Affinity Bancshares, Inc. Announces Third Quarter 2023 Financial Results

Affinity Bancshares, Inc. (NASDAQ:“AFBI”) (the “Company”), the holding company for Affinity Bank (the “Bank”), today announced net income of $1.6 million for the three months ended September 30, 2023, as compared to $1.9 million for the three months ended September 30, 2022.

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		At or for the three months ended,
Performance Ratios:		September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022
Net income (in thousands)		$	1,623			$	1,590			$	1,722			$	1,699			$	1,861
Diluted earnings per share			0.25				0.24				0.26				0.26				0.27
Common book value per share			18.50				18.34				18.02				17.73				17.37
Tangible book value per share (1)			15.63				15.47				15.20				14.92				14.57
Total assets (in thousands)			855,431				876,905				932,302				791,283				776,390
Return on average assets			0.74	%			0.71	%			0.84	%			0.84	%			0.95	%
Return on average equity			5.42	%			5.37	%			5.90	%			5.78	%			6.30	%
Equity to assets			13.85	%			13.45	%			12.69	%			14.80	%			14.84	%
Tangible equity to tangible assets (1)			11.95	%			11.59	%			10.92	%			12.75	%			12.75	%
Net interest margin			3.36	%			3.17	%			3.58	%			3.85	%			4.12	%
Efficiency ratio			71.78	%			71.68	%			69.73	%			71.38	%			67.62	%
(1) Non-GAAP measure - see “Explanation of Certain Unaudited Non-GAAP Financial Measures” for more information and reconciliation to GAAP.

Net Income

• Net income was $1.6 million for the three months ended September 30, 2023, as compared to $1.9 million for the three months ended September 30, 2022, as a result of an increase in deposit interest expense offset by an increase in interest income.
• Net income was $4.9 million for nine months ended September 30, 2023 as compared to $5.4 million for the nine months ended September 30, 2022, as a result of an increase in deposit interest expense and recognition of the remaining fair value mark on the acquired Federal Home Loan Bank advances that was recognized upon payoff during the first quarter 2022, partially offset by an increase in interest income.

Results of Operations

• Net interest income was $6.9 million for the three months ended September 30, 2023 compared to $7.5 million for the three months ended September 30, 2022. The decrease was due to an increase in deposit costs partially offset by an increase in interest income.
• Net interest income was $20.5 million for the nine months ended September 30, 2023 compared to $22.4 million for the nine months ended September 30, 2022. The decrease was due to an increase in deposit costs and recognition of the remaining fair value mark on acquired FHLB advances that was recognized upon payoff during the first quarter of 2022, partially offset by an increase in interest income.
• Net interest margin for the three months ended September 30, 2023 decreased to 3.36% from 4.12% for the three months ended September 30, 2022. Net interest margin for the nine months ended September 30, 2023 decreased to 3.36% from 4.24% for the nine months ended September 30, 2022. The decreases in the margin relate to increases in our costs of funds exceeding our increases in our yield on interest-earning assets. The decrease in the margin for the nine months ended September 30, 2023 was also impacted by the fair value mark on the FHLB advances from acquisition that was recognized upon payoff during the first quarter of 2022.
  • Adjusted net interest margin for the nine months ended September 30, 2023 (see Non-GAAP reconciliation) decreased 59 basis points from 3.95% at nine months ended September 30, 2022 to 3.36%.
• Noninterest income increased $37,000 to $630,000 for the three months ended September 30, 2023 and remained stable at $1.8 million for the nine months ended September 30, 2023 and 2022.
• Non-interest expense decreased $84,000 to $5.4 million for the three months ended September 30, 2023 compared to the respective period in 2022, due to decreases in salaries, occupancy, and advertising expenses offset by increases in data processing and other expenses. Non-interest expense decreased $601,000 to $15.9 million for the nine months ended September 30, 2023 compared to the respective period in 2022 and was a result of the FHLB prepayment penalties paid in first quarter 2022 and decreases in salaries expense.

Financial Condition

• Total assets increased $64.1 million to $855.4 million at September 30, 2023 from $791.3 million at December 31, 2022, as we increased cash to further enhance liquidity.
• Total gross loans increased $14.8 million to $661.0 million at September 30, 2023 from $646.2 million at December 31, 2022. The increase was due to steady loan demand.
• Non-owner occupied office loans totaled $25.4 million at September 30, 2023; average LTV on these loans is 43.0%
  • $9.3 million medical/dental tenants
  • $16.1 million to other various tenants.
• Investment securities held-to-maturity unrealized losses were $970,000, net of tax. Investment securities available-for-sale unrealized losses were $7.8 million, net of tax.
• Cash and cash equivalents increased to $61.5 million at September 30, 2023 from $26.3 million at December 31, 2022, primarily due to an increase in deposits.
• Deposits increased by $51.9 million to $709.0 million at September 30, 2023 compared to $657.2 million at December 31, 2022, in part due to an increase in certificates of deposits of $96.3 million offset by a $44.5 million decrease in non-time deposits, as customers increased deposits in higher-yielding accounts during the current interest rate environment. The certificates of deposit increase included brokered deposits issued in 2023 totaling $72.4 million. Brokered deposits have an average life of 2.6 years and an average interest rate of 4.87%.
• Uninsured deposits were approximately $98.7 million at September 30, 2023 and represented 13.9% of total deposits.
• Borrowings increased by $10.0 million to $20.0 million at September 30, 2023 compared to $10.0 million at December 31, 2022 as we continue to evaluate borrowing needs related to enhancing bank liquidity.

Asset Quality

• Non-performing loans increased to $7.6 million at September 30, 2023 from $6.7 million at December 31, 2022.
• The allowance for credit losses as a percentage of non-performing loans was 120.6% at September 30, 2023, as compared to 138.8% at December 31, 2022.
• Allowance for credit losses to total loans decreased to 1.39% at September 30, 2023 from 1.46% at December 31, 2022.
• Net loan charge-offs were $114,000 for the nine months ended September 30, 2023, as compared to net recoveries of $108,000 for the nine months ended September 30, 2022.

About Affinity Bancshares, Inc.

The Company is a Maryland corporation based in Covington, Georgia. The Company’s banking subsidiary, Affinity Bank, opened in 1928 and currently operates a full-service office in Atlanta, Georgia, two full-service offices in Covington, Georgia, and a loan production office serving the Alpharetta and Cumming, Georgia markets.

Forward-Looking Statements

In addition to historical information, this release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which describe the future plans, strategies and expectations of the Company. Forward-looking statements can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “contemplate,” “continue,” “target” and words of similar meaning. Forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Accordingly, you should not place undue reliance on such statements. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this report. Factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to, changes in general economic conditions, interest rates and inflation; changes in asset quality; our ability to access cost-effective funding; fluctuations in real estate values; changes in laws or regulations; changes in liquidity, including the size and composition of our deposit portfolio and the percentage of uninsured deposits in the portfolio; changes in technology; failures or breaches of our IT security systems; our ability to introduce new products and services and capitalize on growth opportunities; changes in the value of our goodwill and other intangible assets; our ability to successfully integrate acquired operations or assets; changes in accounting policies and practices; our ability to retain key employees; and the effects of natural disasters and geopolitical events, including terrorism, conflict and acts of war. These risks and other uncertainties are further discussed in the reports that the Company files with the Securities and Exchange Commission.

Average Balance Sheets

The following tables set forth average balance sheets, average annualized yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are monthly average balances. Non-accrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense.

		For the Three Months Ended September 30,
		2023												2022
		Average Outstanding Balance				Interest				Average Yield/Rate				Average Outstanding Balance				Interest				Average Yield/Rate
		(Dollars in thousands)
Interest-earning assets:
Loans		$	660,456			$	9,113				5.47	%		$	639,115			$	7,734				4.80	%
Investment securities held-to-maturity			34,158				525				6.10	%			—				—				—
Investment securities available-for-sale			49,242				461				3.71	%			44,690				289				2.56	%
Interest-earning deposits and federal funds			68,892				889				5.12	%			39,384				189				1.91	%
Other investments			2,053				36				6.96	%			1,163				12				4.19	%
Total interest-earning assets			814,801				11,024				5.37	%			724,352				8,224				4.50	%
Non-interest-earning assets			51,971												49,770
Total assets		$	866,772											$	774,122
Interest-bearing liabilities:
Interest-bearing checking accounts		$	90,682			$	73				0.32	%		$	98,473			$	47				0.19	%
Money market accounts			142,346				987				2.75	%			159,478				100				0.25	%
Savings accounts			81,756				569				2.76	%			83,484				187				0.89	%
Certificates of deposit			232,276				2,286				3.90	%			89,871				291				1.28	%
Total interest-bearing deposits			547,060				3,915				2.84	%			431,306				625				0.57	%
FHLB advances and other borrowings			20,000				208				4.13	%			13,696				73				2.12	%
Total interest-bearing liabilities			567,060				4,123				2.88	%			445,002				698				0.62	%
Non-interest-bearing liabilities			180,868												211,986
Total liabilities			747,928												656,988
Total stockholders' equity			118,844												117,134
Total liabilities and stockholders' equity		$	866,772											$	774,122
Net interest rate spread											2.49	%											3.88	%
Net interest income						$	6,901											$	7,526
Net interest margin											3.36	%											4.12	%

		For the Nine Months Ended September 30,
		2023												2022
		Average Outstanding Balance				Interest				Average Yield/Rate				Average Outstanding Balance				Interest				Average Yield/Rate
		(Dollars in thousands)
Interest-earning assets:
Loans		$	659,416			$	26,131				5.30	%		$	616,141			$	22,013				4.78	%
Investment securities held-to-maturity			33,733				1,549				6.14	%			—				—				—
Investment securities available-for-sale			49,616				1,299				3.50	%			46,585				827				2.37	%
Interest-earning deposits and federal funds			69,340				2,527				4.87	%			43,125				286				0.89	%
Other investments			2,285				109				6.38	%			1,117				30				3.57	%
Total interest-earning assets			814,390				31,615				5.19	%			706,968				23,156				4.38	%
Non-interest-earning assets			51,675												51,687
Total assets		$	866,065											$	758,655
Interest-bearing liabilities:
Interest-bearing checking accounts		$	92,614			$	172				0.25	%		$	97,463			$	134				0.18	%
Money market accounts			139,726				2,472				2.37	%			151,654				282				0.25	%
Savings accounts			88,528				1,680				2.54	%			84,042				356				0.57	%
Certificates of deposit			207,734				5,691				3.66	%			91,493				840				1.23	%
Total interest-bearing deposits			528,602				10,015				2.53	%			424,652				1,612				0.51	%
FHLB advances and other borrowings			33,975				1,109				4.36	%			12,350				(874	)			-9.46	%
Total interest-bearing liabilities			562,577				11,124				2.64	%			437,002				738				0.23	%
Non-interest-bearing liabilities			184,871												203,164
Total liabilities			747,448												640,166
Total stockholders' equity			118,617												118,489
Total liabilities and stockholders' equity		$	866,065											$	758,655
Net interest rate spread											2.55	%											4.15	%
Net interest income						$	20,491											$	22,418
Net interest margin											3.36	%											4.24	%

AFFINITY BANCSHARES, INC.
Consolidated Balance Sheets
		September 30, 2023				December 31, 2022
		(unaudited)
		(Dollars in thousands except per share amounts)
Assets
Cash and due from banks		$	5,441			$	2,928
Interest-earning deposits in other depository institutions			56,062				23,396
Cash and cash equivalents			61,503				26,324
Investment securities available-for-sale			48,012				46,200
Investment securities held-to-maturity (estimated fair value of $32,925, net of allowance for credit losses of $42 at September 30, 2023 and estimated fair value of $26,251 at December 31, 2022)			34,183				26,527
Other investments			4,885				1,082
Loans			661,016				646,234
Allowance for credit loss on loans			(9,211	)			(9,325	)
Net loans			651,805				636,909
Other real estate owned			2,901				2,901
Premises and equipment, net			3,872				4,257
Bank owned life insurance			15,991				15,724
Intangible assets			18,414				18,558
Other assets			13,865				12,801
Total assets		$	855,431			$	791,283
Liabilities and Stockholders' Equity
Liabilities:
Non-interest-bearing checking		$	170,654			$	190,297
Interest-bearing checking			92,177				91,167
Money market accounts			144,439				148,097
Savings accounts			79,446				101,622
Certificates of deposit			222,329				125,989
Total deposits			709,045				657,172
Federal Home Loan Bank advances and other borrowings			20,000				10,025
Accrued interest payable and other liabilities			7,910				6,983
Total liabilities			736,955				674,180
Stockholders' equity:
Common stock (par value $0.01 per share, 40,000,000 shares authorized; 6,404,961 issued and outstanding at September 30, 2023 and 6,605,384 issued and outstanding at December 31, 2022)			64				66
Preferred stock (10,000,000 shares authorized, no shares outstanding)			—				—
Additional paid in capital			60,978				63,130
Unearned ESOP shares			(4,639	)			(4,795	)
Retained earnings			69,832				65,357
Accumulated other comprehensive loss			(7,759	)			(6,655	)
Total stockholders' equity			118,476				117,103
Total liabilities and stockholders' equity		$	855,431			$	791,283

AFFINITY BANCSHARES, INC.
Consolidated Statements of Income
(unaudited)
			Three Months Ended September 30,								Nine Months Ended September 30,
			2023				2022				2023				2022
			(Dollars in thousands except per share amounts)
Interest income:
Loans, including fees			$	9,113			$	7,734			$	26,131			$	22,013
Investment securities				1,022				301				2,957				857
Interest-earning deposits				889				189				2,527				286
Total interest income				11,024				8,224				31,615				23,156
Interest expense:
Deposits				3,915				625				10,015				1,612
FHLB advances and other borrowings				208				73				1,109				(874	)
Total interest expense				4,123				698				11,124				738
Net interest income before provision for credit losses				6,901				7,526				20,491				22,418
Provision for credit losses				—				187				7				654
Net interest income after provision for credit losses				6,901				7,339				20,484				21,764
Noninterest income:
Service charges on deposit accounts				426				420				1,222				1,205
Other				204				173				638				631
Total noninterest income				630				593				1,860				1,836
Noninterest expenses:
Salaries and employee benefits				3,007				3,187				9,047				9,219
Occupancy				637				675				1,919				1,798
Advertising				59				128				238				326
Data processing				525				486				1,504				1,476
FHLB prepayment penalties				—				—				—				647
Other				1,178				1,014				3,176				3,019
Total noninterest expenses				5,406				5,490				15,884				16,485
Income before income taxes				2,125				2,442				6,460				7,115
Income tax expense				502				581				1,525				1,680
Net income			$	1,623			$	1,861			$	4,935			$	5,435
Weighted average common shares outstanding
Basic				6,417,754				6,652,811				6,500,562				6,683,052
Diluted				6,493,114				6,752,152				6,575,923				6,782,393
Basic earnings per share			$	0.25			$	0.28			$	0.76			$	0.81
Diluted earnings per share			$	0.25			$	0.27			$	0.75			$	0.80

Explanation of Certain Unaudited Non-GAAP Financial Measures

Reported amounts are presented in accordance with GAAP. Additionally, the Company believes the following information is utilized by regulators and market analysts to evaluate a company’s financial condition and, therefore, such information is useful to investors. These disclosures should not be viewed as a substitute for financial results in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies. Refer to the Non-GAAP Reconciliation tables below for details on the earnings impact of these items.

		For the Three Months Ended
Non-GAAP Reconciliation		September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022
Tangible book value per common share reconciliation
Book Value per common share (GAAP)		$	18.50			$	18.34			$	18.02			$	17.73			$	17.37
Effect of goodwill and other intangibles			(2.87	)			(2.87	)			(2.82	)			(2.81	)			(2.80	)
Tangible book value per common share		$	15.63			$	15.47			$	15.20			$	14.92			$	14.57
Tangible equity to tangible assets reconciliation
Equity to assets (GAAP)			13.85	%			13.45	%			12.69	%			14.80	%			14.84	%
Effect of goodwill and other intangibles			(1.90	)%			(1.86	)%			(1.77	)%			(2.05	)%			(2.09	)%
Tangible equity to tangible assets (1)			11.95	%			11.59	%			10.92	%			12.75	%			12.75	%
(1) Tangible assets is total assets less intangible assets. Tangible equity is total equity less intangible assets.

		For the
		Nine Months Ended September 30,
		2023				2022
Operating net income reconciliation
Net income (GAAP)		$	4,935			$	5,435
FHLB mark from called borrowings			—				(988	)
FHLB prepayment penalties			—				647
Income tax expense			—				87
Operating net income		$	4,935			$	5,181
Weighted average diluted shares			6,575,923				6,782,393
Adjusted diluted earnings per share		$	0.75			$	0.76
Net interest income		$	20,491			$	22,418
FHLB mark from called borrowings			—				(988	)
Adjusted Net interest income		$	20,491			$	21,430
Adjusted Net interest income reconciliation
Net interest margin (GAAP)			3.36	%			4.24	%
Effect of FHLB mark from called borrowings			0.00				(0.29	)
Adjusted Net interest margin			3.36	%			3.95	%

 

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The Affinity Bancshares Stock at the time of publication of the news with a fall of -1,16 % to 14,48EUR on Nasdaq stock exchange (26. Oktober 2023, 22:00 Uhr).