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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 June 30, 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

 

AFBI

 

The 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 August 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 June 30, 2021 (unaudited) and December 31, 2020 (audited)

 

2

 

 

 

 

 

 

 

Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 2021 and   .    2020 (unaudited)

 

3

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income (Loss) for the Three Months and Six Months Ended June 30, 2021 and 2020 (unaudited)

 

4

 

 

 

 

 

 

 

Consolidated Statements of Changes in Stockholders’ Equity for the Three Months and Six Months Ended June 30, 2021 and 2020 (unaudited)

 

5

 

 

 

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 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

 

22

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

38

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

39

 

 

 

 

 

PART II.  OTHER INFORMATION

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

40

 

 

 

 

 

Item 1A.

 

Risk Factors

 

40

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

40

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

40

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

40

 

 

 

 

 

Item 5.

 

Other Information

 

40

 

 

 

 

 

Item 6.

 

Exhibits

 

40

 

 

 

 

 

 

 

SIGNATURES

 

41

 

 

1


 

 

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

AFFINITY BANCSHARES, INC.

Consolidated Balance Sheets

 

 

 

June 30, 2021

 

 

December 31, 2020

 

 

 

(unaudited)

 

 

(audited)

 

 

 

(In thousands)

 

Assets

 

 

 

 

 

 

 

 

 

 

Cash and due from banks, including reserve requirement of $0 at June 30, 2021 and

   December 31, 2020

 

$

15,343

 

 

$

5,552

 

Interest-earning deposits in other depository institutions

 

 

100,373

 

 

 

172,701

 

Cash and cash equivalents

 

 

115,716

 

 

 

178,253

 

Investment securities available-for-sale

 

 

36,591

 

 

 

24,005

 

Other investments

 

 

2,476

 

 

 

1,596

 

Loans, net

 

 

582,624

 

 

 

592,254

 

Other real estate owned

 

 

 

 

 

1,292

 

Premises and equipment, net

 

 

7,451

 

 

 

8,617

 

Bank owned life insurance

 

 

15,192

 

 

 

15,311

 

Intangible assets

 

 

18,845

 

 

 

18,940

 

Accrued interest receivable and other assets

 

 

7,912

 

 

 

10,360

 

Total assets

 

$

786,807

 

 

$

850,628

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Savings accounts

 

$

95,057

 

 

$

96,591

 

Interest-bearing checking

 

 

81,382

 

 

 

129,813

 

Market rate checking

 

 

134,139

 

 

 

121,317

 

Non-interest-bearing checking

 

 

195,146

 

 

 

160,819

 

Certificate of deposits

 

 

106,173

 

 

 

131,625

 

Total deposits

 

 

611,897

 

 

 

640,165

 

Federal Home Loan Bank advances

 

 

49,052

 

 

 

19,117

 

Paycheck Protection Program Liquidity Facility (PPPLF) borrowings

 

 

 

 

 

100,813

 

Other borrowings

 

 

 

 

 

5,000

 

Accrued interest payable and other liabilities

 

 

8,223

 

 

 

4,748

 

Total liabilities

 

 

669,172

 

 

 

769,843

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock (par value $0.01 per share, 40,000,000 shares authorized, 6,872,634

   issued and outstanding at June 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 June 30, 2021

   and 1,000,000 shares authorized, no shares outstanding at December 31, 2020)

 

 

 

 

 

 

Additional paid in capital

 

 

67,972

 

 

 

33,620

 

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

 

 

 

 

 

(1,268

)

Unearned ESOP shares

 

 

(5,310

)

 

 

(2,453

)

Retained earnings

 

 

55,100

 

 

 

50,650

 

Accumulated other comprehensive (loss) income

 

 

(196

)

 

 

159

 

Total stockholders' equity

 

 

117,635

 

 

 

80,785

 

Total liabilities and stockholders' equity

 

$

786,807

 

 

$

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.

2


 

AFFINITY BANCSHARES, INC.

Consolidated Statements of Operations

(unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

 

 

 

(In thousands)

 

 

 

 

 

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

 

$

7,997

 

 

$

7,124

 

 

$

17,091

 

 

$

13,520

 

Investment securities, including dividends

 

 

181

 

 

 

117

 

 

 

292

 

 

 

282

 

Interest-earning deposits

 

 

39

 

 

 

14

 

 

 

82

 

 

 

150

 

Total interest income

 

 

8,217

 

 

 

7,255

 

 

 

17,465

 

 

 

13,952

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

684

 

 

 

1,363

 

 

 

1,481

 

 

 

2,625

 

Borrowings

 

 

123

 

 

 

185

 

 

 

233

 

 

 

393

 

Total interest expense

 

 

807

 

 

 

1,548

 

 

 

1,714

 

 

 

3,018

 

Net interest income before provision for loan losses

 

 

7,410

 

 

 

5,707

 

 

 

15,751

 

 

 

10,934

 

Provision for loan losses

 

 

300

 

 

 

300

 

 

 

750

 

 

 

800

 

Net interest income after provision for loan losses

 

 

7,110

 

 

 

5,407

 

 

 

15,001

 

 

 

10,134

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

 

376

 

 

 

304

 

 

 

709

 

 

 

658

 

Gain on sales of investment securities available-for-sale

 

 

 

 

 

20

 

 

 

 

 

 

20

 

Other

 

 

230

 

 

 

214

 

 

 

625

 

 

 

374

 

Total noninterest income

 

 

606

 

 

 

538

 

 

 

1,334

 

 

 

1,052

 

Noninterest expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

2,511

 

 

 

2,180

 

 

 

4,894

 

 

 

6,353

 

Deferred compensation

 

 

62

 

 

 

79

 

 

 

126

 

 

 

142

 

Occupancy

 

 

644

 

 

 

690

 

 

 

1,696

 

 

 

1,337

 

Advertising

 

 

100

 

 

 

71

 

 

 

180

 

 

 

133

 

Data processing

 

 

517

 

 

 

606

 

 

 

999

 

 

 

1,250

 

Other real estate owned

 

 

7

 

 

 

2

 

 

 

19

 

 

 

2

 

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

 

 

(126

)

 

 

 

 

 

(127

)

 

 

29

 

Legal and accounting

 

 

226

 

 

 

282

 

 

 

402

 

 

 

965

 

Organizational dues and subscriptions

 

 

91

 

 

 

80

 

 

 

161

 

 

 

168

 

Director compensation

 

 

50

 

 

 

53

 

 

 

100

 

 

 

101

 

Federal deposit insurance premiums

 

 

67

 

 

 

140

 

 

 

140

 

 

 

253

 

Writedown of premises and equipment

 

 

 

 

 

 

 

 

873

 

 

 

 

Other

 

 

524

 

 

 

392

 

 

 

1,101

 

 

 

924

 

Total noninterest expenses

 

 

4,673

 

 

 

4,575

 

 

 

10,564

 

 

 

11,657

 

Income (loss) before income taxes

 

 

3,043

 

 

 

1,370

 

 

 

5,771

 

 

 

(471

)

Income tax expense (benefit)

 

 

725

 

 

 

291

 

 

 

1,321

 

 

 

(252

)

Net income (loss)

 

$

2,318

 

 

$

1,079

 

 

$

4,450

 

 

$

(219

)

Basic earnings (loss) per share (1)

 

$

0.34

 

 

$

0.16

 

 

$

0.65

 

 

$

(0.03

)

Diluted earnings (loss) per share (1)

 

$

0.34

 

 

$

0.16

 

 

$

0.64

 

 

$

(0.03

)

 

(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 June 30,

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

 

 

 

(In thousands)

 

 

 

 

 

Net income (loss)

 

$

2,318

 

 

$

1,079

 

 

$

4,450

 

 

$

(219

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized (loss) gain on available-for-sale securities, net of

   taxes of $67, $(20), $121 and $(63)

 

 

(196

)

 

 

61

 

 

 

(355

)

 

 

182

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassification adjustment for gain included in net income, net

   of taxes of ($5)

 

 

 

 

 

(15

)

 

 

 

 

 

(15

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive (loss) income

 

 

(196

)

 

 

46

 

 

 

(355

)

 

 

167

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income (loss)

 

$

2,122

 

 

$

1,125

 

 

$

4,095

 

 

$

(52

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited consolidated financial statements.

4


 

AFFINITY BANCSHARES, INC.

Consolidated Statements of Changes in Stockholders’ Equity

(unaudited)

 

 

 

Three and Six Months Ended June 30, 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

 

ESOP loan payment and

   release of ESOP shares

 

$

 

 

$

(8

)

 

$

 

 

$

29

 

 

$

 

 

$

 

 

$

21

 

Issuance of restricted stock

   awards

 

 

 

 

 

17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17

 

Stock-based compensation

   expense

 

 

 

 

 

141

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

141

 

Change in unrealized gain

   on investment securities

   available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

46

 

 

 

46

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,079

 

 

 

 

 

 

1,079

 

Ending balance June 30, 2020

 

$

69

 

 

$

33,436

 

 

$

(1,268

)

 

$

(2,512

)

 

$

47,343

 

 

$

176

 

 

$

77,244

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 gain 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

 

ESOP loan payment and release of

   ESOP shares

 

$

 

 

$

13

 

 

$

 

 

$

52

 

 

$

 

 

$

 

 

$

65

 

Stock-based compensation expense

 

 

 

 

 

75

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

75

 

Change in unrealized gain on

   investment securities available-for-

   sale, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(77

)

 

 

(77

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,318

 

 

 

 

 

 

2,318

 

Ending balance June 30, 2021

 

$

69

 

 

$

67,972

 

 

$

 

 

$

(5,310

)

 

$

55,100

 

 

$

(196

)

 

$

117,635

 

 

(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)

 

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

4,450

 

 

$

(219

)

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

   net of effects of acquisition:

 

 

 

 

 

 

 

 

Depreciation and (accretion) amortization

 

 

354

 

 

 

(98

)

Stock-based compensation expense