Affinity Bancshares(AFBI) - 2025 Q2 - Quarterly Results

Affinity Bancshares, Inc. Second Quarter 2025 Financial Results Overview Executive Summary Affinity Bancshares, Inc. achieved significant net income growth in Q2 2025, reaching $2.2 million, more than doubling from $1.0 million in Q2 2024, driven by increased net interest income and reduced noninterest expenses - Net income for Q2 2025 was $2.2 million, compared to $1.0 million in the same period of 2024[2] Performance Ratios Summary The company demonstrated strong financial performance in Q2 2025, with growth in diluted earnings per share and operating income, significant improvements in return on average assets and equity, and a better efficiency ratio Performance Ratios Key Data | Performance Ratios: | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :------------------ | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Net income (in thousands) | $ 2,152 | $ 1,831 | $ 1,345 | $ 1,730 | $ 1,031 | | Diluted earnings per share | 0.33 | 0.28 | 0.20 | 0.26 | 0.16 | | Operating income (in thousands) | 2,316 | 1,996 | 1,738 | 1,883 | 1,763 | | Adjusted diluted earnings per share | 0.36 | 0.30 | 0.26 | 0.29 | 0.27 | | Common book value per share | 19.66 | 19.25 | 20.14 | 20.02 | 19.49 | | Tangible book value per share | 16.80 | 16.40 | 17.30 | 17.18 | 16.64 | | Total assets (in thousands) | 933,799 | 912,496 | 866,817 | 878,561 | 873,582 | | Return on average assets | 0.94% | 0.83% | 0.61% | 0.78% | 0.48% | | Return on average equity | 7.01% | 5.68% | 4.14% | 5.43% | 3.33% | | Equity to assets | 13.29% | 13.40% | 14.90% | 14.61% | 14.32% | | Tangible equity to tangible assets | 11.58% | 11.65% | 13.08% | 12.80% | 12.49% | | Net interest margin | 3.57% | 3.52% | 3.56% | 3.52% | 3.71% | | Efficiency ratio | 65.72% | 68.55% | 75.95% | 71.48% | 78.74% | Results of Operations Net Income and Operating Income The company achieved significant growth in net income and operating income for both Q2 and H1 2025, primarily driven by increased net interest income and reduced noninterest expenses - Net income for Q2 2025 was $2.2 million, a 113.6% increase from $1.0 million in Q2 2024[2][6] - Net income for H1 2025 was $4.0 million, a 66.7% increase from $2.4 million in H1 2024[6] - Operating income for Q2 2025 was $2.3 million, a 27.8% increase from $1.8 million in Q2 2024[6] - Operating income for H1 2025 was $4.3 million, a 38.7% increase from $3.1 million in H1 2024[6] Net Interest Income and Margin Net interest income increased in H1 2025, but the net interest margin slightly declined in Q2, primarily due to a larger decrease in earning asset yields than in deposit and borrowing costs - Net interest income for H1 2025 increased to $15.1 million from $14.3 million in H1 2024, driven by higher interest income from loans and interest-bearing deposits, partially offset by increased deposit and borrowing costs and reduced investment securities interest income[6] - Net interest margin for H1 2025 remained stable at 3.55%[6] - Net interest income for Q2 2025 increased to $7.8 million from $7.6 million in Q2 2024[9] - Net interest margin for Q2 2025 decreased to 3.57% from 3.71% in Q2 2024, primarily due to an 11 basis point decline in earning asset yields, while deposit and borrowing costs only decreased by 3 basis points[9] Noninterest Income and Expense Noninterest income decreased in both Q2 and H1 2025 due to lower deposit account service charges and the absence of real estate sales gains from 2024, while noninterest expense significantly reduced, mainly from lower other expenses - Noninterest income for H1 2025 decreased by $269 thousand to $1.0 million, primarily due to lower deposit account service charges and the absence of other real estate sales gains recorded in 2024[9] - Noninterest expense for H1 2025 decreased by $1.5 million to $10.8 million, mainly due to a reduction in other expenses[9] - Noninterest income for Q2 2025 decreased by $166 thousand to $540 thousand, primarily due to lower deposit account service charges and the absence of other real estate sales gains recorded in 2024[9] - Noninterest expense for Q2 2025 decreased by $1.3 million to $5.5 million, mainly due to a reduction in other expenses[9] Financial Position and Asset Quality Financial Condition Overview As of June 30, 2025, total assets significantly increased, driven by growth in loans and interest-bearing deposits funded by increased deposits, while borrowings decreased - As of June 30, 2025, total assets increased by $67.0 million to $933.8 million from $866.8 million on December 31, 2024, primarily due to loan growth and increased interest-bearing deposits, funded by deposit growth[9] - As of June 30, 2025, cash and cash equivalents significantly increased by $48.2 million to $89.7 million from $41.4 million on December 31, 2024[9] - As of June 30, 2025, deposits increased by $75.9 million to $749.3 million from $673.5 million on December 31, 2024, with a $42.5 million net increase in demand deposits and a $33.4 million increase in time deposits[9] - As of June 30, 2025, borrowings decreased by $4.8 million to $54.0 million from $58.8 million on December 31, 2024, primarily due to the full repayment of Bank Term Funding Program advances in Q1 2025[9] Loan Portfolio and Asset Quality Total loans continued to grow, the non-owner-occupied office loan portfolio remained stable, non-performing loans decreased, allowance for credit losses coverage improved, and net loan charge-offs significantly reduced, indicating strong asset quality management - As of June 30, 2025, total loans increased by $17.0 million to $731.1 million from $714.1 million on December 31, 2024, driven by consistent demand for construction, consumer, and owner-occupied commercial real estate loans[9] - As of June 30, 2025, non-owner-occupied office loans totaled $39.9 million with an average loan-to-value (LTV) of 48.8%, including $15.8 million in medical/dental tenant loans and $24.1 million in other diversified tenant loans[9] - As of June 30, 2025, non-performing loans decreased to $4.6 million from $4.8 million on December 31, 2024[9] - As of June 30, 2025, the allowance for credit losses as a percentage of non-performing loans increased to 187.1% from 177.9% on December 31, 2024[9] - Net loan charge-offs for H1 2025 were $79 thousand, a significant reduction from $460 thousand in H1 2024[9] Investment Securities and Equity The company held-to-maturity investment securities had unrealized gains, while available-for-sale investment securities had unrealized losses, and shareholders' equity decreased due to dividend payments and share repurchases - As of June 30, 2025, held-to-maturity investment securities had $240 thousand in unrealized gains (after tax)[9] - As of June 30, 2025, available-for-sale investment securities had $5.0 million in unrealized losses (after tax)[9] - As of June 30, 2025, shareholders' equity decreased by $5.0 million to $124.1 million from $129.1 million on December 31, 2024, primarily due to a $1.50 per share dividend paid in Q1 and $2.1 million in common stock repurchases[9] Company Information and Disclosures About Affinity Bancshares, Inc. Affinity Bancshares, Inc. is a Maryland corporation headquartered in Covington, Georgia, with its banking subsidiary, Affinity Bank, established in 1928, operating multiple service and loan production offices across Georgia - The company is a Maryland corporation headquartered in Covington, Georgia[10] - Its banking subsidiary, Affinity Bank, was established in 1928 and operates full-service offices in Atlanta and Covington, with loan production offices in the Alpharetta and Cumming markets[10] Forward-Looking Statements This press release contains forward-looking statements regarding the company's future plans, strategies, and expectations, which are based on current beliefs and subject to significant business, economic, and competitive uncertainties and contingencies, with no obligation to update them, and lists risk factors that could materially adversely affect operations - Forward-looking statements describe the company's future plans, strategies, and expectations, subject to significant business, economic, and competitive uncertainties and contingencies[11] - The company undertakes no obligation to update any forward-looking statements[11] - Risk factors include, but are not limited to, general economic conditions, changes in interest rates and inflation, asset quality changes, ability to obtain funding, real estate value fluctuations, legal and regulatory changes, liquidity changes, technological changes, and IT security system failures or breaches[11] Supplemental Financial Data Average Balance Sheets Analysis The company provides detailed average balance sheets, including average balances, yields, and costs for earning assets and interest-bearing liabilities, along with net interest income and net interest margin, for investor financial assessment - Average balance sheets provide average balances, interest income/expense, and average yields/costs for earning assets (e.g., loans, investment securities, interest-bearing deposits) and interest-bearing liabilities (e.g., deposits, FHLB borrowings)[12][13][14] - For Q2 2025, total earning assets had an average balance of $874.2 million with an average yield of 5.88%; total interest-bearing liabilities had an average balance of $643.8 million with an average cost of 3.14%[13] - For H1 2025, total earning assets had an average balance of $859.6 million with an average yield of 5.85%; total interest-bearing liabilities had an average balance of $627.6 million with an average cost of 3.15%[14] Consolidated Balance Sheets The consolidated balance sheets detail the company's assets, liabilities, and shareholders' equity as of June 30, 2025, and December 31, 2024, reflecting growth in total assets and deposits, and a decrease in shareholders' equity Consolidated Balance Sheet Key Data (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Assets: | | | | Cash and cash equivalents | $ 89,666 | $ 41,425 | | Total loans | 731,135 | 714,115 | | Allowance for credit losses on loans | (8,542) | (8,496) | | Net loans | 722,593 | 705,619 | | Total assets | 933,799 | 866,817 | | Liabilities: | | | | Total deposits | 749,338 | 673,481 | | FHLB advances and other borrowings | 54,000 | 58,815 | | Total liabilities | 809,699 | 737,702 | | Shareholders' Equity: | | | | Total shareholders' equity | 124,100 | 129,115 | | Total liabilities and shareholders' equity | 933,799 | 866,817 | Consolidated Statements of Income The consolidated statements of income detail the company's interest income, interest expense, net interest income, noninterest income and expense, and net income for Q2 and H1 2025 compared to the same periods in 2024 Consolidated Statements of Income Key Data (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :---------------------- | :---------------------- | :---------------------- | :---------------------- | | Total interest income | $ 12,823 | $ 12,222 | $ 24,928 | $ 23,443 | | Total interest expense | 5,045 | 4,654 | 9,813 | 9,125 | | Net interest income before provision for credit losses | 7,778 | 7,568 | 15,115 | 14,318 | | Provision for credit losses | 17 | 213 | 67 | 213 | | Net interest income after provision for credit losses | 7,761 | 7,355 | 15,048 | 14,105 | | Total noninterest income | 540 | 706 | 1,021 | 1,290 | | Total noninterest expense | 5,467 | 6,719 | 10,826 | 12,290 | | Income before income tax expense | 2,834 | 1,342 | 5,243 | 3,105 | | Income tax expense | 682 | 311 | 1,260 | 739 | | Net income | $ 2,152 | $ 1,031 | $ 3,983 | $ 2,366 | | Diluted earnings per share | $ 0.33 | $ 0.16 | $ 0.61 | $ 0.36 | Explanation of Certain Unaudited Non-GAAP Financial Measures The company provides explanations and reconciliation tables for non-GAAP financial measures, including operating net income, adjusted diluted earnings per share, tangible book value per common share, and tangible equity to tangible assets ratio, to supplement GAAP reporting and offer additional investor perspectives - The company provides non-GAAP financial measures such as operating net income, adjusted diluted earnings per share, tangible book value per common share, and tangible equity to tangible assets ratio to supplement GAAP reporting[19] Non-GAAP Reconciliation Key Data (in thousands) | Non-GAAP Reconciliation | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | June 30, 2025 (Year) | June 30, 2024 (Year) | | :----------------------------------- | :------------ | :------------- | :---------------- | :----------------- | :------------ | :------------------- | :------------------- | | Net income (GAAP) | $2,152 | $1,831 | $1,345 | $1,730 | $1,031 | $3,983 | $2,366 | | Operating net income | $2,316 | $1,996 | $1,738 | $1,883 | $1,763 | $4,311 | $3,137 | | Adjusted diluted earnings per share | $0.36 | $0.30 | $0.26 | $0.29 | $0.27 | $0.66 | $0.48 | | Book Value per common share (GAAP) | $19.66 | $19.25 | $20.14 | $20.02 | $19.49 | $19.52 | $19.49 | | Tangible book value per common share | $16.80 | $16.40 | $17.30 | $17.18 | $16.64 | $16.68 | $16.64 | | Equity to assets (GAAP) | 13.29% | 13.40% | 14.90% | 14.61% | 14.32% | 13.29% | 14.32% | | Tangible equity to tangible assets | 11.58% | 11.65% | 13.08% | 12.80% | 12.49% | 11.58% | 12.49% |