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

COVINGTON, Ga.--(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	%

Contacts

Edward J. Cooney
Chief Executive Officer
[phone]