Affinity Bancshares, Inc. Announces Fourth Quarter and Full Year 2023 Financial Results

Business Wire

Thu, Feb 1, 2024, 2:30 PM 11 min read

COVINGTON, Ga., February 01, 2024--(BUSINESS WIRE)--Affinity Bancshares, Inc. (NASDAQ:"AFBI") (the "Company"), February 1, 2024, the holding company for Affinity Bank (the "Bank"), today announced net income of $1.5 million for the three months ended December 31, 2023, as compared to $1.7 million for the three months ended December 31, 2022.


	At or for the three months ended,
Performance Ratios:	December 31, 2023			September 30, 2023			June 30, 2023			March 31, 2023			December 31, 2022
Net income (in thousands)	$	1,514		$	1,623		$	1,590		$	1,722		$	1,699
Diluted earnings per share		0.23			0.25			0.24			0.26			0.26
Common book value per share		18.94			18.50			18.34			18.02			17.73
Tangible book value per share ⁽¹⁾		16.08			15.63			15.47			15.20			14.92
Total assets (in thousands)		843,258			855,431			876,905			932,302			791,283
Return on average assets		0.70	%		0.74	%		0.71	%		0.84	%		0.84	%
Return on average equity		5.03	%		5.42	%		5.37	%		5.90	%		5.78	%
Equity to assets		14.41	%		13.85	%		13.45	%		12.69	%		14.80	%
Tangible equity to tangible assets ⁽¹⁾		12.50	%		11.95	%		11.59	%		10.92	%		12.75	%
Net interest margin		3.32	%		3.36	%		3.17	%		3.58	%		3.85	%
Efficiency ratio		74.30	%		71.78	%		71.68	%		69.73	%		71.38	%
(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 $1.5 million for the three months ended December 31, 2023, as compared to $1.7 million for the three months ended December 31, 2022, as a result of an increase in deposit interest expense offset partially by an increase in interest income.
Net income was $6.4 million for the year ended December 31, 2023 as compared to $7.1 million for the year ended December 31, 2022, as a result of an increase in deposit interest expense and recognition of the remaining fair value mark on acquired Federal Home Loan Bank ("FHLB") 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 $6.7 million for the three months ended December 31, 2023 compared to $7.3 million for the three months ended December 31, 2022. The decrease was due to an increase in deposit costs partially offset by an increase in interest income.
Net interest income was $27.2 million for the year ended December 31, 2023 compared to $29.8 million for the year ended December 31, 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 December 31, 2023 decreased to 3.32% from 3.85% for the three months ended December 31, 2022. Net interest margin for the year ended December 31, 2023 decreased to 3.35% from 4.14% for the year ended December 31, 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 year ended December 31, 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 year ended December 31, 2023 (see Non-GAAP reconciliation) decreased 65 basis points from 4.00% for the year ended December 31, 2022 to 3.35%.
Noninterest income increased $40,000 to $606,000 for the three months ended December 31, 2023 and had an increase of $64,000 to $2.5 million for the year ended December 31, 2023 as compared to 2022.
Non-interest expense decreased $209,000 to $5.4 million for the three months ended December 31, 2023 compared to the same 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 $808,000 to $21.3 million for the year ended December 31, 2023 compared to 2022 and was a result of the FHLB prepayment penalties paid in the first quarter of 2022 and decreases in advertising expense and other expenses.

Financial Condition

Total assets increased $52.0 million to $843.3 million at December 31, 2023 from $791.3 million at December 31, 2022, as we increased cash to further enhance liquidity.
Total gross loans increased $13.6 million to $659.9 million at December 31, 2023 from $646.2 million at December 31, 2022.
Non-owner occupied office loans totaled $26.7 million at December 31, 2023; average loan-to-value ratio on these loans is 41.0%, including
- $11.0 million medical/dental tenants and
- $15.7 million to other various tenants.
Investment securities held-to-maturity unrealized losses were $277,000, net of tax. Investment securities available-for-sale unrealized losses were $6.3 million, net of tax.
Cash and cash equivalents increased $23.7 million to $50.0 million at December 31, 2023 from $26.3 million at December 31, 2022, primarily due to an increase in deposits and borrowings.
Deposits increased by $17.2 million to $674.4 million at December 31, 2023 compared to $657.2 million at December 31, 2022, in part due to an increase in certificates of deposits of $95.0 million offset by a $77.7 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 2.4 years and an average interest rate of 4.87%.
Uninsured deposits were approximately $95.5 million at December 31, 2023 and represented 14.0% of total deposits, excluding deposits collateralized by public funds and internal accounts.
Borrowings increased by $30.0 million to $40.0 million at December 31, 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 $7.4 million at December 31, 2023 from $6.7 million at December 31, 2022.
The allowance for credit losses as a percentage of non-performing loans was 120.1% at December 31, 2023, as compared to 138.8% at December 31, 2022.
Allowance for credit losses to total loans decreased to 1.35% at December 31, 2023 from 1.46% at December 31, 2022.
Net loan charge-offs were $404,000 for the year ended December 31, 2023, as compared to net recoveries of $62,000 for the year ended December 31, 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; the effects of any pandemic; 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 December 31,
	2023							2022
	Average Outstanding Balance		Interest		Average Yield/Rate			Average Outstanding Balance		Interest		Average Yield/Rate
	(Dollars in thousands)
Interest-earning assets:
Loans	$	661,913	$	9,290		5.57	%	$	650,922	$	8,032		4.90	%
Investment securities held-to-maturity		34,194		528		6.13	%		8,809		130		5.85	%
Investment securities available-for-sale		47,268		473		3.97	%		42,653		323		3.00	%
Interest-earning deposits and federal funds		53,442		709		5.26	%		53,238		485		3.61	%
Other investments		5,177		83		6.36	%		758		8		4.19	%
Total interest-earning assets		801,994		11,083		5.48	%		756,380		8,978		4.71	%
Non-interest-earning assets		52,938							50,538
Total assets	$	854,932						$	806,918

Interest-bearing liabilities:
Interest-bearing checking accounts	$	90,298	$	99		0.43	%	$	95,200	$	42		0.18	%
Money market accounts		143,312		1,069		2.96	%		161,901		470		1.15	%
Savings accounts		76,732		558		2.89	%		103,772		499		1.91	%
Certificates of deposit		221,817		2,352		4.21	%		117,102		610		2.07	%
Total interest-bearing deposits		532,159		4,078		3.04	%		477,975		1,621		1.35	%
FHLB advances and other borrowings		29,348		300		4.06	%		2,717		20		2.92	%
Total interest-bearing liabilities		561,507		4,378		3.09	%		480,692		1,641		1.35	%
Non-interest-bearing liabilities		174,077							209,683
Total liabilities		735,584							690,375
Total stockholders' equity		119,348							116,543
Total liabilities and stockholders' equity	$	854,932						$	806,918
Net interest rate spread						2.39	%						3.36	%
Net interest income			$	6,705						$	7,337
Net interest margin						3.32	%						3.85	%

	For the Year Ended December 31,
	2023							2022
	Average Outstanding Balance		Interest		Average Yield/Rate			Average Outstanding Balance		Interest				Average Yield/Rate
	(Dollars in thousands)
Interest-earning assets:
Loans	$	660,045	$	35,422		5.37	%	$	624,908	$	30,045				4.81	%
Investment securities held-to-maturity		33,850		2,078		6.14	%		2,220		130				5.86	%
Investment securities available-for-sale		49,024		1,772		3.61	%		45,594		1,150				2.52	%
Interest-earning deposits and federal funds		65,333		3,236		4.95	%		45,674		771				1.69	%
Other investments		3,014		192		6.37	%		1,027		38				3.70	%
Total interest-earning assets		811,266		42,700		5.26	%		719,423		32,134				4.47	%
Non-interest-earning assets		51,987							51,397
Total assets	$	863,253						$	770,820

Interest-bearing liabilities:
Interest-bearing checking accounts	$	92,030	$	271		0.29	%	$	96,892	$	176				0.18	%
Money market accounts		140,630		3,542		2.52	%		154,237		752				0.49	%
Savings accounts		85,555		2,238		2.62	%		89,015		856				0.96	%
Certificates of deposit		211,285		8,042		3.81	%		97,948		1,449				1.48	%
Total interest-bearing deposits		529,500		14,093		2.66	%		438,092		3,233				0.74	%
FHLB advances and other borrowings		32,808		1,409		4.29	%		9,887		(854	)			(8.64	)%
Total interest-bearing liabilities		562,308		15,502		2.76	%		447,979		2,379				0.53	%
Non-interest-bearing liabilities		182,144							204,842				...
Total liabilities		744,452							652,821
Total stockholders' equity		118,801							117,999
Total liabilities and stockholders' equity	$	863,253						$	770,820
Net interest rate spread						2.50	%								3.94	%
Net interest income			$	27,198						$	29,755
Net interest margin						3.35	%								4.14	%

AFFINITY BANCSHARES, INC. Consolidated Balance Sheets

	December 31, 2023			December 31, 2022
	(Dollars in thousands except per share amounts)
Assets
Cash and due from banks	$	6,030		$	2,928
Interest-earning deposits in other depository institutions		43,995			23,396
Cash and cash equivalents		50,025			26,324
Investment securities available-for-sale		48,561			46,200
Investment securities held-to-maturity (estimated fair value of $33,835, net of allowance for credit losses of $45 at December 31, 2023 and estimated fair value of $26,251 at December 31, 2022)		34,206			26,527
Other investments		5,434			1,082
Loans		659,876			646,234
Allowance for credit loss on loans		(8,921	)		(9,325	)
Net loans		650,955			636,909
Other real estate owned		2,850			2,901
Premises and equipment, net		3,797			4,257
Bank owned life insurance		16,086			15,724
Intangible assets		18,366			18,558
Other assets		12,978			12,801
Total assets	$	843,258		$	791,283

Liabilities and Stockholders' Equity

Liabilities:
Non-interest-bearing checking	$	154,689		$	190,297
Interest-bearing checking		85,362			91,167
Money market accounts		138,673			148,097
Savings accounts		74,768			101,622
Certificates of deposit		220,951			125,989
Total deposits		674,443			657,172
Federal Home Loan Bank advances and other borrowings		40,000			10,025
Accrued interest payable and other liabilities		7,299			6,983
Total liabilities		721,742			674,180
Stockholders' equity:
Common stock (par value $0.01 per share, 40,000,000 shares authorized; 6,416,628 issued and outstanding at December 31, 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		61,026			63,130
Unearned ESOP shares		(4,587	)		(4,795	)
Retained earnings		71,345			65,357
Accumulated other comprehensive loss		(6,332	)		(6,655	)
Total stockholders' equity		121,516			117,103
Total liabilities and stockholders' equity	$	843,258		$	791,283

AFFINITY BANCSHARES, INC. Consolidated Statements of Income (unaudited)
	Three Months Ended December 31,					Year Ended December 31,
	2023			2022		2023			2022
	(Dollars in thousands except per share amounts)
Interest income:
Loans, including fees	$	9,290		$	8,032	$	35,422		$	30,045
Investment securities		1,084			461		4,042			1,318
Interest-earning deposits		709			485		3,236			771
Total interest income		11,083			8,978		42,700			32,134
Interest expense:
Deposits		4,078			1,621		14,093			3,233
FHLB advances and other borrowings		300			20		1,409			(854	)
Total interest expense		4,378			1,641		15,502			2,379
Net interest income before provision for credit losses		6,705			7,337		27,198			29,755
Provision for credit losses		(49	)		50		(42	)		704
Net interest income after provision for credit losses		6,754			7,287		27,240			29,051
Noninterest income:
Service charges on deposit accounts		398			406		1,620			1,611
Other		208			160		846			791
Total noninterest income		606			566		2,466			2,402
Noninterest expenses:
Salaries and employee benefits		3,205			3,002		12,252			12,221
Occupancy		584			725		2,503			2,523
Data processing		520			471		2,025			1,947
FHLB prepayment penalties		—			—		—			647
Other		1,123			1,443		4,538			4,788
Total noninterest expenses		5,432			5,641		21,318			22,126
Income before income taxes		1,928			2,212		8,388			9,327
Income tax expense		414			513		1,940			2,193
Net income	$	1,514		$	1,699	$	6,448		$	7,134
Weighted average common shares outstanding
Basic		6,406,156			6,628,847		6,476,767			6,669,389
Diluted		6,486,442			6,708,922		6,557,053			6,761,771
Basic earnings per share	$	0.24		$	0.26	$	1.00		$	1.07
Diluted earnings per share	$	0.23		$	0.26	$	0.98		$	1.06

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	December 31, 2023			September 30, 2023			June 30, 2023			March 31, 2023			December 31, 2022
Tangible book value per common share reconciliation
Book Value per common share (GAAP)	$	18.94		$	18.50		$	18.34		$	18.02		$	17.73
Effect of goodwill and other intangibles		(2.86	)		(2.87	)		(2.87	)		(2.82	)		(2.81	)
Tangible book value per common share	$	16.08		$	15.63		$	15.47		$	15.20		$	14.92
Tangible equity to tangible assets reconciliation
Equity to assets (GAAP)		14.41	%		13.85	%		13.45	%		12.69	%		14.80	%
Effect of goodwill and other intangibles		(1.91	)%		(1.90	)%		(1.86	)%		(1.77	)%		(2.05	)%
Tangible equity to tangible assets (1)		12.50	%		11.95	%		11.59	%		10.92	%		12.75	%
(1) Tangible assets is total assets less intangible assets. Tangible equity is total equity less intangible assets.

	For the
	Year Ended December 31,
	2023			2022
Operating net income reconciliation
Net income (GAAP)	$	6,448		$	7,134
FHLB mark from called borrowings		—			(988	)
FHLB prepayment penalties		—			647
Income tax expense		—			87
Operating net income	$	6,448		$	6,880
Weighted average diluted shares		6,557,053			6,761,771
Adjusted diluted earnings per share	$	0.98		$	1.02

Net interest income	$	27,198		$	29,755
FHLB mark from called borrowings		—			(988	)
Adjusted Net interest income	$	27,198		$	28,767
Adjusted Net interest income reconciliation
Net interest margin (GAAP)		3.35	%		4.14	%
Effect of FHLB mark from called borrowings		0.00			(0.14	)
Adjusted Net interest margin		3.35	%		4.00	%