FCAP

First Capital Inc. Q1 2026 Filing Summary

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended March 31, 2026. First Capital, Inc. is the financial holding company for First Harrison Bank, an Indiana-chartered commercial bank. The company operates as a non-accelerated filer and a smaller reporting company. As of April 30, 2026, there were 3,345,531 shares of common stock outstanding.

Key Financial Metrics

Material Changes vs. Prior Period

• Profitability: Net income increased 34% year-over-year, driven by a $1.8 million increase in net interest income after provision. The tax-equivalent net interest margin expanded to 3.81% from 3.34% due to higher yields on earning assets (4.96% vs 4.63%) and a lower cost of interest-bearing liabilities (1.56% vs 1.71%).
• Asset Growth: Total assets grew $12.2 million quarter-over-quarter. Net loans increased $10.3 million, led by growth in commercial business ($4.1 million), other construction/development ($6.5 million), and multifamily residential ($1.6 million) loans.
• Deposit Growth: Total deposits increased $13.6 million, primarily due to inflows in savings accounts and time deposits, partially offset by a decline in noninterest-bearing checking accounts.
• Investment Portfolio: Securities available for sale decreased $9.4 million due to sales and unrealized losses. An unrealized loss of $3.9 million was recognized on the portfolio due to rising market interest rates.
• Expense Management: Noninterest expenses rose $572,000 year-over-year, primarily due to increases in professional fees ($241,000), compensation and benefits ($235,000), and consumer fraud losses ($99,000).

Outlook, Risks, and Management Commentary

• Capital Position: The Bank opted into the Community Bank Leverage Ratio (CBLR) framework, reporting a ratio of 11.13% as of March 31, 2026, exceeding the 9% minimum requirement. The Bank remains "well-capitalized."
• Liquidity: The company maintains strong liquidity with $149.6 million in cash and cash equivalents and $407.8 million in securities available for sale. Borrowing capacity with the FHLB stands at $81.3 million based on pledged collateral.
• Interest Rate Risk: Management utilizes Net Interest Income at Risk and Economic Value of Equity (EVE) models. Simulations indicate that a 100-300 basis point increase in rates would increase net interest income, while a decrease would reduce it. EVE is projected to increase with a 100-200 basis point rate hike but decrease with a 300 basis point hike.
• Risk Factors: No material changes to risk factors were disclosed, though management noted potential impacts from international trade regulations and tariffs on inflation and borrower performance.
• Unusual Items: The company recognized a $92,000 loss on the sale of available-for-sale securities to reposition the portfolio for higher future yields. Additionally, consumer fraud losses contributed to the increase in other expenses.

Investor Verification Checklist

• Net Interest Margin Sustainability: Verify if the 3.81% margin is sustainable given the competitive pressure on deposit rates mentioned in management commentary.
• Unrealized Losses: Review the $3.9 million unrealized loss on securities available for sale and assess the impact of continued interest rate volatility on equity.
• Loan Quality Trends: Monitor the allowance for credit losses ($10.35 million) against net charge-offs ($111,000) and the composition of nonperforming loans ($4.03 million total).
• Expense Growth: Investigate the drivers behind the $241,000 increase in professional fees and the rise in consumer fraud losses.
• Capital Ratios: Confirm the Bank's continued compliance with the Community Bank Leverage Ratio (CBLR) framework in subsequent quarters.