First Capital(FCAP) - 2025 Q2 - Quarterly Results

Executive Summary Company Overview First Capital, Inc. (FCAP) reported increased net income and EPS for Q2 and H1 2025, reflecting strong performance from First Harrison Bank - First Capital, Inc. (NASDAQ: FCAP) is the holding company for First Harrison Bank[2] Net Income and Diluted EPS Summary | Metric | Q2 2025 | Q2 2024 | Change | H1 2025 | H1 2024 | Change | | :-------------------- | :------ | :------ | :----- | :------ | :------ | :----- | | Net Income (millions) | $3.8 | $2.8 | +$1.0M | $7.0 | $5.8 | +$1.2M | | Diluted EPS | $1.13 | $0.85 | +$0.28 | $2.09 | $1.73 | +$0.36 | Results of Operations - Three Months Ended June 30, 2025 and 2024 Net Income and Earnings Per Share (EPS) Q2 2025 net income and diluted EPS increased, driven by improved net interest income and lower credit loss provisions Q2 Net Income and Diluted EPS | Metric | Q2 2025 | Q2 2024 | Change | | :-------------------- | :------ | :------ | :----- | | Net Income (millions) | $3.8 | $2.8 | +$1.0M | | Diluted EPS | $1.13 | $0.85 | +$0.28 | Net Interest Income and Margin Q2 net interest income after credit loss provision increased by $1.8 million, driven by higher asset yield and balance, significantly improving net interest margin - Net interest income after provision for credit losses increased by $1.8 million for Q2 2025 compared to Q2 2024[3] Q2 Net Interest Income and Margin Components | Metric | Q2 2025 | Q2 2024 | Change | | :------------------------------------ | :------ | :------ | :----- | | Average Tax-Equivalent Yield on IEAs | 4.82% | 4.42% | +0.40% | | Average Balance of IEAs (billions) | $1.18 | $1.12 | +$0.06B | | Average Cost of Interest-Bearing Liab | 1.64% | 1.71% | -0.07% | | Average Balance of Interest-Bearing Liab (millions) | $883.8 | $830.7 | +$53.1M | | Tax-Equivalent Net Interest Margin | 3.59% | 3.15% | +0.44% | Provision for Credit Losses The provision for credit losses decreased in Q2 2025 compared to Q2 2024, while net charge-offs increased Q2 Provision for Credit Losses and Net Charge-offs | Metric | Q2 2025 | Q2 2024 | Change | | :-------------------------- | :------ | :------ | :----- | | Provision for Credit Losses | $306,000 | $360,000 | -$54,000 | | Net Charge-offs | $113,000 | $30,000 | +$83,000 | Noninterest Income Q2 noninterest income slightly decreased, mainly due to larger equity securities losses, partially offset by a bank-owned life insurance policy redemption gain - Noninterest income decreased by $5,000 for Q2 2025 compared to Q2 2024[5] - Loss on equity securities: $41,000 in Q2 2025 vs. $6,000 in Q2 2024 - Decrease of $17,000 in both gains on sale of loans and increase in cash surrender value of bank-owned life insurance policies - Partially offset by a $46,000 gain on the redemption of a bank-owned life insurance policy in Q2 2025 Noninterest Expenses Q2 noninterest expenses increased due to higher compensation, occupancy, advertising, and data processing costs, reflecting adjustments and system upgrades - Noninterest expenses increased by $494,000 for Q2 2025 compared to Q2 2024[6] - Compensation and benefits increased by $308,000 (due to salary/wage adjustments and health insurance costs) - Occupancy and equipment increased by $69,000 (due to call center system upgrade and ATM servicing) - Advertising increased by $41,000 (due to new marketing efforts) - Data processing expenses increased by $41,000 (due to licensing upgrades and new software) Income Tax Expense Q2 income tax expense increased, resulting in a higher effective tax rate due to a larger proportion of net income being taxable Q2 Income Tax Expense and Effective Tax Rate | Metric | Q2 2025 | Q2 2024 | Change | | :------------------ | :------ | :------ | :----- | | Income Tax Expense | $364,000 | N/A | +$364,000 | | Effective Tax Rate | 18.4% | 14.7% | +3.7% | Results of Operations - Six Months Ended June 30, 2025 and 2024 Net Income and Earnings Per Share (EPS) H1 2025 net income and diluted EPS increased, driven by higher net interest income, despite increased credit loss provisions and noninterest expenses H1 Net Income and Diluted EPS | Metric | H1 2025 | H1 2024 | Change | | :-------------------- | :------ | :------ | :----- | | Net Income (millions) | $7.0 | $5.8 | +$1.2M | | Diluted EPS | $2.09 | $1.73 | +$0.36 | Net Interest Income and Margin H1 net interest income after credit loss provision increased by $2.7 million, driven by higher asset yield and balance, improving net interest margin - Net interest income after provision for credit losses increased by $2.7 million for H1 2025 compared to H1 2024[9] H1 Net Interest Income and Margin Components | Metric | H1 2025 | H1 2024 | Change | | :------------------------------------ | :------ | :------ | :----- | | Average Tax-Equivalent Yield on IEAs | 4.73% | 4.36% | +0.37% | | Average Balance of IEAs (billions) | $1.18 | $1.12 | +$0.06B | | Average Cost of Interest-Bearing Liab | 1.67% | 1.63% | +0.04% | | Average Balance of Interest-Bearing Liab (millions) | $883.2 | $832.2 | +$51.0M | | Tax-Equivalent Net Interest Margin | 3.47% | 3.15% | +0.32% | Provision for Credit Losses H1 provision for credit losses slightly increased due to loan growth and macroeconomic uncertainty, alongside a notable increase in net charge-offs H1 Provision for Credit Losses and Net Charge-offs | Metric | H1 2025 | H1 2024 | Change | | :-------------------------- | :------ | :------ | :----- | | Provision for Credit Losses | $644,000 | $640,000 | +$4,000 | | Net Charge-offs | $197,000 | $85,000 | +$112,000 | - The increase in provision for credit losses was due to loan growth and management's consideration of macroeconomic uncertainty[11] Noninterest Income H1 noninterest income decreased, mainly due to a loss on sale of available-for-sale securities and lower loan sale gains, partially offset by a policy redemption gain - Noninterest income decreased by $56,000 for H1 2025 compared to H1 2024[12] - Loss on sale of available-for-sale securities: $55,000 in H1 2025 vs. $32,000 gain in H1 2024 - Decrease of $29,000 in gains on sale of loans - Partially offset by a $51,000 reduction in loss on equity securities, a $24,000 increase in service charges on deposit accounts, and a $46,000 gain on redemption of a bank-owned life insurance policy Noninterest Expenses H1 noninterest expenses increased significantly, driven by higher compensation, benefits, occupancy, and equipment costs, reflecting adjustments and system upgrades - Noninterest expenses increased by $918,000 for H1 2025 compared to H1 2024[13] - Compensation and benefits increased by $567,000 (due to salary/wage adjustments and health insurance costs) - Occupancy and equipment increased by $229,000 (due to snow removal costs, loss on disposal of premises/equipment, call center system upgrade, and increased ATM servicing expense) Income Tax Expense H1 income tax expense increased, resulting in a higher effective tax rate due to a larger proportion of net income being taxable H1 Income Tax Expense and Effective Tax Rate | Metric | H1 2025 | H1 2024 | Change | | :------------------ | :------ | :------ | :----- | | Income Tax Expense | $529,000 | N/A | +$529,000 | | Effective Tax Rate | 17.9% | 14.7% | +3.2% | Financial Condition - June 30, 2025 vs December 31, 2024 Balance Sheet Overview Total assets increased to $1.24 billion at June 30, 2025, driven by increases in cash, net loans, and securities, with significant deposit growth Balance Sheet Overview | Metric | June 30, 2025 (billions) | Dec 31, 2024 (billions) | Change (millions) | | :-------------------------- | :----------------------- | :---------------------- | :---------------- | | Total Assets | $1.24 | $1.19 | +$50 | | Cash & Cash Equivalents | N/A | N/A | +$28.7 | | Net Loans Receivable | N/A | N/A | +$18.0 | | Securities Available for Sale | N/A | N/A | +$6.3 | | Deposits | $1.11 | $1.07 | +$44.2 | Asset Quality Nonperforming assets decreased from December 31, 2024, indicating an improvement in asset quality Asset Quality Overview | Metric | June 30, 2025 (millions) | Dec 31, 2024 (millions) | Change (millions) | | :------------------ | :----------------------- | :---------------------- | :---------------- | | Nonperforming Assets | $4.0 | $4.5 | -$0.5 | Financial Statements and Reconciliations Consolidated Financial Highlights Key operating and financial data for Q2 and H1 2025 and 2024, and balance sheet information for June 30, 2025 and December 31, 2024, are summarized Consolidated Financial Highlights - Operating Data | OPERATING DATA (Dollars in thousands) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------------------------------ | :------ | :------ | :------ | :------ | | Total interest income | $14,040 | $12,218 | $27,386 | $24,055 | | Total interest expense | $3,628 | $3,561 | $7,393 | $6,798 | | Net interest income | $10,412 | $8,657 | $19,993 | $17,257 | | Provision for credit losses | $306 | $360 | $644 | $640 | | Net income attributable to FCAP | $3,775 | $2,828 | $7,010 | $5,780 | | Diluted EPS | $1.13 | $0.85 | $2.09 | $1.73 | | Cash dividends per share | $0.29 | $0.27 | $0.58 | $0.54 | | Return on average assets (annualized) | 1.24% | 0.99% | 1.16% | 1.01% | | Return on average equity (annualized) | 12.59% | 10.78% | 11.86% | 11.03% | | Net interest margin (tax-equivalent) | 3.59% | 3.15% | 3.47% | 3.15% | Consolidated Financial Highlights - Balance Sheet Information | BALANCE SHEET INFORMATION (Dollars in thousands) | June 30, 2025 | Dec 31, 2024 | | :----------------------------------------------- | :------------ | :----------- | | Total assets | $1,242,687 | $1,187,523 | | Deposits | $1,110,627 | $1,066,439 | | Stockholders' equity | $123,200 | $114,599 | | Allowance for credit losses as % of gross loans | 1.48% | 1.45% | | Nonaccrual loans | $3,992 | $4,382 | | Community Bank Leverage Ratio (Bank only) | 10.80% | 10.57% | Consolidated Average Balance Sheets (Three Months) Average balances, interest income/expense, and yields/costs for interest-earning assets and liabilities for Q2 2025 and 2024 are detailed, showing net interest income and margin components Consolidated Average Balance Sheets (Three Months) | (Dollars in thousands) | Q2 2025 Avg Balance | Q2 2025 Interest | Q2 2025 Yield/Cost | Q2 2024 Avg Balance | Q2 2024 Interest | Q2 2024 Yield/Cost | | :--------------------- | :------------------ | :--------------- | :----------------- | :------------------ | :--------------- | :----------------- | | Total interest earning assets | $1,182,018 | $14,241 | 4.82% | $1,121,842 | $12,405 | 4.42% | | Total interest bearing liabilities | $883,761 | $3,628 | 1.64% | $830,717 | $3,561 | 1.71% | | Net interest income (tax-equivalent basis) | N/A | $10,613 | N/A | N/A | $8,844 | N/A | | Net interest margin (tax-equivalent basis) | N/A | N/A | 3.59% | N/A | N/A | 3.15% | Consolidated Average Balance Sheets (Six Months) Average balances, interest income/expense, and yields/costs for interest-earning assets and liabilities for H1 2025 and 2024 are presented, offering a comprehensive view of interest rate dynamics Consolidated Average Balance Sheets (Six Months) | (Dollars in thousands) | H1 2025 Avg Balance | H1 2025 Interest | H1 2025 Yield/Cost | H1 2024 Avg Balance | H1 2024 Interest | H1 2024 Yield/Cost | | :--------------------- | :------------------ | :--------------- | :----------------- | :------------------ | :--------------- | :----------------- | | Total interest earning assets | $1,175,733 | $27,783 | 4.73% | $1,121,487 | $24,443 | 4.36% | | Total interest bearing liabilities | $883,212 | $7,393 | 1.67% | $832,196 | $6,798 | 1.63% | | Net interest income (tax-equivalent basis) | N/A | $20,390 | N/A | N/A | $17,645 | N/A | | Net interest margin (tax-equivalent basis) | N/A | N/A | 3.47% | N/A | N/A | 3.15% | Reconciliation of GAAP and Non-GAAP Financial Measures Reconciliation of non-GAAP financial measures, including tax-equivalent net interest income and margin, to comparable GAAP measures is provided for better comparability - Non-GAAP measures are used by management for better comparability with prior periods and industry peers, and to provide a further understanding of the Company's ongoing operations[33] Reconciliation of GAAP and Non-GAAP Net Interest Measures | (Dollars in thousands) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------------------------------ | :------ | :------ | :------ | :------ | | Net interest income (GAAP) | $10,412 | $8,657 | $19,993 | $17,257 | | Tax-equivalent adjustment | $201 | $187 | $397 | $388 | | Tax-equivalent net interest income | $10,613 | $8,844 | $20,390 | $17,645 | | Net interest margin (GAAP) | 3.52% | 3.09% | 3.40% | 3.08% | | Net interest margin (tax-equivalent) | 3.59% | 3.15% | 3.47% | 3.15% | | Average yield on interest earning assets (GAAP) | 4.75% | 4.36% | 4.66% | 4.29% | | Average yield on interest earning assets (tax-equivalent) | 4.82% | 4.42% | 4.73% | 4.36% | | Average cost of interest bearing liabilities | 1.64% | 1.71% | 1.67% | 1.63% | | Interest rate spread (tax-equivalent) | 3.18% | 2.71% | 3.06% | 2.73% | Additional Information Company Profile and Branch Network First Harrison Bank operates 17 offices in Indiana and Kentucky, offering banking services including online banking and electronic bill payments via its website - The Bank operates 17 offices in Indiana (Corydon, Edwardsville, Greenville, Floyds Knobs, Palmyra, New Albany, New Salisbury, Jeffersonville, Salem, Lanesville, Charlestown) and Kentucky (Shepherdsville, Mt. Washington, Lebanon Junction)[16] - Access to First Harrison Bank accounts, including online banking and electronic bill payments, is available through www.firstharrison.com[17](index=17&type=chunk) Cautionary Note Regarding Forward-Looking Statements Forward-looking statements in this release are based on current beliefs and expectations, subject to risks and uncertainties, and the Company assumes no obligation to update them - Forward-looking statements are identified by words like 'anticipate,' 'believe,' 'expect,' 'intend,' 'could,' and 'should,' and are based on the Company's current beliefs, assumptions, and expectations[19] - Numerous risks and uncertainties, including general economic conditions, market interest rates, competition, regulatory changes, and loan quality, could cause actual results to differ materially[20] - Readers are cautioned not to place undue reliance on forward-looking statements, and the Company assumes no obligation to update them after the press release date[21] Contact Information Investor inquiries can be directed to Joshua P. Stevens, Chief Financial Officer - Contact: Joshua P. Stevens, Chief Financial Officer - Phone: 812-738-1570