First Capital(FCAP) - 2024 Q1 - Quarterly Results

Financial Highlights First Capital, Inc. reported a net income of $3.0 million, or $0.88 per diluted share, for the first quarter of 2024, a decrease from $3.8 million, or $1.14 per diluted share, in the prior-year period Q1 2024 vs Q1 2023 Earnings Summary | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Income | $3.0 million | $3.8 million | | Diluted EPS | $0.88 | $1.14 | Analysis of Operations (Q1 2024 vs. Q1 2023) The company's Q1 2024 operational performance was impacted by decreased net interest income due to rising interest expenses, increased noninterest expenses, and a partially offsetting decrease in income tax expense Net Interest Income Net interest income after provision for credit losses decreased by $678,000 year-over-year, primarily due to a $2.2 million increase in interest expense, compressing the tax-equivalent net interest margin to 3.14% Net Interest Income and Margin Analysis (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Interest Income | $8.60 million | $9.19 million | | Interest Income | $11.84 million | $10.19 million | | Interest Expense | $3.24 million | $1.00 million | | Tax-Equivalent Net Interest Margin | 3.14% | 3.38% | - The increase in interest expense was driven by a rise in the average cost of interest-bearing liabilities from 0.51% to 1.55% and an increase in average balances from $788.2 million to $833.7 million[3] - The company utilized new borrowings in Q1 2024, with average outstanding balances of $3.4 million from FHLB and $31.9 million from the Federal Reserve's BTFP, which were not present in Q1 2023[3] Provision for Credit Losses The provision for credit losses increased to $280,000 in Q1 2024 due to loan growth and macroeconomic uncertainty, while net charge-offs significantly decreased to $55,000 Credit Loss Provision and Net Charge-offs (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Provision for Credit Losses | $280,000 | $193,000 | | Net Charge-offs | $55,000 | $203,000 | Noninterest Income Noninterest income decreased by $92,000 year-over-year, primarily due to a swing from a gain to a loss on equity securities and lower ATM/debit card fees, partially offset by other income increases - Key drivers for the decrease in noninterest income include a $27,000 drop in ATM/debit card fees and a significant swing in equity securities results, from a $137,000 gain in Q1 2023 to a $68,000 loss in Q1 2024[5] - Partially offsetting factors included a $32,000 gain on the sale of available-for-sale securities, a $58,000 increase in other income, and a $31,000 rise in service charges on deposit accounts[5] Noninterest Expense Noninterest expense increased by $356,000 compared to Q1 2023, driven primarily by higher other expenses, professional fees, compensation and benefits, and data processing expenses Key Increases in Noninterest Expense (Q1 2024 vs Q1 2023) | Expense Category | Increase Amount | | :--- | :--- | | Other Expenses | $163,000 | | Professional Fees | $73,000 | | Compensation and Benefits | $54,000 | | Data Processing Expenses | $45,000 | Income Tax Expense Income tax expense decreased by $262,000 year-over-year due to increased benefits from tax credit entity investments, resulting in a lower effective tax rate of 14.6% Income Tax Analysis (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Income Tax Expense | $507,000 | $769,000 | | Effective Tax Rate | 14.6% | 16.8% | Financial Position (as of March 31, 2024) As of March 31, 2024, total assets remained stable at $1.16 billion, with increased net loans and cash offset by decreased securities and deposits, while BTFP borrowings rose Balance Sheet Highlights (vs. Dec 31, 2023) | Account | March 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | $1.16 billion | $1.16 billion | | Net Loans Receivable | $621.38 million | $614.41 million | | Deposits | $1.01 billion | $1.03 billion | | Borrowed Funds (BTFP) | $33.6 million | $21.5 million | | Nonperforming Assets | $1.7 million | $1.8 million | Consolidated Financial Highlights (Unaudited) This section presents detailed unaudited consolidated financial data for the three months ended March 31, 2024, including operating results, key ratios, and balance sheet information Consolidated Operating Data (Three Months Ended March 31) | (Dollars in thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Total interest income | $11,837 | $10,187 | | Total interest expense | $3,237 | $996 | | Net interest income | $8,600 | $9,191 | | Provision for credit losses | $280 | $193 | | Total non-interest income | $1,899 | $1,991 | | Total non-interest expense | $6,757 | $6,401 | | Income before income taxes | $3,462 | $4,588 | | Income tax expense | $507 | $769 | | Net income | $2,955 | $3,819 | Consolidated Balance Sheet Information | (Dollars in thousands) | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total assets | $1,156,555 | $1,157,880 | | Gross loans | $629,607 | $622,414 | | Deposits | $1,010,092 | $1,025,211 | | Borrowed funds | $33,625 | $21,500 | | Stockholders' equity | $105,725 | $105,233 | Reconciliation of GAAP and Non-GAAP Financial Measures This section reconciles non-GAAP financial measures, such as annualized return on average assets and equity, to comparable GAAP measures for enhanced performance analysis and industry comparison - Management uses non-GAAP measures like annualized return on average assets, annualized return on average equity, and annualized net overhead expense as a percentage of average assets to analyze performance and believes they provide a better understanding of ongoing operations[20] Non-GAAP Reconciliation (Annualized Ratios) | Three Months Ended March 31, | 2024 | 2023 | | :--- | :--- | :--- | | Annualized return on average assets | 1.03% | 1.34% | | Return on average assets before annualization | 0.26% | 0.34% | | Annualized return on average equity | 11.25% | 17.34% | | Return on average equity before annualization | 2.81% | 4.34% | Cautionary Note Regarding Forward-Looking Statements This section advises that forward-looking statements are subject to risks and uncertainties, including economic and regulatory changes, and are not guarantees of future performance - Forward-looking statements are based on current beliefs and expectations, not historical facts, and are subject to significant risks and uncertainties[12] - Factors that could cause different results include economic conditions, market interest rates, competition, and legislative or regulatory changes[13]