Affinity Bancshares, Inc. AFBI US Equity☆

ITEM 1A. Risk Factors

Not applicable, as Affinity Bancshares, Inc. is a “smaller reporting company.”

ITEM 1B. Unresolved Staff Comments

None.

ITEM 2. Properties

As of December 31, 2020, the net book value of our office properties was $6.5 million, and the net book value of our furniture, fixtures and equipment was $2.0 million. The following table sets forth information regarding our offices.

Location Leased or Owned Year Acquired or Leased Net Book Value of Real Property

(In thousands)

Main Office:

Other Properties:

Former Southside Branch Building 2006 927

Bypass Road & Highway 36 Owned/Land

10131 Carlin Avenue Leased

8460 Dr. M. L. King, Jr. Avenue

Affinity Bank Office: Leased 2017 N/A

400 Galleria Parkway SE

Loan Production Office Leased 2019 N/A

5755 North Point Parkway

Affinity Bank Dealer Select Office Leased 2021 N/A

310 North Broad Street

We believe that current facilities are adequate to meet our present and foreseeable needs, subject to possible future expansion.

ITEM 3. Legal Proceedings

Periodically, we are involved in claims and lawsuits, such as claims to enforce liens, condemnation proceedings on properties in which we hold security interests, claims involving the making and servicing of real property loans and other issues incident to our business. We are not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows.

ITEM 4. Mine Safety Disclosures

Not applicable.

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PART II

Our common stock is traded on the Nasdaq Capital Market under the symbol “AFBI.” As of March 25, 2021 we had 356 stockholders of record (excluding the number of persons or entities holding stock in street name through various brokerage firms), and 6,755,160 shares of common stock outstanding.

The payment and amount of any dividend payments will be subject to statutory and regulatory limitations, and will depend upon a number of factors, including the following: regulatory capital requirements; our financial condition and results of operations; our other uses of funds for the long-term value of stockholders; tax considerations; the Federal Reserve Board’s current regulations restricting the waiver of dividends by mutual holding companies; and general economic conditions.

The Federal Reserve Board has issued a policy statement providing that dividends should be paid only out of current earnings and only if our prospective rate of earnings retention is consistent with our capital needs, asset quality and overall financial condition. Regulatory guidance also provides for prior regulatory consultation with respect to capital distributions in certain circumstances such as where the holding company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the holding company’s overall rate or earnings retention is inconsistent with its capital needs and overall financial condition. In addition, Affinity Bank’s ability to pay dividends will be limited if it does not have the capital conservation buffer required by the new capital rules, which may limit our ability to pay dividends to stockholders. No assurances can be given that any dividends will be paid or that, if paid, will not be reduced or eliminated in the future. Special cash dividends, stock dividends or returns of capital, to the extent permitted by regulations and policies of the Federal Reserve Board and the Office of the Comptroller of the Currency, may be paid in addition to, or in lieu of, regular cash dividends.

There were no sales of unregistered securities during the quarter ended December 31, 2020.

There were no repurchases of shares of the Company’s common stock during the three months Ended December 31, 2020.

On January 20, 2021, Affinity Bancshares, Inc. (the “Company”) completed the sale of 3,701,509 shares of its common stock, par value $0.01 per share, in connection with the mutual-to-stock conversion of Community First Bancshares, MHC. As of March 15, 2021, the Company had invested $16.3 million of the net proceeds it received from the sale into the Bank's operations and has retained the remaining amount for general corporate purposes.

The effective date of the Company’s registration statement (Commission No. 333-248745) was November 10, 2020. The Company registered for offer and sale shares of common stock, par value $0.01, at a sales price of $10.00 per share.

The selling agent who assisted the Company in the sale of its common stock was Performance Trust Capital Partners, LLC (“PTCP”). For its services in the subscription and community offerings, PTCP received a fee of 1.0% of the aggregate dollar amount of all shares of common stock sold in the subscription offering. No fee was paid on any shares purchased by the Company’s and Newton Federal Bank’s directors, trustees, officers, employees or their immediate families and their personal trusts, and shares purchased by the Company’s employee benefit plans or trusts.

From the effective date of the registration statement until March 26, 2021 the Company incurred expenses in connection with the offer and sale of the common stock totaling $1.6 million, resulting in net proceeds to the Company of $32.4 million.

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ITEM 6. Selected Financial Data

The summary information presented below at each date or for each of the periods presented is derived in part from the financial statements of Community First Bancshares, Inc. and Affinity Bank. The financial condition data at December 31, 2020 and 2019, and the operating data for the years ended December 31, 2020 and 2019, were derived from the audited consolidated financial statements of Community First Bancshares, Inc. included elsewhere in this annual report. The information at and for the three months ended December 31, 2018 and the years ended September 30, 2018, 2017 and 2016 was derived in part from audited financial statements that are not included in this annual report. The following information is only a summary, and should be read in conjunction with our consolidated financial statements and notes included in this annual report.

At December 31, At September 30,

(In thousands)

Selected Financial Condition Data:

Paycheck Protection Program Liquidity Facility borrowings 100,813 — — — — —

Other borrowings 5,000 — — — — —

(In thousands)

Selected Operating Data:

Provision for loan losses 2,000 — — 500 — —

Earnings per share (basic and diluted) $ 0.41 $ 0.05 $ 0.02 $ 0.06 $ 0.08 N/A

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Performance Ratios:

Capital Ratios:

Asset Quality Ratios:

Other:

Number of part-time employees 4 1 1 0 2 2

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This discussion and analysis reflects our consolidated financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. The information in this section has been derived from the consolidated financial statements, which appear elsewhere in this annual report. You should read the information in this section in conjunction with the other business and financial information provided in this annual report.

Our financial performance between the 2020 and 2019 periods was generally impacted by our acquisition of ABB Financial Group, Inc. (“ABB”) and its wholly owned banking subsidiary, Affinity Bank, in January 2020. Our results of operations and average balances for the 2020 periods include partial period contributions from the acquisition, as compared to no contribution from the acquisition in the 2019 periods.

Overview

Total assets increased $531.3 million, or 166.4%, to $850.6 million at December 31, 2020 from $319.3 million at December 31, 2019. The increase was primarily due to increases in loans and cash and cash equivalents, as a result of our acquisition of ABB and Affinity Bank in January 2020, the origination of PPP loans, and increases in cash equivalents resulting from the deposit of PPP loan proceeds into customers’ accounts at Affinity Bank. Loans increased $344.3 million, or 138.9%, to $592.3 million at December 31, 2020 from $248.0 million at December 31, 2019. Cash and cash equivalents increased to $178.3 million at December 31, 2020, from $48.1 million at December 31, 2019. Securities available-for-sale increased to $24.0 million at December 31, 2020, from $3.8 million at December 31, 2019 due to the acquisition of ABB Financial and Affinity Bank.

Net income increased $2.7 million, or 769.9%, to $3.1 million for the year ended December 31, 2020, compared to $355,000 for the year ended December 31, 2019. The increase was due primarily to an increase in interest income on loans, due to our acquisition of ABB and Affinity Bank in January 2020, partially offset by increases in interest expense on deposits and noninterest expenses. Net interest income before provision for loan losses increased $12.5 million, primarily as a result of an increase in interest income on loans. The provision for loan losses increased to $2.0 million for the year ended December 31, 2020, in light of the COVID-19 pandemic and its effects on economic conditions, compared to no provision for the year ended December 31, 2019. Noninterest income increased $511,000, or 31.1%, to $2.2 million for the year ended December 31, 2020 from $1.6 million for the year ended December 31, 2019, primarily as a result of an increase in service charges on deposit accounts. Noninterest expenses increased $7.4 million, or 52.9%, to $21.4 million for the year ended December 31, 2020, from $14.0 million for the year ended December 31, 2019, primarily as a result of increases in salaries and employee benefits, occupancy, data processing, legal and accounting, and other noninterest expenses.Income tax expense increased by $821,000 for the year ended December 31, 2020, as a result of increased income before income taxes.

A rise in interest rates will present us with a slight challenge in managing our interest rate risk. As a general matter, our interest-bearing liabilities reprice or mature more quickly than our interest-earning assets, which can result in interest expense increasing more rapidly than increases in interest income as interest rates rise. Therefore, increases in interest rates may adversely affect our net interest income and net economic value, which in turn would likely have an adverse effect on our results of operations. As described in “—Management of Market Risk,” our net interest income and our net economic value would decrease as a result of an instantaneous increase in interest rates. To help manage interest rate risk, we promote core deposit products, we continue to diversify our loan portfolio by adding more commercial-related loans, and we proactively manage the liability-side of the balance sheet by adjusting rates offered on our interest-bearing accounts and reviewing long-term funding options to help minimize the compression on our net interest margin. See “—Management of Market Risk.”

Summary of Significant Accounting Policies

The discussion and analysis of the financial condition and results of operations are based on our consolidated financial statements, which are prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of these consolidated financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. We consider the accounting policies discussed below to be significant accounting policies. The estimates and assumptions that we use are based on historical experience and various other factors and are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations.

The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company” we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We determined to take advantage of the

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benefits of this extended transition period. Accordingly, our financial statements may not be comparable to companies that comply with such new or revised accounting standards.

The following represent our significant accounting policies:

Business Combinations and Valuation of Loans Acquired in Business Combinations. We account for acquisitions under Financial Accounting Standards Board (“FASB”) ASC Topic 805, Business Combinations, which requires the use of the acquisition method of accounting. Assets acquired and liabilities assumed in a business combination are recorded at estimated fair value on their purchase date. As provided for under U.S. GAAP, management has up to 12 months following the date of the acquisition to finalize the fair values of acquired assets and assumed liabilities, where it is not possible to estimate the acquisition date fair value upon consummation.

In particular, the valuation of acquired loans involves significant estimates, assumptions and judgment based on information available as of the acquisition date. Substantially all loans acquired in the transaction are evaluated in pools of loans with similar characteristics; and since the estimated fair value of acquired loans includes a credit consideration, no carryover of any previously recorded allowance for loan losses is recorded at acquisition. A number of factors are considered in determining the estimated fair value of purchased loans including, among other things, the remaining life of the acquired loans, estimated prepayments, estimated loss ratios, estimated value of the underlying collateral, estimated holding periods, contractual interest rates compared to market interest rates, and net present value of cash flows expected to be received.

In determining the Day 1 Fair Values of acquired loans, which are the fair value on all acquired loans at the time of the acquisition, management calculates a nonaccretable difference (the credit mark component of the acquired loans) and an accretable difference (the market rate or yield component of the acquired loans). The nonaccretable difference is the difference between the undiscounted contractually required payments and the undiscounted cash flows expected to be collected in accordance with management’s determination of the Day 1 Fair Values. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in cash flows will result in a reversal of the provision for loan losses to the extent of prior charges and then an adjustment to accretable yield, and nonaccretable difference which would have a positive impact on interest income.

The accretable yield on acquired loans is the difference between the expected cash flows and the initial investment in the acquired loans. The accretable yield is recognized into earnings using the effective yield method over the term of the loans. Management separately monitors the acquired loan portfolio and periodically reviews loans contained within this portfolio against the factors and assumptions used in determining the Day 1 Fair Values.

Allowance for Loan Losses. The allowance for loan losses is a reserve for estimated credit losses on individually evaluated loans determined to be impaired as well as estimated credit losses inherent in the loan portfolio. Actual credit losses, net of recoveries, are deducted from the allowance for loan losses. Loans are charged off when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance for loan losses. A provision for loan losses, which is a charge against earnings, is recorded to bring the allowance for loan losses to a level that, in management’s judgment, is adequate to absorb probable losses in the loan portfolio. Management’s evaluation process used to determine the appropriateness of the allowance for loan losses is subject to the use of estimates, assumptions, and judgment. The evaluation process involves gathering and interpreting many qualitative and quantitative factors which could affect probable credit losses. Because interpretation and analysis involves judgment, current economic or business conditions can change, and future events are inherently difficult to predict, the anticipated amount of estimated loan losses and therefore the appropriateness of the allowance for loan losses could change significantly.

The allocation methodology applied by Affinity Bank is designed to assess the appropriateness of the allowance for loan losses and includes allocations for specifically identified impaired loans and loss factor allocations for all remaining loans, with a component primarily based on historical loss rates and a component primarily based on other qualitative factors. The methodology includes evaluation and consideration of several factors, such as, but not limited to, management’s ongoing review and grading of loans, facts and issues related to specific loans, historical loan loss and delinquency experience, trends in past due and non-accrual loans, existing risk characteristics of specific loans or loan pools, the fair value of underlying collateral, current economic conditions and other qualitative and quantitative factors which could affect potential credit losses. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions or circumstances underlying the collectability of loans. Because each of the criteria used is subject to change, the allocation of the allowance for loan losses is made for analytical purposes and is not necessarily indicative of the trend of future loan losses in any particular loan category. The total allowance is available to absorb losses from any segment of the loan portfolio. Management believes the allowance for loan losses is appropriate at December 31, 2020 and 2019. The allowance analysis is reviewed by the board of directors on a quarterly basis in compliance with regulatory requirements. In addition, various regulatory agencies periodically review the allowance for loan losses. As a result of such reviews, we may have to adjust our allowance for loan losses.

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However, regulatory agencies are not directly involved in the process of establishing the allowance for loan losses as the process is the responsibility of Affinity Bank and any increase or decrease in the allowance is the responsibility of management.

Income Taxes. The assessment of income tax assets and liabilities involves the use of estimates, assumptions, interpretation, and judgment concerning certain accounting pronouncements and federal and state tax codes. There can be no assurance that future events, such as court decisions or positions of federal and state taxing authorities, will not differ from management’s current assessment, the impact of which could be significant to the results of operations and reported earnings.

The Company files a consolidated federal and a state income tax return. Amounts provided for income tax expense are based on income reported for financial statement purposes and do not necessarily represent amounts currently payable under tax laws. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax law rates applicable to the periods in which the differences are expected to affect taxable income. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income tax expense. Valuation allowances are established when it is more likely than not that a portion of the full amount of the deferred tax asset will not be realized. In assessing the ability to realize deferred tax assets, management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies. The Company may also recognize a liability for unrecognized tax benefits from uncertain tax positions. Unrecognized tax benefits represent the differences between a tax position taken or expected to be taken in a tax return and the benefit recognized and measured in the consolidated financial statements. Penalties related to unrecognized tax benefits are classified as income tax expense.

Impact of COVID-19 Outbreak

During 2020, global financial markets experienced significant volatility resulting from the spread of COVID-19. In March 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic and the United States declared a National Public Health Emergency. The COVID-19 pandemic has restricted the level of economic activity in our markets. In response to the pandemic, the governments of the state of Georgia and of most other states have taken preventative or protective actions, such as imposing restrictions on travel and business operations, advising or requiring individuals to limit or forego time outside of their homes, and ordering temporary closures of businesses that have been deemed to be non-essential. These measures have dramatically increased unemployment in the United States and have negatively impacted many businesses, and thereby threatened the repayment ability of some of our borrowers.

To address the economic impact in the United States, the CARES Act was signed into law on March 27, 2020. The CARES Act included a number of provisions that affected us, including accounting relief for troubled debt restructurings (“TDRs”). The CARES Act also established the PPP through the SBA, which allowed us to lend money to small businesses to maintain employee payrolls through the crisis with guarantees from the SBA. Under this program, loan amounts may be forgiven if the borrower maintains employee payrolls and meet certain other requirements. During the year ended December 31, 2020, we received SBA authorization for 1,171 PPP loans totaling $130.3 million. We had $101.7 million in PPP loans outstanding as of December 31, 2020.

In addition, the Federal Reserve took steps to bolster the economy by, among other things, reducing the federal funds rate and the discount-window borrowing rate to near zero.

In response to the pandemic, we have implemented protocols and processes to help protect our employees, customers and communities. These measures include:

We have implemented various consumer and commercial loan modification programs to provide our borrowers relief from the economic impacts of COVID-19. Based on guidance in the CARES Act, COVID-19 related modifications to loans that werecurrent as of December 31, 2019 are exempt from TDR classification under U.S. GAAP. In addition, the bank regulatory agencies issued interagency guidance stating that COVID-19 related short-term modifications (i.e., nine months or less) granted for loans that were current as of the loan modification program implementation date are not TDRs. During the year ended December 31, 2020, we

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granted short-term deferrals on 737loans totaling $186.9 million that were otherwise performing (including $115.0 million of dental practice loans). As of December 31, 2020, all of these loans had returned to normal payment status.

Given the unprecedented uncertainty and evolving economic effects and social impacts of the COVID-19 pandemic, the future direct and indirect impact on our business, results of operations and financial condition are highly uncertain. Should current economic conditions persist or continue to deteriorate, we expect that this macroeconomic environment will have a continued adverse effect on our business and results of operations, which could include, but not be limited to: decreased demand for our products and services, protracted periods of lower interest rates, increased noninterest expenses, including operational losses, and increased credit losses due to deterioration in the financial condition of our consumer and commercial borrowers, including declining asset and collateral values, which may continue to increase our provision for credit losses and net charge-offs.

Comparison of Financial Condition at December 31, 2020 and December 31, 2019

Total assets increased $531.3 million, or 166.4%, to $850.6 million at December 31, 2020 from $319.3 million at December 31, 2019. The increase was primarily due to increases in loans and cash and cash equivalents, as a result of our acquisition of ABB and Affinity Bank in January 2020, the origination of PPP loans, and increases in cash equivalents resulting from the deposit of PPP loan proceeds into customers’ accounts at Affinity Bank. We expect our assets to decrease as customers withdraw the cash proceeds from PPP loans, and as PPP loans are forgiven by the SBA. In January 2021, we repaid the related Federal Reserve Bank PPP Liquidity Facility loans we obtained to fund the PPP loans.

Cash and cash equivalents increased $130.1 million, or 270.5%, to $178.3 million at December 31, 2020 from $48.1 million at December 31, 2019, resulting from our acquisition of ABB and Affinity Bank, borrowings obtained from the Federal Reserve Bank’s PPP Liquidity Facility to fund PPP loans, and the deposit of PPP loan proceeds into customers’ accounts at Affinity Bank. As of December 31, 2020, much of the PPP loan proceeds remained in customers’ deposit accounts.

Loans increased $344.3 million, or 138.9%, to $592.3 million at December 31, 2020 from $248.0 million at December 31, 2019. Commercial real estate loans increased $124.1 million, or 227.7%, to $178.6 million at December 31, 2020 from $54.5 million at December 31, 2019, and commercial and industrial loans, excluding PPP loans, increased $126.9 million, or 443.6%, to $155.6 million at December 31, 2020 from $28.6 million at December 31, 2019. Construction loans increased $3.1 million, or 15.0%, to $23.6 million at December 31, 2020 from $20.5 million at December 31, 2019. Consumer loans increased $15.7 million, or 49.8%, to $47.4 million at December 31, 2020 from $31.6 million at December 31, 2019. These increases were primarily attributable to our acquisition of ABB Financial and Affinity Bank in January 2020. In addition, commercial and industrial loans increased as $101.7 million in PPP loans were outstanding as of December 31, 2020. These increases were partially offset by a decrease in one- to four-family residential real estate loans of $25.1 million, or 21.5%, to $91.8 million at December 31, 2020 from $116.8 million at December 31, 2019, as mortgage loans continue to be refinanced elsewhere at lower rates than we offer. The acquisition of ABB Financial and Affinity Bank shifted the composition of the loan portfolio towards increased commercial and industrial lending and commercial real estate lending, and away from one- to four-family mortgage lending.

Securities available-for-sale increased to $24.0 million at December 31, 2020, from $3.8 million at December 31, 2019, due to our acquisition of ABB Financial and Affinity Bank in January 2020.

Total deposits increased $402.0 million, or 168.8%, to $640.2 million at December 31, 2020 from $238.2 million at December 31, 2019. The increase in total deposits included increases of $131.3 million, or 444.2%, in noninterest-bearing checking accounts; $87.9 million, or 263.4%, in market rate checking accounts; $82.5 million, or 174.3%, in interest-bearing checking accounts; $73.9 million, or 325.7%, in savings accounts; and $26.4 million, or 25.1%, in certificates of deposit. These increases are primarily attributable to our acquisition of ABB Financial and Affinity Bank in January 2020. In addition, many of our customers receiving PPP loans deposited the loan proceeds in their accounts at Affinity Bank.

We had $19.1 million of Federal Home Loan Bank advances, $100.8 million in Federal Reserve Bank PPP Liquidity Facility funds, and $5.0 million of other borrowings at December 31, 2020, compared to no borrowings at December 31, 2019. We acquired Federal Home Loan Bank advances in our acquisition of ABB Financial and Affinity Bank in January 2020. We also borrowed $20.0 million from the Federal Home Loan Bank in January 2020 to help fund the acquisition. We borrowed $5.0 million from First National Bankers Bank during the quarter ended June 30, 2020. The loan has a ten-year term with a floating interest rate equal to the Wall Street Journal Prime Rate. The initial interest payment was paid as of September 30, 2020 and the initial principal payment is due June 29, 2021. There is no prepayment penalty.

Stockholders’ equity increased $3.6 million or 4.7%, to $80.8 million at December 31, 2020 from $77.2 million at December 31, 2019. The increase was due primarily to net income of $3.1 million recognized during the year ended December 31, 2020.

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Average Balance Sheets

The following tables set forth average balance sheets, average yields and costs, and certain other information for the years 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 Year Ended December 31, For the Year Ended September 30,

(Dollars in thousands)

Interest-earning assets:

Interest-bearing liabilities:

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Rate/Volume Analysis

The following table presents the effects of changing rates and volumes on our net interest income for the years indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume.

Volume Rate (Decrease) Volume Rate (Decrease)

(In thousands)

Interest-earning assets:

Interest-bearing liabilities:

Paycheck Protection Program Liquidity Facility borrowings 72 — 72 — — —

Other borrowings 97 — 97 — — —

Comparison of Operating Results for the Years Ended December 31, 2020 and 2019

General. Net income increased $2.7 million, or 769.9%, to $3.1 million for the year ended December 31, 2020, compared to $355,000 for the year ended December 31, 2019. The increase was due primarily to an increase in interest income on loans, due to our acquisition of ABB and Affinity Bank in January 2020, partially offset by increases in interest expense on deposits and noninterest expenses.

Interest Income. Interest income increased $15.6 million, or 104.3%, to $30.6 million for the year ended December 31, 2020 from $15.0 million for the year ended December 31, 2019. The increase was due primarily to a $15.9 million, or 113.5%, increase in interest income on loans, which represented a significant majority of our interest income and included $4.1 million of interest and fee income on PPP loans. Our average balance of loans, including PPP loans, increased $333.9 million, or 138.2%, to $575.5 million for the year ended December 31, 2020 from $241.7 million for the year ended December 31, 2019. The increase in the average balance of loans resulted primarily from our acquisition of ABB Financial and Affinity Bank in January 2020 and, to a lesser degree, the origination of PPP loans. Our average yield on loans decreased 60 basis points to 5.20% for the year ended December 31, 2020 from 5.80% for the year ended December 31, 2019, due primarily to a decrease in market interest rates.

Interest income on securities (excluding Federal Home Loan Bank stock) increased $45,000 to $380,000 for the year ended December 31, 2020 from $335,000 for the year ended December 31, 2019. Our average balance of securities increased $4.8 million, or 31.6%, to $19.9 million for the year ended December 31, 2020 from $15.1 million for the year ended December 31, 2019, due to securities included in the acquisition of ABB Financial and Affinity Bank in January 2020. The average rate earned on securities decreased 30 basis points during 2020, to 1.91% from 2.21%, as a result of continued decreases in market interest rates.

Interest income on interest-earning deposits decreased $407,000, or 65.8%, to $212,000 for the year ended December 31, 2020 from $619,000 for the year ended December 31, 2019. The decrease in interest income on interest-earning deposits was due to a 226 basis point decrease in yield, as interest rates dropped significantly in 2020, while our average balance of interest-earning deposits

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increased $45.1 million, or 187.5%, to $69.1 million for the year ended December 31, 2020 from $24.0 million for the year ended December 31, 2019, as a result of the acquisition of ABB Financial and Affinity Bank in January 2020.

Interest Expense. Interest expense increased $3.2 million, or 137.5%, to $5.5 million for the year ended December 31, 2020 compared to $2.3 million for the year ended December 31, 2019, due to increases of $2.5 million in interest expense on deposits and $712,000 in interest expense on borrowings. Interest expense on certificates of deposit increased $994,000, or 61.0%, to $2.6 million for the year ended December 31, 2020 from $1.6 million for the year ended December 31, 2019. The increase in expense on certificates of deposit was a result of a $59.8 million increase in the average balance of certificates of deposit during the year ended December 31, 2020, partially offset by a three basis point decrease in the average rate paid on certificates of deposit. Interest expense on market rate checking accounts increased $691,000, to $965,000 for the year ended December 31, 2020 from $274,000 for the year ended December 31, 2019. The average balance of market rate checking accounts increased by $85.3 million during the year ended December 31, 2020, while the average rate we paid on market rate checking accounts decreased by 13 basis points. Interest expense on statement savings accounts increased by $847,000, to $878,000 for the year ended December 31, 2020 from $31,000 for the year ended December 31, 2019. The average balance of statement savings accounts increased by $63.9 million during the year ended December 31, 2020 and the average rate we paid on statement savings accounts increased by 86 basis points. These increases in average balances were primarily due to deposits assumed in the acquisition of ABB Financial and Affinity Bank in January 2020. These increases were partially offset by a decrease of $66,000, or 18.8%, in interest expense on interest-bearing checking accounts, to $286,000 for the year ended December 31, 2020 from $352,000 for the year ended December 31, 2019. The average balance of interest-bearing checking accounts increased by $19.3 million during the year ended December 31, 2020, while the average rate we paid on interest-bearing checking accounts decreased by 29 basis points.

Interest expense on borrowings increased to $738,000 for the year ended December 31, 2020 compared to $26,000 for the year ended December 31, 2019, as the average balance of borrowings increased to $73.1 million for 2020 from $1.3 million for the prior year, primarily as a result of the acquisition of ABB Financial and Affinity Bank in January 2020, Federal Home Loan Bank advances used to fund the acquisition, Federal Reserve Bank borrowings to fund PPP loans, and the $5.0 million loan to the Company during the second quarter of 2020.

Net Interest Income. Net interest income before provision for loan losses increased $12.5 million, or 98.2%, to $25.1 million for the year ended December 31, 2020 from $12.7 million for the year ended December 31, 2019. Our average net interest-earning assets increased by $85.9 million, or 104.6%, to $168.1 million for the year ended December 31, 2020 from $82.1 million for the year ended December 31, 2019, while our net interest rate spread decreased by 68 basis points to 3.49% for the year ended December 31, 2020 from 4.17% for the year ended December 31, 2019, reflecting a 74 basis point decrease in the weighted average yield on interest-earning assets during 2020, compared to a six basis point decrease in the average rate paid on interest-bearing liabilities. Our net interest margin was 3.77% for the year ended December 31, 2020 compared to 4.51% for the year ended December 31, 2019.

Provision for Loan Losses.Provisions for loan losses are charged to operations to establish an allowance for loan losses at a level necessary to absorb known and inherent losses in our loan portfolio that are both probable and reasonably estimable at the date of the consolidated financial statements. In evaluating the level of the allowance for loan losses, management analyzes several qualitative loan portfolio risk factors including, but not limited to, management’s ongoing review and grading of loans, facts and issues related to specific loans, historical loan loss and delinquency experience, trends in past due and non-accrual loans, existing risk characteristics of specific loans or loan pools, the fair value of underlying collateral, current economic conditions and other qualitative and quantitative factors which could affect potential credit losses. See “—Summary of Significant Accounting Policies” for additional information.

After an evaluation of these factors, particularly in light of the COVID-19 pandemic, we recorded a provision for loan losses of $2.0 million for the year ended December 31, 2020, compared to no provision for the year ended December 31, 2019. Our allowance for loan losses was $6.4 million at December 31, 2020 compared to $4.1 million at December 31, 2019. The allowance for loan losses to total loans was 1.06% at December 31, 2020 compared to 1.64% at December 31, 2019, while the allowance for loan losses to non-performing loans was 129.79% at December 31, 2020 compared to 161.07% at December 31, 2019. We had charge-offs of $185,000 and recoveries of $412,000 during the year ended December 31, 2020. To the best of our knowledge, we have recorded all loan losses that are both probable and reasonable to estimate at December 31, 2020. However, future changes in the factors described above, including, but not limited to, actual loss experience with respect to our loan portfolio, could result in material increases in our provision for loan losses. In addition, the Office of the Comptroller of the Currency, as an integral part of its examination process, will periodically review our allowance for loan losses, and as a result of such reviews, we may have to adjust our allowance for loan losses. However, regulatory agencies are not directly involved in the process of establishing the allowance for loan losses as the process is our responsibility and any increase or decrease in the allowance is the responsibility of management.

43

Noninterest Income. Noninterest income increased $511,000, or 31.1%, to $2.2 million for the year ended December 31, 2020 from $1.6 million for the year ended December 31, 2019. The increase resulted primarily from an increase in service charges on deposit accounts of $437,000, to $1.4 million for the year ended December 31, 2020, compared to $922,000 for the year ended December 31, 2019, supplemented by an increase in other noninterest income of $266,000 during the year ended December 31, 2020, partially offset by decreases in SBA loan fees and gains on sales of investment securities available-for-sale of $65,000 and $127,000, respectively, for the year ended December 31, 2020.

Noninterest Expenses. Noninterest expenses information is as follows.

Year Ended December 31, Change

(Dollars in thousands)

Net loss on sale of other real estate owned 289 (21) 310 (1,476.2)

Organizational dues and subscriptions 306 294 12 4.4

Salaries and employee benefits expense, occupancy expense, advertising expense, federal deposit insurance premiums and other noninterest expense all increased due to our acquisition of ABB Financial and Affinity Bank and the related growth. Data processing expense decreased due to prior expenditures in connection with our planned core data conversion but did include additional costs associated with the system conversion fromour acquisition of ABB Financial and Affinity Bank, while legal and accounting expense increased due to expenses related to our acquisition of ABB Financial and Affinity Bank.

Income Tax Expense. We recorded income tax expense of $792,000 for the year ended December 31, 2020 compared to an income tax benefit of $29,000 for the year ended December 31, 2019. The increase in income tax expense was due to increased income before income taxes in the 2020 period.

Management of Market Risk

General. Our most significant form of market risk is interest rate risk because, as a financial institution, the majority of our assets and liabilities are sensitive to changes in interest rates. Therefore, a principal part of our operations is to manage interest rate risk and limit the exposure of our financial condition and results of operations to changes in market interest rates. Our Asset/Liability Management Committee is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the policy and guidelines approved by our board of directors. We currently utilize a third-party modeling program, prepared on a quarterly basis, to evaluate our sensitivity to changing interest rates, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors.

We have sought to manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates. We have implemented the following strategies to manage our interest rate risk:

• limiting our reliance on non-core/wholesale funding sources;

• growing our volume of transaction deposit accounts;

44

By following these strategies, we believe that we are better positioned to react to increases and decreases in market interest rates. In addition, beginning in calendar 2018, we introduced adjustable-rate, one- to four-family residential real estate loans (in addition to our existing home equity loans and lines of credit, which are originated with adjustable interest rates).

We do not engage in hedging activities, such as engaging in futures, options or swap transactions, or investing in high-risk mortgage derivatives, such as collateralized mortgage obligation residual interests, real estate mortgage investment conduit residual interests or stripped mortgage backed securities.

Net Interest Income. We analyze our sensitivity to changes in interest rates through a net interest income model. Net interest income is the difference between the interest income we earn on our interest-earning assets, such as loans and securities, and the interest we pay on our interest-bearing liabilities, such as deposits and borrowings. We estimate what our net interest income would be for a 12-month period. We then calculate what the net interest income would be for the same period under the assumptions that the United States Treasury yield curve increases or decreases instantaneously by 200 and 400 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve. A basis point equals one-hundredth of one percent, and 100 basis points equals one percent. An increase in interest rates from 3% to 4% would mean, for example, a 100 basis point increase in the “Change in Interest Rates” column below.

The table below sets forth, as of December 31, 2020, the calculation of the estimated changes in our net interest income that would result from the designated immediate changes in the United States Treasury yield curve.

(Dollars in thousands)

(1) Assumes an immediate uniform change in interest rates at all maturities.

The table above indicates that at December 31, 2020, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 1.09% decrease in net interest income, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 3.16% increase in net interest income. At December 31, 2019, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would have experienced a 5.02% increase in net interest income, and in the event of an instantaneous 200 basis point decrease in interest rates, we would have experienced an 8.47% decrease in net interest income.

Net Economic Value. We also compute amounts by which the net present value of our assets and liabilities (net economic value or “NEV”) would change in the event of a range of assumed changes in market interest rates. This model uses a discounted cash flow analysis and an option-based pricing approach to measure the interest rate sensitivity of net portfolio value. The model estimates the economic value of each type of asset, liability and off-balance sheet contract under the assumptions that the United States Treasury yield curve increases or decreases instantaneously by 200 and 400 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve.

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The table below sets forth, as of December 31, 2020, the calculation of the estimated changes in our NEV that would result from the designated immediate changes in the United States Treasury yield curve.

(Dollars in thousands)

(1) Assumes an immediate uniform change in interest rates at all maturities.

(4) NEV Ratio represents NEV divided by the present value of assets.

The table above indicates that at December 31, 2020, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would experience a 3.89% decrease in net economic value, and in the event of an instantaneous 200 basis point decrease in interest rates, we would experience a 3.34% decrease in net economic value. At December 31, 2019, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would have experienced an 3.02% decrease in net economic value, and in the event of an instantaneous 200 basis point decrease in interest rates, we would have experienced a 4.49% increase in net economic value.

GAP Analysis. In addition, we analyze our interest rate sensitivity by monitoring our interest rate sensitivity “gap.” Our interest rate sensitivity gap is the difference between the amount of our interest-earning assets maturing or repricing within a specific time period and the amount of our interest-bearing liabilities maturing or repricing within that same time period. A gap is considered positive when the amount of interest rate sensitive assets maturing or repricing during a period exceeds the amount of interest rate sensitive liabilities maturing or repricing during the same period, and a gap is considered negative when the amount of interest rate sensitive liabilities maturing or repricing during a period exceeds the amount of interest rate sensitive assets maturing or repricing during the same period.

46

The following table sets forth our interest-earning assets and our interest-bearing liabilities at December 31, 2020, which are anticipated to reprice or mature in each of the future time periods shown based upon certain assumptions. The amounts of assets and liabilities shown which reprice or mature during a particular period were determined in accordance with the earlier of term to repricing or the contractual maturity of the asset or liability. The table sets forth an approximation of the projected repricing of assets and liabilities at December 31, 2020, on the basis of contractual maturities, anticipated prepayments and scheduled rate adjustments. The loan amounts in the table reflect principal balances expected to be redeployed and/or repriced as a result of contractual amortization and as a result of contractual rate adjustments on adjustable-rate loans. Amounts are based on a preliminary balance sheet as of December 31, 2020, and may not equal amounts included in our audited consolidated financial statements for the year ended December 31, 2020. However, we believe that there would be no material changes in the results of the gap analysis if audited financial results had been utilized.

Time to Repricing

(Dollars in thousands)

Assets:

Other assets — — — — — 54,402

Liabilities:

Other liabilities — — — — — 5,430

Equity capital — — — — — 82,004

(1) Amounts do not foot due to rounding.

At December 31, 2020, our asset/liability gap from zero days to one year was $(72.9) million, resulting in a gap/assets ratio of -8.57%.

Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the net interest income and net economic value tables presented assume that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the net interest income and NEV tables provide an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on net interest income and NEV and will differ from actual results. Furthermore, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Additionally, certain assets, such as adjustable-rate loans, have features that restrict changes in interest rates both on a short-term basis and over the life of the asset. In the event of changes in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in calculating the gap table.

Interest rate risk calculations also may not reflect the fair values of financial instruments. For example, decreases in market interest rates can increase the fair values of our loans, deposits and borrowings.

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Liquidity and Capital Resources

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from the sale of loans, and proceeds from maturities of securities. We also have the ability to borrow from the Federal Home Loan Bank of Atlanta. At December 31, 2020, we had a $303.8 million line of credit with the Federal Home Loan Bank of Atlanta and had $18.0 million in borrowings outstanding and $16.0 million in letters of credit outstanding, used to collateralize public deposits. In addition, at December 31, 2020, we had a $5.0 million unsecured federal funds line of credit and a $7.5 million unsecured federal funds line of credit. No amount was outstanding on these lines of credit at December 31, 2020. We also have a line of $53.8 million with the Federal Reserve Bank of Atlanta Discount Window secured by $99.5 million in loans. No amount was outstanding on the unsecured lines of credit or the Discount Window December 31, 2020. Under the Federal Reserve Bank’s PPP Liquidity Funding program we have borrowed $100.8 million to fund PPP loans that is secured by the $101.7 million amount of PPP loans. The Company also has a revolving loan with First National Bankers Bank for $5.0 million. The loan is secured by the stock of the Company’s wholly owned subsidiary, Affinity Bank. The loan has a ten-year term with a floating interest rate equal to the Wall Street Journal Prime Rate. The initial interest payment is due September 30, 2020 and the initial principal payment is due June 29, 2021. There is no prepayment penalty.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and short-term investments including interest-bearing demand deposits. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities was $1.4 million and $1.6 million for the years ended December 31, 2020 and 2019, respectively. Net cash used in investing activities, which consists primarily of disbursements for loan originations and the purchase of investment securities and net cash paid in business combination, offset by principal collections on loans, proceeds from the sale of securities and proceeds from maturing securities and pay downs on securities, was $110.4 million and $1.4 million for the years ended December 31, 2020 and 2019, respectively. Net cash provided by financing activities, consisting primarily of activity in deposit accounts and proceeds from the FHLB and PPPLF borrowings, offset by repayment of FHLB borrowings, was $239.1 million and $10.8 million for the years December 31, 2020 and 2019, respectively.

We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained.

At December 31, 2020, we exceeded all of our regulatory capital requirements, and we were categorized as well capitalized at December 31, 2020 and 2019. Management is not aware of any conditions or events since the most recent notification that would change our category.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Commitments.As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. At December 31, 2020, we had outstanding commitments to originate loans of $63.5 million. We anticipate that we will have sufficient funds available to meet our current lending commitments. Time deposits that are scheduled to mature in less than one year from December 31, 2020 totaled $68.7 million. Management expects that a substantial portion of the maturing time deposits will be renewed. However, if a substantial portion of these deposits is not retained, we may utilize Federal Home Loan Bank advances or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.

Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include data processing services, operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities.

Future Accounting Pronouncements

Please refer to Note 1 to the financial statements included as Item 8 in this Annual Report for a description of future accounting pronouncements that may affect our financial condition and results of operations.

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Impact of Inflation and Changing Price

The financial statements and related data presented herein have been prepared in accordance with U.S. GAAP, which requires the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates, generally, have a more significant impact on a financial institution’s performance than does inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk

For information regarding market risk, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

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ITEM 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm F-2

Consolidated Balance Sheets as of December 31, 2020 and 2019 F-3

Notes to Consolidated Financial Statements F-9

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Affinity Bancshares, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Affinity Bancshares, Inc. and subsidiary (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for the years then ended and the related notes to the consolidated financial statements. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness on the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Wipfli LLP

We have served as the Company’s auditor since 2004.

Atlanta, Georgia

March 31, 2021

F-2

AFFINITY BANCSHARES, INC.

Consolidated Balance Sheets

(In thousands except share amounts)

Assets

Interest-earning deposits in other depository institutions 172,701 44,152

Investment securities available-for-sale 24,005 3,818

Intangible assets 18,940 —

Accrued interest receivable and other assets 10,360 3,010

Liabilities and Stockholders' Equity

Liabilities :

Federal Home Loan Bank (FHLB) advances 19,117 —

Paycheck Protection Program Liquidity Facility (PPPLF) borrowings 100,813 —

Other borrowings 5,000 —

Accrued interest payable and other liabilities 4,748 3,946

Commitments

Stockholders' equity:

Preferred stock (1,000,000 shares authorized, no shares outstanding) — —

Accumulated other comprehensive income 159 9

See accompanying notes to consolidated financial statements.

F-3

AFFINITY BANCSHARES, INC.

Consolidated Statements of Income

For the Year Ended December 31, For the Year Ended December 31,

(In thousands except per share amounts)

Interest income:

Investment securities, including dividends 487 356

Interest-earning deposits 212 619

Interest expense:

Net interest income before provision for loan losses 25,142 12,685

Provision for loan losses 2,000 —

Net interest income after provision for loan losses 23,142 12,685

Noninterest income:

Service charges on deposit accounts 1,359 922

Small Business Administration (SBA) loan fees — 65

Gain on sales of investment securities available-for-sale 20 147

Noninterest expenses:

Other real estate owned 20 23

Net loss (gain) on sale and write-down of other real estate owned 289 (21 )

Organizational dues and subscriptions 306 294

Federal deposit insurance premiums 401 48

Income before income taxes 3,880 326

Income tax expense (benefit) 792 (29 )

Basic and diluted earnings per share $ 0.41 $ 0.05

See accompanying notes to consolidated financial statements.

F-4

AFFINITY BANCSHARES, INC.

Consolidated Statements of Comprehensive Income

For the Year Ended December 31, For the Year Ended December 31,

(In thousands)

Other comprehensive income (loss):

Total other comprehensive income 150 450

Total comprehensive income $ 3,238 $ 805

See accompanying notes to consolidated financial statements.

F-5

AFFINITY BANCSHARES, INC.

Consolidated Statements of Changes in Stockholders’ Equity

Accumulated

Additional Other

Common Paid In Treasury Unearned Retained Comprehensive

Stock Capital Stock ESOP Shares Earnings Income (Loss) Total

(In thousands)

Issuance of restricted stock awards 2 177 — — — — 179

ESOP loan payment and release of ESOP shares — 4 — 118 — — 122

Stock-based compensation — 99 — — — — 99

Purchase of treasury stock — — (600 ) — — — (600 )

ASC 606 adoption adjustment, net of tax ($57) — — — — 164 — 164

Issuance of restricted stock awards 1 16 — — — — 17

ESOP loan payment and release of ESOP shares (1 ) (35 ) — 118 — — 82

Stock-based compensation — 281 — — — — 281

See accompanying notes to consolidated financial statements.

F-6

AFFINITY BANCSHARES, INC.

Consolidated Statements of Cash Flows

For the Year Ended December 31, For the Year Ended December 31,

(In thousands)

Cash flows from operating activities, net of effects of combination:

Depreciation and amortization 697 885

Stock-based compensation expense 298 278

Deferred income tax (73 ) 145

Provision for loan losses 2,000 —

Net gain on sale of investment securities available-for-sale (20 ) (147 )

Net loss (gain) on sale of other real estate owned 29 (21 )

Increase in cash surrender value of life insurance (397 ) (211 )

Write-down on other real estate 260 117

Change in:

Accrued interest receivable and other assets (4,272 ) 549

Accrued interest payable and other liabilities (321 ) (436 )

Net cash provided by operating activities 1,371 1,636

Cash flows from investing activities, net of effects of combination:

Purchases of investment securities available-for-sale (13,934 ) —

Purchases of premises and equipment (451 ) (377 )

Proceeds from disposal of premises and equipment 47 —

Proceeds from the sale of investment securities available-for-sale 1,676 16,361

Proceeds from maturity of investment securities held-to-maturity — 1,000

Purchases of other investments (1,358 ) (232 )

Proceeds from sales of other investments 1,700 534

Proceeds from sales of other real estate owned 111 508

Net cash paid in business combination (22,749 ) —

Net cash used in investing activities (110,383 ) (1,378 )

Cash flows from financing activities, net of effects of combination:

Proceeds from FHLB advances 45,000 —

Proceeds from other borrowings 5,000 —

Repayment of repurchase agreements (4,107 ) —

Purchase of treasury stock — (600 )

Net cash provided by financing activities 239,148 10,830

Cash and cash equivalents at beginning of period 48,117 37,029

Cash and cash equivalents at end of period $ 178,253 $ 48,117

Supplemental disclosures of cash flow information:

Cash paid for income taxes 590 90

Bank property transferred to other real estate owned 460 —

Other real estate owned acquired through foreclosure 320 236

Fair value of assets acquired 317,742 —

Fair value of liabilities assumed 288,732 —

Net assets acquired 29,010 —

See accompanying notes to consolidated financial statements.

F-7

AFFINITY BANCSHARES, INC.

Notes to Consolidated Financial Statements

(1) Summary of Significant Accounting Policies

Nature of Operations

Affinity Bancshares, Inc. (the “Company”) is a savings and loan holding company headquartered in Covington, Georgia. The Company has one operating subsidiary, Affinity Bank (the “Bank”, and formerly named “Newton Federal Bank”), a federally chartered savings association, conducting banking activities in Newton County, Georgia and surrounding counties and in Cobb and Fulton County, Georgia and surrounding counties, and originating dental practice loans and indirect automobile loans throughout the Southeastern United States. The Bank offers such customary banking services as consumer and commercial checking accounts, savings accounts, certificates of deposit, mortgage, commercial and consumer loans, including indirect automobile loans, money transfers and a variety of other banking services.

The Company was incorporated in September 2020 to be the successor corporation to Community First Bancshares, Inc., a federal corporation, upon completion of the second-step mutual-to-stock conversion (the “Conversion”) of Community First Bancshares, MHC, the top tier mutual holding company of Community First Bancshares, Inc. Community First Bancshares, Inc. was the former mid-tier holding company for the Bank (formerly named Newton Federal Bank). Prior to completion of the Conversion, approximately 54% of the shares of common stock of Community First Bancshares, Inc. were owned by Community First Bancshares, MHC. In conjunction with the Conversion, Community First Bancshares, Inc. was merged into Affinity Bancshares, Inc. (and ceased to exist) and Affinity Bancshares, Inc. became its successor holding company for Newton Federal Bank.

On January 20, 2021, the Company completed the Conversion. Accordingly, the financial statements and notes thereto reflect the operations of Community First Bancshares, Inc., and not the Company. However, references to the Company include Community First Bancshares, Inc. where indicated by the context. For further information, see Note 17, “Subsequent Events.”

Reorganization

On October 31, 2016, the Board of Directors of the Bank adopted a Plan of Reorganization from a Mutual Savings Association to a Mutual Holding Company and Stock Issuance Plan (the “Plan”). The Plan was subject to the approval of the Board of Governors of the Federal Reserve System and the affirmative vote of at least a majority of the total votes eligible to be cast by the voting members of the Bank at a special meeting. Pursuant to the Plan, in April 2017 the Bank converted to a stock savings bank organized in the mutual holding company structure. The Bank issued all of its outstanding stock to a new holding company, Community First Bancshares, Inc., which sold 3,467,595 shares of common stock to the public at $10.00 per share, representing 46% of its outstanding shares of common stock. This amount included shares purchased by the ESOP, which purchased 3.92% of the common stock of the new holding company outstanding upon the completion of the reorganization and stock issuance. Community First Bancshares, Inc. was organized as a corporation under the laws of the United States. Community First Bancshares, MHC was organized as a mutual holding company under the laws of the United States and owned 54%of the outstanding common stock ofCommunity First Bancshares, Inc.

Basis of Presentation

The accounting principles followed by the Company and the methods of applying these standards and principles conform with accounting principles generally accepted in the United States of America (“GAAP”) and with general practices within the banking industry. In preparing consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts in the consolidated financial statements. Actual results could differ significantly from those estimates. Material estimates common to the banking industry that are particularly susceptible to significant change in the near term include, but are not limited to, the determination of the allowance for loan losses, the valuation of real estate acquired in connection with or in lieu of foreclosure on loans, and valuation allowances associated with deferred tax assets, the recognition of which are based on future taxable income.

Impaired loans and foreclosed real estate properties are carried at fair value less estimated selling costs, the determination of which requires significant assumptions, estimates and judgments. Fair values for foreclosed real estate properties and impaired loans collateralized by real estate are principally based on independent appraised values. Fair value is defined by GAAP as the price that would be received to sell an asset in an orderly transaction between market participants at the

F-8

AFFINITY BANCSHARES, INC.

Notes to Consolidated Financial Statements

measurement date. GAAP further defines an orderly transaction as a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets. An orderly transaction is not a forced transaction like a forced liquidation or distressed sale.

Basic and diluted earnings per share for 2020 was $0.41. The net earnings for this period was $3,088,000 and the weighted average common shares outstanding were 7,570,797. Basic and diluted earnings per share for the year ended December 31, 2019 was $0.05. The net earnings for this period was $355,000 and the weighted average common shares outstanding were 7,515,482.

Emerging Growth Company Status

The Company qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). For as long as the Company is an emerging growth company, it may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies. An emerging growth company may elect to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies, but must make such election when the Company is first required to file a registration statement. The Company has elected to use the extended transition period described above and intends to maintain its emerging growth company status as allowed under the JOBS Act.

Future Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). ASU 2016-02 provides certain targeted improvements to align lessor accounting with the lessee accounting model. It requires lessees to recognize the assets and liabilities on their balance sheet for the rights and obligations created by most leases and continue to recognize expenses on their income statements over the lease term. It will also require disclosures designed to give financial statement users information on the amount, timing and uncertainty of cash flows arising from leases. For emerging growth companies, this update will be effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.The adoption of this ASU is not expected to have a material effect on the Company’s financial position, results of operations or cash flows.

In April 2019, the FASB issued ASU 2019-04 (“ASU 2019-04”), Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. ASU 2019-04 includes technical corrections relating to scope, held-to-maturity disclosures, measurement alternative and remeasurement of equity securities. The effective date is for fiscal years beginning after December 31, 2019, including interim periods within those fiscal years. The adoption of this ASU is not expected to have a material effect on the Company’s financial position, result of operations or cash flows. Accounting Standards Update 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), is intended to provide financial statement users with more decision-useful information related to expected credit losses on financial instruments and other commitments to extend credit by replacing the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. ASU 2016-13 does not specify the method for measuring expected credit losses, and an entity is allowed to apply methods that reasonably reflect its expectations of the credit loss estimate. Additionally, the amendments of ASU 2016-13 require that credit losses on available-for-sale debt securities be presented as an allowance rather than as a write-down. The Company selected a third-party vendor to provide allowance for loan loss software as well as advisory services in developing a new methodology that would be compliant with ASU 2016-13, and is working with the approved third-party vendor to develop the CECL model and evaluate its impact. ASU 2016-13 was originally to become effective for the Company for interim and annual periods beginning after December 15, 2019. In November 2019, the FASB issued Accounting Standards Update 2019 – 10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842): Effective Dates (“ASU 2019–10”). ASU 2019-10 amends the effective date for certain entities, including the Company, for ASU 2016-13, Financial Instruments – Credit Losses. Because the Company is a smaller reporting company, ASU 2016-13 is now effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 enhances and simplifies certain aspects of income tax accounting guidance related to hybrid tax regimes, interim period accounting for enacted changes in tax law, ownership changes in investments, intraperiod tax allocations and tax basis step-up in goodwill. It is effective for the Company for fiscal years beginning after December 15,

F-9

AFFINITY BANCSHARES, INC.

Notes to Consolidated Financial Statements

2020, including interim periods within those fiscal years. The adoption of this ASU is not expected to have a material effect on the Company’s financial position, result of operations or cash flows.

Business Combinations

The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805, Business Combinations (“ASC 805”). The Company recognizes the full fair value of the assets acquired and liabilities assumed and immediately expenses transaction costs. If the amount of consideration exceeds the fair value of assets purchased less the fair value of liabilities assumed, goodwill is recorded. Alternatively, if the amount by which the fair value of assets purchased exceeds the fair value of liabilities assumed and consideration paid, a gain (“bargain purchase gain”) is recorded. Fair values are subject to refinement for up to one year after the closing date of an acquisition as information relative to closing date fair values becomes available. Results of operations of the acquired business are included in the statements of income from the effective date of the acquisition. Additional information regarding the recent acquisition is provided in Note 2.

Cash and Cash Equivalents

Cash and cash equivalents include cash and due from banks and interest-earning deposits in other depository institutions.

Investment Securities

The Company classifies its investment securities in one of three categories: trading, available-for-sale, or held-to-maturity. Trading securities are bought and held principally for the purpose of selling them in the near term. Held-to-maturity securities are those securities for which the Company has the ability and intent to hold the security until maturity. All other securities not included in trading or held-to-maturity are classified as available-for-sale.

Held-to-maturity securities are recorded at cost, adjusted for the amortization or accretion of premiums or discounts. Transfers of securities between categories are recorded at fair value at the date of transfer.

Management evaluates investment securities for other-than-temporary impairment on an annual basis. A decline in the market value of any held-to-maturity investment below cost that is deemed other-than-temporary is charged to earnings for the decline in value deemed to be credit related. The decline in value attributed to non-credit related factors is recognized in other comprehensive income and a new cost basis in the security is established.

Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to the yield. Realized gains and losses for securities classified as held-to-maturity are included in earnings and are derived using the specific identification method for determining the cost of securities sold.

Other Investments

The Federal Home Loan Bank (“FHLB”) stock is an investment that does not have a readily determinable fair value and is carried at cost.The Company is required to hold the FHLB stock as a member of the FHLB and transfer of the stock is substantially restricted.

The First National Bankers Bank (“FNBB”) stock is an investment that does not have a readily determinable fair value and is carried at cost.The Company acquired the stock when it borrowed funds at the holding company from FNBB.

Loans, Loan Fees and Interest Income on Loans

Loans are stated at the principal amount outstanding, net of the allowance for loan losses. Interest on loans is calculated by using the simple interest method on daily balances of the principal amount outstanding.

Accrual of interest is discontinued on a loan when management believes, after considering economic and business conditions and collection efforts that the borrower’s financial condition is such that collection of interest is doubtful. When a loan is placed on nonaccrual status, previously accrued and uncollected interest is charged to interest income on loans. Generally, payments on nonaccrual loans are applied first to principal. Interest income is recorded after principal has been satisfied and as payments are received.

F-10

AFFINITY BANCSHARES, INC.

Notes to Consolidated Financial Statements

Loan fees, net of certain origination costs, are deferred and amortized over the lives of the respective loans as an adjustment to the yield.

A loan is impaired when, based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or at the loan’s observable market price, or at the fair value of the collateral of the loan if the loan is collateral dependent. Estimated impairment losses for collateral dependent loans are set up as specific reserves. Interest income on impaired loans is recognized using the cash-basis method of accounting during the time the loans are impaired.

Allowance for Loan Losses

The allowance for loan losses is established through a provision for loan losses charged to expense. Loans are charged against the allowance for loan losses when management believes that the collection of the principal is unlikely. The allowance represents an amount, which in management’s judgment, will be adequate to absorb probable losses on existing loans that may become uncollectible.Management considers the following when assessing risk in the Company's loan portfolio segments:

Commercial (secured by real estate): Commercial real estate loans are dependent on the industries tied to these loans. Commercial real estate loans are primarily secured by office and industrial buildings, warehouses, small retail shopping facilities and various special purpose properties, including hotels and restaurants. Financial information is obtained from the borrowers and/or the individual project to evaluate cash flows sufficiency to service debt and is periodically updated during the life of the loan. Loan performance may be adversely affected by factors impacting the general economy or conditions specific to the real estate market such as geographic location and/or property type.

Commercial and industrial: Commercial and industrial loans are primarily for working capital, physical asset expansion, asset acquisition loans and other. These loans are made based primarily on historical and projected cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not behave as forecasted and collateral securing loans may fluctuate in value due to economic or individual performance factors. Financial information is obtained from the borrowers to evaluate cash flows sufficiency to service debt and are periodically updated during the life of the loan.

Construction, land and acquisition and development: Construction, land and acquisition and development loans are secured by vacant land and/or property that are in the process of improvement, including (a) land development preparatory to erecting vertical improvements or (b) the onsite construction of industrial, commercial, residential, or farm buildings. Repayment of these loans can be dependent on the sale of the property to third parties or the successful completion of the improvements by the builder for the end user. In the event a loan is made on property that is not yet improved for the planned development, there is the risk that necessary approvals will not be granted or will be delayed. Construction loans also run the risk that improvements will not be completed on time or in accordance with specifications and projected costs.

Residential mortgage 1-4 family: Residential real estate loans are affected by the local residential real estate market, the local economy, and, for variable rate mortgages, movement in indices tied to these loans. At the time of origination, the Company evaluates the borrower's repayment ability through a review of debt to income and credit scores. Appraisals are obtained to support the loan amount. Financial information is obtained from the borrowers and/or the individual project to evaluate cash flows sufficiency to service debt at the time of origination.

Consumer installment: Consumer and other loans may take the form of auto loans, installment loans, demand loans, or single payment loans and are extended to individuals for household, family, and other personal expenditures. At the time of origination, the Company evaluates the borrower's repayment ability through a review of debt to income and credit scores.

Management’s judgment in determining the adequacy of the allowance is based on evaluations of the probability of collection of loans. These evaluations take into consideration such factors as changes in the nature and volume of the loan portfolio, current economic conditions that may affect the borrower’s ability to pay, overall portfolio quality, and review of specific problem loans. Management uses an external independent loan reviewer to challenge and corroborate its loan gradings and to provide additional analysis in determining the adequacy of the allowance for loan losses and necessary provisions to the allowance.

F-11

AFFINITY BANCSHARES, INC.

Notes to Consolidated Financial Statements

Management believes the allowance for loan losses is adequate. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan losses,and as a result of these reviews the Bank may have to adjust or make additions to the allowance for loan losses as a part of management’s ongoing evaluation of its adequacy.

Other Real Estate Owned

Other real estate owned includes real estate acquired through foreclosure. Each other real estate property is initially recorded at its fair value less estimated costs to sell and is subsequently carried at fair value less estimated costs to sell. All foreclosed properties are actively marketed for sale. Fair value is principally based on independent appraisals performed by local credentialed appraisers. Any excess of the carrying value of the related loan over the fair value of the real estate at the date of foreclosure is charged against the allowance for loan losses. Properties in other real estate are re-evaluated annually. Any expense incurred in connection with holding such real estate or resulting from any write-downs in value subsequent to foreclosure is included in noninterest expense. When the other real estate property is sold, a gain or loss is recognized on the sale for the difference between the sales proceeds and the carrying amount of the property.

Premises and Equipment

Premises and equipment are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in earnings for the period. The cost of maintenance and repairs that do not improve or extend the useful life of the respective asset is charged to earnings as incurred, whereas significant renewals and improvements are capitalized. The range of estimated useful lives for premises and equipment are as follows:

Equipment and furniture 3 - 10 years

Buildings 40 years

Automobile 5 years

Bank Owned Life Insurance

The Bank has purchased life insurance policies on certain key executives and members of management. Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other changes or other amounts due that are probable at settlement.

Income Taxes

The Company uses the liability method of accounting for income taxes, which requires the recognition of deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Additionally, this method requires the recognition of future tax benefits, such as net operating loss carryforwards, to the extent that realization of such benefits is more likely than not. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the assets and liabilities are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period that includes the enactment date.

In the event the future tax consequences of differences between the financial reporting bases and the tax bases of the Company’s assets and liabilities results in deferred tax assets, an evaluation of the probability of being able to realize the future benefits indicated by such asset is required. A valuation allowance is provided for the portion of the deferred tax asset when it is more likely than not that some portion or all of the deferred tax asset will not be realized. In assessing the realization of the deferred tax assets, management considers the scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies.

The Company currently evaluates income tax positions judged to be uncertain. A loss contingency reserve is accrued if it is probable that the tax position will be challenged, it is probable that the future resolution of the challenge will confirm that a loss has been incurred, and the amount of such loss can be reasonably estimated.

F-12

AFFINITY BANCSHARES, INC.

Notes to Consolidated Financial Statements

Revenue Recognition

As of January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), using the modified retrospective method. Disclosures of revenue from contracts with customers for periods beginning after January 1, 2019 are presented under ASC Topic 606 and have not materially changed from the prior year amounts. This update prescribes the process related to the recognition of revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 excludes revenue streams relating to loans and investment securities, which are the major source of revenue for the Company, from its scope. As a result, the adoption of the guidance had no material impact on the measurement or recognition of revenue, however, as of January 1, 2019, the Company recognized all prior period other real estate owned deferred gains with a corresponding increase to the opening balance of stockholders’ equity of approximately $164,000 net of tax of $57,000 since all prior period sales qualified for full recognition of the gains in accordance with the new guidance.

Consistent with this guidance, the Company recognizes noninterest income within the scope of this guidance as services are transferred to its customers in an amount that reflects the consideration it expects to be entitled to in exchange for those services. Other types of revenue contracts, the income from which is included in noninterest income, that are within the scope of ASU 2014-09 are:

Service charges on deposit accounts: The deposit contract obligates the Company to serve as a custodian of the customer’s deposited funds and is generally terminable at will by either party. The contract permits the customer to access the funds on deposit and request additional services for which the Company earns a fee, including NSF and analysis charges, related to the deposit account. Income for deposit accounts is recognized over the statement cycle period (typically on a monthly basis) or at the time the service is provided, if additional services are requested.

Small Business Administration (SBA) loan fees: Origination fees on SBA loans are recognized into income up to the amount of the cost of making the loan as is done with other loans. The remainder is deferred and taken into income over the life of the loan. A portion of proceeds from the sale of SBA loans is taken into income while the remainder is deferred over the life of the loan.

ATM fee income: A contract between the Company, as a card-issuing bank, and its customers whereby the Company receives a transaction fee from the merchant’s bank whenever a customer uses a debit or credit card to make a purchase. These fees are earned as the service is provided (i.e., when the customer uses a debit or ATM card).

Other noninterest income: Other noninterest income includes several items, such as wire transfer income, check cashing fees, the increase in cash surrender value of life insurance and safe deposit box rental fees. This income is generally recognized at the time the service is provided and/or the income is earned.

Risk and Uncertainties

The COVID-19 pandemic has disrupted and adversely affected the Company’s business and results of operations, and the ultimate impacts of the pandemic on the Company’s business, financial condition and results of operations will depend on future developments and other factors that are highly uncertain and will be impacted by the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic.

F-13

AFFINITY BANCSHARES, INC.

Notes to Consolidated Financial Statements

(2)Acquisition

On January 10, 2020, Community First Bancshares, Inc.consummated its merger (the “Merger”) with ABB Financial Group, Inc. (“ABB”) pursuant to the Agreement and Plan of Merger by and between Community First Bancshares, Inc. and ABB dated August 19, 2019, (the “Merger Agreement”), whereby ABB was merged with and into Community First Bancshares, Inc., and Affinity Bank, ABB’s wholly owned commercial bank subsidiary serving Cobb County, Georgia and Fulton County, Georgia and surrounding counties, was merged with and into Newton Federal Bank. System integration was completed September 18, 2020. Affinity Bank operated one branch office in Cobb County, Georgia and one loan production office in Fulton County, Georgia.

The purpose of the merger was for strategic reasons beneficial to Community First Bancshares, Inc. The acquisition is consistent with its plan to drive growth and efficiency through increased scale, leverage the strengths of each bank across the combined customer base, enhance profitability, and add shareholder value.

Under the terms of the Merger Agreement, each outstanding share of ABB common stock was converted into the right to receive $7.50 in cash, for a total paid of $40.3 million in cash with no stock issued. Pre-existing ABB equity awards (restricted stock units and stock options) immediately vested upon consummation of the merger. Community First Bancshares, Inc. paid $2.7 million reflecting the net value for the vested ABB restricted stock outstanding at the consummation of the merger.

Community First Bancshares, Inc. accounted for the transaction under the acquisition method of accounting, and thus, the financial position and results of operations of ABB prior to the consummation date were not included in the accompanying consolidated financial statements. The accounting required assets purchased and liabilities assumed to be recorded at their respective fair values at the date of acquisition. Community First Bancshares, Inc. determined the fair value of core deposit intangibles, securities, premises and equipment, loans, other real estate owned, bank owned life insurance and other assets, deposits, debt and deferred taxes with the assistance of third-party valuations, appraisals, and third-party advisors. The estimated fair values will be subject to refinement as additional information relative to the closing date fair values becomes available through the measurement period of approximately one year from consummation.

The fair value of the assets acquired and liabilities assumed on January 10, 2020 was as follows:

As recorded by Fair Value As recorded by

ABB Adjustments CFBI

(in thousands)

Cash, cash equivalents and securities available-for-sale $ 41,561 $ — $ 41,561

Other real estate owned 790 — 790

Excess of assets acquired over liabilities acquired 31,343 (2,333 ) 29,010

Net assets acquired 29,010

Less preferred stock redeemed (5,891 )

Net assets acquired less preferred stock 23,119

F-14

AFFINITY BANCSHARES, INC.

Notes to Consolidated Financial Statements

The following unaudited pro forma information presents the results of operations for the year ended December 31, 2020 and 2019, as if the acquisition had occurred January 1 of each period. These unaudited proforma results are presented for illustrative purposes and are not intended to represent or be indicative of the actual results of operations of the combined company that would have been achieved had the acquisition occurred at the beginning of each period presented, nor are they intended to represent or be indicative of future results of operations.

Year Ended December 31,

(In thousands except per share data)

Total revenues, net of interest expense $ 27,599 $ 24,532

Diluted earnings per share 0.27 0.32

(3) Investment Securities

Investment securities available-for-sale at December 31, 2020 and 2019 are as follows: (in thousands)

Amortized Gross Unrealized Gross Unrealized Estimated

December 31, 2020 Cost Gains Losses Fair Value

Government agency mortgage-backed securities 9,206 326 — 9,532

U.S. Government sponsored enterprises 501 — (1 ) 500

Government agency mortgage-backed securities 3,305 13 — 3,318

There were five securities in an unrealized loss position as of December 31, 2020 for less than 12 months. There was one security in an unrealized loss position greater than 12 months as of December 31, 2020. The unrealized losses on the debt securities arose due to changing interest rates and market conditions and are considered to be temporary because of acceptable investment grades and are reviewed regularly. Three of the securities are agency bonds that are direct obligations of the U.S. Government. The other three securities are trust preferred securities where the Bank performs a credit review regularly and such review has raised no concerns. The Company does not intend to sell the investments and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost basis which may be at maturity.

F-15

AFFINITY BANCSHARES, INC.

Notes to Consolidated Financial Statements

The amortized cost and estimated fair value of investment securities available-for-sale at December 31, 2020 and 2019, by contractual maturity, are shown below. Maturities of mortgage-backed securities will differ from contractual maturities because borrowers may have the right to call or prepay certain obligations with or without call or prepayment penalties. Therefore, these securities are not included in the maturity categories. (in thousands)

December 31,

Amortized Estimated Amortized Estimated

Cost Fair Value Cost Fair Value

U.S. Government sponsored enterprises

Greater than 1 to 5 years — — — —

Greater than 5 to 10 years — — — —

Trust preferred securities

Within 1 year — — — —

Greater than 1 to 5 years — — — —

Proceeds from sales of investment securities available-for-sale during 2020 totaled approximately $1.7 million. Gross gains of $20,000 were realized on the sales during 2020. There were no gross losses during 2020. Proceeds from sales of investment securities available-for-sale during 2019 totaled approximately $16.4 million. Gross gains and gross losses of $213,000 and $66,000, respectively were realized on the sales during 2019.

Available-for-sale securities with a carrying value of approximately $2.3 million and $3.8 million were pledged to secure public deposits at December 31, 2020 and 2019, respectively.

(4) Loans and Allowance for Loan Losses

Major classifications of loans, by collateral code, at December 31, 2020 and 2019 are summarized as follows: (in thousands)

Paycheck Protection Program loans 101,749 —

Construction, land and acquisition & development 23,571 20,502

Less allowance for loan losses (6,361 ) (4,134 )

The Bank grants loans and extensions of credit to individuals and a variety of firms and corporations located primarily in Newton County and other surrounding Georgia counties. A substantial portion of the loan portfolio is collateralized by improved and unimproved real estate and is dependent upon the real estate market. The Bank has a specialized expertise in lending to dentists and dental practices, with dental practice loans totaling $170.8 million, or 29.2% of our loan portfolio, as of December 31, 2020. We had no such concentration as of December 31, 2019 as the specialized expertise in lending to dentists and dental practices was acquired in our merger transaction.

F-16

AFFINITY BANCSHARES, INC.

Notes to Consolidated Financial Statements

The Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, is an economic stimulus bill signed into law on March 27, 2020, in response to the economic fallout of the COVID-19 pandemic in the United States. The creation of the Paycheck Protection Program (PPP) enacted under the CARES Act provides forgivable loans to small businesses for payroll obligations, emergency grants to cover immediate operating costs, and a mechanism for loan forgiveness by the Small Business Administration should all criteria be met. The Bank received SBA authorization for 1,171 PPP loans totaling $130.3 million during 2020. These loans are fully guaranteed by the Small Business Administration.

Qualifying loans in the amount of approximately $309.9 million and $115.4 million were pledged to secure the line of credit from the FHLB at December 31, 2020 and 2019, respectively.

F-17

AFFINITY BANCSHARES, INC.

Notes to Consolidated Financial Statements

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2020 and 2019: (in thousands)

Allowance for loan losses:

Ending allowance attributable to loans:

Individually evaluated for impairment $ 2 35 — — 14 — — 51

Loans:

Allowance for loan losses:

Ending allowance attributable to loans:

Individually evaluated for impairment $ 1 — — — 5 — — 6

Loans:

The Bank individually evaluates all loans for impairment that are on nonaccrual status or are rated substandard (as described below). Additionally, all troubled debt restructurings are evaluated for impairment. A loan is considered impaired when, based on current events and circumstances, it is probable that all amounts due according to the contractual terms of the loan will not be collected. Impaired loans are measured based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, at the loan’s observable market price, or the fair value of the collateral if the loan is

F-18

AFFINITY BANCSHARES, INC.

Notes to Consolidated Financial Statements

collateral dependent. Interest payments received on impaired loans are applied as a reduction of the outstanding principal balance.

Impaired loans At December 31, 2020 and 2019 were as follows: (in thousands)

With no related allowance recorded:

Paycheck Protection Program — — — — —

Construction, land and acquisition & development — — — — —

Consumer installment 8 8 — 9 1

With an allowance recorded:

Construction, land and acquisition & development — — — 727 —

Consumer installment — — — 1,634 —

With no related allowance recorded:

Commercial (secured by real estate) $ 26 26 — 40 9

Paycheck Protection Program — — — — —

Construction, land and acquisition & development — — — — —

Consumer installment — - — — —

With an allowance recorded:

Commercial and industrial — — — — —

Construction, land and acquisition & development — — — — —

Consumer installment — — — — 24

The following table presents the aging of the recorded investment in past due loans, as well as the recorded investment in nonaccrual loans, As of December 31, 2020 and 2019 by class of loans: (in thousands)

F-19

AFFINITY BANCSHARES, INC.

Notes to Consolidated Financial Statements

Paycheck Protection Program — — — — — — —

Construction, land and acquisition & development — — — — 20,502 20,502 —

There were no loans past due over 90 days and still accruing interest as of December 31, 2020 and 2019.

The table below presents information on troubled debt restructurings including the number of loan contracts restructured and the pre- and post-modification recorded investment that have occurred during the years ended December 31, 2020 and 2019. Also included in the table are the number of contracts and the recorded investment for those trouble debt restructurings that have subsequently defaulted during the years ended December 31, 2020 and 2019: (in thousands)

Residential mortgage 1 $ 31 31 — —

Residential mortgage 1 $ 250 250 — —

The Bank has allocated an allowance for loan losses of approximately $17,000 and $6,000 to customers whose loan terms have been modified in troubled debt restructurings as of December 31, 2020 and 2019, respectively.

The CARES Act provides temporary relief from accounting for certain pandemic-related loan modifications as a troubled debt restructuring. The Bank has granted short-term deferrals on 737 loans totaling $186.9 million that were otherwise performing. All of these loans have returned to normal performing status as of December 31, 2020.

The Bank categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. The Bank analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a continuous basis. The Bank uses the following definitions for its risk ratings:

Special Mention. Loans have potential weaknesses that may, if not corrected, weaken or inadequately protect the Bank's credit position at some future date. Weaknesses are generally the result of deviation from prudent lending practices, such as over advances on collateral. Credits in this category should, within a 12 month period, move to Pass if improved or drop to Substandard if poor trends continue.

F-20

AFFINITY BANCSHARES, INC.

Notes to Consolidated Financial Statements

Substandard. Inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any. Loans have a well-defined weakness or weaknesses such as primary source of repayment is gone or severely impaired or cash flow is insufficient to reduce debt. There is a distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans have weaknesses of those classified Substandard, with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable. The likelihood of a loss on an asset or portion of an asset classified Doubtful is high.

Loss. Loans considered uncollectible and of such little value that the continuance as a Bank asset is not warranted. This does not mean that the loan has no recovery or salvage value, but rather the asset should be charged off even though partial recovery may be possible in the future.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be Pass rated loans. As of December 31, 2020 and 2019, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows: (in thousands)

December 31, 2020 Pass Special Mention Substandard Doubtful/ Loss Total

Construction, land and acquisition & development 23,571 — — — 23,571

December 31, 2019 Pass Special Mention Substandard Doubtful/ Loss Total

Paycheck Protection Program — — — — —

Construction, land and acquisition & development 20,502 — — — 20,502

(5) Premises and Equipment

Premises and equipment at December 31, 2020 and 2019 are summarized as follows: (in thousands)

Leasehold improvements 527 —

Construction in process 158 2

Less: Accumulated depreciation 7,568 6,894

F-21

AFFINITY BANCSHARES, INC.

Notes to Consolidated Financial Statements

Depreciation expense was approximately $957,000 and $756,000 for the years ended December 31, 2020 and 2019, respectively.

The Company is obligated under non-cancelable operating leases for certain of its facilities and related land. At December 31, 2020, the approximate minimum annual rentals under these non-cancelable agreements with remaining terms in excess of one year are as follows: (in thousands)

Years ending December 31,

Thereafter —

Total rent expense for leased property approximated $381,000 and $127,000 for the year ended December 31, 2020 and 2019, respectively.

(6) Deposits

At December 31, 2020, contractual maturities of certificate of deposits are summarized as follows: (in thousands).

The aggregate amounts of certificates of deposit of $250,000 or more, the standard FDIC deposit insurance coverage limit per depositor, were approximately $32,859,000 and $30,482,000 at December 31, 2020 and 2019, respectively.

The following is a summary of interest expense on deposits for the years ended December 31, 2020 and 2019: (in thousands)

Savings accounts $ 878 $ 31

Interest-bearing checking accounts 286 352

Market rate checking accounts 965 274

F-22

AFFINITY BANCSHARES, INC.

Notes to Consolidated Financial Statements

(7) Borrowings

At December 31, 2020 and 2019, the Bank had a line of credit totaling $89.1 millionand $78.7 million, respectively, from the FHLB, which is reviewed annually by the FHLB. The following advances, which require monthly or quarterly interest payments, were outstanding at December 31, 2020:

All of the advances above were acquired in connection with the acquisition of Affinity Bank during 2020. At December 31, 2020, the FHLB advances were collateralized by certain loans which totaled approximately $309.9 million and $115.4 million at December 31, 2020 and 2019, respectively, and by the Company’s investment in FHLB stock which totaled approximately $1.3 million and $278,000 at December 31, 2020 and 2019, respectively.

The Company had one FHLB letter of credit of $16.0 millionand $8.0 million used to collateralize public deposits, outstanding at December 31, 2020 and 2019, respectively.

The Company borrowed $5.0 million from First National Bankers Bank during the year ended December 31, 2020.The loan had a ten-year term with a floating interest rate equal to the Wall Street Journal Prime Rate. Interest payments were due quarterly and the initial principal payment was due June 29, 2021. There was no prepayment penalty. The loan was secured by Bank stock. In January 2021, the loan was repaid.

The Company borrowed $100.8 million under the Federal Reserve Bank of Atlanta to fund PPP loans under the U.S. CARES Act (the Paycheck Protection Program Liquidity Facility). This is secured by PPP loans totaling $101.7 million made during the year ended December 31, 2020. These borrowings have a fixed interest rate of 0.35% and a maturity date equal to the maturity date of the related PPP loans, with the PPP loans maturing either two or five years from the origination date of the PPP loan.

At December 31, 2020 and 2019 the Bank had unsecured federal funds lines of credit of $12.5 million, for which no amounts were outstanding. The Bank also has a line of $53.8 million with the Federal Reserve Bank of Atlanta Discount Window secured by $99.5 million in loans as of December 31, 2020. No amount was outstanding on the Discount Window as of December 31, 2020.

(8) Income Taxes

The components of income tax expense (benefit) for the years ended December 31, 2020 and 2019 are as follows: (in thousands)

Rate reduction adjustment — —

The difference between income tax expense (benefit) and the amount computed by applying the statutory federal income tax rate to income before taxes for the years ended December 31, 2020 and 2019 is as follows (in thousands):

F-23

AFFINITY BANCSHARES, INC.

Notes to Consolidated Financial Statements

Statutory Federal tax rate 21 % 21 %

Pretax income at statutory rate $ 815 $ 68

State income tax, net of federal benefit (95 ) 19

Cash surrender value of life insurance (83 ) (44 )

Permanent adjustments 26 (12 )

Actual tax expense 20% and 23%, respectively $ 792 $ (29 )

The following summarizes the sources and expected tax consequences of future deductions or income for income tax purposes which comprised the net deferred taxes at December 31, 2020 and 2019: (in thousands)

Deferred income tax assets:

Allowance for loan losses $ 1,625 $ 1,015

Net operating losses 1,683 —

Fair value adjustments 673 —

Total deferred income tax assets 5,411 2,163

Deferred income tax liabilities:

Core deposit intangible 440 —

Unrealized gain on investment securities available-for-sale 52 3

Total deferred income tax liabilities 1,179 311

Net deferred income tax asset $ 4,232 $ 1,852

The Company establishes a valuation allowance if, based on the weight of the available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of December 31, 2020 and 2019, the Company believes that it will have sufficient earnings to realize its deferred tax asset and has not provided an allowance.

The Company is subject to federal income tax and income tax of state taxing authorities. The Company's federal income tax returns for the years ended December 31, 2020 and 2019 and its state taxing authorities income tax returns for the years ended September 30, 2018 and 2017 are open to audit under the statutes of limitations.

Prior to January 1, 1996, the Bank was permitted under the Internal Revenue Code (the “Code”) a special bad debt deduction related to additions to tax bad debt reserves established for the purpose of absorbing losses. The provisions of the Code permitted the Bank to deduct from taxable income an allowance for bad debts based on the greater of a percentage of taxable income before such deduction or actual loss experience. Retained earnings at December 31, 2020 includes approximately $3,625,000 for which no deferred Federal income tax liability has been recognized. The amounts represent an allocation of income for bad debt deductions for tax purposes only. Reduction of amounts so allocated for purposes other than tax bad debt losses would create income for tax purposes only, which would be subject to the then current corporate income tax rate.

On August 20, 1996, legislation was passed which eliminated the percentage of taxable income bad debt deduction for thrift institutions for tax years beginning after December 31, 1995. This legislation also requires a thrift to generally recapture the excess of its current tax reserves over its 1987 base year reserves whereas the base year reserves are frozen from taxation. No additional financial statement tax expense resulted from this legislation as the Bank had previously provided deferred taxes on this recaptured amount.

F-24

AFFINITY BANCSHARES, INC.

Notes to Consolidated Financial Statements

(9) Employee Stock Ownership Plan

The Company sponsors an employee stock ownership plan (“ESOP”) that covers all employees who meet certain service requirements. The Company makes annual contributions to the ESOP in amounts as defined by the plan document. These contributions are used to pay debt service and purchase additional shares. Certain ESOP shares are pledged as collateral for debt. As the debt is repaid, shares are released from collateral and allocated to active employees, based on the proportion of debt service paid in the year.

In April 2017, the ESOP borrowed $3.0 million payable to the Company for the purpose of purchasing shares of the Company’s common stock. A total of 295,499 shares were purchased with the loan proceeds as part of the Company’s initial stock offering. The balance of the note payable of the ESOP was $2.6 million and $2.7 million at December 31, 2020 and 2019, respectively. Because the source of the loan payments are contributions received by the ESOP from the Company, the related notes receivable is shown as a reduction of stockholders’ equity. As of December 31, 2020 and 2019, 47,200 shares and 35,400 shares have been released, respectively.

(10) Benefit Plans

The Company has a profit sharing plan to provide retirement benefits for all employees. Contributions have been paid in the past to a trust fund annually by the Company in an amount determined by the Board of Directors. No contributions were made to the plan for the plan years ended December 31, 2020 and 2019 as the Board of Directors adopted an incentive program and paid cash bonuses rather than having contributions made to the profit sharing plan.

In 2014, the Company added a 401(k) feature to the profit sharing plan that covers substantially all employees. Under the terms of the feature, the Company may make matching contributions to the plan and the employees can contribute up to the maximum amounts allowed by IRS guidelines. The contribution expense related to the 401(k) feature totaled $161,000and $113,000 for the plan year ended December 31, 2020 and 2019, respectively.

The Company sponsors a deferred compensation plan for directors. Under this plan, participating directors may defer their Board fees and receive the deferred amounts plus interest upon completion of their time as a director or at their election. The cumulative deferred contributions for the directors in the plan and earnings thereon at December 31, 2020 and 2019 totaled approximately $2,830,000and $3,188,000, respectively. These amounts are included in other liabilities in the accompanying consolidated balance sheets. No contributions have been made to the plan since 2015 as the plan was frozen as of June 30, 2015.

The Company has a supplemental executive retirement plan (SERP) in place for one of its executives. This normal retirement benefit consists of a monthly benefit payment equal to the amount that is paid from the annuity contract designated under the SERP. The normal retirement benefit will commence on the first day of the second month following the date of the executive’s separation from service, payable monthly and continuing for the executive’s lifetime. The monthly benefit equals $8,333. If the executive dies after benefit payments have commenced but before receiving a total of 180 monthly payments, the Company shall pay to the executive’s beneficiary the greater of (i) the account balance or (ii) the present value of the remaining payments to satisfy a total of 180 monthly payments. Such death benefit shall be payable in a lump sum no later than 60 days from the date of death. If the executive dies after receiving 180 or more benefit payments, the SERP will terminate and no additional payments will be made. The accrued liability for the plan at December 31, 2020 and 2019 was approximately $439,000 and $29,000, respectively and is recorded in other liabilities. The related expense for the plan was approximately $410,000 and $29,000 in 2020 and 2019, respectively. The earnings from the increase in the value of the annuityfor the years ending December 31, 2020 and 2019 was approximately $5,000 and $0, respectively. The carrying value of the annuity was approximately $952,000 and $947,000 as of December 31, 2020 and 2019, respectively and is recorded in other assets.

(11) Stock-Based Compensation Plans

The Company may grant stock options and restricted stock under its stock-based compensation plans to certain officers, employees and directors. These plans are administered by a committee of the Board of Directors. In August 2018, with subsequent shareholder approval, the 2018 Equity Incentive Plan was approved up to 147,749 share of common stock and up to 369,374 stock options.

F-25

AFFINITY BANCSHARES, INC.

Notes to Consolidated Financial Statements

A Black-Scholes model is utilized to estimate the fair value of stock option grants, while the market price of the Company’s stock at the date of grant is used to estimate the fair value of restricted stock awards. The weighted average assumptions used in the Black-Scholes model for valuing stock option grants were as follows.

December 31

Risk-free interest rate 0.53 % 2.41 %

Expected average Life 7.5 7.5

Weighted average per share fair value $ 2.02 $ 2.97