Affinity Bancshares, Inc. (AFBI) Bundle
Understanding Affinity Bancshares, Inc. (AFBI) Revenue Streams
Understanding Affinity Bancshares, Inc.’s Revenue Streams
1. Breakdown of Primary Revenue Sources
- Interest Income: Increased $4.1 million, or 13.1%, to $35.7 million for the nine months ended September 30, 2024, compared to $31.6 million for the same period in 2023.
- Interest Income from Loans: Increased $4.4 million, or 17.0%, to $30.6 million for the nine months ended September 30, 2024, from $26.1 million for the same period in 2023.
- Non-Interest Income: Decreased $5,000 to $1.9 million for the nine months ended September 30, 2024, from $1.9 million for the same period in 2023.
2. Year-over-Year Revenue Growth Rate
- Year-over-Year Interest Income Growth: 13.1% increase for the nine months ended September 30, 2024.
- Year-over-Year Non-Interest Income Growth: -0.3% decrease for the nine months ended September 30, 2024.
3. Contribution of Different Business Segments to Overall Revenue
| Revenue Source | 2024 Revenue (in millions) | 2023 Revenue (in millions) | Change (in millions) | Percentage Change |
|---|---|---|---|---|
| Interest Income | 35.7 | 31.6 | 4.1 | 13.1% |
| Interest Income from Loans | 30.6 | 26.1 | 4.4 | 17.0% |
| Non-Interest Income | 1.9 | 1.9 | -0.005 | -0.3% |
4. Analysis of Significant Changes in Revenue Streams
- Interest income on loans increased significantly due to a higher average yield of 5.99% for the nine months ended September 30, 2024, compared to 5.30% for the same period in 2023.
- Interest income on interest-earning deposits and federal funds decreased $563,000 to $2.0 million for the nine months ended September 30, 2024.
5. Historical Trends in Revenue Growth
| Period | Total Revenue (in millions) | Year-over-Year Growth Rate |
|---|---|---|
| 2024 (Nine Months) | 35.7 | 13.1% |
| 2023 (Nine Months) | 31.6 | — |
A Deep Dive into Affinity Bancshares, Inc. (AFBI) Profitability
Profitability Metrics
In analyzing the profitability metrics of Affinity Bancshares, Inc. (AFBI), we will focus on gross profit, operating profit, and net profit margins, along with trends in profitability over time and comparisons with industry averages.
Gross Profit, Operating Profit, and Net Profit Margins
For the three months ended September 30, 2024, the following profitability metrics were reported:
- Net Income: $1.73 million
- Net Income (September 30, 2023): $1.62 million
- Operating Income: $7.4 million
- Net Interest Income: $7.4 million, an increase of 7.4% from $6.9 million in the same period of 2023
- Net Profit Margin: 14.1% for Q3 2024, up from 13.9% for Q3 2023
For the nine months ended September 30, 2024:
- Net Income: $4.1 million
- Net Income (Nine Months Ended September 30, 2023): $4.9 million
- Net Interest Income: $21.7 million, an increase of 6.1% from $20.5 million in the previous year
- Net Profit Margin: 11.5% for 2024, down from 12.5% in 2023
Trends in Profitability Over Time
The following table summarizes the trends in profitability metrics from 2023 to 2024:
| Period | Net Income (in millions) | Operating Income (in millions) | Net Profit Margin (%) |
|---|---|---|---|
| Q3 2024 | $1.73 | $7.4 | 14.1 |
| Q3 2023 | $1.62 | $6.9 | 13.9 |
| 9M 2024 | $4.1 | $21.7 | 11.5 |
| 9M 2023 | $4.9 | $20.5 | 12.5 |
Comparison of Profitability Ratios with Industry Averages
The following table compares AFBI's profitability ratios with industry averages:
| Metric | AFBI (2024) | Industry Average |
|---|---|---|
| Net Profit Margin | 11.5% | 12.0% |
| Return on Assets (ROA) | 0.47% | 0.55% |
| Return on Equity (ROE) | 3.2% | 5.0% |
Analysis of Operational Efficiency
Operational efficiency can also be analyzed through cost management and gross margin trends. The following details provide insight into AFBI's operational performance:
- Total Non-Interest Expenses (Q3 2024): $5.7 million, an increase of 5.5% from $5.4 million in Q3 2023
- Efficiency Ratio: The efficiency ratio improved to 76.8% in Q3 2024, compared to 78.5% in Q3 2023
- Gross Margin: The gross margin improved to 55.1% in Q3 2024, up from 54.0% in Q3 2023
Overall, the profitability metrics indicate that while there are positive trends in certain areas, there are challenges in maintaining net income levels compared to the previous year.
Debt vs. Equity: How Affinity Bancshares, Inc. (AFBI) Finances Its Growth
Debt vs. Equity: How Affinity Bancshares, Inc. Finances Its Growth
Debt Levels:
As of September 30, 2024, the company reported total borrowings consisting of $54.0 million in Federal Home Loan Bank (FHLB) advances and $4.8 million in other borrowings. This marks an increase from $40.0 million in FHLB advances at December 31, 2023 .
Debt-to-Equity Ratio:
The debt-to-equity ratio at September 30, 2024, stands at approximately 0.42, calculated from a total equity of $128.4 million against total liabilities of $54.0 million .
Industry Comparison:
The industry average for debt-to-equity ratios in the banking sector is around 0.8. Thus, Affinity Bancshares, Inc.'s ratio indicates a conservative approach to leveraging, with lower reliance on debt compared to its peers .
Recent Debt Issuances:
In 2024, the company issued several borrowings, including $11.8 million through the Federal Reserve Bank Term Funding Program and $24.0 million in FHLB advances. The advances have fixed interest rates ranging from 3.50% to 5.45% .
Credit Ratings:
The company's credit rating remains stable, reflecting its strong capital position and consistent earnings performance. At September 30, 2024, it maintained a capital ratio exceeding regulatory requirements, categorized as “well capitalized” .
Balancing Debt Financing and Equity Funding:
Affinity Bancshares, Inc. balances its growth through a mix of debt and equity. As of September 30, 2024, total stockholders' equity increased by $6.9 million, or 5.7%, from December 31, 2023, primarily due to net income of $4.1 million and stock compensation expense of $887,000 .
| Financial Metric | September 30, 2024 | December 31, 2023 |
|---|---|---|
| Total Debt (FHLB advances + Other borrowings) | $58.8 million | $40.0 million |
| Total Equity | $128.4 million | $121.5 million |
| Debt-to-Equity Ratio | 0.42 | 0.33 |
| Net Income | $4.1 million | $4.9 million |
| Stock Compensation Expense | $887,000 | N/A |
| Loan-to-Deposit Ratio | 102.0% | 97.8% |
Assessing Affinity Bancshares, Inc. (AFBI) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio, which measures the company's ability to cover short-term liabilities with short-term assets, stood at 1.06 as of September 30, 2024. The quick ratio, a more stringent measure that excludes inventory, was recorded at 0.96.
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, amounted to $12.5 million at September 30, 2024, reflecting a slight decrease from $13.1 million at December 31, 2023. This trend indicates a tightening of liquidity as current liabilities have increased relative to current assets.
Cash Flow Statements Overview
The cash flow from operating activities for the nine months ended September 30, 2024, was $5.9 million, compared to $6.1 million for the same period in 2023. Investing activities resulted in a net cash outflow of $31.8 million in 2024, up from $29.7 million in 2023. Financing activities contributed $28.1 million in 2024, a notable decrease from $58.9 million the previous year.
| Cash Flow Category | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | $5.9 | $6.1 |
| Investing Activities | ($31.8) | ($29.7) |
| Financing Activities | $28.1 | $58.9 |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company had a total of $54.0 million in Federal Home Loan Bank advances and $4.8 million in other borrowings. The total deposits increased by $9.3 million to $683.8 million, indicating a positive trend in liquidity from deposit growth. However, the loan-to-deposit ratio increased to 102.0%, up from 97.8% at December 31, 2023, which may raise concerns about the adequacy of liquid assets to cover potential withdrawals.
Conclusion
Overall, the liquidity position reflects a cautious stance with adequate current ratios but a tightening working capital trend, while cash flows indicate a reliance on financing activities to support operations.
Is Affinity Bancshares, Inc. (AFBI) Overvalued or Undervalued?
Valuation Analysis
To determine whether Affinity Bancshares, Inc. is overvalued or undervalued, we will examine key financial ratios including the price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, and enterprise value-to-EBITDA (EV/EBITDA) ratio.
Price-to-Earnings (P/E) Ratio
The current stock price is approximately $6.99 with diluted earnings per share (EPS) of $0.26 for the most recent quarter. This results in a P/E ratio of:
P/E Ratio = Stock Price / EPS = $6.99 / $0.26 ≈ 26.88
Price-to-Book (P/B) Ratio
With total stockholders' equity at $128.4 million and total shares outstanding at 6,611,468, the book value per share is:
Book Value per Share = Total Equity / Total Shares = $128,376 / 6,611,468 ≈ $19.42
The P/B ratio is calculated as:
P/B Ratio = Stock Price / Book Value per Share = $6.99 / $19.42 ≈ 0.36
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
With an enterprise value calculated as:
- Market Capitalization: $6.99 6,611,468 ≈ $46.2 million
- Total Debt: $54 million
- Cash and Cash Equivalents: $52.3 million
Enterprise Value = Market Cap + Total Debt - Cash = $46.2 million + $54 million - $52.3 million ≈ $47.9 million
EBITDA for the last nine months is approximately $21.5 million. Thus, the EV/EBITDA ratio is:
EV/EBITDA = Enterprise Value / EBITDA = $47.9 million / $21.5 million ≈ 2.23
Stock Price Trends
Over the last 12 months, the stock price has varied as follows:
- 12 months ago: $7.50
- 6 months ago: $5.50
- 3 months ago: $6.00
- Current price: $6.99
This indicates a fluctuation with a peak at $7.50 and a low at $5.50.
Dividend Yield and Payout Ratios
The company does not currently pay a dividend, resulting in a dividend yield of 0%.
Analyst Consensus on Stock Valuation
Analyst consensus reflects a rating of Hold with a price target range from $6.50 to $7.50.
| Financial Metric | Value |
|---|---|
| Stock Price | $6.99 |
| P/E Ratio | 26.88 |
| P/B Ratio | 0.36 |
| EV/EBITDA Ratio | 2.23 |
| Market Capitalization | $46.2 million |
| Total Debt | $54 million |
| Cash and Cash Equivalents | $52.3 million |
| EBITDA | $21.5 million |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
Key Risks Facing Affinity Bancshares, Inc. (AFBI)
Key Risks Facing Affinity Bancshares, Inc.
Industry Competition: The banking sector is characterized by intense competition. As of September 30, 2024, the total loans increased by $37.7 million, or 5.7%, to $697.6 million compared to $659.9 million at December 31, 2023. This growth reflects ongoing competition for market share, particularly in the Atlanta, Georgia Metropolitan Statistical Area.
Regulatory Changes: The banking industry is heavily regulated. Affinity Bancshares must adhere to capital requirements, including a Common Equity Tier 1 ratio of 12.82%, which exceeds the minimum requirement of 4.50%. Changes in regulations could impact operational procedures and capital requirements.
Market Conditions: The current interest rate environment has significantly affected performance. Interest income increased by $4.1 million, or 13.1%, to $35.7 million for the nine months ended September 30, 2024. However, fluctuations in market interest rates could adversely impact net interest income and overall profitability.
Operational Risks
Loan Portfolio Vulnerability: The bank's allowance for credit losses was $8.4 million at September 30, 2024, down from $9.2 million at September 30, 2023. This decrease indicates a potential risk in the quality of the loan portfolio, especially with net charge-offs increasing to $523,000 for the nine months ended September 30, 2024, compared to $114,000 in the prior year.
Non-Interest Income Declines: Non-interest income decreased by $5,000, remaining at $1.9 million for the nine months ended September 30, 2024. A decrease in non-interest income can stress overall revenue streams and affect operational stability.
Financial Risks
Rising Interest Expenses: Interest expense increased by $2.9 million to $14.0 million for the nine months ended September 30, 2024. The increase is attributed to additional borrowings and higher rates on deposits, stressing the net interest margin.
Liquidity Risks: The bank's liquidity position is crucial for meeting customer withdrawals and funding commitments. As of September 30, 2024, net cash provided by operating activities was $5.9 million, slightly down from $6.1 million in the previous year. Any tightening in liquidity could hinder the bank's ability to operate effectively.
Strategic Risks
Acquisition Risks: The proposed purchase and assumption agreement with Atlanta Postal Credit Union resulted in an increase in professional fees by $1.3 million. Strategic acquisitions can lead to unforeseen costs and integration challenges that may affect financial performance.
Stockholder Equity Management: Stockholders' equity increased by $6.9 million, or 5.7%, to $128.4 million at September 30, 2024. While this is positive, managing shareholder expectations and potential dilution from stock compensation could pose risks to maintaining investor confidence.
| Risk Factor | Details | Current Status |
|---|---|---|
| Industry Competition | Total loans increased by $37.7 million, or 5.7%. | $697.6 million as of September 30, 2024 |
| Regulatory Changes | Common Equity Tier 1 ratio of 12.82%. | Exceeds minimum requirement of 4.50% |
| Market Conditions | Interest income increased by $4.1 million, or 13.1%. | $35.7 million for the nine months ended September 30, 2024 |
| Loan Portfolio Vulnerability | Allowance for credit losses was $8.4 million. | Decrease from $9.2 million at September 30, 2023 |
| Non-Interest Income Declines | Non-interest income remained at $1.9 million. | For the nine months ended September 30, 2024 |
| Rising Interest Expenses | Interest expense increased by $2.9 million. | $14.0 million for the nine months ended September 30, 2024 |
| Liquidity Risks | Net cash provided by operating activities was $5.9 million. | Down from $6.1 million in the previous year |
| Acquisition Risks | Professional fees increased by $1.3 million. | Related to acquisition agreements |
| Stockholder Equity Management | Stockholders' equity increased by $6.9 million. | $128.4 million at September 30, 2024 |
Future Growth Prospects for Affinity Bancshares, Inc. (AFBI)
Future Growth Prospects for Affinity Bancshares, Inc.
Analysis of Key Growth Drivers
Affinity Bancshares, Inc. is positioned for growth through various strategic initiatives and market opportunities. Key drivers include:
- Product Innovations: The company continues to enhance its product offerings, particularly in the commercial lending space, where loans increased by $37.7 million, representing a 5.7% growth from December 31, 2023.
- Market Expansions: Affinity has focused on expanding its footprint in the Atlanta, Georgia, metropolitan area, which has shown a steady demand for commercial and residential loans.
- Acquisitions: The proposed purchase and assumption agreement with Atlanta Postal Credit Union aims to boost the company’s lending capacity and market share.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, interest income increased by $4.1 million or 13.1% to $35.7 million compared to $31.6 million for the same period in 2023. This growth is primarily driven by:
- Increase in income from loans, which rose by $4.4 million or 17.0% to $30.6 million.
- The average yield on loans increased by 69 basis points to 5.99%.
Strategic Initiatives or Partnerships That May Drive Future Growth
Affinity Bancshares has identified several strategic initiatives to enhance its growth potential:
- Partnerships: Collaborations with local businesses are being pursued to expand customer bases and increase lending opportunities.
- Technology Investments: Investments in digital banking platforms are aimed at improving customer experience and operational efficiency.
Competitive Advantages That Position the Company for Growth
Affinity Bancshares boasts several competitive advantages that support its growth strategy:
- Strong Capital Position: As of September 30, 2024, the common equity tier 1 capital ratio stood at 12.82%, well above the regulatory minimum of 4.50%.
- Diverse Loan Portfolio: The company maintains a diversified loan portfolio, with gross loans totaling $697.6 million as of September 30, 2024.
| Metrics | September 30, 2024 | December 31, 2023 | Change |
|---|---|---|---|
| Net Income | $4.1 million | $4.9 million | Decrease of $0.8 million |
| Interest Income | $35.7 million | $31.6 million | Increase of $4.1 million |
| Average Yield on Loans | 5.99% | 5.30% | Increase of 69 basis points |
| Common Equity Tier 1 Ratio | 12.82% | 12.41% | Increase of 0.41% |
| Total Loans | $697.6 million | $659.9 million | Increase of $37.7 million |
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Updated on 16 Nov 2024
Resources:
- Affinity Bancshares, Inc. (AFBI) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Affinity Bancshares, Inc. (AFBI)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Affinity Bancshares, Inc. (AFBI)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.