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.

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AFBI Selected Data (Graphic: Business Wire)

	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

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