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

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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.

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). Yes ☐ No ☒

As of May ~~6, 2022,~~9, 2023, ~~6,615,785~~6,535,050 shares of the Registrant’s common stock, par value $0.01 per share, were outstanding.

(2) Investment Securities

Investment securities available-for-sale at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 are as follows: (in thousands)


	Amortized		Gross Unrealized		Gross Unrealized			Estimated		Amortized		Gross Unrealized		Gross Unrealized			Estimated
March 31, 2022	Cost		Gains		Losses			Fair Value
March 31, 2023										Cost		Gains		Losses			Fair Value
U.S. Treasury securities	$	5,078	$	—	$	(401	)	$	4,677	$	6,100	$	1	$	(661	)	$	5,440
Municipal securities - tax exempt		538		—		(50	)		488		531		—		(89	)		442
Municipal securities - taxable		2,046		—		(166	)		1,880		2,529		—		(415	)		2,114
U. S. Government sponsored enterprises		11,837		—		(1,511	)		10,326		11,837		—		(3,356	)		8,481
Government agency mortgage-backed securities		20,536		—		(1,521	)		19,015		20,154		—		(2,788	)		17,366
Corporate securities		9,905		—		(380	)		9,525		18,277		1		(967	)		17,311
Total	$	49,940	$	—	$	(4,029	)	$	45,911	$	59,428	$	2	$	(8,276	)	$	51,154
December 31, 2021
December 31, 2022
U.S. Treasury securities	$	5,068	$	5	$	(23	)	$	5,050	$	6,084	$	—	$	(776	)	$	5,308
Municipal securities - tax exempt		540		—		(4	)		536		533		—		(96	)		437
Municipal securities - taxable		796		—		(6	)		790		2,529		—		(485	)		2,044
U. S. Government sponsored enterprises		11,837		—		(295	)		11,542		11,837		—		(3,499	)		8,338
Government agency mortgage-backed securities		21,371		200		(232	)		21,339		20,555		—		(3,053	)		17,502
Corporate securities		9,425		20		(145	)		9,300		13,571		5		(1,005	)		12,571
Total	$	49,037	$	225	$	(705	)	$	48,557	$	55,109	$	5	$	(8,914	)	$	46,200

AFFINITY BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

Investment securities held-to-maturity at March 31, 2023 and December 31, 2022 are as follows: (in thousands)


	Amortized		Gross Unrealized		Gross Unrealized					Estimated
March 31, 2023	Cost		Gains		Losses			Fair Value		Allowance for Credit Losses
U.S. Treasury securities	$	999	$	4	$	—		$	1,003	$	—
Government agency mortgage-backed securities		826		—		(29	)		797		—
Corporate securities		32,336		32		(1,661	)		30,707		(42	)
Total	$	34,161	$	36	$	(1,690	)	$	32,507	$	(42	)
December 31, 2022
U.S. Treasury securities	$	998	$	—	$	—		$	998	$	—
Government agency mortgage-backed securities		837		—		(13	)		824		—
Corporate securities		24,692		4		(267	)		24,429		—
Total	$	26,527	$	4	$	(280	)	$	26,251	$	—

The Bank recorded $32,000 on January 1, 2023 upon adoption of ASC 326, and recorded an additional provision for credit losses for the quarter ended March 31, 2023 of $10,000 for held-to-matuity securities. The Bank also recorded a release of $3,000 for credit losses for unfunded commitments for a net $7,000 of provision for credit losses for the quarter ended March 31, 2023.

Investment securities available-for-sale in an unrealized loss position at March 31, 2023 and December 31, 2022 are as follows: (in thousands)


	Less Than 12 Months					12 Months or More					Total
March 31, 2023	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
U.S. Treasury securities	$	—	$	—		$	4,456	$	(661	)	$	4,456	$	(661	)
Municipal securities - tax exempt		—		—			442		(89	)		442		(89	)
Municipal securities - taxable		462		(22	)		1,652		(393	)		2,114		(415	)
U. S. Government sponsored enterprises		—		—			8,481		(3,356	)		8,481		(3,356	)
Government agency mortgage-backed securities		1,850		(114	)		15,516		(2,674	)		17,366		(2,788	)
Corporate securities		7,920		(212	)		7,827		(755	)		15,747		(967	)
Total	$	10,232	$	(348	)	$	38,374	$	(7,928	)	$	48,606	$	(8,276	)
December 31, 2022
U.S. Treasury securities	$	—	$	—		$	4,331	$	(776	)	$	4,331	$	(776	)
Municipal securities - tax exempt		—		—			437		(96	)		437		(96	)
Municipal securities - taxable		452		(32	)		1,592		(453	)		2,044		(485	)
U. S. Government sponsored enterprises		—		—			8,338		(3,499	)		8,338		(3,499	)
Government agency mortgage-backed securities		5,598		(452	)		11,904		(2,601	)		17,502		(3,053	)
Corporate securities		4,541		(324	)		5,466		(681	)		10,007		(1,005	)
Total	$	10,591	$	(808	)	$	32,068	$	(8,106	)	$	42,659	$	(8,914	)

There were 5711 available-for-sale securities in an unrealized loss position totaling $348,000as of March 31, ~~2022~~2023 for less than 12 months. There were 459 available-for-sale securities in an unrealized loss position for 12 months or greater totaling $7.9 million as of March 31, ~~2022.~~2023. 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. ~~NaN~~Four of the securities are agency bonds and 5five are U.S. Treasury bonds, so all of these are direct obligations of the U.S. Government. ~~NaN~~Thirty-nine of the securities are mortgage backed bonds that have the direct or implied backing of the U.S. Government. ~~NaN~~Four of the bonds are

AFFINITY BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

municipal securities and the remaining 1318 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, 2023, and the Bank expects no credit losses on these securities, given the explicit and implicit guarantees provided by the U.S. federal government. The ~~Company~~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 ~~intend~~have the intent to sell the ~~investments~~U.S. government and agencies debt securities and the corporate securities and it is ~~not~~ likely that ~~the Company~~it will not be required to sell the ~~investments~~securities before their anticipated recovery, the Bank does not consider impairments on these securities to be credit related as of ~~their amortized cost basis which may~~March 31, 2023.

There were 14 held-to-maturity securities in an unrealized loss position totaling $1.7 million as of March 31, 2023 for less than 12 months. There were no held-to-maturity securities in an unrealized loss position greater than 12 months as of March 31, 2023. The unrealized losses on the debt securities arose due to changing interest rates and market conditions and are considered to be ~~at maturity.~~temporary because of acceptable investment grades and are reviewed regularly. One security is a mortgage-backed security of a U.S. Government sponsored agency that has the implied backing of the U.S. Government. Thirteen are subordinated debentures of banks where the Bank performs a credit review quarterly and such reviews have raised no concerns.

Corporate securities account for the majority of the held-to-maturity portfolio as of March 31, 2023. 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, 2023, these securities are all rated as investment grade and the $42,000 of allowance for credit losses associated with these securities was calculated using a Moody's report on the cumulative default rates of corporate issuers.

The amortized cost and estimated fair value of investment securities available-for-sale and held-to-maturity at March 31, ~~2022,~~2023, by contractual maturity, are shown below. Maturities of mortgage-backed securities will differ from contractual maturities because borrowers

~~AFFINITY BANCSHARES, INC.~~

~~Notes to Unaudited Consolidated Financial Statements~~

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)


	Amortized		Estimated		Available-for-Sale				Held-to-Maturity
	Cost		Fair Value		Amortized		Estimated		Amortized		Estimated
U.S. Treasury securities
Within 1 year	$	0	$	0
Greater than 1 to 5 years		0		0
Greater than 5 to 10 years		5,078		4,677
Greater than 10 years		0		0
Municipal securities - tax exempt
Within 1 year		0		0
Greater than 1 to 5 years		0		0
Greater than 5 to 10 years		0		0
Greater than 10 years		538		488
Municipal securities - taxable
Within 1 year		0		0
Greater than 1 to 5 years		0		0
Greater than 5 to 10 years		796		724
Greater than 10 years		1,250		1,156
Government agency securities
Within 1 year		0		0
Greater than 1 to 5 years		0		0
Greater than 5 to 10 years		0		0
Greater than 10 years		11,837		10,326
Corporate securities
					Cost		Fair Value		Cost		Fair Value
Within 1 year		0		0	$	983	$	984	$	—	$	—
Greater than 1 to 5 years		495		486		2,059		2,041		17,731		16,940
Greater than 5 to 10 years		8,910		8,614		24,135		22,000		15,604		14,770
Greater than 10 years		500		425		12,097		8,763		—		—
		29,404		26,896		39,274		33,788		33,335		31,710
Government agency mortgage-backed securities		20,536		19,015		20,154		17,366		826		797
Total	$	49,940	$	45,911	$	59,428	$	51,154	$	34,161	$	32,507

~~NaN~~There were no sales of investment securities ~~were sold~~available-for-sale during the three months ended March 31, ~~2022~~2023 or ~~2021.~~2022.

~~Securities~~Available-for-sale securities with a carrying value of approximately $~~2.5~~4.6 million and $~~2.8~~4.7 million were pledged to secure public deposits at March ~~2022~~31, 2023 and December 31, ~~2021,~~2022, respectively.

~~(3) Loans and Allowance for Loan Losses~~

~~Major classifications of loans, by collateral code, at March 31, 2022 and December 31, 2021 are summarized as follows: (in thousands)~~

March 31, 2022

December 31, 2021

Commercial (secured by real estate - owner occupied)

$
156,332

$
158,662

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

119,461

104,042

Commercial and industrial

155,374

152,834

Paycheck Protection Program loans

7,078

17,883

Construction, land and acquisition & development

27,138

16,317

Residential mortgage 1-4 family

56,448

63,065

Consumer installment

79,862

71,580

Total

601,693

584,384

Less allowance for loan losses

(8,806
)

(8,559
)
Total loans, net

$
592,887

$
575,825

1012

AFFINITY BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

(3) Loans and Allowance for Credit Losses

Major classifications of loans, by collateral code, at March 31, 2023 and December 31, 2022 are summarized as follows: (in thousands)


	March 31, 2023			December 31, 2022
Commercial (secured by real estate - owner occupied)	$	161,860		$	162,989
Commercial (secured by real estate - non-owner occupied)		147,355			135,720
Commercial and industrial		151,343			147,775
Construction, land and acquisition & development		37,615			37,158
Residential mortgage 1-4 family		51,677			51,324
Consumer installment		111,576			111,268
Total		661,426			646,234
Less allowance for credit losses		(9,234	)		(9,325	)
Total loans, net	$	652,192		$	636,909

The Bank grants loans and extensions of credit to individuals and a variety of firms and corporations located primarily in the Atlanta, Georgia MSA. A substantial portion of the loan portfolio is collateralized by improved and unimproved real estate and is dependent upon the real estate market. With the acquisition of Affinity Bank, the Bank ~~is a premier lender~~enhanced its 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 $1.6 million on both March 31, 2023 and December 31, 2022 and is included in other assets on the consolidated balance sheet.

The ~~Coronavirus Aid, Relief, and Economic Security Act, also known as~~adoption of ASU 2016-13 Financial Instruments - Credit Losses (Topic 326) did not result in an increase to allowance for credit losses for loans for the ~~CARES Act, is an economic stimulus bill signed~~Bank.

~~into law on March 27, 2020, in response to the economic fallout of the COVID-19 pandemic in the United States. The~~

~~creation of the Paycheck Protection Program (PPP) enacted under the CARES Act provides forgivable loans to small~~

~~businesses for payroll obligations, emergency grants to cover immediate operating costs, and a mechanism for loan~~

~~forgiveness by the Small Business Administration should all criteria be met. The Bank received SBA authorization for~~ ~~730~~ ~~and~~ ~~1,171~~ ~~PPP loans totaling $66.1~~ ~~million and $130.3~~ ~~million for the years ended December 31, 2021 and 2020, respectively.~~ ~~These loans are fully guaranteed by the Small Business Administration.~~

Qualifying loans in the amount of$~~361.0~~393.9 million and $~~343.6~~384.4 million were pledged to secure the line of credit from the Federal Home Loan Bank of Atlanta (“FHLB”) at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

1113

AFFINITY BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

The following table presents the balance in the allowance for ~~loan~~credit losses and the recorded investment in loans by portfolio segment and based on impairment method as of and for the three months ended March 31, ~~2022~~2023 and as of December 31, ~~2021:~~2022: (in thousands)


March 31, 2022	Commercial (Secured by Real Estate - Owner Occupied)			Commercial (Secured by Real Estate - Non-Owner Occupied)		Commercial and Industrial			Paycheck Protection Program (1)		Construction, Land and Acquisition & Development			Residential Mortgage			Consumer Installment			Unallocated			Total
Allowance for loan losses:
March 31, 2023																										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
Allowance for credit losses:
Beginning balance																										$	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																										$	1,509		$	1,396		$	1,205		$	930	$	1,514		$	2,323		$	357	$	9,234

December 31, 2022
Allowance for credit losses:
Beginning balance	$	2,701		$	1,980	$	2,242		$	—	$	162		$	502		$	969		$	3		$	8,559		$	2,701		$	1,980		$	2,242		$	162	$	502		$	969		$	3	$	8,559
Provision		(266	)		240		33			—		174			(89	)		147			11			250			(421	)		99			55			325		(196	)		801			41		704
Charge-offs		—			—		(26	)		—		—			—			(25	)		—			(51	)		—			—			(26	)		—		—			(123	)		—		(149	)
Recoveries		—			—		3			—		—			38			7			—			48			123			—			21			—		39			28			—		211
Ending balance	$	2,435		$	2,220	$	2,252		$	—	$	336		$	451		$	1,098		$	14		$	8,806		$	2,403		$	2,079		$	2,292		$	487	$	345		$	1,675		$	44	$	9,325
Ending allowance attributable to loans:
Individually evaluated for impairment	$	—		$	1	$	—		$	—	$	—		$	5		$	—		$	—		$	6		$	85		$	1		$	—		$	—	$	4		$	—		$	—	$	90
Collectively evaluated for impairment		2,435			2,219		2,252			—		336			446			1,098			14			8,800			2,318			2,078			2,292			487		341			1,675			44		9,235
Total ending allowance	$	2,435		$	2,220		2,252		$	—	$	336		$	451		$	1,098		$	14		$	8,806		$	2,403		$	2,079		$	2,292		$	487	$	345		$	1,675		$	44	$	9,325
Loans:
Individually evaluated for impairment	$	93		$	3,374	$	388		$	—	$	—		$	2,705		$	—		$	—		$	6,560		$	85		$	3,265		$	—		$	—	$	2,399		$	—		$	—	$	5,749
Collectively evaluated for impairment		156,239			116,087		154,986			7,078		27,138			53,743			79,862			—			595,133			162,904			132,455			147,775			37,158		48,925			111,268			—		640,485
Total loans	$	156,332		$	119,461	$	155,374		$	7,078	$	27,138		$	56,448		$	79,862		$	—		$	601,693		$	162,989		$	135,720		$	147,775		$	37,158	$	51,324		$	111,268		$	—	$	646,234

December 31, 2021
Allowance for loan losses:
Beginning balance	$	1,913		$	1,171	$	1,320		$	—	$	224		$	970		$	719		$	44		$	6,361
Provision		(519	)		809		1,119			—		(62	)		(541	)		310			(41	)		1,075
Charge-offs		-			-		(234	)		—		—			—			(76	)		—			(310	)
Recoveries		1,307			-		37			—		—			73			16			—			1,433
Ending balance	$	2,701		$	1,980	$	2,242		$		$	162		$	502		$	969		$	3		$	8,559
Ending allowance attributable to loans:
Individually evaluated for impairment	$	—		$	1	$	1		$	—	$	—		$	5		$	—		$	—		$	7
Collectively evaluated for impairment		2,701			1,979		2,241			—		162			497			969			3			8,552
Total ending allowance	$	2,701		$	1,980	$	2,242		$	—	$	162		$	502		$	969		$	3		$	8,559
Loans:
Individually evaluated for impairment	$	95		$	3,387	$	753		$	—	$	—		$	2,992		$	1		$	—		$	7,228
Collectively evaluated for impairment		158,567			100,655		152,082			17,883		16,317			60,073			71,579			—			577,156
Total loans	$	158,662		$	104,042	$	152,835		$	17,883	$	16,317		$	63,065		$	71,580		$	—		$	584,384

~~AFFINITY BANCSHARES, INC.~~

~~Notes to Unaudited Consolidated Financial Statements~~

~~(1)~~

~~Includes PPP loans that are fully guaranteed by the SBA; thus~~ The Bank recorded a provision for credit losses for unfunded commitments of $0586,000 ~~allowance~~on January 1, 2023 upon adoption of ASC 326, and recorded a release on unfunded commitments for ~~loan~~the quarter ended March 31, 2023 of $3,000, and is included in other liabilities on the consolidated balance sheet. The Bank also recorded a provision of $10,000 for credit losses ~~has been allocated to these loans.~~for held-to-maturity securities for a net $

7,000 recorded of provision for credit losses for the quarter ended March 31, 2023.

The Bank individually evaluates all loans for impairment that are on nonaccrual status or are rated substandard (as described below). Additionally, all troubled debt restructurings are evaluated for impairment. A loan is considered impaired when, based on current events and circumstances, it is probable that all amounts due according to the contractual terms of the loan will not be collected. Impaired loans are measured based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, at the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent. Interest payments received on impaired loans are applied as a reduction of the outstanding principal balance.

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

AFFINITY BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

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, 2023, and we had $4.3 million of collateral-dependent loans without an allowance and no collateral-dependent loans with an allowance at March 31, 2023.

Impaired loans at ~~March~~December 31, 2022 ~~and December 31, 2021~~ were as follows: (in thousands)


March 31, 2022	Recorded Investment		Unpaid Principal Balance		Allocated Related Allowance		Average Recorded Investment		Interest Income Recognized
December 31, 2022											Recorded Investment		Unpaid Principal Balance		Allocated Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial (secured by real estate - owner occupied)	$	93	$	93	$	—	$	96	$	1	$	—	$	—	$	—	$	—	$	—
Commercial (secured by real estate - non-owner occupied)		3,188		3,188		—		3,172		11		3,089		3,089		—		3,145		—
Commercial and industrial		388		388		—		418		—		—		—		—		—		—
Paycheck Protection Program		—		—		—		—		—
Construction, land and acquisition & development		—		—		—		—		—		—		—		—		—		—
Residential mortgage		1,776		1,776		—		1,836		3		1,526		1,526		—		1,596		5
Consumer installment		—		—		—		2		—		—		—		—		—		—
		5,445		5,445		—		5,524		15		4,615		4,615		—		4,741		5
With an allowance recorded:
Commercial (secured by real estate - owner occupied)	$	—	$	—	$	—	$	—	$	—		85		85		85		90		4
Commercial (secured by real estate - non-owner occupied)		186		186		1		190		3		176		176		1		182		8
Commercial and industrial		—		—		—		—		—		—		—		—		—		—
Construction, land and acquisition & development		—		—		—		—		—		—		—		—		—		—
Residential mortgage		929		929		5		951		13		873		873		4		907		22
Consumer installment		—		—		—		—		—		—		—		—		—		—
		1,115		1,115		6		1,141		16		1,134		1,134		90		1,179		34
Total impaired loans	$	6,560	$	6,560	$	6	$	6,665	$	31	$	5,749	$	5,749	$	90	$	5,920	$	39


December 31, 2021
With no related allowance recorded:
Commercial (secured by real estate - owner occupied)	$	95	$	95	$	—	$	100	$	6
Commercial (secured by real estate - non-owner occupied)		3,199		3,199		—		3,177		45
Commercial and industrial		388		421		—		458		—
Paycheck Protection Program		—		—		—		—		—
Construction, land and acquisition & development		—		—		—		—		—
Residential mortgage		2,052		2,052		—		2,110		31
Consumer installment		1		1		—		3		—
		5,735		5,768		—		5,848		82
With an allowance recorded:
Commercial (secured by real estate - owner occupied)	$	—	$	—	$	—	$	—	$	—
Commercial (secured by real estate - non-owner occupied)		188		189		1		192		12
Commercial and industrial		365		365		1		379		—
Construction, land and acquisition & development		—		—		—		—		—
Residential mortgage		940		941		5		960		60
Consumer installment		—		—		—		—		—
		1,493		1,495		7		1,531		72
Total impaired loans	$	7,228	$	7,263	$	7	$	7,379	$	154

1315

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, ~~2022~~2023 and December 31, ~~2021~~2022 by class of loans: (in thousands)


March 31, 2022	30 -59 Days Past Due		60- 89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total		Nonaccrual
March 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)	$	44	$	—	$	—	$	44	$	156,288	$	156,332	$	—	$	—	$	—	$	—	$	—	$	82	$	—	$	161,778	$	161,860
Commercial (secured by real estate - non-owner occupied)		18		5		—		23		119,438		119,461		3,189		—		—		—		—		170		3,098		144,087		147,355
Commercial and industrial		—		—		388		388		154,986		155,374		388		—		—		—		—		—		—		151,343		151,343
Paycheck Protection Program		—		—		—		—		7,078		7,078		—
Construction, land and acquisition & development		—		—		—		—		27,138		27,138		—		—		—		—		—		—		—		37,615		37,615
Residential mortgage		2,871		97		213		3,181		53,267		56,448		2,683		921		282		—		1,203		412		2,342		47,720		51,677
Consumer installment		355		—		—		355		79,507		79,862		78		393		36		—		429		—		242		110,905		111,576
Total	$	3,288	$	102	$	601	$	3,991	$	597,702	$	601,693	$	6,338	$	1,314	$	318	$		$	1,632	$	664	$	5,682	$	653,448	$	661,426

December 31, 2021

December 31, 2022															30 -59 Days Past Due		60- 89 Days Past Due		90 Days or Greater Past Due		Total Accruing Loans Past Due		Nonaccrual		Current		Total
Commercial (secured by real estate - owner occupied)	$	—	$	—	$	—	$	—	$	158,662	$	158,662	$	—	$	—	$	—	$	—	$	—	$	85	$	162,904	$	162,989
Commercial (secured by real estate - non-owner occupied)		—		—		3,200		3,200		100,842		104,042		3,200		—		—		—		—		3,312		132,408		135,720
Commercial and industrial		338		—		813		1,151		151,684		152,835		813		—		—		—		—		3		147,772		147,775
Paycheck Protection Program		—		—		—		—		17,883		17,883		—
Construction, land and acquisition & development		—		—		-		-		16,317		16,317		-		85		—		—		85		—		37,073		37,158
Residential mortgage		4,094		1,711		321		6,126		56,939		63,065		2,873		2,341		533		249		3,123		3,185		45,016		51,324
Consumer installment		289		45		—		334		71,246		71,580		125		571		59		—		630		135		110,503		111,268
Total	$	4,721	$	1,756	$	4,334	$	10,811	$	573,573	$	584,384	$	7,011	$	2,997	$	592	$	249	$	3,838	$	6,720	$	635,676	$	646,234

On January 1, 2023, the Bank adopted ASU 2022-02, which eliminated the accounting guidance for TDRs by creditors and enhanced the disclosure requirements for certain loan modifications to borrowers experiencing financial difficulty. There were 0no loans ~~past due 90 days or greater~~that were both experiencing financial difficulty and ~~still accruing interest as of~~were modified during the three months ended March 31, ~~2022 and December 31, 2021.~~2023.

There was 0no new troubled debt restructuring during the three months ended March 31, ~~2022 or March 31, 2021.~~2022. ~~NaN~~No troubled debt restructurings subsequently defaulted during the three months ended March 31, ~~2022 or 2021.~~

~~The Bank has allocated an allowance for loan losses of approximately $6,000~~ ~~and $10,000~~ ~~to customers whose loan terms have been modified in troubled debt restructurings as of March 31, 2022 and December 31, 2021, respectively.~~2022.

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.

1416

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.

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, ~~2022~~2023 and December 31, ~~2021,~~2022, 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, 2022	Pass		Special Mention		Substandard		Doubtful/ Loss		Total
											2023		2022		2021		2020		2019		Prior		Revolvers		Total
Pass
Commercial (secured by real estate - owner occupied)	$	155,949	$	383	$	—	$	—	$	156,332	$	631	$	28,653	$	31,956	$	24,037	$	10,648	$	55,049	$	10,450	$	161,424
Commercial (secured by real estate - non-owner occupied)		113,719		2,336		3,406		—		119,461		14,929		35,115		38,516		6,019		10,927		20,620		15,646		141,772
Commercial and industrial		154,949		—		425		—		155,374		9,788		20,778		28,365		15,884		23,784		34,695		18,049		151,343
Paycheck Protection Program		7,078		—		—		—		7,078
Construction, land and acquisition & development		27,138		—		—		—		27,138		1,773		27,602		5,821		112		192		1,271		844		37,615
Residential mortgage		52,728		—		3,720		—		56,448		1,879		5,147		1,727		1,870		1,681		32,441		3,420		48,165
Consumer installment		79,784		—		78		—		79,862		11,164		62,210		24,738		8,082		3,814		426		798		111,232
Total pass												40,164		179,505		131,123		56,004		51,046		144,502		49,207		651,551
Special Mention
Commercial (secured by real estate - owner occupied)												—		—		—		—		—		354		—		354
Commercial (secured by real estate - non-owner occupied)												—		—		—		—		—		2,283		—		2,283
Commercial and industrial												—		—		—		—		—		—		—		—
Construction, land and acquisition & development												—		—		—		—		—		—		—		—
Residential mortgage												—		—		—		—		—		183		—		183
Consumer installment												—		47		45		—		9		—		—		101
Total special mention												—		47		45		—		9		2,820		—		2,921
Substandard
Commercial (secured by real estate - owner occupied)												—		—		—		—		—		82		—		82
Commercial (secured by real estate - non-owner occupied)												—		—		—		22		—		3,278		—		3,300
Commercial and industrial												—		—		—		—		—		—		—		—
Construction, land and acquisition & development												—		—		—		—		—		—		—		—
Residential mortgage												—		215		114		115		127		2,758		—		3,329
Consumer installment												—		79		137		5		22		—		—		243
Total substandard												—		294		251		142		149		6,118		—		6,954

Total	$	591,345	$	2,719	$	7,629	$	—	$	601,693	$	40,164	$	179,846	$	131,419	$	56,146	$	51,204	$	153,440	$	49,207	$	661,426
Current period gross write-offs
Commercial (secured by real estate - owner occupied)											$	—	$	—	$	—	$	—	$	—	$	4	$	—	$	4
Commercial (secured by real estate - non-owner occupied)												—		—		—		—		—		—		—		—
Commercial and industrial												—		—		—		—		—		3		—		3
Construction, land and acquisition & development												—		—		—		—		—		—		—		—
Residential mortgage												—		—		—		—		—		—		—		—
Consumer installment												—		40		57		2		—		—		—		99
Total current period gross write-offs											$	—	$	40	$	57	$	2	$	—	$	7	$	—	$	106

December 31, 2021

Pass

Special
Mention

Substandard

Doubtful/
Loss

Total

Commercial (secured by real estate - owner occupied)

$
158,272

$
390

$
—

$
—

$
158,662

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

98,269

2,352

3,421

—

104,042

Commercial and industrial

151,983

—

852

—

152,835

Paycheck Protection Program

17,883

—

—

—

17,883

Construction, land and acquisition & development

16,005

312

—

—

16,317

Residential mortgage

59,080

—

3,985

—

63,065

Consumer installment

71,440

—

140

—

71,580

Total

$
572,932

$
3,054

$
8,398

$
—

$
584,384

AFFINITY BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements


December 31, 2022	Pass		Special Mention		Substandard		Doubtful/ Loss		Total
Commercial (secured by real estate - owner occupied)	$	162,541	$	362	$	86	$	—	$	162,989
Commercial (secured by real estate - non-owner occupied)		130,115		2,293		3,312		—		135,720
Commercial and industrial		147,772		—		3		—		147,775
Construction, land and acquisition & development		37,158		—		—		—		37,158
Residential mortgage		48,193		—		3,131		—		51,324
Consumer installment		111,049		84		135		—		111,268
Total	$	636,828	$	2,739	$	6,667	$	—	$	646,234

(4) ~~Deposits~~Intangible Assets

The core deposit premium intangible asset had a gross carrying amount of $1.9 million and accumulated amortization of $622,000 at March 31, 2023. The core deposit premium intangible asset had a gross carrying amount of $1.9 million and accumulated amortization of $574,000 at December 31, 2022. Aggregate amortization expense was $48,000 during for the three months ended March 31, 2023 and 2022.

Goodwill acquired through acquisition was $17.2 million at March 31, 2023 and 2022. No impairment loss was recognized during the three months ended March 31, 2023 or 2022.

(5) Deposits

The aggregate amounts of certificates of deposit of $250,000 or more, the standard FDIC deposit insurance coverage limit per depositor, were approximately $~~20.4~~38.2 million at March 31, ~~2022~~2023 and $~~22.6~~26.4 million at December 31, ~~2021.~~2022. Due to the FDIC insurance coverage rules and limits for a depositor's specific group of deposit accounts, it is important to note not all deposits in excess of $250,000 are uninsured.

Brokered CDs totaled $120.4 million and had a weighted average rate of 4.75% and a weighted average maturity of 34 months at March 31, 2023 and $34.9 million and had a weighted average rate of 4.50% and a weighted average maturity of 34 months at December 31, 2022.

~~(5)~~(6) Borrowings

The following FHLB advances, which required monthly or quarterly interest payments, were outstanding at March 31, ~~2022:~~2023:


Advance Date	Advance		Fair Value Adjustment		Interest Rate			Maturity	Rate	Call Feature	Advance		Interest Rate			Maturity	Rate	Call Feature
3/4/2022	$	10,000,000	$	—		0.27	%	4/4/2022	Fixed	N/A
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
3/1/2023												15,000,000		4.89	%	5/1/2023	Fixed	N/A
3/20/2023												20,000,000		4.40	%	9/19/2024	Fixed	N/A
	$	10,000,000	$	—							$	55,000,000

~~AFFINITY BANCSHARES, INC.~~

~~Notes to Unaudited Consolidated Financial Statements~~

There were FHLB advances totaling $~~49.0~~10.0 million consisting of advances with a book value of $~~48.0~~10.0 million and ano fair value adjustment ~~of $1.0~~ ~~million~~ as of December 31, ~~2021.~~2022. At March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the FHLB advances were collateralized by certain loans which totaled approximately $~~361.0~~393.9 million and $~~343.6~~384.4 million, and by the Company’s investment in FHLB stock which totaled approximately $~~772,000~~2.7 million and $~~2.2~~832,000 ~~million~~ at March 31, ~~2021~~2023 and December 31, ~~2021.~~2022. Acquired FHLB advances totaling $49.0 million were paid off during the three months ended March 31, 2022. We were able to accrete to income the remaining $1.0 million fair value adjustment associated with these acquired ~~advances. This decreased our~~advances, resulting in a reduction in interest expense for the three months ended March 31, ~~2022 to a negative~~2022. We also incurred $~~472,000~~647,000. of prepayment penalties during the three months ended March 31, 2022 in connection with the payoff of the acquired advances.

The Company had one FHLB letter of credit of $~~2.5~~ ~~million and $8.0~~12.5 million, used to collateralize public deposits, outstanding at both March 31, ~~2022~~2023 and December 31, ~~2021, respectively.~~2022.

The Company ~~borrowed~~has Federal Funds unsecured lines of credit totaling $~~5.0~~32.5 ~~million from First National Bankers Bank during the year ended December~~million. No amount was borrowed under these lines as of March 31, ~~2020. The loan had a~~ 2023.~~ten-year~~ ~~term with a floating interest rate equal to the Wall Street Journal Prime Rate.~~ ~~Interest payment were due quarterly and the initial principal payment was due~~ ~~June 29, 2021~~. ~~There was~~ 0 ~~prepayment penalty. The loan was secured by Bank stock. In January 2021, the loan was repaid.~~

~~The Company borrowed $100.8~~ ~~million under the Federal Reserve Bank of Atlanta to fund PPP loans under the U.S. CARES Act (the Paycheck Protection Program Liquidity Facility). This was secured by PPP loans totaling $101.7~~ ~~million made during the year ended December 31, 2020. These borrowings had a fixed interest rate of~~ ~~0.35% and a maturity date equal to the maturity date of the related PPP loans, with the PPP loans maturing either~~ ~~two~~ or ~~five years~~ ~~from the origination date of the PPP loan. In January 2021, the borrowing was repaid.~~

1619

AFFINITY BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

~~(6)~~(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 ~~April~~ 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 ~~January~~ 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, ~~2022~~2023 and ~~2021~~2022 was approximately $~~81,000~~78,000 and $~~57,000~~81,000, respectively. The balance of the note payable of the ESOP was approximately $~~5.4~~5.3 million at March 31, ~~2022~~2023 and December 31, ~~2021.~~2022. 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, ~~2022~~2023 and December 31, ~~2021,~~2022, ~~59,000~~80,000 shares had been released.

~~(7)~~(8) Stock-Based Compensation

In ~~August~~ 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. ~~Amounts related~~

In May 2022, shareholders approved the Company’s 2022 Equity Incentive Plan, which authorizes the issuance of up to ~~periods prior~~148,060 shares of common stock pursuant to restricted stock grants and up to 370,150 shares of common stock pursuant to the ~~date~~exercise of ~~the Conversion (January 20, 2021) have been restated to give the retroactive recognition to the exchange ratio applied in the Conversion (~~options.~~0.90686-to-one) (see Note 1).~~

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.

~~There~~ The weighted average assumptions used in Black-Scholes model for valuing stock option grants were as follows: dividend yield is 0 ~~stock~~%, expected volatility is 27.32%, the risk-free interest rate is 3.66%, expected average life is 6.90, and the weighted average per share fair value of options oris $5.40~~restricted stock grants during the three months ended March 31, 2022.~~.

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, 2022		484,519		$	12.28		8.45	$	1,522
Granted		57,500			14.40
Exercise of stock options*		(8,753	)		11.14
Forfeited		—			—
Outstanding - March 31, 2023		533,266		$	12.21		8.06	$	1,439
Exercisable - March 31, 2023		125,255		$	9.78		6.53	$	643

Stock Options

Option Shares Outstanding

Weighted Average Exercise Price

Weighted Average Remaining Life (Years)

Aggregate Intrinsic Value (in thousands)

Outstanding - December 31, 2021

334,970

$
9.90

Granted

—

—

Exercise of stock options

—

—

Forfeited

—

—

Outstanding - March 31, 2022

334,970

$
9.90

7.56

$
1,009

Exercisable - March 31, 2022

102,489

$
10.28

7.33

$
535

The terms of the stock option agreements permit having a number of shares of stock withheld, the fair market value of which as of the date of exercise is sufficient to satisfy the exercise price and/or tax withholding requirements. All 2023 exercises of stock options were exercised in this manner.

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

Weighted Average Grant Date Fair Value

Restricted Shares Outstanding

Outstanding - December 31, 2021

$
8.63

93,336

Granted

—

—

Vested

0

0

Forfeited

—

—

Outstanding - March 31, 2022

$
8.63

93,336


Restricted Stock	Restricted Shares Outstanding		Weighted Average Grant Date Fair Value

Outstanding - December 31, 2022		169,504	$	11.97
Granted		12,400		14.40
Outstanding - March 31, 2023		181,904	$	12.08

1720

AFFINITY BANCSHARES, INC.

Notes to Unaudited Consolidated Financial Statements

The Company recognized approximately $260,000 and $113,000 ~~and~~$~~110,000~~ of stock-based compensation expense during the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 respectively, associated with its common stock awards granted to directors and officers.

As of March 31, ~~2022,~~2023, there was approximately $~~1.1~~3.5 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 ~~2.75~~2.84 years.

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

Management’s discussion and analysis of financial condition and results of operations at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 and for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 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 report on Form 10-Q.

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:

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:

Further, given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the novel coronavirus can be fully controlled and abated. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:

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

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, 2021. The discussion and analysis of the financial condition and results of operations are based on our financial statements, which are prepared in conformity with GAAP. The preparation of these financial statements requires management2022. There have been no material changes to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. We consider the accounting policies discussed below to be significant accounting policies. The estimates and assumptions that we use are based on historical experience and various other factors and are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations.

The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company” we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We intend to take advantage of the benefits of this extended transition period. Accordingly, our financial statements may not be comparable to companies that comply with such new or revised accounting standards.

~~Business Combinations and Valuation of Loans Acquired in Business Combinations.~~ We account for acquisitions under Financial Accounting Standards Board (“FASB”) ASC Topic 805, Business Combinations, which requires the use of the acquisition method of accounting. Assets acquired and liabilities assumed in a business combination are recorded at estimated fair value on their purchase date. As provided for under GAAP, management has up to 12 months following the date of the acquisition to finalize the fair values of acquired assets and assumed liabilities, where it is not possible to estimate the acquisition date fair value upon consummation.

~~In particular, the valuation of acquired loans involves significant estimates, assumptions and judgment based on information available~~policies as ~~of the acquisition date. Substantially all loans acquired~~described in the ~~transaction are evaluated in pools~~Company’s Annual Report on Form 10-K for the year ended December 31, 2022 under “Management’s Discussion and Analysis of ~~loans with similar characteristics;~~Financial Condition and ~~since the estimated fair value~~Results of acquired loans includes a credit consideration, no carryover of any previously recorded allowance for loan losses is recorded at acquisition. A number of factors are considered in determining the estimated fair value of purchased loans including, among other things, the remaining life of the acquired loans, estimated prepayments, estimated loss ratios, estimated value of the underlying collateral, estimated holding periods, contractual interest rates compared to market interest rates, and net present value of cash flows expected to be received.

In determining the Day 1 Fair Values of acquired loans, which are the fair value on all acquired loans at the time of the acquisition, management calculates a nonaccretable difference (the credit mark component of the acquired loans) and an accretable difference (the market rate or yield component of the acquired loans). The nonaccretable difference is the difference between the undiscounted contractually required payments and the undiscounted cash flows expected to be collected in accordance with management’s determination of the Day 1 Fair Values. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in cash flows will result in a reversal of the provision for loan losses to the extent of prior charges and then an adjustment to accretable yield, and nonaccretable difference which would have a positive impact on interest income.

The accretable yield on acquired loans is the difference between the expected cash flows and the initial investment in the acquired loans. The accretable yield is recognized into earnings using the effective yield method over the term of the loans. Management separately monitors the acquired loan portfolio and periodically reviews loans contained within this portfolio against the factors and assumptions used in determining the Day 1 Fair Values.

~~Allowance for Loan Losses.~~ The allowance for loan losses is a reserve for estimated credit losses on individually evaluated loans determined to be impaired as well as estimated credit losses inherent in the loan portfolio. Actual credit losses, net of recoveries, are deducted from the allowance for loan losses. Loans are charged off when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance for loan losses. A provision for loan losses, which is a charge against earnings, is recorded to bring the allowance for loan losses to a level that, in management’s judgment, is adequate to absorb probable losses in the loan portfolio. Management’s evaluation process used to determine the appropriateness of the allowance for loan losses is subject to the use of estimates, assumptions, and judgment. The evaluation process involves gathering and interpreting many qualitative and quantitative factors which could affect probable credit losses. Because interpretation and analysis involve judgment, current economic or business conditions can change, and future events are inherently difficult to predict, the anticipated amount of estimated loan losses and therefore the appropriateness of the allowance for loan losses could change significantly.

The allocation methodology applied by the Bank is designed to assess the appropriateness of the allowance for loan losses and includes allocations for specifically identified impaired loans and loss factor allocations for all remaining loans, with a component primarily based on historical loss rates and a component primarily based on other qualitative factors. The methodology includes evaluation and consideration of several factors, such as, 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. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions or circumstances underlying the collectability of loans. Because each of the criteria used is subject to change, the allocation of the allowance for loan losses is made for analytical purposes and is not necessarily indicative of the trend of future loan losses in any particular loan category. The total allowance is available to absorb losses from any segment of the loan portfolio. Management believes the allowance for loan losses was appropriate at March 31, 2022. The allowance analysis is reviewed by the board of directors on a quarterly basis in compliance with regulatory requirements. In addition, various regulatory agencies periodically review the allowance for loan losses. As a result of such reviews, we may have to adjust our allowance for loan losses. However, regulatory agencies are not directly involved in the process of establishing the allowance for loan losses as the process is the responsibility of the Bank and any increase or decrease in the allowance is the responsibility of management.

~~Income Taxes.~~ The assessment of income tax assets and liabilities involves the use of estimates, assumptions, interpretation, and judgment concerning certain accounting pronouncements and federal and state tax codes. There can be no assurance that future events, such as court decisions or positions of federal and state taxing authorities, will not differ from management’s current assessment, the impact of which could be significant to the results of operations and reported earnings.

The Company and the Bank file consolidated federal and state income tax returns. Amounts provided for income tax expense are based on income reported for financial statement purposes and do not necessarily represent amounts currently payable under tax laws. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax law rates applicable to the periods in which the differences are expected to affect taxable income. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income tax expense. Valuation allowances are established when it is more likely than not that a portion of the full amount of the deferred tax asset will not be realized. In assessing the ability to realize deferred tax assets, management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies. The Company may also recognize a liability for unrecognized tax benefits from uncertain tax positions. Unrecognized tax benefits represent the differences between a tax position taken or expected to be taken in a tax return and the benefit recognized and measured in the financial statements. Penalties related to unrecognized tax benefits are classified as income tax expense.Operations.”

Comparison of Financial Condition at March 31, ~~2022~~2023 and December 31, ~~2021~~2022

Total assets ~~decreased $27.9~~increased $141.0 million, or ~~3.5%~~17.8%, to ~~$760.2~~$932.3 million at March 31, ~~2022~~2023 from ~~$788.1~~$791.3 million at December 31, ~~2021. The decrease was~~2022, due primarily to ~~paying off Federal Home Loan Bank advances and was partially offset by~~ an increase in ~~net loans.~~cash and cash equivalents.

Cash and cash equivalents ~~decreased $41.9~~increased $110.6 million, or ~~37.5%~~420.1%, to ~~$69.9~~$136.9 million at March 31, ~~2022~~2023 from ~~$111.8~~$26.3 million at December 31, ~~2021~~2022 primarily due to cash received from an increase in deposits as ~~excess liquidity was utilized to payoff~~well as an increase in Federal Home Loan Bank advances.

Net loans increased ~~$17.1~~$15.3 million, or ~~3.0%~~2.4%, to ~~$592.9~~$652.2 million at March 31, ~~2022~~2023 from ~~$575.8~~$636.9 million at December 31, ~~2021, including Paycheck Protection Program (PPP)~~2022. Non-owner-occupied real estate loans ~~of $7.1~~increased $11.6 million, ~~and $17.9~~or 8.6%, to $147.4 million at March 31, ~~2022 and~~2023 from $135.7 million at December 31, ~~2021, respectively. Commercial real estate loans~~2022. There were no other material changes in any of our loan categories during the quarter.

Total investment securities increased ~~$13.1~~$12.4 million, or ~~5.0%~~17.3%, to ~~$275.8~~$85.3 million at March 31, ~~2022~~2023, from ~~$262.7~~$72.7 million at December 31, ~~2021, while construction loans increased $10.8 million or 66.3%, to $27.1 million at March 31,~~ 2022, ~~from $16.3 million at December 31, 2021,~~ as we ~~have been successful with our strategic initiative~~continued to invest in securities in an effort to increase construction lending to continue to diversify the loan portfolio. In addition, consumer loans increased $8.3 million, or 11.6%, to $79.9 million at March 31, 2022 from $71.6 million at December 31, 2021, as we continue to experience growth in our indirect automobile loans. These increases were partially offset by a decrease in PPP loans, which decreased $10.8 million or 60.4% to $7.1 million at March 31, 2022 from $17.9 million at December 31, 2021 as a result of continued forgiveness of loans by SBA, and a decrease in one-to-four family residential real estate loans of $6.6 million, or 10.5%, to $56.4 million at March 31, 2022 from $63.1 million at December 31, 2021, as mortgage loans continue to be refinanced at lower rates than we offer.yield.

~~Securities available-for-sale decreased $2.6 million, or 5.4%, to $45.9 million at March 31, 2022 from $48.6 million at December 31, 2021, as the unrealized loss on the investment portfolio increased.~~

Total deposits increased ~~$13.2~~$93.6 million, or ~~2.1%~~14.3%, to ~~$628.0~~$750.8 million at March 31, ~~2022~~2023 from ~~$614.8~~$657.2 million at December 31, ~~2021, which reflected~~2022, reflecting an increase in ~~interest-bearing, market rate, and non-interest-bearing deposits~~certificates of ~~$17.7 million. We experienced increases in non-interest-bearing checking accounts ($8.1~~deposit. Certificates of deposit increased $116.2 million, or 4.2%), market-rate checking accounts ($5.5 million, or 3.8%) and interest-bearing checking accounts ($4.2 million, or 4.6%), due to our continued focus to grow core deposits to fund our loan growth. Offsetting these increases, certificates of deposit decreased $4.5 million, or 4.6%92.2%, to ~~$92.3~~$242.2 million at March 31, ~~2022~~2023 from ~~$96.8~~$126.0 million at December 31, ~~2021. We believe~~2022. This was partially offset by a decrease in non-time deposits of $22.5 million, or 4.25%, as customers increased deposits in higher-yielding accounts during the ~~continued shift in our deposit accounts reflected a decreasing~~current interest rate ~~environment resulting in customers maintaining funds in more liquid deposits.~~environment. The certificates of deposits increase included brokered deposits totaling $85.6 million with an average life of three years and an average interest rate of 5.07%. The loan-to-deposit ratio at March 31, ~~2022~~2023 was ~~94.4%~~86.9%, as compared to ~~93.7%~~96.9% at December 31, ~~2021.~~2022.

We had ~~$10.0~~$55.0 million of FHLB ~~advances~~advance and no other borrowings at March 31, ~~2022,~~2023, compared to ~~$49.0~~$10.0 million of Federal Home Loan Bank advances at December 31, ~~2021. Borrowings were decreased~~2022. We increased borrowings during the ~~three months ended March 31, 2022 as we repaid acquired FHLB borrowings, recognizing $1.0 million~~first quarter of 2023 to increase our liquidity position in ~~accretion~~response to recent market turmoil resulting from the ~~fair value adjustments on acquired advances. Prepayment penalties in the amount~~closures of ~~$647,000 were also recognized with the repayment of these acquired advances for the three months ended March 31, 2022.~~Signature Bank and Silicon Valley Bank.

Stockholders’ equity ~~decreased~~increased by ~~$4.6~~$1.2 million, or ~~3.8%~~1.0% to ~~$116.4~~$118.3 million at March 31, ~~2022~~2023 compared to ~~$121.0~~$117.1 million at December 31, ~~2021,~~2022, primarily due to net income of $1.7 million during the first quarter of 2023, partially offset by a decrease in additional paid in capital from the repurchase of ~~253,779~~59,715 shares of ~~AFBI~~our common stock totaling ~~$3.9 million with~~$867,000 at an average price per share of $15.53 as well as $3.0 in accumulated other comprehensive loss related to our investment portfolio, an increase of negative $2.7 million for the three months ended March 31, 2022 as compared to negative $358,000 at December 31, 2021.$14.46.

The following tables set 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,																	For the Three Months Ended March 31,
	2022									2021								2023							2022
	Average Outstanding Balance			Interest			Average Yield/Rate			Average Outstanding Balance			Interest		Average Yield/Rate			Average Outstanding Balance		Interest		Average Yield/Rate			Average Outstanding Balance		Interest			Average Yield/Rate
	(Dollars in thousands)																	(Dollars in thousands)
Interest-earning assets:
Loans excluding PPP loans	$	574,393		$	6,792			4.73	%	$	490,660		$	6,204		5.06	%
PPP loans		12,369			204			6.59	%		123,457			2,890		9.36	%
Securities		48,648			260			2.14	%		23,751			94		1.59	%
Interest-earning deposits		48,231			17			0.14	%		77,950			42		0.22	%
Loans																		$	651,750	$	8,291		5.16	%	$	586,762	$	6,996			4.84	%
Investment securities held-to-maturity																			32,898		503		6.20	%		—		—			—
Investment securities available-for-sale																			48,844		411		3.41	%		48,648		260			2.14	%
Interest-earning deposits and federal funds																			45,758		488		4.32	%		48,231		17			0.14	%
Other investments		1,000			6			2.33	%		1,990			18		3.56	%		2,643		35		5.39	%		1,000		6			2.33	%
Total interest-earning assets		684,641			7,279			4.25	%		717,808			9,248		5.15	%		781,893		9,728		5.05	%		684,641		7,279			4.25	%
Non-interest-earning assets		62,343									62,054								51,044							62,343
Total assets	$	746,984								$	779,862							$	832,937						$	746,984

Interest-bearing liabilities:
Interest-bearing checking accounts																		$	91,856	$	45		0.20	%	$	96,273	$	42			0.17	%
Money market accounts																			139,495		661		1.92	%		144,455		88			0.25	%
Savings accounts	$	86,195			83			0.38	%	$	94,167			107		0.45	%		95,897		552		2.34	%		86,195		83			0.38	%
Interest-bearing checking accounts		96,273			42			0.17	%		96,513			52		0.22	%
Market rate checking accounts		144,455			88			0.25	%		124,209			133		0.43	%
Certificates of deposit		94,465			290			1.23	%		129,913			506		1.56	%		149,058		1,056		2.87	%		94,465		290			1.23	%
Total interest-bearing deposits		421,388			503			0.48	%		444,802			798		0.72	%		476,306		2,314		1.97	%		421,388		503			0.48	%
FHLB advances		8,821			(975	)		(44.20	)%		29,549			95		1.29	%
PPPLF borrowings		—			—			—			4,150			4		0.35	%
Other borrowings		—			—			—			1,555			10		2.69	%
FHLB advances and other borrowings																			46,723		516		4.48	%		8,821		(975	)		(44.20	)%
Total interest-bearing liabilities		430,209			(472	)		(0.44	)%		480,056			907		0.76	%		523,029		2,830		2.19	%		430,209		(472	)		(0.44	)%
Non-interest-bearing liabilities		195,024									192,150								191,659							195,024
Total liabilities		625,233									672,206								714,688							625,233
Total stockholders' equity		121,751									107,656								118,249							121,751
Total liabilities and stockholders' equity	$	746,984								$	779,862							$	832,937						$	746,984
Net interest rate spread (1)																							2.86	%							4.69	%
Net interest income				$	7,751								$	8,341						$	6,898						$	7,751
Net interest rate spread (1)								4.69	%							4.39	%
Net interest-earning assets (2)	$	254,432								$	237,752
Net interest margin (3)								4.53	%							4.65	%
Average interest-earning assets to interest- bearing liabilities		159.14	%								149.53	%
Net interest margin (2)																							3.58	%							4.53	%

(1) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.

(2) Net ~~interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.~~

~~(3) Net~~ interest margin represents net interest income divided by average total interest-earning assets.

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.

Comparison of Operating Results for the Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022

General. Net income ~~decreased $341,000~~was $1.7 million for the three months ended March 31, 2023 compared to $1.8 million for the three months ended March 31, ~~2022 compared~~2022. The decrease was caused by an increase in deposit interest expense offset by an increase in interest income and decreases in noninterest expenses.

Interest Income. Interest income increased $2.4 million, or 33.6%, to ~~$2.1~~$9.7 million for the three months ended March 31, ~~2021. The decrease was due primarily to a decrease in Payroll Protection Program (PPP) loan related interest and fee income~~2023 from ~~the receipt of forgiveness payments for these loans.~~

~~Interest Income.~~ ~~Interest income decreased $2.0 million, or 21.3%, to~~ $7.3 million for the three months ended March 31, ~~2022 from $9.2~~2022. The increase was due to increases in all categories of interest-earning assets. Interest income on loans increased $1.3 million, or 18.5%, to $8.3 million for the three months ended March 31, ~~2021. The decrease was due to a decrease in interest income on PPP loans, which decreased $2.7 million to $204,000 for the three months ended March 31, 2022~~2023 from ~~$2.9~~$7.0 million for the three months ended March 31, ~~2021.~~2022. Our average balance of ~~and our average yield on PPP loans both decreased significantly as a result of the forgiveness of loans by the SBA during the 2021 period and the related acceleration of recognized fees.~~

~~Excluding PPP loans, interest income on~~ loans increased ~~$588,000,~~by $65.0 million, or ~~9.5%~~11.1%, to ~~$6.8~~$651.8 million for the three months ended March 31, ~~2022~~2023 from ~~$6.2~~$586.8 million for the three months ended March 31, ~~2021. Our~~2022. The average balance of ~~non-PPP~~ loans increased ~~$83.7 million, or 17.1%,~~due to $574.4 million for the three months ended March 31, 2022 from $490.7 million for the three months ended March 31, 2021, as we continue to acquire talent to assist with our strategic initiatives to both increase and diversify thesteady loan ~~portfolio. Our~~demand. The average yield on loans ~~not including PPP loans, decreased 33~~increased 32 basis points to ~~4.73%~~5.16% for the ~~three months ended March 31, 2022 from 5.06%~~current quarter, as compared to 4.84% for the ~~three months ended March 31, 2021,~~prior year period, due to the continued changes in the interest rate ~~environment.~~environment.

Interest income on securities, excluding FHLB stock, increased ~~$166,000~~$654,000 to $914,000 for the three months ended March 31, 2023 from $260,000 for the three months ended March 31, ~~2022 from $94,000 for the three months ended March 31, 2021.~~2022. The average balance of held-to-maturity securities ~~more than doubled to $48.6~~was $33.0 million for the three months ended March 31, ~~2022 from $23.8 million~~2023 compared to zero for the three months ended March 31, ~~2021,~~2022, as we began to classify some new purchases as held-to-maturity. We also experienced an increase in interest income on interest-earning deposits and federal funds to $488,000 for the three months ended March 31, 2023 from $17,000 for the three months ended March 31, 2022, as the yields we received on these funds increased to 4.32% from 0.14% due to ~~our using excess cash from PPP loan repayments and cash previously held~~the continued changes in ~~interest-bearing deposit accounts to invest in securities to increase~~ the ~~yield of our interest-earning assets.~~interest rate environment.

Interest Expense. Interest expense ~~decreased $1.4~~increased $3.3 million ~~or 152.0%,~~ to a$2.8 million for the three months ended March 31, 2023, compared to negative $472,000 for the three months ended March 31, 2022, ~~compared to $907,000 for the three months ended March 31, 2021,~~ due to our repaying acquired FHLB borrowings, recognizing $1.0 million in accretion from the fair value adjustments on acquired ~~advances.~~advances in the previous period and an increasing interest rate environment in the current period.

We ~~experienced decreases~~recognized increases in ~~interest~~all categories of interest-bearing liabilities. Interest expense on ~~all deposit categories, primarily as a result of continued decreases~~deposits increased to $2.3 million for the three months ended March 31, 2023 from $503,000 for the three months ended March 31, 2022. The largest increase was in ~~market rates, but also as a result of a shift in our deposits from certificates of deposit to lower-rate deposit accounts. Interest~~interest expense on certificates of deposit, ~~decreased $216,000, or 42.7%,~~which increased $766,000 to ~~$290,000~~$1.1 million for the three months ended March 31, 2023. The average rate we paid on certificates of deposit increased 164 basis points to 2.87% for the three months ended March 31, 2023 from 1.23% for the three months ended March 31, 2022, ~~from $506,000~~due to the continued changes in the interest rate environment. In addition, the average balance of certificates of deposit increased $54.6 million, or 57.8%, to $149.1 million for the three months ended March 31, ~~2021 . The average balance of certificates of deposit decreased to $35.4 million, or 27.3%, to~~2023 from $94.5 million for the three months ended March 31, 2022, ~~compared~~as customers increased deposits in higher-yielding accounts during the current interest rate environment. We also experienced increases in interest expense on money market accounts, $573,000 to ~~$129.9 million~~$661,000 for the ~~three months~~quarter ended March 31, ~~2021,~~2023 and ~~the average rate we paid on certificates of deposit decreased 33 basis points~~savings accounts, $469,000 to ~~1.23%~~$552,000 for the ~~three months~~quarter ended March 31, ~~2022 from 1.56% for~~2023, due to increases in the ~~three months ended March 31, 2021. Interest expense on market rate checking accounts decreased $45,000, or 33.8%, despite an increase in average balance of $20.2 million, or 16.3%, as the rate~~rates we paid on these ~~deposits decreased 18~~accounts of 167 basis points ~~to 0.25% for the three months ended March 31, 2022 from 0.43% for the three months ended March 31, 2021 due to continued decreases in market rates.~~and 196 basis points, respectively.

Interest expense on borrowings ~~decreased~~increased to ~~a negative $472,000~~$516,000 for the three months ended March 31, ~~2022 compared to $907,000~~2023 from ($975,000) for the three months ended March 31, ~~2021, as~~2022. We recognized gain on the repayment of FHLB advances during the quarter ended March 31, 2022, and we ~~repaid acquired FHLB~~increased borrowings during the ~~current period, recognizing $1.0 million~~quarter ended March 31, 2023 during the first quarter of 2023 to increase our liquidity position in ~~accretion~~response to recent market turmoil resulting from the ~~fair value adjustments on acquired advances.~~closures of Signature Bank and Silicon Valley Bank.

Net Interest Income. Net interest income decreased ~~$590,000,~~$853,000, or ~~7.1% and was~~11.0%, to $6.9 million for the three months ended March 31, 2023 compared to $7.8 million for the three months ended March 31, ~~2022 compared~~2022. Our net interest rate spread decreased to ~~$8.3 million~~2.85% for the three months ended March 31, ~~2021. Our net interest rate spread increased to~~2023 from 4.69% for the three months ended March 31, 2022, ~~from 4.39%~~and our net interest margin decreased to 3.58% for the three months ended March 31, ~~2021, reflecting the repayment of FHLB borrowings, described above while our net interest margin was~~2023 from 4.53% for the three months ended March 31, 2022 ~~compared to 4.65% for~~as the three months ended March 31, 2021. The decrease in net interest margin was primarily due to the decrease in PPP loans as forgiveness payments were received. For the three months ended March 31, 2022, the cost of averagerates we paid on interest-bearing liabilities ~~decreased to (0.44)% from 0.76% for~~increased faster than the ~~three months ended March 31, 2021,~~yields we earned on our interest-earning assets, and as ~~a result of paying~~we paid off FHLB ~~acquired~~ advances and ~~recognizing~~recognized $1.0 million in accretion from fair value adjustments ~~on acquired advances. The total cost of deposits was 0.48%~~during the quarter ended March 31, 2022. Our average net interest-earning assets increased to $258.9 million for the three months ended March 31, ~~2022,~~2023 compared to 0.72% for the three months ended March 31, 2021. The decrease was due to decreasing deposit rates related to the decrease in market rates. Our average net interest-earning assets increased by $16.7 million, or 7.0%, to $254.4 million for the three months ended March 31, ~~2022 from $237.8 million for the three months ended March 31, 2021.~~2022.

Provision for ~~Loan~~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 ~~loan~~credit losses for loans are charged to operations to establish an allowance for ~~loan~~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 ~~loan~~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. See “—Summary of Significant Accounting Policies” for additional information.

After an evaluation of these factors, we recorded a provision for ~~loan~~credit losses of $7,000 for the three months ended March 31, 2023($3,000 was a release of provision related to allowance for unfunded commitment and $10,000 in provision for HTM securities), compared to a provision of $250,000 for the three months ended March 31, ~~2022,~~2022. Our allowance for credit losses was $9.2 million at March 31, 2023 compared to ~~a provision of $450,000~~$9.3 million at December 31, 2022 and $8.8 million at March 31, 2022. The allowance for credit losses to total loans was 1.40% at March 31, 2023 compared to 1.46% at December 31, 2022 and March 31, 2022. This reduces the overall allowance for credit loss to total loans percentage. The allowance for credit losses to non-performing loans was 145.49% at March 31,

2023 compared to 138.80% at December 31, 2022 and 138.94% at March 31, 2022. Net charge-offs were $91,000 for the three months ended March 31, 2021. We increased our provision expense in 2021 due to the uncertainty related to the COVID-19 pandemic. As the economy began to improve in 2021 and continued to improve 2022, less provision expense was required. Our allowance for loan losses was $8.8 million at March 31, 2022 compared to $8.6 million at December 31, 2021 and $6.9 million at March 31, 2021. The allowance for loan losses to total loans was 1.46% at March 31, 2022 compared to 1.46% at December 31, 2021 and 1.10% at March 31, 2021. The allowance for loan losses to total loans is an “all-in” number, meaning it includes all originated and acquired loans. This reduces the overall allowance for loan loss to total loans percentage. However, the acquired loans portfolio was marked to fair market value at acquisition and no carryover of the allowance was allowed. The allowance for loan loss to total loans with the total originated and acquired loans is 1.46% at March 31, 2022 compared to 1.46% at December 31, 2021. Excluding the acquired loans, the allowance to total loans is 2.01%at March 31, 2022 compared to 2.06% at December 31, 2021. The allowance for loan losses to non-performing loans was 138.94% at March 31, 2022 compared to 122.09% at December 31, 2021 and 141.14% at March 31, 2021. Net loan charge offs were $3,000 for the three months ended March 31, 2022,2023, compared to net loan recoveries of ~~$1.1 million~~$62,000 for the year ended December 31, ~~2021. The increase in net recoveries for 2021 was primarily driven by a $1.0 million recovery on a previously charged off commercial real estate loan.~~2022.

To the best of our knowledge, we have recorded all ~~loan~~credit losses that are both probable and reasonable to estimate at March 31, ~~2022.~~2023. 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 ~~loan~~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 ~~loan~~credit losses, and as a result of such reviews, we may have to adjust our allowance for ~~loan~~credit losses. However, regulatory agencies are not directly involved in the process of establishing the allowance for ~~loan~~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 decreased ~~$134,000,~~$43,000, or ~~18.4%~~7.2%, to $552,000 for the three months ended March 31, 2023 from $595,000 for the three months ended March 31, 2022, ~~from $729,000 for the three months ended March 31, 2021. This was~~as a result of ~~the~~a decrease in ~~other non-interest income as income was received in 2021 for a bank owned life insurance death benefit claim and no such benefit claim in 2022.~~mortgage fee income.

Operating expenses decreased ~~$134,000,~~$564,000, or 9.8%, and ~~was~~were $5.2 million for the three months ended March 31, 2023, compared to $5.8 million for the three months ended March 31, 2022, ~~compared~~due primarily to ~~$5.9~~payment of FHLB prepayment penalties in the previous period. We incurred FHLB prepayment penalties as we repaid FHLB advances in the first quarter of 2022, but recognized $1.0 million ~~for the three months ended March 31, 2021, as a result~~ of ~~the decrease~~fair value adjustments in ~~occupancy expense due to facilities consolidation offset with increases in salaries and employee benefits.~~making such repayments.

Income Tax Expense. We recorded income tax expense of $527,000 for the three months ended March 31, 2023 compared to $547,000 for the three months ended March 31, ~~2022 compared to $596,000 for the three months ended March 31, 2021. The lower tax expense for the 2022 period was primarily due to lower pretax income.~~2022. The effective tax rate was ~~23.40%~~23.4% for ~~the three months ended March 31, 2022 compared to 21.84% for the three months ended March 31, 2021.~~each period.

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:

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, which are originated with adjustable interest rates.

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, ~~2022,~~2023, 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.

The table above indicates that 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. At March 31, 2022, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would have experienced a 1.67% decrease in net interest income, and in the event of an instantaneous 200 basis point decrease in interest rates, we would have experienced a 4.99% decrease in net interest income. At March 31, 2021, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would have experienced a 1.13% increase in net interest income, and in the event of an instantaneous 200 basis point decrease in interest rates, we would have experienced a 1.31% decrease in net interest income.

~~Net Economic Value.~~ We also compute amounts by which the net present value of our assets and liabilities (net economic value or “NEV”) would change in the event of a range of assumed changes in market interest rates. This model uses a discounted cash flow analysis and an option-based pricing approach to measure the interest rate sensitivity of net portfolio value. The model estimates the economic value of each type of asset, liability and off-balance sheet contract 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.

~~The table below sets forth, as of March 31, 2022, the calculation of the estimated changes in our NEV that would result from the designated immediate changes in the United States Treasury yield curve.~~

The table above indicates that at March 31, 2022, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would have experienced a 8.59% decrease in net economic value, and in the event of an instantaneous 200 basis point decrease in interest rates, we would have experienced a 0.51% decrease in net economic value. At March 31, 2021, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would have experienced a 3.42% decrease in net economic value, and in the event of an instantaneous 200 basis point decrease in interest rates, we would have experienced a 6.89% decrease in net economic value.

~~GAP Analysis.~~ In addition, we analyze our interest rate sensitivity by monitoring our interest rate sensitivity “gap.” Our interest rate sensitivity gap is the difference between the amount of our interest-earning assets maturing or repricing within a specific time period and the amount of our interest-bearing liabilities maturing or repricing within that same time period. A gap is considered positive when the amount of interest rate sensitive assets maturing or repricing during a period exceeds the amount of interest rate sensitive liabilities maturing or repricing during the same period, and a gap is considered negative when the amount of interest rate sensitive liabilities maturing or repricing during a period exceeds the amount of interest rate sensitive assets maturing or repricing during the same period.

The following table sets forth our interest-earning assets and our interest-bearing liabilities at March 31, 2022, which are anticipated to reprice or mature in each of the future time periods shown based upon certain assumptions. The amounts of assets and liabilities shown which reprice or mature during a particular period were determined in accordance with the earlier of term to repricing or the contractual maturity of the asset or liability. The table sets forth an approximation of the projected repricing of assets and liabilities at March 31, 2022, on the basis of contractual maturities, anticipated prepayments and scheduled rate adjustments. The loan amounts in the table reflect principal balances expected to be redeployed and/or repriced as a result of contractual amortization and as a result of contractual rate adjustments on adjustable-rate loans. Amounts are based on a preliminary balance sheet as of March 31, 2022, and may not equal amounts included in our unaudited consolidated financial statements for the quarter ended March 31, 2022. However, we believe that there would be no material changes in the results of the gap analysis if the unaudited financial results included in Part 1, Item 1 of this quarterly report had been utilized.

~~(2) Gap/assets ratio equals the asset/liability gap for the period divided by total assets ($759.8 million).~~

At March 31, 2022, our asset/liability gap from zero days to one year was negative $52.3 million, resulting in a gap/assets ratio of (6.89)%. At March 31, 2021, our asset/liability gap from zero days to one year was negative $7.4 million, resulting in a gap/assets ratio of (0.93)%.

Certain shortcomings are inherent in the methodologies used in the above interest rate risk ~~measurements.~~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 ~~and net economic value tables~~table presented ~~assume~~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 ~~and NEV tables provide~~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 NEV~~ 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. ~~In the event of changes in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in calculating the gap table.~~

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.

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, ~~2022,~~2023, we had a ~~$197.4~~$198.0 million line of credit with the Federal Home Loan Bank of Atlanta, with advances of ~~$10.0~~$55.0 million outstanding and ~~an $2.5~~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 ~~$7.5~~$20.0 million unsecured federal funds line of credit. We also have a line of ~~$81.7~~$71.7 million with the Federal Reserve Bank of Atlanta Discount Window secured by ~~$111.8~~$105.3 millionin loans. No amount was outstanding on the unsecured lines of credit or the Discount Window at March 31, ~~2022.~~2023.

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 $2.0 million for the three months ended March 31, 2023, compared to $3.9 million for the three months ended March 31, ~~2022, compared to $8.7~~2022. Net cash used in investing activities was $29.2 million for the three months ended March 31, ~~2021. Net cash used in investing activities was~~2023, compared to $17.1 million for the three months ended March 31, ~~2022, compared to $27.1 million for the three months ended March 31, 2021.~~2022. Net cash used in investing activities typically consists primarily of disbursements for loan originations and purchases of investment securities. Net cash ~~used in~~provided by financing activities, which consists primarily of activity in deposit accounts and proceeds/repayments of FHLB advances, and ~~beginning in 2022,~~ a stock repurchase program, was $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, compared to net cash used in financing activities of $28.7 million for the three months ended March 31, 2022, which included repaying $58.0 million of FHLB borrowings, borrowing $20.0 million in FHLB advances and repurchasing stock of $3.9 ~~million, compared to $58.4 million for the three months ended March 31, 2021, which included a capital injection of $35.4 million following our stock offering in January 2021.~~million.

We are committed to maintaining a strong liquidity position. During the three months ended March 31, 2023, in order to further enhance liquidity, we increased brokered deposits by $85.6 million and FHLB borrowings by $45.0 million. 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, ~~2022,~~2023, we exceeded all of our regulatory capital requirements and the Bank is 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, ~~2022~~2023 and December 31, ~~2021~~2022 are presented in the table below (in thousands).

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, ~~2022,~~2023, we had outstanding commitments to originate loans of ~~$84.9~~$83.3 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, ~~2022~~2023 totaled ~~$43.4~~$81.8 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.

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

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, ~~2022.~~2023. 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, ~~2022,~~2023, 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.

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, ~~2022,~~2023, we were not involved in any legal proceedings the outcome of which would be material to our financial condition or results of operations.

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The following table sets forth information in connection with repurchases of shares of the Company’s common stock during the three months ended March 31, ~~2022:~~2023:

(1) The Board of Directors approved a stock repurchase program on ~~January 27,~~October 31, 2022, which authorized the repurchase of up to ~~343,632~~331,997 shares (approximately 5.0% of the then-outstanding shares). The total number of shares purchased as part of the publicly announced plan totaled ~~253,779~~88,398 as of March 31, ~~2022.~~2023. There is no expiration date for the stock repurchase plan.

(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).

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.


Maryland		~~86-1339773~~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)


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


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

Emerging growth company	☒☐


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	2

	Consolidated Balance Sheets at March 31, ~~2022~~2023 (unaudited) and December 31, ~~2021 (audited)~~2022	2

	Consolidated Statements of Income for the Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022 (unaudited)	3

	Consolidated Statements of Comprehensive (Loss) Income for the Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022 (unaudited)	4

	Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022 (unaudited)	5
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022 (unaudited)	6

	Notes to Unaudited Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2124

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3433

Item 4.	Controls and Procedures	3433

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	3534

Item 1A.	Risk Factors	3534

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3534

Item 3.	Defaults Upon Senior Securities	3534

Item 4.	Mine Safety Disclosures	3534

Item 5.	Other Information	3534

Item 6.	Exhibits	3635

	SIGNATURES	3736


		March 31, 2022			December 31, 2021				March 31, 2023			December 31, 2022
		(unaudited)			(audited)				(unaudited)
		(In thousands)							(Dollars in thousands except per share amounts)
Assets	Assets							Assets

Cash and due from banks, including reserve requirement of $0 at March 31, 2022 and December 31, 2021		$	14,302		$	16,239
Cash and due from banks									$	5,714		$	2,928
Interest-earning deposits in other depository institutions			55,596			95,537				131,172			23,396
Cash and cash equivalents			69,898			111,776				136,886			26,324
Investment securities available-for-sale			45,911			48,557				51,154			46,200
Investment securities held-to-maturity (estimated fair value of $32,507, net of allowance for credit losses of $42 at March 31, 2023 and estimated fair value of $26,251 at December 31, 2022)										34,119			26,527
Other investments			1,022			2,476				2,996			1,082
Loans, net			592,887			575,825
Loans										661,426			646,234
Allowance for credit loss on loans										(9,234	)		(9,325	)
Net loans										652,192			636,909
Other real estate owned			3,538			3,538				2,901			2,901
Premises and equipment, net			3,955			3,783				4,156			4,257
Bank owned life insurance			15,462			15,377				15,811			15,724
Intangible assets			18,701			18,749				18,510			18,558
Accrued interest receivable and other assets			8,834			8,007
Other assets										13,577			12,801
Total assets		$	760,208		$	788,088			$	932,302		$	791,283

Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity							Liabilities and Stockholders' Equity

Liabilities:
Non-interest-bearing checking									$	183,862		$	190,297
Interest-bearing checking										97,537			91,167
Money market accounts										134,872			148,097
Savings accounts		$	86,717		$	86,745				92,382			101,622
Interest-bearing checking			95,555			91,387
Market rate checking			151,443			145,969
Non-interest-bearing checking			202,042			193,940
Certificates of deposit			92,288			96,758				242,186			125,989
Total deposits			628,045			614,799				750,839			657,172
Federal Home Loan Bank advances			10,000			48,988
Federal Home Loan Bank advances and other borrowings										55,000			10,025
Accrued interest payable and other liabilities			5,805			3,333				8,153			6,983
Total liabilities			643,850			667,120				813,992			674,180

Stockholders' equity:
Common stock (par value $0.01 per share, 40,000,000 shares authorized; 6,618,855 issued and outstanding at March 31, 2022 and 6,872,634 issued and outstanding at December 31, 2021			66			69
Preferred stock (10,000,000 shares authorized, 0 shares outstanding at March 31, 2022 and December 31, 2021			—			—
Common stock (par value $0.01 per share, 40,000,000 shares authorized; 6,566,137 issued and outstanding at March 31, 2023 and 6,605,384 issued and outstanding at December 31, 2022)										66			66
Preferred stock (10,000,000 shares authorized, no shares outstanding)										—			—
Additional paid in capital			64,241			68,038				62,549			63,130
Unearned ESOP shares			(4,952	)		(5,004	)			(4,743	)		(4,795	)
Retained earnings			60,014			58,223				66,619			65,357
Accumulated other comprehensive loss			(3,011	)		(358	)			(6,181	)		(6,655	)
Total stockholders' equity			116,358			120,968				118,310			117,103
Total liabilities and stockholders' equity		$	760,208		$	788,088			$	932,302		$	791,283


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


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


	Three Months Ended March 31,						Three Months Ended March 31,
	2022			2021			2023		2022
	(In thousands)						(Dollars in thousands except per share amounts)
Interest income:
Loans, including fees	$	6,996		$	9,094		$	8,291	$	6,996
Investment securities, including dividends		266			112
Investment securities								949		266
Interest-earning deposits		17			42			488		17
Total interest income		7,279			9,248			9,728		7,279
Interest expense:
Deposits		503			798			2,314		503
Borrowings		(975	)		109
FHLB advances and other borrowings								516		(975	)
Total interest expense		(472	)		907			2,830		(472	)
Net interest income before provision for loan losses		7,751			8,341
Provision for loan losses		250			450
Net interest income after provision for loan losses		7,501			7,891
Net interest income before provision for credit losses								6,898		7,751
Provision for credit losses								7		250
Net interest income after provision for credit losses								6,891		7,501
Noninterest income:
Service charges on deposit accounts		392			334			391		392
Other		203			395			161		203
Total noninterest income		595			729			552		595
Noninterest expenses:
Salaries and employee benefits		2,942			2,383			3,004		3,008
Deferred compensation		66			64
Occupancy		582			1,052			644		582
Advertising		80			80			97		80
Data processing		494			481			493		494
Other real estate owned		—			12
Net (gain) on sale of other real estate owned		—			(1	)
Legal and accounting		182			177
Organizational dues and subscriptions		131			71
Director compensation		51			50
Federal deposit insurance premiums		60			73
Writedown of premises and equipment		—			873
FHLB prepayment penalties		647			—			—		647
Other		523			577			956		947
Total noninterest expenses		5,758			5,892			5,194		5,758
Income before income taxes		2,338			2,728			2,249		2,338
Income tax expense		547			596			527		547
Net income	$	1,791		$	2,132		$	1,722	$	1,791
Weighted average common shares outstanding
Basic								6,599,672		6,806,405
Diluted								6,681,680		6,908,665
Basic earnings per share	$	0.26		$	0.31		$	0.26	$	0.26
Diluted earnings per share	$	0.26		$	0.31		$	0.26	$	0.26


	Three Months Ended March 31, 2021 and 2022
																Accumulated
				Additional												Other
	Common			Paid In				Treasury			Unearned			Retained		Comprehensive
	Stock (1)			Capital				Stock			ESOP Shares			Earnings		Income (Loss)			Total
							(In thousands)
Beginning balance December 31, 2020	$	69		$	33,628			$	(1,268	)	$	(2,453	)	$	50,650	$	159		$	80,785
ESOP loan payment and release of ESOP shares		—			5				—			52			—		—			57
Stock-based compensation expense		—			110				—			—			—		—			110
Change in unrealized loss on investment securities available- for-sale, net of tax		—			—				—			—			—		(278	)		(278	)
Corporate reorganization
Issuance of common stock (less stock offering expenses of $1,699)		—			32,448				—			—			—		—			32,448
Issuance of shares and loan to ESOP		—			2,961				—			(2,961	)		—		—			—
Treasury stock retired		—			(1,268	)			1,268			—			—		—			—
Net income		—			—				—			—			2,132		—			2,132
Ending balance March 31, 2021	$	69		$	67,884			$	—		$	(5,362	)	$	52,782	$	(119	)	$	115,254

Ending balance December 31, 2021	$	69		$	68,038			$	—		$	(5,004	)	$	58,223	$	(358	)	$	120,968
ESOP loan payment and release of ESOP shares		—			29				—			52			—		—			81
Stock-based compensation expense		—			113				—			—			—		—			113
Change in unrealized loss on investment securities available- for-sale		—			—				—			—			—		(2,653	)		(2,653	)
Common stock repurchase		(3	)		(3,939	)			—			—			—		—			(3,942	)
Net income		—			—				—			—			1,791		—			1,791
Ending balance March 31, 2022	$	66		$	64,241			$	—		$	(4,952	)	$	60,014	$	(3,011	)	$	116,358


	Three Months Ended March 31, 2023 and 2022
														Accumulated
				Additional										Other
	Common			Paid In				Unearned			Retained			Comprehensive
	Stock			Capital				ESOP Shares			Earnings			Income (Loss)			Total
							(In thousands)
Beginning balance December 31, 2021	$	69		$	68,038			$	(5,004	)	$	58,223		$	(358	)	$	120,968
ESOP loan payment and release of ESOP shares		—			29				52			—			—			81
Stock-based compensation expense		—			113				—			—			—			113
Change in unrealized loss on investment securities available- for-sale, net of tax		—			—				—			—			(2,653	)		(2,653	)
Common stock repurchase		(3	)		(3,939	)			—			—			—			(3,942	)
Net income		—			—				—			1,791			—			1,791
Ending balance March 31, 2022	$	66		$	64,241			$	(4,952	)	$	60,014		$	(3,011	)	$	116,358

Ending 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
Issuance of restricted stock awards		—			—				—			—			—			—
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


March 31, 2022	Level 1		Level 2		Level 3		Total
March 31, 2023									Level 1		Level 2		Level 3		Total
Other real estate owned									$	—	$	—	$	2,901	$	2,901
Collateral dependent loans										—		—		5,537		5,537
Total assets at fair value									$	—	$	—	$	8,438	$	8,438

December 31, 2022									Level 1		Level 2		Level 3		Total
Other real estate owned	$	—	$	—	$	3,538	$	3,538	$	—	$	—	$	2,901	$	2,901
Impaired loans		—		—		6,554		6,554		—		—		5,659		5,659
Total assets at fair value	$	—	$	—	$	10,092	$	10,092	$	—	$	—	$	8,560	$	8,560

December 31, 2021	Level 1		Level 2		Level 3		Total
Other real estate owned	$	—	$	—	$	3,538	$	3,538
Impaired loans		—		—		7,221		7,221
Total assets at fair value	$	—	$	—	$	10,759	$	10,759


	Three Months Ended March 31, 2022 vs. 2021
	Increase (Decrease) Due to						Total
							Increase
	Volume			Rate			(Decrease)
	(In thousands)
Interest-earning assets:
Loans excluding PPP loans	$	2,757		$	(2,169	)	$	588
PPP loans		(2,021	)		(665	)		(2,686	)
Securities		125			41			166
Interest-earning deposits		(13	)		(12	)		(25	)
Other investments		(7	)		(5	)		(12	)
Total interest-earning assets		841			(2,810	)		(1,969	)

Interest-bearing liabilities:
Savings accounts		(9	)		(15	)		(24	)
Interest-bearing checking accounts		—			(10	)		(10	)
Market rate checking accounts		114			(159	)		(45	)
Certificates of deposit		(122	)		(94	)		(216	)
Total interest-bearing deposits		(17	)		(278	)		(295	)
FHLB advances		(19	)		(1,051	)		(1,070	)
PPPLF borrowings		(1	)		(3	)		(4	)
Other borrowings		(3	)		(7	)		(10	)
Total interest-bearing liabilities		(40	)		(1,339	)		(1,379	)

Change in net interest income	$	881		$	(1,471	)	$	(590	)


	Three Months Ended March 31, 2023 vs. 2022
	Increase (Decrease) Due to						Total
							Increase
	Volume			Rate			(Decrease)
	(In thousands)
Interest-earning assets:
Loans	$	1,254		$	41		$	1,295
Investment securities held-to-maturity		474			29			503
Investment securities available-for-sale		37			114			151
Interest-earning deposits and federal funds		(1,892	)		2,363			471
Other investments		27			2			29
Total interest-earning assets		(100	)		2,549			2,449

Interest-bearing liabilities:
Interest-bearing checking accounts		(34	)		37			3
Market rate checking accounts		(2,771	)		3,344			573
Savings accounts		393			76			469
Certificates of deposit		734			32			766
Total interest-bearing deposits		(1,678	)		3,489			1,811
FHLB advances		925			566			1,491
Total interest-bearing liabilities		(753	)		4,055			3,302

Change in net interest income	$	653		$	(1,506	)	$	(853	)


	Three Months Ended March 31,						Change
	2022			2021			Amount			Percent
	(Dollars in thousands)
Salaries and employee benefits	$	2,942		$	2,383		$	559			23.5	%
Deferred compensation		66	��		64			2			3.1	%
Occupancy		582			1,052			(470	)		(44.7	)%
Advertising		80			80		—			—
Data processing		494			481			13			2.7	%
Other real estate owned		—			12			(12	)		(100.0	)%
Net (gain) loss on sale of other real estate owned		—			(1	)		(1	)		97.8	%
Legal and accounting		182			177			5			2.8	%
Organizational dues and subscriptions		131			71			60			84.5	%
Director compensation		51			50			1			2.0	%
Federal deposit insurance premiums		60			73			(13	)		(17.8	)%
Writedown of premises and equipment		—			873			(873	)		(100.0	)%
FHLB prepayment penalties		647			—			647			100.0	%
Other		523			577			(54	)		(9.3	)%
Total non-interest expenses	$	5,758		$	5,892		$	(134	)		(2.3	)%


	Three Months Ended March 31				Change
	2023		2022		Amount			Percent
	(Dollars in thousands)
Salaries and employee benefits	$	3,004	$	3,008	$	(4	)		(0.1	)%
Occupancy		644		582		62			10.6	%
Advertising		97		80		17			21.8	%
Data processing		493		494		(1	)		(0.1	)%
FHLB prepayment penalties		—		647		(647	)		(100.0	)%
Other		956		947		9			1.0	%
Total non-interest expenses	$	5,194	$	5,758	$	(564	)		(9.8	)%


Change in Interest Rates (basis points) (1)	Net Interest Income Year 1 Forecast		Year 1 Change from Level			Net Interest Income Year 1 Forecast		Year 1 Change from Level
	(Dollars in thousands)					(Dollars in thousands)
+400	$	25,071		(3.52	)%	$	32,521		6.98	%
+200		25,554		(1.67	)%		31,527		3.71	%
Level		25,987	—				30,400	—
-200		24,690		(4.99	)%		27,718		(8.82	)%
-400		24,441		(5.95	)%		24,222		(20.32	)%


Change in Interest			Estimated Increase (Decrease) in NEV						NEV as a Percentage of Present Value of Assets (3)
Rates (basis points) (1)	Estimated NEV (2)		Amount			Percent			NEV Ratio (4)			Increase (Decrease) (basis points)
(Dollars in thousands)
+400	$	103,764	$	(19,938	)		(16.12	)%		15.19	%		(121	)
+200		113,075		(10,627	)		(8.59	)%		15.77	%		(63	)
—		123,702	—			—				16.40	%	—
-200		123,074		(628	)		(0.51	)%		15.69	%		(71	)
-400		126,526		2,824			(-2.28	)%		16.07	%		(33	)


	Time to Repricing
	Zero to 90 Days			Zero to 180 Days			Zero Days to One Year			Zero Days to Two Years			Zero Days to Five Years			Total
				(Dollars in thousands)
Assets:
Cash and due from banks	$	55,596		$	55,596		$	55,596		$	55,596		$	55,596		$	69,898
Investments		5,437			6,497			7,577			9,581			21,281			46,933
Net loans		79,631			109,987			162,026			258,435			475,507			592,895
Other assets		—			—			—			—			—			50,074
Total	$	140,664			172,080			225,199			323,612			552,384		$	759,800


Liabilities:
Non-maturity deposits	$	173,356			188,359			218,364			278,368			423,696		$	542,849
Certificates of deposit		13,511			24,345			43,720			59,326			86,962			92,321
Borrowings		15,446			15,446			15,446			15,446			15,446			15,446
Other liabilities		—			—			—			—			—			6,608
Equity capital		—			—			—			—			—			102,576
Total (1)	$	202,313			228,150			277,530			353,140			526,104		$	759,800

Asset/liability gap	$	(61,649	)		(56,070	)		(52,331	)		(29,528	)		26,280
Gap/assets ratio (2)		(8.11	)%		(7.38	)%		(6.89	)%		(3.89	)%		3.46	%


						For Capital					To Be Well Capitalized
						Adequacy					Under Prompt Corrective
	Actual					Purposes					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of March 31, 2022:
Common Equity Tier 1
(to Risk Weighted Assets)	$	85,751		13	%	$	29,230		4.50	%	$	42,221		6.50	%
Total Capital
(to Risk Weighted Assets)	$	93,879		14	%	$	51,965		8	%	$	64,956		10	%
Tier I Capital
(to Risk Weighted Assets)	$	85,751		13	%	$	38,974		6	%	$	51,965		8	%
Tier I Capital
(to Average Assets)	$	85,751		12	%	$	29,130		4	%	$	36,412		5	%

As of December 31, 2021:
Common Equity Tier 1
(to Risk Weighted Assets)	$	83,662		13	%	$	27,960		4.50	%	$	40,386		6.50	%
Total Capital
(to Risk Weighted Assets)	$	91,438		15	%	$	49,706		8	%	$	62,133		10	%
Tier I Capital
(to Risk Weighted Assets)	$	83,662		13	%	$	37,280		6	%	$	49,706		8	%
Tier I Capital
(to Average Assets)	$	83,662		11	%	$	31,070		4	%	$	38,837		5	%


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)		Maximum Number of Shares that May Yet Be Purchased Under Plans or Programs (1)
January 1, 2022 through January 31, 2022	0		$	0	0			343,632
February 1, 2022 through February 28, 2022		0		0		0		343,632
March 1, 2022 through March 31, 2022		253,779	$	15.53		253,779		89,853
		253,779	$	15.53		253,779		89,853


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)		Maximum Number of Shares That May Yet Be Purchased Under Plans or Programs (1)

January 1, 2023 through January 31, 2023		4,735	$	14.89		4,735		298,579
February 1, 2023 through February 28, 2023		7,797		15.06		7,797		290,782
March 1, 2023 through March 31, 2023		47,183		14.32		47,183		243,599
		59,715	$	14.46		59,715		243,599


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 March 31, ~~2022,~~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)


		AFFINITY BANCSHARES, INC.

Date:	May 12, ~~2022~~2023	/s/ Edward J. Cooney
		Edward J. Cooney
		President, Chief Executive Officer and Director

Date:	May 12, ~~2022~~2023	/s/ ~~Tessa M. Nolan~~Brandi Pajot
		~~Tessa M. Nolan~~Brandi Pajot
		Senior Vice President and Chief Financial Officer