1


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 8-K/A
                                 CURRENT REPORT

     Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

        Date of Report (Date of earliest event reported): March 20, 2003
                                                          --------------

                               FIRST CAPITAL, INC.
                               -------------------
             (Exact name of registrant as specified in its charter)

      Indiana                           0-25023               35-2056949
      -------                        -------------          --------------
(State or other Jurisdiction of      (Commission            (IRS Employer
incorporation or organization)       File Number)           Identification No.)


220 Federal Drive N.W., Corydon, Indiana                     47112
- ----------------------------------------                    ---------
(Address of principal executive offices)                    (Zip Code)

                                 (812) 738-2198
                                 --------------
              (Registrant's telephone number, including area code)

                                 Not Applicable
                                 --------------
         (Former name or former address, if changed since last report.)





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The Registrant hereby amends the items, financial statements, exhibits or other
portions of its Current Report on Form 8-K dated March 20, 2003 and filed on
March 25, 2003 as set forth herein.

ITEM 7.     FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
            ------------------------------------------------------------------

      (a)   FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.

            Hometown Bancshares, Inc. Consolidated Balance Sheets as of December
            31, 2002 and 2001

            Hometown Bancshares, Inc. Consolidated Statements of Income for the
            Years Ended December 31, 2002 and 2001

            Hometown Bancshares, Inc. Consolidated Statements of Changes in
            Stockholders' Equity for the Years Ended December 31, 2002 and 2001

            Hometown Bancshares, Inc. Consolidated Statements of Cash Flows for
            the Years Ended December 31, 2002 and 2001

            Notes to Consolidated Financial Statements

      (b)   PRO FORMA FINANCIAL INFORMATION.

            First Capital, Inc. and Hometown Bancshares, Inc. Unaudited Pro
            Forma Condensed Combined Balance Sheet for the Year Ended December
            31, 2002

            First Capital, Inc. and Hometown Bancshares, Inc. Unaudited Pro
            Forma Condensed Combined Statements of Income for the Three Months
            Ended March 31, 2003 and the Year Ended December 31, 2002

            Hometown Bancshares, Inc. Notes to the Unaudited Pro Forma Condensed
            Combined Financial Statements

      (c)   EXHIBITS.

            None.


                                        2

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                                   SIGNATURES

            Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                       FIRST CAPITAL, INC.


Dated:  May 30, 2003                   By: /s/ William W. Harrod
                                           -------------------------------------
                                           William W. Harrod
                                           President and Chief Executive Officer




                                        3

 4



                           [MONROE SHINE LETTERHEAD]


                          INDEPENDENT AUDITORS' REPORT



Board of Directors and Stockholders
HOMETOWN BANCSHARES, INC.
New Albany, Indiana


We have  audited  the  accompanying  consolidated  balance  sheets  of  HOMETOWN
BANCSHARES,  INC.  AND  SUBSIDIARY  as of December  31,  2002 and 2001,  and the
related consolidated  statements of income,  changes in stockholders' equity and
cash flows for the years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain reasonable  assurance about whether the consolidated
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  consolidated  financial  statements.  An audit also includes  assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall  consolidated  financial  statement  presentation.  We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of HOMETOWN BANCSHARES,
INC. AND  SUBSIDIARY as of December 31, 2002 and 2001,  and the results of their
operations  and their cash flows for the years  then  ended in  conformity  with
accounting principles generally accepted in the United States of America.


/s/ Monroe Shine

New Albany, Indiana
January 24, 2003
(except for Note 5, as to which
  the date is March 10, 2003)


 5




                           HOMETOWN BANCSHARES, INC. AND SUBSIDIARIES
                                   CONSOLIDATED BALANCE SHEETS
                                   DECEMBER 31, 2002 AND 2001



                                                                                      2002              2001
                                                                                      ----              ----
                                                                                              
ASSETS
  Cash and due from banks                                                         $ 2,002,368       $ 4,189,377
  Interest-bearing deposits with banks                                                902,293         7,648,817
  Securities available for sale, at fair value                                      5,672,081               -
  Securities held to maturity (fair value of $1,141,319 in 2002;
    $3,791,045 in 2001)                                                             1,064,028         3,723,896
  Federal funds sold                                                               11,541,000        12,583,000
  Mortgage loans held for sale                                                      5,593,179         1,411,427
  Loans                                                                            56,727,859        55,423,082
  Less allowance for loan losses                                                    1,572,320           460,603
                                                                               ---------------  ----------------
      Net loans                                                                    55,155,539        54,962,479
                                                                               ---------------  ----------------

  Federal Reserve Bank stock, at cost                                                 179,650           150,000
  Federal Home Loan Bank stock, at cost                                               200,000           200,000
  Foreclosed real estate                                                               85,963               -
  Premises and equipment                                                            2,266,440         2,346,574
  Accrued interest receivable                                                         373,539           365,782
  Other assets                                                                        476,494           133,211
                                                                               ---------------  ----------------

      TOTAL ASSETS                                                               $ 85,512,574      $ 87,714,563
                                                                               ===============  ================

LIABILITIES
  Deposits:
    Noninterest-bearing                                                           $ 4,085,020       $ 3,421,473
    Interest-bearing                                                               74,340,444        76,850,828
                                                                               ---------------  ----------------
      Total deposits                                                               78,425,464        80,272,301

  Accrued interest payable                                                            225,216           326,569
  Other liabilities                                                                    73,623            81,497
                                                                               ---------------  ----------------
      Total Liabilities                                                            78,724,303        80,680,367
                                                                               ---------------  ----------------

STOCKHOLDERS' EQUITY
  Preferred stock without par value,
    Authorized 25,000 shares; none issued                                                 -                 -
  Common stock without par value,
    Authorized 900,000 shares; issued 229,550 shares                                5,972,715         5,972,715
  Retained earnings                                                                   799,404         1,061,481
  Accumulated other comprehensive income                                               16,152               -
                                                                               ---------------  ----------------
      Total Stockholders' Equity                                                    6,788,271         7,034,196
                                                                               ---------------  ----------------

      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                 $ 85,512,574      $ 87,714,563
                                                                               ===============  ================


See notes to consolidated financial statements.

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                               HOMETOWN BANCSHARES, INC. AND SUBSIDIARIES
                                   CONSOLIDATED STATEMENTS OF INCOME
                                 YEARS ENDED DECEMBER 31, 2002 AND 2001



                                                                                 2002            2001
                                                                                 ----            ----
                                                                                       
INTEREST INCOME
  Loans, including fees                                                      $ 4,397,517     $ 4,699,008
  Securities:
   Taxable                                                                       348,711         340,390
   Tax-exempt                                                                     14,681          17,631
  Dividends                                                                       22,414          23,867
  Federal funds sold                                                             159,920         507,396
  Interest-bearing deposits in banks                                              60,638         214,152
                                                                           --------------  --------------
     Total interest income                                                     5,003,881       5,802,444
                                                                           --------------  --------------

INTEREST EXPENSE
  Deposits                                                                     2,552,582       3,722,781
  Federal funds purchased                                                             60             164
                                                                           --------------  --------------
      Total interest expense                                                   2,552,642       3,722,945
                                                                           --------------  --------------

      Net interest income                                                      2,451,239       2,079,499

  Provision for loan losses                                                    1,523,183         106,000
                                                                           --------------  --------------
      Net interest income after provision for loan losses                        928,056       1,973,499
                                                                           --------------  --------------

NONINTEREST INCOME
  Service charges on deposit accounts                                            291,576         207,449
  Mortgage brokerage fees                                                         11,587          73,860
  Net gain on sale of mortgage loans                                             129,435         328,979
  Other income                                                                    38,144          36,360
                                                                           --------------  --------------
      Total noninterest income                                                   470,742         646,648
                                                                           --------------  --------------

NONINTEREST EXPENSE
  Compensation and benefits                                                    1,108,531       1,255,898
  Occupancy expense                                                               95,263          84,708
  Equipment expense                                                               80,253          80,533
  Other expenses                                                                 508,283         442,253
                                                                           --------------  --------------
      Total noninterest expense                                                1,792,330       1,863,392
                                                                           --------------  --------------

      Income before income taxes                                                (393,532)        756,755
      Income tax expense                                                        (131,455)        276,105
                                                                           --------------  --------------

         NET INCOME                                                          $  (262,077)    $   480,650
                                                                           ==============  ==============

         NET INCOME PER COMMON SHARE                                         $     (1.14)    $      2.32
                                                                           ==============  ==============


See notes to consolidated financial statements.


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                                        HOMETOWN BANCSHARES, INC. AND SUBSIDIARIES
                                CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                      FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001



                                                                                               ACCUMULATED
                                                                                                  OTHER
                                                               COMMON         RETAINED        COMPREHENSIVE
                                                                STOCK         EARNINGS            INCOME           TOTAL

                                                                                                   
Balances at January 1, 2001                                 $ 4,984,197      $  580,831        $     -         $ 5,565,028

Net income                                                        -             480,650              -             480,650

Issuance of 29,550 shares of common stock                       988,518            -                 -             988,518
                                                            ------------     -----------       ----------      ------------

Balances at December 31, 2001                                 5,972,715       1,061,481              -           7,034,196

COMPREHENSIVE INCOME
  Net income                                                      -            (262,077)             -            (262,077)

  Other comprehensive income:
    Change in unrealized gain on securities available
    for sale, net of deferred income tax expense of $10,594       -               -               16,152            16,152

    Less:  reclassification adjustment                            -               -                  -                -
                                                                                                               ------------
        TOTAL COMPREHENSIVE INCOME                                                                                (245,925)
                                                                                                               ------------
                                                            ------------     -----------       ----------      ------------
Balances at December 31, 2002                               $ 5,972,715      $  799,404        $  16,152       $ 6,788,271
                                                            ============     ===========       ==========      ============



See notes to consolidated financial statements.

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                               HOMETOWN BANCSHARES, INC. AND SUBSIDIARIES
                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 YEARS ENDED DECEMBER 31, 2002 AND 2001



                                                                                           2002             2001
                                                                                           ----             ----
                                                                                                
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                                                         $   (262,077)    $    480,650
  Adjustments to reconcile net income to net cash provided
    by operating activities:
      Deferred income taxes                                                              (385,488)          18,814
      Depreciation                                                                         88,597           89,311
      Amortization of premium and accretion of discount
        on securities, net                                                                 (3,057)           2,740
      Mortgage loans originated for sale                                               (9,350,635)     (18,665,253)
      Proceeds from mortgage loan sales                                                 5,298,318       19,755,992
      Net gain on sale of mortgage loans                                                 (129,435)        (328,979)
      Provision for loan losses                                                         1,523,183          106,000
      (Increase) decrease in accrued interest receivable                                   (7,757)         182,456
      Decrease in accrued interest payable                                               (101,353)         (26,818)
      Decrease (increase) in other assets                                                  31,611          (36,581)
      Decrease in other liabilities                                                        (7,874)        (148,005)
                                                                                   ---------------  ---------------
        NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES                               (3,305,967)       1,430,327
                                                                                   ---------------  ---------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Net (increase) decrease in interest-bearing deposits with banks                       6,746,524       (7,049,311)
  Net decrease in federal funds sold                                                    1,042,000        3,619,000
  Purchase of securities available for sale                                            (8,638,101)            -
  Proceeds from maturities of securities available for sale                             3,000,000             -
  Purchase of securities held to maturity                                              (3,975,000)      (9,879,807)
  Proceeds from maturities of securities held to maturity                               6,387,000       16,702,000
  Principal payments on mortgage-backed securities                                        243,691          185,849
  Net increase in loans                                                                (1,802,206)      (7,412,848)
  Purchase of Federal Reserve Bank stock                                                  (29,650)            -
  Purchase of premises and equipment                                                       (8,463)        (280,637)
                                                                                   ---------------  ---------------
        NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES                                2,965,795       (4,115,754)
                                                                                   ---------------  ---------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Net increase in noninterest-bearing deposits                                            663,547           85,667
  Net decrease in interest-bearing deposits                                            (2,510,384)         (76,104)
  Issuance of common stock                                                                   -             988,518
                                                                                   ---------------  ---------------
        NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES                               (1,846,837)         998,081
                                                                                   ---------------  ---------------

NET DECREASE IN CASH AND DUE FROM BANKS                                                (2,187,009)      (1,687,346)

Cash and due from banks at beginning of year                                            4,189,377        5,876,723
                                                                                   ---------------  ---------------

CASH AND DUE FROM BANKS AT END OF YEAR                                               $  2,002,368     $  4,189,377
                                                                                   ===============  ===============


See notes to consolidated financial statements.


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                    HOMETOWN BANCSHARES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001


(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         NATURE OF OPERATIONS

         Hometown  Bancshares,  Inc. (the Company) is a one bank holding company
         of Hometown  National Bank (the Bank), a wholly-owned  subsidiary.  The
         Company has no  operating  activities.  The Bank  provides a variety of
         commercial  banking  services  to  individual  and  business  customers
         through its two offices in southern Indiana.

         BASIS OF CONSOLIDATION

         The  consolidated  financial  statements  include  the  accounts of the
         Company  and the  Bank  and  have  been  prepared  in  accordance  with
         generally  accepted  accounting  principles  and conform  with  general
         practices   in  the  banking   industry.   Intercompany   balances  and
         transactions have been eliminated.

         STATEMENT OF CASH FLOWS

         The Company  has defined  cash and cash  equivalents  as those  amounts
         included in the balance sheet caption "Cash and due from banks."

         USE OF ESTIMATES

         The  preparation of financial  statements in conformity  with generally
         accepted  accounting  principles  requires management to make estimates
         and  assumptions  that  affect  the  reported  amounts  of  assets  and
         liabilities and disclosure of contingent  assets and liabilities at the
         date of the financial  statements and the reported  amounts of revenues
         and expenses  during the reporting  years.  Actual results could differ
         from those estimates.

         Material  estimates  that are  particularly  susceptible to significant
         change relate to the determination of the allowance for loan losses and
         the valuation of real estate acquired in connection  with  foreclosures
         or in satisfaction of loans.  In connection with the  determination  of
         the allowance for loan losses and  foreclosed  real estate,  management
         obtains independent appraisals for significant properties.

         While  management  uses available  information  to recognize  losses on
         loans and foreclosed  real estate,  further  reductions in the carrying
         amounts  of loans  and  foreclosed  assets  may be  necessary  based on
         changes in local economic conditions.  In addition, as an integral part
         of their examination process,  regulatory agencies  periodically review
         the estimated losses on loans and foreclosed real estate. Such agencies
         may  require the Bank to  recognize  additional  losses  based on their
         judgments  about  information  available  to them at the  time of their
         examination.  Because of these factors,  it is reasonably  possible the
         estimated  losses  on loans  and  foreclosed  real  estate  may  change
         materially in the near term. However,  the amount of the change that is
         reasonably possible cannot be estimated.

         SECURITIES AVAILABLE FOR SALE

         Securities available for sale consist of debt securities and are stated
         at fair value.  Amortization  of premium and  accretion of discount are
         recognized  in  interest  income  using the  interest  method  over the
         remaining  period to maturity,  adjusted for  anticipated  prepayments.
         Unrealized  gains and losses,  net of tax, on securities  available for
         sale are reported as a separate component of stockholders' equity until
         realized. Realized gains and losses on the sale of securities available
         for sale are determined using the specific identification method.




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                    HOMETOWN BANCSHARES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           DECEMBER 31, 2002 AND 2001


(1 - continued)

         SECURITIES HELD TO MATURITY

         Debt  securities for which the Bank has the positive intent and ability
         to hold to maturity are carried at cost,  adjusted for  amortization of
         premium and  accretion of discount  using the interest  method over the
         remaining  years to  maturity,  adjusted for  anticipated  prepayments.
         Mortgage-backed  securities represent  participating interests in pools
         of long-term  first  mortgage  loans  originated  and serviced by other
         financial institutions or the issuers of the securities.

         MORTGAGE LOANS HELD FOR SALE

         Mortgage loans originated and intended for sale in the secondary market
         are carried at the lower of aggregate cost or estimated fair value. Net
         unrealized  losses are  recognized  through a  valuation  allowance  by
         charges  to  income.  Realized  gains on sales of  mortgage  loans  are
         included in noninterest income.

         LOANS

         Loans  receivable  are stated at unpaid  principal  balances,  less net
         deferred loan fees and the  allowance for loan losses.  The Bank's real
         estate loan portfolio  consists of long-term loans,  collateralized  by
         first mortgages on single-family and multi-family  residential property
         located in the southern  Indiana  area,  commercial  real estate loans,
         commercial business and consumer loans.

         Loan  origination  fees and certain  direct costs of  underwriting  and
         closing  loans are  defined  and the net  deferred  loan fee or cost is
         recognized  as an adjustment  to interest  income over the  contractual
         life of the loans using the interest method.

         The accrual of interest is discontinued on a loan when, in the judgment
         of management,  the  probability of collection of interest is deemed to
         be insufficient to warrant  further  accrual.  The Bank does not accrue
         interest on loans past due 90 days or more  except  when the  estimated
         value of collateral  and  collection  efforts are deemed  sufficient to
         ensure  full  recovery.  When a loan is placed on  non-accrual  status,
         previously  accrued  but unpaid  interest  is  deducted  from  interest
         income.

         Interest payments  received on non-accrual  loans,  including  specific
         impaired  loans,  are  recorded  as a reduction  of the loan  principal
         balance,  and interest income is only recorded once principal  recovery
         is reasonably assured.

         The Bank's practice is to charge off any loan or portion of a loan when
         the loan is determined by  management  to be  uncollectible  due to the
         borrower's   failure   to  meet   repayment   terms,   the   borrower's
         deteriorating or deteriorated financial condition,  the depreciation of
         the  underlying  collateral,  the  loans  classification  as a loss  by
         regulatory examiners, or for other reasons.





 11



                    HOMETOWN BANCSHARES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           DECEMBER 31, 2002 AND 2001


(1 - continued)

         The  allowance  for loan  losses is  maintained  at a level  which,  in
         management's  judgment, is adequate to absorb credit losses inherent in
         the  loan   portfolio.   The  amount  of  the  allowance  is  based  on
         management's  evaluation of the  collectibility  of the loan portfolio,
         including the nature of the portfolio, credit concentrations, trends in
         historical  loss  experience,  specific  impaired  loans,  and economic
         conditions.  The allowance is increased by a provision for loan losses,
         which is  charged  to  expense,  and  reduced  by  charge-offs,  net of
         recoveries.  Changes in the  allowance  relating to impaired  loans are
         charged  or  credited  to the  provision  for loan  losses.  Because of
         uncertainties inherent in the estimation process, management's estimate
         of  credit  losses  inherent  in the  loan  portfolio  and the  related
         allowance may change in the near term.

         A loan is considered  impaired when,  based on current  information and
         events,  it is  probable  that the Bank will be unable to  collect  the
         scheduled  payments of principal or interest  when due according to the
         contractual  terms  of  the  loan  agreement.   Factors  considered  by
         management in determining impairment include payment status, collateral
         value,  and the  probability  of  collecting  scheduled  principal  and
         interest payments when due. Loans that experience insignificant payment
         delays and payment shortfalls generally are not classified as impaired.
         Management  determines the  significance  of payment delays and payment
         shortfalls on a case-by-case  basis,  taking into  consideration all of
         the circumstances surrounding the loan and the borrower,  including the
         length of the delay,  the reasons for the delay,  the borrower's  prior
         payment  record,  and the amount of the  shortfall  in  relation to the
         principal and interest  owed.  Impairment is measured on a loan-by-loan
         basis by either the present value of expected  future cash flows at the
         loan's  effective  interest rate or the fair value of the collateral if
         the loan is collateral dependent.

         PREMISES AND EQUIPMENT

         The Bank uses the straight  line and  accelerated  methods of computing
         depreciation  at rates  adequate to amortize the cost of the applicable
         assets over their useful lives.  Items  capitalized as part of premises
         and equipment are valued at cost.  Maintenance and repairs are expensed
         as incurred.  The cost and related  accumulated  depreciation of assets
         sold, or otherwise  disposed of, are removed from the related  accounts
         and any gain or loss is included in earnings.

         INCOME TAXES

         Income  taxes are  provided  for the tax  effects  of the  transactions
         reported in the financial statements and consist of taxes currently due
         plus deferred taxes related primarily to differences  between the basis
         of  available   for  sale   securities,   allowance  for  loan  losses,
         accumulated depreciation, and accrued income and expenses for financial
         and income  tax  reporting.  The  deferred  tax assets and  liabilities
         represent  the  future tax return  consequences  of those  differences,
         which  will  either  be  taxable  or  deductible  when the  assets  and
         liabilities are recovered or settled.

         ADVERTISING COSTS

         Advertising costs are charged to operations when incurred.




 12



                    HOMETOWN BANCSHARES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           DECEMBER 31, 2002 AND 2001


(1 - continued)

         RECENT ACCOUNTING PRONOUNCEMENTS

         In June 2001,  FASB issued SFAS 143,  ACCOUNTING  FOR ASSET  RETIREMENT
         OBLIGATIONS.  This  statement  applies  to all  entities  and the legal
         obligations  associated  with the  retirement  of  tangible  long-lived
         assets  that  result from the  acquisition,  construction,  development
         and/or  normal  operation  of a  long-lived  asset,  except for certain
         obligations of lessees.  This statement requires that the fair value of
         a liability  for an asset  retirement  obligation  be recognized in the
         period in which it is incurred if a  reasonable  estimate of fair value
         can be made.  This  statement is  effective  for  financial  statements
         issued  for  fiscal  years   beginning   after  June  15,   2002.   The
         implementation  of this  statement is not expected to have an impact on
         the Company's financial condition and results of operations.

         In August 2001, FASB issued SFAS 144,  ACCOUNTING FOR THE IMPAIRMENT OR
         DISPOSAL OF LONG-LIVED  ASSETS.  This  statement  supersedes  SFAS 121,
         ACCOUNTING FOR THE  IMPAIRMENT OF LONG-LIVED  ASSETS AND FOR LONG-LIVED
         ASSETS TO BE DISPOSED OF, and establishes a single financial accounting
         model for  long-lived  assets to be disposed of by sale.  The statement
         retains the requirements of SFAS 121 to recognize an impairment loss if
         the carrying amount of a long-lived  asset is not recoverable  from its
         undiscounted   cash  flows  and  measure  an  impairment  loss  as  the
         difference between the carrying amount and the fair value of the asset.
         This statement is effective for financial  statements issued for fiscal
         years  beginning  after December 15, 2001,  and interim  periods within
         those  fiscal  years.  The  implementation  of  this  statement  is not
         expected  to have an impact on the  Company's  financial  condition  or
         results of operations.

         In May 2002, FASB issued SFAS 145, RESCISSION OF FASB STATEMENTS 4, 44,
         AND 64, AMENDMENT OF FASB STATEMENT 13, AND TECHNICAL CORRECTIONS AS OF
         APRIL 2002. This statement  rescinds SFAS 4, REPORTING GAINS AND LOSSES
         FROM  EXTINGUISHMENT OF DEBT, and an amendment of that statement,  SFAS
         64,  EXTINGUISHMENT OF DEBT MADE TO SATISFY SINKING-FUND  REQUIREMENTS.
         This statement also rescinds SFAS 44,  ACCOUNTING FOR INTANGIBLE ASSETS
         OF MOTOR  CARRIERS,  and amends  SFAS 13,  ACCOUNTING  FOR  LEASES,  to
         eliminate  an  inconsistency   between  the  required   accounting  for
         sale-leaseback  transactions  and the required  accounting  for certain
         lease  modifications  that have  economic  effects  that are similar to
         sale-leaseback transactions.  This statement also amends other existing
         authoritative  pronouncements  to make various  technical  corrections,
         clarify  meanings,   or  describe  their  applicability  under  changed
         conditions.  This  statement is effective  for  transactions  occurring
         after  May  15,  2002.  The  implementation  of this  statement  had no
         material  impact on the  Company's  financial  condition  or results of
         operations.

         In June 2002,  FASB issued SFAS 146,  ACCOUNTING  FOR COSTS  ASSOCIATED
         WITH  EXIT  OR  DISPOSAL  ACTIVITIES.   This  statement  addresses  the
         accounting  and  reporting for costs  associated  with exit or disposal
         activities and nullifies  previous guidance.  The principal  difference
         between this  statement  and prior  guidance is that a liability  for a
         cost  associated  with  an  exit  or  disposal  activity  can  only  be
         recognized  when  actually  incurred  versus  the date when  management
         commits to the plan. This statement  establishes that fair value is the
         objective for initial  measurement of the liability.  This statement is
         effective  for exit or disposal  activities  that are  initiated  after
         December 31, 2002. The implementation of this statement is not expected
         to have an impact on the  Company's  financial  condition or results of
         operations.


 13



                    HOMETOWN BANCSHARES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           DECEMBER 31, 2002 AND 2001


(1 - continued)

         In October  2002,  the FASB  issued SFAS 147,  ACQUISITIONS  OF CERTAIN
         FINANCIAL INSTITUTIONS,  AN AMENDMENT OF FASB STATEMENTS 72 AND 144 AND
         FASB  INTERPRETATION  9, which  addresses the financial  accounting and
         reporting  for  the   acquisitions  of  all  or  part  of  a  financial
         institution.  SFAS 147 removes acquisitions of financial  institutions,
         except for transactions  between two or more mutual  enterprises,  from
         the scope of both SFAS 72 and  Interpretation 9 and requires that those
         transactions  be accounted  for in accordance  with SFAS 141,  BUSINESS
         COMBINATIONS,  and SFAS 142, GOODWILL AND OTHER INTANGIBLE ASSETS. SFAS
         147 also amends SFAS 144,  ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF
         LONG-LIVED    ASSETS,    to    include    in   its   scope    long-term
         customer-relationship  and credit  cardholder  intangible  assets,  and
         requires  companies  to cease  amortization  of  unidentifiable  assets
         associated  with certain  branch  acquisitions.  The provisions of this
         statement were effective  beginning October 1, 2002. The implementation
         of this  statement had no material  impact on the  Company's  financial
         condition or results of operation.


(2) PENDING MERGER

         On  September  25, 2002,  the Company and First  Capital,  Inc.  (First
         Capital),  a thrift holding company for First Harrison Bank in Corydon,
         Indiana,  entered into an agreement and plan of merger  whereby each of
         the  issued  and  outstanding  common  shares  of the  Company  will be
         exchanged for the shares of First  Capital's  common stock or $46.50 in
         cash per share. The number of shares of First Capital's common stock to
         be exchange for each share of the Company's  common stock will be based
         on the average  closing  price of First  Capital's  common stock over a
         twenty day  trading  period  shortly  before the closing of the merger.
         Elections to receive stock,  cash or a combination of stock and cash by
         the shareholders will be limited by a requirement that 50% of the total
         number of outstanding shares of the Company's common stock be exchanged
         for First Capital common stock. The merger is subject to regulatory and
         shareholder approvals.  The merger is expected to be completed in March
         2003.


(3)      RESTRICTION ON CASH AND DUE FROM BANKS

         The Bank is required to maintain  reserve  balances on hand or with the
         Federal Reserve Bank which are  noninterest-bearing and unavailable for
         investment.  The average amount of those reserve balances for the years
         ended  December  31, 2002 and 2001,  were  approximately  $266,000  and
         $460,000, respectively.


 14



                    HOMETOWN BANCSHARES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           DECEMBER 31, 2002 AND 2001


(4)      DEBT SECURITIES

         Debt securities have been classified in the consolidated balance sheets
         according to management's  intent. The amortized cost and fair value of
         held to maturity debt  securities  and the related  unrealized  holding
         gains and losses were as follows:



                                                                           GROSS            GROSS
                                                           AMORTIZED     UNREALIZED      UNREALIZED       FAIR
                                                             COST          GAINS           LOSSES        VALUE
                                                                                          
             DECEMBER 31, 2002:
             Securities available for sale:
                Federal agency:
                   Notes and debentures                   $ 5,645,335     $   26,746    $    -        $ 5,672,081
                                                            =====================================================


             Securities held to maturity:
                Federal agency:
                   Notes and debentures                   $   500,000    $   56,094    $     -        $   556,094
                   Mortgage-backed securities                 296,028        14,197          -            310,225
                                                           ------------------------------------------------------
                                                              796,028        70,291          -            866,319
                                                              ---------------------------------------------------

               Municipal bonds                                268,000         7,000           -           275,000
                                                           ------------------------------------------------------

                 Total held to maturity                   $ 1,064,028    $   77,291    $      -       $ 1,141,319
                                                          =======================================================

             DECEMBER 31, 2001:
             Securities held to maturity:
               Federal agency:
                 Notes and debentures                     $ 2,895,496    $   62,569    $      -       $ 2,958,065
                 Mortgage-backed securities                   543,400           780           -           544,180
                                                          -------------------------------------------------------
                                                            3,438,896        63,349           -         3,502,245
                                                          -------------------------------------------------------
               Municipal bonds                                285,000         3,800           -           288,800
                                                          -------------------------------------------------------

                 Total held to maturity                   $ 3,723,896    $   67,149    $      -       $ 3,791,045
                                                          =======================================================

         At December 31, 2002,  federal agency securities with an amortized cost
         of $56,961 and a fair value of $57,797  were  pledged to secure  public
         deposits and certain borrowings.

         The amortized cost and fair value of debt securities as of December 31,
         2002, by contractual maturity, are shown below.


                                                     AVAILABLE FOR SALE                    HELD TO MATURITY
                                                     ------------------                    ----------------
                                                  AMORTIZED            FAIR              AMORTIZED         FAIR
                                                    COST               VALUE               COST            VALUE

                                                                                           
              Due within one year                $      -         $      -            $   21,379       $  22,059
              Due after one year through
                five years                         4,378,193        4,394,831            591,816         650,603
              Due after five years through
                ten years                            517,142          522,188            133,426         137,053
              Due after ten years                    750,000          755,062             21,379          21,379
                                                   -------------------------------------------------------------
                                                   5,645,335        5,672,081            768,000         831,094
                                                   -------------------------------------------------------------
              Mortgage-backed securities                -                -             296,028           310,225
                                                   -------------------------------------------------------------
                                                 $ 5,645,335      $ 5,672,081        $ 1,064,028     $ 1,141,319
                                                   =============================================================



 15


                    HOMETOWN BANCSHARES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           DECEMBER 31, 2002 AND 2001


(5)      LOANS RECEIVABLE

         Loans  receivable  at  December  31,  2002  and 2001  consisted  of the
         following:



                                                                                     2002                2001
                                                                                     ----                ----
                                                                                              
             Real estate mortgages:
               Residential                                                      $ 10,617,270        $ 10,087,005
               Commercial real estate                                             11,246,827           8,120,884
               Residential construction                                              692,400           1,192,400
               Commercial real estate construction                                 4,574,200           5,622,147
             Commercial loans                                                     27,960,327          28,330,444
             Consumer loans                                                        4,050,280           3,953,027
                                                                               ---------------------------------
                                                                                  59,141,304          57,305,907

               Less:   Undisbursed portion of construction loans                  (2,489,631)         (1,942,917)
               Add:    Net deferred loan fees and costs                               76,186              60,092
                                                                               ---------------------------------
                     Total loans                                                $ 56,727,859        $ 55,423,082
                                                                               =================================

         An analysis of the allowance for loan losses is as follows:
                                                                                     2002                2001
                                                                                     ----                ----

             Beginning balances                                                 $    460,603        $    416,062

             Provision for loan losses                                             1,523,183             106,000
             Recoveries                                                                2,498               2,816
             Loans charged-off                                                      (413,964)            (64,275)
                                                                               ---------------------------------
             Ending balances                                                    $  1,572,320        $    460,603
                                                                               =================================


         The Bank had nonaccrual loans amounting to  approximately  $588,000 and
         $346,000  at  December  31,  2002 and  2001,  respectively.  The  total
         recorded  investment  in loans past due  ninety  days or more and still
         accruing  interest  amounted to approximately  $366,000 and $385,000 at
         December 31, 2002 and 2001, respectively.  The Bank had loans amounting
         to  approximately  $639,000 and  $252,000  specifically  classified  as
         impaired  at  December  31,  2002 and 2001,  respectively.  The average
         recorded   investment  in  impaired  loans  amounted  to  approximately
         $304,000 and  $111,000 for the years ended  December 31, 2002 and 2001,
         respectively.  The allowance for loan losses  related to impaired loans
         amounted to approximately $503,000 and $60,000 at December 31, 2002 and
         2001,  respectively.  The bank recognized  interest income of $6,224 on
         impaired  loans  for the  year  ended  2002.  No  interest  income  was
         recognized on impaired loans in 2001.

         Subsequent to December 31, 2002 and prior to March 10, 2003, management
         completed  an analysis of certain  delinquent  and problem  loans which
         provided additional evidence about the collectibility of those loans as
         of  December  31,  2002 and the  estimated  allowance  for loan  losses
         related  to those  loans as of that  date.  This  analysis  included  a
         revised evaluation of the collateral for certain  collateral  dependent
         impaired  loans  and  loans  past due  ninety  days or more  and  still
         accruing interest. The accompanying financial statements as of December
         31, 2002,  include the effects of the changes in management's  estimate
         of the allowance for loan losses resulting from this analysis.

         The Bank has entered into loan  transactions  with  certain  directors,
         officers  and their  affiliates  (related  parties).  In the opinion of
         management,  such  indebtedness  was incurred in the ordinary course of
         business on  substantially  the same terms as those  prevailing  at the
         time  for  comparable  transactions  with  other  persons  and does not
         involve  more than  normal  risk of  collectibility  or  present  other
         unfavorable features.



 16



                    HOMETOWN BANCSHARES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           DECEMBER 31, 2002 AND 2001


(5 - continued)

         The following table represents the aggregate activity for related party
         loans which during the year ended December 31, 2002:


             Beginning balance                     $ 3,230,488
             New loans and advances                    513,084
             Payments                                 (628,199)
                                                     ---------

             Ending balance                        $ 3,115,373
                                                     =========

(6)      PREMISES AND EQUIPMENT

         Premises and equipment are summarized as follows:

                                                    2002                 2001
                                                    ----                 ----

             Land and land improvements        $    985,868        $    937,373
             Building and improvements            1,076,755           1,122,050
             Furniture and equipment                554,258             548,995
                                                 ------------------------------
                                                  2,616,881           2,608,418
             Less accumulated depreciation          350,441             261,844
                                                 ------------------------------

               Net book value                   $ 2,266,440         $ 2,346,574
                                                  =============================

(7) INCOME TAXES

         The components of income tax expense (credit) were as follows:

                                                 2002                 2001
                                                 ----                 ----

             Current                        $   254,033         $   257,291
             Deferred                          (385,488)             18,814
                                                ---------------------------

               Totals                       $  (131,455)        $   276,105
                                               ============================

         Significant  components  of  the  Company's  deferred  tax  assets  and
         liabilities as of December 31, 2002 and 2001 were as follows:



                                                                         2002                2001
                                                                         ----                ----
                                                                                   
             Deferred tax assets (liabilities):
               Allowance for loan losses                             $   555,234         $   160,246
               Amortizable start-up costs                                   -                  2,570
               Deferred insurance commissions                              5,167               2,301
               Deferred loan origination fees and costs, net             (29,053)            (22,652)
               Nonaccrual loans                                            1,498                -
               Depreciation                                              (82,599)            (77,706)
               Unrealized gain on securities available for sale          (10,594)               -
                                                                     -------------------------------

                   Net deferred tax asset                            $   439,653         $    64,759
                                                                     ===============================



 17



                    HOMETOWN BANCSHARES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           DECEMBER 31, 2002 AND 2001


(7- continued)

         The reconciliation of the income tax credit with the amount which would
         have been provided at the federal statutory rate of 34 percent:


                                                                                     2002                 2001
                                                                                     ----                 ----
                                                                                                 
             Provision (credit) at statutory rate                                 $ (133,801)          $ 257,297
             State income tax-net of federal tax benefit                             (12,587)             28,077
             Tax exempt interest income                                               (4,437)             (5,122)
             Nondeductible merger expenses                                            19,079                 -
             Other                                                                       291              (4,147)
                                                                                   -----------------------------

                 Total income tax expense                                         $ (131,455)          $ 276,105
                                                                                    ============================


(8)      DEPOSITS

         The  aggregate  amount of time  deposit  accounts  of  $100,000 or more
         amounted to  approximately  $26,394,000 and $18,810,000 at December 31,
         2002 and 2001, respectively.

         At December 31, 2002,  scheduled  maturities  of time  deposits were as
         follows:

             Year ending December 31:

              2003                                        $ 36,527,173
              2004                                          17,535,872
              2005                                           3,971,821
              2006                                           1,223,309
              2007 and thereafter                              721,882
                                                           -----------

                Total                                     $ 59,980,057
                                                            ==========

         The Bank held deposits of  approximately  $1,671,000 and $2,179,000 for
         related parties at December 31, 2002 and 2001, respectively.


(9)      EMPLOYEE BENEFIT PLAN

         The  Bank  has  a  qualified  defined  contribution  plan  that  allows
         participating  employees  to  make  tax-deferred   contributions  under
         Internal Revenue Code Section 401(k).

         The Bank made matching  contributions  to the plan of $6,109 and $5,434
         during 2002 and 2001, respectively.


(10)     COMMITMENTS AND CONTINGENT LIABILITIES

         In the  normal  course  of  business,  there  are  outstanding  various
         commitments and contingent  liabilities,  such as commitments to extend
         credit and legal claims, which are not reflected in the balance sheet.

         Commitments  under  outstanding   standby  letters  of  credit  totaled
         $160,000 at December 31, 2002.


 18


                    HOMETOWN BANCSHARES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           DECEMBER 31, 2002 AND 2001


(10 - continued)

         The  following  is a summary  of the  commitments  to extend  credit at
         December 31, 2002 and 2001:


                                                                                     2002                 2001
                                                                                     ----                 ----
                                                                                             
             Loan commitments:
               Fixed rate                                                        $ 1,284,000       $      606,212
               Adjustable rate                                                       445,000              117,000
             Undisbursed portion of commercial and consumer
               lines of credit                                                     5,672,849            7,543,655
             Undisbursed portion of residential construction loans                   556,193              526,224
             Undisbursed portion of commercial construction loans                  1,933,438            1,416,693
                                                                                   ------------------------------

                   Total commitments to extend credit                            $ 9,891,480         $ 10,209,784
                                                                                   ==============================


(11)     CONCENTRATIONS OF CREDIT RISK

         At December 31, 2002, the Bank had  concentrations  of credit risk with
         correspondent banks as follows:

             Due from bank balances in excess of federal deposit
               insurance limit - Bankers Bank of Kentucky          $   1,089,089
             Federal funds sold:
                 Bankers Bank of Kentucky                              7,246,000
                 Farmers Bank, Georgetown, Kentucky                    4,000,000
                 Bank One                                                195,000
                 National City Bank                                      100,000
                                                                      ----------

                                                                    $ 12,630,089
                                                                      ==========

(12)     FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

         The Bank is a party to  financial  instruments  with  off-balance-sheet
         risk in the normal  course of business to meet the  financing  needs of
         its  customers.  These  financial  instruments  include  commitments to
         extend credit and standby letters of credit. These instruments involve,
         to varying degrees, elements of credit and interest rate risk in excess
         of the amounts recognized in the balance sheet.

         The Bank's  exposure to credit loss in the event of  nonperformance  by
         the other party to the financial  instruments for commitments to extend
         credit and standby  letters of credit is represented by the contractual
         notional amount of those  instruments  (see Note 10). The Bank uses the
         same credit policies in making commitments and conditional  obligations
         as it does for on-balance-sheet instruments.

         Commitments  to extend  credit are  agreements to lend to a customer as
         long as there  is no  violation  of any  condition  established  in the
         contract.  Commitments  generally have fixed  expiration dates or other
         termination clauses and may require payment of a fee. Since many of the
         commitments  are expected to expire without being drawn upon, the total
         commitment   amounts  do  not   necessarily   represent   future   cash
         requirements.  The Bank evaluates each customer's creditworthiness on a
         case-by-case  basis.  The amount and type of  collateral  obtained,  if
         deemed  necessary by the Bank upon  extension of credit,  varies and is
         based on management's credit evaluation of the counterparty.




 19



                    HOMETOWN BANCSHARES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           DECEMBER 31, 2002 AND 2001


(12 - continued)

         Standby  letters of credit are  conditional  commitments  issued by the
         Bank to  guarantee  the  performance  of a customer  to a third  party.
         Standby  letters of credit  generally  have fixed  expiration  dates or
         other termination  clauses and may require payment of a fee. The credit
         risk involved in issuing  letters of credit is essentially  the same as
         that involved in extending  loan  facilities  to customers.  The Bank's
         policy for obtaining collateral,  and the nature of such collateral, is
         essentially  the same as that involved in making  commitments to extend
         credit.

         The Bank has not been required to perform on any  financial  guarantees
         and has not  incurred  any  losses on  commitments  during the past two
         years.


(13)     STOCKHOLDERS' EQUITY AND DIVIDENDS

         During 2001,  the Company  issued  29,550  shares of common stock at an
         issue price of $35 per share for gross offering proceeds of $1,034,250.
         Offering  expenses of $45,732 were charged  against the gross  offering
         proceeds.

         The dividends  which the Bank may pay to the Company are  restricted by
         federal   banking   regulations.    Generally,   subject   to   certain
         restrictions, dividends may only be paid out of retained earnings.


(14)     REGULATORY MATTERS

         The  Company  and the Bank are  subject to various  regulatory  capital
         requirements  administered by the federal banking agencies.  Failure to
         meet minimum capital  requirements can initiate  certain  mandatory-and
         possibly  additional   discretionary-actions  by  regulators  that,  if
         undertaken,  could  have a  direct  material  effect  on the  Company's
         financial  statements.   Under  capital  adequacy  guidelines  and  the
         regulatory  framework for prompt corrective action, the Company and the
         Bank must meet specific  capital  guidelines that involve  quantitative
         measures of the  assets,  liabilities,  and  certain  off-balance-sheet
         items as calculated under regulatory accounting practices.  The capital
         amounts and classification  are also subject to quantitative  judgments
         by the regulators about components, risk weightings, and other factors.

         Quantitative  measures  established  by  regulation  to ensure  capital
         adequacy  require the Company and the Bank to maintain  minimum amounts
         and ratios  (set forth in the table  below) of total and Tier I capital
         (as defined in the regulations) to  risk-weighted  assets (as defined),
         and of Tier I capital  (as  defined)  to average  assets (as  defined).
         Management believes,  as of December 31, 2002, that the Company and the
         Bank meet all capital adequacy requirements to which it is subject.

         As of December 31, 2002, the most recent  notification from the Federal
         Reserve Bank  categorized the Company and the Bank as well  capitalized
         under the  regulatory  framework for prompt  corrective  action.  To be
         categorized  as well  capitalized,  each entity must  maintain  minimum
         total risk-based,  Tier I risk-based, and Tier I leverage ratios as set
         forth in the table below.  There are no conditions or events since that
         notification  that  management  believes have changed  either  entity's
         categories.



 20



                    HOMETOWN BANCSHARES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           DECEMBER 31, 2002 AND 2001


(14 - continued)

         The actual capital  amounts and ratios are also presented in the table.
         No amounts were deducted from capital for interest-rate  risk in either
         year.



                                                                                                         MINIMUM
                                                                                                        TO BE WELL
                                                                                 MINIMUM             CAPITALIZED UNDER
                                                                               FOR CAPITAL           PROMPT CORRECTIVE
                                                       ACTUAL                    ADEQUACY:           ACTION PROVISIONS:
                                                 AMOUNT       RATIO         AMOUNT        RATIO       AMOUNT     RATIO
                                                                                                
             (DOLLARS IN THOUSANDS)
             AS OF DECEMBER 31, 2002:
               TOTAL CAPITAL (TO RISK
                 WEIGHTED ASSETS):
                   CONSOLIDATED                 $ 7,570       11.9%        $ 5,106        8.0%          N/A
                   Bank                         $ 7,611       11.9%        $ 5,110        8.0%       $ 6,388     10.0%

               TIER I CAPITAL (TO RISK
                 WEIGHTED ASSETS):
                   CONSOLIDATED                 $ 6,772       10.6%        $ 2,553        4.0%          N/A
                   Bank                         $ 6,813       10.7%        $ 2,555        4.0%       $ 3,833      6.0%

               TIER I CAPITAL (TO AVERAGE
                 ASSETS):
                   CONSOLIDATED                 $ 6,772        7.9%        $ 3,437        4.0%          N/A
                   Bank                         $ 6,813        7.9%        $ 3,437        4.0%       $ 4,296      5.0%

             AS OF DECEMBER 31, 2001:
               TOTAL CAPITAL (TO RISK
                 WEIGHTED ASSETS):
                   CONSOLIDATED                 $ 7,495       12.2%        $ 4,920        8.0%          N/A
                   Bank                         $ 7,480       12.2%        $ 4,920        8.0%       $ 6,151     10.0%

               TIER I CAPITAL (TO RISK
                 WEIGHTED ASSETS):
                   CONSOLIDATED                 $ 7,034       11.4%        $ 2,460        4.0%          N/A
                   Bank                         $ 7,019       11.4%        $ 2,460        4.0%       $ 3,691      6.0%

               TIER I CAPITAL (TO AVERAGE
                 ASSETS):
                   CONSOLIDATED                 $ 7,034        8.2%        $ 3,435        4.0%          N/A
                   Bank                         $ 7,020        8.2%        $ 3,435        4.0%       $ 4,294      5.0%


(15)     NET INCOME PER COMMON SHARE

         Basic  earnings per share is  calculated  by dividing net income by the
         229,550 and 207,162 weighted average common shares  outstanding  during
         2002 and 2001,  respectively.  The  Company has no  potential  dilutive
         common shares.



 21



                    HOMETOWN BANCSHARES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           DECEMBER 31, 2002 AND 2001


(16)    SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

        CASH PAYMENTS FOR:                            2002              2001
                                                      ----              ----

              Interest                            $ 2,653,995        $ 3,749,763
              Taxes                                   234,488            468,850

        NONCASH INVESTING ACTIVITY:
              Transfer of loans to real estate
                acquired through foreclosure      $    95,105        $      -


(17)    ADVERTISING COSTS

        Advertising  costs are expensed when incurred.  Advertising  expense was
        $38,915  and $43,219  for the years  ended  December  31, 2002 and 2001,
        respectively.


 22



                         PRO FORMA FINANCIAL INFORMATION
                               FIRST CAPITAL, INC.



The  following  unaudited  pro  forma  condensed  combined  balance  sheet as of
December 31, 2002 and the unaudited pro forma condensed  combined  statements of
income for the three months ended March 31, 2003 and the year ended December 31,
2002 give  effect to the  merger of First  Capital,  Inc.  (First  Capital)  and
Hometown Bancshares, Inc. (Hometown), accounted for as a purchase.

The unaudited pro forma condensed combined financial information is based on the
historical consolidated financial statements of First Capital and Hometown under
the  assumptions  and  adjustments  set  forth in the  accompanying  notes.  The
unaudited pro forma condensed  combined balance sheet gives effect to the merger
as if the merger had been  consummated at the end of the period  presented.  The
unaudited pro forma condensed  combined  consolidated  statements of income give
effect to the merger as if the merger had been  consummated  on January 1, 2002.
The unaudited pro forma condensed combined consolidated  financial statements do
not give effect to the anticipated cost savings in connection with the merger.

The unaudited pro forma condensed  combined  consolidated  financial  statements
should  be  read in  conjunction  with  the  historical  consolidated  financial
statements  of First Capital and Hometown,  including  the  respective  notes to
those statements. The pro forma information is not necessarily indicative of the
combined financial position or the results of operations in the future or of the
combined  financial  position or the results of operations which would have been
realized had the merger been  consummated  during the periods or as of the dates
for which the pro forma information is presented.  We anticipate that the merger
will provide the combined  company with financial  benefits that include reduced
operating  expenses  and  opportunity  to  earn  more  revenue.  The  pro  forma
information,  while helpful in illustrating the financial characteristics of the
new company under one set of assumptions  does not attempt to predict or suggest
future results.





 23





                                        FIRST CAPITAL, INC. AND HOMETOWN BANCSHARES, INC.
                                      UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
                                                        DECEMBER 31, 2002



(IN THOUSANDS)                                                                                  PRO FORMA
                                                                                               ADJUSTMENTS
                                                           FIRST                     --------------------------------  PRO FORMA
                                                          CAPITAL       HOMETOWN       DEBIT               CREDIT       COMBINED
                                                                                                        
ASSETS
  Cash and due from banks                                $   6,610      $   2,002     $   180  (d),(e)    $ 5,626      $   3,166
  Interest bearing deposits with banks                       6,044            902           -                   -          6,946
  Securities available for sale, at fair value              64,980          5,672          45  (e)              -         70,697
  Securities held to maturity                                1,474          1,064           -                   -          2,538
  Federal funds sold                                             -         11,541           -                   -         11,541
  Loans receivable, net                                    215,996         60,749         124  (e)              -        276,869
  Federal Reserve Bank stock                                     -            180           -  (d)            180              -
  Federal Home Loan Bank stock                               2,716            200           -                   -          2,916
  Premises and equipment                                     7,001          2,266         565  (c), (e)         -          9,832
  Goodwill                                                       -              -       4,791  (e)              -          4,791
  Core deposit intangible                                        -              -         566  (e)              -            566
  Other assets                                               3,732            937          20  (c),(e)          -          4,689
                                                       ------------  -------------  ----------           ---------  -------------
       TOTAL ASSETS                                      $ 308,553      $  85,513     $ 6,291             $ 5,806      $ 394,551
                                                       ============  =============  ==========           =========  =============

LIABILITIES
  Deposits                                               $ 216,202      $  78,425         $ -  (e)        $   963      $ 295,590
  Borrowed funds                                            53,776              -           -                   -         53,776
  Accrued interest payable                                   1,128            225           -                   -          1,353
  Other liabilities                                          1,117             75          12  (a - c),(e)    638          1,818
                                                       ------------  -------------  ----------           ---------  -------------
       Total Liabilities                                   272,223         78,725          12               1,601        352,537
                                                       ------------  -------------  ----------           ---------  -------------
STOCKHOLDERS' EQUITY
  Preferred stock                                                -              -           -                   -              -
  Common stock                                                  26          5,973       5,973  (e)              3             29
  Additional paid-in capital                                12,955              -           -  (e)          6,134         19,089
  Retained earnings                                         23,079            799       1,252  (a -c),(e)       -         22,626
  Accumulated other comprehensive income                       971             16          16  (e)                           971
  Unearned stock compensation plans                           (584)             -           -                   -           (584)
  Treasury stock, at cost                                     (117)             -           -                   -           (117)
                                                       ------------  -------------  ----------           ---------  -------------
       Total Stockholders' Equity                           36,330          6,788       7,241               6,137         42,014
                                                       ------------  -------------  ----------           ---------  -------------

         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY      $ 308,553      $  85,513     $ 7,253             $ 7,738      $ 394,551
                                                       ============  =============  ==========           =========  =============


See Notes to the Unaudited Pro Forma Condensed Combined Financial Statements.



 24




                                  FIRST CAPITAL, INC. AND HOMETOWN BANCSHARES, INC.
                              UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
                                      FOR THE THREE MONTHS ENDED MARCH 31, 2003



(IN THOUSANDS)                                                                          PRO FORMA
                                                                                       ADJUSTMENTS
                                                       FIRST                   ----------------------------  PRO FORMA
                                                      CAPITAL     HOMETOWN       DEBIT          CREDIT        COMBINED
                                                                                              
INTEREST INCOME
   Loans, including fees                             $    3,916    $     910    $      5  (f)   $      -     $   4,821
   Securities                                               713           48          11  (f)          -           750
   Dividends                                                 37            5           -               -            42
   Federal funds sold and interest-bearing
     deposits with banks                                     42           44           -               -            86
                                                    ------------ ------------  ----------      ----------  ------------
       Total interest income                              4,708        1,007          16               -         5,699
                                                    ------------ ------------  ----------      ----------  ------------

INTEREST EXPENSE
   Deposits                                               1,327          492           -  (f)         94         1,725
   Borrowed funds                                           735            -           -               -           735
                                                    ------------ ------------  ----------      ----------  ------------
       Total interest expense                             2,062          492           -              94         2,460
                                                    ------------ ------------  ----------      ----------  ------------

       Net interest income                                2,646          515          16              94         3,239

   Provision for loan losses                                150           29           -               -           179
                                                    ------------ ------------  ----------      ----------  ------------
       Net interest income after provision
         for loan losses                                  2,496          486          16              94         3,060

 NONINTEREST INCOME
   Service charges on deposit accounts                      370           40           -               -           410
   Commission income                                         60           23           -               -            83
   Gain on sale of securities                                51            -           -               -            51
   Gain on sale of mortgage loans                             -            -           -               -             -
   Other income                                              28            8           -               -            36
                                                    ------------ ------------  ----------      ----------  ------------
       Total noninterest income                             509           71           -               -           580
                                                    ------------ ------------  ----------      ----------  ------------

 NONINTEREST EXPENSES
   Compensation and benefits                              1,024          728           -  (f)        270         1,482
   Occupancy and equipment                                  194           84           4  (f)          -           282
   Other expenses                                           700          421          15  (f)        309           827
                                                    ------------ ------------  ----------      ----------  ------------
       Total noninterest expenses                         1,918        1,233          19             579         2,591
                                                    ------------ ------------  ----------      ----------  ------------

       Income before income taxes                         1,087         (676)         35             673         1,049

   Income tax expense                                       366         (175)        141  (f)          -           332
                                                    ------------ ------------  ----------      ----------  ------------

       NET INCOME                                    $      721    $    (501)   $    176        $    673     $     717
                                                    ============ ============  ==========      ==========  ============

       NET INCOME PER COMMON SHARE, BASIC            $     0.29    $   (2.18)                                $    0.26
                                                    ============ ============                              ============
       NET INCOME PER COMMON SHARE, DILUTED          $     0.28    $   (2.18)                                $    0.25
                                                    ============ ============                              ============


See Notes to the Unaudited Pro Forma Condensed Combined Financial Statements.



 25




                                  FIRST CAPITAL, INC. AND HOMETOWN BANCSHARES, INC.
                             UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
                                        FOR THE YEAR ENDED DECEMBER 31, 2002



(IN THOUSANDS)                                                                         PRO FORMA
                                                                                      ADJUSTMENTS
                                                       FIRST                 ---------------------------   PRO FORMA
                                                      CAPITAL     HOMETOWN       DEBIT         CREDIT      COMBINED
                                                                                            
INTEREST INCOME
   Loans, including fees                             $   15,490    $   4,398     $    19  (g)  $      -    $   19,869
   Securities                                             3,089          363          44  (g)         -         3,408
   Dividends                                                143           22           -              -           165
   Federal funds sold and interest-bearing
     deposits with banks                                    190          221           -              -           411
                                                    ------------ ------------  ----------     ----------  ------------
       Total interest income                             18,912        5,004          63              -        23,853
                                                    ------------ ------------  ----------     ----------  ------------
INTEREST EXPENSE
   Deposits                                               6,090        2,553           -  (g)       680         7,963
   Borrowed funds                                         2,712            -           -              -         2,712
                                                    ------------ ------------  ----------     ----------  ------------
       Total interest expense                             8,802        2,553           -            680        10,675
                                                    ------------ ------------  ----------     ----------  ------------

       Net interest income                               10,110        2,451          63            680        13,178

   Provision for loan losses                                305        1,523           -              -         1,828
                                                    ------------ ------------  ----------     ----------  ------------
       Net interest income after provision
         for loan losses                                  9,805          928          63            680        11,350

 NONINTEREST INCOME
   Service charges on deposit accounts                    1,382          292           -              -         1,674
   Commission income                                        261           12           -              -           273
   Gain on sale of securities                                18            -           -              -            18
   Gain on sale of mortgage loans                             -          129           -              -           129
   Other income                                              76           38           -              -           114
                                                    ------------ ------------  ----------     ----------  ------------
       Total noninterest income                           1,737          471           -              -         2,208
                                                    ------------ ------------  ----------     ----------  ------------

 NONINTEREST EXPENSES
   Compensation and benefits                              3,554        1,109           -              -         4,663
   Occupancy and equipment                                  746          175          15  (g)         -           936
   Other expenses                                         2,231          508          61  (g)         -         2,800
                                                    ------------ ------------  ----------     ----------  ------------
       Total noninterest expenses                         6,531        1,792          76              -         8,399
                                                    ------------ ------------  ----------     ----------  ------------

       Income before income taxes                         5,011         (393)        139            680         5,159

   Income tax expense                                     1,763         (131)        184  (g)         -         1,816
                                                    ------------ ------------  ----------     ----------  ------------

       NET INCOME                                    $    3,248    $    (262)    $   323       $    680    $    3,343
                                                    ============ ============  ==========     ==========  ============

       NET INCOME PER COMMON SHARE, BASIC            $     1.31    $   (1.14)                              $     1.21
                                                    ============ ============                             ============
       NET INCOME PER COMMON SHARE, DILUTED          $     1.30    $   (1.14)                              $     1.21
                                                    ============ ============                             ============


See Notes to the Unaudited Pro Forma Condensed Combined Financial Statements.



 26


                   NOTES TO THE UNAUDITED PRO FORMA CONDENSED
                          COMBINED FINANCIAL STATEMENTS



The unaudited pro forma condensed combined financial information is based on the
historical  consolidated  financial statements of First Capital and Hometown and
is presented  to give effect to the merger  described in Note 1. The merger will
be accounted for as a purchase under the  assumptions  and adjustments set forth
below. The unaudited pro forma condensed  combined  financial  statements do not
give effect to any anticipated cost savings in connection with the merger.

The unaudited pro forma condensed combined  financial  statements should be read
in conjunction with the historical  consolidated  financial  statements of First
Capital and Hometown,  including the respective notes to those  statements.  The
pro forma  information is not necessarily  indicative of the combined  financial
position or the results of operations in the future or of the combined financial
position  or the results of  operations  that would have been  realized  had the
merger been  consummated  as of the date or during the periods for which the pro
forma information is presented.

NOTE 1. BASIS OF PRESENTATION

On March 20, 2003, First Capital consummated its acquisition of Hometown, a bank
holding  company  located in New Albany,  Indiana,  pursuant to an Agreement and
Plan of Merger  dated  September  25,  2002.  Hometown is the parent  company of
Hometown National Bank, which was merged with and into the Bank.

Pursuant to the terms of the merger agreement, Hometown stockholders who elected
to receive  Company  stock  received  2.487  shares of Company  common stock and
Hometown  shareholders  who elected to receive cash received  $46.50 in cash for
each share of Hometown common stock.  Hometown  stockholders  who did not submit
properly  completed  election forms within the required timeframe received 0.773
shares of Company  common  stock and  $32.05 in cash for each share of  Hometown
common  stock.  The  Company  issued  285,446  shares of  common  stock and paid
approximately   $5.4   million  in  cash   consideration   to  former   Hometown
stockholders.  The value assigned to the common shares issued in the transaction
was  approximately  $6.1 million  determined by the average closing price of the
Company's  common stock over a  twenty-day  period  ending  March 17, 2003.  The
transaction   was  accounted  for  under  the  purchase  method  of  accounting.
Accordingly,  the results of  operations  of Hometown  have been included in the
Company's  results  of  operations  since  the date of  acquisition.  Under  the
purchase method of accounting, the purchase price is allocated to the respective
assets  acquired and  liabilities  assumed based on their estimated fair values,
net of applicable income tax effects.  The excess of cost over the fair value of
the net assets acquired has been recorded as goodwill.

The unaudited pro forma condensed  combined balance sheet assumes the merger was
consummated  on December 31, 2002.  The unaudited pro forma  condensed  combined
statements  of income  give  effect to the merger as if the merger  occurred  on
January 1, 2002.




 27



                   NOTES TO THE UNAUDITED PRO FORMA CONDENSED
                    COMBINED FINANCIAL STATEMENTS - CONTINUED



NOTE 2.  ACCOUNTING POLICIES AND FINANCIAL STATEMENT CLASSIFICATIONS

The  accounting  policies of both companies are in the process of being reviewed
for  consistency.  As a result of this  review,  certain  conforming  accounting
adjustments may be necessary.  The nature and extent of these  adjustments  have
not been determined but are not expected to be significant.


NOTE 3.  MERGER- AND RESTRUCTURING-RELATED CHARGES

A liability of $270,000  (pre-tax)  has been recorded in the unaudited pro forma
combined    balance   sheet   to   reflect   First    Capital's    merger-   and
restructuring-related  charges in  connection  with the merger.  This  liability
resulted in a $55,000 after-tax charge to retained earnings in the unaudited pro
forma combined balance sheet.

Merger- and restructuring-related charges include additional office supplies and
signage expenses relating to the name change at the Hometown locations, expenses
related to  conversion  of  Hometown's  data  processing  systems,  and  capital
expenditures  for data processing  equipment.  The effect of the proposed charge
has been  reflected in the  unaudited  pro forma  combined  balance  sheet as of
December 31, 2002.  However,  since the charges are nonrecurring,  they have not
been  reflected in the unaudited pro forma combined  statements of income.  (See
note 6)


NOTE 4.  PRO FORMA EARNINGS PER SHARE

The pro forma combined earnings per share information for the three month period
ended March 31, 2003 and the year ended  December  31, 2002,  has been  computed
based on the pro forma combined  weighted average common shares  outstanding for
each  period as if the merger had  occurred  at the  beginning  of the  earliest
period  presented.  The basic and fully diluted  weighted  average common shares
outstanding  for First Capital were  adjusted to include the converted  Hometown
weighted  average common shares  outstanding.  In accordance with the Agreement,
50% of the  outstanding  common shares of Hometown will be converted into common
shares of First Capital at an exchange ratio of 2.487.



 28



                   NOTES TO THE UNAUDITED PRO FORMA CONDENSED
                    COMBINED FINANCIAL STATEMENTS - CONTINUED


NOTE 5.   PRO FORMA BALANCE SHEET ADJUSTMENTS

The following is a summary of the pro forma  adjustments to reflect the business
combination and the effect of merger and  restructuring  related expenses in the
pro forma balance sheet:

                                                    DEBIT            CREDIT
                                                        (IN THOUSANDS)

      (a)  Merger transaction costs of Hometown

           Retained earnings                        $  225
              Other liabilities                                      $  225

           Pro forma adjustment to recognize a liability for merger  transaction
           costs of Hometown  incurred prior to or coincident with  consummation
           of the merger. (No income tax benefit has been assumed)


      (b)  Employee severance costs of Hometown

           Retained earnings                        $  173
              Other liabilities                                      $  173

           Pro forma  adjustment  to recognize a liability,  net of tax benefit,
           for  amounts  payable  by  Hometown  pursuant  to the  severance  and
           non-competition  agreement  with  C.  Ronald  Clark  coincident  with
           consummation  of the merger.  (Total  severance  and  non-competition
           payments  to Mr.  Clark of  $270,000,  net of income  tax  benefit of
           $97,000)


      (c)  Non-recurring merger and restructuring -related costs

           Premises and equipment                   $  165
           Other assets                                 20
           Retained earnings                            55
              Other liabilities                                      $  240


           Pro forma  adjustment  to recognize a liability,  net of tax benefit,
           for non-recurring merger and  restructuring-related  expenses and for
           capital  expenditures  for data  processing  equipment,  software and
           related costs. See Note 3 for additional information.


      (d)  Redemption of restricted equity securities of Hometown

           Cash and due from banks                  $  180
              Federal Reserve Bank stock                             $  180

           Pro forma adjustment to record expected redemption of Federal Reserve
           Bank stock of Hometown upon consummation of merger.


 29


                   NOTES TO THE UNAUDITED PRO FORMA CONDENSED
                    COMBINED FINANCIAL STATEMENTS - CONTINUED


NOTE 5.   PRO FORMA BALANCE SHEET ADJUSTMENTS - CONTINUED

                                                        DEBIT            CREDIT
                                                            (IN THOUSANDS)

      (e)  Purchase accounting adjustments

           Core deposit intangible                     $    566
           Goodwill                                       4,791
           Securities available for sale                     45
           Loans receivable                                 124
           Premises and equipment                           400
           Other liabilities (deferred income taxes)         12
           Common stock                                   5,973
           Retained earnings                                799
           Accumulated other comprehensive income            16
              Cash and due from banks                                  $   5,626
              Common stock                                                     3
              Additional paid-in capital                                   6,134
              Deposits                                                       963

           Pro  forma  adjustments  to  recognize  the  fair  value  adjustments
           assigned to loans, time deposits, and premises and equipment, and the
           core deposit  intangible and goodwill for the acquisition of Hometown
           using the purchase  method of  accounting  at December 31, 2002.  The
           core  deposit  intangible  represents  the  economic  value  of  core
           deposits  as a funding  source.  Core  deposits  is  defined as total
           demand and savings deposits of Hometown of approximately $19 million.
           The core deposit  intangible is amortized over an estimated  economic
           life of 9.3 years.

           Following  is a summary  of the excess of cost over the fair value of
           acquired net assets  (goodwill)  recognized  in the pro forma balance
           sheet:



                                                                           (IN THOUSANDS)
                                                                                  
           Cost of acquired entity:
              Common stock of First Capital issued in
                   exchange for 114,775 common shares of Hometown
                   Bancshares at an exchange ratio of 2.487,
                   285,446 shares at an average closing price of $21.50    $      6,137
              Cash consideration for 114,775 common shares of
                   Hometown Bancshares (50%) at $46.50 per share                  5,337
              Direct costs of the business combination                              289
                                                                           ------------
                 Total cost of Hometown                                                 $     11,763

           Pro forma fair value of acquired assets and (liabilities) at
           12/31/02:
              Total carrying amount of assets                              $     85,513
              Unrealized gain on securities held to maturity                         45
              Fair value adjustment for acquired loans                              124
              Fair value adjustment for premises and equipment                      400
              Value of acquired core deposit intangible                             566
              Net deferred tax asset related to purchase adjustments                 12
              Total carrying amount of liabilities                              (78,725)
              Fair value adjustment for time deposit liabilities                   (963)
                                                                           ------------
                 Pro forma net assets acquired                                                 6,972
                                                                                        ------------
                 Goodwill                                                               $      4,791
                                                                                        ============





 30


                   NOTES TO THE UNAUDITED PRO FORMA CONDENSED
                    COMBINED FINANCIAL STATEMENTS - CONTINUED


NOTE 6.   PRO FORMA STATEMENT OF INCOME ADJUSTMENTS

The following is a summary of the pro forma adjustments to reflect the effect of
the  purchase  accounting  adjustments  and the  effect of  nonrecurring  merger
related expenses in the pro forma statement of income for the three month period
ended March 31, 2003:



                                                                     DEBIT            CREDIT
                                                                         (IN THOUSANDS)
                                                                               
        (f)
           Interest income on loans                                 $      5
           Interest income on securities                                  11
           Occupancy and equipment - depreciation                          4
           Other expenses - amortization of core deposit
              intangible                                                  15
           Income taxes                                                  141
              Interest expense on deposits                                           $     94
              Compensation and benefits - nonrecurring
                severance benefits                                                        270
              Other expenses - nonrecurring merger related
                expenses                                                                  309

The following is a summary of the pro forma adjustments to reflect the effect of
the purchase accounting adjustments in the pro forma statement of income for the
year ended December 31, 2002:

        (g)
           Interest income on loans                                 $     19
           Interest income on securities                                  44
           Occupancy and equipment - depreciation                         15
           Other expenses - amortization of core deposit
              intangible                                                  61
           Income taxes                                                  184
              Interest expense on deposits                                           $    680


The above pro forma  adjustments  are made to recognize the  amortization of the
purchase  accounting  fair value  adjustments  for  loans,  time  deposits,  and
securities,  and the  core  deposit  intangible  amortization  and  depreciation
expense  related to the fair value  adjustment on premises and equipment for the
respective  periods  assuming the merger took place on January 1, 2002. The fair
value  adjustment  for  securities,  loans,  premises and equipment and the core
deposit  intangible have been amortized using the straight-line  method over the
estimated  economic lives of the acquired  assets.  The fair value adjustment on
time  deposits  represents  a  discount  and has  been  amortized  based  on the
contractual  maturities of the time deposits acquired.  The pro forma adjustment
for income taxes has been recognized using a combined effective tax rate of 34%.
The nonrecurring  merger-related expenses incurred during the three month period
ended  March 31,  2002  includes  legal and  professional  expenses  incurred by
Hometown to facilitate the merger and no tax benefit has been assumed.



 31


                   NOTES TO THE UNAUDITED PRO FORMA CONDENSED
                    COMBINED FINANCIAL STATEMENTS - CONTINUED


NOTE 6.   PRO FORMA STATEMENT OF INCOME ADJUSTMENTS - CONTINUED

As noted  above,  the fair value  adjustment  for the time  deposit  liabilities
represents a significant  discount to be  recognized  in earnings  following the
merger.  This fair value  adjustment  results from current market interest rates
which are lower than the  contractual  rates of the acquired time deposits.  The
fair value  adjustment  is expected to be  recognized  in earnings  based on the
contractual  maturities of the time deposits  during each of the next four years
as follows:

                                                               (IN THOUSANDS)

                  Year ending December 31:
                                                   2003         $         600
                                                   2004                   287
                                                   2005                    63
                                                   2006                    13
                                                                --------------
                                                                $         963
                                                                ==============