Dear Shareholders:
We are pleased with the third quarter results, especially in light of the
general downturn in our economy. We expect there will be continued pressure on
household budgets and real estate values going forward. The increase in the
provision for loan losses considers our evaluation of current economic
conditions, our assessment of the risk in the loan portfolio, and other relevant
factors.
With all the recent news about banks and financial companies, we continue to
stay focused on our core business and the communities we serve. We are still
originating quality loans, managing asset quality, growing core deposits, and
continuing to improve of our net interest margin. Our Board of Directors and
management continue to be committed to converting the composition of our balance
sheet from that of thrift to more like a commercial bank. We just completed a
very successful strategic planning session. This gave the Board of Directors and
management an opportunity to renew our plans to meet the many challenges ahead
for the banking business in our community.
We believe this is a time to develop solid relationships with customers while
fine tuning our internal operations. We recently opened our Edwardsville office
and submitted application for an office in Lanesville, Indiana.
Your company had solid core earnings through the third quarter of 2008 and our
capital ratios continue to exceed the regulatory requirements for "well
capitalized" institutions. Our plan is to continue this path of planned growth,
understanding our risk, and protecting capital. These uncertain times may be
with us for many more months. Our mission is to meet the needs and challenges of
our customers with a high level of service while maintaining asset quality.
Please feel free to contact me with any questions, and please remember to refer
all your friends and family to First Harrison Bank.
Sincerely,
/s/ William Harrod
William Harrod
President and CEO
THIRD QUARTER REPORT
First Capital, Inc.
Financial Highlights (Unaudited)
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.
Balance Sheet Highlights As of September 30, Percent
(In thousands except per share and per share information) 2008 2007 Change
-------- ---------- -----------
Total loans (excluding loans held for sale) $328,796 $334,929 -1.83%
Allowance for loan losses 2,755 2,276 21.05%
Allowance for loan losses as a percentage
of total loans (excluding loans held for sale) 0.84% 0.68% 23.30%
Total assets $445,386 $446,789 -0.31%
Total deposits 334,672 324,457 3.15%
Other borrowings 61,315 74,060 -17.21%
Shareholders' equity 46,394 45,118 2.83%
Book value per share 16.57 15.98 3.71%
Nine
Three Months Nine Months Months
Income Statement Summary Ended September 30, Ended September 30, Percent
(In thousands) 2008 2007 2008 2007 Change
--------- --------- ---------- ---------- ----------
Net interest income $3,900 $3,333 $11,205 $10,001 12.04%
Provision for loan losses 602 118 1,340 378 254.50%
Noninterest income 928 899 2,729 2,621 4.12%
Noninterest expense 3,069 2,812 8,852 8,547 3.57%
Earnings before taxes 1,157 1,302 3,742 3,697 1.22%
Provision for income taxes 354 409 1,151 1,186 -2.95%
Net income 803 893 2,591 2,511 3.19%
Nine
Three Months Nine Months Months
Other Financial Data Ended September 30, Ended September 30, Percent
2008 2007 2008 2007 Change
--------- ----------- ---------- ---------- ----------
Diluted earnings per share $0.29 $0.32 $0.92 $0.88 4.55%
Cash dividends per share 0.18 0.17 0.53 0.51 3.92%
Return on average assets (annualized) 0.73% 0.81% 0.77% 0.75% 2.67%
Return on average equity (annualized) 6.90% 8.00% 7.42% 7.52% -1.33%
Net interest margin 3.92% 3.33% 3.68% 3.29% 11.85%
Net overhead expense as a percentage
of average assets (annualized) 2.78% 2.54% 2.61% 2.56% 1.95%