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FIRST CAPITAL INC

FCAP
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Business Summary

First Capital, Inc. operates as a financial holding company for First Harrison Bank, an Indiana-chartered commercial bank. The Bank considers Harrison, Floyd, Clark and Washington counties in Indiana and Bullitt County in Kentucky its primary market area, with all offices located in these five counties. Based on data published by the FDIC, the Bank is the leader in FDIC-insured institutions in deposit market share in Harrison County, Indiana, which includes the Bank's main office, and in Bullitt County, Kentucky, where Peoples was headquartered. The Bank aggressively competes for business with local banks, as well as large regional banks, and its most direct competition for deposit and loan business comes from the commercial banks operating in these five counties.

The Bank is the leader in FDIC-insured institutions in deposit market share in Harrison County, Indiana, and in Bullitt County, Kentucky. The Bank's primary competitors are local banks and large regional banks operating in its five-county primary market area. The Company's competitive advantages include its status as an independent community-oriented financial institution delivering quality customer service, its commitment to customer needs, and community service and support, which management identifies as keys to past and future success.

The Company's primary business activity is the ownership of the outstanding common stock of the Bank. The Bank generates revenue primarily by attracting deposits from the general public and using those funds to originate residential mortgage loans, multi-family residential loans, commercial real estate and business loans and consumer loans. The Bank invests excess liquidity primarily in interest-bearing deposits with the FHLB and other financial institutions, federal funds sold, U.S. government and agency securities, local municipal obligations and mortgage-backed securities. The Company has no other material income other than that generated by the Bank and its subsidiaries.

The Bank's lending activities concentrate on the origination of residential mortgages, including those secured by 1-4 family residential and multifamily properties, both for sale in the secondary market and for retention in the Bank's loan portfolio. The Bank offers both fixed-rate mortgage loans and adjustable rate mortgage loans typically with terms of 15 to 30 years. For the year ended December 31, 2025, the Bank originated and funded $41.8 million of residential mortgage loans for sale in the secondary market. The Bank also originates construction loans for residential properties and, to a lesser extent, commercial properties. At December 31, 2025, the Bank had approved speculative construction loans with total commitments of $6.8 million and outstanding balances of $3.1 million . Commercial real estate loans are generally secured by small retail stores, professional office space, warehouses, industrial buildings, and farm properties, originated with an LTV ratio not to exceed 75% of the appraised value. Commercial business loans are generally secured by inventory, accounts receivable, and business equipment, with approved credit lines totaling $39.3 million at December 31, 2025, of which $11.9 million was outstanding. The Bank offers a variety of secured or guaranteed consumer loans, including automobile and truck loans, home equity loans, home improvement loans, boat loans, mobile home loans and loans secured by savings deposits.

The Bank's securities portfolio includes U.S. Agency notes and bonds, U.S. Treasury notes and bonds, mortgage-backed securities and CMOs, and municipal obligations classified as available for sale, with a fair value of $417.190 million at December 31, 2025. The Bank also holds securities held to maturity consisting of corporate notes with a carrying value of $7.000 million at December 31, 2025. The Bank's deposit products include non-interest bearing checking accounts, NOW accounts, money market accounts, regular savings accounts, certificates of deposit and retirement savings plans. Total deposits were $1.122990 billion at December 31, 2025. The Bank also has access to advances from the FHLB and the FRB's Discount Window for borrowings, though it had no outstanding borrowings at December 31, 2025.

On August 29, 2025, the Company entered into a Joint Rule 10b5-1/Rule 10b-18 Plan Agreement under which the Company's designated broker has the authority to repurchase up to 113,236 shares of common stock of the Company. The Plan commenced on September 4, 2025, and expires on August 28, 2026. During the quarter ended December 31, 2025, 12,039 shares were purchased under the stock repurchase program at an average price of $43.42 per share. The maximum number of shares that may yet be purchased under the plan is 99,989 . The Company paid dividends of $1.20 per share in 2025. The Company also dissolved its wholly-owned insurance subsidiary, FHB Risk Mitigation Services, Inc. (Captive), on December 31, 2023, after the IRS issued proposed regulations that may have resulted in the Captive being considered a listed transaction.

Net income attributable to the Company was $16.367 million , or $4.89 per diluted share for 2025, compared to $11.940 million , or $3.57 per diluted share for 2024. Total revenues, consisting of net interest income plus noninterest income, were $50.615 million in 2025 compared to $43.446 million in 2024. Return on average assets for 2025 was 1.34% compared to 1.02% for 2024, and return on average equity for 2025 was 13.18% compared to 10.97% for 2024. The efficiency ratio was 58.4% for 2025 compared to 64.1% for 2024. Total annual shareholder return, including the increase in the Company's stock price from $32.25 at December 31, 2024 to $59.20 at December 31, 2025 and dividends of $1.20 per share, was 87.3% for 2025.

Business Outlook

Management intends to continue to focus on growth in the loan portfolio and the secondary market lending programs in the Bank's market areas. The Bank will continue to emphasize commercial real estate and other commercial business lending as well as consumer lending, and will also continue to focus on increasing secondary market lending as a source of noninterest income. The Company is evaluating growth opportunities to expand the Bank's market area and market share through acquisitions of other financial institutions or branches of other institutions. The focus in 2026 will be to continue the enhancement and expansion of customer relationships in these and surrounding markets.

The Company continues to implement recommendations from a previously completed profit improvement project conducted by an outside consulting firm that management believes will improve overall profitability in future periods through increased noninterest income and decreased noninterest expenses. Management will continue to focus on maintaining a reduced level of nonperforming assets through improved collection efforts and underwriting on nonperforming loans. The Company also continues to evaluate vendor contracts for potential cost savings and efficiencies.

The Company is improving profitability by expanding product offerings to customers and leveraging recent investments in technology to increase the productivity and efficiency of staff. The Company continues to implement recommendations from a previously completed profit improvement project to improve overall profitability. The Company also continues to evaluate vendor contracts for potential cost savings and efficiencies.

The Company's capital management strategy to enhance shareholder value includes the repurchase of Company stock and the payment of dividends. On August 29, 2025, the Company entered into a Joint Rule 10b5-1/Rule 10b-18 Plan Agreement under which the Company's designated broker has the authority to repurchase up to 113,236 shares of common stock. The Plan commenced on September 4, 2025, and expires on August 28, 2026. The Company paid dividends of $1.20 per share in 2025.

The Company's operating strategy includes monitoring asset quality and credit risk in the loan and investment portfolios and originating high-quality commercial and consumer loans. In 2026, management will continue to focus on maintaining a reduced level of nonperforming assets through improved collection efforts and underwriting on nonperforming loans. The Company also faces risks from strong competition within its market area, which has made it more difficult to make new loans and at times has forced the Bank to offer higher deposit rates.

The Company's business may be adversely affected by conditions in the financial markets and economic conditions generally, particularly in its geographically concentrated five-county market area. Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity, or investor or business confidence; limitations on the availability or increases in the cost of credit and capital; increases in inflation or interest rates; high unemployment; natural disasters; or a combination of these or other factors. The Company is also subject to extensive regulation, supervision and examination by the Federal Reserve Board, IDFI and FDIC, and any change in regulation or oversight may have a material impact on operations.

Risk Factors

The Company faces significant credit risk from its commercial real estate loan portfolio of $207.1 million , or 31.2% of total loans at December 31, 2025, and its commercial business loan portfolio of $62.0 million , or 9.4% of total loans, both of which are inherently riskier than residential mortgage lending and may be affected by adverse conditions in the real estate market or the economy. The Bank's loan portfolio includes $308.8 million , or 46.6% of total loans, with fixed interest rates, exposing the Company to above-average interest rate risk in a rising rate environment as these loans do not reprice to market. The Company's nonperforming loans totaled $4.4 million at December 31, 2025, which adversely affect net income through foregone interest income and increased administration costs. The Company relies heavily on dividends from the Bank as its primary source of cash, and these dividends are subject to regulatory restrictions; Indiana law prohibits the Bank from paying dividends in an amount greater than its undivided profits, and the Bank must obtain regulatory approval if total dividends for a calendar year exceed the sum of its year-to-date net income combined with retained net income for the previous two years. The Company faces operational risks from reliance on third-party vendors for processing and handling of records and data, and any failure by these vendors to maintain adequate internal controls could result in a temporary disruption in the ability to conduct business.

Management Priorities

Management's discussion emphasizes the Company's transformation from a traditional thrift to a commercial bank, with a focus on commercial real estate and business lending, secondary market lending, and growing low-cost demand deposit accounts. Key forward-looking statements include the intention to continue focusing on growth in the loan portfolio and secondary market lending programs, maintaining a reduced level of nonperforming assets through improved collection efforts, and evaluating growth opportunities through acquisitions. The strategic priorities emphasized for the period ahead are: monitoring asset quality and credit risk; improving profitability by expanding product offerings and leveraging technology investments; continuing to emphasize commercial real estate, commercial business, and consumer lending; growing commercial and personal demand deposit accounts; continuing the capital management strategy through stock repurchases and dividends; and evaluating growth opportunities to expand market area and market share through acquisitions.

View Source Annual Report on SEC.gov ↗

References

  1. [1] Item 1, Business — Mortgage Banking Activities
  2. [2] Item 1, Business — Construction Loans
  3. [3] Item 1, Business — Construction Loans
  4. [4] Item 1, Business — Commercial Business Loans
  5. [5] Item 1, Business — Commercial Business Loans
  6. [6] Item 1, Business — Investment Activities
  7. [7] Item 1, Business — Investment Activities
  8. [8] Item 1, Business — Deposit Activities and Other Sources of Funds
  9. [9] Item 5, Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  10. [10] Item 5, Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  11. [11] Item 5, Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  12. [12] Item 5, Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  13. [13] Item 5, Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  14. [14] Item 7, MD&A — Selected Financial Data
  15. [15] Item 7, MD&A — Selected Financial Data
  16. [16] Item 7, MD&A — Selected Financial Data
  17. [17] Item 7, MD&A — Selected Financial Data
  18. [18] Item 7, MD&A — Selected Financial Data
  19. [19] Item 7, MD&A — Selected Financial Data
  20. [20] Item 7, MD&A — Selected Financial Ratios
  21. [21] Item 7, MD&A — Selected Financial Ratios
  22. [22] Item 7, MD&A — Selected Financial Ratios
  23. [23] Item 7, MD&A — Selected Financial Ratios
  24. [24] Item 7, MD&A — General
  25. [25] Item 7, MD&A — General
  26. [26] Item 5, Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  27. [27] Item 5, Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  28. [28] Item 5, Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  29. [29] Item 7, MD&A — General
  30. [30] Item 5, Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  31. [31] Item 5, Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  32. [32] Item 1, Business — Loan Portfolio Analysis
  33. [33] Item 1, Business — Loan Portfolio Analysis
  34. [34] Item 1, Business — Loan Portfolio Analysis
  35. [35] Item 1, Business — Loan Portfolio Analysis
  36. [36] Item 1A, Risk Factors — Above Average Interest Rate Risk Associated with Fixed-Rate Loans
  37. [37] Item 1A, Risk Factors — Above Average Interest Rate Risk Associated with Fixed-Rate Loans
  38. [38] Item 1, Business — Nonperforming Assets
  39. [39] Item 7, MD&A — Selected Financial Data
  40. [40] Item 7, MD&A — Selected Financial Data
  41. [41] Item 7, MD&A — Selected Financial Data
  42. [42] Item 7, MD&A — Selected Financial Data
  43. [43] Item 7, MD&A — Selected Financial Data
  44. [44] Item 7, MD&A — Selected Financial Data
  45. [45] Item 7, MD&A — Selected Financial Data
  46. [46] Item 7, MD&A — Selected Financial Data
  47. [47] Item 7, MD&A — Results of Operations
  48. [48] Item 7, MD&A — Results of Operations
  49. [49] Item 7, MD&A — Selected Financial Data
  50. [50] Item 7, MD&A — Selected Financial Data
  51. [51] Item 7, MD&A — Selected Financial Data
  52. [52] Item 7, MD&A — Selected Financial Data
  53. [53] Item 7, MD&A — Selected Financial Data
  54. [54] Item 7, MD&A — Selected Financial Data
  55. [55] Item 7, MD&A — Selected Financial Ratios
  56. [56] Item 7, MD&A — Selected Financial Ratios
  57. [57] Item 7, MD&A — Selected Financial Ratios
  58. [58] Item 7, MD&A — Selected Financial Ratios
  59. [59] Item 1, Business — ACL on Loans Analysis
  60. [60] Item 1, Business — ACL on Loans Analysis
  61. [61] Item 1, Business — ACL on Loans Analysis
  62. [62] Item 1, Business — ACL on Loans Analysis
  63. [63] Item 1, Business — Nonperforming Assets
  64. [64] Item 7, MD&A — Selected Financial Ratios
  65. [65] Item 7, MD&A — Selected Financial Ratios
  66. [66] Item 7, MD&A — Selected Financial Data
  67. [67] Item 7, MD&A — Selected Financial Data
  68. [68] Item 7, MD&A — Selected Financial Data
  69. [69] Item 7, MD&A — Selected Financial Data

Analysis on 6/21/2026