Update: Athens Bancshares Earnings

| About: Athens Bancshares (AFCB)


Athens Bancshares reports earnings.

The results reaffirm my thesis that the bank is limited in the ways that it can grow its bottom line.

Although returns will pale in comparison to peers, the bank's buyback program will continue to be the main EPS driver .

It doesn't take long to find the positive effects of Athens Bancshares' (NASDAQ:AFCB) massive buyback program in the most recent earnings announcement. Net income of $1.3 million for the first half of 2014 was a modest improvement on the $1.2 million earned during the same time last year, but the buybacks lifted EPS by 31.5% to $0.75.

Share purchases aside, net interest income also improved from a higher earning asset yield (up 4.88% to 4.93%), coupled with an $85 thousand fall in interest expenses. Unlike a few other banks, this quarter was not helped out by an increase in non-interest mortgage related fees (which were down), but non-performing assets continued to improve, and are down to only 0.87% of total assets (down 37% since year-end).

Shares still trade around book value, but returns on equity will continue to look below average due to the low leverage ratio currently in place. Return on assets is up 8.5% to 0.89, but there is so much dead weight in equity that I can't imagine seeing anything close to double digits for several years - and by that I mean several years with a lot of shareholders returns. The upside of this is that the bank looks safe, and can continue to deploy capital when the price is right, but the big question is when will the price be right for investors? I'm okay with the current tempo, but I don't see any way for this one to grow without help from the buybacks. Not a great position to be in unless your here hoping for either a dividend hike or a potential acquisition offer, but also not one that's going to get you into too much trouble.

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