Dear Shareholders:
We are pleased to report net income of $889,000 or $0.32 per diluted share for
the quarter ended June 30, 2008, compared to $869,000 or $0.31 per diluted share
during the same period in 2007. For the six months ended June 30, 2008, the
company earned $1.8 million or $0.63 per diluted share compared to $1.6 million
or $0.57 for the same period in 2007.
We are pleased to have raised our dividend from $0.17 per quarter to $0.18 per
quarter effective June 30, 2008. I am sure you are well aware of the troubling
news about other financial institutions. I am happy to report to you that First
Harrison Bank is a well capitalized institution and that we continue to
emphasize our core fundamentals. Our provision for loan losses for the six
months ended June 30, 2008 was $738,000, a $478,000 increase from the $260,000
provision for loan losses recorded for the same period in 2007. This increase is
representative of our consideration of the recent trends in general economic
conditions in our evaluation of the allowance for loan losses, including:
depreciating collateral values, job losses and continued pressures on household
budgets in our market area.
Our tier 1 capital (to adjusted total assets) ratio as of June 30, 2008 was
8.70%. The regulatory minimum required to be considered well-capitalized is 4%.
This is just one benchmark to be considered a well capitalized institution - and
we met the other benchmarks as well as of June 30, 2008. Our management is
dedicated to staying the course with our long term plan of moving the balance
sheet from that of a thrift to more like a commercial bank. While many financial
companies are struggling, we believe our strategy of following our core
fundamentals and understanding our risks have served us well.
We know the banking business has many challenges ahead. We are working hard to
monitor risks within our loan portfolio and address any issues. There are
opportunities to build and develop customer relationships during these
challenging times. Our management and board is committed to working hard to
protect your investment in First Capital, Inc. We look forward to working with
you in the future. Please remember us for all your financial service needs.
Sincerely,
/s/ William W. Harrod
BALANCE SHEET HIGHLIGHTS As of June 30, Percent
(In thousands except per share in per share information) (unaudited) 2008 2007 Change
- ------------------------------------------------------------------------------------------------------------------------
Total loans (excluding loans held for sale) $330,782 $334,408 -1.08%
Allowance for loan losses 2,451 2,333 5.06%
Allowance for loan losses as a percentage
of total loans (excluding loans held for sale) 0.74% 0.70% 6.21%
Total assets $452,233 $445,346 1.55%
Total deposits 338,008 322,852 4.69%
Other borrowings 65,178 75,056 -13.16%
Shareholders equity 46,318 44,250 4.67%
Book value per share 16.49 15.64 5.45%
Six
Three Months Six Months Months
INCOME STATEMENT SUMMARY Ended June 30, Ended June 30, Percent
(In thousands)(unaudited) 2008 2007 2008 2007 Change
- ------------------------------------------------------------------------------------------------------------------------
Net interest income $ 3,768 $ 3,349 $ 7,305 $ 6,668 9.55%
Provision for loan losses 513 35 738 260 183.85%
Noninterest income 923 908 1,801 1,722 4.59%
Noninterest expense 2,901 2,933 5,783 5,735 0.84%
Earnings before taxes 1,277 1,289 2,585 2,395 7.93%
Provision for income taxes 388 420 797 777 2.57%
Net income 889 869 1,788 1,618 10.51%
Six
Three Months Six Months Months
OTHER FINANCIAL DATA Ended June 30, Ended June 30, Percent
(unaudited) 2008 2007 2008 2007 Change
- ------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share $ 0.32 $ 0.31 $ 0.63 $ 0.57 10.53%
Cash dividends per share 0.18 0.17 0.35 0.34 2.94%
Return on average assets (annualized) 0.78% 0.78% 0.78% 0.72% 8.33%
Return on average equity (annualized) 7.59% 7.79% 7.67% 7.28% 5.36%
Net interest margin 3.69% 3.32% 3.57% 3.28% 8.84%
Net overhead expense as a percentage
of average assets (annualized) 2.55% 2.64% 2.54% 2.57% -1.17%