Executive Summary

Q2 2024 delivered resilient profitability amid funding cost pressure: net income $1.653M ($1.11 diluted EPS) vs $1.239M ($0.83) YoY; sequentially modestly lower vs Q1 2024 $1.772M ($1.19) as higher expenses and lower noninterest income offset NII growth .
Net interest margin expanded YoY to 3.75% (from 3.52%) as asset repricing outpaced deposit cost increases; sequentially improved from 3.72% in Q1 2024, aided by stabilizing funding costs and higher earning asset yields .
Loan growth remained healthy: total loans +2.4% QoQ and +8.9% YoY, led by commercial loans (+3.4% QoQ) and continued strength in 1–4 family ARMs and HELOCs; credit quality remained strong (NPL/Loans 0.07%, ACL/Loans 0.61%) with no provision in Q2 due to net recoveries .
Deposit base stabilized (+1.4% QoQ) with noninterest-bearing at 37.5% of total (up from 37.1% in Q1), though mix shift vs last year persists; management highlighted continued funding pressure but slowing velocity of increases—a key sentiment driver for H2 NIM trajectory .

What Went Well and What Went Wrong

What Went Well
- NIM improvement and stabilization: “Asset repricing and stabilizing funding cost are supporting net interest margin and helping to offset continued weakness in the mortgage environment.”
- Broad-based loan growth: commercial banking loans ex student +2.73% QoQ; consumer/residential growth continued, primarily ARMs and HELOCs; total loans +$14.1M QoQ and +$49.2M YoY .
- Strong credit quality and no provision: net recovery of $107K supported no Q2 provision; NPL/Loans 0.07% and ACL/Loans 0.61% with coverage far above NPLs .
What Went Wrong
- Mortgage segment still a drag: Q2 mortgage pre-tax loss $(193)K (vs $(303)K) despite actions to expand revenue opportunities and improve sold-loan margins; macro housing headwinds persist .
- Funding cost headwinds remain: money market rate up 137 bps YoY; time deposits up 199 bps YoY, including $20M of brokered CDs at ~4.89%, pressuring cost of funds despite some stabilization .
- Noninterest income dipped sequentially to $1.391M from $1.604M in Q1; Q1 also benefited from a $233.9K one-time mortgage pipeline valuation adjustment (non-recurring tailwind) .

Financial Results

Metric	Q2 2023	Q1 2024	Q2 2024
Interest income ($M)	$8.099	$9.335	$9.869
Interest expense ($M)	$1.975	$2.939	$3.259
Net interest income ($M)	$6.124	$6.396	$6.610
Provision for credit losses ($M)	$0.000	$0.150	$0.000
Noninterest income ($M)	$1.221	$1.604	$1.391
Noninterest expense ($M)	$5.832	$5.629	$5.939
Pretax income ($M)	$1.513	$2.221	$2.062
Income tax expense ($M)	$0.274	$0.449	$0.409
Net income ($M)	$1.239	$1.772	$1.653
Diluted EPS ($)	$0.83	$1.19	$1.11
Net interest margin (%)	3.52%	3.72%	3.75%
ROA (%)	0.67%	0.97%	0.88%
ROE (%)	7.70%	10.50%	9.63%

Segment performance (pre-tax, $000s):

Segment Pre-tax	Q2 2023	Q1 2024	Q2 2024
Commercial banking	$1,816	$2,134	$2,255
Mortgage banking	$(303)	$87	$(193)
Income before taxes (total)	$1,513	$2,221	$2,062

Key KPIs and balance sheet:

KPI	Q2 2023	Q1 2024	Q2 2024
Total loans ($000)	556,170	591,338	605,408
Total deposits ($000)	628,382	620,269	628,912
Noninterest-bearing deposits (% of total)	39.63%	37.10%	37.54%
CET1 ratio (Bank)	14.36%	13.51%	13.44%
Tier 1 leverage (Bank)	11.18%	11.36%	11.33%
NPL/Loans (ex guaranteed)	0.06%	0.05%	0.07%
ACL/Loans	0.58%	0.60%	0.61%
Book value per share ($)	$43.08	$45.72	$46.91
Shareholders’ equity ($000)	64,014	68,358	70,142

Notes:

VBFC does not report a consolidated “Revenue” line; we present net interest income and noninterest income separately to reflect operating income drivers .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net interest margin	2H 2024	No formal numeric guidance	Management expects NIM support from asset repricing and stabilizing funding costs; velocity of funding cost increases slowing as of 6/30/24	Directional: maintained/improving
Funding mix/costs	2H 2024	No formal numeric guidance	Anticipates continued pressure on funding base but disciplined deposit mix/cost management; brokered time deposits ($20M at ~4.89%) supplement base	Directional: cautious
Credit quality/provision	2H 2024	No formal numeric guidance	Credit quality strong; no Q2 provision due to net recoveries and stable economy; ACL viewed sufficient	Directional: stable
Mortgage banking	2H 2024	No formal numeric guidance	Continue navigating weak mortgage environment; pursuing revenue opportunities and margin improvement on loans sold	Directional: gradual improvement focus

No formal quantitative guidance ranges were provided in the Q2 press release .

Earnings Call Themes & Trends

No Q2 2024 earnings call transcript was found in our corpus; themes below reflect management press release commentary across quarters.

Topic	Previous Mentions (Q4’23 and Q1’24)	Current Period (Q2’24)	Trend
NIM trajectory	Q4: NIM expanded 37 bps to 3.83% post securities repositioning; entering 2024 with support . Q1: NIM 3.72%, compressed 7 bps YoY amid higher funding costs .	NIM 3.75%, up QoQ and YoY; asset repricing and stabilizing funding costs helping .	Improving/stabilizing
Funding costs & deposit mix	Q4: Anticipated continued pressure; lower-cost deposit base near 40% of total . Q1: Brokered CDs of $20M at 4.89% added; overall cost of funds up to 1.78% .	Funding pressure persists but velocity slowing by 6/30; noninterest-bearing 37.5% of deposits .	Pressure moderating
Loan growth	Q4: Core loans +1.6% QoQ; consumer/residential strong . Q1: Core loans +2.84% QoQ .	Total loans +2.4% QoQ; commercial +3.4% QoQ; residential growth continues .	Solid growth
Mortgage banking	Q4: Segment loss; macro headwinds (rates/inventory) . Q1: Small profit aided by $233.9K valuation adjustment .	Q2 segment loss $(193)K; continue expanding revenue opportunities and margins .	Still weak; operational mitigation
Credit quality	Q4: Strong metrics; ACL/Loans 0.59%, NPL/Loans 0.06% . Q1: Strong metrics; provision $150K for growth .	Strong: NPL/Loans 0.07%; no provision due to net recoveries and stable conditions .	Stable/strong
Capital & liquidity	Q4: CET1 13.86%, T1 leverage 11.14% . Q1: CET1 13.51%, T1 leverage 11.36% .	CET1 13.44%, T1 leverage 11.33%—well-capitalized .	Stable, well-capitalized

Management Commentary

“We are pleased with the Company’s performance during the second quarter. Asset repricing and stabilizing funding cost are supporting net interest margin and helping to offset continued weakness in the mortgage environment.” — Jay Hendricks, President & CEO
“While we anticipate continued pressure on our funding base, increasing loan yields and disciplined management of our deposit mix and cost will support our net interest margin the remainder of the year.” — Jay Hendricks
Q1 context on headwinds: “Higher funding cost squeezed our net interest income in addition to continued weakness in the mortgage environment.” — Jay Hendricks

Q&A Highlights

No Q2 2024 earnings call transcript was available in our search; the company communicated results via press release, so no public Q&A highlights could be extracted [ListDocuments results showed no earnings-call transcript for the period].

Estimates Context

Wall Street consensus (S&P Global) for VBFC Q2 2024 EPS and revenue was unavailable in our system due to missing SPGI/CIQ mapping for the ticker, so we could not assess beats/misses versus estimates. As a result, no comparisons to consensus are presented here.

Key Takeaways for Investors

NIM is turning from defense to offense: YoY expansion and QoQ improvement, with management citing stabilizing funding costs—constructive for H2 earnings power if asset yields continue to reprice upward .
Balance sheet growth remains disciplined and relationship-led: commercial loans +3.4% QoQ; total loans +2.4% QoQ amid healthy credit—supports NII momentum into H2 .
Credit remains a differentiator: minimal NPLs and no Q2 provision (net recoveries) highlight benign credit, enabling earnings resilience despite elevated funding costs .
Funding cost pressure persists but is moderating: deposit mix still favorable with ~38% noninterest-bearing; watch the pace of remix and brokered CD usage as rates evolve .
Mortgage remains an earnings headwind; improvement efforts continue, but macro housing constraints limit near-term contribution—model conservatively on the segment .
Capital ratios are solid (CET1 13.44%; leverage 11.33%), providing flexibility to support growth and absorb volatility .
With no consensus estimates available, stock reaction likely hinges on narrative signals (NIM stabilization, credit strength, loan growth) rather than headline beats/misses—monitor deposit mix and cost of funds into Q3 .

Village Bank & Trust Financial Corp. (VBFC)·Q2 2024 Earnings Summary