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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period

Commission File No. 001-39914

 

Affinity Bancshares, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Maryland

 

82-1147778

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

3175 Highway 278

Covington, Georgia

 

30014

(Address of Principal Executive Offices)

 

(Zip Code)

 

(770) 786-7088

(Registrant’s Telephone Number, Including Area Code)

 

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.01 per share

 

AFBI

 

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. YesNo

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YesNo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YesNo

 

 

 

 

 

 

 

 

 

As of May 7, 2024, 6,416,628 shares of the Registrant’s common stock, par value $0.01 per share, were outstanding.

 

 

 


 

Affinity Bancshares, Inc.

Form 10-Q

Table of Contents

 

 

 

 

 

Page

PART I. FINANCIAL INFORMATION

 

 

 

 

 

Item 1.

 

Financial Statements

 

2

 

 

 

 

 

 

 

Consolidated Balance Sheets at March 31, 2024 (unaudited) and December 31, 2023

 

2

 

 

 

 

 

 

 

Consolidated Statements of Income for the Three Months Ended March 31, 2024 and 2023 (unaudited)

 

3

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2024 and 2023 (unaudited)

 

4

 

 

 

 

 

 

 

Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2024 and 2023 (unaudited)

 

5

 

 

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023 (unaudited)

 

6

 

 

 

 

 

 

 

Notes to Unaudited Consolidated Financial Statements

 

7

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

21

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

30

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

30

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

31

 

 

 

 

 

Item 1A.

 

Risk Factors

 

31

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

 

31

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

31

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

31

 

 

 

 

 

Item 5.

 

Other Information

 

31

 

 

 

 

 

Item 6.

 

Exhibits

 

31

 

 

 

 

 

 

 

SIGNATURES

 

32

 

 

1


 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

AFFINITY BANCSHARES, INC.

Consolidated Balance Sheets

 

 

 

 

 

 

 

 

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

(Dollars in thousands except per share amounts)

 

Assets

 

Cash and due from banks

 

$

6,388

 

 

$

6,030

 

Interest-earning deposits in other depository institutions

 

 

55,007

 

 

 

43,995

 

Cash and cash equivalents

 

 

61,395

 

 

 

50,025

 

Investment securities available-for-sale

 

 

48,239

 

 

 

48,561

 

Investment securities held-to-maturity (estimated fair value of $33,873, net of allowance for credit losses of $45 at March 31, 2024 and estimated fair value of $33,835, net of allowance for credit losses of $45 at December 31, 2023)

 

 

34,230

 

 

 

34,206

 

Other investments

 

 

5,480

 

 

 

5,434

 

Loans

 

 

674,498

 

 

 

659,876

 

Allowance for credit loss on loans

 

 

(8,595

)

 

 

(8,921

)

Net loans

 

 

665,903

 

 

 

650,955

 

Other real estate owned

 

 

2,850

 

 

 

2,850

 

Premises and equipment, net

 

 

3,691

 

 

 

3,797

 

Bank owned life insurance

 

 

16,184

 

 

 

16,086

 

Intangible assets

 

 

18,318

 

 

 

18,366

 

Other assets

 

 

13,257

 

 

 

12,978

 

Total assets

 

$

869,547

 

 

$

843,258

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Non-interest-bearing checking

 

$

164,568

 

 

$

154,689

 

Interest-bearing checking

 

 

86,734

 

 

 

85,362

 

Money market accounts

 

 

144,689

 

 

 

138,673

 

Savings accounts

 

 

74,282

 

 

 

74,768

 

Certificates of deposit

 

 

217,171

 

 

 

220,951

 

Total deposits

 

 

687,444

 

 

 

674,443

 

Federal Home Loan Bank advances and other borrowings

 

 

51,837

 

 

 

40,000

 

Accrued interest payable and other liabilities

 

 

6,966

 

 

 

7,299

 

Total liabilities

 

 

746,247

 

 

 

721,742

 

Stockholders' equity:

 

 

 

 

 

 

Common stock (par value $0.01 per share, 40,000,000 shares authorized;
   
6,416,628 issued and outstanding at March 31, 2024 and December 31, 2023)

 

 

64

 

 

 

64

 

Preferred stock (10,000,000 shares authorized, no shares outstanding)

 

 

 

 

 

 

Additional paid in capital

 

 

61,409

 

 

 

61,026

 

Unearned ESOP shares

 

 

(4,535

)

 

 

(4,587

)

Retained earnings

 

 

72,680

 

 

 

71,345

 

Accumulated other comprehensive loss

 

 

(6,318

)

 

 

(6,332

)

Total stockholders' equity

 

 

123,300

 

 

 

121,516

 

Total liabilities and stockholders' equity

 

$

869,547

 

 

$

843,258

 

 

See accompanying notes to unaudited consolidated financial statements.

2


 

AFFINITY BANCSHARES, INC.

Consolidated Statements of Income

(unaudited)

 

 

 

 

 

Three Months Ended March 31,

 

 

 

 

 

2024

 

 

2023

 

 

 

 

(Dollars in thousands except per share amounts)

 

Interest income:

 

 

 

 

 

 

 

 

Loans, including fees

 

 

 

$

9,499

 

 

$

8,291

 

Investment securities

 

 

 

 

1,075

 

 

 

949

 

Interest-earning deposits

 

 

 

 

647

 

 

 

488

 

Total interest income

 

 

 

 

11,221

 

 

 

9,728

 

Interest expense:

 

 

 

 

 

 

 

 

Deposits

 

 

 

 

4,002

 

 

 

2,314

 

FHLB advances and other borrowings

 

 

 

 

470

 

 

 

516

 

Total interest expense

 

 

 

 

4,472

 

 

 

2,830

 

Net interest income before provision for credit losses

 

 

 

 

6,749

 

 

 

6,898

 

Provision for credit losses

 

 

 

 

 

 

 

7

 

Net interest income after provision for credit losses

 

 

 

 

6,749

 

 

 

6,891

 

Noninterest income:

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

 

 

 

395

 

 

 

391

 

Other

 

 

 

 

189

 

 

 

161

 

Total noninterest income

 

 

 

 

584

 

 

 

552

 

Noninterest expenses:

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

 

 

3,179

 

 

 

3,004

 

Occupancy

 

 

 

 

618

 

 

 

644

 

Data processing

 

 

 

 

511

 

 

 

493

 

Other

 

 

 

 

1,262

 

 

 

1,053

 

Total noninterest expenses

 

 

 

 

5,570

 

 

 

5,194

 

Income before income taxes

 

 

 

 

1,763

 

 

 

2,249

 

Income tax expense

 

 

 

 

428

 

 

 

527

 

Net income

 

 

 

$

1,335

 

 

$

1,722

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

Basic

 

 

 

 

6,416,628

 

 

 

6,599,672

 

Diluted

 

 

 

 

6,524,332

 

 

 

6,681,680

 

Basic earnings per share

 

 

 

$

0.21

 

 

$

0.26

 

Diluted earnings per share

 

 

 

$

0.20

 

 

$

0.26

 

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited consolidated financial statements.

3


 

AFFINITY BANCSHARES, INC.

Consolidated Statements of Comprehensive Income

(unaudited)

 

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

 

 

(In thousands)

 

Net income

 

$

1,335

 

 

$

1,722

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized gain on available-for-sale securities, net of taxes of $5 and $161

 

14

 

 

474

 

 

 

 

 

Total other comprehensive income

 

14

 

 

474

 

 

 

 

 

 

 

 

Total comprehensive income

 

$

1,349

 

 

$

2,196

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited consolidated financial statements.

4


 

AFFINITY BANCSHARES, INC.

Consolidated Statements of Changes in Stockholders’ Equity

(unaudited)

 

 

Three Months Ended March 31, 2024 and 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

Common

 

 

Paid In

 

 

Unearned

 

 

Retained

 

 

Comprehensive

 

 

 

 

 

Stock

 

 

Capital

 

 

ESOP Shares

 

 

Earnings

 

 

Income (Loss)

 

 

Total

 

 

 

 

 

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance December 31, 2023

 

 

64

 

 

$

61,026

 

 

$

(4,587

)

 

$

71,345

 

 

$

(6,332

)

 

$

121,516

 

ESOP loan payment and release of ESOP shares

 

 

 

 

34

 

 

 

52

 

 

 

 

 

 

86

 

Stock-based compensation expense

 

 

 

 

 

349

 

 

 

 

 

 

 

 

 

 

 

 

349

 

Change in unrealized loss on investment securities available-for-sale, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14

 

 

 

14

 

Net income

 

 

 

 

 

 

 

 

 

1,335

 

 

 

 

1,335

 

Ending balance March 31, 2024

 

 

64

 

 

 

61,409

 

 

 

(4,535

)

 

 

72,680

 

 

 

(6,318

)

 

 

123,300

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance December 31, 2022

 

 

66

 

 

$

63,130

 

 

$

(4,795

)

 

$

65,357

 

 

$

(6,655

)

 

$

117,103

 

ESOP loan payment and release of ESOP shares

 

 

 

 

26

 

 

 

52

 

 

 

 

 

 

78

 

Stock-based compensation expense

 

 

 

 

 

260

 

 

 

 

 

 

 

 

 

 

 

 

260

 

Change in unrealized loss on investment securities available-for-sale, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

474

 

 

 

474

 

Common stock repurchase

 

 

 

 

 

(867

)

 

 

 

 

 

 

 

 

 

 

 

(867

)

Adoption of new accounting pronouncement (see Note 1)

 

 

 

 

 

 

 

 

 

 

 

(460

)

 

 

 

 

 

(460

)

 Net income

 

 

 

 

 

 

 

 

 

1,722

 

 

 

 

1,722

 

Ending balance March 31, 2023

 

 

66

 

 

$

62,549

 

 

$

(4,743

)

 

$

66,619

 

 

$

(6,181

)

 

$

118,310

 

 

See accompanying notes to unaudited consolidated financial statements.

5


 

AFFINITY BANCSHARES, INC.

Consolidated Statements of Cash Flows

(unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

 

 

(In thousands)

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

1,335

 

 

$

1,722

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation, (accretion) and amortization

 

 

162

 

 

 

183

 

Stock-based compensation expense

 

 

349

 

 

 

260

 

Deferred income tax expense

 

 

241

 

 

 

 

Provision for credit losses

 

 

 

 

 

7

 

ESOP expense

 

 

86

 

 

 

78

 

Increase in cash surrender value of bank owned life insurance

 

 

(98

)

 

 

(87

)

Change in:

 

 

 

 

 

 

Accrued interest receivable and other assets

 

 

(525

)

 

 

(779

)

Accrued interest payable and other liabilities

 

 

(333

)

 

 

615

 

Net cash provided by operating activities

 

 

1,217

 

 

 

1,999

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of investment securities held-to-maturity

 

 

 

 

 

(7,609

)

Purchases of investment securities available-for-sale

 

 

 

 

 

(5,710

)

Purchases of premises and equipment

 

 

(132

)

 

 

(148

)

Proceeds from paydowns of investment securities available-for-sale

 

 

375

 

 

 

1,379

 

Proceeds from paydowns of investment securities held-to-maturity

 

 

24

 

 

 

15

 

Purchases of other investments

 

 

(46

)

 

 

(2,339

)

Proceeds from sales of other investments

 

 

 

 

 

425

 

Net change in loans

 

 

(14,906

)

 

 

(15,226

)

Net cash used in investing activities

 

 

(14,685

)

 

 

(29,213

)

Cash flows from financing activities:

 

 

 

 

 

 

Net change in deposits

 

 

13,001

 

 

 

93,668

 

Stock repurchase

 

 

 

 

 

(867

)

Proceeds from FHLB advances

 

 

 

 

 

65,000

 

Repayment of FHLB advances

 

 

 

 

 

(20,000

)

Repayment of federal funds purchased

 

 

 

 

 

(25

)

Proceeds from other borrowings

 

 

11,837

 

 

 

 

Net cash provided by financing activities

 

 

24,838

 

 

 

137,776

 

Net change in cash and cash equivalents

 

 

11,370

 

 

 

110,562

 

Cash and cash equivalents at beginning of period

 

 

50,025

 

 

 

26,324

 

Cash and cash equivalents at end of period

 

$

61,395

 

 

$

136,886

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

 

4,791

 

 

 

2,372

 

Change in unrealized loss on investment securities available-for-sale, net of tax

 

 

14

 

 

 

474

 

See accompanying notes to unaudited consolidated financial statements.

6


AFFINITY BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

 

(1) Nature of Operations

Affinity Bancshares, Inc. (the “Company”) is a bank holding company, headquartered in Covington, Georgia. The Company has one operating subsidiary, Affinity Bank, National Association (the “Bank”, and formerly named “Affinity Bank”), a national bank, conducting banking activities primarily in Newton County, Georgia and surrounding counties and in Cobb and Fulton Counties, Georgia and surrounding counties, and originating dental practice loans and indirect automobile loans throughout the Southeastern United States. The Bank offers such customary banking services as consumer and commercial checking accounts, savings accounts, certificates of deposit, mortgage, commercial and consumer loans, including indirect automobile loans, money transfers and a variety of other banking services. The Company was incorporated in 2020 to be the successor corporation to Community First Bancshares, Inc., a federal corporation, upon completion of the second-step mutual-to-stock conversion (the “Conversion”) of Community First Bancshares, MHC, the top tier mutual holding company of Community First Bancshares, Inc, the former mid-tier holding company for the Bank.

Basis of Presentation

The accompanying unaudited consolidated financial statements and notes thereto contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly, in accordance with accounting principles generally accepted in the United States of America (“GAAP”), the financial position of the Company as of March 31, 2024 and the results of its operations and its cash flows for the periods presented. The interim consolidated financial information should be read in conjunction with the audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for a full year or for any other period.

Use of Estimates – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Material estimates common to the banking industry that are particularly susceptible to significant change in the near term include, but are not limited to, the determination of the allowance for credit losses, the valuation of other real estate acquired in connection with foreclosure or in satisfaction of loans and valuation allowances associated with the realization of deferred tax assets, which are based on future taxable income.

Summary of Significant Accounting Policies – The accounting and reporting policies of the Company conform to GAAP and general practices within the banking industry. There have been no material changes or developments in the application of principles or in our evaluation of the accounting estimates and the underlying assumptions or methodologies that we believe to be Critical Accounting Policies as disclosed in the Company’s financial statements for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K.

Earnings per Share

Basic earnings per common share are calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common share are calculated by dividing net income available to common shareholders by the weighted average number of shares adjusted for the dilutive effect of common stock awards (outstanding stock options), if any. Presented below are the calculations for basic and diluted earnings per common share.

 

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

 

(Dollars in thousands except per share data)

 

 

 

 

 

 

 

Net income

$

1,335

 

 

$

1,722

 

Weighted average common shares outstanding

 

6,416,628

 

 

 

6,599,672

 

Effect of dilutive common stock awards

 

107,704

 

 

 

82,008

 

Diluted weighted average common shares outstanding

 

6,524,332

 

 

 

6,681,680

 

Basic earnings per common share

$

0.21

 

 

$

0.26

 

Diluted earnings per common share

 

0.20

 

 

 

0.26

 

 

 

There were 379,500 anti-dilutive options for the three months ended March 31, 2024 and 292,454 anti-dilutive options for the three months ended March 31, 2023.

7


AFFINITY BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

 

(2) Investment Securities

Investment securities available-for-sale at March 31, 2024 and December 31, 2023 are as follows: (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2024

 

Amortized Cost

 

 

Gross
Unrealized Gains

 

 

Gross
Unrealized Losses

 

 

Estimated Fair Value

 

U.S. Treasury securities

 

$

5,157

 

 

$

 

 

$

(698

)

 

$

4,459

 

Municipal securities - tax exempt

 

 

525

 

 

 

 

 

 

(89

)

 

 

436

 

Municipal securities - taxable

 

 

2,530

 

 

 

 

 

 

(401

)

 

 

2,129

 

U. S. Government sponsored enterprises

 

 

11,837

 

 

 

 

 

 

(3,192

)

 

 

8,645

 

Government agency mortgage-backed securities

 

 

18,248

 

 

 

 

 

 

(2,906

)

 

 

15,342

 

Corporate securities

 

 

18,401

 

 

 

40

 

 

 

(1,213

)

 

 

17,228

 

Total

 

$

56,698

 

 

$

40

 

 

$

(8,499

)

 

$

48,239

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

$

5,147

 

 

$

 

 

$

(649

)

 

$

4,498

 

Municipal securities - tax exempt

 

 

527

 

 

 

 

 

 

(85

)

 

 

442

 

Municipal securities - taxable

 

 

2,530

 

 

 

 

 

 

(395

)

 

 

2,135

 

U. S. Government sponsored enterprises

 

 

11,837

 

 

 

 

 

 

(3,207

)

 

 

8,630

 

Government agency mortgage-backed securities

 

 

18,643

 

 

 

 

 

 

(2,695

)

 

 

15,948

 

Corporate securities

 

 

18,355

 

 

 

30

 

 

 

(1,477

)

 

 

16,908

 

Total

 

$

57,039

 

 

$

30

 

 

$

(8,508

)

 

$

48,561

 

 

Investment securities held-to-maturity at March 31, 2024 and December 31, 2023 are as follows: (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2024

 

Amortized Cost

 

 

Gross
Unrealized Gains

 

 

Gross
Unrealized Losses

 

 

Fair Value

 

 

Estimated Allowance for Credit Losses

 

U.S. Treasury securities

 

$

999

 

 

$

 

 

$

(4

)

 

$

995

 

 

$

 

Government agency mortgage-backed securities

 

 

776

 

 

 

 

 

 

(55

)

 

 

721

 

 

 

 

Corporate securities

 

 

32,500

 

 

 

55

 

 

 

(398

)

 

 

32,157

 

 

 

(45

)

Total

 

$

34,275

 

 

$

55

 

 

$

(457

)

 

$

33,873

 

 

$

(45

)

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

$

999

 

 

$

 

 

$

(4

)

 

$

995

 

 

$

 

Government agency mortgage-backed securities

 

 

795

 

 

 

 

 

 

(76

)

 

 

719

 

 

 

 

Corporate securities

 

 

32,457

 

 

 

58

 

 

 

(394

)

 

 

32,121

 

 

 

(45

)

Total

 

$

34,251

 

 

$

58

 

 

$

(474

)

 

$

33,835

 

 

$

(45

)


Corporate securities account for the majority of the held-to-maturity portfolio as of March 31, 2024. As stated above, these corporate securities are accounted for as securities, but are underwritten as loans with features that are typically found in commercial loans. Accordingly, the Bank monitors the credit quality of these corporate bonds through quarterly credit reviews to determine impairment, if any. At March 31, 2024, these securities are all rated as investment grade and the $45,000 of allowance for credit losses associated with these securities was calculated using a Moody's report on the cumulative default rates of corporate issuers.

 

Investment securities available-for-sale in an unrealized loss position at March 31, 2024 and December 31, 2023 are as follows: (in thousands)

 

8


AFFINITY BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

 

 

 

Less Than 12 Months

 

 

12 Months or More

 

 

Total

 

March 31, 2024

 

Fair Value

 

 

Unrealized Loss

 

 

Fair Value

 

 

Unrealized Loss

 

 

Fair Value

 

 

Unrealized Loss

 

U.S. Treasury securities

 

$

 

 

$

 

 

$

4,459

 

 

$

(698

)

 

$

4,459

 

 

$

(698

)

Municipal securities - tax exempt

 

 

 

 

 

 

 

 

436

 

 

 

(89

)

 

 

436

 

 

 

(89

)

Municipal securities - taxable

 

 

 

 

 

 

 

 

2,129

 

 

 

(401

)

 

 

2,129

 

 

 

(401

)

U. S. Government sponsored enterprises

 

 

 

 

 

 

 

 

8,645

 

 

 

(3,192

)

 

 

8,645

 

 

 

(3,192

)

Government agency mortgage-backed securities

 

 

 

 

 

 

 

 

15,342

 

 

 

(2,906

)

 

 

15,342

 

 

 

(2,906

)

Corporate securities

 

 

961

 

 

 

(19

)

 

 

13,724

 

 

 

(1,194

)

 

 

14,685

 

 

 

(1,213

)

Total

 

$

961

 

 

$

(19

)

 

$

44,735

 

 

$

(8,480

)

 

$

45,696

 

 

$

(8,499

)

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

$

 

 

$

 

 

$

4,498

 

 

$

(649

)

 

$

4,498

 

 

$

(649

)

Municipal securities - tax exempt

 

 

 

 

 

 

 

 

442

 

 

 

(85

)

 

 

442

 

 

 

(85

)

Municipal securities - taxable

 

 

 

 

 

 

 

 

2,135

 

 

 

(395

)

 

 

2,135

 

 

 

(395

)

U. S. Government sponsored enterprises

 

 

 

 

 

 

 

 

8,630

 

 

 

(3,207

)

 

 

8,630

 

 

 

(3,207

)

Government agency mortgage-backed securities

 

 

 

 

 

 

 

 

15,948

 

 

 

(2,695

)

 

 

15,948

 

 

 

(2,695

)

Corporate securities

 

 

5,557

 

 

 

(214

)

 

 

8,774

 

 

 

(1,263

)

 

 

14,331

 

 

 

(1,477

)

Total

 

$

5,557

 

 

$

(214

)

 

$

40,427

 

 

$

(8,294

)

 

$

45,984

 

 

$

(8,508

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

There was one available-for-sale security in an unrealized loss position totaling $19,000 as of March 31, 2024 for less than 12 months. There were 68 available-for-sale securities in an unrealized loss position for 12 months or greater totaling $8.5 million as of March 31, 2024. The unrealized losses on the debt securities arose due to changing interest rates and market conditions and are considered to be temporary because of acceptable investment grades and are reviewed regularly. Four of the securities are agency bonds and five are U.S. Treasury bonds, so all of these are direct obligations of the U.S. Government. Thirty-nine of the securities are mortgage-backed bonds that have the direct or implied backing of the U.S. Government. Four of the bonds are municipal securities and the remaining 17 securities are corporate securities that are either trust preferred securities or subordinated debentures where the Bank performs a credit review regularly and such review has raised no concerns.

 

Debt securities issued by U.S. government agencies, U.S. government-sponsored enterprises ("GSEs"), and the U.S. Treasury, including notes and mortgage-backed securities, accounted for the majority of the available-for-sale portfolio as of March 31, 2024, and the Bank expects no credit losses on these securities, given the explicit and implicit guarantees provided by the U.S. federal government. The available-for-sale portfolio also includes corporate securities, but are underwritten as loans with features that are typically found in commercial loans. Accordingly, the Bank monitors the credit quality of these corporate bonds through quarterly credit reviews to determine impairment, if any. The decline in fair value is attributable to changes in interest rates, and not credit quality, and the Bank does not have the intent to sell the U.S. government and agencies debt securities and the corporate securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Bank does not consider impairments on these securities to be credit related as of March 31, 2024.

 

The amortized cost and estimated fair value of investment securities available-for-sale and held-to-maturity at March 31, 2024, by contractual maturity, are shown below. Maturities of mortgage-backed securities may differ from contractual maturities

9


AFFINITY BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

 

because borrowers may have the right to call or prepay certain obligations with or without call or prepayment penalties. Therefore, these securities are not included in the maturity categories. (in thousands)

 

 

 

Available-for-Sale

 

 

Held-to-Maturity

 

 

 

Amortized

 

 

Estimated

 

 

Amortized

 

 

Estimated

 

 

 

Cost

 

 

Fair Value

 

 

Cost

 

 

Fair Value

 

Within 1 year

 

$

 

 

$

 

 

$

999

 

 

$

995

 

Greater than 1 to 5 years

 

 

6,950

 

 

 

6,592

 

 

 

16,782

 

 

 

16,716

 

Greater than 5 to 10 years

 

 

21,160

 

 

 

18,810

 

 

 

15,718

 

 

 

15,441

 

Greater than 10 years

 

 

10,340

 

 

 

7,495

 

 

 

 

 

 

 

 

 

 

38,450

 

 

 

32,897

 

 

 

33,499

 

 

 

33,152

 

Government agency mortgage-backed securities

 

 

18,248

 

 

 

15,342

 

 

 

776

 

 

 

721

 

Total

 

$

56,698

 

 

$

48,239

 

 

$

34,275

 

 

$

33,873

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

There were no sales of investment securities available-for-sale during the three months ended March 31, 2024 or 2023.

Available-for-sale securities with a carrying value of approximately $4.0 million and $4.2 million were pledged to secure public deposits at March 31, 2024 and December 31, 2023, respectively.

(3) Loans and Allowance for Credit Losses

Major classifications of loans, by collateral code, at March 31, 2024 and December 31, 2023 are summarized as follows: (in thousands)

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Commercial (secured by real estate - owner occupied)

 

$

162,638

 

 

$

157,691

 

Commercial (secured by real estate - non-owner occupied)

 

 

145,610

 

 

 

145,100

 

Commercial and industrial

 

 

142,509

 

 

 

140,407

 

Construction, land and acquisition & development

 

 

55,292

 

 

 

47,685

 

Residential mortgage 1-4 family

 

 

53,133

 

 

 

53,650

 

Consumer installment

 

 

115,316

 

 

 

115,343

 

Total

 

 

674,498

 

 

 

659,876

 

Less allowance for credit losses

 

 

(8,595

)

 

 

(8,921

)

Total loans, net

 

$

665,903

 

 

$

650,955

 

 

The Bank grants loans and extensions of credit to individuals and a variety of firms and corporations located primarily in the Atlanta, Georgia Metropolitan Statistical Area. A substantial portion of the loan portfolio is collateralized by improved and unimproved real estate and is dependent upon the real estate market. The Bank also conducts lending within professional markets, with a primary focus on the dental industry in Georgia and adjoining states. The majority of these loans are commercial and industrial credits for practice acquisitions and equipment financing with the remainder being owner-occupied real estate. Accrued interest on loans totaled $2.2 million on March 31, 2024 and $2.1 million on December 31, 2023 and is included in other assets on the consolidated balance sheet.

 

 

10


AFFINITY BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

 

The following table presents the balance in the allowance for credit losses as of and for the three months ended March 31, 2024 and 2023 (in thousands)

 

 

 

Commercial
(Secured by Real
Estate - Owner Occupied)

 

 

Commercial
(Secured by Real Estate - Non-Owner Occupied)

 

 

Commercial
and Industrial

 

 

Construction,
Land and
Acquisition & Development

 

 

Residential
 Mortgage

 

 

Consumer
Installment

 

 

Unallocated

 

 

Total

 

Beginning balance December 31, 2023

 

$

1,397

 

 

$

1,298

 

 

$

1,806

 

 

$

927

 

 

$

1,038

 

 

$

1,534

 

 

$

921

 

 

$

8,921

 

Provision

 

 

167

 

 

 

(6

)

 

 

(70

)

 

 

152

 

 

 

(31

)

 

 

139

 

 

 

(351

)

 

 

 

Charge-offs

 

 

(160

)

 

 

 

 

 

 

 

 

 

 

 

(5

)

 

 

(193

)

 

 

 

 

 

(358

)

Recoveries

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32

 

 

 

 

 

 

32

 

Ending balance, March 31, 2024

 

$

1,404

 

 

$

1,292

 

 

$

1,736

 

 

$

1,079

 

 

$

1,002

 

 

$

1,512

 

 

$

570

 

 

$

8,595

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance, December 31, 2022

 

$

2,403

 

 

$

2,079

 

 

$

2,292

 

 

$

487

 

 

$

345

 

 

$

1,675

 

 

$

44

 

 

$

9,325

 

Provision

 

 

(898

)

 

 

(683

)

 

 

(1,084

)

 

 

443

 

 

 

1,169

 

 

 

740

 

 

 

313

 

 

 

 

Charge-offs

 

 

(4

)

 

 

 

 

 

(3

)

 

 

 

 

 

 

 

 

(99

)

 

 

 

 

 

(106

)

Recoveries

 

 

8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

 

 

 

 

 

 

15

 

Ending balance, March 31, 2023

 

$

1,509

 

 

$

1,396

 

 

$

1,205

 

 

$

930

 

 

$

1,514

 

 

$

2,323

 

 

$

357

 

 

$

9,234

 

 

No provision for credit losses on loans was recorded for the three months ended March 31, 2024 and 2023. A release on unfunded commitments for the three months ended March 31, 2024 and 2023 of $0 and $3,000 was recorded, and is included in other liabilities on the consolidated balance sheet. The allowance for unfunded commitments as of March 31, 2024 and December 31, 2023 was $531,000. The Bank also recorded a provision of $0 and $10,000 for credit losses for held-to-maturity securities for a net $0 and $7,000 recorded of provision for credit losses for the three months ended March 31, 2024 and 2023.

 

The Bank individually evaluates loans meeting a certain threshold for impairment that are on nonaccrual status or are rated substandard (as described below). Additionally, all loan modifications to a borrower with financial difficulty are evaluated for impairment.

Collateral-Dependent Loans
We classify a loan as collateral-dependent when our borrower is experiencing financial difficulty, and we expect repayment to be provided substantially through the operation or sale of collateral. Our commercial loans have collateral that is comprised of real estate and business assets. Our consumer loans have collateral that is substantially comprised of residential real estate. There were no significant changes in the extent to which collateral secures our collateral-dependent loans during the three months ended March 31, 2024
and 2023, and we had $4.1 million and $4.3 million of collateral-dependent loans without an allowance and no collateral-dependent loans with an allowance at March 31, 2024 and December 31, 2023, respectively.

 

11


AFFINITY BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

 

The following table presents the aging of the recorded investment in past due loans, as well as the recorded investment in nonaccrual loans, as of March 31, 2024 and December 31, 2023 by class of loans: (in thousands)

March 31, 2024

 

30 -59
Days
 Past Due

 

 

60- 89
Days
 Past Due

 

 

90 Days
or Greater
Past Due

 

 

Total Accruing Loans
Past Due

 

 

Nonaccrual with Allowance

 

 

Nonaccrual without Allowance

 

 

Current

 

 

Total

 

Commercial (secured by real estate - owner occupied)

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

162,638

 

 

$

162,638

 

Commercial (secured by real estate - non-owner occupied)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,280

 

 

 

141,330

 

 

 

145,610

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

142,509

 

 

 

142,509

 

Construction, land and acquisition &
   development

 

 

13

 

 

 

 

 

 

 

 

 

13

 

 

 

 

 

 

19

 

 

 

55,260

 

 

 

55,292

 

Residential mortgage

 

 

1,507

 

 

 

 

 

 

 

 

 

1,507

 

 

 

 

 

 

2,528

 

 

 

49,098

 

 

 

53,133

 

Consumer installment

 

 

332

 

 

 

 

 

 

 

 

 

332

 

 

 

 

 

 

337

 

 

 

114,647

 

 

 

115,316

 

Total

 

$

1,852

 

 

$

 

 

$

 

 

$

1,852

 

 

$

 

 

$

7,164

 

 

$

665,482

 

 

$

674,498

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

30 -59
Days
 Past Due

 

 

60- 89
Days
 Past Due

 

 

90 Days
or Greater
Past Due

 

 

Total Accruing Loans
Past Due

 

 

Nonaccrual with Allowance

 

 

Nonaccrual without Allowance

 

 

Current

 

 

Total

 

Commercial (secured by real estate - owner occupied)

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

157,691

 

 

$

157,691

 

Commercial (secured by real estate - non-owner occupied)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,505

 

 

 

140,595

 

 

 

145,100

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

140,407

 

 

 

140,407

 

Construction, land and acquisition &
   development

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

47,685

 

 

 

47,685

 

Residential mortgage

 

 

2,534

 

 

 

 

 

 

 

 

 

2,534

 

 

 

 

 

 

2,504

 

 

 

48,612

 

 

 

53,650

 

Consumer installment

 

 

246

 

 

 

 

 

 

 

 

 

246

 

 

 

 

 

 

417

 

 

 

114,680

 

 

 

115,343

 

Total

 

$

2,780

 

 

$

 

 

$

 

 

$

2,780

 

 

$

 

 

$

7,426

 

 

$

649,670

 

 

$

659,876

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

There were no loan modifications to a borrower with financial difficulty during the three months ended March 31, 2024 or 2023. No loan modifications made to a borrower with financial difficulty subsequently defaulted during the three months ended March 31, 2024 and 2023.

The Bank categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. The Bank analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a continuous basis. The Bank uses the following definitions for its risk ratings:

Special Mention. Loans have potential weaknesses that may, if not corrected, weaken or inadequately protect the Bank's credit position at some future date. Weaknesses are generally the result of deviation from prudent lending practices, such as over advances on collateral. Credits in this category should, within a 12-month period, move to Pass if improved or drop to Substandard if poor trends continue.

12


AFFINITY BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

 

Substandard. Inadequately protected by the current net worth and paying capacity of the obligor, or by the collateral pledged, if any. Loans have a well-defined weakness or weaknesses such as primary source of repayment is gone or severely impaired or cash flow is insufficient to reduce debt. There is a distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans have the same weaknesses as those classified Substandard, with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable. The likelihood of a loss on an asset or portion of an asset classified Doubtful is high.

Loss. Loans considered uncollectible and of such little value that the continuance as a Bank asset is not warranted. This does not mean that the loan has no recovery or salvage value, but rather the asset should be charged off even though partial recovery may be possible in the future.

13


AFFINITY BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

 

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be Pass rated loans. As of March 31, 2024 and December 31, 2023, and based on the most recent analysis performed, the risk category and year of origination of loans by class of loans is as follows: (in thousands)

 

March 31, 2024

2024

 

 

2023

 

 

2022

 

 

2021

 

 

2020

 

 

Prior

 

 

Revolvers

 

 

Total

 

Pass

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial (secured by real estate - owner occupied)

$

4,773

 

 

$

13,138

 

 

$

24,750

 

 

$

28,527

 

 

$

22,559

 

 

$

62,986

 

 

$

5,581

 

 

$

162,314

 

Commercial (secured by real estate - non-owner occupied)

 

4,383

 

 

 

31,925

 

 

 

36,744

 

 

 

28,451

 

 

 

4,377

 

 

 

25,566

 

 

 

5,797

 

 

 

137,243

 

Commercial and industrial

 

8,127

 

 

 

21,279

 

 

 

21,425

 

 

 

27,458

 

 

 

15,263

 

 

 

41,577

 

 

 

7,380

 

 

 

142,509

 

Construction, land and acquisition & development

 

7,502

 

 

 

25,403

 

 

 

14,628

 

 

 

4,688

 

 

 

106

 

 

 

476

 

 

 

2,470

 

 

 

55,273

 

Residential mortgage

 

335

 

 

 

4,985

 

 

 

5,670

 

 

 

2,399

 

 

 

1,876

 

 

 

29,255

 

 

 

5,575

 

 

 

50,095

 

Consumer installment

 

12,150

 

 

 

38,689

 

 

 

42,245

 

 

 

15,393

 

 

 

3,996

 

 

 

1,649

 

 

 

551

 

 

 

114,673

 

Total pass

 

37,270

 

 

 

135,419

 

 

 

145,462

 

 

 

106,916

 

 

 

48,177

 

 

 

161,509

 

 

 

27,354

 

 

 

662,107

 

Special Mention

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial (secured by real estate - owner occupied)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

324

 

 

 

 

 

 

324

 

Commercial (secured by real estate - non-owner occupied)

 

 

 

 

 

 

 

-

 

 

 

3,517

 

 

 

 

 

 

541

 

 

 

 

 

 

4,058

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction, land and acquisition & development

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

220

 

 

 

 

 

 

220

 

Consumer installment

 

 

 

 

53

 

 

 

226

 

 

 

14

 

 

 

11

 

 

 

2

 

 

 

 

 

 

306

 

Total special mention

 

 

 

 

53

 

 

 

226

 

 

 

3,531

 

 

 

11

 

 

 

1,087

 

 

 

 

 

 

4,908

 

Substandard

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial (secured by real estate - owner occupied)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial (secured by real estate - non-owner occupied)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,309

 

 

 

-

 

 

 

4,309

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction, land and acquisition & development

 

 

 

 

 

 

 

 

 

 

-

 

 

 

19

 

 

 

 

 

 

 

 

 

19

 

Residential mortgage

 

 

 

 

-

 

 

 

197

 

 

 

104

 

 

 

104

 

 

 

2,368

 

 

 

45

 

 

 

2,818

 

Consumer installment

 

 

 

 

80

 

 

 

96

 

 

 

147

 

 

 

5

 

 

 

9

 

 

 

 

 

 

337

 

Total substandard

 

 

 

 

80

 

 

 

293

 

 

 

251

 

 

 

128

 

 

 

6,686

 

 

 

45

 

 

 

7,483

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

$

37,270

 

 

$

135,552

 

 

$

145,981

 

 

$

110,698

 

 

$

48,316

 

 

$

169,282

 

 

$

27,399

 

 

$

674,498

 

Current year to date period gross write-offs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial (secured by real estate - owner occupied)

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Commercial (secured by real estate - non-owner occupied)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

160

 

 

 

 

 

 

160

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction, land and acquisition & development

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage

 

 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5

 

Consumer installment

 

 

 

 

7

 

 

 

144

 

 

 

37

 

 

 

 

 

 

5

 

 

 

 

 

 

193

 

Total current period gross write-offs

$

 

 

$

7

 

 

$

149

 

 

$

37

 

 

$

 

 

$

165

 

 

$

 

 

$

358

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14


AFFINITY BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

 

December 31, 2023

2023

 

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

Prior

 

 

Revolvers

 

 

Total

 

Pass

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial (secured by real estate - owner occupied)

$

11,210

 

 

$

23,441

 

 

$

29,832

 

 

$

22,982

 

 

$

11,287

 

 

$

49,744

 

 

$

8,863

 

 

$

157,359

 

Commercial (secured by real estate - non-owner occupied)

 

32,830

 

 

 

37,395

 

 

 

25,702

 

 

 

4,436

 

 

 

10,015

 

 

 

15,546

 

 

 

10,562

 

 

 

136,486

 

Commercial and industrial

 

22,473

 

 

 

21,590

 

 

 

27,252

 

 

 

14,764

 

 

 

16,697

 

 

 

25,317

 

 

 

12,314

 

 

 

140,407

 

Construction, land and acquisition & development

 

21,557

 

 

 

17,392

 

 

 

5,034

 

 

 

721

 

 

 

216

 

 

 

210

 

 

 

2,534

 

 

 

47,664

 

Residential mortgage

 

5,354

 

 

 

5,672

 

 

 

2,447

 

 

 

1,289

 

 

 

1,424

 

 

 

28,710

 

 

 

5,736

 

 

 

50,632

 

Consumer installment

 

42,601

 

 

 

46,869

 

 

 

17,488

 

 

 

4,866

 

 

 

1,919

 

 

 

247

 

 

 

543

 

 

 

114,533

 

Total pass

 

136,025

 

 

 

152,359

 

 

 

107,755

 

 

 

49,058

 

 

 

41,558

 

 

 

119,774

 

 

 

40,552

 

 

 

647,081

 

Special Mention

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial (secured by real estate - owner occupied)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

332

 

 

 

 

 

 

332

 

Commercial (secured by real estate - non-owner occupied)

 

 

 

 

 

 

 

3,539

 

 

 

 

 

 

 

 

 

540

 

 

 

 

 

 

4,079

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction, land and acquisition & development

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

222

 

 

 

 

 

 

222

 

Consumer installment

 

73

 

 

 

190

 

 

 

99

 

 

 

21

 

 

 

31

 

 

 

 

 

 

 

 

 

414

 

Total special mention

 

73

 

 

 

190

 

 

 

3,638

 

 

 

21

 

 

 

31

 

 

 

1,094

 

 

 

 

 

 

5,047

 

Substandard

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial (secured by real estate - owner occupied)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial (secured by real estate - non-owner occupied)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,535

 

 

 

-

 

 

 

4,535

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction, land and acquisition & development

 

 

 

 

 

 

 

 

 

 

21

 

 

 

 

 

 

 

 

 

 

 

 

21

 

Residential mortgage

 

 

 

 

202

 

 

 

108

 

 

 

107

 

 

 

113

 

 

 

2,266

 

 

 

 

 

 

2,796

 

Consumer installment

 

50

 

 

 

205

 

 

 

118

 

 

 

11

 

 

 

12

 

 

 

 

 

 

 

 

 

396

 

Total substandard

 

50

 

 

 

407

 

 

 

226

 

 

 

139

 

 

 

125

 

 

 

6,801

 

 

 

-

 

 

 

7,748

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

$

136,148

 

 

$

152,956

 

 

$

111,619

 

 

$

49,218

 

 

$

41,714

 

 

$

127,669

 

 

$

40,552

 

 

$

659,876

 

Current year to date period gross write-offs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial (secured by real estate - owner occupied)

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Commercial (secured by real estate - non-owner occupied)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

204

 

 

 

 

 

 

204

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

3

 

Construction, land and acquisition & development

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer installment

 

9

 

 

 

159

 

 

 

125

 

 

 

14

 

 

 

 

 

 

 

 

 

 

 

 

307

 

Total current period gross write-offs

$

9

 

 

$

159

 

 

$

125

 

 

$

14

 

 

$

 

 

$

207

 

 

$

 

 

$

514

 

 

(4) Intangible Assets

The core deposit premium intangible asset had a gross carrying amount of $1.9 million and accumulated amortization of $813,000 at March 31, 2024. The core deposit premium intangible asset had a gross carrying amount of $1.9 million and accumulated amortization of $765,000 at December 31, 2023. Aggregate amortization expense was $48,000 for the three months ended March 31, 2024 and 2023.

Goodwill acquired through acquisition was $17.2 million at March 31, 2024 and 2023. No impairment loss was recognized during the three months ended March 31, 2024 and 2023.

15


AFFINITY BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

 

(5) Deposits

The aggregate amount of certificates of deposit ("CDs") of $250,000 or more, the standard FDIC deposit insurance coverage limit per depositor, was approximately $30.4 million at March 31, 2024, and $31.2 million at December 31, 2023. Due to the FDIC insurance coverage rules and limits for a depositor's specific group of deposit accounts, it is important to note that not all deposits in excess of $250,000 are uninsured.

Brokered CDs totaled $107.4 million and had a weighted average rate of 4.65% and a weighted average maturity of 28 months at March 31, 2024 and $107.3 million and had a weighted average rate of 4.87% and a weighted average maturity of 28 months at December 31, 2023.

(6) Borrowings

The following Federal Home Loan Bank ("FHLB") advances, which required monthly or quarterly interest payments, were outstanding at March 31, 2024 and December 31, 2023:

 

Advance Date

 

Advance

 

 

Interest Rate

 

 

Maturity

 

Rate

 

Call Feature

1/6/2023

 

$

10,000,000

 

 

 

4.22

%

 

1/6/2026

 

Fixed

 

N/A

1/6/2023

 

 

10,000,000

 

 

 

3.94

%

 

1/6/2028

 

Fixed

 

N/A

10/25/2023

 

 

10,000,000

 

 

 

3.99

%

 

10/25/2028

 

Convertible

 

4/25/2024

12/14/2023

 

 

10,000,000

 

 

 

3.28

%

 

12/14/2028

 

Convertible

 

6/14/2024

 

 

$

40,000,000

 

 

 

 

 

 

 

 

 

 

 

At March 31, 2024 and December 31, 2023, the FHLB advances were collateralized by certain loans which totaled approximately $406.1 million and $392.6 million, and by the Company’s investment in FHLB stock which totaled approximately $2.5 million at March 31, 2024 and December 31, 2023.

The Company had one FHLB letter of credit of $12.5 million, used to collateralize public deposits, outstanding at both March 31, 2024 and December 31, 2023.

The Company has Federal Funds unsecured lines of credit totaling $32.5 million. No amount was borrowed under these lines as of March 31, 2024.

We also have a line of $76.8 million and $67.4 million with the Federal Reserve Bank secured by $101.9 million and $96.1 million in loans and investment securities as of March 31, 2024 and December 31, 2023. There was $11.8 million and $0 outstanding under the Bank Term Funding Program at March 31, 2024 and December 31, 2023.

 

 

16


AFFINITY BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

 

(7) Employee Stock Ownership Plan

The Company sponsors an employee stock ownership plan (“ESOP”) that covers all employees who meet certain service requirements. The Company makes annual contributions to the ESOP in amounts as defined by the plan document. These contributions are used to pay debt service and purchase additional shares. Certain ESOP shares are pledged as collateral for debt. As the debt is repaid, shares are released from collateral and allocated to active employees, based on the proportion of debt service paid in the year.

In 2017, the ESOP borrowed $3.0 million payable to the Company for the purpose of purchasing shares of the Company’s common stock. A total of 295,499 shares were purchased with the loan proceeds as part of the Company’s initial stock offering. In 2021, the ESOP borrowed $3.0 million payable to the Company for the purpose of purchasing additional shares of the Company’s common stock. A total of 225,721 shares were purchased with the loan proceeds as part of the Company’s second stock offering. Total ESOP expense for the three months ended March 31, 2024 and 2023 was approximately $86,000 and $78,000, respectively. The balance of the note payable of the ESOP was approximately $5.1 million at March 31, 2024 and December 31, 2023. Because the source of the loan payments is contributions received by the ESOP from the Company, the related note receivable is shown as a reduction of stockholders’ equity. As of March 31, 2024 and December 31, 2023, 101,000 shares had been released.

(8) Stock-Based Compensation

In 2018, shareholders approved the Company’s 2018 Equity Incentive Plan, which authorizes the issuance of up to 133,987 shares of common stock pursuant to restricted stock grants and up to 334,970 shares of common stock pursuant to the exercise of options.

In May 2022, shareholders approved the Company’s 2022 Equity Incentive Plan, which authorizes the issuance of up to 148,060 shares of common stock pursuant to restricted stock grants and up to 370,150 shares of common stock pursuant to the exercise of options.

A Black-Scholes model is utilized to estimate the fair value of stock option grants, while the market price of the Company’s stock at the date of grant is used to estimate the fair value of restricted stock awards.

A summary of the Company’s stock option activity is summarized below.

Stock Options

 

Option Shares Outstanding

 

 

Weighted Average Exercise Price

 

 

Weighted Average Remaining Life (Years)

 

 

Aggregate Intrinsic Value (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Outstanding - December 31, 2023

 

 

640,766

 

 

 

12.58

 

 

 

7.75

 

 

 

1,419

 

 Outstanding - March 31, 2024

 

 

640,766

 

 

 

12.58

 

 

 

7.51

 

 

 

2,476

 

 Exercisable - March 31, 2024

 

 

236,905

 

 

 

10.98

 

 

 

6.28

 

 

 

1,294

 

 

 

 

Intrinsic value represents the amount by which the fair market value of the underlying stock exceeds the exercise price of the stock options. A summary of the Company’s restricted stock activity is summarized below.

Restricted Stock

 

 

 

 

 

Restricted Shares Outstanding

 

 

Weighted Average Grant Date Fair Value

 

 

 

 

 

 

 

 

 

 

 

 

 Outstanding - December 31, 2023

 

 

 

 

 

 

166,591

 

 

 

13.46

 

 Vested

 

 

 

 

 

 

(3,467

)

 

 

 

 Outstanding - March 31, 2024

 

 

 

 

 

 

163,124

 

 

 

13.44

 

 

17


AFFINITY BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

 

 

 

The Company recognized approximately $349,000 and $260,000, of stock-based compensation expense during the three months ended March 31, 2024 and 2023 respectively, associated with its common stock awards granted to directors and officers.

 

As of March 31, 2024, there was approximately $3.4 million of unrecognized compensation cost related to equity award grants. The cost is expected to be recognized over the weighted average remaining vesting period of approximately 2.24 years.

(9) Fair Value Measurements and Disclosures

The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. From time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as collateral dependent loans and other real estate owned. These nonrecurring fair value adjustments typically involve application of the lower of cost or market accounting or write-downs of individual assets. Additionally, the Company is required to disclose, but not record, the fair value of other financial instruments.

Fair Value Hierarchy

The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets.

Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

Following are descriptions of valuation methodologies used for assets and liabilities recorded at fair value.

Cash and Cash Equivalents

The carrying value of cash and cash equivalents is a reasonable estimate of fair value.

Investment Securities Available-for-Sale

Available-for-sale securities are recorded at market value. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, and U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter market funds. Level 2 securities include mortgage-backed securities issued by government sponsored enterprises and state, county and municipal bonds. Securities classified as Level 3 include asset-backed securities in less liquid markets.

 

Other Investments

The carrying value of other investments includes FHLB stock and First National Bankers Bank stock and approximates fair value.

Loans

The Company does not record loans at fair value on a recurring basis, unless a loan is considered collateral dependent and a specific reserve may be required to be established within the allowance for credit losses. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered individually evaluated. Once a loan is identified as collateral dependent, management measures impairment in accordance with GAAP. The fair value of collateral dependent loans is estimated using one of three methods, including

18


AFFINITY BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

 

collateral value, market value of similar debt, and discounted cash flows. Those collateral dependent loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceeds the recorded investments in such loans. In accordance with GAAP, collateral dependent loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price, the Company records the collateral dependent loan as nonrecurring Level 2. When an appraised value is used or an appraisal is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the collateral dependent loan as nonrecurring Level 3. For disclosure purposes, the fair value of fixed rate loans which are not considered collateral dependent is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings. For non collateral dependent variable rate loans, the carrying amount is a reasonable estimate of fair value for disclosure purposes.

Other Real Estate Owned

Other real estate owned properties are adjusted to fair value upon transfer of the loans to other real estate. Subsequently, other real estate assets are carried at fair value less estimated selling costs. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price, the Bank records the other real estate as nonrecurring Level 2. When an appraised value is used or an appraisal is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Bank records the other real estate asset as nonrecurring Level 3.

Deposits

The fair value of savings accounts, interest bearing checking accounts, non-interest bearing checking accounts and market rate checking accounts is the amount payable on demand at the reporting date, while the fair value of fixed maturity certificates of deposit is estimated by discounting the future cash flows using current rates at which comparable certificates would be issued.

FHLB Advances and Other Borrowings

FHLB advances are carried at cost and the fair value is obtained from the Federal Home Loan Bank of Atlanta. Federal Funds
Purchased are carried at cost and because they are overnight funds, the carrying value is a reasonable estimate of fair value.

Commitments to Extend Credit

Commitments to extend credit are short-term and, therefore, the carrying value and the fair value are considered immaterial for disclosure.

Assets Recorded at Fair Value on a Recurring Basis

The Company’s only assets recorded at fair value on a recurring basis are available-for-sale securities that had fair values of approximately $48.2 million and $48.6 million at March 31, 2024 and December 31, 2023. They are classified as Level 2.

Assets Recorded at Fair Value on a Nonrecurring Basis

The Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost

19


AFFINITY BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

 

at the end of the period. Assets measured at fair value on a nonrecurring basis are included in the table below as of March 31, 2024 and December 31, 2023 (in thousands).

 

March 31, 2024

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Other real estate owned

 

$

 

 

$

 

 

$

2,850

 

 

$

2,850

 

Collateral dependent loans

 

 

 

 

 

 

 

 

1,281

 

 

 

1,281

 

Total assets at fair value

 

$

 

 

$

 

 

$

4,131

 

 

$

4,131

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Other real estate owned

 

$

 

 

$

 

 

$

2,850

 

 

$

2,850

 

Collateral dependent loans

 

 

 

 

 

 

 

 

1,440

 

 

 

1,440

 

Total assets at fair value

 

$

 

 

$

 

 

$

4,290

 

 

$

4,290

 

 

The carrying amounts and estimated fair values (in thousands) of the Company’s financial instruments at March 31, 2024 and December 31, 2023 are as follows:

 

 

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

 

Carrying

 

 

Estimated

 

 

Carrying

 

 

Estimated

 

 

 

 

Amount

 

 

Fair Value

 

 

Amount

 

 

Fair Value

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

Level 1

 

$

61,395

 

 

$

61,395

 

 

$

50,025

 

 

$

50,025

 

Investment securities available-for-sale

Level 2

 

 

48,239

 

 

 

48,239

 

 

 

48,561

 

 

 

48,561

 

Investment securities held-to-maturity

Level 2

 

 

34,230

 

 

 

33,873

 

 

 

34,206

 

 

 

33,835

 

Other investments

Level 3

 

 

5,480

 

 

 

5,480

 

 

 

5,434

 

 

 

5,434

 

Loans, net

Level 3

 

 

665,903

 

 

 

646,136

 

 

 

650,955

 

 

 

635,957

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

Level 2

 

 

687,444

 

 

 

685,322

 

 

 

674,443

 

 

 

673,854

 

FHLB advances and other borrowings

Level 3

 

 

51,837

 

 

 

51,515

 

 

 

40,000

 

 

 

39,830

 

 

Limitations

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on many judgments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial instruments include deferred income taxes and premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

 

 

20


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

Management’s discussion and analysis of financial condition and results of operations at March 31, 2024 and December 31, 2023 and for the three months ended March 31, 2024 and 2023 is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited consolidated financial statements and the notes thereto appearing in Part I, Item 1, of this Quarterly Report on Form 10-Q.

Cautionary Note Regarding Forward-Looking Statements

This report contains forward-looking statements, which 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. These forward-looking statements include, but are not limited to:

statements of our goals, intentions and expectations;
statements regarding our business plans, prospects, growth and operating strategies;
statements regarding the quality of our loan and investment portfolios; and
estimates of our risks and future costs and benefits.

These 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.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

general economic conditions, either nationally or in our market areas, that are worse than expected;
changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses;
our ability to access cost-effective funding;
changes in liquidity, including the size and composition of our deposit portfolio and the percentage of uninsured deposits in the portfolio;
fluctuations in real estate values and both residential and commercial real estate market conditions;
demand for loans and deposits in our market area;
our ability to implement and change our business strategies;
competition among depository and other financial institutions, including with respect to service charges and fees;
inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make;
adverse changes in the securities or secondary mortgage markets;
changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;
changes in tax laws;
changes in the quality or composition of our loan or investment portfolios;
technological changes that may be more difficult or expensive than expected;
failure or breaches of our IT security systems;
the inability of third-party providers to perform as expected;

21


 

our ability to manage market risk, credit risk and operational risk in the current economic environment;
our ability to introduce new products and services, enter new markets successfully and capitalize on growth opportunities;
our ability to successfully integrate into our operations any assets, liabilities, customers, systems and management personnel we may acquire and our ability to realize related revenue synergies and cost savings within expected time frames, and any goodwill charges related thereto;
changes in consumer spending, borrowing and savings habits;
changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;
our ability to retain key employees;
the effects of global or national war, conflict or acts of terrorism;
changes in the value of our goodwill or other intangible assets;
risks related to the COVID-19 pandemic or any other pandemic;
the effects of any Federal government shutdown;
our compensation expense associated with equity allocated or awarded to our employees; and
changes in the financial condition, results of operations or future prospects of issuers of securities that we own.

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.

Summary of Significant Accounting Policies

A summary of our accounting policies is described in Note 1 of the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. There have been no material changes to our significant accounting policies as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Comparison of Financial Condition at March 31, 2024 and December 31, 2023

Total assets increased $26.3 million, or 3.1%, to $869.5 million at March 31, 2024 from $843.3 million at December 31, 2023, due primarily to an increase in cash and cash equivalents as well as an increase in loans.

Cash and cash equivalents increased $11.4 million, or 22.7%, to $61.4 million at March 31, 2024 from $50.0 million at December 31, 2023 primarily due to cash received from an increase in deposits as well as an increase in Federal Reserve borrowings to enhance our levels of liquidity.

Gross loans increased $14.6 million, or 2.2%, to $674.5 million at March 31, 2024 from $659.9 million at December 31, 2023. Construction loans increased $7.6 million, or 16.0%, to $55.3 million at March 31, 2024 from $47.7 million at December 31, 2023. Owner-occupied commercial real estate loans increased $4.9 million, or 3.1%, while commercial and industrial loans increased $2.1 million, or 1.5% and non-owner-occupied commercial real estate loans increased $510,000 or 0.4%. We experienced decreases in residential mortgages of $517,000 and in consumer installment loans of $27,000.

22


 

Total deposits increased $13.0 million, or 1.9%, to $687.4 million at March 31, 2024 from $674.4 million at December 31, 2023, reflecting an increase in demand deposits and money market accounts. Non-interest bearing deposits increased $9.9 million, or 6.4%, as a result of our business customers' cyclical demands at year-end. Our certificates of deposits include brokered deposits at March 31, 2024, totaling $107.4 million,which had an average life of 28 months and an average interest rate of 4.65%. The loan-to-deposit ratio at March 31, 2024 was 98.1%, as compared to 97.8% at December 31, 2023.

We had $40.0 million of FHLB advances and $11.8 million in other borrowings at March 31, 2024, and $40.0 million of FHLB advances at December 31, 2023. During the first quarter of 2024, we borrowed $11.8 million in funds through the Federal Reserve Bank Term Funding Program.

Stockholders’ equity increased by $1.8 million, or 1.5% to $123.3 million at March 31, 2024 compared to $121.5 million at December 31, 2023, primarily due to net income of $1.3 million during the first quarter of 2024, and stock compensation expense of $349,000.

23


 

Average Balance Sheets

The following table sets forth average balance sheets, average annualized yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are monthly average balances. Non-accrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense.

 

 

 

For the Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

 

 

Average
Outstanding
Balance

 

 

Interest

 

 

Average
Yield/Rate

 

 

Average
Outstanding
Balance

 

 

Interest

 

 

Average
Yield/Rate

 

 

 

(Dollars in thousands)

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

$

664,660

 

 

$

9,499

 

 

 

5.75

%

 

$

651,750

 

 

$

8,291

 

 

 

5.16

%

Investment securities held-to-maturity

 

 

34,213

 

 

 

528

 

 

 

6.21

%

 

 

32,898

 

 

 

503

 

 

 

6.20

%

Investment securities available-for-sale

 

 

48,169

 

 

 

463

 

 

 

3.87

%

 

 

48,844

 

 

 

411

 

 

 

3.41

%

Interest-earning deposits and federal funds

 

 

50,083

 

 

 

647

 

 

 

5.20

%

 

 

45,758

 

 

 

488

 

 

 

4.32

%

Other investments

 

 

5,447

 

 

 

84

 

 

 

6.20

%

 

 

2,643

 

 

 

35

 

 

 

5.39

%

Total interest-earning assets

 

 

802,572

 

 

 

11,221

 

 

 

5.62

%

 

 

781,893

 

 

 

9,728

 

 

 

5.05

%

Non-interest-earning assets

 

 

52,145

 

 

 

 

 

 

 

 

 

51,044

 

 

 

 

 

 

 

Total assets

 

$

854,717

 

 

 

 

 

 

 

 

$

832,937

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing checking accounts

 

$

88,057

 

 

$

103

 

 

 

0.47

%

 

$

91,856

 

 

$

45

 

 

 

0.20

%

Money market accounts

 

 

140,600

 

 

 

1,086

 

 

 

3.11

%

 

 

139,495

 

 

 

661

 

 

 

1.92

%

Savings accounts

 

 

74,412

 

 

 

528

 

 

 

2.85

%

 

 

95,897

 

 

 

552

 

 

 

2.34

%

Certificates of deposit

 

 

219,806

 

 

 

2,285

 

 

 

4.18

%

 

 

149,058

 

 

 

1,056

 

 

 

2.87

%

Total interest-bearing deposits

 

 

522,875

 

 

 

4,002

 

 

 

3.08

%

 

 

476,306

 

 

 

2,314

 

 

 

1.97

%

FHLB advances and other borrowings

 

 

52,615

 

 

 

470

 

 

 

3.59

%

 

 

46,723

 

 

 

516

 

 

 

4.48

%

Total interest-bearing liabilities

 

 

575,490

 

 

 

4,472

 

 

 

3.13

%

 

 

523,029

 

 

 

2,830

 

 

 

2.19

%

Non-interest-bearing liabilities

 

 

156,697

 

 

 

 

 

 

 

 

 

191,659

 

 

 

 

 

 

 

Total liabilities

 

 

732,187

 

 

 

 

 

 

 

 

 

714,688

 

 

 

 

 

 

 

Total stockholders' equity

 

 

122,530

 

 

 

 

 

 

 

 

 

118,249

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

 

$

854,717

 

 

 

 

 

 

 

 

$

832,937

 

 

 

 

 

 

 

Net interest rate spread

 

 

 

 

 

 

 

 

2.49

%

 

 

 

 

 

 

 

 

2.86

%

Net interest income

 

 

 

 

$

6,749

 

 

 

 

 

 

 

 

$

6,898

 

 

 

 

Net interest margin

 

 

 

 

 

 

 

 

3.38

%

 

 

 

 

 

 

 

 

3.58

%

 

 

 

Rate/Volume Analysis

The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume.

 

 

 

24


 

 

Three Months Ended March 31,
2024 vs. 2023

 

 

Increase (Decrease) Due to

 

 

Total

 

 

 

 

 

 

 

 

Increase

 

 

Volume

 

 

Rate

 

 

(Decrease)

 

 

(In thousands)

 

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

 

 

Loans

$

927

 

 

$

281

 

 

$

1,208

 

Investment securities held-to-maturity

 

25

 

 

 

 

 

 

25

 

Investment securities available-for-sale

 

(292

)

 

 

344

 

 

 

52

 

Interest-earning deposits and federal funds

 

144

 

 

 

15

 

 

 

159

 

Other investments

 

48

 

 

 

1

 

 

 

49

 

Total interest-earning assets

 

852

 

 

 

641

 

 

 

1,493

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

Interest-bearing checking accounts

 

(396

)

 

 

454

 

 

 

58

 

Market rate checking accounts

 

169

 

 

 

256

 

 

 

425

 

Savings accounts

 

(769

)

 

 

745

 

 

 

(24

)

Certificates of deposit

 

1,181

 

 

 

48

 

 

 

1,229

 

Total interest-bearing deposits

 

185

 

 

 

1,503

 

 

 

1,688

 

FHLB advances and other borrowings

 

821

 

 

 

(867

)

 

 

(46

)

Total interest-bearing liabilities

 

1,006

 

 

 

636

 

 

 

1,642

 

 

 

 

 

 

 

 

 

 

Change in net interest income

$

(154

)

 

$

5

 

 

$

(149

)

 

 

 

 

 

 

 

 

 

 

Comparison of Operating Results for the Three Months Ended March 31, 2024 and 2023

General. Net income was $1.3 million for the three months ended March 31, 2024, compared to $1.7 million for the three months ended March 31, 2023. The decrease was caused by an increase in interest expense, offset partially by an increase in interest income.

Interest Income. Interest income increased $1.5 million, or 15.3%, to $11.2 million for the three months ended March 31, 2024 from $9.7 million for the three months ended March 31, 2023. The increase was due to increases in all categories of interest-earning assets. Interest income on loans increased $1.2 million, or 14.6%, to $9.5 million for the three months ended March 31, 2024 from $8.3 million for the three months ended March 31, 2023. The average yield on loans increased 59 basis points to 5.75% for the current quarter, as compared to 5.16% for the prior year period, due to the continued changes in the interest rate environment. In addition, our average balance of loans increased by $12.9 million, or 2.0%, to $664.7 million for the three months ended March 31, 2024 from $651.8 million for the three months ended March 31, 2023. The average balance of loans increased due to steady loan demand.

Interest income on interest-earning deposits and federal funds increased $159,000 to $647,000 for the three months ended March 31, 2024 from $488,000 for the three months ended March 31, 2023. The average balance of interest-earning deposits and federal funds increased $4.3 million to $50.1 million for the three months ended March 31, 2024 compared to $45.8 million for the three months ended March 31, 2023, as we held excess cash to increase liquidity, as described above. In addition, the yields we received on these funds increased to 5.20% from 4.32% due to the continued changes in the interest rate environment.

Interest income on available-for-sale and held-to-maturity securities increased $77,000 to $991,000 for the three months ended March 31, 2024 from $914,000 for the three months ended March 31, 2023.

25


 

 

Interest Expense. Interest expense increased $1.6 million to $4.5 million for the three months ended March 31, 2024, compared to $2.8 million for the three months ended March 31, 2023, due to increases in the average balances of interest-bearing liabilities as well as the rates paid on such liabilities.

 

We recognized increases in all categories of interest-bearing liabilities. Interest expense on deposits increased $1.7 million to $4.0 million for the three months ended March 31, 2024 from $2.3 million for the three months ended March 31, 2023. The largest increase was in interest expense on certificates of deposit, which increased $1.2 million to $2.3 million for the three months ended March 31, 2024. The average rate we paid on certificates of deposit increased 131 basis points to 4.18% for the three months ended March 31, 2024 from 2.87% for the three months ended March 31, 2023, due to the continued changes in the interest rate environment and the average balance increase of $70.7 million to $219.8 million for the three months ended March 31, 2024 from $149.1 million for the three months ended March 31, 2023. We also experienced increases of $425,000 in interest expense on money market accounts, due to increases in the rates we paid on these accounts of 119 basis points.

 

Interest expense on borrowings decreased to $470,000 for the three months ended March 31, 2024 from $516,000 for the three months ended March 31, 2023, due to short term funding needs for the three months ended March 31, 2023.

Net Interest Income. Net interest income decreased $149,000, or 2.2%, to $6.7 million for the three months ended March 31, 2024 compared to $6.9 million for the three months ended March 31, 2023. Our net interest rate spread decreased to 2.49% for the three months ended March 31, 2024 from 2.86% for the three months ended March 31, 2023, and our net interest margin decreased to 3.38% for the three months ended March 31, 2024 from 3.58% for the three months ended March 31, 2023 as the rates we paid on interest-bearing liabilities increased faster than the yields we earned on our interest-earning assets. Our average net interest-earning assets decreased to $227.1 million for the three months ended March 31, 2024 compared to $258.9 million for the three months ended March 31, 2023.

Provision for Credit Losses. The provisions for credit losses consists of provisions for credit losses for loans and unfunded loan commitments, as well as held-to-maturity securities.

Provisions for credit losses for loans are charged to operations to establish an allowance for credit losses at a level necessary to absorb known and inherent losses in our loan portfolio that are both probable and reasonably estimable at the date of the consolidated financial statements. In evaluating the level of the allowance for credit losses for loans, management analyzes several qualitative loan portfolio risk factors including, but not limited to, management’s ongoing review and grading of loans, facts and issues related to specific loans, historical loan loss and delinquency experience, trends in past due and non-accrual loans, existing risk characteristics of specific loans or loan pools, the fair value of underlying collateral, current economic conditions and other qualitative and quantitative factors which could affect potential credit losses.

Provisions for credit losses for unfunded commitments are charged to operations to establish an allowance for credit losses for contractual obligations to extend credit. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The estimate is influenced by historical loss experience, adjusted for current risk characteristics, and economic factors.

Provisions for credit losses for held-to-maturity securities are also charged to operations to establish an allowance on a collective basis by major security type. The estimate of expected credit losses for held-to-maturity securities considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

After an evaluation of these factors, we recorded no provision for credit losses for the three months ended March 31, 2024, compared to a provision of $7,000 for the three months ended March 31, 2023. Our allowance for credit losses was $8.6 million at March 31, 2024, and $8.9 million at December 31, 2023 . The allowance for credit losses to total loans was 1.27% at March 31, 2024 compared to 1.35% at December 31, 2023. The allowance for credit losses to non-performing loans was 120.0% at March 31, 2024 compared to 120.1% at December 31, 2023. Net charge-offs were $326,000 for the three months ended March 31, 2024, compared to net loan chargeoffs of $91,000 for the three months ended March 31, 2023.

To the best of our knowledge, we have recorded all credit losses that are both probable and reasonable to estimate at March 31, 2024. However, future changes in the factors described above, including, but not limited to, actual loss experience with respect to our loan portfolio, could result in material increases in our provision for credit losses. In addition, the Office of the Comptroller of the Currency, as an integral part of its examination process, periodically reviews our allowance for credit losses, and as a result of such reviews, we may have to adjust our allowance for credit losses. However, regulatory agencies are not directly involved in the process

26


 

of establishing the allowance for credit losses as the process is our responsibility and any increase or decrease in the allowance is the responsibility of management.

Non-interest Income. Non-interest income increased $32,000, or 5.8%, to $584,000 for the three months ended March 31, 2024 from $552,000. There were no material changes in any categories of non-interest income.

Non-interest Expenses. Non-interest expenses information is as follows.

 

 

 

Three Months Ended March 31,

 

 

Change

 

 

 

2024

 

 

2023

 

 

Amount

 

 

Percent

 

 

 

(Dollars in thousands)

 

Salaries and employee benefits

 

$

3,179

 

 

$

3,004

 

 

$

175

 

 

 

5.8

%

Occupancy

 

 

618

 

 

 

644

 

 

 

(26

)

 

 

(4.0

)%

Data processing

 

 

511

 

 

 

493

 

 

 

18

 

 

 

3.7

%

Other

 

 

1,262

 

 

 

1,053

 

 

 

209

 

 

 

19.8

%

Total non-interest expenses

 

$

5,570

 

 

$

5,194

 

 

$

376

 

 

 

7.2

%

 

Salaries and employee benefits expense increased related to stock compensation for restricted stock and stock options that were issued in 2023. Other expenses increased $209,000 related to increases in professional fees and FDIC insurance premiums.

 

Income Tax Expense. We recorded income tax expense of $428,000 for the three months ended March 31, 2024 compared to $527,000 for the three months ended March 31, 2023. The effective tax rate was 24.3% and 23.4% for the respective periods.

 

Management of Market Risk

General. Our most significant form of market risk is interest rate risk because, as a financial institution, the majority of our assets and liabilities are sensitive to changes in interest rates. Therefore, a principal part of our operations is to manage interest rate risk and limit the exposure of our financial condition and results of operations to changes in market interest rates. Our Asset/Liability Management Committee is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the policy and guidelines approved by our board of directors. We currently utilize a third-party modeling program, prepared on a quarterly basis, to evaluate our sensitivity to changing interest rates, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors.

We have sought to manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates. We have implemented the following strategies to manage our interest rate risk:

limiting our reliance on non-core/wholesale funding sources;
growing our volume of transaction deposit accounts;
increasing our investment securities portfolio, with an average maturity of less than 15 years;
diversifying our loan portfolio by adding more commercial-related loans and consumer loans, which typically have shorter maturities and/or balloon payments; and
continuing to price our one-to-four family residential real estate loan products in a way that encourages borrowers to select our balloon loans as opposed to longer-term, fixed-rate loans.

By following these strategies, we believe that we are better positioned to react to increases in market interest rates. In addition, we originate adjustable-rate, one-to-four-family residential real estate loans and home equity loans and lines of credit.

27


 

We do not engage in hedging activities, such as engaging in futures, options or swap transactions, or investing in high-risk mortgage derivatives, such as collateralized mortgage obligation residual interests, real estate mortgage investment conduit residual interests or stripped mortgage-backed securities.

Net Interest Income. We analyze our sensitivity to changes in interest rates through a net interest income model. Net interest income is the difference between the interest income we earn on our interest-earning assets, such as loans and securities, and the interest we pay on our interest-bearing liabilities, such as deposits and borrowings. We estimate what our net interest income would be for a 12-month period. We then calculate what the net interest income would be for the same period under the assumptions that the United States Treasury yield curve increases or decreases instantaneously by 200 and 400 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve. A basis point equals one-hundredth of one percent, and 100 basis points equals one percent. An increase in interest rates from 3% to 4% would mean, for example, a 100 basis point increase in the “Change in Interest Rates” column below.

The table below sets forth, as of March 31, 2024, the calculation of the estimated changes in our net interest income that would result from the designated immediate changes in the United States Treasury yield curve.

 

Change in Interest Rates
(basis points) (1)

 

Net Interest Income
Year 1 Forecast

 

 

Year 1 Change
from Level

 

 

 

(Dollars in thousands)

 

 

 

 

+400

 

$

31,385

 

 

 

0.64

%

+200

 

 

31,395

 

 

 

0.68

%

Level

 

 

31,184

 

 

 

-200

 

 

29,951

 

 

 

(3.95

)%

-400

 

 

27,392

 

 

 

(12.16

)%

 

(1) Assumes an immediate uniform change in interest rates at all maturities.

The table above indicates that at March 31, 2024, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would have experienced a 0.68% increase in net interest income, and in the event of an instantaneous 200 basis point decrease in interest rates, we would have experienced a 3.95% decrease in net interest income. At March 31, 2023, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would have experienced a 3.71% increase in net interest income, and in the event of an instantaneous 200 basis point decrease in interest rates, we would have experienced a 8.82% decrease in net interest income.

Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurement. Modeling changes require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the net interest income table presented assumes that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the net interest income table provides an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on net interest income and will differ from actual results. Furthermore, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Additionally, certain assets, such as adjustable-rate loans, have features that restrict changes in interest rates both on a short-term basis and over the life of the asset.

Interest rate risk calculations also may not reflect the fair values of financial instruments. For example, decreases in market interest rates can increase the fair values of our loans, deposits and borrowings.

28


 

Liquidity and Capital Resources

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from the sale of loans, and proceeds from maturities of securities. We also have the ability to borrow from the Federal Home Loan Bank of Atlanta. At March 31, 2024, we had a $219.2 million line of credit with the Federal Home Loan Bank of Atlanta, with advances of $40.0 million outstanding and a $12.5 million letter of credit outstanding, and we had a $5.0 million unsecured federal funds line of credit, a $7.5 million unsecured federal funds line of credit, and a $20.0 million unsecured federal funds line of credit. We also have a line of $76.8 million with the Federal Reserve Bank secured by $101.9 million in loans and investment securities. At March 31, 2024, we had $11.8 million outstanding under the Federal Reserve Bank Term Funding Program.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and short-term investments including interest-bearing demand deposits. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities was $1.2 million for the three months ended March 31, 2024, compared to $2.0 million for the three months ended March 31, 2023. Net cash used in investing activities was $14.7 million for the three months ended March 31, 2024, compared to $29.2 million for the three months ended March 31, 2023. Net cash used in investing activities typically consists primarily of disbursements for loan originations and purchases of investment securities. Net cash provided by financing activities, which consists primarily of activity in deposit accounts and proceeds/repayments of FHLB advances, and a stock repurchase program, was $24.8 million for the three months ended March 31, 2024 which included borrowing $11.8 million from the Federal Reserve Bank compared to net cash provided by financing activities of $137.8 million for the three months ended March 31, 2023,which included repaying $20.0 million of FHLB borrowings, borrowing $65.0 million in FHLB advances and repurchasing stock of $867,000.

We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained.

At March 31, 2024, we exceeded all of our regulatory capital requirements and the Bank was categorized as “well capitalized.” Management is not aware of any conditions or events since the most recent notification that would change our category. The Bank’s actual capital amounts and ratios for March 31, 2024 and December 31, 2023 are presented in the table below (in thousands).

 

 

 

 

 

 

 

 

 

For Capital

 

 

To Be Well Capitalized

 

 

 

 

 

 

 

 

 

Adequacy

 

 

Under Prompt Corrective

 

 

 

Actual

 

 

Purposes

 

 

Action Provisions

 

 

 

Amount

 

 

Ratio

 

 

Amount

 

 

Ratio

 

 

Amount

 

 

Ratio

 

As of March 31, 2024:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Equity Tier 1 (to Risk Weighted Assets)

 

$

97,306

 

 

 

12.50

%

 

$

35,030

 

 

 

4.50

%

 

$

50,599

 

 

 

6.50

%

Total Capital (to Risk Weighted Assets)

 

 

106,500

 

 

 

13.68

%

 

 

62,281

 

 

 

8.00

%

 

 

77,851

 

 

 

10.00

%

Tier I Capital (to Risk Weighted Assets)

 

 

97,306

 

 

 

12.50

%

 

 

46,707

 

 

 

6.00

%

 

 

62,281

 

 

 

8.00

%

Tier I Capital (to Average Assets)

 

 

97,306

 

 

 

11.53

%

 

 

33,758

 

 

 

4.00

%

 

 

42,197

 

 

 

5.00

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2023:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Equity Tier 1 (to Risk Weighted Assets)

 

$

95,335

 

 

 

12.41

%

 

$

34,570

 

 

 

4.50

%

 

$

49,934

 

 

 

6.50

%

Total Capital (to Risk Weighted Assets)

 

 

104,858

 

 

 

13.65

%

 

 

61,455

 

 

 

8.00

%

 

 

76,819

 

 

 

10.00

%

Tier I Capital (to Risk Weighted Assets)

 

 

95,335

 

 

 

12.41

%

 

 

46,093

 

 

 

6.00

%

 

 

61,455

 

 

 

8.00

%

Tier I Capital (to Average Assets)

 

 

95,335

 

 

 

11.27

%

 

 

33,837

 

 

 

4.00

%

 

 

42,296

 

 

 

5.00

%

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. At March 31, 2024, we had outstanding

29


 

commitments to originate loans of $75.5 million. We anticipate that we will have sufficient funds available to meet our current lending commitments. Time deposits that are scheduled to mature in less than one year from March 31, 2024 totaled $81.5 million. Management expects that a substantial portion of the maturing time deposits will be renewed. However, if a substantial portion of these deposits is not retained, we may utilize FHLB advances or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.

Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include data processing services, operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information required by this item is included in Part 1, Item 2 of this quarterly report under “Management of Market Risk.”

Item 4. Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of March 31, 2024. Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective.

During the quarter ended March 31, 2024, there have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

30


 

PART II – OTHER INFORMATION

We are not involved in any pending legal proceedings as a defendant other than routine legal proceedings occurring in the ordinary course of business. At March 31, 2024, we were not involved in any legal proceedings the outcome of which would be material to our financial condition or results of operations.

Item 1A. Risk Factors

Not applicable for smaller reporting companies.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

 

Item 6. Exhibits

 

Exhibit

Number

Description

3.1

Charter of Affinity Bancshares, Inc. (1)

3.2

Bylaws of Affinity Bancshares, Inc. (2)

 

 

 

3.3

 

Amendment to Bylaws of Affinity Bancshares, Inc. (3)

 

31.1

 

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

31.2

 

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

32

 

Written Statement of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

101.0

The following materials for the quarter ended September 30, 2023, formatted in inline XBRL (Extensible Business Reporting Language): (i) Balance Sheets, (ii) Statements of Income, (iii) Statements of Comprehensive (Loss) Income, (iv) Statements of Changes in Stockholders’ Equity, (v) Statements of Cash Flows, and (vi) Notes to Financial Statements

 

 

 

104.0

 

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

 

(1) Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1, as amended (Commission File No. 333-215041).

(2) Incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1, as amended (Commission File No. 333-215041).

(3) Incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on May 31, 2017 (Commission File No. 001-38074).

 

 

31


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

 

 

 

AFFINITY BANCSHARES, INC.

 

 

 

 

 

 

Date:

 

May 9, 2024

 

 

/s/ Edward J. Cooney

 

 

 

 

 

Edward J. Cooney

 

 

 

 

 

President and Chief Executive Officer

 

 

 

 

 

 

Date:

 

May 9, 2024

 

 

/s/ Brandi Pajot

 

 

 

 

 

Brandi Pajot

 

 

 

 

 

Senior Vice President and Chief Financial Officer

 

32