1
EXHIBIT 99.1
[First Capital, Inc. Letterhead]
REPORT TO SHAREHOLDERS
First Capital, Inc.
Dear Shareholders:
Our Salem office opened on November 28th. We anticipate great things from our
staff and the community. We have been actively making business calls in Salem.
The customers seem excited about our company coming to their community. Our
philosophy of high touch and high tech should serve us well in the market.
Net income for the third quarter exceeded net income for the same quarter last
year as net interest income for 2007 outpaced net interest income for the same
period in 2006. We expect continued improvement in our net interest margin going
forward as we continue our efforts to restructure our balance sheet to resemble
that of a commercial bank rather than that of a traditional thrift institution.
We would like to address any concerns you may have about your company holding
and originating "sub-prime mortgage" loans. In past communications we have
discussed our commitment to continued safe and sound banking and lending
practices. It is not part of our business plan to originate and hold any
sub-prime mortgage loans or to purchase securities backed by sub-prime mortgage
loans. It is our goal to have good steady growth and not place your company at
risk for any short term gains.
We are working hard to improve asset quality while seeking to grow our most
profitable loans. Our Board and Senior Management had a very productive
strategic planning session this Fall. This gives us an opportunity to consider
the strengths and weaknesses of your company and build on opportunities to keep
us competitive into the future.
As always, we very much appreciate your continued support as a shareholder and
we hope you choose First Harrison Bank for all your financial needs. Sincerely,
/s/ William Harrod
William Harrod
President and CEO
2
- --------------------------------------------------------------------------------
THIRD QUARTER REPORT
NINE MONTHS ENDED SEPTEMBER 30, 2007
THIRD QUARTER REPORT
First Capital, Inc.
CORPORATE ADDRESS
First Capital, Inc.
220 Federal Drive, NW
Corydon, Indiana 47112
COMMON SHARES
The common shares of the Company are listed on The Nasdaq Stock Market(R). The
trading symbol is FCAP. In newspaper listings, Company shares are frequently
listed as First Capital, Inc.
TRANSFER AGENT
Investor Relations Department
Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016-9982
Tel: (800) 368-5948
www.rtco.com
MARKET MAKERS
Sweeney Cartwright
Keefe, Bruyette & Woods, Inc.
UBS Financial Services
2
BALANCE SHEET HIGHLIGHTS As of September 30, Percent
(Dollars in thousands, except per share information) 2007 2006 Change
- -----------------------------------------------------------------------------------------------------------------------
Total loans (excluding loans held for sale) $334,929 $342,915 -2.33%
Allowance for loan losses 2,276 2,262 0.62%
Allowance for loan losses as a percentage
of total loans (excluding loans held for sale) 0.68% 0.66% 3.02%
Total assets $446,789 $451,725 -1.09%
Total deposits 324,457 323,628 0.26%
Other borrowings 74,060 81,634 -9.28%
Shareholders equity 45,118 43,508 3.70%
Book value per share 15.98 15.28 4.55%
Nine
Three Months Nine Months Months
INCOME STATEMENT SUMMARY Ended September 30, Ended September 30, Percent
- --------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) 2007 2006 2007 2006 Change
Net interest income $3,333 $3,284 $10,001 $10,183 -1.79%
Provision for loan losses 118 215 378 585 -35.38%
Noninterest income 899 830 2,621 2,395 9.44%
Noninterest expense 2,812 2,645 8,547 7,924 7.86%
Income before taxes 1,302 1,254 3,697 4,069 -9.14%
Income tax expense 409 402 1,186 1,347 -11.95%
Net income 893 852 2,511 2,722 -7.75%
Nine
Three Months Nine Months Months
OTHER FINANCIAL DATA Ended September 30, Ended September 30, Percent
2007 2006 2007 2006 Change
- --------------------------------------------------------------------------------------------------------------------
Diluted earnings per share $0.32 $0.30 $0.88 $0.96 -8.33%
Cash dividends per share 0.17 0.17 0.51 0.51 0.00%
Return on average assets (annualized) 0.81% 0.77% 0.75% 0.82% -8.54%
Return on average equity (annualized) 8.00% 7.94% 7.52% 8.52% -11.74%
Net interest margin 3.33% 3.24% 3.29% 3.38% -2.66%
Net overhead expense as a percentage
of average assets (annualized) 2.54% 2.38% 2.56% 2.39% 7.11%