How sustainable is the earnings growth given the reliance on non‑interest income such as Bank Owned Life Insurance proceeds?

Fundamentals – sustainability check

Jeffersonville Bancorp’s Q2 net income rose modestly (+8.5 % YoY) but the “growth” is largely a net‑interest‑margin swing (‑$589 k interest expense, +$533 k loan interest/fees) rather than a true operating expansion. The only “extra” boost in 2024 came from a $453 k one‑off gain on Bank‑Owned Life‑Insurance (BOLI) proceeds. In the current quarter that line is down $432 k, meaning the company has lost a non‑recurring, non‑operating source that had previously inflated earnings. Without BOLI, the core banking franchise is barely breaking even on a per‑share basis (0.78 $ vs. 0.72 $ a year ago) and is being offset by higher taxes and a larger credit‑loss provision. Thus, the earnings trajectory is not sustainable on a purely organic basis; any future upside will have to come from genuine loan‑book growth, better net‑interest spreads, or cost‑efficiency gains.

Market & technical view

The stock is still a micro‑cap (OTCQB) with limited analyst coverage, so price action tends to be driven by earnings surprises and broader small‑cap sentiment. The modest beat may have already been priced in, and the removal of the BOLI tailwind could trigger a downward correction if investors re‑price the earnings quality. On the daily chart, JFBC has been hovering near its 20‑day moving average and lacks clear bullish momentum (no breakout above recent highs, RSI still in the 45‑50 range). Volume has been thin, which amplifies the risk of a sharp move on any further earnings miss.

Actionable insight

• Risk‑averse investors should view the earnings growth as fragile and consider trimming exposure or staying on the sidelines until the bank demonstrates a repeatable net‑interest expansion or cost‑saving initiatives.
• If the stock is already at a premium (e.g., P/E > 15 on a non‑recurring‑adjusted basis), a short‑term short could be justified on the expectation of a pull‑back once the BOLI boost is fully removed from the forward outlook.
• Long‑term holders may keep the position only if they believe the loan‑portfolio can be scaled or the balance sheet can be re‑structured to generate sustainable non‑interest income (e.g., fee‑based services). In that case, a stop‑loss around 5‑7 % below the current market price would protect against the downside while allowing upside if the bank improves its core profitability.