Affinity Bancshares, Inc. Announces Third 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 $1.9 million for the three months ended September 30, 2022, as compared to $1.8 million for the three months ended September 30, 2021. For the nine months ended September 30, 2022, net income was $5.4 million, as compared to $6.3 million for the nine months ended September 30, 2021.

	At or for the three months ended,
Performance Ratios:	September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021			September 30, 2021
Net income (in thousands)	$	1,861		$	1,783		$	1,791		$	1,318		$	1,805
Diluted earnings per share		0.27			0.27			0.26			0.20			0.26
Common book value per share		17.37			17.51			17.58			17.60			17.42
Tangible book value per share ^(1)		14.57			14.68			14.75			14.87			14.69
Total assets (in thousands)		776,390			766,679			760,208			788,088			789,965
Return on average assets		0.95	%		0.95	%		0.97	%		0.66	%		0.91	%
Return on average equity		6.30	%		6.13	%		5.97	%		4.36	%		6.00	%
Equity to assets		14.84	%		15.05	%		15.31	%		15.35	%		15.15	%
Tangible equity to tangible assets ^(1)		12.75	%		12.93	%		13.17	%		13.29	%		13.08	%
Net interest margin		4.12	%		4.06	%		4.47	%		3.60	%		3.74	%
Efficiency ratio		67.62	%		67.23	%		69.00	%		74.29	%		65.87	%
(1) Non-GAAP measure - see “Explanation of Certain Unaudited Non-GAAP Financial Measures” for more information and reconciliation to GAAP.

Net Income

• Net income was $1.9 million for the three months ended September 30, 2022, as compared to $1.8 million for the three months ended September 30, 2021, as a result of a decrease in Payroll Protection Program (PPP) loan-related interest and fee income, partially offset by a decrease in interest expense.
• Net income was $5.4 million for the nine months ended September 30, 2022, as compared to $6.3 million for the nine months ended September 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.

Results of Operations

• Net interest income was $7.5 million for the three months ended September 30, 2022 compared to $6.9 million for the three months ended September 30, 2021 due to an increase in loan interest, partially offset by a decrease in PPP loan-related interest and fee income. Net interest income was $22.4 million for the nine months ended September 30, 2022 compared to $22.6 million for the nine months ended September 30, 2021. The decrease for the nine months ended September 30, 2022 compared to the same period in 2021 was a result of a decrease in PPP loan-related interest and fee income, 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.
• The Company’s net interest margin increased to 4.12% from 3.78% for the three months ended September 30, 2022 and 2021. Net interest margin for the nine months ended September 30, 2022 increased slightly to 4.24% from 4.17% for the nine months ended September 30, 2021.
• Noninterest income was $593 thousand for the three months ended September 30, 2022 and $771 thousand for the three months ended September 30, 2021. For the nine months ended September 30, 2022, noninterest income was $1.8 million compared to $2.1 million for the nine months ended September 30, 2021. The decreases were a result of the Company recognizing gains on sale of other real estate and death benefits received from bank owned life insurance in previous periods.
• Non-interest expense was $5.5 million and $5.0 million for the three months ended September 30, 2022 and 2021. Non-interest expense was $16.5 million and $15.6 million for the nine months ended September 30, 2022 and 2021. The increases were due in part to the increases in salaries and employee benefits as a result of the Company’s strategic initiative to attract and retain talent.

Financial Condition

• Total assets decreased $11.7 million to $776.4 million at September 30, 2022 from $788.1 million at December 31, 2021.
• Total net loans increased $65.3 million to $641.1 million at September 30, 2022 from $575.8 million at December 31, 2021 due primarily to strategic lending staff hires made to diversify our loan portfolio.
• Deposits increased by $31.2 million to $646.0 million at September 30, 2022 compared to $614.8 million at December 31, 2021.
• Borrowings decreased by $39.0 million to $10.0 million at September 30, 2022 compared to $49.0 million at December 31, 2021 as we repaid Federal Home Loan Bank borrowings.

Asset Quality

• Non-performing loans remained unchanged at $7.0 million at September 30, 2022 and December 31, 2021.
• The allowance for loan losses as a percentage of non-performing loans was 132.8% at September 30, 2022, as compared to 122.1% at December 31, 2021.
• Allowance for loan losses was 1.43% of total loans at September 30, 2022, as compared to 1.46% of total loans at December 31, 2021.
• Net loan recoveries were $108,000 for the nine months ended September 30, 2022, as compared to $295,000 for the nine months ended September 30, 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, including terrorism, conflict and acts of war. 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 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,
	2022							2021
	Average Outstanding Balance		Interest		Average Yield/Rate			Average Outstanding Balance		Interest		Average Yield/Rate
	(Dollars in thousands)
Interest-earning assets:
Loans	$	639,115	$	7,734		4.80	%	$	568,442	$	7,332		5.12	%
Securities		44,690		289		2.56	%		40,569		216		2.13	%
Interest-earning deposits		39,384		189		1.91	%		115,330		53		0.18	%
Other investments		1,163		12		4.19	%		2,476		21		3.37	%
Total interest-earning assets		724,352		8,224		4.50	%		726,817		7,622		4.19	%
Non-interest-earning assets		49,770							64,408
Total assets	$	774,122						$	791,225
Interest-bearing liabilities:
Interest-bearing checking accounts	$	98,473	$	47		0.19	%	$	83,519	$	43		0.21	%
Market rate checking accounts		159,478		100		0.25	%		136,984		117		0.34	%
Savings accounts		83,484		187		0.89	%		93,717		100		0.43	%
Certificates of deposit		89,871		291		1.28	%		105,285		369		1.40	%
Total interest-bearing deposits		431,306		625		0.57	%		419,505		629		0.60	%
FHLB advances		13,696		73		2.12	%		49,039		132		1.07	%
Total interest-bearing liabilities		445,002		698		0.62	%		468,544		761		0.65	%
Non-interest-bearing liabilities		211,986							203,336
Total liabilities		656,988							671,880
Total stockholders' equity		117,134							119,345
Total liabilities and stockholders' equity	$	774,122						$	791,225
Net interest rate spread						3.88	%						3.54	%
Net interest income			$	7,526						$	6,861
Net interest-earning assets	$	279,350						$	258,273
Net interest margin						4.12	%						3.78	%

	For the Nine Months Ended September 30,
	2022								2021
	Average Outstanding Balance		Interest			Average Yield/Rate			Average Outstanding Balance		Interest		Average Yield/Rate
	(Dollars in thousands)
Interest-earning assets:
Loans	$	616,141	$	22,013			4.78	%	$	596,024	$	24,424		5.48	%
Securities		46,585		827			2.37	%		31,374		472		2.01	%
Interest-earning deposits		43,125		286			0.89	%		92,880		134		0.19	%
Other investments		1,117		30			3.57	%		2,273		57		3.32	%
Total interest-earning assets		706,968		23,156			4.38	%		722,551		25,087		4.63	%
Non-interest-earning assets		51,687								63,028
Total assets	$	758,655							$	785,579
Interest-bearing liabilities:
Interest-bearing checking accounts	$	97,463	$	134			0.18	%	$	88,154	$	138		0.21	%
Market rate checking accounts		151,654		282			0.25	%		130,933		378		0.39	%
Savings accounts		84,042		356			0.57	%		93,823		310		0.44	%
Certificates of deposit		91,493		840			1.23	%		114,623		1,284		1.49	%
Total interest-bearing deposits		424,652		1,612			0.51	%		427,533		2,110		0.66	%
FHLB advances		12,304		(875	)		(9.50	)%		41,471		350		1.13	%
Other borrowings		46		1			3.43	%		1,927		15		1.01	%
Total interest-bearing liabilities		437,002		738			0.23	%		470,931		2,475		0.69	%
Non-interest-bearing liabilities		203,164								199,971
Total liabilities		640,166								670,902
Total stockholders' equity		118,489								114,677
Total liabilities and stockholders' equity	$	758,655							$	785,579
Net interest rate spread							4.15	%						3.94	%
Net interest income			$	22,418							$	22,612
Net interest margin							4.24	%						4.17	%

AFFINITY BANCSHARES, INC.
Consolidated Balance Sheets
	September 30, 2022			December 31, 2021
	(unaudited)
	(In thousands)
Assets
Cash and due from bank	$	6,887		$	16,239
Interest-earning deposits in other depository institutions		33,619			95,537
Cash and cash equivalents		40,506			111,776
Investment securities available-for-sale		41,878			48,557
Other investments		1,025			2,476
Loans, net		641,062			575,825
Other real estate owned		3,538			3,538
Premises and equipment, net		4,069			3,783
Bank owned life insurance		15,637			15,377
Intangible assets		18,606			18,749
Other assets		10,069			8,007
Total assets	$	776,390		$	788,088
Liabilities and Stockholders' Equity
Liabilities:
Non-interest-bearing checking	$	204,781		$	193,940
Interest-bearing checking		93,235			91,387
Market rate checking		160,377			145,969
Savings accounts		88,840			86,745
Certificates of deposit		98,784			96,758
Total deposits		646,017			614,799
Federal Home Loan Bank advances		10,000			48,988
Accrued interest payable and other liabilities		5,152			3,333
Total liabilities		661,169			667,120
Stockholders' equity:
Preferred stock (10,000,000 shares authorized, no shares outstanding at September 30, 2022 and December 31, 2021)		—			—
Common stock (par value $0.01 per share, 40,000,000 shares authorized; 6,634,885 issued and outstanding at September 30, 2022 and 6,872,634 issued and outstanding at December 31, 2021)		65			69
Additional paid in capital		63,289			68,038
Unearned ESOP shares		(4,847	)		(5,004	)
Retained earnings		63,658			58,223
Accumulated other comprehensive loss		(6,944	)		(358	)
Total stockholders' equity		115,221			120,968
Total liabilities and stockholders' equity	$	776,390		$	788,088

AFFINITY BANCSHARES, INC.
Consolidated Statements of Income
(unaudited)
	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022			2021
	(In thousands)
Interest income:
Loans, including fees	$	7,734	$	7,332	$	22,013		$	24,424
Investment securities		301		237		857			529
Interest-earning deposits		189		53		286			134
Total interest income		8,224		7,622		23,156			25,087
Interest expense:
Deposits		625		629		1,612			2,110
Borrowings		73		132		(874	)		365
Total interest expense		698		761		738			2,475
Net interest income before provision for loan losses		7,526		6,861		22,418			22,612
Provision for loan losses		187		225		654			975
Net interest income after provision for loan losses		7,339		6,636		21,764			21,637
Noninterest income:
Service charges on deposit accounts		420		416		1,205			1,126
Other		173		355		631			980
Total noninterest income		593		771		1,836			2,106
Noninterest expenses:
Salaries and employee benefits		3,187		2,777		9,219			7,797
Occupancy		675		633		1,798			2,329
Advertising		128		116		326			296
Data processing		486		520		1,476			1,518
Writedown of premises and equipment		—		14		—			888
FHLB prepayment penalties		—		—		647			—
Other		1,014		967		3,019			2,764
Total noninterest expenses		5,490		5,027		16,485			15,592
Income before income taxes		2,442		2,380		7,115			8,151
Income tax expense		581		575		1,680			1,896
Net income	$	1,861	$	1,805	$	5,435		$	6,255
Weighted average common shares outstanding
Basic
Diluted
Basic earnings per share	$	0.28	$	0.26	$	0.81		$	0.90
Diluted earnings per share	$	0.27	$	0.26	$	0.80		$	0.89

Explanation of Certain Unaudited Non-GAAP Financial Measures

Reported amounts are presented in accordance with GAAP. 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 below for details on the earnings impact of these items.

Non-GAAP Reconciliation	September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021			September 30, 2021
Tangible book value per common share reconciliation
Book Value per common share (GAAP)	$	17.37		$	17.51		$	17.58		$	17.60		$	17.42
Effect of goodwill and other intangibles		(2.80	)		(2.83	)		(2.83	)		(2.73	)		(2.73	)
Tangible book value per common share	$	14.57		$	14.68		$	14.75		$	14.87		$	14.69
Tangible equity to tangible assets reconciliation
Equity to assets (GAAP)		14.84	%		15.05	%		15.31	%		15.35	%		15.15	%
Effect of goodwill and other intangibles		(2.09	)%		(2.12	)%		(2.14	)%		(2.06	)%		(2.07	)%
Tangible equity to tangible assets		12.75	%		12.93	%		13.17	%		13.29	%		13.08	%