GlobeNewswire Inc | Oct 23, 2020 08:00AM EDT

October 23, 2020

CORYDON, Ind., Oct. 23, 2020 (GLOBE NEWSWIRE) -- First Capital, Inc. (the Company) (NASDAQ: FCAP), the holding company for First Harrison Bank (the Bank), today reported net income of $2.7 million or $0.82 per diluted share for the quarter ended September 30, 2020, compared to $2.9 million or $0.87 per diluted share for the quarter ended September 30, 2019. The decrease was primarily due to a decrease in net interest income after provision for loan losses partially offset by an increase in noninterest income.

Net interest income after provision for loan losses decreased $1.0 million for the quarter ended September 30, 2020 as compared to the same period in 2019. Interest income decreased $980,000 when comparing the periods due to a decrease in the average tax-equivalent yield on interest-earning assets from 4.35% for the third quarter of 2019 to 3.40% for the third quarter of 2020 partially offset by an increase in the average balance of interest-earning assets from $766.9 million for the third quarter of 2019 to $871.2 million for the third quarter of 2020. The decrease in the tax-equivalent yield was due to the Federal Open Market Committee (FOMC) lowering interest rates due to the COVID-19 pandemic and the Bank originating $45.9 million in loans through the Small Business Administrations Paycheck Protection Program (PPP) which carry a fixed rate of 1.00%. Interest expense decreased $132,000 when comparing the periods due to a decrease in the average cost of interest-bearing liabilities from 0.35% for the third quarter of 2019 to 0.24% for the third quarter of 2020. This was partially offset by an increase in the average balance of interest-bearing liabilities from $567.7 million for the third quarter of 2019 to $625.9 million for the third quarter of 2020. As a result of the changes in interest-earning assets and interest-bearing liabilities, the tax-equivalent interest rate spread decreased from 4.00% for the quarter ended September 30, 2019 to 3.16% for the same period in 2020.

Based on managements analysis of the allowance for loan losses, the provision for loan losses increased from $225,000 for the quarter ended September 30, 2019 to $400,000 for the same period in 2020. The increase in provision for loan losses primarily reflects changes to qualitative factors within the Banks allowance for loan losses calculation related to uncertainties surrounding COVID-19. The Bank recognized net charge-offs of $60,000 for the quarter ended September 30, 2020 compared to $95,000 for the same period in 2019.

Noninterest income increased $783,000 for the quarter ended September 30, 2020 as compared to the same period in 2019. The third quarter of 2020 included $980,000 in gains on the sale of loans compared to $353,000 during the same period in 2019. Included in gains on the sale of loans during the third quarter of 2020 was a $214,000 gain on the sale of the Banks $1.5 million credit card portfolio. ATM and debit card fees also increased $196,000 when comparing the two periods. This was partially offset by a $96,000 decrease in service charges on deposit accounts.

Noninterest expense increased $53,000 for the quarter ended September 30, 2020 as compared to the same period in 2019. Compensation and benefits expense increased $134,000 when comparing the two periods. This was partially offset by data processing expense which decreased $90,000 when comparing the two periods.

Income tax expense decreased $124,000 for the third quarter of 2020 as compared to the third quarter of 2019 primarily due to an increase in nontaxable income and a decrease in taxable interest income for the quarter ended September 30, 2020. As a result, the effective tax rate for the quarter ended September 30, 2020 was 13.1% compared to 15.5% for the same period in 2019.

For the nine months ended September 30, 2020, the Company reported net income of $7.3 million or $2.17 per diluted share compared to net income of $7.9 million or $2.37 per diluted share for the same period in 2019.

Net interest income after provision for loan losses decreased $2.2 million for the nine months ended September 30, 2020 compared to the same period in 2019. Interest income decreased $1.8 million when comparing the two periods, due to a decrease in the average tax-equivalent yield on interest-earning assets from 4.30% for the nine months ended September 30, 2019 to 3.68% for the same period in 2020 partially offset by an increase in the average balance of interest-earning assets from $758.3 million for the nine months ended September 30, 2019 to $822.3 million for the same period in 2020. Interest expense decreased $207,000 as the average cost of interest-bearing liabilities decreased from 0.34% for the nine months ended September 30, 2019 to 0.28% for the same period in 2020, while the average balance of interest-bearing liabilities increased from $566.5 million for the nine months ended September 30, 2019 to $601.7 million for the same period in 2020. As a result of the changes in interest-earning assets and interest-bearing liabilities, the tax-equivalent interest rate spread decreased from 3.96% for the nine months ended September 30, 2019 to 3.40% for the nine months ended September 30, 2020.

Based on managements analysis of the allowance for loan losses, the provision for loan losses increased from $975,000 for the nine months ended September 30, 2019 to $1.6 million for the nine months ended September 30, 2020 primarily due to changes to qualitative factors within the Banks allowance for loan losses calculation related to uncertainties surrounding COVID-19. The Bank recognized net charge-offs of $233,000 for the nine months ended September 30, 2020 compared to $301,000 for the same period in 2019.

Noninterest income increased $1.3 million for the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019. The increase was primarily due to increases in gains on loans sold and ATM and debit card fees of $1.3 million and $461,000, respectively, partially offset by a $245,000 decrease in service charges on deposit accounts when comparing the two periods. In addition, the nine months ended September 30, 2020 included a $126,000 unrealized loss on equity securities compared to a $108,000 unrealized gain on equity securities during the same period in 2019.

Noninterest expenses increased $67,000 for the nine months ended September 30, 2020 as compared to the same period in 2019. Compensation and benefit expense increased $758,000 when comparing the two periods. This was partially offset by decreases in net loss on foreclosed real estate, data processing expense and advertising expense of $292,000, $246,000 and $127,000, respectively.

Income tax expense decreased $340,000 for the nine months ended September 30, 2020 as compared to the same period in 2019 primarily due to an increase in nontaxable income and a decrease in taxable interest income. This resulted in an effective tax rate of 14.2% for the nine months ended September 30, 2020, compared to 16.3% for the same period in 2019.

Total assets increased $120.7 million to $948.2 million at September 30, 2020 from $827.5 million at December 31, 2019. Cash and cash equivalents and net loans receivable increased $82.9 million and $25.6 million, respectively, from December 31, 2019 to September 30, 2020. The loan growth was primarily due to the previously mentioned $45.9 million in PPP loans originated. Deposits increased $111.2 million from December 31, 2019 to $833.4 million at September 30, 2020. Noninterest-bearing, interest-bearing demand deposits and savings accounts increased $48.9 million, $37.5 million and $27.5 million, respectively, from December 31, 2019. Nonperforming assets (consisting of nonaccrual loans, accruing loans 90 days or more past due, troubled debt restructurings on accrual status, and foreclosed real estate) increased from $3.1 million at December 31, 2019 to $3.8 million at September 30, 2020. The Bank has assisted customers experiencing a COVID-19 related hardship by approving payment extensions and waiving or refunding certain banking fees. As of September 30, 2020, the Bank had approved such extensions on loans totaling $68.1 million, primarily related to commercial real estate lending relationships. Of that total, $58.1 million had resumed normal payments.

At September 30, 2020, the Bank was considered well-capitalized under applicable federal regulatory capital guidelines.

The Bank currently has eighteen offices in the Indiana communities of Corydon, Edwardsville, Greenville, Floyds Knobs, Palmyra, New Albany, New Salisbury, Jeffersonville, Salem, Lanesville and Charlestown and the Kentucky communities of Shepherdsville, Mt. Washington and Lebanon Junction.

Access to First Harrison Bank accounts, including online banking and electronic bill payments, is available through the Banks website at www.firstharrison.com. The Bank offers non-FDIC insured investments to complement its offering of traditional banking products and services through its business arrangement with LPL Financial LLC (LPL), member SIPC. For more information and financial data about the Company, please visit Investor Relations at the Banks aforementioned website. The Bank can also be followed on Facebook.

Cautionary Note Regarding Forward-Looking Statements

This press release may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the use of the words anticipate, believe, expect, intend, could and should, and other words of similar meaning. Forward-looking statements are not historical facts nor guarantees of future performance; rather, they are statements based on the Companys current beliefs, assumptions, and expectations regarding its business strategies and their intended results and its future performance.

Numerous risks and uncertainties could cause or contribute to the Companys actual results, performance and achievements to be materially different from those expressed or implied by these forward-looking statements. Factors that may cause or contribute to these differences include, without limitation, the severity, magnitude and duration of the COVID-19 pandemic, including impacts of the pandemic and of businesses and governments responses to the pandemic on our operations and personnel, and on commercial activity and demand across our and our customers businesses, market, economic, operational, liquidity, credit and interest rate risks associated with the Companys business (including developments and volatility arising from the COVID-19 pandemic), general economic conditions, including changes in market interest rates and changes in monetary and fiscal policies of the federal government; competition; the ability of the Company to execute its business plan; legislative and regulatory changes; and other factors disclosed periodically in the Companys filings with the Securities and Exchange Commission.

Because of the risks and uncertainties inherent in forward-looking statements, readers are cautioned not to place undue reliance on them, whether included in this press release, the Companys reports, or made elsewhere from time to time by the Company or on its behalf. These forward-looking statements are made only as of the date of this press release, and the Company assumes no obligation to update any forward-looking statements after the date of this press release.

Contact:Chris FrederickChief Financial Officer812-734-3464

FIRST CAPITAL, INC. AND SUBSIDIARYConsolidated Financial Highlights (Unaudited) Nine Months Ended Three Months Ended September 30, September 30,OPERATING DATA 2020 2019 2020 2019(Dollars in thousands, except per share data) Total interest income $ 22,288 $ 24,097 $ 7,240 $ 8,220 Total interest expense 1,243 1,450 371 503 Net interest income 21,045 22,647 6,869 7,717 Provision for loan 1,576 975 400 225 lossesNet interest incomeafter provision for 19,469 21,672 6,469 7,492 loan losses Total non-interest 6,392 5,106 2,616 1,833 incomeTotal non-interest 17,366 17,299 5,923 5,870 expenseIncome before income 8,495 9,479 3,162 3,455 taxesIncome tax expense 1,207 1,547 413 537 Net income 7,288 7,932 2,749 2,918 Less net incomeattributable to the 10 10 3 3 noncontrollinginterestNet incomeattributable to First $ 7,278 $ 7,922 $ 2,746 $ 2,915 Capital, Inc. Net income per share attributable toFirst Capital, Inc. common shareholders:Basic $ 2.18 $ 2.38 $ 0.82 $ 0.87 Diluted $ 2.17 $ 2.37 $ 0.82 $ 0.87 Weighted averagecommon shares outstanding:Basic 3,338,705 3,331,854 3,343,038 3,335,816 Diluted 3,348,802 3,343,176 3,348,332 3,344,322 OTHER FINANCIAL DATA Cash dividends per $ 0.72 $ 0.71 $ 0.24 $ 0.24 shareReturn on averageassets (annualized) 1.10 % 1.30 % 1.17 % 1.42 %(1)Return on averageequity (annualized) 9.34 % 11.61 % 10.24 % 12.19 %(1)Net interest margin 3.48 % 4.04 % 3.23 % 4.09 %(tax-equivalent basis)Interest rate spread 3.40 % 3.96 % 3.16 % 4.00 %(tax-equivalent basis)Net overhead expense as a percentageof average assets 2.62 % 2.84 % 2.53 % 2.85 %(annualized) (1) September 30, December 31, BALANCE SHEET 2020 2019 INFORMATION Cash and cash $ 134,211 $ 51,360 equivalentsInterest-bearing time 6,843 6,490 depositsInvestment securities 264,034 254,562 Gross loans 498,532 471,555 Allowance for loan 6,404 5,061 lossesEarning assets 887,345 766,148 Total assets 948,166 827,496 Deposits 833,399 722,177 Stockholders' equity,net of noncontrolling 107,982 98,836 interestNon-performing assets: Nonaccrual loans 2,173 1,765 Accruing loans past 0 13 due 90 daysForeclosed real estate 57 170 Troubled debtrestructurings on 1,561 1,166 accrual statusRegulatory capital ratios (Bank only):Community Bank 9.53 % 10.01 % Leverage Ratio (2) (1) See reconciliation of GAAP and non-GAAP financial measures for additional informationrelating to thecalculation of this item.(2) Effective March 31, 2020, the Bank opted in to the Community Bank LeverageRatio (CBLR) framework. As such,the other regulatoryratios are no longer provided. RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL MEASURES (UNAUDITED): This presentation contains financial information determined by methods otherthan in accordance with accounting principles generally accepted in the UnitedStates of America (?GAAP?). Management uses these ?non-GAAP? measures in itsanalysis of the Company's performance. Management believes that these non-GAAPfinancial measures allow for better comparability with prior periods, as wellas with peers in the industry who provide a similar presentation, and provide afurther understanding of the Company's ongoing operations. These disclosuresshould not be viewed as a substitute for operating results determined inaccordance with GAAP, nor are they necessarily comparable to non-GAAPperformance measures that may be presented by other companies. The followingtable summarizes the non-GAAP financial measures derived from amounts reportedin the Company's consolidated financial statements and reconciles thosenon-GAAP financial measures with the comparable GAAP financial measures. Nine Months Ended Three Months Ended September 30, September 30, 2020 2019 2020 2019 Return on averageassets before 0.82 % 0.98 % 0.29 % 0.36 %annualizationAnnualization factor 1.33 1.33 4.00 4.00 Annualized return on 1.10 % 1.30 % 1.17 % 1.42 %average assets Return on averageequity before 7.01 % 8.71 % 2.56 % 3.05 %annualizationAnnualization factor 1.33 1.33 4.00 4.00 Annualized return on 9.34 % 11.61 % 10.24 % 12.19 %average equity Net overhead expenseas a % of average assets beforeannualization 1.96 % 2.13 % 0.63 % 0.71 %Annualization factor 1.33 1.33 4.00 4.00 Annualized netoverhead expense as a 2.62 % 2.84 % 2.53 % 2.85 %% of average assets