AFBI Affinity Bancshares Inc

Affinity Bancshares, Inc. (NASDAQ:“AFBI”) (the “Company”), the holding company for Affinity Bank (the “Bank”), today announced net income of $1.8 million for the three months ended March 31, 2022 as compared to $2.1 million for the three months ended March 31, 2021.

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For the three months ended,

Performance Ratios:

March 31, 2022

December 31, 2021

September 30, 2021

June 30, 2021

March 31, 2021

Return on average assets

 

0.97%

 

0.66%

 

0.91%

 

1.18%

 

1.11%

Return on average equity

5.97%

4.36%

6.00%

7.95%

8.03%

Net interest margin

 

4.53%

 

3.64%

 

3.78%

 

4.10%

 

4.65%

Efficiency ratio

69.00%

74.29%

65.87%

58.30%

64.96%

Results of Operations

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

Net Interest Income and Margin

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

Provision for Loan Losses

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

Non-interest Income

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

Non-interest Expense

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

Income Tax Expense

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

Financial Condition

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

Asset Quality

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

About Affinity Bancshares, Inc.

The Company is a Maryland corporation based in Covington, Georgia. The Company’s banking subsidiary, Affinity Bank, opened in 1928 and currently operates a full-service office in Atlanta, Georgia, two full-service offices in Covington, Georgia, and a loan production office serving the Alpharetta and Cumming, Georgia markets.

Average Balance Sheets

The following table sets forth average balance sheets, average annualized yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are monthly average balances. Non-accrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense.

 

 

For the Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

 

 

Average Outstanding Balance

 

 

Interest

 

 

Average Yield/Rate

 

 

Average Outstanding Balance

 

 

Interest

 

 

Average Yield/Rate

 

 

 

(Dollars in thousands)

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans excluding PPP loans

 

$

574,393

 

 

$

6,792

 

 

 

4.73

%

 

$

490,660

 

 

$

6,204

 

 

 

5.06

%

PPP loans

 

 

12,369

 

 

 

204

 

 

 

6.59

%

 

 

123,457

 

 

 

2,890

 

 

 

9.36

%

Securities

 

 

48,648

 

 

 

260

 

 

 

2.14

%

 

 

23,751

 

 

 

94

 

 

 

1.59

%

Interest-earning deposits

 

 

48,231

 

 

 

17

 

 

 

0.14

%

 

 

77,950

 

 

 

42

 

 

 

0.22

%

Other investments

 

 

1,000

 

 

 

6

 

 

 

2.33

%

 

 

1,990

 

 

 

18

 

 

 

3.56

%

Total interest-earning assets

 

 

684,641

 

 

 

7,279

 

 

 

4.25

%

 

 

717,808

 

 

 

9,248

 

 

 

5.15

%

Non-interest-earning assets

 

 

62,343

 

 

 

 

 

 

 

 

 

62,054

 

 

 

 

 

 

 

Total assets

 

$

746,984

 

 

 

 

 

 

 

 

$

779,862

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Savings accounts

 

$

86,195

 

 

 

83

 

 

 

0.38

%

 

$

94,167

 

 

 

107

 

 

 

0.45

%

Interest-bearing checking accounts

 

 

96,273

 

 

 

42

 

 

 

0.17

%

 

 

96,513

 

 

 

52

 

 

 

0.22

%

Market rate checking accounts

 

 

144,455

 

 

 

88

 

 

 

0.25

%

 

 

124,209

 

 

 

133

 

 

 

0.43

%

Certificates of deposit

 

 

94,465

 

 

 

290

 

 

 

1.23

%

 

 

129,913

 

 

 

506

 

 

 

1.56

%

Total interest-bearing deposits

 

 

421,388

 

 

 

503

 

 

 

0.48

%

 

 

444,802

 

 

 

798

 

 

 

0.72

%

FHLB advances (4)

 

 

8,821

 

 

 

(975

)

 

 

(44.20

)%

 

 

29,549

 

 

 

95

 

 

 

1.29

%

PPPLF borrowings

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4,150

 

 

 

4

 

 

 

0.35

%

Other borrowings

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,555

 

 

 

10

 

 

 

2.69

%

Total interest-bearing liabilities

 

 

430,209

 

 

 

(472

)

 

 

(0.44

)%

 

 

480,056

 

 

 

907

 

 

 

0.76

%

Non-interest-bearing liabilities

 

 

195,024

 

 

 

 

 

 

 

 

 

192,150

 

 

 

 

 

 

 

Total liabilities

 

 

625,233

 

 

 

 

 

 

 

 

 

672,206

 

 

 

 

 

 

 

Total stockholders' equity

 

 

121,751

 

 

 

 

 

 

 

 

 

107,656

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

 

$

746,984

 

 

 

 

 

 

 

 

$

779,862

 

 

 

 

 

 

 

Net interest income

 

 

 

 

$

7,751

 

 

 

 

 

 

 

 

$

8,341

 

 

 

 

Net interest rate spread (1)

 

 

 

 

 

 

 

 

4.69

%

 

 

 

 

 

 

 

 

4.39

%

Net interest-earning assets (2)

 

$

254,432

 

 

 

 

 

 

 

 

$

237,752

 

 

 

 

 

 

 

Net interest margin (3)

 

 

 

 

 

 

 

 

4.53

%

 

 

 

 

 

 

 

 

4.65

%

Average interest-earning assets to

interest-bearing liabilities

 

 

159.14

%

 

 

 

 

 

 

 

 

149.53

%

 

 

 

 

 

 

(1)

Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.

(2)

Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3)

Net interest margin represents net interest income divided by average total interest-earning assets.

(4)

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

AFFINITY BANCSHARES, INC.

Consolidated Balance Sheets

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

(unaudited)

 

 

(audited)

 

 

 

(In thousands)

 

Assets

 

 

 

 

 

 

 

 

Cash and due from banks, including reserve requirement of $0 at March 31, 2022 and December 31, 2021

 

$

14,302

 

 

$

16,239

 

Interest-earning deposits in other depository institutions

 

 

55,596

 

 

 

95,537

 

Cash and cash equivalents

 

 

69,898

 

 

 

111,776

 

Investment securities available-for-sale

 

 

45,911

 

 

 

48,557

 

Other investments

 

 

1,022

 

 

 

2,476

 

Loans, net

 

 

592,887

 

 

 

575,825

 

Other real estate owned

 

 

3,538

 

 

 

3,538

 

Premises and equipment, net

 

 

3,955

 

 

 

3,783

 

Bank owned life insurance

 

 

15,462

 

 

 

15,377

 

Intangible assets

 

 

18,701

 

 

 

18,749

 

Accrued interest receivable and other assets

 

 

8,834

 

 

 

8,007

 

Total assets

 

$

760,208

 

 

$

788,088

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Savings accounts

 

$

86,717

 

 

$

86,745

 

Interest-bearing checking

 

 

95,555

 

 

 

91,387

 

Market rate checking

 

 

151,443

 

 

 

145,969

 

Non-interest-bearing checking

 

 

202,042

 

 

 

193,940

 

Certificates of deposit

 

 

92,288

 

 

 

96,758

 

Total deposits

 

 

628,045

 

 

 

614,799

 

Federal Home Loan Bank advances

 

 

10,000

 

 

 

48,988

 

Accrued interest payable and other liabilities

 

 

5,805

 

 

 

3,333

 

Total liabilities

 

 

643,850

 

 

 

667,120

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Common stock (par value $0.01 per share, 40,000,000 shares authorized; 6,618,685 issued and outstanding at March 31, 2022 and 6,872,634 issued and outstanding at December 31, 2021)

 

 

66

 

 

 

69

 

Preferred stock (10,000,000 shares authorized, no shares outstanding at March 31, 2022 and December 31, 2021)

 

 

—

 

 

 

—

 

Additional paid in capital

 

 

64,241

 

 

 

68,038

 

Unearned ESOP shares

 

 

(4,952

)

 

 

(5,004

)

Retained earnings

 

 

60,014

 

 

 

58,223

 

Accumulated other comprehensive loss

 

 

(3,011

)

 

 

(358

)

Total stockholders' equity

 

 

116,358

 

 

 

120,968

 

Total liabilities and stockholders' equity

 

$

760,208

 

 

$

788,088

 

AFFINITY BANCSHARES, INC.

Consolidated Statements of Income

(unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

 

 

(In thousands)

 

Interest income:

 

 

 

 

 

 

Loans, including fees

 

$

6,996

 

 

$

9,094

 

Investment securities, including dividends

 

 

266

 

 

 

112

 

Interest-earning deposits

 

 

17

 

 

 

42

 

Total interest income

 

 

7,279

 

 

 

9,248

 

Interest expense:

 

 

 

 

 

 

Deposits

 

 

503

 

 

 

798

 

Borrowings

 

 

(975

)

 

 

109

 

Total interest expense

 

 

(472

)

 

 

907

 

Net interest income before provision for loan losses

 

 

7,751

 

 

 

8,341

 

Provision for loan losses

 

 

250

 

 

 

450

 

Net interest income after provision for loan losses

 

 

7,501

 

 

 

7,891

 

Noninterest income:

 

 

 

 

 

 

Service charges on deposit accounts

 

 

392

 

 

 

334

 

Other

 

 

203

 

 

 

395

 

Total noninterest income

 

 

595

 

 

 

729

 

Noninterest expenses:

 

 

 

 

 

 

Salaries and employee benefits

 

 

2,942

 

 

 

2,383

 

Deferred compensation

 

 

66

 

 

 

64

 

Occupancy

 

 

582

 

 

 

1,052

 

Advertising

 

 

80

 

 

 

80

 

Data processing

 

 

494

 

 

 

481

 

Other real estate owned

 

 

—

 

 

 

12

 

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

 

 

—

 

 

 

(1

)

Legal and accounting

 

 

182

 

 

 

177

 

Organizational dues and subscriptions

 

 

131

 

 

 

71

 

Director compensation

 

 

51

 

 

 

50

 

Federal deposit insurance premiums

 

 

60

 

 

 

73

 

Writedown of premises and equipment

 

 

—

 

 

 

873

 

FHLB prepayment penalties

 

 

647

 

 

 

—

 

Other

 

 

523

 

 

 

577

 

Total noninterest expenses

 

 

5,758

 

 

 

5,892

 

Income before income taxes

 

 

2,338

 

 

 

2,728

 

Income tax expense

 

 

547

 

 

 

596

 

Net income

 

$

1,791

 

 

$

2,132

 

Basic earnings per share

 

$

0.26

 

 

$

0.31

 

Diluted earnings per share

 

$

0.26

 

 

$

0.31

 

Explanation of Non-GAAP Financial Measures

Reported amounts are presented in accordance with GAAP. The Company’s management believes that the supplemental non-GAAP information, which consists of reported net income less interest and fees income on PPP loans plus expenses related to the write-off of a branch building and lease provides a better comparison of the amount of the Company’s earnings. Management also believes that reported loans less PPP loans, deferred loan fees and other loan adjustments (consisting of loans in process), provides a better comparison of the amount of the Company’s loan portfolio. Additionally, the Company believes this information is utilized by regulators and market analysts to evaluate a company’s financial condition and, therefore, such information is useful to investors. These disclosures should not be viewed as a substitute for financial results in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies. Refer to the Non-GAAP Reconciliation table at the end of this document for details on the earnings impact of these items.

March 31, 2022

December 31, 2021

September 30, 2021

June 30, 2021

March 31, 2021

(In thousands)

Non-GAAP Reconciliation

Total Loans

 

$

601,693

 

$

584,384

 

$

571,170

 

$

590,011

 

$

626,096

Plus:

Fair Value Marks

 

 

1,239

 

 

1,350

 

 

1,422

 

 

1,529

 

 

1,607

Deferred Loan fees

 

 

958

 

 

958

 

1,077

 

1,666

 

2,466

Less:

 

 

 

 

 

 

 

 

 

 

Payroll Protection

 

 

 

Program Loans

 

 

7,146

 

 

18,124

 

32,204

 

73,020

 

126,054

Indirect Auto

 

 

 

 

 

 

 

 

 

 

Dealer Reserve

 

 

2,058

 

 

1,846

 

 

1,724

 

 

1,495

 

 

1,302

Other Loan

 

Adjustments

 

 

69

 

 

224

 

102

 

447

 

0

Gross Loans

 

$

594,617

 

$

566,498

 

$

539,639

 

$

518,244

 

$

502,813

 

March 31, 2022

December 31, 2021

September 30, 2021

June 30, 2021

March 31, 2021

(In thousands)

Non-GAAP Reconciliation

Net Income

 

$

1,791

 

$

1,318

 

$

1,805

 

$

2,318

 

$

2,132

Less:

PPP Interest Income

 

 

30

 

 

59

 

 

121

 

 

269

 

 

312

PPP Fee Income

 

174

 

271

 

741

 

1,419

 

2,578

Plus:

 

 

 

 

 

 

 

 

 

 

Branch Building and

 

 

 

 

 

 

 

 

 

 

Lease Write-Off

 

 

 

 

 

 

 

 

 

 

1,186

Tax Effect

 

47

 

84

 

208

 

403

 

372

Non-GAAP Net Income

 

$

1,634

 

$

1,072

 

$

1,151

 

$

1,033

 

$

800

 

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

Edward J. Cooney Chief Executive Officer (678)742-9990