Affinity Bancshares Reports Strong Loan Growth and Improved Asset Quality in 2024

Affinity Bancshares, Inc. (NASDAQ:AFBI) recently announced its financial results for the fourth quarter and full year of 2024, highlighting notable improvements in loan growth and asset quality. The company's strategic focus on loan growth and yield management has contributed to a strong net interest margin, while its conservative risk management approach has led to significant improvements in asset quality metrics.



Loan Growth and Net Interest Margin
Affinity Bancshares reported a notable increase in total gross loans, which grew by $54.2 million to $714.1 million. This growth reflects strong demand in various loan categories, particularly in construction and commercial sectors. The bank's conservative loan-to-value (LTV) ratio of 46.8% on office exposure provides a cushion against commercial real estate concerns, further supporting the bank's growth strategy.

The bank's net interest margin (NIM) improved to 3.54% in 2024, up from 3.35% in 2023. This improvement was driven by higher interest income on loans and investment securities, despite increased deposit and borrowing costs. The bank's proactive balance sheet management, including the sale of $10.4 million in low-yielding investment securities, has also contributed to the NIM improvement.



Asset Quality and Risk Management
Affinity Bancshares' asset quality has shown significant improvement, with non-performing loans (NPLs) decreasing to $4.8 million from $7.4 million in 2023. The allowance for credit losses as a percentage of non-performing loans strengthened to 177.9% from 120.1% year-over-year, indicating a more conservative and robust risk management approach. However, the increase in net charge-offs to $650,000 from $404,000 warrants monitoring, although still manageable at 0.09% of total loans.

The bank's conservative lending practices and proactive risk management strategies have contributed to the improvement in asset quality. By maintaining a strong allowance for credit losses and closely monitoring net charge-offs, Affinity Bancshares has demonstrated its commitment to managing risks effectively.

Efficiency Ratio and Funding Costs
While the bank's efficiency ratio deteriorated to 76.20% from 71.86% year-over-year, this is partly attributed to merger-related expenses. The slight deposit outflow of $1.0 million and increased reliance on borrowings ($18.8 million increase) suggest some pressure on funding costs that could impact future margins. However, the bank's strategic focus on loan growth and yield management has helped mitigate these challenges.

In conclusion, Affinity Bancshares' financial performance in 2024 reflects a complex picture of the bank's strategic positioning. While headline net income declined 15.6% year-over-year, the adjusted operating income showed improvement, indicating underlying business strength when excluding merger-related costs. The bank's strategic focus on loan growth and yield management, coupled with its conservative risk management approach, has contributed to a strong net interest margin and improved asset quality. As the bank continues to execute its strategic initiatives, it is well-positioned for potential future growth.