Affinity bancshares, inc. announces second quarter 2022 financial results
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 june 30, 2022 as compared to $2.3 million for the three months ended june 30, 2021. for the six months ended june 30, 2022, net income was $3.6 million as compared to $4.5 million for the six months ended june 30, 2021. for the three months ended, performance ratios: june 30, 2022 march 31, 2022 december 31, 2021 september 30, 2021 june 30, 2021 return on average assets (1) 0.95% 0.97% 0.66% 0.91% 1.18% return on average equity (1) 6.13% 5.97% 4.36% 6.00% 7.95% net interest margin (1) 4.06% 4.47% 3.60% 3.74% 4.06% efficiency ratio 67.23% 69.00% 74.29% 65.87% 58.30% (1) annualized. results of operations net income was $1.8 million for the three months ended june 30, 2022, as compared to $2.3 million for the three months ended june 30, 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. net income was $3.6 million for the six months ended june 30, 2022, as compared to $4.5 million for the six months ended june 30, 2021, as a result of lower interest and fee income on ppp loans partially offset by a decrease in interest expense primarily related to the recognition of remaining discounts upon the payoff of acquired federal home loan bank advances. net interest income and margin net interest income decreased $269,000, and was $7.1 million for the three months ended june 30, 2022, compared to $7.4 million for the three months ended june 30, 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. net interest income decreased $859,000, and was $14.9 million for the six months ended june 30, 2022, compared to $15.8 million for the six months ended june 30, 2021, as a result of a decrease in 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 primarily related to the recognition of remaining discounts upon the payoff of acquired federal home loan bank advances. average interest-earning assets decreased by $27.1 million, and was $702.9 million for the three months ended june 30, 2022, compared to $730.0 for the three months ended june 30, 2021. average interest-earning assets decreased by $29.1 million, and was $698.1 million for the six months ended june 30, 2022, compared to $727.2 million for the six months ended june 30, 2021. this decrease was a result of the decrease in ppp loans as forgiveness payments were received for both the three- and six-month periods ended june 30, 2022. the company’s net interest margin remained constant at 4.06% for the three months ended june 30, 2022, and june 30, 2021. net interest margin for the six months ended june 30, 2022, decreased to 4.27% from 4.33% for the six months ended june 30, 2021. for the three months ended june 30, 2022, the cost of average interest-bearing liabilities decreased to 0.47% from 0.70% for the three months ended june 30, 2021, as a result of paying off federal home loan bank advances and decreasing deposit rates related to the decrease in market rates. for the six months ended june 30, 2022, the cost of average interest-bearing liabilities decreased to 0.02% from 0.72% for the six months ended june 30, 2021, as a result of paying off federal home loan bank advances and recognizing $1.0 million in accretion from fair value adjustments on acquired advances. the total cost of deposits was 0.46% for the three months ended june 30, 2022, compared to 0.65% for the three months ended june 30, 2021. for the six months ended june 30, 2022, the total cost of deposits was 0.47% compared to 0.69% for the six months ended june 30, 2021. the decrease was due to decreasing deposit rates related to the decrease in market rates for both the three- and six-month periods ended june 30, 2022. provision for loan losses for the three months ended june 30, 2022, the provision for loan loss expense was $217,000 compared to $300,000 for the three months ended june 30, 2021. for the six months ended june 30, 2022, the provision for loan loss expense was $467,000 compared to $750,000 for the six months ended june 30, 2021. we increased our provision expense in 2021 due to the uncertainty related to the covid-19 pandemic. we continue to assess current economic conditions when determining the level of provision expense. net loan charge offs were $25,000 for the six months ended june 30, 2022, compared to net loan recoveries of $276,000 for the six months ended june 30, 2021. non-interest income for the three months ended june 30, 2022, noninterest income increased $42,000 to $648,000 compared to $606,000 for the three months ended june 30, 2021. for the six months ended june 30, 2022, noninterest income decreased $91,000 to $1.2 million compared to $1.3 million for the six months ended june 30, 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 increased $564,000, and were $5.2 million for the three months ended june 30, 2022, compared to $4.7 million for the three months ended june 30, 2021. for the six months ended june 30, 2022, operating expenses increased $431,000, and were $11.0 million for the six months ended june 30, 2022, compared to $10.6 million for the six months ended june 30, 2021. the increase in salaries and employee benefits were due to the company’s strategic initiative to attract and retain talent for both the three- and six-month periods ended june 30, 2022. income tax expense we recorded income tax expense of $552,000 for three months ended june 30, 2022, compared to $725,000 for the three months ended june 30, 2021. for the six months ended june 30, 2022, income tax expense was $1.1 million compared to $1.3 million for the six months ended june 30, 2021. the lower tax expense for both the three- and six-month periods ended june 30, 2022, was primarily due to lower pretax income. financial condition total assets decreased by $21.4 million to $766.7 million at june 30, 2022, from $788.1 million at december 31, 2021. the decrease was due primarily to a decrease in cash and cash equivalents of $56.4 million due to paying off federal home loan bank advances, partially offset by an increase in net loans. cash and equivalents decreased $56.4 million, to $55.0 million at june 30, 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 $4.0 million at june 30, 2022, as compared to december 31, 2021, as our unrealized loss on the investment portfolio increased due to the rise in interest rates. total net loans increased $38.5 million to $614.4 million at june 30, 2022 from $575.8 million at december 31, 2021, including paycheck protection program (ppp) loans of $916,000 and $17.9 million at june 30, 2022 and december 31, 2021, respectively. loans increased due to our continued success with our strategic initiatives to grow organically and diversify our loan portfolio. this includes adding additional lenders to our business development team. deposits increased by $11.4 million to $626.2 million at june 30, 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 $23.0 million. the loan-to-deposit ratio at june 30, 2022 was 98.1%, as compared to 93.7% at december 31, 2021. stockholders’ equity decreased to $115.4 million at june 30, 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 308,602 shares of common stock totaling $4.8 million with an average price per share of $15.48 as well as an increase in accumulated other comprehensive loss related to our investment portfolio. asset quality the company’s non-performing loans remained constant at $7.0 million at june 30, 2022 and december 31, 2021. the allowance for loan losses as a percentage of non-performing loans was 129.5% at june 30, 2022, as compared to 122.1% at december 31, 2021. the company’s allowance for loan losses was 1.44% of total loans at june 30, 2022, as compared to 1.46% of total loans at 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. forward-looking statements in addition to historical information, this release may contain forward-looking statements within the meaning of the private securities litigation reform act of 1995, which describe the future plans, strategies and expectations of the company. forward-looking statements can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “contemplate,” “continue,” “target” and words of similar meaning. forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. in addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. accordingly, you should not place undue reliance on such statements. we are under no duty to and do not take any obligation to update any forward-looking statements after the date of this report. factors which could have a material adverse effect on the operations of the company and its subsidiaries include, but are not limited to, changes in general economic conditions, interest rates and inflation; changes in asset quality; our ability to access cost-effective funding; fluctuations in real estate values; changes in laws or regulations; changes in technology; failures or breaches of our it security systems; our ability to introduce new products and services and capitalize on growth opportunities; our ability to successfully integrate acquired operations or assets; changes in accounting policies and practices; our ability to retain key employees; the impact of the covid-19 pandemic; and the effects of natural disasters and geopolitical events. these risks and other uncertainties are further discussed in the reports that the company files with the securities and exchange commission. average balance sheets the following tables set forth average balance sheets, average 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 june 30, 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 $ 609,646 $ 7,212 4.73 % $ 505,912 $ 6,310 4.99 % ppp loans 3,750 71 7.58 % 107,154 1,687 6.30 % securities 46,461 279 2.40 % 29,619 163 2.20 % interest-earning deposits 41,856 79 0.76 % 84,950 39 0.18 % other investments 1,187 12 3.95 % 2,346 18 3.06 % total interest-earning assets 702,900 7,653 4.36 % 729,981 8,217 4.50 % non-interest-earning assets 51,662 57,220 total assets $ 754,562 $ 787,201 interest-bearing liabilities: savings accounts $ 82,478 87 0.42 % $ 93,598 103 0.44 % interest-bearing checking accounts 97,618 45 0.19 % 84,571 44 0.21 % market rate checking accounts 150,863 93 0.25 % 131,466 128 0.39 % certificates of deposit 90,194 259 1.15 % 108,936 409 1.50 % total interest-bearing deposits 421,153 484 0.46 % 418,571 684 0.65 % fhlb advances 14,341 27 0.76 % 45,610 123 1.08 % other borrowings 137 1 1.71 % — — — total interest-bearing liabilities 435,631 512 0.47 % 464,181 807 0.70 % non-interest-bearing liabilities 202,296 206,119 total liabilities 637,927 670,300 total stockholders' equity 116,635 116,901 total liabilities and stockholders' equity $ 754,562 $ 787,201 net interest income $ 7,141 $ 7,410 net interest rate spread (1) 3.89 % 3.80 % net interest-earning assets (2) $ 267,269 $ 265,800 net interest margin (3) 4.06 % 4.06 % average interest-earning assets to interest- bearing liabilities 161.35 % 157.26 % (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 six months ended june 30, 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 $ 596,429 $ 14,004 4.70 % $ 501,596 $ 12,514 4.99 % ppp loans 8,035 275 6.84 % 115,260 4,577 7.94 % securities 47,549 539 2.27 % 26,701 256 1.92 % interest-earning deposits 45,026 97 0.43 % 81,469 82 0.20 % other investments 1,094 17 3.21 % 2,169 36 3.29 % total interest-earning assets 698,133 14,932 4.28 % 727,195 17,465 4.80 % non-interest-earning assets 52,661 55,514 total assets $ 750,794 $ 782,709 interest-bearing liabilities: savings accounts $ 84,326 169 0.40 % $ 93,881 210 0.45 % interest-bearing checking accounts 96,949 87 0.18 % 90,509 95 0.21 % market rate checking accounts 147,677 182 0.25 % 127,858 261 0.41 % certificates of deposit 92,318 549 1.19 % 119,366 915 1.53 % total interest-bearing deposits 421,270 987 0.47 % 431,614 1,481 0.69 % fhlb advances 11,596 (948 ) (16.35 )% 37,624 219 1.16 % other borrowings 69 1 1.70 % 69 14 41.69 % total interest-bearing liabilities 432,935 41 0.02 % 469,307 1,714 0.72 % non-interest-bearing liabilities 198,680 201,098 total liabilities 631,615 670,405 total stockholders' equity 119,179 112,304 total liabilities and stockholders' equity $ 750,794 $ 782,709 net interest income $ 14,891 $ 15,751 net interest rate spread (1) 4.26 % 4.08 % net interest-earning assets (2) $ 265,197 $ 257,888 net interest margin (3) 4.27 % 4.33 % average interest-earning assets to interest-bearing liabilities 161.26 % 154.95 % (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 june 30, 2022 december 31, 2021 (unaudited) (audited) (in thousands) assets cash and due from banks, including reserve requirement of $0 at june 30, 2022 and december 31, 2021 $ 8,111 $ 16,239 interest-earning deposits in other depository institutions 47,288 95,537 cash and cash equivalents 55,399 111,776 investment securities available-for-sale 44,551 48,557 other investments 1,400 2,476 loans, net 614,358 575,825 other real estate owned 3,538 3,538 premises and equipment, net 4,048 3,783 bank owned life insurance 15,549 15,377 intangible assets 18,653 18,749 accrued interest receivable and other assets 9,183 8,007 total assets $ 766,679 $ 788,088 liabilities and stockholders' equity liabilities: savings accounts $ 82,742 $ 86,745 interest-bearing checking 96,176 91,387 market rate checking 159,900 145,969 non-interest-bearing checking 198,177 193,940 certificates of deposit 89,180 96,758 total deposits 626,175 614,799 federal home loan bank advances 20,000 48,988 accrued interest payable and other liabilities 5,133 3,333 total liabilities 651,308 667,120 stockholders' equity: common stock (par value $0.01 per share, 40,000,000 shares authorized; 6,590,362 issued and outstanding at june 30, 2022 and 6,872,634 issued and outstanding at december 31, 2021 65 69 preferred stock (10,000,000 shares authorized, no shares outstanding at june 30, 2022 and december 31, 2021 — — additional paid in capital 63,497 68,038 unearned esop shares (4,899 ) (5,004 ) retained earnings 61,797 58,223 accumulated other comprehensive loss (5,089 ) (358 ) total stockholders' equity 115,371 120,968 total liabilities and stockholders' equity $ 766,679 $ 788,088 affinity bancshares, inc. consolidated statements of income (unaudited) three months ended june 30, six months ended june 30, 2022 2021 2022 2021 (in thousands) interest income: loans, including fees $ 7,283 $ 7,997 $ 14,279 $ 17,091 investment securities, including dividends 291 181 556 292 interest-earning deposits 79 39 97 82 total interest income 7,653 8,217 14,932 17,465 interest expense: deposits 484 684 987 1,481 borrowings 28 123 (947 ) 233 total interest expense 512 807 40 1,714 net interest income before provision for loan losses 7,141 7,410 14,892 15,751 provision for loan losses 217 300 467 750 net interest income after provision for loan losses 6,924 7,110 14,425 15,001 noninterest income: service charges on deposit accounts 393 376 785 709 other 255 230 458 625 total noninterest income 648 606 1,243 1,334 noninterest expenses: salaries and employee benefits 2,959 2,511 5,901 4,894 deferred compensation 64 62 131 126 occupancy 541 644 1,123 1,696 advertising 118 100 198 180 data processing 497 517 990 999 other real estate owned — 7 — 19 net (gain) on sale of other real estate owned — (126 ) — (127 ) legal and accounting 203 226 385 402 organizational dues and subscriptions 133 91 264 161 director compensation 51 50 102 100 federal deposit insurance premiums 52 67 112 140 writedown of premises and equipment — — — 873 fhlb prepayment penalties — — 647 — other 619 524 1,142 1,101 total noninterest expenses 5,237 4,673 10,995 10,564 income before income taxes 2,335 3,043 4,673 5,771 income tax expense 552 725 1,099 1,321 net income $ 1,783 $ 2,318 $ 3,574 $ 4,450 basic earnings per share $ 0.27 $ 0.34 $ 0.53 $ 0.65 diluted earnings per share $ 0.27 $ 0.34 $ 0.53 $ 0.64 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 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. june 30, 2022 march 31, 2022 december 31, 2021 september 30, 2021 june 30, 2021 (in thousands) non-gaap reconciliation total loans $ 623,359 $ 601,693 $ 584,384 $ 571,170 $ 590,011 plus: fair value marks 1,157 1,239 1,350 1,422 1,529 deferred loan fees 873 958 958 1,077 1,666 less: payroll protection program loans 916 7,146 18,124 32,204 73,020 indirect auto dealer reserve 2,386 2,058 1,846 1,724 1,495 other loan adjustments 82 69 224 102 447 gross loans $ 622,005 $ 594,617 $ 566,498 $ 539,639 $ 518,244 june 30, 2022 march 31, 2022 december 31, 2021 september 30, 2021 june 30, 2021 (in thousands) non-gaap reconciliation net income $ 1,783 $ 1,791 $ 1,318 $ 1,805 $ 2,318 less: ppp interest income 9 30 59 121 269 ppp fee income 62 174 271 741 1,419 plus: tax effect 17 47 84 208 403 non-gaap net income $ 1,729 $ 1,634 $ 1,072 $ 1,151 $ 1,033 june 30, 2022 march 31, 2022 december 31, 2021 september 30, 2021 june 30, 2021 (in thousands) non-gaap reconciliation total equity $ 115,371 $ 116,358 $ 120,968 $ 119,703 $ 117,635 minus: goodwill 17,219 17,219 17,219 17,219 17,219 core deposit intangible 1,435 1,483 1,530 1,578 1,626 tangible common equity 96,717 97,656 102,219 100,906 98,790 divided by: outstanding shares 6,590 6,619 6,873 6,873 6,873 tangible book value per share $ 14.68 $ 14.75 $ 14.87 $ 14.68 $ 14.37
