Part I [Business](index=4&type=section&id=ITEM%201.%20Business) Affinity Bancshares, Inc. operates as a Maryland-based holding company for Affinity Bank, focusing on diversified lending and deposit gathering nationwide - Affinity Bancshares, Inc. operates as the holding company for its wholly-owned subsidiary, Affinity Bank[16](index=16&type=chunk) Company Financial Snapshot as of December 31, 2022 | Metric | Amount (in millions) | | :--- | :--- | | Total Assets | $791.3 | | Loans | $636.9 | | Deposits | $657.2 | | Stockholders' Equity | $117.1 | [Lending Activities](index=6&type=section&id=Lending%20Activities) Lending activities focus on commercial, residential, and consumer loans, with a significant niche in dental practice financing and growing auto loans - The company has a specialized expertise in lending to the dental industry, with these loans totaling **$185.1 million**, or **28.6%** of the total loan portfolio, as of December 31, 2022[24](index=24&type=chunk)[25](index=25&type=chunk) Loan Portfolio Composition (December 31, 2022 vs. 2021) | Loan Type | 2022 Amount (in thousands) | 2022 Percent | 2021 Amount (in thousands) | 2021 Percent | | :--- | :--- | :--- | :--- | :--- | | Commercial (secured by real estate - owner occupied) | $162,989 | 25.22% | $158,662 | 27.15% | | Commercial (secured by real estate - non-owner occupied) | $135,720 | 21.00% | $104,042 | 17.81% | | Commercial and industrial | $147,775 | 22.87% | $170,718 | 29.21% | | Construction, land and acquisition & development | $37,158 | 5.75% | $16,317 | 2.79% | | Residential mortgage 1-4 family | $51,324 | 7.94% | $63,065 | 10.79% | | Consumer installment | $111,268 | 17.22% | $71,580 | 12.25% | | **Total** | **$646,234** | **100.00%** | **$584,384** | **100.00%** | - The indirect automobile lending division, Affinity Bank Dealer Select (ABDS), has grown significantly, with **$108.5 million** in indirect auto loans as of December 31, 2022[49](index=49&type=chunk) [Delinquencies and Asset Quality](index=12&type=section&id=Delinquencies%20and%20Asset%20Quality) Asset quality improved in 2022, with non-performing assets and classified assets decreasing, indicating a stronger portfolio Non-Performing Assets (December 31, 2022 vs. 2021) | Metric | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Total non-accrual loans | $6,720 | $7,011 | | Total real estate owned | $2,901 | $3,538 | | **Total non-performing assets** | **$9,870** | **$10,549** | | Total non-performing loans to total loans | 1.04% | 1.42% | | Total non-performing assets to total assets | 1.25% | 1.34% | Classified and Special Mention Assets (December 31, 2022 vs. 2021) | Category | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Substandard assets | $6,667 | $8,398 | | Doubtful assets | $0 | $0 | | Loss assets | $0 | $0 | | **Total classified assets** | **$6,667** | **$8,398** | | Special mention assets | $2,739 | $3,054 | [Allowance for Loan Losses](index=14&type=section&id=Allowance%20for%20Loan%20Losses) The allowance for loan losses increased to $9.3 million, improving coverage of non-performing loans despite a slight decrease as a percentage of total loans Allowance for Loan Losses Activity (Years Ended December 31) | Metric | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Allowance at beginning of period | $8,559 | $6,361 | | Provision for loan losses | $704 | $1,075 | | Net (charge-offs) recoveries | $62 | $1,123 | | **Allowance at end of period** | **$9,325** | **$8,559** | Key Allowance Ratios (at Year-End) | Ratio | 2022 | 2021 | | :--- | :--- | :--- | | Allowance to non-performing loans | 138.75% | 122.08% | | Allowance to total loans outstanding | 1.44% | 1.74% | [Sources of Funds](index=17&type=section&id=Sources%20of%20Funds) Deposits are the primary funding source, growing to $657.2 million, while FHLB borrowings were significantly reduced Deposit Composition (December 31, 2022 vs. 2021) | Account Type | 2022 Amount (in thousands) | 2022 Percent | 2021 Amount (in thousands) | 2021 Percent | | :--- | :--- | :--- | :--- | :--- | | Non-interest-bearing checking | $190,297 | 28.96% | $193,940 | 31.65% | | Interest-bearing checking | $91,167 | 13.87% | $89,384 | 14.59% | | Money market accounts | $148,097 | 22.54% | $145,969 | 23.82% | | Savings accounts | $101,622 | 15.46% | $86,745 | 14.15% | | Certificates of deposit | $125,989 | 19.17% | $96,758 | 15.79% | | **Total** | **$657,172** | **100.00%** | **$612,796** | **100.00%** | - FHLB advances were reduced from **$49.0 million** at year-end 2021 to **$10.0 million** at year-end 2022[104](index=104&type=chunk) [Supervision and Regulation](index=21&type=section&id=Supervision%20and%20Regulation) The bank and holding company are extensively regulated, with the bank exceeding all capital requirements and considered "well capitalized" - Affinity Bank has exercised the "covered savings association election," which permits a federal savings bank to operate with the same rights and privileges as a national bank[128](index=128&type=chunk)[129](index=129&type=chunk) - The bank is subject to minimum capital standards, including a common equity Tier 1 ratio of **4.5%**, a Tier 1 ratio of **6.0%**, and a total capital ratio of **8.0%** It must also maintain a capital conservation buffer of **2.5%** to avoid limits on capital distributions[132](index=132&type=chunk)[134](index=134&type=chunk) - As of December 31, 2022, Affinity Bank's capital levels exceeded all applicable requirements and it met the criteria for being considered "well capitalized"[137](index=137&type=chunk)[152](index=152&type=chunk) [Risk Factors](index=28&type=section&id=ITEM%201A.%20Risk%20Factors) This item is not applicable as the company qualifies as a "smaller reporting company" [Unresolved Staff Comments](index=28&type=section&id=ITEM%201B.%20Unresolved%20Staff%20Comments) The company reported no unresolved staff comments [Properties](index=28&type=section&id=ITEM%202.%20Properties) Company properties, including offices and equipment, had a net book value of $4.3 million as of December 31, 2022 - The net book value of office properties was **$2.0 million**, and furniture, fixtures, and equipment was **$2.3 million** as of December 31, 2022[171](index=171&type=chunk) [Legal Proceedings](index=29&type=section&id=ITEM%203.%20Legal%20Proceedings) The company is involved in routine legal claims but no material adverse proceedings are pending [Mine Safety Disclosures](index=29&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=29&type=section&id=ITEM%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq, with 6.6 million shares outstanding and 372,315 shares repurchased in 2022 - The company's common stock is traded on the Nasdaq Capital Market under the symbol "AFBI" As of March 20, 2023, there were **6,596,910 shares** outstanding[176](index=176&type=chunk) Share Repurchases for the Year Ended December 31, 2022 | Metric | Value | | :--- | :--- | | Total Shares Purchased | 372,315 | | Average Price Paid per Share | $15.32 | [Reserved](index=30&type=section&id=ITEM%206.%20%5BReserved%5D) This item is reserved [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=ITEM%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net income decreased to $7.1 million in 2022 due to higher expenses and lower interest income, despite slight asset growth - Total assets increased by **$3.2 million** (**0.4%**) to **$791.3 million**, primarily due to a **$61.1 million** (**10.6%**) increase in net loans[184](index=184&type=chunk) - Net income decreased by **$439,000** (**5.8%**) to **$7.1 million** for 2022, compared to **$7.6 million** in 2021[185](index=185&type=chunk) - The decrease in interest income on loans was largely due to a **$5.5 million** reduction in interest and fee income from Paycheck Protection Program (PPP) loans[185](index=185&type=chunk) [Comparison of Financial Condition](index=32&type=section&id=Comparison%20of%20Financial%20Condition) Total assets marginally increased to $791.3 million, driven by loan growth funded by reduced cash and FHLB borrowings, while equity decreased - Net loans increased by **$61.1 million** (**10.6%**), driven by growth in non-owner occupied commercial real estate (**+$31.7M**), consumer loans (**+$39.7M**), and construction loans (**+$20.8M**)[195](index=195&type=chunk) - Total deposits increased by **$44.4 million** (**7.2%**), led by a **$29.2 million** increase in certificates of deposit[197](index=197&type=chunk) - Stockholders' equity decreased by **$3.9 million** (**3.2%**) due to a **$6.3 million** accumulated other comprehensive loss and **$5.7 million** in stock repurchases, offset by **$7.1 million** in net income[199](index=199&type=chunk) [Comparison of Operating Results](index=35&type=section&id=Comparison%20of%20Operating%20Results) Net income decreased to $7.1 million in 2022 due to higher noninterest expenses and lower noninterest income, despite increased net interest income - Interest income on loans decreased by **$1.4 million**, primarily due to a **$5.5 million** reduction in PPP loan interest and fees[207](index=207&type=chunk) - Interest expense on borrowings decreased significantly to a negative **$(854,000)** from **$497,000** in 2021, due to the repayment of acquired FHLB advances which resulted in the recognition of **$1.0 million** in accretion from fair value adjustments[210](index=210&type=chunk) Noninterest Expenses (Years Ended December 31) | Category | 2022 (in thousands) | 2021 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Salaries and employee benefits | $12,221 | $10,663 | 14.6% | | Occupancy | $2,523 | $2,935 | (14.1)% | | FHLB prepayment penalties | $647 | $0 | 100.0% | | Write-down of premises and equipment | $0 | $1,176 | (100.0)% | | Other | $4,312 | $3,880 | 11.1% | | **Total noninterest expenses** | **$22,126** | **$20,968** | **5.5%** | [Management of Market Risk](index=37&type=section&id=Management%20of%20Market%20Risk) Interest rate risk is managed through portfolio diversification and deposit growth, with a 200 bps rate increase projected to decrease net interest income by 2.34% Net Interest Income Sensitivity Analysis (as of December 31, 2022) | Change in Interest Rates (basis points) | Estimated Year 1 Change from Level | | :--- | :--- | | +400 | (5.07)% | | +200 | (2.34)% | | Level | — | | -200 | (3.14)% | | -400 | (11.86)% | [Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=ITEM%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section refers to market risk disclosures within Management's Discussion and Analysis of Financial Condition and Results of Operations [Financial Statements and Supplementary Data](index=40&type=section&id=ITEM%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the consolidated financial statements for 2022 and 2021, including auditor's report and detailed notes - The independent auditor, Wipfli LLP, issued an opinion that the financial statements present fairly, in all material respects, the financial position of the Company in conformity with U.S. GAAP[242](index=242&type=chunk) - The auditor identified the estimate of the allowance for loan losses for loans collectively evaluated for impairment as a critical audit matter due to the significant judgment and estimation uncertainty involved[247](index=247&type=chunk)[248](index=248&type=chunk) [Consolidated Financial Statements](index=43&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show total assets of $791.3 million and net income of $7.1 million for 2022 Consolidated Balance Sheet Highlights (as of December 31) | Account | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $26,324 | $111,776 | | Loans, net | $636,909 | $575,825 | | Total assets | $791,283 | $788,088 | | Total deposits | $657,172 | $612,796 | | Total liabilities | $674,180 | $667,120 | | Total stockholders' equity | $117,103 | $120,968 | Consolidated Income Statement Highlights (for the Year Ended December 31) | Account | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Net interest income | $29,755 | $29,276 | | Provision for loan losses | $704 | $1,075 | | Noninterest income | $2,402 | $2,678 | | Noninterest expenses | $22,126 | $20,968 | | **Net income** | **$7,134** | **$7,573** | | Diluted earnings per share | $1.06 | $1.09 | [Notes to Consolidated Financial Statements](index=48&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, loan portfolio analysis, regulatory capital, and the adoption of new accounting standards like CECL - The company adopted ASU 2016-02 (Leases) on January 1, 2022, resulting in the recognition of a right-of-use asset and lease liability of approximately **$2.7 million**[276](index=276&type=chunk) - The company adopted ASU 2016-13 (CECL) on January 1, 2023, recording a one-time entry to retained earnings of **$437,000**, net of tax, primarily for credit losses on unfunded commitments[277](index=277&type=chunk) Bank Regulatory Capital Ratios (as of December 31, 2022) | Ratio | Actual Ratio | Minimum for Capital Adequacy | Minimum to be Well Capitalized | | :--- | :--- | :--- | :--- | | Common Equity Tier 1 | 11.86% | 4.50% | 6.50% | | Total Capital | 13.11% | 8.00% | 10.00% | | Tier I Capital | 11.86% | 6.00% | 8.00% | | Tier I Leverage | 10.97% | 4.00% | 5.00% | [Changes In and Disagreements With Accountants on Accounting and Financial Disclosure](index=79&type=section&id=ITEM%209.%20Changes%20In%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reported no changes in or disagreements with its accountants on accounting and financial disclosure [Controls and Procedures](index=79&type=section&id=ITEM%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2022 - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[446](index=446&type=chunk) - Based on an assessment using the COSO framework, management believes the company's internal control over financial reporting was effective as of December 31, 2022[450](index=450&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=80&type=section&id=ITEM%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2023 Proxy Statement [Executive Compensation](index=80&type=section&id=ITEM%2011.%20Executive%20Compensation) Executive compensation information is incorporated by reference from the 2023 Proxy Statement [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=80&type=section&id=ITEM%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section details equity compensation plans, with 484,519 securities issuable under outstanding options as of December 31, 2022 Equity Compensation Plan Information (as of December 31, 2022) | Plan Category | Number of securities to be issued upon exercise | Weighted-average exercise price | Number of securities remaining available for future issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 484,519 | $12.28 | 230,227 | [Certain Relationships and Related Transactions, and Director Independence](index=81&type=section&id=ITEM%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence is incorporated by reference from the 2023 Proxy Statement [Principal Accountant Fees and Services](index=81&type=section&id=ITEM%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information on principal accountant fees and services is incorporated by reference from the 2023 Proxy Statement Part IV [Exhibits and Financial Statement Schedules](index=81&type=section&id=ITEM%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists exhibits filed with the annual report, including corporate documents and required certifications [Form 10-K Summary](index=82&type=section&id=ITEM%2016.%20Form%2010-K%20Summary) This item is not applicable

[PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the unaudited consolidated financial statements and management's discussion and analysis for the quarter ended March 31, 2022 [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) This section presents Affinity Bancshares, Inc.'s unaudited consolidated financial statements and detailed notes for the quarter ended March 31, 2022 [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets provide a snapshot of the company's financial position at March 31, 2022, and December 31, 2021, showing a decrease in total assets and stockholders' equity, primarily driven by a reduction in cash and FHLB advances, partially offset by an increase in net loans | Metric (in thousands) | March 31, 2022 (unaudited) | December 31, 2021 (audited) | | :-------------------- | :------------------------- | :-------------------------- | | Total Assets | $760,208 | $788,088 | | Total Liabilities | $643,850 | $667,120 | | Total Stockholders' Equity | $116,358 | $120,968 | | Cash and cash equivalents | $69,898 | $111,776 | | Loans, net | $592,887 | $575,825 | | Total Deposits | $628,045 | $614,799 | | Federal Home Loan Bank advances | $10,000 | $48,988 | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) The consolidated statements of income show a decrease in net income for the three months ended March 31, 2022, compared to the same period in 2021, primarily due to lower interest income from PPP loans and FHLB prepayment penalties, partially offset by a significant decrease in interest expense from borrowings | Metric (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Total Interest Income | $7,279 | $9,248 | | Total Interest Expense | $(472) | $907 | | Net Interest Income before provision for loan losses | $7,751 | $8,341 | | Provision for loan losses | $250 | $450 | | Total Noninterest Income | $595 | $729 | | Total Noninterest Expenses | $5,758 | $5,892 | | Income before income taxes | $2,338 | $2,728 | | Income Tax Expense | $547 | $596 | | Net Income | $1,791 | $2,132 | | Basic Earnings Per Share | $0.26 | $0.31 | | Diluted Earnings Per Share | $0.26 | $0.31 | [Consolidated Statements of Comprehensive (Loss) Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20(Loss)%20Income) The consolidated statements of comprehensive income (loss) indicate a shift from comprehensive income in 2021 to a comprehensive loss in 2022, primarily driven by a substantial increase in net unrealized loss on available-for-sale securities | Metric (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Net Income | $1,791 | $2,132 | | Net unrealized loss on available-for-sale securities, net of taxes | $(2,653) | $(278) | | Total comprehensive (loss) income | $(862) | $1,854 | [Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) The statements of changes in stockholders' equity reflect a decrease in total equity from December 31, 2021, to March 31, 2022, mainly due to common stock repurchases and a significant increase in accumulated other comprehensive loss from investment securities | Metric (in thousands) | December 31, 2021 | March 31, 2022 | | :-------------------- | :---------------- | :------------- | | Ending balance Total Stockholders' Equity | $120,968 | $116,358 | | Common stock repurchase | — | $(3,942) | | Change in unrealized loss on investment securities available-for-sale | $(358) | $(2,653) | | Net income | $2,132 | $1,791 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The consolidated statements of cash flows show a net decrease in cash and cash equivalents for the three months ended March 31, 2022, primarily driven by cash used in investing and financing activities, including significant FHLB advance repayments and stock repurchases | Metric (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $3,908 | $8,666 | | Net cash used in investing activities | $(17,093) | $(27,125) | | Net cash used in financing activities | $(28,693) | $(58,396) | | Net change in cash and cash equivalents | $(41,878) | $(76,855) | | Cash and cash equivalents at end of period | $69,898 | $101,398 | [Notes to Unaudited Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) This section details the company's operations, accounting policies, and specific financial statement line items, including investments, loans, deposits, and equity [(1) Nature of Operations](index=8&type=section&id=(1)%20Nature%20of%20Operations) Affinity Bancshares, Inc. is a savings and loan holding company operating through Affinity Bank, which provides banking services in Georgia and specializes in dental practice and indirect automobile loans. The company underwent a mutual-to-stock conversion in January 2021, raising $37.1 million in gross proceeds - Affinity Bancshares, Inc. is a savings and loan holding company, with its operating subsidiary, Affinity Bank, primarily serving Newton County, Georgia, and surrounding areas. The Bank also originates dental practice loans and indirect automobile loans across the Southeastern United States[17](index=17&type=chunk)[196](index=196&type=chunk) - The Company completed a second-step mutual-to-stock conversion on January 20, 2021, raising gross proceeds of **$37.1 million** from the sale of **3,701,509 shares** of common stock at **$10.00 per share**[18](index=18&type=chunk)[197](index=197&type=chunk) - The proceeds from the stock offering were used to fund an addition to the Employee Stock Ownership Plan (**$3.0 million**), cover offering expenses (**$1.7 million**), invest in the Bank's operations (**$16.3 million**), and retain the remainder for general corporate purposes[18](index=18&type=chunk)[197](index=197&type=chunk) [Earnings per Share](index=9&type=section&id=Earnings%20per%20Share) Basic and diluted earnings per common share decreased for the three months ended March 31, 2022, compared to the same period in 2021, reflecting a lower net income despite a slight decrease in weighted average common shares outstanding | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net income (in thousands) | $1,791 | $2,132 | | Weighted average common shares outstanding | 6,806,405 | 6,873,137 | | Effect of dilutive common stock awards | 102,260 | 16,615 | | Diluted weighted average common shares outstanding | 6,908,665 | 6,889,752 | | Basic earnings per common share | $0.26 | $0.31 | | Diluted earnings per common share | $0.26 | $0.31 | - There were **13,454 anti-dilutive options** for the three months ended March 31, 2022, compared to **190,928 anti-dilutive options** for the three months ended March 31, 2021[22](index=22&type=chunk)[201](index=201&type=chunk) [(2) Investment Securities](index=10&type=section&id=(2)%20Investment%20Securities) The company's available-for-sale investment securities decreased in fair value at March 31, 2022, compared to December 31, 2021, primarily due to increased unrealized losses across various security types, driven by changing interest rates and market conditions | Investment Securities Available-for-Sale (in thousands) | March 31, 2022 (Estimated Fair Value) | December 31, 2021 (Estimated Fair Value) | | :-------------------------------------- | :------------------------------------ | :--------------------------------------- | | U.S. Treasury securities | $4,677 | $5,050 | | Municipal securities - tax exempt | $488 | $536 | | Municipal securities - taxable | $1,880 | $790 | | U.S. Government sponsored enterprises | $10,326 | $11,542 | | Government agency mortgage-backed securities | $19,015 | $21,339 | | Corporate securities | $9,525 | $9,300 | | **Total** | **$45,911** | **$48,557** | - As of March 31, 2022, there were **57 securities** in an unrealized loss position for less than 12 months and **four** for 12 months or greater. These losses are considered temporary due to acceptable investment grades and the company's intent and ability to hold them until recovery or maturity[26](index=26&type=chunk)[205](index=205&type=chunk) - No securities were sold during the three months ended March 31, 2022 or 2021[29](index=29&type=chunk)[208](index=208&type=chunk) [(3) Loans and Allowance for Loan Losses](index=11&type=section&id=(3)%20Loans%20and%20Allowance%20for%20Loan%20Losses) Net loans increased at March 31, 2022, driven by growth in commercial real estate, construction, and consumer installment loans, partially offset by a decrease in PPP loans. The allowance for loan losses increased, with a lower provision for loan losses reflecting an improving economic outlook | Loan Classification (in thousands) | March 31, 2022 | December 31, 2021 | | :--------------------------------- | :------------- | :---------------- | | Commercial (owner occupied) | $156,332 | $158,662 | | Commercial (non-owner occupied) | $119,461 | $104,042 | | Commercial and industrial | $155,374 | $152,834 | | Paycheck Protection Program loans | $7,078 | $17,883 | | Construction, land & development | $27,138 | $16,317 | | Residential mortgage 1-4 family | $56,448 | $63,065 | | Consumer installment | $79,862 | $71,580 | | Total Loans | $601,693 | $584,384 | | Less allowance for loan losses | $(8,806) | $(8,559) | | **Total Loans, net** | **$592,887** | **$575,825** | | Allowance for Loan Losses (in thousands) | March 31, 2022 | December 31, 2021 | | :--------------------------------------- | :------------- | :---------------- | | Beginning balance | $8,559 | $6,361 | | Provision | $250 | $1,075 | | Charge-offs | $(51) | $(310) | | Recoveries | $48 | $1,433 | | **Ending balance** | **$8,806** | **$8,559** | - The allowance for loan losses to total loans was **1.46%** at March 31, 2022, consistent with December 31, 2021. Excluding acquired loans, this ratio was **2.01%** at March 31, 2022, down from **2.06%** at December 31, 2021[308](index=308&type=chunk) - The allowance for loan losses to non-performing loans was **138.94%** at March 31, 2022, an increase from **122.09%** at December 31, 2021[308](index=308&type=chunk) [(4) Deposits](index=16&type=section&id=(4)%20Deposits) The aggregate amount of certificates of deposit of $250,000 or more decreased from December 31, 2021, to March 31, 2022 | Deposit Type (in thousands) | March 31, 2022 | December 31, 2021 | | :-------------------------- | :------------- | :---------------- | | Certificates of deposit of $250,000 or more | $20,400 | $22,600 | [(5) Borrowings](index=16&type=section&id=(5)%20Borrowings) FHLB advances significantly decreased during the three months ended March 31, 2022, due to the repayment of acquired advances, which also resulted in the recognition of accretion from fair value adjustments | Borrowing Type (in thousands) | March 31, 2022 | December 31, 2021 | | :---------------------------- | :------------- | :---------------- | | FHLB advances | $10,000 | $49,000 | - Acquired FHLB advances totaling **$49.0 million** were paid off during the three months ended March 31, 2022, leading to the accretion of **$1.0 million** from fair value adjustments and a decrease in interest expense[57](index=57&type=chunk)[236](index=236&type=chunk) - The Company had an FHLB letter of credit of **$2.5 million** outstanding at March 31, 2022, down from **$8.0 million** at December 31, 2021, used to collateralize public deposits[57](index=57&type=chunk)[236](index=236&type=chunk) [(6) Employee Stock Ownership Plan](index=18&type=section&id=(6)%20Employee%20Stock%20Ownership%20Plan) The Company's ESOP incurred higher expenses for the three months ended March 31, 2022, compared to the prior year, with the note payable balance remaining stable | ESOP Metric (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------- | :-------------------------------- | :-------------------------------- | | Total ESOP expense | $81 | $57 | - The balance of the ESOP note payable was approximately **$5.4 million** at both March 31, 2022, and December 31, 2021[59](index=59&type=chunk)[238](index=238&type=chunk) [(7) Stock-Based Compensation](index=18&type=section&id=(7)%20Stock-Based%20Compensation) Stock-based compensation expense slightly increased for the three months ended March 31, 2022, with no new stock options or restricted stock grants during the period. A significant amount of unrecognized compensation cost remains | Stock-Based Compensation (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Stock-based compensation expense | $113 | $110 | - As of March 31, 2022, there was approximately **$1.1 million** of unrecognized compensation cost related to equity award grants, expected to be recognized over a weighted average remaining vesting period of approximately **2.75 years**[64](index=64&type=chunk)[243](index=243&type=chunk) - No stock options or restricted stock grants were issued during the three months ended March 31, 2022[60](index=60&type=chunk)[239](index=239&type=chunk) [(8) Fair Value Measurements and Disclosures](index=19&type=section&id=(8)%20Fair%20Value%20Measurements%20and%20Disclosures) The company uses fair value measurements for certain assets and liabilities, classifying them into Level 1, 2, or 3 based on observability of inputs. Available-for-sale securities are recurring Level 2 assets, while impaired loans and other real estate owned are nonrecurring Level 3 assets - The Company classifies assets and liabilities at fair value into three levels: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[66](index=66&type=chunk)[245](index=245&type=chunk) | Assets Recorded at Fair Value (in thousands) | March 31, 2022 | December 31, 2021 | | :------------------------------------------- | :------------- | :---------------- | | Available-for-sale securities (Level 2) | $45,911 | $48,557 | | Other real estate owned (Level 3) | $3,538 | $3,538 | | Impaired loans (Level 3) | $6,554 | $7,221 | | **Total assets at fair value (nonrecurring)** | **$10,092** | **$10,759** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of the company's financial condition, operating results, market risk, liquidity, and capital resources for the quarter ended March 31, 2022 [General](index=22&type=section&id=General) This section introduces the purpose of the Management's Discussion and Analysis, providing context for the financial condition and operating results - The Management's Discussion and Analysis aims to provide insights into the financial condition and results of operations for Affinity Bancshares, Inc. as of March 31, 2022, and December 31, 2021, and for the three months ended March 31, 2022, and 2021[87](index=87&type=chunk)[266](index=266&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=22&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section highlights that the report contains forward-looking statements, which are subject to significant business, economic, and competitive uncertainties and contingencies. It also lists various factors, including general economic conditions, interest rate fluctuations, and the impact of the COVID-19 pandemic, that could cause actual results to differ materially from expectations - The report includes forward-looking statements identifiable by words such as 'believe,' 'intend,' 'anticipate,' 'expect,' and 'will,' which are subject to inherent business, economic, and competitive uncertainties[88](index=88&type=chunk)[267](index=267&type=chunk) - Key factors that could cause actual results to differ include general economic conditions, changes in loan delinquencies, funding access, real estate values, demand for loans/deposits, interest rate environment, regulatory changes, technological changes, and the ongoing impact of the COVID-19 pandemic[89](index=89&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk)[268](index=268&type=chunk)[270](index=270&type=chunk)[271](index=271&type=chunk) [Summary of Significant Accounting Policies](index=23&type=section&id=Summary%20of%20Significant%20Accounting%20Policies) This section details the company's significant accounting policies, including business combinations, valuation of acquired loans, allowance for loan losses, and income taxes. It emphasizes the use of estimates and assumptions in financial reporting and notes the company's election to use the extended transition period for new accounting pronouncements as an emerging growth company - The Company accounts for acquisitions using the acquisition method, recording acquired assets and assumed liabilities at estimated fair value on the purchase date[97](index=97&type=chunk)[276](index=276&type=chunk) - The allowance for loan losses is a reserve for estimated credit losses, determined through an evaluation process that considers qualitative and quantitative factors, including historical loss rates, economic conditions, and collateral values[101](index=101&type=chunk)[103](index=103&type=chunk)[280](index=280&type=chunk)[282](index=282&type=chunk) - As an 'emerging growth company' under the JOBS Act, the Company intends to delay the adoption of new or revised accounting pronouncements until they are applicable to private companies[95](index=95&type=chunk)[274](index=274&type=chunk) [Comparison of Financial Condition at March 31, 2022 and December 31, 2021](index=25&type=section&id=Comparison%20of%20Financial%20Condition%20at%20March%2031,%202022%20and%20December%2031,%202021) The company's total assets decreased by 3.5% to $760.2 million at March 31, 2022, primarily due to a significant reduction in cash and cash equivalents used to pay off Federal Home Loan Bank advances. This was partially offset by a 3.0% increase in net loans, driven by growth in commercial real estate, construction, and consumer loans, despite a decrease in PPP loans | Metric (in millions) | March 31, 2022 | December 31, 2021 | Change (Amount) | Change (%) | | :------------------- | :------------- | :---------------- | :-------------- | :--------- | | Total Assets | $760.2 | $788.1 | $(27.9) | (3.5)% | | Cash and cash equivalents | $69.9 | $111.8 | $(41.9) | (37.5)% | | Net Loans | $592.9 | $575.8 | $17.1 | 3.0% | | Securities available-for-sale | $45.9 | $48.6 | $(2.6) | (5.4)% | | Total Deposits | $628.0 | $614.8 | $13.2 | 2.1% | | FHLB Advances | $10.0 | $49.0 | $(39.0) | (79.6)% | | Stockholders' Equity | $116.4 | $121.0 | $(4.6) | (3.8)% | - Net loans increased by **$17.1 million**, or **3.0%**, to **$592.9 million**, driven by commercial real estate loans (up **$13.1 million** or **5.0%**), construction loans (up **$10.8 million** or **66.3%**), and consumer loans (up **$8.3 million** or **11.6%**). This growth was partially offset by a **$10.8 million (60.4%) decrease** in PPP loans and a **$6.6 million (10.5%) decrease** in residential real estate loans[107](index=107&type=chunk)[286](index=286&type=chunk) - Total deposits increased by **$13.2 million**, or **2.1%**, to **$628.0 million**, with increases in non-interest-bearing checking, market-rate checking, and interest-bearing checking accounts, partially offset by a decrease in certificates of deposit[110](index=110&type=chunk)[289](index=289&type=chunk) [Comparison of Operating Results for the Three Months Ended March 31, 2022 and 2021](index=28&type=section&id=Comparison%20of%20Operating%20Results%20for%20the%20Three%20Months%20Ended%20March%2031,%202022%20and%202021) Net income decreased by $341,000 to $1.8 million for the three months ended March 31, 2022, primarily due to a significant reduction in PPP loan-related interest income and FHLB prepayment penalties. However, interest expense saw a substantial decrease due to the repayment of acquired FHLB borrowings, leading to a negative interest expense | Metric (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change (Amount) | Change (%) | | :-------------------- | :-------------------------------- | :-------------------------------- | :-------------- | :--------- | | Net Income | $1,791 | $2,132 | $(341) | (16.0)% | | Interest Income | $7,279 | $9,248 | $(1,969) | (21.3)% | | Interest Expense | $(472) | $907 | $(1,379) | (152.0)% | | Net Interest Income | $7,751 | $8,341 | $(590) | (7.1)% | | Provision for Loan Losses | $250 | $450 | $(200) | (44.4)% | | Non-interest Income | $595 | $729 | $(134) | (18.4)% | | Non-interest Expenses | $5,758 | $5,892 | $(134) | (2.3)% | | Income Tax Expense | $547 | $596 | $(49) | (8.2)% | - Interest income decreased by **$2.0 million**, or **21.3%**, primarily due to a **$2.7 million decrease** in PPP loan interest income as a result of loan forgiveness[120](index=120&type=chunk)[299](index=299&type=chunk) - Interest expense decreased by **$1.4 million**, or **152.0%**, to a negative **$472,000**, mainly due to the repayment of acquired FHLB borrowings and the recognition of **$1.0 million** in accretion from fair value adjustments[124](index=124&type=chunk)[303](index=303&type=chunk) - Net interest margin decreased to **4.53%** from **4.65%**, primarily due to the decrease in PPP loans. However, the net interest rate spread increased to **4.69%** from **4.39%** due to FHLB borrowing repayments[127](index=127&type=chunk)[306](index=306&type=chunk) - Provision for loan losses decreased to **$250,000** from **$450,000**, reflecting an improving economic environment post-COVID-19 pandemic[129](index=129&type=chunk)[308](index=308&type=chunk) - Non-interest income decreased by **$134,000**, or **18.4%**, due to the absence of a bank-owned life insurance death benefit claim in 2022 that occurred in 2021[311](index=311&type=chunk) - Non-interest expenses decreased by **$134,000**, or **2.3%**, primarily due to a decrease in occupancy expense from facilities consolidation, partially offset by increases in salaries and employee benefits[312](index=312&type=chunk) [Management of Market Risk](index=30&type=section&id=Management%20of%20Market%20Risk) The company actively manages interest rate risk, its most significant market risk, through strategies like limiting wholesale funding, growing transaction deposits, and diversifying its loan portfolio. Analysis using net interest income and net economic value models indicates sensitivity to interest rate changes, with a negative asset/liability gap in the short term - The Company's primary market risk is interest rate risk, managed by the Asset/Liability Management Committee to minimize exposure to earnings and capital[314](index=314&type=chunk)[315](index=315&type=chunk) - Strategies to manage interest rate risk include limiting reliance on non-core funding, growing transaction deposit accounts, increasing investment securities with shorter maturities, and diversifying the loan portfolio with more commercial and consumer loans[315](index=315&type=chunk)[317](index=317&type=chunk) | Change in Interest Rates (basis points) | Year 1 Change from Level (Net Interest Income Forecast) | | :-------------------------------------- | :------------------------------------------------------ | | +400 | (3.52)% | | +200 | (1.67)% | | Level | — | | -200 | (4.99)% | | -400 | (5.95)% | | Change in Interest Rates (basis points) | Estimated Increase (Decrease) in NEV (Percent) | | :-------------------------------------- | :--------------------------------------------- | | +400 | (16.12)% | | +200 | (8.59)% | | — | — | | -200 | (0.51)% | | -400 | (-2.28)% | - At March 31, 2022, the asset/liability gap from zero days to one year was negative **$52.3 million**, with a gap/assets ratio of **(6.89)%**[331](index=331&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position through deposits, loan and security payments, and available credit lines. It also exceeds all regulatory capital requirements, with the Bank categorized as 'well capitalized' at March 31, 2022 - Primary sources of funds include deposits, principal and interest payments on loans and securities, and proceeds from loan sales and security maturities[335](index=335&type=chunk) - Available liquidity includes a **$197.4 million** line of credit with FHLB (with **$10.0 million** outstanding), a **$5.0 million** unsecured federal funds line, a **$7.5 million** unsecured federal funds line, and an **$81.7 million** line with the Federal Reserve Bank of Atlanta Discount Window[335](index=335&type=chunk) | Capital Ratios (to Risk Weighted Assets) | March 31, 2022 (Actual Ratio) | December 31, 2021 (Actual Ratio) | | :--------------------------------------- | :---------------------------- | :------------------------------- | | Common Equity Tier 1 | 13% | 13% | | Tier I Capital | 14% | 13% | | Total Capital | 14% | 15% | - The Bank is categorized as 'well capitalized' as of March 31, 2022, exceeding all regulatory capital requirements[338](index=338&type=chunk) [Off-Balance Sheet Arrangements and Aggregate Contractual Obligations](index=35&type=section&id=Off-Balance%20Sheet%20Arrangements%20and%20Aggregate%20Contractual%20Obligations) The company has off-balance sheet risks primarily from commitments to extend credit, totaling $84.9 million at March 31, 2022. It also has contractual obligations for data processing, operating leases, borrowed funds, and deposit liabilities - Outstanding commitments to originate loans totaled **$84.9 million** at March 31, 2022[340](index=340&type=chunk) - Time deposits scheduled to mature in less than one year from March 31, 2022, totaled **$43.4 million**, with management expecting a substantial portion to be renewed[340](index=340&type=chunk) - Contractual obligations include data processing services, operating leases for premises and equipment, and agreements related to borrowed funds and deposit liabilities[341](index=341&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section refers to the market risk disclosures provided within 'Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations,' specifically under the 'Management of Market Risk' subsection [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2022. No material changes to internal controls over financial reporting occurred during the quarter - The Company's disclosure controls and procedures were evaluated and deemed effective as of March 31, 2022[343](index=343&type=chunk) - No material changes in internal controls over financial reporting occurred during the quarter ended March 31, 2022[343](index=343&type=chunk) [PART II. OTHER INFORMATION](index=36&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information including legal proceedings, risk factors, equity sales, defaults, and exhibit listings [Item 1. Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company is not involved in any material legal proceedings beyond routine matters occurring in the ordinary course of business - The Company is not involved in any pending legal proceedings that would be material to its financial condition or results of operations as of March 31, 2022[166](index=166&type=chunk)[345](index=345&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) This item is not applicable for smaller reporting companies, as indicated in the report - Item 1A. Risk Factors is not applicable for smaller reporting companies[167](index=167&type=chunk)[346](index=346&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is not applicable to the company for the reporting period - Item 2. Unregistered Sales of Equity Securities and Use of Proceeds is not applicable[167](index=167&type=chunk)[346](index=346&type=chunk) [Item 3. Defaults Upon Senior Securities](index=36&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - There were no defaults upon senior securities[167](index=167&type=chunk)[346](index=346&type=chunk) [Item 4. Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Item 4. Mine Safety Disclosures is not applicable[167](index=167&type=chunk)[346](index=346&type=chunk) [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=36&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company repurchased 253,779 shares of its common stock in March 2022 under a publicly announced program, with 89,853 shares remaining available for repurchase | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet Be Purchased Under Plans or Programs | | :--------------------------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | :------------------------------------------------------------------------- | | January 1, 2022 through January 31, 2022 | 0 | $0 | 0 | 343,632 | | February 1, 2022 through February 28, 2022 | 0 | $0 | 0 | 343,632 | | March 1, 2022 through March 31, 2022 | 253,779 | $15.53 | 253,779 | 89,853 | | **Total** | **253,779** | **$15.53** | **253,779** | **89,853** | - The Board of Directors approved a stock repurchase program on January 27, 2022, authorizing the repurchase of up to **343,632 shares** (approximately **5.0%** of outstanding shares), with no expiration date[169](index=169&type=chunk)[347](index=347&type=chunk) [Item 6. Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the company's charter, bylaws, certifications, and financial statements formatted in inline XBRL - Exhibits include the Company's Charter and Bylaws, certifications from the Principal Executive and Financial Officers (Sections 302 and 906 of Sarbanes-Oxley Act), and financial statements in inline XBRL format[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk)[175](index=175&type=chunk)[349](index=349&type=chunk)[350](index=350&type=chunk)[351](index=351&type=chunk)[352](index=352&type=chunk)[354](index=354&type=chunk) [SIGNATURES](index=38&type=section&id=SIGNATURES) The report is duly signed on behalf of Affinity Bancshares, Inc. by its Chief Executive Officer and Chief Financial Officer - The report was signed by Edward J. Cooney, Chief Executive Officer and Director, and Tessa M. Nolan, Senior Vice President and Chief Financial Officer, on May 12, 2022[178](index=178&type=chunk)[357](index=357&type=chunk)

Financial Performance - Affinity Bancshares, Inc. raised gross proceeds of $37.0 million by selling 3,701,509 shares of common stock at $10.00 per share during its second-step stock offering[25]. - As of December 31, 2020, Affinity Bancshares, Inc. had total assets of $850.6 million, loans of $592.3 million, deposits of $640.2 million, and stockholders' equity of $80.8 million[26]. - The company completed the acquisition of ABB Financial Group, Inc. for approximately $40.3 million, with additional redemptions and acquisitions totaling $7.3 million[31]. - The total loan portfolio amounted to $592.3 million as of December 31, 2020, with an allowance for losses of $6.4 million[44]. - The total non-performing loans to total loans ratio was 0.82%, down from 1.02% in the previous year[107]. - The allowance for loan losses increased to $6,361 million at the end of 2020 from $4,134 million at the end of 2019, reflecting a provision for loan losses of $2,000 million[116]. Loan Portfolio - As of December 31, 2020, the company’s dental practice loans totaled $170.8 million, representing 29.2% of its loan portfolio[40]. - Commercial and industrial loans were $155.6 million, accounting for 25.9% of the gross loans, excluding $101.7 million from the Paycheck Protection Program[49]. - The company’s one- to four-family residential real estate loans were $91.8 million, making up 15.3% of the total loan portfolio[44]. - The commercial real estate loans totaled $178.5 million, representing 29.8% of the total loan portfolio, with $142.7 million (23.2%) secured by owner-occupied properties[55]. - The largest commercial real estate loan was $8.0 million, secured by an industrial warehouse under construction, and was performing according to its terms as of December 31, 2020[56]. - The company had $1,292 million in total real estate owned, up from $140 million in the previous year[107]. Regulatory Compliance - Affinity Bancshares, Inc. is subject to comprehensive regulation and examination by the Federal Reserve Board[26]. - Affinity Bank is regulated by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation[154]. - The company is classified as "well capitalized" as of December 31, 2020 and 2019, meeting all required capital ratios[191]. - The Federal Reserve Board regulates Affinity Bancshares, with authority to restrict activities deemed risky to Affinity Bank[201]. Market and Economic Conditions - The population of Newton County, where Affinity Bank operates, grew 14.3% from 2010 to 2021, with a projected growth of 6.1% from 2021 to 2026[33]. - Cobb County's median household income was approximately $88,072, higher than both the Georgia and national medians[34]. - The unemployment rate in Cobb County, Georgia, was 4.3% in January 2021, lower than the national rate of 6.8%[37]. Business Strategy - The company plans to enhance its products and services to meet the evolving needs of customers, focusing on local consumer and small business markets[38]. - The company’s marketing strategies emphasize building relationships with current customers and developing new profitable business relationships[38]. - The company is focusing on experienced, growing small- to medium-sized businesses with solid historical and projected cash flows for its commercial lending[50]. Deposits and Funding - The total deposits amounted to $640.165 million as of December 31, 2020, with a weighted average interest rate of 0.74%[136]. - Noninterest-bearing checking accounts represented 25.12% of total deposits, amounting to $160.819 million[136]. - The company generated deposits through its virtual bank, FitnessBank, which offers higher interest rates based on fitness goals[132]. Loan Management - Affinity Bank had granted short-term deferrals on 737 loans totaling approximately $186.9 million as of December 31, 2020, all of which returned to normal payment status[92]. - The bank's loan approval authority allows the CEO and Chief Credit Officer to approve loans up to $3.5 million combined, while individual loan officers can approve loans up to $300,000[85]. - Affinity Bank's delinquency procedures involve contacting customers at 15 days past due and initiating foreclosure proceedings at 120 days past due[88]. Capital and Borrowing - Affinity Bank had a $303.8 million line of credit with the Federal Home Loan Bank of Atlanta as of December 31, 2020[139]. - Affinity Bank borrowed $100.8 million from the Federal Reserve Bank of Atlanta to fund PPP loans, secured by $101.7 million in originated PPP loans[142]. - The maximum amount of borrowings outstanding during the year was $129.2 million, with an average balance of $20.3 million[143]. Employee and Taxation - Affinity Bancshares, Inc. had 79 full-time employees and four part-time employees as of December 31, 2020[144]. - Affinity Bank is subject to federal and state income taxation and has not been audited for the past five years[145].

[Explanatory Note](index=2&type=section&id=Explanatory%20Note) [Company Formation and Status](index=2&type=section&id=Company%20Formation%20and%20Status) Affinity Bancshares, Inc. was formed as a stock holding company for Newton Federal Bank, pending conversion, with no current operations or assets; financial data is in Exhibit 99.1 - Affinity Bancshares, Inc. was established to be the stock holding company for Newton Federal Bank following a mutual-to-stock conversion[2](index=2&type=chunk) - As of September 30, 2020, the company had not completed its conversion, possessed no assets or liabilities, and had not conducted any business[2](index=2&type=chunk) - The quarterly report of Community First Bancshares, Inc., the active holding company, is provided for informational purposes in Exhibit 99.1[2](index=2&type=chunk) [PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Financial statements are not applicable for Affinity Bancshares, Inc. due to its non-operational status, with relevant financial data in Exhibit 99.1 - Financial Statements are not applicable for Affinity Bancshares, Inc. for this period. Readers are directed to the Explanatory Note[4](index=4&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=3&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's Discussion and Analysis is not applicable as the company is a newly formed entity without operations pending conversion, as noted in the Explanatory Note - Management's Discussion and Analysis (MD&A) is not applicable. Readers are directed to the Explanatory Note[4](index=4&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=3&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Disclosures about market risk are not applicable as the company had no assets, liabilities, or operations during the period, as noted in the Explanatory Note - Disclosures about Market Risk are not applicable. Readers are directed to the Explanatory Note[4](index=4&type=chunk) [Item 4. Controls and Procedures](index=3&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of September 30, 2020, with no material changes to internal controls over financial reporting during the quarter - Based on an evaluation as of September 30, 2020, the Company's management, including the CEO and CFO, concluded that disclosure controls and procedures were effective[4](index=4&type=chunk) - No changes in the Company's internal controls over financial reporting occurred during the quarter ended September 30, 2020, that materially affected or are likely to materially affect them[5](index=5&type=chunk) [PART II – OTHER INFORMATION](index=4&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Other Information (Items 1, 1A, 2, 3, 4, 5)](index=4&type=section&id=Items%201%2C%201A%2C%202%2C%203%2C%204%2C%205) Various informational items, including Legal Proceedings, Risk Factors, and Unregistered Sales of Equity Securities, are not applicable due to the company's lack of operations during the period - The following items are not applicable and refer to the Explanatory Note: Legal Proceedings, Risk Factors, Unregistered Sales of Equity Securities and Use of Proceeds, and Defaults Upon Senior Securities[6](index=6&type=chunk) - Mine Safety Disclosures are not applicable, and there was no information to report under Item 5 (Other Information)[6](index=6&type=chunk) [Item 6. Exhibits](index=4&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and the Quarterly Report of Community First Bancshares, Inc. (Exhibit 99.1) containing substantive financial data Exhibit List | Exhibit | Description | | :--- | :--- | | 31.1 | Certification of Principal Executive Officer (SOX 302) | | 31.2 | Certification of Principal Financial Officer (SOX 302) | | 32 | Written Statement of CEO and CFO (SOX 906) | | 99.1 | Quarterly Report on Form 10-Q of Community First Bancshares, Inc. for the Quarter Ended September 30, 2020 |