FIRST CAPITAL INC

Previous wording

The discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s consolidated financial statements that have been prepared in accordance with GAAP. The preparation of the Company’s financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, income and expenses. These estimates are based upon historical experience and on various other assumptions that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The estimates and judgments that management believes involve the most complex and subjective estimates and judgments and have the most effect on the Company’s reported financial position and results of operations are described as critical accounting policies in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. During the nine months ended September 30, 2025, there was no significant change in the Company’s critical account policies or the application of critical accounting policies as disclosed in the Company’s Annual report on Form 10-K for the year ended December 31, 2024.

Current wording

The discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s consolidated financial statements that have been prepared in accordance with GAAP. The preparation of the Company’s financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, income and expenses. These estimates are based upon historical experience and on various other assumptions that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The estimates and judgments that management believes involve the most complex and subjective estimates and judgments and have the most effect on the Company’s reported financial position and results of operations are described as critical accounting policies in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. During the three months ended March 31, 2026, there was no significant change in the Company’s critical account policies or the application of critical accounting policies as disclosed in the Company’s Annual report on Form 10-K for the year ended December 31, 2025.

Previous wording

Total assets increased $48.0 million from $1.19 billion at December 31, 2024 to $1.24 billion at September 30, 2025.

Current wording

Total assets increased $12.2 million from $1.27 billion at December 31, 2025 to $1.28 billion at March 31, 2026.

Previous wording

Net loans receivable (excluding loans held for sale) increased $11.1 million from $631.2 million at December 31, 2024 to $642.3 million at September 30, 2025. Commercial real estate, multifamily residential, 1-4 family residential mortgage, and home equity and second mortgage loans increases of $16.8 million, $13.1 million, $7.0 million, and $5.1 million, respectively, were partially offset by a decrease of $30.9 million in other construction, development and land loans during the nine months ended September 30, 2025.

Current wording

Net loans receivable (excluding loans held for sale) increased $10.3 million from $654.1 million at December 31, 2025 to $664.4 million at March 31, 2026. Other construction, development and land, commercial business, and multifamily loan increases of $6.5 million, $4.1 million, and $1.6 million, respectively, were partially offset by a decrease of $2.0 million in consumer and other loans during the three months ended March 31, 2026.

Previous wording

Cash and cash equivalents increased from $105.9 million at December 31, 2024 to $112.2 million at September 30, 2025 primarily due to net deposit inflows at the Bank which were partially offset by loan originations and purchases of available for sale securities.

Current wording

Cash and cash equivalents increased from $137.3 million at December 31, 2025 to $149.6 million at March 31, 2026 primarily due to net deposit inflows and sales of available for sale securities at the Bank which were partially offset by loan originations.

Previous wording

Securities available for sale increased $32.4 million from $389.2 million at December 31, 2024 to $421.6 million at September 30, 2025. Purchases of $108.0 million of securities classified as available for sale were made during the nine months ended September 30, 2025 and consisted primarily of U.S. government agency CMOs and mortgage-backed securities and municipal bonds. Principal payments and maturities of available for sale securities totaled $24.0 million and $45.1 million, respectively, during the nine months ended September 30, 2025. Securities classified as available for sale totaling $17.9 million were sold during the nine months ended September 30, 2025 and consisted primarily of municipal and U.S. government agency notes and bonds. In addition, there was an unrealized gain of $12.1 million on the securities available for sale portfolio during the nine month period ended September 30, 2025 due primarily to decreasing market interest rates.

Current wording

Securities available for sale decreased $9.4 million from $417.2 million at December 31, 2025 to $407.8 million at March 31, 2026. Purchases of $45.7 million of securities classified as available for sale were made during the three months ended March 31, 2026 and consisted primarily of U.S. government agency CMOs and mortgage-backed securities and municipal bonds. Principal payments and maturities of available for sale securities totaled $14.5 million and $17.8 million, respectively, during the three months ended March 31, 2026. Securities classified as available for sale totaling $18.7 million were sold during the three months ended March 31, 2026 and consisted primarily of municipal and U.S. government agency notes and bonds. In addition, there was an unrealized loss of $3.9 million on the securities available for sale portfolio during the three month period ended March 31, 2026 due primarily to increasing market interest rates.

Previous wording

Total deposits increased $28.3 million from $1.07 billion at December 31, 2024 to $1.09 billion at September 30, 2025. Time deposits, non-interest bearing checking accounts, and savings accounts increases of $28.9 million, $15.5 million, and $3.7 million, respectively, were partially offset by a decrease of $20.0 million in interest bearing checking accounts during the nine months ended September 30, 2025. Deposit inflows and outflows are influenced by prevailing market interest rates, competition, local and national economic conditions, and fluctuations in our customers’ own liquidity needs and may also be influenced by recent developments in the financial services industry.

Current wording

Total deposits increased $13.6 million from $1.12 billion at December 31, 2025 to $1.14 billion at March 31, 2026. Savings accounts and time deposit increases of $9.0 million and $5.4 million, respectively, were partially offset by a decrease of $1.5 million in non-interest bearing checking accounts during the three months ended March 31, 2026 Deposit inflows and outflows are influenced by prevailing market interest rates, competition, local and national economic conditions, and fluctuations in our customers’ own liquidity needs and may also be influenced by recent developments in the financial services industry.

Previous wording

Total stockholders’ equity attributable to the Company increased from $114.6 million at December 31, 2024 to $132.4 million at September 30, 2025, primarily due to a $9.3 million net unrealized gain on available for sale securities as well as an $8.5 million increase in retained net income. The net unrealized gain on available for sale securities during the period is primarily due to decreased market interest rates.

Current wording

Total stockholders’ equity attributable to the Company increased from $137.8 million at December 31, 2025 to $138.0 million at March 31, 2026, primarily due to a $3.3 million increase in retained net income partially offset by a $3.1 million net unrealized loss on available for sale securities. The net unrealized loss on available for sale securities during the period is primarily due to increased market interest rates.

Previous wording

**Net income.**Net income attributable to the Company was $4.5 million ($1.34 per diluted share) for the three months ended September 30, 2025 compared to $2.9 million ($0.87 per diluted share) for the three months ended September 30, 2024.

Current wording

**Net income.**Net income attributable to the Company was $4.3 million ($1.30 per diluted share) for the three months ended March 31, 2026 compared to $3.2 million ($0.97 per diluted share) for the three months ended March 31, 2025.

Previous wording

**Net interest income.**Net interest income after provision for credit losses increased $2.1 million for the three months ended September 30, 2025 as compared to the same period in 2024.

Current wording

**Net interest income.**Net interest income after provision for credit losses increased $1.8 million for the three months ended March 31, 2026 as compared to the same period in 2025.

Previous wording

Total interest income increased $1.4 million when comparing the two periods primarily due to an increase in the average tax-equivalent yield on interest-earning assets from 4.59% for the quarter ended September 30, 2024 to 4.94% for the same period in 2025, in addition to an increase in the average balance of interest-earning assets from $1.17 billion for the quarter ended September 30, 2024 to $1.20 billion for the same period in 2025.

Current wording

Total interest income increased $1.6 million when comparing the two periods primarily due to an increase in the average tax-equivalent yield on interest-earning assets from 4.63% for the first quarter of 2025 to 4.96% for the same period in 2026, in addition to an increase in the average balance of interest-earning assets from $1.17 billion for the first quarter of 2025 to $1.22 billion for the same period in 2026.

Previous wording

Total interest expense decreased $397,000 when comparing the two periods. The average cost of interest-bearing liabilities decreased from 1.87% for the quarter ended September 30, 2024 to 1.66% for the same period in 2025, while the average balance of interest-bearing liabilities increased from $875.8 million for the quarter ended September 30, 2024 to $891.3 million for the same period in 2025.

Current wording

Total interest expense decreased $259,000 when comparing the two periods. The average cost of interest-bearing liabilities decreased from 1.71% for the quarter ended March 31, 2025 to 1.56% for the same period in 2026, while the average balance of interest-bearing liabilities increased from $881.6 million for the quarter ended March 31, 2025 to $901.4 million for the same period in 2026.

Previous wording

As a result of the changes in interest-earning assets and interest-bearing liabilities, the tax-equivalent net interest margin increased from 3.19% for the quarter ended September 30, 2024 to 3.71% for the same period in 2025.

Current wording

As a result of the changes in interest-earning assets and interest-bearing liabilities, the tax-equivalent net interest margin increased from 3.34% for the quarter ended March 31, 2025 to 3.81% for the same period in 2026.

Previous wording

Provision for credit losses. Based on management’s analysis of the ACL on loans and unfunded loan commitments, the provision for credit losses decreased from $463,000 for the quarter ended September 30, 2024 to $150,000 for the quarter ended September 30, 2025. The Bank recognized net charge-offs of $17,000 and $64,000 for the quarters ended September 30, 2025 and 2024, respectively.

Current wording

Provision for credit losses. Based on management’s analysis of the ACL on loans and unfunded loan commitments, the provision for credit losses increased from $338,000 for the quarter ended March 31, 2025 to $350,000 for the quarter ended March 31, 2026. The Bank recognized net charge-offs of $111,000 and $84,000 for the quarters ended March 31, 2026 and 2025, respectively.

Previous wording

**Noninterest income.**Noninterest income increased $506,000 for the quarter ended September 30, 2025 as compared to the quarter ended September 30, 2024 primarily due to the Company recognizing a $150,000 gain on equity securities for the quarter ended September 30, 2025 compared to a $196,000 loss on equity securities for the quarter ended September 30, 2024. In addition, the Company recognized a $119,000 increase in gain on sale of loans as well as an increase of $47,000 in ATM and debit card fee income when comparing the two periods. These increases were partially offset by the Company recognizing a net $39,000 loss on the sale of available for sale securities during the quarter ended September 30, 2025. The Company did not sell any securities during the quarter ended September 30, 2024.

Current wording

**Noninterest income.**Noninterest income increased $200,000 for the quarter ended March 31, 2026 as compared to the quarter ended March 31, 2025 primarily due to the Company recognizing an increase of $160,000 in the gain on equity securities when comparing the two periods. In addition, the Company recognized increases of $45,000 and $44,000 in ATM and debit card fee income, and the gain on sale of loans, respectively, when comparing the two periods. These increases were partially offset by the Company recognizing a $92,000 loss on the sale of available for sale securities for the quarter ended March 31, 2026 compared to a loss of $55,000 for the same period in 2025. The loss on sale of available for sale securities during the quarter ended March 31, 2026 was a result of management’s decision to sell $18.7 million of available for sale securities to better position the Company’s investment portfolio for increased future yields.

Previous wording

**Noninterest expense.**Noninterest expenses increased $540,000 for the quarter ended September 30, 2025 as compared to the same period in 2024. This was primarily due to increases in occupancy and equipment and compensation and benefits expenses of $331,000 and $202,000, respectively. The increase in occupancy and equipment expenses is primarily due to costs for the demolition and subsequent rebuilding of one of the Bank’s Bullitt County branches in addition to a loss recognized for the remaining net book value of assets associated with the branch. The increase in compensation and benefits is due to increases in salary and wages associated with annual cost of living and performance related adjustments.

Current wording

**Noninterest expense.**Noninterest expenses increased $572,000 for the quarter ended March 31, 2026 as compared to the same period in 2025. This was primarily due to increases in professional services, compensation and benefits and other expenses of $241,000, $235,000 and $99,000, respectively. The increase in professional services is due to increased consulting fees. The increase in compensation and benefits is due to increases in salary and wages associated with annual cost of living and performance related adjustments as well as increases in the cost of Company-provided health insurance benefits. The increase in other expenses is primarily due to an increase in consumer fraud losses recognized for the quarter ended March 31, 2026 as compared to the same period in 2025.

Previous wording

Income tax expense. Income tax expense increased $530,000 for the quarter ended September 30, 2025 as compared to the same period in 2024 resulting in an effective tax rate of 19.2% for the quarter ended September 30, 2025, compared to 15.6% for the same period in 2024. The increase in the Bank’s effective tax rate for the quarter reflects a higher proportion of net income being subject to taxation compared to the same period last year.

Current wording

Income tax expense. Income tax expense increased $358,000 for the quarter ended March 31, 2026 as compared to the same period in 2025 resulting in an effective tax rate of 19.2% for the quarter ended March 31, 2026, compared to 17.2% for the same period in 2025. The increase in the Bank’s effective tax rate for the quarter ended March 31, 2026 reflects a higher proportion of net income being subject to taxation compared to the same period last year.

Previous wording

The Bank’s primary sources of funds are customer deposits, proceeds from loan repayments, maturing securities and borrowings from the FHLB or FRB. While loan repayments and maturities are a predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by market interest rates, general economic conditions and competition. At September 30, 2025, the Bank had cash and cash equivalents of $112.2 million and securities available-for-sale with a fair value of $421.6 million. If the Bank requires funds beyond its ability to generate them internally, it has additional borrowing capacity with the FHLB, FRB, collateral eligible for repurchase agreements and unsecured federal funds purchased lines of credit with other financial institutions.

Current wording

The Bank’s primary sources of funds are customer deposits, proceeds from loan repayments, maturing securities and borrowings from the FHLB or FRB. While loan repayments and maturities are a predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by market interest rates, general economic conditions and competition. At March 31, 2026, the Bank had cash and cash equivalents of $149.6 million and securities available-for-sale with a fair value of $407.8 million. If the Bank requires funds beyond its ability to generate them internally, it has additional borrowing capacity with the FHLB, FRB, collateral eligible for repurchase agreements and unsecured federal funds purchased lines of credit with other financial institutions.

Previous wording

The Company is a separate legal entity from the Bank and must provide for its own liquidity. In addition to its operating expenses, the Company, on a stand-alone basis, is responsible for paying any dividends declared to its shareholders. The Board of Directors of the Company also has authorized the repurchase of shares of its common stock. The Company’s primary source of income is dividends received from the Bank. The amount of dividends that the Bank may declare and pay to the Company in any calendar year, without the receipt of prior approval from the Indiana Department of Financial Institutions (“IDFI”), cannot exceed net income for that year to date plus retained net income (as defined under Indiana law) for the preceding two calendar years. On a stand-alone basis, the Company had liquid assets of $2.8 million at September 30, 2025.

Current wording

The Company is a separate legal entity from the Bank and must provide for its own liquidity. In addition to its operating expenses, the Company, on a stand-alone basis, is responsible for paying any dividends declared to its shareholders. The Board of Directors of the Company also has authorized the repurchase of shares of its common stock. The Company’s primary source of income is dividends received from the Bank. The amount of dividends that the Bank may declare and pay to the Company in any calendar year, without the receipt of prior approval from the Indiana Department of Financial Institutions (“IDFI”), cannot exceed net income for that year to date plus retained net income (as defined under Indiana law) for the preceding two calendar years. On a stand-alone basis, the Company had liquid assets of $2.3 million at March 31, 2026.

Previous wording

The Bank is required to maintain specific amounts of capital pursuant to regulatory requirements. Beginning in 2020, qualifying community banks with assets of less than $10 billion are eligible to opt in to the Community Bank Leverage Ratio (“CBLR”) framework. The CBLR is the ratio of a bank’s tangible equity capital to average total consolidated assets. A qualifying community bank that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under Prompt Corrective Action statutes. The federal banking agencies may consider a financial institution’s risk profile when evaluating whether it qualifies as a community bank for purposes of the capital ratio requirement. The federal banking agencies must set the minimum capital for the new CBLR at not less than 8% and not more than 10%, and has set the minimum ratio at 9% effective January 1, 2022. A financial institution that falls below the minimum CBLR generally has a two quarter grace period to get back into compliance as long as it maintains a minimum CBLR of 8%. A financial institution can elect to be subject to or opt out of the CBLR framework at any time. As a qualified community bank, the Bank had opted into the CBLR framework as of September 30, 2025 and December 31, 2024 and its CBLR was 10.82% and 10.57% as of those dates, respectively. Management believes that the Bank met all capital adequacy requirements to which it was subject as of September 30, 2025. At both September 30, 2025 and December 31, 2024, the Bank was considered “well-capitalized” under applicable regulatory guidelines.

Current wording

The Bank is required to maintain specific amounts of capital pursuant to regulatory requirements. Beginning in 2020, qualifying community banks with assets of less than $10 billion are eligible to opt in to the Community Bank Leverage Ratio (“CBLR”) framework. The CBLR is the ratio of a bank’s tangible equity capital to average total consolidated assets. A qualifying community bank that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under Prompt Corrective Action statutes. The federal banking agencies may consider a financial institution’s risk profile when evaluating whether it qualifies as a community bank for purposes of the capital ratio requirement. The federal banking agencies must set the minimum capital for the new CBLR at not less than 8% and not more than 10%, and has set the minimum ratio at 9% effective January 1, 2022. A financial institution that falls below the minimum CBLR generally has a two quarter grace period to get back into compliance as long as it maintains a minimum CBLR of 8%. A financial institution can elect to be subject to or opt out of the CBLR framework at any time. As a qualified community bank, the Bank had opted into the CBLR framework as of March 31, 2026 and December 31, 2025 and its CBLR was 11.13% and 11.01% as of those dates, respectively. Management believes that the Bank met all capital adequacy requirements to which it was subject as of March 31, 2026. At both March 31, 2026 and December 31, 2025, the Bank was considered “well-capitalized” under applicable regulatory guidelines.

Previous wording

For the nine months ended September 30, 2025, the Company did not engage in any off-balance sheet transactions reasonably likely to have a material effect on the Company’s financial condition, results of operations or cash flows.

Current wording

For the three months ended March 31, 2026, the Company did not engage in any off-balance sheet transactions reasonably likely to have a material effect on the Company’s financial condition, results of operations or cash flows.