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Affinity Bancshares, Inc. (AFBI)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 delivered stable bottom-line growth: net income $1.73M and diluted EPS $0.26, up year-over-year vs $1.62M and $0.25 in Q3 2023, driven by higher loan yields despite rising funding costs .
  • Net interest income rose to $7.41M and NIM to 3.52% YoY (from $6.90M and 3.36%); sequentially, NIM compressed vs Q2 (3.71%) as cost of funds increased to 2.58% and borrowings rose to $58.8M .
  • Expenses climbed on merger-related professional fees and higher compensation; efficiency ratio improved sequentially to 71.48% from 78.74% in Q2, reflecting revenue strength and cost control despite deal costs .
  • Asset quality mixed: coverage strengthened vs year-end (ACL/NPL 172.4% vs 120.1%), but non-performing loans increased sequentially to $4.9M from $3.0M in Q2; YTD net charge-offs rose to $523k vs $114k prior-year period .
  • Wall Street consensus estimates for Q3 2024 (EPS, revenue) were unavailable via S&P Global at time of retrieval; no beat/miss assessment provided (values not available via S&P Global).

What Went Well and What Went Wrong

What Went Well

  • Net interest income increased YoY to $7.41M and NIM to 3.52%, as earning asset yields outpaced deposit and borrowing cost increases .
  • Demand deposit mix improved (net +$16.5M YTD), helping reduce certificates of deposit (-$7.1M YTD) and support liquidity while holding uninsured deposits to ~15.2% of total .
  • Coverage of problem loans strengthened: ACL/NPL improved to 172.4% vs 120.1% at year-end, signaling enhanced loss absorption capacity .

What Went Wrong

  • Sequential margin compression (NIM 3.52% vs 3.71% in Q2) as cost of funds rose to 2.58% and borrowing needs increased, pressuring spread .
  • Noninterest expense rose to $5.70M, with professional fees tied to the proposed merger with Atlanta Postal Credit Union and higher salaries/benefits, diluting operating leverage .
  • Asset quality softened sequentially: non-performing loans increased to $4.9M vs $3.0M in Q2; YTD net charge-offs rose to $523k vs $114k in the prior-year YTD, warranting monitoring of credit trends .

Financial Results

Quarterly P&L and Margin Trends

MetricQ1 2024Q2 2024Q3 2024
Net Income ($USD Thousands)$1,335 $1,031 $1,730
Diluted EPS ($USD)$0.20 $0.16 $0.26
Total Interest Income ($USD Thousands)$11,221 $12,222 $12,302
Net Interest Income ($USD Thousands)$6,749 $7,568 $7,414
Net Interest Margin %3.38% 3.71% 3.52%
Efficiency Ratio %75.96% 78.74% 71.48%
Noninterest Income ($USD Thousands)$584 $706 $566
Noninterest Expense ($USD Thousands)$5,570 $6,719 $5,704

YoY Comparison (Q3 2024 vs Q3 2023)

MetricQ3 2023Q3 2024
Net Income ($USD Thousands)$1,623 $1,730
Diluted EPS ($USD)$0.25 $0.26
Net Interest Income ($USD Thousands)$6,901 $7,414
Noninterest Income ($USD Thousands)$630 $566
Noninterest Expense ($USD Thousands)$5,406 $5,704
Net Interest Margin %3.36% 3.52%
Efficiency Ratio %71.78% 71.48%

Balance Sheet and Credit KPIs

MetricQ1 2024Q2 2024Q3 2024
Total Assets ($USD Thousands)$869,547 $872,558 $878,561
Gross Loans ($USD Thousands)$674,498 $692,591 $697,572
Total Deposits ($USD Thousands)$687,444 $689,712 $683,770
Borrowings ($USD Thousands)$51,837 $51,837 $58,815
Uninsured Deposits ($USD Millions)$107.1 $106.3 $103.7
ACL / Total Loans %1.27% 1.22% 1.20%
Non-Performing Loans ($USD Millions)$7.2 $3.0 $4.9
ACL / NPL Coverage %120.0% 282.0% 172.4%

Deposit Mix and Funding Cost

MetricQ1 2024Q2 2024Q3 2024
Demand Deposits / Total (%)37% 36% 36%
Cost of Funds %2.42% 2.47% 2.58%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
————Company did not provide formal financial guidance in Q3 2024 press materials

Earnings Call Themes & Trends

No Q3 2024 earnings call transcript was available; themes reflect press release commentary.

TopicPrevious Mentions (Q2, Q1)Current Period (Q3)Trend
Net Interest Margin dynamicsNIM rose to 3.71% in Q2 as asset yields outpaced funding costs ; Q1 at 3.38% amid higher deposit costs NIM 3.52%; asset yields higher but COF rising, margin compressed vs Q2 Moderating sequentially, still stronger YoY
Funding costs / deposit mixCOF 2.47% in Q2, demand mix improved (+$18.4M) ; COF 2.42% in Q1 COF 2.58%; demand deposits +$16.5M YTD, CDs down $7.1M COF pressure up; mix improving
Credit qualityNPLs fell to $3.0M in Q2, ACL/NPL 282% ; Q1 NPLs $7.2M, ACL/NPL 120% NPLs up to $4.9M; ACL/NPL 172% Sequential deterioration vs Q2, improved vs Q1
Merger-related costsProfessional fees elevated in Q2 tied to APCU merger Professional fees continued to elevate noninterest expense Ongoing deal-related expense headwind
Loan growth focusConstruction and commercial non-owner occupied properties drove growth in Q2 Continued loan demand in construction and non-owner occupied CRE Sustained loan growth

Management Commentary

  • “Net interest income was $7.4 million for the three months ended September 30, 2024… The increase was due to an increase in interest income on loans, partially offset by a rise in deposit and borrowing costs and a decrease in interest income on interest-earning deposits.”
  • “Non-interest expense increased $298,000 to $5.7 million… due to increases in professional fees related to our proposed merger with Atlanta Postal Credit Union and increases in salaries and employee benefits.”
  • “Deposits increased by $9.3 million… with a $16.5 million net increase in demand deposits partially offset by $7.1 million decrease in certificates of deposits.”
  • “Non-performing loans decreased to $4.9 million at September 30, 2024 from $7.4 million at December 31, 2023… The allowance for credit losses as a percentage of non-performing loans was 172.4%… Allowance… to total loans decreased to 1.20%.”

Q&A Highlights

No Q3 2024 earnings call transcript or Q&A was available in the company’s filings or materials reviewed; therefore, no analyst Q&A themes or guidance clarifications can be provided [Search: none returned; 19 docs listed with no transcript].

Estimates Context

  • S&P Global consensus estimates for Q3 2024 EPS and revenue were unavailable at time of retrieval due to API access limits; as such, beat/miss analysis vs Wall Street estimates cannot be assessed. Values would normally be retrieved from S&P Global.

Key Takeaways for Investors

  • Sequential NIM compression to 3.52% alongside rising cost of funds (2.58%) and higher borrowings indicates near-term spread pressure; monitor funding costs and liquidity posture as the APCU merger process advances .
  • YoY margin expansion and stronger NII confirm earnings resiliency from loan yields; sustaining demand deposit mix improvements helps mitigate CD repricing headwinds .
  • Expense discipline improved sequentially (efficiency 71.48% vs 78.74% in Q2), but professional fees tied to the merger remain an overhang; expect continued noninterest expense variability until closing .
  • Credit indicators mixed: ACL/NPL coverage remains robust, yet NPLs increased sequentially; focus on office/non-owner occupied CRE exposures given sector dynamics and watch charge-off trajectory (YTD $523k) .
  • Uninsured deposits trending lower (15.6% → 15.4% → 15.2%) reduce tail risk; continued growth in demand deposits (net +$16.5M YTD) is constructive for stability and cost .
  • Without consensus estimates, trading catalysts will center on merger updates, deposit mix/cost trends, and asset quality disclosures; a clean credit print and controlled fees likely support near-term sentiment .
  • Medium-term thesis: earnings leverage from loan growth within disciplined funding and improved coverage metrics; outcomes depend on execution through merger-related transition and maintaining deposit granularity .