FCAP

First Capital Inc. Q3 2025 Filing Summary

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended September 30, 2025, for First Capital, Inc. (FCAP), a financial holding company for First Harrison Bank, an Indiana-chartered commercial bank. The company is classified as a non-accelerated filer and a smaller reporting company. As of October 31, 2025, there were 3,347,627 shares of common stock outstanding.

Key Financial Metrics

Material Changes vs. Prior Period

• Profitability Surge: Net income increased 54% year-over-year for the quarter and 32% year-over-year for the nine-month period. This was driven by a 20% increase in net interest income and a 28% reduction in the provision for credit losses.
• Net Interest Margin (NIM) Expansion: The tax-equivalent NIM improved to 3.71% for Q3 2025 from 3.19% in Q3 2024, and 3.55% YTD 2025 from 3.16% YTD 2024. This resulted from higher yields on earning assets (4.94% vs 4.59% in Q3) and a lower cost of interest-bearing liabilities (1.66% vs 1.87% in Q3).
• Asset Growth: Total assets grew $48 million to $1.24 billion. Loans increased $11.1 million, led by growth in commercial real estate ($16.8M) and multifamily residential ($13.1M), partially offset by a $30.9M decrease in construction and land loans.
• Investment Portfolio: Securities available for sale increased $32.4 million to $421.6 million, driven by $108 million in purchases and a $12.1 million unrealized gain due to decreasing market interest rates.
• Expense Increases: Noninterest expenses rose $540,000 in Q3 and $1.5 million YTD. Increases were primarily due to occupancy costs (branch demolition/rebuilding) and compensation (cost of living adjustments and health insurance).

Guidance, Outlook, and Risks

• Capital Position: The Bank opted into the Community Bank Leverage Ratio (CBLR) framework, reporting a ratio of 10.82% as of September 30, 2025, exceeding the 9% minimum requirement. The Bank is considered "well-capitalized."
• Liquidity: The company maintains strong liquidity with $112.2 million in cash and equivalents and $421.6 million in available-for-sale securities. There were no outstanding borrowings from the FHLB or BTFP at period end.
• Interest Rate Risk: Simulation modeling indicates the company is asset-sensitive. A 100 basis point increase in rates is projected to increase Net Interest Income by 5.22% over a one-year horizon. Conversely, a 100 basis point decrease would reduce Net Interest Income by 5.32%.
• Risk Factors: Management notes risks related to general economic conditions, inflation, supply chain disruptions, and changes in monetary policy. There were no material changes to risk factors from the previous 10-K.
• Unusual Items: The increase in occupancy expenses included a loss on the disposal of premises and equipment associated with branch upgrades and demolition. The company recognized a $150,000 gain on equity securities in Q3 2025 compared to a $196,000 loss in the prior year.

Investor Verification Checklist

• Branch Renovation Costs: Verify the timeline and total capital impact of the Bullitt County branch demolition and rebuilding, which drove occupancy expense increases.
• Construction Loan Portfolio: Review the $30.9 million decrease in "Other Construction, Development and Land" loans to ensure it reflects strategic portfolio management rather than credit deterioration.
• Equity Security Valuation: Confirm the fair value and underlying performance of the equity securities that generated a $150,000 gain in Q3 2025.
• Deposit Mix Stability: Monitor the shift in deposit composition, specifically the $20 million decrease in interest-bearing checking accounts versus the $15.5 million increase in non-interest-bearing accounts.
• Stock Repurchase Plan: Track the execution of the Rule 10b5-1 plan, which authorized the repurchase of up to 113,236 shares through August 2026.