPPLF borrowings

 

 

(100,813

)

 

 

 

Repayment of other borrowings

 

 

(5,000

)

 

 

 

Proceeds from stock offering

 

 

37,116

 

 

 

 

Stock offering expenses

 

 

(1,699

)

 

 

 

Funding of ESOP

 

 

(2,961

)

 

 

 

Net cash (used in) provided by financing activities

 

 

(58,396

)

 

 

36,362

 

Net change in cash and cash equivalents

 

 

(76,855

)

 

 

192

 

Cash and cash equivalents at beginning of period

 

 

178,253

 

 

 

48,117

 

Cash and cash equivalents at end of period

 

$

101,398

 

 

 

48,309

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

914

 

 

 

1,248

 

Fair value of assets acquired

 

 

 

 

 

317,742

 

Fair value of liabilities assumed

 

 

 

 

 

288,732

 

Net assets acquired

 

 

 

 

 

29,010

 

 

 

See accompanying notes to unaudited consolidated financial statements.

 

 

6


 

 

AFFINITY BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

 

(1)

Nature of Operations

Affinity Bancshares, Inc. (the “Company”) is a savings and loan holding company headquartered in Covington, Georgia. The Company has one operating subsidiary, Affinity Bank (the “Bank”, and formerly named “Newton Federal Bank”), a federally chartered savings association, conducting banking activities primarily in Newton County, Georgia and surrounding counties and in Cobb and Fulton County, Georgia and surrounding counties, and originating dental practice loans and indirect automobile loans throughout the Southeastern United States. The Bank offers such customary banking services as consumer and commercial checking accounts, savings accounts, certificates of deposit, mortgage, commercial and consumer loans, including indirect automobile loans, money transfers and a variety of other banking services.  

The Company was incorporated in September 2020 to be the successor corporation to Community First Bancshares, Inc., a federal corporation, upon completion of the second-step mutual-to-stock conversion (the “Conversion”) of Community First Bancshares, MHC, the top tier mutual holding company of Community First Bancshares, Inc. Community First Bancshares, Inc. was the former mid-tier holding company for the Bank (formerly named Newton Federal Bank). Prior to completion of the Conversion, approximately 54% of the shares of common stock of Community First Bancshares, Inc. were owned by Community First Bancshares, MHC. In conjunction with the Conversion, Community First Bancshares, Inc. was merged into Affinity Bancshares, Inc. (and ceased to exist) and Affinity Bancshares, Inc. became its successor holding company for Newton Federal Bank.  

On January 20, 2021, the Company completed the Conversion. Accordingly, prior comparable periods within the financial statements and notes thereto reflect the operations of Community First Bancshares, Inc., and not the Company.  However, references to the Company include Community First Bancshares, Inc. where indicated by the context.  

Reorganization

On January 20, 2021, the Company completed the Conversion of Community First Bancshares, MHC, the top tier mutual holding company of Community First Bancshares, Inc. Community First Bancshares, Inc. was the former mid-tier holding company for Affinity Bank (formerly named Newton Federal Bank). Prior to completion of the Conversion, approximately 54% of the shares of common stock of Community First Bancshares, Inc. were owned by Community First Bancshares, MHC. In conjunction with the Conversion, Community First Bancshares, Inc. was merged into Affinity Bancshares, Inc. (and ceased to exist) and Affinity Bancshares, Inc. became its successor holding company for Newton Federal Bank.

 

As part of the Conversion, on January 20, 2021, the Company raised gross proceeds of $37.1 million by selling a total of 3,701,509 shares of common stock at $10.00 per share in a stock offering. The Company utilized $3.0 million of the proceeds to fund an addition to its Employee Stock Ownership Plan (“ESOP”) loan for the acquisition of additional shares at $10.00 per share. Expenses incurred related to the offering were $1.7 million and have been recorded against offering proceeds. The Company invested $16.3 million of the net proceeds it received from the sale into the Bank’s operations and has retained the remaining amount for general corporate purposes. Concurrent with the completion of the stock offering, each share of Community First Bancshares, Inc. common stock owned by public stockholders (stockholders other than Community First Bancshares, MHC) was exchanged for 0.90686 shares of Company common stock.  All share amounts have been adjusted for the conversion, including outstanding restricted stock and stock options.       

Basis of Presentation

The accompanying unaudited consolidated financial statements and notes thereto contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly, in accordance with accounting principles generally accepted in the United States of America (“GAAP”), the financial position of the Company as of March 31, 2021 and the results of its operations and its cash flows for the periods presented. The interim consolidated financial information should be read in conjunction with the annual financial statements and the notes thereto included in the Company’s December 31, 2020 Form 10-K.  The results of operations for the quarter ended March 31, 2021, are not necessarily indicative of the results to be expected for a full year or for any other period.  

Use of Estimates – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Material estimates common to the banking industry that are particularly susceptible to significant change in the near term include, but are not limited to, the determination of the allowance for loan losses, the valuation of acquired loans, the valuation of other real estate acquired in connection with foreclosure or in

7


AFFINITY BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

 

satisfaction of loans and valuation allowances associated with the realization of deferred tax assets, which are based on future taxable income.

Summary of Significant Accounting Policies – The accounting and reporting policies of the Company conform to GAAP and general practices within the banking industry. There have been no material changes or developments in the application of principles or in our evaluation of the accounting estimates and the underlying assumptions or methodologies that we believe to be Critical Accounting Policies as disclosed in the Company’s financial statements for the year ended December 31, 2020 included in the Company’s Form 10-K.

Earnings per Share

Basic earnings per common share are calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common share are calculated by dividing net income available to common shareholders by the weighted average number of shares adjusted for the dilutive effect of common stock awards (outstanding stock options), if any. Presented below are the calculations for basic and diluted earnings per common share.

 

 

Three Months Ended March 31,

 

 

2021

 

 

2020

 

 

(In thousands except per share data)

 

 

 

 

 

 

 

 

 

Net income

$

2,132

 

 

$

(1,298

)

Weighted average common shares outstanding

 

6,873,137

 

 

 

6,828,277

 

Effect of dilutive common stock awards

 

16,615

 

 

 

 

Diluted weighted average common shares outstanding

 

6,889,752

 

 

 

6,828,277

 

Basic earnings (loss) per common share*

$

0.31

 

 

$

(0.19

)

Diluted earnings (loss) per common share*

$

0.31

 

 

$

(0.19

)

 

*Cumulative quarterly per share performance may not equal annual per share totals due to the effects of the amount and timing of capital increases. When computing earnings per share for an interim period, the denominator is based on the weighted average shares outstanding during the interim period, and not on an annualized weighted average basis. Accordingly, the sum of the earnings per share data for the quarters will not necessarily equal the year-to-date earnings per share data.

 

For the three months ended March 31, 2021, options to purchase 190,928 shares are excluded from the calculation of diluted earnings per common share as the effect of their exercise would have been anti-dilutive. For the three months ended March 31, 2020, options to purchase 90,441 shares are excluded from the calculation of diluted earnings per common share as the effect of their exercise would have been anti-dilutive.

Recent Accounting Pronouncements

There have been no pronouncements issued during the quarter that would have a material impact on the Company's financial statements.

(2)

Acquisition

On January 10, 2020, the Company consummated its merger with ABB Financial Group, Inc. (“ABB”) pursuant to the Agreement and Plan of Merger by and between the Company and ABB dated August 19, 2019, (the “Merger Agreement”), whereby ABB was merged with and into the Company, and Affinity Bank, ABB’s wholly owned commercial bank subsidiary serving Cobb County, Georgia and Fulton County, Georgia and surrounding counties, was merged with and into Newton Federal Bank. The system integration is expected to be completed in September 2020.  Affinity Bank operated one branch office in Cobb County, Georgia and one loan production office in Fulton County, Georgia.

The purpose of the merger was for strategic reasons beneficial to the Company. The acquisition is consistent with its plan to drive growth and efficiency through increased scale, leverage the strengths of each bank across the combined customer base, enhance profitability, and add liquidity and shareholder value.

Under the terms of the Merger Agreement, each outstanding share of ABB common stock was converted into the right to receive $7.50 in cash, for a total paid of $40.3 million in cash with no stock issued.  Pre-existing ABB equity awards (restricted stock

8


AFFINITY BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

 

units and stock options) immediately vested upon consummation of the merger. The Company paid $2.7 million for vesting ABB restricted stock.  

The Company accounted for the transaction under the acquisition method of accounting, and thus, the financial position and results of operations of ABB prior to the consummation date were not included in the accompanying consolidated financial statements. The accounting required assets purchased and liabilities assumed to be recorded at their respective fair values at the date of acquisition. The Company determined the fair value of core deposit intangibles, securities, premises and equipment, loans, other real estate owned, bank owned life insurance and other assets, deposits, debt and deferred taxes with the assistance of third-party valuations, appraisals, and third-party advisors. The estimated fair values will be subject to refinement as additional information relative to the closing date fair values becomes available through the measurement period of approximately one year from consummation.

The fair value of the assets acquired and liabilities assumed on January 10, 2020 was as follows:

 

 

As recorded by

 

Fair Value

 

As recorded by

 

 

ABB

 

Adjustments

 

CFBI

 

 

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and securities available-for-sale

$

41,561

 

 

 

 

41,561

 

Loans

 

264,176

 

 

(2,327

)

 

261,849

 

Other real estate owned

 

790

 

 

 

 

790

 

Core deposit intangible

 

 

 

1,913

 

 

1,913

 

Fixed assets and other assets

 

11,629

 

 

 

 

11,629

 

Total assets acquired

$

318,156

 

 

(414

)

 

317,742

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

249,049

 

 

265

 

 

249,314

 

Borrowings and other liabilities

 

37,764

 

 

1,654

 

 

39,418

 

Total liabilities acquired

$

286,813

 

 

1,919

 

 

288,732

 

 

 

 

 

 

 

 

 

 

 

Excess of assets acquired over liabilities acquired

$

31,343

 

 

(2,333

)

 

29,010

 

 

 

 

 

 

 

 

 

 

 

Purchase price

 

 

 

 

 

 

$

40,338

 

Net assets acquired

 

 

 

 

 

 

 

29,010

 

Less preferred stock redeemed

 

 

 

 

 

 

 

(5,891

)

Net assets acquired less preferred stock

 

 

 

 

 

 

$

23,119

 

Goodwill

 

 

 

 

 

 

$

17,219

 

 

The following unaudited pro forma information presents the results of operations for three months ended March 31, 2020, as if the acquisition had occurred January 1 of the period. The Company expects to achieve further operating cost savings and other business synergies as a result of the acquisition which are not reflected in the pro forma amounts. These unaudited pro forma results are presented for illustrative purposes and are not intended to represent or be indicative of the actual results of operations of the combined company that would have been achieved had the acquisition occurred at the beginning of the period presented, nor are they intended to represent or be indicative of future results of operations.

 

 

Three Months Ended March 31,

 

 

2020

 

 

(In thousands except per share data)

 

 

 

 

 

Total revenues, net of interest expense

$

6,041

 

Net loss

 

(2,358

)

Diluted loss per share

 

(0.31

)

 

9


AFFINITY BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

 

 

(3)

Investment Securities 

Investment securities available-for-sale at March 31, 2021 and December 31, 2020 are as follows: (in thousands)

 

 

 

Amortized

 

 

Gross

Unrealized

 

 

Gross

Unrealized

 

 

Estimated

 

March 31, 2021

 

Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

U.S. Government sponsored enterprises

 

$

11,837

 

 

 

 

 

 

(319

)

 

 

11,518

 

Government agency mortgage-backed securities

 

 

8,115

 

 

 

284

 

 

 

 

 

 

8,399

 

Trust preferred securities

 

 

4,228

 

 

 

11

 

 

 

(135

)

 

 

4,104

 

Total

 

$

24,180

 

 

 

295

 

 

 

(454

)

 

 

24,021

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government sponsored enterprises

 

 

11,870

 

 

 

1

 

 

 

(12

)

 

 

11,859

 

Government agency mortgage-backed securities

 

 

9,206

 

 

 

326

 

 

 

 

 

 

9,532

 

Trust preferred securities

 

 

2,715

 

 

 

 

 

 

(101

)

 

 

2,614

 

Total

 

$

23,791

 

 

 

327

 

 

 

(113

)

 

 

24,005

 

 

There were six securities in an unrealized loss position as of March 31, 2021 for less than 12 months.  There were two securities in an unrealized loss position greater than 12 months as of March 31, 2021.  The unrealized losses on the debt securities arose due to changing interest rates and market conditions and are considered to be temporary because of acceptable investment grades and are reviewed regularly.  Four of the securities are issues of U.S. Government sponsored agencies where the repayment sources of principal and interest are backed by U.S. Government sponsored agencies.  The other four securities are trust preferred securities and subordinated debentures where the Bank performs a credit review regularly and such review has raised no concerns.  The Company does not intend to sell the investments and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost basis which may be at maturity.  

 

The amortized cost and estimated fair value of investment securities available-for-sale at March 31, 2021, by contractual maturity, are shown below. Maturities of mortgage-backed securities will differ from contractual maturities because borrowers may have the right to call or prepay certain obligations with or without call or prepayment penalties. Therefore, these securities are not included in the maturity categories.  (in thousands)

 

 

 

Amortized