Affinity bancshares, inc announces third quarter 2021 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 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. 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
