Affinity Bancshares, Inc.

Affinity Bancshares, Inc. (NASDAQ: AFBI) operates as a bank holding company primarily through its wholly-owned subsidiary, Affinity Bank, National Association. The company's business model centers on taking deposits from the general public and investing these funds, along with capital generated from operations, into various loan types including commercial real estate, commercial and industrial, and residential real estate loans, with a lesser focus on construction and land loans and consumer loans. Affinity Bank also maintains an investment portfolio primarily composed of mortgage-backed securities and obligations issued by U.S. government-sponsored enterprises and Federal Home Loan Bank stock. The company offers a range of deposit accounts, including checking, savings, and certificates of deposit, and has a unique virtual bank, FitnessBank, which provides higher interest rates based on customers meeting fitness goals. Affinity Bancshares, Inc. manages its operations as a single unit and does not report separate operating segments.

The company faces competition in its local market areas from large money center and regional banks, community banks, and credit unions for both loans and deposits. Additionally, it competes with savings institutions, mortgage banking firms, consumer finance companies, and, for deposits, with money market funds, brokerage firms, mutual funds, and insurance companies. As of June 30, 2025, Affinity Bancshares held a deposit market share of 19.99% in Newton County, ranking first among eight institutions, and 1.80% in Cobb County, ranking 13th among 25 institutions ⁴.

Affinity Bank's lending activities are diversified across several categories. As of December 31, 2025, the loan portfolio was composed of commercial real estate loans (owner-occupied) at $163.225 million ⁵, commercial real estate loans (non-owner occupied) at $176.580 million ⁶, commercial and industrial loans at $146.491 million ⁷, construction, land, and acquisition & development loans at $72.596 million ⁸, residential mortgage 1-4 family loans at $47.966 million ⁹, and consumer installment loans at $135.824 million ¹⁰. A significant specialization exists in lending to dentists and dental practices, with these loans totaling $194.1 million ¹¹, representing 26.1% ¹² of the total loan portfolio as of December 31, 2025. Of this dental loan amount, 62% consisted of commercial business loans and 38% were commercial real estate loans. The company's indirect automobile lending division, Affinity Bank Dealer Select, operates from Monroe, Georgia, and had $134.8 million ¹³ in indirect automobile loans as of December 31, 2025.

For the fiscal year ended December 31, 2025, Affinity Bancshares reported total assets of $881.7 million ¹⁴, an increase of 1.7% ¹⁵ from $866.8 million ¹⁶ at December 31, 2024. Net loans increased by $28.6 million ¹⁷, or 4.0% ¹⁸, to $733.688 million ¹⁹. Cash and cash equivalents rose by $12.4 million ²⁰, or 30.0% ²¹, to $53.850 million ²². Total deposits increased by $21.5 million ²³, or 3.2% ²⁴, to $695.005 million ²⁵. Stockholders' equity decreased by $2.1 million ²⁶, or 1.6% ²⁷, to $127.019 million ²⁸. Net income for the year ended December 31, 2025, was $8.332 million ²⁹, a 53.1% ³⁰ increase from $5.441 million ³¹ in the prior year. Basic earnings per share were $1.33 ³², and diluted earnings per share were $1.29 ³³. The allowance for credit losses stood at $8.994 million ³⁴ at year-end 2025, representing 1.21% ³⁵ of total loans.

Year-over-year, interest income increased by $3.0 million ³⁶, or 6.3% ³⁷, to $51.009 million ³⁸ in 2025, driven by a $3.5 million ³⁹ increase in interest income on loans. The average yield on loans increased by 15 basis points to 6.16% ⁴⁰. Interest expense increased by $1.1 million ⁴¹, or 5.7% ⁴², to $19.872 million ⁴³, primarily due to higher deposit costs. Net interest income before provision for credit losses increased by $2.0 million ⁴⁴, or 6.8% ⁴⁵, to $31.137 million ⁴⁶. The net interest margin improved to 3.59% ⁴⁷ from 3.54% ⁴⁸. The provision for credit losses decreased to $125,000 ⁴⁹ in 2025 from $438,000 ⁵⁰ in 2024. Noninterest income decreased by $91,000 ⁵¹, or 4.5% ⁵², to $1.924 million ⁵³, mainly due to a $136,000 ⁵⁴ decrease in service charges on deposit accounts. Noninterest expenses decreased by $2.1 million ⁵⁵, or 8.7% ⁵⁶, to $21.699 million ⁵⁷, primarily due to a reduction in other expenses, specifically merger-related expenses.

During the reported period, the company continued its strategic initiative to increase construction lending, resulting in a $5.0 million ⁵⁸, or 7.4% ⁵⁹, increase in construction loans to $72.596 million ⁶⁰. The growth in savings accounts, which increased by $20.9 million ⁶¹, or 27.5% ⁶², to $96.981 million ⁶³, is attributed to the opening of additional FitnessBank accounts, competitive rate adjustments, and increased advertisement of rates. The company also sold certain debt securities previously classified as held-to-maturity, which resulted in a reclassification of all remaining held-to-maturity securities totaling $7.6 million ⁶⁴ to available-for-sale in November 2025, due to the sale tainting the held-to-maturity classification.

Management's specific guidance for the upcoming period is not explicitly provided in the filing. However, the company's Asset/Liability Management Committee is responsible for evaluating and managing interest rate risk, aiming to minimize exposure of earnings and capital to changes in market interest rates. The company utilizes a third-party modeling program quarterly to assess sensitivity to changing interest rates.

The company has identified several growth areas and strategic initiatives. A key focus is on diversifying its loan portfolio by increasing commercial-related loans, which typically have shorter maturities and/or balloon payments. This is evidenced by the increase in construction loans by $5.0 million ⁵⁸, or 7.4% ⁵⁹, to $72.596 million ⁶⁰ at December 31, 2025, as part of a strategic initiative to diversify the loan portfolio. Another growth vector is the expansion of its transaction deposit accounts, which is supported by the growth in savings accounts by $20.9 million ⁶¹, or 27.5% ⁶², to $96.981 million ⁶³, attributed to the virtual bank, FitnessBank, and competitive rate adjustments. The company also aims to increase its investment securities portfolio, with an average maturity of less than 15 years, and to price one-to-four family residential real estate loan products to encourage adjustable-rate loans over longer-term, fixed-rate loans.

Regarding operational outlook, the company aims to manage its cost structure and improve efficiency. Noninterest expenses decreased by $2.1 million ⁵⁵, or 8.7% ⁵⁶, to $21.699 million ⁵⁷ for the year ended December 31, 2025, primarily due to a decrease in other expenses, specifically merger-related expenses. This suggests an ongoing focus on cost management. The company's cybersecurity risk management program, overseen by the Chief Operations Officer and the IT Committee, is designed around the National Institute of Standards and Technology (NIST) Cybersecurity Framework, regulatory guidance, and industry standards. This includes regular employee education and training, preparedness simulations, and recovery and resilience tests. The company also conducts regular assessments of its infrastructure, software systems, and network architecture using internal and third-party experts. A third-party risk management program is in place to manage cybersecurity risks associated with external service providers and the supply chain.

Planned capital allocation includes maintaining a strong liquidity position, with a target liquidity ratio of 12.0% ⁶⁵ or greater. At December 31, 2025, the company had a $50.6 million ⁶⁶ line of credit with the Federal Home Loan Bank of Atlanta, with $54.0 million ⁶⁷ in borrowings outstanding, and a $13.0 million ⁶⁸ letter of credit. Additionally, there are $32.5 million ⁶⁹ in unsecured federal funds lines of credit and a $56.7 million ⁷⁰ line with the Federal Reserve Bank of Atlanta Discount Window. The company also adopted a stock repurchase program on January 7, 2026, authorizing the repurchase of up to 304,524 shares ⁷¹, or approximately 5% ⁷² of current outstanding shares. Dividends paid to shareholders totaled $8.801 million ⁷³ for the year ended December 31, 2025.

Management explicitly flagged several structural headwinds and execution risks. These include the effects of conditions in financial markets and general economic conditions, changes in loan delinquencies and write-offs, the ability to access cost-effective funding, fluctuations in real estate values, demand for loans and deposits, changes in liquidity, competition, inflation and interest rate environment changes, adverse changes in securities or secondary mortgage markets, and changes in laws or government regulations. The company also highlighted risks related to technological changes, information technology security system failures or breaches, inability of third-party providers to perform, and the ability to manage market, credit, and operational risk.

The company faces material risks across several categories. Macroeconomic risks include the effects of general economic conditions, nationally or in its market areas, that are worse than expected, and fluctuations in real estate values, both residential and commercial. Changes in the interest rate environment pose a significant market risk, potentially reducing margins and yields, mortgage banking revenues, the fair value of financial instruments, or loan originations, while increasing defaults, losses, and prepayments. Competitive risks arise from a concentration of financial institutions in its market area, including large money center and regional banks, community banks, credit unions, mortgage banking firms, consumer finance companies, money market funds, brokerage firms, mutual funds, and insurance companies. Regulatory and geopolitical risks include changes in laws or government regulations or policies affecting financial institutions, such as regulatory fees, capital requirements, and insurance premiums, as well as monetary and fiscal policies of the U.S. Government, changes in tax laws, and the effects of any Federal government shutdown. Operational risks encompass technological changes that may be more difficult or expensive than expected, failure or breaches of information technology security systems, the inability of third-party providers to perform as expected, and the ability to manage market, credit, and operational risk in the current economic environment. The company also notes the inherent risks in its loan portfolio, such as the higher risk associated with commercial real estate loans due to larger balances and dependence on property operations, and commercial and industrial loans which rely on business cash flows and fluctuating collateral values. Construction and land loans carry additional risks related to cost estimates, market value of completed projects, and governmental regulation. Consumer loans, particularly unsecured or rapidly depreciating assets like indirect automobile loans, entail greater risk due to borrower financial stability and collection challenges. The company's largest commercial real estate loan totaled $9.52 million ⁷⁴ at December 31, 2025, and its loans-to-one-borrower limit was approximately $16.1 million ⁷⁵ at the same date.

Management's message to shareholders conveys a focus on strategic growth and prudent risk management, emphasizing the company's ability to navigate a dynamic financial landscape. The overall tone is one of cautious optimism, highlighting the company's improved financial performance in the past year. Net income increased $2.9 million ²⁹, or 53.1% ³⁰, to $8.3 million ²⁹ for the year ended December 31, 2025, compared to $5.4 million ³¹ for the year ended December 31, 2024. This improvement was attributed to increased interest income and decreased noninterest expenses, partially offset by higher deposit costs. Management is committed to maintaining a strong liquidity position, aiming for a liquidity ratio of 12.0% ⁶⁵ or greater, and has demonstrated this by exceeding all regulatory capital requirements, being categorized as "well capitalized" at December 31, 2025 and 2024. Key strategic priorities for the period ahead include continued diversification of the loan portfolio, particularly by increasing commercial-related loans and construction lending, as evidenced by the $5.0 million ⁵⁸ increase in construction loans. Another priority is the growth of transaction deposit accounts, supported by initiatives like the virtual bank, FitnessBank, which contributed to a $20.9 million ⁶¹ increase in savings accounts. Lastly, management is focused on optimizing the investment securities portfolio and managing interest rate risk by encouraging adjustable-rate residential mortgage loans. The company also initiated a stock repurchase program on January 7, 2026, authorizing the repurchase of up to 304,524 shares ⁷¹, or approximately 5% ⁷² of current outstanding shares, signaling a commitment to shareholder returns.