Affinity Bancshares, Inc. Announces First Quarter 2024 Financial Results

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Affinity Bancshares, Inc. reported net income of $1.3 million for the first quarter of 2024, down from $1.7 million in the same period last year. Despite a decrease in net income, the company experienced growth in total assets and loans, reflecting steady loan demand and an increase in deposits. The company's non-performing loans decreased, and it maintained a strong allowance for credit losses. Affinity Bancshares, Inc. continues to focus on enhancing liquidity and evaluating borrowing needs to support its financial stability.

Positive

• Net income decreased from $1.7 million in Q1 2023 to $1.3 million in Q1 2024.
• Total assets increased to $869.5 million at March 31, 2024, from $843.3 million at December 31, 2023.
• Gross loans grew to $674.5 million at March 31, 2024, from $659.9 million at December 31, 2023.
• Non-performing loans decreased to $7.2 million at March 31, 2024, from $7.4 million at December 31, 2023.
• Allowance for credit losses as a percentage of non-performing loans was 120.0% at March 31, 2024.
• Net loan charge-offs were $326,000 for Q1 2024, compared to $91,000 for Q1 2023.

Negative

• Net interest income decreased to $6.7 million in Q1 2024 from $6.9 million in Q1 2023.
• Net interest margin decreased to 3.38% in Q1 2024 from 3.58% in Q1 2023.
• Investment securities available-for-sale unrealized losses were $6.3 million, net of tax.
• Allowance for credit losses to total loans decreased to 1.27% at March 31, 2024, from 1.35% at December 31, 2023.
• Efficiency ratio increased to 75.96% in Q1 2024 from 69.73% in Q1 2023.

Financial Analyst

Affinity Bancshares, Inc.'s report shows a year-over-year decrease in net income from $1.7 million to $1.3 million, with a decline in diluted earnings per share from $0.26 to $0.20. This dip can be attributed to higher deposit interest expenses, despite an increase in interest income. Investors may view such a contraction in profitability with concern, especially given the decrease in net interest margin from 3.58% to 3.38%. This is indicative of pressure on the bank's core income-generating activities. However, the rise in total assets and solid loan growth could signal healthy underlying business activity, potentially offsetting some concerns regarding immediate profitability.

Market Analyst

From a market perspective, the modest uptick in noninterest income and increased deposit base suggest a stable customer foundation but are juxtaposed with an uptick in non-interest expenses. The growth in uninsured deposits to 15.6% of total deposits might be of interest to investors, as it reflects customer trust but also points to a potential increase in risk exposure. Additionally, a careful eye should be kept on the bank's asset quality, with non-performing loans slightly decreasing and an allowance for credit losses covering 120% of these loans.

Risk Analyst

The report includes some mixed signals regarding the bank's risk profile. The equity to assets ratio has increased year-over-year from 12.69% to 14.18%, suggesting a stronger capital buffer, which is positive for risk management. However, with tangible equity to tangible assets also rising, it's clear there's a focus on maintaining a solid capital base amid uncertain economic conditions. It's worth noting the increase in net loan charge-offs, which could be an early warning of deteriorating loan quality, albeit the current levels still seem manageable within the context of the bank's overall asset quality.

COVINGTON, Ga.--(BUSINESS WIRE)-- Affinity Bancshares, Inc. (NASDAQ:“AFBI”) (the “Company”), the holding company for Affinity Bank (the “Bank”), today announced net income of $1.3 million for the three months ended March 31, 2024, as compared to $1.7 million for the three months ended March 31, 2023.

		At or for the three months ended,
Performance Ratios:		March 31, 2024				December 31, 2023				September 30, 2023				June 30, 2023				March 31, 2023
Net income (in thousands)		$	1,335			$	1,514			$	1,623			$	1,590			$	1,722
Diluted earnings per share			0.20				0.23				0.25				0.24				0.26
Common book value per share			19.21				18.94				18.50				18.34				18.02
Tangible book value per share (1)			16.36				16.08				15.63				15.47				15.20
Total assets (in thousands)			869,547				843,258				855,431				876,905				932,302
Return on average assets			0.63	%			0.70	%			0.74	%			0.71	%			0.84	%
Return on average equity			4.38	%			5.03	%			5.42	%			5.37	%			5.90	%
Equity to assets			14.18	%			14.41	%			13.85	%			13.45	%			12.69	%
Tangible equity to tangible assets (1)			12.33	%			12.50	%			11.95	%			11.59	%			10.92	%
Net interest margin			3.38	%			3.32	%			3.36	%			3.17	%			3.58	%
Efficiency ratio			75.96	%			74.30	%			71.78	%			71.68	%			69.73	%
(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 $1.3 million for three months ended March 31, 2024 as compared to $1.7 million for the three months ended March 31, 2023, as a result of an increase in deposit interest expense partially offset by an increase in interest income.

Results of Operations

• Net interest income was $6.7 million for the three months ended March 31, 2024 compared to $6.9 million for the three months ended March 31, 2023. The decrease was due to an increase in deposit costs, partially offset by an increase in interest income.
• Net interest margin for the three months ended March 31, 2024 decreased to 3.38% from 3.58% for the three months ended March 31, 2023. The decreases in the margin relate to increases in our costs of funds exceeding our increases in our yield on interest-earning assets.
• Noninterest income increased $32,000 to $584,000 for the three months ended March 31, 2024.
• Non-interest expense increased $376,000 to $5.6 million for the three months ended March 31, 2024 compared to the respective period in 2023, due to increases in salaries, data processing and other expenses offset by decreases in occupancy expenses.

Financial Condition

• Total assets increased $26.3 million to $869.5 million at March 31, 2024 from $843.3 million at December 31, 2023, as we increased cash to further enhance liquidity and experienced loan growth.
• Total gross loans increased $14.6 million to $674.5 million at March 31, 2024 from $659.9 million at December 31, 2023. The increase was due to steady loan demand.
• Non-owner occupied office loans totaled $26.4 million at March 31, 2024; average LTV on these loans is 41.0%, including
  • $10.5 million medical/dental tenants and
  • $15.9 million to other various tenants.
• Investment securities held-to-maturity unrealized losses were $301,000, net of tax. Investment securities available-for-sale unrealized losses were $6.3 million, net of tax.
• Cash and cash equivalents increased to $61.4 million at March 31, 2024 from $50.0 million at December 31, 2023, primarily due to an increase in deposits.
• Deposits increased by $13.0 million to $687.4 million at March 31, 2024 compared to $674.4 million at December 31, 2023, with $11.3 million of the increase in demand deposits.
• Uninsured deposits were approximately $107.1 million at March 31, 2024 and represented 15.6% of total deposits.
• Borrowings increased by $11.8 million to $51.8 million at March 31, 2024 compared to $40.0 million at December 31, 2023 as we continue to evaluate borrowing needs related to enhancing bank liquidity.

Asset Quality

• Non-performing loans decreased to $7.2 million at March 31, 2024 from $7.4 million at December 31, 2023.
• The allowance for credit losses as a percentage of non-performing loans was 120.0% at March 31, 2024, as compared to 120.1% at December 31, 2023.
• Allowance for credit losses to total loans decreased to 1.27% at March 31, 2024 from 1.35% at December 31, 2023.
• Net loan charge-offs were $326,000 for the three months ended March 31, 2024, as compared to net loan charge-offs of $91,000 for the three months ended March 31, 2023.

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 March 31,
		2024												2023
		Average Outstanding Balance				Interest				Average Yield/Rate				Average Outstanding Balance				Interest				Average Yield/Rate
		(Dollars in thousands)
Interest-earning assets:
Loans		$	664,660			$	9,499				5.75	%		$	651,750			$	8,291				5.16	%
Investment securities held-to-maturity			34,213				528				6.21	%			32,898				503				6.20	%
Investment securities available-for-sale			48,169				463				3.87	%			48,844				411				3.41	%
Interest-earning deposits and federal funds			50,083				647				5.20	%			45,758				488				4.32	%
Other investments			5,447				84				6.20	%			2,643				35				5.39	%
Total interest-earning assets			802,572				11,221				5.62	%			781,893				9,728				5.05	%
Non-interest-earning assets			52,145												51,044
Total assets		$	854,717											$	832,937
Interest-bearing liabilities:
Interest-bearing checking accounts		$	88,057			$	103				0.47	%		$	91,856			$	45				0.20	%
Money market accounts			140,600				1,086				3.11	%			139,495				661				1.92	%
Savings accounts			74,412				528				2.85	%			95,897				552				2.34	%
Certificates of deposit			219,806				2,285				4.18	%			149,058				1,056				2.87	%
Total interest-bearing deposits			522,875				4,002				3.08	%			476,306				2,314				1.97	%
FHLB advances and other borrowings			52,615				470				3.59	%			46,723				516				4.48	%
Total interest-bearing liabilities			575,490				4,472				3.13	%			523,029				2,830				2.19	%
Non-interest-bearing liabilities			156,697												191,659
Total liabilities			732,187												714,688
Total stockholders' equity			122,530												118,249
Total liabilities and stockholders' equity		$	854,717											$	832,937
Net interest rate spread											2.49	%											2.86	%
Net interest income						$	6,749											$	6,898
Net interest margin											3.38	%											3.58	%

AFFINITY BANCSHARES, INC. Consolidated Balance Sheets (unaudited)
		March 31, 2024				December 31, 2023
		(Dollars in thousands except per share amounts)
Assets
Cash and due from banks		$	6,388			$	6,030
Interest-earning deposits in other depository institutions			55,007				43,995
Cash and cash equivalents			61,395				50,025
Investment securities available-for-sale			48,239				48,561
Investment securities held-to-maturity (estimated fair value of $33,873, net of allowance for credit losses of $45 at March 31, 2024 and estimated fair value of $33,835, net of allowance for credit losses of $45 at December 31, 2023)			34,230				34,206
Other investments			5,480				5,434
Loans			674,498				659,876
Allowance for credit loss on loans			(8,595	)			(8,921	)
Net loans			665,903				650,955
Other real estate owned			2,850				2,850
Premises and equipment, net			3,691				3,797
Bank owned life insurance			16,184				16,086
Intangible assets			18,318				18,366
Other assets			13,257				12,978
Total assets		$	869,547			$	843,258
Liabilities and Stockholders' Equity
Liabilities:
Non-interest-bearing checking		$	164,568			$	154,689
Interest-bearing checking			86,734				85,362
Money market accounts			144,689				138,673
Savings accounts			74,282				74,768
Certificates of deposit			217,171				220,951
Total deposits			687,444				674,443
Federal Home Loan Bank advances and other borrowings			51,837				40,000
Accrued interest payable and other liabilities			6,966				7,299
Total liabilities			746,247				721,742
Stockholders' equity:
Common stock (par value $0.01 per share, 40,000,000 shares authorized; 6,416,628 issued and outstanding at March 31, 2024 and December 31, 2023)			64				64
Preferred stock (10,000,000 shares authorized, no shares outstanding)			—				—
Additional paid in capital			61,409				61,026
Unearned ESOP shares			(4,535	)			(4,587	)
Retained earnings			72,680				71,345
Accumulated other comprehensive loss			(6,318	)			(6,332	)
Total stockholders' equity			123,300				121,516
Total liabilities and stockholders' equity		$	869,547			$	843,258

AFFINITY BANCSHARES, INC. Consolidated Statements of Income (unaudited)
		Three Months Ended March 31,
		2024				2023
	(Dollars in thousands except per share amounts)
Interest income:
Loans, including fees		$	9,499			$	8,291
Investment securities			1,075				949
Interest-earning deposits			647				488
Total interest income			11,221				9,728
Interest expense:
Deposits			4,002				2,314
FHLB advances and other borrowings			470				516
Total interest expense			4,472				2,830
Net interest income before provision for credit losses			6,749				6,898
Provision for credit losses			—				7
Net interest income after provision for credit losses			6,749				6,891
Noninterest income:
Service charges on deposit accounts			395				391
Other			189				161
Total noninterest income			584				552
Noninterest expenses:
Salaries and employee benefits			3,179				3,004
Occupancy			618				644
Data processing			511				493
Other			1,262				1,053
Total noninterest expenses			5,570				5,194
Income before income taxes			1,763				2,249
Income tax expense			428				527
Net income		$	1,335			$	1,722
Weighted average common shares outstanding
Basic			6,416,628				6,599,672
Diluted			6,524,332				6,681,680
Basic earnings per share		$	0.21			$	0.26
Diluted earnings per share		$	0.20			$	0.26

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		March 31, 2024				December 31, 2023				September 30, 2023				June 30, 2023				March 31, 2023
Tangible book value per common share reconciliation
Book Value per common share (GAAP)		$	19.21			$	18.94			$	18.50			$	18.34			$	18.02
Effect of goodwill and other intangibles			(2.85	)			(2.86	)			(2.87	)			(2.87	)			(2.82	)
Tangible book value per common share		$	16.36			$	16.08			$	15.63			$	15.47			$	15.20
Tangible equity to tangible assets reconciliation
Equity to assets (GAAP)			14.18	%			14.41	%			13.85	%			13.45	%			12.69	%
Effect of goodwill and other intangibles			(1.85	)%			(1.91	)%			(1.90	)%			(1.86	)%			(1.77	)%
Tangible equity to tangible assets (1)			12.33	%			12.50	%			11.95	%			11.59	%			10.92	%
(1) Tangible assets is total assets less intangible assets. Tangible equity is total equity less intangible assets.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240426283380/en/

Edward J. Cooney

Chief Executive Officer

(678) 742-9990

Source: Affinity Bancshares, Inc.

FAQ

What was Affinity Bancshares, Inc.'s net income for the first quarter of 2024?

Affinity Bancshares, Inc. reported a net income of $1.3 million for the first quarter of 2024.

How did the total assets of Affinity Bancshares, Inc. change from December 31, 2023, to March 31, 2024?

Total assets increased to $869.5 million at March 31, 2024, from $843.3 million at December 31, 2023.

What was the allowance for credit losses as a percentage of non-performing loans at March 31, 2024?

The allowance for credit losses as a percentage of non-performing loans was 120.0% at March 31, 2024.

How did the net loan charge-offs compare between the first quarters of 2024 and 2023?

Net loan charge-offs were $326,000 for Q1 2024, compared to $91,000 for Q1 2023.