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.
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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
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