FIRST CAPITAL INC Annual Report - How They Did This Year

I’ve put together this guide to help you understand how First Capital Inc., the parent company of First Harrison Bank, performed this year. My goal is to cut through the corporate jargon so you can decide if this company fits your investment goals.

1. What does this company do?

First Capital is a community bank based in Corydon, Indiana. Instead of acting like a global investment firm, they take deposits from local neighbors and use that money to fund home, construction, and business loans. They have shifted from being a traditional home-loan lender to a modern commercial bank focused on business lending. For the year ending December 31, 2025, the company earned $14.2 million in profit, showing that this business-focused model is working.

2. Where they operate

The bank focuses on its own backyard. They operate 18 locations across five counties in Indiana and Kentucky. They hold the top spot for deposit market share in Harrison County, Indiana, and Bullitt County, Kentucky. This local dominance acts as a "moat," helping them compete against massive national banks. By staying local, they understand credit risks better than their national competitors.

3. How they are lending (The 2025 Update)

The bank’s loan portfolio grew from $639 million in 2024 to $663 million in 2025. Here is the big shift:

• Commercial Real Estate: This remains their biggest focus, growing from $185.3 million to $205.5 million.
• Multifamily Residential: This area nearly doubled, growing from $37.1 million to $69.6 million.
• Construction: They pulled back here, dropping from $76 million to $41.1 million. This move reduces their exposure to the risks and ups-and-downs common in construction projects.

4. Loan Quality and "Rainy Day" Safety

The bank is proactive about safety. They increased their "rainy day fund" (money set aside for bad loans) to $10.1 million, up from $9.3 million last year. Even as they grow, the percentage of loans where the borrower stopped paying dropped from 0.69% to 0.64%. For every $1 of unpaid loans, they have $2.32 in reserve, providing a strong buffer against potential losses.

5. Financial Health: Deposits and Borrowing

The bank is in a strong position. They didn't need to borrow from the Federal Reserve or other banks in 2025; they are entirely funded by local deposits.

• Deposit Growth: Total deposits grew from $1.06 billion to $1.12 billion, providing a stable, low-cost funding base.
• Capital Strength: The bank uses a safety score called the Community Bank Leverage Ratio. They hit 11.01% in 2025, well above the 9% threshold required to be considered "well-capitalized."

6. Real-World Risks & Investor Considerations

• Dividends: While they paid a quarterly dividend of $0.26 per share in 2025, future payouts depend on profit and regulatory approval.
• Talent: The bank relies on its local team. If key managers leave, they could take important customer relationships with them, which would impact the business.
• Issuing Shares: The company may issue more shares to raise money. If they do, your ownership percentage in the company will shrink.
• Cybersecurity: They face constant digital threats. A major breach could lead to fines, lawsuits, and a loss of community trust.
• Interest Rates: As a bank, their profit margins are sensitive to Federal Reserve rate changes. If rates shift, the gap between what they pay depositors and what they earn on loans could shrink, affecting their bottom line.

Final Thought for Investors: First Capital Inc. is currently operating as a stable, locally-focused institution with a clear shift toward commercial lending. When considering this investment, weigh their strong capital position and local market dominance against the inherent risks of interest rate sensitivity and the potential for future share dilution.