Affinity Bancshares, Inc. Announces First Quarter 2023 Financial Results

COVINGTON, Ga.--(BUSINESS WIRE)--Affinity Bancshares, Inc. (NASDAQ:"AFBI") (the "Company"), the holding company for Affinity Bank (the "Bank"), today announced net income of $1.7 million for the three months ended March 31, 2023, as compared to $1.8 million for the three months ended March 31, 2022.

		At or for the three months ended,
Performance Ratios:		March 31, 2023				December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022
Net income (in thousands)		$	1,722			$	1,699			$	1,861			$	1,783			$	1,791
Diluted earnings per share			0.26				0.26				0.27				0.27				0.26
Common book value per share			18.02				17.73				17.37				17.51				17.58
Tangible book value per share (1)			15.20				14.92				14.57				14.68				14.75
Total assets (in thousands)			932,302				791,283				776,390				766,679				760,208
Return on average assets			0.84	%			0.84	%			0.95	%			0.95	%			0.97	%
Return on average equity			5.90	%			5.78	%			6.30	%			6.13	%			5.97	%
Equity to assets			12.69	%			14.80	%			14.84	%			15.05	%			15.31	%
Tangible equity to tangible assets (1)			10.92	%			12.75	%			12.75	%			12.93	%			13.17	%
Net interest margin			3.58	%			3.85	%			4.12	%			4.06	%			4.47	%
Efficiency ratio			69.73	%			71.38	%			67.62	%			67.23	%			69.00	%
(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 $1.7 million for the three months ended March 31, 2023, as compared to $1.8 million for the three months ended March 31, 2022, as a result of an increase in deposit interest expense offset by an increase in interest income and decreases in noninterest expenses.
• Operating net income was $1.7 million and $0.26 diluted earnings per share for the three months ended March 31, 2023, as compared to $1.5 million and $0.22 diluted earnings per share for the three months ended March 31, 2022.

Results of Operations

• Net interest income was $6.9 million for the three months ended March 31, 2023 compared to $7.8 million for the three months ended March 31, 2022, due to an increase in deposit costs and recognition of remaining purchase accounting fair value discounts upon the payoff of acquired Federal Home Loan Bank (FHLB) advances in the first quarter of 2022, partially offset by an increase in interest income on loans.
• Net interest margin for the three months ended March 31, 2023 decreased to 3.58% from 4.53% for the three months ended March 31, 2022. The Company anticipates it will experience continued margin compression in 2023 as a result of recent increases in market interest rates along with the mark on the FHLB advances from acquisition that was recognized upon payoff in first quarter 2022.
• Noninterest income was $552 thousand for the three months ended March 31, 2023 and $595 thousand for the three months ended March 31, 2022. The decrease was attributable to a decrease in mortgage fee income.
• Non-interest expense was $5.2 million and $5.8 million for the three months ended March 31, 2023 and 2022, respectively. The decrease was a result of the FHLB prepayment penalties paid in first quarter 2022.

Financial Condition

• Total assets increased $141.0 million to $932.3 million at March 31, 2023 from $791.3 million at December 31, 2022 to further enhance liquidity.
• Total net loans increased $15.3 million to $652.2 million at March 31, 2023 from $636.9 million at December 31, 2022. The increase was due to steady loan demand.
• Non-owner occupied office loans totaled $26.2 million at March 31, 2023; average LTV on these loans is 45%;
  • $10.4 million medical/ dental tenants
  • $15.8 million to other various tenants.
• Investment securities held-to-maturity unrealized losses were $1.3 million, net of tax. Investment securities available-for-sale unrealized losses were $6.2 million, net of tax.
• Cash and cash equivalents increased to $136.9 million at March 31, 2023 from $26.3 million at December 31, 2023, primarily due to an increase in deposits.
• Deposits increased by $93.6 million to $750.8 million at March 31, 2023 compared to $657.2 million at December 31, 2022, in part due to increases in certificates of deposits of $116.2 million offset by $22.6 million decreases in non-time deposits, as customers increased deposits in higher-yielding accounts during the current interest rate environment. The certificates of deposits increase included brokered deposits totaling $85.6 million with an average life of three years and an average interest rate of 5.07%.
• Uninsured deposits were approximately $91.9 million and represented 12.1% of total deposits.
• Borrowings increased by $45.0 million to $55.0 million at March 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 $6.9 million at March 31, 2023 from $6.7 million at December 31, 2022.
• The allowance for credit losses as a percentage of non-performing loans was 145.49% at March 31, 2023, as compared to 138.8% at December 31, 2022.
• Allowance for credit losses decreased to 1.40% at March 31, 2023 from 1.46% of total loans at December 31, 2022.
• Net loan charge-offs were $91 thousand for the three months ended March 31, 2023, as compared to $3 thousand for the three months ended March 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; 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,
		2023												2022
		Average Outstanding Balance				Interest				Average Yield/Rate				Average Outstanding Balance				Interest				Average Yield/Rate
		(Dollars in thousands)
Interest-earning assets:
Loans		$	651,750			$	8,291				5.16	%		$	586,762			$	6,996				4.84	%
Investment securities held-to-maturity			32,898				503				6.20	%			-				-				-
Investment securities available-for-sale			48,844				411				3.41	%			48,648				260				2.14	%
Interest-earning deposits and federal funds			45,758				488				4.32	%			48,231				17				0.14	%
Other investments			2,643				35				5.39	%			1,000				6				2.33	%
Total interest-earning assets			781,893				9,728				5.05	%			684,641				7,279				4.25	%
Non-interest-earning assets			51,044												62,343
Total assets			832,937											$	746,984
Interest-bearing liabilities:
Interest-bearing checking accounts		$	91,856			$	45				0.20	%		$	96,273			$	42				0.17	%
Money market accounts			139,495				661				1.92	%			144,455				88				0.25	%
Savings accounts			95,897				552				2.34	%			86,195				83				0.38	%
Certificates of deposit			149,058				1,056				2.87	%			94,465				290				1.23	%
Total interest-bearing deposits			476,306				2,314				1.97	%			421,388				503				0.48	%
FHLB advances and other borrowings			46,723				516				4.48	%			8,821				(975	)			(44.20	)%
Total interest-bearing liabilities			523,029				2,830				2.19	%			430,209				(472	)			(0.44	)%
Non-interest-bearing liabilities			191,659												195,024
Total liabilities			714,688												625,233
Total stockholders' equity			118,249												121,751
Total liabilities and stockholders' equity		$	832,937											$	746,984
Net interest rate spread											2.86	%											4.69	%
Net interest income						$	6,898											$	7,751
Net interest margin											3.58	%											4.53	%

AFFINITY BANCSHARES, INC.
Consolidated Balance Sheets
(unaudited)
		March 31, 2023				December 31, 2022
		(Dollars in thousands except per share amounts)
Assets
Cash and due from banks		$	5,714			$	2,928
Interest-earning deposits in other depository institutions			131,172				23,396
Cash and cash equivalents			136,886				26,324
Investment securities available-for-sale			51,154				46,200
Investment securities held-to-maturity (estimated fair value of $32,507)			34,119				26,527
Other investments			2,996				1,082
Loans, net			652,192				636,909
Other real estate owned			2,901				2,901
Premises and equipment, net			4,156				4,257
Bank owned life insurance			15,811				15,724
Intangible assets			18,510				18,558
Other assets			13,577				12,801
Total assets		$	932,302			$	791,283
Liabilities and Stockholders' Equity
Liabilities:
Non-interest-bearing checking		$	183,862			$	190,297
Interest-bearing checking			97,537				91,167
Money market accounts			134,872				148,097
Savings accounts			92,382				101,622
Certificates of deposit			242,186				125,989
Total deposits			750,839				657,172
Federal Home Loan Bank advances and other borrowings			55,000				10,025
Accrued interest payable and other liabilities			8,153				6,983
Total liabilities			813,992				674,180
Stockholders' equity:
Common stock (par value $0.01 per share, 40,000,000 shares authorized; 6,566,137 issued and outstanding at March 31, 2023 and 6,605,384 issued and outstanding at December 31, 2022)			66				66
Preferred stock (10,000,000 shares authorized, no shares outstanding)			-				-
Additional paid in capital			62,549				63,130
Unearned ESOP shares			(4,743	)			(4,795	)
Retained earnings			66,619				65,357
Accumulated other comprehensive loss			(6,181	)			(6,655	)
Total stockholders' equity			118,310				117,103
Total liabilities and stockholders' equity		$	932,302			$	791,283

AFFINITY BANCSHARES, INC.
Consolidated Statements of Income
(unaudited)
			Three Months Ended March 31,
			2023				2022
			(Dollars in thousands except per share amounts)
Interest income:
Loans, including fees			$	8,291			$	6,996
Investment securities				949				266
Interest-earning deposits				488				17
Total interest income				9,728				7,279
Interest expense:
Deposits				2,314				503
FHLB advances and other borrowings				516				(975	)
Total interest expense				2,830				(472	)
Net interest income before provision for credit losses				6,898				7,751
Provision for credit losses				7				250
Net interest income after provision for credit losses				6,891				7,501
Noninterest income:
Service charges on deposit accounts				391				392
Other				161				203
Total noninterest income				552				595
Noninterest expenses:
Salaries and employee benefits				3,004				3,008
Occupancy				644				582
Advertising				97				80
Data processing				493				494
FHLB prepayment penalties				-				647
Other				956				947
Total noninterest expenses				5,194				5,758
Income before income taxes				2,249				2,338
Income tax expense				527				547
Net income			$	1,722			$	1,791
Weighted average common shares outstanding
Basic				6,599,672				6,806,405
Diluted				6,681,680				6,908,665
Basic earnings per share			$	0.26			$	0.26
Diluted earnings per share			$	0.26			$	0.26

Explanation of Certain Unaudited Non-GAAP Financial Measures

Reported amounts are presented in accordance with GAAP. Additionally, the Company believes this 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 table below for details on the earnings impact of these items.

			At or For the Period Ending
Non-GAAP Reconciliation			March 31, 2023				December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022
Operating net income reconciliation
Net income (GAAP)			$	1,722			$	1,699			$	1,861			$	1,783			$	1,791
FHLB mark from called borrowings				-				-				-				-				988
FHLB prepayment penalties				-				-				-				-				647
Income tax expense				-				-				-				-				(87	)
Operating net income			$	1,722			$	1,699			$	1,861			$	1,783			$	1,537
Weighted average diluted shares				6,681,680				6,708,922				6,752,152				6,684,721				6,908,665
Adjusted earnings per share			$	0.26			$	0.26			$	0.27			$	0.27			$	0.22
Tangible book value per common share reconciliation
Book Value per common share (GAAP)			$	18.02			$	17.73			$	17.37			$	17.51			$	17.58
Effect of goodwill and other intangibles				(2.82	)			(2.81	)			(2.80	)			(2.83	)			(2.83	)
Tangible book value per common share			$	15.20			$	14.92			$	14.57			$	14.68			$	14.75
Tangible equity to tangible assets reconciliation
Equity to assets (GAAP)				12.69	%			14.80	%			14.84	%			15.05	%			15.31	%
Effect of goodwill and other intangibles				(1.77	)%			(2.05	)%			(2.09	)%			(2.12	)%			(2.14	)%
Tangible equity to tangible assets (1)				10.92	%			12.75	%			12.75	%			12.93	%			13.17	%
(1) Tangible assets is total assets less intangible assets. Tangible equity is total equity less intangible assets.

Contacts

Edward J. Cooney
Chief Executive Officer
[phone]