First Capital, Inc.

What they do

The Company owns all of the outstanding common stock of First Harrison Bank, which converted from a federal savings association to an Indiana-chartered commercial bank in 2018 and is regulated primarily by the Indiana Department of Financial Institutions and the FDIC. The Bank takes deposits and makes loans through offices located entirely in Harrison, Floyd, Clark and Washington counties in Indiana and Bullitt County in Kentucky, with its main office in Corydon, 35 miles west of Louisville. Management describes the balance sheet as having been transformed from a traditional thrift to a commercial bank, selling newly originated fixed-rate residential mortgages into the secondary market while retaining variable-rate residential loans and expanding commercial lending staff.

Revenue drivers

• Net interest income — The core earnings engine: interest on loans and securities less interest paid on deposits and borrowings. Tax-equivalent net interest margin was 3.98% for the quarter ended June 30, 2026, up from 3.59% a year earlier, on average interest-earning assets of $1.24 billion.
• Commercial real estate and commercial business lending — Management states it expanded commercial lending staff specifically to grow commercial real estate and commercial business loans, which are held in the portfolio alongside consumer and residential construction loans.
• Residential mortgage banking activity — Newly originated qualified fixed-rate residential mortgage loans are sold in the secondary market while variable-rate residential mortgages are retained, generating ongoing origination and sale activity rather than long-term fixed-rate balance sheet exposure.
• Noninterest income — Includes service charges on deposit accounts, ATM and debit card fees, and gains or losses on equity securities. Noninterest income rose $187,000 year over year in Q2 2026, helped by a $92,000 gain on equity securities versus a $41,000 loss in Q2 2025 and a $54,000 increase in deposit service charges.

Recent performance

For the quarter ended June 30, 2026, First Capital reported net income of $4.8 million, or $1.43 per diluted share, compared with $3.8 million, or $1.13 per diluted share, in the second quarter of 2025. Net interest income after provision for credit losses increased $1.6 million as the average tax-equivalent yield on interest-earning assets rose from 4.82% to 5.12% and the average cost of interest-bearing liabilities fell from 1.64% to 1.56%. The provision for credit losses increased to $425,000 from $306,000, and net charge-offs were $58,000 versus $113,000 a year earlier. Noninterest expenses rose $359,000, driven by compensation and benefits, advertising and other expenses, and the effective tax rate rose to 20.8% from 18.4%. For the six months ended June 30, 2026, net income was $9.1 million, or $2.72 per diluted share, compared with $7.0 million, or $2.09 per diluted share, a year earlier.

Strategy

Management's stated asset-side strategy is to operate as a commercial bank rather than a traditional thrift, selling newly originated qualified fixed-rate residential mortgage loans into the secondary market and retaining variable-rate mortgages, while expanding commercial lending staff to grow commercial real estate and commercial business loans. The Bank also originates consumer and residential construction loans for the portfolio. Growth is concentrated in the five-county footprint, where the Bank states it leads FDIC-insured institutions in deposit market share in Harrison County, Indiana and Bullitt County, Kentucky. The Bank reports it has never offered Alt-A, sub-prime or no-document mortgage loans, and no acquisitions or new market entries are disclosed in the provided excerpts.

Risks

• Geographic and market concentration — All of the Bank's offices and most of its loans are concentrated in Harrison, Floyd, Clark and Washington counties in Indiana and Bullitt County in Kentucky, so local economic conditions disproportionately affect credit quality.
• Competition from larger banks — The filing states the Bank aggressively competes with local banks as well as large regional banks in its footprint, which can pressure loan and deposit pricing.
• Credit losses on the loan portfolio — The provision for credit losses rose to $425,000 in Q2 2026 from $306,000 a year earlier, and management identifies loan delinquency rates and deposit flows among the factors that could cause actual results to differ.
• Regulatory and legislative change — The Company cites changes in federal and state legislation and regulation among the factors that could cause results to differ from expectations, and the Bank is supervised by the IDFI and FDIC while the Company is a financial holding company supervised by the Federal Reserve Bank of St. Louis.

Outlook

The 8-K earnings release and the provided filing excerpts do not include specific management guidance for future periods, and the 10-K states that First Capital does not undertake to update forward-looking statements except as required by law. Reported trends through the first half of 2026 show a higher tax-equivalent net interest margin and lower cost of interest-bearing liabilities compared with the prior-year period, alongside higher noninterest expenses and a higher effective tax rate. Management flags deposit flows, loan delinquency rates, competitive pricing and changes in regulation as factors that could affect future results.