Affinity Bancshares(AFBI) - 2024 Q3 - Quarterly Report

Financial Performance - Net income for the three months ended September 30, 2024, was $1.7 million, an increase from $1.6 million for the same period in 2023 [82]. - Net income for the nine months ended September 30, 2024, was $4.1 million, down from $4.9 million for the same period in 2023, a decrease of 16.3% [98]. - Interest income increased by $4.1 million, or 13.1%, to $35.7 million for the nine months ended September 30, 2024, due to higher income from loans and investment securities [99]. - Net interest income increased by $1.2 million, or 6.1%, to $21.7 million for the nine months ended September 30, 2024, with a net interest margin of 3.54% [106]. - Net interest income increased by $513,000, or 7.4%, to $7.4 million for the three months ended September 30, 2024 [88]. Asset and Loan Growth - Total assets increased by $35.3 million, or 4.2%, to $878.6 million at September 30, 2024, from $843.3 million at December 31, 2023, primarily due to an increase in loans [70]. - Gross loans increased by $37.7 million, or 5.7%, to $697.6 million at September 30, 2024, with construction loans rising by $16.0 million, or 33.6% [70]. - Average balance of loans increased by $38.4 million, or 5.8%, to $698.9 million for the three months ended September 30, 2024 [83]. - Commitments to originate loans outstanding as of September 30, 2024, totaled $80.9 million [132]. Deposits and Funding - Total deposits increased by $9.3 million, or 1.4%, to $683.8 million at September 30, 2024, driven by increases in demand deposits and money market accounts [71]. - Demand deposits increased by $9.2 million, or 3.9%, reflecting cyclical demands from business customers [71]. - The loan-to-deposit ratio at September 30, 2024, was 102.0%, compared to 97.8% at December 31, 2023 [71]. - The company had a $218.6 million line of credit with the Federal Home Loan Bank of Atlanta, with $54.0 million in advances outstanding [123]. Interest Income and Expense - Interest income rose by $1.3 million, or 11.6%, to $12.3 million for the three months ended September 30, 2024, primarily driven by a $1.5 million increase in loan income [83]. - Interest expense increased by $2.9 million to $14.0 million for the nine months ended September 30, 2024, primarily due to additional borrowings [102]. - Interest expense increased by $765,000 to $4.9 million for the three months ended September 30, 2024, due to higher average balances of interest-bearing liabilities [85]. - Interest expense on money market accounts increased by $251,000 to $1.2 million for the three months ended September 30, 2024 [86]. Credit Quality - Provisions for credit losses are established to absorb known and inherent losses in the loan portfolio [90]. - No provision for credit losses was recorded for the three months ended September 30, 2024, with an allowance for credit losses of $8.4 million, down from $9.2 million at September 30, 2023, representing a decrease of 8.7% [93]. - Net charge-offs for the three months ended September 30, 2024, were $63,000, compared to $41,000 for the same period in 2023, indicating an increase of 53.7% [93]. - The allowance for credit losses to total loans was 1.20% at September 30, 2024, compared to 1.35% at December 31, 2023 [107]. Non-Interest Income and Expenses - Non-interest income decreased by $64,000, or 10.2%, to $566,000 for the three months ended September 30, 2024, primarily due to a decline in merchant services volume [95]. - Total non-interest expenses increased by $298,000, or 5.5%, to $5.7 million for the three months ended September 30, 2024, driven by an increase in salaries and employee benefits [96]. Capital and Liquidity - Stockholders' equity rose by $6.9 million, or 5.7%, to $128.4 million at September 30, 2024, primarily due to net income of $4.1 million during the first nine months of 2024 [73]. - As of September 30, 2024, the Bank's Common Equity Tier 1 capital ratio was 12.82%, exceeding the regulatory requirement of 4.50% [130]. - The total capital ratio as of September 30, 2024, was 13.97%, above the required minimum of 8.00% [130]. - The company is committed to maintaining a strong liquidity position and anticipates sufficient funds to meet current funding commitments [126]. Tax and Cash Flow - The effective tax rate for the nine months ended September 30, 2024, was 23.9%, compared to 23.6% for the same period in 2023 [110]. - For the nine months ended September 30, 2024, net cash provided by operating activities was $5.9 million, compared to $6.1 million for the same period in 2023 [125]. - Net cash used in investing activities was $31.8 million for the nine months ended September 30, 2024, compared to $29.7 million for the same period in 2023 [125]. - Net cash provided by financing activities was $28.1 million for the nine months ended September 30, 2024, which included net proceeds from borrowing of $18.8 million from the Federal Reserve Bank [125]. Interest Rate Sensitivity - As of September 30, 2024, a 200 basis point increase in interest rates would result in a 0.15% increase in net interest income, while a decrease of the same magnitude would lead to a 4.20% decrease [119].