Affinity Bancshares, Inc. Announces First Quarter 2022 Financial Results

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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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.

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.

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